EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of January 25, 1999 by and between Regis
Corporation, a Minnesota corporation ("BUYER"), Regis Merger Sub, Inc., a
Minnesota corporation ("SUB") and The Barbers, Hairstyling for Men & Women,
Inc., a Minnesota corporation ("COMPANY"). BUYER, SUB and COMPANY are referred
to individually herein as a "Party" and collectively herein as the "Parties."
This Agreement contemplates a merger of SUB, a newly formed, wholly
owned first tier subsidiary of BUYER with and into COMPANY in a reorganization
pursuant to Code ss. 368(a)(1)(A) and 368(a)(2)(E) whereby the COMPANY
stockholders will receive voting common stock of BUYER in exchange for all of
their capital stock in COMPANY, all pursuant to the plan of reorganization set
forth herein.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Acquisition Proposal" means any bona fide proposal by a Person
which proposes a (A) merger, consolidation or similar transaction involving
COMPANY, (B) sale, lease or other disposition directly or indirectly, by merger,
consolidation, share exchange or otherwise, of substantially all of the assets
of COMPANY and its Subsidiaries taken together, (C) issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange or any
similar transaction) securities (or options, rights or warrants to purchase, or
securities convertible into, such securities) representing a majority of the
voting power of COMPANY or (D) a transaction in which any Person, including,
without limitation, COMPANY and any Subsidiary, or any affiliate thereof (other
than BUYER) shall acquire beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act), or the right to acquire beneficial ownership of
50% or more of the outstanding Common Stock of COMPANY, or if any Person shall
have commenced a tender or exchange offer for 50% or more (or which, assuming
the maximum amount of securities which could be purchased, would result in any
Person beneficially owning 50% or more) of the then outstanding Common Stock.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Benefit Plans" has the meaning set forth in Section 3.11 below.
"Break-up Fee" has the meaning set forth in Section 5.10(b).
"BUYER" has the meaning set forth in the preface above.
"BUYER Share" means any share of the Common Stock, $.05 par value
per share, of BUYER.
"BUYER's Knowledge" means the actual knowledge of any of either
Xxxxx Xxxxx, Xxxx X. Xxxxxxxxxxx, Xxxxx X. Xxxxxx, Xxxxxxxxxxx X. Xxx, Xxxx
Xxxxxx, Xxxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxx Xxxxxxxx and/or Xxxx X. Xxxxx.
"Certificate" and "Certificates" have the meanings set forth in
Section 2.9(a) below.
"Certificate of Incorporation" has the meaning set forth in Section
2.4(b) below.
"Certificate of Merger" has the meaning set forth in Section 2.3
below.
"Claim" and "Claims" have the meanings set forth in Section 5.5(a)
below.
"Closing" has the meaning set forth in Section 2.2 below.
"Closing Agreement" has the meaning set forth in Section 3.9(s)(iv)
below.
"Closing Date" has the meaning set forth in Section 2.2 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY Proxy Statement" has the meaning set forth in Section
3.17(ii) below.
"COMPANY Share" means any share of the Common Stock, $.10 par value
per share, of COMPANY.
"COMPANY Stockholder" means any Person who or which holds any
COMPANY Shares.
"COMPANY's Knowledge" means the actual knowledge of any of either
Xxxxxxxx X. Xxxxxxx, Xxxxxxxxx X. Xxxxxxx, Xx., Xxxxxx X. Xxxxxxxxxxxx, Xxxx X.
Xxx, Xxxxx X. Xxxxxx, J. Xxxxx Xxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxxxxxx, and/or Xxxx X. Xxxxxxx.
"Conversion Ratio" has the meaning set forth in Section 2.5 below.
"Disclosure Schedule" has the meaning set forth in Article 3 below.
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"Effective Time" has the meaning set forth in Section 2.4(a) below.
"Environmental Laws" has the meaning set forth in Section 3.12(a)
below.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Agent" has the meaning set forth in Section 2.9(b) below.
"Expenses" has the meaning set forth in Section 8.1 below.
"Fairness Opinion" has the meaning set forth in Section 6.2(i)
below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Hazardous Substance" has the meaning set forth in Section 3.12(b)
below.
"Indemnitee" has the meaning set forth in Section 5.5(a) below.
"IRS" means the Internal Revenue Service.
"Loss" and "Losses" have the meanings set forth in Section 5.5(a)
below.
"Material Adverse Effect" has the meaning set forth in Section 3.1
below.
"Material Subsidiaries" means WCH, Inc., CLS International, Inc.,
and The Barbers Export, Inc.
"Merger" has the meaning set forth in Section 2.1 below.
"Merger Consideration" has the meaning set forth in Section 2.5
below.
"Minnesota Business Corporation Act" means the Minnesota Business
Corporation Act, Minnesota Statutes Chapter 302A, as amended.
"Most Recent Fiscal Quarter End" has the meaning set forth in
Section 4.6 below.
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"Multiemployer Pension Plans" has the meaning set forth in Section
3.11(c) below.
"Option Plans" has the meaning set forth in Section 2.6 below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parties" has the meaning set forth in the preface above.
"Party" has the meaning set forth in the preface above.
"Pension Plans" has the meaning set forth in Section 3.11 below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prospectus" means the final prospectus relating to the registration
of the BUYER Shares under the Securities Act.
"Public Reports" has the meaning set forth in Sections 3.5 and 4.5
below.
"Registration Statement" has the meaning set forth in Section
3.18(i) below.
"Requisite COMPANY Stockholder Approval" means the affirmative vote
of a majority of the COMPANY shares in favor of this Agreement and the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable or for taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
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"Special COMPANY Meeting" has the meaning set forth in Section 5.6
below.
"Stock Option" has the meaning set forth in Section 2.6 below.
"SUB" has the meaning set forth in the preface above.
"SUB Share" means any share of Common Stock, $1.00 par value per
share, of SUB.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Surviving Corporation" has the meaning set forth in Section 2.1
below.
"Taxes" has the meaning set forth in Section 3.9(s)(i) below.
"Tax Return" has the meaning set forth in Section 3.9(s)(ii) below.
"Tax Ruling" has the meaning set forth in Section 3.9(s)(iii) below.
"Willful Breach" has the meaning set forth in Section 7.1(c) below.
2. Basic Transaction.
2.1 The Merger. At the Effective Time, on and subject to the terms
and conditions of this Agreement, SUB will merge with and into COMPANY (the
"Merger"). The separate existence of SUB shall cease, and COMPANY shall be the
corporation surviving the Merger (the "Surviving Corporation") and shall be
governed by the laws of the State of Minnesota.
2.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the BUYER,
0000 Xxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, commencing at 9:00 a.m. local time
on the second business day following the satisfaction or waiver of the
conditions set forth in Section 6 (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
2.3 Actions at the Closing. At the Closing, (i) COMPANY will deliver
to BUYER and SUB the various certificates, instruments, and documents referred
to in Section 6.1 below, (ii) BUYER and SUB will deliver to COMPANY the various
certificates, instruments, and documents referred to in Section 6.2 below, (iii)
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SUB and COMPANY will file with the Secretary of State of the State of Minnesota
a Certificate of Merger in such form as required by, and executed and certified
in accordance with, the relevant provisions of the Minnesota Business
Corporation Act (the "Certificate of Merger"), and (iv) BUYER will deliver to
the Exchange Agent in the manner provided below in this Article 2 the
certificate evidencing the BUYER Shares issued in the Merger.
2.4 Effect of Merger.
(a) General. The Merger shall become effective at the time (the
"Effective Time") SUB and COMPANY file the Certificate of Merger with the
Secretary of State of the State of Minnesota. The Merger shall have the effect
set forth in the Minnesota Business Corporation Act. The Surviving Corporation
may, at any time after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of either SUB or COMPANY
in order to carry out and effectuate the transactions contemplated by this
Agreement.
(b) Certificate of Incorporation. The Certificate of Incorporation
of SUB in effect at and as of the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation upon and following the Merger.
(c) Bylaws. The Bylaws of SUB in effect at and as of the Effective
Time will be the Bylaws of the Surviving Corporation upon and following the
Merger.
(d) Directors and Officers. The directors and officers of SUB in
office at and as of the Effective Time will be the directors and officers of the
Surviving Corporation upon and following the Merger.
