<PAGE>
-------------------------------
OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION -------------------------------
Washington, D.C. 20549 OMB Number: 3235-0145
Expires: October 31, 1994
Estimated average burden
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SCHEDULE 13D
(Rule 13d-101)
Information to be included in statements filed pursuant to Rule 13d-1(a)
and Amendments thereto filed pursuant to Rule 13d-2(a)
(Amendment No. 1)/1/
GOOD TIMES RESTAURANTS INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $0.001 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
0003821401
------------------------------------
(CUSIP Number)
DARREN R. HENSLEY, ESQ., JACOBS CHASE FRICK KLEINKOPF & KELLEY LLC
1050 SEVENTEETH STREET, STE. 1500, DENVER, COLORADO 80265 (303) 685-4800
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
OCTOBER 5, 1998
------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box[_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
/1/The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ---------------------- --------------------------------------
CUSIP No. 0003821401 Page 2 of 9 Pages
- ---------------------- --------------------------------------
================================================================================
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (Entities Only)
THE BAILEY COMPANY, L.P., IRS # 84-0584467
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
COLORADO
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
-------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 426,667
-------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON -0-
-------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
426,667
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
426,667
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [_]
EXCLUDES CERTAIN SHARES*
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- ---------------------- --------------------------------------
CUSIP No. 0003821401 Page 3 of 9 Pages
- ---------------------- --------------------------------------
================================================================================
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
THE ERIE COUNTY INVESTMENT CO., IRS #34-4227790
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
OHIO
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF -0-
------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 468,447
-------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON -0-
-------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
441,347
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
468,447
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [_]
EXCLUDES CERTAIN SHARES*
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- ---------------------- --------------------------------------
CUSIP No. 0003821401 Page 4 of 9 Pages
- ---------------------- --------------------------------------
================================================================================
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (Entities Only)
PAUL T. BAILEY
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 22,000
------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 468,447
-------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 22,000
-------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
441,347
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
490,447
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [_]
EXCLUDES CERTAIN SHARES*
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.1%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- ---------------------------- ----------------------------
CUSIP No. 0003821401 Page 5 of 9 Pages
- ---------------------------- ----------------------------
Amendment No. 1
to Schedule 13D
This amended statement relates to the shares of Common Stock, $0.001 par
value ("Common Stock"), of Good Times Restaurants Inc., a Nevada corporation
(the "Company"). Items 1, 2, 3, 4, 5, 6 and 7 of a statement on Schedule 13D
previously filed by The Erie County Investment Co., an Ohio corporation
("Erie"), and The Bailey Company, L.P., a Colorado limited partnership
("Bailey"), are amended as set forth below.
Item 1. Security and Issuer.
- ----------------------------
Item 1 is restated in its entirety as follows:
This Schedule 13D relates to shares of Common Stock of the Company, whose
principal executive offices are located at 601 Corporate Circle, Golden,
Colorado 80401.
Item 2. Identity and Background.
- --------------------------------
No change except for addition of the following:
This statement is also filed on behalf of Paul T. Bailey, an individual
("Mr. Bailey"), the controlling shareholder of Erie. The business address of
Mr. Bailey is 601 Corporate Circle, Golden, Colorado 80401; his present
principal occupation is an officer of Erie; and he is a citizen of the United
States.
During the past five years, Mr. Bailey has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ----------------------------------------------------------
No change except for addition of the following:
5
<PAGE>
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CUSIP No. 0003821401 Page 6 of 9 Pages
- --------------------- ------------------------
Mr. Bailey previously acquired an aggregate of 22,000 shares of Common
Stock in open market transactions as set forth below:
<TABLE>
<CAPTION>
Number of Shares Purchase Price Per
Date of Common Stock Share of Common Stock
---- ---------------- ---------------------
<S> <C> <C>
06/11/95 800 $4.32
10/17/95 200 2.49
05/31/96 200 3.01
06/14/96 1,000 3.22
07/02/96 200 3.01
07/22/96 720 2.58
07/19/96 80 3.00
08/28/96 1,000 2.58
12/02/96 800 1.93
06/13/97 200 1.86
06/18/97 1,000 1.93
04/22/98 600 3.00
04/23/98 1,200 3.00
05/07/98 3,000 2.75
06/19/98 1,343 2.63
06/22/98 100 2.63
06/23/98 8,557 2.63
09/18/98 1,000 2.40
</TABLE>
Such acquisitions were funded out of Mr. Bailey's personal funds.
Item 4. Purpose of Transaction.
- -------------------------------
No change except for addition of the following:
As a result of a negotiated transaction with the Company, the Company, Erie
and Bailey have entered into a letter agreement (the "Letter Agreement")
pursuant to which Bailey and Erie have agreed to guarantee (the "Guaranties")
certain third party loans to the Company up to an aggregate principal amount of
$6,000,000. The Company will pay Bailey and Erie quarterly fees based upon the
average outstanding principal and interest of the loans guaranteed by them
during each calendar quarter. The Company may elect to pay such fees in cash or
shares of Common Stock ("Guarantee Stock"), or both. To the extent such fees are
paid in cash, the fees shall equal one-half of one percent (0.5%) of the average
outstanding principal and interest of the loans guaranteed during each calendar
quarter, and to the extent such fees are paid in Guarantee Stock, the fees shall
equal three-fourths of one percent (0.75%) of the average outstanding principal
and interest of the loans guaranteed during each calendar quarter. The Company
will also issue to Bailey a warrant to purchase 426,667 shares of Common Stock
("Warrant Stock") at an exercise price of $0.0001 per share, such Warrant to be
exercisable upon the initiation by the Company of any bankruptcy petition or
upon the initiation of any other comparable insolvency or liquidation
proceedings by the Company or in the event of any involuntary bankruptcy
adjudication of the Company. In addition, the Company will indemnify Bailey and
Erie for any loss, liability, cost or expense incurred by Bailey and Erie under
the Guaranties. Such right of indemnification will be secured by a secondary
pledge by the Company to Bailey and Erie of all of its properties and assets
securing the loans. For so long as the Guaranties are outstanding or the Company
is indebted to Bailey or Erie as a result of the Guaranties, the Company will
not (i) merge with or into any other entity or entities, (ii) sell, lease,
abandon, transfer or otherwise dispose of in excess of fifty-one percent (51%)
of the Company's total assets, (iii) pay any dividend on any shares of its
capital stock, except for dividends payable solely in additional shares of
Common Stock, (iv) redeem or otherwise acquire any shares of its capital stock,
except for purchases of shares of Common Stock from former employees pursuant to
contractual rights relating to the termination of their employment, (v) in
certain circumstances, incur additional indebtedness, (vi) liquidate, dissolve
or wind up, or (vii) acquire the stock or assets of any person or entity except
in the ordinary course of business. Additionally, certain of the Company's
covenants under the Series A Convertible Stock Purchase Agreement previously
filed as Exhibit 10 to this Statement on Schedule 13D and incorporated herein by
reference in its entirety, as amended by First Amendment to Series A Convertible
Preferred Stock Purchase Agreement filed as Exhibit 10.1 hereto and incorporated
herein by reference in its entirety and Amendment and Agreement Regarding Series
A Convertible Preferred Stock filed as Exhibit 10.2 hereto and incorporated
herein by reference in its entirety, and certain of the Company's covenants and
restrictions pursuant to the terms of the Certificate of Amendment of Articles
of Incorporation of the Company filed as Exhibit 4.1 hereto and incorporated
herein by reference in its entirety shall continue for so long as the Guaranties
are outstanding or the Company is indebted to Bailey or Erie as a result of the
Guaranties, and in certain cases for so long as any of the Warrant Stock,
Guarantee Stock and two-thirds of the Conversion Stock (as defined in Item 5
below) is held by Bailey and Erie. The Letter Agreement is attached hereto as
Exhibit 10.3 and is incorporated herein by reference in its entirety, and the
foregoing summary of the terms thereof are qualified by reference to the actual
Letter Agreement.
The Registration Rights Agreement previously filed as Exhibit 4 to this
Statement on Schedule 13D and incorporated herein by reference in its entirety
is amended by the Letter Agreement to provide the registration rights thereunder
to Erie and Bailey with respect to the Guarantee Stock and the Warrant Stock.
The Board of Directors of Erie (the "Board") has adopted The Erie County
Investment Co. Stock Option Plan (the "Plan") effective as of March 1, 1998.
Pursuant to the terms of the Plan, a committee of the Board may determine to
provide certain persons, including directors, officers and key employees of Erie
and certain other persons, the opportunity to acquire a proprietary interest in
the Company by granting such persons options to acquire shares of Common Stock
owned by Erie. Currently, options to acquire 13,900 shares of Common Stock at
an exercise price of $2.45 per share are outstanding under the Plan. The Plan
is attached hereto as Exhibit 10.4 and is incorporated herein by reference in
its entirety, and the foregoing summary of the terms thereof are qualified by
reference to the actual Plan.
On March 1, 1998, Erie entered into Stock Purchase Agreements (the
"Purchase Agreements") with certain of its employees (the "Employees") pursuant
to which Erie sold the Employees 27,100 shares of Common Stock (the "Employee
Shares") owned by Erie at a price of $2.45 per share pursuant to an incentive
plan adopted by the Board for employees of Erie and its affiliates. The
Employees delivered promissory notes (the "Notes") to Erie as payment for the
Employee Shares, with such Notes secured by a pledge by the Employees of the
Employee Shares and any dividends or distributions thereon. Erie retained the
right to vote the Employee Shares and the Employees are restricted from
transferring the Employee Shares until such time as Employees have paid to Erie
all amounts due under the Notes. The form of Purchase Agreement is attached
hereto as Exhibit 10.5 and is incorporated herein by reference in its entirety,
and the foregoing summary of the terms thereof are qualified by reference to the
actual Purchase Agreement.
Other than the transactions set forth herein, none of Bailey, Erie or Mr.
Bailey has any plans or proposals that would result in any of the consequences
listed in paragraphs (a) - (j) of Item 4 of Schedule 13D.
6
<PAGE>
- -------------------- -----------------------
CUSIP No. 0003821401 Page 7 of 9 Pages
- -------------------- -----------------------
Item 5. Interest in Securities of the Issuer.
- ---------------------------------------------
No change except for restatement of (a), (b), (c) and (d) as follows:
(a) As of August 31, 1998, Bailey converted 1,000,000 shares of the
Company's Series A Convertible Preferred Stock, $0.01 par value (the "Preferred
Stock"), into 426,667 shares of Common Stock (the "Conversion Stock"). The
shares of Common Stock represent approximately 24.4% of the outstanding Common
Stock (based on the number of shares of Common Stock outstanding as of June 30,
1998 as reported by the Company in its Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1998 (the "Outstanding Shares") and giving effect to the
conversion of the Preferred Stock). Erie and Mr. Bailey own 41,780 shares
(including the shares of Common Stock sold to the Employees pursuant to the
Purchase Agreements and over which Erie retains voting power and the shares of
Common Stock subject to options to acquire such shares pursuant to the Plan) and
22,000 shares of Common Stock, respectively, which represent approximately 2.4%
and 1.3%, respectively, of the outstanding Common Stock (based upon the
Outstanding Shares and giving effect to the conversion of the Preferred Stock by
Bailey). Erie and Mr. Bailey may be deemed to beneficially own the 426,667
shares of Common Stock held by Bailey and Mr. Bailey may be deemed to
beneficially own the 41,780 shares of Common Stock held by Erie (including the
shares of Common Stock sold to the Employees pursuant to the Purchase Agreements
and over which Erie retains voting power and the shares of Common Stock subject
to options to acquire such shares pursuant to the Plan). Erie and Mr. Bailey
disclaim beneficial ownership of any shares of Common Stock held by Bailey and
Mr. Bailey disclaims beneficial ownership of any shares of Common Stock held by
Erie.
