-----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, DBUbbfDN66fqpBW3r/S/eSyjzJZ/o//if7u4ZQP5Pq2WxcqVyFv2tLMCtb27bc3K UNKOgViVKYPDriClKUGaig== 0000950146-98-001369.txt : 19980814 0000950146-98-001369.hdr.sgml : 19980814 ACCESSION NUMBER: 0000950146-98-001369 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98684369 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 FORM 10-Q 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 June 30, 1998 Commission file number 1-7697 I.C.H. Corporation ------------------ Exact name of Registrant as specified in its charter Delaware 43-6069928 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 9255 Towne Centre Drive, Suite 600, San Diego, California 92121 --------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (619) 587-8533 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _X_ No___ Number of shares of common stock outstanding on June 30, 1998: 2,910,884*. ----------- *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 June 30, 1998 2 Consolidated Statements of Operations for the Three Months ended June 30, 1997 and for the Three Months ended June 30, 1998 3 Consolidated Statements of Operations for the Six Months ended June 30, 1997 and for the Six Months ended June 30, 1998 4 Consolidated Statements of Cash Flows for the Six Months ended June 30, 1997 and for the Six Months ended June 30, 1998 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Part II. Other Information 18 Signatures 20 Exhibit Index 21
I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share amounts)
December 31, 1997 June 30, 1998 (Unaudited) ----------------- ------------------- ASSETS Current Assets Cash and cash equivalents $ 4,418 $ 4,070 Accounts receivable 530 79 Inventories 1,372 1,538 Deferred income taxes 1,257 1,137 Other current assets 1,565 2,395 -------- -------- Total current assets 9,142 9,219 Property and equipment, net 24,696 27,112 Intangible assets, net 39,470 44,087 Other assets 1,956 1,441 -------- -------- Total assets $ 75,264 $ 81,859 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 2,741 $ 3,618 Accrued liabilities 8,745 10,284 Current portion of long-term debt 1,714 3,714 Current portion of capital lease obligation 948 948 -------- -------- Total current liabilities 14,148 18,564 Non-current liabilities: Long-term debt 44,718 46,150 Long-term capital lease obligations 2,699 2,149 Deferred income taxes 1,908 1,935 Other liabilities 606 1,026 -------- -------- Total liabilities 64,079 69,824 Stockholders' Equity: Preferred stock, $0.01 par value; 1,000,000 authorized; none issued and outstanding Common stock, $0.01 par value; 9,000,000 authorized; 2,573,084 outstanding 24 26 Paid-in-capital 12,025 12,049 Retained earnings (deficit) (864) (40) -------- -------- Total liabilities and stockholders' equity $ 75,264 $ 81,859 ======== ========
The accompanying Notes are an integral part of the Consolidated Financial Statements. 2 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION (In thousands except share amounts)
Predecessor Company Combined Company ---------------------------------------------------- ----------------- For the one For the two For the three For the three month ended months ended months ended Months ended April 30, 1997 June 30, 1997 June 30, 1997 June 30, 1998 ---------------------------------------------------- ----------------- Revenues and other income: Restaurant sales $10,041 $18,533 $28,574 $30,850 Real estate operations & other 12 401 413 394 ------- ------- ------- ------- Total revenues 10,053 18,934 28,987 31,244 Costs and expenses: Restaurant costs and expenses 8,567 15,374 23,941 25,402 General and administrative 558 984 1,542 1,899 Depreciation and amortization 560 1,197 1,757 1,327 Real estate operations & other -- 328 328 299 Non-recurring/restructuring -- 1,256 1,256 -- ------- ------- ------- ------- Operating income (loss) 368 (205) 163 2,317 Interest 170 1,051 1,221 1,439 ------- ------- ------- ------- Income (loss) before taxes 198 (1,256) (1,058) 878 Provision(benefit)for taxes 101 (461) (360) 347 ------- ------- ------- ------- Net income (loss) $ 97 $ (795) $ (698) $ 531 ======= ======= ======= ======= Net income (loss) per share: Basic $ (0.28) $ 0.18 Diluted $ (0.28) $ 0.17 Weighted-average common shares outstanding (see note) Basic Diluted 2,793,550 2,910,884 2,793,550 3,195,000
The accompanying Notes are an integral part of the Consolidated Financial Statements. 3 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except share amounts)
Predecessor Company Combined Company ---------------------------------------------------- ----------------- For the four For the two For the six For the six months ended months ended months ended Months ended April 30, 1997 June 30, 1997 June 30, 1997 June 30, 1998 ---------------------------------------------------- ----------------- Revenues and other income: Restaurant sales $37,868 $18,533 $ 56,401 $59,186 Real estate operations & other 48 401 449 752 ------- ------- -------- ------- Total revenues 37,916 18,934 56,850 59,938 Costs and expenses: Restaurant costs and expenses 32,006 15,374 47,380 48,759 General and administrative 2,212 984 3,196 3,856 Depreciation and amortization 2,006 1,197 3,203 2,598 Real estate operations & other -- 328 328 546 Non-recurring/restructuring -- 1,256 1,256 -- ------- ------- -------- ------- Operating income (loss) 1,692 (205) 1,487 4,179 Interest 638 1,051 1,689 2,805 ------- ------- -------- ------- Income (loss) before taxes 1,054 (1,256) (202) 1,374 Provision (benefit) for taxes 434 (461) (27) 550 ------- ------- -------- ------- Net income (loss) $ 620 $ (795) $ (175) $ 824 ======= ======= ======== ======= Net income (loss) per share: Basic $ (0.28) $ 0.29 Diluted $ (0.28) $ 0.27 Weighted-average common shares outstanding (see note) Basic Diluted 2,793,550 2,852,200 2,793,550 3,037,000
The accompanying Notes are an integral part of the Consolidated Financial Statements. 4 I.C.H. CORPORATION and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands except share amounts)
Predecessor Company -------------------- --------------------- For the Period For the six Feb 19, 1997 thru months ended June 30, 1997 June 30, 1998 -------------------- --------------------- Cash flows from operating activities: Net income (loss) $ (897) $ 824 Adjustments to reconcile net income (loss) to cash from operating activities: Depreciation and amortization 1,210 2,598 Deferred income taxes 660 147 Changes in current assets and liabilities: Accounts receivable 1,011 451 Inventories 132 (166) Accounts payable and accrued expenses 1,625 2,416 Other, net (619) (830) -------- ------- Net cash provided by oeprating activities 3,122 5,440 -------- ------- Cash flows from investing activities: Capital expenditures (401) (4,962) Proceeds from disposition of property and equipment 5,000 718 Acquisition of restaurant properties (13,614) (5,387) Other, net -- 935 -------- ------- Net cash provided (used) by investing activities (9,015) (8,696) -------- ------- Cash flows from financing activities: Repayment on credit agreement (23,772) -- Proceeds from issuance of long-term debt, net of expenses 33,934 4,325 Repayment of long-term debt and capital lease obligations (503) (1,443) Other, net (427) 26 -------- ------- Net cash provided (used) by financing activities 9,232 2,908 -------- ------- Net change in cash and cash equivalents 3,339 (348) Cash and cash equivalents at beginning of period 500 4,418 -------- ------- Cash and cash equivalents at end of period $ 3,839 $ 4,070 ======== =======
