SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXHANGE ACT OF 1934
For the quarter ended September 30, 1998
Commission file number 1-7697
I.C.H. Corporation
Exact name of Registrant as specified in its charter
Delaware 43-6069928
----------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9255 Towne Centre Drive, Suite 600, San Diego, California 92121
---------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (619) 587-8533
------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes _X_ No ___
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _X_ No___
Number of shares of common stock outstanding on September 30, 1998: 2,911,000*.
-----------
*Assumes full conversion of all remaining outstanding shares of common stock and
preferred stock of pre-reorganized I.C.H. Corporation. See Note 5 of Notes to
consolidated financial statements.
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
Index
Page
Number
------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1997
and September 30, 1998 2
Consolidated Statements of Operations for the
Three Months ended September 30, 1997 and for
the Three Months ended September 30, 1998 3
Consolidated Statements of Operations for the
Nine Months ended September 30, 1997 and for
the Nine Months ended September 30, 1998 4
Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1997 and for
the Nine Months ended September 30, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information 18
Signatures 20
Exhibit Index 21
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
As of As of
Decmeber 31, September 30,
1997 1998
-------- -------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 4,418 $ 4,565
Accounts receivable 530 432
Inventories 1,372 1,588
Deferred income taxes 1,257 1,137
Other current assets 1,565 2,561
-------- -------
Total current assets 9,142 10,283
Property and equipment, net 24,696 25,579
Intangible assets, net 39,470 44,206
Other assets 1,956 3,296
-------- -------
Total assets $ 75,264 $83,364
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,741 $ 3,506
Accrued liabilities 8,745 10,223
Current portion of long-term debt 1,714 1,714
Current portion of capital lease obligations 948 948
-------- -------
Total current liabilities 14,148 16,391
Non-current liabilities:
Long-term debt 44,718 49,112
Long-term capital lease obligations 2,699 2,563
Deferred income taxes - net 1,908 1,070
Other liabilities 606 1,329
-------- -------
Total liabilities 64,079 70,465
-------- -------
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000
authorized; none issued and outstanding
Common stock, $0.01 par value; 9,000,000
authorized; 2,594,416 outstanding 24 26
Paid-in-capital 12,025 12,049
Retained earnings (deficit) (864) 824
-------- -------
Total stockholders' equity 11,185 12,899
-------- -------
Total liabilities and stockholders' equity $ 75,264 $83,364
======== =======
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements
2
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands except share amounts)
<TABLE>
<CAPTION>
For the three months ended
September 30,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Revenue and other income:
Restaurant sales $ 26,224 $ 33,190
Other 464 (16)
---------- ----------
Total Revenues 26,688 33,174
Cost and expenses:
Restaurant costs and expenses 21,819 27,649
General and administrative 1,641 2,133
Depreciation and amortization 1,633 1,157
Other 316 --
Non-recurring/restructuring charges 414 --
---------- ----------
Operating income 865 2,235
Interest expense 1,701 1,443
---------- ----------
Income (loss) from continuing operations
before income taxes (836) 792
Provision (benefit) for income taxes (344) 316
---------- ----------
Income (loss) from continuing operations (492) 476
Gain from sale of discontinued operations -- 388
---------- ----------
Net income (loss) $ (492) $ 864
========== ==========
Income (loss) from continuing operations per share:
Basic $ (.18) $ .17
Diluted $ (.18) $ .15
Gain from discontinued operations per share:
Basic
Diluted $ -- $ .13
$ -- $ .12
Net income (loss) per share:
Basic $ (.18) $ .30
Diluted $ (.18) $ .27
Weighted-average common shares
Outstanding (see note)
Basic 2,793,550 2,911,000
Diluted 2,793,550 3,148,000
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
3
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In thousands except share amounts)
<TABLE>
<CAPTION>
Predecessor Company Combined Company
For the four For the five For the nine For the nine
months ended months ended months ended Months ended
April 30, 1997 September 30, 1997 September 30, 1997 September 30, 1998
-------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenue and other income:
Restaurant sales $ 37,868 $ 44,757 $ 82,625 $92,376
Other 48 906 954 736
----------- ----------- -------- -------
Total Revenues 37,916 45,663 83,579 93,112
Cost and expenses:
Restaurant costs and expenses 32,006 37,190 69,196 76,408
General and administrative 2,212 2,722 4,934 5,989
Depreciation and amortization 2,006 2,830 4,836 3,755
Other -- 744 744 546
Non-recurring/restructuring charges -- 1,670 1,670 --
----------- ----------- -------- -------
Operating income 1,692 507 2,199 6,414
Interest expense 638 2,752 3,390 4,248
----------- ----------- -------- -------
Income (loss) from continuing operations
before income taxes 1,054 (2,245) (1,191) 2,166
Provision (benefit) for income taxes 434 (859) (425) 866
----------- ----------- -------- -------
Income (loss) from continuing operations 620 (1,386) (766) 1,300
Gain from sale of discontinued operations -- -- -- 388
----------- ----------- -------- -------
Net Income (loss) $ 620 $ (1,386) $ (766) $ 1,688
=========== =========== ======== =======
Income (loss) from continuing
operations
per share: $ (.27) $ .45
Basic $ (.27) $ .42
Diluted
Gain from discontinued operations per
share: $ -- $ .14
Basic $ -- $ .13
Diluted
Net income (loss) per share:
Basic $ (.27) $ .59
Diluted $ (.27) $ .55
Weighted-average common shares
outstanding (see note)
Basic 2,793,550 2,881,000
Diluted 2,793,550 3,083,000
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
4
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
<TABLE>
<CAPTION>
Combined Company
------------ ------------
For the nine For the nine
months ended months ended
September 30, September 30,
1997 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (766) $ 1,688
Gain from sale of subsidiary -- (388)
Adjustments to reconcile net income (loss) to cash
from operating activities:
Depreciation and amortization 4,836 3,856
Deferred income taxes 4,414 147
Changes in current assets and liabilities:
Accounts receivable 948 30
Inventories 224 (216)
Accounts payable and accrued expenses (2,594) 2,805
Other, net (210) (1,096)
------- -------
Net cash provided by operating activities 6,852 6,826
------- -------
Cash flows from investing activities:
Capital expenditures (3,449) (8,089)
Proceeds from disposition of property and equipment 44,877 758
Investment in Sybra, Inc. net of $886 cash acquired (13,614) --
Acquisition of restaurant properties -- (5,970)
Sale of subsidiary 5,000 2,955
Other, net -- (617)
------- -------
Net cash provided (used) by investing activities 32,814 (10,963)
------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net 33,984 6,195
Repayment of long-term debt and capital
lease obligation (2,698) (1,937)
Repayment of debt to former owner of Sybra, Inc (23,772) --
Distribution to former Parent (46,079) --
Other, net (456) 26
------- -------
Net cash provided (used) by financing activities (39,021) 4,284
------- -------
Net changes in cash and cash equivalents 645 147
Cash and cash equivalents at beginning of period 2,794 4,418
------- -------
Cash and cash equivalents at end of period $ 3,439 $ 4,565
======= =======
</TABLE>
The accompanying Notes are an integral part of the
Consolidated Financial Statements
5
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 1. BUSINESS
Organization, Business and Summary of Significant Accounting Policies:
Preparation of Interim Financial Statements
The Consolidated Financial Statements of I.C.H. Corporation (the "Company") and
Subsidiaries have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain amounts have been
reclassified from previous presentations. These Consolidated Financial
Statements include estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities and the
amounts of revenues and expenses. Actual results could differ from those
estimates. In the opinion of the Company, these statements include all
adjustments necessary for a fair presentation of the results of all interim
periods reported herein. All adjustments are of a normal recurring nature unless
otherwise disclosed. Certain information and footnote disclosures prepared in
accordance with generally accepted accounting principles have been either
condensed or omitted pursuant to SEC rules and regulations. The Company
believes, however, that the disclosures made are adequate for a fair
presentation of results of operations, financial position and cash flows. These
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and accompanying notes included in the
Company's latest annual report on Form 10-K.
Organization
I.C.H. Corporation is the post-reorganization successor to ICH Corporation ("Old
ICH"). Old ICH, together with its subsidiaries, filed voluntary petitions for
relief under Chapter 11 on October 10, 1995. The Company's plan of
reorganization (the "Reorganization Plan") was confirmed February 7, 1997 and
became effective on February 19, 1997 (the "Effective Date"). Until its
acquisition of Sybra, Inc. (see Note 2), the Company had no significant business
operations. As a result, revenues, operating loss and cash flows for the Company
for the period from February 19, 1997 to April 30, 1997 have been reflected in
the nine-month period ended September 30, 1997.
On the Effective Date, all of the outstanding equity securities ("Old ICH Common
Stock" and "Old ICH Preferred Stock", collectively the "Old ICH Stock") of Old
ICH were canceled. The Company's Restated Certificate of Incorporation
authorized the issuance of 9,000,000 shares of common stock and 1,000,000 shares
of preferred stock. Holders of Old ICH Stock have two years from the Effective
Date in which to exchange their canceled shares for the Company's common stock.
Generally, holders of the canceled Old ICH shares are entitled to receive 0.0269
shares of the Company's common stock for each share of Old ICH Common Stock and
0.2 shares of the Company's common stock for each share of Old ICH Preferred
Stock and, for a period of 40 days from the Effective Date, certain holders
could elect to exchange canceled shares for a single de minimis cash payment.
Business and Presentation
The accompanying Consolidated Financial Statements labeled "Company" include the
accounts of the Company and its wholly-owned subsidiaries, principally Sybra,
Inc. ("Sybra"). All significant intercompany accounts and transactions have been
eliminated. Sybra currently operates a chain of 177 fast food restaurants as a
franchisee of Arby's, Inc. ("Arby's") clustered in five regions, primarily in
Texas, Michigan, Pennsylvania, Florida and California.
6
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
Sybra is considered to be a Predecessor of the Company and, accordingly, the
historical financial statements of Sybra, prior to its acquisition by the
Company on April 30, 1997, are presented with the accompanying financial
statements of the Company. The acquisition of Sybra resulted in changes in the
cost basis of Sybra's assets and liabilities, use of estimated lives for certain
of the intangibles that are different from those used by the Predecessor and a
different capital structure. These factors significantly affect the
comparability of the Predecessor's financial information.
Significant Accounting Policies
Fiscal Year. The Company operates on a calendar year basis. Sybra, however, uses
a 52/53 week fiscal year ending on the last Saturday of the year. Accordingly,
the accompanying financial statements include Sybra's results for the periods
ended September 27, 1997 and September 26, 1998.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash
equivalents.
Food and Supplies Inventories. Food and supplies inventories are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.
Property and Equipment. Property and equipment is stated at cost less
accumulated depreciation and amortization. Normal repairs and maintenance costs
are expensed as incurred. Depreciation is being recorded on a straight-line
basis over the following estimated useful lives:
Buildings 40 years
Restaurant equipment 5-10 years
Buildings under capitalized leases and leasehold improvements are amortized on a
straight-line basis over the lesser of the lease term or the estimated useful
lives of the assets.
Intangibles. Franchise agreements with Arby's require the Company to pay a
franchise fee for each new restaurant developed and de minimis renewal fees for
franchises that have expired. Each franchise agreement provides the Company the
right to operate an Arby's restaurant for a period of 20 years and is renewable
by the Company, subject to certain conditions, for varying terms of up to 20
years. Franchise fees are capitalized and amortized using the straight-line
method over 40 years.
Acquired royalty rights, representing the fair value of favorable royalty rates
of acquired franchises, are capitalized and amortized on a straight-line basis
over 20 years or the remaining life of the franchise agreement, whichever is
less.
