GOOD TIMES RESTAURANTS INC.
8620 Wolff Court, Suite 330
Westminster, Colorado 80030
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held February 12, 1998
To the shareholders of Good Times Restaurants Inc.:
An Annual Meeting of the shareholders of Good Times Restaurants Inc. (the
"Company") will be held at the Doubletree Hotel, 8773 Yates Drive, Westminster,
Colorado 80030, at 3:00 P.M. (MST) on Thursday, February 12, 1998, or at any
adjournment or postponement thereof, to (i) vote upon the election of directors,
(ii) consider and act upon a one for five reverse split of the Company's common
stock and (iii) transact such other business as may properly come before the
meeting.
Details relating to these matters are set forth in the attached Proxy
Statement. All shareholders of record as of the close of business on December
22, 1997 will be entitled to notice of, and to vote at, such meeting or at
any adjournment or postponement thereof.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1997 IS INCLUDED WITH THIS NOTICE AND THE ATTACHED PROXY
STATEMENT.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY. A BUSINESS REPLY ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
THE DELIVERY OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING.
YOU ARE HEREBY ADVISED THAT THE COMPANY'S COMMON STOCK MAY BE DELISTED FROM THE
NASDAQ SMALLCAP MARKET SYSTEM IF AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES
ARE NOT REPRESENTED AT THE MEETING IN PERSON OR BY PROXY OR IF THE REVERSE SPLIT
IS NOT APPROVED.
Sincerely,
Susan Knutson
Secretary
Denver, Colorado
December 29, 1997
GOOD TIMES RESTAURANTS INC.
8620 Wolff Court, Suite 330
Westminster, Colorado 80030
(303) 427-4221
========================================
PROXY STATEMENT
========================================
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 12, 1998
============================================================================
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Good Times Restaurants Inc., a Nevada
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
of the Company ("Annual Meeting") to be held at 3:00 P.M. (MST) on February
12, 1998 at the Doubletree Hotel, 8773 Yates Drive, Westminster, Colorado
80030, or at any adjournment or postponement thereof. The Company anticipates
that this Proxy Statement and accompanying form of Proxy will be first mailed
or given to all shareholders of the Company on or about December 29, 1997.
The shares represented by all proxies that are properly executed and submitted
will be voted at the meeting in accordance with the instructions indicated
thereon. Unless otherwise directed, votes will be cast FOR the proposals
presented. Provided that a majority of all outstanding shares of common stock
of the Company are represented in person or by proxy at the Annual Meeting (a
quorum), the vote of a majority of the shares represented at the meeting in
person or by proxy will be required to enact any or all of the proposals.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in
person, at the Annual Meeting that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith and all costs of
soliciting proxies will be paid by the Company. In addition to the
solicitation by mail, proxies may be solicited by Officers and regular
employees of the Company by telephone, telegraph or personal interview. Such
persons will receive no compensation for their services other than their
regular salaries. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of the shares held on the record date, and the
Company may reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
VOTING SECURITIES
The close of business on December 22, 1997, has been fixed by the Board
of Directors of the Company as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. At such
date, there were outstanding 6,434,849 shares of the Company's $.001 par value
common stock (hereinafter referred to as the "common stock"), each of which
entitles the holder thereof to one vote per share on each matter which may
come before the meeting. Additionally, there are outstanding 1,000,000 shares
of $.01 par value Series A Convertible Preferred Stock, hereinafter referred
to as the "preferred stock." The shares of preferred stock vote together with
the common stock as a single class except upon amendments of rights and
preferences for the preferred stock and certain matters relating to the Board
of Directors. Cumulative voting is not permitted. The Company has no other
class of voting securities outstanding.
The Company's common stock may be delisted from the NASDAQ SmallCap
Market System if at least a majority of all outstanding shares are not
represented at the Annual Meeting in person or by proxy or if the proposal to
reverse split the Company's common stock is not approved (see "Proposal to
Reverse Split the Company's Outstanding Shares of Common Stock").
Each share of preferred stock is entitled to the number of votes equal to
the number of shares of common stock into which such share of preferred stock
is convertible at the time of the Annual Meeting. The holders of preferred
stock have the right at any time during each conversion period shown on the
table below to convert up to the number of shares of 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 preferred stock to be
converted divided by the applicable conversion price (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. As of the date of this Proxy Statement, no
shares of preferred stock have been converted to common stock. Irrespective
of whether any shares of preferred stock have been converted prior to the
Annual Meeting, the holders of the preferred stock will have the right at the
Annual Meeting to vote 2,133,333 shares of common stock representing 24.9% of
all votes entitled to be cast at the Annual Meeting.
