SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
June 27, 1999
----------------------------------------------------
THERMOLASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-13104 06-1360302
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
2055-C Luna Road
Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (781) 622-1000
<PAGE>
FORM 8-K
Item 2. Disposition of Assets
Effective June 27, 1999, ThermoLase Corporation (the "Company") sold all
of the shares of The Greenhouse Spa, Inc. to TGH, LLC, a Pennsylvania limited
liability company which is wholly owned by the Stuart Michael Katzoff Trust (the
"Trust"). Gerald Katzoff, the President of The Greenhouse Spa, Inc. prior to and
after the sale of the shares and the President of The Company's Spa Division
until the completion of the transactions described herein, is the sole trustee
of the Trust. The Greenhouse Spa, Inc. is the owner of a luxury destination spa
in Arlington, Texas, at which spa services are provided to women during week
long stays at the Greenhouse Spa.
The purchase price for the shares of The Greenhouse Spa, Inc. consisted of
a promissory note by TGH, LLC in the amount of $10 million, payable in full,
together with interest at the rate of 10% per year, on June 27, 2000. The $10
million promissory note may be extended for an additional six months if the
outstanding principal balance of the note is reduced to $6 million on or before
June 27, 2000, and provided that a variety of other conditions have been
satisfied. The $10 million promissory note is secured by all of the assets of
TGH, LLC and by a guaranty by The Greenhouse Spa, Inc. secured by all of the
assets of The Greenhouse Spa, Inc. including the real estate on which the
Greenhouse Spa in Arlington, Texas, is located. The Company paid TGH, LLC
$300,000 to cover the cost of certain renovation work at the Greenhouse Spa in
Arlington, Texas.
Also effective June 27, 1999, the Company sold the assets of its
Greenhouse day spas to GH Day Spas, Inc., a Pennsylvania corporation that is
also wholly owned by the Trust. The Greenhouse day spas provide cosmetic spa
services and laser-based hair-removal and skin-resurfacing services. GH Day
Spas, Inc. acquired the assets and will continue to operate day spas at nine
facilities previously operated by the Company. GH Day Spas, Inc. also acquired
certain of the Company's assets that are located at five closed day spas. The
facilities that GH Day Spas, Inc. will continue to operate are located in
Beverly Hills and Newport Beach, California; Denver, Colorado; Greenwich,
Connecticut; Troy, Michigan; Edina, Minnesota; Manhasset, New York; and Dallas
and Houston, Texas.
The purchase price for the assets of the day spas consisted of a
promissory note in the amount of $2.5 million, payable in full together with
interest at the rate of 10% per year, on June 27, 2000. The $2.5 million
promissory note may be extended for an additional six months if the outstanding
principal balance of the $10 million note by TGH, LLC is reduced to $6 million
on or before June 27, 2000, and provided that a variety of other conditions have
been satisfied. The $2.5 million promissory note is secured by all of the assets
of GH Day Spas, Inc.
The sale prices of each of (i) the shares of The Greenhouse Spa, Inc. and
(ii) the assets of the Company's day spas were determined by the parties in
arms-length negotiations based on, among other things, a third-party appraisal
of the Greenhouse Spa in Arlington, Texas.
GH Day Spas, Inc. agreed to offer employment to all employees of the
continuing day spas on substantially the same terms and conditions as their
employment with the Company. GH Day Spas, Inc. also agreed to assume certain
continuing obligations of the Company under contracts relating primarily to the
continuing day spas.
In connection with the sale of the Greenhouse day spas, GH Day Spas, Inc.
agreed to assume all liability for performing services and/or providing goods in
satisfaction of all outstanding gift certificates and customer deposits, and for
customer prepayments for multiple treatment packages with respect to services
not yet performed. The Company agreed to continue to pay the lease payments at
the nine day spa locations that GH Day Spas, Inc. will continue to operate until
such time as the Company has paid $1.5 million of such lease payments. GH Day
Spas, Inc. will be responsible for the balance of the lease payments at these
day spas for the period through December 31, 2000, and has the right but is not
obligated to renew all of the leases for the balance of the terms thereof. The
Company has also provided GH Day Spas, Inc. with working capital in the amount
of $500,000.
The Company has incurred a loss on the sale and closure of the spas of
approximately $31 million, including losses on ongoing lease obligations. This
amount will be recorded in the Company's quarter ended July 3, 1999, together
with charges for other restructuring actions.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Condensed Financial Information
and Exhibits
(a) Financial Statements
Not applicable.
(b) Pro Forma Condensed Financial Statements
The following unaudited pro forma condensed statements of operations set
forth the results of operations for the fiscal year ended October 3, 1998, and
the six months ended April 3, 1999, as if the disposition by the Company of the
Greenhouse Spa in Arlington, Texas, and all of the domestic day spas, including
those closed by the Company in fiscal 1999, (the "Spa Business"), had occurred
at the beginning of fiscal 1998. The unaudited pro forma condensed balance sheet
sets forth the financial position as of April 3, 1999, as if the dispositions
had occurred as of that date.
The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the
disposition of the Spa Business been consummated at the beginning of fiscal
1998, due to other restructuring actions being undertaken by the Company
unrelated to the disposition of this business, including charges for impairment
of lasers and the termination of various international joint venture
arrangements. These statements should be read in conjunction with the
accompanying notes herein and the historical consolidated financial statements
and related notes of the Company included in its Annual Report on Form 10-K, as
amended, for the fiscal year ended October 3, 1998, and Quarterly Report on Form
10-Q for the six months ended April 3, 1999.
3
<PAGE>
<TABLE>
<CAPTION>
THERMOLASE CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Fiscal Year Ended October 3, 1998
(Unaudited)
<S> <C> <C> <C>
Pro Forma
Adjustments:
Results of
ThermoLase Spa Business Pro Forma
(In thousands except per share amounts)
Revenues:
Product revenues $ 22,765 $ - $ 22,765
Service revenues 17,326 (10,108) 7,218
-------- ------- --------
40,091 (10,108) 29,983
-------- ------- --------
Costs and Operating Expenses:
Cost of product revenues 15,590 - 15,590
Cost of service revenues 22,285 (19,860) 2,425
Selling, general, and administrative expenses 22,306 (1,035) 21,271
Research and development expenses 3,028 - 3,028
Restructuring costs 10,155 (4,638) 5,517
-------- ------- --------
73,364 (25,533) 47,831
-------- ------- --------
Operating Income (Loss) (33,273) 15,425 (17,848)
Interest Income 4,512 - 4,512
Interest Expense (5,343) - (5,343)
Equity in Losses of Joint Ventures (1,203) - (1,203)
-------- ------- --------
Income (Loss) Before Income Tax Provision (35,307) 15,425 (19,882)
Income Tax Provision (5,879) - (5,879)
-------- ------- --------
Net Income (Loss) $(41,186) $15,425 $(25,761)
======== ======= ========
Basic and Diluted Loss per Share $ (1.07) $ (.67)
======== ========
Basic and Diluted Weighted Average Shares 38,528 38,528
======== ========
4
<PAGE>
THERMOLASE CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Six Months Ended April 3, 1999
(Unaudited)
Pro Forma
Adjustments:
Results of
ThermoLase Spa Business Pro Forma
(In thousands except per share amounts)
Revenues:
Product revenues $ 12,610 $ (380) $ 12,230
Service revenues 6,751 (5,339) 1,412
-------- ------- --------
19,361 (5,719) 13,642
-------- ------- --------
Costs and Operating Expenses:
Cost of product revenues 8,594 (191) 8,403
Cost of service revenues 14,671 (12,665) 2,006
Selling, general, and administrative expenses 8,527 (221) 8,306
Research and development expenses 973 - 973
-------- ------- --------
32,765 (13,077) 19,688
-------- ------- --------
Operating Income (Loss) (13,404) 7,358 (6,046)
Interest Income 1,243 (6) 1,237
Interest Expense (2,680) 5 (2,675)
Equity in Losses of Joint Ventures (200) - (200)
-------- ------- --------
Income (Loss) Before Income Tax Provision (15,041) 7,357 (7,684)
Income Tax Provision (96) - (96)
-------- ------- --------
Net Income (Loss) $(15,137) $ 7,357 $ (7,780)
========= ======= ========
Basic and Diluted Loss per Share $ (.38) $ (.20)
========= ========
Basic and Diluted Weighted Average Shares 39,332 39,332
========= ========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
THERMOLASE CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
As of April 3, 1999
(Unaudited)
<S> <C> <C> <C> <C>
Pro Forma Adjustments
Accounts of Spa Business
ThermoLase Spa Business Adjustments Pro Forma
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 40,820 $ (10) $ (800) $ 40,010
Accounts receivable, net 4,965 (571) - 4,394
Notes receivable, net - - 4,000 4,000
Inventories 6,621 (143) - 6,478
Prepaid expenses 1,022 (422) - 600
-------- --------- -------- ---------
53,428 (1,146) 3,200 55,482
-------- --------- -------- ---------
Property, Plant, and Equipment, at Cost, Net 41,299 (23,958) - 17,341
-------- --------- -------- ---------
Other Assets 7,387 (2) 3,000 10,385
-------- --------- -------- ---------
Cost in Excess of Net Assets of Acquired Companies 15,296 (7,554) - 7,742
-------- --------- -------- ---------
$117,410 $ (32,660) $ 6,200 $ 90,950
======== ========= ======== =========
6
<PAGE>
THERMOLASE CORPORATION
PRO FORMA CONDENSED BALANCE SHEET (continued)
As of April 3, 1999
(Unaudited)
Pro Forma Adjustments
Accounts of Spa Business
ThermoLase Spa Business Adjustments Pro Forma
(In thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 2,314 $ - $ - $ 2,314
Accrued payroll and employee benefits 2,406 - - 2,406
Accrued restructuring costs 2,507 - 12,032 14,539
Customer deposits 2,550 (2,299) - 251
Other accrued expenses 4,429 (1,001) - 3,428
Due to parent company and affiliated companies 3,174 28 - 3,202
---------- --------- --------- ----------
17,380 (3,272) 12,032 26,140
---------- --------- --------- ----------
Long-term Obligations 115,054 (54) - 115,000
---------- --------- --------- ----------
Deferred Lease Liability 1,206 (1,010) - 196
---------- --------- --------- ----------
Common Stock Subject to Redemption 40,500 - - 40,500
---------- --------- --------- ----------
Shareholders' Investment:
Common stock 408 - - 408
Capital in excess of par value 35,640 - - 35,640
Accumulated deficit (72,244) - (34,156) (106,400)
Treasury stock at cost (20,534) - - (20,534)
Parent company investment - (28,324) 28,324 -
---------- --------- --------- ----------
(56,730) (28,324) (5,832) (90,886)
---------- --------- --------- ----------
$ 117,410 $ (32,660) $ 6,200 $ 90,950
========== ========= ========= ==========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THERMOLASE CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Pro Forma Adjustments to Pro Forma Condensed Statements of Operations
All pro forma adjustments to the pro forma condensed statements of
operations for the fiscal year ended October 3, 1998, and the six months ended
April 3, 1999, represent the results of the spas sold and closed.
Note 2 - Pro Forma Adjustments to Pro Forma Condensed Balance Sheet (In thousands)
All pro forma adjustments to the pro forma condensed balance sheet as of
April 3, 1999, captioned "Accounts of Spa Business," represent the assets and
liabilities of the spas sold and closed.
The following pro forma adjustments to the pro forma condensed balance
sheet as of April 3, 1999, are related to the sale of the spas:
Spa Business
Adjustments
Debit (Credit)
Cash and Cash Equivalents
Cash paid by the Company to the acquirers for certain $ (800)
renovations and initial working capital requirements
---------
Notes Receivable, Net
Current portion of notes receivable issued to the Company by the acquirers 4,000
---------
Other Assets
Long-term notes receivable issued to the Company by the acquirers, at 3,000
their estimated fair market value
---------
Accrued Restructuring Costs
Remaining lease obligations for all spas, net of estimated sublease receipts (12,032)
---------
Accumulated Deficit
Excess of the net book value of the spas over the estimated fair 34,156
market value of consideration received
---------
Parent Company Investment
Elimination of the spa business' equity accounts (28,324)
---------
8
<PAGE>
Item 7. Financial Statements, Pro Forma Combined Condensed Financial Information and Exhibits
(continued)
(c) Exhibits
2.1 Stock Purchase Agreement between ThermoLase Corporation and TGH, LLC,
dated June 27, 1999. Exhibits to this agreement have been omitted from the
copy of the agreement filed herewith. Copies of such exhibits will be
furnished supplementally to the Commission upon request to the Company.
2.2 Asset Purchase Agreement between ThermoLase Corporation and GH Day Spas,
Inc., dated June 27, 1999. Exhibits to this agreement have been omitted
from the copy of the agreement filed herewith. Copies of such exhibits
will be furnished supplementally to the Commission upon request to the
Company.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 12th day of July, 1999.
THERMOLASE CORPORATION
By: /s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
</TABLE>
---------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BETWEEN
THERMOLASE CORPORATION,
as Seller
AND
TGH, LLC,
as Buyer
Dated: June 27, 1999
===============================================================
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of the 27th day of June,
1999, by and among TGH, LLC, a Pennsylvania limited liability company, and
THERMOLASE CORPORATION, a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding capital stock
(consisting of two thousand (2000) common shares) of the Company (as defined
below), which is engaged primarily in the business of owning and operating the
Destination Spa (as defined below); and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell
to Buyer, upon the terms and subject to the conditions set forth in this
Agreement, all of the Shares (as defined below).
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, intending to be legally bound hereby, the parties hereto agree
as follows:
A. DEFINITIONS.
1. "Affiliate" of a Person means any Person which, directly or
indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such Person. An
Affiliate of Seller shall include ThermoTrex Corporation and
ThermoElectron Corporation and Affiliates thereof.
2. "Agreement" means this Stock Purchase Agreement, and all Exhibits
and Schedules attached hereto, as the same shall be amended from
time to time.
3. "Benefit Plan" means any Plan of Seller, or any predecessor or
Affiliate of Seller, existing prior to or as of the date hereof
to which Seller contributes or has contributed on behalf of any
Employee, or under which any Employee or any beneficiary thereof
is covered, or is eligible for coverage or has benefit rights.
