-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ALwfxNoUc7GVFKAkTkpEbc6giF52jLiscEX/sWxuR0wSF0Gqkv4dHhlu0foYNQH+ zbuLrplgJ/n6T7dSSUpbzA== 0001001348-96-000086.txt : 19960723 0001001348-96-000086.hdr.sgml : 19960723 ACCESSION NUMBER: 0001001348-96-000086 CONFORMED SUBMISSION TYPE: PRES14A CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960719 FILED AS OF DATE: 19960719 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOOD TIMES RESTAURANTS INC CENTRAL INDEX KEY: 0000825324 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 841133368 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: PRES14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18590 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 8620 WOLFF CT STE 330 CITY: WESTMINSTER STATE: CO ZIP: 80030 BUSINESS PHONE: 3034274221 MAIL ADDRESS: STREET 1: 8620 WOLFF COURT STREET 2: SUITE 330 CITY: WESTMINSTER STATE: CO ZIP: 80030 FORMER COMPANY: FORMER CONFORMED NAME: PARAMOUNT VENTURES INC DATE OF NAME CHANGE: 19900205 PRES14A 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 GOOD TIMES RESTAURANTS INC. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11. 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount previously paid: 2) Form, Schedule or Registration Statement Number: 3) Filing party: 4) Date filed: GOOD TIMES RESTAURANTS INC. 8620 Wolff Court Suite 330 Westminster, Colorado 80030 _______________ NOTICE OF SPECIAL MEETING OF STOCKHOLDERS To Be Held August 30, 1996 A special meeting of stockholders of Good Times Restaurants Inc., a Nevada corporation, will be held at 8620 Wolff Court, Suite 330, Westminster, Colorado, on August 30, 1996 at 2:00 P.M., local time: (1) To consider and act upon an Amendment to the Company's Articles of Incorporation to authorize the issuance of 5,000,000 shares of preferred stock, $.01 par value, 1,000,000 of which will be designated as Series A Convertible Preferred Stock and sold to an investor and 4,000,000 of which will be reserved for future issuance in the discretion of the Board of Directors. Details relating to the above matter are set forth in the attached Proxy Statement. The Company's management is not aware of any other matters to come before the meeting. The Board of Directors has fixed July 29, 1996 as the record date for stockholders entitled to notice of, and to vote at, the meeting. IF YOU DO NOT PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY WITHOUT DELAY. A BUSINESS REPLY ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. Sincerely, Susan Knutson Secretary Denver, Colorado July 29, 1996 GOOD TIMES RESTAURANTS INC. 8620 Wolff Court Suite 330 Westminster, Colorado 80030 (303) 427-4221 PROXY STATEMENT SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 30, 1996 The accompanying proxy is solicited by the Board of Directors of GOOD TIMES RESTAURANTS INC. (the "Company") for use at a Special Meeting of Stockholders to be held at 8620 Wolff Court, Suite 330, Westminster, Colorado on August 30, 1996 at 2:00 P.M., local time, and at any and all adjournments thereof for the purpose set forth in the Notice of Special Meeting of Stockholders. The Company anticipates that this Proxy Statement and the accompanying form of proxy will be first sent or given to stockholders on or about July 29, 1996. Any stockholder giving such a proxy has the right to revoke the proxy at any time before it is voted by written notice to the Secretary of the Company, by executing a new proxy bearing a later date or by voting in person at the Special Meeting. A proxy, when executed and not revoked, will be voted in accordance therewith. If no instructions are given, proxies will be voted FOR the proposal presented by management. All expenses in connection with the solicitation of proxies will be borne by the Company. The Company will also supply brokers or persons holding stock in their names or in the names of their nominees with such number of proxies and Proxy Statements as they may require for mailing to beneficial owners and will reimburse them for their reasonable expenses incurred in connection therewith. Certain Directors, Officers and employees of the Company not specifically employed for that purpose may solicit proxies without additional compensation by mail, telephone, facsimile transmission, telegraph or personal interview. The Company has also engaged Regan & Associates, Inc., an unrelated company, to solicit proxies on the Company's behalf by additional mailings and telephone solicitations. The Company has agreed to pay Regan & Associates a fee of $____________ for its services, with fifty percent of such fee to be waived in the event that the required affirmative vote to approve the proposal set forth in the Notice of Special Meeting of Stockholders is not obtained at such meeting. UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB/A, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995, AND/OR A COPY OF THE SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, INCLUDING SCHEDULES THERETO, DATED AS OF MAY 31, 1996 AND AMENDED JULY _____, 1996 AND DISCUSSED HEREIN, TO EACH RECORD OR BENEFICIAL OWNER OF ITS COMMON STOCK ON THE RECORD DATE. SUCH REQUESTS SHOULD BE DIRECTED TO THE COMPANY AT 8620 WOLFF COURT, SUITE 330, WESTMINSTER, COLORADO 80030, ATTENTION: SUSAN KNUTSON. VOTING SECURITIES The close of business on July 29, 1996, has been fixed by the Board of Directors of the Company as the record date for the determination of stockholders entitled to notice of and to vote at the Special Meeting. On that date, the Company had outstanding 6,314,824 shares of Common Stock, $.001 par value, all of which are entitled to vote on the matters to come before the Special Meeting. Each outstanding share of Common Stock entitles the holder to one vote. The presence in person or by proxy of a majority of the outstanding shares of Common Stock is necessary to constitute a quorum at the meeting. If a quorum is not present, the meeting may be adjourned from time to time until a quorum is obtained. The affirmative vote of a majority of the outstanding shares will be required to approve the matter specified herein to be voted upon. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of July 16, 1996, certain information with respect to the record and beneficial ownership of the Company's Common Stock by all stockholders known by the Company to own more than five percent of its outstanding Common Stock, and by all Directors and executive officers individually and as a group. Percentage of Name, Address and Number of Shares Outstanding Position Held Beneficially Owned Common Stock** Dan W. James II 400,365(1) 6.3% 8620 Wolff Court, Suite 330 Westminster, CO 80030 Chairman, Director First Registration Corporation of Oklahoma City 183,270(1)(2) 2.9% 120 N. Robinson Ave. P.O. Box 25189 Oklahoma City, OK 73125 Shareholder Boyd E. Hoback 165,424(3) 2.6% 8620 Wolff Court, Suite 330 Westminster, CO 80030 Officer and Director B. Edwin Massey 113,799(4) 1.8% 8620 Wolff Court, Suite 330 Westminster, CO 80030 Director Richard J. Stark 17,083(5) * 6075 South Quebec Suite 103 Englewood, CO 80111 Director Thomas P. McCarty 5,500(6) * 8779 Johnson Street Arvada, CO 80005 Director Alan A. Teran 5,000(7) * 2126 Knollwood Drive Boulder, CO 80302 Director Robert D. Turrill 60,703(8) * 8620 Wolff Court, Suite 330 Westminster, CO 80030 Officer All executive officers 951,144(9) 14.4% and Directors as a group (7 persons) * Less than one percent ** Rule 13-d under the Securities Exchange Act of 1934, involving the determination of beneficial owners of securities, includes as beneficial owners of securities, among others, any person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power and/or investment power with respect to such securities; and, any person who has the right to acquire beneficial ownership of such security within sixty days through means, including, but not limited to, the exercise of any option, warrant, right or conversion of a security. Any securities not outstanding that are subject to such options, warrants, rights or conversion