United Capital

Busines Lending

A BankUnited Company

DEVELOPMENT LINE LOAN AND SECURITY

 

 AGREEMENT

THIS DEVELOPMENT LINE LOAN and SECURITY AGREEMENT (the “ Development Line Agreement ” ) is made effective the 30 day of June, 2014, by and between GOOD TIMES DRIVE THRU INC., a corporation formed under the laws of the State of Colorado (collectively, the “ Borrower ” ) and UNITED CAPITAL BUSINESS LENDING, INC. (the “ Lender ” ).

Recitals

WHEREAS, the Lender has agreed to advance up to Two Million One Hundred Thousand and 00/100 Dollars, ($2,100,000.00), to the Borrower and entities designated by the Borrower and approved by the Lender to finance the purchase of a Point of Sales System ( “ POS System ” ) in an amount up to Seven Hundred Fifty Thousand and 00/100 Dollars, ($750,000.00), and to finance the development of three (3) new Good Times Burgers and Frozen Custard Restaurant locations (the “ Good Times Restaurants ” ) in an amount up to One Million Three Hundred Twenty Thousand and 00/100 Dollars ($1,350,000.00), pursuant to the terms and conditions of this Development Line Agreement; and

WHEREAS, in connection with such financing, the Borrower and GOOD TIMES RESTAURANTS INC., the sole shareholder and Guarantor of the Borrower ’ s obligations pursuant to a Guaranty Agreement executed in connection herewith (collectively referred to as the “ Guarantor ” ), have concurrently herewith entered into, or may from time to time hereafter enter into, a Promissory Note or Notes in the maximum aggregate amount of up to $750,000 to finance the cost of the POS System (collectively, the “ POS Note ” ) and one or more promissory notes in connection with the development of Good Times Restaurants (the “ Development Line Notes ” ) executed in connection herewith (the POS Note and the Development Line Notes are collectively referred to herein as the “ Notes ” ), a Collateral Assignment of Franchise Agreements Partnership Interests Agreement and Collateral Assignment of Management Agreement signed by the Guarantor (collectively, “ Collateral Assignment Agreement ” ), loan agreements and other security agreements, pledge agreements, guaranty agreements, hypothecation agreements, subordination agreements, indemnity agreements, assignments or other agreements in connection therewith and the Guarantor had guaranteed the Borrower ’ s obligations pursuant to Guaranty Agreement executed in connection herewith (the “ Guaranty; the Collateral Assignment Agreement executed by the Guarantor each of executed herewith and this Development Line Agreement, Guaranty, the Note, as hereinafter defined, together with any of the foregoing entered into, are referred to as the "Loan Documents"); and

WHEREAS, the Lender is willing to provide the financing contemplated by the Loan Documents upon the terms and conditions set forth below and with the understanding that the Borrower ’ s obligations to the Lender under the Loan Documents, now existing or hereafter arising, be subject to the following terms and further that they be secured as set forth below.

NOW, THEREFORE, as an inducement to the Lender to provide such financing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower agrees as follows:

1.

DEVELOPMENT LINE LOANS  

1.1

In addition to the sums funded under the POS Note , the Lender agrees to fund to Borrower, upon the submission of the Borrower to the Lender of a one or more loan disbursement requests a maximum aggregate principal amount One Million, Three Hundred Fifty Thousand and 00/100 Dollars ($1,350,000.00) (the “ Development Line Amount ” ) for a maximum total loan amount of Two Million One Hundred Thousand Dollars ($2,100,000.00) for the development of three new Good Times Burger & Frozen Custard restaurants (a “ Good Times Facility ” ) by the Borrower.  On or before July 1, 2015 (the “ Draw Down Date ” ), the Borrower may request a disbursement in the amount necessary to develop an individual Good Times Facility and shall execute a Promissory Note in the full amount of each disbursement request which shall incur interest at a rate of 6.69% and be repayable over 84 months and which shall include such other terms and conditions and as are set forth in the Loan Documents, including the Notes, which shall be in a form consistent with the Promissory Note attached hereto as Schedule 1.1, subject to the following terms and conditions:

(a)

There shall be no Event of Default under the Loan Documents, including without limitation, a failure by Borrower to pay interest when due or any other fees due under any obligation of the Borrower to the Lender;

(b)

The Borrower will provide Lender with a sources and uses for construction and equipping of the new Good Times Facility in form and substance satisfactory to the Lender. Interest will begin accruing on the entire amount due and owing under each Note executed by the Borrower (the “ Individual Note Amount ” ) when the first loan disbursement request for that note is funded by the Lender. Notwithstanding that interest will accrue on the Development Line Note Amount beginning with the funding of the first loan disbursement under that note, the Borrower agrees and understands that if the funds are being used to develop a new Good Times Facility Lender will not disburse to the Borrower more than One Hundred Percent  (100%) of the total costs for development set forth on the sources and uses approved by the Lender and actually expended or due and owing by the Borrower for improvements completed or equipment purchased and installed at the time any single disbursement is made in connection with the development of a Good Times Facility.   

(c)

The Borrower shall make all requests for disbursement of loan funds under this Development Line Agreement by or before the Draw Down Date.

(d)

The Borrower and the Guarantor shall certify to the Lender that each representations and warranties made by the Borrower and the Guarantor in the Loan Documents continue to be true and correct and that they are in compliance with all covenants under the Loan Documents.

(e)

Borrower shall have provided to the Lender, in a form and substance approved by the Lender, evidence of insurance for the new facility.

(f)

Borrower shall have provided the Lender with a copy of any lease agreement for the location at which the new facility is located and used its best efforts to obtain a landlord waiver both in form and substance satisfactory to the Lender.  

 

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(g)

Borrower shall have provided Lender with evidence that the Borrower and the new facility have all necessary licenses and approvals and are authorized to operate as a Good Times Facility.

2.

COLLATERAL

2.1.

Collateral . As security for the prompt payment and performance by the Borrower of its indebtedness, liabilities and other obligations to Lender of every kind and nature, including, but not limited to, indebtedness, liabilities and other obligations under the Loan Documents, whether now existing or hereafter created, whether direct, indirect, contingent, primary, secondary, alone, joint with any other person, due, to become due, advanced in the future, now existing, hereafter created, principal, interest, expense payments, enforcement and liquidation costs, and/or attorneys ’ fees and expenses (collectively, the “ Obligations ” ), the Borrower hereby grants to Lender and agrees that Lender shall have a perfected, continuing first priority security interest in all of the following property and assets of the Borrower, wherever situated (any part or all of the following, the “ Collateral ” ), together with all present and future attachments, accessories, substitutions and replacements as well as all proceeds (cash and noncash), rents, profits and products of the following, including, without limitation, insurance proceeds and condemnation awards and products thereof.

The Collateral shall consist of all of the Borrower ’ s personal property and fixtures, wherever located, including, but not limited to the locations listed on Schedule 2.1(a) , and now owned or hereafter acquired, including: partnership interests, including, but not limited to its interest in Fast Restaurants Co-Development Limited Partnership ( “ Fast Restaurants ” ) and all distributions and proceeds relating to such partnership interest, accounts, chattel paper, inventory, equipment, instruments (including promissory notes), investment property, documents, deposit accounts, letter-of-credit rights, general intangibles (including payment intangibles), supporting obligations, all of the Borrowers ’ rights to receive any servicing, profit sharing or royalty fees under any Franchise Agreements, and any associated documents relating to the Borrower ’ s granting a franchise for the development or operation of a Good Times Burgers & Frozen Custard Restaurant, all of Borrower ’ s intellectual property, including, but not limited to all patents, patent applications, patent disclosures and inventions; trademarks, service marks, trade dress, logos, trade names, corporate names and Internet domain names; copyrights and copyrightable works; information systems, databases and software; websites and web addresses; licenses, registrations, applications and renewals for any of the foregoing; trade secrets (as defined by applicable Law) and all derivations, modifications and enhancements to any of the foregoing , and, without limiting the foregoing, each of the trademarks, service marks set forth on Schedule 2.1(b) any fees or royalties due in connection with any licensing agreements granting franchisees the right to use such trademarks and service marks, and, to the extent not listed above as original collateral, proceeds and products of the foregoing.

2.2.

Rights of Secured Party; Disposition.  The Borrower agrees that Lender shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of the State(s) in which the Collateral is located as well as those provided in this Development Line Agreement. The Borrower covenants and agrees to promptly execute and deliver and authorizes the Lender to execute and file all financing statements, continuation statements and amendments to financing statements and other instruments and documents reasonably requested by Lender to perfect and maintain as perfected the security interest granted in this Development Line Agreement, and the Borrower shall pay all costs and expenses Lender incurs in the preparation, execution, recording and filing of any such instrument or document. Borrower may not sell, lease, transfer or otherwise dispose of, and will not permit any lien, security interest or other encumbrance to attach to, the Collateral, other than those in favor of Lender or permitted by Lender in writing, except that Borrower may, in the ordinary course of the Borrower ’ s business, and in the absence of an Event of Default hereunder, collect its accounts, instruments and chattel paper and sell its inventory.

 

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2.3.

Title. The Borrower represents and warrants that it is the owner of the Collateral and has good and marketable title to the Collateral, free and clear of all liens, security interests and other encumbrances except for those in favor of Lender and previously disclosed to Lender in writing.  At its sole expense, the Borrower agrees to defend its title to the Collateral and Lender security interest therein against all persons and against all security interests adverse to Lender.

 

 

This Development Line Agreement is subject to the further terms and conditions set forth on the following pages, and the Borrower acknowledges that it has read this Development Line Agreement, including the terms and conditions set forth on the following pages, and has received a copy.

2.4.

Place(s) of Business and Location of Collateral . The Borrower represents and warrants that the address of Borrower and Borrower ’ s state of organization are set forth on the attached Schedule 2.4, attached hereto and incorporated by reference herein.  Except for mobile equipment and motor vehicles, if any, included in the Collateral, the Collateral and all books and records included in or relating to the Collateral are and will be located at Borrower ’ s place of business as reflected on Schedule 2.4 or at such other address also specified on the attached Schedule 2.4 . Borrower will immediately advise Lender in writing of any changes to its state of organization, new place of business or the closing of any of Borrower ’ s existing places of business and, by 10 days ’ prior written notice to Lender, of any change in the location of the Collateral, or any part thereof, or the books and records included in or relating to the Collateral.

2.5.

Personal Property , Borrower represents and warrants that all equipment and other goods which constitute part of the Collateral are personal property and are not and will not be affixed to real estate in such a manner as to become a fixture or part of such real estate, nor will such equipment or other goods be attached to or incorporated into any other personal property that is not owned by Borrower and part of the Collateral.  At Lender ’ s request and subject to the existing liens disclosed to the Lender and listed on Scheduled 2.5 attached hereto (the “ Permitted Liens ” ) , Borrower agrees to furnish a written waiver by the record owner, landlord, lessor, mortgagee, secured party or other lien or interest holder of or against such real estate or personal property, thereby waiving all right, title or interest in and to any affected Collateral, and acknowledging Lender ’ s security interest in and rights and remedies pertaining to such Collateral including the right to remove any Collateral from such real estate or personal property, all at Borrower ’ s sole cost and risk, without any liability to Lender arising from such removal.

3.

