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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X ] 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):
[ ] $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:
_____________________________________________
[X] 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 September 12, 1996
A special meeting of stockholders of Good Times Restaurants Inc.,
a Nevada corporation, will be held at the Doubletree Hotel, 8773
Yates Drive, Westminster, Colorado, on September 12, 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 25, 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 SEPTEMBER 12, 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 the Doubletree
Hotel, 8773 Yates Drive, Westminster, Colorado on September 12,
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 professional fee
of $4,500 plus out-of-pocket expenses (not to exceed $2,250) for
its services, with fifty percent of the professional 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 DATED AS OF MAY
31, 1996, AS AMENDED, INCLUDING SCHEDULES THERETO, 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 25, 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 183,270(1)(2) 2.9%
of Oklahoma City
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. Mr. Massey has indicated that he will
resign as a Director in order to facilitate the election of
the Directors by the holders of Series A Convertible
Preferred Stock as discussed in this Proxy Statement.
(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
A 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 (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. Also shown in the table
is the percentage of all outstanding Common Stock that full
conversion during each period would represent assuming no further
issuances of Common Stock by the Company other than pursuant to
such conversions. If the holders of Series A Preferred Stock
convert all of such shares at the earliest permitted times, they
will hold an aggregate of 25.3% of all outstanding Common Stock
assuming no further issuances of Common Stock by the Company
other than pursuant to such conversions.
Percentage of
Maximum Outstanding
Aggregate Common Stock
Number of Represented
Conversion Preferred Conversion by Full
Period Shares Factor Conversion
October 1, 1997 - 500,000 .46875 14.5%
October 31, 1997
November 1, 1997 - 500,000(1) .56875 12.2%
December 31, 1997
January 1, 1998 - 250,000 .46875 7.8%(2)
January 31, 1998 500,000(1) .56875 11.4%
February 1, 1998 - 750,000(1) .56875 17.3%
March 31, 1998
April 1, 1998 - 250,000 .46875 7.8%(2)
April 30, 1998 750,000(1) .56875 16.2%
May 1, 1998 - 1,000,000(1) .56875 21.8%
April 30, 1999
May 1, 1999 1,000,000(1) the greater of (i) the
and thereafter Dividend Conversion Rate
at the time of conversion
and (ii) .46875
(1) To the extent not previously converted.
(2) Assumes no prior conversions.
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 $4,000 for its services in
rendering the fairness opinion. Such fee was based on the time
spent by Cohig and payment of the fee was 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) reviewed 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
B.
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 September 12, 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.
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
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 autho-
rized officer. If shares are held
in the name of two or more persons,
all should sign.)
EXHIBIT 3.1
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
Conversion Period Number of Shares Conversion Price
October 1, 1997 - 500,000 $0.46875
October 31, 1997
November 1, 1997 - 500,000* $0.56875
December 31, 1997
January 1, 1998 - 250,000 $0.46875
January 31, 1998 500,000* $0.56875
February 1, 1998 - 750,000* $0.56875
March 31, 1998
April 1, 1998 - 250,000 $0.46875
April 30, 1998 750,000* $0.56875
May 1, 1998 -
April 30, 1999 1,000,000* $0.56875
May 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
* To the extent not previously converted.
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 October 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.
EXHIBIT 99
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.
