SERIES A CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
by and among
GOOD TIMES RESTAURANTS INC.
and
THE XXXXXX COMPANY
Dated as of May 31, 1996
TABLE OF CONTENTS
Page
ARTICLE ITHE PREFERRED SHARES. . . . . . . . . . . . . . . . . .1
SECTION 1.01 Issuance, Sale and Delivery of the Preferred
Shares . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE IIREPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . .2
SECTION 2.01 Organization, Qualifications and Corporate
Power. . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 2.02 Authorization of Agreements, Etc. . . . . . .2
SECTION 2.03 Validity. . . . . . . . . . . . . . . . . . .3
SECTION 2.04 Authorized Capital Stock. . . . . . . . . . .3
SECTION 2.05 Litigation; Compliance with Law . . . . . . .4
SECTION 2.06 Subsidiaries. . . . . . . . . . . . . . . . .4
SECTION 2.07 Loans and Advances. . . . . . . . . . . . . .5
SECTION 2.08 Assumptions, Guaranties, Etc, of Indebtedness
of Other Person. . . . . . . . . . . . . . . . . . . .5
SECTION 2.09 Governmental Approval . . . . . . . . . . . .5
SECTION 2.10 Agreements. . . . . . . . . . . . . . . . . .5
SECTION 2.11 Undisclosed Liabilities . . . . . . . . . . .6
SECTION 2.12 Disclosure. . . . . . . . . . . . . . . . . .6
SECTION 2.13 Offering of the Preferred Shares. . . . . . .6
SECTION 2.14 Brokers . . . . . . . . . . . . . . . . . . .7
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . .7
ARTICLE IVCONDITIONS TO THE OBLIGATIONS OF THE PURCHASER . . . .8
ARTICLE VCONDITIONS TO THE OBLIGATIONS OF THE COMPANY. . . . . 13
ARTICLE VICOVENANTS OF THE COMPANY . . . . . . . . . . . . . . 13
SECTION 6.01 Financial Statements, Reports, Etc. . . . . 13
SECTION 6.02 Right of Participation. . . . . . . . . . . 14
SECTION 6.03 Reserve for Conversion Shares . . . . . . . 15
SECTION 6.04 Corporate Existence . . . . . . . . . . . . 16
SECTION 6.05 Properties, Business, Insurance . . . . . . 16
SECTION 6.06 Inspection, Consultation and Advice . . . . 16
SECTION 6.07 Restrictive Agreements Prohibited . . . . . 16
SECTION 6.08 Transactions with Affiliates. . . . . . . . 16
SECTION 6.09 Use of Proceeds . . . . . . . . . . . . . . 17
SECTION 6.10 Board of Directors Meeting. . . . . . . . . 17
SECTION 6.11 Compensation Committee. . . . . . . . . . . 17
SECTION 6.12 Capital Expenditures. . . . . . . . . . . . 18
SECTION 6.13 Employment. . . . . . . . . . . . . . . . . 18
SECTION 6.14 Investments . . . . . . . . . . . . . . . . 18
SECTION 6.15 Maintenance of Properties . . . . . . . . . 18
SECTION 6.16 D&O Insurance . . . . . . . . . . . . . . . 18
SECTION 6.17 By-laws . . . . . . . . . . . . . . . . . . 18
SECTION 6.18 Activities of Subsidiaries. . . . . . . . . 18
SECTION 6.19 Compliance with Laws. . . . . . . . . . . . 19
SECTION 6.20 Keeping of Records and Books of Account . . 19
SECTION 6.21 Change in Nature of Business. . . . . . . . 19
ARTICLE VIIBREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS 19
SECTION 7.01 Redemption. . . . . . . . . . . . . . . . . 19
ARTICLE VIIIMISCELLANEOUS. . . . . . . . . . . . . . . . . . . 19
SECTION 8.01 Survival of Agreements. . . . . . . . . . . 19
SECTION 8.02 Brokerage . . . . . . . . . . . . . . . . . 19
SECTION 8.03 Parties in Interest . . . . . . . . . . . . 20
SECTION 8.04 Assignment. . . . . . . . . . . . . . . . . 20
SECTION 8.05 Notices . . . . . . . . . . . . . . . . . . 21
SECTION 8.06 Entire Agreement. . . . . . . . . . . . . . 21
SECTION 8.07 Counterparts. . . . . . . . . . . . . . . . 21
SECTION 8.08 Amendments. . . . . . . . . . . . . . . . . 21
SECTION 8.09 Severability. . . . . . . . . . . . . . . . 21
SECTION 8.10 Titles and Subtitles. . . . . . . . . . . . 21
SECTION 8.11 Governing Law . . . . . . . . . . . . . . . 21
SCHEDULE I Disclosure Schedule
SCHEDULE II Other Securities
SCHEDULE III Security Holders
INDEX TO EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Articles and all amendments thereto
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
(this "Agreement"), dated as of May __, 1996, is by and between
Good Times Restaurants Inc., a Nevada corporation (the
"Company"), and The Xxxxxx Company, a Colorado limited
partnership ("Purchaser").