(b) Bailey, Erie and Mr. Bailey may be deemed to share voting and
dispositive power over the 426,667 shares of Common Stock held directly by
Bailey. Erie and Mr. Bailey may be deemed to share voting and dispositive power
over 14,680 shares of Common stock held directly by Erie (including the shares
of Common Stock subject to options to acquire such shares pursuant to the Plan)
and voting power over the 27,100 shares of Common Stock sold by Erie to the
Employees pursuant to the Purchase Agreements. Mr. Bailey has sole voting and
dispositive power over the 22,000 shares of Common Stock held by Mr. Bailey.
(c) Other than the conversion of the Preferred Stock by Bailey as set forth
in Item 5(a) above and the September 18, 1998 purchase of Common Stock by Mr.
Bailey as set forth in Item 3 above and incorporated herein by reference in
their entirety, in the past 60 days, none of Bailey, Erie or Mr. Bailey has
effected any transaction in the Preferred Stock or Common Stock.
(d) The Employees who purchased the Employee Shares from Erie pursuant to
the Purchase Agreements have the right to receive dividends from, and the
proceeds from the sale of, the Employee Shares; provided, however, that any such
dividends are pledged to secured the Employees' obligations under the Notes and
the Employees' rights to sell or transfer the Employee Shares are restricted
until the Employees have satisfied their obligations under the Notes.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
- ------------------------------------------------------------------------------
to Securities of the Issuer.
- ---------------------------
No change except for addition of the following:
The descriptions of the Letter Agreement, the Plan and the Purchase
Agreements in Item 4 above are incorporated herein by reference in their
entirety.
7
<PAGE>
- -------------------- ---------------------------
CUSIP No. 0003821401 Page 8 of 9 Pages
- -------------------- ---------------------------
Item 7. Material to be Filed as Exhibits.
- -----------------------------------------
No change except for addition of the following:
Exhibit 4.1 Certificate of Amendment of Articles of Incorporation of the
Company
Exhibit 10.1 First Amendment to Series A Convertible Preferred Stock Purchase
Agreement effective as of May 31, 1996 by and between the Company
and Bailey
Exhibit 10.2 Amendment and Agreement Regarding Series A Convertible Preferred
Stock effective as of October 31, 1997 by and between the Company
and Bailey
Exhibit 10.3 Letter Agreement dated September 25, 1998 and executed on
October 5, 1998 by and among the Company, Bailey and Erie
Exhibit 10.4 The Erie County Investment Co. Stock Option Plan effective as of
March 1, 1998
Exhibit 10.5 Form of Stock Purchase Agreement between Erie and the Employees
dated as of March 1, 1998
Exhibit 99.1 Joint Filing Agreement dated as of October 5, 1998 by and
between Erie, Bailey and Mr. Bailey
<PAGE>
- -------------------- ---------------------------
CUSIP No. 0003821401 Page 9 of 9 Pages
- -------------------- ---------------------------
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 5, 1998
____________________________________
(Date)
THE BAILEY COMPANY, a Colorado limited partnership
By: THE ERIE COUNTY INVESTMENT CO., an Ohio
corporation, its general partner
By: /s/ William D. Whitehurst
________________________________________
William D. Whitehurst, Vice-President
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 5, 1998
________________________________________________
(Date)
THE ERIE COUNTY INVESTMENT CO., an Ohio
corporation
By: /s/ William D. Whitehurst
______________________________________
William D. Whitehurst, Vice-President
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 5, 1998
________________________________________________
(Date)
By: /s/ Paul T. Bailey
______________________________________
Paul T. Bailey
<PAGE>
Exhibit 4.1
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Good Times Restaurants Inc., a corporation organized under the laws of the
State of Nevada (the "Corporation"), by its President and Secretary does hereby
certify:
I. That the Board of Directors of the Corporation at a meeting duly
held on the 10th day of June, 1996, passed a resolution declaring that the
following change and amendment to the Corporation's Articles of Incorporation is
advisable.
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:
<PAGE>
i. Number of Shares. The series of Preferred Stock designated
----------------
and known as "Series A Convertible Preferred Stock" shall
consist of 1,000,000 shares.
ii. Voting.
------
(1) 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.
(2) 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.
(3) 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
2
<PAGE>
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.
iii. 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
3
<PAGE>
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.
iv. 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,
4
<PAGE>
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.
V. 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:
(1) (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.
(2) Amend, alter or repeal its Certificate of
Incorporation or By-laws;
5
<PAGE>
(3) 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
(4) 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.
vi. Conversion. The holders of shares of Series A Convertible
----------
Preferred Stock shall have the following conversion rights:
(1) 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 follwing
table:
6
<PAGE>
<TABLE>
<CAPTION>
Maximum
-------
Conversion Period Number of Shares Conversion Price
- ----------------- ---------------- ----------------
<S> <C> <C>
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.
</TABLE>
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 certiticate
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.
7
<PAGE>
(2) 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.
(3) 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 tbe
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
8
<PAGE>
determined in good faith by the Board of Directors of the Corporation.
(4) 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.
(5) 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.
(6) Other Notices. In case at any time:
-------------
(a) 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;
9
<PAGE>
(b) 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;
(c) 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
(d) 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.
(7) 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
10
<PAGE>
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.
(8) 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.
(9) 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.
(10) 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.
(11) 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
11
<PAGE>
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).
vii. Redemption. The shares of Series A Convertible Preferred Stock may be
----------
redeemed by the Corporation, as its option, as follows:
(1) 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.
(2) 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.
12
<PAGE>
(3) 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
13
<PAGE>
redeem the balance of such shares, or such portion thereof for
which funds are then legally available, on the basis set forth
above.
(4) 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.
viii. 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;
14
<PAGE>
(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.
II. That at a duly held Special Meeting of Stockholders held on September 12,
1996, the foregoing amendment was adopted by the affirmative vote of a majority
of the total number of shares outstanding and entitled to vote on the amendment.
15
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be signed by its President and its Secretary and its corporate seal to be
hereto affixed this 23rd day of September, 1996.
GOOD TIMES RESTAURANTS INC.
By: /s/ Boyd E. Hoback
---------------------------------
Boyd E. Hoback, President
By: /s/ Susan Knutson
---------------------------------
Susan Knutson, Secretary
(Seal)
STATE OF COLORADO )
) ss.
COUNTY OF ADAMS )
On September 23, 1996 personally appeared before me, a Notary Public, Boyd
E. Hoback and Susan Knutson, who acknowledged that they executed the above
instrument.
My commission expires:
/s/ Robin L. Boeff
---------------------------------
[NOTARY PUBLIC Notary Public
STATE OF COLORADO SEAL]
My Commission Expires 7/13/99
16
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO SERIES A CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT
The First Amendment to Series A Convertible Preferred Stock Purchase
Agreement (this "Amendment") dated this ____ day of September, 1996, effective
as of May 31, 1996, is by and between Good Times Restaurants Inc. (the
"Company") and The Bailey Company ("Purchaser").
RECITALS
A. The Company and Purchaser entered into that certain Series A
Convertible Preferred Stock Purchase Agreement dated May 31, 1996 (the
"Agreement"), by which Purchaser agreed to purchase 1,000,000 shares of the
Company's Series A Convertible Preferred Stock (the "Preferred Shares"), and the
Company agreed to issue the Preferred Shares to Purchaser, on the terms and
conditions contained in the Agreement.
B. The Company and Purchaser desire to modify and amend certain terms
of the Agreement and certain Exhibits thereto.
AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Purchaser agree
that the Agreement, and certain Exhibits thereto, are hereby amended as follows:
1. Capitalized terms used herein, and not otherwise defined, shall have
the meanings ascribed to such terms in the Agreement. References to Sections and
paragraphs shall refer to Sections and paragraphs of the Agreement, unless the
context requires otherwise.
2. The first sentence of Section 2.04, Authorized Capital Stock, is
------------------------
hereby deleted in its entirety and replaced with the following language: "If the
shareholders of the Company approve the transactions contemplated hereby, as of
the First Installment Date the authorized capital stock of the Company shall
consist of (i) 5,000,000 shares of preferred stock, $.01 par value per share, of
which 1,000,000 shares shall be designated as Series A Convertible Preferred
Stock, and (ii) 50,000,000 shares of Common Stock.
3. The first sentence of Article IV, paragraph (a)(iv) is hereby
deleted in its entirety and replaced with the following language: "The
authorized capital stock of the Company consists of (i) 5,000,000 shares of
preferred stock, of which only 1,000,000 shares are designated as Series A
Convertible Preferred Stock, and (ii) 50,000,000 shares of Common Stock."
4. The second sentence of Article IV, paragraph (i) is hereby deleted
in its entirety and replaced with the following language:
<PAGE>
The Articles shall have been duly amended, if necessary, to provide
that all directors of the Company shall be indemnified against, and
absolved of, liability to the Company and its stockholders to the
maximum extent permitted under the laws of the State of Nevada.
5. The following language shall be added to the Agreement as Section
6.22:
"Authorized Common Stock. For so long as Purchaser and its
-----------------------
affiliates, in the aggregate, beneficially own two-thirds of the
Preferred Shares (including the Common Stock into which such
Preferred Shares are convertible), the number of shares of
authorized Common Stock of the Company may not be increased or
decreased by the Company without the approval of Purchaser."
6. The following language shall be added to the Agreement as Section
6.23:
"Additional Series of Preferred Stock. Notwithstanding anything in
------------------------------------
the Articles to the contrary, for as long as Purchaser and its
affiliates, in the aggregate, beneficially own two-thirds of the
Preferred Shares (including the Common Stock into which such
Preferred Shares are convertible), the Company shall not issue any
series of preferred stock in addition to the Series A Convertible
Preferred Stock without the approval of Purchaser."
7. Section A.1. to Exhibit B to the Agreement, which is entitled
Series A Convertible Preferred Stock Terms, (referred to in this Amendment as
- ------------------------------------------
"Terms") is hereby deleted in its entirety and replaced with the following
language: "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."
8. Section 5.b. of the Terms is hereby amended to replace the term
"Certificate of Incorporation" with the Term "Articles of Incorporation."
9. The table in Section 6.a. of the Terms is hereby deleted in its
entirety and replaced with the following table:
2
<PAGE>
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.
10. Except as expressly set forth in this First Amendment, the Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
effective as of the day and year first above written.
GOOD TIMES RESTAURANTS INC.