Equity in operating leases, representing the estimated fair value of base rental
rates, less the actual rental obligation, is amortized on a straight-line basis
over 20 years or the remaining life of the lease including option periods,
whichever is less.
Goodwill is amortized using the straight-line method over 40 years. At each
balance sheet date, the Company evaluates the realizability of goodwill based
upon expectations of operating income for the restaurants as a group. The
Company believes that no material impairment of goodwill exists at September 30,
1998.
7
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
Income Taxes. Deferred income taxes are computed using the liability method,
which provides that deferred tax assets and liabilities are recorded based on
the differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Advertising Expenses. All advertising costs are expensed as incurred.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses in the financial statements and in the disclosure of
contingent assets and liabilities. While actual results could differ from those
estimates, management believes that actual results will not be materially
different from amounts provided in the accompanying consolidated financial
statements.
Earnings Per Share. In 1997, the Company adopted SFAS No. 128, "Earnings Per
Share," which requires presentation of both basic and diluted earnings per
share. Basic net income per share is computed based on the weighted-average
number of common shares outstanding during the period (see Note 5). Net earnings
per common share for the Predecessor is not presented as the per share results
are not meaningful due to the changes resulting from the acquisition of Sybra
(see Note 2).
NOTE 2. ACQUISITION OF SYBRA
On April 30, 1997, the Company acquired all of the common stock of Sybra for
$15,614 including related expenses and net of cash acquired of $886. The Company
incurred $2,000 in acquisition indebtedness to the seller and paid the remainder
in cash. The acquisition was recorded under the purchase method of accounting
and, accordingly, the results of operations of Sybra commencing May 1, 1997 are
included in the accompanying financial statements of the Company. The purchase
price was allocated to identifiable tangible and intangible assets and
liabilities based on their estimated fair values, with the excess of the
purchase price over the fair value of such net assets acquired reflected as
goodwill, as follows:
Current Assets $ 3,428
Franchise rights 3,865
Other intangibles, excluding goodwill 8,299
Goodwill 28,159
Tangible assets 20,342
Liabilities assumed (48,479)
--------
Purchase price $ 15,614
========
8
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 3. OLD ICH TRANSACTIONS
On April 25, 1997, the Company exercised its option pursuant to the
Reorganization Plan, to sell all of the outstanding capital stock of Bankers
Multiple Line Insurance Company ("BML"), a property and casualty insurer
licensed in all fifty states, for its carrying value of $5,000. In March 1997,
the Company received $2,790 in satisfaction of a receivable related to the
Reorganization Plan.
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1998
----------------- ------------------
<S> <C> <C>
Term loan, 10.63%, payable monthly
through 2012 $33,984 $33,198
Loan, 14.40% 9,000 9,000
Acquisition indebtedness due in 1999 2,000 2,000
Other 1,448 6,628
------- -------
46,432 50,826
Less: current portion 1,714 1,714
------- -------
Total $44,718 $49,112
======= =======
</TABLE>
Concurrently with the acquisition of Sybra, the Company entered into a loan
agreement that provides, on an aggregate basis, a $35,000 fixed-rate term loan
bearing interest at 10.63% with a weighted-average maturity of 12.5 years. The
term loan is collateralized by substantially all of the restaurant equipment
owned by Sybra. The proceeds of the term loan were used to fund the acquisition
of Sybra and retire debt payable to Sybra's former parent assumed in the
acquisition. The loan agreement contains covenants which require, among other
things, the maintenance of a minimum fixed charge coverage ratio, restrictions
that limit the payment of dividends, and other provisions and restrictive
covenants. As of September 30, 1998, the Company was in compliance with all such
covenants.
As an element of the sale/leaseback transactions completed immediately before
Sybra's acquisition by the Company, Sybra received $9,000 as a loan. The loan
element of the transaction carries an interest rate of approximately 14.40% and
may be repaid at any time without penalty. If not repaid in full earlier than
December 31, 1999, the loan amortizes over 20 years. The Company currently
intends on refinancing this loan prior to fiscal 2000.
9
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
At September 30, 1998, long-term debt had a fair value that approximates the
carrying value.
NOTE 5. EQUITY AND EARNINGS PER COMMON SHARE
Given the stock conversion provisions of the Reorganization Plan, the Company
has not determined and cannot currently determine the ultimate number of shares
of common stock that will be issued upon completion of the stock conversion.
However, based on the number of outstanding shares of Old ICH Stock on the
Effective Date, and after considering nominal shareholders of record and shares
which were exchanged for cash under the provisions of the Reorganization Plan,
the Company estimates that a maximum of approximately 2,911,000 shares of the
Company's common stock could be issued, although the amount could be lower if
all shares are not exchanged prior to the end of the two-year period.
Although conservative, the Company has used the maximum 2,911,000 shares in
computing earnings per share. As of October 30, 1998, 2,594,416 shares of common
stock were outstanding.
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding during
each period. Diluted computations include dilutive common share equivalents.
<TABLE>
<CAPTION>
Three months Nine months
ended ended
September 30, September 30,
1998 1998
------------- -------------
<S> <C> <C>
Income for computation of basic earnings
per share and diluted earnings per share $ 864 $1,688
====== ======
Weighted-average shares for computation
of basic earnings per share 2,911 2,881
Incremental shares on assumed issuance
and repurchase of stock options 237 202
------ ------
Weighted-average shares for computation of
diluted earnings per share 3,148 3,083
====== ======
Basic earnings per share $ 0.30 $ 0.59
====== ======
Diluted earnings per share $ 0.27 $ 0.55
====== ======
</TABLE>
10
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 6. PROFORMA CONDENSED STATEMENTS OF OPERATIONS DATA
Unaudited proforma statements of operations data for the nine months ended
September 30, 1997, before the $1.7 million charge taken during the period,
reflect the Company's acquisition of Sybra using the purchase method of
accounting as if the Sybra acquisition, which occurred on April 30, 1997, had
occurred on January 1, 1997. As a result of the acquisition, the Company
incurred acquisition debt of approximately $35 million and entered into
sale/leaseback transactions on 61 of Sybra's restaurants which had been
previously classified as owned, resulting in higher interest and rent expense.
<TABLE>
<CAPTION>
Nine Months
ended
September 30, 1997
------------------
<S> <C>
Revenues $ 83,579
Costs and expenses:
Restaurant costs and expenses 71,156
General and administrative 4,837
Depreciation and amortization 4,181
Other 744
--------
Operating income 2,661
Interest expense 4,447
--------
Loss before taxes (1,786)
Income tax benefit (724)
--------
Net Loss $ (1,062)
========
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain information discussed below may constitute forward-looking statements
within the meaning of the federal securities laws. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be achieved. Forward-looking information is subject to certain risks, trends and
uncertainties that could cause actual results to differ materially from
projected results. Among those risks, trends and uncertainties are the general
economic climate, costs of food and labor, consumer demand, interest rate
levels, the availability of financing and other risks associated with the
acquisition, development and operation of new and existing restaurants. Unless
otherwise indicated all amounts are in thousands, except share amounts.
GENERAL
The Company's revenues consist almost entirely of restaurant sales and revenues
from its wholly-owned subsidiary, Sybra, Inc., which it acquired on April 30,
1997.
Restaurant costs and expenses include all direct costs, including direct labor,
occupancy costs, advertising expenses, royalty payments, expenditures for
repairs and maintenance, and workers' compensation, casualty and general
liability insurance costs. Advertising fees paid to AFA Service Corporation, a
non-profit association of Arby's restaurant operators, to develop and prepare
advertising materials and to undertake marketing research, are equal to 0.7% of
restaurant sales. In addition, the Company operates its restaurants pursuant to
licenses which require the Company to pay Arby's, Inc. a royalty based upon
percentages of its restaurant sales (presently an aggregate of approximately
2.9% of the Company's restaurant sales). The royalty rate for new restaurants
(currently 4%) will result in an increase in the Company's aggregate royalty
rate as new Arby's restaurants are opened.
General and administrative expenses consist of corporate and regional office
expenses, including executive and administrative compensation, office expenses,
travel and professional fees.
RESULTS OF OPERATIONS
The following table sets forth, with respect to the Company and for the periods
indicated, the percentage of total revenues represented by certain expense and
income items.
For purposes of the discussion below, the historical results of operations for
the combined nine month period ended September 30, 1997, are not indicative of
the results that would actually have been obtained if the Company's acquisition
of Sybra had occurred on January 1, 1997. The Predecessor historical combined
nine month period ended September 30, 1997 does not give effect to, among other
items, corporate expenses necessary to operate on a stand-alone basis. Such
expenses include higher interest and rent expense, certain administrative
services, tax compliance, treasury service, human resource administration and
legal services.
12
<PAGE>
The Predecessor unaudited proforma statement of operations data for the combined
nine month period ended September 30, 1997 reflect the Company's acquisition of
Sybra using the purchase method of accounting as if the acquisition, which
occurred on April 30, 1997, had occurred on January 1, 1997. As a result of the
acquisition, the Company incurred acquisition debt of approximately $35 million
and entered into sale/leaseback transactions on 61 of Sybra's restaurants which
had been previously classified as owned, resulting in higher interest and rent
expense.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
1997 1998
----- -----
<S> <C> <C>
Revenues 100.0% 100.0%
Expenses
Restaurant costs & expenses 81.8 83.3
General & administrative 6.1 6.4
Depreciation & amortization 6.1 3.6
Other 1.2 --
Non occurring/restructuring charge 1.6 --
----- -----
Operating income 3.2 6.7
Interest expense 6.3 4.3
----- -----
Income (loss) from continuing operations
before taxes (3.1) 2.4
Income tax (benefit) expense (1.3) 1.0
----- -----
Income (loss) from continuing operations (1.8) 1.4
Gain from sale of discontinued operations -- 1.2
----- -----
Net income (loss) (1.8)% 2.6%
===== =====
</TABLE>
Comparison of the Quarter Ended September 30, 1998 and the Quarter Ended
September 30, 1997.
Revenues - Revenues were $33.2 million for the third quarter of FY 1998 as
compared to $26.7 million for the same period of FY 1997, an increase of $6.5
million or 24.3% primarily as a result of two new store openings and eleven
store acquisitions. Same store sales increased 10% for the period.
Restaurant Costs & Expenses - Restaurant costs and expenses were $27.6 million,
or 83.3% of sales, for the third quarter of FY 1998 as compared to $21.8
million, or 81.8% of sales for the same period of FY 1997, an increase of $5.8
million. As a percent of sales, costs increased as a result of higher labor
costs due to increased store manager incentive bonuses from improved store
performance.
General and Administrative - General and administrative costs and expenses were
$2.1 million, or 6.4% of sales, for the third quarter of FY 1998 as compared to
$1.6 million, or 6.1% of sales for the same period of FY 1997, an increase of
$492 as a result of costs and expenses associated with operating the Company as
a stand alone public company, as explained above, and increased expenses
associated with business development and real estate operations necessary to
achieve new store development requirements.
Depreciation and Amortization - Depreciation and amortization expense was $1.2
million, or 3.6% of sales in the third quarter of FY 1998 as compared to $1.6
million, or 6.1% of sales in the same period of FY 1997.
13
<PAGE>
Interest Expense - Interest expense was $1.4 million in the third quarter of FY
1998 as compared to $1.7 million in the same period of FY 1997, a decrease of
$258.
The gain of $388 on the sale of a discontinued operation was related to the
sale of Perry Park in July 1998 for approximately $3.1 million in cash. (See
Capital Loss Carry Forward Section).