2.5 Conversion and Dissenting Shareholders.
(a) Conversion. At and as of the Effective Time, except as otherwise
provided in Section 2.5(b) below and subject to Section 2.9, each COMPANY Share
shall be canceled and retired and shall be converted into the right to receive
one-third (1/3) of one BUYER Share (the ratio of one-third (1/3) of one BUYER
Share to one COMPANY Share is referred to herein as the "Conversion Ratio" and
the BUYER Shares so received are referred to as the "Merger Consideration"),
provided, however, that the Conversion Ratio shall be subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split,
or other change in the number of COMPANY Shares outstanding. No COMPANY Share
shall be deemed to be outstanding or to have any rights other than those set
forth above in this Section 2.5 after the Effective Time. From the date of this
Agreement to the Closing Date, COMPANY's Board of Directors shall not adopt any
new "poison pill," stockholder rights plan or other similar plan applicable to
the transactions contemplated by this Agreement.
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(b) Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, any COMPANY Shares held by a person (a "Dissenting
Shareholder") who duly demands appraisal of his or its COMPANY Shares pursuant
to the Minnesota Business Corporation Act and complies with all the provisions
of the Minnesota Business Corporation Act concerning the right of holders of
COMPANY Shares to demand appraisal of their shares in connection with the Merger
shall not be converted as described in Section 2.5(a), but shall become the
right to receive such cash consideration as may be determined to be due to such
Dissenting Shareholder as provided in the Minnesota Business Corporation Act.
If, however, such Dissenting Shareholder withdraws his demand for appraisal or
fails to perfect or otherwise loses his or its right of appraisal, in any case
pursuant to the Minnesota Business Corporation Act, such shares shall be deemed
to be converted as of the Effective Time into the right to receive BUYER Shares,
without interest, pursuant to Section 2.5(a). The COMPANY shall give BUYER (i)
prompt notice of any demands for appraisal of shares received by the COMPANY and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demand. The COMPANY shall not, without the
prior written consent of BUYER, make any payment with respect to, or settle,
offer to settle or otherwise negotiate any such demands.
2.6 Stock Options or Warrants and Related Matters. Prior to the
expiration of twenty business days after the date hereof, COMPANY shall deliver
to BUYER a list setting forth each stock option and warrant issued by the
COMPANY outstanding on the date hereof, whether or not fully exercisable
(collectively, "Stock Options" and individually, a "Stock Option"), to purchase
COMPANY Shares pursuant to all Stock Option Plans of COMPANY, in each case as
amended and in effect as of the date of this Agreement (collectively, the
"Option Plans"). Prior to the Effective Time, the COMPANY shall use its best
efforts to (i) cancel the rights of holders of Stock Options to purchase COMPANY
Shares, and (ii) amend all Stock Options so that, effective at the Effective
Time, COMPANY Shares shall no longer be deliverable upon exercise thereof and in
lieu of COMPANY Shares, such Stock Options shall be exercisable for a number of
BUYER Shares equal to the number of COMPANY Shares subject to such Stock Options
outstanding multiplied by the Conversion Ratio. The per share exercise price for
each such Stock Option shall be the current exercise price per COMPANY Share
divided by the Conversion Ratio. Effective as of the Effective Time, BUYER shall
assume all obligations of COMPANY with respect to such Stock Options, as so
modified. Promptly following the Effective Time, BUYER shall issue option
agreements representing such Stock Options, as so modified.
2.7 No Fractional Shares. No fraction of a BUYER Share will be
issued, but in lieu thereof each holder of COMPANY Shares who would otherwise be
entitled to a fraction of a BUYER Share will, upon surrender thereof to the
Exchange Agent, be paid an amount in cash equal to the value of such fraction of
a share based on the closing sale price for BUYER Shares on the Nasdaq National
Market
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on the last day prior to the Closing Date on which BUYER Shares were traded. No
interest shall be paid on such amount.
2.8 SUB Shares. Each SUB Share issued and outstanding at and as of
the Effective Time shall be canceled and retired and shall be converted into the
right to receive one share of the Surviving Corporation.
2.9 Procedure for Payment.
(a) Merger Consideration. Except as set forth herein, from and after
the Effective Time, each holder of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of
COMPANY stock ("Certificate" or "Certificates") shall be entitled to receive in
exchange therefor, upon surrender thereof to the Exchange Agent, the Merger
Consideration for each share of COMPANY stock so represented by the Certificate
or Certificates surrendered by such holder thereof.
(b) Exchange Agent. Immediately after the Effective Time, (A) BUYER
will furnish to Norwest Bank Minnesota, N.A. (the "Exchange Agent") a stock
certificate (issued in the name of the Exchange Agent or its nominee)
representing that number of BUYER Shares equal to the product of (I) the
Conversion Ratio times (II) the number of outstanding COMPANY Shares plus the
number of such shares subject to options and (B) BUYER will cause the Exchange
Agent to mail a letter of transmittal (with instructions for its use) to each
record holder of outstanding COMPANY Shares for the holder to use in
surrendering the Certificates which represented his or its COMPANY Shares in
exchange for a Certificate representing the number of BUYER Shares to which he
or it is entitled. Such letter of transmittal shall specify that delivery shall
be effected, and risk of loss and title to the Certificate or Certificates shall
pass, only upon proper delivery of the Certificate or Certificates to the
Exchange Agent, shall advise such holder of the effectiveness of the Merger and
the procedures to be used in effecting the surrender of the Certificate or
Certificates for exchange therefor. Upon surrender to the Exchange Agent of a
Certificate or Certificates, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and such
other documents as may be reasonably requested, the Exchange Agent shall,
pursuant to the Merger, promptly deliver to the person entitled to the Merger
Consideration for each share of COMPANY stock so represented by the Certificate
or Certificates surrendered by such holder thereof, and such Certificate or
Certificates shall forthwith be canceled.
(c) Transfer. If delivery of all or part of the Merger Consideration
is to be made to a person other than the person in whose name a surrendered
Certificate is registered, it shall be a condition of such delivery or exchange
that the Certificate so surrendered shall be properly endorsed or shall be
otherwise in
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proper form for transfer and that the person requesting such delivery or
exchange shall have paid any transfer and other taxes required by reason of such
delivery or exchange in a name other than that of the registered holder of the
Certificate surrendered or shall have established to the reasonable satisfaction
of BUYER that such tax either has been paid or is not payable.
(d) Right to Merger Consideration. Until surrendered and exchanged
in accordance with this Section 2.9, each such Certificate shall, after the
Effective Time, represent solely the right to receive the Merger Consideration,
multiplied by the number of shares of COMPANY Shares evidenced by such
Certificate, and shall have no other rights. No interest shall accrue or be
payable on any Merger Consideration. Neither BUYER nor COMPANY shall be liable
to any holder of shares of COMPANY Shares for any Merger Consideration (or
dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Dividends on BUYER Shares. From and after the Effective Time, no
holder of a Certificate or Certificates shall be entitled to receive any
dividend or other distribution from BUYER until surrender of such holder of
Certificate or Certificates for a Certificate or Certificates representing BUYER
Shares. Upon such surrender, there shall be paid to the holder the amount of any
dividends or other distributions (without interest) that theretofore became
payable by BUYER, but were not paid by reason of the foregoing with respect to
the number of whole shares of BUYER Shares represented by the Certificate or
Certificates issued upon such surrender. From and after the Effective Time,
BUYER shall, however, be entitled to treat such Certificate or Certificates that
have not yet been surrendered or exchanged as evidencing the ownership of the
aggregate Merger Consideration into which such BUYER Shares represented by such
Certificate or Certificates shall have been converted, notwithstanding any
failure to surrender such Certificate or Certificates.
(f) Termination of Exchange Agent. BUYER may cause the Exchange
Agent to return any BUYER Shares remaining unclaimed 180 days after the
Effective Time, and thereafter each remaining record holder of outstanding
COMPANY Shares shall be entitled to look to BUYER (subject to abandoned
property, escheat, and other similar laws) as a general creditor thereof with
respect to the BUYER Shares and dividends and distributions thereon to which he
or it is entitled upon surrender of his or its certificates.
