SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number: 0-18590
GOOD TIMES RESTAURANTS INC.
(Exact name of small business issuer in its charter)
Nevada 84-1133368
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
8620 Wolff Court, Suite 330, Westminster 80030
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 427-4221
Securities registered pursuant to Section 12(b) of the Act:
Title of each class<PAGE>
Name of each exchange on which
registered<PAGE>
NONE<PAGE>
<PAGE>
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
Common Stock Purchase Warrants
(Title of class)
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-KSB is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
Registrant's revenues for the most recent fiscal year was $17,522,017.
As of October 31, 1995, the aggregate market value of voting stock held by non-
affiliates was $5,509,045.
As of October 31, 1995, the Registrant had 6,939,824 shares of common stock
outstanding.
Transitional Small Business Disclosure Format Yes No X <PAGE>
This filing has been amended pursuant to a typographical error on Page
15, Item 6, "Operating Data" whereby "Income (Loss) from Operations" for the
year ended September 30, 1995 is ($1,850,000) in lieu of $1,850,000,
and on Page 28, Item 11, "Security Ownership of Certain Beneficial
Owners and Management" whereby Director Richard J. Stark's Percentage
of Outstanding Common Stock is .2% in lieu of 2.0% and whereby Thomas P.
McCarty's Beneficial Ownership is 5,500 shares.
PART I
ITEM 1. BUSINESS
Background
Good Times Restaurants Inc. (the "Company") was organized under Nevada
law in 1987 and is the holding company for two wholly-owned subsidiaries that
are engaged in the business of developing, owning, operating and franchising
restaurants under the names Good Times Drive Thru Burgers SM and Round The
Corner restaurants. Good Times! Drive Thru Burgers SM restaurants are owned and
operated by the Company's subsidiary, Good Times Drive Thru Inc. (Good Times
Drive Thru Burgers SM and Good Times Drive Thru Inc. are interchangeably
referred to herein as "Good Times" or "Drive Thru") and Round The Corner
restaurants are owned and operated by the Company's former subsidiary, Round
The Corner Restaurants, Inc. (Round The Corner and Round The Corner
Restaurants, Inc. are interchangeably referred to herein as "RTC"). With RTC's
restaurant sales significantly declining in 1994 and 1995 and RTC incurring
significant losses, the Company decided to divest itself of RTC and focus all
of its resources on development of the Good Times concept. On September 30,
1995, the Company sold 100% of the stock of RTC to Hot Concepts Management
Group, L.L.C. ("Hot Concepts").
RTC was established in 1968 and developed a chain of sit-down gourmet
hamburger restaurants. In 1986, RTC, then a closely-held corporation, formed
Drive Thru in order to explore and develop the "Good Times! Drive Thru
Burgers"SM double drive through concept. Drive Thru was expected to take
advantage of the emerging industry and demographic trends that favor drive-
through and take-out patronage and to take advantage of RTC's experienced
management in site location, marketing, quality assurance programs, training,
accounting systems and distribution and purchasing networks.
In 1988, RTC distributed Drive Thru stock to its shareholders after which
Drive Thru operated as an independent company. Between 1990 and 1992, Drive
Thru entered into a series of transactions resulting in Drive Thru becoming a
public company and merging with RTC.
Prior to the merger, Drive Thru had maintained a close working
relationship with RTC through a management agreement, shared employees, certain
common officers and directors and shared administrative offices. The
relationship of Drive Thru with RTC enabled Drive Thru to benefit from the
years of testing for food and paper products and dependable suppliers by RTC.
Drive Thru also benefited from joint purchasing economies through RTC's
established network of suppliers and manufacturers and from joint marketing
expertise. These synergies were enhanced with the completion of the merger.
As the number of Good Times units increased, Drive Thru was able to function
autonomously and these synergies were no longer applicable. This, combined
with RTC's restaurant sales significantly declining in 1994 and 1995 and RTC
incurring significant losses, led the Company to divest itself of RTC and focus
all of its resources on development of the Good Times concept. On September 30,
1995, the Company sold 100% of the stock of RTC to Hot Concepts.
Corporate Operations
In February 1993, the Company restructured the operations and management
of Drive Thru and RTC as separately accountable wholly-owned subsidiaries of
the Company to allow their managements to focus exclusively on their respective
businesses. The Company currently leases approximately 5,600 square feet of
space for its executive offices in Westminster, Colorado for $67,896 per year.
The lease is for a five year period commencing in April 1993, with an
additional five year renewal option. Through fiscal 1995, the Company
provided administrative and accounting support to Drive Thru and RTC and
charged monthly management fees for such services. With the sale of RTC, the
Company no longer provides such services to RTC and has consolidated its
functions with Drive Thru.
The Company's corporate staff is responsible for executive management,
compliance with all regulatory requirements associated with being a publicly-
traded corporation, investor and public relations, audits and financial
reporting, marketing and cash management. The management fee that was charged
to Drive Thru and RTC was calculated as a percentage of each subsidiary's
revenues to total revenues of the Company, such that all expenses incurred by
the Company were reimbursed through these management fees. With the sale of
RTC and consolidation of the Company's operations with Drive Thru, the Company
will no longer charge a management fee to Drive Thru. The Company also
provides repair and maintenance services to Drive Thru's restaurants and
charges the restaurants based on an hourly rate.
The Company directly employs fourteen full-time employees and one part-
time employees. The full-time employees include the President and Chief
Executive Officer of the Company, its Executive Vice President and Chief
Financial Officer, its Vice President of Marketing, its Controller, five full-
time accounting personnel and two full-time and one part-time administrative
personnel. The repair and maintenance department employs three of the
Company's full-time employees. All other personnel associated with the Company
are employed by Drive Thru.
For 1996, Drive Thru plans to concentrate its efforts and capital on the
growth of the Good Times restaurant chain in Colorado through additional joint-
venture and franchised units.
Good Times
Good Times Drive Thru Inc. is engaged in the operation and development
of the Good Times! Drive Thru BurgersSM restaurants, featuring extremely fast
service and a limited, high quality menu for drive-through and walk-up
customers only. Drive Thru currently operates and franchises twenty-five Good
Times restaurants in the State of Colorado, of which twenty-one are located in
metropolitan Denver, one in Boulder, one in Longmont, one in Grand Junction,
and one in Greeley. There is also one Good Times restaurant in Boise, Idaho.
Pursuant to the co-development provisions in its development agreements with
two Drive Thru franchisees, nine of these units in Colorado and one unit in
Boise, Idaho are owned jointly with such franchisees. Seven Good Times units
are franchised restaurants with four operating in the Denver metropolitan area,
one in Grand Junction, Colorado, one in Greeley, Colorado, and one in Longmont,
Colorado. Good Times is offering franchises for the development of additional
Good Times restaurants.
Drive Thru's goals in fiscal 1995 were to continue to develop the
Colorado market and to expand the Good Times concept into an out-of-state
market. In the spring of 1995, Drive Thru reached an agreement with a
franchisee of four Rally's Hamburger restaurants in Las Vegas, Nevada to
acquire those four units. It was management's intent to convert those units
into Good Times restaurants and to develop an additional six Good Times
restaurants in Las Vegas over a twelve month period. Management believed that
with ten units operating in the Las Vegas market, Good Times would have
"critical mass" in the Las Vegas Area of Dominant Influence ("ADI"), or
television market. ("Critical mass" is defined by the Company as having a
sufficient number of restaurants in a market to economically advertise on
television and to take advantage of operational and distribution economies of
scale.) Drive Thru opened the first two converted Rally's units in June 1995
and the other two restaurants in August 1995. However, Drive Thru experienced
unexpected difficulty in securing suitable locations at reasonable cost in the
Las Vegas market for new stores and realized that critical mass could not be
achieved within an acceptable period of time. During the same time period,
media advertising costs in Denver increased dramatically, requiring a higher
level of store penetration in Colorado to support the Company's advertising
campaign. Since four units would continue to operate at a significant loss
until Drive Thru could effectively advertise in the Las Vegas market, it was
decided to cease operations in Las Vegas and sell the stores. The four Las
Vegas units were closed on October 31, 1995 and sold as of November 30, 1995.
Drive Thru will focus its development efforts in fiscal 1996 on new Colorado
locations.
The Concept. The concept of drive-through only restaurants has existed
for over 40 years. It has again become appealing since it addresses both
changing consumer profiles and continuing restaurant industry concerns. The
simplicity and relatively low capital requirements of the concept provide the
opportunity for growth and profitability.
Management believes, based upon its experience in the restaurant industry
and research reports, that the double drive thru hamburger restaurant concept
has proven to be successful because of the following principal factors:
... Capital investment of 1/2 to 2/3 that of a major fast-food
restaurant with seating and parking facilities.
... Ratio of sales to capital investment substantially higher than a
major fast-food restaurant.
... Margins of sales to operating costs comparable to major fast-food
restaurants.
... Cost of menu items to the consumer comparable or lower than those
of large hamburger chains, yet providing similar or higher quality
products than those chains.
Good Times' unique 880 square foot "double drive-thru" modular buildings
are designed to serve a growing segment of the fast-food market (off-premise
consumption) that finds traditional sit-down dining too slow, too inconvenient
or too expensive for their needs. While traditional hamburger chains also
offer single drive-through service, it is difficult for them to match Good
Times pricing as their investment costs for building and equipment are
typically one and a half to two times higher than a Good Times restaurant.
Good Times' food preparation and service systems deliver a quality meal with
a much faster order-delivery response time and have the capacity to reach the
same sales levels as traditional hamburger chains. Typically, a customer
receives an order 30 to 45 seconds after his vehicle reaches the take-out
window. The simplicity of the menu, the relatively low capital investment, and
the efficient design of the building and equipment allow Good Times to sell its
products at comparable or lower prices than the major fast food hamburger
chains. The limited menu allows maximum attention to be devoted to food
quality and speed of service.
Menu. The menu of a Good Times restaurant is limited to hamburgers,
cheeseburgers, chicken sandwiches, french fries, milk shakes and soft drinks.
Each sandwich is made to order at the time the customer places the order and
is not pre-prepared.
The hamburger patty is 3.2 ounces of 100% USDA approved beef, served on
a four-inch sesame seed bun. Hamburgers and cheeseburgers are garnished with
fresh lettuce, fresh sliced, sweet red onions, mayonnaise, mustard, ketchup,
pickles and fresh sliced tomato. The cheese is 100% pure sharp American
thickly sliced. The chicken sandwiches include a spiced, battered deep-fried
breast patty and a 3-1/2-ounce grilled spicy breast patty, both served with
mayonnaise, lettuce and tomato. Fryers are equipped with compensating
computers to deliver a consistent product and minimize the skills required of
employees.
As of November 30, 1995, the price of the deluxe Good Times hamburger was
$.99, the deluxe cheeseburger $1.24, the deluxe double cheeseburger $1.99, the
deluxe bacon-cheeseburger $1.79, the chicken sandwiches $2.09, the chicken club
sandwich $2.69, french fries $.79 and $.99 and a 16-ounce soft drink $.79. All
cups, sandwich bags and serving bags carry the Good Times! Drive Thru BurgersSM
logo.
Good Times restaurants are generally open 14 to 16 hours per day, seven
days a week, for lunch, dinner and late-night snacks and meals.
The Building. The Good Times restaurants are less than one-third the
size of the typical restaurants of the four largest hamburger chains and
require approximately one-half the land area based upon management's experience
in the restaurant industry and research reports. The Good Times restaurant
building is a double drive-through and walk-up style structure containing
approximately 880 square feet built on 18,000 to 25,000 square-foot lots. All
restaurants utilize a double drive-thru concept that allows simultaneous
service from opposite sides of the restaurant and one or two walk-up windows.
There is no inside seating area although most have a patio for outdoor eating.
Management of Drive Thru believes that the building form, design and
aesthetic appeal address key issues and concerns of the consumer: speed,
cleanliness, security, eye appeal and low maintenance. The original three
buildings were predominantly white ceramic tile and glass panels in a red metal
grid system. The design of the fourth and future buildings thereafter
constructed by Drive Thru or its franchisees was changed to facilitate modular
construction and highway transport and to enhance identity and visual appeal
thus improving drive-by customer awareness. The new building is modular in
construction with a reinforced concrete slab and welded tubular steel
structural members. The exterior consists of a cream-colored dry-vit system
with an enclosed glass vestibule at the front for walk-up service and to
exhibit the fast system of service. A brightly lit multi-colored fascia band
runs the entire length on both sides of the building in addition to product and
Good Times proprietary signage. The rest rooms and walk-in refrigerators are
modular components of the building. The buildings are transportable and
therefore can be moved from an unsuccessful site to a better location. Though
management does extensive site evaluation and expects a minimum number of
buildings will ever have to be moved, it is anticipated that two or three
underperforming Good Times units will be relocated in 1996. (Drive Thru's
original Good Times unit was demolished in April 1993 and the new modular
building replaced it on a different pad at the same site.)
As a result of the relatively small size of the restaurant building, Good
Times restaurants require significantly less capital investment and have
substantially lower operating costs per unit than recently constructed full-
service fast food restaurants. The cost of a fully equipped Good Times
restaurant is one-half to two-thirds the cost for a major fast-food restaurant
with seating and parking facilities. Because Good Times restaurants are small,
Good Times can take advantage of smaller and odd-sized lots that have little
or no development value or small pads and out lots of shopping centers and
malls, thereby decreasing ground lease costs and overall expenses.
Plan of Operation. The first objective of Drive Thru has been to develop
critical mass in the Denver television market (referred to as the Denver ADI
which includes Boulder, Greeley, Longmont and other communities in northern
Colorado.) Management believed that, in Denver, critical mass required
approximately 20 restaurants to be operating, which was the number of Good
Times operating in the Denver ADI when the decision was made to open the Las
Vegas Good Times restaurants. However, increased advertising by its
competitors and significant increases in the cost of advertising in Denver has
caused management to reevaluate critical mass as requiring 30 to 35 Good Times
restaurants in the Denver ADI. Good Times currently has nine company-owned,
six franchised and nine joint venture stores in the Denver ADI. Drive Thru also
operates one joint venture restaurant in Boise, Idaho and has one franchised
restaurant in Grand Junction, Colorado.
At September 30, 1995, the Company operated 17 company-owned and joint-
venture Good Times restaurants and had seven franchised restaurants open in
Colorado. Drive Thru acquired four former Rally's Hamburger restaurants in Las
Vegas, Nevada which were converted to Good Times units, but were sold as of
November 30, 1995. These units are not included in this total.
September 30, 1994 September 30, 1995
Company-owned restaurants 8(1) 9
Joint venture restaurants 5 8
Franchise operated restaurants 2 7
Total restaurants 15 24(2)
(1) This total includes the company-owned Good Times restaurant in Greeley,
Colorado. That restaurant was sold to a franchisee in March 1995 and is
included in the September 30, 1995 total of franchise operated restaurants.
(2) Subsequent to September 30, 1995, Drive Thru opened two joint-venture
Good Times restaurants; one in Boise, Idaho and one in the Denver ADI.
In fiscal 1996, Drive Thru will focus on developing new Good Times
restaurants in the Denver ADI primarily through franchising. Drive Thru
currently has in place seven franchise agreements; five are in the Denver ADI,
one is for the Western Slope of Colorado; and one is for Boise, Idaho. Drive
Thru is also currently in negotiations with several other potential franchisees
for the development of additional units in Colorado.
Management anticipates that Drive Thru and its existing franchisees will
develop a total of five to eight Good Times units in the Denver ADI in calendar
1996. Two of those units are anticipated to be joint venture units and the
remainder are to be franchised units. The current plan in the Denver ADI in
1996 is that two new Good Times restaurants will be opened in the second
quarter of calendar 1996, at least three new Good Times restaurants will be
opened in the third quarter of calendar 1996 and two new Good Times units will
be opened in the fourth quarter of calendar 1996.
The implementation of the development schedule set forth above for the
Denver ADI during fiscal 1996 will help Drive Thru achieve the "critical mass"
for media advertising necessary to effectively compete in the Denver market.
Reaching such critical mass increases media advertising and supervision
efficiencies thereby creating high consumer awareness so as to increase average
restaurant sales volumes.
Drive Thru's ongoing objective is to continue to increase average
restaurant sales through increased customer counts in each day part (lunch,
dinner and late-night), selective menu and price promotions and effective
marketing of Good Times competitive attributes of high quality products, quick
service and low prices. Drive Thru is also evaluating the performance of Good
Times units whose sales are significantly below the average of other Good Times
locations. It is likely that two or three underperforming Good Times
restaurants will be relocated in 1996 and that Drive Thru will take a charge
against earnings relating to the write-off of certain non-reusable assets of
these restaurants.
Operations and Management. Good Times has defined three ingredients
essential to its success: (I) consistent delivery of high quality products;
(ii) speed of service; and (iii) value pricing. The order system at each Good
Times restaurant is equipped with an internal timing device that displays and
records the time each order takes to prepare and deliver. The total
transaction time for the delivery of food at the window is approximately 30 to
45 seconds which is significantly faster than most of the larger full-service
hamburger chains.
Each Good Times unit employs a general manager, two assistant managers
and approximately 25 employees most of whom work part-time during three shifts.
Operating systems and training materials are utilized to ensure consistent
performance to Good Times' standards. An eight to ten week training program
is utilized to train restaurant managers on all phases of the operation.
Ongoing training is provided as necessary. Management of Drive Thru believes
that incentive compensation of its restaurant managers is essential to the
success of its business. Accordingly, in addition to a salary, managerial
employees may be paid a bonus based upon proficiency in meeting financial and
performance objectives. Drive Thru provides a medical and dental insurance
plan to management with a portion of the cost contributed by the participating
employee.
Drive Thru presently purchases its products from independent food
processors and distributors and does not anticipate any difficulty in
continuing to obtain an adequate quantity of food products of acceptable
quality and at acceptable prices.
Financial and management control is maintained through the use of data
processing and centralized accounting and management information systems which
are provided by the Company. Restaurant managers forward sales reports, vendor
invoices, payroll data and other operating information to Drive Thru's
headquarters. Management receives weekly and monthly reports identifying food,
labor and operating expenses and other significant indicators of restaurant
performance. Management of Drive Thru believes that such reporting
requirements enhance its ability to control and manage its expanding
operations.
Drive Thru employs a full-time Director of Human Resources whose
principal responsibility is to recruit and coordinate the training of
management personnel required for continued expansion of Good Times units in
the Denver ADI. In addition, Drive Thru has one real estate manager whose
responsibility is to lease or purchase sites for franchise and company
development and one construction manager who is responsible for the
construction of new units.
Marketing and Advertising. Marketing activities to date have focused on
radio advertising and restaurant level promotions in the immediate trade area
around each location. Drive Thru aired its first television advertising in
fiscal 1995, however, additional restaurants in the Denver ADI are required to
support a regular schedule of television media. Within the Denver market the
ultimate objective is to develop adequate market penetration by establishing
a sufficient number of Good Times restaurants to support radio and television
advertising.
In April 1993, Good Times initiated its first radio advertising campaign.
Management believes that the implementation of radio advertising and continued
complimentary "word of mouth" was the principal reason that same store sales
showed increases of 19.6% for fiscal 1994 over fiscal 1993 and 15.4% for the
first six months of fiscal 1995 over fiscal 1994. Good Times ran its first
television advertising campaign between March and June 1995. However, in the
second half of fiscal 1995, Good Times' competitors increased their
advertising, focusing on price promotions and tie-ins with major motion
pictures. This, coupled with adverse weather in April and May, rendered the
television and radio advertising for Good Times much less effective than in the
past.
The cost of effective television advertising has also increased
significantly and Drive Thru does not anticipate television advertising to be
repeated in 1996. It is anticipated that with the fulfillment of the 1996
development schedule, Good Times will advertise on television in 1997. The
marketing efforts of Good Times focus on building "brand awareness" of the Good
Times concept, combined with product and pricing messages, which is important
as hamburger operators compete against one another based on price. Drive Thru
believes that it has a higher quality product, delivered to the customer
faster, at an equal or better value than its competitors.
Signage is one of the most important elements for establishing identity
at each location. The Good Times restaurant sign package that has been
developed offers flexibility based on local codes, site layout and surrounding
property. The free-standing sign can be dimensionally increased or decreased
while maintaining the same look and can be pole-mounted for high traffic areas
where allowed.
Franchise Program. Drive Thru has prepared prototype area rights and
franchise agreements, a Uniform Franchise Offering Circular and advertising
material to be utilized in soliciting prospective franchisees. Drive Thru
seeks to attract franchisees having experience as restaurant operators, that
are well-capitalized and have demonstrated the ability to develop multi-unit
franchises. Drive Thru will carefully review sites selected for franchises and
will monitor performance of franchise units. Good Times is currently working
with potential franchisees only for development of units in Colorado.
Drive Thru estimates that it will cost a franchisee on average
approximately $475,000 to $575,000 to open a Good Times restaurant, including
pre-opening costs and working capital and assuming the land is leased. A
franchisee typically will pay a royalty of 4% of gross sales, an advertising
fee of at least .5% of gross sales, plus participation in regional or national
advertising when developed up to 4% of sales, and initial development and
franchise fees aggregating $20,000 per unit. Among the services and materials
which Drive Thru provides to franchisees are site selection assistance, plans
and specifications for construction of the Good Times restaurants, an operating
manual which includes product specifications and quality control procedures,
training, on-site pre-opening supervision and advice from time to time relating
to operation of the franchised restaurant.
Initial franchise development has been focused principally in the Denver
ADI. In fiscal 1995 Drive Thru entered into new franchise agreements for the
Western Slope of Colorado and Boise, Idaho. In 1996, Good Times will seek
franchisees for development of additional units in the Denver ADI.
Drive Thru has entered into four franchise development agreements in the
Denver ADI. Six franchise units and nine joint-venture units have been
developed under the development agreements for the Denver ADI. One joint-
venture unit and two franchised units are expected to be developed in 1996
pursuant to these agreements. One franchise unit (in Grand Junction, Colorado)
has been open pursuant to the development agreement for the Western Slope of
Colorado and an additional unit in Silverthorne, Colorado is anticipated to be
open by the franchisee in 1996. One joint-venture unit has been opened in
Boise, Idaho in 1995, however, no additional units are planned to be open in
Boise in 1996.
Pursuant to these development agreements, in the event that Drive Thru
plans the development of a new Good Times unit in the franchisee's development
area, Drive Thru must notify the franchisee, provide information regarding the
site, including a site evaluation, and the franchisee then has the option to
franchise that unit or waive his rights as to that unit. In circumstances
where Drive Thru and the franchisee have agreed to co-develop units,
co-developed units will be established pursuant to limited partnerships in which
Drive Thru will be the general partner and the developer will be the limited
partner. Each partner will have a 50% interest in the partnership and will,
therefore, be obligated to pay 50% of development costs. As general partner,
Drive Thru receives a management fee and/or franchise royalty payments.
Currently, Drive Thru is negotiating with additional groups for
franchises in Colorado. In addition to the Good Times restaurants being
developed in 1996 pursuant to existing development agreements, Drive Thru
anticipates two to four additional franchised units to be opened in the Denver
ADI during calendar 1996. Furthermore, Drive Thru is negotiating the sale of
two existing company-owned Good Times units to two existing franchisees.
Development agreements provide for payment of development fees to Drive
Thru by the developer and require that the developer enter into a franchise
agreement covering each franchised restaurant. The franchise agreements
generally provide for payment of franchise fees and royalties of 4% of annual
sales. Under certain circumstances, Drive Thru has allowed a sliding scale of
royalty payments based on sales volumes.
Operations to Date. The first Good Times prototype unit was opened in
Boulder, Colorado, in September 1987. Operations were refined at that
restaurant so as to achieve greater efficiency and quality of products. The
next two Good Times! Drive Thru BurgersSM restaurants were opened in 1988, one
in Denver and one in Thornton, Colorado. Subsequently, after it was determined
the Thornton location was not generating a desirable sales volume, the building
was dismantled and reassembled on a site in Denver. Management believes that
this relocation of the structure validated Drive Thru's subsequent decision to
use a modular building which can be economically dismantled and moved to a more
attractive site.
In August 1991, Drive Thru formed Good Times Limited Partnership I, of
which Drive Thru was the sole general partner. The Partnership opened a Good
Times restaurant in Greeley, Colorado, in August 1991. Effective October 1,
1992 all of the limited partners agreed to convert their limited partnership
interests into a total of 114,306 shares of common stock of the Company and
warrants to purchase 57,153 shares of common stock at $3.50 per share, such
warrants expiring July 15, 1995. The expiration date of the warrants was
subsequently extended to February 10, 1997. In March 1992, Drive Thru opened
a fifth Good Times restaurant in Denver. The site was previously utilized for
a Rally's double drive-through restaurant which had been closed. The building
was remodeled to generally conform to the format, including signage, of Good
Times units.
In November 1992 and March 1993, Drive Thru opened its sixth and seventh
restaurants in the Denver metropolitan area. These units were subsequently
sold to the franchisee for the south Denver metropolitan area pursuant to the
development agreement between Drive Thru and the franchisee.
Drive Thru opened its eighth unit on October 19, 1993, 50% of which was
sold to an existing franchisee on February 1, 1994, and opened twelve
additional restaurants during calendar 1994. Six of these were co-developed
with the same franchisee, two were franchises and four were company-owned. In
calendar 1995, Drive Thru opened six new restaurants, including four units in
the Denver ADI of which one was company-owned, two were joint-venture units and
one was a franchised unit. Drive Thru opened one franchised unit in Grand
Junction, Colorado and one joint-venture unit in Boise, Idaho.
Good Times opened two restaurants in June 1995 and two restaurants in
August 1995 in Las Vegas, Nevada. These units were previously owned by a
franchisee of Rally's Hamburgers, Inc. However, Drive Thru experienced
unexpected difficulty in securing suitable locations on which it could develop
new units at reasonable cost in the Las Vegas market and realized that critical
mass could not be achieved within an acceptable period of time. Since the four
units would continue to operate at a significant loss until Drive Thru could
effectively advertise in the Las Vegas market, management decided to cease
operations in Las Vegas and sell the stores. The four Las Vegas units were
closed on October 31, 1995 and sold as of November 30, 1995. In addition to
approximately $315,000 in operating losses in Las Vegas, the Company took a
charge of $710,000 for the discontinuance of its Las Vegas operations and
write-down of assets in fiscal 1995.
Employees. At December 1, 1995, Drive Thru employed approximately 572
persons (including approximately 513 hourly), of whom 33 were management and
staff personnel, 72 were restaurant management and 467 were restaurant
employees. Drive Thru considers its employee relations to be good. None of
its employees is covered by a collective bargaining agreement.
Round The Corner
Round The Corner Restaurants, Inc., was founded in Boulder, Colorado in
1968. RTC operates eleven restaurants, with ten restaurants along the Eastern
Slope of the Rocky Mountains in Colorado and a food court outlet located in the
California Mall in downtown Denver. RTC also has three franchises, two of
which are operating in Colorado Springs and one 1,500 square foot restaurant
in Dallas, Texas. Most facilities are approximately 4,000 square feet and are
located in or adjacent to major shopping malls or other high traffic areas.
Though RTC contributed approximately $115,000 of cash flow to the Company
in fiscal 1994, it experienced a net loss of $606,000 in fiscal 1995. In
August 1994, management anticipated that RTC would incur losses in 1995 and,
as a result of this expectation and the negative trends at RTC, Company and RTC
management began an analysis of the business and assets of RTC in order to
formulate a plan for RTC. This analysis resulted in the decision to sell RTC.
On September 30, 1995, the Company completed the sale of RTC to Hot
Concepts in consideration for $100,000 in cash, a note in the amount of
$291,394, and the assumption of all of RTC's liabilities. The sale of RTC by
the Company resulted in a deferred gain of $66,000 which will be recognized as
the note is paid off by Hot Concepts. As a result of the sale of RTC to Hot
Concepts and the assumption of RTC's liabilities by Hot Concepts, the Company's
financial performance will no longer be affected by RTC.
Government Regulation
Each of the Good Times restaurants is subject to the regulations of
various health, sanitation, safety and fire agencies in the jurisdiction in
which the restaurant is located. Difficulties or failures in obtaining the
required licenses or approvals could delay or prevent the opening of a new Good
Times restaurant. Federal and state environmental regulations have not had a
material effect on Good Times' operations. More stringent and varied
requirements of local governmental bodies with respect to zoning, land use and
environmental factors could delay or prevent development of new restaurants in
particular locations. The Company and Drive Thru are subject to the Fair Labor
Standards Act which governs such matters as minimum wages, overtime and other
working conditions. In addition, the Company and Drive Thru are subject to the
Americans With Disabilities Act (the "ADA") which requires restaurants and
other facilities open to the public to provide for access and use of facilities
by the handicapped. Management believes that the Company and Drive Thru are
in compliance with the ADA.
The Company and Drive Thru are also subject to federal and state laws
regulating franchise operations, which vary from registration and disclosure
requirements in the offer and sale of franchises to the application of
statutory standards regulating franchise relationships.
Competition
The restaurant industry, including the fast food segment, is highly
competitive. Drive Thru competes with a large number of other hamburger
oriented, fast food restaurants in the areas in which it operates. Many of
these restaurants are owned and operated by regional and national restaurant
chains, many of which have greater financial resources and experience than does
the Company. Restaurant companies that currently compete with Good Times in
the Denver market include McDonald's, Burger King, Wendy's and Hardee's.
Double drive through restaurant chains such as Rally's Hamburgers, Inc. and
Checker's Drive-In Restaurants, Inc., currently operating a total of over 1,000
double drive through restaurants in various markets in the United States, are
not currently operating in Colorado. Management of Drive Thru believes that
such double drive through restaurant chains will not expand into Colorado;
however, such possibility exists and would result in significant competition
for Drive Thru.