4. "Books and Records" of any Person mean all files, documents,
instruments, papers, books and records relating to the business,
operations, condition of (financial or other), results of
operations and business of such Person, including without
limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, contracts, customer
lists, computer files and programs, retrieval programs, operating
data and plans and environmental studies and plans.
5. "Business Day" means any calendar day which is not a Saturday,
Sunday or public holiday under the Laws of the United States of
America.
1
<PAGE>
6. "Buyer" means TGH, LLC, a Pennsylvania limited liability company.
7. "Claim" means any written or oral demand, claim, suit, Lien,
action, expense, including counsel fees, cause of action,
investigation or notice by any Person alleging actual or
potential liability.
8. "Closing" means the execution of this Agreement by Seller and
Buyer.
9. "Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder or with respect
thereto.
10. "Collateral Documents" means collectively each of the documents,
agreements and instruments to be executed, delivered and
performed in connection with this Agreement.
11. "Company" means the Greenhouse Spa, Inc., a Pennsylvania
corporation.
12. "Control" (including, with correlative meaning, the terms
"Controlled by" and "under common Control with"), as used with
respect to any Person, means the possession, directly or
indirectly, of the power to elect a majority of the board of
directors or to direct or cause the direction of the management
and policies of such Person, whether through the ownership of
voting securities, by contract, family relationship or otherwise
and, in any event and without limitation of the foregoing, any
Person owning fifty percent (50%) or more of the voting
securities of another Person shall be deemed to control that
Person.
13. "Default" means (a) a breach of or default under any contract,
(b) the occurrence of an event which with the passage of time or
the giving of notice or both would constitute a breach of or
default under any contract, or (c) the occurrence of an event
that (with or without the passage of time or the giving of notice
or both) would give rise to a right of damages, specific
performance, termination, renegotiation or acceleration under any
contract.
14. "Destination Spa" means the Greenhouse Spa which is a health
spa/personal fitness facility located at 1171 107th Street,
Arlington, Texas.
15. "Employee" means any employee, former employee or any employee
who is on paid leave of absence or disability leave of the
Company or any employee of Seller who is employed by Seller
primarily to provide services to the Company.
16. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder or with respect thereto.
17. "Exhibits" mean the exhibits, attached to, referenced in and
delivered pursuant to this Agreement.
2
<PAGE>
18. "GAAP" means generally accepted accounting principles
consistently applied, as applied in the United States of America.
19. "Governmental Entity" means any government and political
subdivisions thereof, court, arbitral tribunal, administrative
agency, tribunal or commission or any other governmental or
regulatory body, instrumentality or authority, whether federal,
state or local.
20. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
21. "Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred
purchase price of goods or services (other than trade payables or
accruals incurred in the ordinary course of business), (iv) under
capital leases, and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any
other Person.
22. "Indemnified Party" means any Person claiming indemnification
under any provision of Section I.
23. "Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Section
I.
24. "Intellectual Property" means collectively, all copyrights,
patents, trademarks, trade names, brand names, brand marks,
logos, licenses, computer software, computer systems and related
proprietary documentation, trade secrets and related data,
inventions, inventor's work papers and notebooks, disclosure of
inventions, proprietary technology, formulae, processes, research
and development in progress, know-how, designs, and all other
proprietary information and similar intangible rights.
25. "Known" or "Knowledge" or words of similar import mean, with
regard to a particular fact or other matter, that the Person is
actually aware of such fact or other matter or a prudent
individual could be expected to know. Knowledge of Seller shall
not include Knowledge of facts or matters solely as a result of
the Knowledge of Gerald or Lydia Katzoff or employees reporting
to them. With respect to the Knowledge of Seller, it is further
limited by the fact that Buyer's Affiliate owned the Destination
Spa prior to June 12, 1998 and thereafter officers and employees
of Buyer operated it on a day to day basis.
26. "Laws" mean all laws, statutes, ordinances, governmental
regulations, orders, decrees, edicts, rules or other requirements
of any Governmental Entity, including without limitation, those
covering environmental, safety, health, transportation, bribery,
record keeping, employment, Tax, anti-discrimination, antitrust,
wage and hour and price and wage control matters.
3
<PAGE>
27. "Liabilities" mean all Indebtedness, obligations and other
liabilities, and any Loss, damage, cost, unpaid expense, claim,
deficiency, guaranty or endorsement of or by any Person.
28. "Lien" means any mortgage, lien (including federal, state and
local Tax liens), security interest, pledge, negative pledge,
encumbrance, assessment, title retention agreement, restriction
or restraint on transfer, defect of title, charge in the nature
of a lien or security interest, or option (whether consensual,
statutory or otherwise) or any conditional sale contract, title
retention contract or other contract to give any of the
foregoing.
29. "Litigation" means any action, lawsuit, arbitration, criminal
prosecution, tax audit, administrative or other proceeding or
investigation, or any inquiry asserting a violation of any Law,
by, before or for any Governmental Entity.
30. "Loss" means any and all damages, losses, obligations,
deficiencies, liabilities, encumbrances, penalties, fines, costs
and expenses, including without limitation interest, court costs,
reasonable fees of attorneys, accountants and other experts or
other reasonable expenses of Litigation or other proceedings or
of any Claim, Default or assessment, other than consequential
damages.
31. "Material Adverse Effect" means an effect which is or would be
materially adverse to the Company.
32. "Person" means any natural person, sole proprietorship,
corporation, partnership, joint venture, association, trust, or
any other entity or organization, including a government or a
political subdivision, agency or instrumentality thereof.
33. "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
34. "Post-Closing Periods" mean any taxable period beginning (or
deemed pursuant to Section D.8.b.iv.(b.) to begin) after the date
hereof.
35. "Pre-Closing Periods" mean any taxable period during which Seller
owned the Company that ends (or is deemed pursuant to Section
D.8.b.iv to end) on or before the date hereof.
4
<PAGE>
36. "Relevant Contracts" mean any and all contracts to which Seller
or its Affiliate is a party relating to the Company entered into
in the ordinary course of business at any time prior to the date
hereof.
37. "Right of First Refusal" means a right of first refusal in favor
of SMK Group, LLC, to purchase the Company, which right will be
terminated as of the date hereof.
38. "Schedules" mean the schedules, attached to, referenced in and
delivered pursuant to this Agreement.
39. "Seller" means ThermoLase Corporation, a Delaware corporation.
40. "Seller's Deed of Trust" means the deed of trust given by the
Company securing the Destination Spa (as more specifically
described therein) as collateral for the Ten Million Dollar
($10,000,000) note from Buyer to Seller.
41. "Shares" mean all of the shares of common stock of the Company
constituting a one hundred percent (100%) ownership interest in
the Company.
42. "Survival Date" means the date which is two (2) years after the
date hereof.
43. "Tankovich Agreement" means a license agreement with Nickolai
Tankovich dated as of February 10, 1993, a copy of which is
attached hereto as Exhibit "F".
44. "Tax(es)" mean all taxes, and all charges, fees, levies or other
assessments in the nature of a tax, including but not limited to
all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, hotel, withholding,
payroll, employment, social security, unemployment, excise,
estimated, stamp, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever,
including all interest and penalties thereon, and additions to
tax or additional amounts imposed by any taxing authority,
domestic or foreign upon a Person, or any of its Affiliates or
properties.
45. "Tax Returns" mean all returns, declarations and reports,
estimates and information returns and statements required by
applicable law to be filed with respect to Taxes.
5
<PAGE>
B. ACQUISITION OF THE STOCK.
1. Purchase and Sale. Subject to the terms and conditions of this
Agreement, on the date hereof, Buyer hereby purchases and
acquires from Seller and Seller hereby sells and transfers to
Buyer the Shares, for the consideration delivered to Seller
pursuant to Section C below. In furtherance thereof, Seller
shall, on the date hereof, deliver to Buyer the certificates
representing all of the Shares, duly endorsed for transfer or
accompanied by stock powers executed in blank for transfer.
2. Books and Records. On the date hereof, in addition to the
delivery and transfer of the Shares to Buyer, Seller shall
deliver to Buyer any of the Books and Records of the Company
which are within the control of Seller or any of its Affiliates.
C. CONSIDERATION TO SELLER. As the sole consideration for the Shares to be
sold by Seller to Buyer, Buyer shall execute and deliver to Seller or its
nominee, effective as of the date hereof a promissory note in the amount of
Ten Million Dollars ($10,000,000.00) and a security agreement, and Buyer
shall cause the Company to execute and deliver Seller's deed of trust; a
guaranty of Buyer's obligations under the Ten Million Dollar
($10,000,000.00) promissory note, and a security agreement, all in favor of
Seller and all in the form attached hereto as Exhibits "A", "B", "C", "D"
and "E", respectively.
D. REPRESENTATIONS AND WARRANTIES OF SELLER. In connection with the sale of the
Shares to Buyer, Seller hereby represents and warrants to Buyer as follows:
1. Organization, Power, Standing and Qualification of Seller. Seller
is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware and all other
jurisdictions in which the failure to be in good standing would
have a Material Adverse Effect. Seller has full power and
authority (corporate and otherwise) to carry on its businesses as
it is now being conducted and to own and operate the properties
and assets now owned and operated by it.
2. Corporate Power and Authority. Seller has the requisite corporate
power and authority to execute, deliver and perform this
Agreement and the Collateral Documents and to transfer the Shares
to Buyer. The execution, delivery and performance of this
Agreement and each of the Collateral Documents and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action (corporate or
otherwise) on the part of Seller and requires no further
authorization or consent by Seller or any other party. All
resolutions by the Board of Directors of Seller authorizing the
actions taken in connection with the sale of the Shares,
including the execution and delivery of this Agreement, are in
accordance with the Articles and By-Laws of Seller and were duly
adopted and continue in full force and effect. All corporate
consents and authorizations required to be obtained by Seller
with regard to this Agreement and consummation of the
transactions contemplated hereby have been obtained. The officers
of Seller executing this Agreement and the documents executed and
delivered pursuant to or in connection with this Agreement are
incumbent officers of Seller and are authorized to do so. This
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Agreement and the Collateral Documents required to be executed on
the date hereof, have been duly and validly executed and
delivered by Seller. This Agreement and the Collateral Documents
constitute the legal, valid and binding obligation of Seller,
enforceable in accordance with their terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar Laws affecting the enforcement of
creditors' rights generally.
3. Validity of Contemplated Transactions. The execution, delivery
and performance of this Agreement and each of the Collateral
Documents and the consummation of the transactions contemplated
hereby and thereby do not and will not: (a) violate, breach or
contravene any of the terms, conditions or provisions of the
Articles of Incorporation or By-Laws of Seller; (b) violate,
breach, be in conflict with, constitute a Default under, cause
the acceleration of any payments pursuant to, or otherwise impair
the good standing, validity or effectiveness of any contract
relating to the Company or the Shares; (c) violate any provision
of Law applicable to Seller or any of its properties or assets;
(d) require any consent, approval, waiver, authorization or
permit of, or filing or registration with or notification to, any
Governmental Entity or any other Person to be obtained by Seller;
(e) result in the creation or imposition of any Lien; or (f)
otherwise adversely affect the good standing, validity or
effectiveness of any contract which would have a Material Adverse
Effect on the operation of the Company. To Seller's Knowledge,
there is no proceeding pending or threatened before any court or
Governmental Entity in which it is being sought to restrain or
prohibit the consummation of the transactions contemplated
hereby.
4. Title to the Shares. Seller is the valid and lawful record and
beneficial owner of all of the Shares of the Company, all of
which has been duly authorized and validly issued and is fully
paid and non-assessable, and is free and clear of all pledges,
Liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever, except any restrictions
which may be created by operation of state or federal securities
Laws, and except for the Right of First Refusal. On the date
hereof, Buyer shall receive from Seller good, valid and
marketable title to all of the Shares, free and clear of all
pledges, Liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities
Laws).
5. Organization, Good Standing and Qualification of the Company. The
Company is a corporation duly organized, validly existing and in
good standing under the Laws of the Commonwealth of Pennsylvania,
with full corporate power and authority to own its assets and
conduct its business as owned and conducted on the date hereof.
The Company is duly qualified and in good standing as a foreign
corporation in the State of Texas. True and complete copies of
the Articles of Incorporation and By-Laws of the Company
(including all amendments thereto) have been previously delivered
to Buyer, and a correct and complete list of the officers and
directors of the Company is attached hereto as Schedule D.5,
which is incorporated herein.
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6. Capital Structure; Equity Ownership.
a. The authorized capital stock of the Company consists of
one million (1,000,000.00) shares with par value of One
Dollar ($1.00) per share, two thousand (2,000) shares of
which are issued and outstanding in the name of Seller.
b. Except for the Right of First Refusal, there are no
outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or calls,
demands or commitments obligating the Company to
issue, transfer or purchase any shares of its capital
stock, or obligating Seller to transfer any shares of
capital stock of the Company. No shares of capital
stock of the Company are in the Company's treasury,
or are reserved for issuance pursuant to stock
options, warrants, agreements or other rights to
purchase capital stock.
7. Subsidiaries and Investments. The Company does not own, directly
or indirectly, any stock or other equity securities of any
corporation or entity, or have any direct or indirect equity or
ownership interest in any person, firm, partnership, corporation,
venture or business other than the business conducted by the
Company.
8. Tax Matters.
a. Past Tax Matters.
i. The Company has submitted to Seller Tax Returns for the
Company for the period from January 1, 1998 to June 12,
1998, which must be approved by Seller before filing,
which filing may be no later than September 15, 1999 to
be timely. Seller represents that it has obtained
extensions to file said Tax Returns until September 15,
1999 and will review such Tax Returns and timely advise
the Company of any comments with regard thereto so that
the Tax Returns can be timely filed. The failure of
Seller to advise the Company of any comments to the Tax
Returns in writing by September 1, 1999 shall
constitute a waiver by Seller of its rights to provide
any comments to said Tax Returns.
ii. The Company has submitted to Seller Tax Return
information for the period from June 13, 1998 to
December 31, 1998, which when approved by Seller will
form a part of the consolidated Tax Returns of Seller,
which Seller will timely file and, to the extent
required, pay any Taxes due thereon.