<TABLE>
<CAPTION>
Combined Company
-------- -------
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1998
------------------ ------------------
(Historical) (Proforma)
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses 82.8 85.1 82.1
General & administrative 5.9 5.8 6.4
Depreciation & amortization 5.8 5.0 4.0
Other 0.9 0.9 0.6
Nonrecurring/restructuring 2.0 -- --
----- ----- -----
Operating income 2.6 3.2 6.9
Interest expense 4.0 5.3 4.6
----- ----- -----
Income (loss) before income taxes (1.4) (2.1) 2.3
Provision (benefit) income expense (.5) (.8) .9
----- ----- -----
Income (loss) from continuing operations (.9) (1.3) 1.4
Gain from sale of discontinued operations -- -- .4
----- ----- -----
Net Income (loss) (.9)% (1.3)% 1.8%
===== ===== =====
</TABLE>
14
<PAGE>
Comparison of the Nine Months Ended September 30, 1998 and the Nine Months Ended
September 30, 1997 on a Historical Basis
Revenues - Revenues were $93.1 million for FY 1998 as compared to $83.6 million
for the same period of FY 1997, an increase of $9.5 million primarily as a
result of two new store openings and twenty-five store acquisitions and same
store sales increasing 2.7 for the period.
Restaurant Costs & Expenses - Restaurant costs and expenses were $76.4 million,
or 82.1% of sales, for FY 1998 as compared to $69.2 million, or 82.8% of sales
for the same period of FY 1997, an increase of $7.2 million. As a percent of
sales, costs decreased as a result of improved food margins and decreased labor
costs.
General and Administrative - General and administrative costs and expenses were
$6.0 million, or 6.4% of sales, for FY 1998 as compared to $4.9 million, or 5.9%
of sales for the same period of FY 1997, an increase of $1.1 million as a result
of costs and expenses associated with operating the Company as a stand alone
public company, as explained above, and increased expenses associated with
business development and real estate operations necessary to achieve new store
development requirements.
Depreciation and Amortization - Depreciation and amortization expense was $3.8
million, or 4.0% of sales in FY 1998 as compared to $4.8 million, or 5.8% of
sales in the same period of FY 1997, a decrease of $1.1 million as a result of
the impact of the sale/leaseback of 61 properties related to the Sybra
acquisition which were classified as owned in prior years.
Interest Expense - Interest expense was $4.2 million in FY 1998 as compared to
$3.4 million in the same period of FY 1997, an increase of $858 as a result of
debt incurred in connection with the Sybra acquisition.
Net gain from the sale of a subsidiary of $388 was related to the sale of Perry
Park in July 1998 for approximately $3.1 million in cash. (See Capital Loss
Carry Forward section)
Comparison of the Nine Months Ended September 30, 1998 and the Nine Months Ended
September 30, 1997 on a Pro forma Basis
Revenues - Revenues were $93.1 million for FY 1998 as compared to $83.6 million
for the same period of FY 1997, an increase of $9.5 million primarily as a
result of two new store openings and twenty-five store acquisitions and same
store sales increasing 2.7% for the period.
Restaurant Costs & Expenses - Restaurant costs and expenses were $76.4 million,
or 82.1% of sales, for FY 1998 as compared to $71.2 million, or 85.1% of sales
on a proforma basis for the same period of FY 1997, an increase of $5.3 million.
As a percent of sales, costs decreased as a result of improved food margins and
decreased labor costs.
15
<PAGE>
General and Administrative - General and administrative costs and expenses were
$6.0 million, or 6.4% of sales, for FY 1998 as compared to $4.9 million, or 5.9%
of sales on a proforma basis for the same period of FY 1997, an increase of $1.2
million as a result of costs and expenses associated with operating the Company
as a stand alone public company, as explained above, and increased expenses
associated with business development and real estate operations necessary to
achieve new store development requirements.
Depreciation and Amortization - Depreciation and amortization expense was $3.8
million, or 4.0% of sales in FY 1998 as compared to $4.2 million, or 5.0% of
sales on a proforma basis in the same period of FY 1997.
Interest Expense - Interest expense was $4.2 million in FY 1998 as compared to
$4.4 million on a proforma basis in the same period of FY 1997.
IMPACT OF THE YEAR 2000 ISSUES
Based on a recent assessment, the Company has determined that it will not have
to modify or replace any of its software and that its computer systems will
properly utilize dates beyond December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs arise from debt service on indebtedness
incurred in connection with the Sybra acquisition and the funding of capital
expenditures. As of September 30, 1998, the Company had outstanding indebtedness
for borrowed money of $33.2 million under a term facility with Atherton Capital
Incorporated. The term facility has a weighted-average maturity of 12.5 years
and bears interest at 10.63%. The term facility requires monthly payments of
principal and interest, is collatoralized by substantially all of the restaurant
equipment owned by Sybra, and imposes certain financial restrictions and
covenants.
The Company's primary source of liquidity during the quarter ended September 30,
1998 was the operation of the restaurants owned by its operating subsidiaries,
including Sybra.
In the future, the Company's liquidity and capital resources will primarily
depend on the operations of Sybra which, under the provisions of its loan
agreement, would permit, under certain conditions, distributions and dividends
to the Company. Sybra, like most restaurant businesses, is able to operate with
nominal or deficit working capital because all sales are for cash and inventory
turnover is rapid. Renovation and/or remodeling of existing stores is either
funded directly by Sybra from available cash or, in some instances, is financed
through outside lenders. Construction or acquisition of new stores is generally,
although not always, financed by outside lenders. The Company believes that it
will continue to be able to secure adequate financing on acceptable terms for
new store construction and acquisitions and that cash generated from operations
will be adequate to meet its needs for the foreseeable future, although no
assurances can be given.
On August 7, 1997, Sybra executed a loan commitment letter with Franchise
Finance Corporation of America ("FFCA") to finance the construction of up to 12
new Arby's restaurants during the next two years. Under the terms of the
commitment letter, FFCA has agreed to finance mortgage and equipment loans for
up to 12 new Arby's restaurants to be built by Sybra, to a maximum of $1 million
per location.
The Company maintains, with a bank, a $150 letter of credit that automatically
renews in November of each year.
On April 15, 1998, Sybra, Inc. acquired one operating Arby's restaurant, as well
as sites for the development of two additional Arby's restaurants, all located
in Southern New Jersey, contiguous to Sybra's Eastern region. The total purchase
price of the acquisition, which includes two leased properties and fee ownership
of one property, was approximately $1.35 million, of which approximately $650
was financed through a sale/leaseback transaction.
On May 1, 1998, Sybra, Inc. acquired four operating Arby's restaurants located
in Michigan, within Sybra's Northern region. The total purchase price of the
acquisition, which includes two leased properties and fee ownership of two
properties, was approximately $4.8 million, of which approximately $3.9 million
was financed through sale/leaseback transactions and leasehold mortgage and
equipment financing.
16
<PAGE>
On June 30, 1998, the Company acquired eleven operating Arby's restaurants, as
well as one site for the development of an additional Arby's restaurant, all
located within Sybra's Southwestern region. The total purchase price of the
acquisition was approximately $4.1 million, of which approximately $3.9 million
was financed through sale/leaseback transactions, equipment financing and the
assumption of existing indebtedness.
On July 8, 1998, the United States Bankruptcy Court for the Northern District of
Texas, Dallas Division, entered an order approving the settlement of the
Company's claims against certain former officers, directors and advisors of Old
ICH. Pursuant to the Reorganization Plan, these claims were retained as assets
of the Company. Under the terms of the settlement agreement, the Company
received $340 in cash as well as $271 in cash from the proceeds of the sale of
67,652 shares of its own common stock which were surrendered to the Company by
the settling parties pursuant to the settlement agreement. In addition, under
the settlement agreement, one of the settling parties has agreed to provide the
Company with discounted financial advisory services worth up to $150,000.
On July 31, 1998 the Company completed the sale of the Perry Park golf course
and real estate development located in Owen County, in Kentucky to Par-Tee LLC,
a Kentucky limited liability company, for $3.1 million in cash resulting in a
gain of $388. The gain from discontinued operations of $388 included a gain from
the recording of a tax deferred asset of $719. (See Capital Loss Carry Forward
section)
On September 8, 1998, Sybra executed a sale/leaseback financing commitment with
CNL Fund Advisors, Inc. to finance up to $20 million of properties to be
developed and operated by Sybra. The commitment letter expires on February 25,
2000.
CAPITAL LOSS CARRY FORWARD
On April 25, 1997, the Company sold its interest in the stock of Bankers
Multiple Line Insurance Company which generated a significant tax loss (see Note
3 of Notes to Consolidated Financial Statements). Due to limitations pursuant to
the Internal Revenue Code and Treasury regulations thereunder, no deferred tax
asset has been recorded for the capital loss carry forward due to the
uncertainty of its existence and realizability.
The gain from the sale of a discontinued operation of $388 was related to the
sale of Perry Park in July 1998 for approximately $3.1 million in cash. The gain
from discontinued operations included a reduction in the valuation allowance
previously recorded against a deferred tax asset specifically related to the
difference in the book and tax basis of this asset.
17
<PAGE>
CAPITAL EXPENDITURES
The Company's capital expenditures were $8.1 million for the nine months ended
September 30, 1998 which includes new store development as well as store
maintenance, store remodel and store renovation capital expenditures. The
Company anticipates that Sybra's store maintenance, store remodel and store
renovation capital expenditures in 1998 (which excludes new store development
capital expenditures) will approximate $2.5 million. The level of capital
expenditures for new store development and acquisitions will be dependent upon
several factors, including the number of stores constructed and/or acquired as
well as the capital structure of any such transactions.
ITEM 5. OTHER INFORMATION
The Company has entered into an asset purchase agreement, dated as of August 14,
1998 and amended as of October 6, 1998, with Lyon's Restaurants, Inc. ("Lyon's")
for the purchase of up to 77 full-service family dining restaurants, located
primarily in northern California and doing business under the "Lyon's" name, for
$22.6 million. The assets to be purchased include substantially all of Lyon's
tangible and intangible assets, including the Lyon's trademark and certain
related marks, as well as Lyon's leasehold interests, real estate improvements,
restaurant equipment and related assets. Of the total $22.6 million purchase
price, up to $16.5 million is to be financed by USRP (Finance), LLC through
leasehold mortgage and equipment financing, while the balance of the purchase
price will come from the Company's working capital. The Company currently
anticipates that the proposed acquisition will occur in December 1998, although
no assurances can be given.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit No. Exhibit Title
- ----------- -------------
10.25 Asset Purchase Agreement, dated as of August 14, 1998,
among Lyon's of California, Inc., I.C.H. Corporation and
Lyon's Restaurants, Inc.
10.26 Amendment to Asset Purchase Agreement, dated as of October
6, 1998, among Lyon's of California, Inc., I.C.H.
Corporation and Lyon's Restaurants, Inc.
27.1 Financial Data Schedule
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, I.C.H.
Corporation has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 13, 1998
I.C.H. Corporation
By: /s/ James R. Arabia
-----------------------
James R. Arabia
Chairman and Chief
Executive Officer
By: /s/ David A. Brainard
-------------------------
David A. Brainard
Chief Financial Officer
20
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- ------- -------------
10.25 Asset Purchase Agreement, dated as
of August 14, 1998, among Lyon's of
California, Inc., I.C.H. Corporation
and Lyon's Restaurants, Inc.
10.26 Amendment to Asset Purchase Agreement,
dated as of October 6, 1998, among
Lyon's of California, Inc., I.C.H.
Corporation and Lyon's Restaurants, Inc.
27 Financial Data Schedule
21
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and
entered into as of this 14th day of August, 1998, by and between Lyon's of
California, Inc., a California corporation, I.C.H. Corporation, a Delaware
corporation and Lyon's Restaurants, Inc., a Delaware corporation ("Seller").
