NOBLE ROMANS INC
General Information - -------------------  Noble Roman's, Inc., an Indiana corporation incorporated in 1972 (the "Company"), sells and services franchises for non-traditional and co-branded foodservice operations under the trade names "Noble Roman's Pizza" and "Tuscano's Italian Style Subs." The concepts' hallmarks include high quality pizza and sub sandwiches, along with other related menu items, simple operating systems, labor-minimizing operations, attractive food costs and overall affordability. In 2005 the Company began selling franchises for its dual-branded concept in traditional locations. The Company plans to sell development territories to Area Developers in an attempt to accelerate growth in the dual-branded traditional concept. Prior to focusing its efforts on franchising for non-traditional and co-branded foodservice operations, the Company had approximately 25 years' experience operating full-service pizza restaurants, giving it unique advantages in the design and consultation of foodservice systems for franchisees. Since 1997, the Company has focused its efforts and resources primarily on franchising for non-traditional and co-branded locations and now has awarded franchises in 44 states plus Washington, D.C., Puerto Rico, Guam, Italy and Canada. The initial investment, including franchise fee, for a Noble Roman's franchise ranges from approximately $26,700 to $197,500, for a Tuscano's franchise from approximately $30,600 to $167,900, and for both franchises in the same facility from approximately $56,000 to $261,700, depending on the type of facility. Royalties and fees from franchise operations accounted for 86.1%, 85.8% and 86.2% of total revenue for 2003, 2004 and 2005, respectively. Other financial information about the Company's business, including revenue, profit and loss and total assets, is detailed in Item 8 - Financial Statements and Supplementary Data.  Products & Systems - ------------------  Noble Roman's Pizza - -------------------  Superior quality that our customers can taste - that is the hallmark of Noble Roman's Pizza. Every ingredient and process has been designed with a view to produce superior results. Here are a few of the differences that we believe make our product unique:       o    Crust made with only specially milled flour with above average protein           and yeast.      o    Fresh packed, uncondensed sauce made with secret spices, parmesan           cheese and vine-ripened tomatoes.      o    100% real cheese blended from mozzarella and muenster, with no soy           additives or extenders.      o    100% real meat toppings, again with no additives or extenders - a real           departure from many pizza concepts.      o    Vegetable and mushroom toppings that are sliced and delivered fresh,           never canned.      o    An extended product line that includes breadsticks with dip, pasta,           baked sandwiches, salads, wings and a line of breakfast products.      o    A recently introduced fully-prepared pizza crust that captures the           made-from-scratch pizzeria flavor which gets delivered to the           franchise location shelf-stable so that dough handling is no longer an           impediment to a consistent product.                                         4   The Company carefully developed all of its menu items to be delivered in a ready-to-use form requiring only on-site assembly and baking. These menu items are manufactured by third party vendors and distributed by unrelated distributors who deliver throughout all 48 contiguous states. This process results in products that are great tasting, quality consistent, easy to assemble, relatively low in food cost and require very low amounts of labor.  Tuscano's Italian Style Subs - ----------------------------  During 2004, the Company improved its cold sub sandwich menu items and expanded the offerings into a separate concept called Tuscano's Italian Style Subs. Tuscano's was designed to be comfortably familiar from a customer's perspective but with many distinctive features that include an Italian themed menu. The franchise fee and ongoing royalty for a Tuscano's is identical to that charged for a Noble Roman's Pizza franchise. For the most part, the Company expects to award Tuscano's franchises for the same facilities as Noble Roman's Pizza franchises, although Tuscano's franchises are also available for locations that do not have a Noble Roman's Pizza franchise.  With its Italian theme, Tuscano's offers a distinctive yet recognizable format. Like most other brand name sub concepts, customers select menu items at the start of the counter line then choose toppings and sauces according to their preference until they reach the check out point. Yet Tuscano's has many unique competitive features, including its Tuscan theme, the extra rich yeast content of its fresh baked bread, the thematic menu selections and serving options, high quality meats, and generous yet cost-effective quality sauces and spreads. Tuscano's was designed to be premium quality, simple to operate and cost-effective.  Franchise Development - ---------------------  Noble Roman's has sold franchises in 44 states from coast-to-coast within the United States. In addition, it has sold franchises for military bases in Puerto Rico, Guam and Italy, and for entertainment facilities and convenience stores in Canada.  The Company plans to continue its focus on awarding franchise agreements for both Noble Roman's Pizza and Tuscano's Italian Style Subs in non-traditional venues such as hospitals, military bases, universities, convenience stores, attractions, entertainment facilities, casinos, airports, travel plazas, office complexes and hotels which it has been doing the past several years. In addition, the Company recently began offering the dual-branded concept of Noble Roman's/Tuscano's for stand-alone traditional locations.  In order to seek more rapid growth, the Company has initiated a strategy to sell development territories, by television areas of dominant influence, to Area Developers for the growth of its traditional dual-branded concept. Area Developers will have the exclusive right to develop the dual-branded traditional concept in their area. The Area Development Agents will generally pay a development fee of $.05 per capita in their development area and will receive 30% of the initial franchise fee and 2/7ths of the royalty from the locations developed pursuant to those agreements. The Company retains all training and supervision responsibilities and must approve all franchisees and all locations. In order to maintain the rights to develop the territory, each Development Agent has to meet the minimum development schedule stipulated in the Area Development Agreement. Currently, the Company is in discussions with several potential Area Developers.                                         5   Competition - -----------  The restaurant industry in general is very competitive with respect to convenience, price, product quality and service. In addition, the Company competes for franchise sales on the basis of product engineering and quality, investment cost, cost of sales, distribution, simplicity of operation and labor requirements. A change in the business strategy of one or more of the Company's competitors could have an adverse effect on the Company's ability to sell additional franchises, maintain and renew existing franchises or sell its products through its franchise system. Many of the Company's competitors are very large, internationally established companies.  Within the competitive environment of the non-traditional franchise segment of the restaurant industry, management has defined what it believes to be certain competitive advantages for the Company. First, several of the Company's competitors in the non-traditional segment are also large chains operating thousands of franchised, traditional restaurants. Because of the contractual relationships with many of their franchisees, some competitors may be unable to offer wide-scale site availability for potential non-traditional franchisees. The Company is not faced with any significant geographic restrictions.  Within the competitive environment of the traditional franchise segment of the restaurant industry, management has defined what it believes to be certain competitive advantages for the Company. One of these advantages is that due to the Company's recently developed fully-prepared crust, pizzas can be prepared and baked in less than five minutes, which the Company believes is a significant advantage especially in the delivery segment of the business.  Several of the Company's competitors in the non-traditional segment were established with little or no organizational history in owning and operating traditional foodservice locations. This lack of operating experience may be a limitation for them in attracting and maintaining non-traditional franchisees who, by the nature of the segment, often have little exposure to foodservice operations themselves. The Company's background in traditional restaurant operations has provided it experience in structuring, planning, marketing, and cost controlling franchise unit operations which may be of material benefit to franchisees.  Seasonality of Sales - --------------------  Direct sales of non-traditional franchises may be affected in minor ways by certain seasonalities and holiday periods. Franchise sales to certain non-traditional venues may be slower around major holidays such as Thanksgiving and Christmas, and during the first quarter of the year. Franchise sales to other non-traditional venues show less or no seasonality. Additionally, in middle and northern climates where adverse winter weather conditions may hamper outdoor travel or activities, foodservice sales by franchisees may be sensitive to sudden drops in temperature or precipitation which would in turn affect Company royalties.                                         6   Employees - ---------  As of February 28, 2006, the Company employed approximately 29 persons full-time and 47 persons on a part-time, hourly basis. No employees are covered under collective bargaining agreements, and the Company believes that relations with its employees are good.  Trademarks and Service Marks - ----------------------------  The Company owns and protects several trademarks and service marks. Many of these, including NOBLE ROMAN'S (R), Noble Roman's Pizza(R), THE BETTER PIZZA PEOPLE (R) and Tuscano's Italian Style Subs(R) are registered with the United States Patent and Trademark Office as well as with the corresponding agencies of certain other foreign governments. The Company believes that its trademarks and service marks have significant value and are important to its sales and marketing efforts.  Government Regulation - ---------------------  The Company and its franchisees are subject to various federal, state and local laws affecting the operation of our respective businesses. Each franchise location is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building and other agencies and ordinances in the state or municipality in which the facility is located. The process of obtaining and maintaining required licenses or approvals can delay or prevent the opening of a franchise location. Vendors, such as our third party production and distribution services, are also licensed and subject to regulation by state and local health and fire codes, and U. S. Department of Transportation regulations. The Company, its franchisees and its vendors are also subject to federal and state environmental regulations.  The Company is subject to regulation by the Federal Trade Commission ("FTC") and various state agencies pursuant to federal and state laws regulating the offer and sale of franchises. Several states also regulate aspects of the franchisor-franchisee relationship. The FTC requires us to furnish to prospective franchisees a disclosure document containing certain specified information. Some states also regulate the sale of franchises and require registration of a franchise offering circular with state authorities. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for additional federal regulation of the franchisor-franchisee relationship in certain respects. State laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship, and the Company would be subject to applicable laws in each jurisdiction where it seeks to market additional franchised units.
All phases of the Company's operations are subject to a number of uncertainties, risks and other influences, many of which are outside of the Company's control and any one of which, or a combination of which, could materially affect the Company's results of operations. Important factors that could cause actual results to differ materially from the Company's expectations are discussed below. Prospective investors should carefully consider these factors before investing in the Company's securities. These risks and uncertainties include, without limitation:                                         7   Competition from larger companies.  The Company competes for franchise sales with large national companies and numerous regional and local companies. Many of the Company's competitors have greater financial and other resources than the Company. The restaurant industry in general is intensely competitive with respect to convenience, price, product quality and service. In addition, the Company competes for franchise sales on the basis of product engineering and quality, investment cost, cost of sales, distribution, simplicity of operation and labor requirements. A change in the business strategy of one or more of the Company's competitors could have an adverse effect on the Company's ability to sell additional franchises, maintain and renew existing franchises or sell its products through its franchise system. As a result of these factors, we may have difficulty competing effectively from time to time or in certain markets.  Dependence on growth strategy.  A significant component of the Company's growth strategy is selling new franchises and assisting franchisees in opening new restaurants. The opening and success of new restaurants will depend upon various factors, including the franchisee's ability to find suitable sites, the ability to negotiate leases for the new restaurants on acceptable terms, the ability to comply with applicable regulatory requirements, the ability to meet construction schedules, the ability of the franchisees to manage their anticipated expansion and to hire and train personnel, the ability of the franchisees to obtain acceptable financing and the effect of competition and general economic and business conditions including, but not limited to, food and labor costs. Many of the foregoing factors are not within the control of the Company. There can be no assurance that the Company will be able to achieve its plans with respect to the opening of new franchise units.  Dependence on success of franchisees.  A significant portion of the Company's earnings comes from royalties generated by its franchises. Franchisees are independent operators, and their employees are not the Company's employees. The Company provides training and support to franchisees, but the quality of franchise store operations may be diminished by any number of factors beyond the Company's control. Consequently, franchisees may not successfully operate stores in a manner consistent with the Company's standards and requirements, or may not hire and train qualified managers and other store personnel. If they do not, the Company's image and reputation may suffer, and its revenues and stock price could decline. While the Company attempts to ensure that its franchisees maintain the quality of its brand and branded products, franchisees may take actions that adversely affect the value of the Company's intellectual property or reputation.  Dependence on consumer preferences and perceptions.  The restaurant industry is often affected by changes in consumer tastes, national, regional and local economic conditions, demographic trends, traffic patterns and the type, number and location of competing restaurants. The Company can be substantially adversely affected by publicity resulting from food quality, illness, injury, or other health concerns or operating issues stemming from one restaurant or a limited number of restaurants.                                         8   Interruptions in supply or delivery of fresh food products.  Dependence on frequent deliveries of fresh product also subjects the Company to the risks that shortages or interruptions in the supply caused by inclement weather or other conditions could adversely affect the availability, quality and cost of ingredients. In addition, factors such as inflation, market conditions for cheese, food, paper and labor may also adversely affect the franchisees and, as a result, adversely affect the Company's ability to add new restaurants.  Dependence on a few individuals.  The Company's business has been and will continue to be dependent upon the efforts and abilities of certain members of its management, particularly Paul Mobley, the Company's Chairman, Chief Executive Officer and Chief Financial Officer, and A. Scott Mobley, the Company's President and Chief Operating Officer. The loss of either of their services could have a material adverse effect on the Company.  Company subject to Indiana law with regard to purchase of the Company's stock.  Certain provisions of Indiana law applicable to the Company could have the affect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could also limit the price that certain investors might be willing to pay in the future for shares in the Company. These provisions include prohibitions against certain business combinations with persons that become "interested shareholders" (persons owning or controlling shares with voting power equal to 10% or more) unless the Company's Board of Directors approves either the business combination or the acquisition of stock before the person becomes an "interested shareholder."  Company and its franchisees subject to various federal, state and local laws with regard to the operation of the businesses.  The Company is subject to regulation by the FTC and various state agencies pursuant to federal and state laws regulating the offer and sale of franchises. Several states also regulate aspects of the franchisor-franchisee relationship. The FTC requires the Company to furnish to prospective franchisees a disclosure document containing certain specified information. Some states also regulate the sale of franchises and require registration of a franchise offering circular with state authorities. Substantive state laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the franchisor-franchisee relationship in certain respects. The state laws often limit, among other things, the duration and scope of non-competition provisions and the ability of a franchisor to terminate or refuse to renew a franchise. Some foreign countries also have disclosure requirements and other laws regulating franchising and the franchisor-franchisee relationship, and the Company would be subject to applicable laws in each jurisdiction where it seeks to market additional franchise units.  Each franchise location is subject to licensing and regulation by a number of governmental authorities, which include health, safety, sanitation, building and other agencies and ordinances in the state or municipality in which the facility is located. The process of obtaining and maintaining required licenses or approvals can delay or prevent the opening of a franchise location. Vendors, such as our third party production and distribution services, are also licensed and subject to regulation by state and local health and fire codes, and U. S. Department of Transportation regulations. The Company, its franchisees and its vendors are also subject to federal and state environmental regulations.                                         9
None.
The Company's headquarters are located in 8,000 square feet of leased office space in Indianapolis, Indiana. The lease for this property expires in December 2008.  The Company also leases space for the Company-owned dual-branded restaurant in Indianapolis, Indiana which is used as a demonstration and test restaurant. The lease for this property expires December 31, 2010. The Company has the option to extend the term of this lease for two additional five-year periods.  The Company leases space for operating a dual-branded restaurant in Indianapolis, Indiana which it intends to sell when an appropriate franchisee can be identified. The lease for this property expires December 5, 2010. The Company has the option to extend the term of this lease for two additional five-year periods. This lease also provides for the Company to assign the lease to a franchisee when it is franchised.
The Company, from time to time, is involved in various litigation relating to claims arising out of its normal business operations.  The Company is not involved in any litigation currently, nor is any litigation currently threatened, which would have any material effect upon the Company.