(g) Fees of Exchange Agent. BUYER shall pay all charges and expenses
of the Exchange Agent.
2.10 Closing of Transfer Records. As of and after the Effective
Time, transfers of COMPANY Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation.
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2.11 Taking of Necessary Action; Future Action. Each of the parties
will take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of both Parties, the officers and
directors of the Surviving Corporation are fully authorized in the name of their
corporation or otherwise to take, and will take, all such lawful and necessary
action.
3. Representations and Warranties of COMPANY.
Except as set forth in the Public Reports (as defined below) of the
COMPANY or the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"), which shall be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Article 3, COMPANY represents and
warrants to BUYER that:
3.1 Organization, Qualification, and Corporate Power. Each of
COMPANY and its Material Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of COMPANY and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required except for such failures to be so qualified
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on COMPANY. As used in this Agreement, the term
"Material Adverse Effect" means with respect to any person, any change or effect
that is materially adverse to the financial condition, business or results of
operations of such person and its subsidiaries, taken as a whole. Each of
COMPANY and its Subsidiaries has full corporate power and authority to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. COMPANY beneficially owns all of the outstanding capital stock
of each of its Subsidiaries, except as described in the Disclosure Schedule.
3.2 Capitalization. The entire authorized capital stock of COMPANY
consists of 7,500,000 COMPANY Shares, of which as of December 31, 1998,
3,983,269 COMPANY Shares are issued and outstanding and no COMPANY Shares are
held in treasury. All of the issued and outstanding COMPANY Shares have been
duly authorized and are validly issued, fully paid, and nonassessable. Except as
set forth in the Disclosure Schedule, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require COMPANY to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
Except as set forth in the Disclosure Schedule, there are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to COMPANY.
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3.3 Authorization of Transaction. COMPANY has full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder subject to receiving the Requisite COMPANY Stockholder
Approval. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by the board of
directors of the COMPANY and no other corporate proceedings on the part of the
COMPANY or its shareholders are necessary to authorize this Agreement and to
consummate the transactions so contemplated other than the Requisite COMPANY
Stockholder Approval and the filing of the Certificate of Merger. Assuming that
this Agreement constitutes a valid and binding obligation of BUYER, this
Agreement has been duly executed and delivered and constitutes the valid and
legally binding obligation of COMPANY, enforceable in accordance with its terms
and conditions except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally; and
(ii) the remedy of specific performance and injunctive and other forms of
equitable remedies may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
3.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) materially violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of COMPANY and its Subsidiaries is
subject or any provision of the charter or bylaws of any of COMPANY and its
Subsidiaries or (ii) materially conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument or other arrangement to
which any of COMPANY and its Subsidiaries is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Other than in connection with the
provisions of the Xxxx-Xxxxx-Xxxxxx Act, the Minnesota Business Corporation Act,
the Securities Exchange Act, the Securities Act, and the state securities laws,
none of COMPANY and its Subsidiaries needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
3.5 Filings with the SEC. COMPANY has made all filings with the SEC
that it has been required to make under the Securities Act and the Securities
Exchange Act (collectively, the "Public Reports"). Each of the Public Reports
has complied with the Securities Act and the Securities Exchange Act in all
material
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respects. None of the Public Reports, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. BUYER and SUB
acknowledge that (i) the COMPANY's Public Reports contain projections, (ii)
BUYER and SUB have not relied on such projections in entering into this
Agreement, and (iii) that the COMPANY may not achieve such projections.
3.6 Financial Statements. COMPANY has filed an Annual Report on Form
10-KSB for the fiscal year ended September 24, 1998. The financial statements
included in or incorporated by reference into this Public Report (including the
related notes and schedules) have been prepared in accordance with GAAP applied
on a consistent basis throughout the period covered thereby, present fairly the
financial condition of COMPANY and its Subsidiaries as of the indicated dates
and the results of operations of COMPANY and its Subsidiaries for the indicated
periods, and are consistent with the books and records of COMPANY and its
Subsidiaries.
3.7 Events Subsequent to Most Recent Fiscal Year End. Except as set
forth in the Disclosure Schedule, since September 24, 1998, there has not been
(a) any material adverse change in the business, financial condition or
operations of COMPANY and its Subsidiaries taken as a whole (except for changes
resulting from a change in general economic conditions), (b) in the case of the
COMPANY, any declaration, setting aside or payment of any dividend or any other
distribution with respect to its capital stock, or (c) any change by the COMPANY
in accounting principles or methods.
3.8 Litigation. Except as set forth in the Disclosure Schedule, or
as disclosed in the COMPANY Public Reports, there are no claims, actions, suits,
investigations or proceedings pending or, to the knowledge of COMPANY,
threatened against or adversely affecting the COMPANY or any of its Subsidiaries
or any of their respective properties at law or in equity, before or by any
federal, state, municipal or other governmental agency or authority, or before
any arbitration board or panel which individually or in the aggregate are likely
to have a Material Adverse Effect on COMPANY; provided, however, the Disclosure
Schedule lists all pending lawsuits against the COMPANY or any of its
Subsidiaries except for lawsuits as of the date hereof covered by insurance
maintained by the COMPANY.
3.9 Tax Matters. Except as set forth in the Disclosure Schedule:
(a) Filing of Timely Tax Returns. COMPANY and each of its
Subsidiaries have filed (or there has been filed on its behalf) all material Tax
Returns (as hereinafter defined) required to be filed by each of them under
applicable law. All such Tax Returns were filed on a timely basis. To the extent
requested by BUYER, COMPANY has delivered to BUYER correct and complete copies
of all
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Tax Returns, examination reports, statements of deficiencies assessed against or
agreed to by any of COMPANY and its Subsidiaries since January 2, 1996 and all
Tax Rulings and Closing Agreements.
(b) Payment of Taxes. COMPANY and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid all material Taxes (as
hereinafter defined) that are currently due and payable except for those
contested in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. COMPANY and its Subsidiaries have established on
their books and records reserves adequate to pay all Taxes and reserves for
deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of COMPANY or
any of its Subsidiaries except liens for Taxes not yet due or being contested in
good faith through appropriate proceedings.
(e) Withholding Taxes. COMPANY and each of its Subsidiaries have
complied in all material respects with the provisions of the Code relating to
the withholding of Taxes, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law, withheld from any
employee wages and any amounts owed to any independent contractor, creditor,
stockholder, or other third party and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither COMPANY nor
any of its Subsidiaries has requested any extension of time within which to file
any material Tax Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Neither COMPANY nor any of
its Subsidiaries has executed any outstanding waivers of comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or Tax Returns of COMPANY or any of its
Subsidiaries.
(i) Powers of Attorney. No power of attorney currently in force has
been granted by COMPANY or any of its Subsidiaries concerning any material Tax
matter.
(j) Tax Rulings. Neither COMPANY nor any of its Subsidiaries has
received a Tax Ruling (as hereinafter defined) or entered into a Closing
Agreement (as hereinafter defined) with any taxing authority that would have a
continuing material adverse effect after the Closing Date.
13
(k) Tax Sharing Agreements. Neither COMPANY nor any Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(l) Code Sections 280G and 162(m). Neither COMPANY nor any of its
Subsidiaries is a party to any agreement, contract, or arrangement that could
result, on account of the transactions contemplated hereunder, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code or nondeductible compensation under Code
162(m).
(m) Liability for Others. None of COMPANY or any of its Subsidiaries
(A) has any liability for Taxes of any person other than COMPANY and its
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law) as a transferee or successor, (ii) by
contract, or (iii) otherwise.
(n) Continuity of Business Enterprises. COMPANY operates at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Treasury
Reg. ss.1.368-1(d).
(o) Tax-Free Reorganization. Neither the COMPANY nor any of its
Subsidiaries has through the date of this Agreement taken or agreed to take any
action that would prevent the Merger from qualifying as a reorganization under
the Code. COMPANY and its Subsidiaries will not, at the time of the transaction,
have any outstanding warrants, options, convertible securities, or any other
type of right pursuant to which any person could acquire stock in the COMPANY
that, if exercised or converted, would affect BUYER's acquisition or retention
of "control" of COMPANY within the meaning of Section 368(c) of the Code.