<TABLE>
<CAPTION>
Maximum Percentage of
Number Outstanding
Number of of Common Common Stock
Convertible Shares Represented
Conversion Preferred Conversion Issuable on by Full
Period Shares Price Conversion(2) Conversion(2)
_________ ____________ __________ ____________ ______________
<S> <C> <C> <C> <C>
October 1, 1997 - 1,000,000 $.46875 2,133,333 24.9%
April 30, 1998
May 1, 1998 - 1,000,000 (1) $.56875 1,758,242 21.46%
April 30, 1999
May 1, 1999 1,000,000 (1) the greater
and thereafter of (i) the
Dividend
Conversion
Rate (3)
at the time
of conversion
and (ii)
.46875
</TABLE>
(1) To the extent not previously converted.
(2) Assumes no prior conversions and no additional issuances of common
stock.
(3) Dividends accrue with respect to the preferred stock at the rate of
$.08 per share per annum. The dividends are payable at the option of
the holder of preferred stock in cash or in shares of common stock.
The "Dividend Conversion Rate" is 75% of the average of the public
market closing prices of the common stock for the fourteen trading
days immediately prior to the dividend payment date but not less than
$.46875.
Shareholders of common stock are entitled to one vote per share of common
stock owned. Shareholders of preferred stock are entitled to 2,133,333 votes
which are equal to the number of shares of common stock into which their
preferred stock is convertible at the time of the Annual Meeting. A majority
of all votes entitled to be cast, represented in person or by proxy,
constitutes a quorum at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 22, 1997, the stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's common and preferred stock ("Principal
Shareholders"), all Directors and Officers individually and all Directors and
Officers of the Company as a group. There are no contractual arrangements or
pledges of the Company's securities, known to the Company, which may at a
subsequent date result in a change of control of the Company.
<TABLE>
<CAPTION>
Number of
Number of Series A
Common Preferred
Shares Shares
Name, Address and Beneficially % of Beneficially %
Position Held Owned Class** Owned of Class
________________ ___________ ________ ___________ _________
<S> <C> <C> <C> <C>
The Bailey Company, LP 2,218,666 (1) 25.89% 1,000,000 (2) 100%
601 Corporate Circle
Golden, CO 80401
The Erie Co. Investment 2,434,666 (1) 28.42% 1,000,000 (2) 100%
Co.
601 Corporate Circle
Golden, CO 80401
David E. Bailey 28,500 (3) * - 0 - *
601 Corporate Circle
Golden, CO 80401
Director
Geoffrey R. Bailey 103,250 (3) * - 0 - *
601 Corporate Circle
Golden, CO 80401
Chairman, Director
Dan W. James, II 227,650 (3),(4) 2.65% - 0 - *
8620 Wolff Court, Suite 330
Westminster, CO 80030
Director
Boyd E. Hoback 186,248 (3),(5) 2.1% - 0 - *
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer and Director
Richard J. Stark 10,000 (3) * - 0 - *
6075 South Quebec
Suite 103
Englewood, CO 80111
Director
Thomas P. McCarty 10,500 (3) * - 0 - *
8779 Johnson Street
Arvada, CO 80005
Director
Alan A. Teran 10,500 (3) * - 0 - *
2126 Knollwood Drive
Boulder, CO 80302
Director
Robert D. Turrill 63,895 (6) * - 0 - *
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer
Scott G. LeFever 54,210 (6) * - 0 - *
8620 Wolff Court, Suite 330
Westminster, CO 80030
Officer
All officers and directors
as a group (9 persons) 5,348,085 60.26%
</TABLE>
_______________________
* Less than one percent
** Rule 13-d under the Securities Exchange Act of 1934, involving the
determination of beneficial owners of securities, includes as
beneficial owners of securities, among others, any person who directly
or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares voting power and/or investment
power with respect to such securities; and, any person who has the
right to acquire beneficial ownership of such security within sixty
days through means, including, but not limited to, the exercise of any
option, warrant, right or conversion of a security. Any securities
not outstanding that are subject to such options, warrants, rights or
conversion privileges shall be deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class
owned by such person, but shall not be deemed to be outstanding for the
purpose of computing the percentage of the class by any other person,
except that the above numbers for percentage of class assume full
conversion of the 1,000,000 shares of outstanding preferred stock into
an aggregate of 2,133,333 shares of common stock for total outstanding
common shares of 8,568,182.
