NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held January 22, 1999
[LOGO]
GOOD TIMES RESTAURANTS INC.
601 Corporate Circle
Golden, Colorado 80401
To the shareholders of Good Times Restaurants Inc.:
An Annual Meeting of the shareholders of Good Times Restaurants Inc. (the
"Company") will be held at the Doubletree Hotel, 8773 Yates Drive,
Westminster, Colorado, 80030 on January 22, 1999 at 2:00 PM (MST), or at any
adjournment or postponement thereof, to vote upon the following matters:
(i) to elect seven directors to serve during the ensuing year and
until their successors are elected and qualified;
(ii) to increase the number of shares of the Company's common stock
which are authorized in its 1992 Incentive Stock Option Plan from 150,000 to
525,000 shares;
(iii) to increase the number of shares of the Company's common stock
which are authorized in its 1992 Non-Statutory Stock Option Plan from 60,000
to 125,000 shares; and
(iv) to transact such other business as may properly come before the
meeting.
Details relating to these matters are set forth in the attached Proxy
Statement. All shareholders of record as of the close of business on December
11, 1998 will be entitled to notice of, and to vote at, such meeting or at any
adjournment or postponement thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN
THE ENCLOSED PROXY. A BUSINESS REPLY ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. THE DELIVERY OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
Sincerely,
Susan Knutson
Secretary
Denver, Colorado
December 18, 1998
GOOD TIMES RESTAURANTS INC.
601 Corporate Circle
Golden, Colorado 80401
(303) 384-1400
======================================
PROXY STATEMENT
======================================
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1999
===========================================================================
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Good Times Restaurants Inc., a Nevada
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
of the Company ("Annual Meeting") to be held at 2:00 PM (MST) on January 22,
1999 at the Doubletree Hotel, 8773 Yates Drive, Westminster, Colorado 80030,
or at any adjournment or postponement thereof. The Company anticipates that
this Proxy Statement and accompanying form of Proxy will be first mailed or
given to all shareholders of the Company on or about December 18, 1998. The
shares represented by all proxies that are properly executed and submitted
will be voted at the meeting in accordance with the instructions indicated
thereon. Unless otherwise directed, votes will be cast "FOR" the proposals
presented. Provided that a majority of all outstanding shares of common stock
of the Company are represented in person or by proxy at the Annual Meeting (a
quorum), the vote of a majority of the shares represented at the meeting in
person or by proxy will be required to enact any or all of the proposals.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of such revocation to the Company, by
substituting a new proxy executed at a later date, or by requesting, in
person, at the Annual Meeting that the proxy be returned.
All of the expenses involved in preparing, assembling and mailing this
Proxy Statement and the materials enclosed herewith and all costs of
soliciting proxies will be paid by the Company. In addition to the
solicitation by mail, proxies may be solicited by officers and regular
employees of the Company by telephone, telegraph or personal interview. Such
persons will receive no compensation for their services other than their
regular salaries. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of the shares held on the record date, and the
Company may reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1998 IS INCLUDED WITH THIS PROXY STATEMENT.
<PAGE>
VOTING SECURITIES
The close of business on December 11, 1998, has been fixed by the Board
of Directors of the Company as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. At such
date, there were outstanding 1,754,991 shares of the Company's $.001 par value
common stock (hereinafter referred to as the "common stock"), each of which
entitles the holder thereof to one vote per share on each matter which may
come before the meeting.
A majority of all votes entitled to be cast, represented in person or by
proxy, constitutes a quorum at the Annual Meeting. If a quorum is present,
approval of all matters upon which the shareholders are to vote requires the
approval of a majority of shares represented in person or by proxy at the
meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 1, 1998, the stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's common stock ("Principal Shareholders"),
all directors and officers individually and all directors and officers of the
Company as a group. There are no contractual arrangements or pledges of the
Company's securities, known to the Company, which may at a subsequent date
result in a change of control of the Company.
<TABLE>
Number of
Common
Shares
Name, Address and Beneficially % of
Position Held Owned Class**
<S> <C> <C>
The Bailey Company, L.P. 460,828 (1) 26.26%
601 Corporate Circle
Golden, CO 80401
The Erie County 502,608 (1) 28.64%
Investment Co.