WHEREAS, the Company wishes to issue and sell to the
Purchaser an aggregate of 1,000,000 shares (the "Preferred
Shares") of the authorized but unissued Series A Convertible
Preferred Stock, $0.01 par value, of the Company (the "Series A
Convertible Preferred Stock"); and
WHEREAS, the Purchaser wishes to purchase the Preferred
Shares on the terms and subject to the conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree
as follows:
ARTICLE I
THE PREFERRED SHARES
SECTION 1.01 Issuance, Sale and Delivery of the Preferred
Shares. The Company agrees to issue and sell to the Purchaser,
and the Purchaser hereby agrees to purchase from the Company, an
aggregate of 1,000,000 Preferred Shares at the purchase price of
$1.00 per share for an aggregate purchase price of $1,000,000
(the "Purchase Price"). Purchaser shall purchase from the
Company, and the Company shall sell to Purchaser, the Preferred
Shares in three installments (the "Installments") as follows:
(i) on the later to occur of June 1, 1996 and the first day of
the month immediately following the approval by the Company's
shareholders of the transactions contemplated hereby (the "First
Installment Date"), Purchaser shall purchase 500,000 of the
Preferred Shares for $250,000 in cash by applying the proceeds
from the collection of the $250,000 owed by the Company to
Purchaser pursuant to that certain Promissory Note made by the
Company and payable to Purchaser dated March 1, 1996 (the
"Note"); (ii) on the date that is three (3) months after the
First Installment Date (the "Second Installment Date"), Purchaser
shall buy 250,000 of the Preferred Shares for $250,000; and
(iii) on the date that is three (3) months after the Second
Installment Date (the "Third Installment Date"), Purchaser shall
buy 250,000 of the Preferred Shares for $250,000 (each, an
"Installment Date"). On each Installment Date, the Company shall
issue and deliver to the Purchaser a stock certificate or
certificates in definitive form, registered in the name of the
Purchaser or its designee, representing the Preferred Shares
being purchased at such time. As payment in full for the
Preferred Shares being purchased by Purchaser on each Installment
Date and against delivery of the stock certificate or
certificates therefor, the Purchaser shall transfer to the
account of the Company by wire transfer or other immediately
available funds the portion of the Purchase Price attributable to
such Installment.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that,
except as set forth in the Disclosure Schedule attached as
Schedule I (which Disclosure Schedule makes explicit reference to
the particular representation or warranty as to which exception
is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall
apply):
SECTION 2.01 Organization, Qualifications and Corporate
Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Nevada and is duly licensed or qualified to transact business as
a foreign corporation and is in good standing in each
jurisdiction in which the nature of the business transacted by it
or the character of the properties owned or leased by it requires
such licensing or qualification. The Company has the corporate
power and authority to own and hold its properties and to carry
on its business as now conducted and as proposed to be conducted,
to execute, deliver and perform this Agreement and the
Registration Rights Agreement with the Purchaser in the form
attached hereto as Exhibit A (the "Registration Rights
Agreement"), and all agreements ancillary thereto, to issue, sell
and deliver the Preferred Shares and to issue and deliver the
shares of Common Stock, $0.001 par value, of the Company ("Common
Stock") issuable upon conversion of the Preferred Shares (the
"Conversion Shares").
(b) Except for Good Times Drive Thru Inc. (the
"Subsidiary"), the Company does not (i) own of record or
beneficially, directly or indirectly, (A) any shares of capital
stock or securities convertible into capital stock of any other
corporation or (B) except as disclosed on Schedule II, any
participating interest in any partnership, joint venture or other
non-corporate business enterprise, or (ii) control, directly or
indirectly, any other entity.
SECTION 2.02 Authorization of Agreements, Etc.
(a) Other than obtaining shareholder approval for the
transactions contemplated hereby, which the Company shall make a
good faith effort to obtain prior to the first Installment, the
execution and delivery by the Company of this Agreement and the
Registration Rights Agreement, and the performance by the Company
of its obligations hereunder and thereunder, the issuance, sale
and delivery of the Preferred Shares and the issuance and
delivery of the Conversion Shares, have been duly authorized by
all requisite corporate action and will not violate any provision
of law, any order of any court or other agency of government, the
Articles of Incorporation of the Company, as amended (the
"Articles"), or the By-laws of the Company, as amended, or any
provision of any indenture, agreement or other instrument to
which the Company, or any of its properties or assets is bound,
or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties
or assets of the Company.
(b) If the shareholders of the Company approve the
transactions contemplated hereby, the Preferred Shares will be
duly authorized and, when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable
shares of Series A Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and
clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set
forth in the Registration Rights Agreement. If the shareholders
of the Company approve the transactions contemplated hereby, the
Conversion Shares will be duly reserved prior to the first
Installment for issuance upon conversion of the Preferred Shares
and, when so issued, will be duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof and will be
free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set
forth in the Registration Rights Agreement. Neither the
issuance, sale or delivery of the Preferred Shares nor the
issuance or delivery of the Conversion Shares is subject to any
preemptive right of stockholders of the Company or to any right
of first refusal or other right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly
executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable in
accordance with its terms. The Registration Rights Agreement,
when executed and delivered in accordance with this Agreement,
will constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its respective terms.
SECTION 2.04 Authorized Capital Stock. If the shareholders
of the Company approve the transactions contemplated hereby, as
of the First Installment Date the authorized capital stock of the
Company shall consist of (i) 10,000,000 shares of Series A
Convertible Preferred Stock which is the only class of preferred
stock of the Company, and (ii) 10,000,000 shares of Common Stock.
As of the date hereof, 6,314,824 shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable with
no personal liability attaching to the ownership thereof and no
shares of Preferred Stock have been issued. The holders of
subscriptions, warrants, options, convertible securities, and
other rights (contingent or other) to purchase or otherwise
acquire equity securities of the Company, and the number of
shares of Common Stock and the number of such subscriptions,
warrants, options, convertible securities, and other such rights
held by each, are as set forth in the attached Schedule III. If
the shareholders of the Company approve the transactions
contemplated hereby, the designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect
of each class and series of authorized capital stock of the
Company will be, as of the First Installment Date, as set forth
in the Articles, a copy of which is attached hereto as Exhibit B,
and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding
and enforceable and in accordance with all applicable laws.
Except as set forth in the attached Schedule III, (i) no
subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire
equity securities of the Company is authorized or outstanding,
and (ii) except as provided herein there is no commitment by the
Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Articles or
as set forth in the attached Schedule III, the Company does not
have any obligation (contingent or other) to purchase, redeem or
otherwise acquire any of its equity securities or any interest
therein or to pay any dividend or make any other distribution in
respect thereof. There are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to
any securities of the Company. All of the outstanding securities
of the Company were issued in compliance with all applicable
Federal and state securities laws.