Management of Drive Thru believes that it may have a competitive
advantage in terms of quality of product and price-value compared to
traditional fast food hamburger chains. However, recent price discounting by
the major fast food hamburger chains has had a detrimental effect on Good
Times' sales. Early development of its double drive through concept in
Colorado has given Drive Thru an advantage over other double drive through
chains that may seek to expand into Colorado because of Good Times' brand
awareness and present restaurant locations. In addition, management of Drive
Thru believes Drive Thru has a competitive advantage in the areas of
purchasing and distribution, financial systems, marketing, construction, site
selection, quality assurance and training. Nevertheless, Drive Thru may be at
a competitive disadvantage with other restaurant chains with greater name
recognition and marketing capability. Furthermore, most of Drive Thru's
competitors in the fast-food business operate more restaurants, have been
established longer and have greater financial resources and name recognition
than Good Times. There is also active competition for management personnel,
as well as for attractive commercial real estate sites suitable for
restaurants.
Trademarks - Colorado
Drive Thru has registered its mark "Good Times! Drive Thru Burgers"SM in
the state of Colorado and will endeavor to register such mark in each state it
or a franchisee intends to open a restaurant. At present, Drive Thru relies
solely upon common law trademark protection and state registration. Such
reliance will not protect Drive Thru against a prior user of the mark and, if
prior use is established, Drive Thru may not be able to use the mark in the
area of such use. Drive Thru has applied for federal trademark registration.
No assurance can be given that any such registration will issue or, if it does
issue, that Drive Thru's right to the name will be protected in all desirable
jurisdictions. While the mark is important to Drive Thru, unavailability of
the mark in any particular geographic area into which it desires to expand
operations may not necessarily be materially adverse. Such name non-
availability may, however, preclude the economies and other advantages which
may be available through nationwide or regional marketing and advertising.
ITEM 2. PROPERTIES
As of December 31, 1995, Drive Thru has an ownership interest in 19 Good
Times units, 18 of which are located in Colorado and one in Boise, Idaho. Ten
are held in limited partnerships of which Drive Thru is a general partner and
has a 50% interest in the partnership. There are nine Good Times units wholly-
owned by Drive Thru.
Each of the Good Times restaurants is a free-standing structure
containing approximately 880 square feet situated on lots of approximately
18,000 to 25,000 square feet. The land is leased at all of these locations.
Drive Thru intends to enter into ground leases wherever possible. However,
there is no assurance that leasing will be available for desirable sites and
Drive Thru may be required to purchase such sites. In the event financing is
not available for such acquisitions, Drive Thru may have to utilize cash that
could otherwise be used to develop additional Good Times restaurants. In such
event, Drive Thru will endeavor to enter into sale/leaseback transactions for
such real estate.
All of the restaurants are regularly maintained by the Company's repair
and maintenance staff as well as by outside contractors, when necessary.
Management believes that all of its properties are in good condition and that
there will not be a need for significant capital expenditures to maintain the
operational and aesthetic integrity of the properties for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS
To the knowledge of management, no legal proceedings are pending or
threatened against the Company or Good Times or their respective properties
which could have a material adverse effect upon the Company or Good Times.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's outstanding shares of Common Stock (the "Common Stock") and
Common Stock Purchase Warrants (the "Warrants") are traded in the over-the-
counter market. The following table sets forth the quarterly high and low bid
prices as reported by the National Quotation Bureau Incorporated and NASDAQ
from October 1, 1993 through September 30, 1995, as adjusted for the one-for-
four reverse stock split in May 1992. The quotations represent prices quoted
between dealers and do not include commissions, mark-ups or mark-downs and thus
may not represent actual transactions.
Common Stock Series A Warrants Series B Warrants
Bid Prices Bid Prices Bid Prices
Quarter Ended High Low High Low High Low
December 31, 1993 2.25 1.56 .59 .28 N/A N/A
March 31, 1994 2.00 1.50 .50 .31 .50 .25
June 30, 1994 1.56 1.13 .25 .19 .34 .25
September 30, 1994 1.59 1.19 .25 .19 .31 .28
December 30, 1994 1.47 1.27 .22 .21 .31 .26
March 31, 1995 1.38 1.11 .11 .14 .26 .22
June 30, 1995 1.67 1.29 .15 .13 .32 .23
September 30, 1995 1.20 .96 .10 .08 .15 .09
As of September 30, 1995, there were approximately 385 holders of record
of Common Stock and 109 holders of Warrants. However, management estimates that
there are not fewer than 2,257 beneficial owners of the Company's Common Stock.
The NASDAQ symbols for the Common Stock and the outstanding Series A warrants
and Series B warrants are "GTIM", "GTIMW," and "GTIMZ", respectively.
In August 1994, the Company gave notice ot the holders of the Series A
warrants that the expiration date of such warrants had been extended from June
15, 1995 to February 10, 1997.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company's ability to
pay future dividends will necessarily depend upon its earnings and financial
condition. However, since restaurant development is capital intensive, it is
the intention of the Company to retain earnings, if any, for that purpose.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE COMPANY, GOOD TIMES AND RTC
On July 27, 1992, the stockholders of the Company approved a merger with
RTC. For financial statement purposes, RTC was considered the acquiring company
and the transaction was treated as a purchase by RTC of the Company, effective
August 1, 1992. For legal purposes, however, the Company remained the surviving
entity and the combined entity retained the Company's capital structure.
In February 1993, the Company's operations and management were reorganized
to allow Drive Thru and RTC to function as separately accountable entities and
to allow RTC's and Drive Thru's managements to focus exclusively on their
respective businesses. The Company provided administrative and accounting
support to Drive Thru and RTC in fiscal 1995 and charged monthly management fees
of $70,000 and $35,000, respectively, for such services. On September 29, 1995,
the Company completed the sale of RTC to Hot Concepts and ceased providing these
services to RTC. As a result, the Company will no longer receive management
fees from RTC. The Company does not antncipate a material reduction in its
general and administrative expenses due to the sale of RTC. However, the
Company is able to provide management services to Drive Thru without
significantly increasing general and administrative expenses in spite of the
increase in the number of Drive Thru units. Beginning in fiscal 1996, the
administrative and accounting functions of the Company will be consolidated with
Drive Thru's operations and no management fees will be charged to Drive Thru.
The following selected financial data is derived from the companies'
historical financial statements and is qualified in its entirety by such
financial statements which are included in Item 7.
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
The following presents certain historical financial information of the
Company. This financial information includes the combined operations of the
Company, Drive Thru and RTC for the fiscal years ended September 30, 1994 and
1995.
<PAGE>
Year Ended
September 30,
Operating Data: 1994 1995
Net Revenues $15,177,000 $17,522,000
Restaurant Operating Costs:
Food and paper costs 4,984,000 6,090,000
Labor, occupancy and other 7,333,000 9,169,000
Depreciation and amortization 457,000 700,000
Loss on disposal of restaurant
and equipment - (360,000)
Loss on Las Vegas
discontinued operations - (710,000)
Total restaurant operating costs 12,774,000 17,029,000
Income From Restaurant Operations 2,403,000 493,000
Selling, General and Administrative
Expense 2,279,000 2,343,000
Income (Loss) From Operations 124,000 (1,850,000)
Other Income and (Expenses):
Minority income (expense), net (141,000) (131,000)
Interest, net (71,000) (10,000)
Other, net (90,000) (99,000)
Total other income and (expenses) (302,000) (240,000)
Net Loss $ (178,000) $(2,090,000)
Net Loss Per Share $ (.04) $ (.30)
Weighted Average Shares Outstanding 4,985,000 6,863,000
September 30,
1994 1995
Balance Sheet Data:
Working Capital (deficit) $(707,000) $(795,000)
Total assets 12,802,000 9,285,000
Minority Interest 1,641,000 1,735,000
Long-term debt 1,374,000 378,000
Stockholders' equity $7,050,000 $4,986,000
Results of Operations
For fiscal 1994, the operating results of the Company included its two
operating subsidiaries, Drive Thru and RTC. The operating results for fiscal
1995 include a full year of operations for Drive Thru and the operations of RTC
only for the first six months of fiscal 1995. Operating results of RTC from
April 1, 1995 to September 30, 1995 are included in loss on disposal of
restaurants and equipment in the consolidated statement of operations as a
result of the Company's formal plan of disposal of RTC adopted on March 31,
1995. Therefore, in the following discussion and analysis, management has
limited its discussion of RTC's operating results to its net revenues and the
net losses of the Company attributable to RTC. Increases in revenues and
expenses between years for the Company are primarily the result of the addition
of new Good Times restaurants. These increases are partially offset by
decreases in RTC revenues and expenses. Explanation of such changes is provided
below in the detailed discussion of the operating performance between years.
Fiscal Years 1995 and 1994
Net Revenues. Net revenues for the year ended September 30, 1995,
increased $2,345,000 (15.5%) to $17,522,000 from $15,177,000 for the year ended
September 30, 1994. This increase is primarily attributable to an increase in
revenue of Drive Thru of $7,157,000 (105%) to $13,959,000 in fiscal 1995 from
net revenues of $6,802,000 for fiscal 1994. Fiscal 1995 net revenues includes
RTC net revenues of $3,563,000 through March 31, 1995. RTC's full fiscal 1995
net revenues of $6,597,000 (including net revenues of $3,034,000, which are a
component of loss on disposal of restaurants and equipment, for the period from
April 1, 1995 to September 30, 1995) decreased by $1,775,000 from net revenues
of $8,372,000 in fiscal 1994. The decline in RTC's net revenues was primarily
attributable to increased competition and the Company's decision to focus its
resources on Drive Thru rather than utilizing those resources to enhance the RTC
concept to make it more competitive in the casual theme segment of the
restaurant industry. The Company ceased reporting results from RTC as of
April 1, 1995. Had the Company included a full year of RTC net revenues in
its fiscal 1995 results, net revenues for the Company for the year ended
September 30, 1995 would have been $20,556,000. One Good Times unit was sold
by Drive Thru to a franchisee in March 1995. The unit generated net revenues
of $139,000 during the time it was operated by Drive Thru in fiscal 1995.
Therefore, the operating results of this restaurant are only included in Drive
Thru's and the Company's operating results through February 28, 1995.
The increase in revenues at Drive Thru is primarily attributable to the
opening of additional company-owned and franchised Good Times units during
fiscal 1995 and a 6.5% increase in same store sales for stores that have been
open fifteen months or longer. However, in the
last six months of fiscal 1995, same store sales declined 3.0% for all Good
Times units opened fifteen months or longer. Average unit volumes for the
company-owned Drive Thru restaurants open all of fiscal 1995 were $896,000.
Based on the trend for the last six months of fiscal 1995, on an annualized
basis average unit volumes for Company-owned and joint-venture units has
declined to $859,000. Only three franchise restaurants were open for the full
1995 fiscal year. Those restaurants had net revenues of $1,067,000, $904,000,
and $343,000, respectively, which was the basis for franchise royalty fees to be
paid to Drive Thru. During the last six months of fiscal 1995, the six
franchised Good Times units open for the full six month period are generating
annual average unit volumes of $762,000 on an annualized basis.
Food and Paper Costs. In fiscal 1995, Drive Thru's food and paper costs
were 36.5% of net restaurant sales compared to 37.2% of net restaurant sales in
fiscal 1994. The decline in Drive Thru's food and paper costs is primarily
attributable to lower beef prices and an improvement in overall commodity prices
resulting from the increased purchasing economies of Drive Thru.
Income From Restaurant Operations. For the year ended September 30, 1995,
the Company's income from restaurant operations was $493,000 (including $245,000
of income from restaurant operations of RTC through March 31, 1995) compared to
$2,403,000 (including $1,136,000 in income from restaurant operations of RTC
through March 31, 1995) in fiscal 1994. The decrease in income from restaurant
operations is principally the result of a ($710,000) loss relating to Drive
Thru's exit from the Las Vegas market and ($360,000) of operating losses
associated with RTC oeprations from the time the disposal plan was approved
through its disposal on September 30, 1995 and the disposal of restaurants and
equipment resulting from the sale of RTC. Without those charges, the Company
would have had income from restaurant operations (including income from
restaurant operations of RTC through March 31, 1995) of $1,563,000 in fiscal
1995. Drive Thru's income from restaurant operations was $284,000 (excluding
franchise revenues) in fiscal 1995 compared to $1,097,000 (excluding franchise
revenues) in fiscal 1994. The decrease in income from restaurant operations for
Drive Thru is primarily attributable to the closure and sale of the Good Times
units in Las Vegas and accrued expenses associated with the anticipated
relocation of an existing Good Times restaurant. Drive Thru does not anticipate
future charges associated with its discontinued operations in Las Vegas in
future reporting periods. Drive Thru's income from restaurant operations was
negatively impacted in fiscal 1995 by increased labor costs and lower average
unit sales in the last six months of fiscal 1995. Labor costs rose due to
higher management salaries and hourly wages resulting from an increasingly
competitive labor market in Colorado. There was also an increase in Drive Thru
net franchise development fees and royalties from $165,000 in fiscal 1994 to
$209,000 in fiscal 1995. Income from restaurant operations for Drive Thru were
negatively impacted by an increase in new store opening cost amortization of
$422,000 in fiscal 1995 from $95,000 in fiscal 1994.
Income (Losses) From Operations. The Company had loss from operations
before other income and expenses of ($1,850,000) in fiscal 1995 compared to
income from operations of $124,000 in fiscal 1994. Income from operations was
primarily affected by the losses associated with the closing of the four Las
Vegas units and the sale of RTC and a decline in operating performance of RTC
restaurants. Drive Thru had a loss from operations of ($599,000) in fiscal 1995
(exclusive of the $710,000 charge for the closure and sale of its Las Vegas
units and $66,000 in accrued expenses for the anticipated relocation of one
Drive Thru unit) compared to income from Drive Thru operations of $170,000 in
fiscal 1994. Drive Thru does not anticipate future charges associated with its
discontinued operations in Las Vegas in future reporting periods. Selling,
general and administrative expenses decreased from $2,279,000 (15% of net
revenues) to $2,343,000 (13.4% of net revenues) in fiscal 1995. Management of
the Company believes that selling, general and administrative expenses will
remain approximately the same in fiscal 1996.
Net Loss. The net loss for the Company was ($2,090,000) for the year ended
September 30, 1995, compared to a net loss for the Company of ($178,000) for the
year ended September 30, 1994. Drive Thru had a net loss of ($1,527,000) in
fiscal 1995 compared to net income of $83,000 in fiscal 1994. Of this amount,
($710,000) is attributable to the closure of Drive Thru's Las Vegas operations
and approximately ($315,000) are losses from operations in fiscal 1995 for the
Las Vegas Good Times units. RTC incurred a net loss of ($606,000) in fiscal
1995 compared to a net loss of ($87,000) in fiscal 1994.
In addition to the net losses of Drive Thru and RTC in the year ended
September 30, 1995, the Company, exclusive of its subsidiaries, had net income
of $43,000 compared to a loss of ($175,000) in the year ended September 30,
1994. In fiscal 1995, the Company charged Drive Thru and RTC a monthly
management fee for services equal to $70,000 and $35,000, respectively.
Generally, the Company, exclusive of its subsidiaries, will incur a loss that is
attributable principally to depreciation of corporate assets and net interest
expense; however, in fiscal 1995, that loss was eliminated due to a decrease in
general and administrative expenses incurred by the Company compared to its
original budget, upon which the management fee was based. With the sale of RTC,
the Company's general and administrative expenses will be consolidated with
Drive Thru's operations.
Liquidity and Capital Resources
As of September 30, 1995, the Company had $767,000 of cash and marketable
securities on hand. Drive Thru had cash on hand of $686,000. The remaining
$81,000 was the Company's cash on hand. This amount is believed sufficient to
cover working capital needs of the Company for the 1996 fiscal year. The
Company and Drive Thru had a combined working capital deficit of ($795,000).
In April 1995, the Company negotiated the extension of the maturity of $300,000
of notes that matured on May 31, 1995 for an additional five year term. Because
restaurant sales are collected in cash and accounts payable for food and paper
products are paid two to four weeks later, restaurant companies often operate
with working capital deficits. It is anticipated that working capital deficits
will expand as new Drive Thru restaurants are opened. Subsequent to September
30, 1995, Drive Thru utilized a significant portion of its cash-on-hand for the
development of a joint-venture Good Times unit in Denver, which opened in
December 1995. Drive Thru's co-development partner has not made its required
payment to Drive Thru as of the date of this filing. Therefore, in order to
bolster Drive Thru's cash reserves and provide additional working capital, Drive
Thru is negotiating the sale of two company-owned Drive Thru restaurants. The
sale of RTC is not expected to have an adverse impact on the cash flows of the
Company or Drive Thru.
Net cash used in operating activities of the Company was ($451,000) for
fiscal 1995 compared to net cash provided by operating activities of the Company
of $1,063,000 in fiscal 1994. This was the result of a net loss of ($2,090,000)
for fiscal 1995, non-cash reconciling items totaling $1,560,000 (comprised
principally of depreciation and amortization, minority interest and a loss on
the planned exit of the Las Vegas market of ($710,000) and increases in
operating assets and liabilities totaling $79,000 (primarily a decrease in
accounts receivable, prepaid expenses, accrued other liabilities, and accounts
payable). The cash and cash equivalent balance was $767,000 and $522,000 as of
September 30, 1995 and 1994, respectively.
Net cash provided by investing activities by the Company in fiscal 1995 was
$1,041,000 which includes proceeds from the sale of assets of $2,792,000, the
purchase of marketable securities for $2,541,000, the sale of marketable
securities of $1,517,000 and the purchase of property and equipment for
$2,775,000. Drive Thru utilizes all cash provided by investing activities for
capital expenditures consisting primarily of expenditures for the development of
new Good Times restaurants. In fiscal 1994 and 1995, Drive Thru developed five
company-owned Good Times restaurants and eight co-developed units. The Company
expects that capital expenditures will decrease in fiscal 1996 as additional
Good Times restaurants are primarily developed by franchisees. Drive Thru
entered into an equipment lease line of credit in the amount of $2 million of
which it has utilized approximately $550,000 as of December 20, 1995. The line
of credit required the Company and Drive Thru to maintain certain financial and
operating criteria. One requirement is that the Company and Drive Thru each
maintain a net worth of at least $5.5 million. As a result of the losses
incurred by the Company and Drive Thru in fiscal 1995, the Company and Drive
Thru are in violation of such requirement and the Lessor has declared an event
of default to have occurred. The Company is currently negotiating the
restructuring or prepayment of the lease financing and does not anticipate that
such restructuring or prepayment will have a materially adverse impact on the
operations of the Company or Drive Thru. However, it is anticipated that no
further leases will be entered into pursuant to the lease line of credit.
Net cash used in investing activities by the Company in fiscal 1994 was
$6,677,000, which included proceeds from the sale of assets of $400,000, the
sale of marketable securities for $1,034,000, and the purchase of property and
equipment for $6,071,000.
Net cash used in financing activities by the Company in fiscal 1995 was
$345,000 which includes principal payments on notes payable and long-term debt
of $630,000, borrowings on notes payable and long-term debt of $56,000
distributions to minority interests in partnerships of $414,000 and
contributions from minority interests in partnerships of $643,000.
Net cash provided by financing activities by the Company in fiscal 1994 was
$5,318,000, which included proceeds from the sale of common stock of $4,565,000,
principal payments on notes payable and long-term debt of $424,000, distribution
paid to minority interests in partnerships of $222,000, borrowings of $13,000,
and contributions from minority interest in partnerships of $1,386,000.
Neither the Company nor Drive Thru currently have any bank lines of credit.
The Company and Drive Thru currently intends to use its cash resources and
cash generated from operations for working capital and, to the extent possible,
to build cash reserves. No new company-owned Good Times restaurants are planned
for development in fiscal 1996. Drive Thru's existing cash resources, assuming
the sale of two company-owned Good Times units, are sufficient to meet Drive
Thru's current obligation to develop two co-developed units in Colorado in
fiscal 1996. Drive Thru will require additional capital in order to develop
additional company-owned Good Times Drive Thru restaurants in the future.
In the event Drive Thru is not successful in obtaining additional capital,
management intends to continue to develop Good Times Drive Thru restaurants
through franchising and joint development activities with existing and new
franchisees.
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This new
standard is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact of this
new standard on the Company's financial statements, the Company does not believe
that adoption of the new standard will have a material effect on the financial
statements.
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation (FAS 123). The new
statement is effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company currently does not intend to adopt the fair value
accounting rules of FAS 123, and will be subject only to the disclosure
requirements. However, the Company intends to continue its analysis of FAS 123
and may elect to adopt its provisions in the future.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES:
Independent Auditor's Report
Consolidated Balance Sheets - September 30, 1995
Consolidated Statements of Operations - For the Years Ended
September 30, 1995 and 1994
Consolidated Statement of Stockholders' Equity - For the Period from
October 1, 1993 to September 30, 1995
Consolidated Statements of Cash Flows - For the Years Ended
September 30, 1995 and 1994
Notes to Consolidated Financial Statements
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Good Times Restaurants Inc. and Subsidiaries:
Independent Auditor's Report
Consolidated Balance Sheet - September 30, 1995
Consolidated Statements of Operations - For the Years Ended
September 30, 1994 and 1995
Consolidated Statement of Changes of Stockholders' Equity -
For the Period from October 1, 1993 through September 30, 1995
Consolidated Statements of Cash Flows - For the Years Ended
September 30, 1994 and 1995
Notes to Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Good Times Restaurants Inc.
We have audited the accompanying consolidated balance sheet of Good Times
Restaurants Inc. and subsidiaries as of September 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended September 30, 1995 and 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Good Times
Restaurants Inc. and subsidiaries as of September 30, 1995, and the results of
their operations and their cash flows for the years ended September 30, 1995 and
1994, in conformity with generally accepted accounting principles.
Hein + Associates LLP
Denver, Colorado
December 1, 1995
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 767,000
Receivables 105,000
Inventories 70,000
Prepaid expenses and other 233,000
Total current assets 1,175,000
Property and Equipment, at cost:
Land and building 2,574,000
Leasehold improvements 2,763,000
Fixtures and equipment 3,118,000
8,455,000
Less accumulated depreciation and amortization (1,305,000)
7,150,000
Other Assets:
Assets held for sale 61,000
Note receivables 744,000
Other 155,000
960,000
Total Assets $9,285,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations $298,000
Accounts payable 611,000
Accrued wages and salaries 215,000
Accrued property taxes 129,000
Accrued cost of lease abandonment 133,000
Accrued loss on planned exit of Las Vegas market 145,000
Accrued and other liabilities 439,000
Total current liabilities 1,970,000
Long-Term Capital Lease Obligations,
net of current portion 78,000
Long-term Debt 300,000
Deferred Liabilities 216,000
Minority Interests in Partnerships 1,735,000
Commitments (Note 5)
Stockholders' Equity:
Common stock, $.001 par value; 50,000,000 shares
authorized, 6,898,152 shares issued and outstanding 7,000
Capital contributed in excess of par value 11,683,000
Notes receivable from officers (881,000)
Accumulated deficit (5,823,000)
Total stockholders' equity 4,986,000
Total Liabilities and Stockholders' Equity $9,285,000
See accompanying notes to these consolidated financial statements.<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
September 30,
1994 1995
Net Revenues:
Restaurant sales 15,012,000 $17,313,000
Area development & franchise fees 85,000 55,000
Franchise royalties 80,000 154,000
15,177,000 17,522,000
Restaurant Operating Costs:
Food and paper costs 4,984,000 6,090,000
Restaurant labor costs 4,558,000 6,071,000
Restaurant occupancy costs 2,094,000 2,007,000
Other restaurant operating costs 681,000 1,091,000
Depreciation and amortization 457,000 700,000
Loss on disposal of restaurants
and equipment - 360,000
Loss on planned exit of the
Las Vegas market - 710,000
Total restaurant operating costs 12,774,000 17,029,000
Income from Restaurant Operations 2,403,000 493,000
Selling, General and Administrative Expense:
General and administrative 1,540,000 1,549,000
Advertising 739,000 794,000
Total selling, general
and administrative expenses 2,279,000 2,343,000
Other Income (Expenses):
Interest income 111,000 90,000
Interest expense (182,000) (100,000)
Minority interest in income
of partnerships (141,000) (131,000)
Other, net (90,000) (99,000)
Total other expenses, net (302,000) (240,000)
Net Loss $ (178,000) $2,090,000)
Net Loss per Share $ (.04) $ (.30)
Weighted Average Shares Outstanding 4,985,000 6,863,000
See accompanying notes to these consolidated financial statements.<PAGE>
<TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 1, 1993 THRU SEPTEMBER 30, 1995
<CAPTION>
Common Stock Capital In Officers
Issued Par Excess Of Notes Accumulated
Shares Value Par Value Receivbls Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1993 2,979,102 $3,000 $6,140,000 $ - $(3,555,000) $2,588,000
Sale of stock in public
offering 3,216,000 3,000 4,562,000 - - 4,565,000
Stock issued for land 55,970 - 75,000 - - 75,000
Net loss - - - - (178,000) (178,000)
Balances, September 30, 1994 6,251,072 6,000 10,777,000 - (3,733,000) 7,050,000
Additional cost incurred for
Good Times public offering - - (7,000) - - (7,000)
Stock issued to employee
benefit plan 22,080 - 33,000 - - 33,000
Stock purchased by officers 625,000 1,000 880,000 - - 881,000
Notes receivable from officers
for stock purchase - - - (881,000) - (881,000)
Net loss - - - - (2,090,000)(2,090,000)
Balances, September 30, 1995 6,898,152 $7,000 $11,683,000 $(881,000)
$(5,823,000)$4,986,000
</TABLE>
See accompanying notes to these consolidated financial
statements.<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
September 30,
1994 1995
Cash Flows from Operating Activities:
Net loss $(178,000) $(2,090,000)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 457,000 700,000
Minority interest 141,000 131,000
Loss on planned exit of
Las Vegas market - 710,000
Unrealized loss on marketable
securities 39,000 -
Cash transferred in sale of subsidiary - (7,000)
Common stock for services - 26,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (47,000) 287,000
Inventories (4,000) (44,000)
Prepaid expenses and other (283,000) 154,000
(Decrease) increase in:
Accounts payable 310,000 (217,000)
Accrued and other liabilities 628,000 (101,000)
Net cash provided by (used in)
operating activities 1,063,000 (451,000)
Cash Flows from Investing Activities:
Purchase of property and equipment (6,071,000) (2,775,000)
Proceeds from sale of assets 400,000 2,792,000
Principal payments on notes receivable 28,000 -
Purchase of marketable securities (1,034,000) (1,517,000)
Sale of marketable securities - 2,541,000
Net cash (used in) provided by
investing activities (6,677,000) 1,041,000
Cash Flows from Financing Activities:
Proceeds from sale of common stock (net) 4,565,000 -
Principal payments on notes payable and
long-term debt (424,000) (630,000)
Borrowings on notes payable and
long-term debt 13,000 56,000
Distributions paid to minority interests
in partnerships (222,000) (414,000)
Contributions from minority interest in
partnerships 1,386,000 643,000
Net cash provided by (used in)
financing activities 5,318,000 (345,000)
Increase (Decrease) in Cash (296,000) 245,000
Cash, beginning of period 818,000 522,000
Cash, end of period $522,000 $767,000
See accompanying notes to these consolidated financial statements.
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $166,000 $100,000
Purchase of land, building, and equipment
through long-term debt and stock $350,000 $351,000
Stock issued to officers for notes
receivable $ - $881,000
Sale of land, building, and equipment for
notes receivable $ - $450,000
Stock issued to employee 401(k) plan $ - $ 26,000
Sale of RTC for notes receivable $ - $391,000
See accompanying notes to these consolidated financial statements.
1. Organization and Summary of Significant Accounting Policies:
Organization - Good Times Restaurants Inc. (Good Times or the Company)
is a Nevada corporation. In July 1992, Good Times merged with Round the
Corner Restaurants, Inc. (RTC). Good Times, prior to the merger and
currently as a subsidiary of the Company, operates as Good Times Drive
Thru Inc. (Drive Thru). All of the stock of RTC was sold as of
September 30, 1995.
Drive Thru commenced operations in 1986 and, as of September 30, 1995,
operates 17 company-owned and joint venture double drive-thru fast food
hamburger restaurants. In addition, Drive Thru has seven franchises
operating in Colorado, and is offering franchises for development of
additional Drive Thru restaurants. Subsequent to September 30, 1995,
the Company opened two co-developed restaurants, one in Boise, Idaho
and one in Denver, Colorado.
Principles of Consolidation - The consolidated financial statements
include the accounts of Good Times and its subsidiaries, including a
50% owned limited partnership in which the Company exercises control as
general partner. All intercompany accounts and transactions are
eliminated. The unrelated limited partners' equity of each partnership
has been recorded as minority interest in the accompanying consolidated
financial statements.
Deferred Opening Costs - The Company has deferred certain direct
incremental costs in connection with the opening of new restaurants.
The net pre-opening costs included in prepaid expenses is $114,000 at
September 30, 1995. The pre-opening costs are amortized over a one
year period.
Inventories - Inventories are stated at the lower of cost or market,
determined by the first-in, first-out method, and consist of restaurant
food items and related paper supplies.
Property and Equipment - Depreciation is recognized on the straight-
line method over the estimated useful lives of the assets or the lives
of the related leases, if shorter, as follows:
Building 15 years
Leasehold improvements 7-15 years
Fixtures and equipment 3-8 years
Maintenance and repairs are charged to expense as incurred, and
expenditures for major improvements are capitalized. When assets are
retired, or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation with any resulting gain or loss
credited or charged to income.