The accompanying Notes are an integral part of the Consolidated Financial Statements. 5 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 six-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 transactions have been eliminated. Sybra currently operates a chain of 177 fast food restaurants as a franchisee of Arby's, Inc. ("Arby's") clustered in five regions, primarily in Texas, Michigan, Pennsylvania, Florida and California. As of June 30, 1998, another subsidiary operated a golf course and real estate development in Kentucky. 6 I.C.H. CORPORATION and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share amounts) Sybra is considered to be a Predecessor of the Company and, accordingly, the historical financial statements of Sybra, prior to its acquisition by the Company on April 30, 1997, are presented with the accompanying financial statements of the Company. The acquisition of Sybra resulted in changes in the cost basis of Sybra's assets and liabilities, use of estimated lives for certain of the intangibles that are different from those used by the Predecessor and a different capital structure. These factors significantly affect the comparability of the Predecessor's financial information. Significant Accounting Policies Fiscal Year. The Company operates on a calendar year basis. Sybra, however, uses a 52/53 week fiscal year ending on the last Saturday of the year. Accordingly, the accompanying financial statements include Sybra's results for the periods ended June 28, 1997 and June 27, 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 June 30, 1998. 7 I.C.H. CORPORATION and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share amounts) Income Taxes. Deferred income taxes are computed using the liability method, which provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Advertising Expenses. All advertising costs are expensed as incurred. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements and in the disclosure of contingent assets and liabilities. While actual results could differ from those estimates, management believes that actual results will not be materially different from amounts provided in the accompanying consolidated financial statements. Earnings Per Share. In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which requires presentation of both basic and diluted earnings per share. Basic net income per share is computed based on the weighted-average number of common shares outstanding during the 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 ==========
8 I.C.H. CORPORATION and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share amounts) NOTE 3. OLD ICH TRANSACTIONS On April 25, 1997, the Company exercised its option pursuant to the Reorganization Plan, to sell all of the outstanding capital stock of Bankers Multiple Line Insurance Company ("BML"), a property and casualty insurer licensed in all fifty states, for its carrying value of $5,000. In March 1997, the Company received $2,790 in satisfaction of a receivable related to the Reorganization Plan. NOTE 4. LONG-TERM DEBT Long-term debt consists of the following as of:
December 31, 1997 June 30, 1998 ------------------------ --------------------- Term loan, 10.63%, payable monthly through 2012 $ 33,984 $ 33,135 Loan, 14.40% 9,000 9,000 Acquisition indebtedness due in 1999 2,000 2,000 Other 1,448 5,729 ------------------------ --------------------- 46,432 49,864 Less: current portion 1,714 3,714 ------------------------ --------------------- Total $ 44,718 $ 46,150 ======================== =====================
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 June 30, 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 currently 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. 9 I.C.H. CORPORATION and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share amounts) 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 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. At June 30, 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 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 2,910,884 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 2,910,884 shares in computing earnings per share. As of June 30, 1998, 2,573,084 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 Six months ended ended June 30, 1998 June 30, 1998 -------------- -------------- Income for computation of basic earnings per share and diluted earnings per share $ 531 $ 824 ==== ===== Weighted-average shares for computation of basic earnings per share 2,911 2,852 Incremental shares on assumed issuance and repurchase of stock options 284 185 ----- ----- Weighted-average shares for computation of diluted earnings per share 3,195 3,037 ===== ===== Basic earnings per share $0.18 $0.29 ===== ===== Diluted earnings per share $0.17 $0.27 ===== =====
10 I.C.H. CORPORATION and SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share amounts) NOTE 6. PROFORMA CONDENSED STATEMENTS OF OPERATIONS DATA Unaudited proforma statements of operations data for the six months ended June 30, 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 Six Months ended ended June 30, 1997 June 30, 1997 ------------- ------------- Revenues $28,987 $56,850 Costs and expenses: Restaurant costs and expenses 24,957 49,310 General and administrative 1,544 3,196 Depreciation and amortization 1,274 2,548 ------- ------- Operating income 1,212 1,796 Interest expense 1,373 2,746 ------- ------- Loss before taxes (161) (950) Income tax benefit (96) (380) ------- ------- Net Loss $ (65) $ (570) ======= =======
11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information discussed below may constitute forward-looking statements within the meaning of the federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from projected results. Among those risks, trends and uncertainties are the general economic climate, costs of food and labor, consumer demand, interest rate levels, the availability of financing and other risks associated with the acquisition, development and operation of new and existing restaurants. Unless otherwise indicated all amounts are in thousands, except share amounts. GENERAL The Company's revenues consist almost entirely of restaurant sales and revenues from its wholly-owned subsidiary, Sybra, Inc., which it acquired on April 30, 1997. Restaurant costs and expenses include all direct costs, including direct labor, occupancy costs, advertising expenses, royalty payments, expenditures for repairs and maintenance, and workers' compensation, casualty and general liability insurance costs. Advertising fees paid to AFA Service Corporation, a non-profit association of Arby's restaurant operators, to develop and prepare advertising materials and to undertake marketing research, are equal to 0.7% of restaurant sales. In addition, the Company operates its restaurants pursuant to licenses which require the Company to pay Arby's, Inc. a royalty based upon percentages of its restaurant sales (presently an aggregate of approximately 2.9% of the Company's restaurant sales). The royalty rate for new restaurants (currently 4%) will result in an increase in the Company's aggregate royalty rate as new Arby's restaurants are opened. General and administrative expenses consist of corporate and regional office expenses, including executive and administrative compensation, office expenses, travel and professional fees. RESULTS OF OPERATIONS The following table sets forth, with respect to the Company and for the periods indicated, the percentage of total revenues represented by certain expense and income items. For purposes of the discussion below, the historical results of operations for the combined three month period and the combined six month period ended June 30, 1997, are not indicative of the results that would actually have been obtained if the Company's acquisition of Sybra had occurred on January 1, 1997. The Predecessor historical 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. 12 The Predecessor unaudited proforma statement of operations data for the combined three month period and the combined six month period ended June 30, 1997 reflect the Company's acquisition of Sybra using the purchase method of accounting as if the acquisition, which occurred on April 30, 1997, had occurred on January 1, 1997. As a result of the acquisition, the Company incurred acquisition debt of approximately $35 million and entered into sale/leaseback transactions on 61 of Sybra's restaurants which had been previously classified as owned, resulting in higher interest and rent expense.