SECTION 2.05 Litigation; Compliance with Law. There is no
(i) action, suit, claim, proceeding or investigation pending or,
to the best knowledge of the Company, threatened against or
affecting the Company or any principal of any of the foregoing,
at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (iii)
governmental inquiry pending or, to the best of the knowledge of
the Company, threatened against or affecting the Company
(including without limitation any inquiry as to the qualification
of the Company to hold or receive any license or permit), and to
the best of the Company's knowledge there is no basis for any of
the foregoing. The Company has not received any opinion or
memorandum or legal advice from legal counsel to the effect that
it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The
Company is not in default with respect to any order, writ,
injunction or decree known to or served upon the Company of any
court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company
pending or threatened against others. The Company has complied
with all laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services
the noncompliance with which would have a material adverse effect
on the Company; the Company has all necessary permits, licenses
and other authorizations required to conduct its business as
conducted and as proposed to be conducted; and the Company has
been operating its business pursuant to and in compliance with
the terms of all such permits, licenses and other authorizations.
There is no existing law, rule, regulation or order, and the
Company after due inquiry is not aware of any proposed law, rule,
regulation or order, whether Federal, state, county or local,
which would prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its
business in any jurisdiction in which it is now conducting
business or in which it proposes to conduct business.
SECTION 2.06 Subsidiaries. The Subsidiary is a corporation
duly incorporated, validly existing and in good standing under
the laws of the State of Colorado and is duly licensed or
qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which it is required to be
licensed or qualified. The authorized stock of the Subsidiary
consists of 10,000,000 shares of common stock, 999,900 shares of
which are issued and outstanding. All of the issued and
outstanding shares of its common stock have been duly authorized
and are validly issued, fully paid and non-assessable. The
Company owns all of the issued and outstanding shares of common
stock of the Subsidiary, free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and
state securities laws). There are no outstanding or authorized
options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or
commitments that could require the Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to
the Subsidiary. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any
capital stock of the Subsidiary.
SECTION 2.07 Loans and Advances. Except as set forth in
the Schedule I, the Company does not have any outstanding loans
or advances to any person and is not obligated to make any such
loans or advances.
SECTION 2.08 Assumptions, Guaranties, Etc, of Indebtedness
of Other Person. The Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on
any indebtedness of any other person, business or entity
(including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit
or collection in the ordinary course of business.
SECTION 2.09 Governmental Approval. Subject to the accuracy
of the representations and warranties of the Purchaser set forth
in Article III of this Agreement, no registration or filing with,
or consent or approval of or other action by, any Federal, state
or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by
the Company of this Agreement or the Registration Rights
Agreement, the issuance, sale and delivery of the Preferred
Shares or, upon conversion thereof, the issuance and delivery of
the Conversion Shares, other than (i) filings pursuant to state
securities laws (all of which filings have been made by the
Company, other than those which are required to be made after the
date hereof and which will be duly made on a timely basis) in
connection with the sale of the Preferred Shares, and (ii) with
respect to the Registration Rights Agreement, the registration of
the shares covered thereby with the Securities and Exchange
Commission (the "Commission") and filings pursuant to state
securities laws.
SECTION 2.10 Agreements. Consummation of the transactions
contemplated hereby (i) will not affect the validity of any
material contract, agreement, commitment, license or other
understanding or arrangement (collectively, "Contracts") to which
the Company is a party; and (ii) will not entitle any parties
related to the Company (including without limitation officers and
directors of the Company) to any payments, bonus or other
benefits that may be considered "golden parachute" payments
("Golden Parachute Payments") or any payments or other benefits
made or granted in connection with the transactions contemplated
hereby. The payment by the Company of Golden Parachute Payments,
if any, shall be subordinate to any and all payments to the
holders of the Preferred Shares. Notwithstanding the foregoing,
the Company shall be free to perform its obligations pursuant to
its current agreement with Xxxx X. Xxxxxx if Xx. Xxxxxx is
terminated by the Company without "cause", unless such
termination occurs within 60 days of a determination by the Board
of Directors of the Company to dissolve the Company; provided,
however, this Section 2.10 shall not in any way modify or alter
the Company's agreement with Xx. Xxxxxx.
SECTION 2.11 Undisclosed Liabilities. Neither the Company
or the Subsidiary has any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued) except for (i) liabilities set
forth on the Company's most recent balance sheet and
(ii) liabilities which have arisen after the date of the most
recent balance sheet in the ordinary course of business (none of
which results from, arises out of, relates to, or was caused by
any breach of contract).
SECTION 2.12 Disclosure. To the best of the Company's
knowledge (i) neither this Agreement, nor any Schedule or Exhibit
to this Agreement, or ancillary agreements hereto or thereto (the
"Acquisition Documents ") contains an untrue statement of a
material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading, (ii) none
of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the
transactions contemplated hereby contains an untrue statement of
a material fact or omits a material fact necessary to make the
statements contained therein not materially misleading, and (iii)
there is no fact which the Company has not disclosed to the
Purchaser and its counsel in writing and of which the Company is
aware which materially and adversely affects or could materially
and adversely affect the business, financial condition,
operations, property or affairs of the Company. The financial
projections and other estimates provided to Purchaser by the
Company were prepared by the Company based on the Company's
experience in the industry and on assumptions of fact and opinion
as to future events which the Company, at the date of their
preparation, believed to be reasonable. As of the date hereof no
facts have come to the attention of the Company which would, in
its opinion, require it to revise or amplify the assumptions
underlying such projections and other estimates or the
conclusions derived therefrom.
SECTION 2.13 Offering of the Preferred Shares. Neither the
Company nor any person authorized or employed by the Company as
agent, broker, dealer or otherwise in connection with the
offering or sale of the Preferred Shares, or any security of the
Company similar to the Preferred Shares, has offered the
Preferred Shares or any such similar security for sale to, or
solicited any offer to buy the Preferred Shares or any such
similar security from, or otherwise approached or negotiated with
respect thereto with, any person or persons so as to subject the
offering, issuance or sale of the Preferred Shares to the
registration provisions of the Securities Act; and neither the
Company nor any person acting on its behalf has taken or will
take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under
circumstances which might require the integration of such
security with Preferred Shares under the Securities Act or the
rules and regulations of the Commission thereunder), so as to
subject the offering, issuance or sale of the Preferred Shares to
the registration provisions of the Securities Act.
SECTION 2.14 Brokers. The Company does not have any
contract, arrangement or understanding with any broker, finder or
similar agent with respect to the sale of the Preferred Shares
contemplated by this Agreement.