privileges shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person, but shall not be deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. All shares held by the executive officers, Directors and principal stockholders listed above are restricted securities and as such are subject to limitations on resale. The shares may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended, under certain circumstances. (1) Includes 7,682 shares owned by the son of Mr. James, an aggregate of 6,966 shares owned by the Kent B. Hayes Trust, and an aggregate of 3,483 shares covered by presently exercisable warrants held by the Kent B. Hayes Trust for the benefit of Mr. James. (2) May be deemed to be beneficially owned by Mr. James since First Registration Corporation of Oklahoma City is the nominee of trusts administered by and for Mr. James and members of his family. (3) Includes an aggregate of 151,666 shares covered by presently exercisable options and warrants. (4) Includes 20,804 shares owned by the children of Mr. Massey and an aggregate of 52,063 shares covered by presently exercisable warrants. (5) Includes an aggregate of 10,689 shares covered by presently exercisable options and warrants. (6) Includes an aggregate of 5,000 shares covered by presently exercisable options. (7) Includes an aggregate of 5,000 shares covered by presently exercisable options. (8) Includes an aggregate of 50,000 shares covered by presently exercisable options. (9) Includes 277,901 shares covered by presently exercisable options and warrants and 218,722 shares held of record by others which may be deemed to be beneficially owned. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION OF THE COMPANY The Board of Directors of the Company believes it advisable and in the best interests of the Company to amend its Articles of Incorporation to authorize 5,000,000 shares of Preferred Stock, $.01 par value (the "Amendment"). One million of such shares will be designated as Series A Convertible Preferred Stock (the "Series A Preferred Stock") in order that the financing transaction described below may be consummated. The proposed Amendment shall be substantially in the form set forth in Exhibit 3(i) attached to this Proxy Statement. Approval of the Amendment requires the affirmative vote of the holders of a majority of the outstanding shares of the Company's Common Stock. The Board of Directors has unanimously approved the Amendment and recommends that stockholders vote FOR the Amendment. The Company has entered into a Series A Convertible Preferred Stock Purchase Agreement dated as of May 31, 1996, as amended July ___________, 1996 (the "Purchase Agreement"), with The Bailey Company, a Colorado limited partnership ("Bailey"), pursuant to which Bailey has agreed to purchase and Good Times has agreed to sell 1,000,000 shares of Series A Convertible Preferred Stock. The Purchase Agreement is contingent upon, among other matters, approval by the stockholders of the Amendment authorizing and designating the Series A Preferred Stock. The following discussion summarizes the principal terms of the Purchase Agreement and the Series A Preferred Stock. A copy of the full Purchase Agreement containing such terms may be obtained from the Company in the manner specified on pages 1 and 2 of this Proxy Statement. The purchase price to be paid by Bailey for the 1,000,000 shares of Series A Preferred Stock is $1.00 per share, or a total of $1,000,000. The purchase and payment will take place in three installments. The first installment will occur on the first day of the month following stockholder approval of the authorization of the Amendment and Bailey will purchase on such date 500,000 shares of the Series A Preferred Stock in consideration of $250,000 cash and the cancellation of a promissory note of the Company payable to Bailey in the amount of $250,000 arising out of a loan in that amount made by Bailey to the Company on March 1, 1996. Bailey will purchase the second installment of 250,000 shares of the Series A Preferred Stock three months after the date of the first installment for $250,000 cash. Bailey will purchase the third installment of 250,000 shares of the Series A Preferred Stock three months after the date of the second installment for $250,000 cash. The proceeds of the purchase are intended to be used by the Company for the development of new Good Times restaurants through the period ending December 31, 1997. The Company understands that Bailey has extensive experience in the restaurant business through its ownership and operation of a substantial number of Arby's Roast Beef Restaurants in Colorado. In reaching its decision to approve the Purchase Agreement with Bailey, and therefore to approve the Amendment authorizing the Preferred Stock and designating the Series A Preferred Stock and to recommend that the stockholders of the Company vote for the Amendment, the Board of Directors considered a number of factors, including the following: (a) The Company's need for additional capital to develop additional Good Times restaurants; (b) The prior inability of the Company to attract such capital from other investors on more favorable terms; and (c) The successful experience of Bailey and its principals in the fast-food restaurant business. The Board of Directors also considered the fairness opinion on the Purchase Agreement of Cohig & Associates, Inc. described below. The purpose of the proposed Amendment to the Company's Articles of Incorporation to authorize 4,000,000 shares of Preferred Stock in addition to the 1,000,000 shares of Series A Preferred Stock is to improve the Company's ability and flexibility in meeting its future capital needs. The Company however has no current plans to issue shares of Preferred Stock in addition to the Series A Preferred Stock. If the proposed Amendment is adopted, the additional shares of Preferred Stock may be issued from time to time in one or more series and each such series will have such designations, rates of dividend, redemption prices, voting rights, liquidation preferences, sinking fund provisions, conversion or exchange rights and other special rights as the Board of Directors may fix prior to the time of issuance of such series. The Board of Directors will be empowered to authorize the Company to issue some or all of the additional Preferred Stock at such time or times, to such persons and for such consideration as it may deem desirable without a further vote of the stockholders and without offering such Preferred Stock to the holders of the Common Stock of the Company. The principal terms of the Purchase Agreement and of the Series A Preferred Stock are as follows: Voting. Except with respect to certain matters relating to the Board of Directors (see "Board Size and Membership"), the Series A Preferred Stock will vote together with the Common Stock of the Company as a single class on all actions to be taken by the stockholders of the Company. Each share of Series A Preferred Stock will be entitled to such number of votes on each action equal to the number of shares of Common Stock into which such share of the Series A Preferred Stock is convertible at the time of such vote. The Purchase Agreement and the provisions of the Articles of Incorporation with respect to the Series A Preferred Stock may not however be amended without the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series A Preferred Stock. Dividends. The holders of the Series A Preferred Stock will be entitled to cumulative cash dividends equal to $.08 per share per annum, or eight percent of the purchase price paid for the Series A Preferred Stock, commencing to accrue on the date the shares of Series A Preferred Stock are issued. The dividends are payable on the first day of each calendar quarter commencing July 1, 1997 and shall be payable at the option of each holder of the Series A Preferred Stock in cash or in shares of Common Stock of the Company. For such purpose the number of shares of Common Stock will be calculated by dividing the dollar amount of the dividend by 75 