601 Corporate Circle
Golden, CO 80401
David E. Bailey 15,500 (3) *
601 Corporate Circle
Golden, CO 80401
Director
Geoffrey R. Bailey 28,650 (3) 1.63%
601 Corporate Circle
Golden, CO 80401
Chairman, Director
<PAGE>
Dan W. James, II 69,455 (2),(4) 3.95%
601 Corporate Circle
Golden, CO 80401
Director
Boyd E. Hoback 52,254 (5) 2.90%
601 Corporate Circle
Golden, CO 80401
Officer and Director
Richard J. Stark 10,100 (4) *
6075 South Quebec
Suite 103
Englewood, CO 80111
Director
Thomas P. McCarty 5,500 (4) *
8779 Johnson Street
Arvada, CO 80005
Director
Alan A. Teran 10,900 (4) *
2126 Knollwood Drive
Boulder, CO 80302
Director
Robert D. Turrill 16,765 (6) *
601 Corporate Circle
Golden, CO 80401
Officer
Scott G. LeFever 14,605 (6) *
601 Corporate Circle
Golden, CO 80401
Officer
All officers and directors
as a group (9 persons) 223,729 (7) 12.07% (7)
</TABLE>
_______________________
* Less than one percent
** Rule 13-d under the Securities Exchange Act of 1934, involving the
determination of beneficial owners of securities, includes as beneficial
owners of securities, among others, any person who directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares voting power and/or investment
power with respect to such securities; and, any person who has the right
to acquire beneficial ownership of such security within sixty days
through means, including, but not limited to, the exercise of any option,
warrant, right or conversion of a security. Any securities not
outstanding that are subject to such options, warrants, rights or
conversion privileges shall be deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned
by such person, but shall not be deemed to be outstanding for the purpose
of computing the percentage of the class by any other person. All numbers
of shares in this Proxy Statement reflect the 1 for 5 reverse split of
the Company's common stock as approved by the shareholders on February
12, 1998.
(1) Includes 426,667 shares of common stock which were issued to The
Bailey Company, L.P. ("TBC") as of August 31, 1998 upon conversion
of 1,000,000 shares of the Company's Series A Convertible Preferred
Stock, $.01 par value, owned by TBC (the "Conversion Shares"). All
of the Conversion Shares are "restricted securities" and as such
are subject to limitations on resale. The Conversion Shares may be
sold pursuant to Rule 144 under certain circumstances and may be
registered for resale in the future. TBC is 77% owned by The Erie
County Investment Co. ("Erie") which should be deemed the
beneficial owner of the Company's common stock held by TBC. Erie
also owns 41,780 shares of the Company's common stock in its own
name. David Bailey is a director and the president of Erie and
Geoffrey Bailey is a director and the executive vice president of
Erie.
(2) Includes an aggregate of 24,296 shares held in various Trusts for
the benefit of Mr. James.
(3) Includes 4,000 shares of presently exercisable non-statutory stock
options.
(4) Includes 5,000 shares of presently exercisable non-statutory stock
options.
(5) Includes 13,049 shares of presently exercisable non-statutory stock
options and 30,880 of presently exercisable incentive stock
options.
(6) Includes 2,761 shares of presently exercisable non-statutory stock
options and 10,600 of presently exercisable incentive stock
options.
(7) Does not include shares held beneficially by TBC and Erie. If
such shares were included, the number of shares beneficially held
by all officers and directors as a group would be 726,337 and the
percentage of class would be 39.18%.
All shares held by the officers, directors and Principal Shareholders
listed above are "restricted securities" and as such are subject to
limitations on resale. The shares may be sold pursuant to Rule 144 under
certain circumstances.
