UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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) JANUARY 24, 1997
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THE BARBERS HAIRSTYLING
FOR MEN & WOMEN, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
0-24466 41-0945858
(Commission File Number) (IRS Employer Identification Number)
300 INDUSTRIAL BOULEVARD N.E., MINNEAPOLIS, MINNESOTA 55413
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (612) 331-8500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 24, 1997, The Barbers Hairstyling for Men & Women, Inc. (the
"Company"), through its wholly-owned subsidiary, WCH, Inc., completed its
acquisition of the assets of We Care Hair Development Inc. ("WCHDI") and the
issued and outstanding capital stock of We Care Realty Inc. ("WCRI"). Pursuant
to these acquisitions, the Company will own the "We Care Hair"(R) franchise
system which includes a chain of franchisees operating approximately 140
value-priced hair care salons located throughout the United States and Mexico.
The assets of WCHDI and stock of WCRI were acquired for aggregate consideration
of $2 million in cash plus 40% of fees received from existing franchisees during
the next six years. The Asset Purchase Agreement dated December 24, 1996 with
WCHDI and the Stock Purchase Agreement dated January 24, 1997, with WCRI are
filed as Exhibits 2.1 and 2.3 of this Form 8-K. The purchase price and other
terms of the agreements were determined by negotiation between the parties.
The Company obtained the cash consideration from a loan from Norwest Bank N.A.,
which was collateralized by a first lien security interest in the Company's
accounts receivable, inventories, equipment and general intangibles.
Prior to this acquisition, there existed no relationship between WCHDI or WCRI,
and the Company or any of its affiliates, any director or officer of the Company
or any associate of any such officer or director.
ITEM 7. FINANCIAL REPORTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited financial statements of WCHDI and WCRI are currently
not available. The financial statements will be filed as soon
as practicable, but not later than April 9, 1997.
(b) Pro Forma Financial Information
The required pro forma financial information relative to the
acquisition is currently not available. The pro forma
financial information will be filed as soon as practicable,
but not later than April 9, 1997.
(c) Exhibits:
2.1 Asset Purchase Agreement dated December 24, 1996
between WCH, Inc., The Barbers, Hairstyling for Men &
Women, Inc. and We Care Hair Development Inc.
2.2 First Amendment to Asset Purchase Agreement dated
January 24, 1997 between WCH, Inc., The Barbers,
Hairstyling for Men & Women, Inc. and We Care Hair
Development Inc.
2.3 Stock Purchase Agreement dated January 24, 1997
between WCH, Inc., John F. Amico, Sr., Peter Buck,
Frederick A. DeLuca and We Care Hair Realty, Inc.
2.4 Agreement as to Post Closing Items dated January 24,
1997 between WCH, Inc., The Barbers, Hairstyling for
Men & Women, Inc., We Care Hair Development Inc., We
Care Hair Realty Inc. and John F. Amico, Sr.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
THE BARBERS HAIRSTYLING FOR
MEN & WOMEN, INC.
Dated: February 6, 1997 By: /s/ J. Brent Hanson
------------------------------------
J. Brent Hanson
Its Chief Financial Officer
ASSET PURCHASE AGREEMENT
by and among
WCH, INC.,
as the Purchaser,
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.,
as The Barbers
and
WE CARE HAIR DEVELOPMENT, INC.
as the Seller,
Effective as of December 24, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Description Page
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<S> <C> <C>
SECTION 1
SALE AND PURCHASE OF ASSETS.............................. 2
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1.1 SALE AND PURCHASE......................................................... 2
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1.2 CONSIDERATION............................................................. 2
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1.3 NO ASSUMPTION OF LIABILITIES.............................................. 3
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1.4 SALES TAXES............................................................... 3
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1.5 THE BARBERS GUARANTY...................................................... 3
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SECTION 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER................ 3
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2.1 ORGANIZATION OF THE SELLER................................................ 3
--------------------------
2.2 AUTHORITY................................................................. 4
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2.3 BINDING OBLIGATION........................................................ 4
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2.4 NO BREACH................................................................. 4
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2.5 FINANCIAL INFORMATION..................................................... 4
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2.6 TRADE NAMES, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS.................... 5
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2.7 PATENT AND PATENT RIGHTS.................................................. 5
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2.8 FRANCHISE AGREEMENTS...................................................... 5
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2.9 COMPLIANCE WITH LAWS...................................................... 6
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2.10 ACTIONS AND PROCEEDINGS................................................... 6
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2.11 SUPPLIERS AND FRANCHISEES................................................. 6
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2.12 FULL DISCLOSURE........................................................... 7
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2.13 RESOLUTION OF POTENTIAL CONFLICTS OF INTEREST............................. 7
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2.14 TITLE..................................................................... 7
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2.15 NO CONSENT................................................................ 7
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2.16 NO MATERIAL ADVERSE CHANGE................................................ 7
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2.17 COMPUTER RELATED INTELLECTUAL PROPERTY.................................... 8
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2.18 FRANCHISEE BENEFIT PLANS AND INSURANCE.................................... 9
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2.19 TAX MATTERS............................................................... 9
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2.20 DOMESTIC DEVELOPMENT AGENT AGREEMENTS..................................... 9
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2.21 INTERNATIONAL DEVELOPMENT AGREEMENTS...................................... 9
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2.22 ACCOUNTS RECEIVABLE PRIOR TO CLOSING DATE................................. 10
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2.23 CONVERSION OF FRANCHISE AGREEMENTS........................................ 10
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SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER............... 11
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3.1 ORGANIZATION OF THE PURCHASER............................................. 11
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3.2 ORGANIZATION OF THE BARBERS............................................... 11
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3.3 AUTHORITY................................................................. 11
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3.4 BINDING OBLIGATION........................................................ 11
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3.5 NO CONFLICTS.............................................................. 11
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3.6 LITIGATION AND OTHER PROCEEDINGS.......................................... 11
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3.7 WE CARE HAIR(R)CORPORATE SALONS........................................... 12
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3.8 ACCOUNTS RECEIVABLE PRIOR TO CLOSING DATE................................. 12
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3.9 CURRENT MEXICO FRANCHISE OPERATION........................................ 12
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3.10 FRANCHISE OPERATION OF LISA AND WILLIAM SCHMITZ........................... 12
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SECTION 4
THE CLOSING...................................... 12
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4.1 THE CLOSING DATE AND PLACE................................................ 12
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4.2 ACTIONS AND DELIVERIES BY THE SELLER AT THE CLOSING....................... 12
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4.3 ACTIONS AND DELIVERIES BY THE PURCHASER AND THE BARBERS AT THE CLOSING.... 13
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SECTION 5
CONDITIONS TO CLOSING................................. 13
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5.1 CONDITIONS PRECEDENT OF THE PURCHASER AND THE BARBERS..................... 13
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5.2 CONDITIONS PRECEDENT OF THE SELLER........................................ 14
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SECTION 6
THE SELLER'S OBLIGATIONS AFTER CLOSING......................... 15
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6.1 FURTHER ASSURANCES........................................................ 15
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6.2 INDEMNIFICATION BY THE SELLER............................................. 15
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SECTION 7
PURCHASER'S OBLIGATIONS AFTER CLOSING......................... 17
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7.1 FURTHER ASSURANCES........................................................ 17
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7.2 INDEMNIFICATION BY THE PURCHASER.......................................... 18
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.......................................................................... 18
SECTION 8
NONDISCLOSURE AND NON-COMPETE............................. 19
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8.1 CONFIDENTIAL INFORMATION.................................................. 19
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8.2 COVENANTS NOT TO COMPETE.................................................. 19
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8.3 REMEDIES.................................................................. 20
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8.4 PUBLIC POLICY............................................................. 20
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SECTION 9
COSTS AND BROKER'S FEES................................ 21
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9.1 COSTS BORNE BY PARTIES.................................................... 21
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9.2 BROKER'S FEES............................................................. 21
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SECTION 10
FORM OF AGREEMENT AND SEVERABILITY........................... 21
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10.1 HEADINGS.................................................................. 21
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10.2 ENTIRE AGREEMENT.......................................................... 21
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10.3 COUNTERPARTS.............................................................. 21
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10.4 SEVERABILITY.............................................................. 21
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10.5 INCORPORATION OF EXHIBITS AND SCHEDULES................................... 21
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SECTION 11
PARTIES........................................ 22
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11.1 OTHER PARTIES............................................................. 22
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11.2 ASSIGNMENT................................................................ 22
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SECTION 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................... 22
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SECTION 13
NOTICES........................................ 22
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SECTION 14
PUBLICITY; CONFIDENTIALITY............................... 23
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14.1 PUBLIC ANNOUNCEMENT....................................................... 23
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SECTION 15
GOVERNING LAW..................................... 24
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SECTION 16
ARBITRATION....................................... 24
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</TABLE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), effective as of
December 24, 1996, is made by and among WCH, INC., a Minnesota corporation, its
successors or assigns, (the "Purchaser"), THE BARBERS, HAIRSTYLING FOR MEN &
WOMEN, INC., a Minnesota corporation ("The Barbers"), and WE CARE HAIR
DEVELOPMENT, INC., a Delaware corporation (the "Seller");
W I T N E S S E T H :
WHEREAS, the Seller is the owner and operator of a hair care products
and services franchise system operating under the trade name and service mark
"We Care Hair"(R) with salon locations across the United States and
internationally (the "Business") and desires to sell certain assets of the
Business to the Purchaser; and
WHEREAS, the Seller is the owner of certain franchise agreements of the
Business described and listed on Schedule 2.8(a) attached hereto and
incorporated herein by reference, which the Purchaser desires to purchase in
accordance with Section 1.2(a) of this Agreement (the "Cash Franchise
Agreements"); and
WHEREAS, the Seller is the owner of certain franchise agreements of the
Business described and listed on Schedule 2.8(b) attached hereto and
incorporated herein by reference, which the Purchaser desires to purchase in
accordance with Section 1.2(b) of this Agreement (the "Earn Out Franchise
Agreements;" the Earn Out Franchise Agreements and the Cash Franchise Agreements
are collectively referred to as the "Franchise Agreements"); and
WHEREAS, the Seller is the owner of certain trade names, trade marks,
service marks and other intellectual property rights of the Business described
and listed on Schedule 2.6 attached hereto and incorporated herein by reference,
and all goodwill associated therewith (the "Intellectual Property Rights"); and
WHEREAS, the Seller is the owner of all rights to franchise,
subfranchise, license, sublicense, develop, own and operate hair care salons
under the trade name and service mark "We Care Hair(R)" (the "Development
Rights"; the Franchise Agreements, the Intellectual Property Rights, and the
Development Rights are hereinafter collectively referred to as the "Assets"),
subject only to the Franchise Agreements, the Agent Agreements (as defined in
Section 2.20 below), the International Agreement (as defined in Section 2.21
below), the Mexico Franchise Agreement (as defined in Section 3.9 below), the
Amico Franchise Agreement (as defined in Section 3.10 below), the Louisiana
Agreement (as defined in Section 5.1(c), below); and
WHEREAS, the Purchaser desires to purchase the Assets for the
consideration and under the terms and conditions set forth herein; and
WHEREAS, due to the Seller's expertise in and knowledge of the
Business, the Seller's competition with the Purchaser would cause the Purchaser
irreparable harm, the loss from which could not be adequately compensated by
damages in an action at law; and
WHEREAS, due to John F. Amico's expertise in and knowledge of the
Business and as partial consideration for this Agreement, John F. Amico has
agreed to execute a Confidentiality and Noncompetition Agreement in the form
attached hereto as Exhibit B;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties agree as follows:
SECTION 1
SALE AND PURCHASE OF ASSETS
1.1 SALE AND PURCHASE. Subject to and on the express reliance upon the
warranties, representations and covenants set forth in this Agreement, the
Seller does hereby agree to sell, transfer and deliver to the Purchaser and the
Purchaser does hereby agree to purchase, acquire and accept from the Seller on
the Closing Date all rights, title and interest in and to the Assets for the
consideration set forth herein.
1.2 CONSIDERATION. The purchase price for the Assets being acquired
hereunder (the "Purchase Price") shall be as follows:
(a) AT THE CLOSING. The Purchaser shall pay to the Seller Two
Million and 00/100 Dollars ($2,000,000) in cash or by wire transfer
of federal funds on the Closing Date;
(b) EARN OUT. The Purchaser shall pay to the Seller an amount equal
to forty percent (40%) of all initial franchise fees and royalties
actually received and collected by the Purchaser pursuant to the
Earn Out Franchise Agreements during the period commencing on the
day after the Closing Date and ending on the sixth anniversary of
the Closing Date (the "Earn Out"). The Earn Out shall be payable
under the following terms and conditions:
(i) No Earn Out percentage will be due from the Purchaser
with respect to franchise fees and royalties from any
salon that has not been opened within eighteen (18)
months after the Closing Date;
(ii) No Earn Out percentage will be due from the Purchaser
with respect to the first Two Hundred and Fifty
Thousand ($250,000) of franchise fees and royalties
received and collected by the Purchaser under the
Earn Out Franchise Agreements;
(iii) The Earn Out percentage will be due and payable on or
before that date which is sixty (60) days after the
expiration of each of the first six (6) Years
following the Closing Date. For purposes of this
Agreement, an "Earn Out Year" shall mean each period
of January 1 through December 31 following the
Closing Date. Notwithstanding the above, no further
payments under the Earn Out shall accrue after
January 24, 2004;
(iv) The Purchaser shall have complete discretion with
respect to the Earn Out Franchise Agreements and may
without notice to or consent from the Seller
compromise, waive, release any obligation owed by any
franchisee under the Earn Out Franchise Agreements;
and
(v) The Purchaser shall have the right to deduct from any
payments due to the Seller under this Section 1.2(b)
an amount equal to the Revised Valuation set forth on
Schedule 2.8(a) for any salon listed on such schedule
that is closed on or before the first anniversary of
the Closing Date.
1.3 NO ASSUMPTION OF LIABILITIES. The Purchaser will not assume, nor
has the Purchaser agreed to pay for, any liability, claim or other obligation of
the Seller, whether now existing or arising in the future related to acts of the
Seller before the Closing Date (with the acknowledgement by the Seller that it
shall be responsible for its acts after the Closing Date), whether accrued,
contingent or otherwise, including without limitation, any liabilities of the
Seller accrued through the Closing Date, and the Seller shall remain responsible
for, and shall pay or provide for, all such liabilities, claims and other
obligations of the Seller arising on or before the Closing Date. The Seller
shall not be responsible for performance of any obligations of the franchisor
under any Franchise Agreements or under the Cost Cutters(R) franchise agreement
executed between the franchisee and The Barbers after the Closing Date. The
Purchaser shall assume responsibility for any acts of the Purchaser or
performance of any obligations of the franchisor under the existing Franchise
Agreements or under the Cost Cutters(R) franchise agreements executed between
the franchisee and The Barbers after the Closing Date. The Purchaser shall be
responsible for administration of the Franchise Agreements in compliance with
all state and federal laws after the Closing Date.
1.4 SALES TAXES. All sales taxes, and any other transfer taxes, payable
with respect to the transfer of the Assets shall be paid on the Closing Date by
the Seller.
1.5 THE BARBERS GUARANTY. To secure the payment of the obligations of
the Purchaser under Sections 1.2(b) of this Agreement, The Barbers hereby
guarantees the prompt payment when due of all payment obligations owed to the
Seller from the Purchaser under Section 1.2(b) of this Agreement.
SECTION 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
In order to induce the Purchaser to enter into this Agreement, the
Seller represents and warrants to, and covenants with, the Purchaser as set
forth below:
2.1 ORGANIZATION OF THE SELLER. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has the corporate power and authority to own, lease and operate its properties,
to carry-out its Business as now being and as heretofore conducted, and to
execute and deliver, and to perform its obligations under, this Agreement and
any agreements to be executed in connection with this Agreement on the Closing
Date or thereafter. Each the Seller is duly qualified to conduct business in the
State of Delaware and in any other state as to which such qualification is
required by law. The Seller has duly obtained all licenses, permits, orders and
approvals under all applicable laws, regulations and ordinances that are
material to the conduct of its Business in the places and in the manner
currently conducted.
2.2 AUTHORITY. The execution, delivery, and performance of this
Agreement have been, and any agreements to be executed in connection with this
Agreement on the Closing Date will have been, duly and validly authorized and
approved by the Board of Directors and Shareholders, as necessary, of the
Seller, as evidenced by a certificate of the Secretary of the Seller to be
delivered to the Purchaser on the Closing Date, and no further corporate action
is required to authorize the execution, delivery or performance of this
Agreement, and any agreements to be executed in connection with this Agreement
on the Closing Date, by the Seller.
2.3 BINDING OBLIGATION. This Agreement has been, and any agreements to
be executed in connection with this Agreement on the Closing Date will have
been, duly executed by and on behalf of the Seller, and constitutes, or will
constitute when executed, valid and binding obligations of the Seller, which
obligations are enforceable in accordance with their terms, subject only to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws.
2.4 NO BREACH. Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby and thereby (a)
violates any provision of the Articles of Incorporation or Bylaws of the Seller;
(b) violates, conflicts with or results in the breach or termination of, or
otherwise gives any other contracting party the right to terminate, or
constitutes (or with notice or lapse of time, or both, would constitute) a
default (by way of substitution, novation or otherwise) under the terms of any
of the Franchise Agreements, the Leases (as defined below) or any contract,
mortgage, lease, bond, indenture, agreement, franchise or other instrument or
obligation that, individually or in the aggregate, would materially and
adversely affect the Seller, any of its assets or properties or the Assets; (c)
results in the creation of any lien, charge or encumbrance upon the properties
or assets of the Seller or the Assets pursuant to the terms of any such
contract, mortgage, lease, bond, indenture, agreement, franchise or other
instrument or obligation; (d) violates any judgment, order, injunction, decree
or award of any court, arbitrator, administrative agency or governmental or
regulatory body against, or binding upon, the Seller or upon the securities,
properties, Assets, or Business of the Seller; (e) constitutes a violation by
the Seller of any statute, law or regulation of any jurisdiction as such law or
regulation relates to the Seller or to the securities, properties, Assets, or
Business of the Seller that would materially and adversely affect the Seller or
any of their respective assets or properties, or the Assets; or (f) violates any
Permit (as such term is defined in Section 2.9 below) in a manner that would
materially and adversely affect the Seller or any of their respective assets or
properties, or the Assets.