REPRESENTATIONS OF BORROWER . To induce Lender to accept this Development Line Agreement for the purposes for which it is given, Borrower represents and warrants to Lender as follows:

3.1

Financial Information. Any financial statement submitted by Borrower to Lender, including any schedules and notes pertaining thereto, is true and complete and fully and fairly presents the financial condition of Borrower at the date thereof and there have been no material adverse changes in the financial condition of Borrower from the date thereof to the date hereof, not disclosed to Lender.

 

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3.2

No Conflicting Agreements. Borrower is not in default under or in violation of any agreement, contract, instrument, order, judgment, decree, statute, law, rule, or regulation to which it is subject or by which it is bound, and the execution and delivery of, and the performance of the obligations under, this Development Line Agreement will not immediately or with the passage of time, the giving of notice, or both, result in the creation or imposition of any security interest in, or lien or encumbrance upon, any of the assets of Borrower except in favor of Lender.

3.3

Binding Agreement; Consideration; Review of Loan Documents. This Development Line Agreement and each of the other Loan Documents to which Borrower is a party have been duly executed and delivered by Borrower, constitute the valid and legally binding obligation of Borrower, and are fully enforceable against Borrower in accordance with their terms subject only to laws affecting the rights of creditors generally and application of general principles of equity. Borrower will obtain substantial direct and indirect benefits arising from its execution and delivery of this Development Line Agreement. Borrower has examined or has had an opportunity to examine each of the Loan Documents prior to the date hereof.

3.4

Litigation. Except as disclosed on Schedule 3.4 , there are no judgments, injunctions or similar orders or decrees outstanding against Borrower and there are no claims, actions, suits or proceedings pending or, to Borrower ’ s knowledge and belief, threatened against Borrower, or any of Borrower ’ s property, at law or in equity, by or before any court or governmental authority which if determined adversely to Borrower would result in any material adverse change in the financial condition, assets or business prospects of Borrower.

3.5

Taxes. Borrower has filed or obtained lawful extensions of all Federal, State, local and foreign tax returns which are required to be filed by Borrower, and Borrower has paid all Federal, State, local and foreign taxes shown to be due on such tax returns or which have been assessed against Borrower.

3.6

Insolvency. Borrower is not, and has not been, the subject of any bankruptcy, reorganization, insolvency, readjustment of debt, trusteeship, receivership, dissolution or liquidation proceeding.

Borrower ’ s warranties and representations herein are true, correct, complete and not misleading in any material respect and Borrower agrees to indemnify Lender from any loss, cost or expense as a result of any representation or statement of Borrower, or any agent of Borrower, being false, incorrect, incomplete or misleading in any material respect.

4.

COVENANTS OF BORROWER

4.1.

Affirmative Covenants of the Borrower .  So long as any of the Obligations (or commitments therefor) are outstanding, Borrower shall:

(a)

Existence . Continue to conduct its businesses and, if applicable, maintain its good standing in each jurisdiction where the Borrower is organized and required to register or qualify to do business.  Borrower further agrees to provide thirty (30) days prior written notice to Lender of any change in the jurisdiction of its organization.

 

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(b)

Payment and Performance .  Pay its Obligations when due and perform, comply with and observe the terms and conditions of all Loan Documents in which it is a party.

(c)

Taxes .  Pay when due all taxes, assessments and governmental charges and levies (including, without limitation, FICA payments and withholding taxes) upon it or upon its income, profits or property (including, without limitation, the Collateral).

(d)

lnsurance  

(i)   Coverage .  At its own expense, Borrower shall obtain and maintain in force insurance policies naming Lender as sole loss payee and as additional insured, covering losses or damage to the Collateral due to fire (with extended coverage), theft, physical damage and such other risks as Lender may from time to time reasonably require, as detailed in the Insurance Binder Request, which insurance shall insure the Collateral for its full replacement cost.  All insurance for loss or damage to Collateral shall provide that losses, if any, shall be payable to Lender.  The proceeds of such insurance payable as a result of loss of or damage to the Collateral shall be applied, at Lender's option, (a) toward the replacement, restoration or repair of the Equipment which may be lost, stolen, destroyed or damaged, or (b) toward payment of the balance outstanding under the Loan Documents.  In addition, Borrower shall also carry public liability insurance, both personal injury and property damage.  All insurance required hereunder shall be in form and amount and with companies satisfactory to Lender.   Borrower shall pay or cause to be paid the premiums therefor and deliver to Lender evidence satisfactory to Lender of such insurance coverage.   Borrower shall cause to be provided to Lender, not less than fifteen (15) days prior to the scheduled expiration or lapse of such insurance coverage, evidence satisfactory to Lender of renewal or replacement coverage.

(ii) Endorsements .  Each insurer shall agree, by endorsement upon the policy or policies issued by it, or by independent instrument furnished to Lender, that (a) it will give Lender thirty (30) days' prior written notice of the effective date of any material alteration or cancellation of such policy; (b) insurance as to the interest of any named loss payee other than Borrower shall not be invalidated by any actions, inactions, breach of warranty or conditions or negligence of Borrower with respect to such policy or policies; and (c) it will waive any right of subrogation against Lender.

(e)

Maintenance of Collateral . Do all things necessary to maintain, preserve, protect and keep the Collateral in good condition and make all necessary and proper repairs, renewals and replacements thereto needed to maintain the Collateral in good condition and not permit anything to be done to the Collateral which may impair the value thereof.  Lender, or an agent designated by Lender, shall be permitted to enter Borrower ’ s premises and examine, audit and inspect the Collateral and the books and records relating thereto at any reasonable time and from time to time without notice. Lender shall have no duty to, and Borrower hereby releases Lender from all claims for loss or damage caused by Lender ’ s delay or failure to collect, protect, preserve or enforce any of the Collateral or preserve rights against debtors or prior parties to the Collateral.

(f)

Business Name. Immediately notify Lender of any change in the name under which Borrower conducts its business.

 

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(g)

Financial Statements and Other Reports.  Maintain at all times a system of accounting, including, without limitation, books and records of the Collateral, established and administered in accordance with such business practices, and deliver, or cause to be delivered, to Lender (no more than one hundred twenty (120) days after the end of Borrower ’ s fiscal year, its annual accountant prepared consolidated and store level consolidating audited financial statements for the Borrower and Guarantor as of the end of such year and the related statements of income, retained earnings and cash flows for such year in form and content satisfactory to Lender; and (ii) annual accountant prepared Corporate Federal Tax Returns for Borrower within thirty (30) days of their submission to the Internal Revenue Service. Each submission of financial statements shall include a Covenant Compliance Certificate in the form attached hereto as Schedule 4.1(g) which has been completed by the Borrower to include the Borrower ’ s most recent financial reporting (the “ Compliance Certificate ” ).

(h)

Compliance with Laws. Comply with all laws, rules, regulations and decrees to which Borrower may be subject and the violation of which may have a material adverse effect on the Borrower ’ s business, operations, properties or financial condition.

(i)

Notice of Defaults and Material Adverse Changes . Promptly give written notice to Lender of (a) the occurrence of any Event of Default under any of the Loan Documents; (b) any event, development or circumstance which might materially adversely affect Borrower ’ s business, operations, properties or financial condition, including but not limited to a change in any material term or default under any lease, licensing  agreement, development agreement,  franchise agreement, management agreement or employment agreement (collectively, a “ Material Agreement ” ) to which the Borrower is a party; (c) the departure, demotion, termination or replacement of any of the corporate officers of the Borrower or members of its Management Team which shall include the Chief Executive Officer, Chief Financial Officer, Vice President of Operations and Controller (the “ Management Team ” ) or the designation of any new individuals as corporate officers or members of the Management Team (d) the threat or actual commencement of a criminal proceeding or investigation into the activities of the Borrower; (e) its receipt of a notification from a federal or state regulator that a Borrower has violated or is being investigated for violating any applicable federal or state law governing its operations;  or (f) notice of the commencement of any action, suit or proceeding at law or in equity by or before any court, governmental agency or instrumentality which could result in any material adverse change in the business, operations, prospects, properties or assets or in the condition, financial or otherwise, of the Borrower.

(j)

Debt Service Coverage Ratio Covenant : Maintain, on the basis of Borrower ’ s consolidated financial statements and operating results (prepared in accordance with generally accepted accounting procedures) calculated as of the then most current Fiscal Year End for the then 12 month or four quarter period ( “ Period ” ), a minimum Debt Service Coverage Ratio before distributions of 1.40:1.00 and a minimum Debt Service Coverage Ratio after distributions of 1.10:1.00 tested annually, which “ Debt Service Coverage Ratio ” is defined as the ratio of (X) earnings before interest, taxes, depreciation and amortization for the Period to (Y) the sum of: i) the principal amount of all contractual debt payments owed to all lenders (excluding payables incurred in the ordinary course of business, but including debt due to shareholders or other related parties), maturing in the twelve (12) calendar months immediately succeeding the Period; plus, ii) total interest expense for the Period, iii) the projected sum of the first 12 monthly payments of principal and interest that would be due under any additional debt to be incurred by Borrowers which would result from the funding of any approved credit facility.  This calculation will be performed by the Borrower in each Compliance Certificate submitted with annual financial reporting under Section 4.1(g) and shall be verified by the Lender.  The Lender shall also test for covenant compliance upon receipt of each request for new store development funding from the Borrower, upon the occurrence of an Event of Default or if the  Lender believes, in its sole discretion, that there has been a material adverse change in the Borrower ’ s financial condition.   

 

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(k)   Leverage Ratio Covenant:   Maintain, on a consolidated basis, a Leverage Ratio not to exceed 2.45:1.00 for each calendar quarter beginning on July 1, 2014 and continuing thereafter until all of the Obligations are paid in full.  As used herein, Leverage Ratio shall be defined as the ratio of Total Funded Debt held by the Borrowers on an aggregated basis divided by aggregated Earnings before Interest, Taxes, Depreciation, and Amortization as determined under GAAP. This calculation will be performed by the Borrower in each Compliance Certificate submitted with the annual financial reporting under Section 4.1(g) and shall be verified by the Lender.  The Lender shall also test for covenant compliance upon receipt of each request for new store development funding from the Borrower, upon the occurrence of an Event of Default or if the Lender believes, in its sole discretion, that there has been a material adverse change in the Borrower ’ s financial condition.

(l)   Quick Ratio Covenant :

Maintain, on the basis of Borrower ’ s consolidated financial statements and operating results (prepared in accordance with generally accepted accounting procedures) calculated as of the then most current Fiscal Year End, a Quick Ratio greater than .75:1.0.   As used herein , the Quick Ratio shall be defined as the ratio of the sum of the Borrower's Cash plus Inventory divided by the sum of all of the Borrower's currently due and owing liabilities all as defined by GAAP, and including 30 Days of principal and interest payments due on all Debt and capitalized leases. The Lender shall test for compliance with the Quick Ratio Covenant on an annual basis or upon the occurrence of an Event of Default or if the Lender believes, in its sole discretion that there has been a material adverse change in the Borrower ’ s financial condition.

             (m)   Franchise Disclosure Document : Borrower shall provide the Lender with a copy of any Franchise Disclosure Document, or amendment thereto, filed by a Borrower with any federal or state agency contemporaneously with their filing of the document or amendment thereto with a state or federal agency.  

(n)

Composition of Management Team.  Borrower shall provide the Lender with thirty (30) days prior written notice of the departure, termination or replacement of any officers of the Borrower or members of the Management Team..