All shares held by the Officers, Directors and Principal Shareholders
listed above are "restricted securities" and as such are subject to
limitations on resale. The shares may be sold pursuant to Rule 144
under certain circumstances.
(1) Includes 2,133,333 shares of common stock which are issuable upon
conversion of the preferred stock on the date of the Annual Meeting,
plus 85,333 shares of common stock owned by The Bailey Company, L.P.,
which is 77% owned by the Erie County Investment Co. which should be
deemed the beneficial owner.
(2) On October 1, 1996, January 1, 1997 and April 1, 1997, the Company
issued an aggregate of 1,000,000 shares of its Series A Convertible
Preferred Stock to The Bailey Company, L.P., which is 77% owned by The
Erie County Investment Co. which should be deemed the beneficial owner.
(3) Includes 10,000 shares of presently exercisable non-statutory stock
options issued October 1, 1997 pursuant to the approval of the
Company's Board of Directors.
(4) Includes 7,762 shares owned by the son of Mr. James and an aggregate of
6,966 shares owned by the Kent B. Hayes Trust for the benefit of Mr.
James.
(5) Includes an aggregate of 150,000 shares of presently exercisable
incentive stock options.
(6) Includes an aggregate of 50,000 shares of presently exercisable
options.
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Positions Date Began With Company
____ ____ __________ ______________________
<S> <C> <C> <C>
Geoffrey R. Bailey 46 Chairman of the Board October 1996
Dan W. James, II 50 Director August 1989
Boyd E. Hoback 42 President, Chief Executive September 1987
Officer and Director
Robert D. Turrill 49 Vice President of October 1990
Marketing
Scott G. LeFever 39 Vice President of September 1987
Operations
Richard J. Stark 57 Director July 1990
Thomas P. McCarty 44 Director April 1994
Alan A. Teran 52 Director April 1994
David E. Bailey 42 Director October 1996
</TABLE>
___________________
All seven directors of the Company are elected annually unless no annual
shareholders' meeting is held, in which event the directors serve until their
successors have been elected and qualified. At this Annual Meeting, the
Company's nominees for the seven directorships are each of the foregoing named
persons who is currently serving as a director of the Company. The proxies
will be voted for the Company's director nominees unless a contrary
specification is made in the proxy. All nominees have indicated their
willingness to serve as directors of the Company. However, if any nominee is
unable or should decline to serve as a director, it is the intention of the
persons named in the proxy to vote for such other person as they in their
discretion shall determine.
Officers serve at the discretion of the Board of Directors. The Company
does not currently have a nominating committee of the Board of Directors or
committees performing similar functions. The Company has a compensation
committee and an audit committee of the Board of Directors, both of which
consist of directors Stark, Teran, McCarty and Geoff Bailey and the audit
committee also includes Boyd E. Hoback, the President, Chief Executive Officer
and a director of the Company. A majority of the directors in both committees
are independent directors. Members of the compensation and audit committees
each receive $100 per meeting attended, however where both compensation and
audit committee meetings are held at the same gathering only $100 is paid to
each attendee with respect to such gathering.
There are no family relationships among the directors or executive
officers except for Geoff Bailey and David Bailey who are brothers and
principals of The Bailey Company, a franchisee and joint venture partner of
the Company and the owner of all outstanding shares of preferred stock. There
are no arrangements or understandings between any director and any other
person pursuant to which that director was elected except for David Bailey and
Geoff Bailey who were elected pursuant to the Series A Convertible Preferred
Stock Purchase and Sale Agreement (see "Bailey Preferred Stock Investment").
Five meetings of the Board of Directors and two meetings of the
compensation committee of the Company (including regularly scheduled and
special meetings) were held during the last full fiscal year. No member of
the Board of Directors attended fewer than 75% of the aggregate of the total
number of meetings of the Board of Directors. Each non-employee director
receives $300 for each Board of Directors meeting attended.
This paragraph sets forth certain background information about the
Company and its affiliates, which information is necessary to fully understand
the following executive officer and director descriptions. The Company was
organized under Nevada law in 1987 and is now the parent company for Good
Times Drive Thru Inc. ("Drive Thru"), a wholly owned subsidiary which is
engaged in the business of developing, owning, operating and franchising
restaurants under the name Good Times Drive Thru BurgersSM. Round the Corner
Restaurants, Inc. ("RTC") was established in 1968 and developed a chain of
sit-down gourmet hamburger restaurants. In 1986, RTC, then a closely held
corporation, formed Drive Thru to develop the Good Times' concept and business
and in 1988 RTC distributed Drive Thru stock to its shareholders after which
Drive Thru operated as an independent company. Between 1990 and 1993, the
Company, Drive Thru and RTC entered into a series of transactions (including
the merger of the Company with Drive Thru and RTC) resulting in Drive Thru and
RTC becoming wholly owned subsidiaries of the Company. On September 30, 1995,
the Company sold 100% of the stock of RTC. As a result of underperforming
restaurants and other financial difficulties, RTC subsequently filed for
Chapter 11 bankruptcy protection in October 1996 (see "Round the Corner").