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company are as follows:
<TABLE>
Name Age Positions Date Began With Company
<S> <C> <C> <C>
Geoffrey R. Bailey 47 Chairman of the Board October 1996
Dan W. James, II 51 Director August 1989
Boyd E. Hoback 43 President, Chief Executive September 1987
Officer and Director
Robert D. Turrill 50 Vice President of October 1990
Marketing
Scott G. LeFever 40 Vice President of September 1987
Operations
Richard J. Stark 58 Director July 1990
Thomas P. McCarty 45 Director April 1994
Alan A. Teran 53 Director April 1994
David E. Bailey 43 Director October 1996
</TABLE>
___________________
This paragraph sets forth certain background information about the
Company and its affiliates, which information is necessary to fully understand
the following executive officer and director descriptions. The Company was
organized under Nevada law in 1987 and is now the parent company for Good
Times Drive Thru Inc. ("Drive Thru"), a wholly owned subsidiary which is
engaged in the business of developing, owning, operating and franchising
restaurants under the name Good Times Drive Thru Burgers(SM). Round the Corner
Restaurants, Inc. ("RTC") was established in 1968 and developed a chain of
sit-down gourmet hamburger restaurants. In 1986, RTC, then a closely held
corporation, formed Drive Thru to develop the Good Times' concept and business
and in 1988 RTC distributed Drive Thru stock to its shareholders after which
Drive Thru operated as an independent company. Between 1990 and 1993, the
Company, Drive Thru and RTC entered into a series of transactions (including
the merger of the Company with Drive Thru and RTC) resulting in Drive Thru and
RTC becoming wholly owned subsidiaries of the Company. On September 30, 1995,
the Company sold 100% of the stock of RTC. As a result of underperforming
restaurants and other financial difficulties, RTC subsequently filed for
Chapter 11 bankruptcy protection in October 1996 (see "Round the Corner").
Geoffrey R. Bailey, Chairman. Mr. Bailey is a director and executive
vice president of the Erie County Investment Company ("Erie"). He is
responsible for the operations and development of 64 Arby's restaurants owned
by The Bailey Company, a 77% owned subsidiary of Erie. Mr. Bailey is a
graduate of the University of Denver with a Bachelor's Degree in Business
Administration. He joined Erie in 1979 and became Chairman of the Board of the
Company in October 1996.
Dan W. James, II, Director. Mr. James became a Director of the Company
on December 18, 1990 and served as Chairman from December 16, 1992 to October
1, 1996. He is also a Director of Drive Thru. Mr. James is one of the co-
founders of RTC and had served as a Director of RTC from 1968 until 1992. Mr.
James devotes the majority of his time to the management of private
investments.
Boyd E. Hoback, President, CEO and Director. Mr. Hoback had served as
Vice President, Chief Operating Officer and Treasurer of the Company since
December 18, 1990, and as a Director since February 1992. Mr. Hoback held
similar positions with Drive Thru from its inception in December 1986. On
December 16, 1992, Mr. Hoback was elected President and Chief Executive
Officer of the Company. He is also Chairman of the Board of Directors,
President and Chief Executive Officer of Drive Thru. Prior to assuming his
positions with Drive Thru, Mr. Hoback served as Executive Vice President of
Finance and Development of RTC since 1983.
Robert D. Turrill, V.P. of Marketing. Mr. Turrill has been involved in
all phases of operations with direct responsibility for menu development,
purchasing and cost control, research and multi-media advertising for RTC.
Subsequent to the merger of the Company and RTC in 1992, Mr. Turrill devoted a
portion of his time to the development of a marketing program for Drive Thru.
As Drive Thru continued to expand, Mr. Turrill's time devoted to Drive Thru
increased significantly. Therefore, Mr. Turrill was transferred from RTC to
the newly created Company position of Vice President of Marketing, effective
October 1, 1994. Mr. Turrill is also a principal in Great Burgers, Inc., the
franchisee of the RTC food court in Dallas, Texas.
Scott G. LeFever, V.P. of Operations. Mr. LeFever has been involved in
all phases of operations with direct responsibility for unit service
performance, personnel and cost controls. Mr. LeFever was Director of
Operations for RTC from 1983 to 1987. He then became Director of Operations
for Drive Thru from 1987 to 1992 during which time he helped develop the Drive
Thru operating systems. Mr. LeFever was reassigned to the position of Drive
Thru's Vice President of Operations in August 1995 and devotes his time to the
operational management of Drive Thru. Mr. LeFever is also a principal in Great
Burgers, Inc., the franchisee of the RTC food court in Dallas, Texas.
Richard J. Stark, Director. Mr. Stark is President of Boulder Asset
Management, a firm advising several large individual investors. Prior to
forming Boulder Asset Management in 1984, Mr. Stark served as Chief Investment
Officer of InterFirst Investment Management in Dallas. Previously he was
responsible for all individual money management at Standard &
Poor's/Intercapital in New York.
