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 March 31, 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.)
9404 Genesee Avenue, La Jolla, California 92037
-----------------------------------------------
(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 March 31, 1998: 2,793,550*.
-----------
*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 March 31, 1998 2
Consolidated Statements of Operations for the
Three Months ended March 29, 1997
and for the Three Months ended March 31, 1998 3
Consolidated Statements of Cash Flows for the Three Months
ended March 29, 1997 and for the Three Months ended March
31, 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II. Other Information 14
Signatures 15
Exhibit Index 16
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1998
(Unaudited)
----------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,418 $ 4,897
Accounts receivable 530 816
Inventories 1,372 1,369
Deferred income taxes 1,257 1,296
Other current assets 1,565 1,960
----------------- -----------------
Total current assets 9,142 10,338
Property and equipment, net 24,696 26,210
Intangible assets, net 39,470 39,958
Other assets 1,956 1,859
----------------- -----------------
Total assets $ 75,264 $ 78,365
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,741 $ 3,436
Accrued liabilities 8,745 9,556
Current portion of long-term debt 1,714 1,714
Current portion of capital lease obligations 948 948
----------------- -----------------
Total current liabilities 14,148 15,654
----------------- -----------------
Non-current liabilities:
Long-term debt 44,718 46,255
Long-term capital lease obligations 2,699 2,424
Deferred income taxes 1,908 1,960
Other liabilities 606 565
----------------- -----------------
Total liabilities 64,079 66,858
----------------- -----------------
Stockholders' Equity:
Preferred stock, $0.01 par value; 1,000,000
authorized; none issed and outstanding
Common stock; $0.01 par value; 9,000,000
authorized; 2,432,322 outstanding 24 24
Paid-in-capital 12,025 12,054
Retained earnings (deficit) (864) (571)
----------------- -----------------
Total stockholders' equity 11,185 11,507
----------------- -----------------
Total liabilities and stockholders' equity $ 75,264 $ 78,365
================= =================
</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>
Predecessor Company
------------------ --------------
For the three For the three
months ended March months ended
29, 1997 March 31, 1998
------------------ --------------
<S> <C> <C>
Revenues and other income:
Restaurant sales $27,827 $28,336
Real estate operations and other 36 358
------------------ --------------
27,863 28,694
------------------ --------------
Costs and expenses:
Restaurant costs and expenses 23,439 23,357
General and administrative 1,654 1,957
Depreciation and amortization 1,446 1,271
Other -- 247
------------------ --------------
Operating Income 1,324 1,862
Interest expense 468 1,366
------------------ --------------
Income before income taxes 856 496
Provision for income taxes 333 203
------------------ --------------
Net income $523 $293
================== ==============
Net income per share
Basic $0.10
Diluted $0.10
Weighted-average common shares outstanding (See note 5)
Basic 2,793,550
Diluted 2,913,000
</TABLE>
The accompanying Notes are an integral part
of the Consolidated Financial Statements.
3
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands except share amounts)
<TABLE>
<CAPTION>
Predecessor Company
-------------------- ---------------------
For the three For the three
months ended months ended
March 29, 1997 March 31, 1998
-------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 523 $ 293
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization 1,446 1,271
Deferred income taxes 91 13
Changes in current assets and liabilities:
Accounts receivable 26 (286)
Inventories 75 3
Payable to (due from) former parent (60) (450)
Accounts payable and accrued expenses (390) 1,284
Other, net 316 159
-------------------- ---------------------
Net cash provided by operating activities 2,027 2,287
-------------------- ---------------------
Cash flows from investing activities:
Capital expenditures (1,440) (2,481)
Proceeds from disposition of property and equipment 376 9
Acquisition of restaurant properties -- (577)
Other, net -- (50)
--------------------- ----------------------
Net cash provided (used) by investing activities (1,064) (3,099)
--------------------- ----------------------
Cash flows from financing activities:
Bank overdraft 1,729
Borrowings on credit agreement 7,629 --
Repayment on credit agreement (7,625) --
Proceeds from issuance of long-term debt, net of expenses -- 1,975
Repayment of long-term debt and capital lease obligations -- (713)
Other, net -- 29
-------------------- ---------------------
Net cash provided (used) by financing activities (1,725) 1,291
-------------------- ---------------------
Net change in cash and cash equivalents (762) 479
Cash and cash equivalents at beginning of period 2,294 4,418
-------------------- ---------------------
Cash and cash equivalents at end of period $ 1,532 $4,897
==================== =====================
</TABLE>
The accompanying Notes are an integral part
of the Consolidated Financial Statements.
4
<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 Iterim 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 presentation. 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 three-month period ended June 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 transaction have been
eliminated. Sybra currently operates a chain of 163 fast food restaurants
clustered in five regions, primarily Texas, Michigan, Pennsylvania, Florida and
California as a franchisee of Arby's, Inc. ("Arby's"). Another subsidiary
operates a golf course and real estate development in Kentucky.
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
5
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
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 March 29, 1997 and March 28, 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 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 March 31,
1998.
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
6
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
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 year (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).
New Accounting Standards. In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information,"
superseding SFAS No. 14, "Financial Reporting of Segments of a Business
Enterprise." SFAS No. 131 establishes new standards for reporting operating
segment information in annual and interim financial statements. The Company does
not believe this Statement will have any impact on the financial statements.
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:
<TABLE>
<CAPTION>
<S> <C>
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
=====================
</TABLE>
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.
7
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1998
------------------------ ---------------------
<S> <C> <C>
Term loan, 10.63%, payable monthly
through 2012 $ 33,984 $ 33,563
Loan, 14.40% 9,000 9,000
Acquisition indebtedness due in 1999 2,000 2,000
Other 1,448 3,406
------------------------ ---------------------
46,432 47,969
Less: current portion 1,714 1,714
------------------------ ---------------------
Total $ 44,718 $ 46,255
======================== =====================
</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
March 31, 1998, the Company was in compliance with all such covenants.
As a result of sale/leaseback transactions completed immediately before its
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, the loan
amortizes over 20 years. The Company intends on refinancing this loan prior to
fiscal 2000.
The Company maintains, with a bank, a $150 letter of credit that automatically
renews in November of each year.
On August 1, 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 mortage and equipment loans for up
to 12 new Arby's restaurants to be built by Sybra, to a maximum of $1 million
per location.
At March 31, 1998, long-term debt had a fair value that approximates the
carrying value.
On February 1, 1998, the Company incurred $325 in financing indebtedness related
to its' acquisition of eight stores in California. The debt carries an interest
rate of 10%, amortizes over ten years and conatins covenants and restrictions
customary for transactions of this type.
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
8
<PAGE>
I.C.H. CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share amounts)
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
2,793,550 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 2,793,550 shares in
computing earnings per share. As of March 31, 1998, 2,433,322 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 ended
March 31, 1998
------------------
<S> <C>
Income for computation of basic earnings
per share and diluted earnings per share $293
====
Weighted-average shares for computation
of basic earnings per share
2,794
Incremental shares on assumed issuance
and repurchase of stock options 119
-----
Weighted-average share for computation of
diluted earnings per share 2,913
=====
Basic earnings per share $0.10
=====
Diluted earnings per share $0.10
=====
</TABLE>
NOTE 6. PROFORMA CONDENSED STATEMENTS OF OPERATIONS DATA
- --------------------------------------------------------
Unaudited proforma statements of operations data for the three months ended
March 31, 1997 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>
Three months ended
March 31, 1997
-------
<S> <C>
Revenues $27,863
Costs and expenses:
Restaurant costs and expenses 24,497
General and administrative 1,508
Depreciation and amortization 1,274
-------
Operating income 584
Interest expense 1,373
-------
Loss before taxes (789)
Income tax benefit (316)
-------
Net Loss $ (473)
=======
</TABLE>
9
<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 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 three months ended March 31, 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 period 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.
The Predecessor unaudited proforma statement of operations data for the three
months ended March 31, 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.
10
<PAGE>
<TABLE>
<CAPTION>
Predecessor Company
----------- -------
Three Months
Three Months Ended Ended
March 31, 1997 March 31, 1998
-------------------------- --------------
(Historical) (Proforma)
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Expenses
Restaurant costs & expenses 84.1% 87.9% 81.4%
General & administrative 5.9% 5.4% 6.8%
Depreciation & amortization 5.2% 4.6% 4.4%
Other -- -- .9%
------ ------ ------
Operating income 4.8% 2.1% 6.5%
Interest expense 1.7% 4.9% 4.8%
------ ------ ------
Income (loss) before taxes 3.1% (2.8)% 1.7%
Income tax (benefit) expense 1.2% (1.1)% .7%
------ ------ ------
Net income (loss) 1.9% (1.7)% 1.0%
====== ====== ======
</TABLE>
Comparison of the Quarter Ended March 31, 1998 and the Quarter Ended March 31,
1997 on a Historical Basis
Revenues - Revenues were $28.7 million for the first quarter of FY 1998 as
compared to $ 27.9 million for the same period of FY 1997, an increase of $ 831
primarily as a result of new store openings and store acquisitions net of same
store sales being down 1.9% for the period. The decline in same store sales is
attributable to a change in marketing strategy emphasizing brand quality and
fewer discount price promotions begun in the third quarter of 1997.
Restaurant Costs & Expenses - Restaurant costs and expenses were $23.4 million,
or 81.4% of sales, for the first quarter of FY 1998 as compared to $23.4
million, or 84.1% of sales for the same period of FY 1997, a decrease of $82. 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
$2.0 million, or 6.8% of sales, for the first quarter of FY 1998 as compared to
$1.7 million, or 5.9% of sales for the same period of FY 1997, an increase as a
percent of sales as a result of costs and expenses associated with operating
I.C.H. Corporation 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 $1.4
million, or 4.4% of sales in the first quarter of FY 1998 as compared to $1.4
million, or 5.2% of sales in the same period of FY 1997, a decrease as a percent
of sales as a result of the impact of the sale/leaseback of 61 properties
classified as owned in prior years as a result of purchase accounting related to
the Sybra acquisition.
Other - Other expenses of $247 in the first quarter of FY 1998 relate to the
costs of operating Perry Park.
Interest Expense - Interest expense was $1.4 million in the first quarter of FY
1998 as compared to $468 in the same period of FY 1997, an increase of $898 as a
result of debt incurred as a result of the Sybra acquisition.
11
<PAGE>
Comparison of the Quarter Ended March 31, 1998 and the Quarter Ended March 31,
1997 on a Pro forma Basis
Revenues - Revenues were $ 28.7 million for the first quarter of FY 1998 as
compared to $ 27.9 million for the same period of FY 1997, an increase of $ 831
primarily as a result of new store openings and store acquisitions net of same
store sales being down 1.9% for the period. The decline in same store sales is
attributable to a change in marketing strategy emphasizing brand quality and
fewer discount price promotions begun in the third quarter of 1997.
Restaurant Costs & Expenses - Restaurant costs and expenses were $23.4 million,
or 81.4% of sales, for the first quarter of FY 1998 as compared to $24.5
million, or 87.9% of sales on a proforma basis for the same period of FY 1997, a
decrease of $1.1 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
$2.0 million, or 6.8% of sales, for the first quarter of FY 1998 as compared to
$1.5 million, or 5.4% of sales on a proforma basis for the same period of FY
1997, an increase as a percent of sales as a result of costs and expenses
associated with operating I.C.H. Corporation 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 $1.4
million, or 4.4% of sales in the first quarter of FY 1998 as compared to $1.3
million, or 4.6% of sales on a proforma basis in the same period of FY 1997.
Other - Other expenses of $247 in the first quarter of FY 1998 relate to the
costs of operating Perry Park.
Interest Expense - Interest expense was $1.4 million in the first quarter of FY
1998 as compared to $1.4 million on a proforma basis in the same period of FY
1997.
PERRY PARK RESORTS, INC.
The Perry Park real estate consists of an approximately 2,600 acre planned
development including an 18-hole golf course, club house, restaurant, salable
lots, three lakes, additional platted but undeveloped lots and unimproved
acreage. The platted undeveloped lots and unimproved acreage are estimated to be
approximately 1,800 acres. The operations of the Perry Park development are
seasonal in nature and are not material to the operations of the Company.
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 March 31, 1998, the Company had outstanding indebtedness for
borrowed money of $33.6 million under a term facility with Atherton
12
<PAGE>
Capital Incorporated ("Atherton"). 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 March 31,
1998 was the operation of the restaurants owned by 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 February 1, 1998, the Company acquired eight stores and the management of a
ninth store located in Sacramento, California through a wholly-owned subsidiary.
The aggregate purchase price was $650 and 20,000 warrants to purchase common
stock of the Company at an exercise price of $5 per common share which resulted
in goodwill of $580. The Company financed $325 of the acquisition price with the
former owner.
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 existance and realizability.
CAPITAL EXPENDITURES
The Company's capital expenditures were $2.0 million for the three months ended
March 31, 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.
13
<PAGE>
ITEM 5. OTHER INFORMATION
- -------------------------
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Title
- ----------- -------------
<S> <C>
10.21 Asset Purchase Agreement, dated as of
February 18, 1998, between Sybra, Inc. and
RGS Enterprises of New Jersey, Inc.
10.22 Asset Purchase Agreement, dated as of
February 19, 1998, among Sybra, Inc.,
Wolverine Food Systems, Inc. and
Wolverine Properties, G.P.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A Report on Form 8-K, dated February 10, 1998, was filed by the Company
during the quarter ended March 31, 1998. Items 5 and 7 were reported
thereon.
14
<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: May 15, 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
15
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- --------------------------------------------------------------------
<S> <C>
10.21 Asset Purchase Agreement, dated as of
February 18, 1998, between Sybra, Inc. and
RGS Enterprises of New Jersey, Inc.
