SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ____________________
Commission File Number: 0-18590
_______
GOOD TIMES RESTAURANTS INC.
_____________________________________________________________________________
(Exact name of small business issuer in its charter)
Nevada 84-1133368
_____________________________________________________________________________
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer
Identification No.)
601 Corporate Circle, Golden, Colorado 80401
_____________________________________________________________________________
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code: (303) 384-1400
______________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
___________________ _____________________________
NONE
______ _____________________________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
_____________________________
(Title of class)
Common Stock Purchase Warrants
______________________________
(Title of class)
Indicate by check X whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
Indicate by check X if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-KSB is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Registrant's revenues for the most recent fiscal year were $13,065,000.
As of December 1 , 1998, the aggregate market value of voting stock held by
non-affiliates was $3,454,585.
As of December 18, 1998, the Registrant had 1,754,991 shares of common stock
outstanding.
Documents Incorporated by Reference:
Incorporated herein by reference are Part III, Items 9 through 12 to the
Registrant's definitive proxy statement to be issued in conjunction with
Registrant's Annual Meeting of Shareholders to be held on January 22, 1999.
Transitional Small Business Disclosure Format Yes _____ No X
PART I
ITEM 1. BUSINESS
Background
Good Times Restaurants Inc. (the "Company") was organized under Nevada
law in 1987 and is the holding company for a wholly-owned subsidiary that is
engaged in the business of developing, owning, operating and franchising
restaurants under the name Good Times Drive Thru Burgers SM. Good Times Drive
Thru BurgersSM restaurants are owned, operated and franchised by the Company's
subsidiary, Good Times Drive Thru Inc. (Good Times Drive Thru BurgersSM and
Good Times Drive Thru Inc. are interchangeably referred to herein as "Good
Times" or "Drive Thru").
Corporate Operations
The Company currently leases approximately 3,350 square feet of space for
its executive offices in Golden, Colorado for approximately $44,000 per year.
The lease is for a one year period expiring in April 1999 with two one-year
options to renew.
The Company is a holding company and its officers are the President and
Chief Executive Officer of the Company, two Vice Presidents and the
Controller, Secretary and Treasurer. Officers of the Company hold the same
position with Drive Thru and all personnel associated with the Company are
employees of Drive Thru.
For 1999 , Drive Thru plans to concentrate its efforts and capital on the
growth of the Good Times restaurant chain in Colorado through additional
company-owned, joint-venture and franchised restaurants.
Good Times
Good Times Drive Thru Inc. is engaged in the operation and development of the
Good Times Drive Thru Burgers(SM) restaurants, featuring extremely fast
service and a limited, high quality menu for drive-through and walk-up
customers. During fiscal 1997 and 1998, five restaurants were developed
featuring a lobby with interior seating. Drive Thru currently operates and
franchises a total of twenty-nine Good Times restaurants of which twenty-eight
are in the State of Colorado, of which twenty-six are located in the Denver
greater metropolitan area, one in Grand Junction and one in Silverthorne.
There is one franchised Good Times restaurant in Boise, Idaho. Six of the
restaurants are company-owned, nine are owned jointly with two separate co-
development partners. Fourteen Good Times restaurants are franchised
restaurants with nine operating in the Denver metropolitan area, one in
Silverthorne, Colorado, one in Grand Junction, Colorado, one in Greeley,
Colorado, one in Longmont, Colorado and one in Boise, Idaho. Good Times is
offering franchises for the development of additional Good Times restaurants.
In fiscal 1997, Drive Thru developed one new franchised restaurant and
two new joint-venture restaurants and began construction on the conversion of
an existing double drive thru restaurant to one with a dining room and 48
seats. The franchised restaurant was developed as a part of an Amoco gas and
convenience store development, comprising 2,000 sq. ft. of restaurant space
and a dining room with drive thru.
In fiscal 1998, Drive Thru developed two new franchised restaurants, one
of which is a conversion of a 1,700 square foot fast food restaurant and one
is a new prototype 2,300 square foot building with 70 seats.
The hamburger fast food market remains intensely competitive with the
major competitors aggressively discounting menu prices, which had an adverse
impact on Drive Thru's sales and operating profits in fiscal 1996. Over the
last two fiscal years, the Company has positioned the concept away from a
price point focus to one based on superior taste, product quality and speed of
service. The Company believes it has an advantage in providing a superior
level of service, quality and overall value based upon consumer research
studies, but has been limited in its ability to effectively advertise and
build awareness of its brand until "critical mass" in restaurant sales are
achieved in the Colorado market for consistent television and radio
advertising. The Company believes it is beginning to reach critical mass.
Beginning in September 1997, Drive Thru initiated a television
advertising campaign focused on building its brand personality, taste
superiority positioning and general awareness and continued the campaign
throughout fiscal 1998. It is management's intent to continue to develop the
concept based upon those attributes important to the quick service restaurant
consumer other than price such as taste, speed and overall value supported by
a highly differentiated brand personality in its advertising.
The Company's objectives for fiscal 1999 are to continue to build
additional company-owned, joint-venture and franchised restaurants in
Colorado. Additionally, the Company will introduce limited new menu offerings
and advertise what it believes to be competitive price points for its
products.
Colorado is divided into two primary television markets--Denver and
Colorado Springs/Pueblo. It is the Company's intent to fully develop the
Denver market and then develop the Colorado Springs market over the next three
to four years, depending on availability of financing and suitable sites.
Management estimates the Denver market will support 40-50 Good Times
restaurants and the Colorado Springs market will support 8-12 restaurants.
The Concept. Good Times was initially developed as a drive thru only,
limited menu concept featuring high quality products and extremely fast
service, with menu prices 30-40 percent lower than the major hamburger chains.
The price advantage once held has diminished due to continued aggressive price
discounting by the major chains.
Management has focused the development of the concept based on developing
strong differentiation in the taste of its products (with a more distinctive
taste profile), the speed of service, the overall value and a differentiated
brand personality built through its advertising and employee service methods.
While the double drive thru format performs well in select locations, it
is management's opinion that the perceived value for its products and sales
producing capacity of sites may be enhanced with the addition of small, highly
efficient dining rooms, accessing consumer occasions not available with drive
thru only.
The Company plans to develop additional double drive thru restaurants and
restaurants with seating and a single drive thru lane in fiscal 1999,
depending on individual site dynamics and the best format for the highest
return on investment. Good Times' food preparation and service systems
deliver a quality meal with a faster order-delivery response time and have the
capacity to reach the same sales levels as traditional hamburger chains.
Typically, a customer receives an order 30 to 45 seconds after their vehicle
reaches the take-out window during peak order periods. The simplicity of the
menu, the relatively low capital investment, and the efficient design of the
building and equipment allow Good Times to sell its products at comparable or
lower prices than the major fast food hamburger chains except during short
term discount promotions by the competition. The limited menu allows maximum
attention to be devoted to food quality and speed of service.
Menu. The menu of a Good Times restaurant is limited to hamburgers,
cheeseburgers, chicken sandwiches, french fries, onion rings, milkshakes and
soft drinks. Each sandwich is made to order at the time the customer places
the order and is not pre-prepared.
The hamburger patty is 4.0 ounces of specially formulated 100% USDA
approved beef, served on a 4 1/4-inch sesame seed bun. Hamburgers and
cheeseburgers are garnished with fresh lettuce, fresh sliced sweet red onions,
mayonnaise, mustard, ketchup, pickles and fresh sliced tomato. The cheese is
100% pure sharp American thickly sliced. The chicken sandwiches include a
spiced, battered whole muscle breast patty and a grilled spicy breast patty,
both served with mayonnaise, lettuce and tomato. Equipment has been automated
and equipped with compensating computers to deliver a consistent product and
minimize the skills required of employees.
As of December 1, 1998, the price of the deluxe Good Times hamburger was
$1.49, the deluxe cheeseburger $1.79, the deluxe double cheeseburger $2.69,
the deluxe bacon-cheeseburger $2.49, the chicken sandwiches $2.69, the chicken
club sandwich $3.19, french fries $.89 and $1.09, onion rings $1.59 and a 22-
ounce soft drink $.99.
Good Times restaurants are generally open 14 to 16 hours per day, seven
days a week, for lunch, dinner and late-night snacks and meals.
The Building. The existing double drive thru Good Times restaurants are
less than one-third the size of the typical restaurants of the four largest
hamburger chains and require approximately one-half the land area based upon
management's experience in the restaurant industry and research reports. The
current standard Good Times restaurant building is a double drive-through and
walk-up style structure containing approximately 880 square feet built on
18,000 to 30,000 square-foot lots. Most existing restaurants utilize a double
drive-thru concept that allows simultaneous service from opposite sides of the
restaurant and one or two walk-up windows with a patio for outdoor eating.
The Company has developed a new 2,300 square foot prototype building with a
dining room and 70 seats and a 1,000 square foot, 48 seat addition for
existing restaurants that may be used on select locations.
Management of Drive Thru believes that the building form, design and
aesthetic appeal address key issues and concerns of the consumer: speed,
cleanliness, security, eye appeal and an identifiable brand image. The
exterior consists of a cream-colored dry-vit system with an enclosed glass
vestibule at the front for walk-up service. A brightly lit multi-colored
fascia band runs the length of both sides of the building in addition to
product and Good Times proprietary signage. The rest rooms and walk-in
refrigerators are modular components of the building. The double drive thru
buildings are transportable and therefore can be moved from an unsuccessful
site to a better location. Management does extensive site evaluation and
expects a minimum number of buildings will ever have to be moved, however one
under-performing Good Times unit was relocated in 1996 and one in 1997.
Plan of Operation. The first objective of Drive Thru has been to develop
critical mass in the Denver television market (referred to as the Denver ADI
which includes Boulder, Greeley, Longmont and other communities in northern
Colorado.) In the past, Management believed that, in Denver, critical mass
required approximately 20 restaurants to be operating. However, increased
advertising by its competitors and significant increases in the cost of
advertising in Denver has caused management to reevaluate critical mass as
requiring 32 to 35 Good Times restaurants in the Denver ADI.
As of December 18, 1998, the Company operated fifteen company-owned and
joint-venture Good Times restaurants and had thirteen franchised restaurants
open in Colorado and one in Boise, Idaho.
<TABLE>
December 15, 1997 December 15, 1998
<S> <C> <C>
Company-owned restaurants 8 6
Joint venture restaurants 9 9
Franchise operated restaurants 11 14
__ __
Total restaurants 28 29
</TABLE>
During fiscal 1998, Drive Thru opened one company-owned restaurant and
two franchised restaurants. One company-owned restaurant was closed in March
of 1998 due to the condemnation of the development on which it was located.
The building and equipment are currently in storage and will be moved to a new
site in the Spring of 1999. One company-owned restaurant was sold to a
franchisee in September 1998.
Management anticipates that Drive Thru and its franchisees will develop a
total of four to seven Good Times units in the Denver ADI in 1999.
Drive Thru's ongoing objective is to continue to increase average
restaurant sales through increased customer counts in each daypart (lunch,
dinner and late-night), selective menu and price promotions and effective
marketing of Good Times competitive attributes of high quality products, quick
service and overall value. The Company anticipates modest price increases in
1999 in anticipation of higher hourly wages and to reduce cost of sales.
Operations and Management. Good Times has defined three ingredients
essential to its success: (i) consistent delivery of high quality, great
tasting products; (ii) superior speed of service; and (iii) competitive value
pricing. The order system at each Good Times restaurant is equipped with an
internal timing device that displays and records the time each order takes to
prepare and deliver. The total transaction time for the delivery of food at
the window is approximately 30 to 45 seconds during peak times.
Each Good Times unit employs a general manager, one to two assistant
managers and approximately 25 employees, most of whom work part-time during
three shifts. Operating systems and training materials are utilized to ensure
consistent performance to Good Times' standards. An eight to ten week
training program is utilized to train restaurant managers on all phases of the
operation. Ongoing training is provided as necessary. Management of Drive
Thru believes that incentive compensation of its restaurant managers is
essential to the success of its business. Accordingly, in addition to a
salary, managerial employees may be paid a bonus based upon proficiency in
meeting financial and performance objectives. Drive Thru provides a medical
and dental insurance plan to management with a portion of the cost contributed
by the participating employee.
Drive Thru presently purchases its products from independent food
processors and distributors and does not anticipate any difficulty in
continuing to obtain an adequate quantity of food products of acceptable
quality and at acceptable prices.
Financial and management control is maintained through the use of
automated data processing and centralized accounting and management
information systems which are provided by the Company. Restaurant managers
forward sales reports, vendor invoices, payroll data and other operating
information to Drive Thru's headquarters daily via an automated "polling" of
each restaurant's point-of-sale systems. Management receives daily, weekly
and monthly reports identifying food, labor and operating expenses and other
significant indicators of restaurant performance. Management of Drive Thru
believes that such reporting requirements enhance its ability to control and
manage its operations.
Drive Thru employs a full-time Director of Human Resources whose
principal responsibility is to recruit and coordinate the training of
management personnel required for continued expansion of Good Times units in
the Denver ADI.
Marketing and Advertising. Prior to fiscal 1998, marketing activities
focused on radio advertising and restaurant level promotions in the immediate
trade area around each location. The Company implemented a consistent
television advertising campaign in fiscal 1998 and anticipates increasing its
level of spending on television advertising in fiscal 1999.
The marketing efforts of Good Times focus on building "brand awareness"
of Good Times' attributes for the best tasting, unique products within the
context of ad campaigns that are "irreverent, funny and full of surprises",
combined with specific product messages. Supported by consumer research,
Drive Thru believes that it has a better tasting product, delivered to the
customer faster, at an equal or better value than its competitors.
Signage is one of the most important elements for establishing identity
at each location. The Good Times restaurant sign package that has been
developed offers flexibility based on local codes, site layout and surrounding
property.
Franchise Program. Drive Thru has prepared prototype area rights and
franchise agreements, a Uniform Franchise Offering Circular and advertising
material to be utilized in soliciting prospective franchisees. Drive Thru
seeks to attract franchisees having experience as restaurant operators, that
are well-capitalized and have demonstrated the ability to develop multi-unit
franchises. Drive Thru will carefully review sites selected for franchises
and will monitor performance of franchise units. Good Times is currently
working with potential franchisees only for development of units in Colorado.
Drive Thru estimates that it will cost a franchisee on average
approximately $475,000 to $575,000 to open a Good Times double drive thru
restaurant, including pre-opening costs and working capital, assuming the land
is leased. A franchisee typically will pay a royalty of 4% of net sales, an
advertising fee of at least 0.5% of net sales, plus participation in regional
or national advertising up to 5% of net sales, and initial development and
franchise fees aggregating $20,000 per unit. Among the services and materials
which Drive Thru provides to franchisees are site selection assistance, plans
and specifications for construction of the Good Times drive thru restaurants,
an operating manual which includes product specifications and quality control
procedures, training, on-site pre-opening supervision and advice from time to
time relating to operation of the franchised restaurant.
Drive Thru has entered into six franchise agreements in the Denver ADI.
Twelve franchise restaurants and nine joint-venture restaurants are operating
under the development agreements for the Denver ADI. One franchise
restaurant in Grand Junction, Colorado has been open pursuant to the
development agreement for the Western Slope of Colorado. One joint-venture
restaurant opened in Boise, Idaho in 1995, and effective November 1, 1996,
that restaurant was sold as a franchise restaurant.
Operations to Date. The first Good Times prototype unit was opened in
Boulder, Colorado, in September 1987 and Drive Thru grew slowly to seven
restaurants by March, 1993, two of which were franchised restaurants.
Thirteen additional restaurants were developed by December 31, 1994, seven of
which were joint-ventured, two were franchised, and four were company-owned.
In calendar 1995, Drive Thru opened six new restaurants, including one
company-owned, two joint-ventured and one franchised restaurants in the Denver
ADI, one franchised unit in Grand Junction, Colorado and one joint-ventured
unit in Boise, Idaho. In calendar 1996, Drive Thru opened one franchised
unit, converted the Boise, Idaho unit to a franchise and closed two under-
performing restaurants. In calendar 1997, Drive Thru opened one company-owned
unit, two joint-ventured restaurants and one franchised restaurant. In
calendar 1998, Drive Thru opened two franchised restaurants.
Good Times opened two restaurants in June 1995 and two restaurants in
August 1995 in Las Vegas, Nevada. These units were previously owned by a
franchisee of Rally's Hamburgers, Inc. However, Drive Thru experienced
unexpected difficulty in securing suitable locations on which it could develop
new units at reasonable cost in the Las Vegas market and realized that
critical mass could not be achieved within an acceptable period of time.
Since the four units would continue to operate at a significant loss until
Drive Thru could effectively advertise in the Las Vegas market, management
decided to cease operations in Las Vegas and sell the stores. The four Las
Vegas units were closed on October 31, 1995 and sold as of November 30, 1995.
Employees. At December 1, 1998, Drive Thru employed approximately 345
persons (including approximately 287 hourly restaurant employees), of whom 21
were management and staff personnel and 37 were restaurant management. Drive
Thru considers its employee relations to be good. None of its employees is
covered by a collective bargaining agreement.
Round The Corner
On September 30, 1995, the Company completed the sale of Round The Corner
Restaurants, Inc. ("RTC") to Hot Concepts in consideration for $100,000 in
cash, a note in the amount of $291,394, and the assumption of all of RTC's
liabilities. The sale of RTC by the Company resulted in a deferred gain of
$66,000. The Company was notified in August, 1996 of financial difficulties
at RTC and of its Chapter 11 bankruptcy filing in October, 1996. In addition
to the write-off of the note receivable, the Company recorded a reserve of
$333,000 for potential losses associated with its guarantee of two restaurant
leases and a note payable, the reserve was increased by $217,000 in the period
ended September 30, 1998 due to one of the lease guarantees. One of such
restaurants is being operated by the Company and one has been subleased. The
Company entered into a settlement agreement with RTC whereby RTC paid the
Company $300,000 for the settlement of all of the Company's claims against
RTC.
Bailey Preferred Stock Investment
On May 31, 1996, the Company entered into a Series A Convertible
Preferred Stock Purchase Agreement with The Bailey Company ("TBC") for the
purchase by TBC of one million shares of Series A Convertible Preferred Stock.
The aggregate purchase price for such shares was $1 million.
Effective August 31, 1998, TBC converted all of the Convertible Preferred
Stock into 426,667 shares of Common Stock of the Company. Additionally under
a separate agreement, TBC and its controlling owner agreed to guarantee up to
$6 million of future mortgage debt obligations of the Company for the
development of new restaurants.
Government Regulation
Each of the Good Times restaurants is subject to the regulations of
various health, sanitation, safety and fire agencies in the jurisdiction in
which the restaurant is located. Difficulties or failures in obtaining the
required licenses or approvals could delay or prevent the opening of a new
Good Times restaurant. Federal and state environmental regulations have not
had a material effect on Good Times' operations. More stringent and varied
requirements of local governmental bodies with respect to zoning, land use and
environmental factors could delay or prevent development of new restaurants in
particular locations. The Company and Drive Thru are subject to the Fair
Labor Standards Act which governs such matters as minimum wages, overtime and
other working conditions. In addition, the Company and Drive Thru are subject
to the Americans With Disabilities Act (the "ADA") which requires restaurants
and other facilities open to the public to provide for access and use of
facilities by the handicapped. Management believes that the Company and Drive
Thru are in compliance with the ADA.
The Company and Drive Thru are also subject to federal and state laws
regulating franchise operations, which vary from registration and disclosure
requirements in the offer and sale of franchises to the application of
statutory standards regulating franchise relationships.
Competition
The restaurant industry, including the fast food segment, is highly
competitive. Drive Thru competes with a large number of other hamburger
oriented, fast food restaurants in the areas in which it operates. Many of
these restaurants are owned and operated by regional and national restaurant
chains, many of which have greater financial resources and experience than
does the Company. Restaurant companies that currently compete with Good Times
in the Denver market include McDonald's, Burger King, Wendy's and Carl's Jr.
Double drive through restaurant chains such as Rally's Hamburgers, Inc. and
Checker's Drive-In Restaurants, Inc., currently operating a total of over 800
double drive through restaurants in various markets in the United States, are
not currently operating in Colorado. Management of Drive Thru believes that
such double drive through restaurant chains will not expand into Colorado;
however, such possibility exists and would result in significant competition
for Drive Thru.
Management of Drive Thru believes that it may have a competitive
advantage in terms of quality of product and price-value compared to
traditional fast food hamburger chains. However, price discounting by the
major fast food hamburger chains in fiscal 1996 and 1997 had a detrimental
effect on Good Times' sales. Early development of its double drive through
concept in Colorado has given Drive Thru an advantage over other double drive
through chains that may seek to expand into Colorado because of Good Times'
brand awareness and present restaurant locations. In addition, management of
Drive Thru believes Drive Thru has a competitive advantage in the areas of
purchasing and distribution, financial systems, marketing, construction, site
selection, quality assurance and training. Nevertheless, Drive Thru may be at
a competitive disadvantage with other restaurant chains with greater name
recognition and marketing capability. Furthermore, most of Drive Thru's
competitors in the fast-food business operate more restaurants, have been
established longer and have greater financial resources and name recognition
than Good Times. There is also active competition for management personnel,
as well as for attractive commercial real estate sites suitable for
restaurants.
Trademarks - Colorado
Drive Thru has registered its mark "Good Times! Drive Thru Burgers"SM in
the state of Colorado and will endeavor to register such mark in each state it
or a franchisee intends to open a restaurant. At present, Drive Thru relies
solely upon common law trademark protection and state registration. Such
reliance will not protect Drive Thru against a prior user of the mark and, if
prior use is established, Drive Thru may not be able to use the mark in the
area of such use. While the mark is important to Drive Thru, unavailability
of the mark in any particular geographic area into which it desires to expand
operations may not necessarily be materially adverse. Such name non-
availability may, however, preclude the economies and other advantages which
may be available through nationwide or regional marketing and advertising.
ITEM 2. PROPERTIES
The Company currently leases approximately 3,350 square feet of space for
its executive offices in Golden, Colorado for approximately $44,000 per year.
The lease is for successive one year periods expiring in April, 2001. The
space is leased from The Bailey Company at their corporate headquarters.
As of December 18, 1998, Drive Thru has an ownership interest in 15 Good
Times units, all of which are located in Colorado. Nine of these restaurants
are held in limited partnerships of which Drive Thru is the general partner
and has a 50% interest in eight of the partnership restaurants and a 78%
interest in one partnership restaurant. There are six Good Times units
wholly-owned by Drive Thru. One restaurant building and equipment package was
moved from an operating site in fiscal 1998 due to condemnation of the
development. It is anticipated that the restaurant and equipment will be
relocated to a new site in the Spring of 1999.
