SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
GOOD TIMES RESTAURANTS INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4)and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement Number:
3) Filing party:
4) Date filed:
GOOD TIMES RESTAURANTS INC.
8620 Wolff Court
Suite 330
Westminster, Colorado 80030
_______________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held August 30, 1996
A special meeting of stockholders of Good Times Restaurants Inc.,
a Nevada corporation, will be held at 8620 Wolff Court, Suite
330, Westminster, Colorado, on August 30, 1996 at 2:00 P.M.,
local time:
(1) To consider and act upon an Amendment to the Company's
Articles of Incorporation to authorize the issuance of
5,000,000 shares of preferred stock, $.01 par value,
1,000,000 of which will be designated as Series A
Convertible Preferred Stock and sold to an investor and
4,000,000 of which will be reserved for future issuance
in the discretion of the Board of Directors.
Details relating to the above matter are set forth in the
attached Proxy Statement. The Company's management is not aware
of any other matters to come before the meeting. The Board of
Directors has fixed July 29, 1996 as the record date for
stockholders entitled to notice of, and to vote at, the meeting.
IF YOU DO NOT PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE,
SIGN AND RETURN THE ENCLOSED PROXY WITHOUT DELAY. A BUSINESS
REPLY ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Sincerely,
Susan Knutson
Secretary
Denver, Colorado
July 29, 1996
GOOD TIMES RESTAURANTS INC.
8620 Wolff Court
Suite 330
Westminster, Colorado 80030
(303) 427-4221
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 30, 1996
The accompanying proxy is solicited by the Board of
Directors of GOOD TIMES RESTAURANTS INC. (the "Company") for use
at a Special Meeting of Stockholders to be held at 8620 Wolff
Court, Suite 330, Westminster, Colorado on August 30, 1996 at
2:00 P.M., local time, and at any and all adjournments thereof
for the purpose set forth in the Notice of Special Meeting of
Stockholders. The Company anticipates that this Proxy Statement
and the accompanying form of proxy will be first sent or given to
stockholders on or about July 29, 1996.
Any stockholder giving such a proxy has the right to revoke
the proxy at any time before it is voted by written notice to the
Secretary of the Company, by executing a new proxy bearing a
later date or by voting in person at the Special Meeting. A
proxy, when executed and not revoked, will be voted in accordance
therewith. If no instructions are given, proxies will be voted
FOR the proposal presented by management.
All expenses in connection with the solicitation of proxies
will be borne by the Company. The Company will also supply
brokers or persons holding stock in their names or in the names
of their nominees with such number of proxies and Proxy
Statements as they may require for mailing to beneficial owners
and will reimburse them for their reasonable expenses incurred in
connection therewith. Certain Directors, Officers and employees
of the Company not specifically employed for that purpose may
solicit proxies without additional compensation by mail,
telephone, facsimile transmission, telegraph or personal
interview. The Company has also engaged Regan & Associates,
Inc., an unrelated company, to solicit proxies on the Company's
behalf by additional mailings and telephone solicitations. The
Company has agreed to pay Regan & Associates a fee of
$____________ for its services, with fifty percent of such fee to
be waived in the event that the required affirmative vote to
approve the proposal set forth in the Notice of Special Meeting
of Stockholders is not obtained at such meeting.
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB/A, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1995, AND/OR A COPY OF THE SERIES A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, INCLUDING
SCHEDULES THERETO, DATED AS OF MAY 31, 1996 AND AMENDED JULY
_____, 1996 AND DISCUSSED HEREIN, TO EACH RECORD OR BENEFICIAL
OWNER OF ITS COMMON STOCK ON THE RECORD DATE. SUCH REQUESTS
SHOULD BE DIRECTED TO THE COMPANY AT 8620 WOLFF COURT, SUITE 330,
WESTMINSTER, COLORADO 80030, ATTENTION: SUSAN KNUTSON.
VOTING SECURITIES
The close of business on July 29, 1996, has been fixed by
the Board of Directors of the Company as the record date for the
determination of stockholders entitled to notice of and to vote
at the Special Meeting. On that date, the Company had
outstanding 6,314,824 shares of Common Stock, $.001 par value,
all of which are entitled to vote on the matters to come before
the Special Meeting.
Each outstanding share of Common Stock entitles the holder
to one vote. The presence in person or by proxy of a majority of
the outstanding shares of Common Stock is necessary to constitute
a quorum at the meeting. If a quorum is not present, the meeting
may be adjourned from time to time until a quorum is obtained.
The affirmative vote of a majority of the outstanding shares will
be required to approve the matter specified herein to be voted
upon.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of July 16, 1996, 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 five percent of its outstanding Common
Stock, and by all Directors and executive 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) 6.3%
8620 Wolff Court,
Suite 330
Westminster, CO 80030
Chairman, Director
First Registration
Corporation of
Oklahoma City 183,270(1)(2) 2.9%
120 N. Robinson Ave.
P.O. Box 25189
Oklahoma City, OK 73125
Shareholder
Boyd E. Hoback 165,424(3) 2.6%
8620 Wolff Court,
Suite 330
Westminster, CO 80030
Officer and Director
B. Edwin Massey 113,799(4) 1.8%
8620 Wolff Court,
Suite 330
Westminster, CO 80030
Director
Richard J. Stark 17,083(5) *
6075 South Quebec
Suite 103
Englewood, CO 80111
Director
Thomas P. McCarty 5,500(6) *
8779 Johnson Street
Arvada, CO 80005
Director
Alan A. Teran 5,000(7) *
2126 Knollwood Drive
Boulder, CO 80302
Director
Robert D. Turrill 60,703(8) *
8620 Wolff Court,
Suite 330
Westminster, CO 80030
Officer
All executive officers 951,144(9) 14.4%
and Directors as
a group (7 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 owned by any other person.
All shares held by the executive officers, Directors and
principal stockholders listed above are restricted
securities and as such are subject to limitations on
resale. The shares may be sold pursuant to Rule 144 under
the Securities Act of 1933, as amended, 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 by and 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 20,804 shares owned by the children of Mr. Massey
and an aggregate of 52,063 shares covered by presently
exercisable warrants.
(5) Includes an aggregate of 10,689 shares covered by presently
exercisable options and warrants.
(6) Includes an aggregate of 5,000 shares covered by presently
exercisable options.
(7) Includes an aggregate of 5,000 shares covered by presently
exercisable options.