4.2.

Negative Covenants. Borrower covenants and agrees with Lender that, until all Borrower ’ s Obligations have been paid and otherwise satisfied in full, Borrower will not, directly or indirectly, without Lender ’ s prior written consent:

(a)   Merger. Enter into or be a party to any merger, consolidation, reorganization or exchange of stock or assets.

(b)   Transfer or Encumbrance of Property.  Sell, assign, transfer, encumber, lien or convey any of its assets, other than in the normal course of business.

 

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 (c)   Change in Ownership. Permit the Guarantor to sell, convey, transfer, assign, pledge, or permit the sale, conveyance or encumbrance of any of its stock in the Borrower.  

(d)   Indebtedness . So long as any of the Obligations (or commitments therefore) are outstanding, Borrower may not, without Lender ’ s prior written consent make capital expenditures which exceed in the aggregate One Hundred and Fifty Thousand Dollars($150,000.00) in any fiscal year or, in the aggregate, incur or assume any additional indebtedness, directly or indirectly, contingent, primary, secondary, alone or jointly with another person in excess of One Hundred and Fifty Thousand Dollars ($150,000.00), except any indebtedness due or to become due to the Guarantor, provided such indebtedness does not cause the Borrower to violate the financial covenants set forth in Section 4.2, the Borrower or unsecured trade accounts payable incurred in the ordinary course of business

                (e)   Change in Material Agreement .  Materially modify, alter or amend any term or condition of any Material Agreement.

5.

EVENTS OF DEFAULT

The occurrence of one or more of the following events shall constitute an “ Event of Default ” or default under this Development Line Agreement

5.1.

Failure to Pay and/or Perform Under the Loan Documents . Any payment of the Obligations is not made when due or the Obligations, including, without limitation, any condition, covenant or agreement set forth in this Development Line Agreement, are not otherwise observed or performed. Notwithstanding the foregoing, if the Lender is not able to debit the a regularly scheduled monthly payment due under the Notes from the account designated by the Borrower in the Direct Draft Agreement of even date herewith and the Borrower does not have actual notice of the nonpayment, the Lender shall notify the Borrower and the Borrower shall have 2 business days to make any payments then due and owing under the Notes.

5.2.

Breach of Representations and Warranties . Any representation or warranty made herein or in any report, certificate, financial statement or other instrument or document furnished in connection with any of the Obligations or under the Loan Documents is false or misleading in any material respect.

5.3.

Default Documents.  An Event of Default or default occurs under any of the Loan Documents, including the breach of any of the affirmative or negative covenants contained in Section 4 hereof, or any other Material Agreements and such default is not cured within any applicable grace period.

5.4.

Default on Other Obligations. The occurrence of any default with respect to any indebtedness of Borrower to any person, including but not limited to Lender, which continues beyond any applicable grace or notice period and a determination by Lender, in its reasonable discretion, that the same does reflect that a material adverse change has occurred in the financial condition of the Borrower or will have a material adverse effect on the prospect for Lender to fully and punctually realize the full benefits conferred on Lender by this Development Line Agreement.

 

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5.5.

Receivership; Bankruptcy .  Borrower or Guarantor (a) applies for or consents to the appointment of a receiver, trustee or liquidator of itself or any of its property, (b) admits in writing its inability to pay its debts as they mature, (c) makes a general assignment for the benefit of creditors, (d) is adjudicated bankrupt or insolvent, (e) files a voluntary petition in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors, or take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or file an answer admitting the material allegations of a petition filed against Borrower in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (f) by any act indicate the Borrower ’ s consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of Borrower ’ s property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days.

5.6.

Execution; Attachment . Any execution or attachment is levied against the Collateral, or any part thereof, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same has been levied.

5.7.

Sale of Assets .  Borrower is a party to any sale of assets not in the ordinary course of business without Lender ’ s prior written consent.

5.8.

Judgments . Any judgments are issued against Borrower or any of its property in excess of $100,000.00.

       5.9    Civil and Criminal Proceedings. The actual commencement of a criminal proceeding or investigation or the commencement of  any action, suit or proceeding at law or in equity by or before any court, governmental agency or instrumentality which could result in a material adverse change in the business, operations, prospects, properties or assets or in the condition, financial or otherwise, of Borrower.

 

     5.10   Extraordinary Loss. The occurrence of any event causing extraordinary loss or depreciation of the value of Borrower ’ s assets (whether or not insured) and the facts with respect thereto which could result in any material adverse change in the business, operations, prospects, properties or assets or in the condition, financial or otherwise, of Borrower.

6.

RIGHTS AND REMEDIES UNDER DEFAULT

Upon the occurrence and during the continuation of a Event of Default, Lender may declare the Obligations to be immediately due and payable, without presentment, demand, protest, or any notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Loan Documents to the contrary notwithstanding.

In addition to all other rights and remedies provided under the Loan Documents or as exist at law or in equity from time to time, Lender may, without notice to or demand upon the Borrower:

6.1

Request any debtor obligated on any account, instrument or chattel paper included in the Collateral to make payments thereon directly to Lender, with Lender ’ s taking control of the cash and noncash proceeds thereof;

 

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6.2

Compromise, extend or renew any of the Collateral or deal with the same as Lender may deem advisable;

6.3

Make exchanges, substitutions or surrenders of all or any part of the Collateral;

6.4

Enter upon and remove from Borrower ’ s place of business all books and records relating to or evidencing any of the Collateral or, without cost or expense to Lender, make such use of Borrower ’ s place(s) of business as may be reasonably necessary to administer, control and collect the Collateral, although Lender will make the same available to the Borrower for examination and copying at reasonable times;

6.5

Repair, alter or supply goods, if necessary, to fulfill in whole or in part the purchase order of any debtor;

6.6

Institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral;

6.7

Endorse Borrower ’ s name upon any items of payment relating to the Collateral or on any proof of claim in bankruptcy against a debtor; and

6.8

Without notice to or demand upon Borrower and without waiving or releasing any of Borrower ’ s Obligations or any default, make such payment or perform such act which is the subject of such default for Borrower ’ s account and at Borrower ’ s expense (the "Expense Payments ” ') and enter upon Borrower ’ s premises for that purpose and take all such action thereon as Lender may consider necessary or appropriate for such purpose, provided that under no circumstances shall Lender have any obligation to make any Expense Payments. All sums so paid or advanced by Lender and all third party costs and expenses (including, without limitation, reasonable attorneys ’ fees and expenses) incurred in connection therewith, together with interest thereon from the date of payment at the rate of interest specified in the Loan Documents for overdue payments, shall constitute and become a part of the Obligations.

6.9   Upon the occurrence and during the continuation of an Event of Default, in addition to all of Lender ’ s rights and remedies under this Development Line Agreement, Lender shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of the State(s) in which the Collateral is located and under other applicable laws and Lender is authorized to direct that any payments made in connection with the Collateral be directed to the Lender, and further to offset and apply to all or any part of the Obligations and Lender is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other properly of any nature whatsoever of mine now or at any time hereafter in Lender ’ s possession, in transit to or from Lender or otherwise under Lender ’ s control or custody. Upon demand by Lender, Borrower shall assemble the Collateral and make it available to Lender at a place designated by Lender. Lender or Lender ’ s agents may enter upon Borrower ’ s premises to take possession of the collateral, to remove it, to render it unusable, or to sell or otherwise dispose of it.

Any written notice of the sale, disposition or other intended action by Lender with respect to the Collateral which is sent by regular mail, postage prepaid, to the Borrower at the address set forth herein, or such other address as the Borrower may from time to time designate in writing, at least ten (10) days prior to such sale, disposition or other action, shall constitute reasonable notice to the Borrower. Borrower shall pay on demand all reasonable third party costs and expenses, including, without limitation, reasonable attorneys ’ fees and expenses, incurred by Lender or on Lender ’ s behalf in the enforcement of this Development Line Agreement and the other Loan Documents, the creation, perfection, maintenance, preservation, defense or protection of Lender ’ s security interest in the Collateral, the management, collection and other preparation of the Collateral for sale or other disposition, the sale or other disposition of the Collateral and any other exercise by Lender of Lender ’ s rights and remedies. All such costs and expenses (the “ Enforcement Costs ” ), together with interest thereon from the date incurred at the rate of interest specified in the Loan Documents for overdue payments, shall be paid by the Borrower to Lender on demand and shall constitute and become a part of the Obligations. Any proceeds of sale or other disposition of the Collateral will be applied by Lender first to the payment of the Enforcement Costs and the Expense Payments, and any balance of such proceeds will be applied by Lender to the payment of the balance of the obligations in such order and manner of application as Lender may from time to time in Lender ’ s sole discretion determine. After such application of the proceeds, any balance shall be paid to the Borrower or to any other party entitled thereto. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, Borrower shall remain liable, joint and severally with any other obligation, for such deficiency.

 

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Loan #71329

 

7.

MISCELLANEOUS

7.1.

Notice: Any notice, demand, request or other communication which Lender or Borrower may be required to give hereunder shall be in writing. Notices sent by hand delivery shall be deemed delivered upon receipt. Notices sent by overnight mail shall be deemed delivered the following day. Notices sent by first class mail shall be deemed delivered three (3) days after deposit in the United States Mail System. If notice is tendered pursuant to the provisions of this Section and is refused by the intended recipient thereof ’ , the notice, nevertheless, shall be considered to have been given and shall be effective as of the date herein provided. Notices shall be addressed as follows, or to such other addresses as the parties may designate by like notice:

If to the Borrower:

GOOD TIMES DRIVE THRU INC.

601 Corporate Circle

Golden, CO 80401

Attn: Mr. Boyd Hoback

If to Lender:

United Capital Business Lending, Inc.

215 Schilling Circle, Suite 100

Hunt Valley, MD 21031

Attn: Lisa Wheatley – Operations Department

Joseph Serio – Portfolio Management Department

7.2.

Remedies, Etc. Cumulative . Each of Lender ’ s rights and remedies provided for in the Loan Documents or now or hereafter existing at law or in equity, by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right or remedy provided for in the Loan Documents under current law or now or hereafter existing at law or in equity, by statute or otherwise, and the exercise or beginning of the exercise by Lender of any one or more of such rights or remedies shall not preclude the simultaneous or late exercise by Lender of any or all such other rights or remedies. In order to entitle Lender to exercise any remedy reserved to Lender in this Development Line Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Development Line Agreement.

 

Customer #47856 Page 12 of 15

Loan #71329

7.3.

No Waiver of Rights . No failure or delay by Lender to insist upon the strict performance of any term or condition of the Loan Documents, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such term or condition, or of any such breach, or preclude Lender from exercising any such right or remedy at any later time or times. By accepting payment after the due date of any amount payable under this Development Line Agreement, or under any of the other Loan Documents, Lender shall not be deemed to have waived the right either to require prompt payment when due of all other amounts payable under the Loan Documents, or to declare a default for failure to effect such prompt payment of any other amounts payable under the Loan Documents.

7.4.

Entire Agreement . To the extent of any conflict with the terms of this Development Line Agreement, this Development Line Agreement shall completely and fully supersede all prior agreements, both written and oral, between Lender and the Borrower relating to the security for the Obligations, and in the event of any inconsistency between this Development Line Agreement and any other Loan Documents relating to the security provided herein, this Development Line Agreement shall control. Neither Lender nor Borrower shall hereafter have any rights under such prior agreements but shall look solely to the Loan Documents for definition and determination of all of our respective rights, liabilities and responsibilities relating to the provisions hereof and thereof

7.5.