percent of the average of the public market closing prices of the Common Stock for the 14 trading days immediately prior to the dividend payment date (the "Dividend Conversion Rate"). Notwithstanding the foregoing, the divisor for the first dividend will not be less than $.46875. If a holder elects to receive a dividend in cash, the Company may defer the payment of the dividend if in the reasonable judgment of the Board of Directors payment thereof would jeopardize the Company's ability to meet its current and foreseeable obligations. Liquidation. Upon any liquidation, dissolution or winding up of the Company, the holders of the shares of Series A Preferred Stock will be entitled to a preference over the Common Stock equal to the original purchase price of the Series A Preferred Stock plus all accrued dividends which have not been paid. Conversion. The holders of the Series A Preferred Stock will have the right at any time during each conversion period shown on the table below to convert up to the maximum number of shares of Series A Preferred Stock shown on such table for such conversion period into the number of shares of Common Stock which is equal to the number of shares of Series A Preferred Stock to be converted divided by the applicable conversion factor (or per share price) as set forth in the table. Conversion Period Maximum Aggregate Conversion Factor Number of Preferred Shares (Non-Cumulative) September 1, 1997 - 500,000 .46875 September 30, 1997 October 1, 1997 - 500,000 .56875 November 30, 1997 December 1, 1997 - 250,000 .46875 December 31, 1997 500,000 .56875 January 1, 1998 - 750,000 .56875 February 28, 1998 March 1, 1998 - 250,000 .46875 March 31, 1998 750,000 .56875 April 1, 1998 - 1,000,000 .56875 March 31, 1999 April 1, 1999 and 1,000,000 the greater of (i) thereafter the Dividend Conversion Rate at the time of conversion and (ii) .46875 Redemption. The Company may from time to time at its option redeem some or all of the shares of the Series A Preferred Stock at any time after the second anniversary of the initial purchase thereof. The redemption price will be the original purchase price plus any unpaid accrued dividends. The Company must give at least thirty (but not more than forty) days' prior notice of any intent to redeem and the holders of the Series A Preferred Stock subject to redemption may after such notice convert their Series A Preferred Stock to Common Stock as provided above. Board Size and Membership. The number of Directors of the Company may not be increased above seven without the affirmative vote of the holders of at least two-thirds of the then outstanding shares of Series A Preferred Stock. The holders of the Series A Preferred Stock will have the right to elect two directors to the Board of Directors of the Company, one of which Directors will have the right to serve as Chairman of the Board. The remaining Directors will be elected by all Common and Series A Preferred stockholders voting as a group. In the event (i) the Board fails to declare a Series A Preferred Stock dividend, unless such dividend is to be paid in cash and then unless in the reasonable judgement of the Board of Directors payment thereof would jeopardize the Company's ability to meet its current and foreseeable obligations; (ii) the Company files for bankruptcy or is adjudged insolvent; or (iii) the Company fails to cure a breach of the agreement between it and the holders of the Series A Preferred Stock after notice thereof, the holders of the Series A Preferred Stock may remove Directors and elect four Directors to the Board. Restrictions. While any shares of Series A Preferred Stock are outstanding, the Company may not do any of the following without the consent of the Directors which are elected by the holders of the Series A Preferred Stock, as described above: a. Consent to any liquidation or dissolution of the Company; consolidate, merge or acquire the stock or assets of any entity (except for one exception relating to certain Steak-Out restaurants); or sell or transfer a majority of its assets. b. Incur any debt that is payable over a period of longer than a year at any time when the Company's earnings before interest, taxes, depreciation and amortization are less than 120 percent of the aggregate payments on long-term debt which the Company reasonably expects to make over the 12 months after such debt is to be incurred. c. Amend or repeal its Articles of Incorporation. d. Pay any dividend on any shares of stock other than the Series A Preferred Stock, except for stock dividends, or purchase any shares of the Company's Common Stock except pursuant to any contractual obligation to repurchase the Common Stock of former employees. e. Engage in any business other than the restaurant business. Future Transactions. The Purchase Agreement grants Bailey a right of participation in any future equity offerings of the Company on the same terms as those offered to others to the extent necessary to preserve Bailey's proportionate equity interest in the Company represented by the Series A Preferred Stock and the Common Stock issued upon conversion of the Series A Preferred Stock. This right of participation does not apply to securities issued: (A) upon conversion of the Preferred Stock; (B) as a stock dividend or stock split of the Common Stock; (C) pursuant to outstanding subscriptions, warrants, options and convertible securities; (D) solely in consideration for the acquisition by the Company of another entity; or (E) pursuant to a firm commitment underwriting. In addition, the Board of Directors may not authorize the issuance of additional Preferred Stock without the concurrence of Bailey so long as Bailey holds two-thirds of the Series A Preferred Stock and/or the Common Stock acquired by the conversion thereof. The Board of Directors also may not authorize an amendment to the Company's Articles of Incorporation increasing or decreasing the authorized Common Stock of the Company without the concurrence of Bailey so long as Bailey holds two-thirds of the Series A Preferred Stock and/or the Common Stock acquired by the conversion thereof. In connection with the proposed transaction, the Company has entered into a Registration Rights Agreement whereby the holders of the Series A Preferred Stock are given certain registration rights with respect to the public resale of Common Stock acquired by conversion of the Series A Preferred Stock. The holders of fifty percent or more of such stock may require the Company to register all or a lesser number of such shares for public sale under the Securities Act of 1933, as amended. The holders of such Common Stock are limited to two such demands for registration. Notwithstanding the foregoing, if the Company is at the time eligible to register its Common Stock using Form S-3 or any successor thereto, any Series A Preferred Stock holder may require the Company to register its Common Stock on such form, provided that the reasonably anticipated aggregate price to the public for such shares would exceed $1,000,000. The limitation on the number of demands for registration is not applicable to demands for registration on Form S-3 provided the foregoing conditions are satisfied. The holders of the Series A Preferred Stock are also entitled to notice from the Company of any registration of the Company's Common Stock on a form which would permit registration of the Common Stock acquired by conversion of the Series A Preferred Stock, and to have their shares of Common Stock registered on such form. The number of shares of Common Stock which must be so registered may be reduced if the managing underwriter for a public offering for which the registration is being made concludes that inclusion in the offering of the number of shares of Common Stock requested to be registered would adversely affect the marketing of the securities to be sold by the Company therein. The Company has, in effect, a right of first refusal to purchase any shares of Series A Preferred Stock offered by Bailey to a third party on the same terms and conditions as