None.                                       PART II
Market Information - ------------------  The Company's common stock is included on Nasdaq "Electronic Bulletin Board" and trades under the symbol "NROM."                                          10    The following table sets forth for the periods indicated, the high and low bid prices per share of common stock as reported by Nasdaq. The quotations reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not represent actual transactions.                                             2004                    2005            Quarter Ended:            High       Low         High         Low                                      ----       -----       ----         ---             March 31                 $1.55       $1.01       $.95          $.70            June 30                   1.50        1.15       $.85          $.63            September 30              1.35        1.00      $1.15          $.71            December 31               1.15         .73      $1.01          $.77   Holders of Record - -----------------  As of March 1, 2006, there were approximately 351 holders of record of the Company's common stock. This excludes persons whose shares are held of record by a bank, brokerage house or clearing agency.  Dividends - ---------  The Company has never declared or paid dividends on its common stock. The Company intends to retain earnings to fund the development and growth of its business and does not expect to pay any dividends within the foreseeable future.  Sale of Unregistered Securities - -------------------------------  None.  Equity Compensation Plan Benefit Information - --------------------------------------------  The following table provides information as of December 31, 2005 with respect to the shares of our common stock that may be issued under our existing equity compensation plans.                                                                                                                 Number of securities                                                                                                             remaining available for                                                Number of Securities to be    Weighted-average exercise       future issuance under                                                  issued upon exercise of       price of outstanding        equity compensation plans                                                   outstanding options,           options, warrants           (excluding securities                                                    warrants and rights               and rights             reflected in column (a))                 Plan Category                             (a)                            (b)                          (c)     Equity compensation plans approved by stockholders                                                  --                        $   --                         --  Equity compensation plans not approved by stockholders                                             303,750                        $ 1.05                          --                                                     ----------------                                            ---------------- Total                                                    303,750                        $ 1.05                          --                                                     ----------------                                            ----------------                                           11
Year Ended December 31,                                                     -------------------------------------------------------- Statement of Operations Data:                         2001        2002        2003        2004        2005                                                     --------    --------    --------    --------    --------       Royalties and fees                                  $  5,162    $  5,644    $  6,701    $  6,789    $  7,270 Administrative fees and other                            306         294         199         125          72 Restaurant revenue                                       279         711         882         998       1,089                                                     --------    --------    --------    --------    --------       Total revenue                                    5,747       6,649       7,782       7,912       8,431 Operating expenses                                     2,051       2,152       2,328       2,522       2,627 Restaurant operating expenses                            266         702         867         962       1,059 Depreciation and amortization                             54          63          68          50          70 General and administrative                             1,207       1,255       1,259       1,403       1,491                                                     --------    --------    --------    --------    --------       Operating income                                 2,169       2,477       3,260       2,975       3,184 Interest and other                                     1,255       1,254       1,047         946         817 Other income                                                           --          --          --          --       2,801                                                     --------    --------    --------    --------    -------- Income before income taxes from continuing       operations                                         914       1,223       2,213       2,029       5,168 Income taxes                                             311         416         752         690       1,757                                                     --------    --------    --------    --------    --------       Net income from continuing operations              603         807       1,461       1,339       3,411  Loss from discontinued operations                     (1,671)       (313)       (167)       (404)       (560)                                                     --------    --------    --------    --------    --------       Net income (loss)                             $ (1,068)   $    494    $  1,294    $    935    $  2,851       Cumulative preferred dividends                                                           --          --          --          --          16                                                     --------    --------    --------    --------    --------       Net income (loss) available to common           stockholders                              $ (1,068)   $    494    $  1,294    $    935    $  2,835                                                     ========    ========    ========    ========    ========  Weighted average number of common shares              14,794      16,058      16,169      16,280      16,849       Net income per share from continuing           operations                                $    .04    $    .05    $    .09    $    .08    $    .20       Loss per share from discontinued operations       (.11)       (.02)       (.01)       (.02)       (.03)                                                     --------    --------    --------    --------    --------           Net income (loss) per share               $   (.07)   $    .03    $    .08    $    .06    $    .17                                                     ========    ========    ========    ========    ========  Balance Sheet Data (at year end):  Working capital (deficit)                           $    (83)   $     16    $  2,220    $  2,107    $  2,793 Total assets                                          13,192      13,601      14,284      15,249      15,523 Long-term obligations, net of current portion         10,141       9,232      10,099       9,740       7,125 Stockholders' equity                                $    675    $  1,168    $  2,462    $  4,256    $  6,513
Introduction - ------------  The Company sells and services franchises for non-traditional, co-branded and stand-alone foodservice operations under the trade name "Noble Roman's Pizza" and "Tuscano's Italian Style Subs." Both concepts' hallmarks include high quality products, simple operating systems, labor minimizing operations, attractive food costs and overall affordability.  On August 25, 2005, the Company consummated a Settlement Agreement with SummitBridge National Investments, LLC and related entities. As of a result of the Settlement Agreement, Noble Roman's acquired all of SummitBridge's debt and equity interests in Noble Roman's, except for 2,400,000 shares of common stock,                                          12   for a purchase price of $8,300,000. These interests consisted of a senior secured promissory note in the principal amount of $7,700,000, interest accrued on the note of $927,756, 3,214,748 shares of Noble Roman's common stock, $4,929,274 stated amount of Noble Roman's no-yield preferred stock which was convertible into 1,643,092 shares of common stock, and a warrant to purchase 385,000 shares of Noble Roman's common stock with an exercise price of $.01 per share.  Simultaneous with the closing on the Settlement Agreement, Noble Roman's obtained a new six- year term loan in the principal amount of $9,000,000. The new note calls for monthly principal payments of $125,000 plus interest at the rate of LIBOR plus 4% per annum adjusted on a monthly basis. The Company's obligations under the loan are secured by the grant of a security interest in its personal property. The Company elected to purchase a swap contract fixing the rate on 50% of the principal balance for the first two years and then $3 million of the principal amount for the following two years at an annual interest rate of 8.83% per annum.  Financial Summary - -----------------  The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. The Company evaluates the carrying values of its assets, including property, equipment and related costs, accounts receivable and deferred tax asset, periodically to assess whether any impairment indications are present due to (among other factors) recurring operating losses, significant adverse legal developments, competition, changes in demands for the Company's products or changes in the business climate that affect the recovery of recorded value. If any impairment of an individual asset is evident, a charge will be provided to reduce the carrying value to its estimated fair value.  Contractual Obligations - -----------------------                           Total      Less than 1 year   1-3 Years        3-5 Years   More than 5 years        Long-term debt        $8,625,000      $1,500,000      $3,000,000      $3,000,000      $1,125,000 Operating leases         725,567         200,806         373,377         151,384              --                       ----------      ----------      ----------      ----------      ----------      Total            $9,350,567      $1,700,806      $3,373,377      $3,151,384      $1,125,000                       ==========      ==========      ==========      ==========      ==========   The following table sets forth the 2003, 2004 and 2005 operating results included in the Company's consolidated statement of operations.                                          13                    Condensed Consolidated Statement of Operations                       Noble Roman's, Inc. and Subsidiaries                                                                          Years Ended December 31,                                     ------------------------------------------------------------------------------------------                                                  2003                            2004                            2005                                                  ----                            ----                            ----        Royalties and fees                  $ 6,700,457        86.1%        $ 6,788,590         85.8%        $ 7,269,868        86.2% Administrative fees and other           199,231          2.6            124,893           1.6             72,177           .9 Restaurant revenue                      882,305         11.3            998,037          12.6          1,088,783         12.9                                         -------         ----            -------          ----          ---------         ----      Total revenue                    7,781,992        100.0          7,911,520         100.0          8,430,828        100.0  Express operating expenses:      Salaries and wages               1,083,168         13.9          1,169,701          14.8          1,139,502         13.5      Trade show expense                 327,615          4.2            405,580           5.1            474,555          5.6      Travel expense                     219,365          2.8            282,302           3.6            333,617          4.0      Other operating expense            698,120          9.0            664,001           8.4            678,231          8.0 Restaurant expenses                     867,227         11.1            961,552          12.2          1,059,396         12.6 Depreciation                             67,938           .9             50,493            .6             69,964           .8 General and administrative            1,259,035         16.2          1,403,338          17.7          1,491,243         17.7                                       ---------         ----          ---------          ----          ---------         ----       Operating income                 3,259,524         41.9          2,974,553          37.6          3,184,320         37.8  Interest expense                      1,046,581         13.4            946,234          12.0            817,357          9.7 Other income                                  -            -                  -             -          2,800,830         33.2                                       ---------         ----          ---------          ----          ---------         ----      Income before income taxes       2,212,944         28.4          2,028,319          25.6          5,167,793         61.3 Income taxes                            752,401          9.7            689,628           8.7          1,757,049         20.8                                       ---------         ----          ---------          ----          ---------         ----      Net income from continuing           operations                 $1,460,543        18.8%        $ 1,338,691         16.9%        $ 3,410,744        40.5%                                      ==========                     ===========                      ===========   2005 Compared with 2004 - -----------------------  Total revenue increased from $7.9 million in 2004 to $8.4 million in 2005. This increase was primarily the result of an increase in royalties and fees from the addition of new franchises. Royalties and fees increased from approximately $6.8 million in 2004 to approximately $7.3 million in 2005. Included in royalties and fees were approximately $795,500 for 2004 and $699,500 for 2005 for initial franchise fees. Because one of the Company's strategic directions is to grow its business by franchising non-traditional locations, and because the number of such locations that are available for targeted growth is large, the Company believes that the initial franchise fee revenue for non-traditional locations will continue. Additionally, the Company has recently targeted additional growth by developing traditional dual-branded locations through the use of Area Developers. Because of this addition, the Company believes that franchise fee revenue has the potential to be greater in the future.  Restaurant revenues increased from $998,037 in 2004 to $1.089 million in 2005. The Company only intends to operate one restaurant to be used for testing and demonstration purposes but from time to time temporarily operates others until a suitable franchisee is located.  Salaries and wages decreased from 14.8% of revenue in 2004 to 13.5% of revenue in 2005. This decrease was primarily the result of actual salaries and wages remaining constant while the revenue increased primarily as a result of an increase in franchise locations.  Trade show expenses increased from 5.1% of revenue in 2004 to 5.6% of revenue in 2005. This increase was primarily the result of adding additional national trade shows in different venues. The Company anticipates this actual dollar expense to                                          14   remain approximately the same in 2006 and, with anticipated growth in revenue, the percentage expense is anticipated to decrease in 2006.  Travel expenses increased from 3.6% of revenue in 2004 to 4.0% of revenue in 2005. This increase was primarily the result of opening more locations farther away from the home office. Even though the Company expects opening more locations farther away from the home office will continue, the Company anticipates that the expected additional growth in revenue for 2006 will offset the expected increase in travel so that the travel expense, as a percentage of revenue, would stabilize or slightly decrease over time.  Other operating expenses decreased from 8.4% of revenue in 2004 to 8.0% of revenue in 2005. This decrease was primarily the result of maintaining operating expenses at approximately the same dollar amount while the revenue increased primarily from the growth in franchise locations. The Company anticipates that other operating expenses, as a percentage of revenue, will continue to decline as a result of anticipated additional growth in 2006 while maintaining operating expenses at approximately the same dollar amount.  Restaurant expenses increased from 12.2% of revenue in 2004 to 12.6% of revenue in 2005. This increase resulted primarily from the Company operating more restaurants on a temporary basis in 2005. The Company only intends to operate one restaurant to be used for testing and demonstration purposes but from time to time temporarily operates others until a suitable franchisee is located.  General and administrative expenses remained a constant 17.7% of revenue in 2004 and 2005. This was primarily the result of growth in administrative expense being offset by growth in revenue. The increase in administrative expenses was due in part to expenses associated with the now-settled SummitBridge litigation. The Company expects to be able to maintain the current level of cost as a percent of revenue and possibly lower it slightly over time with the expenses from the SummitBridge litigation now over.  Operating income increased from $3.0 million in 2004 to $3.2 million in 2005. This was primarily the result of additional revenue from growth in the number of franchise locations while maintaining control of the operating expenses.  Interest expense decreased from 12.0% of revenue in 2004 to 9.7% of revenue in 2005. This was a result of a decrease in interest cost because of the reduction in the amount of debt outstanding and, additionally, the result of an increase in revenue.  Other income was $2.8 million in 2005 resulting from the Company consummating a settlement agreement with SummitBridge National Investments, LLC and related entities, as described above under "-Introduction."  Net income from continuing operations increased from $1.34 million in 2004 to $3.41 million in 2005. This increase was primarily the result of the other income described in the previous paragraph and, additionally, the increase in income from continuing operations from $1.34 million in 2004 to $1.56 million in 2005 as a result of the increase in operating income.  The Company recognized a net loss from discontinued operations in 2005 of $560,153 after a tax benefit of $387,603 and $403,753 after a tax benefit of $243,175 in 2004. The loss from discontinued operations was primarily the result of settling lease disputes on lease agreements related to restaurants closed in                                          15   1999 and 2000 and for legal fees related to the discontinued operations. The Company believes that any additional expenses resulting from the discontinued operations, in the future, will not be material.  2004 Compared with 2003 - -----------------------  Total revenue increased from $7.8 million in 2003 to $7.9 million in 2004. Continuing fees such as royalties and product allowances were approximately the same in 2004 as 2003, while new franchise fees increased approximately $400,000 and commissions on equipment sales decreased by approximately $250,000.  Restaurant revenues increased from approximately $882,000 in 2003 to $998,000 in 2004. This increase was the result of operating more units on a temporary basis in 2004 than were operated in 2003. From time to time the Company operates units until a qualified franchisee can be located. The Company does not plan to operate any units on a permanent basis except for one location which is used as a test kitchen and demonstration facility.  Salaries and wages increased from 13.9% of revenue in 2003 to 14.8% of revenue in 2004. This increase was primarily the result of preparing the Company for additional growth beyond what was realized in 2004.  Trade show expenses increased from 4.2% of revenue in 2003 to 5.1% of revenue in 2004. This increase was the result of participating in more national trade shows to attract franchisees from additional venues to further diversify the Company's target market.  Travel expenses increased from 2.8% of revenue in 2003 to 3.6% of revenue in 2004. This increase was the result of more locations opening farther away from the home office.  Other operating expenses decreased from 9.0% of revenue in 2003 to 8.4% of revenue in 2004. This decrease was primarily the result of tightly controlling operating expenses.  Restaurant expenses increased from 11.1% of revenue in 2003 to 12.2% of revenue in 2004. This increase was the result of operating more units on a temporary basis in 2004 than were operated in 2003.  General and administrative expenses increased from 16.2% of revenue in 2003 to 17.7% of revenue in 2004. This increase was primarily the result of the cost of the litigation with SummitBridge.  Operating income decreased from $3.3 million in 2003 to $3.0 million in 2004. This decrease was the result of various increases in expenses described above while achieving less growth in revenue than was expected.  Net income from continuing operations decreased from $1.46 million in 2003 to $1.34 million in 2004. This decrease was primarily the result of the various increases in expenses, as described above, while less than expected growth in revenue was achieved.  The Company recognized a net loss from discontinued operations in 2004 of $403,753 after a tax benefit of $243,175. Additionally, the Company recorded previously unrecorded deferred tax assets from discontinued operations in the amount of $527,095 in 2004.                                          16   Impact of Inflation - -------------------  The primary inflation factors affecting the Company's operations are food and labor costs to the franchisee. To date, the Company has been able to offset the effects of inflation in food costs without significantly increasing prices through effective cost control methods and greater purchasing power as a result of additional growth. The competition for labor has resulted in higher salaries and wages for the franchisees, however, that effect is largely minimized by the relatively low labor requirements of the Company's franchise concepts.  Liquidity and Capital Resources - -------------------------------  The Company's strategy is to grow its business by continuing to franchise in non-traditional locations and by franchising in traditional locations primarily through the use of Area Development Agents. This strategy does not require significant additional capital.  As a result of the Company's strategy, cash flow generated from operations, the Company's current rate of entering into new franchises and the anticipated growth, the Company believes it will have sufficient cash flow to meet its obligations and to carry out its current business plan.  On August 25, 2005, the Company finalized a Settlement Agreement with SummitBridge National Investments, LLC and related entities. As of a result of the Settlement Agreement, Noble Roman's acquired all of SummitBridge's debt and equity interests in Noble Roman's, except for 2,400,000 shares of common stock, for a purchase price of $8,300,000. These interests consisted of a senior secured promissory note in the principal amount of $7,700,000, interest accrued on the note of $927,756, 3,214,748 shares of Noble Roman's common stock, $4,929,274 stated amount of Noble Roman's no-yield preferred stock which was convertible into 1,643,092 shares of common stock, and a warrant to purchase 385,000 shares of Noble Roman's common stock with an exercise price of $.01 per share.  Simultaneous with the closing on the Settlement Agreement, Noble Roman's obtained a new six- year term loan in the principal amount of $9,000,000. The new note calls for monthly principal payments of $125,000 plus interest at the rate of LIBOR plus 4% per annum adjusted on a monthly basis. The Company's obligations under the loan are secured by the grant of a security interest in its personal property. The Company elected to purchase a swap contract fixing the rate on 50% of the principal balance for the first two years and then $3 million of the principal amount for the following two years at an annual interest rate of 8.83% per annum.  The Company does not anticipate that any of the recently issued Statement of Financial Accounting Standards will have a material impact on the Company's Statement of Operations or its Balance Sheet.  Forward Looking Statements - --------------------------  The statements contained above in Management's Discussion and Analysis concerning the Company's future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the Company that are based on the beliefs of the management of the Company, as well as assumptions and estimates made by and information currently available to the Company's management. The Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist including, but not limited to, competitive factors and pricing pressures, shifts in market demand, general                                          17   economic conditions, changes in demand for the Company's products or franchises, the impact of competitors' actions and changes in prices or supplies of food ingredients and labor as well as the factors discussed above under "Risk Factors." Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.
The Company's current borrowings are at a monthly variable rate tied to LIBOR. However, the Company elected to purchase a swap contract fixing the rate on 50% of the principal balance for the first two years and then $3 million of the principal amount for the following two years at an annual interest rate of 8.83% per annum.  The Company has concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.                                                           18
December 31,                                                                                           ------------                                                 Assets                                2004            2005                                                                                       ----            ----    Current assets:    Cash - non-restricted                                                          $    260,025    $    740,940    Cash - restricted                                                                   196,754              --    Accounts and notes receivable (net of allowances of $82,262 in 2004 and         $122,262 in 2005)                                                            1,011,758       1,299,942    Inventories                                                                         207,856         221,712    Assets held for resale                                                                   --         461,709    Prepaid expenses                                                                    505,646         301,661    Current portion of long-term notes receivable                                       183,478         173,498    Deferred tax asset - current portion                                                994,148       1,478,175                                                                                   ------------    ------------            Total current assets                                                      3,359,665       4,677,637                                                                                   ------------    ------------  Property and equipment:    Equipment                                                                         1,042,790       1,150,718    Leasehold improvements                                                               94,017         105,503                                                                                   ------------    ------------                                                                                      1,136,807       1,256,221    Less accumulated depreciation and amortization                                      484,068         565,102                                                                                   ------------    ------------           Net property and equipment                                                   652,739         691,119                                                                                   ------------    ------------ Deferred tax asset (net of current portion)                                          9,135,834       7,782,360 Other assets including long-term portion of notes receivable                         2,100,437       2,371,774                                                                                   ------------    ------------                       Total assets                                                $ 15,248,675    $ 15,522,890                                                                                   ============    ============                                    Liabilities and Stockholders' Equity Current liabilities:    Accounts payable and accrued expenses                                          $  1,252,852    $    384,928    Current portion of long-term notes payable                                               --       1,500,000                                                                                   ------------    ------------                 Total current liabilities                                            1,252,852       1,884,928                                                                                   ------------    ------------  Long-term obligations:    Note payable to bank (net of current portion)                                     7,700,000       7,125,000    Subordinated debentures                                                           2,040,000              --                                                                                   ------------    ------------                 Total long-term liabilities                                          9,740,000       7,125,000                                                                                   ------------    ------------  Stockholders' equity:    Common stock (25,000,000 shares authorized, 17,136,884 outstanding        at December 31, 2004 and 16,322,136 outstanding as of December 31, 2005)     18,648,512      21,021,632    Preferred stock (5,000,000 shares authorized)                                     4,929,274       1,978,800    Accumulated deficit                                                             (19,321,963)    (16,487,470)                                                                                   ------------    ------------                 Total stockholders' equity                                           4,255,823       6,512,962                                                                                   ------------    ------------                       Total liabilities and stockholders' equity                  $ 15,248,675    $ 15,522,890                                                                                   ============    ============  See accompanying notes to consolidated financial statements.                                         