RECITALS
A. Seller is engaged in the business of owning and operating of a
chain of restaurants under the name "Lyon's Restaurants" (the
"Business").
B. Seller wishes to sell substantially all the assets it uses in
connection with the Business at the price and on the other
terms and conditions specified in detail below.
C. I.C.H. Corporation, through Lyon's of California, Inc.,
its wholly-owned subsidiary, wishes to so purchase and
acquire such Assets from Seller. (I.C.H. Corporation
and Lyon's of California, Inc. are hereafter referred
to, collectively, as "Buyer" with the rights and
obligations of each entity more fully set forth in
Section 1.4).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Transfer of Assets.
1.1. Purchase and Sale of Assets. On the Closing Date, as
hereinafter defined, in consideration of the covenants, representations and
obligations of Buyer hereunder, and subject to the conditions hereinafter set
forth, Seller shall sell, assign, transfer, convey, and deliver to Buyer, and
Buyer shall purchase from Seller all of Seller's right, title, and interest in
and to the assets (of every type and description, whether tangible or
intangible, wherever located and whether or not identified or disclosed on
Seller's books and records) and properties, goodwill, and business which are
owned or leased and used by Seller in the operation of the Business
(collectively, the "Property"), excluding, however, all of the Excluded Assets
(as defined in Section 1.2 below). The Property shall consist of, among other
things, the following:
1.1.1. Leases and Contracts. Seller's right, title, and
interest, including security and other deposits thereunder (i) as lessee under
those real property leases
<PAGE>
described on Exhibit A-1 to this Agreement (collectively, the "Real Property
Leases"), (ii) as lessee under those equipment, personal property and intangible
property leases, rental agreements, licenses, contracts, agreements and similar
arrangements described on Exhibit A-2 to this Agreement (collectively, the
"Other Leases"), (iii) as a party to those other contracts, leases, orders,
purchase orders, licenses, contracts, agreements and similar arrangements
described on Exhibit A-3 to this Agreement (collectively, the "Other Contracts"
and together with the Other Leases, the "Other Leases and Contracts"), and (iv)
under those SNDA's (as defined in Section 8.9) that are being assumed by Seller
and assigned to Buyer or that are newly obtained by Seller as more fully
discussed in Section 8.9.
1.1.2. Improvements. All improvements, and all appurtenances to
such improvements, located on the real property (collectively, the "Real
Property") occupied by Seller under the Real Property Leases, including, without
limitation, buildings, outside storage areas, signage, and pylon signs,
driveways, walkways and parking areas, but in all events only to the extent of
Seller's interest in the same (collectively, the "Improvements").
1.1.3. Personal Property. All of those items of equipment and
tangible personal property owned by Seller and listed in Exhibit B to this
Agreement and all other tangible personal property now or hereafter owned by
Seller and used exclusively in connection with the Business, including, without
limitation, all such furniture, vehicles, machinery, equipment, tools, spare
parts, computers, fixtures and furnishings located at or on the Real Property
(collectively, the "Personal Property"). As used in this Agreement, the Personal
Property shall not include the Inventory. The Personal Property shall also
expressly exclude any equipment or other tangible property held by Seller
pursuant to a lease, rental agreement, contract, license or similar arrangement
(a "Contract") where Buyer does not assume the underlying Contract relating to
such personal property at the Closing.
1.1.4. Intangible Property. All intangible personal property
owned or held by Seller and used exclusively in connection with the Business,
but in all cases only to the extent of Seller's interest and only to the extent
transferable, together with all books, records and like items pertaining to the
Business, including, without limitation, the name "Lyon's Restaurants", the
goodwill of the Business, trademarks, trade names, service marks, all plans and
specifications for the Improvements, all appraisals, engineering, soils, pest
control, and other reports relating to the Real Property, catalogues, customer
lists and other data bases, correspondence with present
2
<PAGE>
or prospective customers and suppliers, advertising materials, software
programs, and telephone exchange numbers identified with the Business and all
permits, licenses, authorizations, and approvals relating to the operation of
the business (collectively, the "Intangible Property"). As used in this
Agreement, Intangible Property shall in all events exclude any software or other
item of intangible property held by Seller pursuant to a license or other
Contract where Buyer does not assume the underlying Contract relating to such
intangible personal property at the Closing.
1.1.5. Receivables. All instruments, receivables, accounts
receivable and unbilled costs and fees and, subject to Section 1.2, all causes
of action relating or pertaining to the foregoing (collectively, the
"Receivables").
1.1.6. Inventory. All supplies, goods, materials, work in
process, inventory and stock in trade owned by Seller (collectively, the
"Inventory").
1.2. Excluded Assets.
1.2.1. Excluded Assets Generally. Notwithstanding anything to
the contrary in this Agreement, the Property shall not include the following
(the "Excluded Assets"): (i) those items excluded pursuant to the provisions of
Section 1.1 above; (ii) all cash or cash equivalents; (iii) all preference or
avoidance claims and actions of Seller, including, without limitation, any such
claims and actions arising under Section 544, 545, 547, 548, 549, and 550 of the
United States Bankruptcy Code; (iv) Seller's rights under this Agreement and all
cash and non-cash consideration payable or deliverable to Seller pursuant to the
terms and provisions hereof or any subsequent agreement between Seller and
Buyer; (v) insurance proceeds, claims and causes of action with respect to or
arising in connection with (A) any lease, contract, or agreement which is not
assigned to Buyer at the Closing, or (B) any item of tangible or intangible
property located on or about or used solely in connection with a location, the
Real Property Lease for which is not acquired by Buyer at the Closing; (vi) any
lease, contract, or agreement to which Seller is a party which is not listed or
described on Exhibit A-1, Exhibit A-2, or Exhibit A-3 to this Agreement; (vii)
the certificate of incorporation, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of Seller as
a corporation; (viii) any Privileged Information (as defined in Section 1.2.2),
(ix) any information about employees who do not accept offers of employment from
Buyer, (x) any asset or obligation set forth in an Exclusion Notice (as defined
in Section 1.2.3), and (xi) a promissory note and accompanying trust
3
<PAGE>
deed received from sale of Seller's former Sparks, Nevada location and presently
held by Seller's senior lenders.
1.2.2. Privileged Information. "Privileged Information" shall
mean matters subject to the attorney-client privilege except for matters that
relate to the Properties or the operation of the Business. For example, matters
pertaining to deliberations of the board of directors, the bankruptcy case, the
process of selling assets, and other corporate matters shall be considered
Privileged Information, but matters pertaining to operation of the store
locations, dealings with vendors, and day-to-day operating issues shall not be
considered Privileged Information.
1.2.3. Exclusion Notices. Buyer shall have the right to deliver
written notice to Seller from time to time, but no later than five (5) business
days prior to the Closing Date, that Buyer does not desire to acquire title to
certain assets of Seller or to assume certain Real Property Leases or any Other
Leases or Contracts. Any such notice shall be considered an "Exclusion Notice."
Delivery of an Exclusion Notice shall not affect the Purchase Price.
1.3. Instruments of Transfer. The sale, assignment, transfer,
conveyance and delivery of the Property to Buyer shall be made by assignments, a
bill of sale, and other instruments of assignment, transfer and conveyance
provided for in Section 3 below and such other instruments as may reasonably be
requested by Buyer and which do not increase in any material way the burdens
imposed by this Agreement upon Seller.
1.4. Relationship Between I.C.H. Corporation and Lyon's of
California, Inc.. It is the intent of Seller and Buyer that both I.C.H.
Corporation and Lyon's of California, Inc. be fully responsible for all
obligations of Buyer under this Agreement and that any breach of or default
under this Agreement shall be the joint and several responsibility of I.C.H.
Corporation and Lyon's of California, Inc. Seller acknowledges and agrees that
the transfer of assets and assumption of liabilities on the Closing Date will be
to and from Lyon's of California, Inc. only and that I.C.H. Corporation shall
not take title to any assets from nor assume any liabilities of Seller on the
Closing Date. Buyer shall be responsible for demonstrating to the Bankruptcy
Court (as defined in Section 8.4.1) that Lyon's of California, Inc. is capable
of providing adequate assurance of future performance within the meaning of 11
U.S.C ss. 365(f)(2).
1.5. Continued Use of Corporate Name. Buyer hereby consents to
Seller's retention of the name "Lyon's Restaurants, Inc." as the corporate name
of Seller and grants to Seller a non-exclusive license to use such name as its
corporate name; provided, that if after the Closing Date, Seller intends to
4
<PAGE>
engage in the operation of any business, Seller shall change its corporate name
prior to doing so.
2. Consideration.
2.1. Purchase Price.
(a) The cash consideration to be paid by Buyer to Seller for
the Property (the "Purchase Price") shall be TwentyTwo Million Dollars
($22,000,000).
(i) Concurrently with the mutual execution and delivery of
this Agreement (the date of such mutual execution and delivery is sometimes
referred to herein as the "Execution Date"), Buyer shall deposit into an escrow
(the "Escrow") with an escrow agent or company (the "Escrow Holder") reasonably
designated by Seller One Million Dollars ($1,000,000) (the "Deposit") in
immediately available, good funds (funds delivered in this manner are referred
to herein as "Good Funds"), pursuant to joint escrow instructions to be
delivered to the Escrow Holder on or before the Execution Date. In turn, the
Escrow Holder shall immediately deposit the Deposit into an interest-bearing
account. The Deposit shall become nonrefundable upon the earlier of the entry of
the (x) Sale Order (as defined in Section 8.4.2), or (y) termination of the
transaction contemplated by this Agreement by reason of Buyer's default (a
"Buyer Default Termination"). At the Closing, the Deposit (and any interest
accrued thereon) shall be paid to Seller on account of the Purchase Price. In
the event the Deposit becomes non-refundable by reason of a Buyer Default
Termination, Escrow Holder shall immediately disburse the Deposit and all
interest accrued thereon to Seller to be retained by Seller for its own account.
If the transactions contemplated herein terminate by reason of (A) Seller's
default, (B) the failure of a condition to Buyer's obligations, or (C) the
consummation of a sale to a third party as described in Section 8.4. below, the
Escrow Holder shall return to Buyer the Deposit (together with all interest
thereon), but less Buyer's one-half share of the Escrow Holder's escrow fees and
charges.
(ii) On the Closing Date, Buyer shall pay and deliver, in
Good Funds, the balance of the Purchase Price to Seller.
2.2. Assumed Liabilities. Buyer shall, effective as of the Closing
Date, be assigned Seller's interest under the Real Property Leases and Other
Leases and Contracts and shall assume all liabilities of Seller accruing under
the Real Property Leases, under the Other Leases and Contracts on and after the
Closing Date, and under any permits or licenses arising after the Closing Date;
provided that Seller shall pay all cure amounts owing under any of the Real
Property Leases and Other Leases and
5
<PAGE>
Contracts as of the Closing which the Bankruptcy Court may order to be paid as a
condition to Seller's assumption and assignment of any Real Property Lease or
Other Lease or Contract. Other than the liabilities and obligations of Seller
expressly assumed by Buyer hereunder, Buyer is not assuming and shall not be
liable for any liabilities or obligations of Seller.
2.3. Instruments of Assumption. The assumption by Buyer of the
assumed liabilities referred to in Section 2.2 shall be further evidenced by the
Assignment of Leases and such other instruments as may reasonably be requested
by Seller and which do not increase in any material way the burdens imposed by
this Agreement upon Buyer.