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iii. Within one hundred twenty (120) days of the date
hereof, the Company will submit to Seller Tax Return
information for the period from January 1, 1999 until
the date hereof, which when approved by Seller will
form a part of the consolidated Tax Returns of Seller,
which Seller will timely file and, to the extent
required, pay any Taxes due thereon.
iv. In addition to the information and obligations set
forth in Sections D.8.a.i, D.8.a.ii, and D.8.a.iii,
hereinabove, Seller has filed or will timely file all
Tax Returns required to be filed by it with respect to
the Company, and has paid or will timely pay all Taxes,
and other impositions as and to the extent required by
applicable law. Without limitation of the foregoing,
Seller, with respect to the Company, has made all
required filings and payments to the date hereof with
respect to Taxes to the extent such filings and
payments are not made directly by the Company, and
there are no outstanding or pending claims,
deficiencies or assessments with respect to any Taxes
of Seller with respect to the Company. With respect to
any accrued Tax obligations regarding the Company,
which are not yet due and payable, Seller has paid or
will pay in full all Taxes on or before the time when
the same become due and payable, and Seller will be
responsible for and shall indemnify the Company and
Buyer for all such Tax obligations accruing during the
period of its ownership of the Company regardless of
when payment was or is actually due.
v. To the Knowledge of Seller, there are no audits pending
with respect to any Tax Returns of or with respect to
the Company, and no waiver of statutes of limitations
have been given or requested with respect to any Taxes
of or with respect to the Company. To the extent that
there are any Tax liabilities with respect to the
period of Seller's ownership of the Company, imposed on
Seller or the Company, Seller agrees to remain liable
for such Taxes, whether it is imposed on the Company or
Seller.
b. Consolidated Tax Returns.
i. Preparation and Filing of Seller's Consolidated 1999
Tax Return.
(a.) Seller shall cause to be prepared and timely filed
all Tax Returns of the Company attributable to any
period ending on or before the date hereof.
(b.) Buyer shall prepare and timely file or shall cause
to be prepared and timely filed all other Tax
Returns with respect to the Company.
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ii. Tax Indemnification by Seller.
(a.) Seller shall indemnify Buyer and the Company in respect
of, and hold Buyer and the Company harmless, on an
after-tax basis (which shall mean that any damage
resulting to Buyer or the Company is reduced by the
amount of any Tax benefit received by the Company or
Buyer in connection with any payments made which gave
rise to the claim for indemnification), against (x)
damages resulting from, relating to, or constituting a
breach of any Tax representation set forth in this
Agreement, (y) the failure to perform any covenant or
agreement set forth in this Section D.8.b, and (z)
without duplication, the following Taxes with respect
to the Company:
(i.) Any and all Taxes due and payable by the Company
for any period during which Seller owned the
Company; and
(ii.)Any liability of such entities for Taxes of
other entities whether pursuant to Treasury
Regulation Section 1.1502-6 (or comparable or
similar provision under state, local or foreign
law), as transferee or successor or pursuant to
any contractual obligation for any period that
ends (or is deemed pursuant to Section D.8.b.iv.
(b.) to end) on or before the date hereof for
periods during which Seller owned the Company,
The amounts specified in paragraphs (i.) and (ii.)
shall be reduced (but not below zero) by the amount of
any accruals for Taxes on the balance sheet of the
Company as of the date hereof (exclusive of any
accruals for "deferred taxes" or similar items that
reflect timing differences between Tax and financial
accounting principles). For purposes of Section
D.8.b.ii.(a.)(i.), any and all transactions or events
contemplated by this Agreement that occur at or prior
to the date hereof shall be deemed to have occurred in
a Pre-Closing Period.
(b.) All claims for indemnification pursuant to this Section
D.8.b shall be made in accordance with Section I of
this Agreement.
iii. Tax Indemnification by Buyer. Buyer and the Company shall
indemnify and hold Seller harmless, on an after-Tax basis,
from and against, the following Taxes with respect to the
Company:
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(a.) Any and all Taxes for Post-Closing Periods, due or
payable by the Company; and
(b.) Any and all Taxes due and payable by the Company for
any Pre-Closing Period to the extent of the amounts of
any accruals for Tax liabilities on the balance sheet
of the Company as of the date hereof (exclusive of any
accruals for "deferred taxes" or similar items that
reflect timing differences between Tax and financial
accounting principles).
(c.) As stated above, all claims for indemnification
pursuant to this Section D.8.b shall be made in
accordance with Section I of this Agreement.
iv. Allocation of Certain Taxes. In the case of any Taxes that
are attributable to the taxable period which begins before
the date hereof and ends after the date hereof, the amount
of Taxes attributable to the Pre-Closing Period and the
Post-Closing Period shall be determined as follows:
(a.) Buyer and Seller agree that if the Company is permitted
but not required under applicable federal, state or
local tax Laws to treat the date hereof as the last day
of a taxable period, Buyer and Seller shall treat such
day as the last day of a taxable period.
(b.) Except to the extent provided in Section D.8.b.iv.(a.),
in the case of ad valorem Taxes imposed on the Company
and franchise or similar Taxes imposed on the Company
based on capital (including net worth or long-term
debt) or number of shares of stock authorized, issued
or outstanding, such Taxes shall be allocated between
the Pre-Closing Period and the Post-Closing Period
based upon the respective number of days in each such
period.
(c.) Except to the extent provided in Sections D.8.b.iv.(a.)
and D.8.b.iv.(b.), all other Taxes shall be allocated
between the Pre-Closing Period and the Post-Closing
Period based upon an interim closing of the books of
the Company as of the end of the day of the date hereof
and the computation of the Tax for each resulting
period as if the period were a separate taxable period;
provided, however, that in no event shall the
hypothetical Tax for any period be less than zero.
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v. Cooperation on Tax Matters.
(a.) Buyer and Seller and their respective Affiliates shall
cooperate in the preparation of all Tax Returns, or
relate to any examination or audit of Tax Returns, for
any tax periods for which one party could reasonably
require the assistance of the other party in obtaining
any necessary information. Such cooperation shall
include, but not be limited to, furnishing prior years'
Tax Returns or return preparation packages illustrating
previous reporting practices or containing historical
information relevant to the preparation of such Tax
Returns, and furnishing such other information within
such party's possession requested by the party filing
such Tax Returns as is relevant to their preparation.
Such cooperation and information also shall include
without limitation promptly forwarding copies of
appropriate notices and forms or other communications
received from or sent to any taxing authority which
relate to the Company, and providing copies of all
relevant Tax Returns, together with accompanying
schedules and related workpapers, documents relating to
rulings or other determinations by any taxing authority
and records concerning the ownership and tax basis of
property, which the requested party may possess. Buyer
and the Company and Seller and its Affiliates shall
make their respective employees and facilities
available on a mutually convenient basis to provide
explanation of any documents or information provided
hereunder.
(b.) For a period of ten (10) years after the date hereof or
such longer period as may be required by law, Buyer
shall, and shall cause the Company to, retain and not
destroy or dispose of any Tax Returns (including
supporting materials), books and records (including
computer files) of, or with respect to the activities
or Taxes of, such entities for all taxable periods
ending or deemed, pursuant to Section D.8.b.iv.(c.), to
end on or prior to the date hereof to the extent Buyer
or the Company received or had possession of such
records on the date hereof.
(c.) For a period of ten (10) years after the date hereof or
such longer period as may be required by law, Seller
(or its Affiliates) shall retain and not destroy or
dispose of any Tax Returns (including supporting
materials), books and records (including computer
files) of, or with respect to the activities or Taxes
of, the Company for all taxable periods ending (or
deemed, pursuant to Section D.8.b.iv.(c.) to end) on or
prior to the date hereof to the extent Seller did not
deliver such records to Buyer or the Company.
Thereafter, Seller shall not destroy or dispose of any
such Tax Returns, books or records unless it first
offers them to Buyer in writing and Buyer fails to
accept such offer within sixty (60) days of it being
made.
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(d.) If Buyer or the Company (as the case may be) on the one
hand, or Seller on the other, fails to provide any
information requested by the other party in the time
specified herein, or if no time is specified pursuant
to this Section D.8.b.v, within a reasonable period, or
otherwise fails to do any act required of it under this
Section D.8.b.v, then the party failing to so provide
the information or do such act shall be obligated,
notwithstanding any other provision of this Agreement,
to indemnify the party requesting the information or
act and shall so indemnify the requesting party and
hold such party harmless from and against any and all
costs, claims or damages, including, without
limitation, all Taxes or deficiencies thereof, payable
as a result of such failure. Notwithstanding the
foregoing, the party that failed to deliver the
information or do the act requested, shall in no event
be obligated to make any payments pursuant to this
Section D.8.b.v.(d.) or otherwise be liable, if such
party used all reasonable commercial efforts to provide
the requested information or perform the requested act.
(e.) Buyer shall control any Tax audits of the Company for
all periods; provided, however, that Buyer shall notify
Seller of any audit in which items with respect to
which Seller has indemnified Buyer pursuant to this
Section D.8.b are in issue and shall thereafter keep
Seller informed on a timely basis of any material
developments in the audit relating to such items. In no
event shall Buyer settle any issue with a taxing
authority relating to any such item without Seller's
consent, provided that Seller shall first have
acknowledged in writing its obligation to indemnify
Buyer with respect to any and all damages relating to
such item and an adverse resolution of such item would
not have a material adverse effect on the business or
operations of Buyer or the Company.
vi. Termination of Tax-Sharing Agreements. All Tax sharing
agreements or similar arrangements with respect to or
involving the Company shall be terminated prior to the date
hereof and, after the date hereof, the Company shall not be
bound thereby or have any liability thereunder for amounts
due in respect of periods ending on or before the date
hereof.
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vii. Certain Tax Elections.
(a.) Seller shall not elect, cause to be elected or
participate in any election pursuant to Treasury
Regulation Section 1.1502-76(b)(2) (or any comparable
provisions of foreign or state law) to allocate items
of income and expense of the Company between the
taxable year of Seller ending on the date hereof and
its taxable year commencing on the day after the date
hereof on a proportionate method based on the number of
days contained in each such taxable year.
(b.) To the maximum extent permitted by applicable law,
neither Buyer nor any of its Affiliates will carry-back
to any taxable period of Seller or any of its
Affiliates any loss, credit or deduction incurred or
generated in, or attributable to any period commencing
after the date hereof that would affect any Tax Return
or Tax of Seller or any of its Affiliates, and Buyer
agrees to make or exercise, or cause to be made or
exercised, any and all necessary or permitted elections
(including elections pursuant to Section 1723(b)(3)(C)
of the Code) available under applicable law to avoid
any such carryback.
(c.) Neither Seller nor any of its Affiliates shall make an
election pursuant to Treasury Regulation Section
1.1502-20(g) to re-attribute all or any portion of any
net operating losses of the Company to Seller.
9. Benefit Plans.
a. Compliance. Each Benefit Plan affecting an Employee is, has
been and will be in compliance in all material respects and
is, has been and will be administered in all material
respects in accordance with the applicable provisions of
ERISA, the Code, and any other applicable law.
b. Funding. Seller or its Affiliates have made and will make
all payments and contributions to all Benefit Plans on a
timely basis as required by the terms of each such plan and
any applicable law.
c. Participation. With respect to all Employees of the Company,
participation in and coverage under all Benefit Plans will
terminate as of the date hereof, unless continued
participation and coverage is required by operation of law.
10. Litigation; Compliance. Except as set forth in Schedule D.10,
attached hereto and incorporated herein, there is no suit,
action, Claim, arbitration, administrative or legal or other
proceeding, or governmental investigation pending or, to Seller's
Knowledge threatened, against or related to Seller with respect
to or against the Company, nor any failure to comply with, nor
any Default under, any Law, or order applicable to, nor any
violation of or Default with respect to any order, writ,
injunction, judgment, or decree of any court or Governmental
Entity or other instrumentality issued or pending against Seller
or the Company which is reasonably expected to have a Material
Adverse Effect.
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11. Intellectual Property Rights.
a. To Seller's Knowledge, as of the date hereof, the Company
has the right to use all Intellectual Property necessary or
appropriate for the operation of the Company, free and clear
of all Liens, and such Intellectual Property will not be
adversely affected by the transactions contemplated by this
Agreement or the Collateral Documents. As of the date
hereof, Seller has not received notice since June 12, 1998
that it is infringing upon any Intellectual Property of any
other Person in connection with the operation of the
Company.
b. Seller and its Affiliates have not entered into any
agreement to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to,
any Intellectual Property used in the Company, except
pursuant to the Tankovich Agreement.
c. Seller will enter into a license agreement with the Company
granting the Company the perpetual right to use the
Intellectual Property which is the subject of the Tankovich
Agreement, and Buyer shall make any and all payments due
thereunder with respect to the use of such Intellectual
Property.
12. Product Liability Claims. Seller is a named insured under all
policies of insurance relating to product liability listed on
Schedule D.12, attached hereto and incorporated herein, for and
against any Claim for product liability based on any event
occurring prior to the date hereof, which insurance coverage will
continue in effect for the benefit of Seller after the date
hereof for a period of not less than two (2) years.
13. Bank Accounts. All cash in all Bank Accounts maintained by Seller
and the Company shall be the property of Seller. Buyer and Seller
shall cooperate with each other to remove the name of any person
who should not longer be an authorized signatory on any of the
accounts of Seller and the Company.
14. Finder's or Broker's Fees. Buyer and Seller represent and warrant
that no broker or other person is entitled to any commission or
finder's fee in connection with any of the transactions
contemplated by this Agreement.
15. Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to, any Governmental Entity on
the part of Seller is required in connection with the execution,
delivery and performance of this Agreement or in connection with
the consummation of the transactions contemplated hereby or
thereby.
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E. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
1. Organization, Power, Standing and Qualification. Buyer is a
limited liability company duly organized, validly existing, and
in good standing under the Laws of the Commonwealth of
Pennsylvania, and has full power and authority to own the Shares.
2. Power and Authority. Buyer has the requisite power and authority
to execute, deliver and perform this Agreement and the Collateral
Documents to which it is a party and to purchase the Shares. The
execution, delivery and performance of this Agreement and each of
the Collateral Documents to which Buyer is a party and the
consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of
Buyer and requires no further authorization or consent by Buyer.