(p) Other. None of the COMPANY and its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations. None of
the COMPANY and its Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
(q) As used in this Agreement:
(i) "Taxes" means any Federal, state, county, local or
foreign taxes, charges, fees, levies, or other assessments,
including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental
14
entity, and includes any interest and penalties (civil or criminal)
on or additions to any such taxes;
(ii) "Tax Return" means a report, return or other
information required to be supplied to a governmental entity with
respect to Taxes including, where permitted or required, combined or
consolidated returns for a group of entities;
(iii) "Tax Ruling" means a written ruling of a taxing
authority relating to Taxes; and
(iv) "Closing Agreement" means a written and legally
binding agreement with a taxing authority relating to Taxes.
3.10 Labor Matters. Except as set forth in Schedule 3.10, there are
no collective bargaining or other labor union agreements to which the COMPANY or
any of its Subsidiaries is a party or by which any of them is bound. Except as
set forth in Schedule 3.10, neither the COMPANY nor any of its Subsidiaries has
encountered any labor union organizing activity, or had any actual or, to
COMPANY's Knowledge, threatened employee strikes, work stoppages, slowdowns or
lockouts.
3.11 ERISA Compliance.
(a) Schedule 3.11 contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
and all other bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, Christmas bonus,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) maintained, or contributed to, by the COMPANY or any of its
Subsidiaries for the benefit of any officers, employees or directors of the
COMPANY or any of its Subsidiaries currently or within the last five years
(collectively, "Benefit Plans"). The COMPANY agrees to deliver or make available
to BUYER within fourteen (14) days after the date of this Agreement true,
complete and correct copies of (1) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), (3) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required, (4) each trust agreement and group annuity contract relating to any
Benefit Plan, and (5) the most recent actuarial report relating to any Benefit
Plan.
(b) Except as disclosed in Schedule 3.11, all Pension Plans have
been the subject of determination letters from the Internal Revenue Service to
the effect that such Pension Plans are
15
qualified and exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the COMPANY, has revocation been threatened, nor has
any such Pension Plan been amended since the date of its most recent
determination letter or application therefore in any respect that would
adversely affect its qualification or materially increase its costs.
(c) Except as disclosed on Schedule 3.11, no Pension Plan that the
COMPANY or any of its Subsidiaries maintains, or to which the COMPANY or any of
its Subsidiaries is or was previously obligated to contribute, other than any
Pension Plan that is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA; collectively, the "Multiemployer Pension Plans"), had, as
of the respective last annual valuation date for each such Pension Plan, any
"unfunded benefit liabilities" (as such term is defined in Section 4001(a)(18)
of ERISA), based on actuarial assumptions which have been furnished to BUYER.
None of the COMPANY's Pension Plans has an "accumulated funding deficiency" (as
such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived. To the best knowledge of the COMPANY, none of the
COMPANY, any of its Subsidiaries, any officer of the COMPANY or any of its
Subsidiaries or any of the Benefit Plans which are subject to ERISA, including
the Pension Plans, or any trusts created thereunder, or any trustee or
administrator thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility that could subject the COMPANY, any of its
Subsidiaries or any officer of the COMPANY or any of its Subsidiaries to the tax
or penalty on prohibited transactions imposed by such Section 4975 or to any
liability under Sections 502(i) or 502(1) of ERISA. Except as disclosed on
Schedule 3.12, neither any of such Pension Plans nor any of such trusts have
been terminated, nor has there been any "reportable event" (as that term is
defined in Section 4043 of ERISA) with respect to which the 30-day notice
requirement has not been waived and the COMPANY is not aware of any other
reportable events with respect thereto during the last five years. Neither the
COMPANY nor any of its Subsidiaries has suffered or otherwise caused a "complete
withdrawal" or a "partial withdrawal" (as such terms are defined in Section 4203
and Section 4205, respectively, of ERISA) since the effective date of such
Sections 4203 and 4205 with respect to any of the Multiemployer Pension Plans.
Neither the COMPANY nor any of its Subsidiaries is secondarily liable for any
withdrawal liability as a result of the sale of assets within the meaning of
Section 4204 of ERISA. To the knowledge of the COMPANY, in the event a "complete
withdrawal" currently occurred with respect to any of the Multiemployer Pension
Plans, there would be no withdrawal liability assessed against the COMPANY or
any of its Subsidiaries.
16
(d) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 3.11, (i) no such Benefit Plan is
unfunded or funded through a welfare benefits fund, as such term is defined in
Section 419(e) of the Code, (ii) each such Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code, complies in all
material respects with the applicable requirements of Section 4980B(f) of the
Code and Section 1862(b)(1) of the Social Security Act and (iii) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to the
COMPANY or any of its Subsidiaries on or at any time after the Effective Time.
(e) Except as disclosed on Schedule 3.11, each Benefit Plan conforms
in all material respects and, to the knowledge of the COMPANY, in form and
operation to all applicable laws and regulations, and all reports or information
relating to such Benefit Plan required to be filed with any governmental entity
or disclosed to participants have been timely filed and disclosed. Except as
disclosed on Schedule 3.11, no Pension Plan holds any employer security or
employer real property within the meaning of Section 407 of ERISA.
(f) Except as disclosed on Schedule 3.11, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of the COMPANY or any Subsidiary thereof to severance pay,
unemployment compensation or any other payment or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee or former employee.
(g) Except as disclosed on Schedule 3.11, neither the COMPANY nor
any of its Subsidiaries has announced a plan to create or a legally binding
commitment to amend any Benefit Plan or to create any new arrangement which
would be a Benefit Plan.
(h) All insurance premiums with respect to any Benefit Plan
(including premiums to the Pension Benefit Guaranty Corporation) have been paid
in full. Except as disclosed on Schedule 3.11, there are no retrospective
adjustments provided for under any insurance contracts maintained pursuant to
any Benefit Plan with regard to policy years or other periods ending on or
before the Effective Time.
(i) Except as disclosed in Schedule 3.11, no Benefit Plan or the
deduction of any contributions thereto by the COMPANY or any of its Subsidiaries
has been the subject of audit by the Internal Revenue Service or the Department
of Labor, and no litigation or asserted claims exist against the COMPANY or any
of its Subsidiaries or any Benefit Plan or fiduciary with respect thereto (other
than such benefit claims as are made in the normal operation of a Benefit Plan).
To the knowledge of the COMPANY, there are no facts which would give rise to or
could give rise to any action, suit, grievance, arbitration or other claim.
17
3.12 Environmental Matters.
(a) Except as set forth on Schedule 3.12, to the COMPANY's
Knowledge, the COMPANY and each of its Subsidiaries are in material compliance
with all applicable federal, state, regional and local laws, statutes,
ordinances, judgments, rulings and regulations relating to any matters of
pollution, protection of the environment or environmental regulation or control
(collectively, "Environmental Laws"). Neither the COMPANY nor any of its
Subsidiaries has received any written notice (i) of any violation of an
Environmental Law or (ii) of the institution of any suit, action, claim, or
proceedings alleging such violation or investigation by any Governmental Entity
or any third party of any such violation.
(b) Except as disclosed on Schedule 3.12 and as to matters that are
not anticipated to have a Material Adverse Effect on the COMPANY, to the
COMPANY's Knowledge, neither the COMPANY nor any of its Subsidiaries has (i)
released, transported or disposed of any Hazardous Substances (as hereinafter
defined) on, under, or at any of the COMPANY's or any of its Subsidiaries'
properties or any other properties, (ii) reason to know of the release or
disposal of any Hazardous Substances on, under or at any of COMPANY's or any of
its Subsidiaries' properties, arising from the conduct of operations on the
COMPANY's or any of its Subsidiaries' properties, or (iii) received any written
notice which has not been paid, settled or otherwise resolved (w) of any
violation of any Environmental Law or any other law, statute, rule or regulation
regarding Hazardous Substances on or under any of the COMPANY's or any of its
Subsidiaries' properties or any other properties, (x) of the institution or
pendency of any suit, action, claim, proceeding or investigation by any
Governmental Entity or any third party of any such violation, (y) of any actual
or potential liability for the response to or remediation of Hazardous Substance
at or arising from any of the COMPANY's or any of its Subsidiaries' properties
or any other properties, or (z) of any actual or potential liability for the
costs of response to or remediation of Hazardous Substances at or arising from
any of the COMPANY's or any of its Subsidiaries' properties or any other
properties. For purposes of this Agreement, the term "Hazardous Substance" shall
mean any toxic or hazardous materials or substances, including asbestos, buried
contaminants, chemicals, flammable explosives, radioactive materials, petroleum
and petroleum products and any substances defined as, or included in the
definition of, "hazardous substances", "hazardous wastes", "hazardous materials"
or "toxic substances" under any Environmental Law.