Thomas P. McCarty, Director. Mr. McCarty has spent the last 26 years in
the food service industry including eleven years owning and operating his own
group of restaurants, working for a major food service distributor, working
for and eventually owning a real estate brokerage company which specialized in
restaurant real estate and consulting, and he was recently the vice president
for development of Rock Bottom Restaurants, Inc. Mr. McCarty has two degrees
from the University of Colorado including a B.S. in Accounting and a B.S. in
Journalism.
Alan A. Teran, Director. Mr. Teran has spent the past 26 years working
in the restaurant industry, beginning in 1969 as restaurant manager at Cork &
Cleaver. In 1971 Mr. Teran was a regional manager for Cork & Cleaver, in 1973
was promoted to Vice President of Operations and in 1976 became President of
the company. In October 1981, Mr. Teran acquired the Cork & Cleaver in
Boulder, Colorado. He went on to become one of the first franchisees of Le
Peep Restaurants in 1983. In addition to being Director of the Company, Mr.
Teran is also a Director of Boulder Valley Bank and Trust and Morton's
Restaurant Group which is the operator of Morton's Steak Houses and
Bertolini's. Mr. Teran graduated from the University of Akron in 1968 with a
degree in business.
David E. Bailey, Director. Mr. Bailey is a director and President of
the Erie County Investment Company ("Erie") (of which The Bailey Company is a
77% owned subsidiary). He is also the president of InverWest Development
Corporation, a subsidiary of Erie. Mr. Bailey is responsible for managing the
day to day operations of Erie and its subsidiaries with primary focus on
Erie's real estate and energy businesses. He received his Bachelor of Finance
Degree from the University of Colorado and his Masters Degree in Business
Administration in Construction Management and Real Estate from the University
of Denver in 1993. Mr. Bailey joined Erie in 1980 and became a Director on the
Board of the Company in October 1996.
All seven directors of the Company are elected annually unless no annual
shareholders' meeting is held, in which event the directors serve until their
successors have been elected and qualified. At this Annual Meeting, the
Company's nominees for the seven directorships are each of the foregoing named
persons who is currently serving as a director of the Company. The proxies
will be voted for the Company's director nominees unless a contrary
specification is made in the proxy. All nominees have indicated their
willingness to serve as directors of the Company. However, if any nominee is
unable or should decline to serve as a director, it is the intention of the
persons named in the proxy to vote for such other person as they in their
discretion shall determine.
Officers serve at the discretion of the Board of Directors. The Company
does not currently have a nominating committee of the Board of Directors or
committees performing similar functions. The Company does however have a
compensation committee and an audit committee of the Board of Directors, both
of which consist of directors Stark, Teran, McCarty and Geoff Bailey and the
audit committee also includes Boyd E. Hoback, the President, Chief Executive
Officer and a director of the Company. A majority of the directors in both
committees are independent directors. Members of the compensation and audit
committees each receive $100 per meeting attended, however where both
compensation and audit committee meetings are held at the same gathering only
$100 is paid to each attendee with respect to such gathering.
There are no family relationships among the directors or executive
officers except for Geoff Bailey and David Bailey who are brothers and
principals of The Bailey Company, L.P., a franchisee and joint venture partner
of the Company. David Bailey is also a director and the president and Geoff
Bailey is a director and the executive vice president of Erie County
Investment Co., which owns 77% of The Bailey Company, L.P. There are no
arrangements or understandings between any director and any other person
pursuant to which that director was elected except for David Bailey and Geoff
Bailey who were elected pursuant to the Series A Convertible Preferred Stock
Purchase and Sale Agreement (see "The Bailey Company, L.P.").
Five meetings of the Board of Directors, one meeting of the compensation
committee and one meeting of the audit committee (including regularly
scheduled and special meetings) were held during the last full fiscal year. No
member of the Board of Directors attended fewer than 80% of the aggregate of
the total number of meetings of the Board of Directors. Each non-employee
director receives $300 for each Board of Directors meeting attended.
Compliance with Section 16(a) of the Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended September 30, 1998, all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with, except with respect to Boyd Hoback who made one
late filing with respect to his Form 5 as a result of an EDGAR system problem
and Richard Stark and Alan Teran who each made one late filing with respect to
a stock acquisition as a result of an administrative timing error.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows all cash compensation paid by the Company or
any of its subsidiaries, as well as other compensation paid or accrued during
the fiscal years indicated, to the Chief Executive Officer of the Company as
of the end of the Company's last fiscal year (the "Named Executive Officer").