Survival of Loan Documents ; Successors and Assigns . All covenants, agreements, representations and warranties made by Borrower in this Development Line Agreement shall survive the execution and delivery hereof and of the other Loan Documents and shall continue in full force and effect so long as any of the Obligations are outstanding. Whenever in this Development Line Agreement any of the parties hereto is referred to, such reference shall be deemed to include the heirs, successors and assigns of such party or parties; and all covenants, agreements, representations and warranties by Borrower or on Borrower ’ s behalf which are contained in this Development Line Agreement shall inure to the benefit of Lender ’ s successors and assigns, and all covenants, agreements, representations and warranties by Lender or on Lender ’ s behalf which are contained in this Development Line Agreement shall inure to the benefit of Borrower ’ s permitted successors and permitted assigns. This Development Line Agreement may not be assigned by the Borrower without Lender ’ s prior written consent.

7.6.

Governing Law . This Development Line Agreement and any other Loan Documents executed and delivered by Borrower shall be governed by, and construed in accordance with, the laws of the State of Maryland, without regard to principles of conflicts of laws, except to the extent that the validity or perfection of the security interest granted by or remedies provided under this Development Line Agreement are governed by the laws of a jurisdiction other than the State of Maryland.

 

7.7.

Modifications.  No modification or waiver of any provision of the Loan Documents, nor any consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing, and then such modification, waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Borrower in any case shall entitle the Borrower to any other or further notice or demand in the same, similar or other circumstance.

7.8.

Illegality; Severability ; Invalidity of Any Part. If any provision or part of any provision of this Development Line Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or any remaining part of any provision) of this Development Line Agreement, and this Development Line Agreement shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained in this Development Line Agreement, but only to the extent of its invalidity, illegality, or unenforceability.

 

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Loan #71329

 

7.9.

Number . Whenever used herein, the singular number shall include the plural and the plural shall include the singular.

7.10.

Definitions.  For the purposes of this Development Line Agreement, "Loan Documents, ” as defined above, shall include, but not be limited to, any and all documents, agreements or instruments described in such definition; “ Collateral ” , as defined above, shall include any part or all of the Collateral and the terms used herein which are defined by the Uniform Commercial Code as adopted in the State of Maryland, or in such other State the laws of which may be applicable hereto, shall have the same meanings hereunder as assigned to them by such Code.

7.11.

Headings .   The headings in this Development Line Agreement are for convenience only and shall not limit or otherwise affect any of the terms and conditions hereof.

7.12.

WAIVER OF TRIAL BY JURY .  THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THE LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS DEVELOPMENT LINE AGREEMENT . THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THE SIGNING OF THIS DEVELOPMENT LINE AGREEMENT AND IN THE MAKING OF THIS WAIVER, AND THAT IT UNDERSTANDS THE TERMS OF THIS WAIVER AND ALL TERMS OF THIS DEVELOPMENT LINE AGREEMENT .

7.13.

Forum Selection . Any suit or proceeding instituted by Borrower arising out of, relating to or brought in connection with the Loan Documents or the transactions contemplated hereunder or thereunder shall be brought against Lender only in the courts of the State of Maryland or in the United States District Court for the District of Maryland. Further, I expressly consent to the personal jurisdiction of the courts of the State of Maryland and the United States District Court for the District of Maryland.

7.14.

UCC Filings . The Borrower authorizes the Lender to execute and file financing statements covering the Collateral In accordance with the Uniform Commercial Code, plus any amendments thereto, and appoint Lender and Lender ’ s agents as Borrower ’ s attorney-in-fact to sign on Borrower ’ s behalf any other documents needed to confirm, establish, re-establish, continue, perfect, protect or insure Lender ’ s interest in the Collateral.

7.15.

Joint and Several Liabilities.  The Borrower and Guarantor shall be jointly and severally liable for payment of its obligations to the Lender as and when due and payable in accordance with the provisions of this Development Line Agreement or any other agreement executed by such person in connection with the Loan. The Borrowers agrees that the Lender may (without notice to or consent of any or all of the undersigned or any other person who has agreed to guarantee the Loan and with or without consideration) release, compromise, settle with, proceed against any or all of the undersigned or any other Borrowers without affecting, impairing, lessening or releasing the Obligations of the undersigned or of the other Borrowers.

 

Customer #47856 Page 14 of 15

Loan #71329

7.16

Counterpart Signatures.

The Loan Documents may be executed in any number of counterparts and by different parties in counterparts.  Each counterpart when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement and shall be treated as an original document.

IN WITNESS WHEREOF, and intending to be legally bound the Borrower has executed and delivered this Development Line Agreement at the place and as of the date first above set forth.

BORROWER:  

GOOD TIMES DRIVE THRU INC.

By: Boyd E. Hoback

Name: Boyd E. Hoback, as

Title:

President

Customer #47856

Page 15 of 15

Loan #71329

United Capital

Business Lending

A BankUnited Company

COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS , MANAGEMENT AGRE E MENT  

AND PARTNERSHIP INTERESTS

THIS COLLATERAL ASSIGNMENT OF FRANCHISE AGREEMENTS , MANAGEMENT AGREEMENT and PARTNERSHIP INTERESTS AGREEMENT (this "Assignment"), dated as of Ju ly _, 201 4 is made by and between GOOD TIMES DRIVE THRU INC. , a Colorado c orporation (the "Assignor"), and UNITED CAPITAL BUSINESS LENDING, INC . , a Delaware corporation, (hereinafter referred to as "Assignee").

RECITALS

WHEREAS, Assignor is the franchisor under certa in Franchise Agreements for Good Times Burgers & Frozen Custard restaurant l ocations set forth on Exhibit A ( the “ Franchise Agreements ” );

WHEREAS, Assignor is the General Partner of Fast Restaurants Co-Development Limited Partnership, a Colorado l imited p artnership (the “ Limited Partnership ” );

WHEREAS, Assignor is the Manager of the restaurants owned by the Limited Partnership pursuant to the terms and conditions of a Management Agreement by and between the Assignor and the Limited Partnership dated May 1, 1993 (the “ Management Agreement ” );

WHEREAS, by the execution of this Assignment, Assignor desires to induce Assignee to extend certain financial accommodations to Assignor (the "Loan") pursuant to that certain Development Line Loan and Security Agreement dated of even date he rewith, by and between Assignee and , and A ssignor as Lender (as hereafter amended, supplemented, modified and/or restated from time to time, the " Development Line Agreement "); and

WHEREAS, Assignee is unwilling to execute, deliver or perform under the Development Line Agreement or other Loan Documents (as defined in the Development Line Agreement ) unless the Assignor collaterally assigns its rights under the Franchise Agreements , the Management Agreement and the Assignor ’ s partnership interest in the Limited Partnership t o secure the Loan and all of the Assignor ’ s Obligations, as that term is defined in the Development Line Agreement , thereunder .

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

Customer #47856

Page 1 of 4

Loan #71329-001

AGREEMENT

1.   As additional collateral security for all debts, liabilities, or obligations of Assignor now existing or hereafter arising under the Loan Documents, Assignor hereby assigns, transfers and sets over to Assignee all of its rights, but not its obligations, as the General Partner under the Limited Partnership Agreement of the Limited Partnership (the “ Limited Partnership Agreement ” ) , its rights under the Management Agreement and the Franchise Agreements . The Assignor understands and agrees that notwithstanding this assignment, its General Partnership Interest in the Limited Partnership and its rights under the Management Agreement and the Franchise Agreements are included in Collateral as that term is defined in the Development Line Agreement and are subject to the terms and conditions of the Development Line Agreement . The Assignor and Assignee acknowledge and agree that i f there is a conflict between the terms and condit ions of this Assignment and the Development Line Agreement , the terms of this A ssignment shall control. The Assignor and Assignee further agree that Exhibit A of this Assignment shall be amended to include any franchise agreement s for a Good Times Burgers & Frozen Custard l ocation entered into by the Assignor and a franchisee after the date of this Assignment and that any future franchise agreements shall become subject to the terms and conditions of this Assignment upon their execution by the Assignor .  

2.   Assignee shall have no obligation or duty to perform any of the obligations of the Assignor under the Limited Partnership Agreement , the Management Agreement or the Franchise Agreements , all of which shall remain the sole and exclusive duty and obligation of the Assignor .

 

3.   The rights assigned hereunder include, and are not limited to, any and all rights of payment and enforcement regarding warranties, representations, covenants and indemnities made by the Limited Partnership under the Limited Partnership Agreement or the Management Agreement or the Franchisees under the Franchise Agreement s , and all rights, claims or causes of action against the Limited Partner or Franchisees for any breach or violation by the Limited Partnership or Limited Partners under the Limited Partnership or the Management Agreement or the Franchisees of the provisions of the Franchise Agreement s ;   provided, however , that so long as there exists no payme nt default under Section 5 .1 of the Development Line Agreement  which remains uncured for a period of 30 days, Assignor may collect all payments due and owing under the Limited Partnership Agreement , the Management Agreement and/or the Franchise Agreement s and enforce all of the rights, claims or causes of action which Assignor may have under the Limited Partnership Agreement , Management Agreement or the Franchise Agreement s , but only to the extent such enforcement is not inconsistent with Assignee's interest under this Assignment or the Development Line Agreement .

 

4.   Upon the occurrence and during the continuance of a payment default under Section 5 .1 of the Development Line Agreement  which remains uncured for a period of 30 days , Assignee may direct  (i) the Franchisee s and the Limited Partnership  to remit all payments due and owing to Assignor directly to Assignee ; (ii) the Assignor to deliver the original Franchise Agreements to the Assignee within five (5) days of demand by the Assignee; and (ii i ) Assignee may enforce, at the cost and expense of Assignor, either in its own name or in the name of Assignor, all rights of Assignor under the Limited Partnership Agreement, Management Agreement or the Franchise Agreement, including, without limitation, to ( a ) bring suit to enforce any rights under the Limited Partnershi p Agreement, Management Agreement or the Franchise Agreement, ( b ) compromise or settle any disputed claims as to rights under the Limited Partnership Agreement, Management Agreement or the Franchise Agreement, ( c ) give releases

Customer #47856

Page 2 of 4

Loan #71329-001

or acquaintances of rights under this A ssignment , and/or ( d ) do any and all things necessary, convenient, desirable or proper to fully and completely effectuate the collateral assignment of the rights under th is A ssignment .

5.   Assignor hereby constitutes and appoints the Assignee or the Assignee's designee as Assignor's attorney-in-fact with full power in Assignor's name, place and stead to, upon the occurrence and during the continuance of a payment default under Section 5 .1 of the Development Line Agreement , do or accomplish any of the aforementioned undertakings and to execute such documents or instruments in the name or stead of Assignor as may be necessary, convenient, desirable or proper in the Assignee's sole and exclusive discretion. The aforementioned power of attorney shall be a power of attorney coupled with an interest and irrevocable. In the event any action is brought by the Assignee to enforce any rights under th is A ssignment , Assignor agrees to fully cooperate with and assist the Assignee in the prosecution thereof.