10.22 Asset Purchase Agreement, dated as of
February 19, 1998, among Sybra, Inc.,
Wolverine Food Systems, Inc. and
Wolverine Properties, G.P.
27 Financial Data Schedule
</TABLE>
16
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of February 18, 1998 by and among SYBRA, INC., a Michigan corporation ("Buyer"),
and RGS ENTERPRISES OF NEW JERSEY, INC., a New Jersey corporation (the
"Seller").
WITNESSETH:
WHEREAS, the Seller currently owns certain assets relating to an
operating Arby's restaurant specified as unit 213 (the "Operating Restaurant")
and a sublease of the land and building associated with a closed Roy Rogers
restaurant located in Vineland, New Jersey (collectively, the "Restaurants");
WHEREAS, Seller also currently holds a contract to purchase the land,
building and equipment associated with a closed Arby's restaurant located in
West Berlin, New Jersey; and
WHEREAS, Buyer desires to purchase and assume from the Seller, as the
case may be, and the Seller desires to sell and assign to Buyer, as the case may
be, substantially all of the assets relating to the Operating Restaurant, the
sublease relating to the closed Roy Rogers restaurant located in Vineland, New
Jersey and the contract relating to the closed Arby's restaurant located in West
Berlin, New Jersey, and the parties hereto desire to enter into certain other
agreements, all upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
representations, warranties, covenants and agreements hereinafter contained, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, at the closing provided for in Section 1.10 hereof (the
"Closing"), Seller shall sell, transfer, convey, assign and deliver to Buyer,
and Buyer shall purchase, acquire and accept from Seller, all of Seller's
rights, title and interest in and to the assets (of every type and description,
whether tangible or intangible) and properties, goodwill and business which are
owned or leased and used by the Seller in the operation of the Operating
Restaurant (collectively, the "Assets"), excluding, however, all of the Excluded
Assets (defined below). The Assets shall consist of, among other things, the
following:
(a) All of the machinery, furniture, fixtures, equipment, signs,
cash registers, uniforms and other personal property (collectively, the "FF&E")
owned and used by the Seller in the operation of the Operating Restaurant and
located on the premises thereof;
<PAGE>
(b) All inventories of food, beverages, paper supplies and other
consumables (collectively, the "Inventory") located on the premises thereof;
(c) All of Seller's rights, title and interest in and to the
franchise agreement with Arby's, Inc. (the "Arby's License Agreement")
pertaining to the Operating Restaurant which is set forth on Schedule 1.1 (c)
attached hereto and all rights for the use of the trademarks, tradenames, and
service marks arising from such agreement (subject to Arby's, Inc.'s ownership
of all identifying marks and logos);
(d) All of the Seller's right, title and interest in and to all
of the contracts, agreements, real property leases, personal property leases,
commitments and undertakings (the "Contracts") as identified in Schedule 1.1(d);
(e) All records, technical information, price lists, marketing
information, sales information and employee records which are or have been
maintained by the Seller in connection with the operation of the Operating
Restaurant; and
(f) To the extent assignable, all of the Seller's right, title
and interest in and to all permits, licenses, authorizations and approvals
relating to the operation of the Restaurants.
1.2 Excluded Assets. There shall be excluded from the Assets being sold
and transferred hereunder the following (the "Excluded Assets"):
(a) Seller's cash on hand and bank deposits at the time of
Closing;
(b) All accounts receivable, all notes receivable, all
intercompany receivables, all interest receivables, all advances, cash value of
life insurance net of loans, prepaid interest and refundable income taxes and
any other taxes;
1.3 Assumption of Liabilities. Except as expressly provided in this
Section 1.3, Buyer shall not assume or be responsible for any liabilities,
obligations or debts of any of the Seller under or by reason of this Agreement.
Subject to the terms and conditions set forth in this Agreement, Buyer shall
assume, become fully and solely responsible for and shall timely pay, perform
and discharge in full all of the following liabilities, obligations and debts of
the Seller (collectively, the "Assumed Liabilities"):
(a) All of the Seller's liabilities, obligations and debts under
the Contracts which come due or relate to time periods from and after the
Closing Date in accordance with the respective terms thereof;
(b) All of the Seller's liabilities, obligations and debts in
respect of unpaid rent, charges or other payments for which a Purchase Price
adjustment is made pursuant to Section 1.6 hereof;
(c) Any utility and telephone bills and other similar
liabilities, obligations and debts arising in the ordinary course from the
operations of the Restaurants which relate to time periods from and after the
Closing Date; and
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(d) Any other liabilities, expenses or obligations relating to,
based on or arising out of the operations of the Restaurants by Buyer from and
after the Closing Date (it being understood that the Seller shall remain fully
and solely responsible for, shall indemnify and hold Buyer harmless with respect
to, and shall timely pay, perform and discharge in full any and all liabilities,
expenses or obligations relating to, based upon or arising out of the operations
of the Restaurants on or prior to the Closing Date).
1.4 Purchase Price. Subject only to the adjustments specified in this
Agreement and upon and subject to all other terms and conditions set forth in
this Agreement, in consideration of the sale, assignment, transfer, conveyance
and delivery of the Assets by Seller pursuant to this Agreement, Buyer shall pay
to the Seller the sum of Seven Hundred Thousand Dollars ($700,000), plus an
amount equal to the value (at Seller's cost) of the Inventory with respect to
the Operating Restaurant, (collectively, the "Purchase Price") payable pursuant
to the terms of Section 1.5 below:
1.5 Payment of Purchase Price. At the Closing, Buyer shall deliver or
cause to be delivered to the Seller the Purchase Price by wire transfer of
immediately available funds to such bank account or bank accounts as shall be
designated by Seller in writing prior to the Closing Date.
1.6 Purchase Price Adjustments. The Purchase Price shall be increased or
decreased, as the case may be, by the amount of rent, taxes, assessments,
deposits and other expenses prepaid or unpaid by the Seller as of the Closing
Date.
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated
as set forth on Schedule 1.7 hereto. The foregoing allocation shall be made in a
manner consistent with Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"). Each party hereby agrees that it will not make any return,
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 in this Section 1.7.
1.8 Taxes. All sales and use taxes arising out of the purchase and sale
of the Assets shall be paid at the Closing and shall be borne equally by Seller,
on the one hand, and Buyer, on the other hand.
1.9 License Transfer Fees. All license transfer and service or training
fees due and owing to Arby's, Inc. arising out of the purchase and sale of the
Assets shall be paid at the Closing by, and be the exclusive obligation of,
Buyer.
1.10 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fidelity Title
Abstract located at 411 Route 70 East, Cherry Hill, New Jersey on or before
April 15, 1998 (the parties hereto making a good faith effort to close on or
before March 31, 1998), following the satisfaction of all of the conditions to
Closing set forth herein, or on such other date and at such other time or place
as the parties may agree. The date of the Closing is sometimes referred to
herein as the "Closing Date".
3
<PAGE>
1.11 Deliveries by Seller. At the Closing, the Seller shall deliver or
cause to be delivered to Buyer (unless previously delivered) the following:
(a) this duly executed Agreement;
(b) a duly executed Bill of Sale substantially in the form of
Exhibit A attached hereto;
(c) a duly executed Assignment and Assumption Agreement
substantially in the form of Exhibit B attached hereto (the "Assignment and
Assumption Agreement");
(d) a duly executed Lease Assignment and Assumption Agreement
substantially in the form of Exhibit C attached hereto (the "Lease Assignment
and Assumption Agreement");
(e) an opinion of counsel to the Seller substantially in the form
of Exhibit D attached hereto;
(f) a duly executed Leasehold Assignment and Assumption Agreement
substantially in the form of Exhibit E attached hereto (the "Leasehold
Assignment and Assumption Agreement");
(g) a duly executed Real Property Contract Assignment and
Assumption Agreement substantially in the form of Exhibit F attached hereto (the
"Real Property Contract Assignment and Assumption Agreement");
(h) the books and records of Seller as provided in Section 2.2
hereof;
(i) copies of all necessary consents, approvals, authorizations
and waivers of all third parties referred to in Section 5.4 hereof;
(j) copies of resolutions of Seller's Board of Directors
authorizing this Agreement and the other agreements, documents and instruments
to be executed and delivered by Seller pursuant hereto and the transactions
contemplated hereby and thereby; and
(k) all other previously undelivered documents, instruments and
writings required to be delivered by Seller on or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
1.12 Deliveries by Buyer. At the Closing, the Buyer shall deliver or
cause to be delivered to Seller (unless previously delivered) the following:
(a) the funds referred to in Section 1.4 hereof;
(b) this duly executed Agreement;
(c) a duly executed Bill of Sale substantially in the form of
Exhibit A attached hereto;
4
<PAGE>
(d) a duly executed Assignment and Assumption Agreement
substantially in the form of Exhibit B attached hereto;
(e) a duly executed Lease Assignment and Assumption Agreement
substantially in the form of Exhibit C attached hereto;
(f) a duly executed Leasehold Assignment and Assumption Agreement
substantially in the form of Exhibit E attached hereto;
(g) a duly executed Real Property Contract Assignment and
Assumption Agreement substantially in the form of Exhibit F attached hereto;
(h) copies of resolutions of Buyer's Board of Directors
authorizing this Agreement and the other agreements, documents and instruments
to be executed and delivered by Buyer pursuant hereto and the transactions
contemplated hereby and thereby; and
(i) all other previously undelivered documents, instruments and
writings required to be delivered by Buyer on or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
1.13 Transfer of Employees. The Seller shall, effective as of the
Closing Date, terminate the employment of all of the employees who are then
employed by the Seller at the premises of the Restaurants to be transferred as
of the Closing Date (collectively, the "Employees"). Buyer, at its discretion,
may hire any or all of the terminated Employees on or after the Closing Date.
1.14 Accrued Vacation Pay. The Seller shall pay in full the amount of
vacation pay owed to each Employee no later than the Closing Date.
ARTICLE 2
RELATED MATTERS
2.1 Additional Contracts. At the Closing, Buyer and the Seller shall
enter into the following:
(a) a Leasehold Assignment and Assumption Agreement substantially
in the form of Exhibit E attached hereto, pursuant to which Seller shall assign
and Buyer shall assume Seller's sublease with respect to the land and building
associated with a closed Roy Rogers restaurant in Vineland, New Jersey from
Hardee's Food Systems. In connection therewith, in addition to the Purchase
Price, Buyer shall pay to Seller simultaneously with the execution of this
Agreement (to the extent already paid by Seller) or promptly following payment
by Seller (to the extent paid by Seller following the date hereof) (i) the sum
of Five Thousand Dollars ($5,000), as reimbursement to Seller for deposits
previously paid and (ii) the sum of Three Thousand Seven Hundred Fifty Dollars
($3,750), as reimbursement to Seller for rents paid in March 1998, plus an
additional Three Thousand Seven Hundred Fifty Dollars ($3,750), as reimbursement
to Seller for rents paid thereon for each month (or portion thereof) thereafter
until the Closing Date; and
5
<PAGE>
(b) a Real Property Contract Assignment and Assumption Agreement
substantially in the form of Exhibit F attached hereto pursuant to which the
Seller shall assign and Buyer shall assume Seller's contract to purchase the
land, building and equipment associated with a closed Arby's restaurant located
in West Berlin, New Jersey pursuant to a contract attached hereto as Exhibit G
upon the same terms and conditions granted to Seller as set forth in such
contract. In connection therewith, and in addition to the Purchase Price, Buyer
shall pay to Seller simultaneously with the execution of this Agreement (to the
extent already paid by Seller) or promptly following payment by Seller (to the
extent paid by Seller following the date hereof) (i) the sum of One Thousand
Dollars ($1,000), as reimbursement to Seller for deposits previously paid; (ii)
the sum of One Thousand Three Hundred Thirty-Three Dollars ($1,333), as
reimbursement to Seller for utility deposits previously paid; and (iii) the sum
of Four Thousand Dollars ($4,000), as reimbursement to Seller for rents paid in
December 1997, plus an additional Six Thousand Dollars ($6,000), as
reimbursement to Seller for rents paid thereon for each month (or portion
thereof) thereafter until the closing of the transactions contemplated by the
Real Property Contract Assignment and Assumption Agreement; and (iv) the sum of
Seven Thousand Eighty-Eight Dollars and Two Cents (1,088.02), as reimbursement
to Seller for leasing fees previously paid. In addition, Buyer shall reimburse
Seller at Closing for similar reasonable expenditures incurred by Seller between
the date hereof and the Closing, such as insurance and utilities.
2.2 Books and Records of Seller. Seller agrees to deliver to Buyer on or
as soon as practicable after the Closing Date, as requested by Buyer, all books
and records of such Seller (including, but not limited to, correspondence,
memoranda, books of account, personnel and payroll records and the like)
relating to the ownership and/or operation of the Operating Restaurant. All
books and records of Seller which are not delivered to Buyer hereunder will be
preserved by Seller for a period of seven (7) years following the Closing and
made available to Buyer and its authorized representatives upon reasonable
notice during normal business hours for purposes of review and/or for purposes
of making copies or extracts therefrom (at Buyer's expense) if so desired by
Buyer. Buyer agrees to make available to Seller and its respective authorized
representatives during such period as reasonably required by Seller the
respective books and records previously delivered by Seller to Buyer for
purposes of review and/or for purposes of making copies or extracts therefrom if
so desired by Seller.
2.3 Confidentiality; Non-Competition.
(a) The Seller acknowledges that Buyer would be irreparably
damaged if confidential information about Seller's businesses with respect to
the Restaurants were disclosed to or utilized on behalf of any person, firm,
corporation or other business organization which is in competition in any
respect with the operation of the Restaurants. The Seller covenants and agrees
that it will not at any time, and will use its respective best efforts to cause
its employees, agents, affiliates and associates (as the terms "affiliate" and
"associate" are defined by the Rules and Regulations promulgated under the
Securities Act of 1933, as amended) not to at any time, without the prior
written consent of Buyer, disclose or use any such confidential information,
except to employees and authorized representatives of Buyer. In connection
therewith, Seller acknowledges that they will, prior to Closing, deliver all
such confidential information about the Restaurants and the Assets to Buyer,
without retaining any copies thereof or extracts therefrom.