No other executive officers of the Company received cash compensation for such
period in all capacities in which the executive officer earned in excess of
$100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Other(6)
Name & Principal Fiscal Other Annual (Common
Position Year Salary Bonus(2) Compensation(3) Options Stock)
<S> <C> <C> <C> <C> <C> <C>
Boyd E. Hoback, 1998 $110,000 -0- $10,000 10,800(4) 810
President & CEO(1) 1997 $110,000 -0- $10,000 30,000(5) 827
1996 $110,000 -0- $10,000 -0- 673
</TABLE>
_________________________
(1) Elected to these positions on December 16, 1992. During the last three
fiscal years he served continuously as an executive officer of Drive
Thru.
(2) The Board of Directors approved a bonus plan in fiscal 1995 for Mr.
Hoback that was contingent upon certain performance criteria. The plan
provided for a bonus of up to 50% of salary for Mr. Hoback. Due to the
Company's losses in fiscal 1995 through 1998, no bonuses were awarded to
Mr. Hoback.
(3) Consists of an officers' expense allowance.
(4) Consists of incentive stock options to purchase 8,800 shares and non-
statutory stock options to purchase 2,000 shares.
(5) Consists of cancelled and reissued incentive stock options.
(6) Consists of 401(k) stock grants to match 50% employee contribution.
Stock Options
On April 23, 1992, the Board of Directors of the Company adopted an
incentive stock option plan (the "1992 ISO Plan") covering 60,000 shares of
the Company's Common Stock and a non-statutory stock option plan (the "1992
NSO Plan") covering 30,000 shares of the Company's Common Stock. Since such
adoption, the 1992 ISO Plan and 1992 NSO Plan have been amended from time to
time to increase the authorized number of shares thereunder. The last such
increase was in 1994 when the authorized number of shares under the 1992 ISO
Plan were increased to 150,000 and the authorized number of shares under the
1992 NSO Plan were increased to 60,000.
The employees of the Company who, in the opinion of the Board of
Directors, are primarily responsible for the management, promotion and
protection of the interests of the Company are eligible to be granted options
under the 1992 ISO Plan. As of September 30, 1998 there were approximately
twenty-eight key employees who were eligible to be granted options under the
1992 ISO Plan, all of whom have been granted options thereunder. 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 are eligible to be
granted options under the 1992 NSO Plan. Only members of the Board of
Directors and certain officers of the Company have been granted options under
the 1992 NSO Plan. All options granted under either plan are exercisable at
prices not less than the fair market value of the Common Stock on the date of
grant. The plans are administered by the Board of Directors or a committee of
two or more directors, as determined by the Board of Directors. The terms of
the options granted may not exceed ten years with respect to the 1992 ISO Plan
and five years with respect to the 1992 NSO Plan.
Effective as of October 1, 1998 and pursuant to the recommendations of
the Company's compensation committee, the Company issued additional incentive
stock options to its employees for the purchase of 42,420 shares of Common
Stock. All incentive stock options are subject to vesting schedules, are
exercisable at $2.31 per share and expire on October 1, 2008. Also on October
1, 1998 the Company issued non-statutory stock options to each of its
directors for the purchase of 24,001 shares of Common Stock and it reissued
10,000 non-statutory stock options which were due to expire in April, 1999.
The non-statutory stock options are fully vested, exercisable at $2.31 per
share and expire on October 1, 2003. After the foregoing stock option grants,
all available authorized stock options under both the 1992 ISO Plan and 1992
NSO Plan have been granted.
All options are non-transferable other than by will or by the laws of
descent and distribution and may be exercised during the optionee's lifetime
only by the optionee.
The following table shows the stock option grants during the fiscal year
ended September 30, 1998 to the Named Executive Officer. All options are
fully vested.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS IN
FISCAL YEAR ENDED SEPTEMBER 30, 1998
% of Total
No. of Shares Options Granted
Underlying to Employees in Exercise Expiration
Name Options Granted Fiscal Year Price Date
<S> <C> <C> <C> <C>
Boyd E. Hoback 8,800 (1) 21% $2.50 10/01/2007
2,000 (2) 100%(3) $2.50 10/01/2002
</TABLE>
__________________________
(1) Incentive stock options. All options are fully vested. Subsequent to
September 30, 1998 Mr. Hoback was granted incentive stock options to
purchase 9,590 shares of the Company's common stock as part of the
option grants on October 1, 1998 described above. Such options are
subject to a four-year vesting schedule.