2.5 FINANCIAL INFORMATION. The Seller has delivered to the Purchaser
true copies, certified by the chief financial officer or Treasurer of the
Seller, of financial information regarding royalties and sales of goods and
services by all franchisees of the Seller and the financial statements of the
Seller, audited by Robbins, Green, Horowitz, Lester & Co., LLP, for fiscal years
ended December 31, 1995, December 31, 1994 and December 31, 1993 and unaudited
interim financial statements for the nine months ended September, 30 1996 (the
"Financial Data"), which are set forth at Schedule 2.5 and incorporated herein
by reference. The audited financial statements contained within the Financial
Data for fiscal years ended 1995, 1994 and 1993 are audited in accordance with
generally accepted auditing standards, and all Financial Data is prepared in
conformity with generally accepted accounting principles, consistently applied
and in accordance with past and current practices of the Seller, so as to fairly
and accurately present the financial condition of the Seller in all material
respects as at their respective dates and for the periods then-ended. The
royalty and sales information contained within the Financial Data are true and
accurate representations of the exact information provided by the franchisees of
the Seller to the Seller for the periods reflected in such financial
information, and there is no circumstance, condition, event, arrangement or fact
that would indicate that such financial information may be materially and
adversely inaccurate.
2.6 TRADE NAMES, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS. Schedule
2.6 hereof sets forth all trade and fictitious business names, trademarks,
service marks, trade names, commercial symbols and copyrights, including but not
limited to Computer Related Intellectual Property (as defined below), used by
the Seller that are material to its Business. All of such rights are included in
the Intellectual Property Rights. The Seller does not use any of such rights by
consent of any other rightful owner thereof, and the same are fully assignable
(except as otherwise provided by law) and free and clear of any mortgages,
liens, claims, charges, security interests, encumbrances or other restrictions
or limitations whatsoever. The Seller has not received any claim of infringement
of any adversely held trademark, service mark, trade name, brand name, trade
names, commercial symbols, fictitious business name, copyright or franchise of
any other person relating to any of the rights and properties listed on Schedule
2.6.
2.7 PATENT AND PATENT RIGHTS. The Seller does not own or have rights in
or to any United States or foreign patents. There is no claim of infringement by
the Seller of any patent held, or asserted, by any other person or entity, and
the Seller knows of no basis for any such charge or claim.
2.8 FRANCHISE AGREEMENTS. Schedule 2.8(a) hereof sets forth, as of the
date hereof and as of the Closing Date, all of the Cash Franchise Agreements,
Schedule 2.8(b) hereof sets forth, as of the date hereof and as of the Closing
Date, all of the Earn Out Franchise Agreements, and Schedule 2.8(c) hereof sets
forth, as of the date hereof, and as of the Closing Date, all of the salons that
are under development. Together, Schedules 2.8(a) and 2.8(b) hereof set forth,
as of the date hereof and as of the Closing Date, all of the Franchise
Agreements under the We Care Hair(R) franchise system or any other business
system or trademark or service mark and all other contracts, agreements,
understandings or commitments with any franchisee under the We Care Hair(R)
franchise system and with any person or entity involving the Intellectual
Property Rights; attached to Schedules 2.8(a) and 2.8(b) is an accurate and
complete copy of each agreement between the Seller and each such person or
entity. There have been delivered or made available to the Purchaser true and
complete copies of all of the contracts and other written agreements set forth
on Schedules 2.8(a) and 2.8(b) or on any other Schedule. All of those contracts
and other agreements are valid, subsisting, in full force and effect (except as
otherwise provided by the terms thereof), and binding upon the Seller and on the
other parties thereto in accordance with their terms (subject to all bankruptcy
and insolvency laws) and the Seller has paid in full all amounts due by it
thereunder as of the Closing Date pursuant to this Agreement and has satisfied
in all material respects all of its liabilities and obligations thereunder and
is not in default under any of them, nor, to the knowledge of the Seller, is any
other party to any such contract or other agreement in default thereunder, nor
does any condition exist which, with notice or lapse of time or both, constitute
a default thereunder by the Seller or, to the knowledge of the Seller, by any
other party thereto, which default has or will have a materially adverse affect
on the Seller or the Assets. No approval or consent of any person is needed in
order that the contracts and other agreements as set forth on Schedule 2.8(a) or
2.8(b) or on any other Schedule continue in full force and effect following the
consummation of the transactions contemplated by this Agreement.
2.9 COMPLIANCE WITH LAWS. The Seller is not in violation of any
applicable judgment, order, injunction, award or decree. The Seller (a) is not
in violation of any material federal, state or local law, ordinance or
regulation, or any other requirement, guideline or standard of any governmental
or regulatory body, court or arbitrator applicable to the Business of the Seller
including, without limitation, state or federal franchising and business
opportunity laws, federal and state environmental or anti-trust laws, state or
federal laws relating to usury or the collection and payment of interest and
applicable state and local licensing, zoning, building and health and safety
laws and ordinances, the violation of which would materially and adversely
affect their respective assets (financial or otherwise) or the Assets and there
is no circumstance, condition, event or arrangement that is likely to materially
and adversely affect the Assets, and (b) would not be in violation of any such
law, ordinance, regulation, guideline, standard or other requirement that has
been enacted or adopted but is not yet effective if it were effective at the
date hereof or at the Closing Date. The Seller (including any professional
employees of the Seller) has all permits, licenses, orders or approvals of any
federal, state or local governmental or regulatory body (collectively, the
"Permits") that are material to or necessary in the conduct of the Business of
the Seller; all Permits are in full force and effect, no notices of violations
have been received by the Seller in respect of any Permit, no violations of the
Permits and no proceeding is pending or threatened to revoke or limit any
Permit.
2.10 ACTIONS AND PROCEEDINGS. Except as disclosed on Schedule 2.10
hereof, there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations (whether or not the defense thereof or
liabilities in respect thereof are covered by policies of insurance) pending or
threatened against, involving or affecting the Seller or any of its respective
subsidiaries, affiliates, properties or assets, including but not limited to the
Assets which, individually or in the aggregate, might have a material and
adverse effect on the transactions contemplated hereby or upon its assets,
business, operations or condition (financial or otherwise), including but not
limited to the Assets, and there are no outstanding orders, writs, injunctions,
awards, sentences or decrees of any court, governmental agency, regulatory body
or arbitration tribunal against, involving or materially affecting the Seller or
the Assets (exclusive of any statute or regulation of general applicability).
Except as disclosed in Schedule 2.10, there is no fact, event or circumstance
that may give rise to any suit, action, claim, investigation or proceeding that
would be required to be listed on Schedule 2.10, if currently pending or
threatened against the Seller. Except as disclosed in Schedule 2.10 hereof,
there are no actions, suits, claims or legal, administrative or arbitration
proceedings pending or threatened which would give rise to any right of
indemnification from the Seller or any successor to the business of the Seller.
2.11 SUPPLIERS AND FRANCHISEES.
(a) Schedule 2.11(a) hereof sets forth (i) the Seller's twenty
largest suppliers (in dollar volume) during fiscal year ended December
31, 1996 and (ii) the name and address of each of the Seller's
franchisees.
(b) Except as set forth on Schedule 2.11(b), other than upon
contract completion, no such franchisee or supplier intends to cancel
or otherwise modify its relationship with the Seller or to decrease
materially or limit its services, supplies or materials to the Seller
or its usage or purchase of the services or products of the Seller, and
the consummation of the transactions contemplated by this Agreement
will not adversely affect the ability of the Purchaser to continue such
relationship with any such supplier or franchisee.
2.12 FULL DISCLOSURE. All documents, schedules and other materials
delivered or to be delivered by or on behalf of the Seller to the Purchaser in
connection with this Agreement and the transactions contemplated hereby are true
and complete. The information furnished by or on behalf of the Seller to the
Purchaser in connection with this Agreement and the transactions contemplated
hereby does not, in light of the circumstances in which the statements contained
in the information are made, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
therein not false or misleading. There is no fact not disclosed by or on behalf
of the Seller to the Purchaser in writing which materially and adversely affects
or will materially and adversely affect the Seller's assets, properties,
business, operations or condition (financial or otherwise), including but not
limited to the Assets, and no circumstance, condition, event or arrangement that
is likely to materially and adversely affect the Assets or the ability of the
Seller to perform its obligations under this Agreement.
2.13 RESOLUTION OF POTENTIAL CONFLICTS OF INTEREST. Except as set forth
on Schedule 2.13 hereof (which shall include a brief description of any matter
disclosed thereon), neither the Seller, nor any entity controlled by the Seller
nor any officer or shareholder of the Seller:
(a) owns, directly or indirectly, any interest in (excepting
not more than 5% stock holdings for passive investment purposes in
securities of publicly held and traded companies), or is or has been
during the one-year period prior to the date hereof, an officer,
director, employee or consultant of any person or entity which is or
has been engaged in business as a competitor, franchisee, landlord,
tenant, lender, provider, customer or supplier of the Seller or of any
franchisee or other affiliate of the Seller;
(b) owns, directly or indirectly, in whole or in part, any
material tangible or intangible property that the Seller uses or the
use of which is necessary or desirable for the conduct of Business of
the Seller; or
(c) has any cause of action or other claim whatsoever against,
or owes any amount to the Seller except for any accounts receivable
arising in the ordinary course of business, accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements existing on the date hereof or the Closing Date.
2.14 TITLE. The Seller has, or will have on the Closing Date, good and
marketable title to each item of the Assets free and clear of all liens, claims,
charges, security interests, encumbrances, or other restrictions or limitations
of any nature whatsoever.
2.15 NO CONSENT. No consent of any other party and no consent, license,
approval or authorization of, or exemption by, or registration or declaration or
filing with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, validity or enforceability of this
Agreement with respect to the Seller or the consummation by the Seller of the
transactions contemplated hereby.
2.16 NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change in the assets, properties, business, operations or condition (financial
or otherwise) of the Seller, including but not limited to the Assets, the
Business, since December 31, 1995, and there is no change that is threatened,
nor has there been any damage, breach of contract, destruction or loss
materially and adversely affecting the Seller's assets, properties,
relationships with its suppliers or franchisees, business, operations or
condition (financial or otherwise), including but not limited to the Assets and
the Business.
2.17 COMPUTER RELATED INTELLECTUAL PROPERTY.
(a) Schedule 2.17(a) to this Agreement is a true and complete
list which, without extensive or revealing descriptions, sets forth the
Seller's computer related intellectual property (all of which are
included within the definition of the Intellectual Property Rights and,
therefore, within the definition of the "Assets"), including all trade
secrets, know-how, computer software programs and routines, domain
names, website content and any proprietary rights arising under the
laws of patent, copyright, trademark or trade secret under the laws of
the United States or any foreign country (collectively, "Computer
Related Intellectual Property") to which the Seller or any director,
officer, employee, or agent of the Seller has use, possessory, or
proprietary rights, whether sole or shared. The specific location of
all of the Computer Related Intellectual Property's documentation,
including its complete description, specifications, charts, procedures
and other material relating to it, is also set forth with it in
Schedule 2.17(a). The Computer Related Intellectual Property's
documentation is current, accurate and sufficient in detail and content
to identify and explain it and to allow its full and proper use by the
Purchaser without reliance on the special knowledge or memory of
others.
(b) Neither the Seller, nor any director, officer, employee or
agent of the Seller has had any such proprietary rights which have been
transferred, whether by sale, assignment or license, or have been lost
for any reason, within the past two (2) years.
(c) All parts of the Computer Related Intellectual Property
are presently protected, and are not part of the public knowledge or
literature, nor have they been used, divulged or appropriated for the
benefit of any past or present employees or other persons, or to the
detriment of the Seller, except as contemplated by the Franchise
Agreements.
(d) The Seller is the sole owner of the Computer Related
Intellectual Property free and clear of any liens, encumbrances,
restrictions or legal or equitable claims of others, except as
contemplated in the Franchise Agreements. The Seller has taken
appropriate measures to protect the secrecy, confidentiality and value
of the Computer Related Intellectual Property.
(e) Any copies of software listed on Schedule 2.17(a) are in
the Seller's possession and control, except for certain copies of
software in the possession of franchisees of the Seller set forth on
Schedule 2.17(e), which franchisees have entered into license
agreements with the Seller also included as part of Schedule 2.17(e)
hereto.
(f) For purposes of this Section 2.17, the term "computer
software programs" includes any set of arithmetic or logical
instructions mean to run on, or to control the operation of, any
computer (i) whether those instructions are a complete program, a
collection of programs making up a subsystem or system, mere
subroutines or meant to operate in conjunction with other software and
(ii) whether such instructions must be run through another computer
program (i.e., a "compiler") before being usable on a computer, be used
at execution time in conjunction with another computer program (i.e.,
"interpreter") or are in a form that can be run on a computer "as is,"
except for any necessary interfaces with the computer's microcode,
operating system or reference-resolving routines (i.e., "loaders" or
"linkage editors").
2.18 FRANCHISEE BENEFIT PLANS AND INSURANCE. Schedule 2.18 sets forth
all pension, profit sharing, thrift, retirement, employee stock ownership,
deferred compensation, stock ownership, stock purchase, performance share,
severance, welfare benefit, insurance or other similar plans, agreements,
arrangements or understandings, including but not limited to any "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), sponsored, maintained or to
which contributions are made by (a) the Seller or (b) any other organization
which is a member of a controlled group of organizations (within the meaning of
Sections 4.14(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code")) of which the Seller is a member, and which covers or
covered any of the Seller's or existing or former franchisees or any existing or
former employees of existing or former franchisees.
2.19 TAX MATTERS. The Seller has timely filed or caused to be filed all
federal, state and other tax returns, forms and information that it and he are
required to file or have obtained appropriate, effective and unexpired
extensions therefor. All of the information in the filings are accurate and such
filings accurately reflect in all respects the tax liabilities of the filing
entity. Except for those amounts set forth on Schedule 2.19(a) (each of which
shall be paid in full by the Seller on or before the Closing Date), all taxes,
assessments and other governmental charges imposed upon the Seller or upon any
of the Assets, income or franchises of the Seller, including but not limited to
the Assets or the Business, or any sales by the Seller, other than any charges
that are currently payable without penalty or interest, have been paid. The
Seller acknowledges and agrees that the Purchaser shall have the right, but not
the obligation (it being understood by all parties that the Purchaser is
assuming under this Agreement no liabilities of the Seller whatsoever), to pay,
at the Closing, any such unpaid sums owed by the Seller to the Internal Revenue
Service or any state in which the Seller owes taxes or any other taxing or
governmental agency, including, but not limited to those amounts set forth on
Schedule 2.19(a), and to deduct such amounts paid by the Purchaser from the
amounts due from the Purchaser to the Seller at the Closing or thereafter. There
is no actual or proposed tax assessment or adjustment with respect to any item
which has to do with the Seller for any fiscal period. The Seller has not waived
or extended any applicable statute of limitations relating to the assessment of
federal, state or other taxes. Except as set forth on Schedule 2.19(b), no
examination of the federal, state or other tax returns, forms or information of
the Seller is currently in progress or threatened.
2.20 DOMESTIC DEVELOPMENT AGENT AGREEMENTS. Schedule 2.20 hereof sets
forth, as of the date hereof, all of the Development Agent Agreements in effect
under or relating to the We Care Hair(R), franchise system for territories
within the United States, except for the Louisiana Agreement (the "Agent
Agreements"); attached to Schedules 2.20 is an accurate and complete copy of
each Agent Agreement between the Seller and each such person or entity. There
have been delivered or made available to the Purchaser true and complete copies
of such Agent Agreements set forth on Schedule 2.20. No other Agent Agreements
or other agreements or documents pertaining to rights affecting the We Care
Hair(R) franchise system in the United States exist as of the date hereof or as
of the Closing Date.
2.21 INTERNATIONAL DEVELOPMENT AGREEMENTS. Schedule 2.21 hereof sets
forth, as of the date hereof, all of the Development Agreements in effect under
or relating to the We Care Hair(R) franchise system for territories outside the
United States, except for the Mexico Agreement (defined below) (the
"International Agreements"); attached to Schedules 2.21 is an accurate and
complete copy of each International Agreement between the Seller and each such
person or entity. There have been delivered or made available to the Purchaser
true and complete copies of such International Agreements set forth on Schedule
2.21. No other International Agreements or other agreements or documents
pertaining to rights affecting the We Care Hair(R) franchise system outside the
United States exist as of the date hereof or as of the Closing Date.
2.22 ACCOUNTS RECEIVABLE PRIOR TO CLOSING DATE. The Seller hereby
acknowledges that all accounts receivable existing as of the Closing Date due
from franchisees under the Franchise Agreements shall remain assets of the
Seller, and the Seller agrees it will attempt to collect such accounts
receivable only through the methods and efforts of the Purchaser or with the
Purchaser's prior written consent. The Purchaser agrees to forward to the Seller
payments on such accounts receivable received by the Purchaser, but it shall be
assumed, regardless of any instructions received from the franchisee, that any
payments received by the Purchaser from such franchisees are payments of
obligations currently due to the Purchaser and only after all such obligations
are paid to the Purchaser shall any excess be forwarded to the Seller as payment
of such accounts receivable due to the Seller.
2.23 CONVERSION OF FRANCHISE AGREEMENTS. The Seller hereby covenants
and agrees to assist the Purchaser in whatever manner possible in converting the
We Care Hair(R) salons and Franchise Agreements to Cost Cutters(R) salons and
franchise agreements.
2.24 WE CARE HAIR(R) CORPORATE SALONS. Schedule 2.24 hereof sets forth,
as of the date hereof and as of the Closing Date, all of the We Care Hair(R)
corporate salons (the "Corporate Salons" and each a "Corporate Salon"). The
Seller agrees that one (1) of the Corporate Salons shall close and cease
business operations or be sold as an independent business operation prior to the
first anniversary of the Closing Date. The Seller further acknowledges and
agrees that, with respect to each of four (4) of the Corporate Salons, the
Seller will, on or prior to the first anniversary of the Closing Date, either
close such Corporate Salon, sell such Corporate Salon as an independent business
operation, begin operating such Corporate Salon pursuant to an executed and
effective We Care Hair(R) franchise agreement with terms in form and content
satisfactory to the Purchaser, or begin operating such Corporate Salon pursuant
to an executed and effective Cost Cutters(R) franchise agreement. If the Seller
elects the sell such a Corporate Salon as an independent business, then the
Seller hereby agrees that the Purchaser or The Barbers shall have a thirty (30)
day right of first refusal to purchase the assets of such Corporate Salon on
terms similar to any other potential purchaser or, if none, on terms mutually
agreed upon at that time. The Seller further acknowledges and agrees that if
such Corporate Salons are operated as either a We Care Hair(R) salon or a Cost
Cutters(R) salon, all franchise fees, royalties and other fees shall begin to
accrue after the first anniversary of the Closing Date.
SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
In order to induce the Seller to enter into this Agreement, the
Purchaser represents and warrants to, and covenants with, the Seller as set
forth below:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of Minnesota,
and has the corporate power and authority to execute and deliver, and to perform
its obligations under this Agreement and any agreements to be executed in
connection with this Agreement on the Closing Date or thereafter. The Purchaser
is a wholly-owned subsidiary of The Barbers.
3.2 ORGANIZATION OF THE BARBERS. The Barbers is a corporation duly
organized, validly existing, and in good standing under the laws of Minnesota,
and has the corporate power and authority to execute and deliver, and to perform
its obligations under this Agreement and any agreements to be executed in
connection with this Agreement on the Closing Date or thereafter.
3.3 AUTHORITY. The execution, delivery, and performance of this
Agreement have been, and any agreements to be executed in connection with this
Agreement on the Closing Date will have been, duly and validly authorized and
approved by the Boards of Directors of the Purchaser and The Barbers,
respectively, as evidenced by certificates of the Secretary of the Purchaser and
The Barbers, respectively, to be delivered to the Seller on the Closing Date,
and no further corporate action is required to authorize the execution,
delivery, or performance of this Agreement, and any agreements to be executed in
connection with this Agreement on the Closing Date.
3.4 BINDING OBLIGATION. This Agreement has been, and any agreements to
be executed in connection with this Agreement on the Closing Date will have
been, duly executed by and on behalf of the Purchaser and The Barbers, and
constitutes, or will constitute when executed, valid and binding obligations of
the Purchaser and The Barbers according to their terms, which obligations are
enforceable in accordance with their terms, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws.
3.5 NO CONFLICTS. The execution, delivery, and performance of this
Agreement, and any agreements to be executed in connection with this Agreement
on the Closing Date, by the Purchaser and the Barbers, does not and will not
violate, conflict with or result in a breach of, or constitute a default under,
any of the terms, conditions or provisions of the Articles of Incorporation or
Bylaws of each such corporation, any statute, law or regulation of any
jurisdiction as it relates to each such corporation, or any judgment, order,
injunction, decree or award of any court, arbitrator, administrative agency, or
governmental or regulatory body against or binding upon each such corporation.
3.6 LITIGATION AND OTHER PROCEEDINGS. There are no claims, actions,
suits or proceedings pending before any court or governmental authority or, to
the knowledge of the Purchaser, any investigations pending, or claims, actions,
suits, proceedings or investigations threatened, which question or challenge the
validity of this Agreement, and any agreements to be executed in connection with
this Agreement on the Closing Date, or any action taken or to be taken by the
Purchaser or The Barbers in connection with the transactions contemplated
hereby.
3.7 WE CARE HAIR(R) CORPORATE SALONS. The Purchaser agrees to allow
three (3) of the Corporate Salons set forth on Schedule 2.24, attached hereto,
to continue operating as We Care Hair(R) salons or to convert to Cost Cutters(R)
franchises, incurring no initial franchise fees or royalties until the ownership
of such salons transfers to a person or entity other than the Seller, John F.
Amico, his wife, or any son or daughter of John F. Amico. Such Corporate Salons,
whether operated as We Care Hair(R) salons or Cost Cutters(R) salons shall not
be obligated to pay initial franchise fees or royalties but shall be obligated
to pay all other fees due to the Purchaser, The Barbers or as agreed to by any
local group of franchisees, including but not limited to advertising fees on a
national or local level.
3.8 ACCOUNTS RECEIVABLE PRIOR TO CLOSING DATE. The Purchaser hereby
acknowledges that all accounts receivable existing as of the Closing Date due
from franchisees under the Franchise Agreements shall remain assets of the
Seller, and the Purchaser agrees, subject to the terms of Section 2.23 above, to
assist the Seller in the timely collection of such accounts receivable.
3.9 CURRENT MEXICO FRANCHISE OPERATION. The Purchaser acknowledges that
there currently exists a franchised We Care Hair(R) salon in Saltillo, Mexico,
which pays no franchise fees or royalties and receives no services from the
Seller and operates under a franchise agreement described and listed on Schedule
3.9 (the "Mexico Agreement"). The Purchaser agrees to continue to allow such
salon to operate under the terms and conditions of such franchise agreement.
3.10 FRANCHISE OPERATION OF LISA AND WILLIAM SCHMITZ. The Purchaser
acknowledges that there currently exists a franchised We Care Hair(R) salon at
an address of 2445 South Schaumburg Road, Schaumburg, Illinois 60194, which pays
no franchise fees or royalties and is operated under the franchise agreement
described and listed on Schedule 3.10 (the "Amico Franchise Agreement"). The
Purchaser agrees to allow such salon to operate under the terms and conditions
of such franchise agreement until the Disposition Date applicable to such salon.
Upon such Disposition Date, the franchisee must execute and thereafter must
perform all terms and conditions of either the then-current Cost Cutters(R)
franchise agreement or the then-current We Care Hair(R) franchise agreement.
SECTION 4
THE CLOSING
4.1 THE CLOSING DATE AND PLACE. The delivery of the bill of sale,
assignments, endorsements, authorizations, and other instruments of transfer for
the Assets by the Seller, and the delivery of the consideration by the Purchaser
(the "Closing") shall take place at the offices of Mackall, Crounse & Moore,
PLC, at 1400 AT&T Tower, 901 Marquette Avenue, Minneapolis, Minnesota at 9:00
a.m. Minneapolis time, or some other location as mutually agreed upon by the
parties hereto, on January 24, 1997 (the "Closing Date").
4.2 ACTIONS AND DELIVERIES BY THE SELLER AT THE CLOSING. At the
Closing, the Seller shall deliver or cause to be delivered to the Purchaser,
against delivery of the items specified in Section 4.3 and 4.4 below the
documents provided for in the Closing Memorandum set forth herein as Schedule 4.
4.3 ACTIONS AND DELIVERIES BY THE PURCHASER AND THE BARBERS AT THE
CLOSING. At the Closing, the Purchaser shall deliver or cause to be delivered to
the Seller against delivery of the items specified in Section 4.2 above:
(a) the documents provided for in the Closing Memorandum set
forth herein as Schedule 4; and
(b) the cash portion of the Purchase Price due from Purchaser
pursuant to Section 1.2(a) above.
SECTION 5
CONDITIONS TO CLOSING
5.1 CONDITIONS PRECEDENT OF THE PURCHASER AND THE BARBERS. The
obligations of the Purchaser and The Barbers under this Agreement to be
performed on the Closing Date shall be subject to the conditions that:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. On or
before the Closing Date, the representations and warranties of the
Seller contained in this Agreement or any certificate or document
delivered pursuant to the provisions of this Agreement shall be true in
all material respects on and as of the Closing Date as though such
representations and warranties were made at and as of such date;
(b) COMPLIANCE WITH AGREEMENT. On or before the Closing Date,
the Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with
by such parties prior to or at the Closing Date;
(c) AGREEMENT REGARDING LOUISIANA FRANCHISE TERRITORY. On or
before the Closing Date, the Seller shall have delivered a written
agreement regarding the right of Ron Navarro to develop We Care Hair(R)
salons in Louisiana under terms satisfactory to the Purchaser, in its
sole discretion; provided, however, the Purchaser acknowledges and
agrees that such agreement will include the rights of such developer to
develop We Care Hair(R) salons on an exclusive basis in Louisiana, the
right to do so without any obligation to pay franchise fees, no right
to receive (and no obligation of the Purchaser or others to provide)
franchise or other support or services with respect to such development
or such salons, and shall be of a perpetual duration (the "Louisiana
Agreement");
(d) AGREEMENT WITH FRANCHISEE UNDER AMICO FRANCHISE AGREEMENT.
On or before the Closing Date, the Seller shall have delivered to the
Purchaser a written agreement executed by the franchisee under the
Amico Agreement which such person or entity shall have agreed, under
terms and conditions satisfactory to the Purchaser, and pursuant to the
provisions of Section 3.10 above.
(e) LICENSE AGREEMENT WITH JOHN F. AMICO. On or before January
17, 1997, the Seller shall have delivered to the Purchaser a license
agreement governing the right of John F. Amico or any affiliated
corporation to use the trademark "We Care Hair(R)" in order to
manufacturer and sell hair care products under the We Care Hair(R)
name, with terms and conditions in form and content satisfactory to the
Purchaser.
(f) STOCK PURCHASE AGREEMENT. On or before January 17, 1997,
the Seller shall have delivered to the Purchaser a stock purchase
agreement executed by the holders of one hundred percent (100%) of the
outstanding stock of We Care Hair Realty, Inc., a Delaware corporation,
pursuant to which such shareholders shall transfer and assign all
right, title and interest in and to all such issued and outstanding
voting stock of the We Care Hair Realty, Inc. to the Purchaser, with
terms in form and content satisfactory to the Purchaser, in its sole
discretion.
(g) FINANCING OF THE PURCHASER. On or before December 24,
1996, the Purchaser shall have received from Norwest Bank, N.A.,
written confirmation that financing is available to the Purchaser for
the transactions contemplated by this Agreement with terms and
conditions satisfactory to the Purchaser, in its sole discretion.
(h) SCHEDULES TO THIS AGREEMENT. On or before January 17,
1997, the Seller shall have completed and delivered to the Purchaser
all schedules and due diligence items referenced in this Agreement, and
such schedules and due diligence items shall have been, in all cases,
in form and content acceptable to the Purchaser, in its sole
discretion.
(i) ACCOUNTING OF ADVERTISING FUND. On or before January 17,
1997, the Seller shall have provided to the Purchaser an accounting,
for the three years prior to the Closing Date, of any franchisee
advertising fund in form and content satisfactory to the Purchaser. The
balance of any such franchisee advertising fund agreed upon by the
Purchaser following such accounting shall be transferred to the
Purchaser within thirty-one (31) days of the Closing Date.
5.2 CONDITIONS PRECEDENT OF THE SELLER. The obligations of the Seller
under this Agreement to be performed on the Closing Date shall be subject to the
following conditions that, on or before the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of
the representations and warranties of the Purchaser contained in this
Agreement or any certificate or document delivered pursuant to the
provisions of this Agreement shall be true in all material respects on
and as of the Closing Date as though such representations and
warranties were made at and as of such date; and
(b) COMPLIANCE WITH AGREEMENT. The Purchaser and The Barbers
shall have performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by such
parties prior to or at the Closing Date.
SECTION 6
THE SELLER'S OBLIGATIONS AFTER CLOSING
6.1 FURTHER ASSURANCES.
(a) INSTRUMENTS. The Seller, on and at any time after the
Closing Date, will execute, acknowledge, and deliver any further
assignments, conveyances, and other assurances, documents and
instruments of transfer reasonably requested by the Purchaser and will
take any other action consistent with the terms of this Agreement that
may be reasonably requested by the Purchaser for the purpose of
selling, transferring, assigning, granting, conveying, delivering or
confirming to the Purchaser any or all of the Assets as of the Closing
Date.
(b) ROYALTY PAYMENTS; EXISTING ROYALTY RECEIVABLES. In the
event that any franchisee pays to the Seller after the Closing Date,
any royalties or other fees or sums accruing after the Closing Date,
the Seller will immediately forward and pay over to the Purchaser such
royalties or other payments. With regard to accounts receivable arising
prior to the Closing Date and due to the Seller pursuant to the
Franchise Agreements, the Seller agrees it will attempt to collect such
accounts receivable only through the methods and efforts of the
Purchaser or with the Purchaser's prior written consent. The Seller
expressly agrees that it shall not, without the prior written consent
of the Purchaser, commence legal action for the purposes of collecting
any such accounts receivable or other amounts existing on the Closing
Date against such franchisee under the Franchise Agreements.
(c) ENFORCEMENT. If reasonably requested by the Purchaser, the
Seller, at the Purchaser's sole cost and expense, further agrees to
prosecute or otherwise enforce in its own name for the benefit of the
Purchaser any claims, rights or benefits that are transferred to the
Purchaser by this Agreement and that require prosecution or enforcement
in the Seller's name.
(d) USE OF WE CARE HAIR DEVELOPMENT, INC. AS CORPORATE NAME.
The Seller agrees not to use the corporate name "We Care Hair
Development, Inc.," or any name confusingly similar to such corporate
name or to any of the Intellectual Property Rights after the Closing
Date. The Seller further agrees to deliver to the Purchaser evidence
satisfactory to the Purchaser that the Seller has taken all necessary
steps to change its corporate name on or before the Closing Date.
(e) ADVERTISING FUNDS. The balance of any franchisee
advertising fund agreed upon by the Purchaser following an accounting
under Section 5.1(i) on the Closing Date shall be transferred to the
Purchaser within thirty-one (31) days of the Closing Date.
6.2 INDEMNIFICATION BY THE SELLER.
(a) INDEMNIFICATION. Subject to the provisions of Sections
6.2(d) below, the Seller hereby agree to indemnify and hold harmless
the Purchaser and its respective officers, directors, partners,
employees, agents and counsel, from and against any and all damages or
deficiencies resulting from (i) any misrepresentation, breach of
warranty or nonfulfillment of any covenant, indemnity, undertaking or
agreement on the part of the Seller contained in this Agreement or any
agreement executed in connection with this Agreement, (ii) any
liability or obligation arising before the Closing Date from under, or
with respect to the operations of the Business or Assets and (iii) any
and all actions, suits, proceedings, demands, assessments or judgments,
costs or expenses (including, but not limited to, reasonable attorneys'
fees and other costs and expenses incident to proceedings or
investigations or to the defense of any claim) related to any of the
foregoing. Any liability under this Section 6.2 shall accrue and be due
and payable to the Purchaser as and when such damages or deficiencies
are accrued and due and payable by the Purchaser, as the case may be.
(b) WITHHOLD AND OFFSET. In the event the Purchaser claims in
writing that it is entitled to indemnification by the Seller pursuant
to this Section 6.2 specifying the amount and nature of the claim in
reasonable detail, then, among all other rights and remedies (none of
which are exclusive and all of which are cumulative), the Purchaser
shall have the right to withhold a like amount of all payments of the
Earn Out due and payable pursuant to Section 1.2 (b) above.
(c) DEFENSE OF CLAIM. If the Purchaser (the "Indemnified
Party") asserts that the Seller has become obligated to the Indemnified
Party pursuant to this Section 6.2, or in the event that any suit,
action, investigation, claim or proceeding is begun, made or instituted
as a result of which the Seller may become obligated to an Indemnified
Party under this Section 6.2, then the Indemnified Party shall give
prompt written notice thereof to the Seller. The Seller shall have the
right, at their expense and with counsel of their choosing, to control
and defend, contest, settle (at no cost to the Indemnified Party) or
otherwise protect against any such suit, action, investigation, claim
or proceeding. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by
counsel of the Indemnified Party's choice. In any event, the
Indemnified Party shall cooperate with the Seller in the defense of any
such suit, action, investigation, claim or proceeding. Without limiting
the generality of the foregoing, the Indemnified Party shall furnish
documentary or other evidence as is then in its possession as may
reasonably be requested by the Seller for the purpose of defending
against any such suit, action, investigation, claim or proceeding. In
the event that the Seller does not elect to control and defend,
contest, settle or otherwise protect against any such suit, action,
investigation, claim or proceeding, the Indemnified Party may do so and
the Seller shall indemnify the Indemnified Party and reimburse the
Indemnified Party's expenses as incurred.
(d) LIMITATIONS. Notwithstanding anything to the contrary
contained in this Agreement, the Seller shall not be liable to the
Purchaser for any amounts under this Section 6.2 unless and only to the
extent any claims against the Seller under this Section 6.2 are made by
the Purchaser by notice to the Seller on or before the third
anniversary of the Closing Date. The limitation set forth in this
Section 6.2(d) shall not apply to any actions, suits, proceedings,
demands, assessments or judgments, costs or expenses (including, but
not limited to, reasonable attorneys' fees and other costs and expenses
incident to proceedings or investigations or to the defense of any
claim) arising under or in connection with Section 2.19 or 2.9 of this
Agreement.
SECTION 7
PURCHASER'S OBLIGATIONS AFTER CLOSING
7.1 FURTHER ASSURANCES.
(a) ROYALTY PAYMENTS. The Purchaser agrees to forward and pay
over to the Seller any and all franchise fees or royalties received by
the Purchaser on or after the Closing Date from franchisees under the
Franchise Agreements to the extent such franchise fees or royalties
relate to accounts receivable existing on the Closing Date due from
such franchisees for sales generated by such franchisees, and other
liabilities accruing, prior to the Closing Date, it being understood,
however, that all payments received by the Purchaser on or after the
Closing Date from or in respect to such franchisees shall first be used
to pay all franchise fees and royalties and other obligations due from
such franchisees under the Franchise Agreements for sales generated and
other liabilities accruing on or subsequent to the Closing Date and
only the excess, if any, after all such liabilities accruing on or
after the Closing Date have been paid shall any amount be paid by the
Purchaser to the Seller for application to the accounts receivable or
other amounts due for liabilities accruing prior to the Closing Date.
Subject to the foregoing, the Purchaser acknowledges and agrees to
assist in the collection any of the franchise fees or royalties due
from such franchisees occurring prior to the Closing Date.
(b) PAYMENTS TO SELLER FOR SALONS UNDER DEVELOPMENT. The
Seller currently has certain salons under development, which salons are
identified as such on Schedule 2.8(c). In the event that one or more of
such development salons open for business within eighteen months after
the Closing Date (the "Open Development Salons"), then, with respect
the Open Development Salons, the Purchaser shall pay to the Seller the
Earn Out percentage in accordance with the terms of Section 1.2 (b)
above on all franchise fees and royalties actually received and
collected by the Purchaser from the franchisees of such Open
Development Salons. The Seller shall be paid no money with respect to
any salon under a franchise agreement listed on Schedule 2.8(c) that
opens for business on or after that date which is eighteen (18) months
after the Closing Date.