All consents and authorizations required to be obtained by Buyer
with regard to this Agreement and consummation of the
transactions contemplated hereby have been obtained. The manager
of Buyer executing this Agreement and the documents executed and
delivered pursuant to or in connection with this Agreement is the
incumbent manager of Buyer and is authorized to do so. This
Agreement and the Collateral Documents, to the extent Buyer is a
party thereto, constitute the legal, valid and binding
obligations of Buyer, enforceable in accordance with their terms,
except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar Laws affecting the
enforcement of creditors' rights generally.
3. Validity of Contemplated Transactions. The execution, delivery
and performance of this Agreement, and each of the Collateral
Documents, and the consummation of the transactions contemplated
hereby and thereby do not and will not: (a) violate, breach or
contravene any provision of the organizational documents of
Buyer; (b) violate, breach, be in conflict with, constitute a
Default under, cause the acceleration of any payments pursuant
to, or otherwise impair the good standing, validity or
effectiveness of any contract by which Buyer or Buyer's property
is bound or subject any property or asset of Buyer to any
contract to which Buyer is a party or by which Buyer is bound;
(c) violate any provision of Law or any permit applicable to
Buyer or its properties or assets; or (d) require any consent,
approval, waiver, authorization, or permit of, or filing or
registration with, or notification to, any Governmental Entity or
other Person to be obtained by Buyer except as has been made or
waived. To Buyer's Knowledge, there is no proceeding pending or
threatened before any court or Governmental Entity in which it is
being sought to restrain or prohibit the consummation of the
transactions contemplated hereby, and no investigation that might
eventuate in any such suit, action or proceeding is pending or
threatened.
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4. Inspection Opportunity. Buyer acknowledges that its authorized
agents have been operating the Company on behalf of Seller and
therefore have been given an opportunity to examine such
instruments, documents and other information relating to the
Company as they have deemed necessary or advisable in order to
make an informed decision relating to the purchase of the Shares
and their suitability as an investment for Buyer and that they
have been afforded an opportunity to ask questions and to obtain
any additional information necessary in order to verify the
accuracy of the information furnished and that such parties have,
in fact, asked all such questions and reviewed all such
instruments, documents and other information as they have deemed
necessary under the circumstances. Notwithstanding the foregoing,
the parties hereto acknowledge and agree that (i) Buyer is
relying upon the accuracy of the representations, warranties and
covenants of Seller contained in this Agreement and the
Collateral Documents, and (ii) Buyer has been induced to enter
into this Agreement and the Collateral Documents and to
consummate the transactions contemplated hereby and thereby as a
result of Seller's willingness to make accurate representations
and warranties and to undertake to perform the covenants
contained in this Agreement and the Collateral Documents.
5. HSR Act. Buyer has reviewed the rules relating to the size-of-
parties test under the HSR Act and Buyer is not a Ten Million
Dollar ($10,000,000.00) person for the purposes thereof.
6. Access to Information. Following the date hereof, Seller will
cooperate fully with Buyer and shall provide Buyer and its
accountants, counsel, and other representatives (including
without limitation, its bankers and other lending sources,
auditors and engineers), during normal business hours, and
provide full access to the Books and Records, Relevant Contracts,
and other documents, records, and information of Seller with
respect to the Company, as Buyer or its representatives may
reasonably request.
F. RESIGNATIONS. Seller shall have delivered to Buyer the written
resignations, dated and effective on the date hereof, of such of the
officers and directors of the Company as may be requested by Buyer.
G. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of Seller or Buyer prior to or after the
date hereof, except for (a) representations or warranties made by any party
as provided herein or in any Collateral Document which were (i) not true
when made and (ii) were made by such party fraudulently or with intent to
defraud or mislead, which representations and warranties shall survive in
accordance with the applicable statute of limitations, and (b)
representations and warranties relating to Tax matters and relating to
environmental matters, which shall survive in accordance with the
applicable statute of limitations, all representations and warranties made
by Seller and Buyer in this Agreement or pursuant hereto shall survive the
date hereof until the Survival Date, and thereafter as to any Claims or
Losses notice of which is given prior to the Survival Date.
H. CONDUCT OF SELLER AND BUYER AFTER CLOSING. Seller will cooperate with Buyer
after the date hereof to effect the orderly transfer of the Shares. In
addition, after the date hereof, at the request of either party and at the
requesting party's expense, but without additional consideration, the other
party shall execute and deliver from time to time such further instruments
of assignment, conveyance and transfer, shall cooperate in the conduct of
Litigation and the processing and collection of insurance claims, and shall
take such other actions as may reasonably be required to convey and deliver
more effectively to Buyer the Shares.
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I. INDEMNIFICATION.
1. General.
a. Subject to Section I.2 below, Seller shall defend, indemnify
and hold harmless Buyer from, against and with respect to
any and all Claims, Losses, costs, expenses, obligations,
Liabilities, damages, recoveries and deficiencies, including
costs of investigation, interest, penalties and reasonable
attorneys' fees, that Buyer may incur, sustain or suffer as
a result of any breach of, or failure by Seller to perform,
any of the representations, warranties, covenants or
agreements of Seller contained in this Agreement, in any
Exhibit or Schedule furnished by or on behalf of Seller
under this Agreement, the Collateral Documents, or as a
result of the conduct of Seller with respect to the Company
prior to the date hereof.
b. Subject to Section I.2 below, Buyer shall defend, indemnify
and hold harmless Seller from, against and with respect to
any and all Claims, Losses, costs, expenses, obligations,
Liabilities, damages, recoveries and deficiencies, including
costs of investigation, interest, penalties and reasonable
attorneys' fees, that Seller may incur, sustain or suffer as
a result of any breach of, or failure by Buyer to perform,
any of the representations, warranties, covenants or
agreements of Buyer contained in this Agreement, in any
Exhibit or Schedule furnished by or on behalf of Buyer under
this Agreement, the Collateral Documents, or as a result of
the conduct of Buyer with respect to the Company on or after
the date hereof.
2. Claims for Indemnity. Whenever a Claim shall arise for which any party
shall be entitled to indemnification hereunder, the Indemnified Party
shall notify the Indemnifying Party in writing within ten (10) days of
the Indemnified Party's first receipt of notice of, or the Indemnified
Party's obtaining Knowledge of, such Claim, and in any event within
such shorter period as may be necessary for the Indemnifying Party to
take appropriate action to resist such Claim. Such notice shall
specify all facts Known to the Indemnified Party giving rise to such
indemnity rights and shall estimate (to the extent reasonably
possible) the amount of potential liability arising therefrom. If the
Indemnifying Party shall be duly notified of such dispute, the parties
shall attempt to settle and compromise the same or shall submit the
same to arbitration in accordance with Section L.6 and any rights of
indemnification established by reason of such settlement, compromise,
or arbitration shall promptly thereafter be paid and satisfied by any
Indemnifying Party obligated to make indemnification hereunder.
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3. Right to Defend. Subject to Sections B.8.b.v.(e), if the facts giving
rise to any Claim for indemnification shall involve any actual or
threatened action or demand by any third party against the Indemnified
Party or any of its Affiliates, the Indemnifying Party shall be
entitled (without prejudice to the Indemnified Party's right to
participate at its own expense through counsel of its own choosing),
at its expense and through a single counsel of their own choosing, to
control the defense or prosecution of such Claim in the name of the
Indemnifying Party, or if necessary, in the name of the Indemnified
Party. In any event, the Indemnified Party shall give the Indemnifying
Party advance written notice of any proposed compromise or settlement
of any such Claim. If the remedy sought in any such action or demand
is solely money damages, the Indemnifying Party shall have fifteen
(15) days after receipt of such notice of settlement to object to the
proposed compromise or settlement, and if it does so object, the
Indemnifying Party shall be required to undertake, conduct and
control, through counsel of its own choosing and at its sole expense,
the settlement or defense thereof, and the Indemnified Party shall
cooperate with the Indemnifying Party in connection therewith.
4. Limitations. With respect to breaches of representations and
warranties only given under Sections D.1, D.2, D.3, E.1, E.2, E.3, and
E.5, no party shall be entitled to indemnification hereunder with
respect to such a breach until the total of all damages incurred by
such party with regard to such breaches exceeds Fifty Thousand Dollars
($50,000.00). With respect to breaches of all other representations
and warranties, no party shall be entitled to indemnification
hereunder with respect to such a breach until the total of all damages
incurred by such party with regard to such breaches exceeds Two
Hundred Thousand Dollars ($200,000.00). Notwithstanding anything
stated above to the contrary, the limitations set forth in this
Section shall not apply to a breach of any of the representations and
warranties of which the Indemnifying Party had Knowledge at any time
prior to the date on which such representation and warranty was made
or any breach by the Indemnifying Party of any covenant or obligation
set forth in this Agreement, the Collateral Documents or any other
agreement contemplated hereunder. The total liability of any party
(for indemnification or otherwise) with respect only to a breach of
such representations and warranties shall not exceed an amount equal
to the purchase price set forth in Section C.
J. POST-CLOSING EVENTS.
1. Cooperation. From time to time from and after the date hereof, the
parties will execute and deliver to each other any and all further
agreements, instruments, certificates and other documents as may
reasonably be requested by the other party in order more fully to
consummate the transactions contemplated hereby, and to effect an
orderly transition of the business being acquired by Buyer hereunder.
2. Accounts Payable.
a. Seller shall be liable for all accounts payable of the Company
incurred in the ordinary course of business through the date
hereof.
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<PAGE>
b. Buyer shall immediately deliver to Seller any invoices it
receives following the date hereof which relate to the Company
for obligations incurred by the Company in the ordinary course of
business prior to the date hereof. Seller shall pay such invoices
and all obligations which relate to the Business incurred by
Seller in the ordinary course of business prior to the date
hereof in a timely manner (but on no less than twenty (20) days
notice) so as not to cause the addition of any late fees or other
additional costs as a result of late payment. To the extent such
invoices are not paid timely or Seller and Buyer disagree as to
whose is responsible to pay the invoice, such dispute will be
subject to arbitration in accordance with Section L.6.
K. FORM OF AGREEMENT.
1. Effect of Headings. The Section headings used in this Agreement and
the titles of the Exhibits or Schedules hereto are included for
purposes of convenience only, and shall not affect the construction or
interpretation of any of the provisions hereof or of the information
set forth in such Exhibits or Schedules.
2. Entire Agreement; Waivers. This Agreement and the other agreements and
instruments referred to herein constitute the entire agreement between
the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party
hereto has made any representation or warranty or given any covenant
to the other except as set forth in this Agreement, the Exhibits and
Schedules hereto, and the other agreements and instruments referred to
herein. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party
making the waiver.
3. Counterparts and Facsimile Signatures. This Agreement, any document or
instrument entered into, given or made pursuant to this Agreement or
authorized hereby, and any amendment or supplement thereto may be
executed in two or more counterparts and signature pages may be
transmitted by facsimile and, when so executed and transmitted, will
have the same force and effect as though all signatures were originals
and appeared on a single document. Any signature page of this
Agreement or of such an amendment, supplement, document or instrument
may be detached from any counterpart without impairing the legal
effect of any signatures thereon, and may be attached to another
counterpart identical in form thereto but having attached to it one or
more additional signature pages.
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<PAGE>
4. Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each
other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the term "Section" refers to the
specified Section of this Agreement. Whenever this Agreement refers to
a number of days, such number shall refer to calendar days unless
Business Days are specified. Any representation or warranty contained
herein as to the enforceability of a contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium or
other similar law affecting the enforcement of creditors' rights
generally and to general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
L. ADDITIONAL AGREEMENTS OF THE PARTIES; MISCELLANEOUS PROVISIONS.
1. Renovation of the Destination Spa. The Company has presented to Seller
bills with respect to the renovation of the Destination Spa. Seller
shall pay to the Company by wire Three Hundred Thousand Dollars
($300,000.00) within three (3) days following the date hereof to
satisfy such bills.
2. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to
whom notice is to be given, on the day after the delivery thereof to a
recognized overnight courier service for next-day delivery with all
charges prepaid or billed to the account of the sender, or on the
third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to Seller: ThermoLase Corporation
81 Wyman Street
Waltham, MA 02454
Attn: President
with a copy to: ThermoLase Corporation
81 Wyman Street
Waltham, MA 02454
Attn: General Counsel
If to Buyer: TGH, LLC
7 East Skippack Pike
Ambler, PA.
Attn: Gerald Katzoff, Manager
21
<PAGE>
with a copy to: Kaplin Stewart Meloff Reiter &
Stein, P.C.
350 Sentry Parkway, Building 640
P.O. Box 3037
Blue Bell, Pennsylvania 19422-0765
Attn: L. Leonard Lundy, Esq.
or to such other address as either party shall have specified by
notice in writing given to the other party.
3. Press Releases and Announcements. No party shall issue any press
release or public disclosure relating to the subject matter of this
Agreement without the prior approval of the other party, which shall
not be unreasonably delayed or withheld; provided that Seller may make
any public disclosure it believes in good faith is required by law,
regulation or stock exchange rule (in which case Seller shall advise
Buyer and provide it with a copy of the proposed disclosure prior to
making the disclosure).
4. Additional Agreements and Instruments. On or before the date hereof,
Seller and Buyer shall execute, deliver and file all exhibits,
schedules, agreements, certificates, instruments and other documents,
not inconsistent with the provisions of this Agreement and the
Collateral Documents, which, in the opinion of counsel to the parties
hereto, shall reasonably be required to be executed, delivered and
filed in order to consummate the transactions contemplated by this
Agreement and the Collateral Documents.
5. Governing Law; Jurisdiction; Arbitration. This Agreement shall be
construed and interpreted and the rights granted herein governed in
accordance with the Laws of the State of Texas, except if otherwise
provided in the Exhibits. Except with regard to any Claims for
Specific Performance as provided in Section L.10 and except if
otherwise provided in the Exhibits, any Claim, dispute or controversy
arising under or in connection with this Agreement or any actual or
alleged breach hereof shall be settled exclusively by arbitration to
be held before a single arbitrator in any locale or venue as legal
jurisdiction may otherwise be had over the party against whom the
proceeding is commenced, in accordance with the commercial arbitration
rules of the American Arbitration Association then in effect. As part
of his or her award, the arbitrator shall make a fair allocation of
the fee of the American Arbitration Association, the cost of any
transcript, and the parties' reasonable attorneys' fees, taking into
account the merits and good faith of the parties' Claims and defenses.