By:/s/ Boyd E. Hoback
------------------------
Name: Boyd E. Hoback
----------------------
Title: President, CEO
---------------------
3
<PAGE>
THE BAILEY COMPANY,
a Colorado limited partnership
By: The Erie County Investment Co.,
as to General Partner
By:/s/ David E. Bailey
-----------------------------------
David E. Bailey, President
4
<PAGE>
Exhibit 10.2
GOOD TIMES RESTAURANTS INC.
AMENDMENT AND AGREEMENT REGARDING
SERIES A CONVERTIBLE PREFERRED STOCK
This Amendment and Agreement Series A Convertible Preferred Stock
("Amendment") is dated this 3rd day of December, 1997, effective as of October
31, 1997, by and between Good Times Restaurants Inc. (the "Company") and The
Bailey Company ("Bailey").
RECITALS
A. Bailey currently owns all of the outstanding shares of the
Company's Series A Convertible Preferred Stock consisting of 1,000,000 shares
(the "Preferred Shares"), which shares were purchased by Bailey pursuant to the
terms and conditions of the Series A Convertible Preferred Stock Purchase
Agreement dated May 31, 1996, as amended by the First Amendment to Series A
Convertible Preferred Stock Purchase Agreement dated effective as of May 31,
1996 (the "Agreement"). All capitalized and undefined terms herein shall have
the same meaning as in the Agreement.
B. Pursuant to the Agreement, the Preferred Shares are convertible
into common stock of the Company at various conversion prices depending upon the
number of Preferred Shares being converted and the date of conversion.
C. The Company desires to obtain financing of at least $2,000,000 on
acceptable terms prior to April 30, 1998 ("Financing"), the proceeds of which
shall be used by the Company for the development of additional restaurants and
for advertising and other Company expenses.
D. The Company and Bailey desire to modify and amend the conversion
rights of the Preferred Shares in consideration of Bailey's agreement to
consider in its sole and absolute discretion assisting the Company to obtain its
Financing as set forth herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Bailey agree as
follows:
1. Bailey hereby agrees to review all information provided to it by
the Company in connection with any Financing and it shall consider in its sole
and absolute discretion assisting the Company with such Financing upon terms and
conditions to be mutually agreeable between the Company and Bailey.
Notwithstanding the foregoing, Bailey shall have no obligation to assist the
Company with any Financing whatsoever.
<PAGE>
2. In consideration of Bailey's agreement in paragraph 1 above, the
conversion periods and the conversion prices with respect to the Preferred
Shares as set forth in the Agreement are hereby amended as follows:
Maximum Number of
Conversion Period Preferred Shares Conversion Price
- ----------------- ---------------- ----------------
October 1, 1997 - 1,000,000 $0.46875
April 30, 1998
May 1, 1998 - 1,000,000* $0.56875
April 30, 1999
May 1, 1999 and 1,000,000* the greater of (i) the
thereafter Dividend Conversion Rate at
the time of such conversion,
and (ii)$0.46875
* To the extent not previously converted.
3. If Bailey does not assist the Company in obtaining its Financing,
and if Bailey converts some or all of the Preferred Shares on or before April
30, 1998 at the $0.46875 conversion price as set forth above, then any dividend
shall not be paid or accrue (or to the extent already paid shall be refunded)
from and after October 1, 1997 with respect to the first 500,000 Preferred
Shares (or any portion thereof) converted and from and after January 1, 1998
with respect to the next 250,000 Preferred Shares (or any portion thereof)
converted beyond the first 500,000. Except under the foregoing circumstances,
dividends shall continue to accrue and be payable with respect to all
unconverted Preferred Shares.
4. The Company and Bailey understand and agree that it is impossible
to determine to what extent, if any, and under what circumstances Bailey may
assist the Company in obtaining acceptable Financing. Depending upon the terms
and risks involved in connection with any proposed assistance with a Financing
by Bailey, Bailey may require additional consideration from the Company,
including without limitation additional amendments to the conversion rights with
respect to the Preferred Shares. The Company is not however obligated to accept
any assistance from Bailey nor is it obligated to provide Bailey with any
additional consideration in connection with any Bailey assisted Financing.
5. Except as expressly set forth in this Amendment, all other rights,
powers, preferences, qualifications and restrictions with respect to the
Preferred Shares shall remain in full force and effect.
6. This Amendment has been approved by the vote of the Board of
Directors of the Company without participation of the two Company directors
appointed by Bailey.
2
<PAGE>
7. This Amendment may be executed in counterparts and delivered by
facsimile transmission.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
effective as of October 31, 1997.
GOOD TIMES RESTAURANT INC.,
a Nevada corporation
By:/s/ Boyd E. Hoback
-------------------------------------
Boyd E. Hoback, President
THE BAILEY COMPANY,
a Colorado limited partnership
By: The Erie County Investment Co.,
Its General Partner
By: /s/ David E. Bailey
-------------------------------------
David E. Bailey, President
3
<PAGE>
EXHIBIT 10.3
GOOD TIMES RESTAURANTS INC.
601 Corporate Circle
Golden, CO 80401
September 25, 1998
The Bailey Company
601 Corporate Circle
Golden, CO 80401
Attention: Mr. William D. Whitehurst
Chief Financial Officer and Vice President
The Erie County Investment Company
601 Corporate Circle
Golden, CO 80401
Attention: Mr. David E. Bailey
President
Re: FFCA and Safeco Loan Guaranties
Gentlemen:
This letter will set forth the agreement between Good Times Restaurants
Inc. ("Good Times"), The Bailey Company ("Bailey") and The Erie County
Investment Co. ("Erie") with respect to the guaranties by Bailey of loans to be
obtained by Good Times from Franchise Finance Corporation of America ("FFCA")
and the guaranties by Bailey and Erie of loans to be obtained by Good Times from
Safeco Credit Company, Inc. ("Safeco"). Bailey and Erie are hereinafter
together referred to as "Bailey/Erie."
1. Good Times intends to obtain a series of loans from FFCA and Safeco
with each loan constituting a separate borrowing for the development of a
separate Good Times restaurant, with such loans from FFCA to be guaranteed by
Bailey and with such loans from Safeco to be guaranteed by Bailey/Erie, and with
all such guaranties being pursuant to the terms and conditions of this letter
agreement and pursuant to the terms and conditions of agreements with FFCA and
Safeco. The aggregate amount of such guaranteed loans from
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 2
FFCA shall not exceed $5,700,000 and the aggregate amount of such guaranteed
loans from Safeco shall not exceed $3,000,000. Such guaranteed loans from FFCA
and Safeco are hereinafter referred to as the "FFCA Loans" and the "Safeco
Loans" and together are referred to as the "Loans." Notwithstanding anything to
the contrary contained in the foregoing, the aggregate principal amount of the
Loans guaranteed by Bailey/Erie shall not at any one time exceed $6,000,000.
Good Times may in its sole discretion determine whether a borrowing for the
development of a particular restaurant shall be a FFCA Loan or a Safeco Loan.
2. Subject to the terms and conditions of this letter agreement and of
agreements with FFCA and Safeco, Bailey shall guarantee the repayment of the
FFCA Loans and Bailey/Erie shall guarantee the repayment of the Safeco Loans
(the "Guaranties"). The terms and conditions of the FFCA Loans, and of the
Guaranties thereof, shall be subject to the mutual approval of Good Times and
Bailey and the terms and conditions of the Safeco Loans, and of the Guaranties
thereof, shall be subject to the mutual approval of Good Times and Bailey/Erie.
The location and development plans for each Good Times restaurant to be financed
by one of the FFCA Loans shall also be subject to the approval of Bailey and of
each Restaurant to be financed by one of the Safeco Loans shall be subject to
the approval of Bailey/Erie. The required approvals of Good Times and
Bailey/Erie set forth in this paragraph 2 shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the foregoing, Bailey/Erie
may withhold any of the Guaranties on account of the financial condition of Good
Times or for any other reason in the sole discretion of Bailey/Erie.
3. (a) Good Times shall pay to Bailey and to Bailey/Erie quarterly
percentage fees for the Guaranties based upon the average outstanding principal
and interest of the Loans guaranteed by them during each calendar quarter. Good
Times may elect to pay each such fee in cash or in shares of common stock of
Good Times ("Guarantee Stock") or partly in each. To the extent that such
quarterly fees are paid in cash, the fees shall be .5 percent of the average
outstanding principal and interest of the Loans guaranteed during such quarter
and to the extent that such quarterly fees are paid in Guarantee Stock, the fees
shall be .75 percent of such average outstanding principal and interest
guaranteed during such quarter. All such fees shall be paid within five
business days after the end of each calendar quarter.
(b) To the extent that Good Times elects to pay any of the fees
described in subparagraph (a) above in Guarantee Stock, such shares shall be
valued for such purpose at the average published closing price of Good Times
common stock during the twenty trading days immediately preceding the end of
such calendar quarter. The Guarantee Stock
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 3
and any common stock issued to Bailey pursuant to exercise of the warrant
provided for by paragraph 8 below (the "Warrant Stock") shall be deemed to
constitute additional shares of "Restricted Stock" under the May 31, 1996
Registration Rights Agreement (the "Registration Rights Agreement") between Good
Times and Bailey and be entitled to the registration rights accorded Restricted
Stock under the Registration Rights Agreement. Clause (ii) of Section 13(f) of
the Registration Rights Agreement is hereby amended to read "the date
Bailey/Erie is permitted pursuant to Rule 144 to sell all of its Restricted
Stock." Bailey/Erie understand that any shares of Good Times common stock issued
to them pursuant to this paragraph 3 will not have been registered under the
Securities Act of 1933, as amended, pursuant to an exemption thereunder; that
such shares must be held indefinitely unless a subsequent disposition thereof is
so registered or is exempt from such registration; that certificates
representing such shares shall be endorsed with an appropriate legend; and that
such shares shall constitute restricted stock under Rule 144 of such Act.
4. The documents for the Loans and for the Guaranties shall include the
following provisions:
(a) Upon any required performance by Bailey of the Guaranties of the FFCA
Loans, Bailey shall thereafter be subrogated to and otherwise entitled
to all, or if applicable to share with FFCA, the rights and remedies
of FFCA with respect to such FFCA Loans as to Good Times and as to the
assets of Good Times securing such Loans. In the event of any
required performance by Bailey/Erie of the Guaranties of the Safeco
Loans, Bailey/Erie shall be entitled to share with Safeco all the
rights and remedies of Safeco with respect to such Safeco Loans and as
to Good Times and as to the assets of Good Times securing such Safeco
Loans.
(b) Good Times shall indemnify and hold harmless Bailey/Erie with respect
to any loss, liability or cost and expense incurred by Bailey/Erie
with respect to the Guaranties. The foregoing indemnification
liability of Good Times shall be secured by a pledge in favor of
Bailey/Erie of all of the properties and assets of Good Times securing
the Loans, which pledge shall be secondary and subordinate to the
pledge of such properties and assets to FFCA or Safeco. Bailey/Erie
shall have rights
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 4
as an unsecured creditor as to the remaining properties and assets of
Good times with respect to the foregoing indemnification liability.
(c) Good Times shall have reasonable and customary grace and cure periods
under the documents for the Loans and the Guaranties.