6
<PAGE>
(b) In furtherance of this Section 2.3 and to secure the
interests of Buyer hereunder, Seller agrees that for a period of five (5) years
following the Closing Date (the "Non-Competition Period"), it will not, directly
or indirectly (whether as sole proprietor, partner or venturer, stockholder,
director, officer, employee or consultant or in any other capacity or employee
acting as nominee or agent):
(i) conduct or engage in or be interested in or associated
with any person, firm, association, partnership, corporation or other entity
which conducts or engages, directly or indirectly, in the ownership or operation
of any Arby's restaurant (the "Business") in the southern New Jersey region (the
"Geographic Area");
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any person, firm,
association, partnership, corporation or other entity which conducts or engages,
directly or indirectly, in the Business in the Geographic Area;
(iii) influence or attempt to influence any person, firm,
association, partnership, corporation or other entity who is a contracting party
with Buyer at any time during the Non-Competition Period to terminate any
written or oral agreement with Buyer;
(iv) hire or attempt to hire for employment any person who
is employed by Buyer or attempt to influence any such person to terminate
employment with Buyer; or
(v) call on, solicit or take away as a supplier or
customer or attempt to call on, solicit or take away as a supplier or customer
any person, firm, association, partnership, corporation or other entity that is
a supplier or customer of Buyer.
(c) It is agreed and understood by and among the parties to this
Agreement that the restrictive covenants set forth above are each individually
essential elements of this Agreement and that, but for the agreement of Seller
to comply with such covenants, Buyer would not have agreed to enter into this
Agreement. Further, Seller expressly acknowledges that the restrictions
contained in paragraph (b) of this Section 2.3 are reasonable and necessary to
accomplish the mutual objectives of the parties and to protect Buyer's
legitimate interests in its business and business relationships. Seller further
acknowledges that enforcement of the restrictions contained herein will not
deprive it, or any of its agents, servants or employees, or any of them, of the
ability to earn reasonable livings and that any violation of the restrictions
contained in this Agreement will cause irreparable injury to Buyer. Such
covenants of Seller shall be construed as agreements independent of any other
provision of this Agreement.
(d) The parties hereto agree that damages at law, including, but
not limited to, monetary damages, will be an insufficient remedy to Buyer in the
event that the restrictive covenants of paragraph (b) of this Section 2.3 are
violated and that, in addition to any remedies or rights that may be available
to Buyer, all of which other remedies or rights shall be deemed to be
cumulative, retained by Buyer and not waived by the enforcement of any remedy
available
7
<PAGE>
hereunder, including, but not limited to, the right to sue for monetary damages,
Buyer shall also be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief, including, but not limited to, a
temporary, preliminary or permanent injunction, to enforce the provisions of
this Section 2.3 as well as an equitable accounting of all profits or benefits
arising out of any such violation, all of which shall constitute rights and
remedies to which Buyer may be entitled.
(e) If any court determines that the covenant not to compete
contained in this Section 2.3, or any part hereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As a material inducement to Buyer to enter into this Agreement and to
perform its obligations hereunder, the Seller hereby represents and warrants to
Buyer with respect to itself and the Assets which it purports to own as follows:
3.1 Organization of the Seller. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Seller has all necessary power and authority to own or lease,
operate and sell its properties and to carry on its business as it is now being
conducted.
3.2 Authorization and Approvals. The Seller has all necessary power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly and validly authorized by all necessary
action on the part of the Seller. This Agreement constitutes the legal, valid
and binding obligation of the Seller, enforceable in accordance with its terms,
subject to judicial discretion regarding specific performance or other equitable
remedies, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the enforcement of creditors'
rights and remedies generally. No approvals or consents by any third party,
other then Arby's, Inc. and certain lessors, or any governmental or
administrative body or agency or any court is required in connection with the
Seller's execution and delivery of this Agreement or the performance of its
obligations hereunder.
3.3 No Violation. Neither the Seller's execution and delivery of this
Agreement or the other agreements, documents and instruments to be executed and
delivered by Seller in connection herewith nor the performance of its
obligations hereunder will (a) result in a default under any of the terms,
conditions or provisions of any of the Contracts or any of the Seller's
organizational documents or (b) violate any existing order, writ, injunction,
decree, law, statute, rule or regulation of any court or governmental authority
applicable to the Seller or the Assets.
3.4 Title to Properties. The Seller has good, valid and marketable title
to all of the Assets. On the Closing Date, the Assets owned by the Seller are
free and clear of any title defects or objections, liens, mechanic's liens,
claims, charges, security interests or other encumbrances of
8
<PAGE>
any kind or nature whatsoever, except for (a) minor imperfections of title, none
of which materially detract from the value or impair the use of the Assets, (b)
liens for current real or property taxes not yet due and payable, and (c) the
liens and encumbrances approved in writing by Buyer.
3.5 Financial Statements. The Seller has delivered to Buyer financial
statements of the Operating Restaurant as prepared by Seller's accountants. The
financial statements have been prepared in accordance with generally accepted
accounting principles, practices and procedures consistently applied through the
periods reported upon. Since the date of such financial statements, there has
not been any material adverse change in the financial condition or results of
operations of the Operating Restaurant from those reflected in the latest
financial statements, or any damage, destruction or loss to any assets of the
Operating Restaurant, whether covered by insurance or not, having a material
adverse effect on the assets or businesses of the Operating Restaurant or any
other event or condition of any character relating to and materially affecting
the assets or businesses of the Operating Restaurant.
3.6 Condition of FF&E. The FF&E are, and as of the Closing Date will be,
in good working condition and repair, normal wear and tear excepted, and none of
the FF&E are in need of repairs, except for ordinary, routine maintenance and
repairs which are not in the aggregate material in cost.
3.7 Inventory. The Inventory is of a quality usable and saleable in the
ordinary course of business of the Seller in the operation of the Operating
Restaurant, and there are no obsolete item or items of below standard quality
under the standards set forth in the Arby's License Agreement. At Closing, the
inventory levels at the Operating Restaurant shall be sufficient for the
ordinary course of operation of the Operating Restaurant, consistent with past
practices.
3.8 Contracts. The Seller has delivered to Buyer complete, current and
correct copies of the Contracts, and no changes have been made thereto since the
date of delivery. Each of the Contracts is in full force and effect and is
valid, binding and enforceable in accordance with its terms with respect to the
parties thereto. There are no existing defaults by the Seller thereunder.
3.9 Compliance with Laws. The operation by the Seller of the Operating
Restaurant has been conducted in all material respects in compliance with all
applicable laws, statutes ordinances, rules, regulations, orders, decrees or
ruling of all governmental authorities or agencies having jurisdiction over the
Seller. All licenses, permits and authorizations issued or granted by a federal,
state or local governmental authority or agency which are necessary for the
conduct of the business at the Operating Restaurant are validly held by the
Seller.
3.10 Labor Issues. No strike, picketing or similar action is pending or
threatened against the Seller by their employees or any labor union. In
addition, Seller is not engaged in any unfair labor practices in connection with
the operation of the Operating Restaurant.
3.11 Litigation. There is no pending or threatened suit, action,
arbitration, proceeding, investigation or inquiry before any court or
governmental or administrative body or agency
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against the Seller or either of the Restaurants. The Seller is not in violation
of or in default under or subject to any order, judgment, writ, injunction or
decree of any court or governmental or administrative body or agency.
3.12 Leases. Each of the Restaurants' real property leases
(collectively, the "Leases" and each a "Lease") and all amendments.
modifications and/or extensions thereto or thereof are listed on Schedule 3.12
hereto. Schedule 3.12 hereto also lists, with respect to each Lease, the name of
the tenant(s) and landlord(s). With respect to the Leases, (i) the Leases are in
full force and effect, are unmodified (other than listed on Schedule 3.12
hereto), and are binding and enforceable in accordance with their terms; (ii)
all rental and other charges payable pursuant to the terms and conditions of the
Leases have been paid as of the Closing Date; (iii) the Seller has not defaulted
on any agreement, covenant or condition on the part of or to be performed by or
observed by Seller pursuant to the terms of the Leases, and no condition exists
which, with the serving of notice, passage of time, or both, will constitute
such a default; (iv) there are no actions or proceedings pending or threatened
by any lessor under any of the Leases; (v) except for the security deposits
identified on Schedule 1.1(g) hereto, no lessor holds any deposits for Seller's
account on any Lease; (vi) there are no defaults by any of the respective
lessors of any agreement, covenant or condition on the part of or to be
performed by or observed by such lessors pursuant to the terms of the Leases;
(vii) all reciprocal servitude or similar agreements benefiting any or by which
any real property leased by Seller ("Leased Property") is bound are in full
force and effect and there is no default by any party thereunder of its
obligations; and (viii) each Lease is a direct lease with the fee owner of the
real property. The current expiration dates and remaining options to extend the
Leases are as set forth on Schedule 3.12 hereto, as are the minimum monthly rent
and additional rent under the Leases.
3.13 Zoning and Land Use Matters. (a) All required licenses, permits,
certificates and approvals, including building and use permits, were obtained
and remain valid for the construction, use and occupancy and operation of the
Leased Property and the Restaurants located thereon; (b) the Leased Property and
all improvements located thereon are zoned or have a variance or conditional use
permit for the intended use by the zoning jurisdictions in which it is located;
and (c) the Leased Property is in full compliance with all conditions and
requirements of any building permit, use permits, conditional use permits or
zoning classifications, subdivision approvals, zoning restrictions, building
codes, environmental zoning and land-use laws, and other applicable local, state
and federal laws and regulations and comply with the requirements of all
conditions, covenants and restrictions applicable to the Leased Property.
3.14 Normal Use. The Seller does not know of any facts nor has the
Seller failed to disclose any fact which would prevent any of the Leased
Property from being used and operated after the Closing as Arby's restaurants in
accordance in all material respects with the operational terms of the Arby's
License Agreement.
3.15 Condemnation. The Seller has not received any written notice of any
pending or threatened exercise of eminent domain, condemnation, environmental,
zoning, other land-use regulations proceedings or any other similar action with
respect to any of the Leased Property, and the Seller has not received any
written notice of any federal, state, county, municipal or other
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governmental plans to restrict or change access from any highway or road
bounding any of the Leased Property.
3.16 Copies. All Leases, nondisturbance agreements, landlord estoppel
certificates, certificates of occupancy, sale/leaseback agreements, leasehold
mortgages and other leases in which the Seller is a lessor or sublessor and
which have been delivered or made available to Buyer pursuant to this Agreement
or otherwise in connection with the execution hereof or in connection with
Buyer's due diligence review, are true, complete and correct copies of the
originals of the same documents in the Seller's possession, and the same have
not been modified or amended, except pursuant to documents, copies of which have
been delivered to Buyer.
3.17 Parking, Easements and Related Agreements. Except as set forth in
the Leases, there are no written or oral parking leases, easements, agreements,
grants, licenses, options or any other agreement pursuant to which either Seller
is granted, for use in connection with the Restaurants, parking privileges or
rights, current or perspective, and/or rights of access of any kind or nature in
and to the Leased Property.
3.18 Water, Sewer, Gas, Etc. All water, sewer, gas, electric, telephone
and drainage facilities, and all other utilities required by applicable law or
necessary for the normal use and operation of the Leased Property and the
Restaurants located thereon or by Arby's, Inc.'s standards are available and are
adequate to service the Leased Property and the Restaurants located thereon.
3.19 Violations. All notes or notices of violations of law or municipal
ordinances, orders or requirements noted in or issued by the Department of
Housing and Building, Fire, Labor, Health or other state or municipal department
having jurisdiction over the Leased Property, against or affecting the Leased
Property on and prior to the Closing Date, shall be complied with by the Seller,
and the Leased Property shall be free of the same.
3.20 Environmental Protection.
(a) For purposes of this Section 3.20, the following definitions
shall apply:
(i) "Environmental Laws" shall mean all federal, state,
local and foreign laws imposing liability or establishing standards of conduct
for the protection of the environment and human health;
(ii) "Environmental Claim" shall mean any complaint,
summons, citation, notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter or other communication
from any governmental agency, department, bureau, office or other authority
having jurisdiction or any third party, involving violations of Environmental
Laws or Releases of Hazardous Materials;
(iii)"Environmental Liabilities" shall mean any monetary
obligations, losses, damages, costs and expenses (including all reasonable
out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket expert
and consulting fees and out-of-pocket costs for
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environmental site assessments, remedial investigations and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any governmental authority or any third party which
relate to any violations of Environmental Laws or Release of Hazardous Materials
generated by any of the Restaurants;
(iv) "Hazardous Materials" shall mean (A) any element,
compound or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely
hazardous substance or chemical. Hazardous waste, medical waste, biohazardous
waste or infectious waste, special waste, or solid waste under Environmental
Laws; (B) petroleum and its refined products; (C) polychlorinated biphenyls; (D)
any substance exhibiting a hazardous waste characteristic (as defined under
Environmental Laws), including, but not limited to, corrosivity, ignitability, .
toxicity or reactivity as well as any radioactive or explosive materials; and
(E) asbestos-containing materials;
(v) "Release" shall mean any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment.
(b) To the knowledge of the Seller, Seller has obtained all
permits, licenses or authorizations required by Environmental Laws, except where
the failure to obtain any such permit, license or authorization would not have a
material adverse effect upon the Assets or the operations of any of the
Restaurants (a "Material Adverse Effect"), and all such permits. licenses or
authorizations are in full force and effect, except for such permits, licenses
and authorizations which, if not in full force and effect, would not constitute
a Material Adverse Effect.