Judgment may be entered on the award so rendered in any court having
jurisdiction. Any process or other papers hereunder may be served by
registered or certified mail, return receipt requested, or by personal
service, provided that a reasonable time for appearance or response is
allowed.
6. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their successors
and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the
prior written approval of the other party.
7. Amendments. The parties may mutually amend any provision of this
Agreement at any time. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by both
of the parties hereto.
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<PAGE>
8. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration,
or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
9. Specific Performance. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of
the parties agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of
the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it
may be entitled at law or in equity.
10. Construction. The language used in this Agreement shall be deemed to
be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against
any party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise.
11. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and
made a part hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
WITNESS/ATTEST: BUYER:
TGH, LLC, a Pennsylvania
limited liability company
- --------------------------- By: /s/ Gerald Katzoff
Gerald Katzoff, Manager
WITNESS/ATTEST: Seller:
THERMOLASE CORPORATION, a Delaware
corporation
- --------------------------- By: /s/ Gerald Feldman
Gerald Feldman, President
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
(See Attached)
<PAGE>
EXHIBIT "B"
SECURITY AGREEMENT BETWEEN TGH, LLC AND
THERMOLASE CORPORATION
(See Attached)
<PAGE>
EXHIBIT "C"
SELLER'S DEED OF TRUST
(See Attached)
<PAGE>
EXHIBIT "D"
GUARANTY
(See Attached)
<PAGE>
EXHIBIT "E"
SECURITY AGREEMENT BETWEEN THE GREENHOUSE SPA, INC. AND THERMOLASE CORPORATION
(See Attached)
<PAGE>
EXHIBIT "F"
LICENSE AGREEMENT WITH NICKOLAI TANKOVICH
(See Attached)
<PAGE>
SCHEDULE D.5
LIST OF OFFICERS & DIRECTORS
President: Gerald Katzoff
Vice President of
Operations: Lydia Katzoff
Treasurer: Kenneth J. Apicerno
Secretary: Sandra L. Lambert
Assistant Secretary: Robert V. Aghababian
Assistant Secretary
and General Counsel: Seth H. Hoogasian
Assistant Secretary: Paul F. Kelleher
Assistant Secretary: Hiram N. Pan
<PAGE>
SCHEDULE D.10
PENDING OR THREATENED LITIGATION
1. LaserSpas, Inc. et al. v. ThermoLase Corporation, filed in Cuyahoga
County, Ohio, Court of Common Pleas. (plaintiffs claim that they have
sustained substantial business losses as a result of the poor performance
of the SoftLight Laser, and that ThermoLase violated the Ohio Business
Opportunity Act by failing to provide a disclosure document required by
that act)
2. Reagan Rossen v. ThermoLase, et al., filed in Los Angeles County,
California, Superior Court. (plaintiff claims that her face and neck were
permanently injured by the SoftLight treatment and that she consulted
dermatologists and plastic surgeons to repair the damage)
3. Morton Mazaheri et al. v. ThermoLase Corporation, filed in Riverside
County, California, Superior Court. (plaintiffs claim that ThermoLase
violated the California Unfair Trade Practices on the grounds that
marketing claims relating to SoftLight laser hair removal were misleading)
4. Claudia Obermann v. ThermoLase et al., filed in San Diego County,
California, Superior Court. (plaintiff claims wrongful termination
following disagreement with ThermoLase management regarding licensure to
perform SoftLight hair removal and skin resurfacing procedures)
5. Jamie Debrino. (letter addressed to Boca Raton Greenhouse Spa dated May
20, 1999 makes non-specific claims of "severe bodily injuries" resulting
from negligence of The Greenhouse Spa, and requests insurance coverage
information)
6. Vanessa Harris v. The Greenhouse Spa. (claim before EEOC for
employment discrimination based on complainant's religion)
<PAGE>
SCHEDULE D.12
PRODUCT LIABILITY INSURANCE
Carrier: Medmarc Casualty Insurance Company
Policy No.: 99MA380019
Policy Period: July 1, 1999 to July 1, 2000
Insurance Coverage: damages and expenses for covered claims resulting from
the manufacture, distribution and sale of medical products
The general aggregate limit and the limit per occurrence is not less than $3
million
---------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BETWEEN
THERMOLASE CORPORATION,
as Seller
AND
GH DAY SPAS, INC.,
as Buyer
Dated: June 27, 1999
===============================================================
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 27th day of June, 1999, by
and between GH DAY SPAS, INC., a Pennsylvania corporation ("Buyer"), and
THERMOLASE CORPORATION, a Delaware corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the Business (as defined below) and owns
the Purchased Assets (as defined below); and
WHEREAS, Seller desires to sell and Buyer desires to purchase the
Purchased Assets under the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, representations, warranties, and agreements herein
contained, and intending to be legally bound, Buyer and Seller hereby agree as
follows:
A. DEFINITIONS.
1. "Affiliate" of a Person means any Person which, directly or
indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such Person. An
Affiliate of Seller shall include ThermoTrex Corporation and Thermo
Electron Corporation and Affiliates thereof.
2. "Agreement" means this Asset Purchase Agreement, and all Exhibits and
Schedules attached hereto, as the same shall be amended from time to
time.
3. "Allocation Schedule" means the allocation of the Purchase Price among
the Purchased Assets and the Assumed Liabilities all as set forth on
Schedule C.3 of this Agreement.
4. "Assumed Liabilities" means only those debts, Liabilities and
obligations of Seller with respect to the Business assumed by Buyer as
listed on Schedule E of this Agreement.
5. "Benefit Plan" means any Plan of Seller, or any predecessor or
Affiliate of Seller, existing prior to or as of the date hereof to
which Seller contributes or has contributed on behalf of any Employee
or under which any Employee or any beneficiary thereof is covered, or
is eligible for coverage or has benefit rights.
6. "Books and Records" of any Person mean all files, documents,
instruments, papers, books and records relating to the business,
operations, condition of (financial or other), results of operations
and business of such Person, including without limitation financial
statements, Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title policies, contracts, customer lists, computer files and
programs, retrieval programs, operating data and plans and
environmental studies and plans.
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<PAGE>
7. "Business" means Seller's hair removal, health and cosmetic spa
operations presently conducted at the "Day Spa Locations" and
previously conducted at the "Closed Day Spa Locations."
8. "Business Day" means any calendar day which is not a Saturday, Sunday
or public holiday under the Laws of the United States of America.
9. "Claim" means any written demand, claim, suit, Lien, action, expense,
including counsel fees, cause of action, investigation or notice by
any Person alleging actual or potential liability.
10. "Closed Day Spa Locations" mean the real property leased by Seller
identified as such in Schedule A.15, which is attached hereto and
incorporated herein, the operations of which have been or are being
terminated by and at the sole cost and expense of Seller.
11. "Closing" means the execution of this Agreement and the Collateral
Documents by Seller and Buyer.
12. "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder or with respect thereto.
13. "Collateral Documents" means collectively each of the documents,
agreements and instruments to be executed, delivered and performed in
connection with this Agreement.
14. "Control" (including, with correlative meaning, the terms "Controlled
by" and "under common Control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to
elect a majority of the board of directors or to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract, family
relationship or otherwise and, in any event and without limitation of
the foregoing, any Person owning fifty percent (50%) or more of the
voting securities of another Person shall be deemed to control that
Person.
15. "Day Spa Locations" mean the Subleased Day Spa Locations and the
Managed Day Spa Locations, but excludes the Closed Day Spa Locations,
the location of all of which are set forth on Schedule A.15, which is
attached hereto and incorporated herein.
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<PAGE>
16. "Default" means (a) a breach of or default under any contract, (b) the
occurrence of an event which with the passage of time or the giving of
notice or both would constitute a breach of or default under any
contract, or (c) the occurrence of an event that (with or without the
passage of time or the giving of notice or both) would give rise to a
right of damages, specific performance, termination, renegotiation or
acceleration under any contract.
17. "Destination Spa" means the Greenhouse Spa located at 1171 107th
Street, Arlington, TX.
18. "Employees" mean all employees of Seller engaged in the Business at
any time prior to the date hereof, including former employees of
Seller and employees who are on paid leave of absence or disability
leave.
19. "Environmental Claim" means any Claim (including, without limitation,
potential or actual liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property
damages, personal injuries or penalties) arising out of, related to or
in connection with the use, treatment, removal, storage, disposal,
presence, migration, transport, handling, manufacture, possession,
distribution, or the actual or threatened emission, injection, escape,
dumping, spill, leak, discharge or release of Materials of
Environmental Concern.
20. "Environmental Laws" mean all federal, state and local Laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A.ss.ss.9601 et
seq., the Resource Conversation and Recovery Act ("RCRA"), 42
U.S.C.A.ss.ss.6901 et seq., the Clean Water Act, 33 U.S.C.A.ss.ss.1251
et seq., the Clean Air Act 42 U.S.C.A.ss.ss. 7401 et seq., the
Occupational Safety and Health Act, 29 U.S.C.ss. 651 et seq., The
Toxic Substances Control Act, 15 U.S.C.ss.2601 et seq., and Laws and
regulations relating to emissions, spills, leaks, discharges, releases
or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, possession, distribution, use,
treatment, storage, disposal, presence, transport or handling of
Materials of Environmental Concern.
21. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder or with
respect thereto.
22. "Excluded Assets" means the assets which are specifically excluded
from the Purchased Assets being transferred to Buyer pursuant to this
Agreement as set forth on Schedule B.2 of this Agreement.
23. "Exhibits" mean the exhibits, attached to, referenced in and delivered
pursuant to this Agreement.
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<PAGE>
24. "GAAP" means generally accepted accounting principles consistently
applied, as applied in the United States of America.
25. "Governmental Entity" means any government and political subdivisions
thereof, court, arbitral tribunal, administrative agency, tribunal or
commission or any other governmental or regulatory body,
instrumentality or authority, whether federal, state or local or
foreign.
26. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
27. "Indebtedness" of any Person means all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or
services (other than trade payables or accruals incurred in the
ordinary course of business), (iv) under capital leases, and (v) in
the nature of guarantees of the obligations described in clauses (i)
through (iv) above of any other Person.
28. "Indemnified Party" means any Person claiming indemnification under
any provision of Section J.
29. "Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Section J.
30. "Intellectual Property" means collectively, all copyrights,
trademarks, trade names, brand names, brand marks and logos used
currently for the exclusive benefit of the Business and/or the
Destination Spa, Licenses, computer software, proprietary computer
systems and related proprietary documentation, trade secrets and
related data, and similar intangible rights used currently for the
exclusive benefit of the Business and/or the Destination Spa.
31. "Inventory and Supplies" means all inventory and supplies ordered by
or owned by Seller that are used or will be used in the Business, for
which payments (full or part) have been made or bills (full or part)
for the payment thereof have been submitted to Seller or the Business,
all in "as-is condition," excepting therefrom products located at
Creative Beauty Innovators, Inc., Carollton, Texas for which payment
in full has not been made as of the date hereof.
32. "IRS" means the Internal Revenue Service.
33. "Known" or "Knowledge" or words of similar import mean, with regard to
a particular fact or other matter, that the Person is actually aware
of such fact or other matter or a prudent individual could be expected
to know. Knowledge of Seller shall not include Knowledge of facts or
matters solely as a result of Knowledge of Gerald or Lydia Katzoff or
employees reporting to them.
4
<PAGE>
34. "Laws" mean all laws, statutes, ordinances, governmental regulations,
orders, decrees, edicts, rules or other requirements of any
Governmental Entity, including without limitation, those covering
environmental, safety, health, transportation, bribery, record
keeping, employment, tax, anti-discrimination, antitrust, wage and
hour and price and wage control matters.
35. "Leases" means the leases with the Seller for the Day Spa Locations.
36. "Leased Real Property" means the real property leased at the Day Spa
Locations and the Closed Day Spa Locations.
37. "Leases" means the leases of the Day Spa Locations between Seller, as
tenant, and each of the landlords thereof.
38. "Liabilities" mean all Indebtedness, obligations and other
liabilities, and any Loss, damage, cost, unpaid expense, claim,
deficiency, guaranty or endorsement of or by any Person.
39. "Licenses" mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises, rights, orders
and similar consents or certificates granted or issued by any
Governmental Entity relating to the Business or its assets. 1.
40. "Lien" means any mortgage, lien (including federal, state and local
Tax liens), security interest, pledge, negative pledge, encumbrance,
assessment, title retention agreement, restriction or restraint on
transfer, defect of title, charge in the nature of a lien or security
interest, or option (whether consensual, statutory or otherwise) or
any conditional sale contract, title retention contract or other
contract to give any of the foregoing.
41. "Litigation" means any action, lawsuit, arbitration, criminal
prosecution, tax audit, administrative or other proceeding or
investigation, or any inquiry asserting a violation of any Law, by,
before or for any Governmental Entity.
42. "Loss" means any and all damages, losses, obligations, deficiencies,
liabilities, encumbrances, penalties, fines, costs and expenses,
including without limitation interest, court costs, reasonable fees of
attorneys, accountants and other experts or other reasonable expenses
of Litigation or other proceedings or of any Claim, Default or
assessment, other than consequential damages.
43. "Managed Day Spa Locations" mean the Day Spa Locations which are
identified as such on Schedule A.15 as of the date hereof.
44. "Management Agreement" means the agreement between Seller and Buyer,
as manager, for Buyer to manage a Day Spa Location that is not subject
to a Sublease Agreement between Seller and Buyer.
5
<PAGE>
45. "Material Adverse Effect" means an effect which is or would be
materially adverse to the Business.
46. "Medical Director Agreements" mean those consulting agreements in
which Seller engaged a qualified physician to provide consulting
services that may be required in connection with laser assisted hair
removal and skin resurfacing services to be performed at the Day Spa
Locations and Closed Day Spa Locations, all as more particularly
described therein.
47. "Non-Transferable Assets" means any Purchased Asset or Relevant
Contract, that cannot be transferred to Buyer without the consent of a
third party, which consent has not been obtained as of the date
hereof.
48. "Permitted Liens" mean (i) Liens for current Taxes not yet delinquent
for which appropriate accruals in accordance with GAAP have been
created, (ii) statutory Liens imposed by law which are incurred in the
ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers and materialmen, none of which Permitted Liens,
individually or in the aggregate, has a Material Adverse Effect or
will detract from or interferes or will interfere with either Seller's
or Buyer's, as the case may be, right to dispose of any property, the
use of such property or their prospects, business or operations, as
presently conducted.