2.4. Allocation of Purchase Price. The Purchase Price shall be
allocated by Buyer in its sole discretion prior to Closing and Buyer shall
notify Seller at least five (5) business days prior to Closing with respect to
such allocation; provided that such allocation shall be made in a manner
consistent with Section 1060 of the Internal Revenue Code of 1986, as amended.
Each party agrees that it will not make any returns, filing, report, or other
submission or take any position with or before any federal, state, or local tax
agency or other authority which would conflict or be inconsistent with the
allocation provided by Buyer pursuant to this Section 2.4.
3. Closing Transactions.
3.1. Closing. The Closing of the transactions provided for herein
(the "Closing") shall take place at the offices of Murphy Sheneman Julian &
Rogers, a professional corporation, 101 California Street, Suite 3900, San
Francisco, California 94111 or, at Buyer's option, at the San Francisco office
of Buyer's lender's title company.
3.2. Closing Date. The Closing shall be held on a date mutually
convenient to Seller and Buyer not later than fifteen (15) days after entry of
the Sale Order (as defined in Section 8.4.2) (the "Closing Date"); provided that
Buyer may extend the fifteen (15) day period by another fifteen (15) days by
giving written notice to Seller no later than the tenth (10th) day after entry
of the Sale Order. In no event shall the Closing Date be later than December 31,
1998 (the "Outside Date"). In the event the conditions to Closing have not been
satisfied or waived by the Outside Date, then any party who is not in default
hereunder may terminate this Agreement. Alternatively, the parties may mutually
agree to an extended Closing Date. Until this Agreement is either terminated or
the parties have agreed upon an extended Closing Date, the parties shall
diligently continue to work to satisfy all conditions to Closing and the
transaction contemplated herein shall close as soon as such conditions are
satisfied or waived.
6
<PAGE>
3.3. Seller's Deliveries to Buyer at Closing. On the Closing Date,
Seller shall make the following deliveries to Buyer:
3.3.1. An Assignment and Assumption of Leases and Other
Contracts, duly executed by Seller, substantially in the form attached as
Exhibit C to this Agreement, pursuant to which Seller assigns the Real Property
Leases and Other Contracts (the "Assignment of Leases").
3.3.2. A bill of sale, duly executed by Seller, substantially
in the form attached as Exhibit D to this Agreement, pursuant to which Seller
transfers the Personal Property and the Inventory to Buyer (the "Bill of Sale").
3.3.3. An Assignment of Intangible Property, duly executed by
Seller, in the form attached as Exhibit E to this Agreement, pursuant to which
Seller assigns to Buyer its interest, if any, in and to the Intangible Property
to Buyer (the "Assignment of Intangible Property").
3.3.4. Any such other documents, funds or other things
reasonably contemplated by this Agreement to be delivered by Seller to Buyer at
the Closing.
3.4. Buyer's Deliveries to Seller at Closing. On the Closing Date,
Buyer shall make or cause the following deliveries to Seller:
3.4.1. That portion of the Purchase Price to be delivered by
Buyer directly to Seller at the Closing under Section 2.1 (and Buyer shall cause
Escrow Holder to deliver the Deposit to Seller).
3.4.2. A counterpart of the Assignment of Leases, duly executed
by Buyer.
3.4.3. A counterpart of the Assignment of Intangible Property,
duly executed by Buyer.
3.4.4. Any such other documents, funds or other things
reasonably contemplated by this Agreement to be delivered by Buyer to Seller at
the Closing.
3.5. Prorations. Rent, current taxes, prepaid advertising and other
items of expense (including, without limitation, any prepaid insurance under the
Real Property Leases or Other Leases and Contracts, or any of them) and income
relating to or attributable to the Business and/or the Real Property Leases or
the Other Leases and Contracts shall be prorated between Seller and Buyer as of
the Closing Date. All
7
<PAGE>
obligations due in respect of periods prior to Closing shall be paid in full or
otherwise be the responsibility of Seller and all obligations due in respect of
periods after Closing shall be paid in full or otherwise be the responsibility
of Buyer. Rent shall be prorated on the basis of a thirty (30) day month.
3.6. Sales, Use and Other Taxes. Any sales, purchases, transfer,
stamp, documentary stamp, use or similar taxes under the laws of the states in
which any portion of the Property is located, or any subdivision of any such
state, which may be payable by reason of the sale of the Property under this
Agreement or the transactions contemplated herein shall be borne and timely paid
one-half by Buyer and one-half by Seller.
3.7. Possession. Right to possession of the Property shall transfer
to Buyer on the Closing Date. Seller shall transfer and deliver to Buyer on the
Closing Date such keys, lock and safe combinations and other similar items as
Buyer shall require to obtain immediate and full occupation and control of the
Property, and shall also make available to Buyer at their then existing
locations the originals of all documents in Seller's possession that are
required to be transferred to Buyer by this Agreement.
4. Conditions Precedent to Closing.
4.1. Conditions to Seller's Obligations. Seller's obligation to make
the deliveries required of Seller at the Closing Date shall be subject to the
satisfaction or waiver by Seller of each of the following conditions.
4.1.1. All of the representations and warranties of Buyer
contained herein shall continue to be true and correct at the Closing in all
material respects.
4.1.2. Buyer shall have executed and delivered to Seller the
Assignment of Leases.
4.1.3. Buyer shall have delivered, or shall be prepared to
deliver at the Closing, all cash and other documents required of Buyer to be
delivered at the Closing.
4.1.4. Buyer shall have delivered to Seller appropriate
evidence of all necessary corporate action by Buyer in connection with the
transactions contemplated hereby, including, without limitation: (i) certified
copies of resolutions duly adopted by Buyer's board of directors approving the
transactions contemplated by this Agreement and authorizing the execution,
delivery, and performance by Buyer of this Agreement; and (ii) a certificate as
to the incumbency of officers of Buyer executing this Agreement and any
instrument or
8
<PAGE>
other document delivered in connection with the transactions contemplated by
this Agreement.
4.1.5. Seller shall have determined that it will not incur any
liability under the Worker Adjustment and Retraining Notification Act in
connection with the consummation of this transaction.
4.1.6. All applicable waiting periods relating to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been
terminated and any proceedings that may have been filed or instituted thereunder
shall have been satisfactorily concluded.
4.1.7. No action, suit or other proceedings brought by any
governmental agency shall be pending before any court, tribunal or governmental
authority seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain substantial
damages in respect thereof, or involving a claim that consummation thereof would
result in the violation of any law, decree or regulation of any governmental
authority having appropriate jurisdiction.
4.1.8. The Bankruptcy Court shall have entered the Sale Order,
which shall not have been stayed as of the Closing Date.
4.2. Conditions to Buyer's Obligations. Buyer's obligation to make
the deliveries required of Buyer at the Closing shall be subject to the
satisfaction or waiver by Buyer of each of the following conditions:
4.2.1. Seller shall have substantially performed or tendered
performance of each and every covenant on Seller's part to be performed which,
by its terms, is capable of performance before the Closing.
4.2.2. All representations and warranties of Seller contained
herein shall continue to be true and correct at the Closing in all material
respects.
4.2.3. Seller shall have executed and be prepared to deliver to
Buyer the Assignment of Leases.
4.2.4. Seller shall have delivered, or shall be prepared to
deliver at the Closing, all other documents required of Seller to be delivered
at the Closing.
4.2.5. All applicable waiting periods relating to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or been
terminated and any proceedings that may have
9
<PAGE>
been filed or instituted thereunder shall have been satisfactorily concluded.
4.2.6. No action, suit or other proceedings brought by any
governmental agency shall be pending before any court, tribunal or governmental
authority seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain substantial
damages in respect thereof, or involving a claim that consummation thereof would
result in the violation of any law, decree or regulation of any governmental
authority having appropriate jurisdiction.
4.2.7. The Bankruptcy Court shall have entered the Sale Order,
which shall not have been stayed as of the Closing Date.
4.2.8. There shall not have occurred prior to the Closing Date
a material adverse change in the financial condition or results of operations of
the Business (exclusive of the effect of any locations where the real property
lease is not being assumed by Buyer and exclusive of costs and expenses directly
relating to Seller's filing of a bankruptcy case).
4.3. Termination. If any of the above conditions is neither
satisfied nor waived on or before the date by which the condition is required to
be satisfied, a party who is not then in default hereunder may terminate this
Agreement by delivering to the other written notice of termination. Any waiver
of a condition shall be effective only if such waiver is stated in writing and
signed by the waiving party; provided, however, that the consent of a party to
the Closing shall constitute a waiver by such party of any conditions to Closing
not satisfied as of the Closing Date.
5. Seller's Representations and Warranties. Seller hereby makes the
following representations and warranties to Buyer:
5.1. Validity of Agreement. Upon obtaining the Approval Order, this
Agreement shall constitute the valid and binding obligation of Seller
enforceable in accordance with its terms.
5.2. Organization, Standing and Power. Subject to the applicable
provisions of bankruptcy law, Seller has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its business as
now being conducted and, subject to Seller's obtaining the Approval Order, to
execute, deliver and perform this Agreement and all writings relating hereto.
10
<PAGE>
5.3. Authorization of Seller. Upon obtaining the Approval Order, the
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated, and the performance of, fulfillment of and compliance with
the terms and conditions hereof by Seller do not and will not: (i) conflict with
or result in a breach of the articles of incorporation or the by-laws of Seller;
(ii) violate any statute, law, rule or regulation, or any order, writ,
injunction or decree of any court or governmental authority; or (ii) violate or
conflict with or constitute a default under any agreement, instrument or writing
of any nature to which Seller is a party or by which Seller or its assets or
properties may be bound.
5.4. Title to Property. To Seller's knowledge (which consists of
matters actually known to Seller's senior management), Seller has good and
marketable title to the Property; provided, however, Seller makes no
representation whatsoever as to title to the Intangible Property or the
transferability thereof.
5.5. Compliance With Law. The operations of Seller are in compliance
with all applicable laws, regulations, permits, authorizations and other
governmental orders including, without limitation, applicable safety (including
OSHA), environmental (including wetlands), antipollution, building, zoning or
health laws, ordinances and regulations, except where the failure to so comply
would not be expected to have a material adverse effect on the financial
condition or results of operations of the Business or the Property taken as a
whole (a "Material Adverse Effect").
5.6. No Subsidiaries. Seller does not have any subsidiaries.
5.7. Certificates of Occupancy. Seller has, and will deliver to
Buyer at Closing, certificates of occupancy for each Lyon's Restaurant included
as part of the Property, covering all Improvements located at such restaurants,
except to the extent that the absence thereof would not be expected to have a
Material Adverse Effect.
5.8. Licenses, Permits, Etc. Seller has, and will deliver to Buyer
at Closing, all required licenses (including liquor licenses), permits and
certificates required pursuant to municipal health codes or otherwise in order
to lawfully operate each Lyon's Restaurant included as part of the Properties,
except to the extent that the absence thereof would not be expected to have
Material Adverse Effect.
5.9. Adequacy of Assets. Except for the Excluded Assets, the
Properties include all of the properties, and assets, real, personal, and mixed,
tangible and intangible, and all leases, contracts, and agreements (whether
owned or to which
11
<PAGE>
Seller is a party) which are presently used by Seller in the operation of its
business.
6. Buyer's Warranties and Representations. In addition to the
representations and warranties contained elsewhere in this Agreement, Buyer
hereby makes the following representations and warranties to Seller:
6.1. Validity of Agreement. All action on the part of each Buyer
necessary for the authorization, execution, delivery and performance of this
Agreement by such Buyer, including, but not limited to, the performance of such
Buyer's obligations hereunder, has been taken. This Agreement, when executed and
delivered by such Buyer, shall constitute the valid and binding obligation of
such Buyer enforceable in accordance with its terms.