(c) To the knowledge of the Seller, the operations of the
Restaurants are in full compliance with all Environmental Laws, except where
such noncompliance would not have a Material Adverse Effect.
(d) To the knowledge of the Seller, there has been no Release at
any of the Leased Properties or at any disposal or treatment facility which has
received Hazardous Materials generated by any of the Restaurants which will
result in Environmental Liabilities that have a Material Adverse Effect.
(e) To the knowledge of the Seller, there are no outstanding
Environmental Claims that have a Material Adverse Effect.
3.21 License Agreements. The Seller has previously delivered or made
available to Buyer true, complete and correct copies of the Arby's License
Agreement and other agreements between Arby's, Inc. and the Seller. Set forth on
Schedule 3.21 hereto is a description of the Arby's License Agreement, including
the license agreement number, location and date of termination of the Arby's
License Agreement. The Seller has received no notice of a violation with respect
to the Arby's License Agreement and does not know of any event which would give
rise to a violation or default under the Arby's License Agreement. All renewal
notices, to the
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extent required by the Arby's License Agreement, have been delivered by the
Seller to Arby's, Inc. on a timely basis.
3.22 Contracts for Improvements. At the time of Closing, there will be
no outstanding contracts made by the Seller for any improvements to any of the
Restaurants which have not been fully paid for, and the Seller shall cause to be
discharged all mechanic's liens or materialman's liens, if any, arising from any
labor or materials furnished to the Restaurants prior to the time of Closing.
3.23 Improvements and Structural Defects. The structural portions of the
Restaurants and the plumbing, heating, air conditioning, electrical, mechanical,
life safety and other systems therein are in sufficient operating condition and
repair to allow them to operate as "turn-key" Arby's restaurants.
3.24 Brokers and Finders. Neither the Seller nor any of its directors,
officers. employees or other representatives, as the case may be, has engaged or
employed any broker, finder or agent or has incurred any liability or obligation
to pay any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement.
3.25 Accuracy of Representations and Warranties. Subject to the
qualifications stated herein, no representation or warranty made by the Seller
in this Agreement contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Seller to enter into this Agreement and
to perform its obligations hereunder, Buyer hereby represents and warrants to
the Seller as follows:
4.1 Authorization and Approvals. Buyer has all necessary power and
authority to deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the legal. valid and binding obligation of Buyer
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, and except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or affecting the enforcement of creditors rights and remedies
generally. No approvals or consents by any third party or any governmental or
administrative body or agency or any court is required in connection with
Buyer's execution and delivery of this Agreement or Buyer's performance of its
obligations hereunder.
4.2 No Violation. Neither the execution and delivery of this Agreement
or the other agreements, documents and instruments to be executed and delivered
by Seller in connection herewith nor the performance of the obligations
hereunder will (a) result in a default under any of the terms, conditions or
provisions of any contract, agreement, instrument, commitment or undertaking to
which Buyer is a party or is subject or any of the organizational documents of
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Buyer or (b) violate any existing order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority applicable to Buyer.
4.3 Brokers and Finders. Neither Buyer nor any of its employees or
representatives has engaged or employed any broker, finder or agent or has
incurred any liability or obligation to pay any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement.
4.4 Accuracy of Representations and Warranties. Subject to the
qualifications stated herein, to Buyer's actual knowledge, no representation or
warranty made by Buyer in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made, not
misleading.
ARTICLE 5
COVENANTS OF THE SELLER AND BUYER
Pending the consummation of the transactions contemplated hereunder, the
Seller and Buyer covenant and agree as follows:
5.1 Conduct of Business. From the date hereof until the Closing Date or
the termination of this Agreement pursuant to Article 9 hereof, the Seller shall
conduct the operation of the Operating Restaurant in the ordinary course of
business consistent with prior practices and pursuant to the terms and
provisions of the Arby's License Agreement, except as may be consented to in
writing by Buyer. The Seller shall maintain the FF&E in good working condition
and repair, normal wear and tear excepted. The Seller shall continue to meet the
contractual obligations incurred by it in the ordinary course of business and to
pay all of each of its obligations as they mature in the ordinary course of the
operation of the Operating Restaurant. The Seller shall also use its good faith
best efforts to keep available the services of the Employees, to maintain the
Contracts in full force and effect and to preserve its good relations with its
suppliers, customers and others with whom it has business dealings.
5.2 Access to Buyer. Prior to the Closing Date and upon the written
request of Buyer, the Seller shall give Buyer and its counsel, accountants and
other representatives reasonable access, during normal business hours, to the
Restaurant premises, employees, customer books, contracts, records and all other
information pertaining to the Assets and the operations of the Restaurants as
Buyer may reasonably request.
5.3 Compliance with Laws; Preservation of Accuracy of Representations
and Warranties, Etc. The Seller shall duly comply with all of the laws
applicable to it, and the Seller shall conduct the operation of the Operating
Restaurant and use the Assets in such manner that on the Closing Date the
representations and warranties contained in this Agreement shall be true as
though such representations and warranties were made on and as of such date.
5.4 Consents and Approvals. The Seller and Buyer shall use their
respective best efforts to acquire all necessary consents, approvals,
authorizations and waivers of all third parties
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(including, without limitation, the consent of Arby's, Inc. to the sale of the
Restaurants as set forth herein from Seller to Buyer and the lessors under the
various leases) or governmental agencies or authorities required to be obtained
by them in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereunder.
5.5 Closing Inventory. On or prior to the Closing Date, representatives
of each of the Seller and Buyer shall jointly conduct an inventory of all the
Inventory on hand at the Operating Restaurant, together with all Inventory on
order as of the Closing Date. The results of this inventory shall be reasonably
satisfactory to the parties and shall be attached hereto as Schedule 5.5 as soon
as practicable after the Closing Date. As of the Closing Date, the Seller shall
cause all of the Inventory at the Operating Restaurant to remain at the
Operating Restaurant for operational purposes.
5.6 Bulk Sales Law. Based on the right of indemnification set forth in
Section 8.2 hereof, Buyer hereby waives compliance by Seller with the applicable
bulk transfer laws, including, without limitation, the bulk transfer provisions
of the Uniform Commercial Code of the State of New Jersey, with respect to the
transactions contemplated hereby.
5.7 Estoppel Certificates. Within two (2) business days following the
date hereof, the Seller shall send out for execution estoppel certificates in
the form of Exhibit H attached hereto (the "Estoppel Certificates") to the real
property lessors of each of the Restaurants. The Seller agrees to use its best
efforts to obtain the maximum number of executed Estoppel Certificates prior to
the Closing Date. The Seller agrees to promptly deliver to Buyer copies of
executed Estoppel Certificates as they are received by Seller prior to the
Closing Date.
5.8 Non-Disturbance Agreements. The Seller shall use its best efforts to
obtain from any holder of a superior mortgage on any of the Leased Property, for
the benefit of Buyer, an agreement (the "Non-Disturbance Agreements") 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 defendant in any foreclosure action or proceeding
which may be instituted 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.
5.9 Other Transactions. Until the termination of this Agreement or the
consummation of the transactions contemplated hereby, the Seller shall not, and
the Seller shall cause its directors, officers, employees, agents, affiliates
and advisors not to, directly or indirectly, solicit or initiate the submission
of proposals of offers from, or solicit, encourage, entertain or enter into any
agreement, arrangement or understanding with, or engage in any discussions with,
or furnish any information to, any person or entity, other than Buyer or a
representative thereof, with respect to the acquisition of all or any part of
the Seller or any of its Restaurants. Should the Seller or any of its affiliates
or representatives, during such period, receive any offer or inquiry relating to
such a transaction, or obtain information that such an offer is likely to be
made, the
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Seller shall provide Buyer with immediate notice thereof, which notice shall
include the identity of the prospective offeror and the price and terms of any
offer.
5.10 Supplemental Disclosure. The Seller agrees that, with respect to
the representations and warranties made by it in this Agreement, from the date
hereof until the Closing Date, it shall have the continuing obligation to
promptly supplement or amend the schedules to this Agreement with respect to any
matter hereafter arising or discovered which, if existing or known at the date
hereof, would have been required to be set forth or described in the schedules
to this Agreement; provided, however, that for purposes of the rights and
obligations of the parties hereunder, any such supplemental or amended schedules
and any matters discovered by Buyer in the course of its due diligence review
shall not be deemed to cure any breach of any representation or warranty made in
this Agreement or to have been disclosed as of the date of this Agreement.
5.11 Other Action. Each of the parties hereto shall use its reasonable
best efforts to cause the fulfillment at the earliest practicable date of all of
the conditions to their respective obligations to consummate the purchase and
sale of the Restaurants and the Assets pursuant to this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction by Seller (or waiver by Buyer) on
or prior to Closing Date of the following conditions:
6.1 Representations and Warranties. The representations and warranties
made by the Seller herein shall be true and correct in all material respects on
and as of the date hereof and as of the Closing Date with the same force and
effect as though all such representations and warranties had been made on and as
of the Closing Date.
6.2 Covenants and Agreements. All of the covenants and agreements herein
to be complied with and performed by the Seller on or prior to the Closing Date
will have been complied with and performed in all material respects.
6.3 Consents. The Seller will have obtained the consent of Arby's, Inc.
to convey, transfer or assign the Arby's License Agreement to Buyer, and the
Seller shall have obtained all other necessary consents, approvals,
authorizations and waivers of all third parties (including, without limitation,
the consents, to the extent required, of the lessors under the various Leases)
or governmental agencies or authorities required to be obtained by it in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereunder. Any item required
by this paragraph may be waived in writing by the Buyer.
6.4 Litigation and Claims. No action, suit, proceeding or investigation
by or before any court, administrative agency or other governmental authority
will have been instituted or
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threatened, and no inquiry will have been received that in the reasonable
opinion of Buyer is likely to lead to any action, suit, proceeding or
investigation to restrain, prohibit or invalidate any of the transactions
contemplated by this Agreement.
6.5 Absence of Changes. There shall not have occurred prior to the
Closing Date (a) any material adverse change in the Assets or the financial
condition or results of operations of any of the Restaurants or (b) the legal
inability of the Seller to convey, assign and transfer the Assets to Buyer.
6.6 Financing. Buyer shall have obtained firm commitments for the amount
of financing necessary to enable it to pay the Purchase Price to the Seller;
provided, however, that this condition to Closing shall expire on March 20,
1998.
6.7 Estoppel Certificates. The Seller shall have obtained and delivered
to Buyer executed copies of the Estoppel Certificates referred to in Section 5.7
hereof from its lessors.
6.8 Non-Disturbance Agreements. The Seller shall have obtained and
delivered to Buyer executed copies of the Non-Disturbance Agreements referred to
in Section 5.8 hereof from each holder of a superior mortgage on any of the
Lease Property.
6.9 Additional Contracts. The Seller shall have duly executed the
Leasehold Assignment and Assumption Agreement and the Real Property Contract
Assignment and Assumption Agreement referred to in Section 2.1 hereof.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
The obligation of the Seller to consummate the transactions contemplated
by this Agreement is subject to the satisfaction by Buyer (or waiver by the
Seller) on or prior to the Closing Date of the following conditions:
7.1 Representations and Warranties. The representations and warranties
of Buyer herein shall be true and correct in all material respects on and as of
the date hereof and as of the Closing Date with the same force and effect as
though all such representations and warranties had been made on and as of the
Closing Date.
7.2 Covenants and Agreements. All of the covenants and agreements herein
to be complied with and performed by Buyer on or prior to the Closing Date will
have been complied with and performed in all material respects.
7.3 Consents. The Seller shall have obtained the consent from Arby's,
Inc. to convey, transfer or assign the Arby's License Agreement to Buyer.
7.4 Litigation. No action, suit. proceeding, or investigation by or
before any court, administrative agency or other governmental authority shall
have been instituted or threatened, and no inquiry will have been received that
in the reasonable opinion of the Seller is likely to lead
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to an action, suit, proceeding or investigation to restrain, prohibit or
invalidate any of the transactions contemplated by this Agreement.
7.5 Additional Contracts. The Buyer shall have duly executed the
Leasehold Assignment and Assumption Agreement and the Real Property Contract
Assignment and Assumption Agreement referred to in Section 2.1 hereof.
ARTICLE 8
INDEMNIFICATION
8.1 Survival of Representations. All representations and warranties made
by any party in this Agreement or pursuant hereto shall survive the Closing and
any investigation at any time made by or on behalf of any party for the
applicable statute of limitations period and any extensions thereof.
8.2 Agreement of Seller to Indemnify. The Seller shall indemnify and
defend Buyer and its officers, directors, employees, representatives, agents,
shareholders, partners and affiliates (and their respective officers, directors,
employees. representatives, agents, shareholders, partners and affiliates) and
hold each of them harmless from and against any loss, claim, liability, cost,
damage or expense (including, but not limited to, all expenses reasonably
incurred in investigating, preparing and defending any litigation or proceeding,
commenced or threatened, or any claim or action whatsoever) (collectively,
"Losses") suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any representation or warranty of Seller
contained in this Agreement or in any schedule, certificate, instrument or other
document delivered pursuant hereto, (ii) any breach of any covenant or agreement
of Seller contained in this Agreement, (iii) any liabilities, obligations,
contracts (written or otherwise), debts, expenses or costs of Seller of any kind
or nature other than the Assumed Liabilities, (iv) any federal, state, local,
foreign or other taxes of Seller or with respect to any of the Assets that are
due and payable whether on or before the Closing Date or with respect to any
period or portion thereof ending on or before the Closing Date or (v) any
failure by Seller to comply with applicable bulk transfer laws, including,
without limitation, the bulk transfer provisions of the Uniform Commercial Code
of the State of New Jersey, with respect to the transactions contemplated by
this Agreement. Subject to the provisions of the preceding sentence, payments in
respect of the indemnification provided in this Section 8.2 shall be made
promptly as Losses shall be incurred.