Sales of Restaurants and Restaurant Equity Interests - Sales of
restaurants or non-controlling equity interests in restaurants developed
by the Company are accounted for under the full accrual method or the
installment method. Under the full accrual method, gain is not
recognized until the collectibility of the sales price is reasonably
assured and the earnings process is virtually complete without further
contingencies. When a sale does not meet the requirements for income
recognition, gain is deferred until those requirements are met. Under
the installment method, gain is recognized as principal payments on the
related notes receivable are collected.
During 1995, the Company completed a sales/lease back of four parcels of
land with a cost basis of $1,287,000, which approximated the sales price.
Deferred Liabilities - Rent expense is reflected on a straight-line basis
over the term of the lease for all leases containing step-ups in base
rent. An obligation representing pro-rata future payments (which totaled
$96,000 as of September 30, 1995) has been reflected in the accompanying
consolidated balance sheet as a deferred liability. The remaining
balance represents deferred gain of $120,000 on the sale of various
buildings and RTC, as discussed in Note 2.
Advertising - The Company incurs advertising expense in connection with
marketing of its restaurant operations. Advertising costs are expensed
in the fiscal year incurred.
Franchise and Area Development Fees - Individual franchise fee revenue is
deferred when received and is recognized as income when the Company has
substantially performed all of its obligations under the franchise agree-
ment and the franchisee has commenced operations. Area development fees
and related direct expenses are recognized ratably upon opening of the
applicable restaurants. Continuing royalties from franchisees, which are
a percentage of the gross sales of franchised operations, are recognized
as income when earned. Franchise development expenses, which consist
primarily of legal costs associated with developing and executing master
franchise agreements, are expensed as incurred.
Statement of Cash Flows - For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Income Taxes - income taxes are provided for in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
SFAS No. 109 requires an asset and liability approach in the recognition
of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax bases of the Company's assets and liabilities.
Net Loss per Common Share - The computations of loss per share are based
on the weighted average number of common shares outstanding during each
fiscal period. Warrants and options outstanding are not included in the
computations in loss years because their effect would be antidilutive.
Impact of Recently Issued Accounting Standards - In March 1995, the
Financial Accounting Standards Board issued a new statement titled
"Accounting for Impairment of Long-Lived Assets." This new standard is
effective for years beginning after December 15, 1995 and would change
the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact
of this new standard on the Company's financial statements, the Company
does not believe that adoption of the new standard will have a material
effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation (FAS 123). The
new statement is effective for fiscal years beginning after December 15,
1995. FAS 123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on fair value. Companies that do not
adopt the fair value accounting rules must disclose the impact of
adopting the new method in the notes to the financial statements.
Transactions in equity instruments with non-employees for goods or
services must be accounted for on the fair value method. The Company
currently does not intend to adopt the fair value accounting rules of
FAS 123, and will be subject only to the disclosure requirements.
However, the Company intends to continue its analysis of FAS 123 and may
elect to adopt its provisions in the future.
2. Sale of Restaurants:
On September 30, 1995, the Company sold all its stock in RTC, a 100%
owned subsidiary, for $100,000 cash and a $291,000 note. The note has an
interest rate of prime minus 2% and is payable quarterly based on an
amortization period of 20 years, with a balloon payment at the end of
5 years. The Company has elected to report the gain on sale under the
installment method and to defer the unrealized gain of $66,000 on the
$291,000 note. The buyers of RTC were, in part, members of the
management of RTC before the sale. An officer of the Drive Thru is also
an investor in the entity that purchased RTC. Prior to the sale of RTC,
Good Times retained certain assets and liabilities of RTC, including a
$150,000 note payable and an $50,000 investment in a real estate joint
venture. In conjunction with the sale certain RTC employees who owned
Incentive Stock Options received new Non-statutory Options with the same
terms and conditions as the old options, which were cancelled. Included
in restaurant sales for the years ended September 30, 1995 and 1994 are
revenues related to RTC of $3,563,000 and $8,550,000, respectively. Net
losses of $614,000 and $87,000 are attributable to RTC operations for the
years ended September 30, 1995 and 1994, respectively. The 1995
financial statements only reflect RTC net revenues and operating costs
for the six months ended March 31, 1995, the date that a formal plan of
disposition was approved. Included in the net losses of RTC, is an
operating loss of approximately $229,000 from RTC operations from
April 1, 1995 through September 30, 1995 (the effective sale date), which
is included in loss on disposal of restaurants.
During the year, the Company opened four stores in Las Vegas, and
operated the stores for approximately four months. Prior to year-end,
the Company adopted a formal plan to exit from the Las Vegas market.
Subsequent to year-end, the Company entered into an agreement to sell all
of the Las Vegas stores, including certain items of furniture, fixtures,
and equipment, for approximately $120,000, and assign its rights and
obligations under the land and building leases to the purchaser. The
Company has recognized an expected loss on the exit of approximately
$710,000. The loss includes the write-off of approximately $417,000 of
unsold assets which could not be salvaged, an accrual of approximately
$74,000 for losses incurred after year end, an accrual for approximately
$51,000 in rent payments expected to be made until the purchaser takes
over the leases on or around February 1, 1995 and other expenses in the
amount of approximately $167,000. The Company has segregated the assets
held for sale in the Las Vegas restaurants on the balance sheet.
Revenues of $332,000 and net loss of $315,000 are attributable to the Las
Vegas restaurants' operations during the year ended September 30, 1995.
During the year, the Company adopted a plan to move a building and
equipment currently utilized by one of its restaurants to a new location
in 1996. Certain cost associated with the building, in the amount of
approximately $66,000 have been expensed in the current year in loss on
disposal of restaurants. These costs mainly consist of the write-off of
leasehold improvements and a land lease termination penalty.
3. Notes Receivable:
Notes receivable consist of the following as of September 30, 1995:
Notes receivable, 10%, due March 1, 1997, monthly payments
of interest only, collateralized by a building. $315,000
Note receivable, from purchaser of RTC, interest payable
at 2% below prime, payable in quarterly installments of
approximately $4,000, with remaining balance due in 2005,
collateralized by two RTC restaurants. 291,000
Note receivable, 12%, due October 1, 1997, monthly
payments of interest only, collateralized by a building. 75,000
Note receivable, 9%, monthly payments of principal and
interest in the amount of approximately $1,000, with
final payment on September 1, 2000. 60,000
Other notes, various terms. 108,000
849,000
Less current portion (105,000)
$744,000
4. Notes Payable and Long-Term Debt:
Long-term debt consist of notes payable totaling $300,000 to an
individual and his pension plan with interest at 12%, payable quarterly,
principal due in May 2000.
Subsequent to year-end, a co-developed limited partnership, of which the
Company is the general partner, entered into a $362,000 loan agreement to
finance the development of a restaurant in Boise, Idaho.
5. Commitments:
The Company's office space, and the land underlying the Drive Thru
restaurant facilities, are leased under operating leases. Certain leases
include provisions for additional contingent rental payments if sales
volumes exceed specified levels. Property and equipment includes
equipment under capital leases at September 30, 1995 of approximately
$440,000, less accumulated depreciation of approximately $75,000.
Depreciation of leased equipment is included in depreciation and
amortization expense. Two directors of the Company have personally
guaranteed certain leases.
The terms of one of the capital lease agreement requires, among other
items, the Company to maintain certain financial ratios and provide
certain financial information. As of September 30, 1995, the Company was
not in compliance with a covenant requiring the Company maintain equity
of $5,500,000, however, the Company is current on its monthly payment
obligation to the leasing company. Subsequent to September 30, 1995, the
Company received a notice of an event of default from the lessor. The
Company intends to renegotiate the terms of the lease agreement or pay
down the lease agreement. As such, the lease obligation has been
classified as a current liability. The future minimum rental commitments
for capital leases shown below, however, include monthly payments based
on the original terms of the agreement.
Following is a summary of operating lease activities:
Operating
Leases
1995
Minimum rentals $649,000
Less sublease rentals (76,000)
Net rent expense $573,000
As of September 30, 1995, future minimum rental commitments required
under Good Times and Drive Thru capital and operating leases that have
initial or remaining noncancellable lease terms in excess of one year
are as follows:
Capital Operating
Leases Leases
1996 $123,000 $1,049,000
1997 118,000 1,074,000
1998 107,000 1,046,000
1999 84,000 984,000
2000 62,000 848,000
Thereafter - 8,143,000
494,000 13,144,000
Less sublease rentals - (904,000)
494,000 $12,240,000
Less amount representing interest (118,000)
Present value of net minimum
lease payments $376,000
The Company remains contingently liable on several leases of restaurants
that were previously sold. The future minimum rental commitments relating
to these leases totaled $1,500,000 at September 30, 1995, and have not
been included in the future minimum rental commitment schedule above. The
Company is also a guarantor on a RTC mortgage payable of approximately
$750,000 and a Small Business Administration loan to a franchisee for
approximately $400,000.
6. Franchise and Area Development Agreements:
The Company has five area development agreements which give the rights to
co-develop or franchise approximately an additional 25 Drive Thru
restaurants in Colorado and two in Boise, Idaho. Under the area
development agreements, the Company generally has the right to build
restaurants within the specified geographical areas. However, the Company
must give the franchisee a right of first refusal to develop any
restaurant proposed to be constructed by the Company as one of the
developer's restaurants under the agreement. If the developer elects not
to develop the restaurant, or co-develop, then the Company has the option
to solely operate, co-develop or franchise the restaurant and the
developer retains the right and obligation to develop restaurants as
scheduled in the development agreement or as otherwise mutually agreed
upon. One agreement also requires the Company to issue the franchisee
warrants for the purchase of the Company's common stock in an amount equal
to the franchise or development fees paid divided by the exercise price of
the warrants to purchase common stock. The exercise price of the warrants
to purchase common stock is 120% of the fair market value of the common
stock at the date of issuance and the warrants are exercisable over five
years. As of September 30, 1995, 111,708 warrants have been issued, which
are exercisable at $1.67 to $2.44. The Company has no other significant
continuing obligations associated with the area development agreements.
Area development and franchise expenses for the years ended September 30,
1994 and 1995 primarily related to legal costs associated with area
development agreements.
7. Managed Limited Partnerships:
Drive Thru is the general partner of a limited partnership. This
partnership was entered into during the year ended September 30, 1994, and
was formed to develop Drive Thru restaurants. Limited partner
contributions have been used to construct new restaurants. Drive Thru, as
a general partner, receives an allocation of 50% of the profit and losses
and a fee for its management services. The limited partners' equity has
been recorded as a minority interest in the accompanying consolidated
financial statements.
8. Income Taxes:
Deferred tax assets (liabilities) are comprised of the following at
September 30, 1995:
Long-Term
Deferred assets (liabilities):
Partnership basis difference $ 540,000
ITC carryover 139,000
Net operating loss carryforward 1,340,000
Property and equipment basis differences (1,186,000)
Net deferred tax assets 833,000
Less valuation allowance* 833,000
Net deferred tax assets $ -
________________________
* The valuation allowance decreased by $842,000 during the year ended
September 30, 1995.
The Company has had no taxable income under Federal and state tax laws.
Therefore, no provision for income taxes was included. The Company has
net operating loss carryforwards of approximately $3,500,000 for income
tax purposes which expire from 1999 through 2009. The Company also has
investment tax credit carryforwards of $139,000 which are all subject to
limitation of use.
9. Stockholders' Equity:
During the year ended September 30, 1994, the Company completed a public
offering of 1,608,000 units and received net proceeds of $4,565,000.
Each unit sold for $3.50 and consisted of two shares of common stock and
one three-year warrant for the purchase of one share of common stock at
an exercise price of $2.50 per share. The warrants are redeemable under
certain circumstances by the Company. The Company also sold the
underwriter for $100, warrants to purchase an additional 160,800 units
which are exercisable at $4.20. The underwriter warrants are currently
exercisable through February 1999.
During 1995, the Board of Directors approved an executive stock purchase
plan. Under the plan, executive management acquired 625,000 restricted
shares of the Company's common stock at $1.41 per share, which was the
market price of the Company's publicly traded common stock on the date of
grant. The Company has agreed to allow the purchase of the common stock
through interest bearing notes. The notes and accrued interest are
payable in October 1999, and may be prepaid anytime. Each note has full
recourse to the officers. The Company has the right to repurchase 80%,
60%, 40%, and 20% of the shares if the executive managements' employment
terminates during the first, second, third, and fourth years the shares
are outstanding, respectively.
The Company has an incentive stock option plan (the ISO) and a non-statutory
stock option plan (the NSO) whereby 750,000 shares and 300,000
shares, respectively, are reserved for issuance. As of September 30,
1995, options for the purchase of 507,500 and 125,598 shares of common
stock are outstanding under these plans, respectively, and no options
have been exercised. Options for the purchase of common stock under the
ISO and NSO expire from 1997 through 1999.
The following is a table of activity under these plans:
Incentive Non-
Stock Qualified
Option Stock Exercise
Plan Options Price
Options outstanding
October 1, 1993* 502,500 115,598 N/A
Options granted* - 10,000 $1.75
Options granted* 10,000 - $3.12
Options exchanged** (256,250) - $3.12
Options granted 256,250 - $1.75
Options outstanding
September 30, 1994 512,500 125,598 N/A
Options granted* 25,000 - $1.44
Options canceled (15,000) - $3.12
Options canceled (15,000) - $1.75
Options outstanding
September 30, 1995 507,500 125,598
________________________
* All options outstanding at October 1, 1993 expire in October 1997.
Options issued in 1994 and 1995 expire from 1997 through 1999.
** One half of the incentive stock options outstanding at Apr. 26, 1994
were reissued in April 1994 with an exercise price of $1.75 with a
vesting period of three years and the expiration date extended until
April 1999.
On October 1, 1995, the Company exchanged 10,000 incentive stock
options with an exercise price of $3.12 and 10,000 incentive stock
options with an exercise price of $1.75 for an equal number of non-
qualified stock options with the same terms. The exchange was made to
enable former employees of RTC to maintain their options to buy Good
Times stock.
Subsequent to year-end, the Company also issued 55,800 incentive stock
options to certain employees with an exercise price of $1.25.
In connection with Good Times' prior public offerings and other debt
financing arrangements of Drive Thru and RTC, various warrants and
contingent shares have been granted. The following is a summary of
shares reserved for possible future issuance:
Shares Price Expiration
Warrants:
Public offerings:
1994 offering 1,608,000 $2.50 February 1997
1992 offering 987,500 $3.50 February 1997
Underwriters 689,400 $2.10-$5.78 July 1997 to
February 1999
Converted partnerships 87,513 $3.50 February 1997
Employment termination 52,063 $1.75-3.12 October 1997-
April 1999
Franchisees & Co-development
partners 122,968 $1.67-$2.44 May 1996 to
February 1998
Commission to broker 37,500 $1.17 August 1998
Consideration for sales
leaseback 10,000 $1.75 March 1998-
July 1998
Other 70,000 $3.50 February 1997
Consideration for various
loans: 50,000 $1.40 May 2000
3,714,944
Option Plans
(633,098 from
options granted) 1,050,000 (See prior Oct. 1997
table) to Oct. 2000
Total warrants, and options 4,764,944
10. Retirement Plan:
The Company has implemented a 401(k) profit sharing plan (the Plan).
Eligible employees may make voluntary contributions to the Plan, which
are matched by the Company, using the Company's common stock in an amount
equal to 50% of the employees contribution up to 6% of their
compensation. The amount of employee contributions is limited as
specified in the Plan. The Company may, at its discretion, make
additional contributions to the Plan. The Company has accrued for
contributions of $60,000, at September 30, 1995.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS -- GOOD TIMES RESTAURANTS
INC.
The executive officers and directors of the Company and Drive Thru are
as follows:
Name Age Positions Date Began With Company
Dan W. James II 47 Chairman, Director August 1968 (2)
Boyd E. Hoback 40 President, Chief September 1973 (2)
Executive Officer
and Director (1)
Thomas A. Gordon 41 Exec. Vice President, October 1992
Chief Financial Officer,
Treasurer, Secretary
and Director (3)
Robert D. Turrill 47 Vice President of February 1971 (2)
Marketing
Scott G. LeFever 37 Vice President of September 1978 (2)
Operations (4)
B. Edwin Massey 53 Director August 1968 (2)
Richard J. Stark 55 Director July 1990
Thomas P. McCarty 42 Director April 1994
Alan A. Teran 50 Director April 1994
(1) Director since February 1992.
(2) Dates reflect commencement of positions with a former wholly-owned
subsidiary of the Company.
(3) Director since October 1994.
(4) Position is with Drive Thru.
All directors of the Company hold office until their successors have
been elected and qualified. Officers serve at the discretion of the Board of
Directors. The Company does not currently have standing audit or, nominating
committees of the Board of Directors or committees performing similar
functions. The Board of Directors established a compensation committee of the
Board of Directors consisting of Directors Stark, Teran, McCarty and Massey.
There are no family relationships among the directors or executive
officers. There are no arrangements or understandings between any director
and any other person pursuant to which that director was elected.
Six meetings of the Board of Directors of the Company (including
regularly scheduled and special meetings) were held during the last full
fiscal year. No member of the Board of Directors attended fewer than 75% of
the aggregate of the total number of meetings of the Board of Directors.
Dan W. James II. Mr. James became a Director of the Company on December
18, 1990 and was elected Chairman, on December 16, 1992. Mr. James is one of
the co-founders of RTC, the Company's former subsidiary, and had served as a
Director of RTC since 1968 until 1992. Mr. James devotes the majority of his
time to the management of private investments. Mr. James is also a director
of Drive Thru.
Boyd E. Hoback. Mr. Hoback had served as Vice President, Chief
Operating Officer and Treasurer of the Company since the Paramount Merger with
Drive Thru on December 18, 1990, and as a Director since February 1992. Prior
to that merger, Mr. Hoback held similar positions with Drive Thru from its
inception in December 1986. On December 16, 1992, Mr. Hoback was elected
President and Chief Executive Officer of the Company. He is also Chairman,
President and Chief Executive Officer of Drive Thru. Prior to assuming his
positions with Drive Thru, Mr. Hoback served as Executive Vice President of
Finance and Development of RTC since 1983. Mr. Hoback is also on the Board of
Drive Thru.
Thomas A. Gordon. Mr. Gordon has served as Chief Financial Officer of
the Company, RTC and Drive Thru since October 1992. On December 16, 1992, Mr.
Gordon was elected Executive Vice President of the Company and in October 1994
was elected a Director. Prior to joining the Company, Mr. Gordon held various
investment banking positions in Denver, Colorado, including Vice President and
Manager at United Bank of Denver (1982 - 1987, 1990 - 1991), Senior Vice
President at Boettcher & Company (1987 - 1990), and Vice President at
Kirkpatrick Pettis (1991 - 1992). Mr. Gordon also practiced law with the firm
of Kutak Rock (1977 - 1981). Mr. Gordon is also a Director of Drive Thru.
As a result of various factors, including liabilities incurred in connection
with real estate investments in Colorado in the late 1980s, Mr. Gordon filed a
petition under Chapter 7 of the federal Bankruptcy Code in January 1992 and
has since been discharged.
Robert D. Turrill. Mr. Turrill has been employed by RTC since 1971.
Prior to becoming Executive Vice President of RTC in 1987, he was Vice
President of Marketing and Food Service. Mr. Turrill has been involved in all
phases of operations with direct responsibility for menu development, purchase
and cost control, research and multi-media advertising for RTC. Subsequent to
the merger of the Company and RTC, Mr. Turrill devoted a portion of his time
to the development of a marketing program for Good Times. As Good Times
continued to expand, Mr. Turrill's time devoted to Good Times increased
significantly. Therefore, Mr. Turrill was transferred from RTC to the newly
created Company position of Vice President of Marketing, effective October 1,
1994. Mr. Turrill is also a principal in Great Burgers, Inc., the franchisee
of the RTC food court in Dallas, Texas.
Scott G. LeFever. Mr. LeFever has been employed by RTC since 1978.
Prior to becoming President of Round The Corner in June 1993, he was Vice
President of Operations. Mr. LeFever has been involved in all phases of
operations with direct responsibility for unit service performance, personnel
and cost controls. Mr. LeFever was Director of Operations for Round The
Corner from 1983 to 1986. He then became Director of Operations for Good
Times from 1986 to 1992 during which time he helped develop the Good Times
operating systems. Mr. LeFever was reassigned to the position of Drive Thru's
Vice President of Operations in August 1995 and devotes his time to the
operational management of Drive Thru. Mr. LeFever continues as a Director of
RTC and a principal in Great Burgers, Inc., the franchisee of the RTC food
court in Dallas, Texas.
B. Edwin Massey. Mr. Massey had served as Director, President and Chief
Executive Officer of the Company since December 1990. He founded RTC in 1968
and was its Chairman, President and Chief Executive Officer. He held similar
positions with Drive Thru from its inception in December 1986. On December
16, 1992, Mr. Massey resigned his position as President and Chief Executive
Officer of the Company, but remained President of RTC.
On June 1, 1993, the Company and Mr. Massey entered into an agreement
pursuant to which Mr. Massey resigned his positions with RTC and agreed to the
termination of his employment contract effective June 1, 1993. Mr. Massey
acquired two restaurants from RTC in consideration of a $340,000 note payable
to RTC and relinquishment of any claims under his employment contract. Mr.
Massey transferred the ownership of those two restaurants to Hot Concepts in
October 1995. See "Business of the Company - Certain Transactions."
Richard J. Stark, CFA. Mr. Stark is President of Boulder Asset
Management, a firm advising several large individual investors. Prior to
forming Boulder Asset Management in 1984, Mr. Stark served as Chief Investment
Officer of InterFirst Investment Management in Dallas. Previously he was
responsible for all individual money management at Standard &
Poor's/Intercapital in New York.
Thomas P. McCarty. Mr. McCarty has spent the last 26 years in the food
service industry including eleven years owning and operating his own group of
restaurants, working for a major food service distributor, working for and
eventually owning a real estate brokerage company which specialized in
restaurant real estate and consulting, and he is currently the vice president
for development of Rock Bottom Restaurants, Inc. Mr. McCarty also serves as
the Vice President for Publications and Public Relations for the Colorado
Restaurant Association and serves on its Executive Committee and as a member
of its Board of Directors. Mr. McCarty has two degrees from the University of
Colorado including a B.S. in Accounting and a B.S. in Journalism.
Alan A. Teran. Mr. Teran has spent the past 26 years working in the
restaurant industry, beginning in 1969 as restaurant manager at Cork &
Cleaver. In 1971 Mr. Teran was a regional manager for Cork & Cleaver, in 1973
was promoted to Vice President of Operations and in 1976 became President of
the company. In October 1981, Mr. Teran acquired the Cork & Cleaver in
Boulder, Colorado. He went on to become one of the first franchisees of Le
Peep Restaurants in 1983. Mr. Teran currently holds a seat on three different
corporation's board of directors including Boulder Valley Bank and Trust,
Quantum Restaurant Group, operator of Morton Steak Houses, Micks and Peasants
restaurant concepts, and Good Times Restaurants Inc. Mr. Teran graduated from
the University of Akron in 1968 with a degree in business.
Compliance with Section 16(a) of the Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting person, the Company believes
that, during the fiscal year ended September 30, 1995, all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with except that Director Massey made one late filing on
Form 5 reporting one transaction.
ITEM 10. EXECUTIVE COMPENSATION
Cash Compensation
The following table shows all cash compensation paid by the Company or
any of its subsidiaries, as well as other compensation paid or accrued during
the fiscal years indicated, to the Chief Executive Officer and the next
highest paid executive officer of the Company as of the end of the Company's
last fiscal year (the "Named Executive Officers"). No other executive
officers of the Company received cash compensation for such period in all
capacities in which the executive officer served in excess of $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Name & Principal Fiscal Other Annual
Position Year Salary Bonus(2) Compensation(3) Options (4)(5)
Boyd E. Hoback, 1995 $110,000 -0- $10,000 -0-
President & CEO(1) 1994 $97,500 $30,000 $10,000 -0-
1993 $90,000 -0- $10,000 175,000
Thomas A. Gordon, 1995 $90,000 -0- $11,650 -0-
Executive Vice 1994 $82,500 25,000 $10,000 -0-
President & Chief 1993 $75,000 -0- $10,000 150,000
Financial Officer
(1) Elected to these positions on December 16, 1992. During the last three
fiscal years he served continuously as an executive officer of Drive Thru.
(2) The Board of Directors approved a bonus plan in fiscal 1995 for Messrs.
Hoback and Gordon that were contingent upon certain performance criteria.
The plan provided for bonuses of up to 50% of salary for Mr. Hoback and 40%
of salary for Mr. Gordon. Due to the Company's losses in fiscal 1995, no
bonuses were awarded to Messrs. Hoback and Gordon.
(3) Consists of an officers' expense allowance.
(4) Includes previously-granted options, a portion of which were repriced during
the fiscal year ended September 30, 1994, from an exercise price of $3.12
per share to $1.75 per share and which were extended to expire on October
26, 1999.
(5) Pursuant to an executive stock purchase plan approved by the Board of
DIrectors on October 17, 1994, Messrs. Hoback and Gordon acquired 337,500
and 212,500 shares, respectively of the Company's common stock at $1.41 per
share in consideration for interest bearing notes due October 1999.
The Company has the right to reacquire a portion of such shares through
October 1998 in the event of the termination of Mr. Hoback's or Mr. Gordon's
employment with the Company on account of resignation or cause.
Option Grants
There were no grants of stock options made during the last fiscal year to any of
the Named Executive Officers. In 1994, the Board of Directors repriced one-half
of all employees' incentive stock options from $3.12 per share to $1.75 per
share and extended the expiration date of these options to April 1999.
Options Exercises and Values
None of the Named Executive Officers exercised stock options during the
last fiscal year of the Company. The fiscal year end value of unexercised
options follows:
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Value
Number Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable
Boyd E. Hoback N/A N/A 151,666/23,334 None (1)
Thomas A. Gordon N/A N/A 130,834/19,166 None (1)
(1) As of September 30, 1995, the market value of the Common Stock was
approximately $1.03 per share, or less than the lowest option exercise
price.
Stock Options
On April 23, 1992, the Board of Directors of the Company adopted an
incentive stock option plan (the "1992 ISO") covering 300,000 shares of the
Company's Common Stock and a non-statutory stock option plan (the "1992 NSO")
covering 150,000 shares of the Company's Common Stock less outstanding options
for the purchase of 83,750 shares of such stock.
The optionees under the plans will not recognize income upon grant of the
options. Holders of non-statutory stock options will have income on the date of
exercise of the options equal to the then value of the Company's Common Stock
less the option exercise price. The holders of incentive stock options will not
be required to recognize income upon exercise of the options so long as the
Company's Common Stock issued upon option exercise is not sold until the later
of one year after the date of exercise or two years after the date of grant of
the option. If these requirements are satisfied, then the optionee will realize
capital gain upon sale of the Company's Common Stock in an amount equal to the
sale price less the option exercise price. If these requirements are not
satisfied, the optionee must recognize ordinary compensation income equal to the
excess of the fair market value of the stock on the date of exercise over the
price paid for such stock, and capital gain equal to the sale proceeds (or fair
market value if not disposed of for cash) in excess of the optionee's tax basis
(fair market value on exercise date); provided, however, such compensation
income will not exceed the amount of the sale proceeds over the price paid for
the stock on exercise of the option. For federal income tax purposes, the
Company will be allowed a deduction for the foregoing compensatory element.
For financial accounting purposes, so long as the exercise price is equal to or
in excess of fair market value of the Company's Common Stock on the date of
grant of the option, the Company will not be required to recognize any related
compensation expense upon either option grant or exercise. It has been proposed
that applicable accounting requirements be changed so as to require the issuer
of stock options to realize related compensation expense. However, it is
unknown when, if ever, such changes will be effective.
The spread between fair market value and exercise price as of the date of
exercise of an incentive stock option is an adjustment to income for alternative
minimum tax purposes, which, under certain conditions, may result in application
of the alternative minimum tax rate to such spread.
On October 26, 1992 the Board of Directors of the Company cancelled all of
the outstanding options granted to officers and directors of the Company, RTC
and Drive Thru at various times and incentive stock options and non-statutory
options were issued at an exercise price of $3.12 and expiring October 26,
1997 to replace previously issued ISO's and non-statutory options.
On May 18, 1993 the Board of Directors of the Company voted to increase the
number of shares authorized in the 1992 ISO from 300,000 to 550,000 shares of
the Company's Common Stock and on January 20, 1994, voted to increase the number
of shares authorized in the 1992 NSO from 150,000 to 300,000. Additional
options were granted to key management personnel and options were granted to
management of the Company, Drive Thru and RTC who previously had not been
participants in the 1992 ISO or in the 1992 NSO. The increase in the number of
shares authorized under the stock option plans and the granting of the
additional options reflected the changing responsibilities of executive
management as a result of the restructuring of the Company approved in December
1992, the need of the Company, Drive Thru and RTC to limit cash compensation to
its key employees and the desire of the Board of Directors to retain and
motivate key employees by providing quasi-equity participation in the Company.
At the 1993 annual meeting held in March 1994, the shareholders approved an
increase in the number of shares authorized under the 1992 ISO to 750,000
shares. In April 1994, the Board of Directors repriced one-half of the
incentive stock options granted to employees to $1.75 per share, initiated a new
three year vesting period for such options and extended the expiration date of
the repriced options to April 1999.