For purposes of this Article II, "knowledge of the Company"
means that nothing has come to the attention of either the
Company that (i) gives the Company actual knowledge, or (ii) is
sufficient to put the Company on notice of, or cause the Company
to make further inquiry into, the existence or absence of any
material information or fact bearing on the matter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of
Rule 501 under the Securities Act and was not organized for the
specific purpose of acquiring the Preferred Shares;
(b) it has sufficient knowledge and experience in investing
in companies similar to the Company in terms of the Company's
stage of development so as to be able to evaluate the risks and
merits of its investment in the Company and it is able
financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's
management;
(d) except as permitted by the Registration Rights
Agreement, the Preferred Shares being purchased by it are being
acquired for its own account and for the purpose of investment
and not with a view to or for sale in connection with any
distribution thereof;
(e) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act, (ii) the Preferred Shares and, upon conversion
thereof, the Conversion Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration, (iii) the Preferred
Shares and the Conversion Shares will bear a legend to such
effect, and (iv) the Company will make a notation on its transfer
books to such effect; and
(f) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary
steps in order to perfect the exemption from registration
provided thereby, including (i) obtaining on behalf of the
Company information to enable the Company to establish a
reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being
relied upon with respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase and pay for the
Preferred Shares being purchased by it on each Installment Date
is, at its option, subject to the satisfaction, on or before such
Installment Date, of the following conditions:
(a) Opinions of Counsel. The Purchaser shall have received
from counsel for the Company on or before June 5, 1996 an opinion
dated as of the date hereof, in form and scope satisfactory to
Purchaser and its counsel, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company is duly licensed
or qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which it
owns or leases real property. The Company has the corporate
power and authority to own and hold its properties and to
carry on its business as currently conducted and as proposed
to be conducted. The Company has the corporate power and
authority to execute, deliver and perform this Agreement and
the Registration Rights Agreement, to issue, sell and
deliver the Preferred Shares and, upon conversion thereof,
to issue and deliver the Conversion Shares.
(ii) This Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered
by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with
their respective terms (subject, as to enforcement of
remedies, to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights
of creditors generally), except that such counsel need not
express any opinion as to the validity or enforceability of
the indemnification and contribution provisions of the
Registration Rights Agreement.
(iii) The execution and delivery by the Company of
this Agreement and the Registration Rights Agreement, the
performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and delivery of the Preferred
Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any
provision of law, the Articles or By-laws, each as amended,
of the Company, any order of any court or other agency of
government or any indenture, agreement or other instrument
known to such counsel to which the Company, or any of their
respective properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the
properties or assets of the Company. In rendering the
foregoing opinion, such counsel may assume full disclosure
to Purchaser of all material facts and, with respect to
performance by the Company of its obligations under the
Registration Rights Agreement, may assume compliance by the
Company at such time with the registration requirements of
the Securities Act and with applicable state securities laws
and may disclaim any opinion as to the validity or
enforceability of the indemnification and contribution
provisions of the Registration Rights Agreement.
(iv) The authorized capital stock of the Company
consists of (i) 10,000,000 shares of Series A Convertible
Preferred Stock which is the only class of preferred stock
of the Company, and (ii) 10,000,000 shares of Common Stock.
As of the date hereof, 6,314,824 shares of Common Stock are
validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof and no
shares of Preferred Stock have been issued, except as
provided for herein. As of the date hereof, holders of
record of subscriptions, warrants, options, convertible
securities, and other rights (contingent or other) to
purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the
number of such subscriptions, warrants, options, convertible
securities, and other such rights held by each, are as set
forth in Schedule III. The designations, powers,
preferences, rights, qualifications, limitations and
restrictions in respect of each class or series of
authorized capital stock of the Company are as set forth in
the Articles, and all such designations, powers,
preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in
accordance with all applicable laws (subject, as to
enforcement, to the discretion of courts in awarding
equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally). Except as set
forth in Schedule III, to the knowledge of such counsel, but
without independent investigation, as of the date hereof no
subscription, warrant, option, convertible security, or
other right (contingent or other) to purchase or acquire
equity securities of the Company is authorized or
outstanding and there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders
of any of its equity securities any evidence of indebtedness
or asset. Except as set forth in Schedule III or as
provided for in the Articles, to the knowledge of such
counsel, but without independent investigation, the Company
has no obligation (contingent or other) to purchase, redeem
or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other
distribution in respect thereof.
(v) The Preferred Shares and the Conversion Shares
have been duly authorized. The issuance, sale and delivery
of the Preferred Shares and the issuance and delivery of the
Conversion Shares upon conversion of the Preferred Shares
have been duly authorized by all required corporate action;
the Preferred Shares have been validly issued, are fully
paid and nonassessable with no personal liability attaching
to the ownership thereof and, to the knowledge of such
counsel, are free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through
the Company except as set forth in the Registration Rights
Agreement; and the Conversion Shares have been duly reserved
for issuance upon conversion of the Preferred Shares and,
when so issued, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the
ownership thereof and, to the knowledge of such counsel,
will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company
except as set forth in the Registration Rights Agreement.
Neither the issuance, sale or delivery of the Preferred
Shares nor the issuance or delivery of the Conversion Shares
is subject to any preemptive right of stockholders of the
Company arising under law or the Articles or By-laws of the
Company, each as amended, or, to the knowledge of such
counsel, to any contractual right of first refusal or other
right in favor of any person.
(vi) Except as described in Schedule I, to the
knowledge of such counsel, but without independent
investigation, as of the date hereof there is no material
(A) action, suit, claim, proceeding or investigation pending
or threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (B)
arbitration proceeding relating to the Company pending under
collective bargaining agreements, or (C) governmental
inquiry pending or threatened against or affecting the
Company. To the knowledge of such counsel, but without
independent investigation, the Company is not in default
with respect to any order, writ, injunction or decree known
to such counsel of any court or of any Federal, state,
municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or
foreign.