(c) To the COMPANY's Knowledge, no Environmental Law imposes any
obligation upon the COMPANY or its Subsidiaries arising out of or as a condition
to any transaction contemplated hereby, including, without limitation, any
requirement to modify or to transfer any permit or license, any requirement to
file any notice
18
or other submission with any Governmental Entity, the placement of any notice,
acknowledgement, or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order, or consent decree. To
the COMPANY's Knowledge, no lien has been placed upon any of the COMPANY's
properties or its Subsidiaries' properties under any Environmental Law.
3.13 Material Contract and Agreements.
(a) Except as listed on Schedule 3.13, there are no contracts or
agreements that are material to the business, financial condition, properties,
assets, liabilities or results of operations of the COMPANY and its Subsidiaries
taken as a whole.
(b) As of the date hereof and except as disclosed on Schedule 3.13,
no default in performance or failure to perform under, and no anticipatory
breach of, any of the contracts listed on Schedule 3.13 has occurred or is
continuing, and none of the parties to any such contract has alleged that the
other has defaulted in performance or failed to perform, other than (i) a
default in payment that shall not have continued more than 60 days from the date
on which the payment was originally due pursuant to the terms of the applicable
contracts, and (ii) a default or failure that is immaterial with respect to all
such contracts. To COMPANY's Knowledge, as of the date hereof and except as
disclosed on Schedule 3.13, there are no legal, administrative or other
proceedings threatened, pending or outstanding relating to the performance or
status of any of such contracts. As of the date hereof and except as disclosed
on Schedule 3.13, the COMPANY has not received notice of any anticipatory
breach, pending dispute or anticipated litigation arising from or relating to
any of such contracts, or notice that any of such contracts has been or will be
canceled, revoked or otherwise terminated.
(c) Except as listed on Schedule 3.13, neither the COMPANY nor any
Subsidiary is subject to any agreement which restricts competition with any
other person or provides that the COMPANY, any Subsidiary or affiliate may not
engage in any business or sell or distribute any product or service.
3.14 Intellectual Property. The COMPANY and its Subsidiaries own, or
are licensed or otherwise have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service xxxx rights, copyrights and other proprietary intellectual property
rights and computer programs currently used in the business. Except as set forth
on Schedule 3.14, no claims are pending or, to the knowledge of the COMPANY,
threatened that the COMPANY is infringing or otherwise adversely affecting the
rights of any person with regard to any patent, license, trademark, trade name,
service xxxx, copyright or other intellectual property right. To the knowledge
of the COMPANY, no person is infringing the rights of the COMPANY with respect
to any patent, license, trademark, trade name, service xxxx, copyright or other
intellectual property
19
right.
3.15 Certain Fees. Except for fees payable to Xxxxx Xxxxxxx, Inc.,
none of the COMPANY and its Subsidiaries has any liability or obligation to pay
any fees or commissions to any financial advisor, broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.16 COMPANY Board of Directors Action. The Board of Directors of
COMPANY (at a meeting duly called and held) has by the requisite vote of all
directors present, (a) determined that the Merger is advisable and in the best
interest of the COMPANY and its shareholders, and (b) resolved to recommend the
approval of this Agreement and the Merger by the holders of the COMPANY Shares
and directed that the Merger be submitted for consideration by the holders of
the COMPANY Shares at the Meeting.
3.17 Registration Statement and Proxy Statement.
None of the information supplied or to be supplied by or on behalf
of COMPANY for inclusion or incorporation by reference in:
(i) the registration statement on Form S-4 to be filed
with the SEC by BUYER in connection with the issuance of BUYER
Shares in the Merger (the "Registration Statement") will, at the
time the Registration Statement is filed with the SEC and at the
time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading; and
(ii) the COMPANY proxy statement, in definitive form,
relating to the meeting of COMPANY shareholders to be held in
connection with the Merger (the "COMPANY Proxy Statement") will, at
the date mailed to shareholders and at the time of the meeting of
shareholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading;
3.18 Pooling of Interests Accounting. After review and discussion
with Ernst & Young LLP, independent certified public accountants for COMPANY, to
COMPANY's Knowledge there is no fact pertaining to it which would prevent the
Merger from being accounted for as a pooling of interests in accordance with
GAAP.
To COMPANY's Knowledge, neither the COMPANY nor any of its
Subsidiaries has through the date of this Agreement taken or agreed to take any
action that would prevent the COMPANY and the BUYER from accounting for the
business combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
20
3.19 Non-Survival of Certain Representations and Warranties. No
representations or warranties contained in Section 3 of this Agreement shall
survive the Merger.
4. Representations and Warranties of BUYER. Except as set forth in
the disclosure schedule accompanying this Agreement and initialed by the Parties
(the "Disclosure Schedule"), which shall be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Article 4, BUYER
represents and warrants to COMPANY that:
4.1 Organization, Qualification, and Corporate Power. Each of BUYER
and its Material Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of BUYER and its Material Subsidiaries is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required except for such failures to be so qualified and in
good standing that would not, individually or in the aggregate, have a Material
Adverse Effect on BUYER. BUYER beneficially owns all of the outstanding capital
stock of each of its Subsidiaries, except as described in the Disclosure
Schedule.
4.2 Capitalization. The entire authorized capital stock of BUYER
consists of 50,000,000 BUYER Shares, of which as of December 31, 1998,
23,935,080 BUYER Shares are issued and outstanding. The total number of shares
subject to options is 721,118. All of the BUYER Shares to be issued in the
Merger have been duly authorized and, upon consummation of the Merger, will be
validly issued, fully paid, and nonassessable. The entire authorized capital
stock of SUB consists of 1,000 SUB Shares, all of which are issued and
outstanding.
4.3 Authorization of Transaction. BUYER and SUB have full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the board of directors of the BUYER and no other corporate proceedings on the
part of the BUYER or its shareholders are necessary to authorize this Agreement
and to consummate the transactions so contemplated other than the filing of the
Certificate of Merger. Assuming that this Agreement constitutes a valid and
binding obligation of COMPANY, this Agreement has been duly executed and
delivered and constitutes the valid and legally binding obligation of BUYER,
enforceable in accordance with its terms and conditions except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally; and (ii) the remedy of specific performance and
injunctive and other forms of equitable remedies may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
21
4.4 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) materially violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which BUYER or any of its Subsidiaries is
subject or any provision of the charter or bylaws of BUYER or any of its
Subsidiaries or (ii) materially conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument or other arrangement to
which BUYER or any of its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject. Other than in connection with the provisions
of the Xxxx-Xxxxx-Xxxxxx Act, the Minnesota Business Corporation Act, the
Securities Exchange Act, the Securities Act, and the state securities laws,
BUYER does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement.
4.5 Filings with the SEC. BUYER has made all filings with the SEC
that it has been required to make under the Securities Act and the Securities
Exchange Act (collectively the "Public Reports"). Each of the Public Reports has
complied with the Securities Act and the Securities Exchange Act in all material
respects. None of the Public Reports, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
4.6 Financial Statements. BUYER has filed a Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998 (the "Most Recent Fiscal
Quarter End"), and an Annual Report on Form 10-K for the fiscal year ended June
30, 1998. The financial statements included in or incorporated by reference into
these Public Reports (including the related notes and schedules) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
period covered thereby, present fairly the financial condition of BUYER and its
Subsidiaries as of the indicated dates and the results of operations of BUYER
and its Subsidiaries for the indicated periods, and are consistent with the
books and records of BUYER and its Subsidiaries; provided, however, that the
interim statements are subject to normal year-end adjustments.