The following table summarizes outstanding options granted to executive and
other officers and current directors of the Company and Drive Thru as of
September 30, 1995:
<PAGE>
Incentive Stock Options
Options Options Option Expiration
Name Issued Vested Price Date
Boyd E. Hoback 70,000 70,000 $3.12 10/26/97
70,000 46,666 $1.75 4/26/99
Thomas A. Gordon 57,500 57,500 $3.12 10/26/97
57,500 38,334 $1.75 4/26/99
Robert D. Turrill 30,000 30,000 $3.12 10/26/97
30,000 20,000 $1.75 4/26/99
Scott G. LeFever 36,250 36,250 $3.12 10/26/97
36,250 24,166 $1.75 4/26/99
Non-Statutory Stock Options
Options Options Option Expiration
Name Issued Vested Price Date
Boyd E. Hoback 35,000 35,000 $1.75 10/26/97
Thomas A. Gordon 35,000 35,000 $1.75 10/26/97
Thomas P. McCarty 5,000 5,000 $1.75 4/26/99
Alan A. Teran 5,000 5,000 $1.75 4/26/99
Richard J. Stark 4,996 4,996 $3.12 10/26/97
4,996 4,996 $1.75 4/26/99
The options are non-transferable other than by will or by the laws of
descent and distribution and may be exercised during the optionee's lifetime
only by the optionee. Neither the options nor the shares of Common Stock
issuable upon exercise thereof have been registered for public sale under the
Securities Act of 1933, although the Company reserves the right to do so at any
time. Unless registered, the shares of Common Stock issued upon option exercise
will be restricted securities as defined in Rule 144 under the Securities Act.
Report of Board of Directors Regarding Repricing of Options
Effective April 26, 1994, the Board of Directors authorized an adjustment
to the exercise price of one-half of the incentive stock options granted under
the 1992 ISO to $1.75 per share. In addition, the Board of Directors approved
a new three year vesting period for such options and extended the expiration
date of the repriced options to April 26, 1999.
Over the past several years, the trading price of the Company's Common
Stock has declined significantly. Accordingly, the previously granted options,
whose exercise prices initially exceeded the trading prices of the Company's
shares, no longer provided the incentives to directors and employees that were
intended by the issuance thereof. For this reason, the Board of Directors
accepted management's recommendation that the outstanding options be repriced as
noted above.
Board of Directors
Dan W. James II
Boyd E. Hoback
Thomas A. Gordon
B. Edwin Massey
Richard J. Stark
Thomas P. McCarty
Alan A. Teran
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of September 30, 1995, certain
information with respect to the record and beneficial ownership of the Company's
Common Stock by all stockholders known by the Company to own more than 5% of its
outstanding Common Stock, and by directors and officers individually and as a
group.
Percentage of
Name, Address and Number of Shares Outstanding
Position Held Beneficially Owned Common Stock **
Dan W. James II 400,365(1)(2) 5.8%
8620 Wolff Court, Suite 330
Westminster, CO 80030
Chairman, Director
First Registration Corporation 183,270(1)(2) 2.7%
of Oklahoma City
120 N. Robinson Ave.
P.O. Box 25189
Oklahoma City, OK 73125
Shareholder
Boyd E. Hoback 502,924(3) 7.1%
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer and Director
Thomas A. Gordon 349,832(4) 4.9%
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer
B. Edwin Massey 113,799(5) 1.6%
8620 Wolff Court, Suite 330
Westminster, CO 80030
Director
Richard J. Stark 17,083(6) *
6075 South Quebec
Suite 103
Englewood, CO 80111
Director
Thomas P. McCarty 5,500(7) *
8779 Johnson Street
Arvada, CO 80005
Thomas P. McCarty
Director
Alan A. Teran 5,000(8) *
2126 Knollwood Drive
Boulder, CO 80302
Director
Robert D. Turrill 135,703(9) 1.9%
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer
Scott G. LeFever 62,552(10) *
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer of RTC
All officers and directors 1,592,758(11) 21.5%
as a group (9 persons)
* Less than one percent
** Rule 13-d under the Securities Exchange Act of 1934, involving the
determination of beneficial owners of securities, includes as beneficial
owners of securities, among others, any person who directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares voting power and/or investment power with respect to such
securities; and, any person who has the right to acquire
beneficial ownership of such security within sixty days through means,
including, but not limited to, the exercise of any option, warrant,
right or conversion of a security. Any securities not outstanding that
are subject to such options, warrants, rights or conversion privileges
shall be deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such
person, but shall not be deemed to be outstanding for the purpose of
computing the percentage of the class by any other person.
All shares held by the Officers, Directors and Principal Shareholders
listed above are "restricted securities" and are such are subject to
limitations on resale. The shares may be sold pursuant to Rule 144 under
certain circumstances.
(1) Includes 7,682 shares owned by the son of Mr. James, an aggregate of 6,966
shares owned by the Kent B. Hayes Trust, and an aggregate of 3,483 shares
covered by presently exercisable warrants held by the Kent B. Hayes Trust
for the benefit of Mr. James.
(2) May be deemed to be beneficially owned by Mr. James since First
Registration Corporation of Oklahoma City is the nominee of trusts
administered for Mr. James and members of his family.
(3) Includes an aggregate of 151,666 shares covered by presently exercisable
options and warrants.
(4) Includes an aggregate of 130,834 shares covered by presently exercisable
options.
(5) Includes 20,804 shares owned by the children of Mr. Massey and an aggregate
of 52,063 shares covered by presently exercisable warrants.
(6) Includes an aggregate of 10,689 shares covered by presently exercisable
options and warrants.
(7) Includes an aggregate of 5,000 presently exercisable options.
(8) Includes an aggregate of 5,000 presently exercisable options.
(9) Includes an aggregate of 50,000 shares covered by presently exercisable
options.
(10) Includes an aggregate of 60,416 shares covered by presently exercisable
options.
(11) Includes 465,668 shares covered by presently exercisable options and
warrants and 218,722 shares held of record by others which may be deemed
to be beneficially owned.
On October 17, 1994, the Board of Directors approved an executive stock
purchase plan. Under the plan, executive management acquired 625,000 restricted
shares of the Company's common stock at $1.41 per share which was the market
price of the Company's publicly traded common stock on the date of grant. The
Company has agreed to allow the purchase of the common stock through interest
bearing notes. The notes and accrued interest are payable in October 1999 and
may be repaid any time. Each note has full recourse to the officers. The
Company has the right to repurchase 80%, 60%, 40% and 20% of the shares if
executive managements' employment terminates during the first, second, third and
fourth years the shares are outstanding, respectively. Mr. Hoback acquired
337,500 shares, Mr. Gordon acquired 212,500 share and Mr. Turrill acquired
75,000 shares pursuant to the plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Drive Thru and RTC historically have been under-capitalized and have found
it difficult to obtain required financing without the assistance of certain of
their officers and directors, primarily in the form of guarantees of payment of
restaurant leases and bank debt by Messrs. Massey and James. These principally
involved obligations of RTC. Neither Mr. Massey nor Mr. James receive any
compensation in connection with these guarantees. While none of the related
party transactions may be deemed to have been negotiated at arms' length, all
such transactions were approved by the independent members of the RTC Board of
Directors and, in the opinion of Company management, all such transactions were
fair and are upon terms which were at least as favorable as could have been
obtained from independent third parties. To the extent that Messrs. Massey and
James continue to be guarantors of such obligations, the Company has agreed to
indemnify each of them from any losses that they may incur resulting from such
guarantees.
The infusion of capital provided by net proceeds from the public offering
of the Company's stock in July 1992 and the subsequent merger of the Company and
RTC in July 1992 substantially reduced or eliminated many actual and potential
conflicts of interest as financial assistance from related parties was no longer
required and the effect of existing financial arrangements with related parties
(primarily guaranteed leases and loans) was diminished due to the enhanced
ability of Drive Thru and RTC to pay the guaranteed obligations. Also,
consummation of the merger eliminated many actual and potential conflicts which
arose as a result of the two companies being engaged in the same general
business and from having common directors and officers.
On June 1, 1993, the Company and Mr. Massey entered into an agreement
pursuant to which Mr. Massey resigned his positions with RTC and agreed to the
termination of his employment contract effective June 1, 1993. Mr. Massey
acquired two restaurants from RTC in consideration of a $340,000 note payable to
RTC and relinquishment of any claims he may have had against the Company under
the aforementioned employment contract. Mr. Massey operated the two restaurants
as a franchisee of RTC. Mr. Massey transferred ownership of these restaurants
to Hot Concepts in October 1995. The termination of Mr. Massey's employment at
RTC was part of management's ongoing program to reduce overhead and attain
profitability for RTC.
Messrs. Hoback and Gordon have each entered into employment agreements with
the Company in July 1994 that provide for the payment of compensation equal to
one year's base salary, expense allowance, and other benefits in the event of
the sale of all or substantially all of the assets of the Company or its stock
to an unrelated party, or a merger, acquisition, reorganization or other similar
transaction in which the Company is not the surviving entity.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description Location
2.1 Acquisition Agreement between Registrant
and RTC, as amended (6) - Exhibit 2.1
3.1 Articles of Incorporation of the Registrant (1) - Exhibit 3.1
3.2 Amendment to Articles of Incorporation of
the Registrant dated January 23, 1990 (2) - Exhibit 3.1
3.4 Bylaws of the Registrant (1) - Exhibit 3.2
3.5 Amendment to Bylaws of Registrant
dated June 8, 1992 (6) - Exhibit 3.3A
4.11. Form of Warrant Certificate for the
purchase of an aggregate of 920,000 shares
of Registrant's Common Stock issued in
1990 public offering (3) - Exhibit 4.2
4.12. Form of Underwriters' Warrant for the
purchase of 80,000 shares issued in
connection with 1990 public offering (3) - Exhibit 1.4
4.13. Form of Underwriters' Warrant for the
purchase of 69,000 units issued in
connection with 1992 public offering (6) - Exhibit 1.4
4.14. Form of Warrant Certificate for the
purchase of an aggregate of 720,000
shares of Registrant's common stock
issued in 1992 public offering (6) - Exhibit 4.4
4.15. Amended and Restated Warrant Agreement (6) - Exhibit 4.3
4.16. Form of Warrant Certificate to purchase
an aggregate of 105,000 shares of
Registrant's common stock issued in
November 1991 Private Offering (5) - Exhibit 4.2
4.17. Form of registration rights agreement
relating to 105,000 shares of the Registrant's
common stock issuable upon exercise of warrants
issued in November 1991 Private Offering (5) - Exhibit 4.3
4.18. Form of Warrant Certificate for the purchase
of an aggregate 50,000 shares of Registrant's
Common Stock issued to limited partners of
Good Times Limited Partnership I (6) - Exhibit 4.14
4.19. Incentive Stock Option Plan of Registrant (6) - Exhibit 4.9
4.20. Non-Statutory Stock Option Plan of
Registrant (6) - Exhibit 4.10
4.21. 1992 Incentive Stock Option Plan of
Registrant (6) - Exhibit 4.18
4.22. 1992 Incentive Stock Option Plan of
Registrant, as amended (7) - Exhibit 4.20
4.23. 1992 Non-Statutory Stock Option Plan of
Registrant (6) - Exhibit 4.19
4.24. 1992 Non-Statutory Stock Option Plan of
Registrant, as amended (7) - Exhibit 4.22
4.25. Form of warrant dated June 1, 1995 for the
purchase of 50,000 shares of Registrant's
Common Stock at an exercise price of
$1.40 per share issued to Boulder
Radiologists Inc., Defined Benefit Plan -
Dubach, of indebtedness by Registrant to
Dr. Kenneth Dubach *
10.1 Acquisition Agreement dated April 29, 1992,
by and among Registrant, RTC Acquisition
Company and Round The Corner Restaurants,
Inc., including the Plan of Merger attached
thereto (6) - Exhibit 2.1
10.2 Underwriting Agreement between Registrant
and Cohig & Associates, Inc. dated
June 21, 1990 (3) - Exhibit 1.1
10.3 Underwriting Agreement between Registrant
and Cohig & Associates, Inc. dated
June 15, 1992 (6) - Exhibit 1.1
10.4 Form of Agreement of Limited Partnership
of Good Times Limited Partnership I (5) - Exhibit 10.16
10.5 Employment Agreement dated March 17, 1992,
between Registrant and Boyd E. Hoback (6) - Exhibit 10.38
10.6 Promissory Note dated February 1, 1989,
in the principal amount of $150,000
payable by Registrant and guaranteed
by certain officers and directors of
the Registrant to Boulder Radiologists
Inc. Defined Benefit Plan - Dubach (6) - Exhibit 10.21
10.7 Stipulation and Order dated February 13, 1990,
requiring RTC-Colorado to pay Village on the
Park Associates the sum of $328,000 in
monthly installments of principal and interest
at the rate of 4% per annum through
November 1994, as executed (6) - Exhibit 10.47
10.8 Form of Subscription Agreement used in
connection with the purchase by Good
Times of limited partnership interests
in RTC Limited of Colorado, RTC Limited
of Colorado - 1986 and Good Times Limited
Partnership I (7) - Exhibit 10.42
10.9 Development Agreement dated April 9, 1993,
with Fast Restaurants, Inc. (7) - Exhibit 10.43
10.10 Warranty Deed dated May 1, 1993, in
connection with the sale of the Arapahoe
Road Good Times restaurant to Fast
Restaurants, Inc. for the sum of
$1,088,174.80 (7) - Exhibit 10.44
10.11 Purchase Agreement dated May 3, 1993,
between RTC, Good Times and B. Edwin Massey (7) - Exhibit 10.45
10.12 Franchise Agreement between RTC and Ed
Massey & Associates, Inc. (7) - Exhibit 10.46
10.13 Supplemental Agreement between RTC and
Ed Massey & Associates, Inc. (7) - Exhibit 10.47
10.14 Promissory Note dated June 1, 1993, from Ed
Massey & Associates, Inc. to RTC in the
principal amount of $340,000 (7) - Exhibit 10.48
10.15 Promissory Note made by Fast Restaurants,
Inc. and Colfax & Krameria Inc. to
Good Times in the principal amount
of $280,000 (7) - Exhibit 10.49
10.16 Lease Termination and Purchase and Sale
Agreement dated February 25, 1993, between
Good Times and Fruehauf Investments, Ltd. (7) - Exhibit 10.50
10.17 Promissory Note dated March 30, 1993, made
by Good Times to Fruehauf Investments, Ltd.
in the principal amount of $250,000 (7) - Exhibit 10.51
10.18 Master Equipment Lease Agreement dated
March 16, 1993, between Community Bank of
Parker and Good Times (7) - Exhibit 10.54
10.19 Registration Rights Agreement dated
September 30, 1993, between Good Times
Restaurants Inc. and James M. Mansour (7) - Exhibit 10.55
10.20 Franchise Agreement between Good Times
Drive Thru Inc. and Colfax & Krameria Inc.
dated August 1, 1993 (7) - Exhibit 10.56
10.21 Letter Agreement dated September 30, 1993,
between Registrant and James M. Mansour
regarding Mr. Mansour's option to purchase
at par up to $850,000 principal amount
of secured convertible debentures from
Registrant (7) - Exhibit 10.57
10.22 Development Agreement dated September 30,
1993, between Good Times Drive Thru Inc.
and Rocky Mountain Burgers, Inc. (7) - Exhibit 10.58
10.23 Form of Management Agreement among
Registrant and its wholly-owned subsidiaries,
Good Times Drive Thru Inc. and Round The
Corner Restaurants, Inc. (7) - Exhibit 10.65
10.24 Form of Promissory Note dated October 17,
1994 by and between Good Times Restaurants
Inc. and Messrs. Hoback, Gordon and
Turrill, respectively, in connection
with the Executive Stock Purchase Plan (8) - Exhibit 10.66
10.25 Franchise Agreement between Round The
Corner Restaurants, Inc. and Great Burgers,
Inc. dated January 31, 1994 (8) - Exhibit 10.67
10.26 Form of Stock Purchase Letter Agreement
dated as of October 17, 1994 by and between
Good Times Restaurants Inc. and Messrs. Hoback,
Gordon and Turrill, respectively, in connection
with the Executive Stock Purchase Plan (8) - Exhibit 10.68
10.27 Form of Uniform Commercial Code - Security
Agreement by and between Good Times
Restaurants Inc. and Messrs. Hoback,
Gordon and Turrill, respectively, in
connection with the Executive Stock
Purchase Plan (8) - Exhibit 10.69
10.28 Form of Promissory Note dated June 1, 1995
by and between Good Times Restaurants Inc.
and Boulder Radiologist Inc. Pension Plan
FBO Dubach in the amount of $300,000
due and payable on May 31, 2000 *
10.29 Lease by and between Sheridan Park 7
Partners, a Colorado limited partnership,
and Good Times Restaurants Inc. in
consideration for the payment of rent
for office space in the aggregate amount
of $350,796, commencing April 1, 1993
through April 1998 *
10.30 Master Lease Agreement in the aggregate
amount of $2,000,000 between Capital
Associates International, Inc., as Lessor,
and Good Times Drive Thru Inc. as Lessee *
10.31 Purchase letter agreement dated November
13, 1995 between Steakout, King of Steaks
and Good Times Drive Thru Inc. for the
purchase of assets of four Las Vegas
Good Times restaurants (without exhibits) *
10.32 Employment Agreement agreed to September
14, 1994 between Registrant and Boyd E.
Hoback *
10.33 Employment Agreement agreed to July 14, 1994
between Registrant and Thomas A. Gordon *
10.34 Form of Promissory Note dated November 3, 1995
by and between AT&T Commercial Finance
Corporation, Boise Co-Development Limited
Partnership, Good Times Drive Thru Inc. as
general partner, and Good Times Restaurants
Inc. as guarantor in the amount of
$254,625. *
10.35 Form of Promissory Note dated November 3, 1995
by and between AT&T Commercial Finance
Corporation, Boise Co-Development Limited
Partnership, Good Times Drive Thru Inc. as
general partner, and Good Times Restaurants
Inc. as guarantor in the amount of
$104,055. *
22.1 Subsidiaries of Registrant (8)- Exhibit 22.1
23.1 Consent of HEIN + ASSOCIATES LLP *
(1) Incorporated by reference from Registrant's Registration Statement on Form
S-18 as filed with the Commission on November 30, 1988 (File No.
33-25810-LA).
(2) Incorporated by reference from Registrant's current report on Form 8-K
dated January 18, 1990 (File No. 33-25810-LA).
(3) Incorporated by reference from Registrant's Registration Statement on Form
S-1 as filed with the Commission on March 26, 1990 (File No. 33-33972).
(4) Incorporated by reference from Registrant's Form 10-K for the fiscal year
ended September 30, 1990
(5) Incorporated by reference from Registrant's Form 10-K for the fiscal year
ended September 30, 1991
(6) Incorporated by reference from Registrant's Registration Statement on Form
S-1 as filed with the Commission on March 27, 1992 (File No. 33-46813).
(7) Incorporated by reference from Registrant's Form 10-K for the fiscal year
ended September 30, 1993
(8) Incorporated by reference from Registrant's Form 10-KSB for the fiscal
year ended September 30, 1994.
* Filed herewith.
(b) Form 8-K, filed with the Commission October 16, 1995 pursuant
to the Company completing the sale of 100% of the stock of
Round The Corner Restaurants, Inc. ("RTC"), its wholly-owned
subsidiary, to a private investor and members of RTC's
management team as of September 29, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: January 10, 1996 GOOD TIMES RESTAURANTS INC.
By: /s/ Boyd E. Hoback, President
Boyd E. Hoback, President
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Dan W. James, II Chairman, Director December 29, 1995
Dan W. James II
/s/ Boyd E. Hoback President, Chief January 10, 1996
Boyd E. Hoback Executive Officer
and Director
/s/ Thomas A. Gordon Executive Vice January 10, 1996
Thomas A.Gordon President, Chief
Financial Officer,
Secretary/Treasurer, Director
/s/ B. Edwin Massey Director December 28, 1995
B. Edwin Massey
/s/ Thomas P. McCarty Director December 29, 1995
Thomas P. McCarty
/s/ Alan A. Teran Director January 10, 1996
Alan A. Teran
/s/ Richard J. Stark Director December 27, 1995
Richard J. Stark
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR
THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
OF
GOOD TIMES RESTAURANTS INC.
This is to certify that, for value received, BOULDER
RADIOLOGISTS INC., DEFINED BENEFIT PLAN-DUBACH, or its registered
assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from Good Times Restaurants Inc., a
Nevada corporation (the "Company"), 50,000 shares of common stock,
$.001 par value per share, of the Company (the "Common Stock"), at
a purchase price per share as set forth herein. The number of
shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for a share of Common Stock shall
be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to
as "Warrant Stock" and the exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Price."
(a) Expiration of Warrant. This Warrant may be
exercised in whole or in part at any time or from time to time on
or after the date hereof but prior to the earlier to occur of (i)
May 31, 2000, or (ii) a sale of substantially all of the stock or
assets of the Company or a merger of the Company in a transaction
in which it is not the surviving corporation, provided that the
term surviving corporation shall not apply to the Company in a
reverse triangular merger where the Company has become a wholly
owned subsidiary of another corporation.
(b) Exercise of Warrant. This warrant shall be
exercised by presentation and surrender hereof to the Company with
the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified
in such form, together with all federal and state taxes applicable
upon such exercise. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the Warrant Stock.
Upon receipt by the Company of this Warrant at the office of the
Company, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be
actually delivered to the Holder.
(c) Exercise Price. The Exercise Price shall be $1.40
per share of Common Stock, except that the Exercise Price shall be
subject to adjustment from time to time as provided in Section (g)
.
(d) Reservation of Shares. The Company hereby agrees
that at all times there shall be reserved for delivery upon
exercise of this Warrant such number of shares of Common Stock as
shall be required for issuance or delivery upon exercise of this
Warrant and that the par value of such shares will at all times be
less than the applicable Exercise Price.
(e) Assignment or Loss of Warrant. This Warrant is
assignable by the Holder in whole or in part, subject to the
provisions of paragraph (k) hereof. Any such assignment shall be
made by surrender of this Warrant to the Company, with the
Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax. Upon any assignment of this Warrant as
aforesaid, the Company shall, without charge, execute and deliver
a new Warrant of like tenor registered in the name of the assignee
named in such Assignment Form entitling the assignee to purchase
the number of shares of Common Stock purchasable hereunder (or
under the portion hereof so assigned) and, in the event this
Warrant shall be assigned in part, shall execute and deliver to
the Holder hereof a new Warrant registered in the name of the
Holder entitling him to purchase the balance of the number of
shares of Common Stock purchasable hereunder, and this Warrant
shall promptly be cancelled. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, or destruction or
mutilation of this Warrant, and (in case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the
Company will execute and deliver a new Warrant of like tenor and
date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the
Company, whether or not this Warrant so lost, stolen, destroyed'.
or mutilated shall be at any time enforceable by anyone.
(f) Rights of the Holder. The Holder shall not, by
virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity. The rights of the Holder are
limited to those expressed herein and are not enforceable against
the Company except to the extent set forth herein.
(g) Anti-Dilution Provisions:
(1) Adjustment in Exercise Price. In case the
Company shall at any time issue Common Stock or securities
convertible into Common Stock by way of dividend or other
distribution on any stock of the Company or subdivide or combine
the outstanding shares of Common Stock, the Exercise Price shall
be proportionately decreased in the case of such issuance (on the
day following the date fixed for determining the Company
shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such subdivision or
increased in the case of such combination (on the date that such
subdivision or combination shall become effective).
(2) No Adjustment for Small Amounts. Anything in
this Section (g) to the contrary notwithstanding, the Company
shall not be required to give effect to any adjustment in the
Exercise Price unless and until the net effect of one or more
adjustments, determined as above provided, shall have required a
change of the Exercise Price by at least five cents ($.05), but
when the cumulative net effect of more than one adjustment so
determined shall be to change the actual Exercise Price by at
least five cents ($.05), such change in the Exercise Price shall
thereupon be given effect.
(3) Number of Shares Adjusted. Upon any
adjustment of the Exercise Price, the Holder of this Warrant shall
thereafter (until another such adjustment) be entitled to
purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the
number of shares of Common Stock issuable upon exercise of this
Warrant immediately prior to such adjustment by the Exercise Price
in effect immediately prior to such adjustment and dividing the
product so obtained by the new Exercise Price.
(4) Common Stock Defined. Whenever reference is
made in this Section (g) to the issue or sale of shares of Common
Stock, the term "Common Stock" shall mean the Common Stock of the
Company of the class authorized as of the date hereof and any
other class of stock ranking on a parity with such Common Stock.
However, subject to the provisions of Section (j) hereof, shares
issuable upon exercise hereof shall include only shares of the
class designated as Common Stock of the Company as of the date
hereof.
(h) Officer's Certificate. Whenever the Exercise Price
shall be adjusted as required by the provisions of Section (g)
hereof, the Company shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office, and
with its agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided and setting
forth in reasonable detail the facts requiring such adjustment.
Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company
shall, forthwith after each such adjustment, deliver a copy of
such certificate to the Holder. Such certificate shall be
conclusive as to the correctness of such adjustment.
(i) Notices to Warrant Holders. So long as this
Warrant shall be outstanding and unexercised, if (i) the Company
shall pay any dividend or make any distribution upon the Common
Stock, or (ii) the Company shall offer to the holders of Common
Stock for subscription or purchase by them any shares of stock of
any class or any other rights, or (iii) any capital reorganization
of the Company, reclassification of the capital stock of the
Company, consolidation or merger of the Company with or into
another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, then,
in any such case, the Company shall cause to be delivered to the
Holder at least twenty (20) days prior to the date referred to in
(iv), (v) or (vi) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on
which (iv) a record is to be taken for the purpose of such
dividend, distribution or rights, or (v) such reclassification,
reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the
date, if any, to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such
reclassification, liquidation or winding up, or (vi) such public
offering is to be completed.
(j) Reclassification, Reorganization, Etc. In case of
any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (other than a
change in par value, or from par value to no par value, or from no
par value to par value, or as a result of an issuance of Common
Stock by way of dividend or other distribution or of a subdivision
or combination), the Company shall cause effective provision to be
made so that the Holder shall have the right thereafter, by
exercising this Warrant, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change. Any
such provision shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this
Section (j) shall similarly apply to successive reclassifications,
capital reorganizations and changes of shares of Common Stock.
(k) Transfer to Comply with the Securities Act of 1933.
This Warrant or the Warrant Stock or any other security issued or
issuable upon exercise of this Warrant shall not be sold or
transferred except in compliance with the Securities Act of 1933
(the "Act"), or an exemption thereunder and then only against
receipt by the Company of an agreement of such person to comply
with the provisions of this Section (k) with respect to any resale
or other disposition of such securities.
(l) Holder Representations and Warranties. Holder is
aware of the business affairs and financial condition of the
Company and has acquired sufficient information about such company
to reach an informed and knowledgeable decision to acquire this
Warrant and the Warrant Stock. Holder has had the opportunity to
ask questions of and receive answers from such company and any
persons acting on its behalf concerning such company and to obtain
any additional information necessary to verify the accuracy of any
information received concerning such company, this Warrant, and
the Warrant Stock. Holder is capable of bearing the economic risk
and burdens of this investment, including the possibilities of
complete loss and the lack of public market such that he may not
be possible to readily liquidate this investment whenever desired.
The offer to make this investment was directly communicated to
Holder by the Company in such a manner that Holder was able to ask
questions of and receive answers from the Company or persons
acting on its behalf concerning the terms and conditions of this
transaction, and at no time was Holder presented with or solicited
by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement or any other
form of general advertising. Holder has had substantial
experience in business or investments in one or more of the
following: (a) investment experience with securities, such as
stocks and bonds; (b) ownership of substantial interest in real
property investments;(c) experience as a businessman and/or member
of a profession, and therefore Holder is familiar with business
and financial dealings and problems. Holder understands that this
Warrant and the Warrant Stock have not been and will not be
registered under the Act, and that in selling this Warrant and the
Warrant Stock, the Company has relied upon the exemption from
registration under the Act contained in Section 4(2), which
exemption depends upon, among other things, the bona fide nature
and veracity of Holder's representations and warranties in
Sections (l) and (m) hereof.
(m) Holder's Representations and Warranties: Investment
Purpose. Holder is purchasing this Warrant and the Warrant Stock
for investment for his own account only and not with a view to, or
for resale in connection with, any "distribution" thereof within
the meaning of the Act. Holder acknowledges and understands that
this Warrant and the Warrant Stock must be held indefinitely
unless they are subsequently registered under the Act or an
exemption from such registration is available. Holder understands
that the certificate evidencing this Warrant and the Warrant Stock
will be imprinted with a legend which prohibits the transfer of
this Warrant and the Warrant Stock unless they are registered or
the Company receives an opinion of Holder's counsel reasonably
satisfactory to the Company to the effect that such registration
is not required. Holder further understands that stop transfer
instructions will be in effect with respect to the transfer of
this Warrant and the Warrant Stock consistent with the above.
(n) Warrant Stock Registration Rights. If at any time
the Company proposes to register any of its Common Stock under the
Act on a form that would also permit the registration of the
Warrant Stock, the Company shall use its best efforts to cause to
be registered under the Act at its expense all of the Warrant
Stock.
(o) Applicable Law. This Warrant shall be governed by
and in accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, Good Times Restaurants Inc. and
Holder have executed this Warrant to become effective as of the
1st day of June, 1995.