Combined Company ----------- --------- Three Months Ended Three Months Ended June 30, 1997 June 30, 1998 -------------------------- -------------- (Proforma) (Historical) Revenues 100.0% 100.0% 100.0% Expenses Restaurant costs & expenses 82.6 86.1 81.3 General & administrative 5.3 5.3 6.1 Depreciation & amortization 6.0 4.4 4.2 Other 5.5 - 1.0 ------ ------ ------ Operating income .6 4.2 7.4 Interest expense 4.2 4.7 4.6 ------ ------ ------ Income (loss) before taxes (3.6) (.5) 2.8 Income tax (benefit) expense (1.2) (.3) 1.1 ------ ------ ------ Net income (loss) (2.4) (.2) 1.7 ====== ====== ======
Comparison of the Quarter Ended June 30, 1998 and the Quarter Ended June 30, 1997 on a Historical Basis Revenues - Revenues were $31.2 million for the second quarter of FY 1998 as compared to $29.0 million for the same period of FY 1997, an increase of $2.3 million primarily as a result of two new store openings and eleven store acquisitions. Same store sales were flat for the period. Restaurant Costs & Expenses - Restaurant costs and expenses were $25.4 million, or 81.3% of sales, for the second quarter of FY 1998 as compared to $23.9 million, or 82.6% of sales for the same period of FY 1997, an increase of $1.5 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 $1.9 million, or 6.1% of sales, for the second quarter of FY 1998 as compared to $1.5 million, or 5.3% of sales for the same period of FY 1997, an increase of $357 as a result of costs and expenses associated with operating the Company as a stand alone public company, as explained above, and increased expenses associated with business development and real estate operations necessary to achieve new store development requirements. Depreciation and Amortization - Depreciation and amortization expense was $1.3 million, or 4.2% of sales in the second quarter of FY 1998 as compared to $1.8 million, or 6.0% of sales in the same period of FY 1997, a decrease of $437 as a result of the impact of the sale/leaseback of 61 properties related to the Sybra acquisition which were classified as owned in prior years. 13 Interest Expense - Interest expense was $1.4 million in the second quarter of FY 1998 as compared to $1.2 million in the same period of FY 1997, an increase of $218 as a result of debt incurred in connection with the Sybra acquisition. Comparison of the Quarter Ended June 30, 1998 and the Quarter Ended June 30, 1997 on a Pro forma Basis Revenues - Revenues were $31.2 million for the second quarter of FY 1998 as compared to $29.0 million for the same period of FY 1997, an increase of $2.3 million primarily as a result of two new store openings and eleven store acquisitions. Same store sales were flat for the period. Restaurant Costs & Expenses - Restaurant costs and expenses were $25.4 million, or 81.3% of sales, for the second quarter of FY 1998 as compared to $25.0 million, or 86.1% of sales on a proforma basis for the same period of FY 1997, a decrease of $400. 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 $1.9 million, or 6.1% of sales, for the second quarter of FY 1998 as compared to $1.5 million, or 5.3% of sales on a proforma basis for the same period of FY 1997, an increase of $400 as a result of costs and expenses associated with operating the Company as a stand alone public company, as explained above, and increased expenses associated with business development and real estate operations necessary to achieve new store development requirements. Depreciation and Amortization - Depreciation and amortization expense was $1.3 million, or 4.2% of sales in the second quarter of FY 1998 as compared to $1.3 million, or 4.4% of sales on a proforma basis in the same period of FY 1997. Interest Expense - Interest expense was $1.4 million in the second quarter of FY 1998 as compared to $1.4 million on a proforma basis in the same period of FY 1997.
Combined Company ---------- ------- Six Months Ended Six Months Ended June 30, 1997 June 30, 1998 -------------------------- ---------------- (Historical) (Proforma) Revenues 100.0% 100.0% 100.0% Expenses Restaurant costs & expenses 83.4 86.7 81.4 General & administrative 5.6 5.6 6.4 Depreciation & amortization 5.6 4.5 4.3 Other 2.8 - .9 ------ ------ ----- Operating income 2.6 3.2 7.0 Interest expense 3.0 4.9 4.7 ------ ------ ----- Income (loss) before taxes (.4) (1.7) 2.3 Income tax (benefit) expense (.1) (.7) .9 ------ ------ ----- Net income (loss) (.3) (1.0) 1.4 ====== ====== =====
14 Comparison of the Six Months Ended June 30, 1998 and the Six Months Ended June 30, 1997 on a Historical Basis Revenues - Revenues were $59.9 million for FY 1998 as compared to $56.9 million for the same period of FY 1997, an increase of $3.1 million primarily as a result of two new store openings and twenty-five store acquisitions net of same store sales being down 1.0% 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 which began in the third quarter of 1997. Restaurant Costs & Expenses - Restaurant costs and expenses were $48.8 million, or 81.4% of sales, for FY 1998 as compared to $47.4 million, or 83.4% of sales for the same period of FY 1997, an increase of $1.4 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 $3.9 million, or 6.4% of sales, for FY 1998 as compared to $3.2 million, or 5.6% of sales for the same period of FY 1997, an increase of $660 as a result of costs and expenses associated with operating the Company as a stand alone public company, as explained above, and increased expenses associated with business development and real estate operations necessary to achieve new store development requirements. Depreciation and Amortization - Depreciation and amortization expense was $2.6 million, or 4.3% of sales in FY 1998 as compared to $3.2 million, or 5.6% of sales in the same period of FY 1997, a decrease of $605 as a result of the impact of the sale/leaseback of 61 properties related to the Sybra acquisition which were classified as owned in prior years. Interest Expense - Interest expense was $2.8 million in FY 1998 as compared to $1.7 million in the same period of FY 1997, an increase of $1.1 million as a result of debt incurred in connection with the Sybra acquisition. Comparison of the Six Months Ended June 30, 1998 and the Six Months Ended June 30, 1997 on a Pro forma Basis Revenues - Revenues were $59.9 million for FY 1998 as compared to $56.9 million for the same period of FY 1997, an increase of $3.1 million primarily as a result of two new store openings and twenty-five store acquisitions net of same store sales being down 1.0% for the period. The decline in same store sales is attributable to a change in marketing strategy emphasizing brand quality and fewer discount price prommotions which began in the third quarter of 1997. Restaurant Costs & Expenses - Restaurant costs and expenses were $48.8 million, or 81.4% of sales, for FY 1998 as compared to $49.3 million, or 86.7% of sales on a proforma basis for the same period of FY 1997, a decrease of $551. As a percent of sales, costs decreased as a result of improved food margins and decreased labor costs. 15 General and Administrative - General and administrative costs and expenses were $3.9 million, or 6.4% of sales, for FY 1998 as compared to $3.2 million, or 5.6% of sales on a proforma basis for the same period of FY 1997, an increase of $700 as a result of costs and expenses associated with operating the Company as a stand alone public company, as explained above, and increased expenses associated with business development and real estate operations necessary to achieve new store development requirements. Depreciation and Amortization - Depreciation and amortization expense was $2.6 million, or 4.3% of sales in FY 1998 as compared to $2.5 million, or 4.5% of sales on a proforma basis in the same period of FY 1997. Interest Expense - Interest expense was $2.8 million in FY 1998 as compared to $2.7 million on a proforma basis in the same period of FY 1997. PERRY PARK RESORTS, INC. See Item 5 - Other Information. 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 June 30, 1998, the Company had outstanding indebtedness for borrowed money of $33.1 million under a term facility with Atherton Capital Incorporated. The term facility has a weighted-average maturity of 12.5 years and bears interest at 10.63%. The term facility requires monthly payments of principal and interest, is collatoralized by substantially all of the restaurant equipment owned by Sybra, and imposes certain financial restrictions and covenants. The Company's primary source of liquidity during the quarter ended June 30, 1998 was the operation of the restaurants owned by its operating subsidiaries, including Sybra. 