6.   The Limited Partnership and e ach Franchisee is hereby authorized to recognize Assignee's claims and rights hereunder without investigating any reason for any action taken by Assignee or the validity or the amount of the obligations under the Loan Documents or existence of any default thereunder. Assignor shall provide Assignee with a copy of the written notice sent to the Limited Partnership or Franchisee informing the Limited Partnership or Franchisee of this Assignment and the rights of the Assignee hereunder.

7.   This A ssignment and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the law s of the State of Maryland.

 

8.   This Assignment may be executed by facsimile in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument.

9.   This Assignment shall be binding upon Assignor and Assignor's successors and assigns and shall benefit the Assignee and the Assignee's successors and assigns, pro vided that (a) Assignor may not, without the Assignor ’ s prior written consent, assign or transfer any of this rights under the Loan Documents or its rights or obligations under this Assignment or any interest herein or delegate its duties hereunder, and (b) Assignee shall have the right to assign its rights hereunder and under the Agreement under the conditions provided in the Development Line Agreement    with respect to Loan Documents.

10.   This Assignment may only be amended by a writing executed by Assignor and Assignee.

11.   Except as set forth in the Development Line Agreement, t his Assignment constitutes the final and entire agreement with respect to the collateral assignment of rights under the A ssignment from the Assignor to the Assignee and any term, covenant or provision not set forth herein shall not be considered a part of this Assignment.

Customer #47856

Page 3 of 4

Loan #71329-001

IN WITNESS WHEREOF, each of the parties has duly executed this Assignment as of the date first written above.

Customer #47856

Page 4 of 4

Loan #71329-001

United Capital

Business Lending

A BankUnited Company

PROMISSORY NOTE

$196,023.41                                                                       Hunt Valley, Maryland

                                                                                                                              July 30, 2014

     FOR VALUE RECEIVED, GOOD TIMES DRIVE THRU INC., a corporation formed in the State of Colorado, (the "Borrower"), promises to pay to the order of UNITED CAPITAL BUSINESS LENDING, INC. (the "Lender"), the principal sum of One Hundred Ninety Six Thousand, Twenty Three and 41/100 Dollars ($196,23.41), or so much thereof as may be advanced to or for the account of the Borrower pursuant to the terms and conditions set forth herein and in the Loan Documents, as hereinafter defined, (the "Principal Sum"), together with interest at the rate hereinafter provided, in accordance with the following:

1.

INTEREST .

a.

Commencing as of the date hereof and continuing until August 1, 2021 (the “ Maturity Date ” ), the unpaid Principal Sum shall bear interest at a rate of 6.69% per annum.

b.

All interest payable under the terms of this Promissory Note (the “ Note ” ) shall be calculated on the basis of a three hundred sixty (360) day year and the actual number of days on which there exists an unpaid balance hereunder.

2.

PAYMENTS AND MATURITY .

a.

Interest only shall be payable on the outstanding Principal Sum for the period from the date funds are disbursed under this Note to the 1st day of the next calendar month, payable on the 1st day of that calendar month at the interest rate calculated in accordance with Section 1 above (the “ Interest Rate ” ).

b.

Commencing on September 1, 2014, and continuing on the first day of each and every month thereafter until the Maturity Date, Borrower shall pay equal installments of principal plus interest, at the rate provided in Section 1(a) above, in the amount of Two Thousand, Nine Hundred Twenty Eight and 90/100 Dollars ($2,928.90), which installments have been calculated so as to amortize the outstanding Principal Sum over a period of seven (7) years.  

 

          c.

Unless sooner paid, the unpaid Principal Sum, together with interest accrued and unpaid thereon, shall be due and payable in full on August 1, 2021 (the "Maturity Date") which is the first day of the calendar month following the seventh anniversary of the date hereof, such date may be extended, accelerated or otherwise modified as provided herein.

3.

DEFAULT INTEREST .  Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid Principal Sum shall bear interest thereafter at a rate of five (5%) percent per annum in excess of the then current rate Interest Rate until such Event of Default is cured, in the sole discretion of the Lender.

 

Customer #47856                    Page 1 of 6

Loan #71329-001

4.

LATE CHARGES .  If the Borrower shall fail to make any payment under the terms of this Note within ten (10) days after the date such payment is due, the Borrower shall pay to the Lender on demand a late charge equal to ten (10%) percent of such delinquent payment.

.

5.

APPLICATION AND PLACE OF PAYMENTS .  If no Event of Default shall have occurred, all payments made on account of this Note shall be applied first to the payment of unpaid interest, second to the unpaid Principal Sum, third to the payment of any late charge then due hereunder, and the remainder, if any, shall be applied to the payment of any costs of collection. All payments on account of this Note shall be paid in lawful money of the United States of America in immediately available funds during regular business hours of the Lender at its principal office in Hunt Valley, Maryland or at such other times and places as the Lender may at any time designate in writing to the Borrower. If the Borrower has authorized the Lender to make an automatic debit of the monthly installments due from the Borrower ’ s account pursuant to a Direct Draft Authorization, the Borrower agrees that the Lender shall be authorized to debit the amounts due under Section 2 above from the account identified in the Direct Draft Authorization Form as and when such payments become due and payable and that it will immediately notify the Lender if the account from which the Lender should debit such payments is changed.   

6.

PREPAYMENT . Except as set forth below, prior to the 37 ^th monthly installment, this Note may only be prepaid in full, but not in part, within 30 days ’ advance written notice to Lender by remitting to the Lender the then Unpaid Balance of this Note plus an additional amount (not as a penalty but as compensation for the loss of investment for the remainder of the term) equal to: (a) 3% of such Unpaid Balance if prepayment is made prior to the maturity of the 13th monthly installment; (b) 2% of the Unpaid Balance if prepayment is made after the 13th monthly installment but prior to the maturity of the 25th monthly installment; (c) 1% of the Unpaid Balance if prepayment is made after the 25th monthly installment but prior to the maturity of the 37th monthly installment.  Notwithstanding the foregoing, even if the prepayment of Unpaid Principal is made prior to the 37 ^th monthly installment, the Borrower shall not be required to pay any additional compensation to the Lender if: (a) the total amount of any prepayments of the Unpaid Balance by the Borrower do not exceed $250,000 in any year; or (b) a new credit facility provided by the Lender is the source of the funds for the Borrower ’ s prepayment of the Unpaid Balance.  For the purposes of this provision, “ Unpaid Balance ” means the sum of: (i) the unpaid principal balance of this Note; plus (ii) all accruals (including accrued interest) and other amounts then due under this Note. No other method of prepayment is authorized by this Note. The Borrower may not make a partial prepayment or any prepayment following the occurrence of an Event of Default, without the prior consent of the Lender.  Any approved partial prepayment shall be accompanied by accrued and unpaid interest and may be applied by Lender (in its sole discretion) to principal payments in the inverse order of their maturity.

7.

LOAN DOCUMENTS .      The term "Loan Documents" as used in this Note shall mean collectively this Note, that certain Development Line Loan and Security Agreement of even date herewith by and among the Lender and Borrower, (the "Development Line  Agreement"), the Guaranty given by GOOD TIMES RESTAURANTS INC. (the “ Guarantor ” ) to guaranty the obligations of the Borrower hereunder (the “ Guaranty ” ), and the Collateral Assignments executed by the Borrower and the Guarantor (collectively, the “ Collateral Assignment Agreement ” ) executed in connection therewith and any other instrument, agreement,

 

Customer #47856                        Page 2 of 6

Loan #71329-001

or document previously, simultaneously, or hereafter executed and delivered by the Borrower and/or any other person, singularly or jointly with any other person, evidencing, securing, guaranteeing, or in connection with this Note or the Principal Sum evidenced thereby.

8.

SECURITY . This Note is secured by, among other things the Collateral as that term is defined in the Development Line Agreement and Collateral Assignment Agreement.

9.

EVENTS OF DEFAULT . The occurrence of any one or more of the following events shall constitute an event of default (individually, an "Event of Default" and collectively, the "Events of Default") under the terms of this Note:

a.

The failure of the Borrower to pay to the Lender when due any and all amounts payable by the Borrower to the Lender under the terms of this Note or any other obligation, provided, however that if the Lender is not is not able to debit the a regularly scheduled monthly payment due under the Note from the account designated by the Borrower in the Direct Draft Authorization Agreement of even date herewith and the Borrower does not have actual notice of the nonpayment, the Lender shall notify the Borrower and the Borrower shall have 2 business days to make any payments then due and owing under the Note . ; or

b.

The occurrence of an Event of Default under any of the terms and conditions of any of the Loan Documents.

10.

REMEDIES .  Upon the occurrence of an Event of Default, at the Lender's option, the Lender may immediately accelerate and call due all amounts payable by the Borrower to the Lender under the terms of this Note, including all principal, accrued interest, late charges and other sums due as of the date of the Event of Default, without notice to the Borrower or any other person, and the Lender shall have all of the rights, powers, and remedies available under the terms of this Note, any of the other Loan Documents and all applicable laws. The Borrower and all endorsers, guarantors, and other parties who may now or in the future be primarily or secondarily liable for the payment of the indebtedness evidenced by this Note hereby severally waive presentment, protest and demand, notice of protest, notice of demand and of dishonor and non-payment of this Note.  Lender shall apply any sums collected following an Event of Default first to the costs of collection, second to any late fees due and owing under the Note, third to any unpaid interest due and owing under this Note and finally to any principal sums due and owing under this Note.

11.

EXPENSES .  Notwithstanding anything to the contrary contained in Section 11 above, the Borrower promises to pay to the Lender on demand by the Lender all reasonable costs and expenses incurred by the Lender in connection with the collection and enforcement of this Note, including, without limitation, all reasonable attorneys' fees and expenses and all court costs.

12.

NOTICES . Any notice, request, or demand to or upon the Borrower or the Lender is to be given in writing and shall be deemed to have been received by such party when (i) delivered by hand on the same day as such hand delivery; (ii) delivered by an overnight courier on the next business day; or (iii) sent by certified or registered mail, postage prepaid, return receipt requested, three (3) business days after deposit in the mail to the following addresses:

 

Customer #47856                       Page 3 of 6

Loan #71329-001

If to the Borrower:

GOOD TIMES DRIVE THRU INC.

601 Corporate Circle

Golden, CO 80401

Attn: Mr. Boyd E. Hoback

If to the Lender:

United Capital Business Lending, Inc.

215 Schilling Circle, Suite 100

Hunt Valley, MD 21031

Attn: Lisa Wheatley – Operations Department

Joseph Serio – Portfolio Management

                         Department

Either party hereto may change the address for notices set forth above by providing the other party with ten (10) days prior written notice of such change.

13.

MAXIMUM RATE OF INTEREST; COMMERCIAL LOAN .  If any provision of this Note shall ever be construed to require the payment of any amount of interest in excess of that permitted by applicable law, then the interest to be paid pursuant to this Note shall be held subject to reduction to the amount allowed under applicable law, and any sums paid in excess of the interest rate allowed by law shall be applied in reduction of the principal balance outstanding pursuant to this Note. The Borrower acknowledges that the laws of the State of Maryland will govern the maximum rate of interest that it is permissible for the holder of this Note to charge the Borrower pursuant to this Note. The Borrower warrants that this Note evidences a commercial loan transaction within the meaning of Sections 12-101(c) and 12-103(e), Commercial Law Article, Annotated Code of Maryland (as amended), and that no proceeds of such loan transaction are being used by the Borrower for any consumer purpose.

14.