(8) Includes an aggregate of 50,000 shares covered by presently
exercisable options.
(9) Includes 277,901 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.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
OF THE COMPANY
The Board of Directors of the Company believes it advisable
and in the best interests of the Company to amend its Articles of
Incorporation to authorize 5,000,000 shares of Preferred Stock,
$.01 par value (the "Amendment"). One million of such shares
will be designated as Series A Convertible Preferred Stock (the
"Series A Preferred Stock") in order that the financing
transaction described below may be consummated. The proposed
Amendment shall be substantially in the form set forth in Exhibit
3(i) attached to this Proxy Statement. Approval of the Amendment
requires the affirmative vote of the holders of a majority of the
outstanding shares of the Company's Common Stock. The Board of
Directors has unanimously approved the Amendment and recommends
that stockholders vote FOR the Amendment.
The Company has entered into a Series A Convertible
Preferred Stock Purchase Agreement dated as of May 31, 1996, as
amended July ___________, 1996 (the "Purchase Agreement"), with
The Bailey Company, a Colorado limited partnership ("Bailey"),
pursuant to which Bailey has agreed to purchase and Good Times
has agreed to sell 1,000,000 shares of Series A Convertible
Preferred Stock. The Purchase Agreement is contingent upon,
among other matters, approval by the stockholders of the
Amendment authorizing and designating the Series A Preferred
Stock. The following discussion summarizes the principal terms
of the Purchase Agreement and the Series A Preferred Stock. A
copy of the full Purchase Agreement containing such terms may be
obtained from the Company in the manner specified on pages 1 and
2 of this Proxy Statement.
The purchase price to be paid by Bailey for the 1,000,000
shares of Series A Preferred Stock is $1.00 per share, or a total
of $1,000,000. The purchase and payment will take place in three
installments. The first installment will occur on the first day
of the month following stockholder approval of the authorization
of the Amendment and Bailey will purchase on such date 500,000
shares of the Series A Preferred Stock in consideration of
$250,000 cash and the cancellation of a promissory note of the
Company payable to Bailey in the amount of $250,000 arising out
of a loan in that amount made by Bailey to the Company on March
1, 1996. Bailey will purchase the second installment of 250,000
shares of the Series A Preferred Stock three months after the
date of the first installment for $250,000 cash. Bailey will
purchase the third installment of 250,000 shares of the Series A
Preferred Stock three months after the date of the second
installment for $250,000 cash. The proceeds of the purchase are
intended to be used by the Company for the development of new
Good Times restaurants through the period ending December 31,
1997. The Company understands that Bailey has extensive
experience in the restaurant business through its ownership and
operation of a substantial number of Arby's Roast Beef
Restaurants in Colorado.
In reaching its decision to approve the Purchase Agreement
with Bailey, and therefore to approve the Amendment authorizing
the Preferred Stock and designating the Series A Preferred Stock
and to recommend that the stockholders of the Company vote for
the Amendment, the Board of Directors considered a number of
factors, including the following:
(a) The Company's need for additional
capital to develop additional Good Times restaurants;
(b) The prior inability of the Company
to attract such capital from other investors
on more favorable terms; and
(c) The successful experience of Bailey
and its principals in the fast-food restaurant
business.
The Board of Directors also considered the fairness opinion on
the Purchase Agreement of Cohig & Associates, Inc. described
below.
The purpose of the proposed Amendment to the Company's
Articles of Incorporation to authorize 4,000,000 shares of
Preferred Stock in addition to the 1,000,000 shares of Series A
Preferred Stock is to improve the Company's ability and
flexibility in meeting its future capital needs. The Company
however has no current plans to issue shares of Preferred Stock
in addition to the Series A Preferred Stock.
If the proposed Amendment is adopted, the additional shares
of Preferred Stock may be issued from time to time in one or more
series and each such series will have such designations, rates of
dividend, redemption prices, voting rights, liquidation
preferences, sinking fund provisions, conversion or exchange
rights and other special rights as the Board of Directors may fix
prior to the time of issuance of such series. The Board of
Directors will be empowered to authorize the Company to issue
some or all of the additional Preferred Stock at such time or
times, to such persons and for such consideration as it may deem
desirable without a further vote of the stockholders and without
offering such Preferred Stock to the holders of the Common Stock
of the Company.
The principal terms of the Purchase Agreement and of the
Series A Preferred Stock are as follows:
Voting. Except with respect to certain matters relating to
the Board of Directors (see "Board Size and Membership"), the
Series A Preferred Stock will vote together with the Common Stock
of the Company as a single class on all actions to be taken by
the stockholders of the Company. Each share of Series A
Preferred Stock will be entitled to such number of votes on each
action equal to the number of shares of Common Stock into which
such share of the Series A Preferred Stock is convertible at the
time of such vote. The Purchase Agreement and the provisions of
the Articles of Incorporation with respect to the Series A
Preferred Stock may not however be amended without the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of the Series A Preferred Stock.
Dividends. The holders of the Series A Preferred Stock will
be entitled to cumulative cash dividends equal to $.08 per share
per annum, or eight percent of the purchase price paid for the
Series A Preferred Stock, commencing to accrue on the date the
shares of Series A Preferred Stock are issued. The dividends are
payable on the first day of each calendar quarter commencing July
1, 1997 and shall be payable at the option of each holder of the
Series A Preferred Stock in cash or in shares of Common Stock of
the Company. For such purpose the number of shares of Common
Stock will be calculated by dividing the dollar amount of the
dividend by 75 percent of the average of the public market
closing prices of the Common Stock for the 14 trading days
immediately prior to the dividend payment date (the "Dividend
Conversion Rate"). Notwithstanding the foregoing, the divisor
for the first dividend will not be less than $.46875. If a
holder elects to receive a dividend in cash, the Company may
defer the payment of the dividend if in the reasonable judgment
of the Board of Directors payment thereof would jeopardize the
Company's ability to meet its current and foreseeable
obligations.
Liquidation. Upon any liquidation, dissolution or winding
up of the Company, the holders of the shares of Series A
Preferred Stock will be entitled to a preference over the Common
Stock equal to the original purchase price of the Series A
Preferred Stock plus all accrued dividends which have not been
paid.
Conversion. The holders of the Series A Preferred Stock
will have the right at any time during each conversion period
shown on the table below to convert up to the maximum number of
shares of Series A Preferred Stock shown on such table for such
conversion period into the number of shares of Common Stock which
is equal to the number of shares of Series A Preferred Stock to
be converted divided by the applicable conversion factor (or per
share price) as set forth in the table.