49. "Person" means any natural person, sole proprietorship, corporation,
partnership, joint venture, association, trust, or any other entity or
organization, including a government or a political subdivision,
agency or instrumentality thereof.
50. "Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, severance, separation or other employee benefit
plan, practice, policy or arrangement of any kind, whether written or
oral, including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
51. "Purchased Assets" have the meaning set forth in Section B.1 of this
Agreement.
52. "Purchase Price" has the meaning set forth in Section C.1 of this
Agreement.
53. "Relevant Contracts" mean any and all contracts to which Seller or its
Affiliates is a party relating to the Purchased Assets or otherwise
appurtenant to the Day Spa Locations or used in or intended for use
primarily in the operation of the Business (other than the personal
property leases and the Intellectual Property), together with all
purchase orders and sales orders entered into in the ordinary course
of business at any time prior to the date hereof, all of which Buyer
is willing to assume provided that payment for such purchase orders
and sales orders entered into prior to the date hereof in the ordinary
course of business shall be the obligation of Seller.
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<PAGE>
54. "Relevant Licenses" means all Licensees used in connection with the
Business to the extent transferable or assumable.
55. "Returns" means collectively all federal, state, and local Tax
Returns.
56. "Schedules" mean the schedules, attached to, referenced in and
delivered pursuant to this Agreement.
57. "Sublease Agreements" means the sublease agreements between Seller, as
sublessor, and Buyer, as sublessee, for each Day Spa Location which
has been subleased by Seller to Buyer as of the date hereof, each as
identified on Schedule A.15.
58. "Subleased Day Spa Locations" mean the Day Spa Locations which are
identified as such on Schedule A.15 as of the date hereof.
59. "Survival Date" means the date which is two (2) years after the date
hereof .
60. "Tangible Personal Property" means all furniture, equipment, spare
parts, tools, office equipment and other tangible personal property
(other than Inventory and Supplies) located at, stored for or intended
for use in the Day Spa Locations and the Closed Day Spa Locations.
61. "Tankovich Agreement" means a License Agreement with Nickolai
Tankovich dated as of February 10, 1993, a copy of which is attached
hereto as Exhibit "E".
62. "Tax(es)" mean all taxes and all charges, fees, levies or other
assessments in the nature of a tax, including but not limited to all
net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, withholding, payroll, employment, social
security, unemployment, excise, estimated, stamp, occupation, property
or other taxes, customs, duties, fees, assessments or charges of any
kind whatsoever, including all interest and penalties thereon, and
additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign upon a Person, or any of its Affiliates
or properties.
63. "Tax Returns" mean all returns, declarations and reports, estimates
and information returns and statements required by applicable law to
be filed with respect to Taxes.
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B. SALE AND PURCHASE OF ASSETS.
1. Assets to be Acquired.
a. Subject to the terms and conditions contained herein, (i)
Seller hereby sells, assigns, transfers and delivers to
Buyer, and Buyer hereby purchases from Seller, all of the
assets of Seller used primarily in the Business other than
the Excluded Assets, whether real, personal, or mixed,
tangible or intangible, including Tangible Personal
Property, Intellectual Property, Relevant Licenses, and
Relevant Contracts, all in as-is condition and all free and
clear of all pledges, Liens or other restrictions, other
than Permitted Liens (collectively, the "Purchased Assets"),
and (ii) Buyer hereby assumes the Assumed Liabilities.
b. Purchased Assets located at a Closed Day Spa Location shall
be removed by Buyer within thirty (30) days of the date
hereof, to the extent Seller would be permitted to remove or
move same, all in accordance with the terms of the lease for
each Closed Day Spa Location, and all at Buyer's option. The
cost and expense of such removal and moving shall be shared
equally between Seller and Buyer.
c. Waiver of Bulk Sales. Buyer hereby waives compliance with
any bulk sales acts or similar or corresponding laws of any
jurisdiction applicable to the sale of the Purchased Assets.
2. Excluded Assets. The Excluded Assets are specifically excluded from
the Purchased Assets being transferred to Buyer pursuant to this
Agreement.
3. Non-Transferable Assets.
a. To the extent there are any Non-Transferable Assets, the
parties shall reasonably cooperate to provide to each other
with the benefit of such Non-Transferable Asset.
b. After the date hereof, Seller, at its expense, shall use its
best efforts, and Buyer, at its expense, shall cooperate
with Seller, to obtain any necessary consents, waivers and
approvals, so as to transfer each Non-Transferable Asset to
Buyer without materially adversely modifying, amending or
burdening such Non-Transferable Asset.
c. Neither Seller nor Buyer shall be obligated to pay any
amount or incur any Liability to transfer a Non-Transferable
Asset.
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d. To the extent that as of the date hereof, there is any
Non-Transferable Asset, Seller, at its expense, shall, from
and after Closing, cooperate with Buyer in any reasonable
and lawful arrangement designed to provide the benefit
(including the tax benefits, if possible, that would have
accrued to Buyer had such asset been a Purchased Asset) of
such Non-Transferable Asset to Buyer; provided that Buyer
shall, so long as such benefit is so provided, satisfy or
perform any Liabilities or obligations under or in
connection with such Non-Transferable Asset which would not
be a Liability or obligation retained by Seller if such
Non-Transferable Asset were a Purchased Asset.
C. PURCHASE PRICE.
1. Purchase Price. As full payment for the Purchased Assets, Buyer shall
(i) pay to Seller Two Million Five Hundred Thousand Dollars
($2,500,000.00) (the "Purchase Price") and (ii) assume the Assumed
Liabilities as set forth in Section E hereof.
2. Payment of Purchase Price. The Purchase Price shall be payable on the
date hereof by execution of and delivery to Seller of a promissory
note of Buyer and a security agreement, in the forms attached hereto
as Exhibit "A" and "B", respectively.
3. Allocation of Purchase Price. The Purchase Price and the Assumed
Liabilities assumed by Buyer pursuant to Section E hereof shall be
allocated as set forth on the Allocation Schedule. The Allocation
Schedule shall be adjusted to reflect the adjustments, if any, to the
Purchase Price. Buyer and Seller will file all Tax Returns and
reports, including IRS Form 8594, in accordance with the Allocation
Schedule and neither party will take a contrary position for federal,
state or local Tax purposes that is not consistent with the Allocation
Schedule and the specific allocations set forth in Form 8594 on any
Tax Return or any documents filed by any of said parties with federal,
state or local authorities.
4. Prorations. Except with respect to rent under the Leases and Section
E.2, all prorations with respect to the transactions contemplated
hereby shall be as of the date hereof.
D. LEASED REAL PROPERTY.
1. Buyer and Seller shall enter into a Sublease Agreement, in the form
attached hereto as Exhibit "C", which is incorporated herein by
reference, for each Day Spa Location which has been subleased to Buyer
as of the date hereof. The Day Spa Locations subject to Sublease
Agreements are set forth on Schedule A.15 and are referred to as the
"Subleased Day Spa Locations". The initial term of each Sublease
Agreement shall commence on the date hereof and shall end on December
31, 2000. The term of each Sublease Agreement shall renew and extend
thereafter, at the option of the Buyer, in accordance with the
Sublease Agreement. A Sublease Agreement shall be renewable or
extendable after December 31, 2000 only if all of the Sublease
Agreements and all of the Management Agreements are renewed.
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2. Buyer and Seller shall enter into a Management Agreement for each Day
Spa Location which has not been subleased to Buyer as of the date
hereof, in the form attached hereto as Exhibit "D", which is
incorporated herein by reference. Such Day Spa Locations are set forth
on Schedule A.15 and are referred to as the "Managed Day Spa
Locations". The initial term of each Management Agreement shall
commence on the date hereof and end on December 31, 2000. The term of
each Management Agreement shall renew thereafter, at the option of the
Buyer, in accordance with the Management Agreement. A Management
Agreement shall be renewable or extendable after December 31, 2000
only if all of the Sublease Agreements and all of the Management
Agreements are renewed. If the consent of the landlord is necessary
under a Lease to sublease a Day Spa Location to Buyer which is subject
to a Management Agreement, Seller shall use its best efforts to seek
the consent of the landlord to a sublease to Buyer, subject to the
limitations set forth in Section B.3.c.. If and when the consent is
obtained, Seller and Buyer shall terminate the Management Agreement
and enter into a Sublease Agreement for the balance of the initial
term of the Management Agreement and any renewals thereof.
E. LIABILITIES OF SELLER.
1. Assumed Liabilities. At Closing, Buyer will assume only the Assumed
Liabilities. Except as set forth on Schedule E and herein, Buyer does
not and will not otherwise acquire, discharge, assume, or become
responsible for any debts, Liabilities or obligations of Seller in
connection with the Day Spa Locations or the Closed Day Spa Locations
or in connection with the Business accruing prior to the date hereof.
Except for the Assumed Liabilities, Buyer does not hereby and shall
not assume or in any way undertake to pay, perform, satisfy or
discharge any Liabilities or obligations of Seller and Seller agrees
to pay and satisfy when due those liabilities and obligations not
assumed by Buyer, which, if not paid or satisfied, could result in
Liability to Buyer.
2. Post-Closing Accounts Payable. Buyer shall immediately deliver to
Seller any invoices it receives following Closing which relate to the
Business for accounts payable incurred by Seller in the ordinary
course of business prior to the date hereof. Seller shall pay such
invoices and all accounts payable which relate to the Business
incurred by Seller in the ordinary course of business prior to the
date hereof in a timely manner (but on no less than twenty (20) days
notice) so as not to cause the addition of any late fees or other
additional costs as a result of late payment. To the extent such
invoices are not paid timely or Seller and Buyer disagree as to who is
responsible to pay an invoice, such dispute will be subject to the
arbitration provisions hereof.
F. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
to Buyer as follows:
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1. Organization, Power, Standing and Qualification. Seller is a
corporation duly organized, validly existing, and in good standing
under the Laws of the State of Delaware and all other jurisdictions in
which the failure to be in good standing would have a Material Adverse
Effect. Seller has full corporate power and authority to carry on its
businesses as it is now being conducted and to own and operate the
properties and assets now owned and operated by it.
2. Corporate Power and Authority. Seller has the requisite corporate
power and authority to execute, deliver and perform this Agreement and
the Collateral Documents and to transfer the Purchased Assets to
Buyer. The execution, delivery and performance of this Agreement and
each of the Collateral Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary action on the part of Seller and requires no further
authorization or consent by Seller or any other party except as set
forth herein. All resolutions by the Board of Directors of Seller
authorizing the actions taken in connection with the sale of the
Purchased Assets, including the execution and delivery of this
Agreement, are in accordance with the Articles and By-Laws of Seller
and were duly adopted and continue in full force and effect. All
corporate consents and authorizations required to be obtained by
Seller with regard to this Agreement and consummation of the
transactions contemplated hereby have been obtained. The officers of
Seller executing this Agreement and the documents executed and
delivered pursuant to or in connection with this Agreement are
incumbent officers of Seller and are authorized to do so. This
Agreement and the Collateral Documents required to be executed on the
date hereof, have been duly and validly executed and delivered by
Seller. This Agreement and the Collateral Documents constitute the
legal, valid and binding obligation of Seller, enforceable in
accordance with their terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, moratorium or similar Laws
affecting the enforcement of creditors' rights generally.
3. Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement and each of the Collateral Documents and
the consummation of the transactions contemplated hereby and thereby
do not and will not: (a) violate, breach or contravene any of the
terms, conditions or provisions of the Articles of Incorporation or
By-Laws of Seller; (b) violate, breach, be in conflict with,
constitute a Default under, cause the acceleration of any payments
pursuant to, or otherwise impair the good standing, validity or
effectiveness of any contract relating to the Business or the
Purchased Assets; (c) violate any provision of Law applicable to
Seller or any of its properties or assets; (d) require any consent,
approval, waiver, authorization or permit of, or filing or
registration with or notification to, any Governmental Entity or any
other Person to be obtained by Seller other than the landlords under
the Leases, if so required, the Medical Directors under the Medical
Director Agreements, if so required, the licensors under Relevant
Licenses, if any and if so required, and certain registrations or
notifications which may be necessary with respect to the operation of
the SoftLight(R) Laser Hair Management System; (e) result in the
creation or imposition of any Lien, other than Permitted Liens,
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against any of the Purchased Assets or the Business; or (f) otherwise
adversely affect the good standing, validity or effectiveness of any
contract which would have a Material Adverse Effect. To Seller's
Knowledge, there is no proceeding pending or threatened before any
court or Governmental Entity in which it is being sought to restrain
or prohibit the consummation of the transactions contemplated hereby.
4. Title to Properties.
a. There are no Defaults by any party under any of the Leases for
the Day Spa Locations and the obligations to be performed by
Seller as tenant under the Leases have been performed and will be
performed at its sole expense through the date hereof, and
Seller, at its sole expense shall pay all monetary obligations
accrued under the Leases for the Day Spa Locations through June
30, 1999, and prior to and after the date hereof for the Leases
for the Closed Day Spa Locations.
b. Seller has delivered to Buyer prior to the execution of this
Agreement true and complete copies of all Leases, and all
amendments thereof, including material correspondence and other
documentation in Seller's possession, with respect to the Leased
Real Property which may have a Material Adverse Effect.
c. To Seller's Knowledge, there has been no condemnation by a
Governmental Entity with respect to any Leased Real Property.
d. To Seller's Knowledge, no portion of the Leased Real Property are
affected or threatened by any special assessments the cost of
which might be assessed against Buyer.
e. Seller is in possession of and has good, valid and marketable
title to, or has valid leasehold interests in or valid rights
under contracts to use, all the Tangible Personal Property used
in connection with the Business. All the Tangible Personal
Property is free and clear of all Liens, other than Permitted
Liens.
5. Third Party Options. There are no contracts or rights of any kind
with, to, in or under discussion with any third party to acquire any
of the Purchased Assets or any interest in or portion of, the
Purchased Assets or the Business.
6. Inventories and Supplies. The Inventories and Supplies of Seller,
which are included in the Purchased Assets, are carried on the Books
and Records of Seller using the normal inventory valuation policy
utilized by Seller and is in accordance with GAAP, consistently
applied.