8.3 Agreement of Buyer to Indemnify. Buyer shall indemnify the Seller
and each of its officers, directors, employees, representatives, agents,
shareholders, partners and affiliates (and their respective officers, directors,
employees. representatives, agents, shareholders, partners and affiliates) and
hold each of them harmless from and against any Losses suffered or incurred by
any such indemnified party to the extent arising from (i) any breach of any
representation or warranty of Buyer contained in this Agreement or in any
schedule, certificate, instrument or other document delivered pursuant hereto,
(ii) any breach of any covenant or agreement of Buyer contained in this
Agreement, (iii) any liabilities, obligations, contracts (written or otherwise),
debts, expenses or costs of Buyer of any kind or nature under the Assumed
Liabilities or (iv) any federal, state, local, foreign or other taxes of Buyer
or with respect to any of the Assets that are due and payable following the
Closing Date or with respect to any period or portion thereof
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ending after the Closing Date. Subject to the provisions of the preceding
sentence, payments in respect of the indemnification provided in this Section
8.3 shall be made promptly as Losses shall be incurred.
8.4 Remedies Cumulative. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against the other party hereto.
ARTICLE 9
TERMINATION
9.1 Termination. The respective obligations of Seller and Buyer to
consummate the transactions contemplated by this Agreement may be terminated as
follows:
(a) by mutual written agreement of Buyer and Seller;
(b) by Buyer, if the condition to Closing set forth in Section
6.6 hereof has not been satisfied on or prior to March 20, 1998; or
(c) by Buyer or Seller if the Closing shall not have occurred on
or before April 15, 1998; provided, however, that the party exercising the
termination right provided in this paragraph (c) shall not have negligently,
intentionally or willfully caused the failure of any conditions to Closing set
forth in Articles 5 or 6 hereof to be satisfied prior to such date.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1 hereof, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto (or any of their
respective officers or directors), except (i) based upon obligations set forth
in Section 10.2 hereof; (ii) based upon Buyer's obligation to reimburse Seller
for those expenditures set forth in Section 2.1 hereof, provided that such
termination is not the result of Seller's failure to satisfy any of the
conditions to Closing set forth in Sections 6.1 through 6.5 or 6.7 through 6.9
hereof; and (iii) to the extent that failure to satisfy the conditions of
Articles 6 and 7 hereof results from the grossly negligent, intentional or
willful breach, violation or non-compliance by any party hereto of any covenant,
agreement, obligation, representation or warranty contained in this Agreement or
any other agreement referred to herein.
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ARTICLE 10
MISCELLANEOUS
10.1 Notices. All notices. requests. demands and other communications
hereunder shall be in writing and shall be delivered personally, sent by
certified mail, postage prepaid, return receipt requested, overnight courier, or
sent by telecopier or other electronic facsimile transmission, as elected by the
party giving such notice:
(a) if to Buyer:
Sybra, Inc.
8300 Dunwoody Place, Suite 300
Atlanta, Georgia 30350
Attn.: James R. Arabia
with a copy to:
Pryor, Cashman, Sherman and Flynn
410 Park Avenue
10th Floor
New York, New York 10022
Attn.: Robert H. Drechsler, Esq.
(b) if to Seller:
RGS Enterprises of New Jersey, Inc.
120 Fox Valley Glen
Glen Mills, Pennsylvania 19342
Attn.: James R. Sweet
with a copy to:
Law Offices of Jeffrey R. Gans
High Ridge Commons, Suite 201
200 Haddonfield-Berlin Road
Gibbsboro, New Jersey 08026
Attn.: Jeffrey Gans, Esq.
Any such notice or other communication will be deemed to have been received upon
actual receipt if personally delivered, one (1) business day following
transmission if sent by facsimile and appropriate confirmation is received or if
sent by overnight courier, or three (3) business days following mailing. Any
party hereto may change its address or facsimile number specified above by
giving written notice to the other party hereto in the same manner as specified
in this Section 10.1.
10.2 Expenses. Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the negotiation and preparation
of the documentation relating to this Agreement, as well as for entering into
and carrying out the terms and conditions of this Agreement and consummating the
transactions contemplated by this Agreement, irrespective of whether such
transactions shall actually be consummated.
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10.3 Entire Agreement. This Agreement, including the schedules and
annexes attached hereto, contains the entire understanding of the parties hereto
in respect of its subject matter. There are no other restrictions, promises,
warranties, covenants or understandings other than those expressly set forth
herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto.
10.4 Amendments; Waiver. This Agreement may not be amended,
supplemented, canceled or discharged except by a written instrument executed by
the parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege hereunder shall operate as a waiver hereto, nor shall any
single or partial exercise of any right power or privilege hereunder preclude
the exercise of any other right power or privilege (hereunder or otherwise). No
waiver of any breach of any agreement hereunder or any other agreement shall be
deemed to be a waiver of any preceding or succeeding breach of the same or any
other agreement. No extension of time of performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts. The
rights and remedies of the parties under this Agreement are in addition to all
other rights and remedies, at law or in equity, that either party may have
against the other.
10.5 Further Assurances. From time to time, at the request of any party
hereto and without further consideration, the other party or parties shall
execute and deliver to such requesting party such documents and take such other
action (but without incurring any material financial obligation) as such
requesting party may reasonably request in order to consummate more effectively
the transactions contemplated hereby, including, without limitation, vesting in
Buyer good, valid and marketable title to the Restaurants and Assets being
transferred hereunder.
10.6 Severability. Any provision of this Agreement or any of the
agreements contemplated hereby that shall be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
10.7 Headings. The descriptive headings of the Articles and Sections of
this Agreement are inserted for convenience and identification only and do not
constitute a part of this Agreement for purposes of interpretation.
10.8 Assignment. No party may assign its rights or delegate its duties
under this Agreement without the prior written consent of the other party
hereto. Whenever this Agreement refers to the Buyer or the Seller, such
reference will be deemed to include the permitted successors and assigns of such
party. The terms and conditions of this Agreement, the obligations imposed and
the rights conferred hereby will be binding upon and inure to the benefit of the
respective permitted successors and assigns of the parties hereto.
10.9 Attorneys' Fees. In the event of any action at law or in equity
with respect to this Agreement or any schedule, annex or other instrument or
agreement required hereunder, the
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prevailing party in such action or suit shall be entitled to receive its
reasonable attorneys' fees and all other costs and expenses of such action or
suit.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same Agreement.
10.11 Governing Law. This Agreement will be construed and interpreted
according to the laws of the State of New Jersey, without regard to conflict of
laws provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SYBRA, INC.
By: /s/ James R. Arabia
-------------------
Name: James R. Arabia
Title: President
RGS ENTERPRISES OF NEW JERSEY, INC.
By: /s/ James R. Sweet
------------------
Name: James R. Sweet
Title: Vice President
EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as
of February 19, 1998 by and among SYBRA, INC. a Michigan corporation ("Buyer")
and WOLVERINE FOOD SYSTEMS, INC., a Michigan corporation, with respect to the
goodwill, business, assets and properties (other than real property) of the
Restaurants (as defined below) (the "Seller") and WOLVERINE PROPERTIES, G.P., a
Michigan co-partnership, with respect to the real property and capital
improvements thereto of the Restaurants (the "Real Property Seller", and
together with the Seller, the "Sellers").
WITNESSETH:
WHEREAS, the Sellers currently own those certain Arby's restaurants
specified as units 5232, 5461, 5743 and 6130 (collectively, the "Restaurants");
and
WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to Buyer substantially all of the Sellers' respective interests
in the assets owned and used by the Sellers in connection with the ownership and
operation of the Restaurants, and the parties hereto desire to enter into
certain other agreements, all upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and mutual
representations, warranties, covenants and agreements hereinafter contained, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, at the closing provided for in Section 1.10 hereof (the
"Closing"), Seller shall sell, transfer, convey, assign and deliver to Buyer,
and Buyer shall purchase, acquire and accept from Seller, all of Seller's
rights, title and interest in and to the assets (of every type and description,
other than real property and capital improvements thereto, whether tangible or
intangible) and properties, goodwill and business which are owned or leased and
used by the Seller in the operation of the Restaurants (collectively, the
"Assets"), excluding, however, all of the Excluded Assets (defined below). The
Assets shall consist of, among other things, the following:
(a) All of the machinery, furniture, fixtures, equipment, signs,
cash registers, uniforms and other personal property (collectively, the "FF&E")
owned and used by the Seller in the operation of the Restaurants and located on
the premises thereof;
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(b) All inventories of food, beverages, paper supplies and other
consumables (collectively, the "Inventory") located on the premises thereof;
(c) All of Seller's rights, title and interest in and to the
franchise agreements with Arby's, Inc. ("Arby's License Agreements") pertaining
to the Restaurants which are set forth on Schedule 1.1 (c) attached hereto and
all rights for the use of the trademarks, tradenames, and service marks arising
from such agreements (subject to Arby's, Inc.'s ownership of all identifying
marks and logos);
(d) All of the Sellers' respective rights, title and interest in
and to all of the contracts, agreements, real property leases, personal property
leases, commitments and undertakings (the "Contracts") as identified in Schedule
1.1(d);
(e) All records, technical information, price lists, marketing
information, sales information and employee records which are or have been
maintained by the Seller in connection with the operation of the Restaurants;
and
(f) To the extent assignable, all of Seller's right, title and
interest in and to all permits, licenses, authorizations and approvals relating
to the operation of the Restaurants.
1.2 Excluded Assets. There shall be excluded from the Assets being sold
and transferred hereunder the following (the "Excluded Assets"):
(a) Seller's cash on hand and bank deposits at the time of
Closing;
(b) All accounts receivable, refundable income taxes, prepaid
interest, loans and exchanges and loans receivable; and
(c) All assets, leases and other contracts and agreements owned
or utilized by the Sellers with respect to premises other than the Restaurants.
1.3 Assumption of Liabilities. Except as expressly provided in this
Section 1.3, Buyer shall not assume or be responsible for any liabilities,
obligations or debts of any of the Sellers under or by reason of this Agreement.
Subject to the terms and conditions set forth in this Agreement, Buyer shall
assume, become fully and solely responsible for and shall timely pay, perform
and discharge in full all of the following liabilities, obligations and debts of
the Seller (collectively, the "Assumed Liabilities"):
(a) All of the Seller's liabilities, obligations and debts under
the Contracts which come due or relate to time periods from and after the
Closing Date in accordance with the respective terms thereof;
(b) All of the Seller's liabilities, obligations and debts in
respect of unpaid rent, charges or other payments for which a Purchase Price
adjustment is made pursuant to Section 1.6 hereof, together with all rent and
lease obligations relating to the Restaurants and the Assets occurring from and
after the Closing Date;
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(c) Any utility and telephone bills and other similar
liabilities, obligations and debts arising in the ordinary course from the
operations of the Restaurants which relate to time periods from and after the
Closing Date; and
(d) Any other liabilities, expenses or obligations relating to,
based on or arising out of the operations of the Restaurants by Buyer from and
after the Closing Date (it being understood that the Seller shall remain fully
and solely responsible for, shall indemnify and hold Buyer harmless with respect
to, and shall timely pay, perform and discharge in full any and all liabilities,
expenses or obligations relating to, based upon or arising out of the operations
of the Restaurants on or prior to the Closing Date).
1.4 Purchase Price. Subject only to the adjustments specified in this
Agreement and upon and subject to all other terms and conditions set forth in
this Agreement, in consideration of the sale, assignment, transfer, conveyance
and delivery of the Assets by Seller pursuant to this Agreement, Buyer shall pay
to the Seller the sum of Two Million Eight Hundred Thousand Dollars
($2,800,000), subject to reallocation pursuant to Section 1.7 hereof, plus an
amount equal to the value (at Seller's cost) of the Inventory (collectively, the
"Purchase Price") payable pursuant to the terms of Section 1.5 below.
1.5 Payment of Purchase Price. At the Closing, Buyer shall deliver or
cause to be delivered to the Sellers the Purchase Price by wire transfer of
immediately available funds to such bank account or bank accounts as shall be
designated by Sellers in writing prior to the Closing Date.
1.6 Purchase Price Adjustments. The Purchase Price shall be increased or
decreased, as the case may be, by the amount of rent, taxes, assessments and
other expenses prepaid or unpaid by the Sellers as of the Closing Date.
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets upon mutual agreement of the parties hereto. The foregoing
allocation shall be made in a manner consistent with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"). Each party hereby agrees
that it will not make any return, 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
in this Section 1.7.
1.8 Taxes. All sales and use taxes arising out of the purchase and sale
of the Assets shall be paid at the Closing and shall be borne equally by
Sellers, on the one hand, and Buyer, on the other hand.
1.9 License Transfer Fees. All license transfer and service or training
fees due and owing to Arby's, Inc. arising out of the purchase and sale of the
Assets shall be paid at the Closing by, and be the exclusive obligation of,
Buyer.
1.10 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of First Metropolitan
Title Company located at 131 North First Street, Brighton, Michigan on or before
April 24, 1998, following the satisfaction of
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all of the conditions to Closing set forth herein, or on such other date and at
such other time or place as the parties may agree. The date of the Closing is
sometimes referred to herein as the "Closing Date".