GOOD TIMES RESTAURANTS INC.,
a Nevada corporation
By: /s/ Boyd E. Hoback, President
HOLDER:
BOULDER RADIOLOGISTS, INC.,
DEFINED BENEFIT PLAN-DUBACH
By:
Kenneth F. Dubach<PAGE>
PURCHASE FORM
Dated: ____________________, 19___
The undersigned hereby irrevocably elects to exercise
the within Warrant to the extent of purchasing __________ shares
of Common Stock and hereby makes payment of $__________ in
payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(Please type or print in block letters)
Address:
Signature:
ASSIGNMENT FORM
FOR VALUE RECEIVED,
___________________________________________
hereby sells, assigns and transfers unto
Name:
(Please type or print in block letters)
Address:
the right to purchase Common Stock represented by this Warrant
to the extent of __________ shares as to which such right is
exercisable and does hereby irrevocably constitute and appoint
attorney, to transfer the same on the books of the Company with
full power of substitution in the premises.
Signature:
Dated: , 19___
PROMISSORY NOTE
$300,000 Effective as of June 1, 1995
FOR VALUE RECEIVED, the undersigned, Good Times Restaurants
Inc., a Nevada corporation ("Maker"), promises to pay to the order
of Boulder Radiologists Inc. Pension Plan FBO Dubach ("Holder"),
the principal sum of Three Hundred Thousand Dollars ($300,000),
with interest on the outstanding principal balance, payable
quarterly, at the rate of twelve percent (12%) per annum from the
date hereof until paid in full. The principal of this Note shall
be due and payable on May 31, 2000. Payment shall be made in
lawful money of the United States of America at such address as
Holder may reasonably request.
This Note may be prepaid either in whole or in part at
any time without premium or penalty and without the prior written
consent of the Holder hereof.
Upon default in the payment of any principal or interest
when due under this Note continuing for fifteen (15) days after
notice thereof to Maker, the entire principal balance of this Note
and all accrued interest shall, at the option of Holder, be
immediately due and payable. After maturity (whether by
acceleration or otherwise), any unpaid amounts of principal and
interest shall bear interest at the rate of eighteen percent (18%)
per annum until paid.
In the event of any reverse stock split of Maker's common
stock, Holder, upon written notification to Maker, may accelerate
this Note to be due and payable sixty (60) days after completion
of such reverse stock split, provided, however, that Holder shall
not have such right if Maker issues within such sixty-day period
additional common stock purchase warrants to Holder so that Holder
will own in the aggregate warrants to purchase 50,000 shares of
Maker's common stock, all at the same exercise price, which price
will have been adjusted as a result of the reverse stock split.
For example, if Maker completes a one for two reverse stock split
which, under the terms of the Stock Purchase Warrant issued to
Holder contemporaneously with this Note, the Stock Warrant Exercise
Price of $1.40 would be increased to $2.80 and the number of shares
to be issued pursuant to exercise of the Warrant would be reduced
from 50,000 shares to 25,000 shares, then Maker will issue an
additional Stock Purchase Warrant to Holder entitling Holder to
purchase 25,000 shares of stock at a Warrant Exercise price of
$2.80.
Maker hereby waives presentment for payment, demand,
notice of dishonor, protest and notice of protest. Should the
indebtedness represented by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or
other court proceedings, Maker agrees to pay, in addition to the
principal and interest due and payable hereof, all expenses of
collection, including reasonable costs and attorneys' fees. Maker
also agrees to pay all costs and expenses which Holder may incur by
reason of any default by Maker hereunder, including, without
limitation, reasonable attorneys' fees with respect to legal
services relating to any such default and the determination of the
rights and remedies of Holder as a result thereof.
<PAGE>
This Note shall be governed by the laws of the State of
Colorado.
MAKER:
GOOD TIMES RESTAURANTS INC.,
a Nevada corporation
By: /s/ Thomas A. Gordon
Title: Chief Financial Officer
OFFICE LEASE
THIS LEASE is made in duplicate this 7th day of January, 19
93,by and between Sheridan Park 7 Partners, a Colorado Limited
Partnership , hereinafter called "Lessor", and Good Times
Restaurants Inc. , hereinafter called "Lessee",
WITNESSETH:
That in consideration of the payment of the rent and the
keeping and performance of the covenants and agreements by Lessee,
as hereinafter set forth, Lessor has agreed to lease and hereby
does lease and demise unto Lessee the premises known and described
as suite number 330, consisting of approximately 5,658
rentable square feet, as described on Exhibit A attached hereto and
made a part hereof by reference, hereinafter called the "Leased
Premises", and being a part of that building located at 8620 Wolff
Court, Suite 330, Westminster, CO 80030 , hereinafter called the
"Building".
TO HAVE AND TO HOLD the same, with all the appurtenances,
unto Lessee, from 12 o'clock noon on the 1st day of April ,
1993, for, during and until 12 o'clock noon on the 1st day of
April , 1998, hereinafter the "Lease Term" at and for a
rental for the full term aforesaid in the sum of Three Hundred
Fifty Thousand Seven Hundred Ninety Six & 00/100 Dollars ($
350,796.00), payable in installments, the initial payment being the
sum of Five Thousand Six Hundred Fifty Eight and 00/100 Dollars
($5,658.00), together with rent adjustments as set forth
hereinafter, due upon execution of this Lease. Thereafter
installments of see paragraph 44 for rent schedule Dollars ($ -------)
per month, together with rent adjustments as set forth
hereinafter, the first such installment being due and payable on
the first calendar month following the month in which falls the
first day of this Lease with other installments being due and
payable on the first day of each and every calendar month of said
term thereafter until the full payment of the total sum shall be
made. Base Rental Rate shall mean $ 12.00 per rentable square
foot of the Leased Premises. All rentals shall be paid without
notice at the office of Lessor in accordance with Paragraph 4
below. Any rentals or other amounts to be paid under the terms of
this Lease, if not paid within five (5) days of due date, shall, at
Lessor's sole discretion, accrue a late charge of five percent
(5%).
1. SERVICES
Lessor agrees, without extra charge, except as provided below,
during the period Lessee shall occupy the Leased Premises under the
terms hereof, to furnish such heated or cooled air to the Leased
Premises during ordinary business hours as may in the judgement of
Lessor and in compliance with all applicable government
regulations, be reasonably required for the comfortable use and
occupancy of the Leased Premises; to provide the use of passenger
elevators, if applicable, for access and egress to and from the
Leased Premises at all times during ordinary business hours; to
provide janitorial service for the Leased Premises (including such
window washing as may in the judgment of Lessor be reasonably
required); and to cause electric current to be supplied for
lighting the Leased Premises and public halls, but it is understood
that Lessee shall use such electric current as shall be supplied by
Lessor only for lighting and standard office equipment and shall
pay on demand to Lessor for the waste of electric current or
unreasonable or extraordinary demand. Therefore, Lessee shall pay
Lessor as additional rent the cost of electrical current for any
non-standard office equipment. Portable cooling and heating units
are not permitted. Lessor shall pay the cost of replacing light
bulbs or tubes used in Lessor's ceiling fixtures in the Leased
Premises.
1A.Additional and After - hour Services:
Lessor shall not be obligated to furnish any services or utilities,
other than those stated above. If Lessor elects to furnish
services or utilities requested by Lessee in addition to those
listed or at times other than those stated, Lessee shall pay to
Lessor the prevailing charges for such services and utilities,
within 10 days after billing. If Lessee fails to make any such
payment, Lessor may, without notice to Lessee and in addition to
Lessor's other remedies under this Lease, discontinue any or all of
such additional or after-hour services. No such discontinuance of
any service shall result in any liability of Lessor to Lessee or be
considered an eviction or a disturbance of Lessee's use of the
Premises.
2. INTERRUPTION OR DISCONTINUANCE OF LESSOR'S SERVICE.
Lessee agrees that Lessor shall not be liable for failure to supply
any such heating, air conditioning, elevator, janitor or lighting
service, during any period when Lessor uses due diligence to supply
such services, it being understood that Lessor reserves the right
temporarily to discontinue such services, or any of them, at such
times as may be necessary by reason of accident, unavailability of
employees, repairs, alterations or improvements, or whenever by
reason of strikes, lockouts, riots, acts of God or any other
happening beyond control of Lessor, Lessor is unable to furnish
such services.
3. QUIET ENJOYMENT
Lessor agrees to warrant and defend Lessee in the quiet enjoyment
and possession of the Leased Premises during the term of this
Lease.
4. PAYMENT OF RENT
Lessee agrees to pay all rents and sums to be paid to Lessor
hereunder at the times and in the manner herein provided. Rental
checks will be made payable to the order of: DENCOL/Sheridan Park
7 and be paid at: 8753 Yates Drive, Suite 220, Westminster, CO
80030. Lessor reserves the right to change the party to whom
payment will be made and the address of the same by providing 15
days prior written notice to Lessee.
Lessee's covenants to pay rental and other sums due under this
Lease are independent of any other covenant, condition, provision
or agreement herein contained, and said rental payments shall not
be subject to offsets or deductions of any kind by Lessee.
4A.Returned Check Fee:
A fee of the greater of $25.00 or actual cost associated to the
returned check shall be paid by the Lessee to the Lessor for any
returned check.
5. DEPOSIT
Lessee, concurrently with the execution of this Lease, has
deposited with Lessor and shall keep on deposit at all times during
the term of this Lease, the sum of Five Thousand Six Hundred Fifty
Eight and 00/100 Dollars ($ 5,658.00 ) for the purpose hereinafter
set for, to be held by Lessor at: 3680 Iquana Drive, Colorado
Springs, Colorado 80910 , in a non-interest bearing account. If
at any time during the term of this Lease, Lessee shall be in
default in the performance of any of the terms, provisions,
covenants or conditions of this Lease, Lessor shall have the right
to apply said deposit, or so much thereof as may be necessary,
toward the reimbursement for any physical damage to the Leased
Premises and for any attorney's fees and legal costs incurred by
Lessor by reason of such default; and in the event such deposit
shall be diminished by any such payment from or application of the
same, Lessee shall and will forthwith pay to Lessor, or its agent,
as Lessor may request, such sum as shall be necessary to restore
said deposit to the original amount mentioned above. If the amount
of said deposit shall be insufficient to pay, reimburse and fully
discharge such expenses and damages, Lessee shall be and remain
liable for the balance thereof remaining unpaid, and shall pay the
amount of such deficiency to Lessor. After the termination of the
Lessee's tenancy, Lessor shall return to Lessee such part or
portion of said deposit as shall not be required to pay, discharge
and reimburse Lessor for the said expenses and damages.
In the event the property in which the Leased Premises is
located is sold or otherwise conveyed, or a new management agent is
named by Lessor, said security deposit may be transferred by Lessor
to the new owner of the property or new management agent, and
notice thereof shall be given to Lessee.
6. INSURANCE
(1) Lessee, at its expense, shall maintain in force during the
Term: comprehensive general liability insurance, which shall
include coverage for personal liability, contractual liability,
bodily injury, death and property damage, all on an occurrence
basis with respect to the business carried on in or from the
Premises and Lessee's use and occupancy of the Premises, with
coverage for any one occurrence or claim of not less than
$1,000,000 or such other amount as Lessor may reasonably require
upon not less than six months' prior written notice, which
insurance shall include Lessor as an additional named insured and
shall protect Lessor in respect of claims by Lessee as if Lessor
were separately insured;
(2) Lessor agrees to maintain adequate insurance on said
building, including amounts sufficient to restore tenants
structural improvements (excluding trade fixtures or equipment).
All insurance required to be maintained by Lessee shall be on
terms with insurers reasonably acceptable to Lessor. Each policy
shall contain an undertaking by the insurer that no material change
adverse to Lessor or Lessee will be made, and the policy will not
lapse or be canceled, except after not less than 30 days' prior
written notice to Lessor of the intended change, lapse or
cancellation. Lessee shall furnish to Lessor, if and whenever
requested by it, certificates or other evidences acceptable to
Lessor as to the insurance from time to time effected by Lessee and
its renewal or continuation in force.
(3) Lessor and Lessee waive any and all rights to recover
against the other or against any occupant of the building for any
loss or damage to such waiving party arising from any cause covered
by any insurance policy carried by such party. Each party will
deliver to the other, appropriate waiver of subrogation rights
endorsements to all such policies.
7. RENT ADJUSTMENTS--CONSUMER PRICE INDEX
8. RENT ADJUSTMENTS--OPERATING COST INCREASES
Lessee covenants and agrees to pay as Additional Rental an
amount equal to Lessee's proportionate share of any increase in the
amount of "Direct Operating Expenses" and "Real Estate Taxes" as
said terms are hereinafter defined. (a) DIRECT OPERATING
EXPENSES: All direct costs of operation and maintenance determined
by standard accounting practices which shall include all costs,
expenses and disbursements of every kind and nature which Lessor
shall pay or become obligated to pay in connection with the
management, operation, maintenance, replacement and repair of all
buildings, improvements and land comprising the Building and of the
personal property, fixtures, machinery, equipment, systems and
apparatus located in or used in connection therewith. By way of
illustration, Direct Operating Expenses shall include but not be
limited to the following: electricity, lamps, fluorescent tubes,
ballasts, steam, fuel, utility costs, utility taxes, water
(including sewer charges and/or rental), casualty and liability
insurance, repairs and cleaning, janitorial supplies, management
fees, service contracts with independent contractors, telephone,
grounds maintenance, stationary advertising, equipment necessary
for the maintenance and operation of the Building, reasonable
reserves for operating expenses, salaries, wages, payroll charges
and/or taxes, worker's compensation, hospitalization, medical,
surgical, and general welfare benefits (including life insurance)
and pension payments of employees of Lessor engaged in the
operation and maintenance of the Building of which the Demised
Premises form a part.
("Direct Operating Expenses" shall not include depreciation
on the Building of which the Demised Premises are a part or
equipment therein, loan payments, real estate brokers commissions,
or capital expenditures for tenant finish expenses for other
tenants or capital improvements to said building.)
(b) Real Estate taxes shall mean and include all general and
special taxes and assessments levied upon or assessed against the
Building. If at any time during the term of this Lease the method
taxation of real estate prevailing at the time of execution hereof
shall be or has been altered so as to cause the whole or any part
of the taxes now or hereafter levied, assessed or imposed upon
Lessor wholly or partially as a capital levy or measured by the
rents received therefrom, then such new or altered taxes
attributable to the Demised Premises shall be deemed to be included
within the term "Real Estate Taxes" for the purpose of this
paragraph, except that such shall not be deemed to include any
enhancement of said tax attributable to other income or other
ownerships of Lessor. Lessee shall in no event be responsible to
reimburse Lessor for any general income tax liabilities incurred by
Lessor.
(c) If the Direct Operating Expenses and Real Estate Taxes,
respectively, paid or incurred by the Lessor for any year on
account of the operation or maintenance of the Building of which
the Demised Premises are a part are in excess of the actual
Direct Operating Expenses and Real Estate Taxes for the Building
for the calendar year (hereinafter called the "Base Year"),
then the Lessee shall pay such excess amount multiplied by the
Lessee's approximate proportionate share of the net rentable square
footage of the Building. Lessee's approximate proportionate share
is of the Building is %.
Lessor shall by the end of the first calendar quarter of
each year during the term of the Lease, determine if the Direct
Operating Expenses and Real Estate Taxes paid or incurred by Lessor
exceed the actual cost to operate the Building during the Base
Year. Lessor shall then give Lessee a written statement of said
increase and statement of the additional rent payable by Lessee
hereunder. (Failure by Lessor to give such statement shall not be
deemed to constitute a waiver by Lessor of its right to require an
increase in rent.) Lessee shall pay, either in a lump sum or with
the permission of Lessor in four equal quarterly installments, the
amount of any increases due hereunder. Lessee, upon prior written
notice to Lessor and at Lessee's sole cost and expense, shall be
entitled to inspect Lessor's books and records for the Building to
confirm any rental adjustments as contemplated herein. Such right
of inspection shall be limited to one (1) inspection per year and
Lessee under no circumstances shall be entitled to withhold or
delay payment of Additional Rent hereunder until Lessee inspects or
completes his inspection of Lessor's books and records. At no time
shall the rental amount be less than the base rental amount.
(d) Even
though the term of the Original Lease has expired and Lessee has
vacated the Demised Premises, when the final determination is made
of Lessee's share of Direct Operating Expenses and/or Real Estate
Taxes for the year in which this Lease terminates, Lessee shall
immediately pay any Additional Rent due for expenses paid by
Lessor.
(e) In
the event the term of this Lease shall expire or be terminated on
a day other than the last day of the year, then the Additional Rent
due hereunder for the then current year may be estimated by Lessor
in its discretion and shall be prorated and payable by Lessee upon
Lessor's demand.
(f) Amounts payable by Lessee according to this Paragraph 8
will be payable as rent, without deduction or offset. If Lessee
fails to pay any amounts due according to this Paragraph 8, Lessor
will have all the rights and remedies available to it on account of
Lessee's failure to pay rent.
9. CHARACTER OF OCCUPANCY
Lessee agrees to occupy the Leased Premises as business offices
only and to use them in a careful, safe and proper manner; to pay
on demand for any damage to the Leased Premises caused by misuse or
abuse of the Leased Premises by Lessee, its agents or employees, or
by any other person entering upon the Leased Premises under express
or implied invitation of Lessee; not to use or permit the Leased
Premises to be used for any purposes prohibited by the laws of the
United States or any applicable state, county, or city law,
statute, regulation or ordinance; and not to commit waste nor
suffer nor permit waste to be committed nor permit any nuisance on
or in the Leased Premises.
10. ALTERATIONS BY LESSOR
Lessee agrees to permit Lessor at any time to enter the Leased
Premises to examine and inspect the same or make such repairs,
additions or alterations as Lessor may deem necessary or proper for
the safety, improvement or preservation thereof, and it is
expressly understood that Lessor shall at all times have the right
at its election to make such alterations or changes in other
portions of the Building as it may from time to time deem necessary
and desirable, as long as such alterations and changes do not
unreasonably interfere with Lessee's use and occupancy of the
Leased Premises.
11. ALTERATIONS BY LESSEE
Lessee agrees to make no alterations in or additions to the Leased
Premises without first obtaining the written consent of Lessor; and
all alterations, additions or improvements made by either party at
the expense of the Lessee (except only movable office furniture not
attached to the Building) shall be deemed a part of the real estate
and the property of Lessor and shall remain upon and be surrendered
with the Leased Premises as a part thereof, without molestation,
disturbance or injury at the end of said term, whether by lapse of
time or otherwise. At its option, Lessor may require removal of
all improvements made by Lessee to the Leased Premises and that the
Leased Premises be returned to their condition at the time this
Lease was executed. In the event Lessee makes any additions,
alterations or improvements in excess of $1,000.00, a performance
bond shall be posted by the Lessee insuring the Lessor against any
liability for mechanic's liens.
Lessee shall not permit any lien or claim for lien of any
mechanic, laborer or supplier or any other lien to be filed against
the Complex, the Building, the Common Areas, the land which
comprises the Complex, the Premises, or any part of such property
arising out of work performed, or alleged to have been performed
by, or at the direction of, or on behalf of Lessee. If Lessee
fails to have such lien or claim for lien so released or to deliver
such bond to Lessor, Lessor without investigating the validity of
such lien, may pay or discharge the same and Lessee shall reimburse
Lessor upon demand for the amount so paid by Lessor, including
Lessors expenses and attorneys' fees.
12. REPAIRS
Lessee agrees to keep the Leased Premises in as good order,
condition and repair as when they were entered upon, loss by fire
(unless caused by negligence of Lessee, its agents, employees or
invitees), inevitable accident or ordinary wear excepted.
12A.Lessor's Maintenance:
Lessor, at its expense, shall maintain and make necessary repairs
to the structural elements and exterior windows of the Building and
the Common Areas, and the electrical, plumbing, heating,
ventilation and air conditioning systems therein during regular
business hours, except that:
(1)Lessor shall not be responsible for the maintenance, repair
or replacement of any such systems which are located within the
Premises and are supplemental or special to the Building's standard
systems, whether installed pursuant to the Work Agreement or
otherwise; and
(2) The cost of performing any of said maintenance or repairs
caused by the negligence of Lessee, its employees, agents,
servants, licensees, subtenants, contractors or invitees, or the
failure of Lessee to perform its obligations under this Lease,
shall be paid by Lessee except the extent of insurance proceeds, if
any, actually collected by Lessor with regard to the damage
necessitating such repairs; and
(3) Lessor shall not be responsible for the repair of any
floor coverings. The Lessor shall also not be responsible for the
repair or maintenance of any wall finish or covering within the
demised area; and
(4) Lessee agrees, at its expense, to use chair pads for all
areas with carpeting to protect said carpet in the demised
premises.
13. ASSIGNMENT AND SUBLETTING
Lessee shall not assign this Lease or any right hereunder or sublet
the Leased Premises or any part thereof, nor permit any persons
other than Lessee and its employees to operate in said Leased
Premises without the prior written consent of Lessor, which consent
shall not be unreasonably withheld for assigning or subletting to
a tenant whose occupancy and use of the Leased Premises is
compatible with the use and overall plan of Lessor. Lessor shall
have the absolute right to withhold its consent to an assignment or
subletting of the Leased Premises if Lessee is in breach of this
Lease. A consent to any assignment of this Lease or any subletting
of said Leased Premises shall not constitute a waiver or discharge
of the provisions of this paragraph with respect to a subsequent
assignment or subletting.
In the event Lessor consents to any assignment of this Lease
or subletting of the Leased Premises, and as a condition thereto,
Lessee shall pay to Lessor fifty percent (50%) of all profit
derived by Lessee from such assignments or subletting. For
purposes of the foregoing, profit shall be deemed to include, but
shall not be limited to, the amount of all rent payable by such
assignee or sublessee in excess of the Base Rental Rate and any
adjustments thereto as defined in Paragraphs 7 and 8 above. If a
part of the con-sideration for such assignment or subletting shall
be payable other than in cash, the payment to Lessor shall be in
cash for its share of any non-cash consideration based upon the
fair market value thereof.
In the event a sublease or assignment is made as herein
provided, Lessee shall pay Lessor a charge of TWO HUNDRED AND
00/100 DOLLARS ($200.00) in order to reimburse Lessor for all of
the necessary legal and accounting services required in order to
accomplish such assignment or subletting.
14. ASSIGNMENT OR SALE BY LESSOR
In the event Lessor shall assign this Lease and/or sell or convey
the Building, the same shall operate to release Lessor from any
future liability upon any of the covenants or conditions, express
or implied, herein contained in favor of Lessee, and in such event
Lessee agrees to look solely to the successor in interest of Lessor
in and to this Lease. This Lease shall not be affected by such
assignment or sale, and Lessee agrees to attorn to the purchaser or
assignee.
15. INJURY TO PERSON OR PROPERTY
Lessee agrees to neither hold nor attempt to hold Lessor liable for
injury or damage, either proximate or remote, occurring through or
caused by any repairs, alterations, injury or accident to the
Leased Premises, whether by reason of the negligence or default of
the owners or occupants thereof, or any other person, or otherwise,
nor liable for any injury or damage occasioned by gas, smoke, rain,
snow, defective electric wiring or breaking or stoppage of the
plumbing or sewerage upon or in the Leased Premises.
16. INDEMNITY TO LESSOR
Lessee agrees to indemnify and save Lessor harmless of and from all
liability for damages or claims against Lessor on account of
injuries to the person or property of any other tenant in the
Building or to any other person rightfully in the Building for any
purpose whatsoever, where the injuries are caused by the negligence
or misconduct of Lessee, its agents, servants or employees, or of
any other person entering upon the Leased Premises under express or
implied invitation of Lessee or where such injuries are the result
of the violation of laws or ordinances, governmental orders of any
kind, or any of the rules and regulations provided for in this
Lease. Lessor shall indemnify Lessee the same.
17. ESTOPPEL CERTIFICATE
Lessee agrees that from time to time upon not less than ten (10)
days prior written request by Lessor, Lessee (or any permitted
assignee, sublessee, licensee, concessionee or other occupant of
the Premises claiming by, through or under Lessee) will deliver to
Lessor, a statement in writing signed by Lessee certifying (a) that
this Lease is unmodified and in full force and effect (or if there
have been modifications, that this Lease as modified is in full
force and effect and identifying the modifications); (b) the dates
to which the rent and other charges have been paid; (c) that Lessor
is not in default under any provision of this Lease, or, if in
default, the nature thereof in detail; (d) that Lessee is in
occupancy and paying rent on a current basis with no rental offsets
or claims; (e) that there has been no prepayment of rent other than
that provided for in this Lease; (f) that there are no actions,
whether voluntary or otherwise, pending against Lessee under the
bankruptcy laws of the United States or any State thereof, and (g)
such other matters as may be required by a prospective purchaser of
the Building. Lessee's failure to deliver such a statement within
the specified time shall be conclusive upon Lessee that this Lease
is in full force and effect, without modification except as may be
represented by Lessor, that there are no uncured defaults in
Lessor's performance and that not more than one month's rental has
been paid in advance.
18. SURRENDER AND NOTICE
Lessee agrees to surrender and deliver possession of the Leased
Premises promptly at the expiration of this Lease, or in the case
of the termination of this Lease by Lessor by reason of a breach in
any one or more of the covenants or agreements hereof, upon three
(3) days notice after Lessor follows the required legal process.
19. ACCEPTANCE OF PREMISES BY LESSEE
Lessor and Lessee agree that the taking possession of the Leased
Premises by Lessee shall be conclusive evidence as against Lessee
that said premises were in good and satisfactory condition when
possession was taken (except for latent defects).
20. FIRE, RESTORATION OF PREMISES
Lessor and Lessee agree that if the Leased Premises, or the
Building shall be so damaged by fire or other casualty as to render
the Leased Premises wholly untenantable, and if such damage shall
be so great that a competent architect, in good standing and
selected by Lessor, shall certify in writing to Lessor and Lessee
that the Leased Premises with the exercise of reasonable diligence,
cannot be made fit for occupancy within ninety (90) days from the
happening thereof, then this Lease shall cease and terminate from
the date of the occurrence of such damage; and Lessee thereupon
shall surrender to Lessor the Leased Premises and all interest
therein hereunder, and Lessor may reenter and take possession of
the Leased Premises and remove Lessee therefrom. Lessee shall pay
rent, duly apportioned, up to the time of such termination of this
uch termination of this
ventilation and air conditioning systems therein during regular
the Leased Premises can be made tenantable
within said ninety (90) day period from the happening of such
damage, then Lessor shall repair the damage so done with all
reasonable speed and the rent shall be abated only for the period
during which Lessee shall be deprived of the use of the Leased
Premises by reason of such damage and the repair thereof.
If the Leased Premises, without the fault of Lessee, shall be
slightly damaged by fire or other casualty, but not so as to render
the same untenantable, Lessor, after receiving notice in writing of
the occurrence of the injury, shall cause the same to be repaired
with reasonable promptness; and in such event, there shall be a
proportionate abatement of the rent.
If the fire or other casualty causing injury to the Leased
Premises or other parts of the Building shall have been caused by
the negligence or misconduct of the Lessee, its agents, servants or
employees, or if any other person entering upon the premises under
express or implied invitation of Lessee, such injury shall be
repaired by Lessor at the expense of Lessee, to the extent that
such damage is not covered by insurance.
In case the Building throughout be so damaged, whether by fire
or otherwise (though said Leased Premises may not be affected) that
Lessor within sixty (60) days after the happening of such damage
shall decide not to reconstruct, rebuild, or raze the Building,
then upon thirty (30) days' notice in writing to that effect given
by Lessor to Lessee, this Lease shall cease and terminate from the
date of the occurrence of said damage, and Lessee shall pay the
rent, properly apportioned up to such date, and both parties hereto
shall be discharged of all further obligations hereunder.
21. EMINENT DOMAIN, TERMINATION OF LEASE
If the Leased Premises or such portion thereof as shall render the
remaining portion unusable by the Lessee for its intended purpose
shall be taken by right of eminent domain, then this Lease, at the
option of either party, shall forthwith cease and terminate, and
the current rent shall be properly apportioned to the date of such
taking; and in such event Lessor shall receive the entire award for
the lands and improvements so taken.
22. BREACH OF LEASE
If default shall be made in the payment of any sum to be paid by
Lessee under this Lease, and such default shall continue for five
(5) days, or default shall be made in the performance of any of the
other covenants or conditions which Lessee is required to observe
and to perform, and such default shall continue for twenty (20)
days, or if the interest of Lessee, under this Lease shall be
levied upon under execution, or other legal process, or if any
petition shall be filed by or against Lessee to declare Lessee a
bankrupt, for the reorganization or rehabilitation of Lessee or to
delay, reduce or modify Lessee's debts or obligations, if any, or
modify Lessee's capital structure if Lessee be a corporation or
other entity, or if Lessee be declared insolvent according to law,
or if any assignment of Lessee's property shall be made for the
benefit of creditors, or if a receiver or trustee is appointed for
Lessee or Lessee's property, or if Lessee shall abandon the Leased
Premises during the term of this Lease or any renewals or
extensions thereof, then Lessor may treat the occurrence of any one
or more of the foregoing events as a breach of this lease (provided
that no such levy, execution, legal process or petition filed
against Lessee shall constitute a breach of this Lease if Lessee
shall reasonably contest the same by appropriate proceedings and
shall remove or vacate the same within twenty (20) days from this
date of its creation, service or filing).
23. REMEDIES UPON BREACH
In the event of a breach of this Lease by Lessee, default interest
of 18% per annum, compounded annually, shall accrue on all overdue
sums and Lessor may have any one or more of the following described
remedies,in addition to all other rights and remedies provided at
law or in equity:
(a) Lessor may terminate this Lease by written notice and
forthwith repossess the Leased Premises and be entitled to recover
as damages a sum of money equal to the total of (I) the cost of
recovering the Leased Premises, including Lessor's attorney's fees;
(II) the unpaid rent earned at the time of termination; (III)
default interest of 18% per annum, compounded annually, on all
overdue sums; (IV) damages for the wrongful withholding of the
Leased Premises by Lessee; and (V) any other sum of money and
damages owed by Lessee to Lessor.