(vii) Assuming the accuracy of the representations
and warranties of the Purchaser set forth in Article II of
this Agreement, no registration or filing with, and no
consent or approval of, or other action by any Federal,
state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and
performance by the Company of this Agreement and the
Registration Rights Agreement, the issuance, sale and
delivery of the Preferred Shares or, upon conversion
thereof, the issuance and delivery of the Conversion Shares,
other than filings pursuant to federal and state securities
laws (all of which filings, other than those which are
required to be made after the date hereof, have been made by
the Company). In rendering the foregoing opinion with
respect to performance by the Company of its obligations
under the Registration Rights Agreement, such counsel may
assume compliance by the Company at such time with the
registration requirements of the Securities Act and with
applicable state securities laws and may disclaim any
opinion as to the validity or enforceability of the
indemnification and contribution provisions of the
Registration Rights Agreement.
(b) Representations and Warranties to be True and Correct.
The representations and warranties contained in Article II of
this Agreement shall be true, complete and correct in all
material respects on and as of the date hereof and the President
and Treasurer of the Company shall have certified to such effect
to the Purchaser in writing.
(c) Performance. The Company shall have performed and
complied in all material respects with all agreements contained
herein required to be performed or complied with by it prior to
or at the date hereof, and as of each Installment Date, as
applicable, and the President and Treasurer of the Company shall
have certified to the Purchaser in writing as of each Installment
Date to such effect and to the further effect that all of the
conditions set forth in this Article IV have been satisfied.
(d) All Proceedings to be Satisfactory. As of the First
Installment Date, all corporate and other proceedings to be taken
by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser and its counsel shall have received
all such counterpart originals or certified or other copies of
such documents as they reasonably may request.
(e) Supporting Documents. As of the First Installment
Date, the Purchaser and its counsel shall have received copies of
the following documents and all changes, amendments or
modifications thereto:
(i) (A) the Articles, certified as of a recent date by
the Secretary of State of the State of Nevada, (B) a
certificate of said Secretary dated as of a recent date as
to the due incorporation and good standing of the Company,
the payment of all excise taxes by the Company and listing
all documents of the Company on file with said Secretary,
and (C) the By-laws of the Company;
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated as of the Installment Date
and certifying: (A) that attached thereto is a true and
complete copy of the By-laws of the Company as in effect on
the date of such certification; (B) that attached thereto is
a true and complete copy of all resolutions adopted by the
Board of Directors or the stockholders of the Company
authorizing the execution, delivery and performance of this
Agreement and the Registration Rights Agreement, the
issuance, sale and delivery of the Preferred Shares and the
reservation, issuance and delivery of the Conversion Shares,
and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and the
Registration Rights Agreement; (C) that the Articles have
not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause
(i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing this
Agreement and the Registration Rights Agreement, the stock
certificates representing the Preferred Shares and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the
incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
(iii) such additional supporting documents and
other information with respect to the operations and affairs
of the Company as the Purchaser or its counsel reasonably
may request.
(f) Certificates. As of each subsequent Installment Date,
Purchaser shall have received a certificate of the Secretary or
an Assistant Secretary of the Company dated as of the Installment
Date and certifying that (A) neither the Articles nor the By-laws
were amended, revised or modified in any way that could adversely
affect the Preferred Shares since the First Installment Date; (B)
that the resolutions of the Board of Directors or the
stockholders of the Company authorizing the execution, delivery
and performance of the Agreement and the Registration Rights
Agreement, the issuance, sale and delivery of the Preferred
Shares and the reservation, issuance and delivery of the
Conversion Shares delivered to Purchaser are in full force and
effect and have not been effectively altered or changed by
subsequent action by the Board of Directors or shareholders of
the Company.
(g) Approval. The Board of Directors of Purchaser shall
have approved the transactions contemplated hereby on or before
May 31, 1996.
(h) Registration Rights Agreement. The Company shall have
executed and delivered the Registration Rights Agreement.
(i) Articles. The Articles shall read in their entirety as
set forth in Exhibit B. The Articles shall have been duly
amended, if necessary, to provide that: (i) all directors of the
Company shall be indemnified against, and absolved of, liability
to the Company and its stockholders to the maximum extent
permitted under the laws of the State of Nevada, and (ii) the
number of shares of authorized Common Stock of the Company may be
increased or decreased (but not below the number then
outstanding) by the affirmative vote of the holders of two-thirds
of the outstanding shares of capital stock of the Company
entitled to vote thereon, voting together as a single class.
(j) By-Laws. The Company's By-laws shall have been
amended, if necessary, to provide that (i) unless otherwise
required by the laws of the State of Nevada, (A) any two
directors and (B) any holder or holders of at least 25% of the
outstanding shares of Series A Convertible Preferred Stock, shall
have the right to call a meeting of the Board of Directors or
stockholders of the Company, and (ii) the number of directors
fixed in accordance therewith shall in no event conflict with any
of the terms or provisions of the Series A Convertible Preferred
Stock as set forth in the Articles.
(k) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been fixed
at seven (7) and the following persons shall have been elected as
the directors and shall each hold such position as of the date
hereof: Xxx X. Xxxxx, III, Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxx,
Xxxxxx X. XxXxxxx, Xxxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxx
X. Xxxxx.
(l) Lenders. Purchaser's performance hereunder shall not
materially conflict with or result in a breach of any of its
obligations or agreements existing as of the date hereof with any
of its lenders.
(m) Solvency. As of the date of such performance, neither
Purchaser nor the Company shall have (i) filed a voluntary
petition in bankruptcy or been adjudged bankrupt or insolvent,
(ii) made an assignment for the benefit of creditors, (iii)
applied to or petitioned any tribunal for the appointment of a
receiver, intervenor or trustee for all or a substantial part of
its assets, or (iv) been involved in a proceeding under any
bankruptcy law or statute which was commenced and not dismissed
within 60 days.