4.7 Events Subsequent to Most Recent Fiscal Quarter End. Except as
set forth in the Disclosure Schedule, since the Most Recent Fiscal Quarter End,
there has not been (a) any material adverse change in the business, financial
condition, operations or results of operations, of BUYER and its Subsidiaries
taken as a
22
whole, (b) in the case of the BUYER, any declaration, setting aside or payment
of any dividend or any other distribution with respect to its capital stock, or
(c) any material change by the BUYER in accounting principles or methods.
4.8 Certain Fees. None of BUYER and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any financial advisor,
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
4.9 Continuity of Business Enterprise. It is the present intention
of BUYER to continue at least one significant historic business line of COMPANY,
or to use at least a significant portion of COMPANY's historic business assets
in a business, in each case within the meaning of Treasury Reg. ss.1.368-1(d).
4.10 Litigation. Except as set forth in the Disclosure Schedule, or
as disclosed in the BUYER Public Reports, there are no claims, actions, suits,
investigations or proceedings pending or, to the knowledge of BUYER, threatened
against or adversely affecting the BUYER or any of its Subsidiaries or any of
their respective properties at law or in equity, before or by any federal,
state, municipal or other governmental agency or authority, or before any
arbitration board or panel which individually or in the aggregate are likely to
have a Material Adverse Effect on BUYER.
4.11 Tax Matters. Except as set forth in the Disclosure Schedule:
(a) Filing of Timely Tax Returns. BUYER and each of its Subsidiaries
have filed (or there has been filed on its behalf) all material Tax Returns (as
hereinafter defined) required to be filed by each of them under applicable law.
All such Tax Returns were filed on a timely basis. To the extent requested in
writing by COMPANY, BUYER has delivered to COMPANY correct and complete copies
of all Tax Returns, examination reports, statements of deficiencies assessed
against or agreed to by any of COMPANY and its Subsidiaries since July 1, 1995
and all Tax Rulings and Closing Agreements.
(b) Payment of Taxes. BUYER and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid all material Taxes (as
hereinafter defined) that are currently due and payable except for those
contested in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. BUYER and its Subsidiaries have established on
their books and records reserves adequate to pay all Taxes and reserves for
deferred income taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of BUYER or
any of its Subsidiaries except liens for Taxes not yet
23
due or being contested in good faith through appropriate proceedings.
(e) Withholding Taxes. BUYER and each of its Subsidiaries have
complied in all material respects with the provisions of the Code relating to
the withholding of Taxes, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law, withheld from any
employee wages and any amounts owed to any independent contractor, creditor,
stockholder, or other third party and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Neither BUYER nor any
of its Subsidiaries has requested any extension of time within which to file any
material Tax Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Neither BUYER nor any of its
Subsidiaries has executed any outstanding waivers of comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Audit, Administrative and Court Proceedings. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or Tax Returns of BUYER or any of its Subsidiaries.
(i) Powers of Attorney. No power of attorney other than to
PricewaterhouseCoopers currently in force has been granted by BUYER or any of
its Subsidiaries concerning any material Tax matter.
(j) Tax Rulings. Neither BUYER nor any of its Subsidiaries has
received a Tax Ruling (as hereinafter defined) or entered into a Closing
Agreement (as hereinafter defined) with any taxing authority that would have a
continuing material adverse effect after the Closing Date.
(k) Tax Sharing Agreements. Neither BUYER nor any Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(l) Code Sections 280G and 162(m). Neither BUYER nor any of its
Subsidiaries is a party to any agreement, contract, or arrangement that could
result, on account of the transactions contemplated hereunder, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code or nondeductible compensation under Code
ss.162(m).
(m) Liability for Others. None of BUYER or any of its Subsidiaries
(A) has any material liability for Taxes of any person other than BUYER and its
Subsidiaries (i) under Treasure
24
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor, (ii) by contract, or (iii) otherwise.
(n) Tax-Free Reorganization. Neither the BUYER nor any of its
Subsidiaries has through the date of this Agreement taken or agreed to take any
action that would prevent the Merger from qualifying as a reorganization under
the Code.
(o) Other. None of the BUYER and its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations. None of
the BUYER and its Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii).
4.12 Labor Matters. Except as set forth in Schedule 4.12, there are
no collective bargaining or other labor union agreements to which the BUYER or
any of its Subsidiaries is a party or by which any of them is bound. Except as
set forth in Schedule 4.12, neither the BUYER nor any of its Subsidiaries has
encountered any labor union organizing activity, or had any actual or, to
BUYER's Knowledge, threatened employee strikes, work stoppages, slowdowns or
lockouts.
4.13 ERISA Compliance.
(a) Except as disclosed in Schedule 4.13, all Pension Plans have
been the subject of determination letters from the Internal Revenue Service to
the effect that such Pension Plans are qualified and exempt from federal income
taxes under Section 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of the BUYER, has
revocation been threatened, nor has any such Pension Plan been amended since the
date of its most recent determination letter or application therefore in any
respect that would adversely affect its qualification or materially increase its
costs.
(b) Except as disclosed on Schedule 4.13, no Pension Plan that the
BUYER or any of its Subsidiaries maintains, or to which the BUYER or any of its
Subsidiaries is or was previously obligated to contribute, other than any
Pension Plan that is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA; collectively, the "Multiemployer Pension Plans"), had, as
of the respective last annual valuation date for each such Pension Plan, any
"unfunded benefit liabilities" (as such term is defined in Section 4001(a)(18)
of ERISA). None of the BUYER's Pension Plans has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived. To the best knowledge of the BUYER, none of
the BUYER, any of its Subsidiaries, any officer of the BUYER or any of its
Subsidiaries or any of the Benefit Plans which are subject to ERISA, including
the Pension Plans, or any
25
trusts created thereunder, or any trustee or administrator thereof, has engaged
in a "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) or any other breach of fiduciary responsibility
that could subject the BUYER, any of its Subsidiaries or any officer of the
BUYER or any of its Subsidiaries to the tax or penalty on prohibited
transactions imposed by such Section 4975 or to any liability under Sections
502(i) or 502(1) of ERISA. Except as disclosed on Schedule 4.13, neither any of
such Pension Plans nor any of such trusts have been terminated, nor has there
been any "reportable event" (as that term is defined in Section 4043 of ERISA)
with respect to which the 30-day notice requirement has not been waived and the
BUYER is not aware of any other reportable events with respect thereto during
the last five years. Neither the BUYER nor any of its Subsidiaries has suffered
or otherwise caused a "complete withdrawal" or a "partial withdrawal" (as such
terms are defined in Sections 4203 and Section 4205, respectively, of ERISA)
since the effective date of such Sections 4203 and 4205 with respect to any of
the Multiemployer Pension Plans. Neither the BUYER nor any of its Subsidiaries
is secondarily liable for any withdrawal liability as a result of the sale of
assets within the meaning of Section 4204 of ERISA. To the knowledge of the
BUYER, in the event a "complete withdrawal" currently occurred with respect to
any of the Multiemployer Pension Plans, there would be no withdrawal liability
assessed against the BUYER or any of its Subsidiaries.
(c) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 4.13, (i) no such Benefit Plan is
unfunded or funded through a welfare benefits fund, as such term is defined in
Section 419(e) of the Code, (ii) each such Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code, complies in all
material respects with the applicable requirements of Section 4980B(f) of the
Code and Section 1862(b)(1) of the Social Security Act and (iii) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to the BUYER
or any of its Subsidiaries on or at any time after the Effective Time.
(d) Except as disclosed on Schedule 4.13, each Benefit Plan conforms
in all material respects, and to the knowledge of the BUYER, in form and
operation to all applicable laws and regulations, and all reports or information
relating to such Benefit Plan required to be filed with any governmental entity
or disclosed to participants have been timely filed and disclosed. Except as
disclosed on Schedule 4.13, no Pension Plan holds any employer security or
employer real property within the meaning of Section 407 of ERISA.
(e) Except as disclosed on Schedule 4.13, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee of the BUYER or any Subsidiary thereof to severance pay,
unemployment compensation or
26
any other payment or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due to any such employee or former employee.
(f) Except as disclosed on Schedule 4.13, neither the BUYER nor any
of its Subsidiaries has announced a plan to create or a legally binding
commitment to amend any Benefit Plan or to create any new arrangement which
would be a Benefit Plan.