(b) Lessor may retake possession of the Leased Premises and
shall have the right, but not the obligation, without being deemed
to have accepted a surrender thereof, and without terminating this
Lease, to relet the Leased Premises for the remainder of the term
provided for herein; and if the rent received through such
reletting does not at least equal the rent provided for herein,
Lessee shall pay and satisfy any deficiency between the amount of
the rent so provided for and that received through reletting; and,
in addition thereto, Lessee shall pay all reasonable expenses
incurred in connection with any such reletting, including, but not
limited to, the cost of renovating, altering and decorating for a
new occupant, and any and all leasing commissions paid for such
reletting.
24. PREMISES LEFT VACANT--LESSOR MAY TAKE
POSSESSION
Lessor and Lessee agree that if Lessee shall abandon or vacate the
Leased Premises before the end of the term of this Lease, Lessor
may, at its option and without notice, and using such force as may
be necessary, enter the Leased Premises, remove any signs of Lessee
therefrom, and relet the same, or any part thereof, as Lessor may
see fit for the account of Lessee, without thereby voiding or
terminating this Lease, and, for the purpose of such reletting,
Lessor is authorized to make any repairs, changes, alterations or
additions in or to the Leased Premises, as may in the opinion of
Lessor, be necessary or desirable for the purpose of such
reletting, and if a sufficient sum shall not be realized from such
reletting (after payment of all the costs and expenses of such
repairs, changes or alterations, and the expense of such reletting
and the collection of rent accruing therefrom) to equal the
aggregate monthly rental agreed for the balance of this Lease Term
or for any renewal period to be paid by Lessee under the provisions
of this Lease, then Lessee agrees to pay such total deficiency upon
demand therefore, and if no other rental can be obtained after
reasonable effort by Lessor for a period of sixty (60) days after
Lessee's breach as contemplated herein, then Lessee shall be liable
for the total rental due for the balance of the period from the
date of such default.
25. REMOVAL OF LESSEE'S PROPERTY
Lessor and Lessee agree that if Lessee shall fail to remove all
effects from the Leased Premises upon the abandonment thereof or
upon the termination of this Lease for any cause whatsoever,
Lessor, at its option, may remove such effects in any manner that
it shall choose, and store them without liability to Lessor for
loss or damage thereof, and Lessee agrees to pay Lessor on demand
any and all expenses incurred in such removal, including court
costs and attorney's fees and storage charges on such effects for
any length of time they shall be in Lessor's possession; or Lessor,
at its option, without notice, may sell said effects, or any of
them, at private sale and without legal process, for such prices
as Lessor may obtain, and apply the proceeds of such sale upon any
amounts due under this Lease from Lessee to Lessor and upon the
expense incident to the removal and sale of said effects, rendering
the surplus, if any, to Lessee.
26. LIEN ON LESSEE'S FURNISHINGS
27. CONSTRUCTIVE EVICTION--NOTICE REQUIREMENT
If Lessee believes that Lessor has or is committing an act or acts
which constitute constructive eviction, Lessee must provide Lessor
with written notice specifying the act or acts which allegedly
constitute a constructive eviction, and Lessor shall have ten (10)
days from the receipt of said notice to cure the alleged
constructive eviction. Lessee shall not exercise his legal rights
to assert a constructive eviction until Lessor's ten (10) day cure
period has expired, and Lessee shall be deemed to have conclusively
waived its rights to assert a constructive eviction if he abandons
the premises before the cure period has expired.
28. NO IMPLIED SURRENDER OR WAIVER
Lessor and Lessee agree that no act or thing done by Lessor or its
agents during the term of this Lease shall be deemed an acceptance
of a surrender of the Leased Premises, and no agreement to accept
a surrender of the Leased Premises shall be valid, unless the same
be made in writing and subscribed by Lessor. The mention in this
Lease of any particular remedy shall not preclude Lessor from any
other remedy Lessor might have, either in law or in equity, nor
shall the waiver of any violation of any covenant or condition
contained in this Lease or any of the rules and regulations set
forth herein, or hereafter adopted by Lessor, prevent a subsequent
act, which would have originally constituted a violation, from
having all the force and effect of any original violation. In case
it should be necessary or proper for Lessor to bring any action
under this Lease or to place this Lease with an attorney for the
enforcement of any of Lessor's right hereunder, then Lessee agrees
in each and any such case to reimburse Lessor for Lessor's
reasonable attorney's fees and legal expenses, including, but not
limited to, in-house legal expenses. The receipt by Lessor of rent
with knowledge of the breach of any covenant in this Lease, shall
not be deemed a waiver of such breach. The failure to enforce any
of the rules and regulations set forth herein, or hereafter
adopted, against Lessee and/or any other Lessee in the Building
shall not be deemed a waiver of such rules and regulations or any
thereof. The receipt by Lessor of rent from any assignee,
subtenant, or occupant of the Leased Premises shall not be deemed
a waiver of the covenant contained in this Lease against assignment
and subletting, or an acceptance of the assignee, subtenant or
occupant as Lessee, or a release of Lessee from the further
observance of performance by Lessee of the covenants in this Lease
to be observed and performed by the Lessee. No provisions of this
Lease shall be deemed to have been waived by Lessor unless such
waiver be in writing and signed by Lessor.
29. RELOCATION TO OTHER SPACE IN THE BUILDING OR OFFICE PARK
30. FIRST RIGHT OF REFUSAL
31. HOLDING OVER--TENANCY MONTH TO MONTH
Lessor and Lessee agree that if after the expiration of this Lease,
Lessee shall remain in possession of the Leased Premises and
continue to pay rent and without any express agreement as to such
holding over, then such holding over shall be deemed to be a
tenancy from month to month, and Lessee shall be regarded as a
tenant from month to month, subject to all the terms and conditions
of this Lease, except that Lessor may, upon Lessee's holding over
and at Lessor's sole discretion, and upon written notice to Lessee
by Lessor, at any time adjust the monthly rental rate to an amount
equal to one and one half (1 1/2) times the last monthly rental
amount.
32. PAYMENTS AFTER TERMINATION
Lessor and Lessee agree that no payments of money by Lessee to
Lessor after the termination of this Lease, in any manner, or after
the giving of any notice (other than a demand for payment of money)
by Lessor to Lessee, shall reinstate, continue or extend the term
of this Lease or affect any notice given to Lessee prior to the
payment of such money, it being agreed that after the service of
notice or the commencement of a suit or after final judgment
granting Lessor possession of the Leased Premises, Lessor may
receive and collect any sums of rent due, or any other sums of
money due under the terms of this Lease, and the payment of such
sums of money, whether as rent or otherwise, shall not waive said
notice, or in any manner affect any pending suit or any judgment
theretofore obtained.
33. COMPLETION OF THE LEASED PREMISES
Lessor and Lessee agree that the Leased Premises will be finished
in accordance with the terms, specifications, and conditions
contained in the "Tenant Work Letter" attached as Exhibit B to this
Lease. The certificate of the architect (or company) in charge of
the construction or preparation of the Leased Premises shall
control conclusively the date upon which the Leased Premises are
ready for occupancy. Lessor and Lessee also agree that for the
purpose of completing or making repairs or alterations in any
portion of the Building, Lessor may use one or more of the street
entrances, the halls, passageways and elevators of the Building;
provided, however, that there shall be no unnecessary obstruction
of the right of entry to the Leased Premises while the same are
occupied. It is mutually understood and agreed, however, that
anything to the contrary or apparent contrary herein, acceptance of
possession of the Leased Premises shall be conclusive evidence as
against Lessee that the Leased Premises are complete and
satisfactory whether all of the Building shall be completed or not.
34. AUTHORITIES FOR ACTION--NOTICE
Lessor and Lessee agree that Lessor may act in any matter provided
for in this Lease by its President, Vice President or its Building
Manager, and any notice to be given to Lessor as provided for in
this Lease, shall be delivered in writing in person to its
President, Vice President or its Building Manager or sent to its
address as herein set forth or subsequently modified. Any notice
to be given Lessee under the terms and provisions of this Lease
shall be in writing and may be given in person to the chief
official of Lessee located in the Leased Premises or sent to Lessee
by mail at its principal office in the Building.
35. RULES AND REGULATIONS
Lessor and Lessee agree that the following rules and regulations
shall be and are hereby made a part of this Lease, and Lessee
agrees that its employees and agents, or any others permitted by
Lessee to occupy or enter the Leased Premises, will at all times
abide by said rules and regulations and that a default in the
performance and observance thereof shall operate the same as any
other defaults herein:
(a) The sidewalks, entries, passages, corridors, stairways and
elevators of the Building shall not be obstructed by Lessee or its
agents or employees, or be used for any purpose other than ingress
and egress to and from the Leased Premises.
(b) (1) Furniture, equipment or supplies shall be moved in or
out of the Building only upon the elevator and/or through the
access designated by Lessor and then only during such hours and in
such manner as may be prescribed by Lessor.
(2) No safe or article of property, the weight of which may,
in the opinion of Lessor, constitute a hazard or danger to the
Building or its equipment, shall be moved into the premises.
(3) Safes and other equipment, the weight of which is not
excessive shall be moved into, from or about the Building only
during such hours and in such manner as shall be prescribed by
Lessor, and Lessor shall have the right to designate the location
of such articles in the Leased Premises.
(c) No sign, advertisement, or notice shall be inscribed,
painted or affixed on any part of the inside or outside of the
Leased Premises or the Building unless approved by Lessor as to
color, size, style and location; but there shall be no obligation
or duty on Lessor to allow any sign, advertisement or notice to be
inscribed, painted or affixed on any part of the inside or outside
of the Leased Premises or of the Building. Original building
standard suite sign will be prepared for Lessee by the sign writer
appointed by Lessor, the cost of the sign to be paid by Lessor. A
directory in a conspicuous place, with the name of Lessee, will be
provided by Lessor, with the original building standard directory
strips being paid for by Lessor. Any necessary revision in the
building standard suite sign and directory strip, will be made by
Lessor within a reasonable time after notice from Lessee of the
error or change making the revision necessary; such revisions being
at the sole expense of Lessee. No furniture shall be placed in
front of the Building or in any lobby or corridor without the prior
written consent of Lessor. Lessor shall have the right to remove
all non-permitted sign and furniture, without notice to Lessee, at
the expense of Lessee.
(d) Lessee shall not do or permit anything to be done in the
Leased Premises, or bring or keep anything therein, which will in
any way increase the cost of fire insurance for the Building, or on
property kept therein, or in any way injure or annoy them, or
conflict with the laws relating to fire, or with any regulations of
the fire department, or with any insurance policy upon the Building
or any part thereof, or conflict with any applicable fire or health
law, statute, regulation or ordinance.
(e) Lessee shall not employ any person or persons other than
the janitor of Lessor for the purpose of cleaning or taking care of
the Leased Premises without the written consent of Lessor. Lessor
shall not be responsible to Lessee for any loss of property from
the Leased Premises, however occurring, or for any damage done to
Lessee's furniture or equipment by the janitor or any of his staff,
or by another person or persons whomsoever, except that Lessor
agrees to be liable for any such damage caused by its employees
occasioned, in Lessor's opinion, by unusual events, such liability,
however, not to exceed in the aggregate, for each successive period
of twelve months, one-half of one percent of the rent payable
during each such period. Any person or persons employed by Lessee
for the purpose of cleaning or taking care of the Leased Premises,
with the written consent of Lessor, must be subject to and under
the control of the janitor of the Building, in all things in the
Building and outside of the Leased Premises. The janitor of the
Building may at all times keep a pass key, and he and other agents
of Lessor shall at all times be allowed admittance to Leased
Premises.
(f) Water closets and other water fixtures shall not be used
for any purpose other than that for which the same are intended,
and any damage resulting to the same from misuse on the part of
Lessee, its agents or employees, shall be paid for by Lessee. No
person shall waste water by tying back or wedging the faucets in
any manner.
(g) No animals, except handicapped assistance animals, shall
be allowed in the offices, halls, corridors and elevators in the
Building. No person shall disturb the occupants of this or
adjoining buildings or premises by the use of any radio or musical
instrument or by the making of loud or improper noises.
(h) Bicycles or other vehicles shall not be permitted in the
offices, halls, corridors and elevators in the Building, nor shall
any obstruction of sidewalks or entrances of the Building be
permitted. Bicycles shall not be locked to trees, downspouts,
signs or other portions of the Building or surrounding premises.
(i) Lessee shall not allow anything to be placed in the
outside window ledges of the Building, nor shall anything be thrown
by Lessee, its agents or employees, out of the windows or doors, or
down the halls, elevator shafts or ventilating ducts or shafts of
the Building. Lessee, except in the case of fire or other
emergency, shall not open any outside window as this interferes
with the proper functioning of the Building air conditioning
system.
(j) No additional lock or locks or security system shall be
placed by Lessee on any door in the Building unless written consent
of Lessor shall first have been obtained, which consent shall not
be unreasonably withheld. A reasonable number of keys to the
Leased Premises and to the toilet rooms will be furnished by Lessor
to Lessee, and neither Lessee, its agents or employees shall have
any duplicate key made. A reasonable charge for extra keys will be
made to Lessee. At the termination of this tenancy, Lessee shall
promptly return to Lessor all keys to offices, toilet rooms or
vaults.
(k) No awnings shall be placed over the windows except by the
prior written consent of Lessor. No inside screening, draping,
shades or blinds shall be hung on or over the windows except by the
prior written consent of Lessor.
(1) If Lessee desires telegraphic, telephonic, or other
electronic connections, Lessor or its agents will direct the
installers as to where and how the wires may be introduced, and
without such directions, no boring or cutting for wires will be
permitted. Any such installation and connection shall be made at
Lessee's expense.
(m) Whenever heat generating machines or equipment, including
telephone equipment, are used in the leased premises, and such
machines or equipment affect the temperature otherwise maintained
by the air conditioning system, Lessor reserves the right to
install supplemental air conditioning units in the Leased Premises.
The cost of such installation, operation and maintenance of such
supplemental air conditioning, shall be paid by Lessee upon demand
by Lessor.
(n) Lessee shall not install or operate any steam or gas
engine or boiler, or carry on any mechanical business in the Leased
Premises. The use of oil, gas or flammable liquids for heating,
lighting or any other purpose is expressly prohibited. Explosives
or other articles deemed extra hazardous shall not be brought into
the Building.
(o) Any painting or decorating as may be agreed to be done by,
and at the expense of Lessor, shall be done during regular working
hours; should Lessee desire such work done on Sundays, holidays or
outside of regular working hours, Lessee shall pay for the extra
costs thereof.
(p) Except normal picture hanging and except as otherwise
permitted by Lessor, Lessee shall not mark upon, paint signs upon,
cut, drill into, drive nails or screws into, or in any way deface
the walls, ceilings, partitions or floors of the Leased Premises or
of the Building, and any defacement, damage or injury caused by
Lessee, its agents or employees shall be paid for by Lessee.
(q) Lessor shall at all times have the right, by its officers
or agents, to enter the Leased Premises, to inspect and examine the
same, and to show the same to persons wishing to lease them, and
may at any time within ninety (90) days prior to the termination of
this lease, place upon the doors and windows of the Leased Premises
the notice "For Rent", which notice shall not be removed by Lessee.
(r ) Lessor reserves the right to make other reasonable rules
and regulations, or amend these rules and regulations, as Lessor's
judgment may from time to time be necessary and desirable for the
safety, care and cleanliness of the Leased Premises, and for the
preservation of good order thereof.
(s) No overnight parking or storing of vehicles shall be
permitted.
36. SUBORDINATION
Lessor and Lessee agree that this Lease is subject to, and
subordinate to, all ground or underlying leases and to all present
mortgages affecting the real estate on which the Building is
located and the Building of which the Leased Premises is a part,
and to all renewals and extensions thereof, and to any mortgage or
mortgages which may hereafter be executed affecting the same.
37. AMENDMENT OR MODIFICATION
Lessee acknowledges and agrees that it has not relied upon any
statement, representation, agreement or warranty except such as is
expressed herein, and that no amendment or modification to this
Lease shall be valid or binding unless expressed in writing and
executed by Lessor and Lessee in the same manner as in the
execution of this Lease.
38. SEVERABILITY CLAUSE
If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the
term of this Lease, then and in that event, it is the intention of
Lessor and Lessee that the remainder of this Lease shall not be
affected thereby, and it is also the intention of Lessor and Lessee
that in lieu of each clause or provision of this Lease that is
illegal, invalid or unenforceable there be added as a part of this
Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and
be legal, valid and enforceable. The
caption of each paragraph hereof is added as a matter of
convenience only and shall be considered to be of no effect in the
construction of any provision or provisions of this Lease.
39. SUCCESSORS AND ASSIGNS
All terms, conditions and covenants to be observed and performed by
Lessor and Lessee shall be applicable to and binding upon their
respective heirs, administrators, executors, successors and
assigns.
40.ADDENDUM
Where there is an Addendum to this Lease, if there are any
conflicts between the provisions of the Addendum and the provisions
of this Lease, the provisions of the Addendum shall control.
41.BROKERS
Lessee warrants that it has not dealt with any real estate broker
or agent in connection with the negotiation of this Lease to whom
a real estate commission might be due, or who might have an
interest in this transaction, except DENCOL Real Estate Services,
Inc. and Cushman Realty Corporation. .
Lessee agrees to indemnify and hold harmless Lessor and the
Manager from and against any and all liabilities and claims for
commissions and fees arising out of a breach of the foregoing
representation. Lessor shall be responsible for the payment of all
commissions to the broker, if any, specified in this Article, based
upon the leasing commission policy of Lessor applicable to the
Complex as of the date of this Lease.
42.LEGAL COUNSEL
No representation or recommendation is made by the real estate
broker or its agents or employees as to the legal sufficiency,
legal effect, or tax consequences of this Lease, or the
transactions relating thereto. It is recommended that the Lessee
employ an attorney prior to executing this Lease to review the
Lease and provide legal counsel.
43.DATE OF ACCEPTANCE
This Lease is conditioned upon the acceptance by Lessee and
delivery to Lessor of an executed Lease on or before January 8,
1993.
<PAGE>
44.RENT SCHEDULE
Year One thorugh Three = $12.00 per square foot - $5,658.00
per month.
Year Four and Five = $13.00 per square foot - $6,129.00 per
month.
45. Tenant Improvements:
Owner will provide building standard finish to accommodate the
lessee's layout to be determined by a space plan prepared by
Lessor's space planner. The tenant improvements shall include
all space and construction drawings and not exceed $10.38 per
square foot for the leased space as Lessor costs. Any
approved changes resulting in additional costs shallb e paid
by Lessee prior to occupancy of premises.
46. Moving Allowance:
Lessor will provide Lessee a moving allowance for the actual
cost of the move substantiated by paid invoices, not to exceed
$.72 per rentable square foot of leased space.
47. Option to Renew:
Assuming Lessee is not in default of the Lease, Lessor will
provide Lessee with one, (5) year renewal option at hte then
current prevailing market rate for buildings of comparable
quality and location to SheridanPark 7.
48. Exterior Signage:
Pursuant to Lessor's required specifications and City of
Westminster approval, Lessee will be allowed appropriate
signage on the building exterior at Lessor's sole expense.
See Exhibit "C".
49. Interior Signage:
Lessor shall provide building standard directory and Suite
identification at Lessor's expense for th einitial signage at
occupancy of the space. changes t herafter shall be at
Lessee's expense.
READ AND APPROVED this 12th day of January , 1993 .
Sheridan Park 7 Partners, a Colorado limited partnership.
Lessor
By: DENCOL Real Estate Services, Inc. Its Agent
By: /s/ John W. Waid, President
John W. Waid, President
READ AND APPROVED this 12th day of January , 1993 .
Good Times Restaurants Inc. Lessee
By: /s/ Thomas A. Gordon, Chief Financial Officer
ATTEST:
/s/ Boyd E. Hoback
<PAGE>
ADDENDUM "A"
This addendum is attached hereto and forms a part of that certain
Lease dated January 7, 1993, by and between Sheridan Park 7
Partners, hereinafter referred to as "Lessor" and Good Times
Restaurants Inc., hereinafter referred to as "Lessee" covering
5,658 square foot located in Suite 330 at 8620 Wolff Court,
Westminster, CO 80030.
1. Paragraph 1:
a. "Ordinary business hours" are considered to be 8 am to 5
pm Monday through Friday, and 8 am to 12 pm Saturday,
excluding holidays.
b. "Standard Office Equipment" shall include those items of
equipment that do not require additional electrical
service; weigh such that requires an excessive floor
load; or generates heat that requires separate cooling or
ventilating over and above the building HVAC system.
2. Paragraph 2:
Should there be a disruption of Lessee's business for a period
in excess of five (5) business days, Lessor shall abate rent
in the amount of the then current rent being paid by Lessee,
for the period the disruption shall continue.
3. Paragraph 6:
a. "Legal Liability" covers, among other things, persons
authorized to sign and do business on behalf of the
Lessee.
b. "Insurance Against Such Other Perils" is inserted to
cover changes in the insurance industry that may require
changes in Lessee's coverage. The term "reasonably
require" protects the Lessee from unreasonable requests
by Lessor.
4. Paragraph 11:
Excluding tenant improvements done at the time of occupancy of
said Premises.
5. Paragraph 12A:
This paragraph refers to any special or supplemental equipment
installed to accommodate Lessee's needs.
6. Paragraph 14:
This Lease shall remain in full force and effect should such
an assignment or sale be consummated.
7. Paragraph 18:
Add: This time period comes into effect after Lessor has gone
through the required legal procedures.
8. Paragraph 19:
Add: acknowledgement by Lessee that the premises are in
satisfactory condition provided that Lessor is responsible for
any latent defects or uncompleted tenant improvements as
evidenced by a punch list prepared jointly by Lessor and
Lessee.
9. Paragraph 33:
Add: provided that Lessor is responsible for any latent
defects or uncompleted tenant improvements as evidenced by a
punch list prepared jointly by Lessor and Lessee.
10. Paragraph 33:
Add: Lessor shall guarantee substantial completion of the
premises and assure occupancy no later than April 1, 1993.
11. Paragraph 5:
Add: The amount of the security deposit may be applied toward
the last months rent upon Lessee's written notice and Lessor's
inspection of the premises.
12. Paragraph 6:
Add: Lessor at its expense, shall maintain during this Lease
term; liability insurance, fire insurance with extended
coverage, and other insurances on the building and all
property and interest of Lessor in the building with coverage
and amounts including exclusions and deductibles, that is
customarily required for prudent Lessors of comparable
properties in the Metro Denver, Colorado area. Policies for
such insurance shall waive any right of subrogation against
Lessee and all individuals and entities for whom Lessee is
responsible in law.
13. Paragraph 15:
Add: The provisions of this paragraph 15, shall not supersede,
abrogate or impair the waiver of any right of subrogation
against Lessee in Lessor's insurance under paragraph 6 and the
waiver of any right of subrogation against Lessor and Lessee's
insurance under paragraph 6.
<PAGE>
EXHIBIT B
TENANT FINISH WORK LETTER
Lessee Good Times Restaurants, Inc. Projected Occupying Date April 1, 1993
Building Name Sheridan Park 7
& Address of 8620 Wolff Court, Westminster, CO 80030
Demised Premises Suite 330
Lessor's Responsibility for Occupancy Preparation
Preparation of space per Exhibit "A" (space plan), not to exceed $10.28 per
rentable square foot.
Lessee's Responsibility for Occupancy Preparation
Any approved changes resulting in additional cost, shall be paid by Lessee
prior to occupancy of premises.
SPECIFICATIONS/DETAILS OF TENANT FINISH ITEMS
TYPE ROOM DESCRIPTION OF WORK COLOR/PATTERN/MFGR.SPEC. NO.
COST
RES.
Ceiling Existing ceiling in place
Electrical/
Lighting As called for on space plan dated 12/07/92
Flooring To be selected from building standards by Lessee
Phone Outlets As called for on space plan dated 12/07/92
Phone System All ordering & installation of wiring and telephone hook-up
Lessee
Wall Treatment Building standard paint to be selected by Lessee
Window Covering Existing mini blinds
Special
Construction Walls, doors and side lites per space plan
Gross Office Lease - Exhibit B Initial Here
8/86<PAGE>
EXHIBIT "C"
SHERIDAN OFFICE PARK
EXTERIOR SIGNAGE POLICY
1. Minimum Space Requirements: 3,000 square foot net rentable.
2. Minimum Lease Requirements: 3 years.
3. Size Requirements:
18" individual letters, no cursive,
must be block letters, no logos
4. Approval Requirements: Artist rendition must be submitted
and approved by:
A. DENCOL Real Estate Services, Inc.
B. Ownership
C. City/County
5. One (1) sign per tenant.
6. All costs associated with the sign application and approvals
shall be paid by tenant including sign, architectural
drawings, installation, permits, city approval, etc.
7. An additional charge of $50.00 per month will be assessed to
tenant for electrical usage.
L-400/90.1
Rev. 4/95
Lease Agreement #4020
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of May 24, 1995, (the
"Master Agreement") is entered into between Capital Associates
International, Inc., a Colorado corporation (hereinafter called
"Lessor"), having its principal place of business at Capital
Associates Tower, 7175 West Jefferson Avenue, Lakewood, Colorado
80235, and Good Times Drive Thru Inc., a Colorado corporation
(hereinafter called "Lessee"), having its principal place of
business at 8620 Wolff Court, Suite 330, Westminster, Colorado
80030.
As used herein, the terms "Basic Rent Date", "Casualty Value",
"Expiration Date", "Installation Date", "Installation Location",
"Overdue Rate" and any additional defined terms required shall have
the meanings with respect to each item of Equipment set forth on
the Equipment Schedule which describes such item of Equipment.
Section I - Lease and Rental
1.1 Lease of Equipment. Subject to the terms and conditions of
this Master Agreement, Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, the items of personal property
(collectively the "Equipment" or individually an "item of
Equipment") described in Equipment Schedules executed by Lessor and
Lessee from time to time pursuant to this Master Agreement. Each
Equipment Schedule shall be considered a separate lease
incorporating the terms and conditions of this Master Agreement and
shall be referred to herein as the "Lease" with respect to the
Equipment described on such Equipment Schedule. Notwithstanding
Lessee's possession and use of the Equipment, Lessor shall retain
the full legal title to the Equipment, it being expressly
understood that the Lease is a true lease of Equipment owned by
Lessor and not a security instrument. LESSEE ACKNOWLEDGES AND
AGREES THAT (i) LESSEE HAS SELECTED BOTH THE EQUIPMENT AND ITS
SUPPLIER; (ii) LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF THE
EQUIPMENT AND HAS ACQUIRED THE EQUIPMENT IN CONNECTION WITH THE
LEASE; (iii) LESSEE HAS BEEN PROVIDED WITH A COPY OF THE PURCHASE
CONTRACT FOR THE EQUIPMENT; (iv) LESSEE IS ENTITLED TO THE BENEFIT
OF ANY PROMISES OR WARRANTIES PROVIDED TO LESSOR IN CONNECTION
WITH
THE EQUIPMENT BY THE MANUFACTURER/SUPPLIER OF THE EQUIPMENT AND
MAY
CONTACT THE MANUFACTURER/SUPPLIER TO RECEIVE AN ACCURATE AND
COMPLETE STATEMENT OF THOSE PROMISES AND WARRANTIES (INCLUDING
ANY
DISCLAIMERS AND LIMITATIONS); AND (v) THE LEASE QUALIFIES AS A
"FINANCE LEASE" PURSUANT TO ARTICLE 2A OF THE UNIFORM COMMERCIAL
CODE. On the Installation Date of each item of Equipment, such
item of Equipment shall be deemed delivered, accepted by Lessee and
subject to the terms and conditions of the Lease. Upon Lessor's
request, Lessee will promptly execute and deliver an Acceptance
Certificate (prepared by Lessor), confirming such Installation
Date. Lessor may complete information, on Lessee's behalf, on the
Acceptance Certificate if it is returned incomplete by Lessee.
1.2 Rental. Lessee shall pay to Lessor or its Assignee the rent
set forth on the Lease for each item of Equipment (hereinafter
referred to as "Basic Rent") and such additional amounts as are
required to be paid by Lessee pursuant to the Lease ("Supplemental
Rent"). Basic Rent and Supplemental Rent are referred to
collectively as "Rent". In addition, Lessee shall pay to Lessor, on
demand, to the extent permitted by applicable law, interest at the
Overdue Rate on any payment of Rent which is not received by Lessor
or Assignee on the applicable due date. Interest shall accrue from
the due date until the amount is received.
1.3 Net Lease. The Lease is a net lease, and Lessee
acknowledges and agrees that Lessee's obligation to pay all Rent
thereunder, and the rights of Lessor in and to such Rent, shall be
absolute and unconditional and shall not be subject to any
abatement, reduction, set-off, defense, counterclaim or recoupment
("Abatements") for any reason whatsoever, including, without
limitation, Abatements due to any present or future claims of
Lessee against Lessor under the Lease or otherwise, against the
manufacturer or supplier of any item of Equipment, or by reason of
any defect in or damage to, or any loss or destruction of any item
of Equipment, or the interference with the use thereof, or the
bankruptcy or insolvency of Lessor, it being the express intention
of Lessor and Lessee that all Rent payable by Lessee thereunder
shall be and continue to be payable in all events. To the extent
it is determined that other provisions of this Lease are in
conflict with Section 1.3 hereof, the parties hereby agree that the
terms and conditions of such Section shall take precedence over
such other provisions.