All such documents shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to sell the Preferred Shares
hereunder is subject to (i) the Company receiving, on or before
the First Installment Date, approval of the shareholders of the
Company of the transactions contemplated hereby as required by
the Articles, Bylaws or applicable law; and (ii) the approval of
the Company's Board of Directors of the transactions contemplated
hereby on or before June 14, 1996.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchaser that
prior to the issuance of the Preferred Shares, and for as long as
any of the Preferred Shares are outstanding:
SECTION 6.01 Financial Statements, Reports, Etc. The
Company shall furnish to the Purchaser:
(a) within 105 days after the end of each fiscal year of
the Company, any and all documents that the Company is required
to file with the Securities and Exchange Commission; and
comparative statements for the prior fiscal year and the budget
for the fiscal year then ended showing comparisons on a monthly
basis;
(b) at the time of delivery of each annual financial
statement pursuant to Section 6.01(a), a certificate executed by
the President or Chief Financial Officer of the Company stating
that such officer has caused this Agreement and the Series A
Convertible Preferred Stock to be reviewed and has no knowledge
of any default by the Company (or such subsidiary, as the case
may be) in the performance or observance of any of the provisions
of this Agreement or the Series A Convertible Preferred Stock or,
if such officer has such knowledge, specifying such default and
the nature thereof;
(c) no later than sixty (60) days prior to the start of
each fiscal year, consolidated capital and operating expense
budgets, cash flow projections and income and loss projections
for the Company and each of its subsidiaries in respect of such
fiscal year, all itemized in reasonable detail and prepared on a
monthly basis, and, promptly after preparation, any revisions to
any of the foregoing;
(d) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written
report submitted to the Company or any subsidiary of the Company
by its independent public accountants in connection with an
annual or interim audit of the books of the Company or any of its
subsidiaries;
(e) promptly after the commencement thereof, notice of all
actions, suits, claims, proceedings, investigations and inquiries
of the type described in Section 2.07 that could materially
adversely affect the Company individually or any of its
subsidiaries or the Company and all of its subsidiaries taken as
a whole;
(f) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that
the Company or any subsidiary of the Company sends or makes
available to its stockholders or directors or files with the
Commission; and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition,
operations, property or affairs of the Company and its
subsidiaries as Purchaser reasonably may request.
SECTION 6.02 Right of Participation. (a) The Company shall,
prior to any proposed issuance by the Company of any of its
securities (other than debt securities with no equity feature),
offer to the Purchaser by written notice the right, for a period
of fifteen (15) days, to purchase for cash at an amount equal to
the price or other consideration for which such securities are to
be issued, a number of such securities so that, after giving
effect to such issuance (and the conversion, exercise and
exchange into or for (whether directly or indirectly) shares of
Common Stock of all such securities that are so convertible,
exercisable or exchangeable), the Purchaser will continue to
maintain its same proportionate equity ownership in the Company
represented by the Preferred Shares and the Conversion Shares
that it owns, if any, as of the date of such notice (treating the
Purchaser, for the purpose of such computation, as the holder of
the number of shares of Common Stock which would be issuable to
the Purchaser upon conversion, exercise and exchange of all
securities (including but not limited to the Preferred Shares)
held by such Purchaser on the date such offer is made, that are
convertible, exercisable or exchangeable into or for (whether
directly or indirectly) shares of Common Stock and assuming the
like conversion, exercise and exchange of all such other
securities held by other persons); provided, however, that the
participation rights of the Purchaser pursuant to this Section
6.02 shall not apply to securities issued (A) upon conversion of
any of the Preferred Shares, (B) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the
securities issued pursuant to such stock dividend or subdivision
are limited to additional shares of Common Stock, (C) pursuant to
subscriptions, warrants, options, convertible securities, or
other rights which are listed in Schedule III as being
outstanding on the date of this Agreement, (D) solely in
consideration for the acquisition (whether by merger or
otherwise) by the Company or any of its subsidiaries of all or
substantially all of the stock or assets of any other entity, (E)
pursuant to a firm commitment public offering. The Company's
written notice to the Purchaser shall describe the securities
proposed to be issued by the Company and specify the number,
price and payment terms. (The number of shares that the Purchaser
is entitled to purchase under this Section 6.02 shall be referred
to as its "Pro Rata Share." The total number of shares that the
Purchaser is entitled to purchase under this Section 6.02 shall
be referred to as "Offered Shares").
(b) The Purchaser may accept the Company's offer as to the
full number of securities offered to it or any lesser number, by
written notice thereof given by it to the Company prior to the
expiration of the aforesaid fifteen (15) day period, in which
event the Company shall sell and the Purchaser shall buy, upon
the terms specified, the number of securities agreed to be
purchased by Purchaser. The Company shall then be free at any
time prior to ninety (90) days after the date of its notice of
offer to the Purchaser, to offer and sell to any third party or
parties the remainder of such securities proposed to be issued by
the Company (including but not limited to the securities not
agreed by the Purchaser to be purchased by it), at a price and on
payment terms no less favorable to the Company than those
specified in such notice of offer to the Purchaser. However, if
such third party sale or sales are not consummated within such
ninety (90) day period, the Company shall not sell such
securities as shall not have been purchased within such period
without again complying with this Section 6.02.
SECTION 6.03 Reserve for Conversion Shares. The Company
shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, for the purpose
of effecting the conversion of the Preferred Shares and otherwise
complying with the terms of this Agreement, such number of its
duly authorized shares of Common Stock as shall be sufficient to
effect the conversion of the Preferred Shares from time to time
outstanding or otherwise to comply with the terms of this
Agreement. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such
corporate action as may be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes. The Company will obtain
any authorization, consent, approval or other action by or make
any filing with any court or administrative body that may be
required under applicable federal and state securities laws in
connection with the issuance of shares of Common Stock upon
conversion of the Preferred Shares.
SECTION 6.04 Corporate Existence. The Company shall
maintain, and except as otherwise permitted by Section 6.18 cause
each of its subsidiaries to maintain, their respective corporate
existence, rights and franchises in full force and effect.
SECTION 6.05 Properties, Business, Insurance. The Company
shall maintain and cause each of its subsidiaries to maintain as
to their respective properties and business, with financially
sound and reputable insurers, insurance against such casualties
and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall
be deemed by the Company to be sufficient.
SECTION 6.06 Inspection, Consultation and Advice. The
Company shall permit and cause each of its subsidiaries to permit
the Purchaser and such persons as it may designate, at
Purchaser's expense, to visit and inspect any of the properties
of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers,
employees and public accountants (and the Company hereby
authorizes said accountants to discuss with Purchaser and its
designees such affairs, finances and accounts), and consult with
and advise the management of the Company and its subsidiaries as
to their affairs, finances and accounts, all at reasonable times
and upon reasonable notice.