6.2. Organization, Standing and Power. I.C.H. Corporation is a
corporation duly organized and validly existing under the laws of the State of
Delaware. Lyon's of California, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Each
Buyer has all requisite corporate power and authority to own, lease and operate
its properties, to carry on its business as now being conducted and to execute,
deliver and perform this Agreement and all writings relating hereto.
6.3. Authorization of Buyer. The execution, delivery and performance
of this Agreement and all writings relating hereto by each Buyer have been duly
and validly authorized. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and the performance of,
fulfillment of and compliance with the terms and conditions hereof by such Buyer
do not and will not: (i) conflict with or result in a breach of the articles of
incorporation or by-laws of such Buyer; (ii) violate any statute, law, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental authority, or (iii) violate or conflict with or constitute a
default under any agreement, instrument or writing of any nature to which such
Buyer is a party or by which such Buyer or its assets or properties may be
bound.
7. "AS IS" Transaction. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN SECTION 5 ABOVE, SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
ANY MATTER RELATING TO THE PROPERTY INCLUDING, WITHOUT LIMITATION, INCOME TO BE
DERIVED OR EXPENSES TO BE INCURRED IN CONNECTION WITH THE PROPERTY, THE PHYSICAL
CONDITION OF ANY PERSONAL PROPERTY COMPRISING A PART OF THE PROPERTY OR WHICH IS
THE SUBJECT OF ANY OTHER LEASE OR CONTRACT TO BE ASSUMED BY BUYER AT THE
CLOSING, THE ENVIRONMENTAL CONDITION OR OTHER MATTER RELATING TO THE PHYSICAL
CONDITION
12
<PAGE>
OF ANY REAL PROPERTY OR IMPROVEMENTS WHICH ARE THE SUBJECT OF ANY REAL PROPERTY
LEASE TO BE ASSUMED BY BUYER AT THE CLOSING, THE ZONING OF ANY SUCH REAL
PROPERTY OR IMPROVEMENTS, THE VALUE OF THE PROPERTY (OR ANY PORTION THEREOF),
THE TRANSFERABILITY OF PROPERTY, THE TERMS, AMOUNT, VALIDITY OR ENFORCEABILITY
OF ANY ASSUMED LIABILITIES, THE TITLE OF THE PROPERTY (OR ANY PORTION THEREOF,
THE MERCHANTABILITY OR FITNESS OF THE PERSONAL PROPERTY OR ANY OTHER PORTION OF
THE PROPERTY FOR ANY PARTICULAR PURPOSE, OR ANY OTHER MATTER OR THING RELATING
TO THE PROPERTY OR ANY PORTION THEREOF). WITHOUT IN ANY WAY LIMITING THE
FOREGOING, SELLER HEREBY DISCLAIMS ANY WARRANTY (EXPRESS OR IMPLIED) OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AS TO ANY PORTION OF THE
PROPERTY. BUYER FURTHER ACKNOWLEDGES THAT BUYER HAS CONDUCTED AN INDEPENDENT
INSPECTION AND INVESTIGATION OF THE PHYSICAL CONDITION OF THE PROPERTY AND ALL
SUCH OTHER MATTERS RELATING TO OR AFFECTING THE PROPERTY AS BUYER DEEMED
NECESSARY OR APPROPRIATE AND THAT IN PROCEEDING WITH ITS ACQUISITION OF THE
PROPERTY, EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 5
WHICH BY THEIR SPECIFIC TERMS SURVIVE THE CLOSING, BUYER IS DOING SO BASED
SOLELY UPON SUCH INDEPENDENT INSPECTIONS AND INVESTIGATIONS. ACCORDINGLY, EXCEPT
ONLY FOR SUCH SURVIVING REPRESENTATIONS, BUYER WILL ACCEPT THE PROPERTY AT THE
CLOSING "AS IS," "WHERE IS," AND "WITH ALL FAULTS."
8. Conduct and Transaction Prior to Closing.
8.1. Access to Records and Properties of Seller. From and after the
date of this Agreement until the Closing Date, Seller shall afford to Buyer's
officers, independent public accountants, counsel, lenders, consultants,
engineers, and other representatives, free and full access at all reasonable
times to the Property, all records pertaining to the Property or the Business,
and to the personnel of Seller (including officers, employees, and independent
accountants but not including outside directors); provided that requests to
visit the Property or to speak with employees shall be coordinated through
senior management so as not unduly impose on the operation of the Business.
Buyer, however, shall not be entitled to access to any materials containing (a)
Privileged Information, or (b) communications or information about former
employees. Buyer shall be entitled to receive communications and information
with respect to current employees, but Buyer agrees to indemnify Seller and its
officers, directors, employees, and agents, and hold Seller and such other
parties harmless from all claims, demands, liabilities, and causes of action
arising from Seller's disclosure to Buyer of information regarding current
employees. Buyer expressly acknowledges that nothing in this Section 8.1 is
intended to give rise to any contingency to Buyer's obligations to proceed with
the transactions contemplated herein.
8.2. Operation of the Business Pending Closing. Unless Buyer
otherwise consents, during the period prior to the Closing
13
<PAGE>
Date, Seller shall operate the Business as currently operated and only in the
ordinary course and, consistent with such operation, shall use commercially
reasonable efforts to preserve intact its current business organization and its
relationships with employees and persons having dealings with it.
8.3. Hart-Scott Rodino Cooperation. Buyer and Seller shall cooperate
with each other (at their respective sole cost and expense) to comply with, and
provide the information required by, the pre-merger notification and waiting
period rules of the Hart-Scott-Rodino Anti-trust Improvements Act of 1976
(codified in Section 18(a) of Title 15, U.S. Code), in any Federal Trade
Commission regulations, and in any provisions or regulations of or relating to
the Clayton Act. In that connection, Buyer and Seller shall use diligent efforts
to make their joint pre-merger notification filing with the Federal Trade
Commission no later than thirty (30) days following the Execution Date (but not
earlier than the Petition Date (as defined in Section 8.4.1)).
8.4. Bankruptcy Court Approvals.
8.4.1. Bankruptcy Filing. No later than September 9, 1998,
Seller shall file a chapter 11 case (the "Bankruptcy Case") in the United States
Bankruptcy Court for the Northern District of California (the "Bankruptcy
Court"). The date of such filing shall be the "Petition Date."
8.4.2. Motion to Bankruptcy Court for Approval of Sale and Sale
Procedures. Promptly after the Petition Date, Seller will file with the
Bankruptcy Court a motion (the "Motion") requesting entry of an order (the
"Procedure Order") (the terms of which are more fully described below) approving
procedures for sale of the Property to Buyer under 11 U.S.C. ss. 363 and an
order (the "Sale Order") (the terms of which are more fully described below)
confirming sale of the Property to Buyer under 11 U.S.C. ss. 363. The Motion
shall request a hearing on entry of the Procedure Order approximately fifteen
(15) days after the Petition Date and a hearing on entry of the Sale Order
approximately thirty (30) days after entry of the Procedure Order.
8.4.3. Procedure Order. The Motion shall request that the
Procedure Order include the following provisions: (i) that the Bankruptcy Court
set a date for a hearing (the "Sale Hearing") at which overbids for the Property
may be made and at which the sale of the Property to Buyer (or, if applicable, a
successful overbidder) can be confirmed; (ii) that, in the event that Buyer is
not approved by the Bankruptcy Court as the purchaser of the Property, and the
Property (or any material portion thereof) is thereafter sold to any third party
for consideration in excess of the Purchase Price and the other consideration
provided for in this Agreement
14
<PAGE>
notwithstanding Buyer's willingness and ability to consummate the transactions
contemplated by this Agreement, Buyer will be entitled to receive from the
Seller a fee (the "Break-Up Fee") equal to (a) One Million One Hundred Thousand
Dollars ($1,100,000) (i.e., five (5) percent of the Purchase Price), plus (b)
Buyer's documented out-of-pocket expenses (including but not limited to
reasonable attorney's fees, loan commitment fees, and Hart-Scott-Rodino filing
fees) associated with Buyer's efforts to negotiate, document, and pursue the
consummation of the transaction set forth in this Agreement; (iii) that the
Breakup Fee, if it becomes applicable, be paid to Buyer concurrently with the
consummation of such third party sale; (iv) that third party offers to purchase
the Property must (a) be in writing and, together with sufficient financial
information to enable Seller to determine such third party's financial capacity,
be submitted to Houlihan, Lokey, Howard & Zukin, Seller's investment bankers
("HLHZ") and to Seller, Buyer, and the agent for Seller's senior lending group,
and its counsel, and to counsel for the official creditors committee not later
than three (3) business days prior to the Sale Hearing, (b) be subject to no due
diligence, financing, third party consent, or other contingencies (other than a
Hart-Scott-Rodino Act filing), (c) include an agreement to deliver to Seller a
non-refundable deposit of One Million Dollars ($1,000,000) by wire transfer
within one (1) day of such third party's bid being accepted at the Sale Hearing,
(d) if the offer contemplates continued operation of the Business for a period
of time after Closing, be on substantially the same terms (other than purchase
price and other than provisions that relate to periods prior to the date of the
Sale Hearing) as this Agreement, (e) if the offer contemplates a cessation of
the Business upon Closing, contain sufficient detail regarding such cessation to
enable Seller to determine the extra costs that Seller will incur from such
cessation, and (f) include an agreement that an order substantially similar to
the Sale Order described in Section 8.4.5 of this Agreement is acceptable to
such bidder; (v) that no prospective purchaser will be permitted to bid at the
Sale Hearing unless such party has been deemed "financially qualified" by HLHZ,
(vi) that, in order to be considered at the Sale Hearing, any initial bid for
the Property by any third party must be not less than Twenty-Three Million Eight
Hundred Thousand Dollars ($23,800,000), (vii) that subsequent bids for the
Property following such an initial bid shall be in increments of Four Hundred
Thousand Dollars ($400,000), and (vii) that, should overbidding take place at
the Sale Hearing, Buyer shall have the right, but not the obligation, to
participate in the overbidding (including through the use of the Secured
Lender's Contingent Claim Assignment (as defined in Section 8.4.7)) and to be
approved as the overbidder at that hearing.
8.4.4. Seller's Duties With Respect to Procedure Order;
Consequences of Failure to Obtain Procedure Order. Following the filing of the
Motion, Seller shall use
15
<PAGE>
reasonable efforts to obtain entry of the Procedure Order containing the above
provisions. If (a) the Bankruptcy Court refuses to approve the financial terms
of the Breakup Fee, (b) the Bankruptcy Court refuses to enter a Procedure Order
that is substantially similar to the one requested by Seller (other than the
request for approval of use of the Secured Lender's Contingent Claim Assignment
as discussed below), or (c) a Procedure Order is not entered on or before
thirty-three (33) days after the Petition Date, then in any such case Buyer
shall have the right, upon written notice delivered to the Seller, to terminate
this transaction, in which case the transaction contemplated by this Agreement
shall terminate and Buyer and Seller shall be relieved of any further obligation
or liability hereunder. If the Bankruptcy Court enters a Procedure Order, such
notice must be delivered to Seller within three (3) business days after receipt
by buyer of the Procedure Order in order to be effective. If not delivered
within such time period, Buyer will be deemed to have accepted the Procedure
Order and neither the transaction nor this Agreement shall terminate.