Geoffrey R. Bailey, Chairman. Mr. Bailey is a director and executive
vice president of the Erie County Investment Company ("Erie"). He is
responsible for the operations and development of 64 Arby's restaurants owned
by The Bailey Company, a 77% owned subsidiary of Erie. Mr. Bailey is a
graduate of the University of Denver with a Bachelor's Degree in Business
Administration. He joined Erie in 1979 and became Chairman of the Board of
the Company in October 1996.
Dan W. James, II, Director. Mr. James became a Director of the Company
on December 18, 1990 and served as Chairman from December 16, 1992 to October
1, 1996. He is also a Director of Drive Thru. Mr. James is one of the co-
founders of RTC and had served as a Director of RTC from 1968 until 1992. Mr.
James devotes the majority of his time to the management of private
investments.
Boyd E. Hoback, President, CEO and Director. Mr. Hoback had served as
Vice President, Chief Operating Officer and Treasurer of the Company since
December 18, 1990, and as a Director since February 1992. Mr. Hoback held
similar positions with Drive Thru from its inception in December 1986. On
December 16, 1992, Mr. Hoback was elected President and Chief Executive
Officer of the Company. He is also Chairman of the Board of Directors,
President and Chief Executive Officer of Drive Thru. Prior to assuming his
positions with Drive Thru, Mr. Hoback served as Executive Vice President of
Finance and Development of RTC since 1983.
Robert D. Turrill, V.P. of Marketing. Mr. Turrill has been involved in
all phases of operations with direct responsibility for menu development,
purchasing and cost control, research and multi-media advertising for RTC.
Subsequent to the merger of the Company and RTC in 1992, Mr. Turrill devoted a
portion of his time to the development of a marketing program for Drive Thru.
As Drive Thru continued to expand, Mr. Turrill's time devoted to Drive Thru
increased significantly. Therefore, Mr. Turrill was transferred from RTC to
the newly created Company position of Vice President of Marketing, effective
October 1, 1994. Mr. Turrill is also a principal in Great Burgers, Inc., the
franchisee of the RTC food court in Dallas, Texas.
Scott G. LeFever, V.P. of Operations. Mr. LeFever has been involved in
all phases of operations with direct responsibility for unit service
performance, personnel and cost controls. Mr. LeFever was Director of
Operations for RTC from 1983 to 1987. He then became Director of Operations
for Drive Thru from 1987 to 1992 during which time he helped develop the Drive
Thru operating systems. Mr. LeFever was reassigned to the position of Drive
Thru's Vice President of Operations in August 1995 and devotes his time to the
operational management of Drive Thru. Mr. LeFever continues as a Director of
RTC and a principal in Great Burgers, Inc., the franchisee of the RTC food
court in Dallas, Texas.
Richard J. Stark, Director. Mr. Stark is President of Boulder Asset
Management, a firm advising several large individual investors. Prior to
forming Boulder Asset Management in 1984, Mr. Stark served as Chief Investment
Officer of InterFirst Investment Management in Dallas. Previously he was
responsible for all individual money management at Standard &
Poor's/Intercapital in New York.
Thomas P. McCarty, Director. Mr. McCarty has spent the last 26 years in
the food service industry including eleven years owning and operating his own
group of restaurants, working for a major food service distributor, working
for and eventually owning a real estate brokerage company which specialized in
restaurant real estate and consulting, and he was recently the vice president
for development of Rock Bottom Restaurants, Inc. Mr. McCarty has two degrees
from the University of Colorado including a B.S. in Accounting and a B.S. in
Journalism.
Alan A. Teran, Director. Mr. Teran has spent the past 26 years working
in the restaurant industry, beginning in 1969 as restaurant manager at Cork &
Cleaver. In 1971 Mr. Teran was a regional manager for Cork & Cleaver, in 1973
was promoted to Vice President of Operations and in 1976 became President of
the company. In October 1981, Mr. Teran acquired the Cork & Cleaver in
Boulder, Colorado. He went on to become one of the first franchisees of Le
Peep Restaurants in 1983. In addition to being Director of the Company, Mr.