5. Good Times shall not incur any indebtedness for borrowed money other
than the Loans unless during the 12 calendar months preceding such additional
borrowing Good Times' total debt coverage ratio exceeds 125 percent. In that
event, Good Times may incur additional borrowing, and pledge its properties and
assets to secure such additional borrowing, subject to the pledges of
properties and assets for the Loans and for the indemnification liability of
Good Times with respect to the Guaranties, to the extent that such additional
borrowings and the net profits to be realized from any properties and assets to
be acquired with the proceeds of such additional borrowings will not, in the
reasonable judgment of Good Times and Bailey/Erie, result in its debt coverage
ratio becoming less than 125 percent. For purposes of this paragraph 5, debt
coverage ratio shall be defined as net profits (exclusive of extraordinary
profits and losses not realized or incurred in the ordinary course of business)
before interest, taxes, depreciation and amortization divided by total principal
and interest payments. In the event of any disagreement between Good Times and
Bailey/Erie with respect to the debt coverage ratio of Good Times, such debt
coverage ratio shall be determined by the regular independent certified public
accountants of Good Times.
6. So long as the Guaranties are outstanding or for so long as Good Times
may be indebted to Bailey or Erie as a result of the Guaranties, Good Times
shall:
(a) Comply with the covenants of Article VI of the Series A Convertible
Preferred Stock Purchase Agreement between Good Times and Bailey dated
May 31, 1996, as amended, whether or not such preferred stock is
outstanding, except the covenants in Sections 6.02 and 6.03 of Article
VI with respect to the preemptive rights of the preferred stock and
the reservation of common stock for the conversion of preferred stock
which Sections shall apply only for so long as the preferred stock is
outstanding. Without limiting the generality of the foregoing, a
representative of Bailey shall be entitled to attend meetings of the
Board of Directors and of the Compensation Committee of the Company
pursuant to the provisions of Sections 6.10 and 6.11 of
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 5
Article VI for so long as any of the Guaranties are outstanding and
with respect to Section 6.10 for so long as any of the Guarantee Stock
or the Warrant Stock is held by Bailey;
(b) Not liquidate, dissolve or wind up and not consolidate or merge into
or with any other entity or entities or sell, lease, abandon, transfer
or otherwise dispose of in excess of 51 percent of Good Times' total
assets (including intellectual property rights);
(c) Not pay any dividend on any shares of its capital stock, except for
dividends payable solely in the form of additional shares of common
stock, and not redeem or otherwise acquire any shares of its capital
stock except for the purchase of shares of common stock from former
employees pursuant to contractual rights relating to the termination
of their employment; and
(d) Not acquire the stock or assets of any person or entity except in the
ordinary course of its business.
7. Effective as of August 31, 1998, Bailey has converted the shares of
Good Times Series A Convertible Preferred Stock owned by Bailey into shares of
Good Times common stock pursuant to the terms of the May 31, 1996 Series
Convertible Preferred Stock Purchase Agreement between Good Times and Bailey, as
amended. So long as Bailey/Erie owns not less than two-thirds of the aggregate
of the Good Times common stock acquired pursuant to this paragraph 7, the
Guarantee Stock and the Warrant Stock:
(a) Good Times shall not increase the number of Directors constituting its
Board of Directors to a number in excess of seven;
(b) Bailey/Erie shall have the right to elect two Directors to the Board
of Directors of Good Times one of whom shall have the right, in the
discretion of Bailey/Erie, to serve as the Chairman of the Board; and
(c) Good Times shall not amend, alter or repeal its Certificate of
Incorporation or Bylaws.
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 6
8. In consideration for the Guaranties, upon the closing of the first of
the Loans, Good Times shall issue to Bailey a warrant to purchase at $.0001 per
share 426,667 shares of Good Times common stock which shall be exercisable by
Bailey in the event of the initiation by Good Times of any bankruptcy petition
or upon the initiation of any other comparable insolvency or liquidation
proceeding by Good Times or in the event of any involuntary bankruptcy
adjudication of Good Times. Such warrant shall contain standard and customary
provisions approved by Bailey, which approval shall not be unreasonably
withheld, including without limitation anti-dilution provisions.
9. In the event of any breach of this letter agreement by Good Times, in
addition to all rights and remedies under law and equity available as a result
thereof to Bailey/Erie, Bailey/Erie shall not be required thereafter to provide
any Guaranties.
10. Good Times and Bailey/Erie shall from time to time execute such
additional documents as may reasonably be required in order to carry out the
intention and provisions of this letter agreement.
11. The terms and conditions of this letter agreement shall bind and inure
to the benefit of Good Times and Bailey/Erie and their respective successors and
assigns.
12. Good Times and Bailey/Erie acknowledge that the provisions of this
letter agreement have been unanimously approved by the Board of Directors of
Good Times at a meeting in which Directors representing Bailey/Erie did not
participate.
If this letter correctly sets forth our agreement, please sign and return
the attached copy hereof.
Very truly yours,
GOOD TIMES RESTAURANTS INC.
By /s/ Boyd E. Hoback
-------------------------------------
President and Chief Executive Officer
<PAGE>
The Bailey Company
The Erie County Investment Company
September 25, 1998
Page 7
Agreed to this 5th day of October, 1998
THE BAILEY COMPANY
By Geoffrey R. Bailey
------------------
General Manager
THE ERIE COUNTY INVESTMENT COMPANY
By /s/ David E. Bailey
-------------------
President
<PAGE>
EXHIBIT 10.4
THE ERIE COUNTY INVESTMENT CO.
STOCK OPTION PLAN
ARTICLE I
Purpose
The purposes of this Stock Option Plan (this "Plan") of The Erie County
Investment Co., an Ohio corporation (the "Company"), are to enable the Company
to (i) provide opportunities for certain persons, including directors, officers,
key employees of the Company and certain other persons, as determined by the
Committee, as defined in Article II below (the "Eligible Participants"), to
acquire a proprietary interest in Good Times Restaurants, Inc. ("Good Times"),
(ii) increase incentives for the Eligible Participants to contribute to the
Company's performance and future success, (iii) attract and retain individuals
with exceptional business, managerial and administrative talent upon whom, in
large measure, the sustained progress, growth and profitability of the Company
depend, (iv) recognize and acknowledge the services contributed to the Company
by Eligible Participants upon their retirement or departure from the Company and
(v) otherwise compensate Eligible Participants.
ARTICLE II
Definitions
For Plan purposes, except where the context clearly indicates otherwise,
the following terms shall have the following meanings:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Committee" shall mean a committee of the Board, as the Board shall
designate from time to time to administer this Plan.
"Common Stock" shall mean the Common Stock, par value $.001 per share, of
Good Times.
"Current Position" shall have the meaning set forth in Article VI, Section
G.
"Effective Date" shall have the meaning set forth in Article XI.
<PAGE>
"Eligible Participant" shall have the meaning set forth in Article I.
"Exercise Price" shall have the meaning set forth in Article VI.
"Fair Market Value" of the Common Stock shall mean the closing bid price of
Good Times Common Stock on the NASDAQ Small Cap Market.
"Nonqualified Stock Option" or "NQO" shall mean an Option granted under
this Plan that does not comply with one or more requirements for an incentive
stock option, as set forth in Section 422 of the Code.
"Option" shall mean a Nonqualified Stock Option granted under this Plan.
"Option Shares" shall mean shares of Good Times' Common Stock received by
an Optionee upon exercise of an option.
"Optionee" shall mean an Eligible Participant who has been granted one or
more Options.
"Stock Adjustment" shall have the meaning set forth in Article VII.
"Stock Option Agreement" shall have the meaning set forth in Article VI.
ARTICLE III
Administration
A. The Committee. The Committee shall administer the Plan and shall have
-------------
full power and authority to, in addition to other powers set forth herein,
construe and interpret the Plan, resolve any conflict or ambiguity within the
Plan, establish any and all rules and regulations for the operation of the Plan,
establish any and all rules and regulations for the operation of the Committee
and the performance by the Committee of its purposes and functions, and perform
all other acts, including the delegation of administrative responsibilities,
that it deems reasonable and proper. It is the intent of the Company that the
Committee shall have plenary authority to administer the Plan consistent with
the purposes hereof.
The Committee shall hold its meetings at such times and places as it shall
deem advisable. A majority of the members of the Committee shall constitute a
quorum of the Committee. All action of the Committee shall be taken by a
majority of its members. Any action of the Committee may be taken by a written
instrument signed by a majority of the Committee's members, and any action so
taken shall be as effective as if it had been taken by a vote of the Committee.
2
<PAGE>
B. Powers of the Committee. The Committee, without limitation and in its
-----------------------
sole and absolute discretion, shall have full power and authority to:
(a) determine those persons who are Eligible Participants;
(b) determine any conditions precedent and other applicable criteria
in allocating and granting Options;
(c) determine the number and type of each Option and the number of
shares of Common Stock subject to each Option;
(d) determine the Exercise Price of each option (subject to the terms
and conditions set forth in this Plan and in any Stock Option Agreement);
(e) determine the grant date and exercise date of any Option;
(f) impose any vesting restrictions or other restrictions on the
exercise of an Option;
(g) accelerate the exercise date or vesting schedule of an Option or
otherwise amend or modify the terms of any Option or waive any condition
related to any Option;
(h) impose cancellation, transfer, forfeiture and other repurchase
restrictions and limitations on any Option and Option Shares; and
(i) determine any and all other terms, provisions and/or conditions
regarding the grant or exercise of an Option, or the sale, exchange, gift,
transfer, pledge or other disposition of Options and Option Shares.
The terms and conditions of each Stock Option Agreement shall be determined
solely in the discretion of the Committee, subject to the terms and conditions
of this Plan. The terms and conditions of each Option and the related Stock
Option Agreement may be different as among Optionees and/or as among Options
granted to the same Optionee, except as otherwise provided herein.
C. Corrective Measures. The Committee may correct any defect, supply any
-------------------
omission or reconcile any inconsistency in this Plan, any Option or Stock Option
Agreement or other related document, in the manner and to the extent it shall
deem necessary, including amendments hereto or thereto approved by not less than
a majority of the Committee.
D. Decisions Final. Any decision made or action taken by the Committee
---------------
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive and shall be binding upon all Optionees
and their successors or assigns.
3
<PAGE>
ARTICLE IV
Number of Shares Subject to This Plan
The aggregate number of shares of Common Stock available for Option grants
under this Plan shall be established by the Company from time to time. If an
Option or portion thereof shall expire or terminate for any reason without
having been exercised, the unpurchased shares covered by such Option may be
available for future grants of Options; provided, however, that in no event
shall the Committee have any obligation to make such shares available for the
grant of other Options under this Plan.
ARTICLE V
Eligibility
Consistent with this Plan's purposes and the terms contained herein,
Options may be granted to Eligible Participants at times and based on criteria
that the Committee, in its sole discretion, determines are appropriate.
ARTICLE VI
Option Terms and Conditions
All Options granted under this Plan to Eligible Participants shall be
evidenced by a Stock Option Agreement in substantially the form attached hereto
as Exhibit A (a "Stock Option Agreement"), or such other form as the Committee
---------
shall approve from time to time. Each Stock Option Agreement shall be subject to
the provisions of this Plan and such other provisions as the Committee may
adopt, including the following provisions:
A. Exercise Price. The exercise price (the "Exercise Price") per share
--------------
for each Option granted under this Plan shall be set forth in the Stock Option
Agreement.