16 In the future, the Company's liquidity and capital resources will primarily depend on the operations of Sybra which, under the provisions of its loan agreement, would permit, under certain conditions, distributions and dividends to the Company. Sybra, like most restaurant businesses, is able to operate with nominal or deficit working capital because all sales are for cash and inventory turnover is rapid. Renovation and/or remodeling of existing stores is either funded directly by Sybra from available cash or, in some instances, is financed through outside lenders. Construction or acquisition of new stores is generally, although not always, financed by outside lenders. The Company believes that it will continue to be able to secure adequate financing on acceptable terms for new store construction and acquisitions and that cash generated from operations will be adequate to meet its needs for the foreseeable future, although no assurances can be given. On August 7, 1997, Sybra executed a loan commitment letter with Franchise Finance Corporation of America ("FFCA") to finance the construction of up to 12 new Arby's restaurants during the next two years. Under the terms of the commitment letter, FFCA has agreed to finance mortgage and equipment loans for up to 12 new Arby's restaurants to be built by Sybra, to a maximum of $1 million per location. The Company maintains, with a bank, a $150 letter of credit that automatically renews in November of each year. On April 15, 1998, Sybra, Inc. acquired one operating Arby's restaurant, as well as sites for the development of two additional Arby's restaurants, all located in Southern New Jersey, contiguous to Sybra's Eastern region. The total purchase price of the acquisition, which includes two leased properties and fee ownership of one property, was approximately $1.35 million, of which approximately $650 was financed through a sale/leaseback transaction. On May 1, 1998, Sybra, Inc. acquired four operating Arby's restaurants located in Michigan, within Sybra's Northern region. The total purchase price of the acquisition, which includes two leased properties and fee ownership of two properties, was approximately $4.8 million, of which approximately $3.9 million was financed through sale/leaseback transactions and leasehold mortgage and equipment financing. 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 $5.0 million for the six months ended June 30, 1998 which includes new store development as well as store maintenance, store remodel and store renovation capital expenditures. The Company anticipates that Sybra's store maintenance, store remodel and store renovation capital expenditures in 1998 (which excludes new store development capital expenditures) will approximate $2.5 million. The level of capital expenditures for new store development and acquisitions will be dependent upon several factors, including the number of stores constructed and/or acquired as well as the capital structure of any such transactions. 17 ITEM 5. OTHER INFORMATION On June 30, 1998, the Company acquired eleven operating Arby's restaurants, as well as one site for the development of an additional Arby's restaurant, all located within Sybra's Southwestern region. The total purchase price of the acquisition was approximately $4.1 million, of which approximately $3.9 million was financed through sale/leaseback transactions, equipment financing and the assumption of existing indebtedness. On July 8, 1998, the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, entered an order approving the settlement of the Company's claims against certain former officers, directors and advisors of Old ICH. Pursuant to the Reorganization Plan, these claims were retained as assets of the Company. Under the terms of the settlement agreement, the Company received $340,000 in cash as well as 67,652 shares of its own common stock from the settling parties. In addition, under the settlement agreement, one of the settling parties has agreed to provide the Company with discounted financial advisory services worth up to $150,000. On July 31, 1998 the Company completed the sale of the Perry Park golf course and real estate development located in Owen County, in Kentucky to Par-Tee LLC, a Kentucky limited liability company, for $3.1 million in cash. A recent change in the proxy rules of the Securities and Exchange Commission limits the circumstances under which the proxy voting card distributed by registered companies to their shareholders may permit those companies to cast the votes represented by the proxy voting cards in their sole discretion. As applied to the Company, the most important limitation is as follows: For proposals made by a shareholder at the 1999 annual meeting that were not properly submitted by the shareholder for inclusion in the Company's own proxy materials, the Company may vote proxies in its discretion about those proposals only if it has not received notice from the shareholder by March 10, 1999 at the latest that the shareholder intends to make those proposals at the meeting. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith:
Exhibit No. Exhibit Title - ----------- ------------- 10.23 Asset Purchase Agreement, dated as of March 11, 1998, among Sybra, Inc., Richard T. Morath, Toni F. Morath and certain affiliated Subchapter S Corporations. 10.24 I.C.H. Corporation Amended and Restated 1997 Employee Stock Option Plan. 27.1 Financial Data Schedule
19 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: August 13, 1998 I.C.H. Corporation By:/s/ James R. Arabia ------------------- James R. Arabia Chairman and Chief Executive Officer By:/s/ David A. Brainard --------------------- David A. Brainard Chief Financial Officer 20 EXHIBIT INDEX
Exhibit Number Exhibit Title - -------------------------------------------------------------------- 10.23 Asset Purchase Agreement, dated as of March 11, 1998, among Sybra, Inc., Richard T. Morath, Toni F. Morath and certain affiliated Subchapter S Corporations. 10.24 I.C.H. Corporation Amended and Restated 1997 Employee Stock Option Plan 27 Financial Data Schedule
21
EX-10.23 2 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of March 11, 1998 by and among SYBRA, INC., a Michigan corporation ("Buyer"), and RICHARD T. MORATH, TONI F. MORATH AND CERTAIN AFFILIATED SUBCHAPTER S CORPORATIONS LISTED ON THE ATTACHED SIGNATURE PAGES (collectively, the "Sellers"). WITNESSETH: WHEREAS, the Sellers currently own those certain Arby's restaurants specified as units 5420, 5628, 5745, 5854, 6119, 6145, 6208, 6284, 6318, 6355 and 6505 and two tri-facility restaurants each doing business as Chicken Express, Dogs n' Suds and BLT restaurants located in Palmer, Texas and Ross, Texas (collectively, the "Restaurants"); and WHEREAS, Buyer desires to purchase from the Sellers, and the Sellers desire to sell to Buyer substantially all of the assets used by the Sellers in connection with the 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"), Sellers shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from each of them, all of Sellers' 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 each of the Sellers in the operations of their respective 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 each of the Sellers in the operations of their respective Restaurants 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 Sellers' 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 each Seller's respective 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 each of the Sellers in connection with the operation of their respective the Restaurants; and (f) To the extent assignable, all of each Sellers' 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) Sellers' 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; 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 each of the Sellers (collectively, the "Assumed Liabilities"): (a) All of each the Sellers' 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 each the Sellers' 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 Sellers 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 Sellers pursuant to this Agreement, Buyer shall pay to the Sellers the sum of Eight Hundred Ninety-Two Thousand Dollars ($892,000), plus an amount equal to the value (at each 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 in accordance with Schedule 1.7 attached 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 by Buyer. 