MISCELLANEOUS . Each right, power, and remedy of the Lender as provided for in this Note or any of the other Loan Documents, or now or hereafter existing under any applicable law or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Note or any of the other Loan Documents or now or hereafter existing under any applicable law, and the exercise or beginning of the exercise by the Lender of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers, or remedies. No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant, or agreement of this Note or any of the other Loan Documents, or to exercise any right, power, or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant, or agreement or of any such breach, or preclude the Lender from exercising any such right, power, or remedy at a later time or times. By accepting payment after the due date of any amount payable under the terms of this Note, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under the terms of this Note or to declare an Event of Default for the failure to effect such prompt payment of any such other amount. No course of dealing or conduct shall be effective to amend, modify, waive, release, or change any provisions of this Note.

15.

EXTENSIONS OF MATURITY . All parties to this Note, whether maker, endorser, or guarantor, agree that the maturity of this Note, or any payment due hereunder, may be extended at any time or from time to time, in the Lender's sole discretion, without releasing, discharging, or affecting the liability of such party.

 

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16.

ASSIGNABILITY . This Note may not be assigned by the Borrower, but may be assigned by the Lender or any holder at any time.

17.

JOINT AND SEVERAL LIABILITY .   The Borrower shall be jointly and severally liable for payment of its obligations to the Lender as and when due and payable in accordance with the provisions of this Note, the Loan Documents or any other agreement executed by any person or entity obligated to the Lender in in connection with the obligations due and owing under the Note and the Loan Documents. The Borrower agrees that the Lender may (without notice to or consent of any or all of the undersigned or any other person who has agreed to guarantee the Loan and with or without consideration) release, compromise, settle with, proceed against the Guarantor or any person or entity or the undersigned or any other Borrower without affecting, impairing, lessening or releasing the Obligations of the undersigned.

18.

BINDING NATURE . This Note shall inure to the benefit of and be enforceable by Lender and Lender's successors and assigns and any other person to whom Lender may grant an interest in Borrower's obligations to Lender, and shall be binding and enforceable against Borrower and Borrower's personal representatives, successors and assigns.

19.

PARTIAL INVALIDITY .  In the event any provision of this Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal, or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal, or unenforceable.

20.

CAPTIONS . The captions herein set forth are for convenience only and shall not be deemed to define, limit, or describe the scope and intent of this Note.

21.

SEAL AND EFFECTIVE DATE .  This Note is an instrument executed under seal and is to be considered effective and enforceable as of the date set forth on the first page hereof, independent of the date of actual execution and delivery.

22.

GOVERNING LAW . The provisions of this Note shall be construed, interpreted and enforced in accordance with the laws of the State of Maryland as the same may be in effect from time to time, without regard to principles regarding conflict of laws.

23.

CONSENT TO JURISDICTION . The Borrower hereby acknowledges, consents and agrees that the United States District Court for the District of Maryland or any court of competent jurisdiction of the State of Maryland shall have jurisdiction over any suit, action, or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection that the Borrower may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Borrower and may be enforced in any court in which the Borrower is subject to jurisdiction by a suit upon such judgment provided that service of process is effected upon the Borrower as provided in this Note or as otherwise permitted by applicable law.

 

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24.

SERVICE OF PROCESS . The Borrower hereby consents to process being served in any suit, action, or proceeding instituted against the Borrower in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Borrower; and (b) serving a copy thereof in accordance with the Notice provisions set forth in Section 13 of this Note, the agent hereby designated and appointed by the Borrower as its agent for service of process. The Borrower irrevocably agrees that such service shall be deemed to be service of process upon the Borrower in any such suit, action, or proceeding. Nothing in this Section shall affect the right of either party to serve process in any manner otherwise permitted by law and nothing in this Section will limit the right of either party otherwise to bring proceedings against the other party in the courts of any jurisdiction or jurisdictions.

25.

WAIVER OF TRIAL BY JURY .  THE BORROWER AND THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THEY MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THE LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER, AND THAT IT UNDERSTANDS THE TERMS OF THIS WAIVER AND ALL TERMS OF THIS NOTE.

26.

ENTIRE AGREEMENT . This Note, together with all of the other Loan Documents, constitutes the entire agreement between the Borrower and the Lender in any way relating to the obligations evidenced by this Note.

IN WITNESS WHEREOF, the Borrower has executed this Promissory Note, with the intention of creating an instrument under seal, as of the date first written above.

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United Capital

Business Lending

A BankUnited Company

 

GUARANTY AGREEMENT

 

This Guaranty Agreement (this “ Guaranty ” ) is made this 30 day of July, 2014, by GOOD TIMES RESTAURANTS INC. , a corporation formed under the laws of the State of Nevada (the “ Guarantor ” ) in favor of UNITED CAPITAL BUSINESS LENDING, INC. (the “ Lender ” ).

RECITALS

A.

GOOD TIMES DREIVE THRU INC. (the "Borrower") has applied to Lender for a loan in the maximum principal amount of Two Million One Hundred Thousand and 00/100 Dollars ($2,100,000.00) (the “ Loan ” ) as evidenced by promissory notes executed in connection herewith executed by Borrower (collectively the “ Note ” ), which Note is secured by that certain Development Line Loan and Security Agreement ( “ Security Agreement ” ), executed in connection herewith, from the Borrower to the Lender granting the Lender a first perfected lien in the Collateral as defined therein (the “ Collateral ” ).

B.

Lender is willing to make the Loan provided that, among other things, the repayment of the Loan is secured on terms and conditions acceptable to Lender.

C.

Guarantor has requested Lender to provide the Loan to Borrower and Lender has agreed to provide the Loan, but only if Guarantor gives the guaranty provided in this Guaranty.

D.

Guarantor will receive direct and indirect benefits if Lender makes the Loan to Borrower and Guarantor has determined that it is in Guarantor ’ s interest to execute this Guaranty in order to induce Lender to make the Loan to Borrower.

NOW, THEREFORE, in consideration of the premises and for other good, valuable and legal consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor, intending to be legally bound, hereby agrees as follows:

1.

CONSTRUCTION OF GUARANTY AND DEFINITIONS . Unless varied by this Guaranty, all of the terms used herein without definition which are defined by the Maryland Uniform Commercial Code shall have the meanings assigned to them by the Maryland Uniform Commercial Code. Whenever used herein, the words ^“ Borrower, ” ^“ Guarantor, ” “ Lender ” and “ Obligor ” shall be deemed to include their respective heirs, legal representatives, successors and assigns. All words used herein shall be deemed to refer to the singular, plural, masculine, feminine or neuter as the identity of the person or entity or the context may require.

The following terms shall have the following meanings when used herein:

“ Borrower ’ s Obligations ” shall mean the full and punctual observance, payment and performance of all present and future duties, covenants and responsibilities due to Lender by Borrower of any nature whatsoever, including but not limited to the prompt, punctual and full payment when due (whether by demand, stated maturity, acceleration or otherwise but after the expiration of any applicable grace period) and not merely the collection of all present and future indebtedness, liabilities and obligations of Borrower to Lender under (a) the Loan Documents

 

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(extending to all principal, interest, fees, expense payments, liquidation costs, and reasonable attorney ’ s fees and expenses) and (b) any other document, instrument or agreement executed by Borrower and delivered to Lender, whether now existing or hereafter created, whether or not now contemplated and whether or not related to the Loan.

  “ Guarantor ’ s Obligations ” shall mean the full and punctual observance and performance of all present and future duties, covenants and responsibilities due to Lender by Guarantor as a result of or in connection with this Guaranty or any of the other Loan Documents.

“ Loan Documents ” shall mean this Guaranty, the Note, the Development Line Agreement, the Collateral Assignment Agreement and any other document or agreement previously, simultaneously or hereafter executed and delivered by Borrower, by Guarantor and/or by any other Obligor, singly or jointly with another person or persons, to Lender in connection with the Loan, as the same may from time to time be amended.

“ Note ” shall collectively mean the Note and any promissory note or other instrument now in existence or hereafter executed and delivered by Borrower to Lender evidencing  the Loan or a loan, together with all renewals, replacements, modification and amendments thereto.

“ Obligor ” shall mean, individually and collectively, the Guarantor, each other person who is primarily or secondarily liable for the repayment of the Note or any portion thereof, including Borrower, and each person or entity who has executed a Guaranty or who has granted security for the repayment of the Note, together with such person ’ s heirs, personal representatives, successors and assigns.

The term “ person ” shall include an individual, a corporation, an association, a partnership, a limited liability company, a trust, a government (or subdivision, agency or department thereof) and any other entity of any kind. The words “ hereof, ” “ herein, ” “ hereunder ” and words of similar import, when used in this Guaranty, shall refer to this Guaranty as a whole and not to any particular provision hereof.

2.

GUARANTY .

(a) Guaranty. Guarantor hereby unconditionally, directly and absolutely guarantees to Lender the payment and performance of Borrower ’ s Obligations.  Guarantor also agrees to defend, save harmless and indemnify Lender from and against all obligations, demands, loss or liability, by whoever asserted, suffered, incurred or paid arising out of or with respect to Borrower ’ s Obligations, including the amount of any preference liability together with the cost of defending any such preference suit .

(b)

Nature of Guaranty. The guarantees provided in this Guaranty are absolute, unconditional, continuing, direct, and immediate guaranties of payment and not just of collection and are no way conditioned upon or limited by or in any other way affected by:

(i) any attempt by Lender to pursue Lender ’ s rights against Borrower or any other Obligor;

(ii) any attempt by Lender to pursue Lender ’ s rights against any of

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Borrower ’ s real or personal property or any other Obligor ’ s real or personal property;

(iii) any recourse against or foreclosure of any security or collateral now or hereafter pledged, assigned or granted to Lender under the provisions of any of the Loan Documents;

(iv) any action taken or not taken by Lender;

(v) the partial or complete unenforceability or invalidity of any other guaranty or surety agreement, pledge, assignment or other security for any of Borrower ’ s Obligations;

(vi) the invalidity or unenforceability of any provision of the Loan Documents; or

(vii) any defense asserted or claimed by Borrower with respect to Borrower ’ s Obligations including, but not limited to, failure or lack of consideration, breach of warranty, payment, accord and satisfaction, strict foreclosure, statute of frauds, bankruptcy, insolvency, infancy, incompetency, statute of limitations, lender liability and usury.  The obligations of Guarantor under this Guaranty shall not be subject to any counterclaim, recoupment, set-off, reduction, or defense based upon any claim that Guarantor may have against Borrower or Lender, are independent of any other guaranty or guaranties at any time in effect with respect to any of Borrower ’ s Obligations, and may be enforced regardless of the existence of such other guaranty or guaranties.