1.4 Term of Lease. The term of the Lease for each item of
Equipment shall commence on the Installation Date and shall expire
on the Expiration Date for such item of Equipment unless, as
provided herein, the Lease shall have been earlier terminated,
cancelled or the term of the Lease shall have been extended. The
Lease shall be automatically extended beyond the Expiration Date,
unless (i) Lessor has previously cancelled the Lease (as provided
in Section 4.2) or (ii) at least 120 days prior to the Expiration
Date, Lessee gives Lessor written notice of its election to
terminate the Lease on the Expiration Date and then properly
surrenders the Equipment to Lessor (as set forth in Section 3.11
herein) on the day immediately following the Expiration Date. The
term of the Lease extension shall be for successive full monthly
periods until terminated by either party giving to the other not
less than four months prior written notice of termination. If the
term of the Lease is so extended, all terms and conditions of the
original Lease shall remain in full force and effect.
Section II - Representations and Warranties
2.1 Warrantie BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE BY
LESSEE AT ITS SOLE RISK AND EXPENSE. LESSOR SHALL NOT BE LIABLE IN
ANY WAY TO LESSEE (i) FOR ANY LOSS, DAMAGE, OR EXPENSE OF ANY KIND
CAUSED DIRECTLY OR INDIRECTLY BY THE EQUIPMENT, ITS OPERATION, OR
THE INSTALLATION, USE, MAINTENANCE, HANDLING, OR STORAGE THEREOF,
OR BECAUSE IT IS OR BECOMES UNSUITABLE OR UNSERVICEABLE, OR FOR ANY
INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF, OR (ii) FOR ANY
LOSS OF BUSINESS OR PROFITS OR INDIRECT, INCIDENTAL OR CONSEQUENTI
BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE AT ITS SOLE
RISK AND EXPENSE. LESSOR SHALL NOT BE LIABLE IN ANY WAY TO LESSEE
(i) FOR ANY LOSS, DAMAGE, OR EXPENSE OF ANY KIND CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT, ITS OPERATION, OR THE INSTALLATION,
USE, MAINTENANCE, HANDLING, OR STORAGE THEREOF, OR BECAUSE IT IS OR
BECOMES UNSUITABLE OR UNSERVICEABLE, OR FOR ANY INTERRUPTION OF
SERVICE OR LOSS OF USE THEREOF, OR (ii) FOR ANY LOSS OF BUSINESS OR
PROFITS OR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
WHATSOEVER OR HOWSOEVER CAUSED, AND REGARDLESS OF WHETHER A
CLAIM
IS BASED UPON CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY IN
TORT, OR OTHER THEORY. LESSOR MAKES NO PATENT OR INTELLECTUAL
PROPERTY WARRANTIES OR REPRESENTATIONS WHATSOEVER. Lessee agrees
to look solely to the manufacturer or the supplier of the Equipment
and all assignable warranties made by the manufacturer or the
supplier of Lessor are hereby assigned to Lessee for the term of
the Lease.
2.2 Quiet Enjoyment. Lessor covenants that so long as no Event
of Default has occurred under the Lease Lessee may quietly possess
the Equipment subject to and in accordance with provisions of the
Lease.
Section III - Covenants of Lessee
3.1 Use of Equipment. Lessee shall use the Equipment in a
manner which will not disqualify it for manufacturer maintenance,
and in compliance with all laws, rules and regulations of every
governmental authority having jurisdiction over the Equipment and
with the provision of all policies of insurance carried by Lessee
pursuant to Section 3.5. Lessee shall obtain all permits licenses
or other authorizations necessary for the authorizations necessary
for the operation and use of the Equipment. Lessee shall pay all
costs, expenses, fees and charges incurred in connection with the
use and operation of the Equipment.
3.2 Maintenance. Lessee shall, at its expense, take all actions
necessary to maintain and repair the Equipment to keep it in as
good operating condition as it was when it first became subject to
the Lease, ordinary wear and tear resulting from proper use
excepted and, unless otherwise expressly provided for in the Lease,
shall enter into and keep in force a maintenance agreement with the
manufacturer or other maintenance provider acceptable to Lessor to
provide such maintenance and repair. Lessee shall, at its expense,
promptly replace all parts of any item of Equipment that become
worn out, lost, stolen, destroyed, or unfit for use with
replacement parts free of any encumbrance (and title thereto shall
vest in Lessor immediately upon installation); provided, however
that the foregoing requirement to replace parts of Equipment shall
not apply in the case of an Event of Loss as described in Section
3.4(b)(ii) herein.
3.3 Taxes. In addition to the Rent due hereunder, Lessee agrees
to pay and indemnify Lessor for, and hold Lessor harmless from and
against all taxes, assessments, fees and charges (hereinafter
called "Imposts") together with any penalties, fines or interest
thereon levied and imposed by any governmental agency or unit
(state, local, federal, domestic or foreign): (a) with respect to
the Lease; (b) upon the Equipment, its value or any interest of
Lessor and/or Lessee therein; (c) upon or on account of any sale,
rental, purchase, ownership, possession, use, operation,
maintenance, delivery or return of the Equipment; or (d) on account
of, or measured by, the gross earnings or gross receipts arising
from the Equipment, or value added thereto, other than taxes
imposed on or measured by the net income or capital of Lessor. The
amount of such Impost shall become Supplemental Rent to be paid by
Lessee upon Lessor's demand. If any Impost relates to a period
during the term of the Lease (no matter when it is assessed) then
Lessee's liability for such Impost shall continue, notwithstanding
the expiration or termination of the Lease, until all such Imposts
are paid by Lessee.
3.4 Loss of Equipment.
(a) Risk of Loss. Lessee shall bear the entire risk of the
Equipment being lost, damaged, destroyed or rendered permanently
unfit or unavailable for use after its shipment to Lessee and until
it is surrendered to Lessor in accordance with Section 3.11 hereof.
(b) Damage/Event of Loss. (i) In the event any item of
Equipment is damaged to a material extent by any occurrence
whatsoever, Lessee shall promptly notify Lessor and shall determine
within 15 days of the date of such notice whether such item of
Equipment can be repaired. If such Equipment can be repaired,
Lessee shall at its cost and expense repair such Equipment to its
original condition. (ii) In the event any item of Equipment shall
be lost, stolen, destroyed, damaged beyond repair or rendered
permanently unfit or unavailable for use (through a governmental
taking or any other event), for any reason whatsoever (any such
occurrence being referred to as an "Event of Loss"), Lessee shall
promptly notify Lessor and pay to Lessor, on the first day of the
month immediately following such Event of Loss, an amount equal to
the Casualty Value applicable to such item of Equipment calculated
as of the immediately preceding Basic Rent Date plus any unpaid
Rent and the installment of Basic Rent for such item of Equipment
due on the Basic Rent Date following the Event of Loss. After the
payment of such amounts, Lessee's obligation to pay further Basic
Rent for such item of Equipment shall cease, but Lessee's
obligation to pay Supplemental Rent, if any, for such item of
Equipment, and to pay Rent for all other items of Equipment shall
remain unchanged. (iii) Following payment of the Casualty Value
and Rent for an item of Equipment in accordance with the provisions
of paragraph (ii) of this Section 3.4(b), Lessor shall transfer
title to such item of Equipment to Lessee on an AS IS, WHERE IS
basis without representation or warranty.
(c) Disposition of Insurance and Other Proceeds. The proceeds
of insurance or any condemnation of an item of Equipment for which
an Event of Loss has occurred shall be paid to Lessor (to the
extent that Lessor has not previously received all Casualty Value
and other payments required to be made by Lessee pursuant to the
Lease), and the remainder, if any, shall be paid to Lessee. The
proceeds of insurance with respect to damage to an item of
Equipment, the repair of which, in the opinion of Lessee, is
practicable, shall unless an Event of Default hereunder has
occurred and is continuing, be applied either to such repair or to
the reimbursement of Lessee for the cost of such repair.
3.5 Insurance.
(a) Coverage. Lessee will insure for the following risks with
insurers of recognized responsibility: (i) All risk of loss and
physical damage to the Equipment in amounts not less than the
greater of (A) the fair market replacement value or (B) the
aggregate Casualty Value of all Equipment from time to time; and
(ii) Comprehensive public liability and property damage insurance
with respect to the condition, possession, maintenance, operation
and use of the Equipment, in an amount not less than $2,000,000 for
each occurrence.
(b) Delivery of Certificates. Lessee shall deliver to Lessor
and any Assignee(s) a valid Certificate of Insurance for each such
insurance policy upon the execution thereof and a Certificate of
Insurance for each renewal policy not less than 30 days prior to
the expiration of the original policy or any renewal policy. Such
insurance shall (i) include as additional parties insured and loss
payees Lessor and any Assignee(s) of whom Lessee has notice, (ii)
provide that such insurance shall not be materially changed or
cancelled without at least 30 days notice to Lessor and such
Assignees, and (iii) provide that such policy shall not be
invalidated by any negligence of, or breach of warranty by, Lessee.
Upon the request of Lessor, Lessee shall provide any additional
data related to the insurance as Lessor reasonably requests.
3.6 Indemnity. Lessee agrees to indemnify, defend and hold
Lessor harmless from and against all claims, costs, expenses,
damages, losses and liabilities whatsoever incurred by Lessor
(including reasonable attorneys' fees) as a result of or incident
to (a) the ownership, management, control, use, operation, or
storage of the Equipment, or any part thereof during the term of
the Lease, or (b) any default by Lessee under the Lease. Lessee
and Lessor shall each give the other immediate written notice of
any suit, attachment, lien or other judicial process affecting the
Equipment of which they have knowledge. Lessor shall have the
right to appear in defense of any such suit or proceeding. The
appearance of Lessor in such a suit or proceeding shall not
constitute a waiver of its right to require Lessee to fulfill its
obligations under the Lease.
3.7 Inspection. Lessee shall permit any person designated by
Lessor, at Lessor's expense, to visit and inspect the Equipment, or
any part thereof, at such reasonable times and places and as often
as Lessor may reasonably request.
3.8 Sublease/Relocation; Lessee Assignment; Pledge.
(a) Provided that no Event of Default or event which, with
notice or lapse of time could become an Event of Default, has
occurred and is continuing, Lessee may, with Lessor's prior written
consent, sublease or relocate the Equipment to another location
within the continental United States, provided that (i) Lessee
promptly upon invoice reimburses, and indemnifies and holds Lessor
harmless from and against any costs, claims, damages and expenses
relating in any way to such sublease or relocation (including
without limitation, the cost of obtaining any necessary Assignee
consent, any UCC filings, additional taxes, transportation charges
and licenses); (ii) any sublease shall be expressly subject and
subordinate to the terms of this Lease; (iii) Lessee shall assign
its rights under such sublease to Lessor as additional collateral
and security for Lessee's obligations hereunder; and (iv) Lessee
and its sublessee shall cooperate with Lessor as necessary to
protect Lessor's title to the Equipment and Lease. No relocation
or sublease shall relieve Lessee from any of its obligations
hereunder. EXCEPT AS EXPRESSLY PROVIDED ABOVE, LESSEE SHALL NOT
ASSIGN, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS LEASE OR
ITS INTEREST HEREIN.
(b) Lessee shall not create, incur, assume or suffer to exist
any liens on or with respect to the Equipment, Lessor's title
thereto or any interest therein (and Lessee will promptly, at its
own expense, take such action as may be necessary duly to discharge
any such lien), except (i) the respective rights of Lessor and
Lessee as herein provided, (ii) inchoate materialmen's, mechanic's
or other like liens arising in the ordinary course of business of
Lessee and not delinquent, and (iii) liens granted by Lessor to any
Assignee.
3.9 Identification. Upon request, Lessee shall mark or permit
Lessor to mark each item of Equipment in a reasonably prominent
location with a legend stating Lessor's ownership of such item of
Equipment and Lessee shall not allow the name of any other party to
be placed on the Equipment.
3.10 Alterations, Modifications or Additions. Lessee may, at its
own expense and upon prior notice to Lessor, make or permit others
to make Equipment alterations, modifications or additions (such as
memory upgrades and feature additions), provided such alterations,
modifications or additions are readily removable without causing
material damage to the Equipment, do not interfere with the
maintenance thereof, do not create a safety hazard, and are not
subject to any security interest, rent or other right or claim held
or retained by a third party. Such alterations, modifications and
additions may be removed by Lessee at the expiration or termination
of the Lease term (including any extensions), and shall be removed
at such time if requested by Lessor. Any such alterations,
modifications and additions which are not removed by Lessee shall
become the property of Lessor. Except as specifically provided
above, no Equipment alterations, modifications or additions shall
be made or permitted by Lessee.
3.11 Transportation and Equipment Return. All transportation,
rigging, transit insurance and other charges payable for delivery
of the Equipment to and from the premises of Lessee, and all
installation, disconnect and packing charges, shall be paid by
Lessee or the Equipment supplier. On or before the Expiration Date
or earlier termination of the Lease, Lessee shall at its cost and
expense surrender possession of the Equipment at such location(s)
in the continental United States of America as Lessor may direct.
The Equipment is to be in the same condition upon its surrender as
when the Lease commenced (ordinary wear and tear resulting from
proper use excepted) and in the condition otherwise required by the
provisions of the Lease. Notwithstanding anything to the contrary
contained herein, the Lease shall remain in full force and effect
and Lessee shall continue to pay Rent on the Equipment until it is
surrendered to Lessor in the condition required by the Lease.
3.12 Financial Statements. Lessee shall upon execution hereof
and within 120 days after the close of each fiscal year thereafter,
furnish, or cause to be furnished to Lessor and any Assignee, the
audited annual financial statements of Lessee. In addition, upon
request Lessee will provide to Lessor and any Assignee quarterly
financial statements in a form reasonably acceptable to the Lessor.
3.13 Federal and State Income Taxes. Lessee acknowledges that
Lessor shall be entitled to claim (or have claimed) for Federal and
State income tax purposes interest and depreciation deductions on
the total original cost of the Equipment utilizing any method of
depreciation permitted for the Equipment under the Internal Revenue
Code of 1986, as amended or any applicable state tax (hereinafter
called the "Code"). (All interest and depreciation deductions to
which Lessor is entitled under this Section 3.13 are collectively
referred to as "Allowances".) Lessee agrees to take no action
inconsistent with the foregoing or which would result in the loss,
disallowance, recapture or unavailability to Lessor (or an Assignee
of Lessor) of the Allowances, and represents and warrants that from
the time Lessor becomes the owner of the Equipment no depreciation
or other tax benefits will be claimed by Lessee with respect to the
Equipment. Lessee shall indemnify Lessor on an after-tax basis for
any loss of all or any portion of the Allowances due to Lessee's
act, omission to act, misrepresentation or any Event of Loss under
Section 3.4 above.
3.14 Representations and Warranties. Lessee hereby covenants,
represents and warrants to Lessor that (i) it is a corporation duly
organized, validly existing and in good standing in its state of
incorporation and in every jurisdiction in which the Equipment will
be located, (ii) it has taken all corporate action required to
authorize the execution, delivery and performance of this Master
Agreement and each Lease, and such execution, delivery and
performance will not conflict with or violate any provisions of its
charter or articles or certificate of incorporation, by-laws or any
provisions of any agreement, order, decree or judgment by which it
is bound, nor is it now in default under any of the same, (iii)
there is no litigation or proceeding pending or threatened against
it which may have a materially adverse effect on Lessee or which
would prevent or hinder performance of its obligations hereunder,
(iv) this Master Agreement, each Lease and all documents provided
therewith constitute valid obligations of Lessee, binding and
enforceable against it in accordance with their respective terms,
(v) it has the power to enter into each Lease and no further action
by any party is required to effectuate this Master Agreement and
each Lease, (vi) all financial statements heretofore presented to
Lessor are true, correct and present fairly the financial condition
and results of operations of Lessee and do not contain any untrue
statements or material omissions.
Section IV - Default & Remedies
4.1 Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" hereunder:
(a) Lessor shall fail to receive all or any portion of any
installment of Rent or other payment on or before the date such sum
becomes due and payable; or
(b) Any representation or warranty made in the Lease, or in any
report, certificate, financial statement or other statement
furnished to Lessor (or Guarantor) pursuant to the provisions of
the Lease (or any representation or warranty made by Guarantor in
the Guaranty), shall prove to have been false or misleading in any
material respect as of the date on which the same was made; or
(c) Lessee (or Guarantor) shall fail or refuse to duly observe
or perform any other covenant, condition or agreement made by it
hereunder or under any other agreement between Lessor and Lessee
(or under the Guaranty), and such failure or refusal continues
without remedy for a period of 15 days after written notice thereof
to Lessee; or
(d) An attachment or other lien against the Equipment resulting
from any Lessee action, failure to act or responsibility shall be
issued or entered and shall remain undischarged or unbonded for 10
days; or
(e) Lessee (or Guarantor) (i) becomes insolvent, or (ii) files
any application or petition in any tribunal for the appointment of
a receiver or trustee for all or a significant portion of its
assets, or (iii) commences any proceeding under any bankruptcy or
reorganization statute or under any provision of the U.S.
Bankruptcy Code or under any dissolution or liquidation law whether
now or hereafter in effect, or if any petition or application of
the type described above is commenced against Lessee and is not
dismissed within 60 days, or (iv) makes an assignment for the
benefit of creditors or an order is entered appointing a trustee or
receiver for Lessee or any significant portion of its assets or
adjudicating Lessee a bankruptcy.
4.2 Remedies.
(a) If an Event of Default occurs under the Lease, Lessor may
give Lessee notice of the Event of Default and upon the giving of
such notice or at any time thereafter do any or all of the
following (as Lessor in its sole discretion elects): (1) proceed
by appropriate court action or actions to enforce performance by
Lessee of the applicable covenants and terms of the Lease or to
recover damages for the breach thereof; (2) take possession (by
summary proceedings or otherwise) of any or all items of Equipment
subject to the Lease without prejudice to any other remedy or claim
herein referred to; (3) hold, sell, lease, or otherwise dispose
of, any or all items of Equipment subject to the Lease, in any
manner Lessor (in its sole discretion) elects; (4) receive from
Lessee upon demand for any or all Equipment subject to the Lease
the following amounts which Lessee shall be obligated to pay: (i)
any unpaid Rent past due, (ii) as liquidated damages for loss of
bargain and not as a penalty, the aggregate Casualty Value for such
Equipment under the Lease in effect as of the date on which such
Event of Default occurred, (iii) all costs and expenses incurred in
searching for, taking, removing, keeping, storing, repairing, and
restoring such items of Equipment, (iv) all other amounts then
owing by Lessee hereunder, and (v) all costs and expenses,
including (without limitation) reasonable legal fees and expenses,
incurred by Lessor as a result of an Event of Default, or the
exercise by Lessor of its remedies under this Section 4.2; (5) by
notice to Lessee, declare the Lease (for any or all Equipment)
cancelled without prejudice to Lessor's rights in respect of all
obligations set forth in this Section 4.2 and any other obligations
under the Lease then accrued and remaining unsatisfied; or (6)
avail itself of any other remedy or remedies provided for by any
statute or otherwise available by law, in equity or in bankruptcy
or insolvency proceedings.
(b) The remedies set forth in Section 4.2(a) are not intended to
be exclusive, and each shall be cumulative. The amounts to be paid
to Lessor under clause (4) of Section 4.2(a) shall be increased by
interest, at the Overdue Rate, to the date of receipt by Lessor of
the amount payable under said clause, from the respective due dates
of such amounts or (with respect to costs, expenses, and losses for
which Lessor is entitled to payment or reimbursement under said
clause) from the respective dates incurred by Lessor.
(c) Any amounts received by Lessor as the result of its sale,
lease during the original term hereof, or other disposition of the
Equipment hereunder shall be paid or applied in the following
order: (1) to any remaining obligation of Lessee under subparagraph
(4) of Section 4.2(a), (2) to reimburse Lessee for the Casualty
Value previously paid as liquidated damages, and (3) to Lessor, any
remaining balance.
Section V - Miscellaneous
5.1 Reserved.
5.2 Expenses. Lessor and Lessee each shall bear and be
responsible for its own respective costs and expenses incurred in
connection with the preparation, execution and delivery of this
Master Agreement and the Lease. Lessee shall pay and be
responsible for any license or registration fees for the Equipment.
5.3 Performance of Lessee's Obligations. If Lessee shall fail
to make any payment or perform any act required by the Lease,
Lessor may, but shall not be obligated to, make such payment or
perform such act for the account of and at the expense of Lessee
without waiving or releasing any obligation or default. All sums
expended and losses incurred by Lessor pursuant to this Section
5.3, plus interest thereon at the Overdue Rate from the date on
which such sums are expended (or losses are incurred) to the date
on which Lessee reimburses Lessor therefor, shall be included as
Supplemental Rent hereunder and shall be paid by Lessee to Lessor
upon demand.
5.4 Assignment by Lessor. Lessor may sell, transfer, grant a
security interest in or assign part or all of its right, title and
interest in and to the Lease, the Equipment, the Rent or any other
sums due or to become due by Lessee hereunder, to third parties;
and such third parties may also make such sales, transfers, grants
and assignments to other third parties (all third parties referred
to in this Section 5.4 being called an "Assignee" or the
"Assignees"). In the event of an assignment of the Lease, (a) such
assignment (unless otherwise expressly set forth therein) will not
relieve the original Lessor from its duties and obligations
hereunder and shall not be construed to be an assumption by the
Assignee of such obligation; (b) upon notice from Lessor, Lessee
shall make all payments for Rent and other amounts due under the
assigned Lease directly to the Assignee identified in such notice
or its designee; (c) Lessee's obligations hereunder shall not be
subject to any reduction, abatement, defense, set-off, counterclaim
or recoupment for any reason whatsoever; and (d) Lessee will not,
after obtaining knowledge of any such assignment, consent to any
modification of the assigned Lease without the consent of any
Assignees of which Lessee has notice. Reference to Lessor
throughout this Master Agreement shall be deemed to include any
Assignees; provided, however, that the Assignees shall have no
duties and obligations hereunder, except the obligation, so long as
no Event of Default has occurred and the Assignee continues to
receive all sums assigned hereunder, to permit Lessee to possess,
use, and quietly enjoy the Equipment, according to the terms
hereof. Lessee acknowledges that Lessor's assignment pursuant
hereto does not materially impair Lessee's right to obtain
performance, materially change the duties of Lessee, or materially
increase Lessee's burden or risk under the Lease. Upon request,
Lessee shall promptly execute and deliver to Lessor a written
acknowledgement of the provisions of this Section and such other
matters as Lessor may reasonably request.
5.5 Further Assurances. It is expressly understood and agreed
that all of the Equipment shall be and remain personal property
notwithstanding the manner in which the same may be attached or
affixed to realty, and Lessee shall do all acts and enter into all
agreements necessary to insure that the Equipment remains personal
property and hereby indemnifies Lessor for all loss, cost, damage,
and expense (including fees and expenses of counsel) related to or
arising out of any claim that the Equipment constitutes a fixture
or a part of the realty in or upon which it is located. Upon
request of Lessor, Lessee shall at any time and from time to time
after the execution and delivery of the Lease execute and deliver
such further documents (including but not limited to opinions of
counsel, acknowledgements of assignment, waivers, certificates, and
UCC-1 financing statements) and do such further acts and things as
Lessor may reasonably request in order fully to effect the purposes
of the Lease, and any assignment hereof. Lessee hereby appoints
Lessor, with full power of substitution, as its agent and
attorney-in-fact, which appointment is irrevocable and coupled with
an interest, to execute any financing statements in Lessee's name
and to perform all other acts which Lessor deems appropriate and
necessary to perfect Lessor's interest in the Equipment.
5.6 Rights, Remedies, Powers. Each and every right, remedy and
power granted to Lessor hereunder shall be cumulative and in
addition to any other right, remedy or power herein specifically
granted or now or hereafter existing in equity, at law, by virtue
of any statute or otherwise and may be exercised by Lessor from
time to time concurrently or independently and as often and in such
order as Lessor may deem expedient. Any failure, partial exercise,
or delay on the part of Lessor in exercising any such right, remedy
or power, or abandonment or discontinuance of steps to enforce the
same, shall not operate as a waiver thereof or affect Lessor's
right thereafter to exercise the same.
5.7 Communications. Any notice, request, demand, consent,
approval or other communication provided or permitted hereunder
shall be in writing (with a copy to any Assignee) and shall be sent
by certified mail, or a receipted delivery service, to the address
set forth herein or such other address as designated by proper
notice.
5.8 Headings. Section headings are inserted for convenience
only and shall not affect any interpretation of this Master
Agreement. The words "herein", "hereof", "hereby", "hereto",
"hereunder", and words of similar import refer to this Master
Agreement as a whole (including any supplements, addenda and riders
thereto to the extent applicable and the Lease on which the leased
Equipment is described) and not to any particular section, or
subdivision hereof.
5.9 GOVERNING LAW. THIS MASTER AGREEMENT AND EACH LEASE SHALL
BE DEEMED TO HAVE BEEN MADE UNDER, AND SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF COLORADO (WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS) IN ALL RESPECTS, INCLUDING MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
5.10 Severability. If any provision of the Lease is prohibited
by, or is unlawful or unenforceable under any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such prohibition without invalidating
the remaining provisions hereof; provided, however, that any such
prohibition in any jurisdiction shall not invalidate such
provisions in any other jurisdiction; and provided, further, that
where the provisions of any such applicable law may be waived, they
hereby are waived by Lessee to the full extent permitted by law to
the end that the Lease shall be deemed to be valid and binding
agreement in accordance with its terms.
5.11 Survival, Agreement and Modifications. All representations,
warranties, indemnities and covenants of Lessee contained in this
Master Agreement, any Lease or other related document shall
continue in full force and effect until the full payment of all
amounts due notwithstanding the expiration, termination or
cancellation of this Master Agreement or any Lease, provided,
however, that the indemnification obligations of Lessee hereunder
shall survive the payment of all amounts due hereunder and shall be
available if any later claim arises which may be indemnified under
the provisions hereof. This Master Agreement (including any
supplements, addenda and riders) and each Lease describing the
Equipment and referencing this Master Agreement contain the entire
agreement between Lessor and Lessee with respect to the Equipment
and supersede all prior communications,<PAGE>
agreements and understandings,
written or oral, relating to such subject matter.
In the event any conflict exists between the terms
of this Master Agreement and any provisions of a Lease, the Lease
shall govern with respect to the Equipment described therein. This
Master Agreement and each Lease shall be binding upon and shall
inure to the benefit of the respective successors and permitted
assigns of Lessee and Lessor. NO MODIFICATION OR WAIVER OF THE
PROVISIONS HEREOF SHALL BE EFFECTIVE UNLESS IT IS IN WRITING AND
SIGNED BY THE PARTIES HERETO.
5.12 Chattel Paper. An executed Lease (Equipment Schedule),
marked "Original", shall be the original of the Lease for the
Equipment described on such Lease. All other executed counterparts
of the Lease shall be marked "Duplicate". To the extent that the
Lease constitutes chattel paper, as such term is defined in the
Uniform Commercial Code of the applicable jurisdiction, no security
interest in the Lease may be created through the transfer of
possession of any counterpart other than the Original of a Lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Master
Agreement to be executed as of the date first written above.
CAPITAL ASSOCIATES
INTERNATIONAL, INC. GOOD TIMES DRIVE THRU INC.
(Lessor) (Lessee)
By: By: /s/ Thomas A. Gordon
Print Name: Print Name: Thomas A. Gordon
Title: Title: Chief Financial Officer
Federal I.D. Number 84-1043488
<PAGE>
AMENDMENT NO. 1 Doc #402001
to the
Master Lease Agreement #4020 dated May 24, 1995 (the "Master
Agreement")
between
Capital Associates International, Inc. as Lessor
and
Good Times Drive Thru Inc. as Lessee
THIS AMENDMENT to the Master Agreement is entered into as of
May 24, 1995, between Capital Associates International, Inc.
("Lessor") and Good Times Drive Thru Inc. ("Lessee").
WHEREAS, the parties wish to modify the Master Agreement as
hereinafter set forth;
NOW THEREFORE, in consideration of these premises and other
valuable consideration, Lessee and Lessor hereby agree to amend
the following terms and conditions to the Master Agreement:
1. Section 3.4 Loss of Equipment. Insert the following in
Section 3.4(b)(i) after "Equipment": "valued at more
than $10,000."
2. Section 3.14 Representations and Warranties. Insert
"identified" between "all" and "financial statements"
in Section 3.14(vi) and delete the word "true" in
Section 3.14(vi).
3. Section 4.1 Events of Default. Change "15 days" to "30
days" in Section 4.1(c).
4. Section 4.1 Events of Default. Insert the following at
the end of Section 4.1 (e):
"or, (f) Lessee (or any Guarantor) fails to maintain at
all times a Net Worth greater than or equal to
$5,500,000 and a total long term liabilities to Net
Worth ratio of less than or equal to 1.5 to 1. Net
Worth shall be defined as net worth of the company at
the time in question after deducting therefrom the
amount of all intangible items, including all
intangible expansion costs, all unamortized debt
discount and expense, unamortized research and
development expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade
names, copyrights, unamortized excess cost of
investment in subsidiaries over equity at dates of
acquisition, and all similar items which should
properly be treated as intangibles in accordance with
generally accepted accounting principles (excluding
however, capitalized restaurant preopening expenses
which are to be amortized over a twelve month period),
or
(g) Lessee (or any Guarantor) shall suffer a material
adverse change in its financial condition from the date
hereof as a result of which the Lessor deems itself or
any of the Equipment to be insecure, or
(h) Lessee (or any Guarantor) shall (1) sell all or
substantially all of its assets, or (2) be a party to
any merger or consolidation in which the Lessee (or any
Guarantor) is not the surviving entity unless the buyer
of such assets or the surviving entity satisfies all of
the financial requirements of item (f) above and the
buyer or surviving entity receives final credit
approval by Lessor, or
(i) Lessee (or any Guarantor) shall default under any
material agreement to which Lessee (or any Guarantor)
is a party, including, but not limited to, any
indenture or loan agreement, or lease, mortgage or deed
of trust with respect to the real property on which the
Equipment is located, and such default could have a
material adverse effect on Lessee's (or Guarantor's)
ability to perform its obligations under the Lease (or
Guaranty Agreement) or on the Equipment or Lessor's
interest therein."