Each of the existing Good Times restaurants is a free-standing structure
containing approximately 880 square feet (except for two conversions of other
fast food restaurants that are 1,700-1,900 square feet, one conversion of a
double drive thru building to one with seating of 1,900 square feet and one
prototype 2,300 square foot building with seating) situated on lots of
approximately 18,000 to 30,000 square feet. The land is leased at all of
these locations. Drive Thru intends to enter into ground leases wherever
possible. However, there is no assurance that leasing will be available for
desirable sites and Drive Thru may be required to purchase such sites. In the
event financing is not available for such acquisitions, Drive Thru may have to
utilize cash that could otherwise be used to develop additional Good Times
restaurants. In such event, Drive Thru will endeavor to enter into
sale/leaseback transactions or mortgage financing for such real estate.
All of the restaurants are regularly maintained by the Company's repair
and maintenance staff as well as by outside contractors, when necessary.
Management believes that all of its properties are in good condition and that
there will not be a need for significant capital expenditures to maintain the
operational and aesthetic integrity of the properties for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings. The
Company is subject to various lawsuits in the normal course of business.
These lawsuits are not expected to have a material impact to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's outstanding shares of Common Stock (the "Common Stock") and
Common Stock Purchase Warrants (the "Warrants") are traded on the over-the-
counter market. The following table sets forth the quarterly high and low bid
prices as reported by the National Quotation Bureau Incorporated and NASDAQ
from December 31, 1996 through September 30, 1998, as adjusted for the one-
for-five reverse stock split in February 1998. The quotations represent
prices quoted between dealers and do not include commissions, mark-ups or
mark-downs and thus may not represent actual transactions.
<TABLE>
Common Stock Series A Warrants Series B Warrants
Bid Prices Bid Prices Bid Prices
Quarter Ended High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996 2.80 1.60 .30 .15 .30 .15
March 31, 1997 2.80 1.90 .30 .30 .30 .30
June 30, 1997 3.15 1.90 .30 .30 .30 .30
September 30, 1997 2.20 1.90 .30 .30 .30 .30
December 31, 1997 1.90 1.90 .16 .28 .31 .63
March 31, 1998 3.50 3.41 .16 .28 .16 .38
June 30, 1998 2.56 2.56 .22 .28 .22 .38
September 30, 1998 2.50 2.31 .22 .28 .22 .38
</TABLE>
As of December 1, 1998, there were approximately 387 holders of record of
Common Stock and 125 holders of Warrants. However, management estimates that
there are not fewer than 1,550 beneficial owners of the Company's Common
Stock. The NASDAQ symbols for the Common Stock and the outstanding Series A
warrants and Series B warrants are "GTIM", "GTIMW," and "GTIMZ", respectively.
In January 1997, the Company gave notice to the holders of the Series A
and Series B warrants that the expiration date of such warrants had been
extended from February 10, 1997 to February 10, 1999 and the exercise price
of such warrants had been changed to $10.00 per share. The Company expects to
extend the expiration date of these warrants.
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company's ability
to pay future dividends will necessarily depend upon its earnings and
financial condition. However, since restaurant development is capital
intensive, it is the intention of the Company to retain earnings, if any, for
that purpose.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE COMPANY, GOOD TIMES AND RTC
Year 2000 Compliance. Computer programs or other embedded technology that
have been written using two digits (rather than four) to define the applicable
year and that have time-sensitive logic may recognize a date using "00" as the
Year 1900 rather than the Year 2000, which could result in widespread
miscalculations or system failures. Both information technology ("IT")
systems and non-IT systems using embedded technology may be affected by the
Year 2000.
The Company has initiated an enterprise-wide program to prepare the
Company's IT systems and applications for the Year 2000, The Company has
completed the assessment phase of its Year 2000 program and expects to incur
internal staff costs as well as consulting and other expenses related to the
Company's Year 2000 program. In addition, the Company has not completed the
process of verification of whether vendors and suppliers with which the
Company has material relationships are Year 2000 compliant, however the
Company has contacted its major food supplier and has been told that such
supplier has addressed the Year 2000 issue in connection with its business
operations. If the Company and such third parties are unable to address Year
2000 issues in a timely manner, it could result in material financial risk to
the Company, including the loss of revenue and substantial unanticipated
costs. Accordingly, the Company plans to devote all resources necessary to
resolve significant Year 2000 issues in a timely manner.
Expenditures for Year 2000 issues are currently estimated to be $125,000
in fiscal 1999. The Company however is not able to determine the total costs
for its Year 2000 program or whether the Year 2000 will have a material effect
on the Company's financial condition, results of operations or cash flows.
The following selected financial data is derived from the companies'
historical financial statements and is qualified in its entirety by such
financial statements which are included in Item 7.
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
The following presents certain historical financial information of the
Company. This financial information includes the combined operations of the
Company and Drive Thru for the fiscal years ended September 30, 1997 and
September 30, 1998.
<TABLE>
Year Ended
September 30,
_____________
Operating Data: 1997 1998
____ ____
<S> <C> <C>
Net Revenues $ 11,865,000 $13,065,000
Restaurant Operating Costs:
Food and paper costs 4,286,000 4,537,000
Labor, occupancy and other 5,672,000 5,820,000
Depreciation and amortization 667,000 698,000
___________ ___________
Total restaurant operating costs 10,625,000 11,055,000
Income From Restaurant Operations 1,240,000 2,010,000
Other Operating Expenses:
Selling, General and Administrative
Expense 1,713,000 1,839,000
Loss from operating RTC stores 94,000 31,000
Loss (Gain) on disposal of restaurants
and equipment 55,000 (225,000)
Loss from lease guarantees 228,000 217,000
___________ __________
Total Other Operating Expenses 2,090,000 1,862,000
Income (Loss) from Operations (850,000) 148,000
Other Income and (Expenses)
Minority income (expense), net (120,000) (266,000)
Interest, net (34,000) (51,000)
Other, net (97,000) (57,000)
___________ __________
Total other income and (expenses) (251,000) (374,000)
Net Loss $(1,101,000 $(226,000)
=========== ==========
Preferred Stock Dividends in Arrears (65,000) (40,000)
___________ __________
Net Loss Attributable to
Common Shareholders (1,166,000) (266,000)
=========== ==========
Net Loss Per Common Share $ (.91) $ (.20)
=========== ==========
Weighted Average Shares Outstanding 1,275,237 1,345,156
=========== ==========
September 30,
_____________
1997 1998
____ ____
Balance Sheet Data:
Working Capital (deficit) $ (534,000) $ (114,000)
Total assets 7,192,000 6,578,000
Minority Interest 1,619,000 1,465,000
Long-term debt and
long-term capital leases 546,000 463,000
Stockholders' equity $ 2,893,000 $2,682,000
</TABLE>
This Form 10-KSB contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended. Also, documents subsequently filed by the Company with the
commission and incorporated herein by reference may contain forward-looking
statements. The Company cautions investors that any forward-looking
statements made by the Company are not guarantees of future performance and
that actual results could differ materially from those in the forward-looking
statements as a result of various factors, including but not limited to the
following:
(I) The Company competes with numerous well established competitors
who have substantially greater financial resources and longer operating
histories than the Company. Competitors have increasingly offered selected
food items and combination meals, including hamburgers, at discounted prices,
and continued discounting by competitors may adversely affect revenues and
profitability of Company restaurants.
(II) The Company may be negatively impacted if the Company is unable
to sustain same store sales increases that were experienced during the last
two quarters of Fiscal 1998. Sales increases will be dependent, among other
things, on the success of Company advertising and promotion of new and
existing menu items. No assurances can be given that such advertising and
promotions will in fact be successful.
The Company may also be negatively impacted by other factors common to the
restaurant industry such as: changes in consumer tastes away from red meat and
fried foods; increases in the cost of food, paper, labor, health care,
workers' compensation or energy; an inadequate number of hourly paid
employees; and/or decreases in the availability of affordable capital
resources. The Company cautions the reader that such risk factors are not
exhaustive, particularly with
respect to future filings.
Results of Operations
The Company sold RTC as of September 30, 1995. In October 1996, the
purchaser of RTC declared bankruptcy. The following discussion and analysis
includes expenses and liabilities related to the Company's guarantee of
certain RTC leases.
Fiscal Years 1998 and 1997
Net Revenues. Net revenues for the year ended September 30, 1998
increased $1,200,000 (10.1%) to $13,065,000 from $11,865,000 for the year
ended September 30, 1997. Net revenues increased $1,144,000 due to the opening
of one company-owned restaurant in November 1997 and to two restaurants that
were not open for the full prior year period. Net revenues decreased $440,000
from one company-owned restaurant that was closed in March 1998 due to
condemnation of the development (the restaurant will be relocated to a new
site), and one company-owned restaurant that was sold to a franchisee in
September 1998. Net revenues increased $465,000 or 4.8% during fiscal 1998
from same store net revenues for restaurants that have been open for the full
fiscal 1997 and 1998 periods. The increase in same store net revenues is
attributable to menu price increases taken since February 1997 and the
initiation of a television advertising campaign in September 1997. Net
revenues from Drive Thru and its franchisees were $20,560,000 for the fiscal
year ended September 30, 1998 compared to $18,700,000 for the prior fiscal
year.
A new television advertising campaign was initiated in September 1998
featuring the introduction of a new onion ring product. Subsequent to
September 30, 1998, same store net restaurant sales increased 23% and 21% for
October 1998 and November 1998 respectively, from the same prior year periods.
Food and Paper Costs. For the year ended September 30, 1998, Drive
Thru's food and paper costs were 35.6% of net restaurant sales compared to
36.8% of net restaurant sales in fiscal 1997. The decrease in Drive Thru's
food and paper costs is primarily attributable to cumulative menu price
increases of 14.4% taken during the last eight months of the period ended
September 30, 1997, and increases of 3.5% taken in the last 4 months of the
period ended September 30, 1998, with only nominal increases in food and paper
costs.
Income From Restaurant Operations. For the year ended September 30, 1998
Drive Thru's income from restaurant operations was $2,010,000 compared to
$1,240,000 for the year ended September 30, 1997.
Drive Thru's income from restaurant operations as a percentage of net
restaurant revenues was 15.8% for the year ended September 30, 1998, an
increase from 10.6% for the same prior year period. The increase in income
from restaurant operations is attributable to menu price increases as well as
management's focus on improving restaurant labor and operating efficiencies
and expenses. Cash flow from restaurant operations (income from restaurant
operations plus depreciation, opening expenses and accretion of deferred rent)
as a percentage of net restaurant sales was 21.8% for the year ended September
30, 1998 compared to 17.5% for the year ended September 30, 1997. Income and
cash flow from restaurant operations include regional supervision, training
and recruiting expenses of $354,000 for the year ended September 30, 1997 and
$304,000 for the year ended September 30, 1998. Franchise development fees
and royalties increased from $213,000 in fiscal 1997 to $306,000 in fiscal
1998.
Income (Loss) from Operations. Drive Thru's income from operations
improved to $148,000 in fiscal 1998 compared to a loss from operations of
($850,000) in fiscal 1997. Income from operations for the year ended
September 30, 1998 includes a gain of $184,000 from the sale of one company-
owned restaurant to a franchisee in September 1998. Income from operations
was negatively impacted during fiscal 1998 by $217,000 of expenses associated
with one RTC lease guarantee and $31,000 of expenses associated with the
operation by Good Times of one RTC restaurant, compared to $94,000 during
fiscal 1997. During fiscal 1998, the Company negotiated the termination of
one RTC lease, entered into a sublease for one RTC lease and continues to
operate the third RTC restaurant. Selling, general and administrative
expenses increased from $1,713,000 (14.4% of net revenues) in the year ended
September 30, 1997 to $1,839,000 (14.1% of net revenues) in the year ended
September 30, 1998. The increase in selling, general and administrative
expenses is attributable to the initiation of television advertising in
September 1997, which increased advertising expense to $800,000 (6.3% of net
restaurant sales) for the year ended September 30, 1998 from $649,000 (5.6%)
for the year ended September 30, 1997.
Net Loss. The net loss for Drive Thru was ($226,000) for the fiscal year
ended September 30, 1998 compared to a net loss of ($1,101,000) for the fiscal
year ended September 30, 1997. Minority interest expense increased $146,000
as a result of improved Income from Restaurant Operations in the joint-venture
restaurants for the year ended September 30, 1998. Net interest expense
increased $17,000 in fiscal 1998 due to a reduction in interest income from
various notes receivable and a reduction in interest earning cash reserves
compared to fiscal 1997.
Liquidity and Capital Resources
As of September 30, 1998, the Company had $768,000 of cash and cash
equivalents on hand. The Company entered into a settlement agreement with RTC
whereby the Company received $300,000 during fiscal 1998. Management
completed the sale of one company-owned Drive Thru restaurant to a franchisee
in September, 1998 for proceeds of $374,000 ($450,000 sale price less a note
receivable of $76,000). The Company's cash balance and cash generated from
operations will be used for increasing the Company's working capital reserves
and for the development of new restaurants. Management believes this will be
sufficient to cover the working capital needs of the Company for the 1999
fiscal year.
During fiscal 1998, the Company executed a commitment letter with Safeco
Credit Company for up to $3,000,000 in mortgage debt financing for the
development of the new prototype restaurants, including the purchase of land
underlying the restaurants. Management is seeking additional debt and lease
financing for the development of additional company-owned double drive thru
restaurants.
Effective August 31, 1998, TBC converted all of the Convertible Preferred
Stock into 426,667 shares of Common Stock of the Company. Additionally under
a separate agreement, TBC and its controlling owner agreed to guarantee up to
$6 million of future mortgage debt obligations of the Company for the
development of new restaurants.
The Company remains contingently liable on one Las Vegas restaurant lease
that has been subleased, and two RTC restaurant leases, one of which has been
subleased, so management anticipates minimal future losses from RTC or Vegas
lease contingencies. Management also anticipates eliminating its net loss
through improved income from restaurant operations as a result of increasing
sales and improved operating profit margins.
The Company had a working capital deficit of ($114,000). Because
restaurant sales are collected in cash and accounts payable for food and paper
products are paid two to four weeks later, restaurant companies often operate
with working capital deficits. It is anticipated that working capital
deficits will expand as new Drive Thru restaurants are opened.
Net cash provided by operating activities of the Company was $385,000 for
fiscal 1998 compared to $10,000 in fiscal 1997. For fiscal 1998, this was the
result of a net loss of ($226,000) and non-cash reconciling items totaling
$611,000 (comprised principally of depreciation and amortization of $707,000,
minority interest of $266,000, losses associated with lease guarantees of
$217,000 and decreases in operating assets and liabilities totaling $415,000).
Net cash provided by investing activities by the Company in fiscal 1998
was $530,000, which includes the purchase of property and equipment of
$231,000, payments received from RTC bankruptcy settlement agreement of
$300,000 and proceeds from the sale of assets of $532,000. Drive Thru
utilizes all cash provided by investing activities for working capital and for
capital expenditures consisting primarily of expenditures for the development
of new Good Times restaurants and refurbishment of existing restaurants. In
fiscal 1997 Drive Thru developed two joint-venture restaurants. In fiscal
1998 Drive Thru developed one company-owned restaurant.
Net cash used in investing activities by the Company in fiscal 1997 was
$876,000, which included the purchase of property and equipment of $803,000.
Net cash used in financing activities by the Company in fiscal 1998 was
$555,000, which includes principal payments on notes payable and capital
leases of $152,000, borrowings on notes payable and long-term debt of $18,000,
distributions to minority interests in partnerships of $440,000 and
contributions from minority interests in partnerships of $19,000.
Net cash provided by financing activities by the Company in fiscal 1997
was $734,000 which includes principal payments on notes payable and capital
leases of $113,000, borrowings on notes payable and long-term debt of
$200,000, distributions to minority interests in partnerships of $283,000 and
contributions from minority interests in partnerships of $180,000 and proceeds
from the sale of Preferred Stock of $750,000.
Neither the Company nor Drive Thru currently have any bank lines of
credit.
The Company intends to use its cash resources and cash generated from
operations for working capital, and for the development of new company-owned
and joint-venture restaurants in combination with additional debt financing.
Management intends to continue to develop Good Times restaurants through
franchising and joint development activities with existing and new
franchisees.
Impact of Recently Issued Accounting Standards
In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income and SFAS No. 131, Disclosures About Segments
of an Enterprise and Related Information. SFAS No. 130 establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and distributions
to owners. Among other disclosures, SFAS No. 130 requires that all items that
are required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that displays
with the same prominence as other financial statements. SFAS No. 131
supersedes SFAS No.14, "Financial Reporting for Segments of a Business
Enterprise." SFAS No. 131 establishes standards on the way that public
companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It
also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS Nos. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. SFAS No. 130 is not expected to have a material
effect on future financial statement disclosures and results of operations and
financial position will be unaffected by implementation of this standard.
SFAS No. 131 is not expected to have a material impact on the Company.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitizations of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise" were issued in 1998 and are not expected to
impact the Company regarding future financial statement disclosures, results
of operations and financial position.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES:
Independent Auditor's Report
Consolidated Balance Sheet - September 30, 1998
Consolidated Statements of Operations - For the Years Ended
September 30, 1997 and 1998
Consolidated Statement of Stockholders' Equity - For the Period
from October 1, 1996 to September 30, 1998
Consolidated Statements of Cash Flows - For the Years Ended
September 30, 1997 and 1998
Notes to Consolidated Financial Statements
INDEX TO FINANCIAL STATEMENTS
PAGE
Good Times Restaurants Inc. and Subsidiaries:
_____________________________________________
Independent Auditor's Report F-2
Consolidated Balance Sheet - September 30, 1998 F-3
Consolidated Statements of Operations - For the Years Ended
September 30, 1997 and 1998 F-5
Consolidated Statement of Changes of Stockholders' Equity -
For the Period from October 1, 1996 through September 30, 1998 F-6
Consolidated Statements of Cash Flows - For the Years Ended
September 30, 1997 and 1998 F-7
Notes to Consolidated Financial Statements F-8
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Good Times Restaurants Inc.
Golden, Colorado
We have audited the accompanying consolidated balance sheet of Good Times
Restaurants Inc. and subsidiaries as of September 30, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended September 30, 1997 and 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Good Times
Restaurants Inc. and subsidiaries as of September 30, 1998, and the results of
their operations and their cash flows for the years ended September 30, 1997
and 1998, in conformity with generally accepted accounting principles.
Hein + Associates LLP
Denver, Colorado
November 13, 1998
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 768,000
Receivables 281,000
Inventories 52,000
Prepaid expenses and other 8,000
Notes receivable 42,000
Total current assets 1,151,000
Property and Equipment, at cost:
Land and building 2,511,000
Leasehold improvements 2,298,000
Fixtures and equipment 2,735,000
_________
7,544,000
Less accumulated depreciation and amortization (2,625,000)
_________
4,919,000
Other Assets:
Notes receivable 483,000
Other 25,000
508,000
Total Assets $6,578,000
==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-3
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
__________________________________________
<S> <C>
Current Liabilities:
Current maturities of long-term debt $96,000
Accounts payable 441,000
Accrued liabilities - Las Vegas 16,000
Accrued liabilities - RTC 148,000
Accrued other liabilities 564,000
Total current liabilities 1,265,000
Long-Term Liabilities:
Debt 463,000
Las Vegas accrued liabilities 124,000
RTC accrued liabilities 291,000
Deferred liabilities 288,000
_________
Total long-term liabilities 1,166,000
Minority Interests in Partnerships 1,465,000
Commitments and Contingencies (Notes 2, 4, 5, and 8)
Stockholders' Equity:
Preferred stock, .01 par value, 5,000,000 shares authorized,
none issued and outstanding -
Common stock, $.001 par value; 50,000,000 shares
authorized, 1,747,919 shares issued and outstanding 2,000
Capital contributed in excess of par value 11,851,000
Accumulated deficit (9,171,000)
Total stockholders' equity 2,682,000
Total Liabilities and Stockholders' Equity $ 6,578,000
===========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-4
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
September 30,
_____________
1997 1998
____ ____
<S> <C> <C>
Net Revenues:
Restaurant sales $11,652,000 $12,759,000
Area development and franchise fees 20,000 65,000
Franchise royalties 193,000 241,000
Total net revenues 11,865,000 13,065,000
Restaurant Operating Costs:
Food and paper costs 4,286,000 4,537,000
Restaurant labor costs 3,884,000 3,989,000
Restaurant occupancy costs 1,295,000 1,370,000
Accretion of deferred rent 47,000 46,000
Other restaurant operating costs 358,000 390,000
Opening expenses 88,000 25,000
Depreciation and amortization 667,000 698,000
__________ __________
Total restaurant operating costs 10,625,000 11,055,000
__________ __________
Income from Restaurant Operations 1,240,000 2,010,000
Other Operating Expenses (Income):
General and administrative 1,064,000 1,039,000
Advertising 649,000 800,000
Loss from operating RTC stores 94,000 31,000
Loss (gain) on disposal of restaurants
and equipment 55,000 (225,000)
Loss from Las Vegas lease guarantees 228,000 -
Loss from RTC lease guarantees - 217,000
_________ _________
Total other operating expenses 2,090,000 1,862,000
_________ _________
Income (Loss) From Operations (850,000) 148,000
Other Income (Expenses):
Interest income 55,000 40,000
Interest expense (89,000) (91,000)
Minority interest in income (loss) of partnerships (120,000) (266,000)
Other, net (97,000) (57,000)
__________ _________
Total other expenses, net (251,000) (374,000)
__________ _________
Net Loss $(1,101,000) $(226,000)
=========== =========
Preferred Stock Dividends $ (65,000) $ (40,000)
___________ __________
Net Loss Attributable to Common Shareholders $ (1,166,000) $(266,000)
============= =========
Basic and Diluted Earnings Per Share $ (.91) $ (.20)
============= ==========
Weighted Average Common Shares Outstanding 1,275,237 1,345,156
___________ ____________
</TABLE>
See accompanying notes to these consolidated financial statements.
F-5
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 1, 1996 THROUGH SEPTEMBER 30, 1998
Preferred Stock Common Stock Capital in
Issued Par Issued Par Excess of Accumulated
Shares Value Shares Value Par Value Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
October 1,
1996,as
previously
reported - $ - 6,314,820 $6,000 $10,845,000 $(7,844,000) $3,007,000
One-for-
five reverse
common stock
split - - (5,051,856)(5,000) 5,000 - -
________________________________________________________________
Balances,
October 1,
1996,
as adjusted - - 1,262,964 1,000 10,850,000 (7,844,000) 3,007,000
Preferred
stock
issued 1,000,000 10,000 - - 990,000 - 1,000,000
Preferred
stock
issuance
cost - - - - (52,000) - (52,000)
Stock issued
to employee
benefit plan - - 16,592 - 39,000 - 39,000
Net loss - - - - - (1,101,000) (1,101,000)
__________________________________________________________________
Balances,
September
30,
1997 1,000,000 10,000 1,279,556 1,000 11,827,000 (8,945,000) 2,893,000
Stock
issued
to
employee
benefit
plan - - 7,414 - 15,000 - 15,000
Common stock
issued as
preferred
stock
dividends - - 34,282 - - - -
Preferred
stock
converted
to common
stock (1,000,000)(10,000)426,667 1,000 9,000 - -
Net loss - - - - - (226,000) (226,000)
___________________________________________________________________
Balances,
September
30, 1998 - $ - 1,747,919 2,000 $11,851,000 $(9,171,000)$2,682,000
===================================================================
</TABLE>
See accompanying notes to these consolidated financial statements.