B. Term of Option. No Option shall be granted pursuant to this Plan
--------------
after the date ten years after the Effective Date. Options that are outstanding
after such date will, however, remain in effect until such Options are exercised
or expire pursuant to their terms.
C. Assignability of Option. An Option shall be exercisable only by the
-----------------------
Optionee, his guardian or legal representative during his lifetime and shall not
be assignable or transferable by the Optionee (including with respect to any
lien or encumbrance) otherwise than by will or the laws of descent and
distribution. Executors, administrators, heirs, successors and assigns of the
Optionee shall be bound by the terms of the applicable Stock Option Agreement
and this Plan.
4
<PAGE>
D. Time of Exercise. Each Option granted under this Plan shall be
----------------
exercisable on the date or dates, and during the period, and for the number of
shares specified in the Stock Option Agreement(s) covering such Option grants.
The Committee may establish vesting provisions applicable to an Option such that
the Option becomes fully exercisable, for example, in a series of cumulating
portions. The Committee may, in its discretion, permit the accelerated exercise
of any Option, the exercise of all or a portion of which is subject to vesting
provisions. Also, exercise of an Option may be accelerated upon the occurrence
of an event of acceleration as described in any applicable Stock Option
Agreement.
E. Exercise. An Option or portion thereof shall be exercised by delivery
--------
of a written notice of exercise to the Secretary of the Company and payment of
the full Exercise Price to the Company. Until the certificates for Option Shares
represented by an exercised Option are transferred to an Optionee, such Optionee
shall not have any rights as a holder of Common Stock. No Option Shares shall be
delivered upon any exercise of an Option until the requirements of all
applicable laws, rules and regulations have, in the opinion of Company's
counsel, been satisfied. Certificates for Option Shares to be delivered upon
exercise of an Option shall be delivered as soon as practicable following
exercise of an Option.
F. Payment. The Exercise Price payable upon exercise of an Option or
-------
portion thereof may be made:
(a) in United States dollars in cash or by check, bank draft, money
order or by wire transfer of immediately available funds;
(b) in the discretion of the Committee, by delivery of shares of
Common Stock with an aggregate value equal to the Exercise Price;
(c) in the discretion of the Committee, by delivery of Options with
an aggregate net value (i.e., the aggregate value of the Common Stock subject to
such Options less the aggregate Exercise Price of such Options) equal to the
Exercise Price;
(d) in the discretion of the Committee, by (i) purchasing the Common
Stock subject to such Options with the proceeds of a loan (or deemed loan) from
the Company in an amount equal to the aggregate Exercise Price for such Options
(the "Margin Purchase"), (ii) selling the Option Shares purchased to a third
party within three (3) business days after the Margin Purchase and (iii) paying
the aggregate Exercise Price for such Option Shares to the Company immediately
upon the sale of such Option Shares; on the condition that, the Optionee shall,
if requested by the Company, execute those documents required by the Company to
evidence the foregoing loan from the Company to the Optionee, including, without
limitation, a promissory note on terms to be determined by the Company.
(e) in the discretion of the Committee, by a combination of (a) ,
(b), (c) and/or (d) above.
5
<PAGE>
If the Optionee delivers shares of Common Stock or Options as payment of
the Exercise Price upon exercise of an Option, the Committee shall determine
acceptable methods for tendering such shares or Options by the Optionee and may
impose such limitations and prohibitions on the use of Common Stock or Options
for such purposes as it deems appropriate. Any Option tendered as payment of the
Exercise Price shall be canceled by the Company upon receipt.
G. Termination of Service. Subject to the terms set forth in any
----------------------
employment or other binding agreement, in the event an Optionee's Current
Position (as defined below) with the Company is terminated, any Options held by
the Optionee at the time of the termination shall be dealt with as follows:
(a) In the event an Optionee's Current Position with the Company
shall terminate for Cause (as defined below) while holding one or more Options,
that portion of each Option that has not been exercised shall expire coincident
with the termination of the Optionee's Current Position for Cause.
(b) In the event an Optionee's Current Position with the Company
shall terminate for any reason other than for Cause (other than by reason of
death or disability), any Options or portion thereof that are exercisable on the
date of such termination shall be exercisable until the date that is 30 days
after such date of termination.
(c) In the event an Optionee's Current Position with the Company
shall terminate by reason of death or disability, any Options or portion thereof
that are exercisable on the date of such termination shall be exercisable until
the date that is six (6) months or one (1) year, respectively, after such date
of termination.
For purposes hereof, "Current Position" shall mean the Optionee's position
with the Company as an employee, officer or independent contractor.
For purposes of hereof, termination for "Cause" shall be defined as
termination because of any of the following:
(a) The willful and continued failure by Employee to substantially
perform, or the gross negligence in the performance of, his duties hereunder
other than because of disability;
(b) The commission by Employee of misconduct that is injurious to the
Company or a willful act of dishonesty;
(c) A conviction of, or a plea of guilty or nolo contendere by,
---- ----------
Employee in connection with fraud or any crime that constitutes a felony in the
jurisdiction involved; or
6
<PAGE>
(d) The commission by Employee of repeated acts of alcohol abuse that
are injurious to the Company or the knowing use by Employee of any illegal
substances.
The determination that the termination is for "Cause" shall be made in the
reasonable discretion of the Company.
Notwithstanding anything in this Article VI, Section G to the contrary, the
Committee, in its sole discretion, may waive any restrictions contained in this
Section, including any applicable vesting periods.
ARTICLE VII
Adjustments
In the event of a stock dividend, stock split or other subdivision,
consolidation or similar change in the outstanding shares of Common Stock or
capital structure of Good Times which effects the Common Stock subject to an
Option (collectively, a "Stock Adjustment"), the number of shares of Common
Stock reserved or otherwise available for Options pursuant to this Plan and the
Exercise Price per share of outstanding Options shall be equitably adjusted. Any
stock dividend, stock split or other subdivision, consolidation or similar
change in the capital structure of the Company shall have no affect on the
Common Stock issued or reserved pursuant to this Plan or the Options granted
pursuant to this Plan.
ARTICLE VIII
Securities and Other Regulation
A. Applicable Law. The obligation of the Company to transfer shares of
--------------
Common Stock upon the exercise of Options shall be subject to all applicable
laws, regulations, rules and orders which shall then be in effect and required
by governmental entities and the stock exchanges on which the Common Stock may
then be traded and the Company's obligation to transfer such shares shall be
subject to the compliance with such requirements.
B. Disclosures and Certificate Legend. Any person exercising an Option
-----------------------------------
shall make such representations and furnish such information as may, in the
opinion of counsel for the Company, be appropriate to permit the Company to
transfer the Option Shares in compliance with the provisions of the Securities
Act and any applicable state securities laws or any comparable laws.
7
<PAGE>
ARTICLE IX
Amendment and Termination of Plan
A. Amendment or Termination. The Committee may at any time and from time
------------------------
to time suspend or terminate this Plan in whole or in part or amend this Plan in
such respects as the Committee may deem appropriate and in the best interests of
the Company.
B. No Impairment. No amendment, suspension or termination of this Plan
-------------
shall, without the Optionee's written consent, alter or impair any of the rights
or obligations under any Option theretofore granted to such Optionee under this
Plan.
ARTICLE X
Miscellaneous Provisions
A. No Right to Continued Employment. No person shall have any claim or
--------------------------------
right to be granted an Option and the grant of Options shall not be construed as
giving an Optionee the right to be retained in the employ of, or retain any
other relationship with (including a position as a director of), the Company.
Further, the Company expressly reserves the right at any time to dismiss an
Optionee with or without cause, free from any liability or claim under this
Plan, except as provided herein or in another binding agreement (i.e. the
employment of Optionee is "at will").
B. No Rights as Stockholders. No Optionee or his heirs, successors or
-------------------------
assigns shall have any rights with respect to any shares of Common Stock subject
to an Option until the date of the transfer of stock certificates for such
Option Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or other rights
distributed with respect to the Common Stock for which the record date is prior
to the date such stock certificate is issued, except as provided in Article VII.
C. Non-Transferability. Except by will or the laws of descent and
-------------------
distribution or as otherwise provided herein, no right or interest in any Option
granted under this Plan shall be assignable or transferable.
D. Withholding Taxes. To cover applicable withholding for income and
-----------------
employment taxes in the event of the exercise of an NQO, the Company shall, in
its discretion, withhold shares of Common Stock or other compensation, including
salary, otherwise payable to the Optionee equal in value, based on their Fair
Market Value, to the federal and state withholding taxes due upon said
exercise.
8
<PAGE>
E. Plan Expenses. Any expenses of administering this Plan shall be borne
-------------
by the Company.
F. Use of Exercise Proceeds. The payment received from an Optionee in
------------------------
the exercise of Options shall be used for the general corporate purposes of the
Company as determined by the Company.
G. Setoff. All or part of any amount due and payable to Optionee
------
pursuant to this Stock Option Plan or the Stock Option Agreement may be setoff
or applied by the Company, in its sole and absolute discretion, against any
liability (contingent or otherwise) or reimbursement then due or hereafter
arising, incurred by Optionee to the Company, including, but not limited to, any
costs and expenses incurred by the Company with respect to any attempt by the
Optionee to transfer, alienate, sell, assign, pledge or encumber any right or
benefit under the Stock Option Agreement in violation of this Plan or the Stock
Option Agreement.
H. No Liability of Committee Members and Indemnification Thereof. No
-------------------------------------------------------------
member of the Committee shall be personally liable by reason of any contract or
other instrument executed by him or on his behalf in his capacity as a member of
the Committee, nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each member of the Committee and each
other officer, employee or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated or
delegated, against any cost and expense, including legal fees and costs, or
liability, including any sum paid in settlement of a claim with the approval of
the Board, arising out of any act or omission in connection with the Plan unless
arising out of such person's own fraud or bad faith, provided that promptly
after the institution of any such action, suit or proceeding by service of
process on the Committee member, such member shall give the Company written
notice thereof and an opportunity, at the Company's expense, to undertake to
defend the same before such Committee member undertakes such defense on his own
behalf, and provided that the Committee member cooperates with the Company in
such defense and takes no actions (including inaction) which would materially
prejudice the Company. The foregoing right to indemnification shall be in
addition to such other rights as the Committee member or other person may enjoy
as a matter of law, by contract or by reason of insurance coverage of any kind.
Rights granted hereunder shall be in addition to and not in lieu of any rights
to indemnification to which the Committee member or other person may be entitled
pursuant to the Certificate of Incorporation or bylaws of the Company or its
subsidiaries.
I. Arbitration. All disputes arising under this Plan or the Stock Option
-----------
Agreement shall be submitted to binding arbitration in the County of Jefferson,
Colorado, in accordance with the rules and procedures of the American
Arbitration Association. The costs of the arbitration, including any
enforcement thereof, and the fees and costs of counsel shall be borne as
apportioned by the arbitrators taking into account the merits of the positions
of the parties to the arbitration. The award of the arbitrators shall be final
and binding and no party may appeal any award. An award shall be enforceable in
any court of competent jurisdiction in the United States.
9
<PAGE>
If any party proposes to take any action that would irrevocably injure the other
party, such other party may seek, from an appropriate court, an injunction or
restraining order to prevent such action pending resolution by arbitration.