Conversion Period Maximum Aggregate Conversion Factor
Number of Preferred
Shares
(Non-Cumulative)
September 1, 1997 - 500,000 .46875
September 30, 1997
October 1, 1997 - 500,000 .56875
November 30, 1997
December 1, 1997 - 250,000 .46875
December 31, 1997 500,000 .56875
January 1, 1998 - 750,000 .56875
February 28, 1998
March 1, 1998 - 250,000 .46875
March 31, 1998 750,000 .56875
April 1, 1998 - 1,000,000 .56875
March 31, 1999
April 1, 1999 and 1,000,000 the greater of (i)
thereafter the Dividend
Conversion Rate at
the time of
conversion and (ii)
.46875
Redemption. The Company may from time to time at its option
redeem some or all of the shares of the Series A Preferred Stock
at any time after the second anniversary of the initial purchase
thereof. The redemption price will be the original purchase
price plus any unpaid accrued dividends. The Company must give
at least thirty (but not more than forty) days' prior notice of
any intent to redeem and the holders of the Series A Preferred
Stock subject to redemption may after such notice convert their
Series A Preferred Stock to Common Stock as provided above.
Board Size and Membership. The number of Directors of the
Company may not be increased above seven without the affirmative
vote of the holders of at least two-thirds of the then
outstanding shares of Series A Preferred Stock. The holders of
the Series A Preferred Stock will have the right to elect two
directors to the Board of Directors of the Company, one of which
Directors will have the right to serve as Chairman of the Board.
The remaining Directors will be elected by all Common and Series
A Preferred stockholders voting as a group. In the event (i) the
Board fails to declare a Series A Preferred Stock dividend,
unless such dividend is to be paid in cash and then unless in the
reasonable judgement of the Board of Directors payment thereof
would jeopardize the Company's ability to meet its current and
foreseeable obligations; (ii) the Company files for bankruptcy or
is adjudged insolvent; or (iii) the Company fails to cure a
breach of the agreement between it and the holders of the Series
A Preferred Stock after notice thereof, the holders of the Series
A Preferred Stock may remove Directors and elect four Directors
to the Board.
Restrictions. While any shares of Series A Preferred Stock
are outstanding, the Company may not do any of the following
without the consent of the Directors which are elected by the
holders of the Series A Preferred Stock, as described above:
a. Consent to any liquidation or dissolution of the
Company; consolidate, merge or acquire the stock or assets of any
entity (except for one exception relating to certain Steak-Out
restaurants); or sell or transfer a majority of its assets.
b. Incur any debt that is payable over a period of longer
than a year at any time when the Company's earnings before
interest, taxes, depreciation and amortization are less than 120
percent of the aggregate payments on long-term debt which the
Company reasonably expects to make over the 12 months after such
debt is to be incurred.
c. Amend or repeal its Articles of Incorporation.
d. Pay any dividend on any shares of stock other than the
Series A Preferred Stock, except for stock dividends, or purchase
any shares of the Company's Common Stock except pursuant to any
contractual obligation to repurchase the Common Stock of former
employees.
e. Engage in any business other than the restaurant
business.
Future Transactions. The Purchase Agreement grants Bailey a
right of participation in any future equity offerings of the
Company on the same terms as those offered to others to the
extent necessary to preserve Bailey's proportionate equity
interest in the Company represented by the Series A Preferred
Stock and the Common Stock issued upon conversion of the Series A
Preferred Stock. This right of participation does not apply to
securities issued: (A) upon conversion of the Preferred Stock;
(B) as a stock dividend or stock split of the Common Stock; (C)
pursuant to outstanding subscriptions, warrants, options and
convertible securities; (D) solely in consideration for the
acquisition by the Company of another entity; or (E) pursuant to
a firm commitment underwriting. In addition, the Board of
Directors may not authorize the issuance of additional Preferred
Stock without the concurrence of Bailey so long as Bailey holds
two-thirds of the Series A Preferred Stock and/or the Common
Stock acquired by the conversion thereof. The Board of Directors
also may not authorize an amendment to the Company's Articles of
Incorporation increasing or decreasing the authorized Common
Stock of the Company without the concurrence of Bailey so long as
Bailey holds two-thirds of the Series A Preferred Stock and/or
the Common Stock acquired by the conversion thereof.
In connection with the proposed transaction, the Company has
entered into a Registration Rights Agreement whereby the holders
of the Series A Preferred Stock are given certain registration
rights with respect to the public resale of Common Stock acquired
by conversion of the Series A Preferred Stock. The holders of
fifty percent or more of such stock may require the Company to
register all or a lesser number of such shares for public sale
under the Securities Act of 1933, as amended. The holders of
such Common Stock are limited to two such demands for
registration. Notwithstanding the foregoing, if the Company is
at the time eligible to register its Common Stock using Form S-3
or any successor thereto, any Series A Preferred Stock holder may
require the Company to register its Common Stock on such form,
provided that the reasonably anticipated aggregate price to the
public for such shares would exceed $1,000,000. The limitation
on the number of demands for registration is not applicable to
demands for registration on Form S-3 provided the foregoing
conditions are satisfied.
The holders of the Series A Preferred Stock are also
entitled to notice from the Company of any registration of the
Company's Common Stock on a form which would permit registration
of the Common Stock acquired by conversion of the Series A
Preferred Stock, and to have their shares of Common Stock
registered on such form. The number of shares of Common Stock
which must be so registered may be reduced if the managing
underwriter for a public offering for which the registration is
being made concludes that inclusion in the offering of the number
of shares of Common Stock requested to be registered would
adversely affect the marketing of the securities to be sold by
the Company therein.
The Company has, in effect, a right of first refusal to
purchase any shares of Series A Preferred Stock offered by Bailey
to a third party on the same terms and conditions as those
offered to such third party.
Fairness Opinion. The Company retained Cohig & Associates,
Inc. ("Cohig") to render an opinion as to the fairness from a
financial point of view of the Purchase Agreement and the
issuance of the Series A Preferred Stock to Bailey. Cohig is a
securities and investment banking firm which has been involved in
the evaluation of businesses and their securities for other
companies. Cohig has also acted in the past as an underwriter of
the Company's securities and has maintained a market in the
Common Stock of the Company as well as owned shares of the
Company's Common Stock and its Common Stock purchase warrants.