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 Lawyers Title Insurance Corporation located in Dallas, Texas on or before June 30, 1998 (the parties hereto making a good faith effort to close on or before May 1, 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 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 as provided in Section 2.3 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 (it being understood that any such hired employees will be offered substantially similar severance arrangements as such employees currently have with the Sellers). Buyer shall notify Sellers within five (5) business days in advance of the Closing Date of such anticipated hires, if any. ARTICLE 2 RELATED MATTERS 2.1 Real Property Contract of Sale. Concurrently herewith, Buyer and the Sellers 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 Sellers fee title to the real property underlying units 5420, 5628, 5745, 5854, 6119, 6208 and 6505 (the "Fee Units"). 2.2 Other Agreements. At the Closing, Buyer and the Sellers shall enter into a Leasehold Assignment and Assumption Agreement substantially in the form of Exhibit G attached hereto (the "Leasehold Assignment and Assumption Agreement"), pursuant to which Sellers shall assign and Buyer shall assume Sellers' lease with respect to a development site located in Woodlands, Texas. 2.3 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 will be preserved by each 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 each Seller and its 5 respective authorized representatives during such period as reasonably required by each Seller 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. 2.4 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 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, Sellers acknowledge that they will, prior to Closing, deliver all such confidential information about the Restaurants and the Assets to Buyer. (b) In furtherance of this Section 2.4 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 in Texas owned by Buyer or any of its affiliates on the Closing Date, or the ownership or operation of any other fast food concept within a four (4) mile radius (i.e., unit trade area) of any of the Restaurants (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 and which would generate competition with any of the Restaurants or any other restaurants in Texas 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; 6 (iv) except for Sam Grant, Pam Buckner, Chris Morath or Teri Bryant, 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, other than activities in the ordinary course of business relating to fast food concepts located outside the Geographic Area. (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 acknowledges that the restrictions contained in paragraph (b) of this Section 2.4 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 2.4 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 2.4 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 2.4, 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. 7 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: 3.1 Organization of the Sellers. Each of the Subchapter S corporations listed on the attached signature pages is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. 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 8 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. 3.6 Condition of FF&E. The FF&E are, and as of the Closing Date will be, in 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 each of the Sellers 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. To the knowledge of Sellers, the operations by the Sellers of their respective Restaurants have 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 each of the Sellers. 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 Sellers. 3.10 Labor Issues. To the knowledge of Sellers, no strike, picketing or similar action is pending or threatened against Sellers by their employees or any labor union. In addition, Sellers are 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 against the Sellers or any of the Restaurants. 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. 9 3.12 Leases. Each of the Restaurants' real property leases or license agreements, as the case may be (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 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. To the knowledge of Sellers (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, 10 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. 3.18 Water, Sewer, Gas, Etc. To the knowledge of Sellers, 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; 11 (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 (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 12 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 either Seller 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. To the knowledge of Sellers, 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" 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, 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 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 13 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, 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. 4.5 Brokers and Finders. Neither the Buyer 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. ARTICLE 5 COVENANTS OF THE SELLERS AND BUYER 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, each of the Sellers shall conduct the operations of their respective Restaurants in the ordinary course of business consistent with prior practices and pursuant to the terms and provisions of the Arby's License Agreements, as applicable, except as may be consented to in writing by Buyer. Each of the Sellers shall maintain the FF&E in good working condition and repair, normal wear and tear excepted. Each of the Sellers 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 14 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 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 its Restaurants 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. 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 each of the Sellers 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 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. 5.7 Non-Disturbance Agreements. Each 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) 15 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. 5.8 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, Assets or either Seller's outstanding equity interest in any of the Subchapter S. 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. 5.9 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; 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. 5.10 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 Sellers (or waiver by Buyer) on or prior to Closing Date of the following conditions: 16 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 will 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. 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 Sellers; provided, however, that this condition to Closing shall expire on March 31, 1998. 6.7 Estoppel Certificates. The Sellers shall have used their reasonable best efforts to obtain and deliver to Buyer executed copies of the Estoppel Certificates referred to in Section 5.6 hereof from each of their respective lessors. 6.8 Non-Disturbance Agreements. The Sellers shall have used their reasonable best efforts to obtain and deliver to Buyer executed copies of the Non-Disturbance Agreements referred to in Section 5.7 hereof from each holder of a superior mortgage on any of the Lease Property. 17 6.9 Real Property Contract of Sale; Other Agreements. 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. The Sellers each shall have duly executed the Leasehold Assignment and Assumption Agreement and the Option Assignment Agreement referred to in Section 2.2 hereof. 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 by Buyer (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. 7.5 Real Property Contract of Sale; Other Agreements. 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. The Buyer shall have duly executed the Leasehold Assignment and Assumption Agreement and the Option Assignment Agreement referred to in Section 2.2 hereof or otherwise complied with the provisions set forth in Section 2.2 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 a period of one (1) year from the Closing Date. 18 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 or (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. 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 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. In addition, 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 fails 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 Sellers. Buyer also shall assign to Sellers, subject to the consent of Arby's, Inc., all rights under the Arby's License Agreement for such Restaurant. In the event that the Sellers are not made whole by the assignments contemplated by this paragraph, Buyer shall remain liable to under this Section 8.3 until such time as Seller is 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. 