8.4.5. Sale Order. The Motion shall request that the Sale Order
include the following provisions: (i) that sale of the Property to Buyer on the
terms and conditions set forth in this Agreement is approved and Seller is
authorized to proceed with this transaction; (ii) a specific finding that Buyer
is a good faith purchaser of the Property; (iii) that the sale of the Property
to Buyer shall be free and clear of all liens, charges, and encumbrances; (iv)
that Seller is authorized to assume and to assign to Buyer the Real Property
Leases and the Other Leases and Contracts pursuant to Section 365 of the United
States Bankruptcy Code, subject to Seller's obligation to pay any necessary cure
amounts ordered by the Bankruptcy Court; (v) with respect to the Real Property
Leases, the additional findings and/or provisions set forth in Exhibit F to this
Agreement, and (vi) such other matters as Buyer shall reasonably request;
provided that Seller's failure to obtain Bankruptcy Court approval of matters
included in the Motion pursuant to this clause (vi) shall not be a breach of or
default under this Agreement and the obtaining of such approval is not a
condition to Buyer's obligations under this Agreement.
8.4.6. Seller's Duties With Respect to Sale Order; Consequences
of Failure to Obtain Sale Order. Following the entry of the Procedure Order,
Seller shall use reasonable efforts to obtain entry of the Sale Order containing
the above provisions. If (a) the Bankruptcy Court refuses to enter a Sale Order
providing for the assumption and assignment of at least ninety percent (90%) of
the Real Property Leases listed on Exhibit A-1 (other than any Real Property
Leases referred to in an Exclusion Notice), (b) the Bankruptcy Court refuses to
enter a Sale Order providing for the assumption and assignment of Other
16
<PAGE>
Contracts and Leases which, in the aggregate, would have if not assigned to
Buyer a Material Adverse Effect, (c) the Bankruptcy Court refuses to enter a
Sale Order that, except for the matters already referred to in this Section
8.4.6, the Special Landlord Provisions referred to in Section 8.4.9, and the
items included in the Motion at the request of Buyer pursuant to clause (vi) of
Section 8.4.5, is substantially similar to the one requested by Seller, or (d) a
Sale Order is not entered on or before forty (40) days after entry of the
Procedure Order, then in any such case Buyer shall have the right, upon written
notice delivered to the Seller, to terminate this transaction, in which case the
transaction contemplated by this Agreement shall terminate and Buyer and Seller
shall be relieved of any further obligation or liability hereunder. If the
Bankruptcy Court enters a Sale Order, such notice must be delivered to Seller
within three (3) business days after receipt by Buyer of the Sale Order in order
to be effective. If not delivered within such time period, Buyer will be deemed
to have accepted the Sale Order and neither the transaction nor this Agreement
shall terminate.
8.4.7. Secured Lenders' Contingent Claim Assignment. Seller
acknowledges that Buyer and Seller's secured lenders (the "Secured Lenders")
have informed Seller that they have reached an agreement in principal regarding
such Secured Lenders using their best efforts to enable Buyer to credit bid a
portion of the claim currently held by the Secured Lenders in connection with
the sale of the Property to Buyer. Seller agrees that when the specific terms of
such agreement have been finalized, Seller will seek approval of such credit bid
as part of the Motion and will use reasonable efforts to obtain Bankruptcy Court
Approval thereof and to have such approval included in the Procedure Order.
Buyer acknowledges that Seller's obligation with respect thereto is to use
reasonable efforts to obtain such approval. Seller's failure to do so shall not
constitute a breach of or default under this Agreement nor excuse Buyer's
continued performance of its obligations hereunder.
8.4.8. Adequate Assurance of Future Performance. Buyer
acknowledges that 11 U.S.C. ss. 365(f)(2) requires, as a condition of assignment
of an executory contract or unexpired lease, that the assignee provide adequate
assurance of future performance. Buyer agrees that Buyer, rather than Seller,
shall be responsible for satisfaction of this condition.
8.4.9. Special Landlord Provisions. Seller agrees to use
reasonable commercial efforts to obtain the Bankruptcy Court's approval of the
items in paragraphs 10 and 11 of Exhibit F to this Agreement (the "Special
Landlord Provisions") as part of the Sale Order; provided that Seller's failure
to obtain Bankruptcy Court approval of the Special
17
<PAGE>
Landlord Provisions shall not be a breach of or default under this Agreement and
the obtaining of such approval is not a condition to Buyer's obligations under
this Agreement.
8.5. Estoppel Certificates. Promptly after Seller's chapter 11
filing, Seller shall send out for execution estoppel certificates in the form of
Exhibit G to this Agreement (the "Estoppel Certificates") to each of its real
property lessors and sublessors under the Real Property Leases. Seller agrees to
use reasonable commercial efforts to obtain the execution of the Estoppel
Certificates by such lessors and sublessors; provided that Seller's failure to
obtain execution of Estoppel Certificates shall not be a breach of or default
under this Agreement and the obtaining of such executed Estoppel Certificates is
not a condition to Buyer's obligations under this Agreement. Seller agrees to
periodically deliver to Buyer copies of executed Estoppel Certificates as they
are received by Seller.
8.6. Notices of Certain Events. Buyer and Seller shall each promptly
notify the other party of:
(i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental entity
in connection with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened, relating to or involving or
otherwise affecting the Business or Buyer's acquisition thereof or that relate
to the consummation of the transactions contemplated by this Agreement;
(iv) the occurrence, or failure to occur, of any condition, event or
development that causes any representation or warranty contained in this
Agreement to be untrue or inaccurate; or
(v) any failure on the part of such party to comply with or perform
in any material respect any agreement or covenant to be complied with or
performed by it hereunder; provided that the delivery of any notice pursuant to
this Section 8.8 shall not limit or otherwise affect the remedies available
hereunder to Buyer or Seller.
8.7. Interim Financial Statement. Between the date hereof and the
Closing Date, Seller shall promptly provide Buyer with copies of any and all
regularly generated unaudited interim
18
<PAGE>
financial statements of Seller and such other unaudited interim financial
statements of Seller as Buyer may reasonably request.
8.8. Employee Matters.
8.8.1. Hiring Employees. As of the Closing Date, Buyer shall
offer employment to all of Seller's employees, other than "Senior Management"
(as defined in Section 8.8.3), employed by Seller on the Closing Date other than
those persons identified in a confidential written schedule to be delivered by
Buyer to Seller no later than five (5) days prior to the Closing Date. (Any
employee of Seller who becomes employed by Buyer is hereafter referred to as a
"Transferred Employee.") Buyer's offer of employment shall be on such terms and
conditions as Buyer shall determine. Notwithstanding the foregoing, Buyer shall
have no obligation to offer employment to any employee who, as of the Closing
Date: (i) is not actively working for Seller; or (ii) is receiving or has a
present right to receive benefits under Seller's short-term or long-term
disability plans.
8.8.2. Employee Benefits. Buyer shall have no responsibility or
liability for payment of any amounts due to or under any benefit plans
maintained by Seller, or otherwise arising from events prior to the Closing Date
in connection with obligations to employees. Buyer shall be responsible for
employee benefits with respect to Transferred Employees only to the extent
specifically provided in the plans maintained by Buyer that cover such
Transferred Employees after the Closing Date.
8.8.3. Senior Management. Senior Management shall mean persons
holding the following positions with Seller: Chief Executive Officer, V.P.
Operations, V.P. Purchasing & Food Development, V.P. & Controller, V.P. Human
Resources, V.P. Facilities, and General Counsel. Buyer and Seller acknowledge
that Buyer and Senior Management have had no discussions prior to the Execution
Date regarding whether any members of Senior Management will be offered
positions by Buyer. Upon and after the Execution Date, Buyer shall be permitted
to undertake such discussions at Buyer's sole discretion. Buyer shall be under
no obligation to engage in any such discussions and the decision regarding
whether and on what term to offer positions shall be in the sole discretion of
Buyer.
8.9. Subordination, Nondisturbance, and Attornment Agreements.
(a) Buyer shall notify Seller of any holders of superior
mortgages on any of the real property currently leased to Seller from whom Buyer
desires Seller to obtain a Subordination, Nondisturbance, and Attornment
Agreement ("SNDA"). Upon Seller's receipt of such notice, but not earlier than
the Petition Date, Seller shall send out for execution an SNDA which shall
provide in substance that so long as the lease is in effect and Buyer is not in
breach or default beyond applicable grace periods thereunder: (i) Buyer shall
not be joined as a party
19
<PAGE>
defendant in any foreclosure action or proceeding which may be instituted by or
taken by the holder of such superior mortgage, and (ii) Buyer shall not be
evicted from the leased property nor shall Buyer's leasehold estate under the
lease be terminated or disturbed nor shall any of Buyer's rights under the lease
be affected by reason of any default under such superior mortgage, any
disaffirmance of such superior mortgage, or other termination of such superior
mortgage. Seller agrees to use reasonable commercial efforts to obtain the
execution of the SNDA's from such mortgage holders; provided that Seller's
failure to obtain execution of SNDA's shall not be a breach of or default under
this Agreement and the obtaining of such executed SNDA's is not a condition to
Buyer's obligations under this Agreement. Seller agrees to periodically deliver
to Buyer copies of executed SNDA's as they are received by Seller.
(b) Seller shall request authority of the Bankruptcy Court to
assume and assign to Buyer each currently executed SNDA to which Seller is a
party. Seller agrees to use reasonable commercial efforts to obtain the
Bankruptcy Court's consent to such assumption and assignment; provided that
Seller's failure to obtain such consent shall not be a breach of or default
under this Agreement and the obtaining of such consent is not a condition to
Buyer's obligations under this Agreement.
8.10. Other Transactions. Seller agrees that prior to the
Closing it will not, and will cause its directors, officers, representatives,
and agents not to, solicit any proposals or offers for purchase of the Business
(whether by sale of assets or stock, by merger, or otherwise). Buyer
acknowledges that Seller, as a part of the chapter 11 sale process, may be
requested to provide information regarding the Business to other interested
parties and Buyer agrees that the provision of such information under such
circumstances shall not constitute a breach of this Agreement, so long as Seller
has not solicited such third party to purchase the Business following the date
of this Agreement.
9. Miscellaneous.
9.1. Damage and Destruction; Condemnation. Seller shall notify
Buyer immediately of the occurrence of any material damage to or destruction of
the Property which occurs prior to the Closing Date, or the institution or
maintenance of any condemnation or similar proceedings with respect to a
restaurant location. In the event of any material damage to or destruction of
the Property which is not fully covered by insurance, or in the event any such
condemnation or other proceedings are instituted or maintained, Buyer, at its
option, may either (i) terminate this Agreement, or (ii) consummate the purchase
provided for by this Agreement. In all other events or in the event that Buyer
elects to consummate the purchase pursuant to
20
<PAGE>
(ii) above, all insurance or condemnation proceeds, including business
interruption and rental loss proceeds, collected by Seller prior to the Closing
Date, together with an amount equal to all deductible amounts under the
insurance policies covering such damage or destruction and amounts not covered
by insurance (which amounts shall be agreed upon in good faith by Seller and
Buyer and approved by the Bankruptcy Court), shall be credited against the
Purchase Price on Buyer's account, and all entitlement to all other insurance or
condemnation proceeds arising out of such damage or destruction or proceedings
and not collected prior to the Closing Date.
9.2. Attorneys' Fees. In the event that either party hereto brings
an action or other proceeding to enforce or interpret the terms and provisions
of this Agreement, the prevailing party in that action or proceeding shall be
entitled to have and recover from the nonprevailing party all such fees, costs
and expenses (including, without limitation, all court costs and reasonable
attorneys' fees) as the prevailing party may suffer or incur in the pursuit or
defense of such action or proceeding.