(c) CONVERSION INCENTIVE. The Purchaser hereby agrees to offer
to the franchisee of any We Care Hair(R) salon the option to convert
such salon to a Cost Cutters(R) salon under the following terms and
conditions: (i) the converting franchisee converts such We Care Hair(R)
salon to a Cost Cutters(R) salon prior to first anniversary of the
Closing Date by executing the standard Cost Cutters(R) franchise
agreement; (ii) the converting franchisee shall pay no initial
franchise fee normally required under then-current Cost Cutters(R)
standard franchise agreement; (iii) the converting franchisee shall pay
royalties at the rate of seven percent (7%) of sales generated by the
converting salon for the first two (2) years after the date of
conversion; and (iv) the converting franchisee shall pay royalties at
the rate of six percent (6%) of sales generated by the converting salon
for that period beginning on the second anniversary of the date of
conversion and extending to the end of the term of such Cost Cutters(R)
franchise agreement, all as stated in such agreement.
(d) INSTRUMENTS. The Purchaser on and at any time after the
Closing Date, will execute, acknowledge, and deliver any further
assurances, documents and instruments of transfer, reasonably requested
by the Seller and will take any other action consistent with the terms
of this Agreement that may be reasonably requested by the Seller for
the purpose of concluding the transactions contemplated by this
Agreement.
7.2 INDEMNIFICATION BY THE PURCHASER
(a) INDEMNIFICATION. Subject to the provisions of Section
7.2(c) below, the Purchaser hereby agrees to indemnify and hold
harmless the Seller, and the Seller's officers, directors, partners,
employees, agents, stockholders and counsel, from and against any and
all damages or deficiencies resulting from (i) any misrepresentation,
breach of warranty or nonfulfillment of any covenant, indemnity,
undertaking or agreement on the part of the Purchaser or The Barbers
contained in this Agreement or any agreement executed in connection
with this Agreement, (ii) any liability or obligation arising after the
Closing Date from, under, or with respect to the operation of the
Assets after the Closing Date, and (iii) any and all actions, suits,
proceedings, demands, assessments or judgments, costs or expenses
(including, but not limited to, reasonable attorneys' fees and other
costs and expenses incident to proceedings or investigations or to the
defense of any claim) related to any of the foregoing. Any liability
under this Section 7.2 shall accrue and be due and payable to the
Seller as and when such damages or deficiencies are accrued and due and
payable by the Seller, as the case may be.
(b) DEFENSE OF CLAIM. If the Seller (the "Indemnified Party")
asserts that the Purchaser has become obligated to the Indemnified
Party pursuant to this Section 7.2, or in the event that any suit,
action, investigation, claim or proceeding is begun, made or instituted
as a result of which the Purchaser may become obligated to the
Indemnified Party under this Section 7.2, then the Indemnified Party
shall give prompt written notice thereof to the Purchaser. The
Purchaser shall have the right, at its expense and with counsel of its
choosing, to control and defend, contest, settle (at no cost to the
Indemnified Party) or otherwise protest against any such suit, action,
investigation, claim or proceeding. The Indemnified Party shall have
the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of the Indemnified Party's choice. In
any event, the Indemnified Party shall cooperate fully with the
Purchaser in the defense of any such suit, action, investigation, claim
or proceeding. Without limiting the generality of the foregoing, the
Indemnified Party shall furnish the Purchaser with documentary or other
evidence as is then in its possession as may be reasonably requested by
the Purchaser for the purpose of defending against any such suit,
action, investigation, claim or proceeding. In the event that the
Purchaser does not elect to control and defend, contest, settle or
otherwise protect against any such suit, investigation, claim or
proceeding, the Indemnified Party may do so and the Purchaser shall
indemnify the Indemnified Party and reimburse the Indemnified Party's
expenses as incurred.
(c) LIMITATIONS. The indemnification set forth in this Section
7.2 shall survive the Closing Date. Notwithstanding anything to the
contrary contained in this Agreement, the Purchaser shall not be liable
to the Seller for any amounts under this Section 7.2 unless and only to
the extent any claims against the Purchaser under this Section 7.2 are
made by the Seller by notice to the Purchaser on or before the third
anniversary of the Closing Date.
SECTION 8
NONDISCLOSURE AND NON-COMPETE
8.1 CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION. For purposes of this Agreement,
"Confidential Information" shall mean any information, knowledge and
know-how, not known to the general public, regarding the Purchaser's or
The Barbers' processes and products, customers, suppliers, accounts,
financial statements, business systems, and any other information,
knowledge and know-how relating to the Purchaser's or The Barbers'
business, including, but not limited to, any information, knowledge and
know-how regarding the Purchaser's or The Barbers' research,
development, purchasing, pricing, franchising, accounting, engineering,
marketing, merchandising, selling, leasing, servicing, financing and
business techniques. In addition, "Confidential Information" shall mean
any information disclosed to the Seller, or to which the Seller obtains
access, whether originated by the Seller or by others, which the Seller
should reasonably believe to be confidential or proprietary to the
Purchaser or The Barbers, or which is treated by the Purchaser or The
Barbers as being confidential or proprietary. "Confidential
Information" shall include, but not be limited to, trade secret and all
client and customer information of the Purchaser.
(b) NONDISCLOSURE. The Seller shall not in any manner or form
disclose, provide or otherwise make available, in whole or in part, any
Confidential Information to any person or entity without the prior
written consent of the Purchaser or The Barbers, as the case may be.
The Seller shall not in any manner or form use or permit others within
the Seller's control to use any Confidential Information for the
Seller's or Amico's own account or for the account of others without
the prior written consent of the Purchaser or The Barbers, as the case
may be. The Seller shall take all necessary or advisable action,
whether by instruction, agreement or otherwise, to insure the
protection, confidentiality and security of, and to satisfy the
Seller's obligations under this Agreement with respect to the
protection, confidentiality and security of, all Confidential
Information.
8.2 COVENANTS NOT TO COMPETE.
(a) DURING RESTRICTED PERIOD. Except with the prior written
consent of the Purchaser, the Seller shall not, within the geographic
limits of the United States of America, for the period of fifteen (15)
years after the Closing Date (the "Restricted Period"), on the Seller's
own account, or as a consultant, partner, associate, agent, or
shareholder of any other person, firm, entity, partnership or
corporation:
(i) solicit, accept or receive any commissions, fees
or income, including but not limited to commissions from or in
respect of any business competitive to the business or
services of the Purchaser or The Barbers from any person or
entity which was or is an account, client, or customer of the
Purchaser or The Barbers prior to or during the Restricted
Period, or
(ii) contact, solicit or call upon any person or
entity which was or is an account, client or customer of the
Purchaser or The Barbers prior to or during the Restricted
Period for the purpose of selling, providing or performing
business competitive to the business of the Purchaser or The
Barbers; or
(iii) induce or attempt to induce any person or
entity to curtail or cancel any business which such person or
entity had with the Purchaser or The Barbers; or
(iv) induce or attempt to influence any employee of
the Purchaser or The Barbers to terminate his or her
employment with the Purchaser or The Barbers; or
(v) own, operate, lease, franchise, conduct, engage
in, be connected with, have any interest in or assist any
person or entity engaged in any business competitive to the
business of the Purchaser or The Barbers.
The Seller expressly agrees that the time period and the described scope are the
reasonable and necessary time and scope needed to protect the legitimate
business interests of the Purchaser and The Barbers. Nothing contained in this
Section 8.2 shall prevent or restrict the Seller from owning or acquiring,
directly or indirectly, not more than five percent (5%) of the securities of any
publicly held and traded company for the purposes of passive investment.
(b) EXTENSION DURING BREACH. The Seller agrees that the time
period described in Section 8.2 shall be extended beyond such period
for a period equal to the duration of any breach of this Section 8.2 by
the Seller.
(c) "COMPETITIVE" BUSINESS. For the purposes of this Section
8, a business or activity shall be "competitive" to the business or
services of the Purchaser or The Barbers if such business activity
involves in any fashion in the hair care services industry, unless (i)
such activity is limited exclusively to the manufacture, distribution
and sale of hair care products; or (ii) such activity is limited to the
ownership and operation of the salons listed on Schedule 8.2(c)
attached hereto.
8.3 REMEDIES. The Seller agrees that the provisions of this Section 8
are necessary to protect the legitimate business interests of the Purchaser and
The Barbers and The Barbers and to prevent the unauthorized dissemination and
use of Confidential Information and Innovations to and by competitors of the
Purchaser and The Barbers. The Seller also agrees that the Purchaser and The
Barbers will be irreparably harmed and that damages alone cannot adequately
compensate the Purchaser and The Barbers if there is a violation or breach by
the Seller of this Agreement, and that injunctive relief is essential for the
protection of the Purchaser and The Barbers. The Seller therefore agrees that in
case of any alleged violation or breach by the Seller of this Agreement, the
Purchaser and The Barbers shall be entitled to specific performance of this
Agreement and shall be entitled to obtain injunctive relief without posting any
bond or security whatsoever. The rights to such equitable remedies as provided
in this Section 8 shall be in addition to all other rights and remedies which
the Purchaser and The Barbers may have under this Agreement or applicable law.
8.4 PUBLIC POLICY. It is the desire and intent of the Purchaser, The
Barbers and the Seller that the provisions of this Section 8 be enforced to the
fullest extent permissible under the laws and public policy applied in each
jurisdiction in which enforcement is sought. Accordingly, if any part of this
Section 8 is adjudicated to be invalid or unenforceable, then this Section 8
shall be deemed amended to delete that portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section 8 in the particular jurisdiction in which such adjudication is made.
Further, to the extent any provision of this Section 8 deemed unenforceable by
virtue of its scope or limitation, the Purchaser, The Barbers and the Seller
agree that such provision shall, nevertheless, be enforceable to the fullest
extent permissible under the laws and public policies applied in such
jurisdiction where enforcement is sought.
SECTION 9
COSTS AND BROKER'S FEES
9.1 COSTS BORNE BY PARTIES. Except as otherwise provided herein, the
Seller and the Purchaser shall pay all costs and expenses incurred by them in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
9.2 BROKER'S FEES. The Purchaser and the Seller each represent and
warrant to the other that it or they did not deal directly or indirectly with or
through any broker or finder in connection with the transactions contemplated by
this Agreement.
SECTION 10
FORM OF AGREEMENT AND SEVERABILITY
10.1 HEADINGS. The subject headings of the Sections of this Agreement
are not a part of this Agreement and are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of its
provisions.
10.2 ENTIRE AGREEMENT. This Agreement, and the agreements executed in
connection with this Agreement, constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party against whom enforcement is
sought. No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, 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.
10.3 COUNTERPARTS. This Agreement may be executed simultaneously in
more than one counterpart, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.4 SEVERABILITY. If any terms or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity of the other terms
and provisions hereof shall in no way be affected thereby.
10.5 INCORPORATION OF EXHIBITS AND SCHEDULES. All exhibits and
schedules attached hereto in this Agreement are incorporated in this Agreement
as though fully set forth herein.
SECTION 11
PARTIES
11.1 OTHER PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action against any party to this Agreement.
11.2 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, and obligations hereunder shall be assigned by any of
the parties hereto without prior written consent of each of the other parties
hereto.
SECTION 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, opinions, or other writings provided
for in this Agreement and the covenants and agreements to be performed or
complied with by the respective parties before or on or after the Closing Date
shall be deemed to be continuing and shall survive the Closing.
SECTION 13
NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a) on
the date of service if served personally on the party to whom notice is to be
given, (b) on the second 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 set forth below, or (c) on the first day
after delivering the same to a reputable courier service, such as DHL or FedEx
if delivered to such courier service, fees prepaid, with the instructions to
deliver the same under the quickest service possible to the addresses set forth
below:
To the Seller (prior to closing): WE CARE HAIR DEVELOPMENT, INC.
4731 West 136th Street
Crestwood, IL 60445
Attention: Mr. John F. Amico,
President
With a Copy To: __________________________________________
__________________________________________
__________________________________________
__________________________________________
Attention: ____________________________
To the Seller (after to closing): ___________________________________
4731 West 136th Street
Crestwood, IL 60445
Attention: Mr. John F. Amico,
President
With a Copy To: __________________________________________
__________________________________________
__________________________________________
__________________________________________
Attention: ____________________________
To the Purchaser: WCH, INC.
300 Industrial Blvd., NE
Minneapolis MN 55413
Attention: Mr. Frederick Huggins, Jr.
With a Copy To: MACKALL, CROUNSE & MOORE, PLC
1400 AT&T Tower
901 Marquette Avenue
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
To The Barbers: THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
300 Industrial Blvd., NE
Minneapolis MN 55413
Attention: Mr. Frederick Huggins, Jr.
With a Copy To: MACKALL, CROUNSE & MOORE, PLC
1400 AT&T Tower
901 Marquette Avenue
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
Any party may change its address for purposes of this Section by giving the
other parties notice of the new address in the manner set forth above; provided,
however, any notice of change of address shall not be effective until received.
SECTION 14
PUBLICITY; CONFIDENTIALITY
14.1 PUBLIC ANNOUNCEMENT. Except as required by federal securities laws
or applicable state securities laws and announcement to its franchisees by The
Barbers, the parties agree not to make any public announcement of this
transaction or any of its terms or conditions without first consulting with and
obtaining the prior written consent of all parties.
SECTION 15
GOVERNING LAW
This Agreement, the rights and obligations hereunder, and the remedies
available hereunder or at law shall be governed and construed in accordance with
the substantive laws of the State of Minnesota. By execution of this Agreement,
the parties hereto agree to submit to personal jurisdiction in the State of
Minnesota for the purposes of any suit or proceeding brought to enforce or
construe the terms and conditions of this Agreement.
SECTION 16
ARBITRATION
Any dispute, claim or controversy arising out of relating to this
Agreement, or breach, termination or invalidity thereof, shall be finally
settled by arbitration in accordance with applicable procedural rules of the
American Arbitration Association in effect on the date of execution of this
Agreement by one (1) arbitrator selected and mutually agreed upon by the
Purchaser, The Barbers and the Seller. In the event that the parties hereto are
unable to select an arbitrator, then any party to the Agreement may request that
the American Arbitration Association select an arbitrator. The place of
arbitration shall be Minneapolis, Minnesota. The determination of the arbitrator
shall be final and binding upon the parties to the arbitration. Judgment upon
any award rendered by the arbitrator may be entered in any court of competent
jurisdiction. In the event that arbitration proceedings are commenced by any
party hereto against any other party in connection with this Agreement or the
transactions contemplated hereby, the party that does not prevail in such
proceedings shall pay its own expenses and the reasonable attorneys' fees, court
costs, litigation expenses and other costs and expenses incurred by the
prevailing party in such proceedings.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed to be effective as of the date first above written.
The "Seller"
WE CARE HAIR DEVELOPMENT, INC.
By /s/ John F. Amico
------------------------------------
John F. Amico
Its President
The "Purchaser"
WCH, INC.
By /s/ Frederick A. Huggins, Jr.
------------------------------------
Frederick A. Huggins, Jr.
Its President
"The Barbers"
THE BARBERS, HAIRSTYLING FOR
MEN & WOMEN, INC.
By /s/ Frederick A. Huggins, Jr.
------------------------------------
Frederick A. Huggins, Jr.
Its President
FIRST AMENDMENT
TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment"), is
entered into to be effective as of January 24, 1997, by and among WCH, INC., a
Minnesota corporation, its successors or assigns, (the "Purchaser"), THE
BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC., a Minnesota corporation ("The
Barbers"), and WE CARE HAIR DEVELOPMENT INC., a Delaware corporation (the
"Seller");
W I T N E S S E T H
WHEREAS, the parties to this Amendment entered into that certain Asset
Purchase Agreement dated as of December 24, 1996 for the transfer of certain
assets of the Seller (the "Asset Purchase Agreement"); and
WHEREAS, the parties wish to amend, supplement and clarify the terms of
the Asset Purchase Agreement in accordance with the terms of this Amendment;
NOW THEREFORE, in consideration of the foregoing, the mutual promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties agree as follows:
1. DEFINITIONS. Unless otherwise defined in this Amendment, all
capitalized terms used in this Amendment shall have the meanings subscribed to
them in the Asset Purchase Agreement.
2. EARN OUT CLARIFICATIONS. The Asset Purchase Agreement is amended to
incorporate the following clarifications pertaining to payment of the Earn Out:
(a) If any salon for which the Earn Out percentage would otherwise
be payable pursuant to the Asset Purchase Agreement converts
from a We Care Hair(R) franchise to a Cost Cutters(R)
franchise, then the Earn Out percentage shall continue to be
payable pursuant to the Asset Purchase Agreement as if the
salon had remained a We Care Hair(R) franchise.
(b) Under no circumstances will any Earn Out percentage be payable
under the Asset Purchase Agreement with respect to any salon
not listed on Schedule 2.8(b), Schedule 2.8(c), or Schedule
2.8(d). For example (but not by way of limitation), no Earn
Out percentage will be payable with respect to any Cost
Cutters(R) or We Care Hair(R) salon sold, even to an existing
We Care Hair(R) franchisee, if such salon is not listed on one
of Schedules 2.8(b), 2.8(c) or 2.8(d).
(c) Under no circumstances will any Earn Out percentage be payable
under the Asset Purchase Agreement with respect to any
advertising, initial or other franchise fees other than weekly
royalties actually collected by the Purchaser. In that regard,
the phrase "initial franchise fees and" found in Section
1.2(b) of the Asset Purchase Agreement is hereby strickened
and replaced with the word "weekly" and the phrase "franchise
fees and" found in Section 7.1(b) of the Asset Purchase
Agreement is hereby strickened and replaced with the word
"weekly."
(d) Certain individuals have expressed interest in purchasing a We
Care Hair(R)franchise from the Seller and those individuals
and the number of salons to be sold to such individuals are
set forth on Schedule 2.8(d) of the Asset Purchase Agreement.
In the event that any such salon listed on Schedule 2.8(d)
opens for business within eighteen (18) months after the
Closing Date, then, with respect to such salon, the Purchaser
shall pay to the Seller the Earn Out percentage in accordance
with the terms of Section 1.2(b) of the Asset Purchase
Agreement on all weekly royalties actually received and
collected by the Purchaser from the franchisee of such salon.
The Seller shall be paid no money with respect to any salon
listed on Schedule 2.8(d) that opens for business on or after
that date which is eighteen (18) months after the Closing
Date.