The Company is paying Cohig a fee of $________________ for its
services in rendering the fairness opinion. Such fee is based on
the time spent by Cohig and payment of the fee is not contingent
upon the content of the opinion or the approval of the Series A
Preferred Stock.
In arriving at its opinion Cohig:
(i) reviewed the Purchase Agreement, the terms of the
amendment to the Company's Articles of Incorporation designating
the powers, preferences and rights of the Series A Preferred
Stock, financial information on the Company furnished to it by
management of the Company, including financial projections for
the Company, and publicly available information on the Company;
(ii) held discussions with the management of the
Company concerning its business, operations and prospects;
(iii) analyzed the value of the Series A Preferred
Stock based upon its conversion rate, dividend rate and other
terms and based upon the trading market of the Company's Common
Stock;
(iv) considered the revenue, net income, cash flow
and stockholders equity of the Company and changes in such
factors from prior periods to current periods;
(v) reviewed the Registration Rights Agreement to
be entered into by the Company and Bailey;
(vi) the valuations of publicly traded companies in
the same or similar industry as the Company; and
(vii) made such other studies and inquiries as Cohig
deemed relevant.
Cohig relied upon and assumed, without independent
verification, the accuracy and completeness of all financial and
other information furnished to it by the Company. With respect
to the financial projections of the Company, Cohig relied upon
management's assurances that such projections had been reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of management.
Based upon the foregoing analysis of the Company and Cohig's
general knowledge of and experience in the valuation of
securities, Cohig concluded that the Purchase Agreement and the
issuance of the Series A Preferred Stock to Bailey is fair from a
financial point of view to the Company's stockholders. The full
opinion of Cohig is attached to this Proxy Statement as Exhibit
99.
Although the proposed Amendment will not change the right of
the holders of the outstanding Common Stock to receive dividends
at such times and in such amounts as the Board of Directors may
determine, satisfaction of any dividend obligations on
outstanding Preferred Stock, including the Series A Preferred
Stock, will reduce the amount of funds available for the payment
of dividends on Common Stock. If additional shares of Common
Stock are issued in the future, which may include issuances
pursuant to the conversion of Preferred Stock, including the
Series A Preferred Stock, the voting rights of the holders of
outstanding Common Stock will be proportionately diluted. The
holders of Series A Preferred Stock are entitled, and the holders
of any other series of Preferred Stock issued would normally be
entitled, to receive, in the event of any liquidation or other
dissolution or winding up of the Company, a liquidation
preference (plus any accrued but unpaid dividends, if cumulative)
before any distribution of assets of the Company is made to the
holders of the Common Stock.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the
next Annual Meeting of Stockholders must be received by the
Company on or before November 30, 1996, in order to be eligible
for inclusion in the Company's proxy statement and form of proxy.
To be so included, a proposal must also comply with all
applicable provisions of Rule 14a-8 under the Securities Exchange
Act of 1934.
OTHER MATTERS
Management does not know of any other matters to be brought
before the Special Meeting. If any other matters not mentioned
in this proxy statement are properly brought before the meeting,
the individuals named in the enclosed proxy intend to vote such
proxy in accordance with their best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
July 29, 1996
SPECIAL MEETING OF STOCKHOLDERS
GOOD TIMES RESTAURANTS INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned stockholder of Good Times Restaurants Inc.,
a Nevada corporation, hereby appoints Boyd E. Hoback, Chief
Executive Officer and a Director of Good Times Restaurants Inc.,
my proxy to attend and represent me at the Special Meeting of
Stockholders of the corporation to be held on August 30, 1996 at
2:00 p.m., and at any adjournment thereof, and to vote my shares
on any matter or resolution which may come before the meeting and
to take any other action which I could personally take if present
at the meeting.
1. Proposed Amendment to the Company's Articles of
Incorporation: The Company has proposed to amend its Articles of
Incorporation to authorize 5,000,000 shares of preferred stock,
$.01 par value, 1,000,000 of which will be designated as Series A
Convertible Preferred Stock with rights, preferences and powers
set forth in such amendment.
FOR AGAINST ABSTAIN
2. Other Matters. In his discretion upon such other
business as may properly come before the meeting or any
adjournments thereof.
FOR AGAINST ABSTAIN
PLEASE NOTE: Failure to check one of the boxes will give
management the authority to vote the proxy in its discretion.
Shares owned:
Dated this day of , 1996.
Stockholder
(Sign exactly as name appears on
certificate for shares.)
(When signing as attorney,
executor, administrator, trustee or
guardian, give full title as such.
If signer is a corporation, sign
full corporate name by duly
authorized officer. If shares are
held in the name of two or more
persons, all should sign.)
EXHIBIT 3(i)
RESOLUTION AMENDING THE ARTICLES OF INCORPORATION
OF
GOOD TIMES RESTAURANTS INC.
RESOLVED, that the Articles of Incorporation of the
Corporation be amended by deleting Article Fourth thereof and
substituting therefor the following:
ARTICLE IV - AUTHORIZED CAPITAL STOCK
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 55,000,000
shares, consisting of 50,000,000 shares of common stock, $.001
par value per share ("Common Stock"), and 5,000,000 shares of
preferred stock, $.01 par value per share ("Preferred Stock").
The designations, powers, preferences and rights and
the qualifications, limitation or restrictions of the Preferred
Stock shall be as follows:
A. Series A Convertible Preferred Stock.
One million shares of Preferred Stock shall be
designated as Series A Convertible Preferred Stock and shall have
the following designations, powers, preferences and rights and
the qualifications, limitations or restrictions as follows:
1. Number of Shares. The series of Preferred Stock
designated and known as "Series A Convertible Preferred Stock"
shall consist of 1,000,000 shares.
2. Voting.
a. General. Except as may be otherwise provided
in these terms of the Series A Convertible Preferred Stock or by
law, the Series A Convertible Preferred Stock shall vote together
with all other classes and series of stock of the Corporation as
a single class on all actions to be taken by the stockholders of
the Corporation. Each share of Series A Convertible Preferred
Stock shall entitle the holder thereof to such number of votes
per share on each action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each
share of Series A Convertible Preferred Stock would be
convertible based on the Conversion Price then in effect.
b. Board Size. The Corporation shall not,
without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Series A
Convertible Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as
a series, increase the maximum number of Directors constituting
the Board of Directors to a number in excess of seven.
c. Board Seats. The holders of the Series A
Convertible Preferred Stock voting together separately as a class
shall have the right to elect two Directors to the Board of
Directors of the Corporation, one of whom shall have the right to
serve as the Chairman of the Board at their discretion.
