-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C5LTmy0FVrrdskVAUPLVTtDa4PiOnOO29D8EpXAtiKTYOzogzWsDW9I3VmdA+sSx vZww+QSH8Fw620zVcCpvQQ== 0000950146-98-000860.txt : 19980518 0000950146-98-000860.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950146-98-000860 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICH CORP /DE/ CENTRAL INDEX KEY: 0000049588 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 436069928 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07697 FILM NUMBER: 98623295 BUSINESS ADDRESS: STREET 1: 9404 GENESEE AVE CITY: LA JOLLA STATE: CA ZIP: 92037 BUSINESS PHONE: 2149547111 MAIL ADDRESS: STREET 1: P.O. BOX 2699 STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 75221 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHWESTERN LIFE CORP DATE OF NAME CHANGE: 19940808 FORMER COMPANY: FORMER CONFORMED NAME: ICH CORP DATE OF NAME CHANGE: 19930506 FORMER COMPANY: FORMER CONFORMED NAME: ICH CORP/CONSOL NAT/RTS/CFR/MOD AMER LIFE INS/SW LIFE INS/CF DATE OF NAME CHANGE: 19930505 10-Q 1 QUARTERLY REPORT 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. 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 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share amounts)
December 31, 1997 March 31, 1998 (Unaudited) ----------------- ----------------- 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 ================= =================
The accompanying Notes are an integral part of the Consolidated Financial Statements. 2 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except share amounts)
Predecessor Company ------------------ -------------- For the three For the three months ended March months ended 29, 1997 March 31, 1998 ------------------ -------------- 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
The accompanying Notes are an integral part of the Consolidated Financial Statements. 3 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands except share amounts)
Predecessor Company -------------------- --------------------- For the three For the three months ended months ended March 29, 1997 March 31, 1998 -------------------- --------------------- 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 ==================== =====================
The accompanying Notes are an integral part of the Consolidated Financial Statements. 4 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 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 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:
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 =====================
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 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:
December 31, 1997 March 31, 1998 ------------------------ --------------------- 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 ======================== =====================
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 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.
Three months ended March 31, 1998 ------------------ 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 =====
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.
Three months ended March 31, 1997 ------- 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) =======
9 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
Predecessor Company ----------- ------- Three Months Three Months Ended Ended March 31, 1997 March 31, 1998 -------------------------- -------------- (Historical) (Proforma) 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% ====== ====== ======
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 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 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 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:
Exhibit No. Exhibit Title - ----------- ------------- 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
(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 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 EXHIBIT INDEX -------------
Exhibit Number Exhibit Title - -------------------------------------------------------------------- 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
16 EX-10.21 2 ASSET PURCHASE AGREEMENT 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; (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 2 (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 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 (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 (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 (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 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 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 9 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 10 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 11 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 12 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 13 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 14 (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 15 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 16 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 17 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 18 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. 19 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. 20 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 21 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 EX-10.22 3 ASSET PURCHASE AGREEMENT 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; 1 (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; 2 (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 3 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; 4 (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. 5 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 6 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: 7 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. 8 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 9 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. 10 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 11 (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, 12 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 13 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, 14 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 15 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. 16 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 17 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 18 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 19 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 20 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. 21 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 EX-27 4 I.C.H. CORPORATION FINANCIAL DATA SCHEDULE
5 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. 0000049588 I.C.H. Corporation $US 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1998 1 4,897 0 816 0 1,369 10,338 32,019 5,809 78,365 15,654 0 0 0 24 11,483 78,365 28,336 28,694 7,159 26,832 0 0 1,366 496 203 293 0 0 0 293 0 0
-----END PRIVACY-ENHANCED MESSAGE-----