F-6
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
September 30,
1997 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,101,000) $(226,000)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 669,000 707,000
Accretion of deferred rent 47,000 46,000
Minority interest 120,000 266,000
Loss (gain) on disposal of restaurants
and equipment 55,000 (172,000)
Loss on lease guarantees 228,000 217,000
Gain on sale of property, net (2,000) (53,000)
Common stock issued to 401(k) Plan
for Company match 39,000 15,000
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables 46,000 (42,000)
Inventories 3,000 (1,000)
Prepaid expenses and other 17,000 3,000
(Decrease) increase in:
Accounts payable 61,000 (24,000)
Accrued and other liabilities (172,000) (351,000)
________ ________
Net cash provided by operating activities 10,000 385,000
Cash Flows from Investing Activities:
Payments for the purchase of property and
equipment (803,000) (231,000)
Proceeds from sale of assets 2,000 532,000
Payments made in conjunction with
the sale of a store (75,000) -
Loans made to franchisees - (451,000)
Payments received on loans to franchisees - 380,000
Payment received for RTC bankruptcy settlement - 300,000
________ ________
Net cash provided by (used in) investing
activities (876,000) 530,000
Cash Flows from Financing Activities:
Principal payments on notes payable and
long-term debt (113,000) (152,000)
Borrowings on notes payable and long-term debt 200,000 18,000
Distributions paid to minority interests in
partnerships (283,000) (440,000)
Contributions from minority interest in
partnerships 180,000 19,000
Proceeds from the sale of preferred stock 750,000 -
_______ ________
Net cash provided by (used in)
financing activities 734,000 (555,000)
_______ _________
Increase (Decrease) in Cash and Cash
Equivalents (132,000) 360,000
Cash and Cash Equivalents, beginning of period 540,000 408,000
________ ________
Cash and Cash Equivalents, end of period $ 408,000 $ 768,000
========== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest$ 89,000 $ 91,000
========== =========
Cash paid for taxes $ - $ -
========== =========
Purchase of equipment through payables
and capital leases $ 57,000 $ 18,000
========== =========
Conversion of note to preferred stock $ 250,000 $ -
========== =========
Conversion of preferred stock to common
stock $ - $1,000,000
========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-7
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies:
Organization - Good Times Restaurants Inc. (Good Times or the Company) is
a Nevada corporation. In July 1992, Good Times merged with Round the Corner
Restaurants, Inc. (RTC). The Company operates through its subsidiary Good
Times Drive Thru Inc. (Drive Thru). All of the stock of RTC was sold as of
September 30, 1995.
Drive Thru commenced operations in 1986 and, as of September 30, 1998,
operates 15 company-owned and joint venture drive-thru fast food hamburger
restaurants. The Company's restaurants are primarily in Colorado. In
addition, Drive Thru has 13 franchises operating in Colorado and one in Boise,
Idaho, and is offering franchises for development of additional Drive Thru
restaurants.
Principles of Consolidation - The consolidated financial statements
include the accounts of Good Times and its subsidiaries, including certain 50%
(approximately) owned limited partnerships in which the Company exercises
control as general partner. All intercompany accounts and transactions are
eliminated. The unrelated limited partners' equity of each partnership has
been recorded as minority interest in the accompanying consolidated financial
statements.
Opening Costs - Opening costs are expensed as incurred.
Inventories - Inventories are stated at the lower of cost or market,
determined by the first-in, first-out method, and consist of restaurant food
items and related paper supplies.
Property and Equipment - Depreciation is recognized on the straight-line
method over the estimated useful lives of the assets or the lives of the
related leases, if shorter, as follows:
<TABLE>
<S> <C>
Building 15 years
Leasehold improvements 7-15 years
Fixtures and equipment 3-8 years
</TABLE>
Maintenance and repairs are charged to expense as incurred, and
expenditures for major improvements are capitalized. When assets are retired,
or otherwise disposed of, the property accounts are relieved of costs and
accumulated depreciation with any resulting gain or loss credited or charged
to income.
Sales of Restaurants and Restaurant Equity Interests - Sales of
restaurants or non-controlling equity interests in restaurants developed by
the Company are accounted for under the full accrual method or the installment
method. Under the full accrual method, gain is not recognized until the
collectibility of the sales price is reasonably assured and the earnings
process is virtually complete without further contingencies. When a sale does
not meet the requirements for income recognition, gain is deferred until those
requirements are met. Under the installment method, gain is recognized as
principal payments on the related notes receivable are collected.
F-8
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Liabilities - Rent expense is reflected on a straight-line basis
over the term of the lease for all leases containing step-ups in base rent.
An obligation representing future payments (which totaled $236,000 as of
September 30, 1998) has been reflected in the accompanying consolidated
balance sheet as a deferred liability. The remaining balance includes a
deferred gain of $52,000 on the sale of a restaurant.
Advertising - The Company incurs advertising expense in connection with
marketing of its restaurant operations. Advertising costs are expensed the
first time the advertising takes place.
Franchise and Area Development Fees - Individual franchise fee revenue is
deferred when received and is recognized as income when the Company has
substantially performed all of its obligations under the franchise agreement
and the franchisee has commenced operations. Area development fees and
related direct expenses are recognized ratably upon opening of the applicable
restaurants. Continuing royalties from franchisees, which are a percentage of
the gross sales of franchised operations, are recognized as income when
earned. Franchise development expenses, which consist primarily of legal
costs associated with developing and executing master franchise agreements,
are expensed as incurred.
Statement of Cash Flows - For purposes of the statements of cash flows,
the Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Income Taxes - Income taxes are provided for in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires an asset and liability approach in the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of the Company's assets and liabilities.
Net Loss Per Common Share - The income (loss) per share is presented in
accordance with the provisions of SFAS No. 128, Earnings Per Share. SFAS No.
128 replaced the presentation of primary and fully diluted earnings (loss) per
share (EPS) with a presentation of basic EPS and diluted EPS. Basic EPS is
calculated by dividing the income or loss available to common shareholders by
the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. Basic and diluted EPS were the same for fiscal 1998 and 1997 as the
Company had losses from continuing operations and therefore, the effect of all
potential common stocks was antidilutive.
Financial Instruments and Concentrations of Credit Risk - Credit risk
represents the accounting loss that would be recognized at the reporting date
if counterparties failed completely to perform as contracted. Concentrations
of credit risk (whether on or off balance sheet) that arise from financial
instruments exist for groups of customers or counterparties when they have
F-9
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly effected by changes in economic or
other conditions. Financial instruments with off-balance-sheet risk to the
Company include lease liabilities whereby the Company is contingently liable
as the primary leasee of certain leases that were assigned to third parties in
connection with various store closures (see Note 5).
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents
and receivables. At September 30, 1998, the Company maintained cash balances
with a commercial bank, which were approximately $593,000 in excess of FDIC
limits and maintained a government fund balance of $33,000. At September 30,
1998, notes receivable totaled $525,000 and were from four entities. The
notes receivables are generally collateralized by buildings and equipment and
guaranteed by certain individuals. Additionally, the Company has receivables
of $281,000, which consists principally of current franchise receivables and a
condemnation proceeding receivable of approximately $165,000 (see Note 2).
The Company purchases 100% of its restaurant food and paper from one
vendor. The Company believes that there are a sufficient number of other
suppliers from which food and paper could be purchased to prevent any long-
term adverse consequences.
The Company operates in one industry segment, restaurants. A geographic
concentration exists because the Company's customers are generally located in
the State of Colorado.
The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying
amounts of cash, receivables, notes receivables, long-term debt, capital lease
obligations, accounts payable, and accrued liabilities approximate fair value
as a result of the short-term maturities or interest rates that approximate
the Company's current expected borrowing and lending rates.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in these
financial statements and the accompanying notes. The actual results could
differ from those estimates.
Impact of Recently Issued Accounting Standards - In 1997, the Financial
Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that displays with the same
prominence as other financial statements. SFAS No. 131 supersedes SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards on the way that public companies report financial
information about operating segments
F-10
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of a company about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
SFAS Nos. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. SFAS No. 130 is not expected to have a material
effect on future financial statement disclosures and results of operations and
financial position will be unaffected by implementation of this standard.
SFAS No. 131 is not expected to have a material impact on the Company.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise" were issued in 1998 and are not expected to
impact the Company regarding future financial statement disclosures, results
of operations and financial position.
2. Sale of Restaurants:
On September 30, 1995, the Company sold all its stock in RTC, a 100% owned
subsidiary, for $100,000 cash and a $291,000 note. The note had an interest
rate of prime minus 2% and is payable quarterly based on an amortization
period of 20 years, with a balloon payment at the end of 5 years. The Company
elected to report the gain on sale under the installment method and originally
deferred the unrealized gain of $66,000 on the $291,000 note. In 1996, the
purchaser of RTC declared bankruptcy. In connection with the bankruptcy of
RTC in 1996, the Company recorded $231,000 associated with the write-off of
the RTC note receivable (net of deferred gain) and accrued a $333,000 loss
associated with RTC lease guarantees and a note payable (net of estimated
recoveries) guaranteed by the Company. The Company has subleased one RTC
restaurant and is currently managing one RTC restaurant in order to minimize
future losses associated with its lease guarantees. In 1998, the Company
accrued an additional $217,000 related to the lease guarantees. Operating RTC
stores resulted in a loss of $31,000 during fiscal 1998, which is recorded in
other operating expenses.
During the year ended September 30, 1996, the Company approved the sale
of its interest in one of its managed limited partnerships to the limited
partner. The Company remains a guarantor on $296,000 of notes payable assumed
by the purchaser. However, the purchaser and an additional guarantor have
personally agreed to indemnify the Company for any payments made on the note
by the Company.
In 1998, the Company closed a store because a local government body
condemned the development on which it was located. The Company was able to
move the building and equipment to a storage facility. The Company expects to
be reimbursed from the condemnation proceeds for certain costs, including
abandoned site improvements and moving costs, which is included as a
receivable at
F-11
September 30, 1998.
During the year ended September 30, 1998, the Company sold a restaurant
to a franchisee for $374,000 cash and a $76,000 note. The Company recognized
a gain on the sale in the amount of approximately $184,000, which is included
in loss (gain) on disposal of restaurants and equipment.
3. Notes Receivable:
Notes receivable consist of the following as of September 30, 1998:
<TABLE>
<S> <C>
Note receivable, 8%, monthly payments of principal and interest
are due in the amount of $3,410, with the final payment due
in June 2010. Collateralized by a building and equipment and
guaranteed by an individual. $311,000
Note receivable, 8%, monthly payments of principal and interest
are due in the amount of $940, with the final payment due in June
2008. This receivable may be due earlier if sales
generated by the collateralized restaurant exceed a certain
dollar amount. Collateralized by a second interest in a building
and guaranteed by an individual. 76,000
Note receivable, 9%, monthly payments of principal and interest
in the amount of $1,245, with final payment on September 1, 2000
collateralized by building and equipment. The note is personally
guaranteed by an individual. The borrower of this note has not made
payments in over one year, and the note is under lawsuit to
collect. The Company's management intends to pursue full
collection, and believes that the collateral is adequate to cover
the note balance. 42,000
Note receivable, 12%, monthly payments of interest only
are due until September 1, 1999. Starting in September 1999,
equal monthly payments of principal and interest are due, with the
final payment on September 1, 2001. Collateralized by a second
interest in building and equipment. 76,000
Other notes, various terms. 20,000
______
525,000
Less current portion. (42,000)
_______
483,000
=======
</TABLE>
F-12
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Notes Payable and Long-Term Debt:
<TABLE>
<S> <C>
Promissory note, payable by a limited partnership, of which
the Company is the general partner, interest and principal
payable monthly, with the final payment due August 1, 2004.
The interest rate on the note is variable based on the 30-day
commercial paper plus 3%, with a floor of 6%. At the option of
the Company, the interest rate may be converted to a fixed rate
equal to the 7-year treasury bill rate plus 3%, with a floor
of 8%. This note is guaranteed by the Company, and the
limited partner who is also a significant stockholder (see Note 9). $175,000
Note payable to an individual and his pension plan with interest
at 12%, payable quarterly, principal due in May 2000. 300,000
Other notes payable, various terms. 84,000
_______
$559,000
Less current portion. (96,000)
_______
$463,000
========
</TABLE>
As of September 30, 1998, debt payments over the next five years are as
follows:
<TABLE>
<S> <C>
1999 $96,000
2000 331,000
2001 33,000
2002 35,000
2003 34,000
Thereafter 30,000
________
$559,000
________
</TABLE>
During the year, the Company entered into a commitment letter with a
financial institution. Under the terms of the commitment, the Company can
borrow up to $3,000,000. Borrowings under the commitment can be made only for
the development of new Good Times Restaurants. The loan is to be partially
guaranteed by a significant stockholder (or entities related to the
significant stockholder) (see Note 8). The Company has agreed to pay the
guarantors an annual fee in the amount of 2% of the average outstanding
principal in cash or 3% of the average outstanding principal in common stock
and also agreed to issue a warrant to purchase 426,667 shares at $.0001 per
share which is only exercisable in the event of the bankruptcy of the Company.
Furthermore, the Company agreed to certain covenants to remain in effect so
long as the guarantee is in place.
F-13
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments and Contingencies:
The Company's office space, and the land underlying the Drive Thru
restaurant facilities, are leased under operating leases. Certain leases
include provisions for additional contingent rental payments if sales volumes
exceed specified levels. The Company paid no material amounts as a result of
these provisions.
Following is a summary of operating lease activities:
<TABLE>
Operating
Leases
1998
<S> <C>
Minimum rentals $1,294,000
Less sublease rentals (355,000)
____________
Net rent expense $ 939,000
============
As of September 30, 1998, future minimum rental commitments required
under Good Times and Drive Thru capital and operating leases that have initial
or remaining noncancellable lease terms in excess of one year are as follows:
Operating
Leases
1999 $1,322,000
2000 1,332,000
2001 1,214,000
2002 1,193,000
2003 1,082,000
Thereafter 8,042,000
__________
14,185,000
Less sublease rentals (4,686,000)
__________
$9,499,000
==========
</TABLE>
The Company remains contingently liable on several leases of restaurants
that were previously sold, which have been included in the future minimum
rental commitment schedule above. The Company is also a guarantor on a Small
Business Administration loan to a franchisee for approximately $368,000.
The Company is subject to litigation in the normal course of business.
The litigation is not expected to have a material impact to the Company.
F-14
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Managed Limited Partnerships:
Drive Thru is the general partner of certain limited partnerships that
were formed to develop Drive Thru restaurants. Limited partner contributions
have been used to construct new restaurants. Drive Thru, as a general
partner, generally receives an allocation of approximately 50% of the profit
and losses and a fee for its management services. The limited partners'
equity has been recorded as a minority interest in the accompanying
consolidated financial statements.
7. Income Taxes:
Deferred tax assets (liabilities) are comprised of the following at
September 30, 1998:
<TABLE>
<S> <C> <C>
Current Long-Term
Deferred assets (liabilities):
Partnership basis difference $ - $633,000
Net operating loss carryforward - 2,001,000
Property and equipment basis differences - (1,139,000)
Other accrued liability difference 167,000 52,000
_______ _________
Net deferred tax assets 167,000 1,547,000
Less valuation allowance* (167,000) (1,547,000)
Net deferred tax assets $ - $ -
======== =========
</TABLE>
* The valuation allowance increased by $343,000 during the year ended
September 30, 1998 due mainly to an increase in accrued settlement not
deductible currently for tax.
The Company has no taxable income under Federal and state tax laws.
Therefore, no provision for income taxes was included. The Company has net
operating loss carry forwards of approximately $5,400,000 for income tax
purposes which expire from 2002 through 2012. The use of these losses may be
restricted in the future due to changes in ownership.
8. Related Parties:
In fiscal 1998, the Bailey Company (the "Bailey's"), a significant common
stock shareholder, converted all of the outstanding Convertible Preferred
Stock to common stock.
F-15
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Bailey's have entered into a co-development agreement with the
Company as well as two franchise agreements and an attendant management
agreement. The Company also leases office space from the Bailey's. Rent paid
to the Bailey's in 1998 was $22,000 and future rent payments due to the
Bailey's total $22,000 in 1999. The Bailey's and the Company have guaranteed
a loan made to the co-development partnership in the amount of $175,000. Two
of the Company's Board members are principals of the Bailey's. As described
in Note 4, the Bailey's have also agreed to guarantee certain future loan
arrangements and the Company has agreed to pay the Bailey's a fee for this
guarantee.
9.Stockholders' Equity:
On February 12, 1998, the shareholders approved a one-for-five reverse
stock split of the Company's common stock. All references to number of
shares, except shares authorized, and to per share information in the
consolidated financial statements have been adjusted to reflect the reverse
stock split on a retroactive basis.
The Company has the authority to issue 5,000,000 shares of preferred
stock. The Board of Directors has the authority to issue such preferred
shares in series and determine the rights and preferences of the shares as may
be determined by the Board of Directors.
On October 1, 1996, the Company closed the sale of $1 million of
preferred stock, $250,000 of which was the conversion of a note payable. The
remaining $750,000 of preferred stock was purchased in three equal
installments of $250,000 on October 1,1996, January 1, 1997, and April 1,
1997. In connection with the sale, the Company paid stock issuance costs in
the amount of $52,000. In August 1998, the preferred stockholder exercised
its right to convert the preferred stock to common stock at a rate of
$2.34375. All such preferred stock was converted and none is outstanding at
September 30, 1998. As of September 30, 1998, there were $25,000 of dividends
in arrears.
10. Stock-Based Compensation:
The Company has an incentive stock option plan (the ISO) and a non-
statutory stock option plan (the NSO) whereby 150,000 shares and 60,000
shares, respectively, are reserved for issuance. As of September 30, 1998,
options for the purchase of 106,180 and 26,000 shares of common stock are
outstanding under these plans, respectively, and no options have been
exercised. All prior year shares, options and warrants, and their related
prices have been restated to reflect the one-for-five reverse stock split.
The following is a summary of activity under these stock option plans for
the years ended September 30, 1997 and 1998.
F-16
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Incentive Stock Options - Activity for incentive stock options is
summarized below.
<TABLE>
1997 1998
Weighted Weighted
Average Average
Number Exercise Number Exercise
Of Shares Price Of Shares Price
<S> <C> <C> <C> <C>
Outstanding, beginning of year 74,260 $11.40 71,500 $2.50
Canceled (74,660) $11.25 (1,200) $2.50
Granted 71,900 $ 2.50 35,880 $2.50
______ ______
Outstanding, end of year 71,500 $ 2.50 106,180 $2.50
====== =======
</TABLE>
For all options granted during 1997 and 1998, the weighted average fair value
per option was approximately $1.99 and $1.64, respectively. All the
outstanding options at September 30, 1998 had an exercise price of $2.50.
At September 30, 1998, options for 62,890 shares were exercisable. An
additional 5,308, 9,726, 14,144, and the remaining 14,112 shares will be
exercisable on September 30, 1999, 2000, 2001, and 2002, respectively, all at
a $2.50 weighted average exercise price. If not previously exercised, options
outstanding at September 30, 1998 will expire as follows:
<TABLE>
Weighted
Average
Number Exercise
Year Ending September 30, of Shares Price
<S> <C> <C>
2007 70,900 $2.50
2008 35,280 $2.50
_______
Total 106,180
=======
</TABLE>
F-17
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-Qualified Stock Options - The Company has also granted non-qualified
options which are summarized as follows for the years ended September 30, 1997
and 1998:
<TABLE>
1997 1998
Weighted Weighted
Average Average
Number Exercise Number Exercise
Of Shares Price Of Shares Price
<S> <C> <C> <C> <C>
Outstanding, beginning of year 21,121 $11.70 21,121 $11.70
Granted - $ - 14,000 $ 2.50
Canceled/expired - $ - (9,121) $15.60
Exercised - $ - - $ -
______ ______
Outstanding, end of year 21,121 $11.70 26,000 $ 5.38
====== ======
</TABLE>
All outstanding non-qualified options were exercisable at September 30,
1998. If not previously exercised, non-qualified options outstanding at
September 30, 1998 will expire as follows:
<TABLE>
Year Ending September 30,
Weighed
Average
Number Exercise
of Shares Price
<S> <C> <C>
1999 12,000 $8.75
2002 14,000 $2.50
______
Total 26,000
======
</TABLE>
Stock Purchase Warrants - The Company has granted warrants which are
summarized as follows for the years ended September 30, 1997 and 1998:
<TABLE>
1997 1998
Weighted Weighted
Average Average
Number Exercise Number Exercise
Of Shares Price Of Shares Price
<S> <C> <C> <C> <C>
Outstanding, beginning of year 689,710 $ 9.25 571,073 $ 9.85
Granted 536,603 $10.00 - $ -
Repriced (536,603) $14.50 - $ -
Expired (118,637) $15.20 (24,470) $ 6.75
_______ ______
Outstanding, end of year 571,073 $ 9.85 546,603 $ 9.95
======= =======
</TABLE>
F-18
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All outstanding warrants were exercisable at September 30, 1998. If not
previously exercised, warrants outstanding at September 30, 1998 will expire
as follows:
<TABLE>
Weighted
Average
Number Exercise
Year Ending September 30, Of Shares Price
<S> <C> <C>
1999 536,603 $10.00
2000 10,000 $ 7.00
_______
Total 546,603
=======
</TABLE>
The Company expects to extend the expiration date of these warrants.
Pro Forma Stock-Based Compensation Disclosures - The Company applies APB
Opinion 25 and related interpretations in accounting for stock options and
warrants which are granted to employees. Accordingly, no compensation cost
has been recognized for grants of options and warrants to employees since the
exercise prices were not less than the fair value of the Company's common
stock on the grant dates. Had compensation cost been determined based on the
fair value at the grant dates for awards under those plans consistent with the
method of FAS 123, the Company's net loss and loss per share would have been
changed to the pro forma amounts indicated below.
<TABLE>
Year Ended September 30,
1997 1998
<S> <C> <C>
Net loss applicable to common stockholders:
As reported $1,166,000 $266,000
Pro forma 1,278,000 297,000
Net loss per common share:
As reported $ (.18) $ (.20)
Pro forma (.20) (.22)
</TABLE>
The fair value of each employee option granted in 1997 and 1998 was
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:
<TABLE>
Year Ended September 30,
1997 1998
<S> <C> <C>
Expected volatility 130% 105%
Risk-free interest rate 6.5% 5.5%
Expected dividends - -
Expected terms (in years) 3 4
</TABLE>
F-19
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Subsequent to year-end, the Company issued 42,420 incentive stock options
at a exercise price of $2.31. These options expire in the fiscal year 2009.