those offered to such third party. Fairness Opinion. The Company retained Cohig & Associates, Inc. ("Cohig") to render an opinion as to the fairness from a financial point of view of the Purchase Agreement and the issuance of the Series A Preferred Stock to Bailey. Cohig is a securities and investment banking firm which has been involved in the evaluation of businesses and their securities for other companies. Cohig has also acted in the past as an underwriter of the Company's securities and has maintained a market in the Common Stock of the Company as well as owned shares of the Company's Common Stock and its Common Stock purchase warrants. The Company is paying Cohig a fee of $________________ for its services in rendering the fairness opinion. Such fee is based on the time spent by Cohig and payment of the fee is not contingent upon the content of the opinion or the approval of the Series A Preferred Stock. In arriving at its opinion Cohig: (i) reviewed the Purchase Agreement, the terms of the amendment to the Company's Articles of Incorporation designating the powers, preferences and rights of the Series A Preferred Stock, financial information on the Company furnished to it by management of the Company, including financial projections for the Company, and publicly available information on the Company; (ii) held discussions with the management of the Company concerning its business, operations and prospects; (iii) analyzed the value of the Series A Preferred Stock based upon its conversion rate, dividend rate and other terms and based upon the trading market of the Company's Common Stock; (iv) considered the revenue, net income, cash flow and stockholders equity of the Company and changes in such factors from prior periods to current periods; (v) reviewed the Registration Rights Agreement to be entered into by the Company and Bailey; (vi) the valuations of publicly traded companies in the same or similar industry as the Company; and (vii) made such other studies and inquiries as Cohig deemed relevant. Cohig relied upon and assumed, without independent verification, the accuracy and completeness of all financial and other information furnished to it by the Company. With respect to the financial projections of the Company, Cohig relied upon management's assurances that such projections had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of management. Based upon the foregoing analysis of the Company and Cohig's general knowledge of and experience in the valuation of securities, Cohig concluded that the Purchase Agreement and the issuance of the Series A Preferred Stock to Bailey is fair from a financial point of view to the Company's stockholders. The full opinion of Cohig is attached to this Proxy Statement as Exhibit 99. Although the proposed Amendment will not change the right of the holders of the outstanding Common Stock to receive dividends at such times and in such amounts as the Board of Directors may determine, satisfaction of any dividend obligations on outstanding Preferred Stock, including the Series A Preferred Stock, will reduce the amount of funds available for the payment of dividends on Common Stock. If additional shares of Common Stock are issued in the future, which may include issuances pursuant to the conversion of Preferred Stock, including the Series A Preferred Stock, the voting rights of the holders of outstanding Common Stock will be proportionately diluted. The holders of Series A Preferred Stock are entitled, and the holders of any other series of Preferred Stock issued would normally be entitled, to receive, in the event of any liquidation or other dissolution or winding up of the Company, a liquidation preference (plus any accrued but unpaid dividends, if cumulative) before any distribution of assets of the Company is made to the holders of the Common Stock. STOCKHOLDER PROPOSALS Proposals of stockholders intended to be presented at the next Annual Meeting of Stockholders must be received by the Company on or before November 30, 1996, in order to be eligible for inclusion in the Company's proxy statement and form of proxy. To be so included, a proposal must also comply with all applicable provisions of Rule 14a-8 under the Securities Exchange Act of 1934. OTHER MATTERS Management does not know of any other matters to be brought before the Special Meeting. If any other matters not mentioned in this proxy statement are properly brought before the meeting, the individuals named in the enclosed proxy intend to vote such proxy in accordance with their best judgment on such matters. BY ORDER OF THE BOARD OF DIRECTORS July 29, 1996 SPECIAL MEETING OF STOCKHOLDERS GOOD TIMES RESTAURANTS INC. PROXY THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT The undersigned stockholder of Good Times Restaurants Inc., a Nevada corporation, hereby appoints Boyd E. Hoback, Chief Executive Officer and a Director of Good Times Restaurants Inc., my proxy to attend and represent me at the Special Meeting of Stockholders of the corporation to be held on August 30, 1996 at 2:00 p.m., and at any adjournment thereof, and to vote my shares on any matter or resolution which may come before the meeting and to take any other action which I could personally take if present at the meeting. 1. Proposed Amendment to the Company's Articles of Incorporation: The Company has proposed to amend its Articles of Incorporation to authorize 5,000,000 shares of preferred stock, $.01 par value, 1,000,000 of which will be designated as Series A Convertible Preferred Stock with rights, preferences and powers set forth in such amendment. FOR AGAINST ABSTAIN 2. Other Matters. In his discretion upon such other business as may properly come before the meeting or any adjournments thereof. FOR AGAINST ABSTAIN PLEASE NOTE: Failure to check one of the boxes will give management the authority to vote the proxy in its discretion. Shares owned: Dated this day of , 1996. Stockholder (Sign exactly as name appears on certificate for shares.) (When signing as attorney, executor, administrator, trustee or guardian, give full title as such. If signer is a corporation, sign full corporate name by duly authorized officer. If shares are held in the name of two or more persons, all should sign.) EX-3.1 2 EXHIBIT 3(i) RESOLUTION AMENDING THE ARTICLES OF INCORPORATION OF GOOD TIMES RESTAURANTS INC. RESOLVED, that the Articles of Incorporation of the Corporation be amended by deleting Article Fourth thereof and substituting therefor the following: ARTICLE IV - AUTHORIZED CAPITAL STOCK The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 55,000,000 shares, consisting of 50,000,000 shares of common stock, $.001 par value per share ("Common Stock"), and 5,000,000 shares of preferred stock, $.01 par value per share ("Preferred Stock"). The designations, powers, preferences and rights and the qualifications, limitation or restrictions of the Preferred Stock shall be as follows: A. Series A Convertible Preferred Stock. One million shares of Preferred Stock shall be designated as Series A Convertible Preferred Stock and shall have the following designations, powers, preferences and rights and the qualifications, limitations or restrictions as follows: 1. Number of Shares. The series of Preferred Stock designated and known as "Series A Convertible Preferred Stock" shall consist of 1,000,000 shares. 