19 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 31, 1998; or (c) by Buyer or Sellers if the Closing shall not have occurred on or before June 30, 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 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 20 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: c\o Richard T. Morath Toni F. Morath 3002 Jeremes Landing Garland, Texas 75043 with a copy to: Sparks & Rugeley 16 North Caddo P.O. Box 626 Cleburne, Texas 76033 Attn.: Lane Rugeley, 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, Buyer shall pay all of the expenses relating to the negotiation and execution of the documentation relating to this Agreement and the consummation of the transactions contemplated hereby; provided, however, that Sellers shall pay all attorneys' fees, accountants' fees and professional consultants' fees, with the exclusion of any surveyors' fees, incurred by them in connection herewith and with the consummation of the transactions contemplated hereby. In addition, Buyer shall reimburse Sellers at Closing for up to $64,000 of prepayment expenses relating the Sellers' repayment of its outstanding loan to Ameresco. 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. 21 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 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. 22 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 Texas, 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 /s/ Richard T. Morath ---------------------- Name: Richard T. Morath /s/ Toni F. Morath ----------------------- Name: Toni F. Morath CLEBURNE RESTAURANTS, INC. By: /s/ Richard T. Morath ---------------------- Name: Richard T. Morath Title: President WEATHERFORD EATERY COMPANY, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President 23 HENDERSON RESTAURANTS, INC. By: /s/ Richard T. Morath ---------------------- Name: Richard T. Morath Title: President STEPHENVILLE RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President PALMER RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President PARIS RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President SAN ANGELO EATERY CO., INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President 24 GREENVILLE RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President SAN ANTONIO EATERY CO., INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President BROWNWOOD RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President BUFF-PAL RESTAURANTS, INC. By: /s/ Richard T. Morath ------------------------- Name: Richard T. Morath Title: President 25 EX-10.24 3 1997 EMPLOYEE STOCK OPTION PLAN I.C.H. CORPORATION AMENDED AND RESTATED 1997 EMPLOYEE STOCK OPTION PLAN ARTICLE I Purpose The I.C.H. Corporation Amended and Restated 1997 Employee Stock Option Plan is intended to advance the best interests of the Company and its stockholders by providing executives and other key employees possessing substantial responsibility for the management and development of the Company and its subsidiaries with additional incentives to contribute to its growth and prosperity by allowing such executives and key employees to acquire an ownership interest in the Company. It is believed that the availability and granting of stock option awards increases the Company's ability to attract and retain key personnel with exceptional skills and outstanding experience. ARTICLE II Definitions The following capitalized terms used in the Plan shall have the respective meanings set forth in this Article: 2.1 Board: The Board of Directors of I.C.H. Corporation. 2.2 Code: The Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. 2.3 Committee: The Compensation Committee of the Board; provided, however, the Compensation Committee shall not take any action under this Plan unless it is at all times composed solely of not less than three "Non-Employee Directors" within the meaning of Rule 16b-3, as promulgated under the Securities Exchange Act of 1934, as amended. In the event the Compensation Committee is unable to act, the Board shall take any and all actions required or permitted to be taken by the Committee under this Plan. 2.4 Common Stock: The common stock, par value $0.01, of I.C.H. Corporation. 2.5 Company: I.C.H. Corporation and any of its Subsidiaries. 2.6 Disability: Disability within the meaning of Section 22(e)(3) of the Code, as determined by the Committee or as defined in the Optionee's Employment Agreement, if any. 2.7 Effective Date: February 7, 1997. 2.8 Employer: The corporation that employs the employee or Optionee. 2.9 Fair Market Value: Fair Market Value shall mean with respect to a share of Common Stock the value determined on any relevant date in accordance with the following provisions: (i) if the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for whI.C.H. such quotation exists, or (ii) if the Common Stock is at the time listed on any national Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the national Stock Exchange determined by the Committee to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for whI.C.H. such quotation exists, or (iii) if shares of the Common Stock are not then traded on a national market (e.g., the over the counter dealers market) or are not then publicly traded, Fair Market Value shall be determined by the Committee after taking into account such factors as the Committee shall deem appropriate. 2.10 ISO: An "incentive stock option" within the meaning of Section 422 of the Code. 2.11 Non-Employee Director: A director who: (i) is not currently an officer or employee of I.C.H. Corporation or of any Subsidiary; (ii) (A) does not receive compensation, either directly or indirectly, for any non-director service in an amount that would be required to be disclosed under Item 404(a) of Regulation S-K or (B) possess an interest in any other transaction requiring disclosure -2- under such Item; and (iii) is not engaged in a business relationship disclosable under Item 404(b) of Regulation S-K. 2.12 Non-ISO: A stock option that is not an ISO. 2.13 Option: A stock option granted under the Plan. 2.14 Option Price: The purchase price of a share of Common Stock under an Option. 2.15 Optionee: An employee of the Company who has been granted one or more Options under this Plan. 2.16 Retirement: Retirement on or after age sixty-five, or, with the advance consent of the Company, at an earlier age. 2.17 Subsidiary: A subsidiary corporation, as defined in Section 424(f) of the Code. 2.18 Termination Date: A date fixed by the Committee but not later, with respect to an ISO, than the day preceding the tenth anniversary of the date on whI.C.H. the Option is granted or, with respect to a Non-ISO, than the day following the tenth anniversary of the date on whI.C.H. the Option is granted. ARTICLE III Administration 3.1 Except as otherwise provided in the Plan, the Committee shall administer the Plan and shall have full power to grant Options, construe and interpret the Plan, establish and amend rules and regulations for its administration, and perform all other acts relating to the Plan, including the delegation of administrative responsibilities, whI.C.H. it believes reasonable and proper. 3.2 The Committee shall consist of not less than three members of the Board, all of whom shall be Non-Employee Directors, and appointed by the Board. The members of the Committee shall serve at the pleasure of the Board, whI.C.H. shall have the power, at any time and from time to time, to remove members from the Committee or to add members thereto. Vacancies on the Committee, however caused, shall be filled by the Board. The Board shall take all steps necessary to assure that the Committee is composed of Non-Employee Directors within the meaning of Rule 16b-3 as promulgated under the Securities Exchange -3- Act of 1934, as amended, and that Options granted under this Plan comply in all respects with the requirements of Rule 16b-3. Options granted hereunder shall be approved by the Committee. However, if the Committee, for whatever reason, is unable to act, then Options granted under this Plan shall be approved by the Board. 3.3 Subject to the provisions of the Plan, the Committee shall establish the policies and criteria pursuant to whI.C.H. it shall grant Options and administer the Plan. Subject to the provisions of the Plan, the Committee shall, in its discretion, determine whI.C.H. employees of the Company shall be granted Options, the number of shares subject to any such Options, the dates after whI.C.H. Options may be exercised, in whole or in part, and the terms and conditions of the Options. This shall include Options granted with terms and conditions that will permit their designation as ISOs or Non-ISOs. 3.4 The Committee may at any time, with the consent of the Optionee, in its sole discretion, cancel any Option and issue to the Optionee a new Option for an equivalent or lesser number of Common Stock shares, and at a lesser Option Price. 