Teran is also a Director of Boulder Valley Bank and Trust, Quantum Restaurant
Group, operator of Morton Steak Houses, Bertolini's, and Micks and Peasants
restaurant concepts. Mr. Teran graduated from the University of Akron in 1968
with a degree in business.
David E. Bailey, Director. Mr. Bailey is a director and President of
the Erie County Investment Company ("Erie") (of which The Bailey Company is a
77% owned subsidiary). He is also the president of InverWest Development
Corporation, a subsidiary of Erie. Mr. Bailey is responsible for managing the
day to day operations of Erie and its subsidiaries with primary focus on
Erie's real estate and energy businesses. He received his Bachelor of Finance
Degree from the University of Colorado and his Masters Degree in Business
Administration in Construction Management and Real Estate from the University
of Denver in 1993. Mr. Bailey joined Erie in 1980 and became a Director on
the Board of the Company in October 1996.
Compliance with Section 16(a) of the Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent shareholders
are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended September 30, 1997, all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with, except with respect to Robert D. Turrill and Scott
G. LeFever who inadvertently failed to timely file Forms 4 with respect to the
cancellation and reissuance of their incentive stock options and 401(K) stock
grants and David E. Bailey had a late filing with respect to various small
purchases of the Company's common stock.
EXECUTIVE COMPENSATION
Cash Compensation
The following table shows all cash compensation paid by the Company or
any of its subsidiaries, as well as other compensation paid or accrued during
the fiscal years indicated, to the Chief Executive Officer of the Company as
of the end of the Company's last fiscal year (the "Named Executive Officer").
No other executive officers of the Company received cash compensation for such
period in all capacities in which the executive officer earned in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
_______________________________________________________________
Name &
Principal Fiscal Other Annual
Position Year Salary Bonus(2) Compensation(3) Options(4) Other(5)
_______ _____ _______ ________ _____________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Boyd E.
Hoback, 1997 $110,000 -0- $10,000 150,000 4,133
President
& CEO(1) 1996 $110,000 -0- $10,000 -0- 3,364
1995 $110,000 -0- $10,000 -0- -0-
</TABLE>
______________________________
(1) Elected to these positions on December 16, 1992. During the last
three fiscal years he served continuously as an executive officer of
Drive Thru.
(2) The Board of Directors approved a bonus plan in fiscal 1995 for Mr.
Hoback that was contingent upon certain performance criteria. The
plan provided for a bonus of up to 50% of salary for Mr. Hoback. Due
to the Company's losses in fiscal 1995, 1996 and 1997, no bonuses were
awarded to Mr. Hoback.
(3) Consists of an officers' expense allowance.
(4) Consists of cancelled and reissued incentive stock options (see Stock
Options).
(5) Consists of 401(k) stock grants to match 50% employee contribution.
Stock Options
On April 23, 1992, the Board of Directors of the Company adopted an
incentive stock option plan (the "1992 ISO") covering 300,000 shares of the
Company's Common Stock and a non-statutory stock option plan (the "1992 NSO")
covering 150,000 shares of the Company's Common Stock less outstanding options
for the purchase of 83,750 shares of such stock.
On May 18, 1993 the Board of Directors of the Company voted to increase
the number of shares authorized in the 1992 ISO from 300,000 to 550,000 shares
of the Company's Common Stock and on January 20, 1994, voted to increase the
number of shares authorized in the 1992 NSO from 150,000 to 300,000.
Additional options were granted to key management personnel and to other
management personnel who previously had not been participants in the 1992 ISO
or in the 1992 NSO. The increase in the number of shares authorized under the
stock option plans and the granting of the additional options reflected the
changing responsibilities of executive management as a result of the
restructuring of the Company approved in December 1992, the need of the
Company to limit cash compensation to key employees and the desire of the
Board of Directors to retain and motivate key employees by providing quasi-
equity participation in the Company. At the 1993 annual meeting held in March
1994, the shareholders approved an increase in the number of shares authorized
under the 1992 ISO to 750,000 shares. In April 1994, the Board of Directors
repriced one-half of the incentive stock options granted to employees to $1.75
per share, initiated a new three year vesting period for such options and
extended the expiration date of the repriced options to April 1999.
On November 22, 1996, the Board of Directors approved the cancellation of
the Company's incentive stock options outstanding at September 30, 1996. The
Company issued new incentive stock options to its employees for the purchase
of 342,000 shares of common stock. All options are subject to vesting
schedules, are exercisable at $.50 per share and expire on October 1, 2006.