J. Severability. In the event any provision of this Plan shall be held
------------
to be illegal, invalid or unenforceable for any reason, the illegality,
invalidity or unenforceability of such provision shall not affect the remaining
provisions of this Plan, but shall be fully severable and this Plan shall be
construed and enforced as if the illegal, invalid or unenforceable provision had
never been included herein.
K. Governing Law. This Plan and all provisions hereof shall be governed
-------------
by and interpreted in accordance with the laws of the State of Colorado.
ARTICLE XI
Board of Directors Adoption of the Plan
This Plan has been adopted by the Board and will be effective on and as of
March 1, 1998 (the "Effective Date").
10
<PAGE>
THE ERIE COUNTY INVESTMENT CO.
STOCK OPTION PLAN
EXHIBIT A
11
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and entered into as
of the 1st day of March 1998, by and between the BOARD OF DIRECTORS (the
"Board") of THE ERIE COUNTY INVESTMENT CO., an Ohio corporation (the "Company"),
and ______________________, (the "Optionee").
WHEREAS, the Company adopted that certain Stock Option Plan, dated as of
March 1, 1998 (the "Stock Option Plan"), pursuant to which eligible participants
may be granted an option to purchase shares of the common stock of Good Times
Restaurants, Inc. ("Good Times"), par value $.001 per share (the "Common
Stock"); and
WHEREAS, the Company has determined that the Optionee is eligible and
deserving of a grant of an Option.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Grant of Option. The Optionee is hereby granted, as of March 1, 1998
---------------
(the "Grant Date"), this option (this "Option") to purchase _______ shares (the
"Option Shares") of Common Stock. The Company may, from time to time, grant the
Optionee one or more additional Options, each of which will be governed by a
separate Stock Option Agreement.
2. Exercise Price. The exercise price of this Option shall be $2.45 per
--------------
share (the "Exercise Price").
3. Term. This Option shall expire on the date that is ten (10) years
----
after the Grant Date (the "Option Expiration Date").
4. Exercise of Option. To the extent exercisable, this Option may be
------------------
exercised in whole or in part and from time to time (i) until fully exercised,
(ii) until the Option Expiration Date or (iii) until this Option terminates
pursuant to the terms of this Agreement or the Stock Option Plan. In no event,
however, shall this Option be exercisable in whole or in part after the Option
Expiration Date.
This Option may be exercised only by the Optionee, his guardian or legal
representative during the Optionee's lifetime. Neither this Option nor any
portion thereof or interest therein may be sold, pledged, assigned or
transferred in any manner otherwise than by will or by the laws of descent and
distribution. Any sale, pledge, assignment or transfer other than by will or
the laws of descent and distribution shall be void. Executors, administrators,
heirs, successors and assigns of the Optionee shall be bound by the terms of
this Agreement.
12
<PAGE>
Exercise of this Option shall not be effective until the Company has
received written notice of exercise, specifying the number of whole Option
Shares to be purchased. Such notice shall be accompanied by full payment of the
aggregate Exercise Price for the number of Option Shares so purchased, in
accordance with Article VI (F) of the Stock Option Plan. Thereafter, a
certificate or certificates representing the Option Shares so purchased shall,
within a reasonable time, be transferred to the Optionee's name and delivered to
the Optionee, in compliance with applicable securities laws. Upon a partial
exercise of this Option, this Agreement shall be automatically amended to reduce
the number of Option Shares covered by this Agreement by the number of Option
Shares so purchased without the necessity of the execution of a new agreement or
a formal written amendment of this Agreement.
5. Vesting Schedule. This Option shall vest and become exercisable
----------------
according to the following vesting schedule:
(a) Subject to the provisions of Paragraph (b) below, all options
granted on the Effective Date shall become vested in increments after each year
of continuous employment with the Company (or an affiliate thereof), starting
from the date the Optionee commenced employment with the Company (or an
affiliate thereof), (the "Anniversary Date") as follows:
Years of Continuous Employment Percentage
------------------------------ ----------
Fewer than 4 0.00%
4 15.00%
5 14.00%
6 14.00%
7 14.00%
8 15.00%
9 14.00%
10 14.00%
------
100.00%
The Optionee's Anniversary Date, for purposes of this Option, shall be
______________.
(b) Early Vesting. Notwithstanding the vesting schedule of Paragraph
-------------
(a) of this Section 5, if the Optionee has ten (10) or more years of continuous
employment with the Company (or an affiliate thereof) on the Effective Date, all
Options granted to the Optionee pursuant to this Stock Option Agreement shall
vest as of the Effective Date.
6. Taxes. To cover applicable withholding for income and employment
-----
taxes in the event of the exercise of this Option, the Optionee authorizes the
Company to, in the Company's discretion, withhold from any Option Shares to be
issued to the Optionee upon exercise by the Optionee of all or a portion of this
Option, a number of Option Shares based on their Fair Market Value (as defined
in the Stock Option Plan) equal to the amount of any taxes required to be
13
<PAGE>
withheld by any federal, state or local law or regulation as a result of the
exercise of this Option plus any amount necessary for the Company to satisfy the
gain, if any, the Company would realize upon the sale of such stock.
7. Acceptance of Stock Option Plan. The Optionee hereby acknowledges and
-------------------------------
accepts the terms, conditions, and provisions of the Stock Option Plan and
agrees to be bound thereby. Without limitation of the foregoing, the Optionee
hereby agrees, individually and for his or her executors, administrators, heirs,
successors, and assigns, that all decisions or interpretations of the Company or
its duly authorized representatives with regard to any and all aspects of this
Agreement and the Stock Option Plan and the administration thereof shall be
binding, conclusive, and final, even if perceived by Optionee to be unfair or
onerous. If any of the terms of this Agreement are inconsistent with the terms
of the Stock Option Plan, the terms of the Stock Option Plan shall govern. The
Optionee acknowledges that the Company has provided to the Optionee a copy of
the Stock Option Plan and that the Optionee has had an opportunity to obtain
legal and financial counsel with respect to the same.
8. Address for Notices. The parties hereto designate as the respective
-------------------
addresses for the receipt of any notice under this Agreement the addresses set
forth below their signatures on this Agreement.
The parties have executed this Agreement as of the date first written
above.
THE ERIE COUNTY INVESTMENT CO.: OPTIONEE:
By:_________________________________ By: ________________________________
Name (print):_______________________ Name (print):_______________________
Title:______________________________ Social Security Number: ____________
ADDRESS: 601 Corporate Circle ADDRESS:
Golden, Colorado 80401
14
<PAGE>
EXHIBIT 10.5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made and entered into
as of the 1st day of March 1998, by and between THE ERIE COUNTY INVESTMENT CO.
(the "Company") and ____________________, an employee of the Company
("Employee").
WHEREAS, the Board of Directors of the Company has adopted an incentive
plan for employees of the Company and its affiliates whereby eligible employees
may purchase from the Company shares of common stock of Good Times Restaurant,
Inc. ("Good times"), par value $.001 per share (the "Common Stock").
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agrees as follows:
1. Purchase of Shares. On and subject to the terms and conditions of
------------------
this Agreement, Employee shall purchase from the Company and the Company shall
sell to Employee ______ shares of Common Stock (the "Shares"). As consideration
for the Shares, Employee shall deliver to the Company a duly executed promissory
note (the "Note") in the form attached hereto as Exhibit A. The Note shall be
---------
secured by (i) a duly executed stock pledge agreement (the "Security Agreement")
in the form attached hereto as Exhibit B, pledging the Shares as security for
---------
payment under the Note, and (ii) a duly executed collateral assignment of
certificate (the "Collateral Assignment") in the form attached hereto as Exhibit
-------
C (the Note, the Security Agreement and the Collateral Assignment, are
- -
collectively referred to herein as the "Loan Documents").
Upon execution of this Agreement, (i) the Company shall deliver to Employee
any and all stock certificates representing the Shares, accompanied by an
executed Assignment in the form attached hereto as Exhibit D (the "Assignment");
---------
and (ii) the Company and Employee shall execute a notice to Good Times (the
"Notice") in the form attached hereto as Exhibit E, notifying Good Times that
---------
the Company is transferring the Shares to Employee and that, pursuant to Section
4 below, the Company shall retain the voting rights associated with the Shares
until the Employee satisfies all of the obligations under the Loan Documents,
which Notice shall be delivered by the Company to Good Times within 5 days after
the execution of this Agreement.
2. Investment Purpose; Assumption of Risk. Employee agrees that the
--------------------------------------
Shares acquired pursuant to this Agreement shall be acquired for his or her own
account for investment purposes only and not with a view to any distribution or
public offering thereof within the meaning of the Securities Act of 1933, as
amended, or other applicable securities laws. Employee acknowledges and
represents that he or she (i) is able to bear the economic risk of the purchase
described herein, (ii) is able to hold the Shares for an indefinite period of
time, (iii) can afford a complete loss of such investment and (iv) has available
other personal liquid assets to
<PAGE>
ensure that the investment will not cause any undue financial difficulties or
effect Employee's ability to provide for such Employee's current needs and
possible personal financial contingencies.
3. Restriction on Transfer. Until such time as all of Employee's
-----------------------
obligations under the Loan Documents have been fully satisfied and discharged,
Employee shall not sell, assign, transfer, pledge, convey, exchange,
hypothecate, borrow against, permit a security interest to attach to, or
otherwise dispose of or encumber, directly or indirectly, voluntarily or
involuntarily, to a related or unrelated party any of the Shares (a "Prohibited
Transfer"). Any such Prohibited Transfer shall be void and of no force and
effect. Notwithstanding anything to the contrary in this Section 3, Employee
may sell the Shares, and the Company shall cooperate with Employee to facilitate
such a sale, in a transaction whereby the proceeds from the sale are directly
applied to fully satisfy the amounts outstanding under the Note.
4. Voting Rights. As provided for in the Security Agreement, the Company
-------------
shall retain all voting rights associated with the Shares until such time as all
Employee's obligations under the Loan Documents are fully satisfied and
discharged.
5. No Right to Continued Employment. Nothing contained in this Agreement
--------------------------------
shall confer upon Employee any right with respect to the continuation of his or
her employment by the Company, be construed as a contract or guarantee of
employment, or interfere in any way with the right of the Company, at any time,
to terminate such employment or to increase or decrease the compensation or
benefits of Employee. The Company reserves the right to terminate the
employment of Employee at any time, for any reason, with or without cause or
notice.
6. Limitation of Liability; Indemnification. The Company has the sole
----------------------------------------
and absolute discretion to make all decisions with respect to its business. The
Company shall not be liable to Employee for any acts or omissions or for any
errors of judgment, including, but not limited to acts or omissions that affect
the value of the Shares. Employee shall not bring any type of claim or action
against the Company relating to this Agreement. Employee shall indemnify and
hold the Company harmless from any costs incurred by the Company in any claim or
action brought by Employee and from any and all costs incurred by the Company in
any claim or action brought by a creditor of Employee.