The Company also issued 34,000 non-statutory options at an exercise price of
$2.31, which expire in the year 2003. Subsequent to year-end, the Company has
also agreed to increase the authorized number of shares reserved for incentive
stock option issuance to 525,000 upon shareholder approval, and issue an
additional 89,980 incentive stock options and no non-statutory stock options
upon shareholder approval. The exercise price on these options will not be
determined until the Company obtains approval from its shareholders.
11. Retirement Plan:
The Company has a 401(k) profit sharing plan (the Plan). Eligible
employees may make voluntary contributions to the Plan, which are matched by
the Company, using the Company's common stock in an amount equal to 25% of the
employees contribution up to 6% of their compensation. The amount of employee
contributions is limited as specified in the Plan. The Company may, at its
discretion, make additional contributions to the Plan or change the matching
percentage. The Company has accrued for contributions of $20,000 at
September 30, 1998.
F-20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 9-12.
Incorporated herein by reference are Part III, Items 9 through 12 to the
Registrant's definitive proxy statement for its Annual Meeting of Shareholders
to be held on February 12, 1998.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number Description Location
1.1 Underwriting Agreement between Registrant
and Cohig & Associates, Inc. dated
June 15, 1992 (6) - Exhibit 1.1
3.1 Articles of Incorporation of the Registrant (1) - Exhibit 3.1
3.2 Amendment to Articles of Incorporation of
the Registrant dated January 23, 1990 (2) - Exhibit 3.1
3.4 Restated Bylaws of Registrant dated
June 10, 1996 (11) - Exhibit 3.4
3.5 Certificate of Amendment of Articles
of Incorporation (11) - Exhibit 3.5
3.6 Restated Bylaws of Registrant dated
November 7, 1997 (12) - Exhibit 3.6
4.1 Form of Warrant Certificate for the
purchase of an aggregate of 920,000 shares
of Registrant's Common Stock issued in
1990 public offering (3) - Exhibit 4.2
4.2 Form of Underwriters' Warrant for the
purchase of 80,000 shares issued in
connection with 1990 public offering (3) - Exhibit 1.4
4.3 Form of Underwriters' Warrant for the
purchase of 69,000 units issued in
connection with 1992 public offering (6) - Exhibit 1.4
4.4 Form of Warrant Certificate for the
purchase of an aggregate of 720,000
shares of Registrant's common stock
issued in 1992 public offering (6) - Exhibit 4.4
4.5 Amended and Restated Warrant Agreement (6) - Exhibit 4.3
4.6 Form of Warrant Certificate to purchase
an aggregate of 105,000 shares of
Registrant's common stock issued in
November 1991 Private Offering (5) - Exhibit 4.2
4.7 Form of registration rights agreement
relating to 105,000 shares of the Registrant's
common stock issuable upon exercise of warrants
issued in November 1991 Private Offering (5) - Exhibit 4.3
4.8 Form of Warrant Certificate for the purchase
of an aggregate 50,000 shares of Registrant's
Common Stock issued to limited partners of
Good Times Limited Partnership I (6) - Exhibit 4.14
4.9 1992 Incentive Stock Option Plan of
Registrant, as amended *
4.10 1992 Non-Statutory Stock Option Plan of
Registrant, as amended *
4.11 Form of warrant dated June 1, 1995 for the
purchase of 50,000 shares of Registrant's
Common Stock at an exercise price of
$1.40 per share issued to Boulder
Radiologists Inc., Defined Benefit Plan -
Dubach, of indebtedness by Registrant to
Dr. Kenneth Dubach (9) - Exhibit 4.15
4.12 First Amended and Restated Series B
Warrant Agreement (11) - Exhibit 4.16
4.13 Third Amended and Restated Warrant
Agreement (11) - Exhibit 4.17
10.1 Form of Promissory Note dated June 1, 1995
by and between Good Times Restaurants Inc.
and Boulder Radiologist Inc. Pension Plan
FBO Dubach in the amount of $300,000
due and payable on May 31, 2000 (9) - Exhibit 10.28
10.2 Master Lease Agreement in the aggregate
amount of $2,000,000 between Capital
Associates International, Inc., as Lessor,
and Good Times Drive Thru Inc. as Lessee (9) - Exhibit 10.30
10.3 Form of Promissory Note dated November 3, 1995
by and between AT&T Commercial Finance
Corporation, Boise Co-Development Limited
Partnership, Good Times Drive Thru Inc. as
general partner, and Good Times Restaurants
Inc. as guarantor in the amount of
$254,625 (9) - Exhibit 10.34
10.4 Form of Promissory Note dated November 3, 1995
by and between AT&T Commercial Finance
Corporation, Boise Co-Development Limited
Partnership, Good Times Drive Thru Inc. as
general partner, and Good Times Restaurants
Inc. as guarantor in the amount of
$104,055 (9) - Exhibit 10.35
10.5 Series A Convertible Preferred Stock Purchase
Agreement dated as of May 31, 1996 by and
among Good Times Restaurants Inc. and
The Bailey Company (11) - Exhibit 10.13
10.6 First Amendment to Series A Convertible
Preferred Stock Purchase Agreement
effective as of May 31, 1996 by and between
Good Times Restaurants Inc. and The
Bailey Company (11) - Exhibit 10.14
10.7 Registration Rights Agreement dated
May 31, 1996 regarding registration
rights of the common stock issuable
upon conversion of the Series A
Convertible Preferred Stock (11) - Exhibit 10.15
10.8 Employment Agreement dated May 3, 1996
between Registrant and Boyd E. Hoback (11) - Exhibit 10.17
10.9 Amendment and Agreement Regarding
Series A Convertible Preferred Stock
by & between Good Times Restaurants Inc.
and The Bailey Company dated December
3, 1997, effective as of October 31, 1997 (12) - Exhibit 10.13
10.10 Indemnification by Dr. Kenneth Dubach to Good
Times Drive Thru Inc. dated December 10, 1996
with respect to the promissory note of
the Boise Co-Development Limited
Parntership dated November 3, 1995 in the
original amount of $254,625 and the promissory
note dated November 3, 1995 in the original
amount of $104,055. (12) - Exhibit 10.14
10.11 Settlement Agreement between Good Times
Restaurants Inc. and Round The Corner
Restaurants, Inc. dated August 29, 1997 (12) - Exhibit 10.14
10.12 Office lease. *
10.13 The Bailey Company guaranty agreement. *
10.14 Safeco commitment letter. *
10.15 Poison pill. *
21.1 Subsidiaries of Registrant *
23.1 Consent of HEIN + ASSOCIATES LLP *
(1) Incorporated by reference from Registrant's Registration Statement on
Form S-18 as filed with the Commission on November 30, 1988 (File No.
33-25810-LA).
(2) Incorporated by reference from Registrant's current report on Form 8-K
dated January 18, 1990 (File No. 33-25810-LA).
(3) Incorporated by reference from Registrant's Registration Statement on
Form S-1 as filed with the Commission on March 26, 1990 (File No. 33-
33972).
(4) Incorporated by reference from Registrant's Form 10-K for the fiscal
year ended September 30, 1990.
(5) Incorporated by reference from Registrant's Form 10-K for the fiscal
year ended September 30, 1991.
(6) Incorporated by reference from Registrant's Registration Statement on
Form S-1 as filed with the Commission on March 27, 1992 (File No. 33-
46813).
(7) Incorporated by reference from Registrant's Form 10-K for the fiscal
year ended September 30, 1993.
(8) Incorporated by reference from Registrant's Form 10-KSB for the fiscal
year ended September 30, 1994.
(9) Incorporated by reference from Registrant's Form 10-KSB/A for the fiscal
year ended September 30, 1995.
(10) Incorporated by reference from Registrant's Form 10-QSB for the quarter
ended March 31, 1996.
(b) Current Reports on Form 8-K.
None.
(11) Incorporated by reference from Registrant's Form 10-KSB for the fiscal
year ended September 30, 1996.
(12) Incorporated by reference from Registrant's Form 10-KSB for the fiscal
year ended September 30, 1997.
* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: December 18, 1998 GOOD TIMES RESTAURANTS INC.
/s/ Boyd E. Hoback
By:_________________________
Boyd E. Hoback, President
Pursuant to the requirements of Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/Geoffrey R. Bailey
__________________ Chairman December 18, 1998
Geoffrey R. Bailey
/s/Dan W. James II
__________________ Director December 18, 1998
Dan W. James II
/s/Boyd E. Hoback
__________________ President, Chief December 18, 1998
Boyd E. Hoback Executive Officer
and Director
/s/David E. Bailey
___________________ Director December 18, 1998
David E. Bailey
/s/Thomas P. McCarty
___________________ Director December 18, 1998
Thomas P. McCarty
/s/Alan A. Teran
___________________ Director December 18, 1998
Alan A. Teran
/s/Richard J. Stark
___________________ Director December 18, 1998
Richard J. Stark
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 768,000
<SECURITIES> 0
<RECEIVABLES> 281,000
<ALLOWANCES> 0
<INVENTORY> 52,000
<CURRENT-ASSETS> 1,151,000
<PP&E> 7,544,000
<DEPRECIATION> (2,625,000)
<TOTAL-ASSETS> 6,578,000
<CURRENT-LIABILITIES> 1,265,000
<BONDS> 0
2,000
0
<COMMON> 0
<OTHER-SE> 2,680,000
<TOTAL-LIABILITY-AND-EQUITY> 6,578,000
<SALES> 12,759,000
<TOTAL-REVENUES> 13,065,000
<CGS> 4,537,000
<TOTAL-COSTS> 11,055,000
<OTHER-EXPENSES> 2,236,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (91,000)
<INCOME-PRETAX> (226,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (226,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (266,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
Exhibit 4.9
GOOD TIMES RESTAURANTS INC.
1992 INCENTIVE STOCK OPTION PLAN
(as revised 10-13-98)
1. Purpose. The purpose of this 1992 Incentive Stock Option Plan
(the "Plan") is to grant to employees of Good Times Restaurants Inc., a Nevada
corporation (the "Company"), options to purchase its stock so that they may
have an increased incentive to promote the interests of the Company.
2. Eligible Employees. Key employees of the Company who, in the
opinion of the Board of Directors of the Company, are primarily responsible
for the management, promotion and protection of the interests of the Company
shall be eligible to be granted options under the Plan. A key employee shall
not be ineligible because such person is also a director of the Company. One
or more additional options may be granted to persons who at that time hold an
option or options.
3. Option Shares and Option Price. The aggregate number of shares of
the common stock, $.001 par value ("Common Stock"), of the Company with
respect to which such options may be granted under the Plan shall be 525,000.
The purchase price for each share of Common Stock purchased by exercise of an
option granted under the Plan shall be at least 100% of the fair market value
of such share at the time such option is granted, and shall not be exercisable
after the expiration of ten years from the date such option is granted;
provided, however, that any options granted to any eligible employee who is,
at the time of grant of such option, the owner of stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or of its parent or subsidiary corporation shall have a purchase price equal
to at least 110% of the fair market value of the stock subject to the option
and shall not be exercisable after the expiration of five years from the date
such option is granted. In the event of any change in the Company's corporate
structure through merger, consolidation, reorganization, recapitalization,
stock dividend or other change, appropriate proportionate adjustment shall be
made in the number and purchase price of the shares subject to options granted
under the Plan. To the extent the aggregate fair market value (determined at
the grant date) of the stock which is exercisable for the first time by an
employee in any calendar year under any stock option granted to such employee
under this Plan and any other incentive stock option plan of the Company, its
parent or subsidiaries, exceeds $100,000, such options shall be treated as
options which are not incentive stock options.
4. Effective Date and Term of Plan. The Effective Date of the Plan
is April 23, 1992, which is the date of adoption of the Plan by the Board of
Directors (and which precedes the date of approval of the Plan by
shareholders). Unless this Plan is sooner terminated, any option granted
pursuant to this Plan shall be granted within ten years from the Effective
Date.
5. Exercise of Option. Any option granted under the Plan may be
exercised in accordance with the specific terms and conditions relating
thereto set forth in such option, consistent with the Plan, provided, however,
that such option shall be exercisable at the rate of no less than 20% per year
over a five year period beginning with the date on which such option is
granted. Exercise shall be accompanied by delivery to the Company of written
notice specifying the number of shares with respect to which such option is
exercised and full payment of the purchase price for such shares. Options may
be exercised only with respect to full shares. No fractional share of stock
will be issued.
6. Acceleration of the Option. Any option granted under the Plan
shall become fully exercisable (i) immediately prior to the completion of the
merger or sale of substantially all of the stock or assets of the Company in a
transaction in which the Company is not the survivor (see paragraph 11),
except for the merger of the Company into a wholly-owned subsidiary; or (ii)
upon termination of the employee's employment because of his death or
disability or for any other reason, except termination for cause by the
Company or its subsidiaries or termination by the employee for any reason.
7. Expiration of Option.
(a) Subject to specific provisions of each option agreement,
each option granted under the Plan shall expire upon the earliest to occur of
(i) five or ten years from the date such option is granted; or (ii) upon
completion of the merger or sale of substantially all of the stock or assets
of the Company with or to another company in a transaction in which the
Company is not the survivor (see paragraph 11), except for the merger of the
Company into a wholly-owned subsidiary, provided that the Company shall have
given the employee at least 60 days' prior written notice of its intent to
enter into such merger or sale; or (iii) three months immediately following
the termination of the employment of the employee to whom such option is
granted for any reason, except for termination for cause by the Company or
termination because of such employee's death or disability.
(b) If an employee to whom an option was granted under the
Plan shall cease to be employed by the Company for any reason, except for
termination for cause by the Company or termination because of such employee's
death or disability, such employee may, but only within the period of three
months immediately following such termination of employment and in no event
after the expiration date of such option, exercise such option to the extent
that he was entitled to exercise such option at the date of his termination of
employment. If the employment of an employee to whom an option was granted by
the Company is terminated for cause, all rights under any option of such
employee shall expire immediately upon notice to the employee of such
termination.
(c) In the event of the death or disability of an employee
while in the employ of the Company or within the three-month period referred
to in subparagraph (a)(iii) above, the person to whom the option held by such
employee at the time of his death is transferred by will or the laws of
descent and distribution in the case of death (including the decedent's
personal representative), or the employee or his guardian in the case of
disability of the employee, may, but only to the extent such
employee was entitled to exercise such option immediately prior to his death
or disability exercise such option at any time within a period of one year
succeeding the date of death or disability of such employee, but in no event
after the expiration date of such option.
(d) The term "disability" as used herein shall be as defined
in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
8. Employment Obligation. In consideration for the granting of an
option under the Plan, the employee to whom such option is granted shall agree
to remain in the employment of the Company for a period and under terms and
conditions determined and approved by the Board of Directors of the Company
and such employee.
9. Investment Intent. Each option granted under the Plan shall be
granted only to an employee who agrees to purchase any shares acquired by his
exercise of the option for investment purposes only and agrees not to resell
any of such shares in any manner violating the Securities Act of 1933 or any
applicable state statute.
10. Transferability. Options granted under the Plan shall not be
transferable other than by will or the laws of descent and distribution and
may be exercised during the lifetime of the employee to whom such option is
granted only by such employee.
11. Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Company or a committee of two or more directors, as
determined by the Board of Directors. The interpretation and construction of
any provision of the Plan by the Board of Directors shall be final, unless
otherwise determined by the Board of Directors. The term "survivor," however,
as used in subsection (i) of paragraph 6 and subsection (a) (ii) of paragraph
7 shall not apply to the Company in a reverse triangular merger where the
Company has become a wholly owned subsidiary of another corporation. No
member of the Board of Directors shall be liable for any action or
determination made by him in good faith.
12. Intent and Construction. It is the intention of the Company that
all options granted under the Plan shall constitute incentive stock options
within the meaning of the Code, and the Plan shall be construed and
administered in order to effect such intention.
Exhibit 4.10
GOOD TIMES RESTAURANTS INC.
1992 NON-STATUTORY STOCK OPTION PLAN
(as revised 10-13-98)
1. Purpose. The purpose of this 1992 Non-Statutory Stock Option Plan
(the "Plan") is to grant to employees and directors of Good Times Restaurants
Inc., a Nevada corporation (the "Company"), and such other persons as may be
determined by the Board of Directors, options to purchase stock so that they
may have an increased incentive to promote the interests of the Company.
2. Eligible Participants. Key employees, directors of the Company
and such other persons who, in the opinion of the Board of Directors of the
Company, are primarily responsible for the promotion and protection of the
interests of the Company shall be eligible to be granted options under the
Plan. One or more additional options may be given to persons who at that time
hold an option or options. Persons granted options under the Plan who are not
key employees of the Company shall annually receive financial statements of
the Company.
3. Option Shares and Option Price. The aggregate number of shares of
the common stock, $.001 par value ("Common Stock"), of the Company with
respect to which options may be granted under the Plan shall be 125,000. The
purchase price for each share of Common Stock purchased by exercise of an
option granted under the Plan shall be atleast 100% of the fair market value
of such share at the time such option is granted, and shall not be exercisable
after the expiration of five years from the date such option is granted;
provided, however, that any options granted to any eligible employee who is,
at the time of grant of such option, the owner of stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or of its parent or subsidiary corporation shall have a purchase price equal
to at least 110% of the fair market value of the stock subject to the option.
4. Effective Date and Term of Plan. The Effective Date of the Plan
is April 23, 1992, which is the date of adoption of the Plan by the Board of
Directors. Unless sooner terminated, the Plan shall remain in effect for a
period of ten years from the Effective Date.
5. Exercise of Option. Any option granted under the Plan may be
exercised in accordance with the specific terms and conditions relating
thereto set forth in such option, consistent with the Plan, provided, however,
that such option shall be exercisable at the rate of no less than 20% per year
over a five year period beginning with the date on which such option is
granted. Exercise shall be accomplished by delivery to the Company of written
notice specifying the number of shares with respect to which such option is
exercised and full payment of the purchase price for such shares. Options may
be exercised only with respect to full shares. No fractional share of stock
will be issued.
6. Adjustment of Option. In the event of any change in the Company's
corporate structure through merger, consolidation, reorganization,
recapitalization, stock dividend or other change, appropriate proportionate
adjustment shall be made in the number and purchase price of shares subject to
options granted under the Plan.
7. Expiration of Option. Each option granted under the Plan shall
expire upon the earliest to occur of (i) five years from the date such option
is granted; or (ii) the date of completion of the merger or sale of
substantially all of the stock or assets of the Company with or to another
company in a transaction in which the Company is not the survivor (see
paragraph 10), except for the merger of the Company into a wholly-owned
subsidiary, provided that the Company shall have given the optionee at least
60 days' prior written notice of its intent to enter into such merger or sale;
(iii) if the optionee is an employee of the Company, 180 days following the
optionee's death or termination of the optionee's employment because of
disability; or (iv) if the optionee is an employee of the Company, 60 days
following the termination of the optionee's employment by the Company for any
reason other than death or disability or termination for cause; provided,
however, that this subsection (iv) shall not be operative if the optionee,
upon termination of employment, remains on, or becomes a member of, the Board
of Directors of the Company. The term "disability" as used herein shall be as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.
If the employment of an employee to whom an option was granted by the Company
under the Plan is terminated for cause, all rights under any option of such
employee shall expire immediately upon notice to the employee of such
termination.
8. Investment Intent. Each option granted under the Plan shall be
granted only to a participant who agrees to purchase any shares acquired by
his exercise of the option for investment purposes only and agrees not to
resell any of such shares in any manner violating the Securities Act of 1933
or any applicable state statute.
9. Transferability. Options granted under the Plan shall not be
transferable other than by will or the laws of descent and distribution and
may be exercised during the lifetime of the participant to whom such option is
granted only by such participant.
10. Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Company or a committee of two or more directors, as
determined by the Board of Directors. The interpretation and construction of
any provision of the Plan by the Board of Directors shall be final, unless
otherwise determined by the Board of Directors. The term "survivor," however,
as used in subsection (ii) of paragraph 7 shall not apply to the Company in a
reverse triangular merger where the Company has become a wholly owned
subsidiary of another corporation. No member of the Board of Directors shall
be liable for any action or determination made by him in good faith.
11. Intent and Construction. It is the intention of the Company that
all options granted under the Plan shall constitute non-statutory stock
options, and the Plan shall be construed and administered in order to effect
such intention.
Exhibit 10.12
OFFICE LEASE
THE BAILEY COMPANY,
A COLORADO LIMITED PARTNERSHIP
as Landlord
AND
GOOD TIMES RESTAURANTS, INC
A NEVADA CORPORATION
as Tenant
INDEX TO OFFICE LEASE
Section Page No.
DEFINITIONS 3
TERM 5
RENT 6
INSURANCE 7
OPERATING EXPENSES 8
REPAIRS AND MAINTENANCE 9
FIXTURES, PERSONAL PROPERTY AND
ALTERATIONS, PAYMENT OF TAXES 10
USE OF PREMISES 11
DAMAGE AND DESTRUCTION 13
EMINENT DOMAIN 14
DEFAULT 15
ASSIGNMENT AND SUBLETTING 16
ESTOPPEL CERTIFICATE, ATTORNMENT AND
SUBORDINATION 18
NOTICES 19
SUCCESSORS BOUND 19
TENANT FINISH/ MOVING ALLOWANCE
REIMBURSEMENT 19
MISCELLANEOUS 20
OFFICE LEASE
THIS OFFICE LEASE ("Lease"), dated January 1, 1998, is made by and
between THE BAILEY COMPANY, a Colorado limited partnership ("Landlord") and
GOOD TIMES RESTAURANTS, INC., a Nevada corporation ("Tenant") for office space
in 601 Corporate Circle, Golden, Colorado, 80401 ("Building") located in the
City of Golden, County of Jefferson, State of Colorado, described more
particularly on the legal description attached hereto as Exhibit "A" and
incorporated herein by this reference.
In consideration of the mutual covenants contained in this Lease,
Landlord and Tenant agree as follows:
1. DEFINED TERMS, EXHIBITS, PREMISES, COMMON AREAS, LANDLORD'S RESERVED
RIGHTS AND RENTABLE AREA
1.01 Defined Terms.
(a) Annual Base Rent (which includes ordinary common area
maintenance costs :
Years 1 through 3:
$43,628.00 per year ($13.00 x 3356 square feet =
$43,628.00)
(b) Building: The improvements located on the property
described on Exhibit "A".