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7. Financial Statements. Seller has delivered to Buyer true and correct
copies of the financial statements of the Business prepared by Seller
in the normal course of its business through April 1999.
8. Absence of Undisclosed Liabilities. To Seller's Knowledge there are no
reasonable grounds for the assertion against the Business of any
Liability not disclosed in this Agreement or of which Buyer is not
otherwise aware, which would have a Material Adverse Effect.
9. Certain Tax Matters.
a. For any period ending before the date hereof, Seller has duly and
timely filed or will file all Returns required to be filed or
sent by it or on behalf of the Business and all such Returns are
or will be true, correct and complete. Seller has paid or will
pay in full all Taxes and any penalties entered with respect to
the Business, due and payable for any period during Seller's
ownership of the Business. All Taxes, to the extent that they
relate to periods during Seller's ownership of the Business, have
been paid, withheld, or reserved for or will be paid by Seller as
and when due.
b. There are no Liens for Taxes upon any of the Purchased Assets,
and no event has occurred which with the passage of time or the
giving of notice, or both, could result in a Lien (other than
Permitted Liens) for Taxes on any of the Purchased Assets.
c. No deficiency for any Taxes has been proposed, asserted or
assessed against Seller with respect to the Business which has
not been resolved and paid in full.
d. Seller has not requested any extension of time within which to
file any Tax Return, which Tax Return has not since been filed
except for calendar year 1998, which will be timely filed.
10. Litigation; Compliance. Except as set forth in Schedule F.10, attached
hereto and incorporated herein, there is no suit, action, Claim,
arbitration, administrative or legal or other proceeding, or
governmental investigation pending or, to Seller's Knowledge
threatened, against or related to Seller with respect to or against
the Business, nor any failure to comply with, nor any Default under,
any Law, or order applicable to, nor any violation of or Default with
respect to any order, writ, injunction, judgment, or decree of any
court or Governmental Entity or other instrumentality issued or
pending against Seller or the Business which is reasonably expected to
have a Material Adverse Effect.
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11. Benefit Plans.
a. Compliance. Each Benefit Plan affecting an Employee is, has been
and will be in compliance in all material respects and is, has
been and will be administered in all material respects in
accordance with the applicable provisions of ERISA, the Code, and
any other applicable law.
b. Funding. Seller or its Affiliates have made and will make all
payments and contributions to all Benefit Plans on a timely basis
as required by the terms of each such plan and any applicable
law.
12. Hazardous Substances.
a. Compliance. With respect to the Business, Seller is and has
received no written or oral notice, from any Governmental Entity
or any individual, and Seller has no Knowledge of a set of facts
indicating, that Seller is not in compliance with any and all
Environmental Laws with which the failure to comply is reasonably
expected to result in a Material Adverse Effect.
b. Disposal; Conditions. At no time during Seller's ownership of the
Business have there been used or disposed of any Materials of
Environmental Concern in the Leased Real Property and there is no
asbestos or urea formaldehyde foam insulation contained in or
forming part of any building, building component, structure or
space located on or in the Leased Real Property.
c. Potentially Responsible Party. With respect to the Business,
Seller has received no written notice or Claim from any
Governmental Entity or from any private party, alleging that
Seller is a potentially responsible party or is otherwise
allegedly liable for costs associated with the remediation of any
Leased Real Property as required by Law or pursuant to any Lease.
Seller shall be responsible for all Claims related to compliance
with Environmental Laws accruing prior to June 12, 1998 with
respect to the operations of the Day Spa Locations and the Closed
Day Spa Locations, and Buyer shall be responsible for all Claims
related to compliance with Environmental Laws accruing thereafter
with respect to the operations of the Day Spa Locations, and with
respect to the Closed Day Spa Locations from June 12, 1998
through the date hereof.
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13. Intellectual Property Rights.
a. To Seller's Knowledge, as of the date hereof, Seller has the
right to use all Intellectual Property necessary or appropriate
for the operation of the Business or ownership or use of the
Purchased Assets, free and clear of all Liens, and such
Intellectual Property will not be adversely affected by the
transactions contemplated by this Agreement or the Collateral
Documents. To the Knowledge of Seller, Seller has not received
notice within the one year period prior to the date hereof that
it is infringing upon any Intellectual Property of any other
Person in connection with the operation of the Business.
b. Seller and its Affiliates have not entered into any agreement to
make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any Intellectual
Property used in the Business, except pursuant to the Tankovich
Agreement.
c. Seller will enter into a license agreement with Buyer granting
Buyer the perpetual right to use the Intellectual Property which
is the subject of the Tankovich Agreement in connection with the
Business, and Buyer shall make any and all payments due
thereunder with respect to the use of such Intellectual Property
in the Business.
14. Contracts. Seller is not a party to any contracts, including
agreements not to compete, which could restrict or prohibit Buyer's
operations or Buyer's ability to expand the Business in any manner.
15. Product Liability Claims. Seller is a named insured under all policies
of insurance relating to product liability listed on Schedule F.15,
attached hereto and incorporated herein, for and against any Claim for
product liability based on any event occurring prior to the date
hereof, which insurance coverage will continue in effect after the
date hereof for a period of not less than two (2) years.
16. Bank Accounts. All cash in all Bank Accounts maintained by Seller
shall remain the property of Seller. Buyer shall cooperate with Seller
to remove the name of any person associated with Buyer who is an
authorized signatory on any of Seller's accounts.
17. Finder's or Broker's Fees. Buyer and Seller represent and warrant that
no broker or other person is entitled to any commission or finder's
fee in connection with any of the transactions contemplated by this
Agreement.
18. Governmental Approvals and Filings. No consent, approval or action of,
with the execution, delivery and performance of this Agreement or in
connection with the consummation of the transactions contemplated
hereby or thereby.
G. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller as follows:
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1. Organization, Power, Standing and Qualification. Buyer is a
corporation duly organized, validly existing, and in good standing
under the Laws of the Commonwealth of Pennsylvania, and has full power
and authority (corporate or otherwise) to carry on its business as it
is now being conducted and to own and operate the properties and
assets now owned and operated by it. Buyer is and will be at all times
required to be, duly qualified to do business and is in good standing
in each and every jurisdiction where the ownership or leasing of its
properties and assets, including the Purchased Assets and the
operation of the Business requires such qualification except where the
failure to qualify or to be in good standing would not have a Material
Adverse Effect.
2. Power and Authority. Buyer has the requisite power and authority to
execute, deliver and perform this Agreement and the Collateral
Documents to which it is a party and to purchase the Purchased Assets
and assume the Assumed Liabilities. The execution, delivery and
performance of this Agreement and each of the Collateral Documents to
which Buyer is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary action (corporate or otherwise) on the part of Buyer and
requires no further authorization or consent by Buyer. All resolutions
by the Board of Directors of Buyer authorizing the actions taken in
connection with the sale of the Purchased Assets, including the
execution and delivery of this Agreement, are in accordance with the
Articles and By-Laws of Buyer and were duly adopted and continue in
full force and effect. All corporate consents and authorizations
required to be obtained by Buyer with regard to this Agreement and
consummation of the transactions contemplated hereby have been
obtained. The officers of Buyer executing this Agreement and the
documents executed and delivered pursuant to or in connection with
this Agreement are incumbent officers of Buyer and are authorized to
do so. This Agreement and the Collateral Documents, to the extent
Buyer is a party thereto, constitute the legal, valid and binding
obligations of Buyer, enforceable in accordance with their terms,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar Laws affecting the enforcement of
creditors' rights generally.
3. Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement, and each of the Collateral Documents,
and the consummation of the transactions contemplated hereby and
thereby do not and will not: (a) violate, breach or contravene any
provision of the organizational documents of Buyer; (b) violate,
breach, be in conflict with, constitute a Default under, cause the
acceleration of any payments pursuant to, or otherwise impair the good
standing, validity or effectiveness of any contract by which Buyer or
Buyer's property is bound or subject any property or asset of Buyer to
any contract to which Buyer is a party or by which Buyer is bound; (c)
violate any provision of Law or any permit applicable to Buyer or its
properties or assets; or (d) require any consent, approval, waiver,
authorization, or permit of, or filing or registration with, or
notification to, any Governmental Entity or other Person to be
obtained by Buyer except as has been made or waived. To Buyer's
Knowledge, there is no proceeding pending or threatened before any
court or Governmental Entity in which it is being sought to restrain
or prohibit the consummation of the transactions contemplated hereby.
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4. Inspection Opportunity. Buyer acknowledges that its officers,
directors and authorized agents have been operating the Day Spa
Locations on behalf of Seller and therefore have been given an
opportunity to examine such instruments, documents and other
information relating to the Purchased Assets as they have deemed
necessary or advisable in order to make an informed decision relating
to the transactions contemplated by this Agreement and the suitability
of the Business as an investment for Buyer and that they have been
afforded an opportunity to ask questions and to obtain any additional
information necessary in order to verify the accuracy of the
information furnished and that such parties have, in fact, asked all
such questions and reviewed all such instruments, documents and other
information as they have deemed necessary under the circumstances.
Notwithstanding the foregoing, the parties hereto acknowledge and
agree that (i) Buyer is relying upon the accuracy of the
representations, warranties and covenants of Seller contained in this
Agreement and the Collateral Documents, and (ii) Buyer has been
induced to enter into this Agreement and the Collateral Documents and
to consummate the transactions contemplated hereby and thereby as a
result of Seller's willingness to make accurate representations and
warranties and to undertake to perform the covenants contained in this
Agreement and the Collateral Documents.
5. HSR Act. Buyer has reviewed the rules relating to the size-of- parties
test under the HSR Act and Buyer is not a Ten Million Dollar
($10,000,000.00) person for the purposes thereof.
H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of Seller or Buyer prior to or after the
date hereof, except for (a) representations or warranties made by any party
as provided herein or in any Collateral Document which were (i) not true
when made and (ii) were made by such party fraudulently or with intent to
defraud or mislead, which representations and warranties shall survive in
accordance with the applicable statute of limitations, and (b)
representations and warranties relating to Tax matters and relating to
environmental matters, which shall survive in accordance with the
applicable statute of limitations, all representations and warranties made
by Seller and Buyer in this Agreement or pursuant hereto shall survive the
date hereof until the Survival Date, and thereafter as to any Claims or
Losses notice of which is given prior to the Survival Date.
I. CONDUCT OF SELLER AND BUYER AFTER CLOSING.
a. After the date hereof, Buyer shall be responsible for the
operation of the Business. Seller will cooperate with Buyer after
the date hereof to effect the orderly transfer of the Purchased
Assets. In addition, after the date hereof, at the request of
either party and at the requesting party's expense, but without
additional consideration, the other party shall execute and
deliver from time to time such further instruments of assignment,
conveyance and transfer, shall cooperate in the conduct of
Litigation and the processing and collection of insurance claims,
and shall take such other actions as may reasonably be required
to convey and deliver more effectively to Buyer the Purchased
Assets including, without limitation, Non-Transferable Assets or
to confirm and perfect Buyer's title to the Purchased Assets, and
otherwise to accomplish the orderly transfer to Buyer of the
Purchased Assets as contemplated by this Agreement and the
Collateral Documents.
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b. In the event a transfer tax (or tax in substitution thereof) is
levied on all or part of the transactions contemplated hereunder
by any federal, state or local government, the party who is
charged under the applicable law with the obligation to pay (and
not collect) such tax shall timely and fully do so.
J. INDEMNIFICATION.
1. General.
a. Subject to Section J.2 below, Seller shall defend, indemnify and
hold harmless Buyer from, against and with respect to any and all
Claims, Losses, costs, expenses, obligations, Liabilities,
damages, recoveries and deficiencies, including costs of
investigation, interest, penalties and reasonable attorneys'
fees, that Buyer may incur, sustain or suffer as a result of any
breach of, or failure by Seller to perform, any of the
representations, warranties, covenants or agreements of Seller
contained in this Agreement, in any Exhibit or Schedule furnished
by or on behalf of Seller under this Agreement, the Collateral
Documents, or as a result of the conduct of Seller with respect
to the Business prior to the date hereof.
b. Subject to Section J.2 below, Buyer shall defend, indemnify and
hold harmless Seller from, against and with respect to any and
all Claims, Losses, costs, expenses, obligations, Liabilities,
damages, recoveries and deficiencies, including costs of
investigation, interest, penalties and reasonable attorneys'
fees, that Seller may incur, sustain or suffer as a result of any
breach of, or failure by Buyer to perform, any of the
representations, warranties, covenants or agreements of Buyer
contained in this Agreement, in any Exhibit or Schedule furnished
by or on behalf of Buyer under this Agreement, the Collateral
Documents or as a result of the conduct of Buyer in the operation
of the Business on and after the date hereof.
2. Claims for Indemnity. Whenever a Claim shall arise for which any party
shall be entitled to indemnification hereunder, the Indemnified Party
shall notify the Indemnifying Party in writing within ten (10) days of
the Indemnified Party's first receipt of notice of, or the Indemnified
Party's obtaining Knowledge of, such Claim, and in any event within
such shorter period as may be necessary for the Indemnifying Party to
take appropriate action to resist such Claim. Such notice shall
specify all facts Known to the Indemnified Party giving rise to such
indemnity rights and shall estimate (to the extent reasonably
possible) the amount of potential liability arising therefrom. If the
Indemnifying Party shall be duly notified of such dispute, the parties
shall attempt to settle and compromise the same or shall submit the
same to arbitration in accordance with Section L.8 and any rights of
indemnification established by reason of such settlement, compromise,
or arbitration shall promptly thereafter be paid and satisfied by any
Indemnifying Party obligated to make indemnification hereunder.
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<PAGE>
3. Right to Defend. If the facts giving rise to any Claim for
indemnification shall involve any actual or threatened action or
demand by any third party against the Indemnified Party or any of its
Affiliates, the Indemnifying Party shall be entitled (without
prejudice to the Indemnified Party's right to participate at its own
expense through counsel of its own choosing), at its expense and
through a single counsel of their own choosing, to control the defense
or prosecution of such Claim in the name of the Indemnifying Party, or
if necessary, in the name of the Indemnified Party. In any event, the
Indemnified Party shall give the Indemnifying Party advance written
notice of any proposed compromise or settlement of any such Claim. If
the remedy sought in any such action or demand is solely money
damages, the Indemnifying Party shall have fifteen (15) days after
receipt of such notice of settlement to object to the proposed
compromise or settlement, and if it does so object, the Indemnifying
Party shall be required to undertake, conduct and control, through
counsel of its own choosing and at its sole expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with the
Indemnifying Party in connection therewith.