(c)

Lender ’ s Rights to Deal with Borrower and Obligors. Guarantor hereby consents to any and all agreements between Lender and Borrower or between Lender and any Obligor, whether presently existing or hereafter made and whether oral or in writing. Lender without compromising, impairing, modifying, diminishing or in any way releasing or discharging Guarantor from Guarantor ’ s Obligations and without notifying or obtaining the prior approval of Guarantor and at any time or from time to time may:

(i) waive or excuse a default or defaults by Borrower or any other Obligor or delay in the exercise by Lender of any of Lender ’ s rights and remedies with respect to such default or defaults;

(ii) grant extensions of time for the payment or performance by Borrower or any other Obligor;

(iii) release, substitute, exchange, impair, surrender, dispose of or add collateral in whole or in part of Borrower , Guarantor or of any other Obligor or waive, release, modify or subordinate, in whole or in part, any lien or security interest held by Lender on any real or personal property securing payment or performance, in whole or in part, of Borrower ’ s Obligations or Guarantor ’ s Obligations;

(iv) release in whole or in part Borrower or any other Obligor;

(v) apply payments made by Borrower or by any other Obligor to any of Borrower ’ s Obligations, in any order or manner or to any specific account or accounts as Lender may elect;

(vi) modify, change, renew, extend or amend, in any respect, the

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Loan Documents; or

(vii) engage in any other act or permit any other circumstance or condition which might otherwise constitute a legal or equitable discharge of a surety or guarantor.

 

(d)

Waivers by Guarantor. Guarantor unconditionally waives:

(i)

any and all notices whatsoever with respect to this Guaranty or with respect to any of Borrower ’ s Obligations, including, but not limited to, notice of Lender ’ s acceptance of this Guaranty, the present existence or future incurring of any of Borrower ’ s Obligations or any terms or amounts thereof or any change therein, or notice of the obtaining or release of any guaranty, surety agreement, pledge, assignment or other security for any of Borrower ’ s Obligations;

 

(ii) presentment, demand for payment of any sum due from Borrower or any Obligor, notice of dishonor, protest, protest and demand, notice of protest, notice of nonpayment, notice of default by Borrower or any Obligor and demand for performance by Borrower or any Obligor;

(iii) any right to subrogation, reimbursement, and indemnity against Borrower or any Obligor or against any property or other security serving at any time as collateral for any or all of Borrower Obligations;

(iv) any damages which Guarantor may incur as a result of any unintentional or negligent action or inaction by Lender impairing, diminishing, or destroying any of Guarantor ’ s rights of subrogation which Guarantor may have upon payment of any of Borrower ’ s Obligations;

(v) all claims and causes of action of Guarantor against Lender for punitive, exemplary or other non-compensatory damages;

(vi) all rights of redemption of Guarantor with respect to any property directly or indirectly securing any of Borrower ’ s Obligations or this Guaranty ; and

(vii) all rights of Guarantor to have marshalled any property directly or indirectly securing any of Borrower ’ s Obligations or this Guaranty .

(e)

Independent Investigation. Guarantor ’ s execution and delivery to Lender of this Guaranty is based solely upon Guarantor ’ s independent investigation of Borrower ’ s financial condition and not upon any written or oral representation of Lender in any manner.

 

3.

REPRESENTATIONS OF GUARANTOR . To induce Lender to accept this Guaranty for the purposes for which it is given, Guarantor represents and warrants to Lender as follows:

 

                  (a) Financial Information. Any financial statement submitted by Guarantor to Lender, including any schedules and notes pertaining thereto, is true and complete and fully and fairly presents the financial condition of Guarantor at the date thereof and there have been no material adverse changes in the financial condition of Guarantor from the date

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thereof to the date hereof, not disclosed to Lender.

                   (b) No Conflicting Agreements. Guarantor is not in default under or in violation of any agreement, contract, instrument, order, judgment, decree, statute, law, rule, or regulation to which it is subject or by which it is bound, and the execution and delivery of, and the performance of the obligations under, this Guaranty will not immediately or with the passage of time, the giving of notice, or both, result in the creation or imposition of any security interest in, or Lien or encumbrance upon, any of the assets of Guarantor except in favor of Lender.

 

               (c) Binding Agreement; Consideration; Review of Loan Documents. This Guaranty and each of the other Loan Documents to which Guarantor is a party have been duly executed and delivered by Guarantor, constitute the valid and legally binding obligation of Guarantor, and are fully enforceable against Guarantor in accordance with their terms subject only to laws affecting the rights of creditors generally and application of general principles of equity. Guarantor will obtain substantial direct and indirect benefits arising from its execution and delivery of this Guaranty . Guarantor has examined or has had an opportunity to examine each of the Loan Documents prior to the date hereof .

 

                (d) Litigation. There are no judgments, injunctions or similar orders or decrees outstanding against Guarantor and there are no claims, actions, suits or proceedings pending or, to Guarantor ’ s knowledge and belief, threatened against Guarantor, or any of Guarantor ’ s property, at law or in equity, by or before any court or governmental authority which if determined adversely to Guarantor would result in any material adverse change in the financial condition, assets or business prospects of Guarantor.

 

                 (e) Taxes.   Guarantor has filed or obtained lawful extensions of all Federal, State, local and foreign tax returns which are required to be filed by Guarantor, and Guarantor has paid all Federal, State, local and foreign taxes shown to be due on such tax returns or which have been assessed against Guarantor.

                         

                          (f) Insolvency. Guarantor is not, and has not been, the subject of any bankruptcy, reorganization, insolvency, readjustment of debt, trusteeship, receivership, dissolution or liquidation proceeding.

All of Guarantor ’ s warranties and representations herein are true, correct, complete and not misleading in any material respect and Guarantor agrees to indemnify Lender from any loss, cost or expense as a result of any representation or statement of Guarantor, or any agent of Guarantor, being false, incorrect, incomplete or misleading in any material respect.

4.

AFFIRMATIVE COVENANTS . Guarantor covenants and agrees with Lender that, until all Guarantor ’ s Obligations have been paid in full and otherwise satisfied in full, each Guarantor shall:

 

                       (a) Financial Information. The Guarantor shall submit to the Lender accountant prepared Corporate Tax Returns within thirty ( 30 ) days of filing, copies of its federal, state and local tax returns beginning with December 31, 2014 .  The Guarantor shall provide annual accountant prepared Audited Financials (consolidated and store level consolidating) within one hundred twenty (120) days of Fiscal Year End, and Guarantor shall also p romptly furnish to Lender, at such time or times as may be required by Lender, such other financial statements and other information concerning the financial condition of Guarantor and such

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additional financial information, reports or statements as Lender may from time to time reasonably request.

 

                  (b) Taxes. Pay and discharge all taxes, assessments and governmental charges upon Guarantor, its income and properties, prior to the date on which penalties attach thereto.

 

                   (c) Civil and Criminal Proceedings. Promptly notify Lender in writing of (i) the actual commencement of a criminal proceeding or investigation or (ii) any action, suit or proceeding at law or in equity by or before any court, governmental agency or instrumentality which could result in any material adverse change in the business, operations, prospects, properties or assets or in the condition, financial or otherwise, of Guarantor.

 

                   (d) Extraordinary Loss. Promptly notify Lender in writing of any event causing extraordinary loss or depreciation of the value of Guarantor ’ s assets (whether or not insured) that   constitutes a material adverse change in the financial condition of the Guaranto r and will have a material adverse effect on the prospect s of the Lender fully and punctually realiz ing the full benefits conferred on Lender by this Guaranty Agreement.

5.

NEGATIVE COVENANTS . Guarantor covenants and agrees with Lender that, until all Guarantor ’ s Obligations have been paid and otherwise satisfied in full, Guarantor will not, directly or indirectly, without Lender ’ s prior written consent: 

 

                (a) Merger. E nter into or be a party to any merger, consolidation, reorganization or exchange of membership interests or assets.

 

                   (b) Transfer or Encumbrance of Property. S ell, assign, transfer, encumber, lien or convey any of its assets, which could result in any material adverse change in the business, operations, prospects, properties or assets or in the condition, financial or otherwise, of the Guarantor or the Borrower .

 

               (c) Change in Ownership.  Permit the sale, conveyance, transfer, assignment, pledging or other encumb r ance in ownership interest in the Borrower to any person .

 

              (d) Additional Indebtedness . So long as any of the Obligations (or commitments therefore) are outstanding, the Guarantor shall not permit Fast Restaurants Co-Development Limited Partnership to, without the Lender ’ s prior written consent, incur or assume any indebtedness direct or indirect, contingent, primary, secondary, alone or jointly with another person which in the aggregate exceeds One Hundred Thousand Dollars ($100,000), except any indebtedness previously disclosed to the Lender or unsecured trade accounts incurred in the ordinary course of business.               

 

                 (e) Change in Material Agreement .  Materially modify, alter or amend or permit the Borrower to modify, alter or amend any term or condition of any franchise, lease, management, employment, development, limited partnership forbearance or use or licensing agreement to which the Guarantor or the Borrower is a party.

 

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      6.          EVENTS OF DEFAULT . The occurrence of any one or more of the following events shall constitute an “ Event of Default ” under this Guaranty:

 

                 (a) Failure to Pay. The failure of Borrower or the Guarantor to pay any of   Borrower ’ s Obligations or the Guarantors Obligations, as the case may be, within fi fteen ( 1 5) days after notice by Lender to Guarantor that an event of default has occurred under the Loan Documents and such Guarantor ’ s Obligations are due and payable.

 

                (b) Perform, Certain Provisions of this Guaranty . A failure of Guarantor to perform, observe or comply with any of the provisions of S ection 4 (Affirmative Covenants), or of Section 5 (Negative Covenants) of this Guaranty .

 

                  (c) Covenants and Agreements. The failure of Guarantor to perform, observe or comply with any of the provisions of this Guaranty other than those covered by Section 6(a) and 6(b) above, and such failure is not cured to the satisfaction of Lender within thirty (30) days after the date of written notice thereof by Lender to Guarantor; provided however, so long as Guarantor is diligently proceeding to cure such default or defaults and such default or defaults can be cured within the additional time provided, Guarantor shall have an additional period of thirty (30) days to cure such default or defaults.

 

                (d) Information, Representations and Warranties. If any representation or warranty made herein or if any information contained in any financial statement, application, schedule, report or any other document given by Guarantor in connection with this Guaranty or with any of the Loan Documents is not in all material respects true and accurate, or if Guarantor omitted to state any material fact or any fact necessary to make such information not materially misleading.

 

                 (e) Default under Loan Documents. The occurrence of an Event of Default as defined under the Security Agreement or any of the other Loan Documents and the expiration of any applicable grace or cure period.

 

                 (f) Default on Other Obligations. The occurrence of any default with respect to any indebtedness of Guarantor to any person including but not limited to Lender which continues beyond any applicable grace or notice period and a determination by Lender, in its reasonable discretion, that the same reflect s that a material adverse change has occurred in the financial condition of Guarantor or will have a material adverse effect on the prospect for Lender to fully and punctually realize the full benefits conferred on Lender by this Guaranty .

 

                (g) Insolvency. Guarantor shall be or become insolvent (as defined in Section 101 of the United States Bankruptcy Code) or unable to pay its debts as they become due, or admits in writing to such insolvency or to such inability to pay its debts as they become due.

 

                (h) Involuntary Bankruptcy. There shall be filed against Guarantor an involuntary petition or other pleading seeking the entry of a decree or order for relief under the United States Bankruptcy Code or any similar federal or state insolvency or similar laws ordering: (i) the liquidation of Guarantor, or (ii) a reorganization of Guarantor or the business and affairs of Guarantor, or (iii) the appointment of a receiver, liquidator, assignee, custodian, trustee, or similar official for Guarantor of the property of Guarantor and the failure to have such petition or other pleading denied or dismissed within sixty ( 6 0) calendar days from the date of filing.