(2) Non-Statutory stock options. Subsequent to September 30, 1998 Mr.
Hoback was granted non-statutory stock options to purchase 11,049 shares
(7,000 of which were reissued options that were due to expire in April,
1999) of the Company's common stock as part of the option grants on
October 1, 1998 described above.
(3) Mr. Hoback is the only employee director of the Company.
Options Exercises and Values
The Named Executive Officer did not exercise any stock options during the
last fiscal year of the Company. The fiscal year end value of unexercised
options follows:
<TABLE>
<CAPTION>
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Value
Number Unexercised
Unexercised In-the-Money
Options at Options at
Shares Fiscal Year End(#) Fiscal Year End($)
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Boyd E.
Hoback N/A N/A 43,942/7,920 None (1)
</TABLE>
_________________________
(1) The average trading market value of the Common Stock over the past 30
days was approximately $3.25 per share.
Compensation Committee Policies
In order to retain and motivate executive officers and additional
executive talent, the Compensation Committee seeks to maintain compensation
programs competitive with those provided by leading companies in the multi-
unit restaurant business with similar business focus and dynamics as the
Company. The Committee has adopted a compensation strategy to provide (1) base
salaries which are competitive but not above industry averages, (2) above-
average total annual cash opportunities, through incentives based on operating
results, (3) significant long-term incentives based on stock appreciation, and
(4) other benefits for executives which are competitive but not above industry
norms. The primary components of the Company's executive compensation package
consist of base salary, annual incentive bonus awards and stock option awards
as follows:
Base Salary. In reviewing each executive officer's base salary, the
Compensation Committee takes into consideration the executive officer's
responsibilities and performance, salaries for comparable positions at other
companies, and fairness issues relating to pay for other Company executives.
In making salary recommendations or decisions, the committee exercises its
discretion and judgment based on those factors.
Incentive Bonus Awards. The Company has an incentive bonus plan which
covers all of the Company's executive officers. The plan is subject to annual
amendment at the discretion of the Compensation Committee. The Compensation
Committee measures the performance of the Company against an annual business
plan prepared by management and reviewed and approved by the Board of
Directors. The Committee has the discretion whether and in what amounts to
award any incentive bonuses based on individual performance, unusual business
factors, other mitigating factors and performance against the annual plan.
Stock Option Grants. Employees selected by the Compensation Committee
may receive an annual grant of stock options under the 1992 ISO Plan or 1992
NSO Plan (but typically under the 1992 ISO Plan)to purchase a number of shares
of common stock. Officers' annual grants are computed by (1) dividing the
officer's annual salary and bonus by the current market price of the common
stock and (2) multiplying that amount by a factor ranging from zero to two.
The Committee may also grant special stock option awards to new members of
management and for existing members of management at their discretion.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Drive Thru and RTC historically have been under-capitalized and have
found it difficult to obtain required financing without the assistance of
certain of their officers and directors, primarily in the form of guarantees
of payment of restaurant leases by Mr. James and a former director of the
Company. These principally involved obligations of RTC. Neither Mr. James nor
the former director receive any compensation in connection with these
guarantees. While none of the related party transactions may be deemed to have
been negotiated at arms' length, all such transactions were approved by the
independent members of the RTC Board of Directors and, in the opinion of
Company management, all such transactions were fair and are upon terms which
were at least as favorable as could have been obtained from independent third
parties. To the extent that Mr. James and the former director continue to be
guarantors of such obligations, the Company has agreed to indemnify each of
them from any losses that they may incur resulting from such guarantees.
Mr. Hoback entered into an employment agreement with the Company in May,
1996 that provides for his employment as president and chief executive officer
for three years from the date of the agreement at a minimum salary of $110,000
per year, terminable by the Company only for cause. The agreement is renewable
annually by the Board of Directors and has been extended through May, 2000.
The Bailey Company, L.P.