4. Limitations. With respect to breaches of representations and
warranties only given under Sections F.1, F.2, F.3, G.1, G.2, G.3, and
G.5, no party shall be entitled to indemnification hereunder with
respect to such a breach until the total of all damages incurred by
such party with regard to such breaches exceeds Fifty Thousand Dollars
($50,000.00). With respect to breaches of all other representations
and warranties, no party shall be entitled to indemnification
hereunder with respect to such a breach until the total of all damages
incurred by such party with regard to such breaches exceeds Two
Hundred Thousand Dollars ($200,000.00). Notwithstanding anything
stated above to the contrary, the limitations set forth in this
Section shall not apply to a breach of any of the representations and
warranties of which the Indemnifying Party had Knowledge at any time
prior to the date on which such representation and warranty was made
or any breach by the Indemnifying Party of any covenant or obligation
set forth in this Agreement, the Collateral Documents or any other
agreement contemplated hereunder. The total liability of any party
(for indemnification or otherwise) with respect only to a breach of
such representations and warranties shall not exceed an amount equal
to the Purchase Price plus Assumed Liabilities.
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<PAGE>
K. FORM OF AGREEMENT.
1. Effect of Headings. The Section headings used in this Agreement and
the titles of the Exhibits or Schedules hereto are included for
purposes of convenience only, and shall not affect the construction or
interpretation of any of the provisions hereof or of the information
set forth in such Exhibits or Schedules.
2. Entire Agreement; Waivers. This Agreement and the other agreements and
instruments referred to herein constitute the entire agreement between
the parties pertaining to the subject matter hereof, and supersede all
prior agreements or understandings as to such subject matter. No party
hereto has made any representation or warranty or given any covenant
to the other except as set forth in this Agreement, the Exhibits and
Schedules hereto, and the other agreements and instruments referred to
herein. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver.
No waiver shall be binding unless executed in writing by the party
making the waiver.
3. Counterparts and Facsimile Signatures. This Agreement, any document or
instrument entered into, given or made pursuant to this Agreement or
authorized hereby, and any amendment or supplement thereto may be
executed in two or more counterparts and signature pages may be
transmitted by facsimile and, when so executed and transmitted, will
have the same force and effect as though all signatures were originals
and appeared on a single document. Any signature page of this
Agreement or of such an amendment, supplement, document or instrument
may be detached from any counterpart without impairing the legal
effect of any signatures thereon, and may be attached to another
counterpart identical in form thereto but having attached to it one or
more additional signature pages.
4. Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each
other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; and (iv) the term "Section" refers to the
specified Section of this Agreement. Whenever this Agreement refers to
a number of days, such number shall refer to calendar days unless
Business Days are specified. Any representation or warranty contained
herein as to the enforceability of a contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium or
other similar law affecting the enforcement of creditors' rights
generally and to general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
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<PAGE>
L. ADDITIONAL AGREEMENTS OF THE PARTIES; MISCELLANEOUS PROVISIONS.
1. Cooperation. From time to time from and after the date hereof, the
parties will execute and deliver to each other any and all further
agreements, instruments, certificates and other documents as may
reasonably be requested by the other party in order more fully to
consummate the transactions contemplated hereby, and to effect an
orderly transition of the business being acquired by Buyer hereunder.
2. Access to Information. Following the date hereof, Seller will
cooperate fully with Buyer and shall provide Buyer and its
accountants, counsel, and other representatives (including without
limitation, its bankers and other lending sources, auditors and
engineers), during normal business hours, and provide full access to
the Books and Records, Relevant Contracts, and other documents,
records, and information of Seller with respect to the Business and
the Purchased Assets, as Buyer or its representatives may reasonably
request.
3. Benefit Plan Participant Schedule. At the request of Buyer, Seller
will deliver a true and complete list of all Employees and their
beneficiaries who, as of the date hereof, participate in a Benefit
Plan of Seller and the Benefit Plans in which they participate.
4. Day Spa Employees.
a. Buyer will offer to employ all Employees who are employed at the
Day Spa Locations as of the date hereof. Such offers of
employment shall be on substantially similar terms and conditions
as their current employment, including credit for the time in
service as an employee of Seller.
b. With respect to all Employees who are offered and accept
employment with Buyer, participation in and coverage under all
Benefit Plans will terminate as of the date hereof, unless
continued participation and coverage is required by operation of
law.
5. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to
whom notice is to be given, on the day after the delivery thereof to a
recognized overnight courier service for next-day delivery with all
charges prepaid or billed to the account of the sender, or on the
third day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
If to Seller: ThermoLase Corporation
81 Wyman Street
Waltham, MA 02454
Attn: President
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<PAGE>
with a copy to: ThermoLase Corporation
81 Wyman Street
Waltham, MA 02454
Attn: General Counsel
If to Buyer: GH DAY SPAS, INC.
7 East Skippack Pike
Ambler, PA.
Attn: Gerald Katzoff, President
with a copy to: Kaplin Stewart Meloff Reiter & Stein, P.C.
350 Sentry Parkway, Building 640
P.O. Box 3037
Blue Bell, Pennsylvania 19422-0765
Attn: L. Leonard Lundy, Esq.
or to such other address as either party shall have specified by
notice in writing given to the other party.
6. Press Releases and Announcements. No party shall issue any press
release or public disclosure relating to the subject matter of this
Agreement without the prior approval of the other party, which shall
not be unreasonably delayed or withheld; provided that Seller may make
any public disclosure it believes in good faith is required by law,
regulation or stock exchange rule (in which case Seller shall advise
Buyer and provide it with a copy of the proposed disclosure prior to
making the disclosure).
7. Additional Agreements and Instruments. On or before the date hereof,
Seller and Buyer shall execute, deliver and file all exhibits,
schedules, agreements, certificates, instruments and other documents,
not inconsistent with the provisions of this Agreement and the
Collateral Documents, which, in the opinion of counsel to the parties
hereto, shall reasonably be required to be executed, delivered and
filed in order to consummate the transactions contemplated by this
Agreement and the Collateral Documents.
8. Governing Law; Jurisdiction; Arbitration. This Agreement shall be
construed and interpreted and the rights granted herein governed in
accordance with the Laws of the State of Texas, except if otherwise
provided in an Exhibit. Except with regard to any Claims for Specific
Performance as provided in Section L.12 any Claim, dispute or
controversy arising under or in connection with this Agreement or any
actual or alleged breach hereof shall be settled exclusively by
arbitration to be held before a single arbitrator in any locale or
venue as legal jurisdiction may otherwise be had over the party
against whom the proceeding is commenced, in accordance with the
commercial arbitration rules of the American Arbitration Association
then in effect. As part of his or her award, the arbitrator shall make
a fair allocation of the fee of the American Arbitration Association,
the cost of any transcript, and the parties' reasonable attorneys'
fees, taking into account the merits and good faith of the parties'
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<PAGE>
Claims and defenses. Judgment may be entered on the award so rendered
in any court having jurisdiction. Any process or other papers
hereunder may be served by registered or certified mail, return
receipt requested, or by personal service, provided that a reasonable
time for appearance or response is allowed.
9. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their successors
and permitted assigns. No party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the
prior written approval of the other party.
10. Amendments. The parties may mutually amend any provision of this
Agreement at any time. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by both
of the parties hereto.
11. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration,
or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified
after the expiration of the time within which the judgment may be
appealed.
12. Specific Performance. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of
the parties agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of
the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it
may be entitled at law or in equity.
13. Construction. The language used in this Agreement shall be deemed to
be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against
any party. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise.
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14. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and
made a part hereof.
15. Lease Obligations. Seller shall deposit by wire no later than the
second (2nd) day following the date hereof into a separate bank
account of Buyer and Seller, entitled Greenhouse Day Spas Rent Account
maintained at Norwest Bank, Fort Worth, TX, One Million Five Hundred
Thousand Dollars ($1,500,000.00) which shall be disbursed upon the
signatures of Buyer and Seller timely, to pay timely the monetary
obligations due under the Leases for the Day Spa Locations beginning
with the month of July 1999 until the balance of the funds held in
such account are depleted.
16. Cash Payment. Seller shall pay to Buyer by wire no later than the
second (2nd) day following the date hereof a cash payment in the
amount of Five Hundred Thousand Dollars ($500,000.00).
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
BUYER:
WITNESS/ATTEST: GH DAY SPAS, INC., a Pennsylvania
corporation
_______________________ By:_____________________________
Gerald Katzoff, President
SELLER:
WITNESS/ATTEST: THERMOLASE CORPORATION, a Delaware
corporation
_______________________ By:_____________________________
Gerald Feldman, President
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<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
(See Attached)
<PAGE>
EXHIBIT "B"
SECURITY AGREEMENT
(See Attached)
<PAGE>
EXHIBIT "C"
FORM OF SUBLEASE AGREEMENT
(See Attached)
<PAGE>
EXHIBIT "D"
MANAGEMENT AGREEMENT
(See Attached)
<PAGE>
EXHIBIT "E"
LICENSE AGREEMENT WITH NICKOLAI TANKOVICH
(See Attached)
<PAGE>
SCHEDULE A.15
LEASED REAL ESTATE
1. Subleased Day Spa Locations.
1. Inwood Village Shopping Center, 5560 West Lovers Lane, Suites 250 and
252, Dallas, Texas 75209.
2. 3680 Galleria, Edina, Minnesota.
3. 1950 Northern Boulevard, Manhasset, New York.
4. 242 Milwaukee Street, City and County of Denver, State of Colorado.
2. Managed Day Spa Locations.
1. 417 North Canon Drive, Beverly Hills, California 90210.
2. Kirby Oaks Shopping Center, Houston, Harris County, Texas.
3. 44-48 West Putnam Avenue, Greenwich, Connecticut.
4. Somerset Collection North, City of Troy, Oakland County, Michigan.
5. Fashion Island Shopping Center, City of Newport Beach, County of
Orange, State of California.
3. Closed Day Spa Locations.
1. 840 North Michigan Avenue, Chicago, Illinois 60611.
2. Ballet Valet, 634 Collins Avenue, Miami Beach, Florida 33139.
3. 230 Worth Avenue, Palm Beach, Florida 33480.
4. Mizner Park, 456 Plaza Real, Boca Raton, Florida 33432.
5. 7917 Ivanhoe, La Jolla, California 12037.
<PAGE>
SCHEDULE B.2
EXCLUDED ASSETS
1. Bank accounts in the name of ThermoLase Corporation, together with all
cash held in such accounts as of the date hereof.
2. Tax losses relating to the Business for periods prior to the date
hereof.
3. Refunds and claims with respect to payments made by Seller prior to
the date hereof, and causes of actions, and potential causes of action
relating to the Business and accruing prior to the date hereof.
4. Supplies located at Creative Beauty Innovations, Inc. whether
manufactured for or stored for use by the Day Spa Locations.
5. Insurance policies in the name of Seller or one of its Affiliates and
all rights to any payments to Seller and its Affiliates thereunder.
6. Benefits Plans and all rights and obligations thereunder.
7. Lease deposits. 1.
<PAGE>
SCHEDULE C.3
ALLOCATION SCHEDULE
Furniture, Fixtures and Equipment $2,500,000.00
<PAGE>
SCHEDULE E
ASSUMED LIABILITIES
1. All liability for performing services (and/or providing goods) in
satisfaction of all outstanding gift certificates and customer
deposits, and for customer prepayments for multiple treatment packages
with respect to services not yet performed.
2. Commencing on the date hereof, all liabilities for payroll, benefits
(except as required otherwise by operation of law), and withholding
taxes with respect to all Employees who accept Buyer's offer of
employment.
3. Unless agreed otherwise in writing by Seller, all continuing
obligations of Seller under contracts relating primarily to the
Business, including all agreements relating to relationships with a
physician and/or physician owned professional corporations licensed to
perform SoftLight laser hair removal and skin resurfacing, including
the supervision by Medical Directors of laser hair removal and skin
resurfacing services, all at or with respect to Day Spa Locations
only, and payment for such contractual liabilities shall be governed
by the terms of this Agreement.
4. All liabilities and obligations of Buyer under Sublease Agreements and
Management Agreements in accordance with the terms set forth therein.
<PAGE>
SCHEDULE F.10
PENDING OR THREATENED LITIGATION
1. LaserSpas, Inc. et al. V. ThermoLase Corporation, filed in Cuyahoga
County, Ohio, Court of Common Pleas. (plaintiffs claim that they have
sustained business losses as a result of the poor performance of the
SoftLight Laser, and that ThermoLase violated tie Ohio Business
Opportunity Act by failing to provide a disclosure document required
by that act)
2. Reagan Rossen V. ThermoLase, et al., filed in Los Angeles County,
California, Superior Court. (plaintiff claims that her face and neck
were permanently injured by the SoftLight treatment and that she
consulted dermatologists and plastic surgeons to repair the damage)
3. Morton Mazaheri et al. V. ThermoLase Corporation, filed in Riverside
County, California, Superior Court. (plaintiffs claim that ThennoLase
violated the California Unfair Trade Practices on the grounds that
marketing claims relating to SoftLight laser hair removal were
misleading)
4 Claudia Obermann v. ThermoLase et a!., filed in San Diego County,
California, Superior Court. (plaintiff claims wrongful termination
following disagreement with ThermoLase management regarding licensure
to perform SoftLight hair removal and skin resurfacing procedures)
5. Jamie Debrino. (letter addressed to Boca Raton Greenhouse Spa dated
May20, 1999 makes non specific claims of "severe bodily injuries"
resulting from negligence of The Greenhouse Spa, and requests
insurance coverage information)
6. Vanessa Harris v. The Greenhouse Spa. (claim before EEOC for
employment discrimination based on complainant's religion)
<PAGE>
SCHEDULE F.15
PRODUCT LIABILITY INSURANCE
Carrier: Medmarc Casualty Insurance Company
Policy No.: 99MA380019
Policy Period: July 1, 1999 to July 1, 2000
Insurance Coverage: damages and expenses for covered claims resulting from
the manufacture distribution and sale of medical products
The general aggregate limit and the limit per occurrence is not less than
$3 million