2. Voting. a. General. Except as may be otherwise provided in these terms of the Series A Convertible Preferred Stock or by law, the Series A Convertible Preferred Stock shall vote together with all other classes and series of stock of the Corporation as a single class on all actions to be taken by the stockholders of the Corporation. Each share of Series A Convertible Preferred Stock shall entitle the holder thereof to such number of votes per share on each action as shall equal the number of shares of Common Stock (including fractions of a share) into which each share of Series A Convertible Preferred Stock would be convertible based on the Conversion Price then in effect. b. Board Size. The Corporation shall not, without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Series A Convertible Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a series, increase the maximum number of Directors constituting the Board of Directors to a number in excess of seven. c. Board Seats. The holders of the Series A Convertible Preferred Stock voting together separately as a class shall have the right to elect two Directors to the Board of Directors of the Corporation, one of whom shall have the right to serve as the Chairman of the Board at their discretion. Notwithstanding the foregoing or anything else to the contrary provided in these Articles of Incorporation, the holders of Series A Convertible Preferred Stock, voting as a separate series, shall be entitled to remove with or without cause any or all of the Directors and to elect four Directors to the Board of the Corporation if the following events occur: (1) the Board shall fail to declare an Accruing Dividend when due if there is adequate surplus to do so, unless the Board of Directors reasonably determines that the payment of a cash dividend would jeopardize the Corporation's ability to meet its current and reasonably foreseeable obligations, including reasonable reserves therefor; (2) the Corporation files a petition in bankruptcy, is adjudged bankrupt or insolvent, makes an assignment for the benefit of creditors, applies to or petitions any tribunal for the appointment of a receiver, intervenor or trustee for all or a substantial part of its assets, or a proceeding under any bankruptcy law or statute shall have commenced and not been dismissed within 60 days; or (3) if there has been a material breach of any agreement between the Corporation and the holders of the Series A Convertible Preferred Stock and the Company fails to remedy such breach within 14 days after receiving notice of such breach or, if such breach cannot reasonably be cured and the Company continuously and diligently proceeds to remedy such breach, within 30 days after receiving notice of such breach. At any meeting (or in a written consent in lieu thereof) held for the purpose of electing Directors, the presence in person or by proxy (or the written consent) of the holders of a majority of the shares of Series A Convertible Preferred Stock then outstanding shall constitute a quorum of the Series A Convertible Preferred Stock for the election of Directors to be elected solely by the holders of the Series A Convertible Preferred Stock or jointly by the holders of the Series A Convertible Preferred Stock and the Common Stock. A vacancy in any directorship elected solely by the holders of the Series A Convertible Preferred Stock shall be filled only by vote or written consent of the holders of the Series A Convertible Preferred Stock, and a vacancy in the directorship elected jointly by the holders of the Series A Convertible Preferred Stock and the Common Stock shall be filled only by vote or written consent of holders of the Series A Convertible Preferred Stock and the Common Stock as provided above. 3. Dividends. The holders of the Series A Convertible Preferred Stock shall be entitled to receive, out of funds legally available therefor, when and as declared by the Board of Directors, cumulative cash dividends on each share of Preferred Stock equal to 8% of the purchase price paid for such share per annum (the "Accruing Dividend"). The Accruing Dividend shall accrue with respect to each share of Series A Convertible Preferred Stock issued and outstanding from day to day from the date of original issuance of such shares and shall be payable quarterly on January 1, April 1, July 1 and October 1 of each year (each a "Payment Date") commencing July 1, 1997, whether or not earned or declared, and such dividends shall be cumulative if not paid. The Accruing Dividend shall be paid, at the option of the holder of the Series A Convertible Preferred Stock, in cash or in Common Stock. If a holder elects to receive an Accruing Dividend in cash, the Company shall promptly pay such Accruing Dividend unless the Board of Directors reasonably determines that the payment of such dividend would jeopardize the Corporation's ability to meet its current and reasonably foreseeable obligations, including the establishment of reasonable reserves therefor, in which case the payment of such cash dividend will be deferred until such time as the payment of the dividend, in the reasonable discretion of the Board of Directors, would not jeopardize the Corporation's ability to meet such obligations. If a holder elects to receive a dividend of Common Stock, the Corporation shall issue to such holder, within 30 days after the date on which such dividend was due, the number of shares of Common Stock calculated by dividing (i) the dollar value of the dividend, by (ii) 75% of the Dividend Conversion Rate. The "Dividend Conversion Rate" shall be equal to the average of the prices set forth in the "Last Price" column in the NASDAQ Small-Cap issues for the 14 business days immediately preceding the applicable Dividend Payment Date. Notwithstanding the foregoing, if on the July 1, 1997 Payment Date, 75% of the Dividend Conversion Rate is less than $0.46875, then the Dividend Conversion Rate used on that Payment Date shall be $0.46875. If a holder or holders of Series A Convertible Preferred Stock elect to receive a dividend in cash, such holders shall have the right, until such time as the cash dividend is actually paid, to change their election and receive such dividend in the form of Common Stock as provided above; provided, that the size of such Common Stock dividend shall be calculated using the Dividend Conversion Rate applicable at the time the dividend was declared. 4. Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Series A Convertible Preferred Stock shall first be entitled, before any distribution or payment is made upon any stock ranking on liquidation junior to the Series A Convertible Preferred Stock, to be paid an amount equal to $0.46875 per share plus, in the case of each share, an amount equal to all Accruing Dividends accrued but unpaid thereon (whether or not declared) computed to the date payment thereof is made available (such amount payable with respect to one share of Series A Convertible Preferred Stock being sometimes referred to as the "Liquidation Preference Payment" and with respect to all shares of Series A Convertible Preferred Stock being sometimes referred to as the "Liquidation Preference Payments"). If upon such liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed among the holders of Series A Convertible Preferred Stock shall be insufficient to permit payment in full to the holders of Series A Convertible Stock of the Liquidation Preference Payments, then the entire assets of the Corporation to be so distributed shall be distributed ratably among the holders of Series A Convertible Preferred Stock. Upon any such liquidation, dissolution or winding up of the Corporation, immediately after the holders of Series A Convertible Preferred Stock shall have been paid in full the Liquidation Preference Payments, the remaining net assets of the Corporation available for distribution shall be distributed ratably among the holders of Common Stock. Written notice of such liquidation, dissolution or winding up, stating a payment date, the amount of the Liquidation Preference Payments and the place where said Liquidation Preference Payments shall be payable, shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, not less than 20 days prior to the payment date stated therein, to the holders of record of Series A Convertible Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. The consolidation or merger of the Corporation into or with any other entity or entities which results in the exchange of outstanding shares of the Corporation for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof (other than a merger to reincorporate the Corporation in a different jurisdiction), and the sale, lease, abandonment, transfer or other disposition by the Corporation of all or substantially all its assets, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of the provisions of this paragraph 4. For purposes hereof, except as provided herein, the Common Stock shall rank on liquidation junior to the Series A Convertible Preferred Stock. 