(g) All insurance premiums with respect to any Benefit Plan
(including premiums to the Pension Benefit Guaranty Corporation) have been paid
in full. Except as disclosed on Schedule 4.13, there are no retrospective
adjustments provided for under any insurance contracts maintained pursuant to
any Benefit Plan with regard to policy years or other periods ending on or
before the Effective Time.
(h) Except as disclosed in Schedule 4.11, no Benefit Plan or the
deduction of any contributions thereto by the BUYER or any of its Subsidiaries
has been the subject of audit by the Internal Revenue Service or the Department
of Labor, and no litigation or asserted claims exist against the COMPANY or any
of its Subsidiaries or any Benefit Plan or fiduciary with respect thereto (other
than such benefit claims as are made in the normal operation of a Benefit Plan).
To the knowledge of the BUYER, there are no facts which would give rise to or
could give rise to any action, suit, grievance, arbitration or other claim.
4.14 Environmental Matters.
(a) Except as set forth on Schedule 4.14, to the BUYER's Knowledge,
the BUYER and each of its Subsidiaries are in material compliance with all
applicable federal, state, regional and local laws, statutes, ordinances,
judgments, rulings and regulations relating to any matters of pollution,
protection of the environment or environmental regulation or control
(collectively, "Environmental Laws"). Neither the BUYER nor any of its
Subsidiaries has received any written notice (i) of any violation of an
Environmental Law or (ii) of the institution of any suit, action, claim,
proceedings or investigation by any Governmental Entity or any third party of
any such violation.
(b) Except as disclosed on Schedule 4.14 and as to matters that are
not anticipated to have a Material Adverse Effect on the BUYER, to the BUYER's
Knowledge, neither the BUYER nor any of its Subsidiaries has (i) released,
transported or disposed of any Hazardous Substances (as hereinafter defined) on,
under, or at any of the BUYER's or any of its Subsidiaries' properties or any
other properties, (ii) reason to know of the release or disposal of any
Hazardous Substances on, under or at any of BUYER's or any of its Subsidiaries'
properties, arising from the conduct of operations on the BUYER's or any of its
Subsidiaries' properties, or (iii) received any written notice which has not
been paid, settled or otherwise resolved (w) of any violation of any
Environmental Law
27
or any other law, statute, rule or regulation regarding Hazardous Substances on
or under any of the BUYER's or any of its Subsidiaries' properties or any other
properties, (x) of the institution or pendency of any suit, action, claim,
proceeding or investigation by any Governmental Entity or any third party of any
such violation, (y) of any actual or potential liability for the response to or
remediation of Hazardous Substance at or arising from any of the BUYER's or any
of its Subsidiaries' properties or any other properties, or (z) of any actual or
potential liability for the costs of response to or remediation of Hazardous
Substances at or arising from any of the BUYER's or any of its Subsidiaries'
properties or any other properties. For purposes of this Agreement, the terms
"Hazardous Substance" shall mean any toxic or hazardous materials or substances,
including asbestos, buried contaminants, chemicals, flammable explosives,
radioactive materials, petroleum and petroleum products and any substances
defined as, or included in the definition of, "hazardous substances", "hazardous
wastes", "hazardous materials" or "toxic substances" under any Environmental
Law.
(c) To the BUYER's Knowledge, no Environmental Law imposes any
obligation upon the BUYER or its Subsidiaries arising out of or as a condition
to any transaction contemplated hereby, including, without limitation, any
requirement to modify or to transfer any permit or license, any requirement to
file any notice or other submission with any Governmental Entity, the placement
of any notice, acknowledgement, or covenant in any land records, or the
modification of or provision of notice under any agreement, consent order, or
consent decree. To the BUYER's Knowledge, no lien has been placed upon any of
the BUYER's properties or its Subsidiaries' properties under any Environmental
Law.
4.15 Material Contract and Agreements.
(a) As of the date hereof and except as disclosed on Schedule 4.15,
no default in performance or failure to perform under, and no anticipatory
breach of, any of the BUYER's material contracts has occurred or is continuing,
and none of the parties to any such contract has alleged that the other has
defaulted in performance or failed to perform, other than (i) a default in
payment that shall not have continued more than 30 days from the date on which
the payment was originally due pursuant to the terms of the applicable
contracts, and (ii) a default or failure that is immaterial with respect to all
such contracts. To BUYER's Knowledge, as of the date hereof and except as
disclosed on Schedule 3.14, there are no legal, administrative or other
proceedings threatened, pending or outstanding relating to the performance or
status of any of such contracts. As of the date hereof and except as disclosed
on Schedule 3.14, the BUYER has not received notice of any anticipatory breach,
pending dispute or anticipated litigation arising from or relating to any of
such contracts, or notice that any of such contracts has been or will be
canceled, revoked or otherwise terminated.
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(b) Except as listed on Schedule 4.15, neither the BUYER nor any
Subsidiary is subject to any material agreement which restricts competition with
any other person or provides that the BUYER, any Subsidiary or affiliate may not
engage in any business or sell or distribute any product or service.
4.16 Intellectual Property. The BUYER and its Subsidiaries own, or
are licensed or otherwise have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service xxxx rights, copyrights and other proprietary intellectual property
rights and computer programs which are material to the business, financial
condition or results of operations of the BUYER and its Subsidiaries taken as a
whole. Except as set forth on Schedule 4.16, no claims are pending or, to the
knowledge of the BUYER, threatened that the BUYER is infringing or otherwise
adversely affecting the rights of any person with regard to any patent, license,
trademark, trade name, service xxxx, copyright or other intellectual property
right. To the knowledge of the BUYER, no person is infringing the rights of the
BUYER with respect to any patent, license, trademark, trade name, service xxxx,
copyright or other intellectual property right.
4.17 BUYER Board of Directors Action.
(a) The Board of Directors of BUYER at a meeting duly called and
held has by the requisite vote of all directors present determined that the
Merger is advisable and in the best interests of the BUYER and its shareholders.
(b) The Board of Directors of SUB at a meeting duly called and held
has by the requisite vote of all directors present determined that the Merger is
advisable and in the best interests of the SUB and its shareholders.
4.18 COMPANY Proxy Statement. (a) None of the information supplied
or to be supplied by or on behalf of BUYER for inclusion or incorporation by
reference in the COMPANY Proxy Statement, in definitive form, relating to the
meeting of the COMPANY shareholders to be held in connection with the Merger
will, at the date mailed to shareholders and at the time of the meeting of
shareholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(b) The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act, respectively, and the applicable rules and regulations thereunder.
4.19 Survival of Certain Representations and Warranties. The
representations and warranties contained in Section 4 of this
29
Agreement shall survive the Merger for one year after the Effective Time.
5. Covenants.
5.1 Interim Operations. During the period from the date of this
Agreement to the Effective Time, except as specifically contemplated by this
Agreement, or as otherwise approved in advance by BUYER in writing:
(a) Conduct of Business. The COMPANY will, and will cause each of
its Subsidiaries to, conduct their respective businesses only in, and not take
any action except in, the ordinary and usual course of business and consistent
with past practice. The COMPANY will use reasonable efforts to preserve intact
the business organization of the COMPANY and each of its Subsidiaries, to keep
available the service of its and their present officers and key employees and to
preserve the goodwill of those having business relationships with it or its
Subsidiaries.
(b) Articles and Bylaws. The COMPANY will not and will not permit
any of its Subsidiaries to make any change or amendment to their respective
articles of incorporation or bylaws (or comparable governing instruments).
(c) Capital Stock. The COMPANY will not, and will not permit any of
its Subsidiaries to, issue or sell any shares of capital stock or any other
securities of any of them (other than pursuant to Stock Options and the Employee
Stock Purchase Plan) or issue any securities convertible into or exchangeable
for, or options, warrants to purchase, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or enter into any contract,
understanding or arrangement with respect to the issuance of, any shares of
capital stock or any other securities of any of them or purchase or enter into
any arrangement or contract with respect to the purchase or voting of shares of
their capital stock, or adjust, split, combine or reclassify any of their
capital stock or other securities or make any other changes in their capital
structures.
(d) Dividends. The COMPANY will not and will not permit any of its
Subsidiaries to declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock or property) with respect to, or
purchase or redeem, any shares of the capital stock of any of them.