7. Arbitration. All disputes arising under this Agreement shall be
-----------
submitted to binding arbitration in the County of Jefferson, Colorado, in
accordance with the rules and procedures of the American Arbitration
Association. The costs of the arbitration, including any enforcement thereof,
and the fees and costs of counsel shall be borne as apportioned by the
arbitrators taking into account the merits of the positions of the parties to
the arbitration. The award of the arbitrators shall be final and binding and no
party may appeal any award. An award shall be enforceable in any court of
competent jurisdiction in the United States. If any party proposes to take any
action that would irrevocably injure the other party, such other party may
2
<PAGE>
seek, from an appropriate court, an injunction or restraining order to prevent
such action pending resolution by arbitration.
8. Address for Notices. The parties hereto designate as the respective
-------------------
addresses for the receipt of any notice under this Agreement the addresses set
forth below their signatures on this Agreement.
9. Entire Agreement. This Agreement constitutes the entire understanding
----------------
between Employee and the Company, and supersedes all other agreements, whether
written or oral, with respect to the purchase by Employee of the Shares.
10. Recommendation of Legal Counsel. Employee acknowledges that the
-------------------------------
Company has advised Employee that this Agreement has important legal and
financial consequences and that Employee should consult with legal and financial
counsel before signing this Agreement and the Loan Documents and that Employee
has had an opportunity to obtain such legal and financial counsel prior to the
date hereof.
The parties have executed this Agreement as of the date first written
above.
THE ERIE COUNTY INVESTMENT CO.: EMPLOYEE:
By:______________________________ By:_________________________________
Name (print):____________________ Name (print):_______________________
Title:___________________________ Social Security Number:_____________
ADDRESS: 601 Corporate Circle ADDRESS:____________________________
Golden, Colorado 80401 ____________________________
____________________________
3
<PAGE>
THE ERIE COUNTY INVESTMENT CO.
STOCK PURCHASE AGREEMENT
EXHIBIT A
4
<PAGE>
PROMISSORY NOTE
$_________ March 1, 1998
FOR VALUE RECEIVED, ___________________ ("Maker"), promises to pay to THE
ERIE COUNTY INVESTMENT CO., an Ohio corporation ("Payee"), on the earlier to
occur of (i) the tenth anniversary of the date hereof, and (ii) the date on
which Maker sells or otherwise transfers any interest for value in, the Shares
(as defined herein) (the "Maturity Date"), the principal sum of
______________________________ AND __/100 DOLLARS ($__________) (the "Principal
Sum"), together with simple interest on the outstanding unpaid balance of the
Principal Sum, which shall accrue annually at the lowest applicable federal rate
(the "Lowest Applicable Rate"), as adjusted from time to time by the U.S.
Treasury Department, on the basis of a 365-day year and the actual number of
days elapsed. If any amount due and payable hereunder is not paid in a timely
manner, such amount shall bear interest at 18% per annum rather than the Lowest
Applicable Rate and shall be payable on demand.
Notwithstanding the forgoing, Payee may, in its sole and absolute
discretion, on each anniversary of the date hereof or such other date as Payee
may determine, waive any interest due to Payee from Maker on this Promissory
Note; provided that Maker shall, for federal and state income tax purposes,
report any and all interest waived pursuant to this paragraph as additional
compensation income paid by Payee to Maker. Maker hereby acknowledges and
accepts that Payee's decision to charge or waive interest due to Payee on this
Promissory Note is discretionary and is separate and independent from Payee's
decision to charge or waive interest due to Payee on any other promissory note
issued to Payee by Maker or by any other party, and Maker hereby waives any
claim with respect to any charge or waiver that may be perceived to be
discriminatory.
If not sooner paid, all unpaid amounts of the Principal Sum, together with
all then unpaid interest thereon, shall be immediately due and payable on the
Maturity Date. All payments of principal and interest shall be made at Payee's
offices at 601 Corporate Circle, Golden, Colorado 80401. All payments received
hereunder shall be applied first to accrued interest and then to the outstanding
Principal Sum.
This Promissory Note is secured by the shares of common stock, par value
$____ per share, of Good Times Restaurants, Inc. (the "Shares") transferred to
Maker pursuant to that certain Stock Purchase Agreement, dated of even date
herewith, by and between Maker and Payee. Concurrent with the execution of this
Promissory Note, Maker shall execute, in a form acceptable to Payee, (i) a Stock
Pledge Agreement and (ii) a Collateral Assignment of Certificate. Maker shall
have no voting rights with respect to the Shares until Maker's obligations under
this Promissory Note have been discharged in full.
Time is of the essence hereof. In the event of any default in any payment
of the Principal Sum or interest due hereunder, Payee may exercise any and all
of the rights and remedies it may
5
<PAGE>
have pursuant to this Promissory Note, the Stock Pledge Agreement, and under
applicable law. If Payee has to take any action to collect the amount due or to
exercise its rights hereunder, including, without limitation, retaining
attorneys for the collection of this Promissory Note, or if any suit or
proceeding is brought for the recovery of all or any part of, or for protection
of, the indebtedness or to otherwise enforce Payee's rights hereunder, then
Maker shall pay to Payee on demand all costs and expenses incurred by Payee in
connection therewith, and any appeal of any such suit or proceeding, including
but not limited to, the reasonable and customary fees and disbursements of
Payee's attorneys and their staff.
All rights, powers and remedies herein conferred are cumulative, and not
exclusive of any and all other rights and remedies herein conferred, or any and
all rights, powers and remedies existing at law or in equity.
No waiver of any payment or other right under this Promissory Note shall
operate as a waiver of any other payment or right. No delay or failure of Payee
to exercise any right or remedy provided for hereunder shall be deemed a waiver
of such right by Payee hereof, and no exercise of any right or remedy shall be
deemed a waiver of any other right or remedy that Payee may have.
Maker waives presentment, notice of dishonor, notice of acceleration and
protest and consents to any extension of time with respect to any payment due
under this Promissory Note.
This Promissory Note may be prepaid, either in whole or in part, at any
time without premium or penalty.
If any provision in this Promissory Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality or enforceability of
any defective provision shall not be in any way affected or impaired in any
other jurisdiction nor shall such invalid, illegal or unenforceable provision
affect or impair the validity or enforceability of any other provision.
All notices to Maker given hereunder shall be in writing, shall be given
either by hand delivery, by certified mail, return receipt requested, or by
overnight express mail, and if mailed, shall be deemed received three business
days after having been deposited in the United States mail, postage prepaid, or
one business day after having been sent by overnight express mail, addressed as
follows:
______________
______________
______________
______________
6
<PAGE>
At the option of Payee, an action may be brought to enforce this Promissory
Note in the District Court in and for the County of Jefferson, State of
Colorado, in the United States District Court for the District of Denver or in
any other court in which venue and jurisdiction are proper.
Payee may assign or otherwise transfer or convey this Promissory Note
without the prior written consent of the Maker. This Promissory Note shall be
binding on Maker and its successors and permitted assigns and shall inure to the
benefit of Payee and its successors and permitted assigns. This Promissory Note
and any obligations hereunder may not be assigned by Maker.
This Promissory Note may be amended only by a written instrument signed by
Maker and Payee.
This Promissory Note is to be governed by and construed according to the
laws of the State of Colorado.
MAKER:
______________________________________
7
<PAGE>
THE ERIE COUNTY INVESTMENT CO.
STOCK PURCHASE AGREEMENT
EXHIBIT B
8
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of March, 1998, by and between ___________________ (the
"Pledgor"), and THE ERIE COUNTY INVESTMENT CO., an Ohio corporation (the
"Pledgee").
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated of even
date herewith, by and between Pledgor and Pledgee (the "Stock Purchase
Agreement"), Pledgor purchased ____ shares of common stock, par value $.001 per
share, of Good Times Restaurants, Inc. (the "Shares");
WHEREAS, as evidenced by that certain Promissory Note of even date herewith
executed and delivered by Pledgor to Pledgee (the "Promissory Note"), Pledgee
loaned to Pledgor the total sum of ______________________ Dollars ($________);
and
WHEREAS, as an inducement for Pledgee to extend credit to Pledgor, Pledgor
has agreed to execute this Agreement and, pursuant hereto, pledge all of the
Shares as security for the full and prompt payment and performance of all
present and future indebtedness, liabilities and obligations of Pledgor under
the Promissory Note, together with any and all costs and expenses, including
reasonable attorneys' fees and expenses, incurred by Pledgee in connection with
enforcing this Agreement and the Promissory Note (all of such indebtedness,
liabilities, obligations, costs and expenses being hereinafter referred to
collectively as the "Indebtedness").
NOW, THEREFORE, in consideration of the Indebtedness and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. The Shares. The Shares are represented by the stock certificates
----------
numbered _____, _____ and _____, which stock certificate(s) are delivered to
Pledgee with this Agreement.
2. Pledge.
------
(a) As security for the full and prompt payment and performance of the
Indebtedness, Pledgor pledges to Pledgee, pursuant to that certain Collateral
Assignment of Certificate, dated of even date herewith, the Shares and grants
Pledgee a lien on and a security interest in the Shares pursuant to the terms
and conditions hereof and under the Colorado Uniform Commercial Code.
(b) If Pledgor shall become entitled to receive or shall receive, in
connection with any of the Shares, any:
9
<PAGE>
(i) stock certificate, including, but without limitation, any
certificate representing a stock dividend or in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of shares, stock split, spin-off, split-off or
such similar corporate reorganization,
(ii) option, warrant or right, whether as an addition to or in
substitution or exchange for any of the Shares, or otherwise, or
(iii) dividend or distribution payable in cash or in property,
including securities issued by an issuer other than the issuer of any of
the Shares,
then Pledgor shall accept the same as Pledgee's agent, in trust for Pledgee, and
shall deliver them forthwith to Pledgee in the exact form received with, as
applicable, Pledgor's endorsement when necessary, or appropriate stock powers
duly executed in blank, to be held by Pledgee, subject to the terms hereof, as
part of the Shares and as security for the Indebtedness.
3. Default.
-------
(a) For purposes of this Agreement, an "Event of Default" shall be
deemed to have occurred if:
(i) Pledgor fails to pay when due any amount payable under the
Promissory Note;
(ii) Pledgor makes or attempts to make an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating Pledgor bankrupt or insolvent; or any order for relief with respect
to Pledgor is entered under the Federal Bankruptcy Code; or Pledgor petitions or
applies to any tribunal for the appointment of a custodian, trustee or receiver
of Pledgor, or commences any proceeding relating to Pledgor under any insolvency
or readjustment of debt; or any such petition or application is filed, or any
such proceeding is commenced, against Pledgor and either (A) Pledgor, by any
act, indicates his or her approval thereof, consent thereto or acquiescence
therein or (B) such petition, application or proceeding is not dismissed within
60 days;
(iii) a judgment in excess of $100,000 is rendered against
Pledgor and, (x) within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged, and (y)
Pledgee, in its sole and absolute discretion, deems the foregoing events to be
an Event of Default; or
(iv) Pledgor violates any provision of this Agreement, the
Promissory Note, or the Stock Purchase Agreement.