Effective as of October 1, 1997 and pursuant to the recommendations of
the Company's compensation committee, the Company issued additional incentive
stock options to its employees for the purchase of 178,400 shares of Common
Stock. All such incentive stock options are subject to vesting schedules, are
exercisable at $.50 per share and expire on October 1, 2007. Also on October
1, 1997 the Company issued non-statutory stock options to each of its
directors for the purchase of 10,000 shares of Common Stock. The non-
statutory stock options are fully vested, exercisable at $.50 per share and
expire on October 1, 2002.
All options are non-transferable other than by will or by the laws of
descent and distribution and may be exercised during the optionee's lifetime
only by the optionee. Neither the options nor the shares of Common Stock
issuable upon exercise thereof have been registered for public sale under the
Securities Act of 1933, although the Company reserves the right to do so at
any time. Unless registered, the shares of Common Stock issued upon option
exercise will be restricted securities as defined in Rule 144 under the
Securities Act.
The following table shows the incentive stock option grants (there were
no non-statutory options granted) during the fiscal year ended September 30,
1997 to the Named Executive Officer.
INDIVIDUAL OPTION GRANTS IN
FISCAL YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
% of Total
No. of Shares Options Granted
Underlying to Employees in Exercise Expiration
Name Options Granted Fiscal Year Price Date
_____ ______________ _____________ _________ _________
<S> <C> <C> <C> <C>
Boyd E. Hoback 150,000 (1) 43.9% $.50 10/01/2006
</TABLE>
(1) All options are fully vested. Subsequent to September 30, 1997 Mr.
Hoback was granted incentive and non-statutory stock options to
purchase 44,000 and 10,000 shares respectively of the Company's
common stock as part of the option grants on October 1, 1997
described above.
Options Exercises and Values
The Named Executive Officer did not exercise any stock options during the
last fiscal year of the Company. The fiscal year end value of unexercised
options follows:
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Number Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable
_______ ______________ ________ ______________ _______________
<S> <C> <C> <C> <C>
Boyd E.
Hoback N/A N/A 185,000/0 None (1)
</TABLE>
______________________
(1) The average trading market value of the Common Stock over the past 30
days was approximately $.39 per share.
Report of Board of Directors Regarding Repricing of Options
Over the past several years, the trading price of the Company's Common
Stock has declined significantly in spite of successful efforts by the
Company's directors and key employees to reduce corporate overhead, promote
and improve the Good Times Drive Thru BurgersSM concept and bring the Company
closer to profitability. Accordingly, the previously granted options, whose
exercise prices initially exceeded the trading prices of the Company's shares,
no longer provided the incentives to directors and employees that were
intended by the issuance thereof. For this reason, the Board of Directors
accepted management's recommendation that the outstanding options be repriced
as noted above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Drive Thru and RTC historically have been under-capitalized and have
found it difficult to obtain required financing without the assistance of
certain of their officers and directors, primarily in the form of guarantees
of payment of restaurant leases by Mr. James and a former director of the
Company. These principally involved obligations of RTC. Neither Mr. James
nor the former director receive any compensation in connection with these
guarantees. While none of the related party transactions may be deemed to
have been negotiated at arms' length, all such transactions were approved by
the independent members of the RTC Board of Directors and, in the opinion of
Company management, all such transactions were fair and are upon terms which
were at least as favorable as could have been obtained from independent third
parties. To the extent that Mr. James and the former director continue to be
guarantors of such obligations, the Company has agreed to indemnify each of
them from any losses that they may incur resulting from such guarantees.
Mr. Hoback entered into an employment agreement with the Company in May,
1996 that provides for his employment as president and chief executive officer
for three years from the date of the agreement at a minimum salary of $110,000
per year, terminable by the Company only for cause.
In February 1996, the Company repurchased 412,500 shares in the aggregate
of its common stock from Messrs. Hoback and Turrill in consideration for the
cancellation of their indebtedness to the corporation, plus accrued interest
thereon, resulting from their initial purchases of such stock pursuant to an
executive stock purchase plan. Additionally, in February 1996, the Company
repurchased 212,500 shares of its common stock from Thomas Gordon in
connection with the termination of his employment as Executive Vice President
and Chief Financial Officer of the Company.
Bailey Preferred Stock Investment
On May 31, 1996, the Company entered into a Series A Convertible
Preferred Stock Purchase Agreement with The Bailey Company ("TBC") for the
purchase by TBC of one million shares of Series A Convertible Preferred Stock.