SECTION 6.07 Restrictive Agreements Prohibited. Neither
the Company nor any of its subsidiaries shall become a party to
any agreement which by its terms restricts the Company's
performance of this Agreement, the Registration Rights Agreement
or the Articles. The Company shall not become party to any
agreement which by its terms restricts the Company's right to pay
dividends on the Preferred Shares or to meet the redemption
rights of the Preferred Shares.
SECTION 6.08 Transactions with Affiliates. Except for
transactions (i) contemplated by this Agreement, or (ii) with
Purchaser or its affiliates, neither the Company nor any of its
subsidiaries shall enter into any transaction with any director,
officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, member of the family of any
such person, or any corporation, partnership, trust or other
entity in which any such person, or member of the family of any
such person, is a director, officer, trustee, partner or holder
of more than 5% of the outstanding capital stock thereof, except
for transactions on customary terms related to such person's
employment.
SECTION 6.09 Use of Proceeds. The Company shall spend an
amount equal to or greater than the proceeds from the sale of the
Preferred Shares for the development of new Good Times
restaurants on or before December 31, 1997, unless the Board of
Directors unanimously directs otherwise.
SECTION 6.10 Board of Directors Meeting. The Company shall
use its best efforts to ensure that meetings of its Board of
Directors are held at least once each quarter. The Company shall
permit Purchaser, for so long as Purchaser holds of record or
beneficially any Preferred Shares and/or Conversion Shares, or
its designee to have one representative attend each meeting of
the Board of Directors of the Company and each meeting of any
Committee thereof and to participate in all discussions during
each such meeting. The Company shall send to the Purchaser and
designee the notice of the time and place of such meeting in the
same manner and at the same time as it shall send such notice to
its directors or committee members, as the case may be. The
Company shall also provide to the Purchaser and designee copies
of all notices, reports, minutes and consents at the time and in
the manner as they are provided to the Board of Directors or
committee, except for information reasonably designated as
proprietary information by the Board of Directors.
SECTION 6.11 Compensation Committee. The Company shall
establish and maintain a Compensation Committee of the Board of
Directors, which shall consist of three (3) directors, one of
whom shall be a director elected by the holders of the Preferred
Stock voting as a separate series. The Compensation Committee
shall have as its functions the approval of any employee's
compensation over $75,000 per year and overall approval of
employee stock option grants. No compensation or other
remuneration at an annual rate in excess of $75,000 (inclusive of
salary and bonus arrangement) shall be paid to, and no capital
stock of the Company shall be issued or granted to, any director,
officer or employee of, or any consultant or adviser to, the
Company or any of its subsidiaries, without the approval of the
Compensation Committee. No employee stock option plan, employee
stock purchase plan, employee restricted stock plan or other
employee stock plan shall be established without the approval of
the Compensation Committee, other than those already in
existence. Notwithstanding the foregoing, the Company shall not,
without the unanimous consent of the Board of Directors,
(i) issue, grant or sell any stock options, warrants or other
securities convertible into Common Stock to any director, officer
or employee of, or a consultant or advisor to, the Company or any
of its subsidiaries to the extent that such issuance, grant or
sale would result in there being outstanding options and other
securities convertible into Common Stock held by directors,
officers and employees of, and consultants and advisors to, the
Company constituting in the aggregate in excess of 15% of the
outstanding capital stock of the Company (assuming for purposes
of such computation the conversion, exercise and exchange of all
securities of the Company that are convertible, exercisable or
exchangeable into or for shares of Common Stock), or (ii) modify
any terms of any options, warrants or other securities
convertible into Common Stock except that, in the case of the
Company's publicly held warrants and other convertible
securities, the Board of Directors may extend the exercise date
thereof.
SECTION 6.12 Capital Expenditures. Without the prior
approval of the Board of Directors, the Company shall not make
any capital expenditure, including expenditures for capitalized
leases, in an amount in excess of 120% of the budget for such
items approved by the Board of Directors.
SECTION 6.13 Employment. The Company shall not hire, or
commit itself to hire, any individual whose annual compensation,
in salary and benefits, is in excess of $75,000, without the
prior approval of the Board of Directors.
SECTION 6.14 Investments. The Company shall not make any
investment in, or loans or advances to, or guarantees of the
obligations of, any person or entity, except as approved by the
Board of Directors.
SECTION 6.15 Maintenance of Properties. The Company shall
maintain its properties in good condition and operating repair.
SECTION 6.16 D&O Insurance. The Company shall, if required
by the stockholders holding two-thirds of the Preferred Shares
and if not prohibitively expensive as determined in good faith of
the Board of Directors, purchase and maintain adequate liability
insurance coverage for the directors of the Company.
SECTION 6.17 By-laws. The Company shall at all times cause
its By-laws to provide that, (a) unless otherwise required by the
laws of the State of Nevada, (i) any two directors or (ii) any
holder or holders of at least 25% of the outstanding shares of
Series A Convertible Preferred Stock, shall have the right to
call a meeting of the Board of Directors or stockholders, and (b)
the number of directors fixed in accordance therewith shall in no
event conflict with any of the terms or provisions of the Series
A Convertible Preferred Stock as set forth in the Articles. The
Company shall at all times maintain provisions in its By-laws
and/or Articles indemnifying all directors against liability and
absolving all directors from liability to the Company and its
stockholders to the maximum extent permitted under the laws of
the State of Nevada.
SECTION 6.18 Activities of Subsidiaries. The Company shall
not, without the affirmative vote by holders of two-thirds of the
Preferred Shares, permit any subsidiary to consolidate or merge
into or with or sell or transfer all or substantially all its
assets, except that any subsidiary may (i) consolidate or merge
into or with or sell or transfer assets to any other subsidiary,
or (ii) merge into or sell or transfer assets to the Company.
The Company shall not sell or otherwise transfer any shares of
capital stock of any subsidiary, except to the Company or another
subsidiary, or permit any subsidiary to issue, sell or otherwise
transfer any shares of its capital stock or the capital stock of
any subsidiary, except to the Company or another subsidiary. The
Company shall not permit any subsidiary to purchase or set aside
any sums for the purchase of, or pay any dividend or make any
distribution on, any shares of its stock, except for dividends or
other distributions payable to the Company or another subsidiary.