3. REVISED REPRESENTATION 2.22. Section 2.22 of the Asset Purchase
Agreement is hereby amended to read as follows:
The Seller hereby acknowledges that all accounts receivable
existing as of the Closing Date due from franchisees under the
Franchise Agreements shall remain assets of the Seller, and
the Seller agrees it will attempt to collect such accounts
receivable only through the methods and efforts of the
Purchaser or with the Purchaser's prior written consent. The
Purchaser agrees to forward to the Seller payments on such
accounts receivable received by the Purchaser, but it shall be
assumed, regardless of any instructions received from a
franchisee, that a payment received by the Purchaser from a
franchisee is payment of obligations currently due to the
Purchaser from such franchisee and only after all such
obligations from such franchisee are paid to the Purchaser
shall any excess be forwarded to the Seller as payment of such
account receivable due to the Seller from such franchisee.
4. REVISED REPRESENTATION 2.23. Section 2.23 of the Asset Purchase
Agreement is hereby amended to read as follows:
The Seller hereby covenants and agrees to assist the Purchaser
in every commercially reasonably manner to convert the We Care
Hair(R) salons and Franchise Agreements to Cost Cutters(R)
salons and franchise agreements.
5. AMENDMENT TO SECTION 6.2(b). Section 6.2(b) of the Asset Purchase
Agreement is hereby amended to read as follows:
In the event the Purchaser claims in writing that it is
entitled to indemnification by the Seller pursuant to this
Section 6.2 specifying the amount and nature of the claim in
reasonable detail, then, notwithstanding any language to the
contrary contained in this Agreement, the Purchaser's sole and
exclusive remedy and recourse to satisfy such obligation of
indemnification shall be to withhold and retain a like amount
of any payments due to the Seller under this Agreement. Upon
resolution of any such claim, and if such resolution involves
less funds than have been withheld by the Purchaser pursuant
to this Section 6.2(b), then the Purchaser shall release to
the Seller any excess of such funds so withheld.
6. AMENDMENT TO SECTION 7.1(a). Section 7.1(a) of the Asset Purchase
Agreement is hereby amended to read as follows:
The Purchaser agrees to forward and pay over to the
Seller any and all franchise fees or royalties received by the
Purchaser on or after the Closing Date from franchisees under
the Franchise Agreements to the extent such franchise fees or
royalties relate to accounts receivable existing on the
Closing Date due from such franchisees for sales generated by
such franchisees, and other liabilities accruing, prior to the
Closing Date, it being understood, however, that any payment
received by the Purchaser on of after the Closing Date from or
in respect to any such franchisee shall first be used to pay
all franchise fees and royalties and other obligations due
from such franchisee under the Franchise Agreements for sales
generated and other liabilities accruing on or subsequent to
the Closing Date and only the excess, if any, after all such
liabilities of such franchisee accruing on or after the
Closing Date have been paid shall any amount be paid by the
Purchaser to the Seller for application to the account
receivable or other amounts due to Seller from such franchisee
for liabilities accruing prior to the Closing Date. Subject to
the foregoing, the Purchaser acknowledges and agrees to assist
in the collection of any of the franchise fees or royalties
due from such franchisees occurring prior to the Closing Date.
7. AMENDMENT TO SECTION 13. The addresses for notices set forth in
Section 13 of the Asset Purchase Agreement are hereby replaced with following
addresses:
To the Seller (prior to closing): WE CARE HAIR DEVELOPMENT INC.
4731 West 136th Street
Crestwood, IL 60445
Attention: Mr. John F. Amico, Sr.
President
With a Copy To: GREGORY J. ELLIS & ASSOCIATES, LTD.
999 Plaza Drive, Suite 777
Schaumburg, IL 60173
Attention: Mr. Gregory J. Ellis
Attorney at Law
and
LEGAL DEPARTMENT
325 Bic Drive
Milford, CT 06460
Attention: Mr. Robert S. Burstein
Attorney at Law
To the Seller (after the closing): ACHIEVERS III, INC.
4731 West 136th Street
Crestwood, IL 60445
Attention: Mr. John F. Amico, Sr.
President
With a Copy To: GREGORY J. ELLIS & ASSOCIATES, LTD.
999 Plaza Drive, Suite 777
Schaumburg, IL 60173
Attention: Mr. Gregory J. Ellis
Attorney at Law
and
LEGAL DEPARTMENT
325 Bic Drive
Milford, CT 06460
Attention: Mr. Robert S. Burstein
Attorney at Law
To the Purchaser: WCH, INC.
300 Industrial Blvd., NE
Minneapolis, MN 55413
Attention: Mr. Frederick A. Huggins, Jr.
With a Copy To: GRAY, PLANT, MOOTY, MOOTY &
BENNETT, P.A.
3400 City Center; 33 South Sixth Street
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
To The Barbers: THE BARBERS, HAIRSTYLING FOR MEN &
WOMEN, INC.
300 Industrial Blvd., NE
Minneapolis, MN 55413
Attention: Mr. Frederick A. Huggins, Jr.
With a Copy To: GRAY, PLANT, MOOTY, MOOTY &
BENNETT, P.A.
3400 City Center; 33 South Sixth Street
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
8. AMENDMENT TO REPRESENTATION 2.4. The phrase "Except as disclosed in
Schedule 2.4 hereof," is hereby added to the beginning of Section 2.4 of the
Asset Purchase Agreement.
9. AMENDMENT TO REPRESENTATION 2.8. The following sentence is added to
Section 2.8 of the Asset Purchase Agreement:
All of the representations and warranties contained in this
Section 2.8 are subject to the exceptions set forth on
Schedule 2.8 hereof.
10. AMENDMENT TO REPRESENTATION 2.9. The following sentence is added to
Section 2.9 of the Asset Purchase Agreement:
All of the representations and warranties contained in this
Section 2.9 are subject to the exceptions set forth on
Schedule 2.9 hereof.
11. AMENDMENT TO REPRESENTATION 2.15. The phrase "Except as disclosed
on Schedule 2.15 hereof," is hereby added to the beginning of Section 2.15 of
the Asset Purchase Agreement.
12. AMENDMENT TO REPRESENTATION 2.16. The phrase "Except as disclosed
on Schedule 2.16 hereof," is hereby added to the beginning of Section 2.16 of
the Asset Purchase Agreement.
13. ADDITIONS TO EXHIBIT A. The following schedules are added to the
list of schedules contained on Exhibit A to the Asset Purchase Agreement:
Section Number Description
-------------- -----------
2.4 Exceptions to No Breach
2.8 Exceptions to Franchise Agreements
2.8(d) "Expression of Interest" Salons
2.9 Exceptions to Compliance with Laws
2.15 Exceptions to No Consent
2.16 Exceptions to No Change
14. AMENDMENT TO FINANCIAL INFORMATION. Section 2.5 of the Asset
Purchase Agreement is hereby amended by adding a requirement that the Seller
deliver to the Purchaser, in addition to the financial information set forth in
such Section 2.5, unaudited interim financial statements for the nine (9) months
ended September 30, 1995, and the definition of "Financial Data" is hereby
expanded accordingly.
15. ADDITIONAL REPRESENTATION REGARDING EFT AUTHORITY. The Asset
Purchase Agreement is hereby amended by adding the following representation:
The Seller does hereby represent and warrant to the Purchaser
that the Seller has the authority to withdraw funds from the
accounts of the franchisees which the Seller draws from under
the Electronic Fund Transfer Agreement entered into between
the Seller and the Purchaser as of the date of this Agreement.
16. CLARIFICATION TO SECTION 7.1(c). Section 7.1(c) of the Asset
Purchase Agreement is hereby amended by adding the following sentence to it:
This Section 7.1(c) shall apply and refer to only those salons
listed on Schedules 2.8(a) and 2.8(b) hereof.
17. ADDITIONAL REPRESENTATION REGARDING OHIO EXCLUSIONARY ZONE. The
Asset Purchase Agreement is hereby amended by adding the following
representation to it:
The Seller does hereby represent and warrant to the Purchaser
that the existence of the 15 mile exclusionary zone in Ohio as
noted by the Seller on Schedule 2.6 hereof does not create or
cause any violation or breach of any agreement entered into by
the Seller.
18. NO FURTHER CHANGE. Except as amended, clarified and supplemented by
this Amendment, the Asset Purchase Agreement shall remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and effective as of the date first above written.
The "Seller"
WE CARE HAIR DEVELOPMENT INC.
By: /s/ John F. Amico, Sr.
-------------------------------------
John F. Amico, Sr.
Its President
The "Purchaser"
WCH, INC.
By: /s/ Frederick A. Huggins, Jr.
-------------------------------------
Frederick A. Huggins, Jr.
Its President
"The Barbers"
THE BARBERS, HAIRSTYLING FOR
MEN & WOMEN, INC.
By: /s/ Frederick A. Huggins, Jr.
-------------------------------------
Frederick A. Huggins, Jr.
Its President
STOCK PURCHASE AGREEMENT
by and among
WCH, INC.,
as the Purchaser,
JOHN F. AMICO, SR.
PETER BUCK, AND
FREDERICK A. DELUCA,
as the Sellers
and
WE CARE HAIR REALTY, INC.
as WCHR,
Effective as of January 24, 1997
TABLE OF CONTENTS
Section Description Page
SECTION 1 SALE AND PURCHASE OF STOCK.................................... 1
1.1 Sale and Purchase............................................. 1
1.2 Consideration................................................. 1
1.3 We Care Hair Development Inc. Guaranty........................ 2
SECTION 2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLERS
AND WCHR...................................................... 2
2.1 Organization of WCHR.......................................... 2
2.2 Authority..................................................... 2
2.3 Binding Obligation............................................ 2
2.4 No Breach..................................................... 2
2.5 Capital Stock................................................. 3
2.6 Financial Information......................................... 3
2.7 Trade Names, Trademarks, Service Marks, and Copyrights........ 3
2.8 Patent and Patent Rights...................................... 3
2.9 Leases........................................................ 3
2.10 Compliance with Laws.......................................... 4
2.11 Environmental Laws............................................ 4
2.12 Actions and Proceedings....................................... 5
2.13 Full Disclosure............................................... 5
2.14 Resolution of Potential Conflicts of Interest................. 5
2.15 Title......................................................... 6
2.16 No Consent.................................................... 6
2.17 No Material Adverse Change.................................... 6
2.18 Computer Related Intellectual Property........................ 6
2.19 Employee Benefit Plans and Insurance.......................... 7
2.20 Tax Matters................................................... 8
2.21 Tax Consequences.............................................. 8
SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.... 8
3.1 Organization of the Purchaser................................. 8
3.2 Authority..................................................... 8
3.3 Binding Obligation............................................ 8
3.4 No Conflicts.................................................. 9
3.5 Litigation and Other Proceedings.............................. 9
3.6 Investment Representations.................................... 9
3.7 No Consent.................................................... 9
3.8 Full Disclosure............................................... 10
SECTION 4 THE CLOSING................................................... 10
4.1 The Closing Date and Place.................................... 10
4.2 Actions and Deliveries by the Sellers At the Closing.......... 10
4.3 Actions and Deliveries by the Purchaser at the Closing........ 10
SECTION 5 CONDITIONS TO CLOSING......................................... 11
5.1 Conditions Precedent of the Purchaser......................... 11
5.2 Conditions Precedent of the Sellers........................... 11
SECTION 6 THE SELLERS' OBLIGATIONS AFTER CLOSING........................ 12
6.1 Further Assurances............................................ 12
6.2 Indemnification by the Sellers................................ 12
SECTION 7 PURCHASER'S OBLIGATIONS AFTER CLOSING......................... 14
7.1 Further Assurances............................................ 14
7.2 Indemnification by the Purchaser.............................. 14
SECTION 8 COSTS AND BROKER'S FEES....................................... 15
8.1 Costs Borne by Parties........................................ 15
8.2 Broker's Fees................................................. 15
SECTION 9 FORM OF AGREEMENT AND SEVERABILITY............................ 15
9.1 Headings...................................................... 15
9.2 Entire Agreement.............................................. 15
9.3 Counterparts.................................................. 15
9.4 Severability.................................................. 15
9.5 Incorporation of Exhibits and Schedules....................... 15
SECTION 10 PARTIES....................................................... 16
10.1 Other Parties................................................. 16
10.2 Assignment.................................................... 16
SECTION 11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................... 16
SECTION 12 NOTICES....................................................... 16
SECTION 13 PUBLICITY; CONFIDENTIALITY.................................... 18
13.1 Public Announcement........................................... 18
SECTION 14 GOVERNING LAW................................................. 18
SECTION 15 ARBITRATION................................................... 18
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), effective as of
January 24, 1997, is made by and among WCH, INC., a Minnesota corporation, its
successors or assigns, (the "Purchaser"), JOHN F. AMICO, SR., an individual
residing in Florida ("Amico"), PETER BUCK, an individual residing in Connecticut
("Buck"), FREDERICK A. DELUCA, an individual residing in Florida ("DeLuca" and
together with Amico and Buck, with joint and several liability, the "Sellers"),
and WE CARE HAIR REALTY, INC., a Delaware corporation ("WCHR");
W I T N E S S E T H :
WHEREAS, WCHR has authorized capital of Ten Thousand (10,000) shares of
common stock par value of one cent ($.01) per share, of which there are
presently outstanding and validly issued Four Thousand (4,000) shares; and
WHEREAS, Amico, Buck and DeLuca are the owners of Two Thousand (2,000),
One Thousand (1,000), and One Thousand (1,000) validly issued and outstanding
shares of WCHR, respectively; and
WHEREAS, the Sellers are willing to sell to the Purchaser all of the
Sellers' rights, title and interest in and to their shares of the Company on the
terms and conditions hereinafter set forth; and
WHEREAS, the Purchaser is willing to purchase from the Sellers all of
the Sellers' rights, title and interest in and to their shares of the Company on
the terms and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement and of One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties to this Agreement, it is agreed as follows:
SECTION 1
SALE AND PURCHASE OF STOCK
1.1 SALE AND PURCHASE. Subject to and on the express reliance upon the
warranties, representations and covenants set forth in this Agreement, the
Sellers do hereby agree to sell, transfer and assign to the Purchaser and the
Purchaser does hereby agree to purchase, acquire and accept from the Sellers on
the Closing Date all rights, title and interest in and to one hundred percent
(100%) of the total issued and outstanding shares of WCHR presently owned by the
Sellers and evidenced by stock certificates numbered 4, 3 and 2 (the "Purchased
Shares").
1.2 CONSIDERATION. The Purchaser shall pay the Sellers, on the Closing
Date, as and for the purchase price of the Purchased Shares, the sum of One
Hundred Dollar ($100.00) (the "Purchase Price"). As additional consideration for
the transfer of the Purchased Shares and the execution and delivery of this
Agreement by the Sellers, the Purchaser has entered into that certain Asset
Purchase Agreement by and among the Purchaser, The Barbers, Hairstyling For Men
& Women, Inc., a Minnesota corporation, and We Care Hair Development Inc., a
Delaware corporation, dated to be effective as of December 24, 1996 (the "Asset
Purchase Agreement").
1.3 WE CARE HAIR DEVELOPMENT INC. GUARANTY. To secure the performance
of the payment and other obligations, including but not limited to the accuracy
of all representations and warranties made in this Agreement, of the Sellers
under this Agreement, the Sellers agree to cause We Care Hair Development Inc.
to execute and deliver to the Purchaser on the Closing Date a guaranty in the
form attached hereto as Exhibit B and incorporated herein by reference (the
"Guaranty").
SECTION 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLERS AND WCHR
In order to induce the Purchaser to enter into this Agreement, each of
WCHR and the Sellers represents and warrants to, and covenants with, the
Purchaser as set forth below:
2.1 ORGANIZATION OF WCHR. WCHR is a corporation duly organized, validly
existing and in good standing under the laws of Delaware and any other state
material to the operation of its business and has the corporate power and
authority to own, lease and operate its properties, to carry-out its business as
now being and as heretofore conducted, and to execute and deliver, and to
perform its obligations under, this Agreement and any agreements to be executed
in connection with this Agreement on the Closing Date or thereafter. WCHR is
duly qualified to conduct business in the State of Delaware and in any other
state as to which such qualification is required by law. WCHR has duly obtained
all licenses, permits, orders and approvals under all applicable laws,
regulations and ordinances that are material to the conduct of its business in
the places and in the manner currently conducted.
2.2 AUTHORITY. The execution, delivery, and performance of this
Agreement have been, and any agreements to be executed in connection with this
Agreement on the Closing Date will have been, duly and validly authorized and
approved by the Board of Directors and Shareholders, as necessary, of WCHR as
evidenced by a certificate of the Secretary of WCHR to be delivered to the
Purchaser on the Closing Date, and no further corporate action is required to
authorize the execution, delivery or performance of this Agreement, and any
agreements to be executed in connection with this Agreement on or before the
Closing Date, by WCHR. The Sellers are under no legal disability and have the
legal power and right to execute, deliver and perform this Agreement.
2.3 BINDING OBLIGATION. This Agreement has been, and any agreements to
be executed in connection with this Agreement on the Closing Date will have
been, duly executed by and on behalf of the Sellers and WCHR, and constitutes,
or will constitute when executed, valid and binding obligations of the Sellers
and WCHR, which obligations are enforceable in accordance with their terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws.
2.4 NO BREACH. Except as disclosed in Schedule 2.4, neither the
execution and delivery of this Agreement or any agreements to be executed in
connection with this Agreement, nor the consummation of the transactions
contemplated hereby and thereby (a) violates any provision of the Articles of
Incorporation or Bylaws of WCHR; (b) violates, conflicts with or results in the
breach or termination of, or otherwise gives any other contracting party the
right to terminate, or constitutes (or with notice or lapse of time, or both,
would constitute) a default (by way of substitution, novation or otherwise)
under the terms of any of the Franchise Agreements (as defined in the Asset
Purchase Agreement), any franchise agreement for any Open Development Salon (as
defined in the Asset Purchase Agreement), any of the Leases (as defined below)
or any contract, mortgage, lease, bond, indenture, agreement, franchise or other
instrument or obligation that, individually or in the aggregate, would
materially and adversely affect either the Purchased Shares, WCHR, or any of
WCHR's assets or properties; (c) results in the creation of any lien, charge or
encumbrance upon the properties or assets of WCHR or the Purchased Shares
pursuant to the terms of any such contract, mortgage, lease, bond, indenture,
agreement, franchise or other instrument or obligation; (d) violates any
judgment, order, injunction, decree or award of any court, arbitrator,
administrative agency or governmental or regulatory body against, or binding
upon the Purchased Shares, WCHR or upon the securities, properties, or business
of WCHR; (e) constitutes a violation by either the Sellers or WCHR of any
statute, law or regulation of any jurisdiction as such law or regulation relates
to the Purchased Shares, WCHR or to the securities, properties or business of
WCHR that would materially and adversely affect the Purchased Shares, WCHR or
any of WCHR's assets or properties; or (f) violates any Permit (as such term is
defined in Section 2.10 below) in a manner that would materially and adversely
affect either the Purchased Shares, WCHR or any of WCHR's assets or properties.