5. Restrictions. At any time when shares of Series A Convertible Preferred Stock are outstanding, without the unanimous consent of both Directors of the Corporation that are elected by the holders of the Series A Convertible Stock, consenting or voting separately as a class, the Corporation will not: a. (1) Consent to any liquidation, dissolution or winding up of the Corporation, (2) consolidate or merge into or with any other entity or entities, (3) consent to any acquisition of stock or assets of another person or entity (except for Steak Out, King of Steaks, Inc.), (4) sell, lease, abandon, transfer or otherwise dispose of in excess of 51% of the Corporation's total assets (including intellectual property rights), or (5) incur any additional long term debt (i.e., debt that is payable over a period of longer than one year) at any time at which the Corporation's earnings before interest, taxes, depreciation and amortization ("EBITDA"), excluding extraordinary items of gain or loss, is less than 120% of the aggregate interest and principal payments on long term debt that the Corporation reasonably expects to be obligated for over the subsequent 12-month period. b. Amend, alter or repeal its Certificate of Incorporation or By- laws; c. Purchase or set aside any sums for the purchase of, or pay any dividend or make any distribution on, any shares of stock other than the Series A Convertible Preferred Stock, except for dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and except for the purchase of shares of Common Stock from former employees of the Corporation who acquired such shares directly from the Corporation, if each such purchase is made pursuant to contractual rights held by the Corporation relating to the termination of employment of such former employee and the purchase price does not exceed the original issue price paid by such former employee to the Corporation for such shares; or d. Redeem or otherwise acquire any shares of Series A Convertible Preferred Stock except as expressly authorized in paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders of the shares of Series A Convertible Preferred Stock on the basis of the aggregate number of outstanding shares of Series A Convertible Preferred Stock held by each such holder. 6. Conversion. The holders of shares of Series A Convertible Preferred Stock shall have the following conversion rights: a. Right to Convert. Subject to the terms and conditions of this paragraph 6, the holders of Series A Convertible Preferred Stock shall have the right at any time during each Conversion Period shown on the table below (each a "Conversion Period"), to convert up to the Maximum Number of Shares of Series A Convertible Preferred Stock shown on such table for that Conversion Period into such number of fully paid and nonassessable shares of Common Stock as is obtained by dividing the number of shares of Series A Convertible Preferred Stock to be converted by the applicable Conversion Price as set forth in the following table: Maximum Number of Shares Conversion Conversion Period (Non-Cumulative) Price September 1, 1997 - 500,000 $0.46875 September 30, 1997 October 1, 1997 - 500,000 $0.56875 November 30, 1997 December 1, 1997 - 250,000 $0.46875 December 31, 1997 500,000 $0.56875 January 1, 1998 - 750,000 $0.56875 February 28, 1998 March 1, 1998 - 250,000 $0.46875 March 31, 1998 750,000 $0.56875 April 1, 1998 - March 31, 1999 1,000,000 $0.56875 April 1, 1999, and thereafter 1,000,000 the greater of (i) the Dividend Conversion Rate at the time of such conversion, and (ii) $0.46875 Such rights of conversion shall be exercised by the holder thereof by giving written notice to the Corporation during the applicable Conversion Period stating that the holder elects to convert a stated number of shares of Series A Convertible Preferred Stock into Common Stock and by surrender of a certificate or certificates for the shares so to be converted to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of the Series A Convertible Preferred Stock) at any time during its usual business hours on the date set forth in such notice, together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued; provided, however, that following each Conversion Period, no more than the Maximum Number of Shares in the aggregate shall be converted. If holders of the Series A Convertible Preferred Stock desire to convert in excess of the Maximum Number of Shares for a particular Conversion Period, such holders shall have the right to convert up to their pro rata share of the Maximum Number of Shares, unless otherwise agreed by the holders desiring to convert their shares hereunder. b. Issuance of Certificate; Time Conversion Effected. Promptly after the receipt of the written notice referred to in subparagraph 6(a) and surrender of the certificate or certificates for the share or shares of Series A Convertible Preferred Stock to be converted, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder, registered in such name or names as such holder may direct, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Convertible Preferred Stock. To the extent permitted by law, such conversion shall be deemed to have been effected as of the close of business on the date on which such written notice shall have been received by the Corporation and the certificate or certificates for such share or shares shall have been surrendered as aforesaid, and at such time the rights of the holder of such share or shares of Series A Convertible Preferred Stock shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. c. Fractional Shares; Dividends; Partial Conversion. No fractional shares shall be issued upon conversion of Series A Convertible Preferred Stock into Common Stock and no payment or adjustment shall be made upon any conversion on account of any cash dividends on the Common Stock issued upon such conversion. At the time of each conversion, the Corporation shall pay in cash an amount equal to all dividends accrued and unpaid on the shares of Series A Convertible Preferred Stock surrendered for conversion to the date upon which such conversion is deemed to take place as provided in subparagraph 6(b). In case the number of shares of Series A Convertible Preferred Stock represented by the certificate or certificates surrendered pursuant to subparagraph 6(a) exceeds the number of shares converted, the Corporation shall, upon such conversion, execute and deliver to the holder, at the expense of the Corporation, a new certificate or certificates for the number of shares of Series A Convertible Preferred Stock represented by the certificate or certificates surrendered which are not to be converted. If any fractional share of Common Stock would, except for the provisions of the first sentence of this subparagraph 6(c), be delivered upon such conversion, the Corporation, in lieu of delivering such fractional share, shall pay to the holder surrendering the Series A Convertible Preferred Stock for conversion an amount in cash equal to the current market price of such fractional share as determined in good faith by the Board of Directors of the Corporation. d. Subdivision or Combination of Common Stock. In case the Corporation shall at any time subdivide (by stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. e. Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series A Convertible Preferred Stock shall thereupon have the right to receive, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately therefor receivable upon the conversion of such share or shares of Series A Convertible Preferred Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of such Common Stock immediately therefore receivable upon such conversion had such reorganization or reclassification not taken place. In any such case, appropriate provisions shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights. f. Other Notices. In case at any time: (1) the Corporation shall declare any dividend upon its Common Stock payable in cash or stock or make any other distribution to the holders of its Common Stock; (2) the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (3) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or a consolidation or merger of the Corporation with or into another entity or entities, or a sale, lease, abandonment, transfer or other disposition of all or substantially all its assets; or (4) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in any one or more of such cases, the Corporation shall give, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to each holder of any shares of Series A Convertible Preferred Stock at the address of such holder as shown on the books of the Corporation, (a) at least 20 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, and (b) in the case of any such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, at least 20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, as the case may be. g. Stock to be Reserved. The Corporation will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of Series A Convertible Preferred Stock as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Convertible Preferred Stock. The Corporation covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Corporation will take all such action as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange upon which the Common Stock may be listed. The Corporation will not take any action which results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of the Series A Convertible Preferred Stock would exceed the total number of shares of Common Stock then authorized by the Certificate of Incorporation. h. No reissuance of Series A Convertible Preferred Stock. Shares of Series A Convertible Preferred Stock which are converted into shares of Common Stock as provided herein shall not be reissued. i. Issue Tax. The issuance of certificates for shares of Common Stock upon conversion of Series A Convertible Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Convertible Preferred Stock which is being converted. j. Closing of Books. The corporation will at no time close its transfer books against the transfer of any Series A Convertible Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series A Convertible Preferred Stock in any manner which interferes with the timely conversion of such Series A Convertible Preferred Stock, except as may otherwise be required to comply with applicable securities laws. k. Definition of Common Stock. As used in this paragraph 6, the term "Common Stock" shall mean and include the Corporation's authorized Common Stock, par value $0.01 per share, as constituted on the date of filing of these terms of the Series A Convertible Preferred Stock, and shall also include any capital stock of any class of the Corporation thereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided that the shares of Common Stock receivable upon conversion of shares of Series A Convertible Preferred Stock shall include only shares designated as Common Stock of the Corporation on the date of filing of this instrument, or in case of any reorganization or reclassification of the outstanding shares thereof, the stock, securities or assets provided for in subparagraph 6(g). 7. Redemption. The shares of Series A Convertible Preferred Stock may be redeemed by the Corporation, at its option, as follows: a. Optional Redemption. The Corporation shall have the right at any time after September 1, 1998, at its option, to redeem all of the then-outstanding shares of Series A Convertible Preferred Stock, or any portion thereof, in blocks of 100,000 shares; provided, however, that such right is contingent upon all accrued and unpaid Accruing Dividends being fully paid prior to the Corporation's exercise of its redemption rights hereunder; and provided, further, however, that for so long as a holder of Series A Convertible Preferred Stock and its affiliates, in the aggregate, own at least 66.67% of the Series A Convertible Preferred Stock and Conversion Shares, the Corporation shall not have the right to redeem any shares hereunder to the extent that (i) there are fewer than 1,000 shares of Series A Convertible Preferred Stock outstanding, or (ii) such redemption would result in fewer than 1,000 shares of Series A Convertible Preferred Stock remaining outstanding. b. Redemption Price and Payment. The shares of Series A Convertible Preferred Stock to be redeemed hereunder shall be redeemed by paying in cash an amount equal to $1.00 per share plus, in the case of each share, an amount equal to all Accruing Dividends declared but unpaid thereon, computed to the date of such redemption, such amount being referred to as the "Redemption Price." Such payment shall be made in full on the date such shares are redeemed to the holders entitled thereto. c. Redemption Mechanics. At least 30 but not more than 40 days prior to the date on which the Corporation proposes to redeem such shares (the "Redemption Date"), written notice (the "Redemption Notice") shall be given by the Corporation by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, to each holder of record (at the close of business on the business day next preceding the day on which the Redemption Notice is given) of shares of Series A Convertible Preferred Stock notifying such holder of the redemption and specifying the Redemption Price, such Redemption Date, the number of shares of Series A Convertible Preferred Stock to be redeemed from such holder (computed on a pro rata basis in accordance with the number of such shares held by all holders thereof) and the place where such Redemption Price shall be payable. The Redemption Notice shall be addressed to each holder at his address as shown by the records of the Corporation. Notwithstanding anything to the contrary contained herein, holders of Series A Convertible Preferred Stock receiving such Redemption Notice shall have the right to convert their shares of Series A Convertible Preferred Stock subject to such Redemption Notice into Common Stock pursuant to paragraph 6 above. From and after the close of business on a Redemption Date, unless there shall have been a default in the payment of the Redemption Price, all rights of holders of shares of Series A Convertible Preferred Stock (except the right to receive the Redemption Price) shall cease with respect to the shares to be redeemed on such Redemption Date, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the Corporation legally available for redemption of shares of Series A Convertible Preferred Stock on a Redemption Date are insufficient to redeem the total number of shares of Series A Convertible Preferred Stock to be redeemed on such Redemption Date, the holders of such shares shall share ratably in any funds legally available for redemption of such shares according to the respective amounts which would be payable to them if the full number of shares to be redeemed on such Redemption Date were actually redeemed. The shares of Series A Convertible Preferred Stock required to be redeemed but not so redeemed shall remain outstanding and entitled to all rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of such shares of Series A Convertible Preferred Stock, such funds shall be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are then legally available, on the basis set forth above. d. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of Series A Convertible Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever shall be canceled and shall not under any circumstances be reissued; and the Corporation may from time to time take such appropriate action as may be necessary to reduce accordingly the number of authorized shares of Series A Convertible Preferred Stock. 