5. Section 4.2 Remedies. Insert "10 days after" following
"upon" and insert "provided that the Event of Default
is not cured Lessor may" following "thereafter" in
Section 4.2 (a).
6. Section 5.4 Assignment by Lessor. Delete "and" before
"(d)" and after "notice" in (d) add: "and, (e)
Lessee's obligations do not include any sales, use,
property or other taxes which may be required to be
paid in connection with the subsequent Assignment of
the Lease to a third party."
7. It is understood and agreed that this Amendment shall
become a part of and be incorporated into the Master
Agreement effective upon its execution by all parties
named below. All terms and conditions of the Master
Agreement, except as expressly modified herein, shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Amendment to the Master Agreement as of the date first written
above.
CAPITAL ASSOCIATES
INTERNATIONAL, INC. GOOD TIMES DRIVE THRU INC.
(Lessor) (Lessee)
BY: /s/ John A. Reed BY: /s/ Thomas A. Gordon
PRINT NAME: John A. Reed PRINT NAME: Thomas A. Gordon
TITLE: Vice President TITLE: Chief Financial Officer
November 13, 1995
Mr. Gary Schwalb
President
Steakout, King of Steaks, Inc.
c/o Floyd Byrns, Esq.
2601 McLeod Drive
Las Vegas, Nevada 89121
Dear Gary:
This letter will set forth our agreement for the
purchase by Steakout, King of Steaks, Inc., a Nevada corporation
("Steakout"), from Good Times Drive Thru Inc., a Colorado
corporation ("Good Times"), of the assets of the four restaurants
("Restaurants") located at the following addresses:
2300 East Lake Mead Boulevard
North Las Vegas, Nevada
1900 East Charleston Boulevard
Las Vegas, Nevada
1325 East Tropicana Boulevard
Las Vegas, Nevada
868 North Nellis Boulevard
Las Vegas, Nevada
1. Purchased Assets. Steakout shall purchase all of
the assets of the Restaurants consisting of Good Times' leasehold
interests in the real property at the above-described locations
together with the furniture, fixtures and equipment set forth in
Exhibit A attached hereto. All of the foregoing purchased assets
are hereinafter referred to as the "Assets." The Assets are being
purchased by Steakout in "as is" condition and Good Times makes no
warranties express or implied with respect to the Assets other
than those set forth in this Agreement. Steakout shall not assume
any liabilities associated with the Restaurants other than the
assumption of the real property leases therefor for the period
from and after the closing hereunder. Such real property leases,
which are hereinafter referred to as the "Leases," consist of the
following:
Lease dated November 30, 1990,
as heretofore amended, with
College Park Realty Co. as lessor
for the location at 2300 East Lake
Mead Boulevard, North Las Vegas,
Nevada;
Lease dated July 11, 1990, as
heretofore amended, with Hasco NV
as lessor for the location at 1900
East Charleston Boulevard, Las
Vegas, Nevada;
Lease dated July 1, 1995, with
MTK Corporation of America as
lessor for the location at 1325
East Tropicana Boulevard, Las
Vegas, Nevada; and
Lease dated July 1, 1995, with
Cormore Partners, Ltd. as lessor
for the location at 868 North
Nellis Boulevard, Las Vegas,
Nevada.
2. Consideration.
a. The assumption by Steakout of the
Leases shall constitute the consideration for
the assignment of Good Times' interests in
the Leases. The obligations of Steakout
under the Leases in which Good Times is not
released from liability shall be secured by
deeds of trusts covering the leasehold
interests with respect thereto and the
personal guarantees, for a period of two
years, of Gary and Eileen Schwalb.
b. In consideration for the furniture,
fixtures and equipment described in Exhibit
A, Steakout shall pay Good Times the purchase
price of $30,000 per Restaurant. Such amount
shall be paid upon execution of this
Agreement into an interest bearing escrow
account established at Escrow Line, Inc.
located at 2035 Paradise Road, Las Vegas
Nevada. Upon the escrow company's receipt
of written notification from Good Times of
the satisfaction of the Contingency set forth
in Section 3.b. hereof, $15,000 for each of
the East Tropicana and Nellis Boulevard
Restaurants shall be promptly distributed by
the escrow company to Good Times. Upon the
escrow company's receipt of written
notification from Good Times of the
satisfaction of the Contingencies set forth
in Sections 3.a. and 3.b. hereof, the escrow
company shall promptly distribute $15,000 for
each of the East Charleston and Lake Mead
Restaurants to Good Times. The foregoing
$15,000 payments to Good Times shall be non-refundable to Steakout
unless Good Times breaches its obligations under this
Agreement. The remaining $15,000 per
Restaurant in escrow shall be distributed to
Good Times promptly upon the escrow company's
receipt of written notification from Steakout
of the satisfaction of the Contingency set
forth in Section 3.c. hereof, provided that
the Contingencies in Section 3.a. and 3.b.
have also been satisfied at such time,
otherwise such amount shall be distributed to
Good Times upon the last of the Contingencies
to be satisfied.
3. Contingencies. The closing of the purchase of the
Assets and the assumption of the Leases by Steakout is contingent
upon the following ("Contingencies"):
a. The obtaining on or before November
24, 1995 of consents to assignments from the
lessors under the East Charleston and Lake
Mead Leases in forms reasonably acceptable to
Good Times.
b. Good Times' approval on or before
November 20, 1995 of the financial condition
of Steakout.
c. Approval by Steakout on or before
November 30, 1995 of the condition of the
Assets.
4. Closing.
a. The closing of the purchase of the Assets and
the assumption of the Leases by Steakout shall take
place as soon as reasonably possible after the
satisfaction of the Contingencies, but in no event later
than November 30, 1995.
b. Good Times and Steakout, as applicable, shall
execute the following documents in conjunction with or
as soon as reasonably possible after the execution of
this Agreement:
(i) Consent to and Agreement Regarding
Assignment with respect to the East Charleston and
Lake Mead Leases, substantially in the forms
attached hereto as Exhibit B (such documents shall
also be executed by the applicable lessors on or
before the closing);
(ii) Assignment of Lease and Assumption of
Lease regarding the Tropicana and Nellis Leases,
substantially in the forms attached hereto as
Exhibit C;
(iii) Bills of Sale for the Assets
described in Exhibit A with respect to each
Restaurant, substantially in the form attached
hereto as Exhibit D;
(iv) Guaranty Agreement of Gary and Eileen
Schwalb substantially in the form attached hereto
as Exhibit E;
(v) Deeds of Trust with respect to the
leasehold interests of Steakout in each of the
Restaurants, substantially in the forms attached
hereto as Exhibit F; and
(vi) Such other documents and instruments as
are reasonably necessary in order to effectuate
the intentions of the parties with respect to the
sale of the Assets to Steakout.
Upon execution of any of the foregoing documents
prior to closing, such executed documents shall be placed in
trust with a mutually agreeable third party. The holder of
the executed documents shall deliver them at such time and in
such manner as directed in writing by both Good Times and
Steakout.
c. Utilities, taxes, insurance and other
obligations, other than rent under the Leases, shall be
prorated as of the date of closing. Good Times shall
cancel all utilities for the Restaurants as of the date
of closing and shall be entitled to all utility deposits
therefrom. Notwithstanding the assignment of the Leases
to Steakout at the closing, Good Times covenants and
agrees to pay the base rent accruing under each of the
Leases until the earlier of (i) the applicable
Restaurant for each Lease opens for business to the
public, or (ii) February 1, 1996.
5. Deposit Escrow. Steakout shall establish an
interest bearing escrow account with Escrow Line, Inc. within
thirty days prior to the expiration of the term of the Guaranty
described in Section 4(b)(iv). Such escrow account shall be
established for the entire term of the Leases and funded by
Steakout with a minimum amount at all times equal to one month of
rent due under each of the Leases as of February 1, 1998. Escrow
Line, Inc. shall distribute funds in such amounts from such escrow
account to Good Times promptly upon receipt from Good Times of
proof of its payment of any rental or other amounts due under the
Leases.
6. Representations and Warranties.
a. Good Times represents and warrants to Steakout
that:
(i) At the closing the Assets will be in
substantially the same physical condition in all
material respects as on the date of this
Agreement;
(ii) The Assets, including Good Times'
interests in the Leases, are free and clear of
all liens, encumbrances and restrictions other
than the rights of the lessors under the Leases
and current property taxes none of which are past
due;
(iii) The Leases are in full force and
effect and no monetary defaults exist thereunder;
(iv) The execution and carrying out of this
Agreement has been duly authorized by the Board of
Directors of Good Times.
b. Steakout represents and warrants to Good Times
that the execution and carrying out of this Agreement
has been duly authorized by the Board of Directors of
Steakout and that no other authorizations are required
therefor.
7. Indemnification.
a. Good Times shall indemnify and hold harmless
Steakout with respect to any liability, loss, cost or
expense resulting from (i) any breach by Good Times of
a representation, warranty or any other provision of
this Agreement and (ii) any liability or claim
associated with the Restaurants relating to the period
prior to the closing hereunder.
b. Steakout shall indemnify and hold harmless
Good Times with respect to any liability, loss, cost or
expense resulting from (i) any breach by Steakout of a
representation, warranty or any other provision of this
Agreement, and (ii) any liability or claim associated
with the Restaurants relating to the period after the
closing hereunder.
8. Benefit. The terms and conditions of this
Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns.
<PAGE>
If this letter correctly sets forth our agreement, kindly
sign and return the attached copy hereof. This letter may be
signed in counterparts by facsimile.
Very truly yours,
GOOD TIMES DRIVE THRU INC.,
a Colorado corporation
By: /s/ Thomas A. Gordon
Title: Chief Financial Officer
Agreed to this _____ day of November, 1995.
STEAKOUT, KING OF STEAKS, INC.,
a Nevada corporation
By: /s/ Gary Schwalb
Title: President
July 14, 1994
Mr. Boyd E. Hoback
Good Times Restaurants Inc.
8620 Wolff Court, Suite 330
Westminster, CO 80030
Dear Boyd:
This letter will set forth our agreement with respect to your
continued employment by Good Times Restaurants Inc. (the
"Company"). For convenience we shall refer to you as "Hoback".
1. Good Times currently employs Hoback as President and Chief
Executive Officer. Hoback devotes his full time best efforts
to such position and in general to protecting and advancing
the best interests of the Company and its subsidiaries.
2. Hoback's base compensation is currently $100,000 per annum.
Such base compensation shall be periodically increased to the
extent, if any, determined reasonable and appropriate by the
Board of Directors of the Company. Hoback also has an expense
allowance of $10,000 per annum and continues to participate in
the fringe benefits, including vacations, accorded by the
Company to its key executives.
3. In consideration for the efforts put forth by him in enhancing
the value of the Company, upon (i) the sale of all or
substantially all of the assets of the Company to a party that
is not a "Related Party" (as defined below), (ii) the sale of
at least 90% of the capital stock of the Company to a party
which is not a Related Party, or (iii) a merger,
consolidation, reorganization or other similar transaction to
which the Company is a party, except for a transaction in
which the Company is the surviving corporation and, after
giving effect to such transaction, the holders of the
Company's outstanding capital stock immediately before the
transaction own enough of the Company's outstanding capital
stock after the transaction to elect a majority of the
Company's Board of Directors under ordinary circumstances
(each, a "Sale"), Hoback will be entitled to compensation
equal to one year's base salary, expense allowance and other
benefits. For purposes of this Paragraph 3, a "Related Party"
means any of the Shareholders or any entity which controls, is
controlled by or under common control with a Shareholder or
group of Shareholders that own enough of the Company's
outstanding capital stock to elect a majority of the Company's
Board of Directors.
<PAGE>
If this letter correctly sets forth our agreement, kindly sign and
return the attached copy hereof.
Sincerely,
/s/ Dan W. James
Dan W. James
Chairman
AGREED TO THIS 14th DAY OF September, 1994.
/s/ Boyd E. Hoback
Boyd E. Hoback
July 14, 1994
Mr. Thomas A. Gordon
Good Times Restaurants Inc.
8620 Wolff Court, Suite 330
Westminster, CO 80030
Dear Tom:
This letter will set forth our agreement with respect to your
continued employment by Good Times Restaurants Inc. (the
"Company"). For convenience we shall refer to you as "Gordon".
1. Good Times currently employs Gordon as Executive Vice
President and Chief Financial Officer. Gordon devotes his
full time best efforts to such position and in general to
protecting and advancing the best interests of the Company and
its subsidiaries.
2. Gordon's base compensation is currently $85,000 per annum.
Such base compensation shall be periodically increased to the
extent, if any, determined reasonable and appropriate by the
Board of Directors of the Company. Gordon also has an expense
allowance of $10,000 per annum and continues to participate in
the fringe benefits, including vacations, accorded by the
Company to its key executives.
3. In consideration for the efforts put forth by him in enhancing
the value of the Company, upon (i) the sale of all or
substantially all of the assets of the Company to a party that
is not a "Related Party" (as defined below), (ii) the sale of
at least 90% of the capital stock of the Company to a party
which is not a Related Party, or (iii) a merger,
consolidation, reorganization or other similar transaction to
which the Company is a party, except for a transaction in
which the Company is the surviving corporation and, after
giving effect to such transaction, the holders of the
Company's outstanding capital stock immediately before the
transaction own enough of the Company's outstanding capital
stock after the transaction to elect a majority of the
Company's Board of Directors under ordinary circumstances
(each, a "Sale"), Gordon will be entitled to compensation
equal to one year's base salary, expense allowance and other
benefits. For purposes of this Paragraph 3, a "Related Party"
means any of the Shareholders or any entity which controls, is
controlled by or under common control with a Shareholder or
group of Shareholders that own enough of the Company's
outstanding capital stock to elect a majority of the Company's
Board of Directors.
<PAGE>
If this letter correctly sets forth our agreement, kindly sign and
return the attached copy hereof.
Sincerely,
/s/ Dan W. James
Dan W. James
Chairman
AGREED TO THIS 14th DAY OF September, 1994.
/s/ Thomas A. Gordon
Thomas A. Gordon
$254,625.00
November 3, 1995
Westminster, Colorado
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, jointly and severally if
more than one, promises to pay to the order of AT&T Commercial
Finance Corporation or its successors or assigns at PO Box 440, 2
Gatehall Drive, Parsippany, New Jersey 07054-0440 or such other
place as the holder hereof may from time to time designate in
writing, the principal sum of Two Hundred Fifty-Four Thousand Six
Hundred Twenty-Five Dollars and No Cents ($254,625.00) plus
interest on the unpaid principal balance at the rates specified
below.
Interest shall accrue from the date of disbursement of the
principal amount hereof or any portion thereof until December 1,
2000, at the initial rate of Ten percent (10.00%) per annum.
Commencing December 2, 2000, (the "Conversion Date") and
continuing thereafter interest shall-convert to a floating rate
(the "Floating Rate") equivalent to the Prime Rate (as defined
below) as of the Conversion Date plus 2.25%. The undersigned also
may prepay this Note on or after the Conversion Date in full
without a prepayment premium. If the rate converts to the
Floating Rate, the interest rate shall be adjusted on the first
day of each calendar quarter (i.e., each January 1, April 1, July
1 and October 1) upon any change in the Prime Rate to the rate of
two and twenty-five hundredths percent (2.25%) above the Prime
Rate in effect on such date, provided, however, that in no event
shall the interest rate payable hereunder be less than seven
percent (7%) nor greater than the maximum permitted by applicable
law.
The "Prime Rate" is defined as the Prime Rate published in the
honey Rates section of The Wall Street Journal, or if no such
rate is published in The Wall Street Journal, then the nearest
comparable published rate, as determined by the holder of this
Note.
In all cases, interest shall be calculated on the basis of the
actual number of days elapsed over a year of 365 days.
Principal and interest are payable as follows:
One installment of interest only shall be payable on the first
day of the month following the date of this Note.
Then equal monthly installments of principal and interest will be
due and payable on the first day of each and every month
thereafter, and the entire unpaid principal balance together with
accrued and unpaid interest and other charges shall be due and
payable in full on or before December 1, 2015. Unless and until
the amount of any installment changes as set forth herein, the
monthly amount of principal and interest payments shall be
$2,458.00.
In addition to the foregoing installments, the above monthly
principal and interest may be adjusted from time to time to
amortize the remaining principal balance in equal monthly
payments over the remaining term of the loan.
Payments, when made, shall be applied in a manner and order
according to the sole discretion of the holder of this Note
without notice or demand.
If any payment required to be paid by this Note is not paid in
full within ten (10) days after its scheduled due date, the
holder hereof may assess a late charge in the amount of five
percent (5%) of the unpaid amount of the payment, or the maximum
permitted by applicable law, whichever is less.
Failure to make any payment when due, or any default under any
encumbrance or agreement securing this Note shall cause the
entire remaining unpaid balance of principal and interest to be
declared immediately due and payable at the option of the holder
of this Note without notice or demand. This Note also shall be
due and payable in full, at the option of the holder hereof,
without notice or demand, upon any default in any other
obligations owed to the holder by the undersigned, whether now in
existence or hereafter created, including any indebtedness
evidenced by a promissory note or any document securing any such
promissory note.
The undersigned and any endorser or guarantor of this Note hereby
each waive presentment for payment, demand, protest, notice of
non-payment or dishonor, notices of protest and all other demands
and notices in connection with the delivery, performance and
enforcement of this Note and waive all defenses that may be based
on suretyship or impairment of collateral. The undersigned is
bound as a principal and not as a surety. This Note shall bear
interest at the rate of four percent (4.0%) per annum above the
interest rate otherwise payable under the terms of this Note, or
the maximum permitted by applicable law, whichever is less (the
"Default Rate"), after the maturity hereof or following an event
of default hereunder until paid in full.
In the event holder shall employ counsel to collect this
obligation or to administer, protect or foreclose the security
given in connection herewith, the undersigned, jointly and
severally if more than one, agrees to pay reasonable attorney's
fees for services of such counsel, whether or not suit is
brought, plus costs incurred in connection therewith.
The undersigned shall have the option of prepaying this Note in
full or in part at any time hereafter, provided, however, that
the undersigned, jointly and severally if more than one, agrees
to pay a prepayment penalty in accordance with the following
schedule: Five percent (5.0%) of the amount prepaid in the event
such payment is made on or before December 1, 1996; Four percent
(4.0%) of the amount prepaid in the event such payment is made on
or before December 1, 1997; Three percent (3.0%) of the amount
prepaid in the event such payment is made on or before December
1, 1998; Two percent (2.0%) of the amount prepaid in the event
such payment is made on or before December 1, 1999; and One
percent (1.0%) of the amount prepaid in the event such payment is
made on or before December 1, 2000. A prepayment is any payment
made ahead of schedule that exceeds twenty percent (20%) of the
then outstanding principal balance before such prepayment.
If suit is instituted to enforce the terms of this Note, the
Courts of the State of Idaho and the Federal Courts located in
the State of Idaho shall have non-exclusive personal jurisdiction
over the undersigned, and the venue of the suit, at the option of
the holder of this Note, may be laid in Ada County, Idaho The
undersigned agrees not to claim that Idaho is an inconvenient
place for trial.
This Note shall be construed and enforced in accordance with the
laws of the State of Idaho.
If the Note is mutilated, lost, stolen or destroyed, then upon
surrender thereof (if mutilated) or receipt of evidence and
indemnity (if lost, stolen or destroyed) the undersigned shall
execute and deliver a new note of like tenor, which shall show
all payments which have been made on account of the principal
hereof.
The undersigned and any endorser or guarantor of this Note each
hereby agree and consent that, in addition to any methods of
service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any state or
federal court sitting in the State of Idaho may be made by
certified or registered mail, return receipt requested, directed
to the undersigned at the following address:
BOISE CO-DEVELOPMENT LIMITED PARTNERSHIP,
a Colorado limited partnership
8620 Wolff Court, Suite 330
Westminster, CO 80030<PAGE>
THE UNDERSIGNED AND ANY ENDORSER OR GUARANTOR OF THIS NOTE EACH
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY AND
ALL RIGHTS TO ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned have executed this Note as of
the date first above written.
BOISE CO-DEVELOPMENT LIMITED PARTNERSHIP,
a Colorado limited partnership
By: Good Times Drive Thru, Inc.,
a Colorado corporation as general partner of
BOISE CO-Development LIMITED PARTNERSHIP,
a Colorado limited partnership
By: /s/ Boyd E. Hoback, President
Boyd E. Hoback, President
STATE OF COLORADO )
) ss.
COUNTY OF Adams )
On this 3rd day of November, in the year of 1995, before me
Gina M. Wesolek, personally appeared Boyd E. Hoback,
known or identified to me (or proved to be on the oath of
______________) to be the president, or vice-president, or
secretary or assistant secretary, of the corporation that
executed the instrument or the person who executed the
instrument on behalf of said corporation, and acknowledged to me
that such corporation exected the same.
/s/ Gina M. Wesolek
[SEAL] Notary Public
My commission expires on
November 23, 1995
FL WI RATE REVIEW
CONV
9/19/95
$104,055.00
November 3, 1995
Westminster, Colorado
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, jointly and severally if more
than one, promises to pay to the order of AT&T Commercial Finance
Corporation or its successors or assigns at PO Box 440, 2 Gatehall
Drive, Parsippany, New Jersey 07054-0440 or such other place as the
holder hereof may from time to time designate in writing, the
principal sum of One Hundred Four Thousand Fifty-Five Dollars and
No Cents ($104,055.00) plus interest on the unpaid principal
balance at the rates specified below.
Interest shall accrue from the date of disbursement of the
principal amount hereof or any portion thereof until December 1,
2000, at the initial rate of Ten percent (10.00%) per annum.
Commencing December 2, 2000, (the "Conversion Date") and continuing
thereafter interest shall convert to a floating rate (the "Floating
Rate") equivalent to the Prime Rate (as defined below) as of the
Conversion Date plus 2.25%. The undersigned also may prepay this
Note on or after the Conversion Date in full without a prepayment
premium. If the rate converts to the Floating Rate, the interest
rate shall be adjusted on the first day of each calendar quarter
(i.e., each January 1, April 1, July 1 and October 1) upon any
change in the Prime Rate to the rate of two and twenty-five
hundredths percent (2.25%) above the Prime Rate in effect on such
date, provided, however, that in no event shall the interest rate
payable hereunder be less than seven percent (7%) nor greater than
the maximum permitted by applicable law.
The "Prime Rate" is defined as the Prime Rate published in the
Money Rates section of The Wall Street Journal, or if no such rate
is published in The Wall Street Journal, then the nearest
comparable published rate, as determined by the holder of this
Note.
In all cases, interest shall be calculated on the basis of the
actual number of days elapsed over a year of 365 days.
Principal and interest are payable as follows:
One installment of interest only shall be payable on the first day
of the month following the date of this Note.
Then equal monthly installments of principal and interest will be
due and payable on the first day of each and every month
thereafter, and the entire unpaid principal balance together with
accrued and unpaid interest and other charges shall be due and
payable in full on or before December 1, 2002. Unless and until the
amount of any installment changes as set forth herein, the monthly
amount of principal and interest payments shall be $1,728.00.
In addition to the foregoing installments, the above monthly
principal and interest may be adjusted from time to time to
amortize the remaining principal balance in equal monthly payments
over the remaining term of the loan.
Payments, when made, shall be applied in a manner and order
according to the sole discretion of the holder of this Note without
notice or demand.
If any payment required to be paid by this Note is not paid in full
within ten (10) days after its scheduled due date, the holder
hereof may assess a late charge in the amount of five percent (5%)
of the unpaid amount of the payment, or the maximum permitted by
applicable law, whichever is less.
Failure to make any payment when due, or any default under any
encumbrance or agreement securing this Note shall cause the entire
remaining unpaid balance of principal and interest to be declared
immediately due and payable at the option of the holder of this
Note without notice or demand. This Note also shall be due and
payable in full, at the option of the holder hereof, without notice
or demand, upon any default in any other obligations owed to the
holder by the undersigned, whether now in existence or hereafter
created, including any indebtedness evidenced by a promissory note
or any document securing any such promissory note.
The undersigned and any endorser or guarantor of this Note hereby
each waive presentment for payment, demand, protest, notice of non-payment
or dishonor, notices of protest and all other demands and
notices in connection with the delivery, performance and
enforcement of this Note and waive all defenses that may be based
on suretyship or impairment of collateral. The undersigned is bound
as a principal and not as a surety. This Note shall bear interest
at the rate of four percent (4.0%) per annum above the interest
rate otherwise payable under the terms of this Note, or the maximum
permitted by applicable law, whichever is less (the "Default
Rate"), after the maturity hereof or following an event of default
hereunder until paid in full.
In the event holder shall employ counsel to collect this obligation
or to administer, protect or foreclose the security given in
connection herewith, the undersigned, jointly and severally if more
than one, agrees to pay reasonable attorney's fees for services of
such counsel, whether or not suit is brought, plus costs incurred
in connection therewith.
The undersigned shall have the option of prepaying this Note in
full or in part at any time hereafter, provided, however, that the
undersigned, jointly and severally if more than one, agrees to pay
a prepayment penalty in accordance with the following schedule:
Five percent (5.0%) of the amount prepaid in the event such payment
is made on or before December 1, 1996; Four percent (4.0%) of the
amount prepaid in the event such payment is made on or before
December 1, 1997; Three percent (3.0%) of the amount prepaid in the
event such payment is made on or before December 1, 1998; Two
percent (2.0%) of the amount prepaid in the event such payment is
made on or before December 1, 1999; and One percent (1. 0%) of the
amount prepaid in the event such payment is made on or before
December 1, 2000. A prepayment is any payment made ahead of
schedule that exceeds twenty percent (20%) of the then outstanding
principal balance before such prepayment.
If suit is instituted to enforce the terms of this Note, the Courts
of the State of Idaho and the Federal Courts located in the State
of Idaho shall have non-exclusive personal jurisdiction over the
undersigned, and the venue of the suit, at the option of the holder
of this Note, may be laid in Ada County, Idaho The undersigned
agrees not to claim that Idaho is an inconvenient place for trial.
This Note shall be construed and enforced in accordance with the
laws of the State of Idaho.
If the Note is mutilated, lost, stolen or destroyed, then upon
surrender thereof (if mutilated) or receipt of evidence and
indemnity (if lost, stolen or destroyed) the undersigned shall
execute and deliver a new note of like tenor, which shall show all
payments which have been made on account of the principal hereof.
The undersigned and any endorser or guarantor of this Note each
hereby agree and consent that, in addition to any methods of
service of process provided for under applicable law, all service
of process in any such suit, action or proceeding in any state or
federal court sitting in the State of Idaho may be made by
certified or registered mail, return receipt requested, directed to
the undersigned at the following address:
BOISE CO-DEVELOPMENT LIMITED PARTNERSHIP,
a Colorado- limited partnership
8620 Wolff Court, Suite 330
Westminster, CO 80030<PAGE>
THE UNDERSIGNED AND ANY ENDORSER OR GUARANTOR OF THIS NOTE EACH
HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY AND
ALL RIGHTS TO ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned have executed this Note as of
the date first above written.
BOISE CO-DEVELOPMENT LIMITED PARTNERSHIP,
a Colorado limited partnership
By: Good times Drive Thru, Inc.,
a Colorado corporation as general partner of
BOISE CO-DEVELOPMENT LIMITED PARTNERSHIP,
a Colorado limited partnership
By:/s/ Boyd E. Hoback, President
Boyd E. Hoback, President
STATE OF COLORADO )
) ss.
COUNTY OF Adams )
On this 3rd day of November, in the year of 1995, before me
Gina M. Wesolek personally appeared Boyd E. Hoback, known or
identified to me (or proved to be on the oath of ____________) to
be the president, or vice-president, or secretary or assistant
secretary, of the corporation that executed the instrument or the
person who executed the instrument on behalf of said corporation,
and acknowledged to me that such corporation exected the same.
/s/ Gina M. Wesolek
[SEAL] Notary Public
My commission expires on
November 23, 1995
FX W/ RATE REVIEW
CONV
9/19/95
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Good Times Restaurants Inc.
We have audited the accompanying consolidated balance sheet of Good Times
Restaurants Inc. and subsidiaries as of September 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows
for the years ended September 30, 1995 and 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Good Times Restaurants Inc. and subsidiaries as of September 30, 1995,
and the results of their operations and their cash flows for the years
ended September 1995 and 1994, in conformity with generally accepted
accounting principles.
/s/ Hein + Associates LLP
Hein + Associates LLP
Denver, Colorado
December 1, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 767000
<SECURITIES> 0
<RECEIVABLES> 105000
<ALLOWANCES> 0
<INVENTORY> 70000
<CURRENT-ASSETS> 1175000
<PP&E> 8455000
<DEPRECIATION> (1305000)
<TOTAL-ASSETS> 9285000
<CURRENT-LIABILITIES> 1970000
<BONDS> 0
<COMMON> 7000
0
0
<OTHER-SE> 4979000
<TOTAL-LIABILITY-AND-EQUITY> 9285000
<SALES> 17313000
<TOTAL-REVENUES> 17522000
<CGS> 6090000
<TOTAL-COSTS> 17029000
<OTHER-EXPENSES> 2583000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100000
<INCOME-PRETAX> (2090000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1020000)
<DISCONTINUED> 1070000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2090000)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