(c) Common Areas: Areas within and without the Building
used by Landlord, Tenant and other tenants, including without limitation,
ingress, egress, parking areas, lobbies, hallways, restrooms, breakrooms,
fitness room, conference room, meeting rooms, and work spaces; provided,
however certain areas of the Building shall be excluded from Tenant's use
during the term hereof, including, without limitation the Board of Directors
meeting room (except for Tenant's use for Board of Directors meetings at
times approved in advance by Landlord) and other areas as directed from
time-to-time by Landlord. Tenant's use of Common Areas shall be subject to
the rules, regulations and requirements promulgated by Landlord, including
without limitation, use of the fitness room.
(d) Commencement Date: April 1, 1998.
(e) Landlord: The Bailey Company, a Colorado limited
partnership.
(f) Lease Year: Each twelve (12) month period commencing
on April 1, 1998 and ending March 31 of the following year.
(g) Monthly Base Rent: Month 1 through 36: $3,636.00.
(h) Permitted Uses: Office and administrative uses.
(i) Premises: The usable space shown on the plans
attached hereto as Exhibit "B".
(j) Premises Address:
Suite: 100
Street Address: 601 Corporate Circle
City and State: Golden, Colorado 80401
County: Jefferson
(k) Prepaid Rent: First Month's Rent: N/A
(l) Rentable Square Feet of the Building: N/A
(m) Rentable Square Feet of Premises: 3,356
(n) Scheduled Term Commencement Date: April 1, 1998.
(o) Initial Security Deposit: N/A
(p) Tenant's Address prior to Term Commencement Date:
8620 Wolff Court, Ste. 330
Westminster, Colorado, 80030
(q) Term: Twelve(12)months commencing on the Commencement
Date, with options to extend the Term for two additional 12 month periods
pursuant to Article 2.02 hereinbelow.
The foregoing provisions constitute the defined terms ("Defined Terms").
Each reference in this Lease to Article 1.0 I or the Defined Terms shall be
construed to incorporate the applicable Defined Terms. Other terms may be
defined hereinbelow.
1.02. Exhibits. The Exhibits hereinbelow are or will be attached
to this Lease after the signature and by reference thereto are incorporated
herein:
Exhibit A Building Legal Description
Exhibit B Premises Floor Plan
1.03. Premises. Landlord leases the Premises to Tenant, and
Tenant leases the Premises from Landlord, subject to the provisions of this
Lease ("Option"). If the Tenant fails to exercise either option, Tenant must
vacate the Premises at the expiration of the then current Term. In the event
the Tenant falls to exercise the first option to extend the Term, the second
option -ranted to Tenant hereunder shall immediately terminate and be null and
void.
2.03 Early Termination. Notwithstanding, any other provision of
this Lease, in the event Tenant shall sell substantially all of its assets or
merge with a third party entity, which sale and merger occurs during extended
Term of this Lease, Tenant may early terminate this Lease upon ninety (90)
days prior written notice to Landlord.
3. RENT
3.01. Base Rent. The annual base rent shall be the Annual Base
Rent set forth in Article 1.01(a), payable in equal monthly installment equal
to the Monthly Base Rent set forth in Article 1.01 Tenant shall pay the
monthly Base Rent to Landlord in advance upon the first day of each calendar
month of the Term, starting on the Commencement Date at Landlord's address or
at such other place designated by Landlord in a notice to Tenant, without any
prior demand therefore and without any deduction, abatement, or set off
whatsoever. If the Term shall commence or end on a day other than the first
day of a calendar month, then Tenant shall pay, upon the commencement date of
the Term and first day of the last calendar month, a pro rata portion of the
Monthly Base Rent, prorated on a per them basis, with respect to the portions
of the fractional calendar month included in the Term. Upon executing this
Lease, Tenant shall pay the first full Monthly Base Rent owing hereunder along
with Tenant's Security Deposit as provided in Article 3.03 below.
3.02. Late Payment. If any installment of Monthly Base Rent is
not paid within ten (10) days after the same is due hereunder, Tenant shall
pay to Landlord a late payment charge equal to five percent (5%) of the amount
of such delinquent payment of Monthly Base Rent in addition to the installment
of Monthly Base Rent then owing regardless of whether or not a notice of
default or notice or termination has been given by Landlord. This provision
shall not relieve Tenant from payment of Monthly Base Rent at the time and in
the manner herein specified.
3.03. Security Deposit. Upon executing this Lease, Tenant shall
not be required to deposit any Security Deposit with Landlord. However, at
any time during the Lease if Tenant shall be in default of any monetary or
non-monetary obligation hereunder, Landlord may require the Tenant to pay to
the Landlord a Security Deposit equal to two (2) months of Monthly Base Rent.
The Security Deposit shall secure Tenant's obligations under this Lease to pay
Monthly Base Rent and other monetary amounts owed, to maintain the Premises
and repair damages thereto, to insure surrender of the Premises to Landlord in
clean condition and repair upon termination of this Lease, and to discharge
Tenant's other obligations hereunder. Landlord may use and commingle the
Security Deposit with other funds of Landlord. No interest shall accrue nor
be payable by Landlord to 'I'enant for the Security Deposit. If Tenant fails
to perform Tenant's obligations hereunder, Landlord may, but without any
obligation to do so, apply all or any portion of the Security Deposit toward
the Tenant's unfulfilled obligations. If Landlord does so apply any portion
of the Security Deposit, Tenant, upon dei-nand by Landlord, shall immediately
pay Landlord a sufficient amount in cash to restore the Security Deposit to
the full original amount. Tenant's failure to forthwith remit to Landlord a
sufficient amount in cash to restore the Security Deposit to the original sum
deposited within five (5) days after receipt of such demand, shall constitute
an Event of Default. Upon termination of this Lease. if Tenant has then
performed all of Tenant's obligations hereunder, Landlord shall return
Security Deposit to Tenant. If Landlord sells or otherwise transfers
Landlord's rights or interest Linder this Lease, Landlord may deliver the
Security Deposit to the transferee, whereupon Landlord shall be released from
any further liability toTenant with respect to the Security Deposit.
4. INSURANCE
4.01. All Risk Coverage. DLirina the Term, Landlord shall
procure and maintain in full force and effect with respect to the Premises a
policy or policies of all risk insurance with deductible in an amount as
Landlord may unilaterally determine, (including sprinkler, vandalism and
malicious mischief coverage, and any other endorsements required by the holder
of any fee or leasehold mortgage) in an amount equal to one hundred percent
(100%) of the full insurance replacement value (replacement cost new,
including debris removal, and demolition) thereof.
4.02. Public Liability. Tenant shall, at its own cost and
expense, keep and maintain in full force during the Term a policy or policies
of comprehensive public liability insurance, written by an insurance company
approved by Landlord in the form customary to the locality, insuring Tenant's
activities with respect to the Premises and/or Building against loss, damage,
or liability for personal injury or death of any person or loss or damage
toproperty occurring in, upon or about the Premises covering bodily injury in
the amounts of Three Million and No/100 Dollars $3,000,000.00) per person and
Three Million and No/100 Dollars ($3,000,000.00) per occurrence and covering
property damage in the amount of One Million and No/100 ($1,000,000.00);
provided, however, that if at any time during the Term, Tenant shall have in
full force and effect a blanket policy of public liability insurance with the
same coverage for the Premises as described above, as well as coverage of
other premises and properties of Tenant, or in which Tenant has some interest,
such blanket insurance shall satisfy the requirement hereof.
4.03. Rental Abatement Insurance. Tenant shall keep and maintain
in full force and effect during the Term, rental abatement insurance against
abatement or loss of rent in case of fire or other casualty, in an amount at
least equal to the amount of the Monthly Base Rent payable by Tenant during
one year next ensuing, as reasonably determined by Landlord.
4.04. Insurance Certificates. Landlord shall be named as an
additional insured on all such policies set forth in Article 4. Tenant shall
furnish to Landlord, upon the date of commencement of this Lease and
thereafter as requested by Landlord, a certificate of insurance issued by the
insurance carrier of each policy of insurance carried by Tenant pursuant
hereto. Said certificates shall expressly provide that such policies shall
not be cancelable or subject to reduction of coverage or otherwise be subject
to modification except after thirty (30) days from prior written notice to all
the parties names as insured. Landlord, its Successors and assigns, and any
nominee of Landlord holding any interest in the Premises and BLIlidin(y.
including, without limitation, any ground lessor and the holder of any fee or
leasehold mort-age shall be names as insureds under each such policy or
insurance maintained by Tenant pursuant to this Lease.
4.05. Tenant's Failure. If Tenant fails to maintain any insurance
required in this lease, Tenant shall be liable for any loss or cost resulting
from said failure. This Article 4.05 shall not be deemed to be a waiver of
any Landlord's rights and remedies under any other section of this Lease.
4.06. Waiver of Subrogation. Any policy or policies of fire,
extended coverage or similar casualty insurance, which either party obtains in
connection with the Premises, or Tenant's personal property therein, shall, to
the extent the same can be obtained without undue expense, include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured prior to the
occurrence of injury or loss. Landlord and Tenant waive any rights of
recovery against the other for injury or loss due to hazards covered by
insurance containing such a waiver of subrogation clause or endorsement to the
extent of the injury or loss covered thereby.
4.07. Tenant's Property and Fixtures. Tenant shall assume the risk
of damage to any furniture, equipment, machinery goods, supplies, or fixtures
which are to remain the property of Tenant or as to which Tenant retains the
right of removal from the Premises.
4.08. Indemnification of Landlord. Tenant shall indemnify and hold
Landlord harmless from and against (i) any and all liability, penalties,
losses, damages, costs and expenses, demands, causes of action, claims, or
judgments arising from or growing out of any injury to any person or persons
or any damace to any property as a result of any accident or other occurrence
during the Term occasioned in any way as a result of Tenant's or Tenant's
officers, employees, agents, servants, subtenants, concessionaires, licensees,
contractors or invitees use, maintenance, occupation or operation of the
Premises during the Term, and (ii) from and against all legal costs and
charges, including attorneys' fees, incurred in or about any of such matters
and the defense of any action arising out of the same or in discharging the
Building, the Premises and Common Areas or any part thereof from any and all
liens, charges or judgments which may accrue or be placed thereof by reason of
any act or omission of the Tenant; provided, however, that Tenant shall not be
required to indemnify Landlord for any damage or injury of any kind arising as
the result of Landlord'swillful misconduct.
5. OPERATING EXPENSES
5.01. Services and Utilities. So long as Tenant is not in default
under this Lease, Landlord shall provide:(i) to the Premises during normal
business hours, as defined from time-to-time by Landlord, electricity, gas,
water, lighting, janitorial services, elevator services, heating, ventilating,
and air conditioning and other Building, services required in Landlord's
reasonable judgment for the comfortable use and occupancy of the Premises;
and, (ii) to the Common Areas durin- the normal business hours, utilities and
maintenance as required in Landlord's reasonable judgement for the comfortable
use and occupancy thereof. Landlord shall not be liable for, and Tenant shall
not be entitled to, any reduction or abatement of Monthly Base Rent on account
of any failure on the part of Landlord to delivery the services and utilities
provided in this Lease unless the same results from the willful misconduct of
Landlord, nor shall Landlord be liable under any circumstances for any and all
loss or injury to property, however occurring, incidental to any failure to
furnish any utilities or services.
5.02. Special Services.
(a) Additional Services. In the event Landlord provides
utilities, elevator, heating, air conditioning, and/or janitorial services to
Tenant beyond the current services related to the operation and management of
the Building or at times other than during the business hours, Tenant shall
pay to Landlord for such special services as Additional Rent (i) the cost of
such services, plus (ii) a reasonable fee to Landlord for providing such
services in the amount of ten percent (I 0%) of such costs. Any non-routine
or additional janitorial services of Building areas such as lunchrooms, test
kitchen, conference rooms, etc. which result solely from Tenant's
extraordinary use thereof, shall be on a special basis (except with respectto
the removal of trash from trash receptacles or cleaning incidental to normal
cleaning).
(b) Utility Consumption. If Tenant is likely to or does
consume quantities of electricity, water, or gas in excess of the amount
customarily consumed by users of office space, Landlord shall have the right,
at Tenant's sole cost and expense, to install separate metering for such
utilities or to separately charge Tenant for any quantity of such utilities
consumed by Tenant beyond the amounts cutomarily consumed by office users.
Any such charges made by Landlord to Tenant shall be reasonably deten-nined by
Landlord and shall promptly be paid by Tenant to Landlord as Additional Rent.
Notwithstanding anything to the contrary contained herein, Tenant shall not
consume quantities of such utilities in excess of the amounts customarily
consumed by users of office space without obtaining Landlord's prior written
consent thereto.
6. REPAIRS AND MAINTENANCE
6.01. Repairs and Maintenance. Tenant shall, at Tenant's
own expense, maintain the Premises in a clean and safe condition. Ordinary
repairs shall be performed by Tenant at its own expense, except that Landlord
shall keep and maintain all walls, ceilings, and subfloors of the Premises in
good repair. Notwithstandina the provisions hereof, however, Tenant shall be
responsible for directly reimbursing Landlord for the cost of any repairs
performed by Landlord to the extent that such repairs are necessitated by
damage caused by Tenant's negligence or willful misconduct.
6.02. Inspection of Premises. Landlord, governmental
agencies and appropriate authorities, as applicable, at reasonable times, may
enter the Premises to complete construction undertaken by Landlord on the
Premises or Building; to inspect, clean or repair the same; to inspect the
performance by Tenant of the terms and conditions hereof and to affix
reasonable signs and displays; to show the Premises to prospective purchasers,
tenants and lenders, and for all other purposes as Landlord shall reasonably
deem necessary.
6.03. Liens. Tenant shall promptly pay and discharge all
claims for work or labor done, supplies furnished or services rendered at the
request of Landlord, and shall keep the Premises and Building free and clear
of all mechanic's and materialmen's liens in connection therewith. Landlord
shall have the right to post or keep posted on the Premises, or in the
immediate vicinity thereof, any notices of non responsibility for any
construction, alteration, or repair of the Premises by Tenant. If any such
lien is filed, Landlord may, but shall not be required to, take such action or
pay such amount as may be necessary to remove such lien; and, Tenant shall pay
to Landlord as Additional Rent any such amounts expended by Landlord within
five (5) days after notice is received from Landlord of the amount expended by
Landlord.
7. FIXTURES, PERSONAL PROPERTY AND ALTERATIONS, PAYMENT OF
TAXES
7.01. Fixtures and Personal Property. Tenant, at Tenant's
expense, may install any necessary trade fixtures, equipment, and furniture in
the Premises, provided that such items are installed and are removable without
damage to the structure of the Building. Landlord reserves the unilateral
right to approve or disapprove of curtains, draperies, shades, paint, or other
interior improvements. Such improvements must be submitted for Landlord's
written approval prior to installation, or Landlord may remove or replace such
items at Tenant's sole expense. Said trade fixtures, equipment and furniture
shall remain Tenant's property and shall be removed by Tenant upon expiration
of the Term or earlier termination of this Lease. Tenant shall repair, at
Tenant's sole expense, all damage caused by the installation or removal of
trade fixtures, equipment, furniture, or temporary improvements. If Tenant
falls to remove the foregoing items on termination of this Lease, Landlord may
keep and use them or remove any or all of them and cause them to be stored or
sold in accordance with applicable law.
7.02. Alterations, Tenant shall not make or allow to be made any
alterations, additions or improvements to the Premises, either at the
inception of this Lease or subsequently during the Term, without obtaining the
prior written consent of Landlord which consent shall not be unreasonably
withheld. Tenant shall deliver to Landlord full and complete plans and
specifications of all such alterations, additions or improvements, and no such
work shall be commenced by Tenant until Landlord has given its written
approval thereof. Landlord does not expressly or implicitly covenant or
warrant that any plans or specifications submitted by Tenant are safe or that
the same comply with any applicable laws, lawful ordinances, etc. Further,
Tenant shall indemnify and hold Landlord harmless from any loss, cost, or
expense, including attorneys' fees and costs, incurred by Landlord as a result
of any defects in design, materials, or workmanship resulting from Tenant's
alterations, additions, or improvements to the Premises. All alterations,
additions and improvements shall remain the property of Tenant until
termination of this Lease, at which time they shall be and become the property
of Landlord. All repairs, alterations, additions, and restoration by Tenant
hereinafter required or permitted shall be done in a good and workmanlike
manner and in compliance with all applicable laws and lawful ordinances,
bylaws, regulations and orders of any federal, state, county, municipal or
other public authority and of the insurers of the Building. Tenant shall not
permit liens of any kind to be imposed upon the Premises or Building and
Tenant shall discharge of record of such liens within
five (5) days after written notice thereof. Tenant shall reimburse Landlord
for Landlord's reasonable claims for reviewing and approving or disapproving
plans and specifications for any alterations proposed by Tenant. Tenant shall
require that any contractors used by Tenant carry a comprehensive liability
policy covering bodily injury in the amounts of Three Million and No/ 100
Dollars ($3,000,000.00) per person and Three Million and No/ 100 Dollars
($3,000,000.00) per occurrence and covering, property damage in the amount of
One Million and No/100 Dollars ($I,000,000.00). Landlord may require proof on
such insurance prior to commencement of any work on the Premises.
8. USE OF PREMISES.
8.01. General. The Premises shall be used for the Permitted
Uses consistent with any limitation imposed upon Landlord by any governmental
authority, covenants, conditions and restrictions of record affecting the
Building or lender. By commencing occupancy of the Premises, Tenant accepts
the Premises in the condition existing as of the date of such entry, subject
to all applicable municipal, county, state, and federal statutes, laws, and
ordinances, including ordinances and regulations governing and relating to the
use, occupancy, and possession of the Premises (collectively "Regulations").
Except for pre-existing violations, Tenant shall, at Tenant's sole expense,
comply with all Regulations now in force or which may hereafter be in force
relating to the Premises and the use of the Premises, and Tenant shall secure
any permits. Furthermore, Tenant agrees, by Tenant's entry, that Tenant has
conducted an investigation of the Premises and the acceptability of the
Premises for Tenant's use, to the extent that such investigation might affect
or influence Tenant's execution of this Lease. Tenant acknowledges that
Landlord has made no representations or warranties in connection with the
physical condition of the Premises or Tenant's use of the same upon which
Tenant has relied directly or indirectly for any purpose, except as may be set
forth herein. Tenant shall not commit waste, interfere with any other tenants
in the Building, over load the floors or structure of the Building subject the
Premises to any use which would damage the Premises, or raise or violate any
insurance coverage required by this Lease or take any action that would impair
parking or alter parking spaces. Tenant shall strictly comply with all
statutes, laws, ordinances, rules, regulations, and precautions now or
hereafter mandated or advised by any federal, state, local, or other
governmental agency with respect to the use, generation, storage, or disposal
of hazardous, toxic, or radioactive materials (collectively "Hazardous
Materials"). Landlord shall have the right at all reasonable times to inspect
the Premises and to conduct tests and investigations to determine whether
Tenant is in compliance with the foregoing provision, the costs of all such
inspections, tests, and investigations to be borne by Tenant. As herein used,
Hazardous Materials shall include, but not be limited to, those substances
defined as "hazardous substances," "hazardous materials......hazardous
wastes," "toxic substances," or other similar designations in the
comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended 42 U. S. C. Section 9601 et seq.; the Resource Conversation and
Recovery Act, 42 U. S. C. Section 690 1, et seq.; the Hazardous Tenant shall
pay to Landlord a sum equal to the reasonable cost of performing any
obligations required of Tenant by this Lease ,with respect to the surrender of
the Premises, including, without limitation, repairs and maintenance, and upon
such payment Tenant shall be excused from any such obligations. If a
temporary condemnation is for an established period which extends beyond the
Term, the Lease shall terminate as of the date of occupancy by the condemning
authority, and the damages shall be as provided In Articles 10.03 and 10.04
hereinabove and Rent shall be adjusted to the date of occupancy.
11. DEFAULT
11.01 Events of Default. In addition to other provisions of
this Lease, the occurrence of any of the following events shall constitute an
"Event of Default" on the part of the Tenant upon notice from Landlord:
(a) Vacation or Abandonment. Vacation or abandonment of
the Premises; provided, that Tenant shall be deemed to have vacated or
abandoned the Premises if Tenant fails for any reason to use the Premises for
a Permitted Use for a period of ten (10) consecutive days without Landlord's
prior written consent;
(b) Payment. Failure to pay any installment of Monthly
Base Rent, Additional Rent, or other monies due and payable hereunder upon the
date when said payment is due, the failure continuing for a period of ten (10)
days;
(c) Performance. Default in the performance of any of
Tenant's covenants, agreements or obligations hereunder (except default in the
payment of Monthly Base Rent, Additional Rent or other monetary obligation),
the default continuing for thirty (30) days after written notice thereof from
Landlord;
(d) Assignment. A general assignment by Tenant for the
benefit of creditors;
(e) Bankruptcy. The filing of a voluntary petition by
Tenant, or the filing of an involuntary petition by any of Tenant's creditors
seeking the rehabilitation, liquidation or reorganization of Tenant under any
law relating, to bankruptcy, insolvency or other relief of debtors;
(f) Receivership . The appointment or a receiver or
other custodian to take possession of substantially all of Tenant's assets or
of the Tenant's leasehold interest;
(g) Insolvency, Dissolution, Etc. Tenant shall become
insolvent or unable to pay its debts, or shall fail generally to pay its debt
as they become due; or any court shall enter a decree or order directing the
winding up or liquidation of tenant or of substantially all of its assets or
Tenant shall take an action toward the dissolution or winding up of its
affairs or the cessation or suspension of its use of the Premises; or,
(h) Attachment. Attachment, execution, or other
judicial seizure of substantially all of Tenant's assets or the Tenant's
leasehold interest.
11.02 Landlord's Remedies. Upon the occurrence of any of
the Events of Default of this Lease, Landlord shall have the option to pursue
any one or more of the following, remedies without any notice or demand
whatsoever:
(a) Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord. If Tenant fails to so
surrender the Premises, Landlord may, without prejudice to any other remedy
which it may have for possession of the Premises or arrearages in Monthly Base
Rent, enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying such Premises or any part
thereof, without being liable for prosecution or any claim for damages
therefore. Tenant shall pay to Landlord on demand the amount of all loss and
damages which Landlord may suffer by reason of such termination, whether
through inability to relet the Premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the Premises,
without termination of this Lease and without being liable for prosecution or
for any claim for damages therefore, and expel or remove Tenant and any other
person who may be occupying the Premises or any party thereof Landlord may
relet the Premises and receive the Monthly Base Rent therefore. Tenant agrees
to pay to Landlord the monthly or on demand from time-to-time any deficiency
that may arise by reason of any such relenting. In determining the amount of
such deficiency, the brokerage commission, attorneys' fees, remodeling
expenses, and other costs of relenting shall be subtracted from the amount of
rent received under such reletting.