3.5 Any decision made, or action taken, by the Committee or the Board arising out of or in connection with the interpretation and administration of the Plan shall be final and conclusive. ARTICLE IV Shares Subject to the Plan 4.1 The total number of shares of Common Stock available for grants of Options under the Plan shall be 1,500,000, subject to adjustment in accordance with Article VIII of the Plan. These shares may be either authorized but unissued shares or treasury shares. If an Option or portion thereof shall expire, terminate or be cancelled for any reason without having been exercised in full, the unpurchased shares covered by such Option shall be available for future grants of Options. -4- ARTICLE V Eligibility 5.1 Options may be granted to employees of the Company or, with respect to Non-ISO's, to persons who have been engaged to become employees of the Company, provided however, that in the latter case, the effective date of the grant shall be the commencement date of employment. Members of the Board who are not employees of the Company shall not be eligible for Option grants hereunder. ARTICLE VI Terms of Options 6.1 Option Agreements. All Options shall be evidenced by written agreements executed by the Company and the Optionee. Such Options shall be subject to the applicable provisions of the Plan, and shall contain such provisions as are required by the Plan and any other provisions the Committee may prescribe. All agreements evidencing Options shall specify the total number of shares subject to each grant, the Option Price and the Termination Date. Those Options that comply with the requirements for an ISO set forth in Section 422 of the Code at the discretion of the Committee shall be designated ISOs, and all other Options shall be designated Non-ISOs. 6.2 Option Price. The Option Price, regardless of whether the Option is intended to be an ISO or Non-ISO shall not be less than the Fair Market Value of a share of Common Stock on the date the Option is granted. 6.3 Vesting. Unless otherwise determined by the Committee (whI.C.H. determination shall be evidenced by specification in a written grant agreement), all Options granted pursuant to this Plan shall vest over a period of four (4) years, with twenty five (25) percent of the Option vesting on each of the first, second, third and fourth anniversaries of the date the Option is granted, subject to accelerated vesting upon certain events as may be determined by the Committee. 6.4 Period of Exercise. The Committee shall determine the dates after whI.C.H. Options may be exercised in whole or in part for any reason whatsoever. If Options are exercisable in installments, installments or portions thereof that are exercisable and not exercised shall accumulate and remain exercisable. The -5- Committee may also amend an Option to accelerate the dates after whI.C.H. Options may be exercised in whole or in part. However, no Option or portion thereof shall be exercisable after the Termination Date; in addition, unless the Committee determines otherwise (whI.C.H. determination shall be evidenced by specification in a written grant agreement), no Option or portion thereof granted to any Optionee subject to the restrictions of Section 16(b) of the Securities Exchange Act of 1934, as amended, shall be made exercisable during the six month period beginning on the date such Option was granted. 6.5 Special Rules Regarding ISOs Granted to Certain Employees. Notwithstanding any contrary provisions of Section 6.2 and 6.4 of the Plan, no ISO shall be granted to any employee who, at the time the Option is granted, owns (directly, or within the meaning of Section 424(d) of the Code) more than ten percent of the total combined voting power of all classes of stock of the Employer or of any Subsidiary or Parent Corporation thereof, unless (a) the Option Price under such Option is at least one hundred and ten percent (110%) of the Fair Market Value of a share of Common Stock on the date the Option is granted and (b) the Termination Date of such Option is a date not later than the day preceding the fifth anniversary of the date on whI.C.H. the Option is granted. 6.6 Manner of Exercise and Payment. An Option, or portion thereof, shall be exercised by delivery of a written notice of exercise to the Company and payment of the full price of the shares being purchased pursuant to the Option. An Optionee may exercise an Option with respect to less than the full number of shares for whI.C.H. the Option may then be exercised, but an Optionee must exercise the Option in full shares of Common Stock. The price of Common Stock purchased pursuant to an Option, or portion thereof, may be paid in United States dollars in cash or by check, bank draft or money order payable to the order of the Company, or, if specifically permitted under the terms of the Option, through the delivery of shares of Common Stock with an aggregate Fair Market Value on the date of exercise equal to the Option Price, or by any combination of the above methods of payment. The Committee shall determine acceptable methods for tendering Common Stock as payment upon exercise of an Option and may impose such limitations and prohibitions on the use of Common Stock to exercise an Option as it deems appropriate, including, without limitation, any limitation or prohibition designed to avoid certain accounting consequences whI.C.H. may result from the use of Common Stock as payment upon exercise of an option. The Committee may in its discretion allow an Optionee to exercise his Options through a special sale and remittance procedure. To the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to whI.C.H. the Optionee shall concurrently provide irrevocable written instructions to (a) a Company designated brokerage firm to -6- effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchase shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Company by reason of such exercise and (b) the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the exercise date. 6.7 Withholding Taxes. The Company may, in its discretion, require an Optionee to pay to the Company the amount, or make such other arrangements, at the time of exercise or thereafter, that the Company deems necessary to satisfy its obligation to withhold Federal, state or local income or other taxes incurred by reason of the exercise. 6.8 Nontransferability of Options. Each Option shall, during the Optionee's lifetime, be exercisable only by the Optionee, and neither it nor any right hereunder shall be transferable otherwise than by will, the laws of descent and distribution, or, solely with respect to Non-ISO's, a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder) nor will any Option granted hereunder be subject to attachment, execution or other similar process. In the event of any attempt by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of an Option or of any right hereunder, except as provided for herein, or in the event of any levy or any attachment, execution or similar process upon the rights of interests hereby conferred, the Company may terminate the Option by notice to the Optionee and the Option shall thereupon become null and void. 6.9 Cessation of Employment of Optionee. Unless otherwise determined by the Committee (whI.C.H. determination shall be evidenced by specification in a written grant agreement), the following provisions shall apply upon cessation of employment of the Optionee. (a) Cessation of Employment other than by Reason of Retirement, Disability, or Death. If an Optionee shall cease to be employed by the Company otherwise than by reason of Retirement, Disability, or death, unless otherwise determined by the Committee (whI.C.H. determination shall be evidenced by specification in a written grant agreement) each Option held by the Optionee, together with all rights hereunder, shall be exercisable only to the extent exercisable on the date of the cessation of -7- employment, and shall terminate on the earlier of the Termination Date or ninety (90) days following the date of cessation of employment, to the extent not previously exercised; provided, however, that in the event the Optionee's employment with the Company is terminated due to his gross misconduct, the Options granted to such Optionee hereunder shall be null and void after such termination occurs or such determination is made by the Committee. In the event any Options are exercised more than ninety (90) days after an Optionee's