19                         Consolidated Statements of Operations                       Noble Roman's, Inc. and Subsidiaries                                                                     Year Ended December 31,                                                         --------------------------------------------                                                             2003            2004            2005                                                         ------------    ------------    ------------     Royalties and fees                                      $  6,700,457    $  6,788,590    $  7,269,868 Administrative fees and other                                199,230         124,893          72,177 Restaurant revenue                                           882,305         998,037       1,088,783                                                         ------------    ------------    ------------                 Total revenue                              7,781,992       7,911,520       8,430,828  Operating expenses:      Salaries and wages                                    1,083,168       1,169,701       1,139,502      Trade show expense                                      327,615         405,580         474,555      Travel expense                                          219,365         282,302         333,617      Other operating expenses                                698,120         664,001         678,231      Restaurant expenses                                     867,228         961,552       1,059,396 Depreciation and amortization                                 67,938          50,493          69,964 General and administrative                                 1,259,034       1,403,338       1,491,243                                                         ------------    ------------    ------------               Operating income                             3,259,524       2,974,553       3,184,320  Interest and other expense                                 1,046,581         946,234         817,357 Other income                                                      --              --       2,800,830                                                         ------------    ------------    ------------          Income before income taxes from                    continuing operations                   2,212,944       2,028,319       5,167,793  Income tax expense                                           752,401         689,628       1,757,051                                                         ------------    ------------    ------------          Net income from continuing operations             1,460,543       1,338,691       3,410,742  Loss from discontinued operations net of tax benefit     of  $86,071, $243,175 and $387,603, respectively        (167,079)       (403,753)       (560,153)                                                         ------------    ------------    ------------           Net income                                       1,293,464         934,938       2,850,589 Cumulative preferred dividends                                    --              --          16,096                                                         ------------    ------------    ------------           Net income available to common stockholders   $  1,293,464    $    934,938    $  2,834,493                                                         ============    ============    ============  Earnings per share - basic:     Net income from continuing operations               $         09    $        .08    $        .20     Net income                                                   .08             .06             .17 Weighted average number of common shares     outstanding                                           16,168,911      16,280,171      16,848,932  Diluted earnings per share:     Net income from continuing operations               $        .09    $        .08    $        .20     Net income                                                   .08             .06             .16 Weighted average number of common shares     outstanding                                           16,799,214      16,888,236      17,406,367  See accompanying notes to consolidated financial statements.                                         20                         Consolidated Statements of Changes in                               Stockholders' Equity                       Noble Roman's, Inc. and Subsidiaries                                                      Preferred               Common Stock           Accumulated                                                      Stock            Shares          Amount         Deficit             Total                                                      -----            ------          ------         -------             -----       Balance at December 31, 2002                      $ 4,929,274       16,166,158    $ 17,789,452     $(21,550,365)     $ 1,168,361  Non-cash exercise    of warrants                                                         111,666  2003 net income                                                                                       1,293,464        1,293,464                                                   -----------       ----------    ------------     ------------      -----------  Balance at December 31, 2003                        4,929,274       16,277,824      17,789,452      (20,256,901)       2,461,825    Conversion of    participating income notes to    common stock                                                        859,060         859,060                           859,060  2004 net income                                                                                         934,938          934,938                                                   -----------       ----------    ------------     ------------      -----------  Balance at December 31, 2004                        4,929,274       17,136,884      18,648,512      (19,321,963)       4,255,823    2005 net income                                                                                       2,850,589        2,850,589  Cumulative preferred     dividends                                                                                           (16,096)         (16,096)  Conversion of long-term    subordinated debentures to    preferred stock less issuance cost               1,978,800                                                          1,978,800  Conversion of preferred    stock to common stock                          (4,929,274)        1,643,092       4,929,274                                --  Purchase of    SummitBridge shares                                              (2,457,840)     (2,556,154)                       (2,556,154)                                                   -----------       ----------    ------------     ------------      -----------                                                            --                                                --  Balance at December 31, 2005                      $ 1,978,800       16,322,136     $21,021,632     $(16,487,470)      $6,512,962                                                   ===========       ==========     ===========     =============      ==========  See accompanying notes to consolidated financial statements.                                         21                         Consolidated Statements of Cash Flows                       Noble Roman's, Inc. and Subsidiaries                                                                                Year ended December 31,                                                                    ----------------------------------------- OPERATING ACTIVITIES                                                  2003           2004           2005                                                                    -----------    -----------    -----------          Net income                                                    $ 1,293,464    $   934,938    $ 2,850,589      Adjustments to reconcile net income to net cash      provided by operating activities:           Depreciation and amortization                                235,013        137,172        134,403           Interest accrued not paid                                         --             --        354,533           Non-cash gain from purchase of SummitBridge's interest            --             --     (2,800,830)           Deferred income taxes                                        666,330        446,453      1,449,303           Loss from discontinued segment                               253,150        646,927        560,153           Changes in operating assets and liabilities:              (Increase) decrease in:                   Accounts and notes receivable                       (561,940)      (379,616)      (308,559)                   Inventories                                          (21,964)        57,835        (34,868)                   Assets held for resale                                    --             --       (449,564)                   Prepaid expenses                                    (118,333)       (65,745)       163,985                   Other assets                                         (30,905)       (42,861)        21,397              Increase (decrease) in:                  Accounts payable                                     (738,645)       277,962       (253,187)                                                                    -----------    -----------    -----------                  NET CASH PROVIDED BY OPERATING                      ACTIVITIES                                        976,170      2,013,065      1,687,355                                                                    -----------    -----------    -----------  INVESTING ACTIVITIES      Purchase of property and equipment                                (65,946)      (125,851)       (98,402)                                                                    -----------    -----------    -----------              NET CASH USED BY INVESTING ACTIVITIES                     (65,946)      (125,851)       (98,402)                                                                    -----------    -----------    -----------  FINANCING ACTIVITIES      Payment of obligations from discontinued operations              (953,881)    (1,771,718)    (1,190,795)      Payment of cumulative preferred dividends                              --             --        (16,096)      Asset sold for note receivable                                         --        (75,000)            --      Payment of principal on outstanding debt                       (1,713,740)      (165,840)      (375,000)      Payment received on long-term notes receivable                     46,744        147,923        235,201      Purchase of all of SummitBridge's interest in the company          except 2.4 million shares of common stock                          --             --     (8,300,000)      Issuance cost of the new preferred stock                               --             --        (61,200)      Proceeds from issuance of long-term debt, net of debt          issue costs                                                 1,934,919             --      8,599,852                                                                    -----------    -----------    -----------                NET CASH USED BY FINANCING ACTIVITIES                   (685,958)    (1,864,635)    (1,108,038)                                                                    -----------    -----------    -----------  Increase in cash                                                       224,266         22,579        480,915 Cash at beginning of year                                               13,180        237,446        260,025                                                                    -----------    -----------    ----------- Cash at end of year                                                $   237,446    $   260,025    $   740,940                                                                    ===========    ===========    ===========   Supplemental Schedule of Non-Cash Investing and Financing Activities:  The holders of $2,040,000 aggregate principal amount of subordinated debentures exchanged their subordinated debentures for preferred stock with an aggregate liquidation value of $2,040,000.  See accompanying notes to consolidated financial statements.                                         22   Notes to Consolidated Financial Statements Noble Roman's, Inc. and Subsidiaries  Note l:  Summary of Significant Accounting Policies  Organization: The Company sells and services franchises for non-traditional and co-branded foodservice operations under the trade names "Noble Roman's Pizza" and "Tuscano's Italian Style Subs."  Principles of Consolidation: The consolidated financial statements include the accounts of Noble Roman's, Inc. and its subsidiaries, Pizzaco, Inc., N.R. Realty, Inc., GNR, Inc., LPS, Inc., N.R. East, Inc. and Oak Grove Corporation (collectively, the "Company"). Inter-company balances and transactions have been eliminated in consolidation.  Inventories: Inventories consist of food, beverage, restaurant supplies, restaurant equipment and marketing materials and are stated at the lower of cost (first-in, first-out) or market.  Property and Equipment: Equipment and leasehold improvements are stated at cost including property under capital leases. Depreciation and amortization are computed on the straight-line method over the estimated useful lives. Leasehold improvements are amortized over the shorter of estimated useful life or the term of the lease.  Advertising Costs: The Company records advertising costs consistent with Statement of Position 93-7 "Reporting on Advertising Costs." This statement requires the Company to expense advertising production costs the first time the production material is used.  Fair Value of Financial Instruments: The Company's current borrowings are at a monthly variable rate tied to LIBOR. However, the Company elected to purchase a swap contract fixing the rate on 50% of the principal balance for the first two years and then $3 million of the principal amount for the following two years at an annual interest rate of 8.83% per annum.  Use of Estimates: The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The Company records a valuation allowance in a sufficient amount to adjust the total receivables value, in its best judgment, to reflect the amount that the Company estimates will be collected from its total receivables. As any accounts are determined to be uncollectible, they are charged off against the valuation allowance. The Company evaluates its property and equipment and related costs periodically to assess whether any impairment indications are present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any impairment of an individual asset is evident, a loss would be provided to reduce the carrying value to its estimated fair value.  Intangible Assets: Debt issue costs are amortized to interest expense ratably over the term of the applicable debt.  Royalties, Administrative and Franchise Fees: Royalties are recognized as income monthly and are based on a percentage of monthly sales of franchised restaurants. Administrative fees are recognized as income monthly as earned.                                          23   Initial franchise fees are recognized as income when the franchised restaurant is opened.  Income Taxes: The Company provides for current and deferred income tax liabilities and assets utilizing an asset and liability approach along with a valuation allowance as appropriate. The Company concluded that its valuation allowance was adequate at December 31, 2004 and 2005 because it is more likely than not that the Company will earn sufficient income before the expiration of its net operating loss carry forwards to fully realize the value of the recorded deferred tax asset. The net operating loss carry-forward is approximately $25.7 million which expires between the years 2011 and 2016. Management made the determination that the valuation allowance was adequate after reviewing the Company's business plans, all known facts to date, recent trends, current performance and analysis of the backlog of franchises sold but not yet open.  Basic and Diluted Net Income Per Share: Net income per share is based on the weighted average number of common shares outstanding during the respective year. When dilutive, stock options and warrants are included as share equivalents using the treasury stock method.  Note 2:  Notes Payable  On August 25, 2005, the Company consummated a Settlement Agreement with SummitBridge National Investments, LLC and related entities. As of a result of the Settlement Agreement, Noble Roman's acquired all of SummitBridge's debt and equity interests in Noble Roman's, except for 2,400,000 shares of common stock, for a purchase price of $8,300,000. These interests consisted of a senior secured promissory note in the principal amount of $7,700,000, interest accrued on the note of $927,756, 3,214,748 shares of Noble Roman's common stock, $4,929,274 stated amount of Noble Roman's no-yield preferred stock which was convertible into 1,643,092 shares of common stock, and a warrant to purchase 385,000 shares of Noble Roman's common stock with an exercise price of $.01 per share.  Simultaneous with the closing on the Settlement Agreement, Noble Roman's obtained a new six- year term loan in the principal amount of $9,000,000. The new note calls for monthly principal payments of $125,000 plus interest at the rate of LIBOR plus 4% per annum adjusted on a monthly basis. The Company's obligations under the loan are secured by the grant of a security interest in its personal property. The Company elected to purchase a swap contract fixing the rate on 50% of the principal balance for the first two years and then $3 million of the principal amount for the following two years at an annual interest rate of 8.83% per annum.  Simultaneous with the closing under the Settlement Agreement and the new term loan, the previous holders of the Company's subordinated debentures, in the principal amount of $2,040,000, which bore interest at the rate of 8% per annum which was payable quarterly and which were to mature December 31, 2006, accepted an offer from the Company to convert their subordinated debentures to convertible preferred stock with an aggregate liquidation value of $2,040,000 . The convertible preferred stock provides for cumulative dividends of 8% per annum on the liquidation value of the convertible preferred stock. The preferred stock is convertible after December 31, 2006 into Noble Roman's common stock at a conversion price of $2.25 per share. At any time after December 31, 2008, the Company shall have the right, but not the obligation, to redeem all preferred shares for a purchase price equal to the liquidation value.                                          24   Note 3:  Royalties and Fees  Approximately $483,500, $795,500 and $699,500 are included in the 2003, 2004 and 2005 royalties and fees in Consolidated Statement of Operations for initial franchise fees. Because a primary strategy of the Company has been to grow its business by franchising primarily in non-traditional locations and the number of such locations that are available for targeted growth, the Company believes that the initial franchise fee revenue for non-traditional locations will continue. Additionally, the Company has recently targeted additional growth by developing traditional dual-branded locations through the use of Area Developers. Most of the cost for the services required to be performed by the Company are incurred prior to the franchise fee income being recorded which is based on contractual liability for the Franchisee. For the most part, the Company's ongoing royalty income is paid electronically by the Company initiating a draft on the franchisee's account by electronic withdrawal. As such, the Company has no material amount of past due royalties.  In conjunction with the development of Noble Roman's Pizza and Tuscano's Italian Style Subs, the Company has devised its own recipes for many of the ingredients that go into the making of its products ("Proprietary Products"). The Company contracts with various manufacturers to manufacture its Proprietary Products in accordance with the Company's recipes and formulas and to sell those products to authorized distributors at a contract price which includes an allowance for use of the Company's recipes. The manufacturing contracts also require the manufacturers to remit those allowances to the Company on a periodic basis, usually monthly. The Company recognizes those allowances in revenue as earned based on sales reports from the distributors.  Note 4:  Contingent Liabilities for Leased Facilities  The Company formerly leased its restaurant facilities under non-cancelable lease agreements which generally had initial terms ranging from five to 20 years with extended renewal terms. These leases have all been assigned to franchisees who operate them pursuant to a Noble Roman's, Inc. Franchise Agreement. The assignment passes all liability for future lease payments to the assignees, however, the Company remains contingently liable on a portion of the leases to the landlords in the event of default by the assignees. The leases generally required the Company or its assignees to pay all real estate taxes, insurance and maintenance costs. The leases provided for a specified annual rental, and some leases called for additional rental based on sales volume over specified levels at that particular location. At December 31, 2005, contingent obligations under non-cancelable operating leases for 2006, 2007, 2008, 2009, 2010 and after 2010 were approximately $171,528, $171,528, $171,528, $107,688, $107,688 and $460,318, respectively.  Note 5:  Income Taxes:  The Company had a deferred tax asset, as a result of prior operating losses, of $10,129,982 at December 31, 2004 and $8,760,535 at December 31, 2005, most of which expires between the years 2012 and 2016. In 2003, 2004 and 2005, the Company used deferred benefits to offset its tax expense of $752,401, $689,628 and $1,757,051, respectively, and tax benefits from loss on discontinued operations of $86,071, $243,175 and $387,603 for 2003, 2004 and 2005, respectively. After review, based on time period of the tax carryforward and current operating results, the Company reduced its valuation allowance by $500,000 to $1,655,000 against the deferred tax asset as of December 2005. The valuation allowance reduction is reflected in the discontinued operations.                                          25   Note 6:  Common Stock  During 2003, a warrant holder exercised its warrants to purchase 150,000 shares at $.40 per share on a cashless basis and received 111,666 shares of common stock.  During 2004, the holders of participating income notes exercised their option to convert those notes to 859,060 shares of common stock.  During 2005, the Company purchased all of the common stock owned by SummitBridge National Investments, LLC except for 2,400,000 shares after the conversion of its preferred stock with a stated value of $4,929,274 to common stock at the conversion price of $3.00 per share.  At December 31, 2005, the Company had outstanding warrants to purchase common stock as follows:        # Common Shares Represented    Exercise Price    Warrant Expiration Date                 50,000                   $ 1.50               6/30/2006              1,000,000                   $  .40               12/31/2007              1,000,000                   $  .93               12/31/2007                404,000                   $ 1.25               1/15/2008              1,000,000                   $  .93               1/7/2010                 50,000                   $  .95               9/26/2010                600,000                   $  .93               1/24/2011  The Company has an incentive stock option plan for key employees and officers. The options are generally exercisable three years after the date of grant and expire ten years after the date of grant. The option prices are the fair market value of the stock at the date of grant. Options granted and remaining outstanding at December 31, 2005 are: 33,000 common shares at $1.75 per share, 40,000 common shares at $1.00 per share, 8,000 common shares at $1.385 per share, 24,250 common shares at $1.46 per share, 47,500 common shares at $1.45 per share, 75,000 common shares at $.55 per share, 10,000 common shares at $.89 and 66,000 common shares at $.83. As of December 31, 2005, options for 237,750 shares are exercisable.  The Series B Preferred Stock with a liquidation value of $2,040,000 is convertible, after December 31, 2006, at the option of the holder to common stock at a conversion price of $2.25 per share. The Company, at its option, may redeem the preferred stock after December 31, 2008 at the liquidation value.  In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R (revised 2004), "Share-Based Payments" (SFAS 123R). SFAS 123R requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements based on the estimated fair value of the awards. The Company adopted SFAS 123R effective for periods beginning January 1, 2006. For periods prior to 2005, the Company accounted for stock-based compensation using the intrinsic method prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations (APB 25). Accordingly, no compensation cost for stock options has been recognized and none were issued in 2005.                                         26   Note 7:  Statement of Financial Accounting Standards  The Company does not believe that the recently issued Statement of Financial Accounting Standards will have any material impact on the Company's Statement of Operations or its Balance Sheet.  Note 8:  Loss from Discontinued Operations  Pursuant to the Company's strategic decision in 1999 to refocus its business on its non-traditional and co-branding franchising opportunities, the Company closed or franchised all of its formerly owned full-service restaurants. A loss on these discontinued operations was recognized in a gross amount of $1,047,726 in 2003, an expense of $403,753 after a tax benefit of $243,175 in 2004, and an expense of $560,153 after a tax benefit of $387,603 in 2005. The loss from discontinued operations is primarily the result of settling lease disputes on lease agreements related to restaurants closed in 1999 and 2000 and for legal fees related to the discontinued operations.  Note 9:  Contingencies  The Company, from time to time, is involved in various litigation relating to claims arising out of its normal business operations.  The Company is not involved in any litigation currently, nor is any litigation currently threatened, which would have any material effect upon the Company.  Note 10:  Certain Relationships and Related Transactions  The following is a summary of transactions to which the Company and certain officers and directors of the Company are a party or have a financial interest. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates must be approved by a majority of the Company's disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties.  Douglas Coape-Arnold was paid $55,000 in consulting fees and $2,480 in interest on Participating Income Notes in 2003, $60,000 in consulting fees and $4,680 of interest on Participating Income Notes in 2004, and $72,000 in consulting fees and $2,800 of interest on Participating Income Notes in 2005.  Geovest Capital Partners, LP, whose managing partner is Douglas Coape-Arnold, was paid $139,547 in interest in participating income notes in 2003, $150,728 in 2004 and $77,379 in 2005.  On August 25, 2005, the Company consummated a Settlement Agreement with SummitBridge. As of a result of the Settlement Agreement, Noble Roman's acquired all of SummitBridge's debt and equity interests in Noble Roman's, except for 2,400,000 shares of common stock, for a purchase price of $8,300,000. These interests consisted of a senior secured promissory note in the principal amount of $7,700,000, interest accrued on the note of $927,756, 3,214,748 shares of Noble Roman's common stock, $4,929,274 stated amount of Noble Roman's no-yield preferred stock which was convertible into 1,643,092 shares of common stock, and a warrant to purchase 385,000 shares of Noble Roman's common stock with an exercise price of $.01 per share.                                          27   Note 11:  Unaudited Quarterly Financial Information                                                           Quarter Ended                                                        -------------          2005                       December 31   September 30     June 30       March 31          ----                       -----------   ------------     -------       --------                                              (in thousands, except per share data)      Total revenue                         $ 2,114        $ 2,105       $ 2,161       $ 2,051 Operating income                          781            796           831           776 Income before income taxes from     continuing operations                 578          3,390           627           573 Net income from continuing     operations                            382          2,237           414           378 Net income                            $   450        $ 1,912       $   111       $   378 Net income per common share     from continuing operations         Basic                         $   .03        $   .13       $   .02       $   .02         Diluted                           .03            .13           .02           .02 Net income per share         Basic                             .02            .11           .01           .02         Diluted                           .01            .11           .01           .02                                                          Quarter Ended                                                        -------------          2004                       December 31   September 30     June 30       March 31          ----                       -----------   ------------     -------       --------                                              (in thousands, except per share data)  Total revenue                         $ 1,830        $ 2,016       $ 2,123       $ 1,943 Operating income                          574            787           872           742 Income before income taxes from     continuing operations                 363            546           622           497 Net income from continuing     operations                            235            360           416           328 Net income (loss)                     $  (169)       $   360       $   416       $   328 Net income per common share     from continuing operations         Basic                         $   .02        $   .02       $   .03       $   .02         Diluted                           .02            .02           .02           .02 Net income (loss) per share         Basic                            (.01)           .02           .03           .02         Diluted                          (.01)           .02           .02           .02                                             28      To the Board of Directors and   Stockholders of Noble Roman's, Inc.                             INDEPENDENT AUDITORS' REPORT  We have audited the accompanying consolidated balance sheets of Noble Roman's, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, cash flows and changes in stockholders' equity(deficit) for the years ended December 31, 2005, 2004 and 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Noble Roman's, Inc. and subsidiaries at December 31, 2005 and 2004, and the results of their operations, and their cash flows for the years ended December 31, 2005, 2004 and 2003 in conformity with accounting principles generally accepted in United States.  /s/ Larry E. Nunn & Associates, LLC  Columbus, Indiana March 22, 2006                                            29
None.