The aggregate purchase price for such shares is $1 million. The first
installment sale took place on October 1, 1996, for 500,000 shares in
consideration of $250,000 cash and the cancellation of a promissory note of
the Company payable to TBC in the amount of $250,000 arising out of a loan in
that amount made by TBC to the Company on March 1, 1996. The second
installment of 250,000 shares occurred on January 1, 1997, in consideration of
$250,000 cash and the third installment of 250,000 shares occurred on April 1,
1997, in consideration of $250,000 cash. The Company intends to use the funds
received for the development of additional Good Times restaurants.
The Series A Convertible Preferred Stock was authorized by the
stockholders of the Company at a special meeting held September 12, 1996. At
such meeting, the stockholders approved an amendment to the Company's Articles
of Incorporation authorizing five million shares of preferred stock, $.01 par
value. One million of such shares are designated as Series A Convertible
Preferred Stock with rights, designations, powers, preferences and
restrictions set forth in the amendment. The remaining four million shares
may be issued from time to time in one or more series, as determined by the
Board of Directors, but the Board of Directors may not authorize the issuance
of additional shares of preferred stock without the concurrence of TBC so long
as TBC holds two-thirds of the Series A Convertible Preferred Stock and/or the
Common Stock acquired by the conversion thereof.
The shares of Series A Convertible Preferred Stock are entitled to a
dividend of $.08 per share per annum, payable at the option of the holder in
cash or in Common Stock, valued for such purpose at the greater of 75 percent
of the average market value of the Common Stock for the fourteen trading days
preceding the dividend payment date or $.46875. The one million shares of
Series A Convertible Preferred Stock are convertible into a maximum of
2,133,333 shares of Common Stock in staggered intervals beginning October 1,
1997. The shares of Series A Convertible Preferred Stock are entitled to vote
together with the Common Stock to the extent that such shares are convertible
into Common Stock at the time of the vote. The Company may redeem the
outstanding Series A Preferred Stock upon at least thirty days written notice
at any time after October 1, 1998 by paying to the holders the original
purchase price plus any accrued but unpaid dividends. The holders of the
Series A Convertible Preferred Stock also have the right to elect two
directors to the Board of Directors, one of which will have the right to serve
as Chairman of the Board. David E. Bailey and Geoffrey R. Bailey are the
current directors elected by TBC to the Board of Directors, and Geoffrey R.
Bailey serves as Chairman of the Board.
Effective October 31, 1997, the Company and TBC increased the maximum
number of shares of Series A Convertible Preferred Stock which are convertible
prior to April 30, 1998 and extended to April 30, 1998 the period during which
the shares of Series A Convertible Preferred Stock are convertible at the
lower $.46875 conversion price as set forth on page 2 of this Proxy Statement.
Prior to such amendments (i) a maximum of 500,000 shares of Series A
Convertible Preferred Stock could be converted between October 1, 1997 and
December 31, 1997 and only an additional 250,000 shares could be converted
between January 1, 1998 and March 31, 1998 and (ii) the $.46875 conversion
price was available with respect to the first 500,000 shares of Series A
Convertible Preferred Stock only between October 1 and October 31, 1997 and
with respect to the next 250,000 shares of Series A Convertible Preferred
Stock only between January 1 and January 31, 1998. In consideration of such
amendments, TBC has agreed to review and consider assisting the Company with
any proposed financing prior to April 30, 1998. TBC is not, however, obligated
to assist the Company in connection with any financing.
Round The Corner
On September 30, 1995, the Company completed the sale of Round The Corner
Restaurants, Inc. ("RTC") to Hot Concepts Management Group, L.L.C. in
consideration for $100,000 in cash, a note in the amount of $291,394, and the
assumption of all of RTC's liabilities. The sale of RTC by the Company
resulted in a deferred gain of $66,000. The Company was notified in August,
1996 of financial difficulties at RTC and of its Chapter 11 bankruptcy filing
in October, 1996. In addition to the write-off of the note receivable, the
Company recorded a reserve of $333,000 for potential losses associated with
its guarantee of two restaurant leases and a note payable. The Company is
RTC's only secured creditor and holds a lien on the assets of a profitable RTC
restaurant.
In August 1997, the Company entered into a settlement agreement with RTC
to settle all claims and differences between them. The settlement agreement
provides for the payment to the Company from RTC of $300,000 and for the
assignment to the Company of the two RTC restaurant leases which are
guaranteed by the Company. The Company has the right to operate the
restaurants without charge under the "RTC" name. The Company is also to
receive a substantial amount of restaurant equipment used at such restaurants
and other RTC restaurants which are now closed. A motion was filed with the
Bankruptcy Court to approve the settlement agreement between RTC and the
Company. The motion was approved by the Bankruptcy Court on December 19, 1997
and the first of two installments of the $300,000 should be paid to the
Company by the end of December.