9.3. Reasonable Access to Records and Certain Personnel. So long as
the Bankruptcy Case is pending, (i) Buyer shall permit Seller's counsel and
other professionals employed in the Bankruptcy Case (the "Case Professionals")
reasonable access to the financial and other books and records relating to the
Property or the Business (whether in documentary or data form) for the purpose
of the continuing administration of the Bankruptcy Case (including, without
limitation, the pursuit of any avoidance, preference or similar action), which
access shall include (a) the right of the Case Professionals to copy, at their
expense, such documents and records as they may request in furtherance of the
purposes described above, and (b) Buyer's copying and delivering to Case
Professionals such documents or records as they may request, but only to the
extent the Case Professionals furnish Buyer with reasonably detailed written
descriptions of the materials to be so copied and offer to reimburse Buyer for
the reasonable costs and expenses thereof, and (ii) Buyer shall provide Seller
and Case Professionals (at no cost to Seller) with reasonable access to any
members of senior management of Seller that might subsequently be employed by
Buyer during regular business hours to assist Seller in the continuing
administration of the Case, provided that such access does not unreasonably
interfere with Buyer's business operations.
9.4. Notices. Unless otherwise provided herein, any notice, tender,
or delivery to be given hereunder by either party to the other shall be in
writing and may be effected by personal delivery, by delivery from a reputable
overnight courier service, or by registered or certified mail, postage prepaid,
return receipt requested, or by facsimile and shall be deemed
21
<PAGE>
communicated as of the date of receipt. Notices shall be addressed as set forth
below, but each party may change his address by written notice in accordance
with this paragraph.
To Seller: Lyon's Restaurants, Inc.
1165 Triton Drive
Foster City, CA 94404-1285
Attn: Mr. John G. Ghuzzi, Pres./CEO
Facsimile No. (650) 573-4207
With a copy to: Murphy Sheneman Julian & Rogers
101 California St., 39th Floor
San Francisco, CA 94111
Attn: Randy Rogers, Esq.
Facsimile No. (415) 421-7879
To Buyer: Lyon's of California, Inc.
I.C.H. Corporation
9255 Town Centre Drive, Suite 600
San Diego, CA 92121
Attn: Mr. James R. Arabia, Pres.
Facsimile No. (619) 535-1634
With a copy to: Pryor Cashman Sherman & Flynn
410 Park Avenue, 10th Floor
New York, NY 10022
Attn: Robert H. Drechsler, Esq.
Facsimile No. (212) 326-0806
9.5. Entire Agreement. This instrument and the documents to be
executed pursuant hereto contain the entire agreement between the parties
relating to the sale of the Property. Any oral representations or modifications
concerning this Agreement or any such other document shall be of no force and
effect excepting a subsequent modification in writing, signed by the party to be
charged.
9.6. Modification. This Agreement may be modified, amended or
supplemented only by a written instrument duly executed by all the parties
hereto.
9.7. Closing Date. All actions to be taken on the Closing pursuant
to this Agreement shall be deemed to have occurred simultaneously, and no act,
document or transaction shall be deemed to have been taken, delivered or
effected until all such actions, documents and transactions have been taken,
delivered or effected.
9.8. Severability. Should any term, provision or paragraph of this
Agreement be determined to be illegal or void or of no force and effect, the
balance of the Agreement shall survive except that, if Buyer cannot acquire and
Seller cannot
22
<PAGE>
sell substantially all of the Property, either party may terminate this
Agreement, and it shall be of no further force and effect.
9.9. Captions. All captions and headings contained in this Agreement
are for convenience of reference only and shall not bc construed to limit or
extend the terms or conditions of this Agreement.
9.10. Further Assurances. Each party hereto will execute,
acknowledge and deliver any further assurance, documents and instruments
reasonably requested by any other party hereto for the purpose of giving effect
to the transactions contemplated herein or the intentions of the parties with
respect thereto.
9.11. Waiver. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of other provisions, whether or
not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
9.12. Brokerage Obligations. Seller is represented by HLHZ as its
exclusive sale agent with respect to the transactions contemplated herein
pursuant to a written agreement between Seller and HLHZ and HLHZ's commission,
fees and expenses are to be paid by Seller in accordance with the terms and
provisions of such order. Seller and Buyer each represent and warrant to the
other that, except for HLHZ, such party has incurred no liability to any real
estate broker or agent with respect to the payment of any commission regarding
the consummation of the transaction contemplated hereby. Except for any claims
of HLHZ (which are to be handled and satisfied by Seller in accordance with the
above referenced contract), it is agreed that if any claims for commissions,
fees or other compensation, including, without limitation, brokerage fees,
finder's fees, or commissions are ever asserted against Buyer or Seller in
connection with this transaction, all such claims shall be handled and paid by
the party whose actions form the basis of such claim and such party shall
indemnify, defend (with counsel reasonably satisfactory to the party entitled to
indemnification), protect and save and hold the other harmless from and against
any and all such claims or demands asserted by any person, firm or corporation
in connection with the transaction contemplated hereby.
9.13. Payment of Fees and Expenses. Except as provided in Section
9.2 above, each party to this Agreement shall be responsible for, and shall pay,
all of its own fees and expenses, including those of its counsel, incurred in
the negotiation, preparation and consummation of the Agreement and the
transaction described herein.
23
<PAGE>
9.14. Investigations and Survival. The respective representations,
warranties, covenants and agreements of Seller and Buyer herein, or in any
certificates or other documents delivered prior to or at the Closing, shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto nor shall they be affected by the Closing.
9.15. Assignments. This Agreement shall not be assigned by either
party hereto without the prior written consent of the other party hereto.
9.16. Binding Effect. Subject to the provisions of Section 9.15
above, this Agreement shall bind and inure to the benefit of the respective
heirs, personal representatives, successors, and assigns of the parties hereto.
9.17. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of California.
9.18. Good Faith. All parties hereto agree to do all acts and
execute all documents required to carry out the terms of this Agreement and to
act in good faith with respect to the terms and conditions contained herein
before and after Closing.
9.19. Construction. In the interpretation and construction of this
Agreement, the parties acknowledge that the terms hereof reflect extensive
negotiations between the parties and that this Agreement shall not be deemed,
for the purpose of construction and interpretation, drafted by either party
hereto.
9.20. Counterparts. This Agreement may be signed in counterparts.
The parties further agree that this Agreement may be executed by the exchange of
facsimile signature pages provided that by doing so the parties agree to
undertake to provide original signatures as soon thereafter as reasonable in the
circumstances.
9.21. Publicity. From the date hereof through the Closing Date, no
public release or announcement concerning the transactions contemplated hereby
shall be issued by any party without the prior consent or the other parties,
except as such release or announcement be required by law, in which case the
party required to make the release or announcement shall allow the other parties
reasonable time to comment on such release or announcement in advance of such
issuance; provided that nothing in this Section 9.22 shall prevent Seller from
filing any documents with the Bankruptcy Court concerning this Agreement or the
Business nor prevent Seller or its representatives (including HLHZ) from
providing such notices in connection with the Bankruptcy Case or of the sale
procedures in Section 8.4 as Seller considers appropriate.
24
<PAGE>
9.22. Bankruptcy Court Jurisdiction. BUYER AND SELLER AGREE THAT,
FROM AND AFTER THE PETITION DATE AND SO LONG AS THE BANKRUPTCY CASE SHALL REMAIN
PENDING, THE BANKRUPTCY COURT SHALL HAVE EXCLUSIVE JURISDICTION OVER ALL
DISPUTES AND OTHER MATTERS RELATING; TO (i) THE INTERPRETATION AND ENFORCEMENT
OF THIS AGREEMENT OR ANY ANCILLARY DOCUMENT EXECUTED PURSUANT HERETO; AND/OR
(ii) THE PROPERTY AND/OR ASSUMED LIABILITIES, AND BUYER EXPRESSLY CONSENTS TO
AND AGREES NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION.
9.23. Consent Regarding Clovis and Reno. Buyer hereby consents to
Seller's exclusion of the following locations from the Real Property Leases
listed on Exhibit A-1 to this Agreement: (a) Clovis, California, and (b) Reno,
Nevada.
IN WITNESS WHEREOF, the parties hereto have executed this Asset
Purchase Agreement as of the day and year first above written.
I.C.H. Corporation, a
Delaware Corporation
By: /s/ James R. Arabia
------------------------------------------
Name: James R. Arabia
Its: Chairman and CEO
Lyon's of California, Inc., a
California Corporation
By: /s/ James R. Arabia
------------------------------------------
Name: James R. Arabia
Its: Chairman and CEO
Lyon's Restaurants, Inc., a
Delaware Corporation
By:/s/ John G. Ghuzzi
------------------------------------------
Name: John G. Ghuzzi
Its: President and Chief Executive Officer
25
AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement (the "Amendment")
is made and entered into as of this 6th day of October, 1998, by and between
Lyon's of California, Inc., a California corporation, I.C.H. Corporation, a
Delaware corporation (collectively, "Buyer") and Lyon's Restaurants, Inc., a
Delaware corporation ("Seller").
RECITALS
A. Seller and Buyer are parties to that certain Asset Purchase
Agreement dated as of August 14, 1998 (the "Agreement") and
desire to amend the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Defined Terms. All terms used in this Amendment without being
defined shall have the meaning ascribed to them in the Agreement.
2. Change in Purchase Price; Payment Through Promissory Note. The
Purchase Price is hereby changed from Twenty-Two Million Dollars ($22,000,000)
to Twenty-Two Million Six Hundred Thousand Dollars ($22,600,000). The increased
amount of Six Hundred Thousand Dollars ($600,000) shall be in the form of a
promissory note from Buyer to Seller that shall be due and payable on the
earlier of (i) six (6) months after the Closing Date, or (ii) the effective date
of Seller's chapter 11 plan. The amount due under the promissory note shall bear
no interest prior to its due date, but shall bear interest at 8% if not paid
when due.
3. Break Up Fee. The Break-Up Fee (formerly $1,100,000 plus
expenses) shall be reduced by One Hundred Thousand Dollars ($100,000).
4. Minimum Overbid. The initial minimum overbid referred to in Section
8.4.3 of the Agreement is hereby changed from Twenty-Three Million Eight Hundred
Thousand Dollars ($23,800,000) to Twenty-Four Million Four Hundred Thousand
Dollars ($24,400,000).
<PAGE>
5. No Other Changes. Except as specifically set forth in this
Amendment, all of the terms and conditions of the Agreement remain in full force
and effect and are not modified or in any way affected by this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
I.C.H. CORPORATION, a
Delaware Corporation
By: /s/ James R. Arabia
-----------------------------------------
Name: James R. Arabia
Its: Chairman and CEO
LYON'S OF CALIFORNIA, INC., a
California Corporation
By: /s/ James R. Arabia
-----------------------------------------
Name: James R. Arabia
Its: Chairman and CEO
LYON'S RESTAURANTS, INC., a
Delaware Corporation
By: /s/ John G. Ghuzzi
-----------------------------------------
Name: John G. Ghuzzi
Its: President and Chief Executive
Officer
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049588
<NAME> I.C.H. Corporation Financial Data Schedule
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 4,565
<SECURITIES> 0
<RECEIVABLES> 432
<ALLOWANCES> 0
<INVENTORY> 1,588
<CURRENT-ASSETS> 10,283
<PP&E> 30,197
<DEPRECIATION> 4,618
<TOTAL-ASSETS> 83,364
<CURRENT-LIABILITIES> 16,391
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 12,049
<TOTAL-LIABILITY-AND-EQUITY> 83,364
<SALES> 33,190
<TOTAL-REVENUES> 33,174
<CGS> 8,592
<TOTAL-COSTS> 30,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,443
<INCOME-PRETAX> 792
<INCOME-TAX> 316
<INCOME-CONTINUING> 476
<DISCONTINUED> 388
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 864
<EPS-PRIMARY> .17
<EPS-DILUTED> .15
</TABLE>