 

 

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(i) Voluntary Bankruptcy. The commencement by Guarantor of a voluntary case under the federal bankruptcy laws or any federal or state insolvency or similar laws or the consent by Guarantor to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, or similar official for Guarantor of any of the property of Guarantor, or the making by Guarantor of an assignment for the benefit of creditors, or the failure by Guarantor generally to pay the debts of Guarantor as the debts become due.

 

(j) Judgments, Awards. The entry of any judgment, order, award, or decree against Guarantor and a determination by Lender, in its sole discretion, that the same, when aggregated with all other judgments, orders, awards and decrees outstanding against Guarantor, could have a material adverse effect on the prospect for Lender to fully and punctually realize the full benefits conferred on Lender by this Guaranty .

(k)

Adverse Change. The determination by Lender that a material adverse change has occurred in the financial condition of Guarantor from the condition set forth in the most recent financial statement heretofore furnished to Lender, or from the financial condition as heretofore most recently disclosed to Lender in any other manner which the Lender determines, in its sole and absolute discretion could have a material adverse effect on the prospect for the Lender to fully and punctually realize the full benefits of the Lender conferred by this Guaranty Agreement..

7.

RIGHTS AND REMEDIES UPON DEFAULT .

(a)

Rights and Remedies of Lender. In the event of an Event of Default hereunder, Lender may, at its option:

 

                        (i) Declare an amount equal to any or all of the outstanding balance of Guarantor ’ s Obligations to be immediately due and payable by Guarantor without presentment or demand which are hereby expressly waived, whether or not Lender has accelerated and called due any or all sums due from Borrower , and Guarantor shall immediately pay the same to Lender in immediately available funds in lawful money of the United States of America which shall be legal tender in payment of all dues and debts.

 

                     (ii) Exercise its right of setoff against any money, funds, credits or other property of any nature whatsoever of Guarantor now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, Lender or any affiliate of Lender in any capacity whatsoever, including without limitation, any balance of any deposit account and any credits with Lender or any affiliate of Lender.

 

                     (iii) Terminate any outstanding commitments of Lender to Obligor .

 

                    (iv) Exercise any or all rights, powers, and remedies provided for in the Security Agreement or any of the other Loan Documents or now or hereafter existing at law or in equity or by statute or otherwise.

(b)

Costs and Expenses. Guarantor agrees to pay to Lender on demand the reasonable amount of all expenses paid or incurred by Lender in consulting with counsel concerning any of its rights hereunder, under the Security Agreement or the other Loan Documents or under applicable law, and all reasonable expenses, including reasonable attorney ’ s fees and court costs paid or incurred by Lender in exercising or enforcing any of its

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rights hereunder, under the Security Agreement or the other Loan Documents or under applicable law together with interest on all such expenses paid by Lender (the “ Enforcement Costs ” ) at the highest rate charged on the principal sum of any of Borrower ’ s Obligations from the date of payment by Lender until repaid in full. The provisions of this Subsection shall survive the termination of this Guaranty and the payment of all other Guarantor ’ s Obligations.

8.

MISCELLANEOUS .

 

                 (a) Insolvency; Indemnification. Any modification, limitation or discharge of all or any part of Borrower ’ s Obligations arising out of or by virtue of any bankruptcy, arrangement, reorganization or similar proceeding for relief of debtors under Federal or State law initiated by or against Borrower and/or any other Obligor shall not modify, limit, lessen, reduce, impair, discharge or otherwise affect Guarantor ’ s Obligations hereunder in any manner whatsoever. If at any time any payment or portion thereof of Borrower ’ s Obligations, whether made by or for the account of Guarantor, is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by Lender to Borrower under any insolvency, bankruptcy or other federal and/or state laws, rules or regulations or as a result of any dissolution, liquidation or reorganization of Borrower or upon or as a result of the appointment of any receiver, intervenor or conservator of, or trustee or similar officer of Borrower or any substantial part of Borrower ’ s properties or assets, or in connection with any compromise or settlement relating to any of the above, Guarantor hereby agrees that this Guaranty shall continue and remain in full force and effect or be reinstated, as the case may be, all as though such payment(s) had not been made.

 

                  (b) Remedies Cumulative. Each right, power and remedy of Lender hereunder, under the Loan Documents or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent, and the exercise or the beginning of the exercise of any one or more of them shall not preclude the simultaneous or later exercise by Lender of any or all such other rights, powers or remedies. No failure or delay by Lender to insist upon the strict performance of any one or more provisions of this Guaranty or of the Loan Documents or to exercise any right, power or remedy consequent upon a breach thereof or a default hereunder shall constitute a waiver thereof, or preclude Lender from exercising any such right, power or remedy. By accepting full or partial payment after the due date of any of Guarantor ’ s Obligations, Lender shall not be deemed to have waived the right either to require prompt payment when due of all other sums when due and payable, or to declare a default for failure to effect such payment.

 

                (c) Commercial Transaction. The Loan made by Lender to Borrower and guaranteed by Guarantor pursuant to this Guaranty is or was incurred for the purpose _. of acquiring or carrying on a business or commercial enterprise and, as such, is a “ commercial loan ” within the meaning of Title 12 of the Commercial Law Article of the Annotated Code of Maryland (2005 Rep. Vol.), as amended and all proceeds of the Loan have been or will be used by Borrower solely in connection with such business or commercial enterprise.

 

               (d) Choice of Law; Forum Selection; Consent to Jurisdiction. This Guaranty shall be governed by, construed and interpreted in accordance with the laws of the State of Maryland (excluding the choice of law rules thereof). Guarantor hereby (a) agrees that all disputes and matters whatsoever arising under, in connection with, or incident to this Guaranty shall be litigated, if at all, in and before a court located in the State of Maryland to the exclusion of the courts of any other state or country and (b) irrevocably submits to the non-exclusive jurisdiction of any Maryland court or federal court sitting in the State of Maryland in any action or

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proceeding arising out of or relating to this Guaranty , and hereby irrevocably waives any objection to the laying or venue of any such action or proceeding in any such court and any claim that any such action or proceeding has been brought in an inconvenient forum. A final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law.

            (e) Invalidity of Any Part. If any provision or part of any provision of this Guaranty shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or any remaining part of any provision) of this Guaranty , and this Guaranty shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained in this Guaranty , but only to the extent of its invalidity, illegality, or unenforceability.

           (f) Notice: Any notice, demand, request or other communication which Lender or Guarantor may be required to give hereunder shall be in writing. Notices sent by hand delivery shall be deemed delivered upon receipt. Notices sent by overnight mail shall be deemed delivered the following day. Notices sent by first class mail shall be deemed delivered three (3) days after deposit in the United States Mail System. If notice is tendered pursuant to the provisions of this Section and is refused by the intended recipient thereof ’ , the notice, nevertheless, shall be considered to have been given and shall be effective as of the date herein provided. Notices shall be addressed as follows, or to such other addresses as the parties may designate by like notice:

If to Guarantor:

GOOD TIMES RESTAURANTS INC.

601 Corporate Circle

Golden, CO 80401

Attn: Mr. Boyd Hoback

If to Lender:

United Capital Business Lending, Inc.

215 Schilling Circle, Suite 100

Hunt Valley, MD 21031

Attn: Lisa Wheatley – Operations Department

Joseph Serio – Portfolio Management Dept

Notwithstanding anything to the contrary, all notices and demands for payment from Lender actually received in writing by Guarantor shall be considered to be effective upon the receipt thereof by Guarantor regardless of the procedure or method utilized to accomplish delivery thereof to Guarantor.

 

                    (g) Assignment. If any of Borrower ’ s Obligations should be assigned by Lender, Lender shall have the right to assign all or any part of this Guaranty to Lender ’ s assignee without consent of Guarantor, and this Guaranty will inure to the benefit of Lender ’ s assignee to the extent of such assignment, provided that Lender shall continue to have the unimpaired right to enforce this Guaranty as to any of Borrower ’ s Obligations not so assigned.

 

                   (h) Independence and Subordination. The obligations of Guarantor hereunder are independent of any other guaranty(s) at any time in effect with respect to all or any part of Borrower ’ s Obligations and Guarantor ’ s Obligations hereunder may be enforced regardless of the existence of any such other guaranty(s). If Guarantor has advanced or shall advance any sums to Borrower or if Borrower shall hereafter otherwise become indebted to Guarantor, such sums and indebtedness and any lien on any property of Borrower granted to

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Guarantor as security therefore shall be subordinated in all respects to the amounts then or thereafter due and owing to Lender and to any lien granted by Borrower to Lender.

 

                  (i) Effect of Lender ’ s Security Interest. In the event that Lender shall be granted a security interest in or lien upon any real or personal property in respect of or as security for any of the Borrower ’ s Obligations, the same shall be for the sole and exclusive benefit of Lender, and not for the benefit, whether direct or indirect, by subrogation or otherwise, of Guarantor unless Lender shall expressly and in writing grant subrogation or other rights to Guarantor.

 

             (j)  Joint and Several Liabilities. Any other person who, pursuant to a separate agreement has agreed to guarantee the Loan shall be jointly and severally liable for payment of its obligations to the Lender as and when due and payable in accordance with the provisions of this Guaranty or any other agreement executed by such person in connection with the Loan. The undersigned agrees that the Lender may (without notice to or consent of any or all of the undersigned or any other person who has agreed to guarantee the Loan and with or without consideration) release, compromise, settle with, proceed against any or all of the undersigned or any other Guarantor without affecting, impairing, lessening or releasing the Obligations of the undersigned or of the other Guarantors.

(k)

WAIVER OF JURY TRIAL. GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH GUARANTOR AND LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS GUARANTY OR (B) THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR, AND GUARANTOR HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

(l)

General Miscellaneous Provisions. Time is of the essence under this Guaranty. The paragraph headings of this Guaranty are for convenience only, and shall not limit or otherwise affect any of the terms hereof. This Guaranty and the Loan Documents, if any, constitute the entire agreement between the parties with respect to their subject matter and supersede all prior letters, representations, or agreements, oral or written, with respect thereto. Lender may divulge to any potential assignee, transferee or participant all information, reports, financial statements and documents obtained in connection with this Guaranty and any other Loan Documents or otherwise. No modification, release, or waiver of this Guaranty shall be deemed to be made by Lender unless in writing signed by Lender, and each such waiver, if any, shall apply only with respect to the specific instance involved. No course of dealing or conduct shall be effective to modify, release or waive any provisions of this Guaranty or any of the other Loan Documents. This Guaranty shall inure to the benefit of and be enforceable by Lender and Lender ’ s successors and assigns and any other person to whom Lender may grant an interest in Borrower ’ s Obligations and shall be binding upon and enforceable against Guarantor and Guarantor ’ s personal representatives, successors, heirs and assigns. Whenever used herein, the singular number shall include the plural, the plural the singular, and the use of the masculine, feminine, or neuter gender shall include all genders. This Guaranty may be executed in any number of counterparts, all of which, when taken together shall constitute one Agreement.

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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty under seal as of the day and year first hereinabove set forth.

STATE OF COLORADO , COUNTY OF JEFFERSON

The undersigned does hereby certify that on this 8 day of July, 2014, before me, the Subscriber, a Notary Public in and for the State and County aforesaid, personally appeared Boyd E. Hoback , who acknowledged himself to be the President of GOOD TIMES RESTAURANTS INC.

WITNESS my hand and Notarial Seal.

Christi Pennington

Notary Public

My commission expires on:  10-2-14

SEAL AFFIXED

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