Based on his evaluation as of the end of the period covered by this report, Paul W. Mobley, the Company's Chief Executive Officer and Chief Financial Officer, has concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective. There have been no changes in internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
None.                                      PART III
The executive officers and directors of the Company are:          Name                    Age    Positions with the Company         ----                    ---    --------------------------       Paul W. Mobley              65    Chairman of the Board, Chief Executive                                        Officer, Chief Financial Officer and                                        Director      A. Scott Mobley             42    President, Secretary and Director      Douglas H. Coape-Arnold     60    Director      Troy Branson                42    Executive Vice President of Franchising      Mitchell Grunat             53    Vice President of Franchise Services      Michael B. Novak            48    Vice President of Product Development,                                        Purchasing and Distribution       The executive officers of the Company serve at the discretion of the Board of Directors and are elected at the annual meeting of the Board. Directors serve one-year terms or until their successors are elected and qualified. The following is a brief description of the previous business background of the executive officers and directors:       Paul W. Mobley has been Chairman of the Board, Chief Executive Officer and Chief Financial Officer since December 1991 and a Director since 1974. Mr. Mobley was President of the Company from 1981 to 1997. From 1975 to 1987, Mr. Mobley was a significant shareholder and president of a company which owned and operated 17 Arby's franchise restaurants. From 1974 to 1978, he also served as Vice President and Chief Operating Officer of the Company and from l978 to 1981 as Senior Vice President. He is the father of A. Scott Mobley. Mr. Mobley has a B.S. in Business Administration from Indiana University and is a CPA. Mr. Mobley is also a Director of Monroe Bancorp.                                          30        A. Scott Mobley has been President since October 1997 and a Director since January 1992, and Secretary since February 1993. Mr. Mobley was Vice President from November 1988 to October 1997 and from August 1987 until November 1988 served as Director of Marketing for the Company. Prior to joining the Company Mr. Mobley was a strategic planning analyst with a division of Lithonia Lighting Company. Mr. Mobley has a B.S. in Business Administration from Georgetown University and an MBA from Indiana University. He is the son of Paul W. Mobley.       Douglas H. Coape-Arnold was appointed a Director of the Company in May 1999. Mr. Coape-Arnold has been Managing General Partner of Geovest Capital Partners, L.P. since January 1997, and was Managing Director of TradeCo Global Securities, Inc. from May 1994 to December 2002. Mr. Coape-Arnold's prior experience includes serving as Vice President of Morgan Stanley & Co., Inc. from 1982 to 1986, President & Chief Executive Officer of McLeod Young Weir Incorporated from 1986 to 1988, and Senior Vice President of GE Capital's Transportation & Industrial Funding Corp. from 1988 to 1991. Mr. Coape-Arnold is a Chartered Financial Analyst.       Troy Branson, has been Executive Vice President of Franchising for the Company since November 1997 and from 1992 to 1997, he was Director of Business Development. Prior to joining the Company, Mr. Branson was an owner of Branson-Yoder Marketing Group from 1987 to 1992, after graduating from Indiana University where he received a B.S. in Business.       Mitchell Grunat, has been Vice President of Franchise Services for the Company since August 2002. Prior to joining the Company, Mr. Grunat was Chief Operating Officer of Lanter Eye Care from 2001 to 2002, Business Development Officer for Midwest Bankers from 2000 to 2001, and Chief Operating Officer for Tavel Optical Group from 1987 to 2000. Mr. Grunat has B.A. degree in English and Philosophy from Muskingum College.       Michael B. Novak has been Vice President of Product Development, Purchasing and Distribution since March 2006. Prior to recently joining the Company, Mr. Novak was employed by Delco Foods, a regional food distributor from 2001 to 2006. Prior to Mr. Novak being employed by Delco Foods, he was employed by the Company from 1984 to 2001 as a restaurant General Manager, Area Director of Operations and Director of Product Development and Distribution.        Section l6(a) Beneficial Ownership Reporting Compliance      -------------------------------------------------------       Based solely on a review of the copies of reports of ownership and changes in ownership of the Company's common stock, furnished to the Company, or written representations that no such reports were required, the Company believes that during 2005 all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 were complied with.                                        * * *       Because no separate Audit Committee has been established, the Board of Directors, as a whole, acts as the Audit Committee. Mr. Coape-Arnold is qualified as an "Audit Committee Financial Expert."       The Company has adopted a code of ethics for its Senior Executive and Financial Officers. The code of ethics can be obtained by contacting the Company's executive office at the address set forth on the cover page of this report.                                          31
The following table sets forth the cash and non-cash compensation for each of the Company's last three years awarded to or earned by the Chief Executive Officer and three other highest paid executive officers of the Company, the only executive officers whose salary and bonus exceeded $100,000 for 2005.                             SUMMARY COMPENSATION TABLE                            --------------------------                                                                                   Long-Term Compensation                                                        Annual Compensation      Securities Underlying Name and Principal Position                        Year   Salary (l)    Bonus         Options # - ---------------------------                        ----   ----------    -----   ---------------------          Paul Mobley                                    2005    $390,000    $    --               --         Chairman of the Board                      2004    $360,000         --               --                                                    2003    $318,000         --       A. Scott Mobley                               2005    $247,808    $ 2,895               --         President and Secretary                    2004    $241,708    $    --           20,000                                                    2003    $209,135    $    --                -       Troy Branson                                  2005    $100,000    $88,138               --          Executive Vice President of Franchising   2004    $103,846    $82,075           15,000                                                    2003    $100,000    $83,722               --       Mitchell Grunat                               2005    $155,815    $    --               --           Vice President of Franchise Services     2004    $155,769         --           10,000                                                    2003    $141,692         --           10,000 - ------------------  (1) The Company did not have any bonus, retirement, or other arrangements or plans respecting compensation, except for an Incentive Stock Option Plan for executive officers and other employees.  Option Grants In Last Year       The Company did not grant any stock options during the year ended December 31, 2005, to any employee, officer or director.                          Aggregate Option Exercises in Last                   Fiscal Year and Fiscal Year-End Option Values                   ---------------------------------------------  The following table sets forth information concerning the number of exercisable and unexercisable stock options held at December 31, 2005 by the executive officers named in the Summary Compensation Table.                                          32                        Number of Securities            Values of Unexercised                     Underlying Unexercised              In-The-Money                      Options at 12/31/05            Options at 12/31/05 (1)                    Exercisable/Unexercisable       Exercisable/Unexercisable                    -------------------------       -------------------------  Paul W. Mobley        30,000  /       0             $  9,300    /   $     0 A. Scott Mobley       70,000  /  20,000                9,300    /     3,600 Troy Branson          65,000  /  15,000                6,900    /     2,700 Mitchell Grunat       20,000  /  10,000                5,800    /     1,800        (1)  Based on a per share price of $1.01, the last reported transaction           price of the Company's common stock on December 31, 2005.  Employment Agreements - ---------------------  Mr. Paul Mobley has an employment agreement with the Company which fixes his base compensation at $ 390,000 per year for 2005, provides for reimbursement of travel and other expenses incurred in connection with his employment, including the furnishing of an automobile, health and accident insurance similar to that provided other employees, and life insurance in an amount related to his base salary. The initial term of the agreement is seven years and automatically renews each year for a seven-year period unless the Board takes specific action to not renew. The agreement is terminable by the Company for just cause as defined in the agreement.  Mr. A. Scott Mobley has an employment agreement with the Company which fixes his base compensation at $ 248,241 per year for 2005, provides for reimbursement of travel and other expenses incurred in connection with his employment, including the furnishing of an automobile, health and accident insurance similar to that provided other employees, and life insurance in an amount related to his base salary. The initial term of the agreement is five years and automatically renews each year for a five-year period unless the Board takes specific action to not renew. The agreement is terminable by the Company for just cause as defined in the agreement.  The Company does not pay any separate compensation for Directors that are also employees of the Company. During 2005, the Company paid its non-employee Director a fee of $ 72,000.
As of March 1, 2006, there were 16,322,136 shares of the Company's common stock outstanding and and 25,000,000 shares are authorized. The following table sets forth the amount and percent of the Company's voting common stock beneficially owned on March 1, 2006 by (i) each director and named executive officer individually, (ii) each beneficial owner of more than five percent of the Company's outstanding common stock and (iii) all executive officers and directors as a group:                                          13           Name and Address                             Amount and Nature         Percent of Outstanding       of Beneficial Owner                      of Beneficial Ownership (1)    Voting Common Stock (2)       -------------------                      ---------------------------    -----------------------         Paul W. Mobley            One Virginia Avenue, Suite 800            Indianapolis, IN   46204                   3,471,018 (3)                    21.3%      A. Scott Mobley (1)           One Virginia Avenue, Suite 800           Indianapolis, IN  46204                     1,417,326 (4)                     9.3       Geovest Capital Partners, L.P.           750 Lexington Avenue, 4th Floor            New York, N.Y.  10022                      1,667,741 (5)                    11.9       James W. Lewis           335 Madison Ave., Suite 1702            New York, N.Y.  10017                      1,709,580 (6)                    12.2      Douglas H. Coape-Arnold                                                         250,000 (7)                     1.8      Troy Branson                                                          65,100 (8)                      --      Mitchell Grant                                                          20,000 (9)                      --      Zyville E. Lewis            456 N. Maple Street           Greenwich, CT  06830                        1,145,396                         8.2      All Executive Officers and           Directors as a Group (5 Persons)            5,223,444                        29.3 - ------------------   (1)  All shares owned directly with sole investment and voting power, unless      otherwise noted.  (2)  The percentage calculations are based upon 14,052,386 shares of the      Company's common stock, eligible to vote, issued and outstanding as of      March 1, 2006 and, for each officer or director of the group, the number of      shares subject to options, warrants or conversion rights exercisable      currently or within 60 days of March 1, 2006.  (3)  The total includes a warrant to purchase 600,000 shares of stock at an      exercise price of $.40 per share which expires December 31, 2007, a warrant      to purchase 700,000 shares of common stock at an exercise price of $.93 per      share which expires December 31, 2007, a warrant to purchase 600,000 shares      at an exercise price of $.93 per share which expires January 7, 2010, a      warrant to purchase 300,000 shares at an exercise price of $.93 which      expires January 24, 2011, 10,000 shares subject to options granted under an      employee stock option plan which are currently exercisable at $1.00 per      share and 20,000 shares subject to options granted under an employee stock      option plan which are currently exercisable at $.55 per share.  (4)  The total includes 70,000 shares subject to options granted under an      employee stock option plan which are currently exercisable at $1.75 per      share for 20,000 common shares, $1.00 per share for 10,000 common shares,                                         34        $1.45 per share for 20,000 common shares and $.55 per share for 20,000      common shares. Also includes a warrant to purchase 400,000 shares of common      stock at an exercise price of $.40 per share which expires December 31,      2007 and a warrant to purchase 300,000 shares of common stock at an      exercise price of $.93 per share which expires December 31, 2007, a warrant      to purchase 300,000 shares of common stock at an exercise price of $.93 per      share which expires January 7, 2010, and a warrant to purchase 200,000      shares of common stock at an exercise price of $.93 per share which expires      January 24, 2011.  (5)  Mr. Douglas H. Coape-Arnold is Managing Partner of Geovest Capital      Partners, LP, however, Mr. Coape-Arnold disclaims beneficial ownership of      such shares beyond his interest in Geovest Capital Partners.  (6)  This total includes 138,580 shares of common stock owned by James Lewis      Family Investments LP and 220,000 shares of our common stock owned by James      W. Lewis MPPP.  (7)  This total includes a warrant to purchase 100,000 shares of common stock at      an exercise price of $.93 per share which expires January 7, 2010 and a      warrant to purchase 100,000 shares of common stock at an exercise price of      $.93 per share which expires January 24, 2011.  (8)  This total includes 65,000 shares subject to options granted under an      employee stock option plan which are currently exercisable at $.55 per      share for 15,000 common shares, $1.45 per share for 20,000 common shares,      $1.46 per share for 15,000 common shares, $1.38 per share for 5,000 common      shares and $1.75 per share for 10,000 common shares.  (9)  This total includes 20,000 shares subject to options granted under an      employee stock option plan which are currently exercisable at $.89 per      share for 10,000 common shares and $.55 per share for 10,000 common shares.  SummitBridge National Investments LLC, Drawbridge Special Opportunities Fund LP, Drawbridge Special Opportunities Advisors LLC, Fortress Investment Group LLC, Highbridge/Zwirn Special Opportunities Fund, L.P., Highbridge/Zwirn Capital Management LLC, D.B. Zwirn & Co., LLC, and Daniel B. Zwirn (collectively "SummitBridge") filed an Amendment No. 3 to Schedule 13D with the Securities and Exchange Commission on February 15, 2006 in which it reported shared dispositive power over 2,269,750 shares of common stock of the Company. However, SummitBridge currently has no voting rights as to such shares due to the applicability of the Indiana Control Share Acquisition Law. On August 25, 2005, the Company consummated a Settlement Agreement with SummitBridge. Pursuant to the Settlement Agreement, the Company agreed to use commercially reasonable efforts to assist SummitBridge in finding one or more buyers for its stock over a six- to nine-month period. That period has now expired, therefore, SummitBridge has the right to require the Company and its executive officers to use commercially reasonable efforts to cause the Company's shareholders to vote to restore SummitBridge's voting rights on their remaining shares. In addition, since the period has expired, SummitBridge has certain registration rights with respect to the resale of the shares it holds.                                          35
The following is a summary of transactions to which the Company and certain officers and directors of the Company are a party or have a financial interest. The Board of Directors of the Company has adopted a policy that all transactions between the Company and its officers, directors, principal shareholders and other affiliates must be approved by a majority of the Company's disinterested directors, and be conducted on terms no less favorable to the Company than could be obtained from unaffiliated third parties.  Douglas Coape-Arnold, director, was paid $72,000 in consulting fees and $2,800 of interest on Participating Income Notes in 2005.  Geovest Capital Partners, LP, whose managing partner is Douglas Coape-Arnold, was paid $77,379 of interest on Participating Income Notes in 2005.  On August 25, 2005, the Company consummated a Settlement Agreement with SummitBridge. As of a result of the Settlement Agreement, Noble Roman's acquired all of SummitBridge's debt and equity interests in Noble Roman's, except for 2,400,000 shares of common stock, for a purchase price of $8,300,000. These interests consisted of a senior secured promissory note in the principal amount of $7,700,000, interest accrued on the note of $927,756, 3,214,748 shares of Noble Roman's common stock, $4,929,274 stated amount of Noble Roman's no-yield preferred stock which was convertible into 1,643,092 shares of common stock, and a warrant to purchase 385,000 shares of Noble Roman's common stock with an exercise price of $.01 per share. Additional information regarding the Settlement Agreement is set forth in Item 12 above and is incorporated herein by reference.
The following table presents fees for professional audit services rendered by Larry E. Nunn & Associates, LLC for the audit of our annual financial statements, and fees billed for other services rendered by Larry E. Nunn & Associates, LLC during the fiscal years shown.                               Fiscal Year Ended        Fiscal Year Ended                              December 31, 2005        December 31, 2004                              -----------------        -----------------        Audit Fees (1) ....        $ 28,304                  $ 21,097  - --------------------- (1)  Audit Fees consist of fees rendered for professional services rendered for      the audit of our financial statements included in our Forms 10-K for the      years ended December 31, 2005 and 2004, review of the unaudited financial      statements included in our quarterly reports during such years, and      services that are normally provided by Larry E. Nunn & Associates, LLC in      connection with statutory and regulatory filings or engagement.       The engagement of Larry E. Nunn and Associates, LLC for conducting the      audit of its financial statements and the review of its Form 10-Q's during      the years ended December 31, 2005 and 2004, was pre-approved by the      Company's Board of Directors. Larry E. Nunn and Associates, LLC has not      been engaged by the Company to perform any services other than audits of      the Company's financial statements and reviews of its Form 10-Qs. The Board      of Directors does not have a pre-approval policy with respect to work      performed by the independent auditor.                                          36                                        PART IV
The following consolidated financial statements of Noble            Roman's, Inc. and subsidiaries are included in Item 8:           Page                                                                             ----             Consolidated Balance Sheets - December 31, 2004 and 2005           19             Consolidated Statements of Operations - years ended December            31,  2003, 2004 and 2005                                           20             Consolidated Statements of Changes in Stockholders' Equity -            years ended December 31, 2003, 2004 and 2005                       21             Consolidated Statements of Cash Flows - years ended December            31, 2003, 2004 and 2005                                            22             Notes to Consolidated Financial Statements                         23             Report of Independent Registered Accounting Firm - Larry E. Nunn &            Associates, LLC                                                    29             Exhibits             Exhibit No.            3.1       Amended Articles of Incorporation of the Registrant     (1)            3.2       Amended and Restated By-Laws of the Registrant          (1)            3.3       Articles of Amendment of the Articles of Incorporation                      of the Registrant                                       (2)            3.4       Articles of Amendment of the Articles of Incorporation                      of the Registrant dated April 16, 2001            4.1       Specimen Common Stock Certificates                      (1)            4.2       Form of Warrant Agreement            10.1      Employment Agreement with Paul W. Mobley dated                      January 2, 1999            10.2      Employment Agreement with A. Scott Mobley dated                      January 2, 1999            10.3      1984 Stock Option Plan                                  (3)            10.4      Form of Stock Option Agreement                          (3)            10.5      Settlement Agreement with SummitBridge dated                      August 1, 2005                                          (4)            10.6      Loan Agreement with Wells Fargo Bank, N.A. dated                      August 25, 2005                                         (2)            21.1      Subsidiaries of the Registrant                          (5)            31.1      CEO and CFO Certification under Rule 13a-14(a)/15d-14(a)            32.1      CEO and CFO Certification under Section 1350 - -------------------- (1)  Incorporated by reference from Registration Statement filed by the      Registrant on Form S-18 on October 22, 1982 and ordered effective on      December 14, 1982 (SEC No. 2-79963C), and, for the Amended Articles of      Incorporation, from the Registrant's Amendment No. 1 to the Post Effective      Amendment No. 2 to Registration Statement on Form S-1 on July 1, 1985 (SEC      File No.2-84150). (2)  Incorporated by reference from Registrant's current report on Form 8-K      filed August 29, 2005. (3)  Incorporated by reference from the Form S-8 filed by the registrant on      November 29, 1994 (SEC File No. 33-86804). (4)  Incorporated by reference from Registrant's current report on Form 8-K      filed August 5, 2005. (5)  Incorporated by reference to the Registrant's Registration Statement on      Form SB-2 (SEC File No. 33-66850) ordered effective on October 26, 1993.                                         37                                      SIGNATURES         In accordance with of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.                                    NOBLE ROMAN'S, INC.    Date: March 29, 2006            By: /s/  Paul W. Mobley                                      -------------------------------------------                                      Paul W. Mobley, Chief Executive Officer and                                      Chief Financial Officer         In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.    Date: March 29, 2006                          /s/ Paul W. Mobley                                               ----------------------------------                                               Paul W. Mobley                                               Chairman of the Board and Director    Date: March 29, 2006                          /s/ A. Scott Mobley                                               ----------------------------------                                               A. Scott Mobley                                               President and Director    Date: March 29, 2006                          /s/ Douglas H. Coape-Arnold                                               ----------------------------------                                               Douglas H. Coape-Arnold                                               Director                                          38    EX-3.4 2 ex3-4.txt                                                                       Exhibit 3.4                                ARTICLES OF AMENDMENT                                      OF THE                             ARTICLES OF INCORPORATION                                        OF                                NOBLE ROMAN'S, INC.                                      ---------                            Pursuant to I.C. 23-1-29-2 of                       the Indiana Business Corporation Law       The undersigned officer of Noble Roman's, Inc. (the "Corporation"), An Indiana corporation incorporated on September 21, 1972 and existing under and pursuant to the provisions of the Indiana Business Corporation Law, as amended, desiring to give notice of corporate action effectuating amendment of certain provisions of its Articles of Incorporation, does hereby certify the following facts:       FIRST: Pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Articles of Incorporation, as amended, a series of Preferred Stock of the Corporation be mid it is hereby created, pursuant to which Four Million Nine Hundred Twenty-Nine Thousand Two Hundred Seventy-Five (4,929,275) shares of the Preferred Stock shall be designated Series A Convertible Preferred Stock (the "Preferred Shares") and the powers, preferences and relative, participating, optional and other special rights of such Preferred Shares, and the qualifications, limitations or restrictions thereof are as follows:       Section 1. Liquidation.       1.1 Preference. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, each holder of Preferred Shares will be entitled to be paid, before my distribution or payment is made upon any Common Shares, Common Share Equivalents or any other securities which may be subordinated to the Preferred Shares with respect to the liquidation preference set forth in this Section 1.1, an amount in cash or other assets or property equal to the aggregate Liquidation Value of all of such holder's Preferred Shares. After payment of such aggregate Liquidation Value in respect of the Preferred Shares, the entire remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed among the holders of Common Shares in proportion to the Common Shares then held by them.       1.2 Insufficient Funds. If upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets available for distribution to the shareholders of the Corporation (the "Distributable Funds") are insufficient to permit the payment to the holders of Preferred Shares of the fall preferential amount set forth in Section 1.1 above, then the Distributable Funds shall be distributed to the holders of Preferred Shares, ratably in proportion to the number of Preferred Shares held by each such holder on the date of liquidation, dissolution or winding up of the Corporation.             1.3 Notice. Unless such liquidation, dissolution or winding up of the Corporation is waived by the holders of a majority of the Preferred Shares then outstanding in writing pursuant to Section 1.4, the Corporation will mail written notice of such liquidation, dissolution or winding up not less than 30 days prior to the payment date stated therein to each record holder of Preferred Shares.       