On May 31, 1996, the Company entered into a Series A Convertible
Preferred Stock Purchase Agreement with The Bailey Company, L.P. ("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. The
Company used the funds received for the development of additional Good Times
restaurants. So long as TBC holds two-thirds of the Series A Convertible
Preferred Stock and/or the Common Stock acquired by the conversion thereof (i)
The Board of Directors may not authorize the issuance of additional shares of
preferred stock without the concurrence of TBC and (ii) TBC has the right to
elect two directors to the Board of Directors, one of which has the right to
serve as Chairman of the Board. David E. Bailey and Geoffrey R. Bailey are the
current directors elected by TBC to the Board of Directors, and Geoffrey R.
Bailey serves as Chairman of the Board. David E. Bailey is the president and a
director and Geoffrey R. Bailey is the executive vice president and a director
of The Erie County Investment Company ("Erie") which owns 77% of TBC and
should be deemed the beneficial owner of all capital stock of the Company held
by TBC.
Effective August 31, 1998, TBC converted all one million shares of Series
A Convertible Preferred Stock into 426,667 shares of Common Stock pursuant to
the applicable conversion ratio as extended by the Board of Directors of the
Company in consideration for TBC's agreement to guarantee certain loans to the
Company. On September 25, 1998 TBC and Erie entered into an agreement with the
Company pursuant to which TBC and Erie have agreed to guarantee certain loans
to the Company up to the aggregate principal amount of $8,700,000, but not at
any one time to exceed $6 million. The Company is obligated to pay TBC and
Erie quarterly percentage fees for their guarantees based upon the average
outstanding principal and interest of loans guaranteed by them during each
calendar quarter. Such fees are payable by the Company either in cash at the
rate of .5% or in shares of Common Stock of the Company at the rate of .75%.
Any Common Stock so issued is entitled to registration rights to the same
extent that the Common Stock issued upon conversion of the Series A
Convertible Preferred Stock is entitled pursuant to a Registration Rights
Agreement dated May 31, 1996 between the Company and TBC.
On March 12, 1997 the Company and TBC formed a limited partnership, which
is owned 50% by each entity, to own and operate Good Times Drive Thru
Burgers(SM) Restaurants. The Company is the general partner and TBC is a
limited partner of the limited partnership. Currently, the limited partnership
owns one restaurant located in Fort Collins, Colorado.
On April 1, 1998 the Company moved its corporate headquarters to a
building which is owned by TBC and in which TBC also has its corporate
headquarters. The Company signed a twelve month lease which includes two one-
year extension options with TBC at a competitive market rate. The lease covers
3,356 square feet of office space.
TBC is also the owner of two franchised Good Times Drive Thru Burgers(SM)
Restaurants which are located in Thornton and Loveland, Colorado.
Round The Corner
In October 1996 RTC filed for Chapter 11 bankruptcy protection. The
Company was RTC's only secured creditor and held a lien on the assets of a
profitable RTC restaurant. In August 1997, the Company entered into a
settlement agreement with RTC to settle all claims and differences between
them. The settlement agreement provided for the payment to the Company from
RTC of $300,000 and for the assignment to the Company of the two RTC
restaurant leases which are guaranteed by the Company. The Company has the
right to operate the restaurants without charge under the "RTC" name. The
settlement agreement was approved by the Bankruptcy Court on December 19, 1997
and the Company was subsequently paid the $300,000 settlement amount. The
Company has recorded an accumulated loss of $550,000 in connection with the
RTC bankruptcy.
PROPOSALS TO INCREASE THE AUTHORIZED NUMBER OF SHARES IN THE COMPANY'S
INCENTIVE AND NON-STATUTORY STOCK OPTION PLANS
On October 13, 1998, the Board of Directors of the Company adopted an
amendment, subject to shareholder approval, to the Company's 1992 ISO Plan and
1992 NSO Plan to increase the number of shares of Common Stock subject to such
plans from 150,000 to 525,000 shares with respect to the 1992 ISO Plan and
from 60,000 to 125,000 shares with respect to the 1992 NSO Plan. As of October
1, 1998 there are no remaining authorized shares available under either plan.
The increase in the number of shares authorized under the 1992 ISO Plan and
1992 NSO Plan reflects the need of the Company to limit cash compensation to
its key employees and the desire of the Board of Directors to retain and
motivate key employees by providing equity participation in the Company.