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(b) Upon the occurrence of an Event of Default, Pledgee shall have
such rights and remedies with respect to the Shares or any part thereof as are
provided by the Colorado Uniform Commercial Code and such other rights and
remedies with respect to the Shares that Pledgee may have at law or in equity,
under this Agreement, under the Promissory Note and under the Stock Purchase
Agreement, including, without limitation, and in addition to any other rights
and remedies provided elsewhere in this Agreement, the right to:
(i) transfer into Pledgee's name or into the name of Pledgee's
nominee or nominees, all or any portion of the Shares and thereafter (A)
receive all monies paid on or with respect to the Shares, (B) give all
consents, rights, power, privileges and preferences pertaining to the
Shares, (C) exercise any voting or consensual powers, or both, pertaining
to the Shares attributable to such stock or any part thereof, and (D)
otherwise act with respect to the Shares as though Pledgee were the
outright owner thereof, or
(ii) without demand of payment or performance or any other
demand or notice of any kind to or upon Pledgor or any other person (all of
which are, to the extent permitted by law, hereby expressly waived),
realize upon the Shares, or any part thereof, and otherwise sell or dispose
of and deliver the Shares or any part thereof or interest therein, at any
exchange, broker's board or any of Pledgee's offices or elsewhere, at such
prices and on such terms (including, without limitation, a requirement that
any purchaser of all or any part of the Shares purchase the Shares for
investment and without any intention to make a distribution or resale
thereof) as it may deem best, for cash or on credit, with the right to
Pledgee or any purchaser to purchase upon any such sale the whole or any
part of the Shares free of any right of redemption in Pledgor, which right
is hereby expressly waived and released.
(c) The proceeds of any such disposition or other action by Pledgee
shall be applied as follows:
(i) first, to the costs and expenses incurred by Pledgee in
connection therewith or incidental thereto or to the care or safekeeping of
any of the Shares or in any way relating to the rights of the Pledgee
hereunder, including, but not limited to, any reasonable attorneys' fees
and legal expenses;
(ii) second, to the satisfaction of the Indebtedness;
(iii) third, to the payment of any other amounts required by
applicable law; and
(iv) fourth, to Pledgor or any other person or persons legally
entitled thereto to the extent of any surplus proceeds.
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(d) To effectuate the provisions of this Agreement, Pledgor hereby
irrevocably appoints and constitutes Pledgee as its true and lawful attorney
with full power of substitution to complete and fill in any blank endorsements
and resignations, to file the same and to take such further action as Pledgee
may deem necessary to exercise all of its right, title and interest in the
Shares, whether or not such resignation or transfer is affected. The power of
attorney appointment made in this paragraph, being coupled with an interest,
shall be deemed irrevocable until full and complete payment and performance of
the Indebtedness.
4. Representations and Warranties. Pledgor represents and warrants that
------------------------------
upon delivery of the Shares to Pledgee this Agreement shall create a valid first
lien upon, and a perfected security interest in, the Shares and the proceeds
thereof, subject to no prior security interest, lien, charge, encumbrance or
agreement purporting to grant to any third party a security interest in the
Shares.
5. Covenants.
---------
(a) Pledgor covenants and agrees that it will, at its own expense,
defend Pledgee's right, title and interest in and to the Shares against the
claims of any person, firm, association, corporation, partnership, limited
liability company or any other entity, incorporated or otherwise.
(b) Pledgor covenants and agrees that, until the full and complete
satisfaction of the Indebtedness, Pledgor will not, without Pledgee's prior
written consent:
(i) Sell, assign, transfer, hypothecate, convey or otherwise
dispose of any of the Shares or any interest therein; or
(ii) Create, incur or permit to exist any pledge, mortgage,
lien, charge, encumbrance or any security interest whatsoever in or with
respect to any of the Shares or the proceeds thereof, other than that
created hereby.
6. Voting Rights. Pledgor agrees that during the period that Pledgee
-------------
holds and possesses the Shares pursuant to this Agreement, Pledgee shall have
the right to vote the Shares on all matters on which such Shares are entitled to
vote.
7. Cooperative Actions. Pledgor shall promptly execute and deliver to
-------------------
Pledgee any and all documents and notices, whether written or otherwise, with
respect to the Shares, and do such further acts and things as Pledgee may
reasonably request to effect the purposes of this Agreement, including, without
limitation, promptly delivering to Pledgee any and all proxy statements received
by Pledgor with respect to the Shares.
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8. Delivery of Shares. Upon full and complete payment and performance of
------------------
the Indebtedness, Pledgee shall deliver the Shares to Pledgor, together with
duly executed documents of conveyance, and this Agreement shall terminate.
9. Miscellaneous.
-------------
(a) Beyond the exercise of reasonable care to assure the safe custody
of the Shares while held hereunder, Pledgee shall have no duty or liability to
preserve rights pertaining thereto and shall be relieved of all responsibility
for the Shares upon surrendering them or tendering surrender of them to Pledgor.
(b) No course of dealing between Pledgor and Pledgee, nor any failure
to exercise, nor any delay in exercising, any right, power or privilege of
Pledgee hereunder or under the Promissory Note or any other agreement relating
thereto shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
(c) The rights and remedies provided herein and in the Promissory
Note and in all other agreements, instruments and documents delivered pursuant
to or in connection with the Indebtedness are cumulative, and are in addition to
and not exclusive of any rights or remedies provided by law, including, but
without limitation, the rights and remedies of a secured party under the
Colorado Uniform Commercial Code. This Agreement shall remain valid and
enforceable notwithstanding (i) any release of any other collateral or security
for or any person or entity liable on the Indebtedness, (ii) any waiver of any
of the rights and remedies of Pledgee against Pledgor or any other person, (iii)
the amendment, impairment or invalidity of the Promissory Note, or any other
agreement or instrument securing or otherwise pertaining to the Indebtedness, or
any part thereof, or (iv) any extension, increase, decrease or other
modification of the Indebtedness.
(d) The provisions of this Agreement are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision or part thereof in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction or any other
clause or provision in this Agreement in any jurisdiction.
(e) Any notice required or permitted to be given under this Agreement
shall be in writing and deemed given and received when (i) delivered in person,
(ii) deposited with a carrier for delivery on the next business day, or (iii)
sent by facsimile transmission to the party to receive such notice at the
following address or facsimile number or at such other address or facsimile
number as such party shall designate in writing to the other parties in
accordance with this paragraph:
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If to Pledgor: ___________________
___________________
___________________
If to Pledgee: The Erie County Investment Co.
601 Corporate Circle
Golden, Colorado 80401
Facsimile No.: (303) 384-0223
(f) Pledgee may assign or otherwise transfer or convey this Agreement
without the prior written consent of Pledgor. This Agreement shall be binding on
Pledgor and its successors and permitted assigns and shall inure to the benefit
of Pledgee and its successors and assigns. This Agreement and any obligations
hereunder may not be assigned by Pledgor. This Agreement may only be amended by
a writing duly executed by the parties hereto.
(g) This Agreement shall be governed by and construed in accordance
with the law of the State of Colorado.
(h) The section headings in this Agreement are for convenience of
reference only, and shall not be used to interpret or construe this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed this Agreement on the date first above written.
PLEDGOR:
___________________________________
PLEDGEE:
THE ERIE COUNTY INVESTMENT CO.
By:________________________________
Name:______________________________
Title:_____________________________
14
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THE ERIE COUNTY INVESTMENT CO.
STOCK PURCHASE AGREEMENT
EXHIBIT C
15
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COLLATERAL ASSIGNMENT OF CERTIFICATE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, ___________________ ("Assignor") does, subject to the
terms and conditions of that certain Stock Pledge Agreement, dated as of the
date hereof, by and between Assignor and Assignee (as hereinafter defined),
hereby assign, transfer and set over unto THE ERIE COUNTY INVESTMENT CO., an
Ohio corporation (the "Assignee"), all of Assignor's right, title and interest
in and to _____ shares of the common stock, par value $____ per share, of Good
Times Restaurants, Inc., a ________ corporation, represented by certificate(s)
numbered _____, which certificates in original form are attached hereto.
IN WITNESS WHEREOF, this Assignment has been executed and delivered as of
the 1st day of March, 1998.
ASSIGNOR:
_____________________________________________
Name (print): _______________________________
16
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THE ERIE COUNTY INVESTMENT CO.
STOCK PURCHASE AGREEMENT
EXHIBIT D
17
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ASSIGNMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, THE ERIE COUNTY INVESTMENT CO., an Ohio corporation ("Assignor"),
does hereby assign, transfer and set over unto ____________ ("Assignee"), all of
Assignor's right, title and interest in and to _____ shares of the common stock
of Good Times Restaurants, Inc. (the "Shares"). The Shares are represented by
certificate(s) numbered ______________, which certificates in original form are
attached hereto.
IN WITNESS WHEREOF, this Assignment has been executed and delivered as of
this 1st day of March, 1998.
ASSIGNOR: THE ERIE COUNTY INVESTMENT CO.
By: ___________________________________
Title: __________________________________
18
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THE ERIE COUNTY INVESTMENT CO.
STOCK PURCHASE AGREEMENT
EXHIBIT E
19
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THE ERIE COUNTY INVESTMENT CO.
601 Corporate Circle
Golden, Colorado 80401
[DATE]
Good Times Restaurants, Inc.
____________________________
____________________________
____________________________
RE: VOTING RIGHTS ASSOCIATED WITH SHARES OF GOOD TIMES OWNED BY ERIE
Dear ___________:
The Erie County Investment Co. ("Erie") owns ____ shares of Good Times
Restaurants, Inc. ("Good Times") common stock, par value $.001 per share (the
"Common Stock"). This letter is to advise you that, pursuant to a stock purchase
plan (the "Plan") adopted by Erie for the benefit of its employees, Erie sold a
total of ___ shares of Common Stock to certain employees of Erie (or one of its
affiliates), as described in more detail on the attached Schedule. Until
employee satisfies all of the payment and other obligations set forth in the
Plan and in the applicable Stock Purchase Agreement and related documents, Erie
will retain the voting rights associated with the shares of Common Stock sold.
Please contact the undersigned if you have any questions regarding the
foregoing.
Very truly yours,
THE ERIE COUNTY INVESTMENT CO.
By:__________________________
Title:_______________________
EMPLOYEE
_____________________________
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SCHEDULE
Name Number of Shares
---- ----------------
21
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EXHIBIT 99.1
Joint Filing Agreement
The undersigned each agree that (i) the Statement on Schedule 13D
relating to the Common Stock, $0.001 par value, of Good Times Restaurants Inc.
is adopted and filed on behalf of each of them, (ii) all future amendments to
such Statement on Schedule 13D will, unless written notice to the contrary is
delivered as described below, be jointly filed on behalf of each of them, and
(iii) the provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of
1934, as amended, apply to each of them. This Agreement may be terminated with
respect to the obligation to jointly file future amendments to such Statement on
Schedule 13D as to any of the undersigned upon such person giving written notice
thereof to each of the other persons signatory hereto, at the principal office
thereof. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which shall together
constitute one instrument.
THE BAILEY COMPANY, a Colorado limited partnership
By: The Erie County Investment Co.,
its general partner
By: /s/ William D. Whitehurst, Vice President
-----------------------------------------
THE ERIE COUNTY INVESTMENT CO.
By: /s/ William D. Whitehurst, Vice President
-----------------------------------------
By: /s/ Paul T. Bailey
-----------------------------------------
Paul T. Bailey
Dated: October 5, 1998