Notwithstanding the foregoing or anything else to the contrary
provided in these Articles of Incorporation, the holders of
Series A Convertible Preferred Stock, voting as a separate
series, shall be entitled to remove with or without cause any or
all of the Directors and to elect four Directors to the Board of
the Corporation if the following events occur: (1) the Board
shall fail to declare an Accruing Dividend when due if there is
adequate surplus to do so, unless the Board of Directors
reasonably determines that the payment of a cash dividend would
jeopardize the Corporation's ability to meet its current and
reasonably foreseeable obligations, including reasonable reserves
therefor; (2) the Corporation files a petition in bankruptcy, is
adjudged bankrupt or insolvent, makes an assignment for the
benefit of creditors, applies to or petitions any tribunal for
the appointment of a receiver, intervenor or trustee for all or a
substantial part of its assets, or a proceeding under any
bankruptcy law or statute shall have commenced and not been
dismissed within 60 days; or (3) if there has been a material
breach of any agreement between the Corporation and the holders
of the Series A Convertible Preferred Stock and the Company fails
to remedy such breach within 14 days after receiving notice of
such breach or, if such breach cannot reasonably be cured and the
Company continuously and diligently proceeds to remedy such
breach, within 30 days after receiving notice of such breach. At
any meeting (or in a written consent in lieu thereof) held for
the purpose of electing Directors, the presence in person or by
proxy (or the written consent) of the holders of a majority of
the shares of Series A Convertible Preferred Stock then
outstanding shall constitute a quorum of the Series A Convertible
Preferred Stock for the election of Directors to be elected
solely by the holders of the Series A Convertible Preferred Stock
or jointly by the holders of the Series A Convertible Preferred
Stock and the Common Stock. A vacancy in any directorship
elected solely by the holders of the Series A Convertible
Preferred Stock shall be filled only by vote or written consent
of the holders of the Series A Convertible Preferred Stock, and a
vacancy in the directorship elected jointly by the holders of the
Series A Convertible Preferred Stock and the Common Stock shall
be filled only by vote or written consent of holders of the
Series A Convertible Preferred Stock and the Common Stock as
provided above.
3. Dividends. The holders of the Series A
Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, when and as declared by the
Board of Directors, cumulative cash dividends on each share of
Preferred Stock equal to 8% of the purchase price paid for such
share per annum (the "Accruing Dividend"). The Accruing Dividend
shall accrue with respect to each share of Series A Convertible
Preferred Stock issued and outstanding from day to day from the
date of original issuance of such shares and shall be payable
quarterly on January 1, April 1, July 1 and October 1 of each
year (each a "Payment Date") commencing July 1, 1997, whether or
not earned or declared, and such dividends shall be cumulative if
not paid. The Accruing Dividend shall be paid, at the option of
the holder of the Series A Convertible Preferred Stock, in cash
or in Common Stock. If a holder elects to receive an Accruing
Dividend in cash, the Company shall promptly pay such Accruing
Dividend unless the Board of Directors reasonably determines that
the payment of such dividend would jeopardize the Corporation's
ability to meet its current and reasonably foreseeable
obligations, including the establishment of reasonable reserves
therefor, in which case the payment of such cash dividend will be
deferred until such time as the payment of the dividend, in the
reasonable discretion of the Board of Directors, would not
jeopardize the Corporation's ability to meet such obligations.
If a holder elects to receive a dividend of Common Stock, the
Corporation shall issue to such holder, within 30 days after the
date on which such dividend was due, the number of shares of
Common Stock calculated by dividing (i) the dollar value of the
dividend, by (ii) 75% of the Dividend Conversion Rate. The
"Dividend Conversion Rate" shall be equal to the average of the
prices set forth in the "Last Price" column in the NASDAQ
Small-Cap issues for the 14 business days immediately preceding
the applicable Dividend Payment Date. Notwithstanding the
foregoing, if on the July 1, 1997 Payment Date, 75% of the
Dividend Conversion Rate is less than $0.46875, then the Dividend
Conversion Rate used on that Payment Date shall be $0.46875. If
a holder or holders of Series A Convertible Preferred Stock elect
to receive a dividend in cash, such holders shall have the right,
until such time as the cash dividend is actually paid, to change
their election and receive such dividend in the form of Common
Stock as provided above; provided, that the size of such Common
Stock dividend shall be calculated using the Dividend Conversion
Rate applicable at the time the dividend was declared.
4. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Series A Convertible Preferred Stock
shall first be entitled, before any distribution or payment is
made upon any stock ranking on liquidation junior to the Series A
Convertible Preferred Stock, to be paid an amount equal to
$0.46875 per share plus, in the case of each share, an amount
equal to all Accruing Dividends accrued but unpaid thereon
(whether or not declared) computed to the date payment thereof is
made available (such amount payable with respect to one share of
Series A Convertible Preferred Stock being sometimes referred to
as the "Liquidation Preference Payment" and with respect to all
shares of Series A Convertible Preferred Stock being sometimes
referred to as the "Liquidation Preference Payments"). If upon
such liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the assets to be distributed
among the holders of Series A Convertible Preferred Stock shall
be insufficient to permit payment in full to the holders of
Series A Convertible Stock of the Liquidation Preference
Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably among the holders of
Series A Convertible Preferred Stock. Upon any such liquidation,
dissolution or winding up of the Corporation, immediately after
the holders of Series A Convertible Preferred Stock shall have
been paid in full the Liquidation Preference Payments, the
remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of
Common Stock. Written notice of such liquidation, dissolution or
winding up, stating a payment date, the amount of the Liquidation
Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in
person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of
record of Series A Convertible Preferred Stock, such notice to be
addressed to each such holder at its address as shown by the
records of the Corporation. The consolidation or merger of the
Corporation into or with any other entity or entities which
results in the exchange of outstanding shares of the Corporation
for securities or other consideration issued or paid or caused to
be issued or paid by any such entity or affiliate thereof (other
than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or
other disposition by the Corporation of all or substantially all
its assets, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the
provisions of this paragraph 4. For purposes hereof, except as
provided herein, the Common Stock shall rank on liquidation
junior to the Series A Convertible Preferred Stock.