1.11 Deliveries by Sellers. At the Closing, the Sellers shall deliver or
cause to be delivered to Buyer (unless previously delivered) the following:
(a) this duly executed Agreement;
(b) a duly executed Bill of Sale substantially in the form of
Exhibit A attached hereto;
(c) a duly executed Assignment and Assumption Agreement
substantially in the form of Exhibit B attached hereto (the "Assignment and
Assumption Agreement");
(d) a duly executed Lease Assignment and Assumption Agreement
substantially in the form of Exhibit C attached hereto (the "Lease Assignment
and Assumption Agreement");
(e) an opinion of counsel to the Sellers substantially in the
form of Exhibit D attached hereto;
(f) the books and records of Sellers with respect to the
Restaurants as provided in Section 2.2 hereof;
(g) copies of all necessary consents, approvals, authorizations
and waivers of all third parties referred to in Section 5.4 hereof;
(h) copies of resolutions of Sellers' Board of Directors or
general partners, as the case may be, authorizing this Agreement and the other
agreements, documents and instruments to be executed and delivered by Sellers
pursuant hereto and the transactions contemplated hereby and thereby; and
(i) all other previously undelivered documents, instruments and
writings required to be delivered by Sellers on or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
1.12 Deliveries by Buyer. At the Closing, the Buyer shall deliver or
cause to be delivered to Sellers (unless previously delivered) the following:
(a) the funds referred to in Section 1.4 hereof;
(b) this duly executed Agreement;
(c) a duly executed Bill of Sale substantially in the form of
Exhibit A attached hereto;
(d) a duly executed Assignment and Assumption Agreement
substantially in the form of Exhibit B attached hereto;
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(e) a duly executed Lease Assignment and Assumption Agreement
substantially in the form of Exhibit C attached hereto;
(f) copies of resolutions of Buyer's Board of Directors
authorizing this Agreement and the other agreements, documents and instruments
to be executed and delivered by Buyer pursuant hereto and the transactions
contemplated hereby and thereby; and
(g) all other previously undelivered documents, instruments and
writings required to be delivered by Buyer on or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
1.13 Transfer of Employees. Each of the Sellers shall, effective as of
the Closing Date, terminate the employment of all of the employees who are then
employed by each of the Sellers at the premises of the Restaurants to be
transferred as of the Closing Date (collectively, the "Employees"). Buyer, at
its discretion, may hire any or all of the terminated Employees on or after the
Closing Date.
1.14 Accrued Vacation Pay. Each of the Sellers shall pay in full the
amount of vacation pay owed to each of their respective Employees no later than
the Closing Date.
ARTICLE 2
RELATED MATTERS
2.1 Real Property Contract of Sale. Concurrently herewith, Buyer and the
Real Property Seller shall enter into a contract of sale (the "Real Property
Contract of Sale"), which shall be substantially in the form of Exhibit E
attached hereto, pursuant to which Buyer shall purchase from the Real Property
Seller fee title to the real property underlying Unit 5232 and Unit 6130 (the
"Fee Units") for an aggregate purchase price of Two Million Dollars ($2,000,000)
in cash, subject to reallocation pursuant to Section 1.7 hereof.
2.2 Books and Records of Sellers. Each Seller agrees to deliver to Buyer
on or as soon as practicable after the Closing Date, as requested by Buyer, all
books and records of such Seller (including, but not limited to, correspondence,
memoranda, books of account, personnel and payroll records and the like)
relating to the ownership and/or operation of any of the Restaurants. All books
and records of each Seller which are not delivered to Buyer hereunder shall be
preserved by such Seller for a period of seven (7) years following the Closing
and made available to Buyer and its authorized representatives upon reasonable
notice during normal business hours for purposes of review and/or for purposes
of making copies or extracts therefrom (at Buyer's expense) if so desired by
Buyer. Buyer shall preserve all books and records of each Seller delivered to
Buyer hereunder for a period of seven (7) years following the Closing, and shall
make available to each Seller and its respective authorized representatives
during such period the respective books and records previously delivered by each
Seller to Buyer for purposes of review and/or for purposes of making copies or
extracts therefrom if so desired by such Seller.
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2.3 Confidentiality; Non-Competition.
(a) The Sellers acknowledge that Buyer would be irreparably
damaged if confidential information about Sellers' businesses with respect to
the Restaurants were disclosed to or utilized on behalf of any person, firm,
corporation or other business organization which is in competition in any
respect with the operation of the Restaurants. The Sellers each covenant and
agree that they will not at any time, and will use their respective best efforts
to cause their respective agents, affiliates and associates (as the terms
"affiliate" and "associate" are defined by the Rules and Regulations promulgated
under the Securities Act of 1933, as amended) not to at any time, without the
prior written consent of Buyer, disclose or use any such confidential
information, except to employees and authorized representatives of Buyer.
(b) In furtherance of this Section 2.3 and to secure the
interests of Buyer hereunder, each Seller agrees that for a period of five (5)
years following the Closing Date (the "Non-Competition Period"), it will not,
directly or indirectly (whether as sole proprietor, partner or venturer,
stockholder, director, officer, employee or consultant or in any other capacity
or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated
with any person, firm, association, partnership, corporation or other entity
which conducts or engages, directly or indirectly, in the ownership or operation
of any Arby's restaurant (the "Business") which would generate competition with
any of the Restaurants or any other restaurants owned by Buyer or any of its
affiliates on the Closing Date;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any person, firm,
association, partnership, corporation or other entity which conducts or engages,
directly or indirectly, in the Business and which would generate competition
with any of the Restaurants or any other restaurants owned by Buyer or any of
its affiliates on the Closing Date
(iii) influence or attempt to influence any person, firm,
association, partnership, corporation or other entity who is a contracting party
with Buyer at any time during the Non-Competition Period to terminate any
written or oral agreement with Buyer;
(iv) hire or attempt to hire for employment any person who
is employed by Buyer or attempt to influence any such person to terminate
employment with Buyer; or
(v) call on, solicit or take away as a supplier or
customer or attempt to call on, solicit or take away as a supplier or customer
any person, firm, association, partnership, corporation or other entity that is
a supplier or customer of Buyer on the Closing Date.
(c) It is agreed and understood by and among the parties to this
Agreement that the restrictive covenants set forth above are each individually
essential elements of this Agreement and that, but for the agreement of Sellers
to comply with such covenants, Buyer would not have agreed to enter into this
Agreement. Further, each Seller expressly
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acknowledges that the restrictions contained in paragraph (b) of this Section
2.3 are reasonable and necessary to accomplish the mutual objectives of the
parties and to protect Buyer's legitimate interests in its business and business
relationships. Each Seller further acknowledges that enforcement of the
restrictions contained herein will not deprive it, or any of its agents,
servants or employees, or any of them, of the ability to earn reasonable livings
and that any violation of the restrictions contained in this Agreement will
cause irreparable injury to Buyer. Such covenants of Sellers shall be construed
as agreements independent of any other provision of this Agreement and of each
other.
(d) The parties hereto agree that damages at law, including, but
not limited to, monetary damages, will be an insufficient remedy to Buyer in the
event that the restrictive covenants of paragraph (b) of this Section 2.3 are
violated and that, in addition to any remedies or rights that may be available
to Buyer, all of which other remedies or rights shall be deemed to be
cumulative, retained by Buyer and not waived by the enforcement of any remedy
available hereunder, including, but not limited to, the right to sue for
monetary damages, Buyer shall also be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief, including, but not limited
to, a temporary, preliminary or permanent injunction, to enforce the provisions
of this Section 2.3 as well as an equitable accounting of all profits or
benefits arising out of any such violation, all of which shall constitute rights
and remedies to which Buyer may be entitled.
(e) If any court determines that the covenant not to compete
contained in this Section 2.3, or any part hereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
(f) Prior to the closing of the transactions contemplated
hereunder, the Buyer and the Sellers shall keep confidential, and shall use
their best efforts to cause their directors, officers, affiliates, advisors and
employees to keep confidential, the existence of this Agreement, the
transactions described herein and all information concerning the Sellers'
respective assets, properties and business, except that this paragraph shall not
apply to any information which (i) is subsequently disclosed by a third party
which has the bona fide right to make such disclosure, (ii) subsequently becomes
known to the general public through no fault or omission on the part of the
parties or (iii) is required to be disclosed by law or a governmental agency.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As a material inducement to Buyer to enter into this Agreement and to
perform its obligations hereunder, each of the Sellers hereby represents and
warrants to Buyer with respect to themselves and the Assets which they purport
to own as follows:
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3.1 Organization of the Sellers. Wolverine Properties, G.P. is a
co-partnership duly organized, validly existing and in good standing under the
laws of the State of Michigan. Wolverine Food Systems, Inc. is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan. Each of the Sellers has all necessary power and authority to
own or lease, operate and sell its properties and to carry on its business as it
is now being conducted.
3.2 Authorization and Approvals. Each of the Sellers has all necessary
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement has been duly and validly authorized by
all necessary action on the part of each of the Sellers. This Agreement
constitutes the legal, valid and binding obligation of each of the Sellers,
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditors' rights and remedies
generally. No approvals or consents by any third party, other then Arby's, Inc.
and certain lessors, or any governmental or administrative body or agency or any
court is required in connection with the Sellers' execution and delivery of this
Agreement or the performance of their respective obligations hereunder.
3.3 No Violation. Neither the Sellers' execution and delivery of this
Agreement or the other agreements, documents and instruments to be executed and
delivered by Sellers in connection herewith nor the performance of their
respective obligations hereunder will (a) result in a default under any of the
terms, conditions or provisions of any of the Contracts or any of the Sellers'
respective organizational documents or (b) violate any existing order, writ,
injunction, decree, law, statute, rule or regulation of any court or
governmental authority applicable to either of the Sellers or the Assets.
3.4 Title to Properties. Each of the Sellers has good, valid and
marketable title to all of the Assets. On the Closing Date, the Assets owned by
each of the Sellers are free and clear of any title defects or objections,
liens, mechanic's liens, claims, charges, security interests or other
encumbrances of any kind or nature whatsoever, except for (a) minor
imperfections of title, none of which materially detract from the value or
impair the use of the Assets, (b) liens for current real or property taxes not
yet due and payable, and (c) the liens and encumbrances approved in writing by
Buyer.
3.5 Financial Statements. Sellers have delivered to Buyer financial
statements of the Restaurants as prepared by Sellers' respective accountants.
The financial statements have been prepared in accordance with generally
accepted accounting principles, practices and procedures consistently applied
through the periods reported upon. Since the date of such financial statements,
there has not been any material adverse change in the financial condition or
results of operations of any of the Restaurants from those reflected in the
latest financial statements, or any damage, destruction or loss to any assets of
the Restaurants, whether covered by insurance or not, having a material adverse
effect on the assets or businesses of the Restaurants or any other event or
condition of any character relating to and materially affecting the assets or
businesses of the Restaurants.
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3.6 Condition of FF&E. Except as set forth on Schedule 3.6 hereto, the
FF&E are, and as of the Closing Date will be, in good working condition and
repair, normal wear and tear excepted, and, to the Seller's knowledge, none of
the FF&E are in need of repairs, except for ordinary, routine maintenance and
repairs which are not in the aggregate material in cost.
3.7 Inventory. The Inventory is of a quality usable and saleable in the
ordinary course of business of the Seller in the operations of the Restaurants,
and there are no obsolete item or items of below standard quality under the
standards set forth in the Arby's License Agreements. At Closing, the inventory
levels at each Restaurant shall be sufficient for the ordinary course of
operation of such Restaurant, consistent with past practices.
3.8 Contracts. Each of the Sellers has delivered to Buyer complete,
current and correct copies of the Contracts, and no changes have been made
thereto since the date of delivery. Each of the Contracts is in full force and
effect and is valid, binding and enforceable in accordance with its terms with
respect to the parties thereto. There are no existing defaults by any of the
Sellers thereunder.
3.9 Compliance with Laws. The operation by the Seller of the Restaurants
has been conducted in all material respects in compliance with all applicable
laws, statutes ordinances, rules, regulations, orders, decrees or ruling of all
governmental authorities or agencies having jurisdiction over the Seller. All
licenses, permits and authorizations issued or granted by a federal, state or
local governmental authority or agency which are necessary for the conduct of
the business at each Restaurant are validly held by the Seller.
3.10 Labor Issues. No strike, picketing or similar action is pending or
threatened against Sellers by their employees or any labor union. In addition,
Seller is not engaged in any unfair labor practices in connection with the
operation of the Restaurants.
3.11 Litigation. There is no pending or threatened suit, action,
arbitration, proceeding, investigation or inquiry before any court or
governmental or administrative body or agency. The Sellers are not in violation
of or in default under or subject to any order, judgment, writ, injunction or
decree of any court or governmental or administrative body or agency.
3.12 Leases. Each of the Restaurants' real property leases
(collectively, the "Leases" and each a "Lease") and all amendments.
modifications and/or extensions thereto or thereof are listed on Schedule 3.12
hereto. Schedule 3.12 hereto also lists, with respect to each Lease, the name of
the tenant(s) and landlord(s). With respect to the Leases, (i) the Leases are in
full force and effect, are unmodified (other than listed on Schedule 3.12
hereto), and are binding and enforceable in accordance with their terms; (ii)
all rental and other charges payable pursuant to the terms and conditions of the
Leases have been paid as of the Closing Date; (iii) the Sellers have not
defaulted on any agreement, covenant or condition on the part of or to be
performed by or observed by Sellers pursuant to the terms of the Leases, and no
condition exists which, with the serving of notice, passage of time, or both,
will constitute such a default; (iv) there are no actions or proceedings pending
or threatened by any lessor under any of the Leases; (v) no lessor holds any
deposits for any Seller's account on any Lease; (vi) there are no defaults by
any of the respective lessors of any agreement, covenant or condition on the
part of or to be performed by or
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observed by such lessors pursuant to the terms of the Leases; (vii) all
reciprocal servitude or similar agreements benefiting any or by which any real
property leased by any Seller ("Leased Property") is bound are in full force and
effect and there is no default by any party thereunder of its obligations; and
(viii) each Lease is a direct lease with the fee owner of the real property. The
current expiration dates and remaining options to extend the Leases are as set
forth on Schedule 3.12 hereto, as are the minimum monthly rent and additional
rent under the Leases.