2.5 CAPITAL STOCK. The authorized capital of WCHR consists of Ten
Thousand (10,000) shares of stock, of which on the Closing Date Four Thousand
(4,000) shares will be issued and outstanding. On the Closing Date, all of such
issued and outstanding shares of stock will be fully paid and nonassessable.
There are no existing voting trusts or other shareholders' agreements relating
to the stock of WCHR other than this Agreement.
2.6 FINANCIAL INFORMATION. The Sellers and WCHR will have delivered to
the Purchaser on or before the Closing Date true copies, certified by the chief
financial officer or treasurer of WCHR, of the financial statements of WCHR,
audited by Robbins, Green, Horowitz, Lester & Co., LLP, for the fiscal year
ended December 31, 1995 and unaudited interim financial statements for the nine
months ended September, 30 1995 and September 30, 1996 (the "Financial Data"),
which are set forth at Schedule 2.6 and incorporated herein by reference. The
audited financial statements contained within the Financial Data for the fiscal
year ended 1995 are audited in accordance with generally accepted auditing
standards, and all Financial Data is prepared in conformity with generally
accepted accounting principles, consistently applied and in accordance with past
and current practices of WCHR, so as to fairly and accurately present the
financial condition of WCHR in all material respects as at their respective
dates and for the periods then-ended.
2.7 TRADE NAMES, TRADEMARKS, SERVICE MARKS, AND COPYRIGHTS. Schedule
2.7 hereof sets forth all trade and fictitious business names, trademarks,
service marks, trade names, commercial symbols and copyrights, including but not
limited to Computer Related Intellectual Property (as defined below), used by
WCHR that are material to its business (the "Intellectual Property Rights").
WCHR does not use any of such rights by consent of any other rightful owner
thereof, and the same are fully assignable (except as otherwise provided by law)
and free and clear of any mortgages, liens, claims, charges, security interests,
encumbrances or other restrictions or limitations whatsoever. WCHR has not
received any claim of infringement of any adversely held trademark, service
mark, trade name, brand name, trade names, commercial symbols, fictitious
business name, copyright or franchise of any other person relating to any of the
rights and properties listed on Schedule 2.7.
2.8 PATENT AND PATENT RIGHTS. WCHR does not own or have rights in or to
any United States or foreign patents. There is no claim of infringement by WCHR
of any patent held, or asserted, by any other person or entity, and WCHR knows
of no basis for any such charge or claim.
2.9 LEASES. Schedule 2.9 hereof sets forth, as of the date hereof and
as of the Closing Date, (a) all leases related to the real properties used in
connection with the operation of the We Care Hair(R) businesses described in the
Franchise Agreements (as defined in the Asset Purchase Agreement) and all leases
related to the real properties used or to be used in connection with the Open
Development Salons (as defined in the Asset Purchase Agreement), (b) all other
contracts, agreements, understandings or commitments with any franchisee under
the We Care Hair(R) franchise system or any other party involving any leasehold
right or other right in any real property used in connection with any We Care
Hair(R) salon and (c) all material contracts or agreements of WCHR not described
in (a) or (b) above (all of the items described in (a), (b) and (c) above are
collectively referred to as the "Leases"). There have been delivered or made
available to the Purchaser true and complete copies of the Leases. Except as
disclosed on Schedule 2.9(a) hereof, all of the Leases are valid, subsisting in
full force and effect (except as otherwise provided by the terms thereof) and
binding upon the parties thereto in accordance with their terms (subject to all
bankruptcy and insolvency laws) and WCHR has paid in full all amounts due by it
thereunder as of the Closing Date pursuant to this Agreement and has satisfied
in all material respects all of its liabilities and obligations thereunder and
is not in default under any of them, nor, to the knowledge of the Sellers and
WCHR, is any other party to any such Lease in default thereunder, nor does any
condition exist which, with notice or lapse of time or both, constitute a
default thereunder by WCHR or, to the knowledge of WCHR or the Sellers by any
other party thereto, which default has or will have a material adverse effect on
WCHR. No approval or consent of any person is needed in order that the Leases
continue in full force and effect following the consummation of the transactions
contemplated by this Agreement.
2.10 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 2.10 hereof,
WCHR is not in violation of any applicable judgment, order, injunction, award or
decree. Neither the Sellers nor WCHR (a) is in violation of any material
federal, state or local law, ordinance or regulation, or any other requirement,
guideline or standard of any governmental or regulatory body, court or
arbitrator applicable to the business of WCHR, its properties or the Purchased
Shares including, without limitation, state or federal securities laws, state or
federal franchising and business opportunity laws, federal and state
environmental or anti-trust laws, state or federal laws relating to usury or the
collection and payment of interest and applicable state and local licensing,
zoning, building and health and safety laws and ordinances, the violation of
which would materially and adversely affect the Purchased Shares or WCHR's
assets, business, operations or condition (financial or otherwise) and there is
no circumstance, condition, event or arrangement that is likely to materially
and adversely affect WCHR's assets, business, operations or condition (financial
or otherwise) or the Purchased Shares; and (b) would be in violation of any such
law, ordinance, regulation, guideline, standard or other requirement that has
been enacted or adopted but is not yet effective if it were effective at the
date hereof or at the Closing Date. WCHR (including any professional employees
of WCHR) has all permits, licenses, orders or approvals of any federal, state or
local governmental or regulatory body (collectively, the "Permits") that are
material to or necessary in the conduct of the business of WCHR; all Permits are
in full force and effect, no notices of violations have been received by WCHR in
respect of any Permit, no violations of the Permits and no proceeding is pending
or threatened to revoke or limit any Permit.
2.11 ENVIRONMENTAL LAWS. Except as disclosed on Schedule 2.11 hereof,
to the knowledge of the Sellers and WCHR, (a) no toxic or hazardous substances
or wastes, pollutants or contaminants (including, without limitation, asbestos,
urea formaldehyde, the group of organic compounds known as polychlorinated
biphenyls, petroleum products including gasoline, fuel oil, crude oil and
various constituents of such products, and any hazardous substance as defined in
the Comprehensive Environmental Response Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss. 9601 et seq., as amended) have been generated,
treated, stored, released, or disposed of, or otherwise placed, deposited in or
located on any real property under a Lease that would cause or contribute to the
cause of (A) such real property to become a treatment, storage or disposal
facility within the meaning of, or otherwise bring the Property within the ambit
of, the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss.
6901 et seq., or any similar state law or ordinance, (B) a release or threatened
release of toxic or hazardous wastes or substances, pollutants or contaminants,
from such real property within the meaning of, or otherwise bring the Property
within the ambit of, CERCLA, or any similar state law or local ordinance, or (C)
the discharge of pollutants or effluents into any water source or system, the
dredging of pollutants or effluents into any water source or system, the
dredging or filling of any waters or the discharge into the air of any
emissions, that would require a permit under the Federal Water Pollution Control
Act, 33 U.S.C. ss. 1251 et seq., or the Clean Air Act, 42 U.S.C. ss. 7401 et
seq., or any similar state law or local ordinance; (b) there are no substances
or conditions in or on any real property involved in any Lease that may support
a claim or cause of action under RCRA, CERCLA or any other federal, state or
local environmental statutes, regulations, ordinances or other environmental
regulatory requirements; and (c) no above ground or underground tanks are
located in or about such real property, or have been located under, in or about
such real property and have subsequently been removed or filled. To the extent
storage tanks exist on or under such real property, such storage tanks have been
duly registered with all appropriate regulatory and governmental bodies and
otherwise are in compliance with federal, state and local statutes, regulations,
ordinances and other regulatory requirements.
2.12 ACTIONS AND PROCEEDINGS. Except as disclosed on Schedule 2.12
hereof, there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations (whether or not the defense thereof or
liabilities in respect thereof are covered by policies of insurance) pending or
threatened against, involving or affecting the Purchased Shares, WCHR or any of
its respective subsidiaries, affiliates, properties or assets, individually or
in the aggregate, might have a material and adverse effect on the Purchased
Shares, the transactions contemplated hereby or upon WCHR's assets, business,
operations or condition (financial or otherwise) and there are no outstanding
orders, writs, injunctions, awards, sentences or decrees of any court,
governmental agency, regulatory body or arbitration tribunal against, involving
or materially affecting the Purchased Shares or WCHR (exclusive of any statute
or regulation of general applicability). Except as disclosed in Schedule 2.12,
there is no fact, event or circumstance that may give rise to any suit, action,
claim, investigation or proceeding that would be required to be listed on
Schedule 2.12, if currently pending or threatened against WCHR. Except as
disclosed in Schedule 2.12 hereof, there are no actions, suits, claims or legal,
administrative or arbitration proceedings pending or threatened which would give
rise to any right of indemnification from WCHR or any successor to the business
of WCHR.
2.13 FULL DISCLOSURE. All documents, schedules and other materials
delivered or to be delivered by or on behalf of the Sellers or WCHR to the
Purchaser in connection with this Agreement and the transactions contemplated
hereby are true and complete. The information furnished by or on behalf of the
Sellers or WCHR to the Purchaser in connection with this Agreement and the
transactions contemplated hereby does not, in light of the circumstances in
which the statements contained in the information are made, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained therein not false or misleading. There is no fact
not disclosed by or on behalf of the Sellers or WCHR to the Purchaser in writing
which materially and adversely affects or will materially and adversely affect
the Purchased Shares or WCHR's assets, properties, business, operations or
condition (financial or otherwise) and no circumstance, condition, event or
arrangement that is likely to materially and adversely affect the Purchased
Shares or WCHR's assets, properties, business, operations or condition
(financial or otherwise) or the ability of WCHR or the Sellers to perform their
obligations under this Agreement.
2.14 RESOLUTION OF POTENTIAL CONFLICTS OF INTEREST. Except for Amico's
ownership interest in We Care Hair Development Inc. and except as set forth on
Schedule 2.14 hereof (which shall include a brief description of any matter
disclosed thereon), neither the Sellers, nor any entity controlled by the
Sellers, WCHR or any officer, director or shareholder of WCHR:
(a) owns, directly or indirectly, any interest in (excepting
not more than 5% stock holdings for passive investment purposes in
securities of publicly held and traded companies), or is or has been
during the one-year period prior to the date hereof, an officer,
director, employee or consultant of any person or entity which is or
has been engaged in business as a competitor, franchisee, landlord,
tenant, lender, provider, customer or supplier of WCHR or any affiliate
of WCHR;
(b) owns, directly or indirectly, in whole or in part, any
material tangible or intangible property that WCHR uses or the use of
which is necessary or desirable for the conduct of business of WCHR; or
(c) has any cause of action or other claim whatsoever against,
or owes any amount to WCHR or any affiliated company or entity except
for any accrued vacation pay, accrued benefits under employee benefit
plans, and similar matters and agreements existing on the date hereof
or the Closing Date.
2.15 TITLE. Each of the Sellers have, or will have on the Closing Date,
good and marketable title to the Purchased Shares owned by such Seller free and
clear of all liens, claims, charges, security interests, encumbrances, or other
restrictions or limitations of any nature whatsoever.
2.16 NO CONSENT. Except as disclosed on Schedule 2.16 hereof, no
consent of any other party and no consent, license, approval or authorization
of, or exemption by, or registration or declaration or filing with, any
governmental authority, bureau or agency is required in connection with the
execution, delivery, validity or enforceability of this Agreement with respect
to the Sellers or WCHR or the consummation by the Sellers or WCHR of the
transactions contemplated hereby.
2.17 NO MATERIAL ADVERSE CHANGE. Except as disclosed on Schedule 2.17
hereof, there has been no material adverse change in the Purchased Shares or
WCHR's assets, properties, business, operations or condition (financial or
otherwise) since September 30, 1996, and there is no change that is threatened,
nor has there been any damage, breach of contract, destruction or loss
materially and adversely affecting the Purchased Shares or WCHR's assets,
properties, relationships with its suppliers or franchisees, business,
operations or condition (financial or otherwise), including but not limited to
the Leases.
2.18 COMPUTER RELATED INTELLECTUAL PROPERTY.
(a) Schedule 2.18(a) to this Agreement is a true and complete
list which, without extensive or revealing descriptions, sets forth
WCHR's computer related intellectual property (all of which are
included within the definition of the Intellectual Property Rights),
including all trade secrets, know-how, computer software programs and
routines, domain names, website content and any proprietary rights
arising under the laws of patent, copyright, trademark or trade secret
under the laws of the United States or any foreign country
(collectively, "Computer Related Intellectual Property") to which the
Sellers, WCHR or any director, officer, employee, or agent of WCHR has
use, possessory, or proprietary rights, whether sole or shared, and
which are material to the operation of WCHR's business. The specific
location of all of the Computer Related Intellectual Property's
documentation, including its complete description, specifications,
charts, procedures and other material relating to it, is also set forth
with it in Schedule 2.18(a). The Computer Related Intellectual
Property's documentation is current, accurate and sufficient in detail
and content to identify and explain it and to allow its full and proper
use by the Purchaser without reliance on the special knowledge or
memory of others.
(b) Neither the Sellers, WCHR, nor any director, officer,
employee or agent of WCHR has had any such proprietary rights which
have been transferred, whether by sale, assignment or license, or have
been lost for any reason, within the past two (2) years.
(c) All parts of the Computer Related Intellectual Property
are presently protected, and are not part of the public knowledge or
literature, nor have they been used, divulged or appropriated for the
benefit of any past or present employees of WCHR or other persons, or
to the detriment of WCHR, except as contemplated by the Franchise
Agreements or the franchise agreements of the Open Development Salons.
(d) WCHR is the sole owner of the Computer Related
Intellectual Property free and clear of any liens, encumbrances,
restrictions or legal or equitable claims of others. The Sellers or
WCHR has taken appropriate measures to protect the secrecy,
confidentiality and value of the Computer Related Intellectual
Property.
(e) Any copies of software listed on Schedule 2.18(a) are in
WCHR's possession and control, except for certain copies of software in
the possession of persons set forth on Schedule 2.18(e), and each such
user has entered into license agreements with WCHR also included as
part of Schedule 2.18(e) hereto.
(f) For purposes of this Section 2.18, the term "computer
software programs" includes any set of arithmetic or logical
instructions meant to run on, or to control the operation of, any
computer (i) whether those instructions are a complete program, a
collection of programs making up a subsystem or system, mere
subroutines or meant to operate in conjunction with other software and
(ii) whether such instructions must be run through another computer
program (i.e., a "compiler") before being usable on a computer, be used
at execution time in conjunction with another computer program (i.e.,
"interpreter") or are in a form that can be run on a computer "as is,"
except for any necessary interfaces with the computer's microcode,
operating system or reference-resolving routines (i.e., "loaders" or
"linkage editors").
2.19 EMPLOYEE BENEFIT PLANS AND INSURANCE. Schedule 2.19 sets forth all
pension, profit sharing, thrift, retirement, employee stock ownership, deferred
compensation, stock ownership, stock purchase, performance share, severance,
welfare benefit, insurance or other similar plans, agreements, arrangements or
understandings, including but not limited to any "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), sponsored, maintained or to which contributions are
made by (a) WCHR or (b) any other organization which is a member of a controlled
group of organizations (within the meaning of Sections 4.14(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code")) of which WCHR is
a member, and which covers or covered any of WCHR's or existing or former
employees.
2.20 TAX MATTERS. WCHR has timely filed or caused to be filed all
federal, state and other tax returns, forms and information that it is required
to file or has obtained appropriate, effective and unexpired extensions
therefor. All of the information in the filings are accurate and such filings
accurately reflect in all respects the tax liabilities of WCHR. Except for those
amounts set forth on Schedule 2.20(a) (each of which shall be paid in full by
WCHR on or before the Closing Date), all taxes, assessments and other
governmental charges imposed upon WCHR, income of WCHR, the business of WCHR or
the sales of WCHR, other than any charges that are currently payable without
penalty or interest, have been paid. WCHR acknowledges and agrees that the
Purchaser shall have the right, but not the obligation to pay, at the Closing,
any such unpaid sums owed by WCHR to the Internal Revenue Service or any state
in which WCHR owes taxes or any other taxing or governmental agency, including,
but not limited to those amounts set forth on Schedule 2.20(a), and to deduct
such amounts paid by the Purchaser from the amounts due from the Purchaser to
WCHR at the Closing or thereafter under this Agreement or any amount owed by the
Purchaser to We Care Hair Development Inc., its successors or assigns, under the
Asset Purchase Agreement. There is no actual or proposed tax assessment or
adjustment with respect to any item which has to do with WCHR for any fiscal
period. WCHR has not waived or extended any applicable statute of limitations
relating to the assessment of federal, state or other taxes. Except as set forth
on Schedule 2.20(b), no examination of the federal, state or other tax returns,
forms or information of WCHR is currently in progress or threatened.
2.21 TAX CONSEQUENCES. Each of the Sellers acknowledges that to the
extent WCHR is an S corporation under the IRS Code, each of the Sellers will
receive a Schedule K-1 from WCHR to reflect his ownership of the Purchased
Shares during calendar year 1996 and 1997 and that the Sellers will be fully and
exclusively responsible for and shall pay (i) all tax consequences and taxes
related to any income or loss set forth on such Schedule K-1, and (ii) all tax
consequences and taxes related to or arising out of the transactions set forth
in this Agreement.
SECTION 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
In order to induce the Sellers and WCHR to enter into this Agreement,
the Purchaser represents and warrants to, and covenants with, the Sellers and
WCHR as set forth below:
3.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing, and in good standing under the laws of Minnesota,
and has the corporate power and authority to execute and deliver, and to perform
its obligations under this Agreement and any agreements to be executed in
connection with this Agreement on the Closing Date or thereafter.
3.2 AUTHORITY. The execution, delivery, and performance of this
Agreement have been, and any agreements to be executed in connection with this
Agreement on the Closing Date will have been, duly and validly authorized and
approved by the Board of Directors of the Purchaser as evidenced by a
certificate of the Secretary of the Purchaser to be delivered to the Sellers on
the Closing Date, and no further corporate action is required to authorize the
execution, delivery, or performance of this Agreement, and any agreements to be
executed in connection with this Agreement on the Closing Date.