5. Restrictions. At any time when shares of Series A
Convertible Preferred Stock are outstanding, without the
unanimous consent of both Directors of the Corporation that are
elected by the holders of the Series A Convertible Stock,
consenting or voting separately as a class, the Corporation will
not:
a. (1) Consent to any liquidation, dissolution
or winding up of the Corporation, (2) consolidate or merge into
or with any other entity or entities, (3) consent to any
acquisition of stock or assets of another person or entity
(except for Steak Out, King of Steaks, Inc.), (4) sell, lease,
abandon, transfer or otherwise dispose of in excess of 51% of the
Corporation's total assets (including intellectual property
rights), or (5) incur any additional long term debt (i.e., debt
that is payable over a period of longer than one year) at any
time at which the Corporation's earnings before interest, taxes,
depreciation and amortization ("EBITDA"), excluding extraordinary
items of gain or loss, is less than 120% of the aggregate
interest and principal payments on long term debt that the
Corporation reasonably expects to be obligated for over the
subsequent 12-month period.
b. Amend, alter or repeal its Certificate of
Incorporation or By- laws;
c. Purchase or set aside any sums for the
purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Series A Convertible Preferred
Stock, except for dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from
former employees of the Corporation who acquired such shares
directly from the Corporation, if each such purchase is made
pursuant to contractual rights held by the Corporation relating
to the termination of employment of such former employee and the
purchase price does not exceed the original issue price paid by
such former employee to the Corporation for such shares; or
d. Redeem or otherwise acquire any shares of
Series A Convertible Preferred Stock except as expressly
authorized in paragraph 7 hereof or pursuant to a purchase offer
made pro rata to all holders of the shares of Series A
Convertible Preferred Stock on the basis of the aggregate number
of outstanding shares of Series A Convertible Preferred Stock
held by each such holder.
6. Conversion. The holders of shares of Series A
Convertible Preferred Stock shall have the following conversion
rights:
a. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holders of Series A
Convertible Preferred Stock shall have the right at any time
during each Conversion Period shown on the table below (each a
"Conversion Period"), to convert up to the Maximum Number of
Shares of Series A Convertible Preferred Stock shown on such
table for that Conversion Period into such number of fully paid
and nonassessable shares of Common Stock as is obtained by
dividing the number of shares of Series A Convertible Preferred
Stock to be converted by the applicable Conversion Price as set
forth in the following table:
Maximum
Number of Shares Conversion
Conversion Period (Non-Cumulative) Price
September 1, 1997 - 500,000 $0.46875
September 30, 1997
October 1, 1997 - 500,000 $0.56875
November 30, 1997
December 1, 1997 - 250,000 $0.46875
December 31, 1997 500,000 $0.56875
January 1, 1998 - 750,000 $0.56875
February 28, 1998
March 1, 1998 - 250,000 $0.46875
March 31, 1998 750,000 $0.56875
April 1, 1998 -
March 31, 1999 1,000,000 $0.56875
April 1, 1999, and thereafter 1,000,000 the greater
of (i) the
Dividend
Conversion Rate
at the time of
such
conversion, and
(ii) $0.46875
Such rights of conversion shall be exercised by the holder
thereof by giving written notice to the Corporation during the
applicable Conversion Period stating that the holder elects to
convert a stated number of shares of Series A Convertible
Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to
the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Series A Convertible
Preferred Stock) at any time during its usual business hours on
the date set forth in such notice, together with a statement of
the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued;
provided, however, that following each Conversion Period, no more
than the Maximum Number of Shares in the aggregate shall be
converted. If holders of the Series A Convertible Preferred
Stock desire to convert in excess of the Maximum Number of Shares
for a particular Conversion Period, such holders shall have the
right to convert up to their pro rata share of the Maximum Number
of Shares, unless otherwise agreed by the holders desiring to
convert their shares hereunder.
b. Issuance of Certificate; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in
subparagraph 6(a) and surrender of the certificate or
certificates for the share or shares of Series A Convertible
Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a
certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares
of Series A Convertible Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected as
of the close of business on the date on which such written notice
shall have been received by the Corporation and the certificate
or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the
holder of such share or shares of Series A Convertible Preferred
Stock shall cease, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares
represented thereby.
c. Fractional Shares; Dividends; Partial
Conversion. No fractional shares shall be issued upon conversion
of Series A Convertible Preferred Stock into Common Stock and no
payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon
such conversion. At the time of each conversion, the Corporation
shall pay in cash an amount equal to all dividends accrued and
unpaid on the shares of Series A Convertible Preferred Stock
surrendered for conversion to the date upon which such conversion
is deemed to take place as provided in subparagraph 6(b). In
case the number of shares of Series A Convertible Preferred Stock
represented by the certificate or certificates surrendered
pursuant to subparagraph 6(a) exceeds the number of shares
converted, the Corporation shall, upon such conversion, execute
and deliver to the holder, at the expense of the Corporation, a
new certificate or certificates for the number of shares of
Series A Convertible Preferred Stock represented by the
certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except
for the provisions of the first sentence of this subparagraph
6(c), be delivered upon such conversion, the Corporation, in lieu
of delivering such fractional share, shall pay to the holder
surrendering the Series A Convertible Preferred Stock for
conversion an amount in cash equal to the current market price of
such fractional share as determined in good faith by the Board of
Directors of the Corporation.
d. Subdivision or Combination of Common Stock.
In case the Corporation shall at any time subdivide (by stock
split, stock dividend or otherwise) its outstanding shares of
Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
e. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock
of the Corporation shall be effected in such a way that holders
of Common Stock shall be entitled to receive stock, securities or
assets with respect to or in exchange for Common Stock, then, as
a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a
share or shares of Series A Convertible Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares
of Common Stock immediately therefor receivable upon the
conversion of such share or shares of Series A Convertible
Preferred Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a
number of outstanding shares of Common Stock equal to the number
of shares of such Common Stock immediately therefore receivable
upon such conversion had such reorganization or reclassification
not taken place. In any such case, appropriate provisions shall
be made with respect to the rights and interests of such holder
to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price)
shall thereafter be applicable, as nearly as may be, in relation
to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
f. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend
upon its Common Stock payable in cash or stock or make any
other distribution to the holders of its Common Stock;
(2) the Corporation shall offer for subscription
pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
a consolidation or merger of the Corporation with or into
another entity or entities, or a sale, lease, abandonment,
transfer or other disposition of all or substantially all
its assets; or
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of such cases, the Corporation shall
give, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each
holder of any shares of Series A Convertible Preferred Stock at
the address of such holder as shown on the books of the
Corporation, (a) at least 20 days' prior written notice of the
date on which the books of the Corporation shall close or a
record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, and
(b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or
winding up, at least 20 days' prior written notice of the date
when the same shall take place. Such notice in accordance
with the foregoing clause (a) shall also specify, in the case of
any such dividend, distribution or subscription rights, the date
on which the holders of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause (b) shall
also specify the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, as the case may be.