3.13 Zoning and Land Use Matters. (a) All required licenses, permits,
certificates and approvals, including building and use permits, were obtained
and remain valid for the construction, use and occupancy and operation of the
Leased Property and the Restaurants located thereon; (b) the Leased Property and
all improvements located thereon are zoned or have a variance or conditional use
permit for the intended use by the zoning jurisdictions in which it is located;
and (c) the Leased Property is in full compliance with all conditions and
requirements of any building permit, use permits, conditional use permits or
zoning classifications, subdivision approvals, zoning restrictions, building
codes, environmental zoning and land-use laws, and other applicable local, state
and federal laws and regulations and comply with the requirements of all
conditions, covenants and restrictions applicable to the Leased Property.
3.14 Normal Use. None of the Sellers knows of any facts nor have any of
the Sellers failed to disclose any fact which would prevent any of the Leased
Property from being used and operated after the Closing as Arby's Restaurants in
accordance in all material respects with the operational terms of the Arby's
License Agreements.
3.15 Condemnation. None of the Sellers has received any written notice
of any pending or threatened exercise of eminent domain, condemnation,
environmental, zoning, other land-use regulations proceedings or any other
similar action with respect to any of the Leased Property, and none of the
Sellers has received any written notice of any federal, state, county, municipal
or other governmental plans to restrict or change access from any highway or
road bounding any of the Leased Property.
3.16 Copies. All Leases, nondisturbance agreements, landlord estoppel
certificates, certificates of occupancy, sale/leaseback agreements, leasehold
mortgages and other leases in which one or more of the Sellers is a lessor or
sublessor and which have been delivered or made available to Buyer pursuant to
this Agreement or otherwise in connection with the execution hereof or in
connection with Buyer's due diligence review, are true, complete and correct
copies of the originals of the same documents in the Sellers' possession, and
the same have not been modified or amended, except pursuant to documents, copies
of which have been delivered to Buyer.
3.17 Parking, Easements and Related Agreements. Except as set forth in
the Leases, there are no written or oral parking leases, easements, agreements,
grants, licenses, options or any other agreement pursuant to which either Seller
is granted, for use in connection with the Restaurants, parking privileges or
rights, current or perspective, and/or rights of access of any kind or nature in
and to the Leased Property.
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3.18 Water, Sewer, Gas, Etc. All water, sewer, gas, electric, telephone
and drainage facilities, and all other utilities required by applicable law or
necessary for the normal use and operation of the Leased Property and the
Restaurants located thereon or by Arby's, Inc.'s standards are available and are
adequate to service the Leased Property and the Restaurants located thereon.
3.19 Violations. All notes or notices of violations of law or municipal
ordinances, orders or requirements noted in or issued by the Department of
Housing and Building, Fire, Labor, Health or other state or municipal department
having jurisdiction over the Leased Property, against or affecting the Leased
Property on and prior to the Closing Date, shall be complied with by the
Sellers, and the Leased Property shall be free of the same.
3.20 Environmental Protection.
(a) For purposes of this Section 3.20, the following definitions
shall apply:
(i) "Environmental Laws" shall mean all federal, state,
local and foreign laws imposing liability or establishing standards of conduct
for the protection of the environment and human health;
(ii) "Environmental Claim" shall mean any complaint,
summons, citation, notice, directive, order, claim, litigation, investigation,
judicial or administrative proceeding, judgment, letter or other communication
from any governmental agency, department, bureau, office or other authority
having jurisdiction or any third party, involving violations of Environmental
Laws or Releases of Hazardous Materials;
(iii)"Environmental Liabilities" shall mean any monetary
obligations, losses, damages, costs and expenses (including all reasonable
out-of-pocket fees, disbursements and expenses of counsel, out-of-pocket expert
and consulting fees and out-of-pocket costs for environmental site assessments,
remedial investigations and feasibility studies), fines, penalties, sanctions
and interest incurred as a result of any Environmental Claim filed by any
governmental authority or any third party which relate to any violations of
Environmental Laws or Release of Hazardous Materials generated by any of the
Restaurants;
(iv) "Hazardous Materials" shall mean (A) any element,
compound or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely
hazardous substance or chemical. Hazardous waste, medical waste, biohazardous
waste or infectious waste, special waste, or solid waste under Environmental
Laws; (B) petroleum and its refined products; (C) polychlorinated biphenyls; (D)
any substance exhibiting a hazardous waste characteristic (as defined under
Environmental Laws), including, but not limited to, corrosivity, ignitability, .
toxicity or reactivity as well as any radioactive or explosive materials; and
(E) asbestos-containing materials;
(v) "Release" shall mean any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of Hazardous Materials
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(including the abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) into the environment.
(b) To the knowledge of the Sellers, Sellers have obtained all
permits, licenses or authorizations required by Environmental Laws, except where
the failure to obtain any such permit, license or authorization would not have a
material adverse effect upon the Assets or the operations of any of the
Restaurants (a "Material Adverse Effect"), and all such permits. licenses or
authorizations are in full force and effect, except for such permits, licenses
and authorizations which, if not in full force and effect, would not constitute
a Material Adverse Effect.
(c) To the knowledge of the Sellers, the operations of the
Restaurants are in full compliance with all Environmental Laws, except where
such noncompliance would not have a Material Adverse Effect.
(d) To the knowledge of the Sellers, there has been no Release at
any of the Leased Properties or at any disposal or treatment facility which has
received Hazardous Materials generated by any of the Restaurants which will
result in Environmental Liabilities that have a Material Adverse Effect.
(e) To the knowledge of the Sellers, there are no outstanding
Environmental Claims that have a Material Adverse Effect.
3.21 License Agreements. The Sellers have previously delivered or made
available to Buyer true, complete and correct copies of all Arby's License
Agreements and other agreements between Arby's, Inc. and any of the Sellers. Set
forth on Schedule 3.21 hereto is a list of all of the Arby's License Agreements,
including the license agreement number, location and date of termination of each
Arby's License Agreement. The Sellers have received no notice of a violation
with respect to any of the Arby's License Agreements and do not know of any
event which would give rise to a violation or default under any of the Arby's
License Agreements. All renewal notices, to the extent required by the Arby's
License Agreements, have been delivered by the Sellers to Arby's, Inc. on a
timely basis.
3.22 Contracts for Improvements. At the time of Closing, there will be
no outstanding contracts made by any of the Sellers for any improvements to any
of the Restaurants which have not been fully paid for, and the Sellers shall
cause to be discharged all mechanic's liens or materialman's liens, if any,
arising from any labor or materials furnished to the Restaurants prior to the
time of Closing.
3.23 Improvements and Structural Defects. The structural portions of the
Restaurants and the plumbing, heating, air conditioning, electrical, mechanical,
life safety and other systems therein are in sufficient operating condition and
repair to allow them to operate as "turn-key" Arby's restaurants.
3.24 Brokers and Finders. Neither the Sellers nor any of their
directors, officers. employees or other representatives, as the case may be, has
engaged or employed any broker,
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finder or agent or has incurred any liability or obligation to pay any brokerage
fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement.
3.25 Accuracy of Representations and Warranties. Subject to the
qualifications stated herein, to Sellers' actual knowledge, no representation or
warranty made by any of the Sellers in this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Sellers to enter into this Agreement and
to perform their obligations hereunder, Buyer hereby represents and warrants to
the Sellers as follows:
4.1 Authorization and Approvals. Buyer has all necessary power and
authority to deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the legal. valid and binding obligation of Buyer
enforceable in accordance with its terms, subject to judicial discretion
regarding specific performance or other equitable remedies, and except as may be
limited by bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or affecting the enforcement of creditors rights and remedies
generally. No approvals or consents by any third party or any governmental or
administrative body or agency or any court is required in connection with
Buyer's execution and delivery of this Agreement or Buyer's performance of its
obligations hereunder.
4.2 No Violation. Neither the execution and delivery of this Agreement
or the other agreements, documents and instruments to be executed and delivered
by Sellers in connection herewith nor the performance of the obligations
hereunder will (a) result in a default under any of the terms, conditions or
provisions of any contract, agreement, instrument, commitment or undertaking to
which Buyer is a party or is subject or any of the organizational documents of
Buyer or (b) violate any existing order, writ, injunction, decree, law, statute,
rule or regulation of any court or governmental authority applicable to Buyer.
4.3 Brokers and Finders. Neither Buyer nor any of its employees or
representatives has engaged or employed any broker, finder or agent or has
incurred any liability or obligation to pay any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement.
4.4 Accuracy of Representations and Warranties. Subject to the
qualifications stated herein, to Buyer's actual knowledge, no representation or
warranty made by Buyer in this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements, in light of the circumstances under which they were made, not
misleading.
ARTICLE 5
COVENANTS OF THE SELLERS AND BUYER
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Pending the consummation of the transactions contemplated hereunder, the
Sellers and Buyer covenant and agree as follows:
5.1 Conduct of Business. From the date hereof until the Closing Date or
the termination of this Agreement pursuant to Article 9 hereof, Seller shall
conduct the operations of the Restaurants in the ordinary course of business
consistent with prior practices and pursuant to the terms and provisions of the
Arby's License Agreements, except as may be consented to in writing by Buyer.
Seller shall maintain the FF&E in good working condition and repair, normal wear
and tear excepted. Seller shall continue to meet the contractual obligations
incurred by it in the ordinary course of business and to pay all of each of its
obligations as they mature in the ordinary course of the operations of the
Restaurants. Each of the Sellers shall also use its good faith best efforts to
keep available the services of the Employees, to maintain the Contracts in full
force and effect and to preserve its good relations with its suppliers,
customers and others with whom it has business dealings.
5.2 Access to Buyer. Prior to the Closing Date and upon the written
request of Buyer, each of the Sellers shall give Buyer and its counsel,
accountants and other representatives reasonable access, during normal business
hours, to the Restaurant premises, employees, customer books, contracts, records
and all other information pertaining to the real property, the Assets and the
operations of the Restaurants as Buyer may reasonably request.
5.3 Compliance with Laws; Preservation of Accuracy of Representations
and Warranties, Etc. Each of the Sellers shall duly comply with all of the laws
applicable to it, and each of the Sellers shall conduct the operations of the
Restaurants and use the Assets and the real property, as the case may be, in
such manner that on the Closing Date the representations and warranties
contained in this Agreement shall be true as though such representations and
warranties were made on and as of such date.
5.4 Consents and Approvals. Each of the Sellers and Buyer shall use
their respective best efforts to acquire all necessary consents, approvals,
authorizations and waivers of all third parties (including, without limitation,
the consent of Arby's, Inc. to the sale of the Restaurants as set forth herein
from Sellers to Buyer and the lessors under the various leases) or governmental
agencies or authorities required to be obtained by them in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereunder.
5.5 Closing Inventory. On or prior to the Closing Date, representatives
of the Seller and Buyer shall jointly conduct an inventory of all the Inventory
on hand at each of the Restaurants, together with all Inventory on order as of
the Closing Date. The results of this inventory shall be reasonably satisfactory
to the parties and shall be attached hereto as Schedule 5.5 as soon as
practicable after the Closing Date. As of the Closing Date, the Sellers shall
cause all of the Inventory at the Restaurants to remain at the Restaurants for
operational purposes.
5.6 Bulk Sales Law. Based on the right of indemnification set forth in
Section 8.2 hereof, Buyer hereby waives compliance by Sellers with the
applicable bulk transfer laws,
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including, without limitation, the bulk transfer provisions of the Uniform
Commercial Code of the State of Michigan, with respect to the transactions
contemplated hereby.
5.7 Estoppel Certificates. Within two (2) business days following the
date hereof, the Sellers shall send out for execution estoppel certificates in
the form of Exhibit F attached hereto (the "Estoppel Certificates") to each of
their respective lessors. Each of the Sellers agrees to use its best efforts to
obtain the maximum number of executed Estoppel Certificates prior to the Closing
Date. Each Seller agrees to promptly deliver to Buyer copies of executed
Estoppel Certificates as they are received by Sellers prior to the Closing Date.
5.8 Non-Disturbance Agreements. The Seller shall use its best efforts to
obtain from any holder of a superior mortgage on any of the Leased Property, for
the benefit of Buyer, an agreement (the "Non-Disturbance Agreements") 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 defendant in any foreclosure action or proceeding
which may be instituted 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.
5.9 Other Transactions. Until the termination of this Agreement or the
consummation of the transactions contemplated hereby, the Sellers shall not, and
each of the Sellers shall cause its respective directors, officers, employees,
agents, affiliates and advisors not to, directly or indirectly, solicit or
initiate the submission of proposals of offers from, or solicit, encourage,
entertain or enter into any agreement, arrangement or understanding with, or
engage in any discussions with, or furnish any information to, any person or
entity, other than Buyer or a representative thereof, with respect to the
acquisition of all or any part of any of the Sellers or any of their respective
Restaurants. Should any Seller or any of their respective affiliates or
representatives, during such period, receive any offer or inquiry relating to
such a transaction, or obtain information that such an offer is likely to be
made, such Seller shall provide Buyer with immediate notice thereof, which
notice shall include the identity of the prospective offeror and the price and
terms of any offer.