Termination Date, and those Options had previously been designated as ISO's, such Options shall automatically convert to non-ISO's. (b) Cessation of Employment by Reason of Retirement or Disability. If an Optionee shall cease to be employed by the Company by reason of Retirement or Disability, each Option held by the Optionee shall remain exercisable, to the extent it was exercisable at the time of cessation of employment, until the earliest of: i. the Termination Date; ii. the death of the Optionee, or such later date not more than one year after the death of the Optionee as the Committee, in its discretion, may provide pursuant to section 6.9(c) of the Plan; or iii. ninety (90) days following the date of the cessation of the Optionee's employment by reason of Retirement; or iv one year after the date of cessation of the Optionee's employment by reason of Disability; and thereafter all such Options shall terminate together with all rights hereunder, to the extent not previously exercised. (c) Cessation of Employment by Reason of Death. In the event of the death of the Optionee, while employed by the Company, an Option may be exercised at any time or from time to time prior to the earlier of the Termination Date or the first anniversary of the date of the Optionee's death, by the person or persons to whom the Optionee's rights under each Option shall pass by will or by the applicable laws of descent and distribution, to the extent that the Optionee was entitled to exercise it on the Optionee's date of death. In the event of the death of the Optionee while entitled to exercise an option pursuant to Section 6.9(b), the Committee, in its discretion, may permit such Option to be exercised at -8- any time or from time to time prior to the Termination Date during a period of up to one year from the death of the Optionee, as determined by the Committee, by the person or persons to whom the Optionee's rights under each Option shall pass by will or by the applicable laws of descent and distribution; provided, that, such Option shall be exercisable only to the extent that the Option was exercisable under Section 6.9(b) above and that the Optionee's rights under an Option have passed by will or by the applicable laws of descent and distribution; and further provided that the Option and any exercise thereof by any person shall be subject to all terms and conditions of the Plan and the Option applicable to the Optionee. 6.10 Notification of Sales of Common Stock. Any Optionee who disposes of shares of Common Stock acquired upon the exercise of an ISO: (a) within two years after date of the grant of the ISO under whI.C.H. the shares were acquired; (b) within one year after the transfer of such shares to the Optionee; or (c) more than ninety (90) days after his termination of employment with the Company, shall notify the Company of such disposition and of the amount realized upon such disposition. In the event an Optionee terminates employment with the Company due to Disability, the words "ninety (90) days" in this Section 6.10 shall be replaced with the words "one year." ARTICLES VII Limitation on Grants of ISOs 7.1 The aggregate Fair Market Value (determined as of the date the Option is granted) of the Common Stock whI.C.H. any employee may exercise for the first time in any calendar year under this or any other stock option plan maintained by the Employer or by any Subsidiary as an ISO shall be limited to $100,000 or such higher amount as may be permitted from time to time under the Code. ARTICLE VIII Adjustments 8.1 If (a) the Company shall at any time be involved in a transaction to whI.C.H. Section 424(a) of the Code is applicable; (b) the Company shall declare a dividend payable in, or shall subdivide or combine, its Common Stock; or (c) any other event shall occur whI.C.H. in the judgment of the Committee necessitates action by way of adjusting the terms of the outstanding Options, the Committee -9- shall take any such action, including price adjustment, as in its judgment shall be necessary to preserve the Optionee's rights substantially proportionate to the rights existing prior to such event, and to the extent that such action shall include an increase or decrease in the number of shares of Common Stock subject to outstanding Options, the number of shares available under Article IV above shall be increased or decreased, as the case may be, proportionately. The judgment of the Committee with respect to any matter referred to in this Article shall be conclusive and binding upon each Optionee. ARTICLE IX Amendment and Termination of Plan 9.1 The Board may at any time, or from time to time, suspend or terminate the Plan in whole or in part or amend it in such respects as the Board may deem appropriate. 9.2 No amendment, suspension or termination of this Plan shall, without the Optionee's consent, alter or impair any of the rights or obligations under any Option theretofore granted to an Optionee under the Plan. 9.3 The Board may amend this Plan, subject to the limitations cited above, in such matter as it deems necessary to permit the granting of Options meeting the requirements of future amendments or issued regulations, if any, to the Code and Rule 16b-3. ARTICLE X Government and Other Regulations 10.1 The obligation of the Company to issue, or transfer and deliver shares for Options exercised under the Plan shall be subject to all applicable laws, regulations, rules, orders and approvals whI.C.H. shall then be in effect and required by governmental entities and any stock exchanges on whI.C.H. Common Stock is traded. 10.2 In addition to, and without limiting the Company's rights and obligations under the preceding paragraph, the Committee may postpone any exercise of an Option for such time as the Committee in its discretion may deem necessary in order to permit the Company with reasonable diligence (i) to effect or maintain -10- the listing of the Common Stock in the New York Stock Exchange or to effect or maintain registration under the Securities Act of 1933, as amended, of the Plan or the shares issuable upon the exercise of the Option; (ii) to determine that such shares and Plan are exempt from registration; or (iii) to comply with any applicable laws, regulations, rules, orders, or approval requirements then in effect and required by governmental entities or any stock exchange on whI.C.H. the Common Stock is traded. Any such postponement shall not extend the term of an Option, and neither the Company nor its directors or officers shall have any obligation or liability to any Optionee or Optionee's successor with respect to any shares subject to an Option that lapses unexercised because of such postponement. ARTICLE XI Miscellaneous Provisions 11.1 Plan Does Not Confer Employment or Stockholder Rights. The right of the Company to terminate (whether by dismissal or otherwise) the Optionee's employment with it at any time at will, or as otherwise provided by any agreement between the Company and the Optionee, is specifically reserved. Neither the Optionee nor any person entitled to exercise the Optionee's rights in the event of the Optionee's death shall have any rights of a stockholder with respect to the shares subject to each Option, except to the extent that, and until, such shares shall have been issued upon the exercise of each Option. 11.2 Plan Expenses. Any expenses of administering this Plan shall be borne by the Company. 11.3 Use of Exercise Proceeds. Payments received from Optionees upon the exercise of Options shall be used for the general corporate purposes of the Company, except that any Common Stock received in payment may be retired, or retained in the Company's treasury and reissued. ARTICLE XII Effective Date and Shareholder Approval 12.1 The Effective Date of the Plan is February 7, 1997. The Plan has been approved by Shareholders pursuant to the First Amended Joint Plan of Reorganization under Chapter 11 (Dated: November 15, 1996), filed in the -11- United States Bankruptcy Court for the Northern District of Texas, Dallas Division and the applicable disclosure statement filed in such Court with respect thereto. The Bankruptcy Court authorized and approved the adoption of the Plan. Certain amendments to the Plan were approved by shareholders at the Annual Meeting of Shareholders held on May 29, 1998. -12- 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 JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 0000049588 I.C.H. Corporation Financial Data Schedule $US 3-MOS DEC-31-1997 APR-01-1998 JUN-30-1998 1 4,070 0 79 0 1,538 9,219 66,278 39,166 81,859 18,564 0 0 0 26 12,009 81,859 30,850 31,244 7,976 28,927 0 0 1,439 878 347 531 0 0 0 531 .18 .17
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