PROPOSAL TO REVERSE SPLIT THE COMPANY'S OUTSTANDING SHARES OF COMMON STOCK
The Board of Directors of the Company believes it advisable and in the
best interests of the Company to reverse split the Company's issued and
outstanding shares of common stock on the basis of one share for each five
shares of issued and outstanding or held as treasury stock (the "Reverse
Split"). The purpose of the Reverse Split is to meet the new Nasdaq
requirement of maintaining a minimum bid price of $1.00 per share in order to
continue as a trading company on The Nasdaq SmallCap Market System. There
can be no assurance however that after the Reverse Split the minimum bid price
of the Company's common stock will remain above the $1.00 price. IF ON OR
AFTER FEBRUARY 23, 1998 THE MINIMUM BID PRICE OF THE COMPANY'S COMMON STOCK IS
UNDER $1.00 FOR THIRTY CONSECUTIVE BUSINESS DAYS, THE COMPANY'S COMMON STOCK
MAY BE DELISTED FROM THE NASDAQ SMALLCAP MARKET SYSTEM.
Because the Board of Directors of the Company believe that any delisting
of the Company's common stock from The Nasdaq SmallCap Market System will
likely result in a decrease in the per share trading value of such common
stock, the Board of Directors has unanimously approved the Reverse Split and
recommends that the stockholders vote FOR the Reverse Split. If the Reverse
Split is approved by the shareholders of the Company at the Annual Meeting,
the Reverse Split will be effective on February 13, 1998 ("Effective Date").
In connection with the Reverse Split, no fractional shares shall be
issued and the Company shall round up each fractional share to one whole
share. All outstanding securities convertible into or exercisable or
exchangeable for shares of the Company's common stock by stock purchase
warrant, stock option, preferred stock or otherwise, shall be amended as of
the Effective Date to reduce the number of shares of the Company's common
stock issuable upon exercise or exchange thereof to one-fifth of such shares
prior to the Effective Date and to increase the exercise or conversion price
per share by five times the exercise price prior to the Effective Date. The
Reverse Split will not have any effect upon the par value of the Company's
common stock or upon the number of shares of the Company's common stock
authorized in its Articles of Incorporation.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Hein + Associates as the independent
certified public accountants to audit the books, records and accounts of the
Company for its 1998 fiscal year. Hein + Associates has served as the
Company's independent accountants since 1985 and it is, therefore, familiar
with the business and financial procedures with the Company. To the knowledge
of management, neither such firm nor any of its members has any direct or
material indirect financial interest in the Company nor any connection with
the Company in any capacity otherwise than as independent accountants.
A representative of Hein + Associates is expected to be present at the
Annual Meeting to answer proper questions and will be afforded an opportunity
to make a statement regarding the financial statements.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company on or before October
30, 1998 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
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If any other matters not mentioned in this Proxy
Statement are properly brought before the Annual 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
December _______, 1997
ANNUAL MEETING OF SHAREHOLDERS
GOOD TIMES RESTAURANTS INC.
PROXY
The undersigned shareholder 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 annual meeting of the shareholders of the corporation to be held on
February 12, 1998 at 3:00 P.M. (MST), 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. Election of Directors: Management has nominated the following seven
persons to stand for election. You may note "for" or you may withhold your
vote from any of those persons nominated and vote "for" a person nominated by
others or write in your own nominee. To date no one has been nominated by
anyone other than management.
a. Geoffrey R. Bailey For _____
Withhold _____
b. Dan W. James, II For _____
Withhold _____
c. Boyd E. Hoback For _____
Withhold _____
d. Richard J. Stark For _____
Withhold _____
e. Thomas P. McCarty For _____
Withhold _____
f. Alan A. Teran For _____
Withhold _____
g. David E. Bailey For _____
Withhold _____
h. _________________ For _____
Other Withhold _____
2. Reverse Stock Split:
RESOLVED, that the one-for-five reverse split of the Company's common stock is
hereby approved, ratified and confirmed in all respects.
For _______________ Against _______________ Abstained _____________
Failure to check any of these boxes for each proposal will give Boyd E.
Hoback the authority to vote the proxy at his discretion. This Proxy gives
authority to my proxy to vote for me on such other matters as may properly
come before this meeting.
Shares Owned:__________________________
Dated:_________________________________
____________________________________
Signature of Shareholder
(Sign exactly as name appears on certificate)
_____________________________________
Signature if held jointly