g. Stock to be Reserved. The Corporation will
at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the
conversion of Series A Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series
A Convertible Preferred Stock. The Corporation covenants that
all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof,
and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all
such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than
the Conversion Price in effect at the time. The Corporation will
take all such action as may be necessary to assure that all such
shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any
national securities exchange upon which the Common Stock may be
listed. The Corporation will not take any action which results
in any adjustment of the Conversion Price if the total number of
shares of Common Stock issued and issuable after such action upon
conversion of the Series A Convertible Preferred Stock would
exceed the total number of shares of Common Stock then authorized
by the Certificate of Incorporation.
h. No reissuance of Series A Convertible
Preferred Stock. Shares of Series A Convertible Preferred Stock
which are converted into shares of Common Stock as provided
herein shall not be reissued.
i. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Series A Convertible
Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that
the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
holder of the Series A Convertible Preferred Stock which is being
converted.
j. Closing of Books. The corporation will at no
time close its transfer books against the transfer of any Series
A Convertible Preferred Stock or of any shares of Common Stock
issued or issuable upon the conversion of any shares of Series A
Convertible Preferred Stock in any manner which interferes with
the timely conversion of such Series A Convertible Preferred
Stock, except as may otherwise be required to comply with
applicable securities laws.
k. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $0.01 per share,
as constituted on the date of filing of these terms of the Series
A Convertible Preferred Stock, and shall also include any capital
stock of any class of the Corporation thereafter authorized which
shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock
receivable upon conversion of shares of Series A Convertible
Preferred Stock shall include only shares designated as Common
Stock of the Corporation on the date of filing of this
instrument, or in case of any reorganization or reclassification
of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6(g).
7. Redemption. The shares of Series A Convertible
Preferred Stock may be redeemed by the Corporation, at its
option, as follows:
a. Optional Redemption. The Corporation shall
have the right at any time after September 1, 1998, at its
option, to redeem all of the then-outstanding shares of Series A
Convertible Preferred Stock, or any portion thereof, in blocks of
100,000 shares; provided, however, that such right is contingent
upon all accrued and unpaid Accruing Dividends being fully paid
prior to the Corporation's exercise of its redemption rights
hereunder; and provided, further, however, that for so long as a
holder of Series A Convertible Preferred Stock and its
affiliates, in the aggregate, own at least 66.67% of the Series A
Convertible Preferred Stock and Conversion Shares, the
Corporation shall not have the right to redeem any shares
hereunder to the extent that (i) there are fewer than 1,000
shares of Series A Convertible Preferred Stock outstanding, or
(ii) such redemption would result in fewer than 1,000 shares of
Series A Convertible Preferred Stock remaining outstanding.
b. Redemption Price and Payment. The shares of
Series A Convertible Preferred Stock to be redeemed hereunder
shall be redeemed by paying in cash an amount equal to $1.00 per
share plus, in the case of each share, an amount equal to all
Accruing Dividends declared but unpaid thereon, computed to the
date of such redemption, such amount being referred to as the
"Redemption Price." Such payment shall be made in full on the
date such shares are redeemed to the holders entitled thereto.
c. Redemption Mechanics. At least 30 but not
more than 40 days prior to the date on which the Corporation
proposes to redeem such shares (the "Redemption Date"), written
notice (the "Redemption Notice") shall be given by the
Corporation by delivery in person, certified or registered mail,
return receipt requested, telecopier or telex, to each holder of
record (at the close of business on the business day next
preceding the day on which the Redemption Notice is given) of
shares of Series A Convertible Preferred Stock notifying such
holder of the redemption and specifying the Redemption Price,
such Redemption Date, the number of shares of Series A
Convertible Preferred Stock to be redeemed from such holder
(computed on a pro rata basis in accordance with the number of
such shares held by all holders thereof) and the place where
such Redemption Price shall be payable. The Redemption Notice
shall be addressed to each holder at his address as shown by the
records of the Corporation. Notwithstanding anything to the
contrary contained herein, holders of Series A Convertible
Preferred Stock receiving such Redemption Notice shall have the
right to convert their shares of Series A Convertible Preferred
Stock subject to such Redemption Notice into Common Stock
pursuant to paragraph 6 above. From and after the close of
business on a Redemption Date, unless there shall have been a
default in the payment of the Redemption Price, all rights of
holders of shares of Series A Convertible Preferred Stock (except
the right to receive the Redemption Price) shall cease with
respect to the shares to be redeemed on such Redemption Date, and
such shares shall not thereafter be transferred on the books of
the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available
for redemption of shares of Series A Convertible Preferred Stock
on a Redemption Date are insufficient to redeem the total number
of shares of Series A Convertible Preferred Stock to be redeemed
on such Redemption Date, the holders of such shares shall share
ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable
to them if the full number of shares to be redeemed on such
Redemption Date were actually redeemed. The shares of Series A
Convertible Preferred Stock required to be redeemed but not so
redeemed shall remain outstanding and entitled to all rights and
preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of such shares of Series A Convertible Preferred
Stock, such funds shall be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares,
or such portion thereof for which funds are then legally
available, on the basis set forth above.
d. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Series A Convertible Preferred Stock
redeemed pursuant to this paragraph 7 or otherwise acquired by
the Corporation in any manner whatsoever shall be canceled and
shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate action as
may be necessary to reduce accordingly the number of authorized
shares of Series A Convertible Preferred Stock.
8. Amendments. No provision of these terms of the
Series A Convertible Preferred Stock may be amended, modified or
waived without the written consent or affirmative vote of the
holders of at least two-thirds of the then outstanding shares of
Series A Convertible Preferred Stock.