(c) Enter upon the Premises without terminating this
Lease and without being liable for any prosecution or for any claim for
damages therefore, and do whatever Tenant is obligated to do under the terms
of this Lease. Tenant agrees to pay Landlord on demand for expenses which
Landlord may incur in this effecting compliance with Tenant's obligations
under this Lease, together with interest thereon at the highest legal rate per
annum from the date expended until paid. Landlord shall not be liable for any
damages resulting to Tenant from such action, whether caused by negligence of
Landlord or otherwise.
Pursuit of any of the foregoing remedies shall not
preclude pursuit of any of the other remedies herein provided by any other
remedies provided in law or equity, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any Monthly Base Rent due to
Landlord or of any damages accruing to Landlord by reason of violation of any
of the terms, conditions, and covenants herein contained.
12. ASSIGNMENT AND SUBLETTING
12.01. Assignment and Subletting: Prohibition. Tenant shall
not assign, mortgage, pledge, or otherwise transfer this Lease. in whole or in
part, nor sublet or permit occupancy by any party other than Tenant of all or
any part of the Premises, without the prior written consent of Landlord in
each instance. Tenant shall submit each proposed assignment or sublease
agreement to Landlord for Landlord's approval. No assignment or subletting by
Tenant shall relieve Tenant of any obligation under this Lease, including
Tenant's obligations to pay Monthly Base Rent hereunder. Any purported
assignment or subletting contrary to the provisions hereof without consent
shall be void. The consent of Landlord to any assignment or subletting shall
not constitute a waiver of the necessity for such consent to any subsequent
assignment or subletting. As Additional Rent hereunder, Tenant shall
reimburse Landlord for reasonable attorneys' fees and other expenses incurred
by Landlord in connection with any request by Tenant for consent to assignment
or subletting.
12.02. Bonus Rental. If for any assignment or sublease,
Tenant receives rent or other consideration, either initially or over the term
of the assignment or sublease, in excess of the Monthly Base Rent called for
hereunder, or in any case of the sublease or a portion of the Premises, in
excess of such Monthly Base Rent fairly allocable to such portion, after
appropriate adjustments to assure that all other payments called for hereunder
are appropriately taken into account, Tenant shall pay to Landlord, as
Additional Rent hereunder, one hundred percent (100%) of the excess of each
such payment of rent or other consideration received by Tenant promptly after
its receipt.
12.03. Scope. The prohibition against assigning or subletting
contained in this Article shall be construed to include a prohibition against
any assignment or subletting by operation of law. If this Lease shall be
assigned, or if the underlying beneficial interest of Tenant is transferred,
or if the Premises or any part thereof shall be sublet or occupied by anybody
other than Tenant, Landlord may collect rent from the assignee, subtenant, or
occupant and apply the net amount collected to the Monthly Base Rent herein
reserved and apportion any excess rent so collected in accordance with the
terms of the immediately preceding paragraph, but no such assignment,
subletting, occupancy, or collection shall be deemed a waiver of this
covenant, of the acceptance of the assignee, subtenant or occupant as tenant,
or a release of Tenant from the further performance by Tenant of covenants on
the part of Tenant herein contained. No assignment or subletting shall affect
the continuing primary liability of Tenant (which, following assignment, shall
be joint and several with the assignee), and Tenant shall not be released from
performing any of the terms, covenants, and conditions of this Lease.
12.04. Waiver. Notwithstanding any assignment or sublease, or
any indulgences, waivers, or extensions of time granted by Landlord to any
assignee or sublesses, or failure by Landlord to take action against any
assignee or sublessee, Tenant waives notice of any default of any assignee or
sublessee and agrees that Landlord may, at its option, proceed against Tenant
without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers, and
extensions of time granted to any such assignee or sublessee.
12.05. Release. Landlord shall have the right at any time to
convey all or any portion of or interest in the Building. Whenever Landlord
conveys any interest in the Building, Landlord shall be automatically released
form the further performance of covenants on the part of Landlord herein
contained, and from any and all further liability, obligations, costs and
expense, demands, causes of action, claims or judgments arising from or
growing out of, or connected with this Lease after the effective date of said
release. The effective date of said release shall be the date the assignee
executes an assumption of such an assignment whereby the assignee expressly
agrees to assume all of Landlord's obligations, duties, responsibilities, and
liabilities with respect to this Lease. If requested, Tenant shall execute a
form of release and any such other documentation as may be required to further
effect the provisions of this Article 12.
13. ESTOPPEL CERTIFICATE, ATTORNMENT AND SUBORDINATION
13.01. Estoppel Certificate. Within ten (10) days after being
required therefor by Landlord, or if on any sale, assignment or hypothecation
by Landlord of Landlord's interest in the Building, or any part thereof, an
estoppel letter shall be required from Tenant, Tenant shall deliver, in
recordable form, a certificate to any proposed mortgages or purchasers, and
toLandlord, certifying (or stating any contrary statements with specificity)
as follows: (i) that to Tenant's best knowledge, there is no outstanding and
uncured Event of Default under this Lease, and that this Lease is in full
force and effect; (ii) that no modifications have been made in this Lease
since the original execution of the same, if there have been modifications,
stating the modifications; (iii) the expiration date of this Lease; (iv) the
date through which Monthly Base Rent has been paid; (v) that Tenant has
noclaims, defenses, or offsets to any action for collection of rents
thereafter accruing under this Lease; and (vi) no more than one month's
Monthly Base Rent has been paid in advance. In addition, such certificate
shall contain such other information as Landlord may reasonably require.
Tenant's failure to deliver said statement in a timely manner shall be
conclusive upon Tenant that the above-referenced matters are true with respect
to this Lease.
13.02. Attornment. Tenant shall (i) in the event any proceedings are
brought for the foreclosure of, or in the event of exercise of the power of
sale under any mortgage or deed of trust made by the Landlord, its successors
or assigns, encumbering the Premises, or any part thereof, or (ii) in the
event of termination of a ground lease, if any, or (iii) in the event of a
sale or conveyance by Landlord of all or any party of the Building, and if so
requested, attorn to the purchaser upon such foreclosure, sale or conveyance,
or upon any grant of a deed in lieu of a foreclosure, and recognize such
purchaser as the Landlord under this Lease.
13.03. Subordination. The rights of Tenant hereunder are and shall
be, at the election of the mortgagee, subject and subordinate to the lien of
such mortgage, or the lien resulting from any other method of financing or
refinancing, now or hereafter in force against the Building, and to all
advances made or hereafter to be made upon the security thereof; provided,
however, that notwithstanding such subordination, so long as Tenant is not in
default under any of the terms, covenants, and conditions of this Lease,
neither this Lease nor any of the rights of Tenant hereunder upon Tenant's
covenanting that Tenant is not in default hereunder shall be terminated or
subject to termination by any trustee's sale, any action to enforce the
security, or by any proceeding or action in foreclosure. If requested, Tenant
agrees to execute whatever documentation may be required to further effect the
provisions of this Article.
(a) During the original Term of this Lease, Landlord
shall have no right to relocate Tenant within the Building. However, in the
event Landlord desires to relocate Tenant within the Building, Landlord shall
provide Tenant with written notice thereof no less than sixty (60) days prior
to the expiration of the then current Tern of this Lease. It is the intention
that this notification be provided to Tenant in connection with Tenant's
decision to extend the Term of this Lease pursuant to Article 2.02
hereinabove. In the event the Landlord relocates the Tenant within the
Building, Landlord shall provide Tenant with reasonably similar space (which
shall be contiguous in nature) elsewhere within the Building and of
approximately the same size and condition as the Premises.
(b) In the event Landlord requires the Tenant to relocate
within the Building during any extended Term of the Lease, Landlord shall pay
all Tenant's reasonable costs associated in connection therewith including,
without limitation, interoffice moving expenses and computer or telephone
rewiring costs.
(c) In the event Landlord moves Tenant to such new space,
then this Lease and each and all of the terms and conditions hereof shall
remain in full force and effect and thereupon be deemed applicable to such new
space except that a revised floor plan shall become part of this Lease and
shall reflect the location of the new space.
17.03. No Light, Air, or View Easement. Any diminution or
shutting off of light, air, or view by any structure which may be erected on
lands adjacent to or in the vicinity of light, air, or view by any structure
which may be erected the Building shall in no way affect this Lease: or impose
any liability on Landlord.
17.04. Limitation of Landlord's Liability. The obligations of
Landlord under this Lease shall not constitute personal ablations of the
individual partners, directors, officers, or shareholders of Landlord, and
Tenant shall took solely to the real estate that is the subject of this Lease
and to no other assets of Landlord for satisfaction of any liability in
respect of this Lease and shall not seek recourse against the individual
partners, directors, officers, or shareholders of Landlord or any of their
personal assets for such satisfaction.
17.05. Time. Time is of the. essence of every provision hereof.
17.06.Attorney's Fees. In any action or proceeding which the
Landlord or the Tenant may be required to prosecute to enforce its respective
rights hereunder, the unsuccessful party therein agrees to pay all costs
incurred by the prevailing party therein, including reasonable attorneys' fees
to be fixed by the court, and said costs and attorneys' fees shall be made a
part of the judgment in said action.
17.07. Binding Arbitration. The parties hereto agree to settle all
disputes hereunder with binding arbitration. Should there ever be a dispute
of the terms and conditions of this Lease, such dispute shall be settled by
binding arbitration with the Judicial Arbitrators Group, or such similar
organization in the Denver metropolitan area. Any such dispute must be
submitted to arbitration on or before thirty (30) days of the date of which
the dispute began and such arbitration must be concluded within sixty (60)
days from the date of submission unless otherwise mutually agreed by the
parties hereto. The arbitration shall be conducted by a sole arbitrator and
the cost and expense thereof shall be borne equally by the parties; provided,
however, the associated cost and expenses, including, without limitation,
reasonable attorneys fees, shall be borne solely by the parties thereto,
except to the extent as otherwise set forth in this Lease,
17.08. Captions and Article Numbers. The captions, article
numbers, and table of contents appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope or intent or such sections or articles of this Lease nor in any way
affect this Lease.
17.09. Severability. if any term, covenant, condition, or provision
of this Lease, or the application thereof to any person or Circumstance, shall
to any extent be held by a court or competent jurisdiction to be invalid,
void,,3r unenforceable, the remainder of the terms, covenants, conditions, or
provisions of this Lease, or the application thereof to any person or
circumstance, shall remain in full force and effect and shall in no way be
affected, impaired, or invalidated.
17.10. Applicable Law. This Lease, and the rights and obligations
of the parties hereto, shall be construed and enforced in accordance with the
laws of the State of Colorado.
17.11. Holding Over. Should Tenant, or any of its successors in
interest, hold over the Premises, or any part thereof, after the expiration of
the term of this Lease, unless otherwise agreed to in writing, such holding
over shall constitute and be construed as tenancy from month-to-month only, at
a monthly rent eqlal to one hundred ten percent (I I 0%) of the Monthly Base
Rent owed during the final year of the Term of this Lease as the same may be
extended from time-to-time. This inclusion of the preceding sentence shall
not be construed as Landiord's permission for Tenant to hold over.
17.12. Surrender. Upon the expiration or earlier termination of
this Lease, Tenant shall surrender the Premises to Landlord in good order,
condition, and repair, except for reasonable wear and tear or as otherwise
provided herein. Tenant shall not commit or allow any waste or damage to be
committed on any portion of the Premises or Building. All property that
Tenant is required to surrender shall become Landlord's property upon the
termination of this Lease. Landlord may cause any of said personal property
that is not removed from the Premises within thirty (30) days after the date
of any termination of this Lease to be removed from the Premises and stored at
Tenant's expense, or4 at Landlord's election, said personal property
thereafter shall belong to Landlord without the payment of any consideration,
subject to the rights of any person holding a perfected security interest
therein.
17.13. Rules and Regulations. At all times during the Term, Tenant
shall comply with rules and regulations ("Rules and Regulations") as
promulgated by Landlord which shall, by this reference, become part of the
provisions of this Lease for the Buildinc, and the Common Areas.
17.14. No Nuisance. Tenant shall conduct its business and control
its agents, employees, invitees and visitors in such a manner as not to create
any nuisance, or interfere with, annoy or disturb any other tenant or Landlord
in its operation of the Building.
17.15. Landlord's Right to Perform. Upon Tenant's failure to
perform any obligation of Tenant hereunder, including, without limitation,
payment of Tenant's insurance premiums, charges of contractors who have
supplied materials or labor to the Premises, etc., Landlord shall have the
right to perform such obligation of Tenant on behalf of Tenant and/or to make
payment on behalf of Tenant to such parties. Tenant shall reimburse Landlord
the reasonable cost of Landlord's perfon-ning such obligation on Tenant's
behalf, including reimbursement of any amounts that may be expended by
Landlord plus interest at the maximum rate permitted by law, as Additional
Rent.
17.16. Mortgage Protection. No act or failure to act on the part of
the Landlord which would entitle Tenant under the terms,of this Lease, or by
law, to be relieved of Tenant's obligations hereunder or to terminate this
Lease, shall result in a release of such obligations or a termination of this
Lease unless (a) Tenant has given notice by certified mail to any beneficiary
of a deed of trust or mortgage covering the Premises whose address shall have
been furnished to Tenant, and (b) Tenant offers such beneficiary or mortgagee
a reasonable opportunity to cure the default, including time to obtain
possession :)f the Premises by power of sale or of judicial foreclosure, if
such should prove necessary to effect a cure.
17.17. Notification of Mortgaizee, Landlord hereby advises and
notifies Tenant that Landlord's current lender/mortgagee is;set forth
hereinbelow, Pursuant to the loan documents between Landlord and the
lender/mortoragee, lender/mortgagee has certain rights and interests in the
Building and this Lease pursuant to such loan documents. Landlord's
performance hereunder may be subject to the requirements of the
lender/mortgagee. The name and address of the lender/mortgagee is as follows:
Standard Life & Accident Insurance Company
1 Moody Plaza
Galveston, Texas 77550-7999
Attn: Mortgage and Real Estate Investment Department
17.18. Nonliability. Landlord shall not be in default hereunder
or be liable for any damages directly or indirectly resulting from nor shall
the Monthly Base Rent herein reserved be abated by reason of (i) the
interruption of use of the Premises as a result of the installation of any
equipment in connection with the Premises or Building or (ii) any failure to
furnish or delay in furnishing any services required to be provided by
Landlord when such failure or delay is caused by accident or any condition
beyond the reasonable control of Landlord or by the making of necessary
repairs or improvements to the Premises or to the Building, or the limitation,
curtailment, rationing, or restriction on use of water or electricity, gas, or
any other form of energy of any other service or utility whatsoever serving
the Premises or the Building. Landlord shall use reasonable efforts to remedy
any interruption in the furnishing of such services. Construction, interim,
permanent financing or refinancing for the Building, any lender shall request
reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay, or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or materially adversely affect the leasehold interest hereby created
or Tenant's rights hereunder.
17.19. Modification Required by Lender. If, in connection with
obtaining construction, interim, permanent financing or refinancing for the
Building, any lender shall request reasonable modifications in this Lease as a
condition to such financing, Tenant will not unreasonably withhold, delay, or
defer its consent thereto, provided that such modifications do not increase
the obligations of Tenant hereunder or materially adversely affect the
leasehold interest hereby created or Tenant's rights hereunder.
17.20. Recording. Neither Landlord nor Tenant shall record this
Lease nor a short form memorandum thereof without the. prior written consent
of the other.
17.21. Entire Agreement. This Lease, including all Exhibits
attached hereto, sets forth all covenants, promises, agreements, conditions,
and understandings between Landlord and Tenant concerning the Premises,
Building and Common Areas, and there are no covenants, promises, agreements,
conditions, or understandings, either oral or written, between Landlord and
Tenant other than as are herein set forth. Except as herein otherwise
provided, no subsequent alteration, amendment, change, or addition to this
Lease shall be binding upon Landlord or Tenant unless reduced to writing and
signed by Landlord and Tenant.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date first
above written.
LANDLORD
THE BAILEY COMPANY,
a Colorado limited partnership
By: THE ERIE COUNTY INVESTMENT CO.,
An Ohio corporation
General Partner
By: /s/ David E. Bailey
___________________
David E. Bailey, President
TENANT
GOOD TIMES RESTAURANTS INC.
A Nevada corporation
By: /s/Boyd E. Hoback
_________________
Boyd E. Hoback, President
1.04. Common Areas. Time-to-time made by Landlord, Tenant
shall Subject to reasonable rules and regulations from tenants to use the
Common Area.
1.05. Landlords Reserved Rights in Common Areas. Landlord
reserves the right from time-to-time:
(a) To install, use, maintain, repair, and replace pipes, ducts,
conduits, wires, and appurtenant meters and equipment for service to other
parts of the Building above the ceiling services, below), the floor surfaces,
within the walls and in the central core areas, and to relocate any pipes,
ducts, conduits, wires, and appurtenant meters and equipment included in the
Premises which are so located'or located elsewhere outside the Premises;
(b) To change the lines of the lot on which the Building stands
("Lot") and to redesign and re-stripe the parking facilities around
theBuilding and make other reasonable changes and grant other rights thereto
including, without limitation, the granting of easements, rights of way and
right.- of ingress and egress, and similar rights to users of parcels adjacent
to the Lot;
(c) Facility. To alter, relocate, and eliminate any other Common
Areas or facility; and
(d) Parking. Landlord reserves the right to grant exclusive use
to portions of the parking areas to Landlord or to I enants and any other
parties with whom Landlord may contract.
1.06. Rentable Area. The total rentable floor space in the
Building shall be the Rentable Square Feet of the Building. The total
rentable floor space in the Premises shall be the Rentable Square Feet of the
Premises as set forth on Exhibit B.
2. TERM
2.01 Commencement of Term. This Lease shall commence on April 1,
1998, and continue through March 31, 1999, unless earlier terminated as set
forth hereinbelow; provided, however, Tenant may take possession of the
Premises anytime prior to April 1, 1998 free of any Monthly Base Rent during
such early occupancy.
2.02 0ptions to Extend. Landlord hereby grants to Tenant, two
separate options to extend the term of this Lease. Each option shall allow
the Tenant to extend the Term of the Lease for an additional twelve (12)
months f@om the date of the expiration of the then current Term. If Tenant
desires to exercise either or both options, Tenant must provide written notice
thereof to Landlord on or before the thirtieth (30th) day prior to expiration
of the then current Term Materials Transportation Act, 49 U. S. C. Section I
1801 , et. seq.; and any other governmental statutes, laws, ordinances, rules,
regulations, and precautions. Tenant shall not cause, or allow anyone else
under the control of Tenant to cause, any Hazardous Materials to be used,
generated, stored, or disposed of on or about the Premises, Lot, or Building
without the prior written consent of Landlord, which consent may be withheld:
in the sole discretion of Landlord, and which consent may be revoked at
anytime. Tenant's indemnification of Landlord pursuant to Article 4.08,
above, shall extend to all liability, including all foreseeable and
unforeseeable consequential damages, directly or indirectly arising out of the
use, generation, storage, or disposal of Hazardous Materials by Tenant
including, without limitation, the ciost of any required or necessary repair,
cleanup, or detoxification and the preparation of any closure or other
required plans, whether such action is required or necessary prior to or
following the termination of this Lease, to the full extent that such action
is attributable, directly or indirectly, to: the use, generation, storage, or
disposal of Hazardous Materials by Tenant. Neither the written consent by
Landlord to the use, generation, storage, or disposal of Hazardous Materials
nor the strict compliance by Tenant with all statutes, laws, ordinances,
rules, regulations, and precautions pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemniflcation pursuant to this
subsection. Tenant's obligations pursuant to the foregoing indemnity shall
survive the termination of this Lease.
8.02 Signs. Tenant shall not install any sign on the Premises or
Building; provided, however, that Landlord shall installlfor Tenant an
identifying sign in the lobby of the Buildings in conformance with the current
Building signage. Any sign placed by Landlord for the benefit of Tenant on
the Premises or Building!shall be installed at the Tenant's sole cost and
expense, and shall contain only Tenant's name, or the name of any affiliate
Tenant actually occupying the Premises, and no advertising matter. Tenant
shall remove any such sign upon termination of this Lease and shall return the
Premises to their condition prior to the placement or erection of said sign.
8.03. Parking Access. In addition to the general obligation of
Tenant to comply with laws and without limitation there:)f, Landlord shall not
be liable to Tenant nor shall this Lease be affected if any parking privileges
appurtenant to the Premises are impaired by reason for any moratorium,
initiative, referendum, statute, regulation, or other governmental decree or
action which could in any manner prevent or limit the parking rights of Tenant
hereunder.
8.04. Floor Plan . Tenant shall not place a load upon any floor of
the Premises which exceeds the load per square foot which such floor is
designed to carry and which is then allowed by law.
8.05. Deliveries. All deliveries to and from the Premises shall be
made at the location(s) designated by Landlord during the time periods
specified by Landlord and so as to cause the minimum amount of interference
with the business of other tenants.
9.0 DAMAGE AND DESTRUCTION
9.01. Reconstruction. If the Premises are damaged or
destroyed during the Term, Landlord shall, to the extent that insurance
proceeds are available therefor and are not applied by any lender against
payment of an existing loan on the Building or lot, except as hereinafter
provided, diligently repair or rebuild them to substantially the condition in
which they existed immediately prior to such damage or destruction; provided,
however, that any damage which is estimated in good faith by Landlord to be
under Two Thousand and No/I 00 Dollars ($2,000.00), regardless of how such
damage occurred, shall be deemed to constitute "ordinary repairs and
maintenance" and shall be repaired by Tenant at its own expense, regardless of
the availability of any insurance proceeds relating thereto. In the event
that any damage or destruction occurs that is to be repaired by Landlord
hereunder, and the insurance proceeds available to Landlord therefore under
the insurance policies required in Article 4 hereof are insufficient to cover
the costs of such repair, Landlord shall notify Tenant in writing that such
proceeds are insufficient, whereupon Tenant may elect to pay the difference
between the cost of such repairs and the available insurance proceeds by
giving written notice of such election to Landlord within ten (10) days after
Tenant's receipt of Landlord's notice. If Tenant does not deliver such notice
to Landlord within the ten (10) day period, Tenant shall be deemed to have
elected not to pay such difference, and Landlord shall have the right, in its
sole discretion, either to proceed to repair the Premises, or to terminate
this Lease by delivering written notice of such termination to Tenant. Nothing
contained in this Article 9 shall be construed in any event to obligate
Landlord to make ordinary repairs and maintenance that are to be performed by
Tenant at its own expense pursuant to this Article 9.0 1, except to the extent
that such repairs relate to the walls, ceilings, and subfloors of the Premises
that are to be maintained and repaired by Landlord at Tenant's expense
pursuant to Article 6.01 of this Lease.