1.4 Other Liquidation Events. Any (a) sale or issuance or series of sales and/or issuances of shares of the Corporation's capital stock by the Corporation or any, holders thereof, including without limitation pursuant to any merger, consolidation or other Organic Change, which results in any Person or group of affiliated Persons (other than the holders of Common Shares ad Preferred Shares as of the date of the Closing under the Securities Purchase Agreement) owning capital stock of the Corporation possessing the voting power (under ordinary circumstances) to elect a majority of the Board, (b) Organic Change in which the stockholders of the Corporation immediately prior to the transaction possess less than 50% of the voting power of the surviving entity (or its parent) immediately after the transaction, (c) sale or transfer of all or substantially all of the assets of the Corporation, or of the Corporation and its Subsidiaries on a consolidated basis, in any transaction or series of related transactions, (d) Insolvency Event, (e) refinancing, recapitalization or restructuring of the Corporation's debt or equity, or (f) taking of any action described in Section 8.2 without obtaining the necessary consent set forth in such Section, shall be deemed to be a liquidation, dissolution or winding up for purposes of Section 1.1 above, resulting in the redemption of the Preferred Shares upon payment of the aggregate Liquidation Value therefor in accordance with Section 1.1, unless the holders of a majority of the Preferred Shares then outstanding elect by written notice to the Corporation that such event shall not be deemed a liquidation.       Section 2. Dividends.       If at any time the Corporation pays guy dividends or makes any other distributions with respect to the Common Shares, the Corporation shall pay at such tune to each holder of Preferred Shares the dividends or other distributions which such holder would have been entitled to receive bad such holder converted all of its Preferred Shares into Common Shares on the date as of which the holders of Common Shares of record entitled to such dividends or other distributions were determined.       Section 3. Conversion.       3.1 Conversion Procedure.       (a) At any tame and from time to time, any holder of Preferred Shares may convert all or any portion of the Preferred Shares held by such holder into the number of Common Shares computed by (i) multiplying the number of Preferred Shares to be converted by $1.00 and (ii) dividing the resulting product by the Conversion Price then in effect (as determined in Section 3.2 below).       (b) Each conversion of Preferred Shares' will be deemed to have been effected as of the close of business on the date on which the certificate or certificates                                         2   representing the Preferred Shares to be converted have been surrendered at the principal office of the Corporation accompanied by a written request for conversion. At such time as such conversion has been effected, the rights of the holder of such Preferred Shares will cease and the Person or Persons in whose name or names any certificate or certificates for Common Shares are to be issued upon such conversion will be deemed to have become the holder or holders of record of the Common Shares represented thereby.       (c) As soon as possible, but in no event longer than ten business days, after a conversion, has been effected, the Corporation will deliver to the converting holder:            (i) a certificate or certificates representing the number of Common      Shares issuable by reason of such conversion in such name or names and such      denomination or denominations as the converting holder has specified;            (ii) payment in an amount equal to the amount payable under Section      3.1 (f) below with respect to such conversion; and            (iii) a certificate representing any Preferred Shares which were      represented by the certificate or certificates delivered to the Corporation      in connection with such conversion but which were not converted.       (d) The issuance of certificates for Common Shares upon conversion of Preferred Shares will be made without charge to the holders of such Preferred Shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of Common Shares. Upon conversion of each Preferred Share, the Corporation will take all such actions as are necessary in order to insure that the Common Shares issuable with respect to such conversion will be validly issued, fully paid and nonassessable.       (e) The Corporation will not close its books against the transfer of Preferred Shares or Common Shares issued or issuable upon conversion of Preferred Shares in any manner which interferes with the timely conversion of Preferred Shares.       (f) If a fractional interest in a Common Share would, but for this Section 3.1(f), be deliverable upon any conversion of the Preferred Shares, the Corporation shall, in lieu of delivering a fractional interest thereof, pay an amount to the holder thereof equal to the Market Price of such fractional interest as of time of conversion.       (g) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Shares, solely for the purpose of issuance upon the conversion of the Preferred Shares, such number of Common Shares issuable upon the conversion of all outstanding Preferred Shares based upon the Conversion Price then in effect. All Common Shares which are so issuable shall, when issued, be duly and validly issued, My paid and nonassessable and free from all taxes (other than taxes assessable                                          3   on or against such holder), liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such Common Shares may be so issued without violation of any applicable law or governmental regulation applicable to the Corporation or generally applicable to transactions of such type or any requirements of any domestic securities exchange upon which Common Shares may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance).       3.2 Conversion Price.       (a) Initial Conversion The initial Conversion Price will be $3.00. In order to prevent dilution of the conversion rights granted to holders of Preferred Shares hereunder, the Conversion Price will be subject to adjustment from time to time pursuant to this Section 3.2 and Sections 3.4 and 3.5 below. For purposes of this Section 3.2, the Corporation shall be deemed to have issued or sold Common Shares as set forth in Section 3.3 below.       (b) Adjustment for Dilutive Events. If and whenever on or after February 8, 2000 the Corporation issues or sells, or in accordance with Section 3.3 below is deemed to have issued or sold, any Common Shares for consideration per share less than the Conversion Price in effect immediately prior to the time of such issue or sale (a "Dilutive Event"), then forthwith upon the occurrence of any such Dilutive Event the Conversion Price will be reduced so that the Conversion Price in effect immediately following the Dilutive Event will equal the quotient derived by dividing (i) the sum of (x) the product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive Event times the number of Common Shares Deemed Outstanding immediately prior to such Dilutive Event, plus (y) the consideration, if any, received by the Corporation pursuant to such Dilutive Event, by (it) the number of Common Shares Deemed Outstanding immediately after such Dilutive Event. As used in this Section 3.2(b) and in Section 3.3 below, the term "Common Shares" includes Common Share Equivalents.       3.3 Common Shares Deemed Outstanding. For purposes of determining the adjusted Conversion Price pursuant to Section 3.2(b) above, each of the following events shall be deemed to be an issuance and sale of Common Shares by the Corporation and the "Common Shares Deemed Outstanding"' shall be the number of Common Shares actually issued and outstanding plus the number of Common Shares deemed outstanding as a result of the following events as set forth below.       (a) Issuance of Rights, Warrants or Options. If after February 8, 2000 (i) the Corporation in any manner grants any rights, warrants or options to subscribe for or to purchase Common Shares or any securities convertible into or exchangeable for Common Shares (such rights or options referred to herein as "Options" and such convertible or exchangeable stock or securities referred to herein as "Convertible Securities") and (ii) the Price Per Share of Common Shares issuable upon the exercise of such Options, or upon conversion or exchange of such Convertible Securities is less than                                         4   the Conversion Price in effect immediately prior to the time of the granting of such Options, then (x) the total maximum amount of such Common Shares issuable upon the exercise of such Options or upon conversion or exchange of the total maximum number of Convertible Securities issuable upon the exercise of such Options will be deemed to be Common Shares issued and sold by the Corporation, (y) the consideration received pursuant to die Dilutive Event will equal the Price Per Share times the number of Common Shares so deemed issued and sold by the Corporation and (z) the number of Common Shares so deemed issued and sold by the Corporation shall be included in the Common Shares Deemed Outstanding. for purposes of this Section 3.3(a), the "Price Per Share" will be determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon exercise of all such Options, plus in the can of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (ii) the total maximum number of Common Shares issuable upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options. No further adjustment of the Conversion Price will be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Shares are actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities.       (b) Issuance of Convertible Securities. If after February 9, 2000 (i) the Corporation in any manner issues or sells any Convertible Securities and (ii) the Price Per Share of Common Shares issuable upon such conversion or exchange is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then (A) the maximum number of Common Shares issuable upon conversion or exchange of such Convertible Securities will be deemed to be Common Shares issued and sold by the Corporation, (B) the consideration received pursuant to the Dilutive Event will equal the Price Per Share times the number of Common Shares so deemed issued mid sold by the Corporation and (C) the number of Common Shares so deemed issued and sold by the Corporation shall be included in the Common Shares Deemed Outstanding. For the purpose of this Section 3.3(b), the "Price Per Share" will be determined by dividing (i) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (ii) the total maximum number of Common Shares issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Conversion Price will be made when Common Shares are actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments to the Conversion Price had been or are to be made pursuant to Section 3.3(a) above, no further adjustment of the Conversion Price will be made by reason of such issue or sale.       (e) Change in Option Price or Conversion Rate, Expiration of Options. Convertible Securities. If at any time there is a change in (i) the purchase price provided                                         5   for in any Options, (ii) the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Shares, then, the Conversion Price in effect at the time of such change will be readjusted to the Conversion Price which would have been in effect had those Options or Convertible Securities still at the time of such change provided for such changed purchase price, Outstanding additional consideration or changed conversion rate, as the case may be, at the time such Options or Convertible Securities were initially granted, issued or sold-, provided that if such adjustment would result in an increase of the Conversion Price in effect, such adjustment will not be effective until 30 days after written notice thereof has been given by the Corporation to all holders of the Preferred Shares. Any adjustment of the Conversion Price pursuant to Section 3.2(b) that relates to an Option or Convertible Security shall be disregarded to the extent that the right to exercise such Option or convert such Convertible Security expires or is canceled without being exercised, so that the, Conversion Price in effect. immediately after such expiration or cancellation shall, be equal to the Conversion Price in effect immediately prior to the time of the issue of the expired or canceled Option or Convertible Security, with such additional adjustments as would have been made to that Conversion Price had the expired or canceled Option or Convertible Security not been issued.       (d) Calculation of Consideration Received. If any Common Shares, Option or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor or the Price Per Share, as the case may be, will be deemed to be the net amount received or to be received, respectively, by the Corporation therefor. In case any Common Shares, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation or the non-cash portion of the Price Per Share, as the case my be, will be the fair market value of such consideration received or to be received, respectively, by the Corporation, except where such consideration consists of securities, in which case the amount of consideration received or to be received, respectively, by the Corporation will be the Market Price thereof as of the date of receipt. If any Common Shares, Options or Convertible Securities are issued in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Shares, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash and securities will be determined jointly by the Corporation and the holders of a majority of the outstanding Preferred Shares. If such parties are unable to reach agreement within a reasonable period of time, the fair market value of such consideration will be determined by an independent appraiser jointly selected by the Corporation and the holders of a majority of the outstanding Preferred Shares; the cost of such appraiser shall be shared equally by the Corporation and the holders of the Preferred Shares,       (e) Integrated Transactions. In case any Option is issued in connection with the issuance or sale of other securities of the Corporation, together                                         6   comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the Option will be deemed to have been issued for a consideration of $ 1.00.       (f) Treasury Shares. The number of Common Shares Deemed Outstanding at any given time shall not include shares owed or held by or for the account of the Corporation, and the disposition of any shares so owned or held shall be considered an issuance or sale of Common Shares by the Corporation.       (g) Record Date. If the Corporation takes a record of the holders of Common Shares for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Shares, Options or in Convertible Securities or (ii) to subscribe for or purchase Common Shares, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the Common Shares deemed to haw been issued or sold upon the declaration of such dividend of upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.       (h) Exclusion. Notwithstanding the foregoing, the following shall not constitute an issuance and sale of Common Shares by the Corporation for purposes of section 3.2:            (i) Common Shares issued or issuable upon conversion of Preferred      shares;            (ii) Common Shares issued or issuable as a dividend or distribution on      Preferred Shares;            (iii) up to 365,750 Common Shares issued to directors, officers or      employees of, or consultants to, the Corporation pursuant to an agreement      of an option plan or purchase plan or other stock incentive program for      directors, officers, employees or consultants (other than Paul W. Mobley or      A. Scott Mobley) approved by the Board of Directors (the "Employee Stock      Options"), as adjusted for any stock dividend, stock split or other      recapitalization occurring after February 8, 2000;            (iv) Common Shares issued pursuant to the exercise Of any Option      (other than an Employee Stock Option) or conversion of any Convertible      Security issued and outstanding on or before February 9, 2000;            (v) Common Shares and Convertible Securities issued pursuant to (A)      that certain Securities Purchase Agreement dated as of February 9, 2000      between the Corporation and the other parties thereto, and (B) that certain      Securities Purchase Agreement dated as of April 30, 1999 between the      Corporation and the other parties thereto, including, without limitation,      additional Convertible securities issued pursuant to the term thereof in      lieu of interest and                                         7        Common Shares issued upon conversion of any such Convertible Securities      (collectively, the "Investor Securities"); and            (vi) to the extent the Corporation declares a dividend or other      distribution with respect to its Common Shares generally and pays such      dividend or other distribution in the form of Common Shares, the Common      Shares issued or issuable by way of such dividend or other distribution      with respect to Common Shares excluded from the definition of Common Shares      Deemed Outstanding by this Section.       3.4 Subdivision or Combination of Common Shares. If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. If the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of its outstanding Common Shares into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be increased.       3.5 Organic Change.       (a) Corporation Survives. Upon the consummation of an Organic Change (other than a transaction in which the Corporation is not the surviving entity) the term of the Preferred Shares shall be deemed modified, without payment of any additional consideration therefor, so as to provide that upon the conversion of Preferred Shares following the consummation of such Organic Change, the holder of such Preferred Shares shall have the right to acquire and receive (in lieu of or in addition to, the Common Shares acquirable and receivable prior to the Organic Change) such shares of stock, securities or assets as such holder would have received if such holder had converted its Preferred Shares into Common Shares immediately prior to such Organic Change, in each case giving effect to any adjustment of the Conversion Price made after the daft of consummation of the Organic Change. All other terms of the Preferred Shares shall remain in full force and effect following such an Organic Change. The provisions of this Section 3.5(a) shall similarly apply to successive Organic Changes.       (b) Corporation Does Not Survive. The Corporation shall not enter into an Organic Change that is a transaction in which the Corporation is not the surviving entity unless the surviving entity issues new securities, without payment of any additional consideration therefor, with terms that provide that upon the conversion of such securities following the consummation of such Organic Change, the holder of such securities shall have the right to acquire and receive (in lieu of or in addition to the Common Shares acquirable and receivable prior to the Organic Change) such shares of stock, securities or assets as such holder would have received if such holder had converted its Preferred Shares into Common Shares immediately prior to such Organic Change, in each case giving effect to any adjustment of the Conversion Price of such new securities made after the date of consummation of the Organic Change on an equivalent basis to the adjustments provided for the Preferred Shares Conversion Price herein. All other terms                                         8   of the new securities shall be equivalent to the terms of the Preferred Shares provided for herein, The provisions of this Section 3.5(b) shall similarly apply to successive Organic Changes.       3.6 Notices.       (a) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Preferred Shares specifying the Conversion Price in effect thereafter with respect to the particular holder.       (b) The Corporation shall give written notice to all holders of Preferred Shares at least five days prior to the date on which the Corporation closes its books or takes a record for determining rights to vote with respect to any Organic Change, dissolution or liquidation. The Corporation shall also give written notice to the holders of Preferred Shares at least 20 days prior to the date on which any Organic Change shall occur.       3.7 Certain Events. If any event similar to or of the type contemplated by the provisions of this Section 3, but not expressly provided for by such provisions, occurs, then the Board will make an appropriate and equitable adjustment in the Conversion Price so as to protect the rights of the holders of Preferred Shares; provided that no such adjustment will increase the Conversion Price as otherwise determined pursuant to this Section 3 or decrease the number of Common Shares issuable upon conversion of each Preferred Share.       Section 4. Purchase Rights       If at any time the Corporation grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Shares ("Purchase Rights"), then each bolder of Preferred Shares shall be entitled to such Purchase Rights, ratably in proportion to the number of Common Shares each such holder would have held if each had converted all Preferred Shares held by it into Common Shares on the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Shares are to be determined for the grant, issuance or sale of such Purchase Rights.       Section 5. Pre-emptive Rights.       If the Corporation authorizes the issuance and the of any Additional Securities, the Corporation will offer to sell to the holders of Preferred Shares, and each holder of Preferred Shares may elect to purchase, up to that number of Additional Securities such that following such purchase, the holder is able to maintain the same percentage ownership (on a fully-diluted basis) of the outstanding Common Shares of the Corporation which such holder possessed by virtue of its ownership of Preferred Shares (or Common Shares resulting from the conversion thereof) immediately prior to the issuance and sale of the Additional Securities. Holders of Preferred Shares will be entitled to purchase the Additional Securities at the same price and upon the some terms as such securities are being offered to any other Persons; provided that, if such                                         9   Persons are to pay for such Additional Securities in whole or in part with consideration other than cash, then the Board shall make a good faith determination of the fair market value of such non-cash consideration and the holders of the Preferred Shares will be entitled to pay cash equal to the fair market value of the non-cash consideration such holders would otherwise pay hereunder in the purchase of such Additional Securities. Notwithstanding the foregoing, a holder of Preferred Shares will not be permitted to exercise its rights under this Section 5 unless such holder agrees to purchase all securities offered as a package or unit in the issuance of the Additional Securities. The Corporation must give written notice of the issuance of Additional Securities, which notice shall set forth the price and other terms of such issuance, to the holders of Preferred Shares no later than 30 days prior to the issuance date of the Additional Securities (the "Issuance Date"). Upon receipt of such notice, the holders may exercise the right granted by this Section 5 by giving written notice to the Corporation within 30 days following receipt of the aforesaid notice, which written notice from a holder shall specify the number of Additional Securities being purchased by such holder and be accompanied by a cashier's or certified check in the full amount of the price for the Additional Securities being purchased. The Corporation shall promptly make delivery to such holders of certificates for the Additional Securities or other securities upon execution of such documents and instruments as shall govern the issuance of such Additional Securities or other securities. Notwithstanding the foregoing, if a holder of Preferred Shares exercises its rights under this Section 5, such holder shall not be required to purchase the Additional Securities unless and until all other parties have purchased their Additional Securities. If a holder of Preferred Shares who is not required to purchase Additional Securities pursuant to the immediately preceding sentence exercises such holder's rights under this Section 5 following the Issuance Date, then such holder shall be deemed to have owned the Additional Securities purchased by it as of the Issuance Date for the purpose of any benefits of ownership relating to such Additional Securities, including the fight to receive cash or stock dividends declared or other distributions, to participate in a merger or reorganization or to reflect any reclassification of Additional Securities between the Issuance Date and the date upon which such holder purchases the Additional Securities.       Section 6. Tag-Along Rights.       6.1 Notice of Purchase Offers. In the event any person holding Common Shares constituting "restricted securities" under the Securities Act of 1933, as amended (the "Securities Act"), and also being more than 20% of the Common Shares of the Corporation ("Central, Shareholder"), decides to sell any of his, her or its Common Shares pursuant to a bona fide written offer received or sent by such person (collectively a "Purchase Offer"), then such Central Shareholder shall promptly notify each holder of Preferred Shares of the terms and conditions of such Purchase Offer.       6.2 Right to Participate. Each holder of Preferred Shares shall have the right, exercisable upon written notice to the Central Shareholder within 30 business days after receipt of the notice of the Purchase Offer, to participate in such Central Shareholder's sale of Common Shares on the same terms and conditions. To the extent the holder of Preferred Shares exercises such right to participation, the number of Common Shares which such Central Shareholder may                                         10   sell pursuant to such Purchase Offer shall be correspondingly reduced. The right of participation of the holder of Preferred Shares shall be subject to die following terms and conditions:       (a) The holder of Preferred Shares may sell all or any part of that number of Common Shares of the Company equal to the product obtained by multiplying (i) the aggregate number of Common Shares covered by the Purchase Offer by (ii) a fraction, the numerator of which is the number of Common Shares of the Company at the time owned by such holder and the denominator of which is the combined number of Common Shares of the Company at the time owned by the Central Shareholder and all holders of Preferred Shares electing to participate in the Central Shareholder's sale of Common Shares. For purposes of making such computation, a holder of Preferred Shares shall be deemed to own the number of Common Shares into which all its Preferred Shares is at the time convertible.       (b) The holder of Preferred Shares may participate in the sale by delivering to the selling Central Shareholder for transfer pursuant to the Purchase Offer one or more certificates, properly endorsed for transfer, which            (i) the number of Common Shares which the holder of Preferred Shares      elects to sell pursuant to this Section 6.2; or            (ii) that number of Preferred Shares which is at such time convertible      into the number of Common Shares which the holder of Preferred Shares      elects to sell pursuant to this Section 6.2; provided, however, that if the      purchase offeror objects to the delivery of Preferred, Shares in lieu of      Common Shares, the holder of Preferred Shares may convert and deliver      Common Shares as provided in (b)(i) above.       Section 7. Miscellaneous.       7.1 Registration of Transfer. The Corporation shall keep at its principal Office a register for the registration of Preferred Shares. Upon the surrender of my certificate representing Preferred Shares at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Preferred Shares represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of Preferred Shares as is requested by the holder of the surrendered certificate and will be substantially identical In form to the surrendered certificate, and dividends will accrue on the Preferred Shares represented by such new certificate from the date to which dividends have been fully paid on such Preferred Shares represented by the surrendered certificate.       7.2 Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation of the ownership and the loss, theft, destruction or mutilation of my certificate evidencing Preferred Shares, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is an                                         11   institutional investor its own agreement will be satisfactory), or, in the can of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Preferred Shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends will accrue an the Preferred Shares represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.       7.3 Notices. Except as otherwise expressly provided, all notices referred to herein will bee in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (a) to the Corporation, at its principal executive offices and (b) to any shareholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated in writing by such bolder).       Section 8. Voting Rights.       8.1 Board Representation. The holders of more than 50% of the Preferred Shares shall be entitled to select a person to observe all meeting, of the Board       8.2 Other Voting Matters. The Corporation may take the various actions listed below only upon satisfying the one or more voting requirements, set forth below, applicable to such action.       (a) Whenever the Indiana Business Corporation Law provides for a vote of a class of shareholders, the holders of the outstanding shares of any class shall be entitled to vote as a class in respect of any such amendment or transaction and the proposed amendment or transaction shall be approved upon receiving the affirmative vote of the holders of a majority of the outstanding shares of each class of shares entitled to vote as a class in respect thereof and of the total outstanding shares entitled to vote.       (b) So long as any Preferred Shares remain outstanding, the Corporation shall, not without the affirmative vote or written consent by the holders of more than two-thirds of the Preferred Shares then outstanding:            (i) directly or indirectly declare or pay any dividends or make any      distributions upon any of its equity securities;            (ii) except for the Investor Securities, authorize, issue, or enter      into any agreement providing for the issuance (contingent or otherwise) of      (A) any notes or debt securities containing equity features with rights      superior to those of the Preferred Shares (including, without limitation,      any notes or debt securities convertible into or exchangeable for equity      securities, issued in connection with the issuance of equity securities or      containing profit participation features) or (B) any additional series of      preferred shares of the Corporation or any equity                                         12        securities with rights superior to those of the Preferred Shares (or any      securities convertible into or exchangeable for any equity securities); or            (iii) make any amendment to the Corporation's articles of      incorporation or by-laws or enter into any agreements which alter, change      or otherwise amend or adversely effect the rights, preferences or      privileges of the Preferred Shares.       (c) In all other events, except as required by the Indiana Business Corporation Law all holders of shares of the Corporation will vote as a single class, with each holder of Preferred Shares being entitled to cast such number of votes as is equal to the number of Common Shares into which the Preferred Shares of such holder would be converted on the date of such vote.       Section 9. Definitions.       "Additional Securities" means (i) any capital stock of the Corporation, whether now authorized or not. (ii) any rights, options or warrants to purchase any such capital stock or to purchase any securities that are or may become convertible into any such capital stock, and (iii) any securities convertible into any such capital stock. provided, however, that Additional Securities shall not include (a) any Preferred Shares, (b) Common Shares issued upon the. conversion of the Preferred Shares; (c) securities issued as a dividend on, subdivision of or other distribution in respect of all outstanding Common Shares, (d) securities issued upon the conversion, exercise or exchange of any option, warrant or convertible security issued as or in connection with a previous issuance of Additional Securities, (e) securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets of such other corporation, or by other reorganization whereby the Corporation ends up owning, directly or indirectly, greater than 50% of the voting power of the outstanding stock of such other corporation, or (f) any Common Shares described in Section 3.3(h).       "Board" means the Corporation's Board of Directors.       "Common Share" means a share of the Corporation's common stock.       "Common Share Equivalent" means, collectively, any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation.       "Insolvency Event" means (i) the Corporation commencing any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, (19) seeking appointment of a receiver, trustee, custodian or other similar official for it of for all or any substantial part of its assets, or                                         13   (C) making a general assignment for the benefit of its creditors; or (b) there is commenced against the Corporation any case, proceeding or other action of a nature referred to in clause (i) above; or (iii) there is commenced against the Corporation any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial put of its assets; or (iv) the Corporation takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the Corporation generally does not pay its debts as they become due.       "Liquidation Value" of any Preferred Share as of any particular date will be equal to $1.00 (as adjusted for any divisions, whether by stock split, stock dividend or otherwise, or combinations, whether by reverse stock split or otherwise, of the Preferred Shares).       "Market Price" of any security means the average of the closing prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there has been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on the primary exchange on which such security is listed at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which "Market Price" is being determined and the 20 consecutive business days prior to such day. The "Market Price" of a note or other obligation which is not listed on a securities exchange or quoted in the NASDAQ System or reported by the National Quotation Bureau, Incorporated, the total consideration received by the Corporation (including interest) will be discounted at the prime rate of interest at the First National Bank of Chicago in effect at the time the note or obligation is deemed to have been issued. If at any other time such security is not listed on any securities exchange or quoted in the NASDAQ System Or the over-the-counter market, the "Market price", thereof determined jointly by the Corporation and the holders of a majority of the Preferred Shares. If such parties are unable to reach agreement within a reasonable period of time, such fair value will be determined by an independent appraiser jointly selected by the Corporation and the holders of a majority of the Preferred Shares; the cost of such appraiser shall be shared equally by the Corporation and the holders of the Preferred Shares.       "Organic Change" means any capital reorganization, reclassification, consolidation, merger, lease, or sale of all or substantially all of the Corporation's assets to another Person which is effected in such a way that holders of Common Shares are entitled to receive (either directly or upon subsequent liquidation) shares, securities or assets with respect to or in exchange for Common Shares.       "Person" means an individual, a Partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.                                         14        "Securities Purchase Agreement" means the Securities Purchase Agreement, entered into as of the 8th day of February, 2000, by and between the Corporation and the investors identified therein.       SECOND: These Articles of Amendment were duly adopted by the Board of Directors of the Corporation on May 22, 2000 in full legal compliance with the provisions of the Indiana Business Corporation Law, the Articles of Incorporation and the By Laws of the Corporation.       IN WITNESS WHEREOF, the undersigned hereby verifies, subject to the penalties of perjury, that the statements contained herein are true, this 12th day of April, 2001.                                         NOBLE ROMAN'S, INC.                                         By /s/ Paul W. Mobley                                           -------------------------------------                                           Paul W. Mobley, Chairman of the Board                                           and Chief Executive Officer                                                     15    EX-4.2 3 ex4-2.txt                                                                       Exhibit 4.2  The Securities represented hereby have been acquired for investment, have not been registered under the Securities Act of 1933 or state securities laws, and may not be sold, exchanged or transferred in any manner, except in compliance with applicable law and Section 4 hereof  Warrant Certificate No. ________                    Warrants for ________ Shares  Original Issue Date: ___________                  Purchase Price $____ Per Share                           WARRANT TO PURCHASE COMMON STOCK                                         OF                                 NOBLE ROMAN'S, INC.      TABLE OF CONTENTS                                                                             Page  1.  The Warrants.............................................................1  2.  Exercise ................................................................1     2.1 Partial Exercise ....................................................2     2.2 Net Issue Exercise ..................................................2  3.  Payment of Taxes ........................................................3  4.  Transfer and Exchange ...................................................4     4.1 Exchanges ...........................................................4  5.  Adjustments .............................................................4     5.1  Adjustments for Additional Issue or Sale of Common Stock ...........4     5.2  Reorganization, Consolidation, Merger ..............................9     5.3  No Dilution or Impairment .........................................10     5.4  Certificate as to Adjustments .....................................10     5.5  Notices of Record Date ............................................10  6.  Loss or Mutilation .....................................................11  7.  Reservation of Common Stock ............................................11  8.  Registration . .........................................................11           8.1     Authorized Transfers .....................................12           8.2     Demand Registration ......................................12           8.3     Optional Registration ....................................13           8.4     Other Registrations ......................................13           8.5     Exchange Listing .........................................13           8.6     Registration Obligations .................................14           8.7     Expenses .................................................14           8.8     Indemnity to Holders .....................................14           8.9     Indemnity to Company .....................................14           8.10    Termination of Reparation Obligations ....................15           8.11    No Warrant Registration ..................................15           8.12    Rule 144 Information .....................................15  9.  Information ............................................................15  10. Notices ................................................................15  11. Change, Waiver .........................................................16  12. Headings ...............................................................16  13. Law  Governing ........................................................ 16     The Securities represented hereby have been acquired for investment, have not been registered under the Securities Act of 1993 or state securities laws, and may not be sold, exchanged or transferred in any manner in compliance with applicable law and Section 4 hereof.  Warrant Certificate No. ________                    Warrants for ________ Shares  Original Issue Date: ___________                  Purchase Price $____ Per Share                           WARRANT TO PURCHASE COMMON STOCK                                         OF                                 NOBLE ROMAN'S, INC.       This certifies that ___________________________, or permitted assigns under Section 4, is entitled, subject to the terms set forth below, at any time from and after the Original Issue Date set forth above until 5:00 P.M., Eastern time, on the ____ day of __________________________, 20__, to purchase from NOBLE ROMAN'S, INC., (the "Company"), and Indiana corporation, up to fully paid and non-assessable shares of the Company's Common Stock upon surrender hereof, at the principal office of the Company, with the subscription form annexed hereto duly executed, and simultaneous payment therefore, at the purchase price per share of $______ as such price may be adjusted pursuant to this warrant (the "Purchase Price"). The number and character of such shares of Common Stock are subject to adjustment as provided below, and the term "Common Stock" shall mean, unless the context otherwise requires, the stock and other securities and property at the time receivable upon the exercise of this Warrant.       1. The Warrants. The term "Warrants" as used herein shall include all Warrants issued pursuant hereto and also any warrants delivered in substitution or exchange therefore as provided herein. This Warrant does not entitle the holder to any rights as a stockholder of the Company.       2. Exercise. Subject to compliance with the provisions of Section 8 below, this Warrant may be exercised, during the period of exercise specified above, at any time or from time to time, on any business day, for the full number of shares of Common Stock called for hereby, by surrendering it at the principal office of the Company, One Virginia Avenue, Suite 800, Indianapolis, Indiana 46204 with the subscription form fully executed, together with payment in cash or immediately available funds of the sum obtained by multiplying (a) the number of shares of Common Stock called for on the face of this Warrant (without giving effect to any adjustment therein) by (b) the Purchase Price (without giving effect of any adjustment therein).       All or any part of such payment may be made by the surrender by such holder to the Company, at the aforesaid office of any instrument evidencing indebtedness of the Company, which at the date of issue thereof had a maturity of one year or more. All indebtedness so surrendered shall be credited against such purchase price in an amount equal to the outstanding principal amount thereof plus accrued interest to the date of surrender.                                           -2-       The exercise price may also be paid by surrendering the right to a number of shares issuable upon exercise of the Warrant that have a fair market value equal to or greater than the required exercise price. The fair market value shall be the last reported sale price of the Common Stock on the prior business day or, in case no such reported sales take place on such day, the average of the last reported bid and asked price of the Common Stock on such day, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed, or if not so admitted or listed, the average of the closing bid and asked price of the Common Stock as reported by NASDAQ or if not so available as reasonably determined by the Board of Directors of the Company.       If the Warrant is exercised at a time when the Common Stock issuable upon such exercise has not been registered under the Securities Act of 1933 and applicable state securities laws, the Common Stock issued upon such exercise shall contain a legend to that effect and shall refer to Section 8 of this Agreement.           A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of such shares of record as of the close of business on such date. As soon as practicable on or after such date, but in any event within ten (10) business days thereafter, the Company shall issue and deliver to the person or persons entitled to receive the same certificate or certificates for the number of full shares of Common Stock issuable upon such exercise, together with cash, in lieu of any fraction of a share, equal to such fraction of the then current market value of one full share.       2.1 Partial Exercise. This Warrant may be exercised for less than the full number of shares of Common Stock at any time called for hereby from time to time in the manner set forth in Section 2. Upon any partial exercise, the number of shares receivable upon the exercise of this Warrant as a whole, add the sum payable upon the exercise of this Warrant as a whole, shall be proportionately reduced. Upon such partial exercise, this Warrant shall be surrendered and a new Warrant of the same tenor and for the purchase of the number of such shares not purchased upon such exercise shall be issued by the Company to the registered holder hereof.       2.2 Net Issue Exercise. Notwithstanding any provisions herein to the contrary, if the Market Price (as defined below) for one share of Common Stock is greater than the Purchase Price (on the date of exercise of all or a part of this Warrant), in lieu of exercising this Warrant for cask the Holder may, elect to receive Common Stock equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company, together with the form of Election to Exercise attached hereto fully executed, in which event the Company shall issue to the Holder that number of Shares of Common Stock computed using the following formula:           X =   Y x (A-B) / A           Where Y =  the aggregate number of Shares of Common Stock purchasable                     under this Warrant or, if only a portion of this Warrant is                     being exercised, the number                                          - 3 -                      of Shares of Common Stock for which this Warrant is being                     exercised (at the date of such calculation)                      A = Market Price of one Share of Common Stock (at the date                     of such calculation)                      B = Purchase Price (as adjusted to the date of such                     calculation).       "Market Price" shall mean, if the Common Stock is traded on a national securities exchange, the NASDAQ National Market System or the over-the-counter market, the last reported sale price on the business date prior to valuation of the Common Stock on the NASDAQ National Market System or if no sale took place the average of the bid and asked prices on the over-the-counter market on such date. If the Common Stock is not so traded, "Market Price" shall be the value of one share of Common Stock as reasonably determined by the board of directors of the Company-, provided, however, that if Holder objects to such determination by the Board of Directors, then such value shall be determined by appraisal by an independent investment banking firm selected by the Company and acceptable to the Holder, provided, further, that if the Holder and the Company cannot agree on such investment banking firm, such appraised value shall be determined by averaging the appraised values calculated by (a) an independent investment banking firm selected by the Company; (b) an independent investment banking firm selected by the Holder-, and (c) an independent investment banking firm selected by the investment banking firm's selected by the Company and the Holder. Each such appraisal shall be at the Company's expense if the ultimate price per share is determined to be 25% or more greater than the price per share determined by the Board of Directors and in all other cases at the Holder's expense.       3. Payment of Taxes. All shares of Common Stock issued upon the exercise of a Warrant shall be validly issued, fully paid and non-assessable and free of claims of pre-emptive rights, and the Company shall pay all issuance taxes and similar governmental charges that may be imposed in respect of the issue or delivery thereof, but in no event shall the Company pay a tax on or measured by the net income or gain attributable to such exercise. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer of a Warrant or any transfer involved in the issue of any certificate for shares of Common Stock in any name other than that of the registered holder of the Warrant surrendered in connection with the purchase of such shares, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the Company's satisfaction that no tax or other charge is due.       4. Transfer and Exchange. This Warrant shall be transferable in whole or in part only to "accredited investors" or "qualified institutional buyers" in each case as defined in the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, except the holder hereof represents that it is acquiring the Warrants for its own account and for the purpose of investment and not with a view to any distribution or resale thereof within the meaning of the Securities Act of 1933. The holder further agrees that it will not sell, assign or transfer any of the Warrants so acquired in violation of the Securities Act of 1933 or any applicable state securities law and that no such transfer will be made until the Company shall have received from counsel for the                                           -4-  holder reasonably satisfactory to the Company an opinion to the effect that the proposed sale or other transfer of the Warrants by the holder may be effected without such violation. The holder acknowledges that, in taking unregistered Warrants, it must continue to bear the economic risk of its investment for an indefinite period of time because of the fact that such Warrants have not so been registered and further realizes that such Warrants cannot be sold unless they are subsequently registered under the Securities Act of 1933 and applicable state securities laws or an exception from such registration requirements is available. The holder also acknowledges that the Company is not obligated to and does not intend to register the Warrants and that appropriate legends reflecting the status of the Warrants under securities laws may be placed on the face of the Warrant certificates both at the time of their original issue and any transfer and delivery to the holder hereof. The transfer of shares issuable upon exercise of this Warrant is governed by Section 8 hereof.       4.1 Exchanges. This Warrant is exchangeable at the principal office of the Company for Warrants for the same aggregate number of shares of Common Stock, each new Warrant to represent the right to purchase such number of shares as the holder shall designate at the time of such exchange.       5. Adjustments.       5.1 Adjustments for Additional Issue or Sale of Common Stock. In case at any time or from time to time on or after the Original Issue Date, the Company shall issue or sell shares of its Common Stock (other than those excepted by Section 5.1.7) for a consideration per share less than the Market Price, then and in each such case the holder of this Warrant, upon the exercise hereof as provided in Section 2, shall be entitled to receive, in lieu of the shares of Common Stock theretofore receivable upon the exercise of this Warrant a number of shares of Common Stock determined by (a) dividing the Purchase Price by an Adjusted Purchase Price to be computed as provided below in this Section 5.1, and (b) multiplying the resulting quotient by the number of shares of Common Stock called for on the face of this Warrant. Such Adjusted Purchase Price shall be computed (to the nearest cent, a half cent or more being considered a full cent) by dividing:            (i) the sum of (x) the result obtained by multiplying the number of      shares of Common Stock of the Company outstanding immediately prior to such      issue or sale by the Purchase Price (or, if an Adjusted Purchase Price      shall be in effect by reason of a previous adjustment under this Section      5.1, by such Adjusted Purchase Price), and (y) the consideration, if any,      received by the Company upon such issue or sale; by            (ii) the number of shares of Common Stock of the Company outstanding      immediately after such issue or sale.  No adjustment of the Purchase Price, or Adjusted Purchase Price if in effect, however, shaft be made in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments as so carried forward shall amount to $.01 per share or more. For the purpose of this Section 5.1, the following Sections 5.1.1 to 5.1.7 shall be applicable;                                            -5-       5.1.1 (a) Dividends in Common Stock or Convertible Securities. In case at any time on or after the Original Issue Date, the Company shall declare any dividend or order any other distribution, upon any stock of the Company of any class payable in Common Stock, or In any stock or other securities directly or indirectly convertible into or exchangeable for Common Stock (any such stock or other securities being hereinafter called "Convertible Securities"), such declaration or distribution shall be deemed to be an issue and sale (as of the record date), without consideration, of such Common Stock or the Common Stock covered by such Convertible Securities, as the case may be.       (b) Dividends in Other Stock, Securities or Property. In case at any time on or after the Original Issue Date, the Company shall declare any dividend or order any other distribution; upon any class of stock of the Company payable in stock of the Company of a different class (other than Common Stock or Convertible Securities covered by Section 5.1.1 (a)), other securities of the Company or other property of the Company (other than cash), such declaration or distribution shad be deemed an issue and sale, without consideration, of shares of Common Stock in an amount determined as follows:            (i) the value of such distributed stock, securities, or property shall      be determined in good faith by the Board of Directors of the Company as of      the record date of the dividend or distribution;            (ii) the value of a share of the Common Stock shall be determined in      good faith by the Board of Directors of the Company as of the record date      of the aforesaid dividend or distribution;            (iii) the amount determined under clause (i) shall be divided by the      amount determined under clause (ii) and the quotient to the next higher      full number shall be deemed the number of shares of Common Stock of the      Company issued, without consideration, by reason of said dividend or      distribution.       Provided, however, that in the event of a distribution to shareholders of stock of a subsidiary or securities convertible into or exercisable for such stock, the holder of this Warrant, upon the exercise hereof as provided in Section 2, at any time after such distribution, shall be entitled to receive the stock or other securities to which such holder would have been entitled if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 5.1, and no Common Stock shall have been deemed to have been issued.       (c) Dividends in Cash Out of Capital or Surplus. In case at any time on or after the Original Issue Date, the Company shall declare any dividend of order any other distribution upon any stock of the Company, in cash paid or payable out of stated capital or paid-in surplus or surplus created as a result of a re-evaluation of property (determined in each case on a consolidated basis) then to the extent that the amount so paid or payable shall exceed the earned surplus on a consolidated basis, such excess shall be deemed an issue and                                            -6-  sale (as of the record date), without consideration, of shares of Common Stock in an amount determined as follows:            (i) the value of a share of Common Stock, as of the record date, shall      be determined in good faith by the Board of Directors of the Company;            (ii) amount of said excess shall be divided by the value determined      under clause (i) and the quotient so determined to the next higher whole      number shall be deemed the number of shares of Common Stock issued and sold      without consideration.       (d) Reclassification. in case at any time on or after the Original Issue Date, the Company shall order any distribution of any stock of the Company (including Common Stock) or other securities of the Company (including Convertible Securities) or property (including cash) by way of stock split, spin-off, split-up, reclassification, reverse stock split, combination of shares or similar corporate rearrangement, such distribution shall be deemed an issue and sale, without consideration, of shares of Common Stock as follows:            (i) in the case of a distribution in shares of the Common Stock in the      amount of said distribution;            (ii) in the case of a distribution of Convertible Securities as      provided in Section 5.1.2;            (iii) in the case of a distribution of other stock, securities or      property (including cash) as provided in Section 5.1.1(b) (for this      purpose treating cash as other property).       5.1.2 Issuance or Sale of Convertible Securities. In case at any time on or after the Original Issue Due, the Company shall issue or sell any Convertible Securities, there shall be determined the price per share for which Common Stock is issuable upon the conversion or exchange thereof, such determination to be made by dividing (a) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (b) the maximum number of shares of Common Stock of the Company issuable upon conversion or exchange of all of such Convertible Securities, and such issue or We shall be deemed to be an issue or sale for cash (as of the date of issue or sale of such Convertible Securities) of such maximum number of shares of Common Stock at the price per share so determined.       If such Convertible Securities shall by their terms provide for an increase or increases, with the passage of time, in the amount of additional consideration, if any, payable to the Company, or in the rate of exchange, upon the conversion or exchange thereof, the Adjusted Purchase Price shall, forthwith upon any such increase becoming effective, be readjusted (but to no greater extent than originally adjusted) to reflect the same.                                             -7-       If any rights of conversion or exchange evidenced by such Convertible Securities shall expire without having been exercised, the Adjusted Purchase Price shall forthwith be readjusted to be the Adjusted Purchase Price which would have been in effect had an adjustment been made on the basis that the only shares of Common Stock actually issued or sold were those issued upon the conversion or exchange of such Convertible Securities and that they were issued or sold for the consideration actually received by the Company upon such conversion or exchange, plus the consideration, if any, actually received by the Company for the issue or sale of each of the Convertible Securities as were actually converted or exchanged.       5.1.3 Grant of Rights, Warrants or Options for Common Stock. In case at any time on or after the Original Issue Date, the Company shall grant any rights, warrants or options to subscribe for, purchase or otherwise acquire Common Stock (other than those excepted by Section 5.1.7), there shall be determined the minimum price per share for which Common Stock is issuable upon the exercise of such rights, warrant or options, such determination to be made by dividing (a) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights, warrants or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of such rights, warrants or options, by (b) the maximum number of shares of Common Stock of the Company issuable upon the exercise of such rights, warrant or options; and such grant shall be deemed to be an issue or sale for cash (as of the date of the granting of such rights, warrants or options) of such maximum number of shares of Common Stock at the price per share so determined.       If such rights, warrants or options shall by their terms provide for an increase or increases. with the passage of time, in the amount of additional consideration payable to the Company upon the exercise thereof, the Adjusted Purchase Price shall, forthwith upon any such increase becoming effective, be readjusted (but to no greater extent than originally adjusted) to reflect the same.       If any such rights, warrants or options shall expire without having been exercised, the Adjusted Purchase Price shall forthwith be readjusted to the Adjusted Purchase Price which would have been in effect had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those actually issued or sold upon the exercise of such rights, warrants or options and that they were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights, warrants or options.       5.1.4 Determination of Consideration. Upon any issuance or sale for a consideration other than cash, or a consideration pan of which is other than cash, of any shares of Common Stock or Convertible Securities or any rights or options to subscribe for, purchase or otherwise acquire any Common Stock or Convertible Securities, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the                                            -8-  Company. In case any Common Stock or Convertible Securities or any rights or options to subscribe for, purchase or otherwise acquire any Common Stock or Convertible Securities shall be issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, the consideration for the issue or sale of such Common Stock or Convertible Securities or such rights or options shall be deemed to be the portion of such consideration allocated thereto in good faith by the Board of Directors of the Company.       5.1.5 Shares Considered Outstanding. The number of shares of Common Stock outstanding at any given time shall include shares issuable in respect to scrip certificates issued in lieu of fractions of shares of Common Stock, but shall exclude shares held in the treasury of the Company or by subsidiaries of the Company,       5.1.6 Duration of Adjustment Purchase Price. Following each computation or readjustment of an Adjusted Purchase Price as provided in this Section 5.1, the new Adjusted Purchase Price shall remain in effect until a further computation or readjustment thereof is required by this Section 5.1.       5.1.7 Excepted Issues and Sales. No adjustments pursuant to this Section 5. 1 shall be made in respect of (a) the issuance of shares of Common Stock upon exercise of Warrants issued pursuant to the Agreement, (b) the issuance of options or shares of Common Stock upon the exercise of options granted pursuant to any stock option plan for employees or directors of the Company and exercisable at prices not less than the Market Price at the time of grant, (c) the exercise of warrants or the conversion of Convertible Securities to the extent that such warrants or Convertible Securities were outstanding on November 30, 1995 (including that Warrant issued to Oppenheimer & Co.) and exercisable at prices not less than the Market Price at the time of grant or issuance of such warrant or Convertible Securities, and (d) the issuance of up to 175,000 shares of Common Stock upon conversion of indebtedness of the Company. The number of shares of Common Stock referred to in this subparagraph shall be proportionately adjusted to reflect any reclassification, subdivision or Combination of Common Stock or any distribution or dividends on the Common Stock, payable in Common Stock.       5.2 Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or any other corporation the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the Original Issue Date, or in case, after such date, the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then and in each such case the holder of this Warrant, upon the exercise hereof as provided in Section 2, at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which such holder would have been entitled upon such consummation if such holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in Section 5. In each such                                            -9-  case the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.       5.3 No Dilution or impairment. The Company will not, by amendment of its certificate of incorporation or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants, but will at all times in good faith assist In the carrying out of all such term and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the holders of the Warrants against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares upon the exercise of all Warrants at the time outstanding, and (b) will take no action to amend its certificate of incorporation or by-laws which would change to the detriment of the holders of Common Stock (whether or not any Common Stock be at the time outstanding) the dividend or voting rights of the Company's Common Stock; provided that nothing herein contained shall, prohibit the issuance and sale of Preferred Stock of the Company at fair market value. In this regard, the Company shall be deemed to have undertaken a fiduciary duty with respect to the holders of the Warrants.       5.4 Certificate as to Adjustments. In each case of an adjustment in the shares of Common Stock or other stock, securities or property receivable on the exercise of the Warrants, the Company shall compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment and showing in dew the facts upon which such adjustment is based, including a statement of (a) the consideration received or to be received by the Company for any additional shares of Common Stock issued or sold or deemed to have been sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding; and (c) the Adjusted Purchase Price, certified to by the President of the Company, provided, however, that if the Holder reasonably objects to such determination, the Company shall cause a firm of independent certified public accountants of recognized standing selected by the Company (who may be the accountants then auditing the books of the Company) to compute such adjustment in accordance with the terms of the Warrants and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based. All fees and expenses of such independent certified public accountants shall be paid (i) by the Holder if the computation is the same as or less than the made by the Company or (ii) by the Company if the computation is greater than that made by the Company. The Company will forthwith mad a copy of the certificate to each holder of a Warrant at the time outstanding.       5.5 Notices of Record Date. In case:       (a) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of the Warrants) for the Purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any securities, or to receive any other right, or                                            -10-       (b) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation, except for mergers into the Company of subsidiaries whose assets are less than 10% of the total assets of the Company and its consolidated subsidiaries, or any conveyance of all or substantially all of the assets of the Company to another corporation, or       (c) of any voluntary dissolution, liquidation or winding-up of the Company; then, and in each such case, the Company will mail or cause to be mailed, to each holder of a Warrant at the time outstanding a notice specifying, as the case may be, the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any, to be fixed as of which the holders of record of Common Stock (or such stock or securities at the time receivable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, & dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the date therein specified. The rights to notice provided in this Section are in addition to the rights provided elsewhere herein but the failure to give such notice shall not invalidate any such corporate action.       6. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it in the exercise of reasonable discretion, of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of loss, theft or destruction, of indemnity satisfactory to it in the exercise of reasonable discretion, and, in the case of mutilation, upon surrender and cancellation thereof, the Company will execute and deliver in lieu thereof a new Warrant of like tenor except that no such indemnity shad be required from The Provident Bank or any of its affiliates.       7. Reservation of Common Stock. The Company shall at all times reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants.       8. Registration. The holder of this Warrant, by acceptance hereof, agrees prior to any transfer of Warrants or Common Stock issued or issuable upon exercise hereof to give written notice to the Company expressing such holder's intention to effect such transfer and describing briefly the manner of the proposed transfer of such Warrants or Common Stock. Promptly upon receiving such notice, the Company shall present copies thereof to its counsel and the provisions of the following subdivision shall apply:       9.1 Authorized Transfers. If in the opinion of such counsel, concurred in by counsel for the holders of such Warrants or Common Stock, the proposed transfer of the Warrants or Common Stock issued or issuable upon the exercise hereof may be effected without registration                                            -11-  under the Securities Act of 1933 or pursuant to any applicable state securities laws, the Company, as promptly as practicable, shall notify the holder of such Warrants or Common stock hereof of such opinion, whereupon such holder shall be entitled, but only in accordance with the terms of the notice delivered by such holder to the Company, to transfer such Warrants or Common Stock.       8.2 Demand Registration. If, in the opinion of such counsel or in the opinion of the holders of Warrants or Common Stock desiring such transfer, such proposed transfer may not be effected without such registration of the Common Stock issued or issuable upon the exercise hereof, and if after written notice of such opinion to said holder, or if at any time, with or without the presence of such opinions or notice, the holders of the Common Stock issued or issuable upon the exercise of all Warrants issued pursuant to the Agreement equal in the aggregate to not less than 33% of the original number of shares of Common Stock issuable upon exercise of the Warrants shall, at any time, request that a registration statement be filed under the Securities Act of 1933 (the "Act") and any applicable state securities laws, with respect to the Common Stock issued or issuable upon the exercise or proposed exercise hereof, the Company shall promptly give written notice to all then holders of Warrants and holders of Common Stock acquired by such holders upon exercise of Warrants at the respective addresses thereof shown on the books of the Company, of a proposed registration under the Act and applicable state securities laws of Common Stock issued or issuable upon the exercise hereof, and the Company shall, as expeditiously as practicable, use its best efforts to effect such registration of.            (x) Common Stock issued or issuable upon the exercise or proposed      exercise hereof, all as required to comply with such opinion or request,      and            (y) all Common Stock issued or issuable upon the exercise of Warrants,      the holders of which shall have made written requests to the Company for      the registration thereof within 10 days after the giving of such written      notice by the Company.  all to the extent requisite to permit the sale of all Common Stock referred to in the foregoing clauses (x) and (y).       The Company shall not have the right to include in any registration pursuant to Section 8.2, any securities to be distributed by the Company for its own account or any securities to be offered by any other security holder of the Company, except pursuant to binding obligations to include such other securities in such registration statement entered into prior to or on the Original Issue Date of these Warm Furthermore, the Company shall not be required to register any shares under this Section unless the holders have requested the registration of at least 133,333 shares; and may defer the registration of such Common Stock for up to 90 days if the Board of Directors decides in good faith that registration would interfere with other Company activity.       8.3 Optional registration. If the Company, otherwise than pursuant to Section 9.2, at any time proposes to file a registration statement under the Act respecting any equity security of the Company on a form appropriate for registration of a sale of Common Stock, it will at such time give written notice to all registered holders of Warrants and holders of Common Stock acquired by such holders upon exercise of Warrants of its intention to do so and, upon the written request of                                            -12-  any such registered holder given within 10 days after receipt of any such notice (which request shall specify the Common Stock intended to be sold or disposed of by such registered holder and describe the nature of any proposed sale or other disposition thereof), the Company will cause all such shares specified in such request to be so registered provided that if Registration involves an offering by or through underwriters, the Company shall not be required to include Shares owned by holder therein if and to the extent the underwriter managing the offering reasonably believes in good faith and advises the Company that such inclusion would materially adversely affect such offering; provided that (a) if other selling shareholders who are employees or officers of the Company have requested registration of securities in the proposed offering the Company will reduce or eliminate such other selling shareholders' securities before any reduction or elimination of Holder's shares; (b) any such reduction or elimination (after taking into account the effect of clause (a)) shall be pro rata to all other holders of the securities of the Company exercising "piggyback registration rights" similar to those set forth herein in proportion to the respective number of shares they have requested to be registered unless prior agreements of the Company give priority to other persons holding registration rights, and (c) in such event, such Holders shall delay any offering by them of all such Shares owned by them for such period, not to exceed 120 days, as the managing underwriter shall request.       8.4 Other Registrations. If the Common Stock issued or issuable pursuant hereto require registration or qualification with or approval of any United States or state governmental official or authority in addition to registration under the Act before the Common Stock may be sold, the Company will take all requisite action in connection with such registration and will cause any such shares to be duly registered or approved as may be required; provided however that it shall not be required to give a general consent to service of process or to qualify as a foreign corporation or subject itself to taxation as doing business in any such state.       8.5 Listing. if, at the time of any registration pursuant to this Section 8, Common Stock issued or issuable upon exercise of the Warrants meets the criteria for listing on any exchange on which Common Stock of the Company is then listed, the Company shall apply for and use its best efforts to obtain a listing of such Common Stock on such exchange.       8.6 Registration Obligations. The Company will deliver to the holders of such Common Stock after effectiveness of any registration under Section 8, such reasonable number of copies of a definitive prospectus included in such registration statement and of any revised or supplemental prospectus filed as such holders may from time-to-time reasonably request. The Company shall file post-effective amendments or supplements to such registration statement for a period not to exceed 90 days in order that the registration statement my be effective at a times during such 90 day period and at all times comply with the various applicable Federal and State securities laws (after which period the Company may withdraw such Common Stock from registration), and deliver copies of the prospectus contained therein as hereinabove provided.       9.7 Expenses. In the case of any registrations pursuant to Section 8, the Company shall pay all of the expenses in connection therewith, including without limitation costs of complying with Federal and State securities laws and regulations, attorneys' fees of the Company, accounting fees, printing expenses and filing fees, except transfer taxes, underwriting commissions and discounts and other expenses of the holders; provided however that in any registration pursuant                                            -13-  to Section 8.3, such holders participating in the registration shall pay the Company for the incremental portion of the Federal and State registration and filing fees attributable to their shares.       8.8 Indemnity to Holders. The Company will indemnify each such holder of Common Stock being sold by any such holder (and any person who controls such holders or underwriter within the meaning of Section 15 of the Act) against all claims, losses, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact contained in a Prospectus or in any related registration statement, notification or the like or from any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been based upon information furnished in writing to the Company by such holder expressly for use therein and used in accordance with such writing.       8.9 Indemnity to Company. Each holder of a Warrant, and each holder of shares of Common Stock acquired by such holder upon the exercise of a Warrant, by acceptance thereof, agrees to furnish to the Company such information concerning such holder as may be requested by the Company which is necessary in connection with any registration or qualification of shares of Common Stock issued or issuable upon exercise of Warrants proposed to be made by the Company pursuant to this Section 8, and to indemnify the Company, and any officer signing the registration statement and any director and person who controls the Company within the meaning of Section 15 of the Act, against all claims, losses, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact contained in or omitted from information furnished in writing to the Company by such holder expressly for use therein and used in accordance with such writing.       8.10 Termination of Registration Obligations. Subject to the provisions of Section 8.6 hereof, the Company's obligations under Section 8.2 hereof shall be satisfied upon the completion of three registrations requested, except that its obligations under Section 8.2 hereof and its other obligations hereunder shall terminate upon the expiration of two years after exercise of this Warrant, provided, however, that if the Company shall receive a "no-action" letter from the staff of the Securities and Exchange Commission or shall receive an opinion of its counsel, which shall be concurred in by counsel for the holders of Common Stock, to the effect that the Common Stock owned by a particular bolder or a proposed disposition by such person is not required to be registered under the Act or applicable state securities laws, the provisions of this Section 8 shall be terminated with respect to such particular Common Stock. Provided further, that if such no-action letter or such opinion related to a particular disposition of Common Stock, the Provisions Of this Section 8 based on the Act and applicable state securities laws, shall be applicable to such Common Stock and any holder thereof until final consummation of such disposition and if such no-action letter or opinion is terminated expressly or impliedly or subject: to any condition, the Company win comply promptly with any such condition as is applicable to it and within its control, and the provisions of this Section 8 will be applicable to such Common Stock and to any holder thereof if the terms of such no-action letter or opinion terminate or the conditions thereof are not met.       8.11 No Warrant Registration. The Warrants and the Common Stock are restricted securities as that term is defined under Rule 144 issued pursuant to the Act, as amended, and no                                            -14-  transfer thereof shall be made in violation of the Act, as amended. The Company shall have no duty or obligation to register the Warrants at any time.       8.12 Rule 144 Information. The Company shall continue to maintain the registration of its common stock or any other stock issuable upon exercise of this Warrant under the Securities Exchange Act of 1934, as amended, for as long as the Warrants remain outstanding.       9. Information. The Company shall furnish each holder of Warrants with copies of all reports, proxy statements, and similar materials that it furnishes to holders of its Common Stock.       10. Notices. All notices and other communications from the Company to the holder of this Warrant shall be mailed by first-class registered or certified mail, postage prepaid, to the address furnished to the Company in writing by the last holder of this Warrant who shall have furnished an address to the Company in writing.       11. Change, Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated orally but only by an instrument in writing signed by the party against which enforcement by the change, waiver, discharge or termination is sought.       12. Headings. The headings in this Warrant are for the purposes of convenience of references only and shall not be deemed to constitute a part hereof.       13. Law Governing. This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Indiana.                                          NOBLE ROMAN'S, INC.  Date:___________________                BY: ______________________________                                            -15-                                 WARRANT EXERCISE FORM                  (To Be Executed Only Upon Exercise of Warrant)       The undersigned registered owner of this Warrant irrevocably exercises this Warrant for and purchase the number of shares of Common Stock of __________________________, purchasable with this Warrant, and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant.  Date: __________________                                          _______________________________________                                         (Signature of Registered Owner)                                          _______________________________________                                         (Street Address)                                          _______________________________________                                         City        (State)     (Zip)                                            -16-                             WARRANT FORM OF ASSIGNMENT       FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under and within Warrant, with respect to the number of shares of Common Stock set forth below:  Name of Assignee                   Address                    No. of Shares - ----------------                   -------                    -------------  and does hereby irrevocably constitute and appoint ___________ attorney to make such transfer on the books of _______________ maintained for the purpose, with full power of substitution in the premises.  Date: __________________                Signature _____________________________                                          Witness _______________________________       The securities represented hereby have been acquired for investment, have not been registered under the act, and may not be sold, exchanged or transferred in any manner, except in compliance with Section 4 hereof.     EX-10.1 4 ex10-1.txt                                                                      Exhibit 10.1                                                                     ------------                               EMPLOYMENT AGREEMENT                               --------------------       This Employment Agreement, dated as of the 2nd day of January, 1999, between Noble Roman's, Inc., an Indiana corporation ("Company") and Paul W. Mobley ("Mobley").                                      RECITALS:                                     ---------       1. The Company is engaged in pizza focused foodservice solutions for franchising to non-traditional locations ("Business").       2. The Company desires to retain, by contract, a qualified individual to serve as its Chairman; and,       3. Mobley has served as Chairman of the Company and is willing to continue to serve as Chairman of the Company pursuant to the terms and conditions of this Agreement.                                     AGREEMENT:                                    ----------       NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties agree as follows:       1. Employment. The Company hereby employs Mobley and Mobley hereby accepts employment upon the terms and conditions hereinafter set forth.       2. Term. The effective date of this Agreement shall be January 2, 1999. Subject to the provisions for termination as provided in paragraph 10 hereof, the term of this Agreement shall be seven (7) years from and after January 2, 1999 and it shall be automatically renewed for successive seven (7) year periods on January 2 of each year hereafter unless the Board of Directors ("Board")                                         1   takes specific action not to renew. If the Board elects not to renew on any anniversary date, this Agreement shall be in full force and effect during the remaining portion of the then current seven (7) year period.       3. Duties. Mobley is engaged as Chairman of the Company to manage, direct and administer all phases of the Business of the Company, subject to the direction and control of the Board of the Company. The precise services, duties and authority of Mobley as Chairman may be further defined, extended or curtailed from time to time at the discretion of the Board.       4. Extent of Services. Mobley, subject to the control of the Board, shall have the power and authority commensurate and necessary to his position of Chairman of the Company. He shall devote his entire employable time, attention and best efforts to the business of the Company and shall not, without the consent of the Board, which consent shall not be unreasonably withheld, during the term of this Agreement, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit and other pecuniary advantage; but this shall not be construed as preventing Mobley from investing his personal assets in such form or manner as will not require any services on the part of Mobley in the operation of the affairs of the company in which such investments are made. Mobley shall be a full-time employee of the Company and shall devote at least forty (40) hours per week (excused absences and vacation periods counted as hours worked for this purpose) to the affairs of the Company unless the Company consents to a shorter work period.       5. Compensation. Mobley shall be compensated for services rendered hereunder during the term hereof as follows:                                         2        (a) Mobley shall receive a base salary of Two Hundred Seventy-Five Thousand Dollars ($275,000.00) per year payable in equal periodic installments consistent with the Company's payroll practices and subject to withholding of taxes and other customary amounts. During the term hereof, the base salary will be automatically increased by 6% annually unless further increased by action of the Board and, once increased, never decreased.       (b) Mobley may be entitled to bonuses in an amount and at times as determined by the Board.            6. Fringe Benefits:       (a) Mobley shall be entitled to participate in such existing employee benefit plans and insurance programs offered by the Company, or which it may adopt from time to time, for its management or supervisory personnel generally at such times as Mobley shall have fulfilled the eligibility requirement for participation therein. Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs or employee fringe benefits it may adopt from time to time.       (b) During the term of this Agreement, the Company shall provide Mobley with an automobile of such sufficient style and quality as determined by Mobley and consistent with his position as Chairman of the Company. The Company shall pay directly or shall reimburse Mobley for insurance and all normal and reasonable automobile operating expenses, such as maintenance repairs and insurance, that he incurs in the performance of his duties hereunder.                                          3        (c) Mobley shall be entitled to at least four (4) weeks vacation with pay for each year during the term hereof or such greater number of days or weeks of vacation as may be determined by the Board.       (d) The Company shall reimburse Mobley for all reasonable expenses he may incur for promoting the Company's business, including expenses for entertainment, travel and similar items.       (e) The Company shall at its expense, in addition to any life insurance benefits pursuant to paragraph 6(a), provide Mobley with a life insurance policy on the life of Mobley in the amount of five (5) times his base annual salary (as may be changed from time to time), payable to such beneficiary or beneficiaries as Mobley may designate. Mobley shall be the owner of such life insurance policy.       7. Disability. If Mobley shall become physically or mentally disabled during the term of this Agreement to the extent that he shall be unable to perform his duties and services for and on behalf of the Company, and such disability shall continue for a period in excess of one (1) month, the salary then payable to Mobley pursuant to the foregoing paragraph 5(a) shall be paid to Mobley for the balance remaining on the present contract term reduced by any monthly disability insurance benefits he may receive from other disability insurance purchased on his behalf by the Company.       8. Confidentiality. The Company possesses and will continue to possess information which has been created, discovered, developed by or otherwise become known to the Company (including information discovered or made available by subsidiaries, affiliates or joint ventures of the Company or in which property rights have been assigned or otherwise conveyed to the Company) which                                          4   information has commercial value to the Company, including but not limited to trade secrets, innovations, processes, computer codes, data, know how, improvements, discoveries, developments, techniques, marketing plans, strategies, costs, customers, client lists and recipes, or any information Mobley has reason to know the Company would like to treat as confidential for any purpose, such as maintaining a competitive advantage or avoiding undesired publicity, whether or not developed by Mobley ("Confidential Information"). Unless previously authorized in writing or instructed in writing by the Company, Mobley will not, at any time, disclose to others, or use, or allow anyone else to disclose or use any Confidential Information (except as may be necessary in the performance of Mobley's employment with the Company), unless and until and then only to the extent that, such Confidential Information has been ascertainable or obtained from public or published sources or was available to the Company on a non-confidential basis prior to any disclosure, provided that the source of such material is or was not bound by any obligation of confidentiality to the Company.       9. Restrictive Covenants. Mobley acknowledges that because of his skills, his position with the Company and the Confidential Information to which he will be provided on account of such employment with the Company, competition by Mobley with the Company would damage the Company in a manner which cannot adequately be compensated by damages or in action at law. In view of such circumstances, because of the Confidential Information obtained by, or disclosed to Mobley as a material inducement to the Company to enter into this Agreement and to compensate Mobley, as described in paragraph 5, as well as provide him with additional benefits as provided herein and other good and valuable consideration, Mobley covenants and agrees that:                                          5        (a) Non-Competition. During Mobley's employment with the Company and for a period of two (2) years thereafter, Mobley shall not, directly or indirectly in any geographic areas in which the Company is engaged in Business at the time Mobley's employment terminates, participate or assist any other person or entity in any manner or capacity in the pizza food industry.       (b) Non-Solicitation of Employees. During Mobley's employment with the Company and for a period of two (2) years thereafter, Mobley shall not, directly or indirectly solicit for employment any employee of the Company.       (c) Definitions. For purposes of this Agreement, the term "directly or indirectly" shall be construed in its broadest sense and shall include the activities of the members of the Mobley's immediate family or any partnership, corporation or other entity under the control of Mobley.       (d) Reasonable Limitations. Given the important nature of the position Mobley has held and will hold with the Company, the nature of the Company's business and the sensitive nature of the information and duties Mobley will have with the Company, the parties acknowledge that the limitations, including but not limited to the scope of activities prohibited, their geographic area covered and the time limitations, are reasonable. In the event of an actual or threatened breach by Mobley of the provisions of paragraphs 8 and 9 of this Agreement, the Company shall be entitled to an injunction restraining Mobley from such breach. Nothing herein, however, shall be construed as prohibiting the Company from pursuing any other remedies available to it for such actual or threatened breach, including the recovery of damages from Mobley. If Mobley violates any of the covenants in paragraph 9 of this Agreement, the term and the                                          6   covenant violated shall be automatically extended to a like period of time from the date on which Mobley ceases such violation or from the date of the entry of a court of competent jurisdiction of an order or judgment enforcing such covenance, whichever period is later.       10. Termination.       (a) The Company may, at its option, terminate this Agreement at any time upon written notice to Mobley for just cause. Just causes is defined as:            (i)  Mobley's misuse or embezzlement of funds belonging to the                Company, conviction of a felony or crime involving moral                turpitude or use of alcohol or drugs in such a manner as will                injure or adversely effect the reputation of the Company or its                employees, customers, agents, officers or directors;            (ii) Mobley's absence from his employment, other than by disability                for which salary is continued pursuant to paragraph 7, for a                period of ninety (90) consecutive days or more;             (iii) Provisions of this Agreement, gross negligence or willful                malfeasance in discharging his obligations hereunder and such                acts and their consequences are not remedied within ten (10) days                or such longer reasonable period of time designated by the                Company after written notice hereof has been given to Mobley.       (b) This agreement shall not be terminated for any reason(s) except as enumerated above except by mutual agreement or by the death of Mobley.                                          7        (c) In the event of the death of Mr. Mobley during the term of this agreement, Mr. Mobley's heirs shall continue to receive 12 months salary at the same rate of pay he was receiving immediately prior to his death.       (d) Upon the termination of this Agreement for any of the reason specified in 10(a) above, Mobley shall be entitled to receive only the compensation accrued but unpaid as of the date of the termination hereof and shall not be entitled to additional compensation except as expressly provided in this Agreement. For any termination for any other reason the Company must pay Mr. Mobley a lump sum payment, on the day of termination, an amount equal to five (5) times Mr. Mobley's then current annual salary plus the remaining amounts due pursuant to the terms of this contract for the balance of the contract term.       11. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by certified mail to his residence, in the case of Mobley, or to the business address of the Company, in the case of the Company.       12. Waiver and Breach of Severability. The waiver by the Company of a breach of any provision of this Agreement by Mobley shall not operate or be construed as a waiver of any subsequent breach by Mobley. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and the remaining provisions of the Agreement shall continue to be binding and effective.       13. Entire Agreement. This instrument constitutes the entire Agreement of the parties to the Agreement and the subjects contained herein. It may not be changed orally, but only by an Agreement in writing signed by the party against                                          8   whom enforcement of any waiver, change, modification, extension or discharge is sought.       14. Binding Agreement and Governing Law. This Agreement shall be binding upon and shall inure to the benefit of the parties and the successors in interest and shall be construed in accordance with and governed by the laws of the State of Indiana.       15. Survival. Upon termination of this Agreement, the obligations of Mobley in paragraphs 8 and 9 shall continue in effect as provided therein.        IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.                                           NOBLE ROMAN'S, INC.                                           By: /s/ A. Scott Mobley                                              --------------------------                                          Printed: A. Scott Mobley                                           Title:   President                                                         "COMPANY"                                           /s/   Paul W. Mobley                                          ------------------------------                                          Paul W. Mobley                                                          "MOBLEY"                                              9    EX-10.2 5 ex10-2.txt                                                                      Exhibit 10.2                                                                     ------------                                EMPLOYMENT AGREEMENT                               --------------------       This Employment Agreement, dated as of the 2nd day of January, 1999, between Noble Roman's, Inc., an Indiana corporation ("Company") and A. Scott Mobley ("Mobley").                                      RECITALS:                                     ---------       1. The Company is engaged in pizza focused foodservice solutions for franchising to non-traditional locations ("Business").       2. The Company desires to retain, by contract, a qualified individual to serve as its President; and,       3. Mobley has served as President of the Company and is willing to continue to serve as President of the Company pursuant to the terms and conditions of this Agreement.                                     AGREEMENT:                                    ----------       NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties agree as follows:       1. Employment. The Company hereby employs Mobley and Mobley hereby accepts employment upon the terms and conditions hereinafter set forth.       2. Term. The effective date of this Agreement shall be January 2, 1999. Subject to the provisions for termination as provided in paragraph 10 hereof, the term of this Agreement shall be five (5) years from and after January 2, 1999 and it shall be automatically renewed for successive five (5) year periods                                          1   on January 2 of each year hereafter unless the Board of Directors ("Board") takes specific action not to renew. If the Board elects not to renew on any anniversary date, this Agreement shall be in full force and effect during the remaining portion of the then current five (5) year period.       3. Duties. Mobley is engaged as President of the Company to manage, direct and administer all phases of the Business of the Company, subject to the direction and control of the Board. The precise services, duties and authority of Mobley as President may be further defined, extended or curtailed from time to time at the discretion of the Board.       4. Extent of Services. Mobley, subject to the control of the Board, shall have the power and authority commensurate and necessary to his position of President of the Company. He shall devote his entire employable time, attention and best efforts to the business of the Company and shall not, without the consent of the Board, which consent shall not be unreasonably withheld, during the term of this Agreement, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit and other pecuniary advantage; but this shall not be construed as preventing Mobley from investing his personal assets in such form or manner as will not require any services on the part of Mobley in the operation of the affairs of the company in which such investments are made. Mobley shall be a full-time employee of the Company and shall devote at least forty (40) hours per week (excused absences and vacation periods counted as hours worked for this purpose) to the affairs of the Company unless the Company consents to a shorter work period.       5. Compensation. Mobley shall be compensated for services rendered hereunder during the term hereof as follows:                                          2        (a) Mobley shall receive a base salary of One Hundred Seventy Five Thousand Dollars ($175,000.00) per year payable in equal periodic installments consistent with the Company's payroll practices and subject to withholding of taxes and other customary amounts. During the term hereof, the base salary will be automatically increased by 6% annually unless further increased by action of the Board and, once increased, never decreased.       (b) Mobley may be entitled to bonuses in an amount and at times as determined by the Board.       6. Fringe Benefits:       (a) Mobley shall be entitled to participate in such existing employee benefit plans and insurance programs offered by the Company, or which it may adopt from time to time, for its management or supervisory personnel generally at such times as Mobley shall have fulfilled the eligibility requirement for participation therein. Nothing herein shall be construed so as to prevent the Company from modifying or terminating any employee benefit plans or programs or employee fringe benefits it may adopt from time to time.       (b) During the term of this Agreement, the Company shall provide Mobley with an automobile of such sufficient style and quality as determined by Mobley and consistent with his position as President of the Company. The Company shall pay directly or shall reimburse Mobley for insurance and all normal and reasonable automobile operating expenses, such as maintenance repairs and insurance, that he incurs in the performance of his duties hereunder.                                          3        (c) Mobley shall be entitled to at least four (4) weeks vacation with pay for each year during the term hereof or such greater number of days or weeks of vacation as may be determined by the Board.       (d) The Company shall reimburse Mobley for all reasonable expenses he may incur for promoting the Company's business, including expenses for entertainment, travel and similar items.       7. Disability. If Mobley shall become physically or mentally disabled during the term of this Agreement to the extent that he shall be unable to perform his duties and services for and on behalf of the Company, and such disability shall continue for a period in excess of one (1) month, the salary then payable to Mobley pursuant to the foregoing paragraph 5(a) shall be paid to Mobley for the balance remaining on the present contract term reduced by any monthly disability insurance benefits he may receive from other disability insurance purchased on his behalf by the Company.       8. Confidentiality. The Company possesses and will continue to possess information which has been created, discovered, developed by or otherwise become known to the Company (including information discovered or made available by subsidiaries, affiliates or joint ventures of the Company or in which property rights have been assigned or otherwise conveyed to the Company) which information has commercial value to the Company, including but not limited to trade secrets, innovations, processes, computer codes, data, know how, improvements, discoveries, developments, techniques, marketing plans, strategies, costs, customers, client lists and recipes, or any information Mobley has reason to know the Company would like to treat as confidential for any purpose, such as maintaining a competitive advantage or avoiding undesired                                          4   publicity, whether or not developed by Mobley ("Confidential Information"). Unless previously authorized in writing or instructed in writing by the Company, Mobley will not, at any time, disclose to others, or use, or allow anyone else to disclose or use any Confidential Information (except as may be necessary in the performance of Mobley's employment with the Company), unless and until and then only to the extent that, such Confidential Information has been ascertainable or obtained from public or published sources or was available to the Company on a non-confidential basis prior to any disclosure, provided that 2the source of such material is or was not bound by any obligation of confidentiality to the Company.       9. Restrictive Covenants. Mobley acknowledges that because of his skills, his position with the Company and the Confidential Information to which he will be provided on account of such employment with the Company, competition by Mobley with the Company would damage the Company in a manner which cannot adequately be compensated by damages or in action at law. In view of such circumstances, because of the Confidential Information obtained by, or disclosed to Mobley as a material inducement to the Company to enter into this Agreement and to compensate Mobley, as described in paragraph 5, as well as provide him with additional benefits as provided herein and other good and valuable consideration, Mobley covenants and agrees that:       (a) Non-Competition. During Mobley's employment with the Company and for a period of two (2) years thereafter, Mobley shall not, directly or indirectly in any geographic areas in which the Company is engaged in Business at the time Mobley's employment terminates, participate or assist any other person or entity in any manner or capacity in the pizza food industry.                                          5        (b) Non-Solicitation of Employees. During Mobley's employment with the Company and for a period of two (2) years thereafter, Mobley shall not, directly or indirectly solicit for employment any employee of the Company.       (c) Definitions. For purposes of this Agreement, the term "directly or indirectly" shall be construed in its broadest sense and shall include the activities of the members of the Mobley's immediate family or any partnership, corporation or other entity under the control of Mobley.       (d) Reasonable Limitations. Given the important nature of the position Mobley has held and will hold with the Company, the nature of the Company's business and the sensitive nature of the information and duties Mobley will have with the Company, the parties acknowledge that the limitations, including but not limited to the scope of activities prohibited, their geographic area covered and the time limitations, are reasonable. In the event of an actual or threatened breach by Mobley of the provisions of paragraphs 8 and 9 of this Agreement, the Company shall be entitled to an injunction restraining Mobley from such breach. Nothing herein, however, shall be construed as prohibiting the Company from pursuing any other remedies available to it for such actual or threatened breach, including the recovery of damages from Mobley. If Mobley violates any of the covenants in paragraph 9 of this Agreement, the term and the covenant violated shall be automatically extended to a like period of time from the date on which Mobley ceases such violation or from the date of the entry of a court of competent jurisdiction of an order or judgment enforcing such covenance, whichever period is later.                                          6   10.  Termination.       (a) The Company may, at its option, terminate this Agreement at any time upon written notice to Mobley for just cause. Just causes shall include:            (i)  Mobley's misuse or embezzlement of funds belonging to the                Company, conviction of a felony or crime involving moral                turpitude or use of alcohol or drugs in such a manner as will                injure or adversely effect the reputation of the Company or its                employees, customers, agents, officers or directors;            (ii) Mobley's absence from his employment, other than by disability                for which salary is continued pursuant to paragraph 7, for a                period of ninety (90) consecutive days or more;            (iii) Mobley's breach of the provisions of this Agreement, gross                negligence or willful malfeasance in discharging his obligations                hereunder and such acts and their consequences are not remedied                within ten (10) days or such longer reasonable period of time                designated by the Company after written notice hereof has been                given to Mobley.       (b) This agreement shall not be terminated for any reason(s) except as enumerated above except by mutual agreement or by the death of Mobley.       (c) Upon the termination of this Agreement for any of the foregoing reasons, Mobley shall be entitled to receive only the compensation accrued but unpaid as of the date of the termination hereof and shall not be entitled to additional compensation except as expressly provided in this Agreement. For any termination for any other reason the Company must pay Mr. Mobley a lump sum                                          7   payment, on the day of termination, an amount equal to three (3) times Mr. Mobley's then current annual salary plus the remaining amounts due pursuant to the terms of this contract for the balance of the contract term.       11. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if sent by certified mail to his residence, in the case of Mobley, or to the business address of the Company, in the case of the Company.       12. Waiver and Breach of Severability. The waiver by the Company of a breach of any provision of this Agreement by Mobley shall not operate or be construed as a waiver of any subsequent breach by Mobley. In the event any provision of this Agreement is found to be invalid or unenforceable, it may be severed from the Agreement and the remaining provisions of the Agreement shall continue to be binding and effective.       13. Entire Agreement. This instrument constitutes the entire Agreement of the parties concerned the subjects contained herein. It may not be changed orally, but only by an Agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.       14. Binding Agreement and Governing Law. This Agreement shall be binding upon and shall inure to the benefit of the parties and the successors in interest and shall be construed in accordance with and governed by the laws of the State of Indiana.       15. Survival. Upon termination of this Agreement, the obligations of Mobley in paragraphs 8 and 9 shall continue in effect as provided therein.                                          8        IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above.                                              NOBLE ROMAN'S, INC.                                              By:  /s/  Paul W. Mobley                                                  ----------------------                                             Printed:  Paul W. Mobley                                              Title:  Chairman                                                            "COMPANY"                                              /s/  A. Scott Mobley                                             ---------------------------                                             A. Scott Mobley                                                             "MOBLEY"                                                   9    EX-31.1 6 ex31-1.txt                                                                      EXHIBIT 31.1                                                                     ------------ I, Paul W. Mobley, certify that:  (1)  I have reviewed this annual report on Form 10-K of Noble Roman's, Inc.;  (2)  Based on my knowledge, this annual report does not contain any untrue      statement of a material fact or omit to state a material fact necessary to      make the statements made, in light of the circumstances under which such      statements were made, not misleading with respect to the period covered by      this annual report;  (3)  Based on my knowledge, the financial statements, and other financial      information included in this annual report, fairly present in all material      respects the financial condition, results of operations and cash flows of      the registrant as of, and for, the periods presented in this annual report;  (4)  The registrant's other certifying officers and I are responsible for      establishing and maintaining disclosure controls and procedures (as defined      in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:       (a)  designed such disclosure controls and procedures to ensure that           material information relating to the registrant, including its           consolidated subsidiaries, is made known to us by others within those           entities, particularly during the period in which this annual report           is being prepared;       (b)  evaluated the effectiveness of the registrant's disclosure controls           and procedures as of a date within 90 days prior to the filing date of           this annual report (the "Evaluation Date"); and       (c)  presented in this annual report our conclusions about the           effectiveness of the disclosure controls and procedures based on our           evaluation as of the Evaluation Date;  (5)  The registrant's other certifying officers and I have disclosed, based on      our most recent evaluation, to the registrant's auditors and the audit      committee of registrant's board of directors (or persons performing the      equivalent function):       (a)  all significant deficiencies in the design or operation of internal           controls which could adversely affect the registrant's ability to           record, process, summarize and report financial data and have           identified for the registrant's auditors any material weaknesses in           internal controls; and       (b)  any fraud, whether or not material, that involves management or other           employees who have a significant role in the registrant's internal           controls; and       (6)  The registrant's other certifying officers and I have indicated in           this annual report whether or not there were significant changes in           internal controls or in other factors that could significantly affect           internal controls subsequent to the date of our most recent           evaluation, including any corrective actions with regard to           significant deficiencies and material weaknesses.   March 29, 2006                                     /s/ Paul W. Mobley                                                    ----------------------------                                                    Paul W. Mobley                                                    Chief Executive Officer and                                                    Chief Financial Officer    EX-32.1 7 ex32-1.txt                                                                      Exhibit 32.1                                                                     ------------                               CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002   In connection with the Annual Report of Noble Roman's, Inc. (the "Company") on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul W. Mobley, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:       (1)  The Report fully complies with the requirements of section 13(a) or           15(d) of the Securities Exchange Act of 1934; and       (2)  The information contained in the Report fairly presents, in all           material respects, the financial condition and results of operations           of the Company.                                        /s/ Paul W. Mobley                                      -------------------------------------------                                      Paul W. Mobley                                      Chief Executive Officer and Chief Financial                                      Officer of Noble Roman's, Inc.                                       March 29, 2006    -----END PRIVACY-ENHANCED MESSAGE-----