Also on October 13, 1998, the Board of Directors of the Company
determined that if shareholder approval is given to increase the number of
shares covered by the 1992 ISO Plan additional options shall be granted as of
the date of such shareholder approval to certain executive officers of the
Company who would have received such options on October 1, 1998 if a
sufficient number of shares were then authorized under the 1998 ISO Plan. The
following table sets forth certain information regarding such option grants
under the 1992 ISO Plan to the Named Executive Officer:
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1992 ISO Plan
Dollar Value
Name/Position Of Options ($)(1) Number of Units
<S> <C> <C>
Boyd E. Hoback,
President and CEO not determined 30,361
All current executive
officers as a group not determined 89,979
_________________________
(1) The exercise price of the incentive stock options will be the closing
price of the Company's Common Stock on the date of shareholder approval.
(2) The number of shares underlying options.
Provided that a quorum is present, the affirmative vote of a majority of
the votes cast at the meeting is required to approve the amendments to
increase the number of shares of Common Stock subject to the 1992 ISO Plan and
1992 NSO Plan to 525,000 and 125,000 shares respectively. The Board of
Directors believes the amendments are in the best interests of the Company and
its stockholders and recommends that the stockholders vote "FOR" the
amendments.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Hein + Associates as the independent
certified public accountants to audit the books, records and accounts of the
Company for its 1999 fiscal year. Hein + Associates has served as the
Company's independent accountants since 1985 and it is, therefore, familiar
with the business and financial procedures with the Company. To the knowledge
of management, neither such firm nor any of its members has any direct or
material indirect financial interest in the Company nor any connection with
the Company in any capacity otherwise than as independent accountants.
A representative of Hein + Associates is expected to be present at the
Annual Meeting to answer proper questions and will be afforded an opportunity
to make a statement regarding the financial statements.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company on or before August
15, 1999 in order to be eligible for inclusion in the Company's Proxy
Statement and form of Proxy. To be so included, a proposal must also comply
with all applicable provisions of Rule 14a-8 under the Securities Exchange Act
of 1934.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If any other matters not mentioned in this Proxy
Statement are properly brought before the Annual Meeting, the individuals
named in the enclosed proxy intend to vote such proxy in accordance with their
best judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
December 18, 1998.
ANNUAL MEETING OF SHAREHOLDERS
GOOD TIMES RESTAURANTS INC.
PROXY
The undersigned shareholder of Good Times Restaurants Inc., a Nevada
corporation, hereby appoints Boyd E. Hoback, Chief Executive Officer and a
Director of Good Times Restaurants Inc., my proxy to attend and represent me
at the annual meeting of the shareholders of the corporation to be held on
January 22, 1999 at 2:00 P.M. (MST), and at any adjournment thereof, and to
vote my shares on any matter or resolution which may come before the meeting
and to take any other action which I could personally take if present at the
meeting.
1. Election of Directors: Management has nominated the following seven
persons to stand for election. You may note "for" or you may withhold your
vote from any of those persons nominated. To date no one has been nominated by
anyone other than management.
a. Geoffrey R. Bailey For _____
Withhold _____
b. Dan W. James, II For _____
Withhold _____
c. Boyd E. Hoback For _____
Withhold _____
d. Richard J. Stark For _____
Withhold _____
e. Thomas P. McCarty For _____
Withhold _____
f. Alan A. Teran For _____
Withhold _____
g. David E. Bailey For _____
Withhold _____
2. Proposal to Increase the Number of Shares Authorized in the 1992
Incentive Stock Option Plan to 525,000.
RESOLVED, that the number of shares of the Company's Common Stock which are
authorized in its 1992 Incentive Stock Option Plan shall be increased from
150,000 to 525,000 shares.
For _______________ Against _____________ Abstain ____________
3. Proposal to Increase the Number of Shares Authorized in the 1992 Non-
Statutory Stock Option Plan to 125,000.
RESOLVED, that the number of shares of the Company's Common Stock which are
authorized in its 1992 Non-Statutory Stock Option Plan shall be increased from
60,000 to 125,000 shares.
For _______________ Against _____________ Abstain ____________
Failure to check any of these boxes for each proposal will give Boyd E.
Hoback the authority to vote the proxy at his discretion. This Proxy gives
authority to my proxy to vote for me on such other matters as may properly
come before this meeting.
Shares Owned:___________________________
Dated:__________________________________
________________________________________
Signature of Shareholder
(Sign exactly as name appears on certificate)
________________________________________
Signature if held jointly
</TABLE>
