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.
0000 Xxxx 000xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxx, Xx.
President
With a Copy To: XXXXXXX X. XXXXX & ASSOCIATES, LTD.
000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Attorney at Law
and
LEGAL DEPARTMENT
000 Xxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Attorney at Law
To the Seller (after the closing): ACHIEVERS III, INC.
0000 Xxxx 000xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxx, Xx.
President
With a Copy To: XXXXXXX X. XXXXX & ASSOCIATES, LTD.
000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Attorney at Law
and
LEGAL DEPARTMENT
000 Xxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Attorney at Law
To the Purchaser: WCH, INC.
000 Xxxxxxxxxx Xxxx., XX
Xxxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxxxx X. Xxxxxxx, Xx.
With a Copy To: XXXX, PLANT, XXXXX, XXXXX &
XXXXXXX, P.A.
3400 City Center; 00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxxxxx
Attorney at Law
To The Barbers: THE BARBERS, HAIRSTYLING FOR MEN &
WOMEN, INC.
000 Xxxxxxxxxx Xxxx., XX
Xxxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxxxx X. Xxxxxxx, Xx.
With a Copy To: XXXX, PLANT, XXXXX, XXXXX &
XXXXXXX, P.A.
3400 City Center; 00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxxxxx
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/ Xxxx X. Xxxxx, Xx.
-------------------------------------
Xxxx X. Xxxxx, Xx.
Its President
The "Purchaser"
WCH, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxx, Xx.
-------------------------------------
Xxxxxxxxx X. Xxxxxxx, Xx.
Its President
"The Barbers"
THE BARBERS, HAIRSTYLING FOR
MEN & WOMEN, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxx, Xx.
-------------------------------------
Xxxxxxxxx X. Xxxxxxx, Xx.
Its President