SECTION 6.19 Compliance with Laws. The Company shall
comply, and cause each subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which
could materially adversely affect its business or condition,
financial or otherwise.
SECTION 6.20 Keeping of Records and Books of Account. The
Company shall keep, and cause each subsidiary to keep, adequate
records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of
the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes
in connection with its business shall be made.
SECTION 6.21 Change in Nature of Business. The Company
shall not, and shall not permit any subsidiary to, engage in any
business other than the restaurant business without the unanimous
approval of the Board of Directors.
ARTICLE VII
BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 7.01 Redemption. In the event the Company
materially breaches any of its representations, warranties or
covenants contained herein and the Company (i) fails to remedy
such breach within 14 days after receiving notice of such breach
or (ii) if such breach cannot reasonably be cured within 14 days,
and the Company commences to remedy such breach within 14 days of
notice continuously and diligently proceeds to remedy such
breach, fails to remedy such breach within 30 days after
receiving notice thereof, the Company shall, at the election of
Purchaser, redeem some or all of the Preferred Shares held by
Purchaser for a price equal to the Redemption Price for each
share so redeemed. The Company shall redeem such shares within
30 days after its receipt of Purchaser's notice stating the
number of Preferred Shares that Purchaser desires to have
redeemed pursuant to this Section 7.01.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Agreements. All covenants,
agreements, representations and warranties made herein or in the
Registration Rights Agreement or any certificate or instrument
delivered to the Purchaser pursuant to or in connection with this
Agreement or the Registration Rights Agreement shall survive the
execution and delivery of this Agreement and the Registration
Rights Agreement, the issuance, sale and delivery of the
Preferred Shares, and the issuance and delivery of the Conversion
Shares, and all statements contained in any certificate or other
instrument delivered by the Company hereunder or thereunder or in
connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company.
SECTION 8.02 Brokerage. Each party hereto will indemnify
and hold harmless the other against and in respect of any claim
for brokerage or other commissions relative to this Agreement or
to the transactions contemplated hereby, based in any way on
agreements, arrangements or understandings made or claimed to
have been made by such party with any third party (including,
without limitation, amounts paid to any shareholder, officer,
director or affiliate of such party).
SECTION 8.03 Parties in Interest. All representations,
covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and
agreements benefiting Purchaser shall inure to the benefit of any
and all subsequent holders from time to time of Preferred Shares
or Conversion Shares.
SECTION 8.04 Assignment. (a) Purchaser may not assign this
Agreement or any of its rights and obligations hereunder
(including the Preferred Shares) to any person, business or
entity without the prior written approval of the Company which
approval shall not be unreasonably withheld; provided, however,
Purchaser may assign this Agreement, any and all of its rights
and obligations hereunder and the Preferred Shares (i) to any
person, business or entity that is affiliated with Purchaser or
The Erie County Investment Co. and (ii) to any member of the
Control Group (as defined below) if the Control Group in the
aggregate is affiliated with Purchaser. For purposes of this
agreement, (i) an "affiliate" of, or a person "affiliated" with,
a specified person, is a person that directly, or indirectly,
controls, is controlled by or is under common control with, the
person specified; (ii) the term "control" (including the terms
"controlling", "controlled by" and "under common control with")
means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a
person, whether through the ownership (beneficial or otherwise)
of voting securities, by contract or otherwise; and (iii)
"Control Group" shall mean Xxxx X. Xxxxxx, his spouse, children
and grandchildren. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written
consent of Purchaser.
(b) Purchaser shall not offer or agree to sell or
otherwise transfer any or all of its Preferred Shares to a third
party (other than any person, business or entity affiliated with
Purchaser, or to any officer, director, shareholder or partner of
Purchaser or The Erie County Investment Co.), without first
offering (the "Offer") to sell such Preferred Shares to the
Company or its designee by delivering written notice thereof to
the Company which notice shall include the price, terms and
conditions of the Offer. The Company shall have fourteen days
after its receipt thereof (the "Offer Period") to accept the
Offer by delivering written notice of its acceptance thereof to
Purchaser. If the Company fails to deliver its acceptance within
the Offer Period, Purchaser shall be free (subject to the terms
of Section 8.04(a) above) to sell or otherwise transfer such
Preferred Shares to a third party for a period of 90 days after
the end of the Offer Period at a price and on terms and
conditions no less favorable to the Purchaser than those offered
to the Company.
SECTION 8.05 Notices. All notices, requests, consents and
other communications hereunder shall be in writing and shall be
delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex,
addressed as follows:
(a) if to the Company: Good Times Restaurants Inc.
0000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, President
(b) if to the Purchaser: The Erie County Investment Co.
000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, President
SECTION 8.06 Entire Agreement. This Agreement, including
the Schedules and Exhibits hereto, constitutes the sole and
entire agreement of the parties with respect to the subject
matter hereof. All Schedules and Exhibits hereto are hereby
incorporated herein by reference.
SECTION 8.07 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
SECTION 8.08 Amendments. This Agreement may not be amended
or modified, and no provisions hereof may be waived, without the
written consent of the Company and the holders of at least two-thirds of the
outstanding shares of Common Stock issued or issuable upon conversion of the
Preferred Shares.
SECTION 8.09 Severability. If any provision of this
Agreement shall be declared void or unenforceable by any judicial
or administrative authority, the validity of any other provision
and of the entire Agreement shall not be affected thereby.
SECTION 8.10 Titles and Subtitles. The titles and
subtitles used in this Agreement are for convenience only and are
not to be considered in construing or interpreting any term or
provision of this Agreement.
SECTION 8.11 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Colorado.
IN WITNESS WHEREOF, the Company and the Purchaser have
executed this Series A Convertible Preferred Stock Purchase
Agreement as of the day and year first above written.
GOOD TIMES RESTAURANTS, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: President
PURCHASER:
THE XXXXXX COMPANY,
a Colorado limited partnership
By: The Erie County Investment Co.,
as General Partner
By: /s/ Xxxxx X. Xxxxxx, President
Xxxxx X. Xxxxxx, President
SCHEDULE I
Disclosure Schedule
SCHEDULE II
Other Interests
SCHEDULE III
Security Holders