3.3 BINDING OBLIGATION. This Agreement has been, and any agreements to
be executed in connection with this Agreement on the Closing Date will have
been, duly executed by and on behalf of the Purchaser, and constitutes, or will
constitute when executed, valid and binding obligations of the Purchaser
according to their terms, which obligations are enforceable in accordance with
their terms, subject only to applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws.
3.4 NO CONFLICTS. The execution, delivery, and performance of this
Agreement, and any agreements to be executed in connection with this Agreement
on the Closing Date, by the Purchaser does not and will not violate, conflict
with or result in a breach of, or constitute a default under, (a) any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of
such corporation, (b) any statute, law or regulation of any jurisdiction as it
relates to such corporation, (c) any judgment, order, injunction, decree or
award of any court, arbitrator, administrative agency, or governmental or
regulatory body against or binding upon such corporation, or (d) any of the
terms, conditions or provisions of any material contract, mortgage, lease, bond,
indenture, agreement, franchise or other instrument or obligation that,
individually or in the aggregate, would materially and adversely affect the
Purchaser or any of the Purchaser's assets or properties.
3.5 LITIGATION AND OTHER PROCEEDINGS. There are no claims, actions,
suits or proceedings pending before any court or governmental authority or, to
the knowledge of the Purchaser, any investigations pending, or claims, actions,
suits, proceedings or investigations threatened, which question or challenge the
validity of this Agreement, and any agreements to be executed in connection with
this Agreement on the Closing Date, or any action taken or to be taken by the
Purchaser in connection with the transactions contemplated hereby.
3.6 INVESTMENT REPRESENTATIONS. The Purchaser is acquiring the
Purchased Shares pursuant to this Agreement for its own account for investment
or for cancellation and without a view to the distribution thereof, and the
Purchaser agrees that such shares shall bear the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") AND MAY NOT
BE SOLD, ASSIGNED, TRADED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF WITHOUT REGISTRATION UNDER AND COMPLIANCE WITH THE ACT OR WITHOUT A
WRITTEN OPINION LETTER OF LEGAL COUNSEL FOR WCHR THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, TRADED OR PLEDGED OR OTHERWISE DISPOSED OF WITHOUT
REGISTRATION UNDER AND COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAWS OR WITHOUT WRITTEN OPINION LETTERS OF LEGAL COUNSEL FOR WCHR THAT
SUCH REGISTRATION WITH ANY APPLICABLE STATES IS NOT REQUIRED.
3.7 NO CONSENT. No consent of any other party and no consent, license,
approval or authorization of, or exemption by, or registration or declaration or
filing with, any governmental authority, bureau or agency is required in
connection with the execution, delivery, validity or enforceability of this
Agreement with respect to the Purchaser, or the consummation by the Purchaser of
the transactions contemplated hereby.
3.8 FULL DISCLOSURE. All documents, schedules and other materials
delivered or to be delivered by or on behalf of the Purchaser to the Sellers in
connection with this Agreement and the transactions contemplated hereby are true
and complete. The information furnished by or on behalf of the Purchaser to the
Sellers in connection with this Agreement and the transactions contemplated
hereby does not, in light of the circumstances in which the statements contained
in the information are made, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements contained
therein not false or misleading.
SECTION 4
THE CLOSING
4.1 THE CLOSING DATE AND PLACE. The delivery of the assignments,
endorsements, authorizations, and other instruments of transfer for the
Purchased Shares by the Sellers, and the delivery of the consideration by the
Purchaser (the "Closing") shall take place at the offices of Gray, Plant, Mooty,
Mooty & Bennett, P.A., at 3400 City Center, 33 South Sixth Street, Minneapolis,
Minnesota at 10:00 a.m. Minneapolis time, or some other location as mutually
agreed upon by the parties hereto, on January 24, 1997 (the "Closing Date").
4.2 ACTIONS AND DELIVERIES BY THE SELLERS AT THE CLOSING. At the
Closing, the Sellers shall deliver or cause to be delivered to the Purchaser,
against delivery of the items specified in Section 4.3 below the following
documents:
(a) SHARE CERTIFICATES. The share certificates
representing the Purchased Shares, duly endorsed for
transfer to the Purchaser or together with duly
executed share assignments or transfer powers
sufficient to transfer and assign to the Purchasers
all right, title and interest therein.
(b) IN GENERAL. Such other papers, documents and
instruments as may be necessary to effect the
transactions contemplated by this Agreement,
including but not limited to those items to be
delivered by the Sellers as set forth in the Closing
Memorandum set forth herein as Schedule 4.
(c) RESIGNATIONS. The written resignation of each of the
Sellers as an employee, officer and director of WCHR,
as the case may be.
(d) RECORDS. The originals of all corporate, financial,
business and other records of WCHR, including without
limitation, the Leases.
4.3 ACTIONS AND DELIVERIES BY THE PURCHASER AT THE CLOSING. At the
Closing, the Purchaser shall deliver or cause to be delivered to the Sellers
against delivery of the items specified in Section 4.2 above:
(a) THE PURCHASE PRICE. The Purchase Price.
(b) IN GENERAL. Such other papers, documents and
instruments as may be necessary to effect the
transactions contemplated by this Agreement,
including but not limited to those items to be
delivered by the Purchaser as set forth in the
Closing Memorandum set forth herein as Schedule 4.
SECTION 5
CONDITIONS TO CLOSING
5.1 CONDITIONS PRECEDENT OF THE PURCHASER. The obligations of the
Purchaser under this Agreement to be performed on the Closing Date shall be
subject to the conditions that:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. On or
before the Closing Date, each of the representations and warranties of
the Sellers and WCHR contained in this Agreement or any certificate or
document delivered pursuant to the provisions of this Agreement shall
be true in all material respects on and as of the Closing Date as
though such representation and warranty was made at and as of such
date;
(b) COMPLIANCE WITH AGREEMENT. On or before the Closing Date,
the Sellers and WCHR shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with by such parties prior to or at the Closing Date;
(c) ASSET PURCHASE AGREEMENT. On or before January 24, 1997,
the Purchaser, The Barbers, Hairstyling For Men & Women, Inc., and We
Care Hair Development Inc. shall have completed the closing of the
purchase and the transfer of the assets set forth in the Asset Purchase
Agreement in accordance with the terms and condition thereof;
(d) SCHEDULES TO THIS AGREEMENT. On or before January 24,
1997, the Sellers and WCHR shall have completed and delivered to the
Purchaser all schedules and due diligence items referenced in this
Agreement, and such schedules and due diligence items shall have been,
in all cases, in form and content acceptable to the Purchaser, in its
sole discretion; and
(e) FINANCIAL DATA. On or before Closing, the Sellers and WCHR
shall have completed and delivered to the Purchaser the Financial Data
referenced in this Agreement, and such Financial Data shall have been,
in all cases, in form and content acceptable to the Purchaser, in its
sole discretion.
5.2 CONDITIONS PRECEDENT OF THE SELLERS. The obligations of the Sellers
under this Agreement to be performed on the Closing Date shall be subject to the
following conditions that, on or before the Closing Date:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of
the representations and warranties of the Purchaser contained in this
Agreement or any certificate or document delivered pursuant to the
provisions of this Agreement shall be true in all material respects on
and as of the Closing Date as though such representation and warranty
was made at and as of such date;
(b) COMPLIANCE WITH AGREEMENT. The Purchaser shall have
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by such party prior to
or at the Closing Date; and
(c) ASSET PURCHASE AGREEMENT. The Purchaser, The Barbers,
Hairstyling for Men & Women, Inc. and We Care Hair Development Inc.
shall have completed the closing of the purchase and the transfer of
the assets set forth in the Asset Purchase Agreement in accordance with
the terms and conditions thereof.
SECTION 6
THE SELLERS' OBLIGATIONS AFTER CLOSING
6.1 FURTHER ASSURANCES. The Sellers, on and at any time after the
Closing Date, will execute, acknowledge, and deliver any further assignments,
conveyances, and other assurances, documents and instruments of transfer
reasonably requested by the Purchaser and will take any other action consistent
with the terms of this Agreement that may be reasonably requested by the
Purchaser for the purpose of selling, transferring, assigning, granting,
conveying, delivering or confirming to the Purchaser the Purchased Shares as of
the Closing Date.
6.2 INDEMNIFICATION BY THE SELLERS.
(a) INDEMNIFICATION. Subject to the provisions of Sections
6.2(d) below, the Sellers hereby agree to indemnify and hold harmless
the Purchaser and its respective officers, directors, shareholders,
partners, employees, agents and counsel, from and against any and all
damages or deficiencies resulting from (i) any misrepresentation,
breach of warranty or nonfulfillment of any covenant, indemnity,
undertaking or agreement on the part of the Sellers contained in this
Agreement or any agreement executed in connection with this Agreement,
(ii) any liability or obligation arising from, under, or with respect
to the operation, before the Closing Date, of the business of WCHR that
was not reflected in the Financial Data and (iii) any and all actions,
suits, proceedings, demands, assessments or judgments, costs or
expenses (including, but not limited to, reasonable attorneys' fees and
other costs and expenses incident to proceedings or investigations or
to the defense of any claim) related to any of the foregoing. Any
liability under this Section 6.2 shall accrue and be due and payable to
the Purchaser as and when such damages or deficiencies are accrued and
due and payable by the Purchaser, as the case may be.
(b) WITHHOLD AND OFFSET. In the event the Purchaser claims in
writing that it is entitled to indemnification by the Sellers pursuant
to this Section 6.2 specifying the amount and nature of the claim in
reasonable detail, then, notwithstanding any language to the contrary
contained in this Agreement, the Purchaser's sole and exclusive remedy
and recourse to satisfy such obligation of indemnification shall be to
withhold and retain a like amount of any payments due to the Sellers
under this Agreement or to Amico or to We Care Hair Development Inc.
under the Asset Purchase Agreement; as a result, the Sellers shall have
no personal liability to the Purchaser except as provided in this
Section 6.2(b). Upon resolution of any such claim, and if such
resolution involves less funds than have been withheld by the Purchaser
pursuant to this Section 6.2(b), then the Purchaser shall release to
the Sellers any excess of such funds so withheld.
(c) DEFENSE OF CLAIM. If the Purchaser (the "Indemnified
Party") asserts that the Sellers have become obligated to the
Indemnified Party pursuant to this Section 6.2, or in the event that
any suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Sellers may become obligated to an
Indemnified Party under this Section 6.2, then the Indemnified Party
shall give prompt written notice thereof to the Sellers. The Sellers
shall have the right, at their expense and with counsel of their
choosing, to control and defend, contest, settle (at no cost to the
Indemnified Party) or otherwise protect against any such suit, action,
investigation, claim or proceeding. The Indemnified Party shall have
the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of the Indemnified Party's choice. In
any event, the Indemnified Party shall cooperate with the Sellers in
the defense of any such suit, action, investigation, claim or
proceeding. Without limiting the generality of the foregoing, the
Indemnified Party shall furnish documentary or other evidence as is
then in its possession as may reasonably be requested by the Sellers
for the purpose of defending against any such suit, action,
investigation, claim or proceeding. In the event that the Sellers do
not elect to control and defend, contest, settle or otherwise protect
against any such suit, action, investigation, claim or proceeding, the
Indemnified Party may do so and the Seller shall indemnify the
Indemnified Party and reimburse the Indemnified Party's expenses as
incurred.
(d) LIMITATIONS. Notwithstanding anything to the contrary
contained in this Agreement, the Sellers shall not be liable to the
Purchaser for any amounts under this Section 6.2 unless and only to the
extent any claims against the Sellers under this Section 6.2 are made
by the Purchaser by notice to the Sellers on or before the third
anniversary of the Closing Date. The limitation set forth in this
Section 6.2(d) shall not apply to any actions, suits, proceedings,
demands, assessments or judgments, costs or expenses (including, but
not limited to, reasonable attorneys' fees and other costs and expenses
incident to proceedings or investigations or to the defense of any
claim) arising under or in connection with Sections 2.10, 2.20 or 2.21
of this Agreement.
(e) CERTAIN LEASES. The Purchaser and the Sellers acknowledge
that there are certain Leases which are in default or which involve
salons that have closed or which involve salons that are no longer
being operated by We Care Hair(R) franchisees ("Leases in Default").
The Purchaser and the Sellers further acknowledge that We Care Hair
Development Inc. does, by execution of the Guaranty, undertake to
resolve such defaults and, with the approval of the Purchaser,
terminate such Leases in Default, and shall be solely responsible for
all costs and expenses, including without limitation attorneys' fees,
incurred in accomplishing such resolutions and terminations. The
Purchaser does hereby acknowledge We Care Hair Development Inc. is
permitted to undertake negotiations for such resolutions and
terminations and the Purchaser agrees to promptly consider (and not
unreasonably withhold approval of) and, if approved, execute
instruments submitted by We Care Hair Development Inc. to effect any
such resolutions and terminations. The Purchaser will authorize at
least three separate officers of the Purchaser to execute any such
instruments.
SECTION 7
PURCHASER'S OBLIGATIONS AFTER CLOSING
7.1 FURTHER ASSURANCES. The Purchaser on and at any time after the
Closing Date, will execute, acknowledge, and deliver any further assurances,
documents and instruments reasonably requested by the Sellers and will take any
other action consistent with the terms of this Agreement that may be reasonably
requested by the Sellers for the purpose of concluding the transactions
contemplated by this Agreement.
7.2 INDEMNIFICATION BY THE PURCHASER.
(a) INDEMNIFICATION. Subject to the provisions of Section
7.2(c) below, the Purchaser hereby agrees to indemnify and hold
harmless the Sellers, and the Sellers' partners, employees, agents,
personal representatives and counsel, from and against any and all
damages or deficiencies resulting from (i) any misrepresentation,
breach of warranty or nonfulfillment of any covenant, indemnity,
undertaking or agreement on the part of the Purchaser contained in this
Agreement or any agreement executed in connection with this Agreement,
(ii) any liability or obligation arising from, under, or with respect
to the operation, by the Purchaser after the Closing Date, of the
business of WCHR, and (iii) any and all actions, suits, proceedings,
demands, assessments or judgments, costs or expenses (including, but
not limited to, reasonable attorneys' fees and other costs and expenses
incident to proceedings or investigations or to the defense of any
claim) related to any of the foregoing. Any liability under this
Section 7.2 shall accrue and be due and payable to the Sellers as and
when such damages or deficiencies are accrued and due and payable by
the Sellers, as the case may be.
(b) DEFENSE OF CLAIM. If the Sellers (the "Indemnified Party")
assert that the Purchaser has become obligated to the Indemnified Party
pursuant to this Section 7.2, or in the event that any suit, action,
investigation, claim or proceeding is begun, made or instituted as a
result of which the Purchaser may become obligated to the Indemnified
Party under this Section 7.2, then the Indemnified Party shall give
prompt written notice thereof to the Purchaser. The Purchaser shall
have the right, at its expense and with counsel of its choosing, to
control and defend, contest, settle (at no cost to the Indemnified
Party) or otherwise protest against any such suit, action,
investigation, claim or proceeding. The Indemnified Party shall have
the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of the Indemnified Party's choice. In
any event, the Indemnified Party shall cooperate fully with the
Purchaser in the defense of any such suit, action, investigation, claim
or proceeding. Without limiting the generality of the foregoing, the
Indemnified Party shall furnish the Purchaser with documentary or other
evidence as is then in its possession as may be reasonably requested by
the Purchaser for the purpose of defending against any such suit,
action, investigation, claim or proceeding. In the event that the
Purchaser does not elect to control and defend, contest, settle or
otherwise protect against any such suit, investigation, claim or
proceeding, the Indemnified Party may do so and the Purchaser shall
indemnify the Indemnified Party and reimburse the Indemnified Party's
expenses as incurred.
(c) LIMITATIONS. The indemnification set forth in this Section
7.2 shall survive the Closing Date. Notwithstanding anything to the
contrary contained in this Agreement, the Purchaser shall not be liable
to the Sellers for any amounts under this Section 7.2 unless and only
to the extent any claims against the Purchaser under this Section 7.2
are made by the Sellers by notice to the Purchaser on or before the
third anniversary of the Closing Date.
SECTION 8
COSTS AND BROKER'S FEES
8.1 COSTS BORNE BY PARTIES. Except as otherwise provided herein, the
Sellers and the Purchaser shall pay all costs and expenses incurred by them in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement.
8.2 BROKER'S FEES. The Purchaser and the Sellers each represent and
warrant to the other that it or they did not deal directly or indirectly with or
through any broker or finder in connection with the transactions contemplated by
this Agreement.
SECTION 9
FORM OF AGREEMENT AND SEVERABILITY
9.1 HEADINGS. The subject headings of the Sections of this Agreement
are not a part of this Agreement and are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of its
provisions.
9.2 ENTIRE AGREEMENT. This Agreement, and the agreements executed in
connection with this Agreement, constitutes the entire agreement between the
parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the party against whom enforcement is
sought. No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in more
than one counterpart, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.4 SEVERABILITY. If any terms or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity of the other terms
and provisions hereof shall in no way be affected thereby.
9.5 INCORPORATION OF EXHIBITS AND SCHEDULES. All exhibits and schedules
attached hereto in this Agreement are incorporated in this Agreement as though
fully set forth herein.
SECTION 10
PARTIES
10.1 OTHER PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
personal representatives, successors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action against any party to this
Agreement.
10.2 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective personal representatives, successors and permitted assigns, but
neither this Agreement nor any of the rights, interests, and obligations
hereunder shall be assigned by any of the parties hereto without prior written
consent of each of the other parties hereto.
SECTION 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, opinions, or other writings provided
for in this Agreement and the covenants and agreements to be performed or
complied with by the respective parties before or on or after the Closing Date
shall be deemed to be continuing and shall survive the Closing.
SECTION 12
NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a) on
the date of service if served personally on the party to whom notice is to be
given, (b) on the second 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 set forth below, or (c) on the first day
after delivering the same to a reputable courier service, such as DHL or FedEx
if delivered to such courier service, fees prepaid, with the instructions to
deliver the same under the quickest service possible to the addresses set forth
below:
To the Sellers: JOHN F. AMICO
4731 West 136th Street
Crestwood, IL 60445
With a Copy To: GREGORY J. ELLIS & ASSOCIATES, LTD.
