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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Loan #71329

(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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Loan #71329

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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Loan #71329

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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Loan #71329

(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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Loan #71329

(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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Loan #71329

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.

 

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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