9.02 Rent Abatement. Rent due and payable hereunder shall be
abated proportionately, but only to the extent of any proceeds received by
Landlord from rental abatement insurance described in Article 4.03
hereinabove, during any period in which, by reason of any such damage or
destruction, Landlord reasonably determines that there is substantial
interference with the operation of Tenant's business in the Premises, having
regard to the extent to which Tenant may be required to discontinue its
business in the Premises. Such abatement shall continue for the period
commencing with such damage or destruction and ending with a substantial
completion by Landlord of the work of repair or reconstruction which Landlord
is obligated or undertakes to do. If it shall be deten-nined that continuation
of business is not practical pending reconstruction, Monthly Base Rent due and
payable hereunder shall abate to the extent of proceeds from rental abatement
insurance until reconstruction is substantially completed or until business is
totally or partially resumed, whichever is the earlier.
9.03. Excessive Damage or Destruction. If the Building is destroyed
to the extent that the Landlord determines that it cannot, with reasonable
diligence, be fully repaired or restored by Landlord within ninety (90) days
after the date of the dama-e or destruction, Landlord may terminate this
Lease. Notwithstanding the fact that the Premises have been damaged or
destroyed, Landlord shall determine whether the Building can be fully repaired
or restored within the ninety (90) day period, and Landlord's determination
shall be binding upon Tenant. Landlord shall notify Tenant of its
determination, in writing, within fortv five (45) days after the date of the
damage or destruction.
10. EMINENT DOMAIN
10.01 Total Condemnation. If the whole of the Premises is
acquired or condemned by eminent domain, inversely condemned or sold in lieu
of condemnation for any public or quasi public use or purpose ("Condemned"),
then the Term shall terminate as of the date of title vesting in such
proceeding, and Monthly Base Rent shall be adjusted as of the date of such
termination. Landlord and Tenant shall immediately notify the other party of
any such occurrence.
10.02. If any part of the Premises is partially Condemned, and such
partial condemnation renders the Premises unusable for the business of the
Tenant, as reasonably determined by Landlord and Tenant, or in the event a
substantial portion of the Building is Condemned, as reasonably determined by
Landlord, then the Term shall terminate as of the date of title vesting in
such proceeding and Monthly Base Rent shall be adjusted to the date of
termination. If such condemnation is not sufficiently extensive to render the
Premises unusable for the business of Tenant as reasonably determined by
Landlord and Tenant, or less than a substantial portion of the Building is
Condemned, then Landlord shall promptly restore the Premises to a condition
comparable to its condition immediately prior to such condemnation less the
portion thereof listed in such condemnation, and this Lease shall continue in
full force and effect except that after the date of such title vesting the
Monthly Base Rent shall be appropriately reduced as reasonably determined by
Landlord on a pro rata basis. Landlord's obligation to restore the Premises
to their original condition shall be subject to the limitation that Landlord
shall not be required to spend an unreasonable amount of money to do so, as
exclusively determined by Landlord.
10.03. Landlord's Award. If the Premises are wholly or partially
Condemned, then, subject to the provision of Article 10.04 below, Landlord
shall be entitled to the entire award paid for such condemnation, and Tenant
waives any right or claim to any part thereof from Landlord or the condemning
authority.
10.04. Tenant shall have the right to claim and recover from the
condemning authority, but not from Landlord, such compensation as may be
separately awarded or recoverable by Tenant in Tenant's own right on account
of any and all costs or loss to which Tenant might incur removing Tenant's
merchandise, furniture, fixtures, leasehold improvements, equipment and
business interruption to a new location.
10.05. Term. If the whole or any part of the Premises shall be
Condemned for any temporary public or quasi public use or purpose, this Lease
shall remain in full force and effect and Tenant shall be entitled to receive
for itself such portion or portions of any award made for such use with
respect to the period of the taking which is within the Term. If a temporary
condemnation remains in force at the expiration or earlier termination of the
Lease,
Exhibit 10.13
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 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 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 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 respectto 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 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.
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
Agreed to this 5th day of October, 1998
THE BAILEY COMPANY
By: /s/ Geoffrey Bailey
___________________
General Manager
THE ERIE COUNTY INVESTMENT COMPANY
By: /s/ David E. Bailey
___________________
President
Exhibit 10.14
SAFECO
CREDIT COMPANY
165 S. Union Blvd. STE 610
Lakewood, Colorado 80228-2212
June 19, 1998
Mr. Boyd Hoback
Good Times Restaurants Inc.
601 Corporate Circle
Golden, CO 80401
Dear Boyd:
This will confirm that we will submit the financing proposal set forth below
to the Executive Credit Committee of SAFECO Credit Company, Inc. This
proposal is subject to final approval by the Executive Credit Committee and is
not intended as a commitment by SAFECO Credit Company, Inc. to enter into a
financing transaction with proposed Borrower. Such approval may only be made
by our Executive Credit Committee and communicated via formal loan commitment
letter upon loan approval. The following summarizes the major terms and
conditions to which our proposal is subject.
BORROWER: Good Times Restaurants Inc. (Real Estate and Equipment Loan)
GUARANTORS: The Erie County Investment Co.
The Bailey Company
(Both Loans)
Initially, the guaranties will be provided for 50% of the outstanding loan
balance. Starting with the 5th anniversary of the notes, and after the
restaurant property has sustained a fixed charged coverage ratio of 1.5 to 1
for 12 trailing months, the guaranties will be reduced to 25% of the
outstanding loan balance. After 7 years, the guaranties will be fully
released when the following conditions are met:
- Loan to value ratio of less than 50%
- SAFECO Credit Company, Inc. review of Good Times Restaurants Inc.
financial condition is satisfactory.
COLLATERAL:
SAFECO will receive a first security interest in the land, building and
equipment of three (3) Good Times restaurant located in the Denver
Metropolitan Area.
AMOUNT:
Land and Building: SAFECO will finance 80% of cost of 80% MAI appraisal value,
whichever is less up to a maximum of $2,400,000.00
TERM:
Land and Building
180 months based on a 180 month amortization.
Equipment Term: 84 months
PREPAYMENT:
Loan Year Prepayment Premium
1 3.0% of outstanding principal balance
2 2.5% of outstanding principal balance
3 2.5% of outstanding principal balance
4 2.0% of outstanding principal balance
5 1.0% of outstanding principal balance
INTEREST RATE:
The interest rate will be a floating rate of 30 day commercial paper plus
3.00. On the real estate loan, the borrower will have the option during the
first 60 months of the loan to fix the rate at the 10 year treasury rate plus
3.00.
FEES:
A proposal fee in the amount of $10,000.00 is due and payable to SAFECO Credit
Company, Inc. upon acceptance of the proposal. In the event SAFECO Credit
Company, Inc. does not issue a commitment within 20 days from the acceptance
date of this proposal letter of if a commitment is issued but it is not
accepted by the Borrower due to it differing from the structure outlined in
this proposal, the previously paid proposal fee will be refunded to the
Borrower. In the event a commitment is issued by SAFECO Credit Company, Inc.
conforming in all respect to this proposal letter and the commitment is not
acceptable by the Borrower, the previously paid proposal fee will be deemed
earned by SAFECO Credit Company, Inc. If the transaction is consummated, the
proposal fee will be applied to the loan origination fee due at closing.
COSTS:
Borrower shall be responsible for all reasonable costs and expenses relating
to the preparation, execution and recording of all documents regardless of
whether or not the loan is ultimately funded. Documentation will be prepared
by SAFECO's in-house attorneys for a charge of $750.00 per location.
LOAN ORIGINATION FEE:
Upon commencement of the financing, Borrower will pay to SAFECO Credit
Company, Inc. a loan origination fee equal to one (1) percent of the loan
amount.
CONSTRUCTION FINANCING:
Construction financing will be available. Payment of interest will be due
monthly, payable in arrears. The interest rate charged will be the same as
that of the permanent loan.
DOCUMENTATION:
Final loan security documention must be satisfactory in form and content to
SAFECO Credit Company, Inc. It is expected that such documentation will
contain representations and covenants which are customary for loans of this
type. All items to be submitted by Borrower including but not limited to all
insurance certificated and policies, appraisals, surveys and financial
statements must be satisfactory in form and content to SAFECO Credit Company,
Inc. in its sole discretion.
The loan documents will provide The Bailey Company ("Bailey") as Guarantor
under the loans the option, in the event Good Times Restaurants, Inc. defaults
under the loan documents, to (i) fully assume the loans (after all defaults,
reasonably possible for Bailey to cure, have been cured within a reasonable
time period) without paying any additional fees and at the existing terms,
(ii) reasonably cure and continue to make all required principal and interest
payments to SAFECO Credit Company, Inc. with Good Times Restaurants, Inc.
remaining as the primary borrower, or (iii) allow the guaranty to be fully
exercised by SAFECO Credit Company, Inc.
Financial Covenants: Good Times Restaurants, Inc. will maintain a net worth of
not less than $2,000,000.00 and a fixed charged coverage of 1.25 to 1.
CONDITION PRECEDENT:
This letter should not be construed as a commitment by SAFECO Credit Company,
Inc., but as a proposal or financing subject to (1) satisfactory review of
Borrower's and, if applicable, Guarantor(s) financial statements and
supporting data, (2) background investigations of the principals and related
parties to this transaction, (3) receipt of all other information acceptable
in form and substance to SAFECO Credit Company, Inc. and that SAFECO Credit
Company., at it sole discretion, deems necessary to perform due diligence in
evaluating this proposal, and (4) approval by SAFECO Credit Company, Inc.'s
Executive Credit Committee and issuance and acceptance of a formal commitment
letter.
If approved, SAFECO will issue a loan commitment that will be available for
one year from the approval date. If there has been no material change in the
financial condition of the borrower, the commitment can be extended beyond the
first year.
ENVIRONMENTAL CONCERNS:
SAFECO will require that a Phase I Environmental Audit be performed on the
location to insure that is it free of environmental concerns. The Phase I
Environmental Audit must be in accordance with ASTM guidelines.
ACCEPTANCE:
An accepted copy of this letter together with the proposal fee must be
returned to SAFECO Credit Company, Inc. at 165 S. Union Blvd., Suite #610,
Lakewood, CO 80228, on or before 4:30 p.m. on June 30, 1998, after which time
SAFECO Credit Company, Inc.'s committee shall automatically terminate.
By acceptance of this letter, you acknowledge that this is issued at a time
when we have not yet undertaken a full business, credit and legal analysis of
the Borrower and transaction contemplated hereby. As a result of a detailed
investigation and analysis, it may be necessary that we restructure or
otherwise modify this proposal prior to our issuance of a commitment. Our
efforts will be directed towards approval of the transaction as proposed.
We welcome the opportunity to submit this proposal for financing services, and
urge you to contact us immediately should you have any questions.
Sincerely,
SAFECO Credit Company, Inc. Agreed to and Accepted by:
/s/John Black /s/Boyd E. Hoback
___________________ ________________________
Franchise Specialist President and CEO
Date: 6/22/98 Date: 6/22/98
Exhibit 10.15
GOOD TIMES RESTAURANTS INC.
SHAREHOLDER RIGHTS PLAN
Dated as of February 24, 1998
TABLE OF CONTENTS
Page
RECITALS 1
Section 1. Certain Definitions 1
Section 2. Rights 3
Section 3. Exercise of Rights; Purchase Price; Expiration
Date of Rights 4
Section 4. Company Covenants Concerning Shares and Rights 4
Section 5. Record Date 5
Section 6. Adjustment of Purchase Price, Number and
Type of Shares or Number of Rights 5
Section 7. Certificate of Adjusted Purchase Price or
Number of Shares 11
Section 8. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 11
Section 9. Fractional Rights and Fractional Shares 13
Section 10. Agreement of Rights Holders 14
Section 11. Redemption 14
Section 12. Notice of Certain Events 15
Section 13. Notices 16
Section 14. Supplements and Amendments 16
Section 15. Successors; Certain Covenants 16
Section 16. Severability 16
Section 17. Governing Law 16
Section 18. Descriptive Headings 16
Exhibit A. Form of Right Certificate
SHAREHOLDER RIGHTS PLAN
This Shareholder Rights Plan (the "Plan") of Good Times Restaurants Inc., a
Nevada corporation (the "Company"), is made effective as of the 24th day of
February, 1998.
RECITALS
On February 24, 1998 the Board of Directors of the Company authorized and
declared a dividend distribution of one right ("Right") for each share of
Common Stock, $.001 par value, of the Company (a "Common Share") outstanding
as of the close of business on February 24, 1998 (the "Record Date"), with
each Right initially representing the right to purchase one Common Share, upon
the terms and subject to the conditions hereinafter set forth, and further
authorized the issuance of one Right with respect to each Common Share issued
or delivered by the Company after the Record Date but prior to the
Distribution Date (as hereinafter defined);
Section 1. Certain Definitions. For purposes of this Plan, the following
terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the
Company or any Related Person) who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of twenty percent or
more of the Common Shares then outstanding; provided however that (i) any
Person who or which, together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of twenty percent or more of the Common
Shares then outstanding in connection with a transaction or series of
transactions approved prior to such transaction or transactions by the Board
of Directors of the Company shall not be deemed an Acquiring Person by virtue
of such transactions or series of transactions, and (ii) a Person shall not be
deemed to have become an Acquiring Person solely as a result of a reduction in
the number of Common Shares outstanding, unless subsequent to such reduction
such Person or any Affiliate or Associate of such Person shall become the
Beneficial Owner of any additional Common Shares other than as a result of a
stock dividend, stock split or similar transaction effected by the Company in
which all shareholders are treated equally.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act, as in effect on the date of this Plan.
(c) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (whether or not in writing), or
upon the exercise of conversion rights, exchange rights, rights (other than
the Rights), warrants or options, or otherwise; provided however that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or dispose of,
including pursuant to any agreement, arrangement or understanding (whether or
not in writing); or
(iii) of which any other Person is the Beneficial Owner if
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) with such
other Person (or any of such other Person's Affiliates or Associates) with
respect to acquiring, holding, voting or disposing of any securities of the
Company other than pursuant to a revocable proxy or a securities underwriting
arrangement.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of Colorado are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 p.m.,
Mountain Time, on such date; provide however, that if such date is not a
Business Day it shall mean 5:00 p.m., Mountain Time, on the next succeeding
Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
the Common Stock, $.001 par value, of the Company; provided, however, that, if
the Company is the continuing or surviving corporation in a transaction
described in Section 6(a)(ii) or Section 8(a)(ii) hereof, "Common Shares" when
used with reference to the Company shall mean the capital stock or equity
security with the greatest aggregate voting power of the Company. "Common
Shares" when used with reference to any corporation or other legal entity,
other than the Company, including an Issuer (as defined in Section 8(b)
hereof), shall mean the capital stock or equity security with the greatest
aggregate voting power of such corporation or other legal entity.
(g) "Company" shall mean Good Times Restaurants Inc., a Nevada
corporation.
(h) "Distribution Date" shall mean the earlier of:
(i) the Close of Business on the twentieth calendar day (or if
the Share Acquisition Date results from the consummation of a Permitted Offer,
such later date as may be determined by the Company's Board of Directors
before the Distribution Date) after the Share Acquisition Date; or
(ii) the Close of Business on the twentieth calendar day (or such
later date as may be specified by the Board of Directors prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement of
a tender or exchange offer (as determined by reference to Rule 14d-2(a) under
the Exchange Act) by any Person (other than the Company or any Related
Person), the consummation of which could result in beneficial ownership by
such Person of twenty percent or more of the outstanding Common Shares
(including any such date which is after the date of this Plan and prior to the
issuance of the Rights).
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Expiration Date" shall mean the earlier of (i) the Close of
Business on the Final Expiration Date and (ii) the time at which the Rights
are redeemed as provided in Section 11 hereof.
(k) "Final Expiration Date" shall mean December 31, 1999.
(1) "Flip-in Event" shall mean any event described in clauses (A), (B)
or (C) of Section 6(a)(ii) hereof.
(m) "Flip-over Event" shall mean any event described in subsections (i),
(ii) or (iii) of Section 8(a) hereof.
(n) "Issuer" shall have the meaning set forth in Section 8(b) of this
Plan.
(o) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
(p) "Permitted Offer" shall mean a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms for all
outstanding shares of Common Stock determined by at least a majority of the
members of the Board of Directors who are not officers or employees of the
Company and who are not representatives, nominees, Affiliates or Associates of
an Acquiring Person to be (a) that are fair to stockholders (taking into
account all factors that such members of the Board deem relevant including,
without limitation, prices that could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum value)
and (b) otherwise in the best interests of the Company and its stockholders.
(q) "Person" shall mean any individual, firm, corporation, partnership
or other legal entity, and shall include any successor (by merger or
otherwise) of such entity.
(r) "Purchase Price" shall mean initially $20.00 per share of Common
Stock and shall be subject to adjustment from time to time as provided in this
Plan.
(s) "Redemption Price" shall mean $.001 per Right, subject to
adjustment by resolution of the Board of Directors of the Company to reflect
any stock split, stock dividend or similar transaction occurring after the
date hereof.
(t) "Related Person" shall mean (i) any Subsidiary of the Company or
(ii) any employee benefit or stock ownership plan of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan.
(u) "Right" shall have the meaning set forth in the Recitals to this
Plan.
(v) "Right Certificates" shall mean certificates evidencing the Rights,
in substantially the form of Exhibit A attached hereto.
(w) "Securities Act" shall mean the Securities Act of 1933, as amended.
(x) "Share Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person (by press release, filing
made with the Securities and Exchange Commission or otherwise) that an
Acquiring Person has become such.
(y) "Subsidiary" of any Person shall mean any corporation or other
legal entity of which a majority of the voting power of the voting equity
securities or equity interests is owned, directly or indirectly, by such
Person.
(z) "Trading Day" shall mean any day on which the principal national
securities exchange or other transaction reporting system on which the Common
Shares are listed or admitted to trading is open for the transaction of
business or, if the Common Shares are not listed or admitted to trading on any
national securities exchange, a Business Day.
(aa) "Triggering Event" shall mean any Flip-in Event or Flip-over Event.
Section 2. Rights. (i) The Rights will be evidenced by the certificates
representing Common Shares registered in the names of the record holders
thereof (which certificates representing Common Shares shall also be deemed to
be Right Certificates) and not by separate Right Certificates, (ii) the Rights
will be transferable only in connection with the transfer of the underlying
Common Shares, and (iii) the transfer of any certificates evidencing Common
Shares shall also constitute the transfer of the Rights associated with the
Common Shares evidenced by such certificates.
Section 3. Exercise of Rights; Purchase Price; Expiration Date Of Rights.
(a) Until the Distribution Date, the registered holder of any
Right may exercise such Right by written notice to the Company of such
exercise together with payment of the Purchase Price for the Common Share as
to which such Right is exercised. The Purchase Price shall be payable in
lawful money of the United States of America by certified check or bank draft
payable to the order of the Company.
(b) Subject to Section 6(a)(ii) hereof, upon the exercise of a
Right and payment as described above, the Company shall promptly (i)
requisition from any transfer agent of the Common Shares certificates
representing the number of Common Shares to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) after receipt of such certificates cause the same to be
delivered to or upon the order of the registered holder of such Right,
registered in such name or names as may be designated by such holder, (iii) if
appropriate, deliver to or upon the order of the registered holder of such
Right the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 9 hereof or in lieu of the issuance of
Common Shares in accordance with Section 6(a)(iii) hereof, and (iv) deliver
any due bill or other instrument to the registered holder of such Right as
provided by Section 6(l) hereof.
(c) Notwithstanding anything in this Plan to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification or registration in such jurisdiction shall not have been
effected or the exercise of the Rights shall not be permitted under applicable
laws, including but not limited to the Securities Act and applicable state
securities laws.
Section 4. Company Covenants Concerning Shares and Rights. The Company
covenants and agrees that:
(a) It will cause to be reserved and kept available out of its
authorized and unissued Common Shares the number of Common Shares that will be
sufficient to permit the exercise pursuant to Section 3 hereof of all
outstanding Rights.
(b) So long as the Common Shares (and, following the occurrence
of a Triggering Event, Common Shares and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on a national
securities exchange or other transaction reporting system, it will endeavor to
cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or system upon
official notice of issuance.
(c) It will take all such action as may be necessary to ensure
that all Common Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) delivered upon exercise of Rights, at
the time of delivery of the certificates for such shares, shall be (subject to
payment of the Purchase Price) duly and validly authorized and issued, fully
paid and nonassessable shares, free and clear of any liens, encumbrances or
other adverse claims and not subject to any rights of call or first refusal.
(d) It will pay when due and payable any and all federal and state
transfer taxes and charges that may be payable in respect of the issuance or
delivery of the Rights or of any Common Shares (or other securities, as the
case may be) upon the exercise of Rights; provided however that it will not be
required to pay any transfer tax or charge which may be payable in respect of
any transfer, issuance or delivery of certificates representing Common Shares
(or other securities, as the case may be).
(e) It will use its best efforts to (i) file on an appropriate form,
as soon as practicable following the later to occur of a Triggering Event or
the Distribution Date, a registration statement under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, or (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance
with, the securities or "blue sky" laws of the various states in connection
with the exercisability of the Rights; provided however that the Company may
temporarily suspend the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective and upon
any such suspension, the Company will issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
(f) Notwithstanding anything in this Plan to the contrary, the Company
covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 11 or Section 14 hereof, take (or permit any Subsidiary
to take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(g) In the event that the Company is obligated to issue other
securities of the Company, pay cash and/or distribute other property pursuant
to Sections 6 and 8 hereof, it will make all arrangements necessary so that
such other securities, cash and/or property are available for distribution, if
and when appropriate.
Section 5. Record Date. Each Person in whose name any certificate
representing Common Shares (or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become
the holder of record of the Common Shares (or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights were duly exercised hereunder and payment of the
Purchase Price (and all applicable transfer taxes) was made. Prior to the
exercise of a Right, the holder of such Right shall not be entitled by virtue
thereof to any rights of a shareholder of the Company with respect to
securities for which the Right shall be exercisable, including without
limitation the right to vote, receive dividends or other distributions or
exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company except as provided herein.
Section 6. Adjustment of Purchase Price, Number and Type of Shares or Number
of Rights. The Purchase Price, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 6.
(a) (i) In the event that the Company shall at any time after
the date of this Plan (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares into a smaller number of shares or (D) issue any
shares of its capital stock in a reclassification of the Common Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), the
Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification,
and/or the number and/or kind of shares of capital stock issuable on such date
upon exercise of a Right, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive upon
payment of the Purchase Price then in effect the aggregate number and kind of
shares of capital stock which, if such Right had been exercised immediately
prior to such date and at a time when the Common Shares transfer books of the
Company were open, he or she would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 6(a)(i) and Section 6(a)(ii) hereof or Section 8 hereof, the
adjustment provided for in this Section 6(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 6(a)(ii)
or Section 8 hereof.