999 Plaza Drive, Suite 777
Schaumburg, IL 60173
Attention: Mr. Gregory J. Ellis
Attorney at Law
PETER BUCK
11 Centennial Drive
Danbury, CT 06811
With a Copy To: Legal Department
325 Bic Drive
Milford, CT 06460
Attention: Mr. Robert S. Burstein
Attorney at Law
FREDERICK A. DELUCA
3550 Gault Ocean Drive, Apt. 301
Fort Lauderdale, FL 33308
With a Copy To: Legal Department
325 Bic Drive
Milford, CT 06460
Attention: Mr. Robert S. Burstein
Attorney at Law
To WCHR (prior to the Closing): WE CARE HAIR REALTY, INC.
325 Bic Drive
Milford, CT 06460
Attention: Mr. John F. Amico,
President
With a Copy To: Legal Department
325 Bic Drive
Milford, CT 06460
Attention: Mr. Robert S. Burstein
Attorney at Law
To WCHR (after the Closing): WE CARE HAIR REALTY, INC.
300 Industrial Blvd., NE
Minneapolis MN 55413
Attention: Mr. Frederick A. Huggins, Jr.
President
With a Copy To: GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
To the Purchaser: WCH, INC.
300 Industrial Blvd., NE
Minneapolis MN 55413
Attention: Mr. Frederick A. Huggins, Jr.
President
With a Copy To: GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.
3400 City Center
33 South Sixth Street
Minneapolis, MN 55402
Attention: Mr. John W. Fitzgerald
Attorney at Law
Any party may change its address for purposes of this Section by giving the
other parties notice of the new address in the manner set forth above; provided,
however, any notice of change of address shall not be effective until received.
SECTION 13
PUBLICITY; CONFIDENTIALITY
13.1 PUBLIC ANNOUNCEMENT. Except as required by federal securities or
franchise laws or applicable state securities or franchise laws and announcement
to its franchisees by The Barbers, Hairstyling For Men & Women, Inc., the
parties agree not to make any public announcement of this transaction or any of
its terms or conditions without first consulting with and obtaining the prior
written consent of all parties.
SECTION 14
GOVERNING LAW
This Agreement, the rights and obligations hereunder, and the remedies
available hereunder or at law shall be governed and construed in accordance with
the substantive laws of the State of Minnesota. By execution of this Agreement,
the parties hereto agree to submit to personal jurisdiction in the State of
Minnesota for the purposes of any suit or proceeding brought to enforce or
construe the terms and conditions of this Agreement.
SECTION 15
ARBITRATION
Any dispute, claim or controversy arising out of relating to this
Agreement, or breach, termination or invalidity thereof, shall be finally
settled by arbitration in accordance with applicable procedural rules of the
American Arbitration Association in effect on the date of execution of this
Agreement by one (1) arbitrator selected and mutually agreed upon by the
Purchaser and the Sellers. In the event that the parties hereto are unable to
select an arbitrator, then any party to the Agreement may request that the
American Arbitration Association select an arbitrator. The place of arbitration
shall be Minneapolis, Minnesota. The determination of the arbitrator shall be
final and binding upon the parties to the arbitration. Judgment upon any award
rendered by the arbitrator may be entered in any court of competent
jurisdiction. In the event that arbitration proceedings are commenced by any
party hereto against any other party in connection with this Agreement or the
transactions contemplated hereby, the party that does not prevail in such
proceedings shall pay its own expenses and the reasonable attorneys' fees, court
costs, litigation expenses and other costs and expenses incurred by the
prevailing party in such proceedings.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed to be effective as of the date first above written.
The "Sellers"
/s/ John F. Amico, Sr.
--------------------------------------
JOHN F. AMICO, SR.
/s/ Peter Buck
--------------------------------------
PETER BUCK
/s/ Frederick A. Deluca
--------------------------------------
FREDERICK A. DELUCA
"WCHR"
WE CARE HAIR REALTY, INC.
By /s/ John F. Amico, Sr.
-----------------------------------
John F. Amico, Sr.
Its President
The "Purchaser"
WCH, INC.
By /s/ Frederick A. Huggins, Jr.
-----------------------------------
Frederick A. Huggins, Jr.
Its President
EXHIBIT A
LIST OF SCHEDULES
2.4 Exceptions to No Breach
2.6 Financial Data
2.7 Intellectual Property Rights
2.9 Leases
2.9(a) Lease Exceptions
2.10 Compliance Exceptions
2.11 Environmental Matters
2.12 Actions and Proceedings
2.14 Conflicts of Interest
2.16 Consent Exceptions
2.17 No Change Exceptions
2.18(a) Computer Related Intellectual Property
2.18(e) Persons with Access to Computer Related Intellectual Property
2.19 Employee Benefit Plans and Insurance
2.20(a) Delinquent Tax Amounts
2.20(b) Tax Investigations
4 Closing Memorandum
EXHIBIT B
GUARANTY
FOR VALUE RECEIVED, and in consideration of the sum of One Dollar
($1.00) and other good and valuable consideration, in hand paid to the
undersigned guarantor by WCH, INC., a Minnesota corporation (hereinafter the
"Obligee"), the receipt and sufficiency of which is hereby acknowledged, the
undersigned, its successors and assigns, does hereby unconditionally guarantee
the prompt performance of all payment and other obligations of John F. Amico,
Peter Buck, Frederick A. DeLuca and We Care Hair Realty, Inc. (John F. Amico,
Peter Buck, Frederick A. DeLuca and We Care Hair Realty, Inc. are herein
referred to collectively as the "Debtors") under that certain Stock Purchase
Agreement by and among the Obligee and the Debtors dated to be effective January
24, 1997 (the "Stock Purchase Agreement"), and any agreement executed in
connection with the Stock Purchase Agreement, together with any and all expenses
of and incidental to collection, including but not limited to attorneys' fees
(hereinafter referred to collectively as the "obligations").
In the event the Obligee claims in writing that it is entitled to
indemnification by the Debtors, or any of them, pursuant to Section 6.2 of the
Stock Purchase Agreement specifying the amount and nature of the claim in
reasonable detail, or in the event the undersigned otherwise fails to perform
its obligations under this guaranty, then, as the sole and exclusive remedy
therefore, the Obligee shall have the right to withhold a like amount of all
payments due to the undersigned under that certain Asset Purchase Agreement by
and among the Obligee, The Barbers, Hairstyling for Men & Women, Inc. and the
undersigned dated to be effective as of December 24, 1996.
This guaranty is an absolute and completed one and shall be a
continuing one and no notice of any indebtedness already or hereafter contracted
or acquired by Obligee or of any renewal or extension of any thereof need be
given to the undersigned. The undersigned hereby expressly waives demand,
presentment, protest and notice of dishonor on any and all forms of such
indebtedness and also notice of acceptance of this guaranty.
The liability of the undersigned hereunder shall not be affected or
impaired by any failure, neglect or omission on the part of Obligee to realize
upon the obligations, nor by the taking of Obligee of any other guaranty or
guaranties to secure the obligations nor by the taking by Obligee of collateral
or security of any kind.
The undersigned acknowledges that this guaranty is in effect and
binding as to it, and the undersigned agrees that possession of this instrument
of guaranty by Obligee shall be conclusive evidence of due delivery hereof by it
and further agrees that as to the undersigned this guaranty shall continue in
full force and effect notwithstanding any extension of time. The undersigned
agrees that this guaranty shall be terminated only upon the receipt by the
undersigned of written notice of revocation from Obligee, and that in such event
the undersigned's liability hereon shall continue as to indebtedness then
existing and as to any and all renewals or extensions thereof made after such
event.
Except as otherwise required by law, this guaranty shall be construed
according to the laws of the State of Minnesota, in which state it shall be
performed by the undersigned. All disputes or controversies involving this
guaranty shall be resolved by arbitration in accordance with the terms of the
Stock Purchase Agreement. By executing and delivering this guaranty, the
undersigned does hereby agree and submit to personal jurisdiction in the State
of Minnesota for the purposes of any arbitration to enforce or construe the
terms of this guaranty and the undersigned does hereby agree that any such
arbitration shall be held in Minneapolis, Minnesota. The undersigned does hereby
further agree that it shall pay all costs and expenses, including but not
limited to attorneys fees, incurred by Obligee in enforcing this guaranty.
This guaranty shall be binding upon the undersigned and upon its
successors and assigns, and shall inure to the benefit of Obligee and its
successors and assigns.
The acceptance of this guaranty by Obligee is not intended to and does
not release any liability previously existing of any guarantor or surety of any
indebtedness or liability of the Debtor to Obligee.
In addition to the foregoing, the undersigned does hereby expressly
agree to and undertake all of the obligations and responsibilities set forth in
Section 6.2(e) of the Stock Purchase Agreement that are to be assumed and
undertaken by the undersigned by execution of this Guaranty.
Dated this 24th day of January, 1997.
WE CARE HAIR DEVELOPMENT INC.
By /s/ John F. Amico, Sr.
-------------------------------------
John F. Amico, Sr.
Its President
AGREEMENT AS TO POST CLOSING ITEMS
THIS AGREEMENT AS TO POST CLOSING ITEMS (this "Agreement"), is entered
into to be effective as of January 24, 1997, by and among WCH, INC., a Minnesota
corporation, its successors or assigns, (the "Purchaser"), THE BARBERS,
HAIRSTYLING FOR MEN & WOMEN, INC., a Minnesota corporation ("The Barbers"), WE
CARE HAIR DEVELOPMENT INC., a Delaware corporation (the "Seller"), WE CARE HAIR
REALTY, INC., a Delaware corporation ("WCHR"), and JOHN F. AMICO, SR., an
individual residing in Florida ("Amico");
W I T N E S S E T H
WHEREAS, certain parties to this Agreement entered into that certain
Asset Purchase Agreement dated as of December 24, 1996 for the transfer of
certain assets of the Seller, as amended by that certain First Amendment to
Asset Purchase Agreement dated as of January 24, 1997, (the "Asset Purchase
Agreement"); and
WHEREAS, certain of the parties to this Agreement entered into that
certain Stock Purchase Agreement dated as of January 24, 1997 for the transfer
of the stock of WCHR (the "Stock Purchase Agreement"); and
WHEREAS, the parties wish to amend, supplement and clarify the terms of
the Asset Purchase Agreement and the Stock Purchase Agreement in accordance with
the terms of this Agreement and provide for certain post-closing items;
NOW THEREFORE, in consideration of the foregoing, the mutual promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties agree as follows:
1. DEFINITIONS. Unless otherwise defined in this Agreement, all
capitalized terms used in this Agreement shall have the meanings subscribed to
them in the Asset Purchase Agreement and the Stock Purchase Agreement.
2. FINANCIAL DATA. (a) The parties recognize that the Financial Data
referenced in the Stock Purchase Agreement has not been delivered on the Closing
Date. The Seller, Amico and WCHR agree to provide such Financial Data by
February 7, 1997. The Seller, Amico and WCHR agree to indemnify the Purchaser in
accordance with Section 6.2 of the Stock Purchase Agreement to the extent such
Financial Data are not provided by February 7, 1997 and to the extent such
Financial Data varies from the unaudited financial statements of WCHR attached
hereto as Exhibit A and incorporated herein by reference. (b) The parties
recognize that the unaudited portions of the Financial Data referenced in the
Asset Purchase Agreement must be prepared and formatted in a fashion to match
the audited financial statements contained in the Financial Data. The Seller and
Amico agree to provide such unaudited financial data in a required format by
February 7, 1997. The Seller and Amico agree to indemnify the Purchaser in
accordance with Section 6.2 of the Asset Purchase Agreement to the extent such
Financial Data are not provided by February 7, 1997.
3. LITIGATION AND OTHER MATTERS. The Seller, Amico and WCHR acknowledge
and agree that any litigation or potential litigation disclosed on any Schedule
to the Asset Purchase Agreement or the Stock Purchase Agreement, including but
not limited to the threatened litigation by the Arizona franchisees and by
Arnold, shall be the sole and exclusive responsibility of the Seller and,
regardless of such items being disclosed on a Schedule, the Purchaser and The
Barbers shall be indemnified for such items in accordance with Section 6.2 of
the Stock Purchase Agreement and of the Asset Purchase Agreement.
4. MISSING DOCUMENTS. The parties acknowledge that there are certain
instruments which are missing in original form as set forth on Exhibit B
attached hereto and incorporated herein by reference ("Missing Documents"). The
Seller and Amico agree to locate and deliver to the Purchaser an original of
each Missing Document within sixty (60) days from the date hereof.
5. CERTAIN EXCEPTIONS LISTED ON SCHEDULES. The Seller, Amico and WCHR
have listed certain exceptions on schedules to the Asset Purchase Agreement and
the Stock Purchase Agreement. The Seller and Amico acknowledge and agree that,
regardless of such items being disclosed to the Purchaser and The Barbers, the
Seller shall be solely and exclusively responsible for, and shall indemnify the
Purchaser and The Barbers against in accordance with Section 6.2 of the Asset
Purchase Agreement and the Stock Purchase Agreement, the following items:
(a) All matters disclosed on Schedule 2.8 of the Asset
Purchase Agreement, and
(b) All matters disclosed on Schedule 2.9 of the Asset
Purchase Agreement.
6. MINIMUM NET WORTH. The Seller, Amico and WCHR agree that the Seller
will not be dissolved and will maintain a net worth of not less than $200,000
for a period of at least six months commencing on the date hereof. The Seller,
Amico and WCHR shall, upon request, provide such evidence of compliance with
this Section 6 as the Purchaser or The Barbers may request from time to time.
7. ADDITIONAL COLLATERAL. In addition to the remedy set forth in
Sections 6.2(b) of the Asset Purchase Agreement and the Stock Purchase
Agreement, and regardless of the expression within such agreements that such
remedy is the sole remedy, the Seller, Amico and WCHR have, at the Closing and
by this Agreement, agreed to execute and deliver to the Purchaser,
simultaneously with the execution and delivery of this Agreement, a Security
Agreement, and all necessary or advisable UCC financing statements related to
it, granting a security interest to the Purchaser in four promissory notes to be
executed in favor of the Seller by franchisees and a security interest in eight
We Care Hair(R) salons, such Security Agreement to be in the form of Exhibit C
attached hereto and incorporated herein by reference and to continue for a
period of six (6) months. The notes shall be delivered to the Purchaser within
fifteen (15) days from the date hereof.
8. DEVELOPMENT AGENT TERMINATIONS. The Seller and Amico agree to
deliver to the Purchaser written terminations of each of the Agent Agreements
listed on Schedule 2.20 of the Asset Purchase Agreement within sixty (60) days
from the date hereof, such terminations to be in form and content reasonably
satisfactory to the Purchaser. The Seller and Amico agree to indemnify the
Purchaser in accordance with Section 6.2 of the Asset Purchase Agreement to the
extent such terminations are not provided within such sixty (60) day period, and
in any event, shall indemnify the Purchaser for any liability or sums that may
be due or may be paid to such agents under such Agent Agreements.
9. LEASE TERMINATIONS. The Seller, Amico and WCHR agree to indemnify
the Purchaser in accordance with Section 6.2 of the Stock Purchase Agreement for
any liability or expense incurred by the Purchaser, including reasonable
attorneys fees, in connection with any lease termination occurring on or before
the first anniversary of the Closing Date because of a landlord's objection to
the transfer of ownership of the stock of WCHR pursuant to the Stock Purchase
Agreement.
10. ACCOUNTING FOR ADVERTISING FUND. The Seller and Amico agree to
deliver to the Purchaser an accounting, for the three (3) years prior to the
Closing Date, of the We Care Hair(R) franchise advertising fund and deliver such
accounting together with any funds in such franchisee advertising fund to the
Purchaser within thirty-one (31) days of the Closing Date. The Purchaser shall
have the right to audit such accounting. The Seller and Amico agree to indemnify
the Purchaser in accordance with Section 6.2 of the Asset Purchase Agreement
with respect to any errors, omissions or misappropriations of the advertising
funds discovered upon such audit, as well as for any claims raised with respect
to the operations of the fund prior to the Closing Date.
11. TAX MATTERS. The Seller, Amico, and WCHR acknowledge and agree that
any tax matters disclosed on any schedule to the Asset Purchase Agreement or the
Stock Purchase Agreement, including but not limited to, the failure to file the
Ohio tax return for 1995, as well as all other tax matters, whether scheduled or
not, pertaining to the operation of the Seller or WCHR prior to the Closing Date
shall be the sole and exclusive responsibility of the Seller. In addition, the
Seller and Amico shall be responsible for the preparation and filing of the
final S corporation tax return for WCHR for the partial year ending on the
Closing Date and for the payment of all taxes related thereto.
12. ASSIGNMENT OF WEB SITE. The Seller shall execute and deliver to the
Purchaser such written instruments assigning the Seller's Web Site as maybe
reasonably requested by the Purchaser.
13. NAME CHANGE DOCUMENTS. The Seller and Amico shall deliver to
Purchaser within five (5) days after the Closing Date original name change
documents as required by the Asset Purchase Agreement.
14. OBLIGATIONS TO SHAREHOLDERS. The Seller and Amico shall indemnify
the Purchaser and WCHR for all obligations of WCHR owed to its shareholders as
they existed immediately prior to the Closing Date. In that regard, the Seller
agrees to pay its obligation of $4,182.95 to WCHR, and WCHR agrees to pay such
sum to its shareholders in retirement of its debt to such shareholders, and the
balance of the amount owed to shareholders shall remain in WCHR as an additional
contribution to capital.
15. NO FURTHER CHANGE. Except as amended, clarified and supplemented by
this Agreement, the Asset Purchase Agreement and the Stock Purchase Agreement
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and effective as of the date first above written.
The "Seller"
WE CARE HAIR DEVELOPMENT INC.
By: /s/ John F. Amico, Sr.
------------------------------------
John F. Amico, Sr.
Its President
The "Purchaser"
WCH, INC.
By: /s/ Frederick A. Huggins, Jr.
------------------------------------
Frederick A. Huggins, Jr.
Its President
"The Barbers"
THE BARBERS, HAIRSTYLING FOR
MEN & WOMEN, INC.
By: /s/ Frederick A. Huggins, Jr.
------------------------------------
Frederick A. Huggins, Jr.
Its President
"Amico"
/s/ JOHN F. AMICO, SR.
----------------------------------------
JOHN F. AMICO, SR.
"WCHR"
WE CARE HAIR REALTY, INC.
By: /s/ John F. Amico, Sr.
------------------------------------
John F. Amico, Sr.
Its President