B. Other Preferred Stock.
The Preferred Stock other than the Series A Convertible
Preferred Stock may be issued from time to time in one or more
series and for such consideration as the Board of Directors shall
determine. Subject to the limitations set forth herein and any
limitations then prescribed by law, authority is hereby expressly
granted to the Board of Directors to fix by resolution from time
to time the designation of such series and the powers,
preferences and rights of the shares of such series, and the
qualifications, limitations or restrictions thereof, including,
without limitation, the following:
(a) the designation and number of shares
comprising such series, which number may from time to time be
decreased by the Board of Directors (but not below the number of
such shares then outstanding) or may be increased (unless
prohibited by action of the Board of Directors in resolutions
creating such series);
(b) the rate, amount and times at which, and the
preferences and conditions under which, dividends shall be
payable on shares of such series, including, without limitation,
whether such dividends are cumulative or noncumulative and
whether the shares of such series participate or do not
participate in additional dividends after the payment of
preferential dividends with respect to such shares;
(c) any rights and preferences of the holders of
shares of such series upon the liquidation, dissolution or
winding up of the affairs of, or upon any distribution of the
assets of, the Corporation, and whether such amounts vary
depending upon whether such liquidation, dissolution or winding
up is voluntary or involuntary;
(d) the full or limited voting rights, if any, of
the shares of any such series, in addition to voting rights
provided by law; and whether or not, under what conditions and
with respect to what subject matters, the shares of such series
shall be entitled to vote separately as a class;
(e) any times, terms and conditions upon which
the shares of such series may be subject to redemption and the
amount, terms, conditions and manner of operation of any
purchase, retirement or sinking fund to be provided with respect
to the redemption of such shares;
(f) any rights to convert such shares into, or to
exchange such shares for, shares of any other class or classes of
capital stock or of any other series of the same class,
including, without limitation, the prices, rates, conversion or
exchange and any other terms or conditions applicable to such
conversion or exchange;
(g) any limitations upon the payment of dividends
or the making of distributions on or the acquisition or
redemption of Common Stock or any other class of shares
subordinate to the shares of such series with respect to the
payment of dividends;
(h) any conditions or restrictions upon the issue
of any additional shares on a parity with or superior to the
shares of such series other than the Series A Convertible
Preferred Stock; and
(i) any other relative powers, preferences or
rights and any other qualifications, limitations or restrictions
with respect to the shares of such series as the Board of
Directors may deem advisable and as shall not be inconsistent
with the provisions of this Article IV.
Except as specified by the Board of Directors, all shares of
Preferred Stock shall be identical to and of equal rank with all
shares of any other series of Preferred Stock, except as to the
terms from which cumulative dividends, if any, shall accumulate.
C&A COHIG & ASSOCIATES, INC. INVESTMENTS 6300 South Syracuse
Way
Suite 130
Englewood, CO 80111
July 12, 1996
Boyd E. Hoback
Chairman of The Board of Directors
Good Times Restaurants Inc.
8620 Wolff Court, Suite 330
Westminster, CO 80030
Dear Mr. Hoback:
Cohig & Associates, Inc. ("Cohig") has been asked by Good
Times Restaurants Inc. (the "Company") to render an opinion as to
the fairness, from a financial point of view, of the sale of
1,000,000 shares of 8% Convertible Preferred Stock at a purchase
price of $1.00 per share to The Bailey Company for an aggregate
purchase price of $1,000,000. Such terms of the sale are included
in the Series A Convertible Preferred Stock Purchase Agreement
dated May 31, 1996 (the "Agreement"). The Preferred Shares are to
be purchased in three installments: one for 500,000 Shares on the
first day of the month following approval by the Company's
shareholders, 250,000 Shares three months later, and 250,000 Shares
six months after the first installment is paid.
The assignment was prepared in accordance with generally
accepted valuation techniques and included, among other items, an
analysis of the following key valuation concerns:
1. The nature and history of the business enterprise.
2. The economic outlook in general and the condition and
outlook of the specific industry in particular.
3. The financial condition of the business and the book
value of its stock.
4. The earnings capacity of the business.
5. The dividend paying capacity of the business.
6. Intangible values such as goodwill, patents, etc.
7. Historical trading market of the stock, the relative size
of the block to be valued, and the type of security being
valued.
8. The market price of companies engaged in the same or
similar lines of business.
In addition we have: (i) reviewed the Agreement dated May 31,
1996 and Exhibits; (ii) reviewed the Series A Convertible Preferred
Stock Terms; (iii) reviewed the Registration Rights Agreement; (iv)
reviewed financial information on Good Times Restaurants Inc.
furnished to Cohig by management, including financial projections
for Good Times Restaurants Inc.; (v) reviewed publicly available
information; (vi) held discussions with the management of Good
Times Restaurants Inc. concerning the businesses, operations and
prospects for the company; (vii) analyzed the market value of the
Series A Convertible Preferred Stock based on its conversion rate,
dividend rate and other terms; (viii) reviewed the valuations of
publicly traded companies in the same or similar industry; and (ix)
made such other studies and inquiries as Cohig deemed relevant.
Limiting Conditions:
a) Neither Cohig nor its principals have any present or intended
interest in the outcome of this particular transaction.
However, Cohig may maintain a market in the common stock of
Good Times Restaurants Inc., and Cohig may own shares of
common stock and/or stock purchase warrants of the Company.
Cohig's fees for this fairness opinion were based strictly on
professional time charges, and were in no way contingent upon
any derived valuation figures.
b) Cohig does not purport to be a guarantor of value. Valuation
is an imprecise science, with value being a question of
opinion, and reasonable people can differ in their opinion of
value. Cohig does certify that the fairness opinion was
conducted and the conclusions arrived at independently using
conceptually sound and commonly accepted methods of valuation.
c) In preparing the fairness opinion, Cohig used available
information provided by the Company. We did not make
independent examinations of any financial statements,
projections or other information prepared by the Company which
were relied upon and, accordingly, we make no representations
or warranties nor express any opinion regarding the accuracy
or reasonableness of such. With respect to the financial
projections we have reviewed, we have relied upon assurances
that such projections have been reasonably prepared on a basis
reflecting the best, currently available estimates and
judgments of Good Times Restaurants Inc.
d) Publicly available information utilized in preparing the
opinion (e.g., economic, industry, financial) was obtained
from sources deemed to be reliable. It is beyond the scope of
the opinion to verify the accuracy of such information, and we
make no representation as to its accuracy.
Based on and subject to the foregoing considerations, it is
our opinion, as investment bankers, that the Series A Convertible
Preferred Stock Purchase Agreement, from a financial point of view,
is fair to the shareholders of Good Times Restaurants Inc.
Very truly yours,
/s/ Cohig & Associates, Inc.
COHIG & ASSOCIATES, INC.