(ii) In the event that:
(A) any Acquiring Person or any Associate or Affiliate of
any Acquiring Person, at any time after the date of this Plan, directly or
indirectly, shall (1) merge into the Company or otherwise combine with the
Company and the Company shall be the continuing or surviving corporation of
such merger or combination (other than in a transaction subject to Section 8
hereof), (2) merge or otherwise combine with any Subsidiary of the Company,
(3) in one or more transactions (other than in connection with the exercise of
Rights or the exercise or conversion of securities exercisable or convertible
into capital stock of the Company or any of its Subsidiaries) transfer any
assets to the Company or any of its Subsidiaries in exchange (in whole or in
part) for shares of any class of capital stock of the Company or any of its
Subsidiaries or for securities exercisable for or convertible into shares of
any class of capital stock of the Company or any of its Subsidiaries, or
otherwise obtain from the Company or any of its Subsidiaries, with or without
consideration, any additional shares of any class of capital stock of the
Company or any of its Subsidiaries or securities exercisable for or
convertible into shares of any class of capital stock of the Company or any of
its Subsidiaries (other than as part of a pro rata distribution to all holders
of such shares of any class of capital stock of the Company, or any of its
Subsidiaries), (4) sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise dispose (in one or more transactions) of any assets (including
securities), to, from, with or of, as the case may be, the Company or any of
its Subsidiaries (other than in a transaction subject to Section 8 hereof),
(5) receive any compensation from the Company or any of its Subsidiaries other
than compensation as a director or for full-time employment as a regular
employee, in either case, at rates in accordance with the Company's (or its
Subsidiaries') past practices, or (6) receive the benefit, directly or
indirectly (except proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantage provided by the Company or any of its Subsidiaries; or
(B) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation of
the Company with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries (whether or not
with or into or otherwise involving an Acquiring Person), other than a
transaction subject to Section 8 of this Plan, which has the effect, directly
or indirectly, of increasing by more than one percent the proportionate share
of the outstanding shares of any class of equity securities or of securities
exercisable for or convertible into equity securities of the Company or any of
its Subsidiaries of which an Acquiring Person or any Associate or Affiliate of
any Acquiring Person, is the Beneficial Owner; or
(C) any Person (other than the Company or any Related
Person) who or which, together with all Affiliates and Associates of such
Person, shall at any time after the date of this Plan, become an Acquiring
Person other than through a purchase of Common Shares pursuant to a tender
offer made in the manner prescribed by Section 14(d) of the Exchange Act and
the rules and regulations promulgated thereunder and which is a Permitted
Offer;
then in each such case proper provision shall be made so that each holder of a
Right, except as provided below, shall thereafter have a right to receive,
upon exercise thereof in accordance with the term of this Plan at an exercise
price per Right equal to the product of the then-current Purchase Price
multiplied by the number of Common Shares for which a Right was exercisable
immediately prior to the first occurrence of such Flip-in Event (but assuming
the rights were then exercisable), such number of Common Shares as shall equal
the result obtained by multiplying the then-current Purchase Price by the
number of Common Shares for which a Right was exercisable immediately prior to
the first occurrence of such Flip-in Event (assuming exercisability), and
dividing that product by fifty percent of the current per share market price
of a Common Share (determined pursuant to Section 6(d) hereof) on the date of
the first occurrence of any such Flip-in Event. Notwithstanding anything in
this Plan to the contrary, from and after the first occurrence of any such
Flip-in Event, any Rights of which any Acquiring Person or any Associate or
Affiliate of such Acquiring Person involved in such Flip-in Event is or was at
any time the Beneficial Owner after the date upon which such Acquiring Person
became such shall become void and any holder of such Rights shall thereafter
have no right to exercise such Rights under any provision of this Plan.
(iii) In the event that there shall not be sufficient author-
ized but unissued Common Shares or authorized and issued Common Shares held in
treasury to permit the exercise in full of the Rights in accordance with the
foregoing subsection (ii), and the Company is unable to obtain the
authorization of the necessary additional Common Shares within ninety calendar
days after the occurrence of the Flip-in Event, then, notwithstanding anything
in this Plan to the contrary, the Company shall determine the excess of the
value of the Common Shares issuable upon the exercise of a Right over the
Purchase Price (such excess being hereinafter referred to as the "Spread") and
shall be obligated to deliver, upon the surrender of such Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available) and cash (to the extent permitted by applicable law and any
agreements or instruments to which the Company is a party in effect
immediately prior to the first occurrence of any Flip-in Event) in an amount
equal to the Spread. To the extent that any legal or contractual restrictions
prevent the Company from paying the full amount of cash payable in accordance
with the foregoing sentence, the Company shall pay to holders of the Rights as
to which such payments are payable all amounts which are not then restricted
on a pro rata basis and shall continue to make payments on a pro rata basis as
funds become available until the full amount due to each such Right holder has
been paid.
(b) In the event that the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of Common Shares
entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Common Shares (or securities having
equivalent rights, privileges and preferences as the Common Shares
("equivalent common shares")) or securities convertible into Common Shares or
equivalent common shares at a price per Common Share or equivalent common
share (or having a conversion price per share, if a security convertible into
Common or equivalent common shares) less than the current per share market
price of the Common Shares (as determined pursuant to Section 6(d) hereof) on
such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Common Shares outstanding on such record date plus the number of
Common Shares which the aggregate offering price of the total number of Common
Shares and/or equivalent common shares so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current per share market price and the denominator of which
shall be the number of Common Shares outstanding on such record date plus the
number of additional Common Shares and/or equivalent common shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a written statement which shall be conclusive for all purposes.
Common Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In the event that the Company shall fix a record date
for the making of a distribution to all holders of Common Shares (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular periodic cash dividend at a rate not
in excess of 125 percent of the rate of the highest regular periodic cash
dividend paid during the immediately preceding two years), assets, stock
(other than a dividend payable in Common Shares) or subscription rights,
options or warrants (excluding those referred to in Section 6(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price of the Common Shares (as determined pursuant to Section 6(d) hereof) on
such record date or, if earlier, the date on which Common Shares begin to
trade on an ex-dividend or when-issued basis with respect to such
distribution, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
written statement which shall be conclusive for all purposes) of the portion
of the cash, assets, stock or evidences of indebtedness so to be distributed
(in the case of periodic cash dividends, only that portion in excess of 125
percent of the rate of the highest regular periodic cash dividend paid during
the immediately preceding two years) or of such subscription rights, options
or warrants applicable to Common Shares, and the denominator of which shall be
such current per share market price of the Common Shares. Such adjustments
shall be made successively whenever such a record date is fixed; in the event
that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) For the purpose of any computation hereunder, the
"current per share market price" of Common Shares on any date shall be deemed
to be the average of the daily closing prices per share of such Common Shares
for the thirty consecutive Trading Days immediately prior to such date;
provided however that in the event that the current per share market price of
the Common Shares is determined during a period following the announcement by
the issuer of such Common Shares of (A) a dividend or distribution on such
Common Shares payable in such Common Shares or securities convertible into
such Common Shares (other than the Rights) or (B) any subdivision, combination
or reclassification of such Common Shares, and prior to the expiration of
thirty Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to take into account ex-dividend trading
or to reflect the current per share market price per Common Share equivalent.
The closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Shares are
listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in
use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by
a professional market maker making a market in the Common Shares selected by
the Board of Directors of the Company. If the Common Shares are not publicly
held or not so listed or traded, or not the subject of available bid and asked
quotes, "current per share market price" shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a written statement which shall be
conclusive for all purposes.
(e) Except as set forth below, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent in such price; provided, however,
that any adjustments which by reason of this Section 6(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under Section 6 shall be made to the nearest
cent or to the nearest whole Common Share or other share, as the case may be.
Notwithstanding the first sentence of this Section 6(e), any adjustment
required by Section 6 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 8(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Common Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in this Section 6 and the provisions of
Sections 3, 4, 5, 8 and 9 hereof with respect to the Common Shares shall apply
on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided in this Plan.
(h) Upon each adjustment of the Purchase Price as a result of the
calculations made in Section 6(b) hereof and Section 6(c) hereof made with
respect to a distribution of subscription rights, options or warrants
applicable to Common Shares, each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of Common Shares (calculated to the
nearest whole Common Share) obtained by (i) multiplying the number of Common
Shares covered by a Right immediately prior to this adjustment by the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value of the Common Shares issuable upon
exercise of the Rights, the Company shall take any corporate action which may
be necessary in order that the Company may validly and legally issue fully
paid and nonassessable Common Shares at such adjusted Purchase Price.
(j) In any case in which this Section 6 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Common Shares or other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the number of
Common Shares or other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided however that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares, capital stock or securities upon the
occurrence of the event requiring such adjustment.
(k) Notwithstanding anything in this Plan to the contrary, the Company
shall be entitled to make such reductions in the Purchase Price, in addition
to those adjustments expressly required by this Section 6, as and to the
extent that in their good faith judgment the Board of Directors of the Company
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Shares, (ii) issuance wholly for cash of Common
Shares at less than the current per share market price therefor, (iii)
issuance wholly for cash of securities which by their term are convertible
into or exchangeable for Common Shares, (iv) stock dividends, or (v) issuance
of rights, options or warrants referred to in this Section 6, hereafter made
by the Company to holders of its Common Shares shall not be taxable to such
shareholders.
(l) Notwithstanding anything in this Plan to the contrary, in the
event that the Company shall at any time after the date of this Plan and prior
to the Distribution Date (i) declare a dividend on the outstanding Common
Shares payable in Common Shares, (ii) subdivide the outstanding Common Shares,
(iii) combine the outstanding Common Shares into a smaller number of shares,
or (iv) issue any shares of its capital stock in a reclassification of the
outstanding Common Shares, the number of Rights associated with each Common
share then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following
the occurrence of such event, provided that any resulting fractional amount
shall be rounded to the nearest whole number.
Section 7. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 6 or Section 8(a)
hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the transfer agent for the Common Shares, a
copy of such certificate, and (c) if such adjustment is made after the
Distribution Date, mail a brief summary of such adjustment to each holder of a
Right Certificate in accordance with Section 13 hereof.
Section 8. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) Except as provided in Section 8(c) of this Plan, in the event
that, following the Share Acquisition Date, directly or indirectly,
(i) the Company shall consolidate with, or merge with or into,
any other Person (other than a Related Person in a transaction which complies
with Section 4(f) hereof) and the Company shall not be the continuing or
surviving corporation of such consolidation or merger;
(ii) any Person (other than a Related Person in a transaction
which complies with Section 4(f) hereof) shall consolidate with the Company,
or merge with or into the Company and the Company shall be the continuing or
surviving corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Common Shares shall be
changed into or exchanged for stock or other securities of such other Person
or cash or any other property; or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power (including without limitation securities
creating any obligation on the part of the Company and/or any of its
Subsidiaries) representing in the aggregate more than fifty percent of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any Acquiring Person or Persons (other than the Company or any Related
Person in one or more transactions each of which complies with Section 4(f)
hereof), then, and in each such case, proper provision shall be made so that
(A) except as provided below, each holder of a Right shall thereafter have the
right to receive, upon the exercise of it in accordance with the terms of this
Plan at an exercise price per Right equal to the product of the then-current
Purchase Price multiplied by the number of Common Shares for which a Right is
then exercisable, in lieu of Common Shares, such number of validly authorized
and issued, fully paid, nonassessable and freely tradeable Common Shares of
the Issuer (as such term is hereinafter defined), free and clear of any liens,
encumbrances and other adverse claims and not subject to any rights of call or
first refusal, as shall be equal to the result obtained by multiplying the
then-current Purchase Price by the number of Common Shares for which a Right
is exercisable immediately prior to the first occurrence of any Flip-over
Event (or, if a Flip-in Event has occurred prior to the first occurrence of a
Flip-over Event, multiplying the number of Common Shares for which a Right was
exercisable immediately prior to the first occurrence of a Flip-in Event,
assuming the Rights were then exercisable by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product by
fifty percent of the current per share market price of the Common Shares of
the Issuer (determined pursuant to Section 6(d) hereof), on the date of
consummation of such Flip-over Event; (B) the Issuer shall thereafter be
liable for, and shall assume, by virtue of such Flip-over Event, all the obli-
gations and duties of the Company pursuant to this Plan; (C) the term
"Company" shall thereafter be deemed to refer to the Issuer; and (D) the
Issuer shall take such steps (including without limitation the reservation of
a sufficient number of its Common Shares to permit the exercise of all
outstanding Rights) in connection with such consummation as may be necessary
to ensure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be possible, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) For purposes of this Section 8, "Issuer" shall mean (i) in the
case of any Flip-over Event described in Sections 8(a)(i) or (ii) above, the
Person that is the continuing, surviving, resulting or acquiring Person
(including the Company as the continuing or surviving corporation of a
transaction described in Section 8(a)(ii) above), and (ii) in the case of any
Flip-over Event described in Section 8(a)(iii) above, the Person that is the
party receiving the greatest portion of the assets or earning power (including
without limitation securities creating any obligation on the part of the
Company and/or any of its Subsidiaries) transferred pursuant to such
transaction or transactions; provided however that in any such case, (A) if
(1) no class of equity security of such Person is, at the time of such merger,
consolidation or transaction and has been continuously over the preceding
twelve-month period, registered pursuant to Section 12 of the Exchange Act,
and (2) such Person is a Subsidiary, directly or indirectly, of another
Person, a class of equity security of which is and has been so registered, the
term "Issuer" shall mean such other Person; and (B) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, a class of equity
security of two or more of which are and have been so registered, the term
"Issuer" shall mean whichever of such Persons is the issuer of the equity
security having the greatest aggregate market value. Notwithstanding the
foregoing, if the Issuer in any of the Flip-over Events listed above is not a
corporation or other legal entity having outstanding equity securities, then,
and in each such case, (i) if the Issuer is directly or indirectly wholly
owned by a corporation or other legal entity having outstanding equity
securities, then all references to Common Shares of the Issuer shall be deemed
to be references to the Common Shares of the corporation or other legal entity
having outstanding equity securities which ultimately controls the Issuer, and
(ii) if there is no such corporation or other legal entity having outstanding
equity securities, (Y) proper provision shall be made so that the Issuer shall
create or otherwise make available for purposes of the exercise of the Rights
in accordance with the terms of this Plan, a type or types of security or
securities having a fair market value at least equal to the economic value of
the Common Shares which each holder of a Right would have been entitled to
receive if the Issuer had been a corporation or other legal entity having
outstanding equity securities; and (Z) all other provisions of this Plan shall
apply to the issuer of such securities as if such securities were Common
Shares.
(c) Notwithstanding anything contained in this Plan to the contrary,
the adjustments described in Section 8(a) of this Plan shall not be made upon
the occurrence of an event described in Section 8(a)(i) or Section 8(a)(ii) if
all of the following are met:
(i) the Company shall merge or consolidate with an Acquiring
Person (or a wholly owned subsidiary of such Acquiring Person) who became an
Acquiring Person pursuant to a Permitted Offer;
(ii) the per share consideration offered in such merger or
consolidation is equal to or greater than the price per Common Share paid to
all holders of Common Stock whose shares were purchased pursuant to such
Permitted Offer; and
(iii) the form of consideration being offered to the remaining
holders of shares of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer.
(d) The Company shall not consummate any Flip-over Event unless the
Issuer shall have a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 8(b) above) which have not been issued
or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 8 and unless prior to such consummation the
Company and the Issuer shall have both executed an agreement providing for the
terms set forth in subsections (a) and (b) of this Section 8 and further
providing that as soon as practicable after the consummation of any Flip-over
Event, the Issuer will
(i) prepare and file a registration statement under the Securities
Act, with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to cause
such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements of the Issuer and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.
(e) The provisions of this Section 8 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the
event that a Flip-over Event occurs at any time after the occurrence of a
Flip-in Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in this Section 8.
Section 9. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights.
In lieu of any fractional Rights which would otherwise result from this Plan,
the number of Rights to be issued to a shareholder of the Company shall be
rounded to the nearest whole Right.
(b) The Company shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares. In lieu of any fractional Common Shares
which would otherwise result from this Plan, the number of Common Shares to be
issued by the Company under the Plan shall be rounded to the nearest whole
Common Share.
Section 10. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and with every other
holder of a Right that, notwithstanding anything in this Plan to the contrary,
the Company shall not have any liability to any holder of a Right or other
Person as a result of its inability to perform any of its obligations under
this Plan by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of
such obligation; provided however that the Company shall use its best efforts
to have any such order, decree or ruling lifted or otherwise overturned as
soon as reasonably possible.
Section 11. Redemption.
(a) The Board of Directors of the Company may at its option redeem
all but not less than all of the then-outstanding Rights at the Redemption
Price at any time prior to the Close of Business on the earlier of (i) the
Final Expiration Date or (ii) the tenth business day following the Share
Acquisition Date.
(b) If after the occurrence of a Share Acquisition Date and
following the expiration of the right of redemption hereunder but prior to the
occurrence of a Triggering Event, each of the following shall have occurred
and remain in effect: (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of Common Shares in a
transaction, or series of transactions, which did not result in the occurrence
of any Triggering Event such that such Person is thereafter a Beneficial Owner
of ten percent or less of the outstanding Common Shares, (ii) there are no
other Persons, immediately following the occurrence of the event described in
clause (i), who are Acquiring Persons, and (iii) the transfer or other
disposition described in clause (i) above was other than pursuant to a
transaction, or series of transactions, which directly or indirectly involved
the Company or any of its Subsidiaries, then the right of redemption set forth
in Section 11(a) shall be reinstated and thereafter be subject to the
provisions of this Section 11.
(c) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall publicly announce
such action and within ten calendar days thereafter the Company shall give
notice of such redemption to the holders of the then-outstanding Rights by
mailing such notice to all such holders at their last addresses as they appear
upon the registry books of the Company or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given, whether
or not the holder receives the notice. Each such notice of redemption will
state the method by which the payment of the Redemption Price will be made.
The Company may at its option pay the Redemption Price in cash, Common Shares
(based upon the current per share market price of the Common Shares
(determined pursuant to Section 6(d) hereof), at the time of redemption) or
any other form of consideration deemed appropriate by the Board of Directors.
(d) The Board of Directors of the Company may at any time relinquish
any or all of the rights to redeem the Rights under Sections 11(a) or 11(b)
hereof by duly adopting a resolution to that effect. Promptly after adoption
of such a resolution, the Company shall publicly announce such action.
Immediately upon adoption of such resolution, the rights of the Board of
Directors under the portions of this Section 18 specified in such resolution
shall terminate without further action and without any notice.
Section 12. Notice of Certain Events.
(a) In case after the Distribution Date the Company shall propose (i)
to pay any dividend payable in stock of any class to the holders of Common
Shares or to make any other distribution to the holders of Common Shares
(other than a regular periodic cash dividend at a rate not in excess of 125
percent of the rate of the highest regular periodic cash dividend paid during
the immediately preceding two years), (ii) to offer to the holders of Common
Shares rights, options or warrants to subscribe for or to purchase any
additional Common Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Common Shares (other than a reclassification involving only the subdivision of
outstanding Common Shares), or (iv) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of assets or earning power (including without limitation
securities creating any obligation on the part of the Company and/or any of
its Subsidiaries) representing more than fifty percent of the assets and
earning power of the Company and its Subsidiaries, taken as a whole, to any
other Person or Persons, then in each such case the Company shall give to each
holder of a Right Certificate notice in accordance with Section 13 hereof of
such proposed action which shall specify the record date for the purposes of
such stock dividend, distribution or offering of rights, options or warrants,
or the date on which such reclassification, consolidation, merger, sale,
transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the Common Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty calendar days prior
to the record date for determining holders of the Common Shares for purposes
of such action, and in the case of any such other action at least twenty
calendar days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares, whichever
shall be the earlier.
(b) In case any Triggering Event shall occur, then in each such case
the Company shall as soon as practicable thereafter give to each holder of a
Right Certificate notice in accordance with Section 13 hereof of the
occurrence of such event which shall specify the event and the consequences of
the event to holders of Rights.
Section 13. Notices.
(a) Notices or demands authorized by this Plan to be given or made by
the holder of any Right Certificate to or on the Company shall be sufficiently
given or made if sent by (i) confirmed telefax or (ii) first-class mail with
postage prepaid, addressed (until written notice of another address is given
to the holders of Right Certificates) as follows:
Good Times Restaurants Inc.
601 Corporate Circle
Golden, CO 80401
Telefax: (303) 273-0177
Attn: Mr. Boyd E. Hoback, President
(b) Notices or demands authorized by this Plan to be given or made
by the Company to or on the holder of any Right shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Company.
Section 14. Supplements and Amendments. Prior to the Share Acquisition Date,
the Company shall supplement or amend any provision of this Plan in any manner
which the Company may deem desirable without the approval of any holders of
Rights or certificates representing Common Shares. Notwithstanding anything
in this Plan to the contrary, no supplement or amendment shall be made which
decreases the stated Redemption Price or the period of time remaining until
the Final Expiration Date.
Section 15. Successors; Certain Covenants. All the covenants and provisions
of this Plan by or for the benefit of the Company shall bind and inure to the
benefit of its successors and assigns hereunder.
Section 16. Severability. If any term, provision, covenant or restriction of
this Plan is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Plan shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
Section 17. Governing Law. This Plan and each Right Certificate issued
hereunder shall be deemed to be a contract made under the internal substantive
laws of the State of Nevada and for all purposes shall be governed by and
construed in accordance with the internal substantive laws of such State
applicable to contracts to be made and performed entirely within such State.
Section 18. Descriptive Headings. Descriptive headings of the several
sections of this Plan are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Shareholder Rights Plan to be
duly executed on its behalf as of the date first above written.
GOOD TIMES RESTAURANTS INC.,
a Nevada corporation
By: /s/ Boyd E. Hoback
Boyd E. Hoback, President
and
Chief Executive Officer
Exhibit 21.1
December 22, 1997
Good Times Drive Thru Inc., a Colorado Corporation, is the only current
subsidiary of Registrant.
Exhibit 23.1
December 18, 1998
Hein + Associates LLP
717 17th Street, Suite 1600
Denver, Colorado 80202
Gentlemen:
In connection with your consent for the Form S-8 Registration Statement, we
confirm to the best of our knowledge and belief the following representations
made to you.
1. We are responsible for the fair presentation in the financial
statements of financial position, results of operations, and cash flows, in
conformity with generally accepted accounting principles.
2. We have reviewed our representation letter to you dated November 13,
1998 with respect to the audited financial statements for the period ended
September 30, 1998. We now repeat those representations 1 through 22 and
incorporate them herein.
3. There have been no Board of Directors meeting subsequent to October 13,
1998 other than December 10, 1998.
4. No events have occurred subsequent to September 30, 1998 that would
require adjustment in the financial statements.
Very truly yours,
/s/Boyd E. Hoback
__________________
Boyd E. Hoback
President & Chief Executive Officer
/s/Sue Knutson
__________________
Sue Knutson
Controller