5.10 Supplemental Disclosure. Each of the Sellers agrees that, with
respect to the representations and warranties made by it in this Agreement, from
the date hereof until the Closing Date, it shall have the continuing obligation
to promptly supplement or amend the schedules to this Agreement with respect to
any matter hereafter arising or discovered which, if existing or known at the
date hereof, would have been required to be set forth or described in the
schedules to this Agreement, and Buyer shall notify Sellers within a reasonable
time after discovering any information inconsistent with the representations and
warranties of Sellers made herein; provided, however, that for purposes of the
rights and obligations of the parties hereunder, any such supplemental or
amended schedules and any matters discovered by Buyer in the course of its due
diligence review shall not be deemed to cure any breach of any representation or
warranty made in this Agreement or to have been disclosed as of the date of this
Agreement, except to the extent that one or more of the executive officers of
Buyer has actual knowledge of
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information inconsistent with the representations and warranties of Sellers made
herein, Buyer fails to notify Sellers of such information and Buyer consummates
the transactions contemplated hereby.
5.11 Other Action. Each of the parties hereto shall use its reasonable
best efforts to cause the fulfillment at the earliest practicable date of all of
the conditions to their respective obligations to consummate the purchase and
sale of the Restaurants and the Assets pursuant to this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction (or waiver by Buyer) on or prior
to Closing Date of the following conditions:
6.1 Representations and Warranties. The representations and warranties
made by each of the Sellers herein shall be true and correct in all material
respects on and as of the date hereof and as of the Closing Date with the same
force and effect as though all such representations and warranties had been made
on and as of the Closing Date.
6.2 Covenants and Agreements. All of the covenants and agreements herein
to be complied with and performed by each of the Sellers on or prior to the
Closing Date will have been complied with and performed in all material
respects.
6.3 Consents. Each of the Sellers shall have obtained the consent of
Arby's, Inc. to convey, transfer or assign the Arby's License Agreements to
Buyer, and each of the Sellers shall have obtained all other necessary consents,
approvals, authorizations and waivers of all third parties (including, without
limitation, the consents, to the extent required, of the lessors under the
various Leases) or governmental agencies or authorities required to be obtained
by it in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereunder. Any
item required by this paragraph may be waived in writing by the Buyer.
6.4 Litigation and Claims. No action, suit, proceeding or investigation
by or before any court, administrative agency or other governmental authority
will have been instituted or threatened, and no inquiry will have been received
that in the reasonable opinion of Buyer is likely to lead to any action, suit,
proceeding or investigation to restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement.
6.5 Absence of Changes. There shall not have occurred prior to the
Closing Date (a) any material adverse change in the Assets or the financial
condition or results of operations of any of the Restaurants or (b) the legal
inability of either of the Sellers to convey, assign and transfer the Assets to
Buyer.
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6.6 Financing. Buyer shall have obtained firm commitments for a minimum
of $4,100,000 of financing to enable it to pay the Purchase Price to the
Sellers; provided, however, that this condition to Closing shall expire on March
16, 1998.
6.7 Estoppel Certificates. The Sellers shall have obtained and delivered
to Buyer executed copies of the Estoppel Certificates referred to in Section 5.7
hereof from each of their respective lessors.
6.8 Non-Disturbance Agreements. The Sellers shall have obtained and
delivered to Buyer executed copies of the Non-Disturbance Agreements referred to
in Section 5.8 hereof from each holder of a superior mortgage on any of the
Lease Property.
6.9 Real Property Contracts of Sale. All conditions to the closing of
the Real Property Contract of Sale referred to in Section 2.1 hereof shall have
been satisfied or waived.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligation of each of the Sellers to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (or waiver by each
of the Sellers) on or prior to the Closing Date of the following conditions:
7.1 Representations and Warranties. The representations and warranties
of Buyer herein shall be true and correct in all material respects on and as of
the date hereof and as of the Closing Date with the same force and effect as
though all such representations and warranties had been made on and as of the
Closing Date.
7.2 Covenants and Agreements. All of the covenants and agreements herein
to be complied with and performed by Buyer on or prior to the Closing Date will
have been complied with and performed in all material respects.
7.3 Consents. Each of the Sellers shall have obtained the consent from
Arby's, Inc. to convey, transfer or assign the Arby's License Agreements to
Buyer.
7.4 Litigation. No action, suit. proceeding, or investigation by or
before any court, administrative agency or other governmental authority shall
have been instituted or threatened, and no inquiry will have been received that
in the reasonable opinion of the Sellers is likely to lead to an action, suit,
proceeding or investigation to restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement.
ARTICLE 8
INDEMNIFICATION
8.1 Survival of Representations. All representations and warranties made
by any party in this Agreement or pursuant hereto and any investigation at any
time made by or on behalf
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of any party shall survive for a period of two (2) years after the Closing Date;
provided, however, that those representations made pursuant to Sections 3.4 and
3.20 hereof shall survive for the applicable statute of limitations period and
any extensions thereof.
8.2 Agreement of Sellers to Indemnify. Each of the Sellers, jointly and
severally, shall indemnify and defend Buyer and its officers, directors,
employees, representatives, agents, shareholders, partners and affiliates (and
their respective officers, directors, employees. representatives, agents,
shareholders, partners and affiliates) and hold each of them harmless from and
against any loss, claim, liability, cost, damage or expense (including, but not
limited to, all expenses reasonably incurred in investigating, preparing and
defending any litigation or proceeding, commenced or threatened, or any claim or
action whatsoever) (collectively, "Losses") suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of Sellers contained in this Agreement or in any
schedule, certificate, instrument or other document delivered pursuant hereto,
(ii) any breach of any covenant or agreement of Sellers contained in this
Agreement, (iii) any liabilities, obligations, contracts (written or otherwise),
debts, expenses or costs of Sellers of any kind or nature other than the Assumed
Liabilities, (iv) any federal, state, local, foreign or other taxes of Sellers
or with respect to any of the Assets that are due and payable whether on or
before the Closing Date or with respect to any period or portion thereof ending
on or before the Closing Date or (v) any failure by Sellers to comply with
applicable bulk transfer laws, including, without limitation, the bulk transfer
provisions of the Uniform Commercial Code of the State of Michigan, with respect
to the transactions contemplated by this Agreement. Subject to the provisions of
the preceding sentence, payments in respect of the indemnification provided in
this Section 8.2 shall be made promptly as Losses shall be incurred; provided,
however, that such payments shall not exceed $4,800,000 in the aggregate.
8.3 Agreement of Buyer to Indemnify. Buyer shall indemnify each of the
Sellers and each of their officers, directors, employees, representatives,
agents, shareholders, partners and affiliates (and their respective officers,
directors, employees. representatives, agents, shareholders, partners and
affiliates) and hold each of them harmless from and against any Losses suffered
or incurred by any such indemnified party to the extent arising from (i) any
breach of any representation or warranty of Buyer contained in this Agreement or
in any schedule, certificate, instrument or other document delivered pursuant
hereto, (ii) any breach of any covenant or agreement of Buyer contained in this
Agreement, (iii) any liabilities, obligations, contracts (written or otherwise),
debts, expenses or costs of Buyer of any kind or nature under the Assumed
Liabilities or (iv) any federal, state, local, foreign or other taxes of Buyer
or with respect to any of the Assets that are due and payable following the
Closing Date or with respect to any period or portion thereof ending after the
Closing Date. Subject to the provisions of the preceding sentence, payments in
respect of the indemnification provided in this Section 8.3 shall be made
promptly as Losses shall be incurred.
If Buyer fails to perform its obligations under a real property lease
assumed by Buyer hereunder thereby causing Sellers to make payment or have other
obligations under such lease, and if Buyer is unable to indemnify Sellers
therefor pursuant to this Section 8.3, then Buyer shall, at the written request
of Sellers, assign all of its rights in and to such leased property to Seller.
Buyer also shall assign to Seller, subject to the consent of Arby's, Inc., all
rights under the Arby's
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License Agreement for such Restaurant. In the event that Sellers are not made
whole by the assignments contemplated by this paragraph, Buyer shall remain
liable to Sellers under this Section 8.3 until such time as Sellers are fully
compensated.
8.4 Remedies Cumulative. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against the other party hereto.
ARTICLE 9
TERMINATION
9.1 Termination. The respective obligations of Sellers and Buyer to
consummate the transactions contemplated by this Agreement may be terminated as
follows:
(a) by mutual written agreement of Buyer and Sellers;
(b) by Buyer, if the condition to Closing set forth in Section
6.6 hereof has not been satisfied on or prior to March 16, 1998; or
(c) by Buyer or Sellers if the Closing shall not have occurred on
or before April 24, 1998; provided, however, that the party exercising the
termination right provided in this paragraph (c) shall not have negligently,
intentionally or willfully caused the failure of any conditions to Closing set
forth in Articles 6 or 7 hereof to be satisfied prior to such date.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 9.1 hereof, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto (or any of their
respective officers or directors), except (i) based upon obligations set forth
in Section 10.2 hereof and (ii) to the extent that failure to satisfy the
conditions of Articles 6 and 7 hereof results from the grossly negligent,
intentional or willful breach, violation or non-compliance by any party hereto
of any covenant, agreement, obligation, representation or warranty contained in
this Agreement or any other agreement referred to herein.
ARTICLE 10
MISCELLANEOUS
10.1 Notices. All notices. requests. demands and other communications
hereunder shall be in writing and shall be delivered personally, sent by
certified mail, postage prepaid, return receipt requested, overnight courier, or
sent by telecopier or other electronic facsimile transmission, as elected by the
party giving such notice:
(a) if to Buyer:
Sybra, Inc.
8300 Dunwoody Place
Suite 300
Atlanta, Georgia 30350
Attn.: James R. Arabia
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with a copy to:
Pryor, Cashman, Sherman and Flynn
410 Park Avenue
10th Floor
New York, New York 10022
Attn.: Robert H. Drechsler, Esq.
(b) if to Sellers:
Wolverine Properties, G.P.
Wolverine Food Systems, Inc.
211 North First Street
Suite 200
Brighton, Michigan 48116
Attn.: Robert C. Ressler
Thomas J. Price
with a copy to:
Farhat, Tyler & Associates, P.C.
1400 Abbott Road
Suite 440
East Lansing, Michigan 48883
Attn.: Gary L. Tyler, Esq.
Any such notice or other communication will be deemed to have been received upon
actual receipt if personally delivered, one (1) business day following
transmission if sent by facsimile and appropriate confirmation is received or if
sent by overnight courier, or three (3) business days following mailing. Any
party hereto may change its address or facsimile number specified above by
giving written notice to the other party hereto in the same manner as specified
in this Section 10.1.
10.2 Expenses. Except as otherwise expressly provided herein, each party
shall pay all of its own expenses incidental to the negotiation and preparation
of the documentation relating to this Agreement, as well as for entering into
and carrying out the terms and conditions of this Agreement and consummating the
transactions contemplated by this Agreement, irrespective of whether such
transactions shall actually be consummated.
10.3 Entire Agreement. This Agreement, including the schedules and
annexes attached hereto, contains the entire understanding of the parties hereto
in respect of its subject matter. There are no other restrictions, promises,
warranties, covenants or understandings other than those expressly set forth
herein. This Agreement supersedes all prior agreements and understandings
between the parties hereto.
10.4 Amendments; Waiver. This Agreement may not be amended,
supplemented, canceled or discharged except by a written instrument executed by
the parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege hereunder shall operate as a
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waiver hereto, nor shall any single or partial exercise of any right power or
privilege hereunder preclude the exercise of any other right power or privilege
(hereunder or otherwise). No waiver of any breach of any agreement hereunder or
any other agreement shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other agreement. No extension of time of
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
in equity, that either party may have against the other.
10.5 Further Assurances. From time to time, at the request of any party
hereto and without further consideration, the other party or parties shall
execute and deliver to such requesting party such documents and take such other
action (but without incurring any material financial obligation) as such
requesting party may reasonably request in order to consummate more effectively
the transactions contemplated hereby, including, without limitation, vesting in
Buyer good, valid and marketable title to the Restaurants and Assets being
transferred hereunder.
10.6 Severability. Any provision of this Agreement or any of the
agreements contemplated hereby that shall be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
10.7 Headings. The descriptive headings of the Articles and Sections of
this Agreement are inserted for convenience and identification only and do not
constitute a part of this Agreement for purposes of interpretation.
10.8 Assignment. No party may assign its rights or delegate its duties
under this Agreement without the prior written consent of the other party
hereto. Whenever this Agreement refers to the Buyer or the Sellers, such
reference will be deemed to include the permitted successors and assigns of such
party. The terms and conditions of this Agreement, the obligations imposed and
the rights conferred hereby will be binding upon and inure to the benefit of the
respective permitted successors and assigns of the parties hereto.
10.9 Attorneys' Fees. In the event of any action at law or in equity
with respect to this Agreement or any schedule, annex or other instrument or
agreement required hereunder, the prevailing party in such action or suit shall
be entitled to receive its reasonable attorneys' fees and all other costs and
expenses of such action or suit.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same Agreement.
10.11 Governing Law. This Agreement will be construed and interpreted
according to the laws of the State of Michigan, without regard to conflict of
laws provisions thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SYBRA, INC.
By: /s/ James R. Arabia
-------------------
Name: James R. Arabia
Title: President
WOLVERINE PROPERTIES, G.P.
By: /s/ Robert C. Ressler
---------------------
Name: Robert C. Ressler
Title: General Partner
By: /s/ Thomas J. Price
--------------------
Name: Thomas J. Price
Title: General Partner
WOLVERINE FOOD SYSTEMS, INC.
By: /s/ Robert C. Ressler
---------------------
Name: Robert C. Ressler
Title: President
22
<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 MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049588
<NAME> I.C.H. Corporation
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,897
<SECURITIES> 0
<RECEIVABLES> 816
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<PP&E> 32,019
<DEPRECIATION> 5,809
<TOTAL-ASSETS> 78,365
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<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 11,483
<TOTAL-LIABILITY-AND-EQUITY> 78,365
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<CGS> 7,159
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,366
<INCOME-PRETAX> 496
<INCOME-TAX> 203
<INCOME-CONTINUING> 293
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293
<EPS-PRIMARY> 0
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