8. Amendments. No provision of these terms of the Series A Convertible Preferred Stock may be amended, modified or waived without the written consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Series A Convertible Preferred Stock. B. Other Preferred Stock. The Preferred Stock other than the Series A Convertible Preferred Stock may be issued from time to time in one or more series and for such consideration as the Board of Directors shall determine. Subject to the limitations set forth herein and any limitations then prescribed by law, authority is hereby expressly granted to the Board of Directors to fix by resolution from time to time the designation of such series and the powers, preferences and rights of the shares of such series, and the qualifications, limitations or restrictions thereof, including, without limitation, the following: (a) the designation and number of shares comprising such series, which number may from time to time be decreased by the Board of Directors (but not below the number of such shares then outstanding) or may be increased (unless prohibited by action of the Board of Directors in resolutions creating such series); (b) the rate, amount and times at which, and the preferences and conditions under which, dividends shall be payable on shares of such series, including, without limitation, whether such dividends are cumulative or noncumulative and whether the shares of such series participate or do not participate in additional dividends after the payment of preferential dividends with respect to such shares; (c) any rights and preferences of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, and whether such amounts vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary; (d) the full or limited voting rights, if any, of the shares of any such series, in addition to voting rights provided by law; and whether or not, under what conditions and with respect to what subject matters, the shares of such series shall be entitled to vote separately as a class; (e) any times, terms and conditions upon which the shares of such series may be subject to redemption and the amount, terms, conditions and manner of operation of any purchase, retirement or sinking fund to be provided with respect to the redemption of such shares; (f) any rights to convert such shares into, or to exchange such shares for, shares of any other class or classes of capital stock or of any other series of the same class, including, without limitation, the prices, rates, conversion or exchange and any other terms or conditions applicable to such conversion or exchange; (g) any limitations upon the payment of dividends or the making of distributions on or the acquisition or redemption of Common Stock or any other class of shares subordinate to the shares of such series with respect to the payment of dividends; (h) any conditions or restrictions upon the issue of any additional shares on a parity with or superior to the shares of such series other than the Series A Convertible Preferred Stock; and (i) any other relative powers, preferences or rights and any other qualifications, limitations or restrictions with respect to the shares of such series as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Article IV. Except as specified by the Board of Directors, all shares of Preferred Stock shall be identical to and of equal rank with all shares of any other series of Preferred Stock, except as to the terms from which cumulative dividends, if any, shall accumulate. EX-99 3 C&A COHIG & ASSOCIATES, INC. INVESTMENTS 6300 South Syracuse Way Suite 130 Englewood, CO 80111 July 12, 1996 Boyd E. Hoback Chairman of The Board of Directors Good Times Restaurants Inc. 8620 Wolff Court, Suite 330 Westminster, CO 80030 Dear Mr. Hoback: Cohig & Associates, Inc. ("Cohig") has been asked by Good Times Restaurants Inc. (the "Company") to render an opinion as to the fairness, from a financial point of view, of the sale of 1,000,000 shares of 8% Convertible Preferred Stock at a purchase price of $1.00 per share to The Bailey Company for an aggregate purchase price of $1,000,000. Such terms of the sale are included in the Series A Convertible Preferred Stock Purchase Agreement dated May 31, 1996 (the "Agreement"). The Preferred Shares are to be purchased in three installments: one for 500,000 Shares on the first day of the month following approval by the Company's shareholders, 250,000 Shares three months later, and 250,000 Shares six months after the first installment is paid. The assignment was prepared in accordance with generally accepted valuation techniques and included, among other items, an analysis of the following key valuation concerns: 1. The nature and history of the business enterprise. 2. The economic outlook in general and the condition and outlook of the specific industry in particular. 3. The financial condition of the business and the book value of its stock. 4. The earnings capacity of the business. 5. The dividend paying capacity of the business. 6. Intangible values such as goodwill, patents, etc. 7. Historical trading market of the stock, the relative size of the block to be valued, and the type of security being valued. 8. The market price of companies engaged in the same or similar lines of business. In addition we have: (i) reviewed the Agreement dated May 31, 1996 and Exhibits; (ii) reviewed the Series A Convertible Preferred Stock Terms; (iii) reviewed the Registration Rights Agreement; (iv) reviewed financial information on Good Times Restaurants Inc. furnished to Cohig by management, including financial projections for Good Times Restaurants Inc.; (v) reviewed publicly available information; (vi) held discussions with the management of Good Times Restaurants Inc. concerning the businesses, operations and prospects for the company; (vii) analyzed the market value of the Series A Convertible Preferred Stock based on its conversion rate, dividend rate and other terms; (viii) reviewed the valuations of publicly traded companies in the same or similar industry; and (ix) made such other studies and inquiries as Cohig deemed relevant. Limiting Conditions: a) Neither Cohig nor its principals have any present or intended interest in the outcome of this particular transaction. However, Cohig may maintain a market in the common stock of Good Times Restaurants Inc., and Cohig may own shares of common stock and/or stock purchase warrants of the Company. Cohig's fees for this fairness opinion were based strictly on professional time charges, and were in no way contingent upon any derived valuation figures. b) Cohig does not purport to be a guarantor of value. Valuation is an imprecise science, with value being a question of opinion, and reasonable people can differ in their opinion of value. Cohig does certify that the fairness opinion was conducted and the conclusions arrived at independently using conceptually sound and commonly accepted methods of valuation. c) In preparing the fairness opinion, Cohig used available information provided by the Company. We did not make independent examinations of any financial statements, projections or other information prepared by the Company which were relied upon and, accordingly, we make no representations or warranties nor express any opinion regarding the accuracy or reasonableness of such. With respect to the financial projections we have reviewed, we have relied upon assurances that such projections have been reasonably prepared on a basis reflecting the best, currently available estimates and judgments of Good Times Restaurants Inc. d) Publicly available information utilized in preparing the opinion (e.g., economic, industry, financial) was obtained from sources deemed to be reliable. It is beyond the scope of the opinion to verify the accuracy of such information, and we make no representation as to its accuracy. Based on and subject to the foregoing considerations, it is our opinion, as investment bankers, that the Series A Convertible Preferred Stock Purchase Agreement, from a financial point of view, is fair to the shareholders of Good Times Restaurants Inc. Very truly yours, /s/ Cohig & Associates, Inc. COHIG & ASSOCIATES, INC. -----END PRIVACY-ENHANCED MESSAGE-----