(e) Employee Plans, Compensation, Etc. Except in the ordinary course
of its business, the COMPANY will not, and will not permit any of its
Subsidiaries to, amend any Benefit Plan or to adopt any arrangement which would
be a "Benefit Plan" or, except as provided in Schedule 5.1 or pursuant to
collective bargaining agreements as presently in effect, increase the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any existing plan or
30
arrangement or take any action or grant any benefit not required under the terms
of any existing agreements, trusts, plans, funds or other such arrangements to
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing.
(f) Debt. The COMPANY and its Subsidiaries will not, (a) assume or
incur any indebtedness or, except (i) in the ordinary course of business and
(ii) with respect to expenses incurred in connection with the consummation of
the Merger, or (b) except in the ordinary course of business consistent with
past practice, make any loans, advances or capital contributions to, or
investments (other than short-term investments pursuant to customary cash
management systems of the COMPANY) in, any other person other than such of the
foregoing as are made by the COMPANY to, in or from a wholly owned Subsidiary of
the COMPANY. The COMPANY will not enter into any new credit agreements but may
enter into amendments or modifications or replacements of any existing credit
agreements.
(g) Representation and Warranty. The COMPANY will advise BUYER and
BUYER will advise COMPANY within 48 hours of any information which becomes known
to it or to any Subsidiary of COMPANY or BUYER that would make any
representation or warranty of the COMPANY herein materially not true or not
correct.
(h) Acquisitions. The COMPANY and its Subsidiaries will not acquire
(i) by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
(ii) any assets, except purchases of inventory items or supplies or other
purchases in the ordinary course of business consistent with past practice, and
strategic purchases of franchised stores.
(i) Assets Sales. The COMPANY and its Subsidiaries will not sell,
lease, mortgage or otherwise encumber or otherwise dispose of any of its
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and strategic sales of corporate stores
and franchises.
(j) Tax Settlements. The COMPANY and its Subsidiaries will not make
any material tax election other than tax elections in the ordinary course and
consistent with past practices or settle or compromise any material income tax
or other tax liability or refund.
(k) Other Settlements. The COMPANY and its Subsidiaries will not
pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms except for any
existing scheduled litigations.
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5.2 Access and Information. Subject to a confidentiality agreement
between COMPANY and BUYER, COMPANY and BUYER will (and will cause each of their
respective representatives to) afford to the other (or representatives of the
COMPANY or BUYER, including without limitation directors, officers and employees
of COMPANY and BUYER or their affiliates and counsel, accountants and other
professionals retained by COMPANY and BUYER) such access throughout the period
prior to the Effective Time to books, records (including without limitation tax
returns and work papers of independent auditors), agreements, properties
(including for the purpose of making any reasonable Phase I environmental
investigation), personnel, suppliers and franchisees as COMPANY or BUYER
requests from the other.
5.3 Certain Filings, Consents and Arrangements. BUYER and the
COMPANY will (a) promptly make their respective filings, and will thereafter use
their best efforts to promptly make any required submissions, under the
Xxxx-Xxxxx-Xxxxxx Act with respect to the Merger and the other transactions
contemplated by this Agreement and (b) cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, permits or authorizations are required to be obtained under any other
federal, state or foreign law or regulation and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such consents, approvals, permits or authorizations.
5.4 Employee Matters. On and after the Effective Time, the Surviving
Corporation will honor (but only in accordance with their terms in effect at the
date hereof) those employment, executive bonus program, indemnification,
severance, termination, consulting and retirement agreements to which the
COMPANY or any of its Subsidiaries is presently a party.
5.5 Indemnification and Insurance.
(a) From and after the Effective Time, BUYER will indemnify and hold
harmless each of the current directors, officers, agents and other
representatives, who have acted in such capacity prior to or after the date
hereof, of the COMPANY or any of its Subsidiaries (collectively, the
"Indemnitees" and individually, an "Indemnitee") against any and all claims,
damages, liabilities, losses, costs, charges, expenses (including without
limitation reasonable costs of investigation, and the fees and disbursements of
legal counsel and other advisers and experts), judgments, fines, penalties and
amounts paid in settlement, asserted against, incurred by or imposed upon any
Indemnitee (collectively, "Losses" and individually, a "Loss"), (i) in
connection with or arising out of any threatened, pending or completed claim,
action, suit or proceeding (whether civil, criminal, administrative or
investigative), including without limitation any and all claims, actions, suits,
proceedings or investigations by or on behalf of or in the right of or against
the COMPANY or any of its
32
Subsidiaries or their affiliates, or by any present or former shareholder of the
COMPANY (collectively, "Claims" and individually, a "Claim"), which is based
upon, arises out of or in any way relates to the Merger, the COMPANY Proxy
Statement, or any of the transactions contemplated by this Agreement, excluding
any successful Claim that such indemnitee has violated Section 16(b) of the
Exchange Act or Section 10(b) of the Exchange Act, or Rule 10b-5 promulgated
thereunder, and (ii) in connection with or arising out of the enforcement of the
obligations of BUYER set forth in this Section 5.5. This Section 5.5(a) will be
construed as an agreement, as to which the Indemnitees are intended to be third
party beneficiaries, between BUYER and the Indemnitees, as unaffiliated third
parties, and is not subject to any limitations to which BUYER may be subject to
indemnifying its own directors.
(b) From and after the Effective Time, any and all obligations of
COMPANY to indemnify the current officers and directors of COMPANY, whether
pursuant to applicable law, COMPANY's Certificate of Incorporation or Bylaws or
by agreement between COMPANY and the officers and directors, shall be assumed
and paid and performed to the fullest extent permitted by law by BUYER. BUYER
will promptly after the Effective Time, confirm to each such executive officer
and director of COMPANY in writing of such assumption of COMPANY's obligations.
(c) In the event the Surviving Corporation or any of its successors
or assign (i) reorganizes or consolidates with or merges into or enters into
another business combination transaction with any other person or entity and is
not the resulting, continuing or surviving corporation or entity of such
consolidation, merger or transaction (ii) liquidates, dissolves or transfers all
or substantially all of its properties and assets to any person or entity, then,
and in each such case, proper provision will be made so that the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 5.5.
5.6 Special COMPANY Meeting. The COMPANY shall take all action
necessary, in accordance with applicable law and its certificate of
incorporation and bylaws, to convene a special meeting of the holders of COMPANY
Shares ("Special COMPANY Meeting") as promptly as practicable for the purpose of
considering and taking action upon this Agreement. The board of directors of the
COMPANY will recommend that holders of COMPANY Shares vote in favor of and
approve the Merger and this Agreement at the Special COMPANY Meeting.
5.7 COMPANY Proxy Statement; Registration Statement.
(a) As soon as practicable after the date hereof, the COMPANY shall
prepare the COMPANY Proxy Statement, file it with the SEC, use its best efforts
to respond to comments of the Staff of the SEC and clear the COMPANY Proxy
Statement with the Staff of the SEC. Promptly after such clearance the COMPANY
shall mail the
33
COMPANY Proxy Statement to all holders of record of COMPANY Shares who are
holders on the record date for the meeting of shareholders of the COMPANY. BUYER
and the COMPANY shall cooperate with each other in the preparation of the
COMPANY Proxy Statement and the processing thereof with the SEC.
(b) BUYER shall prepare and file the Registration Statement with the
SEC as soon as is reasonably practicable following receipt of comments from the
Staff of the SEC on the COMPANY Proxy Statement or advice that such Staff will
not review such filing (or earlier in the discretion of BUYER and COMPANY) and
shall use its best efforts to have the Registration Statement declared effective
by the SEC as promptly as practicable and to maintain the effectiveness of such
Registration Statement until the Effective Time. BUYER shall also use its best
efforts to take any action required to be taken under state blue sky or
securities laws in connection with the issuance of the BUYER Common Stock
pursuant to the Merger, and the COMPANY shall furnish BUYER all information
concerning the COMPANY and the holders of its capital stock and shall take any
action as BUYER may reasonably request in connection with any such action.
5.8 Compliance with the Securities Act; Pooling; Reorganization.
(a) Prior to the Effective Time, the COMPANY shall cause to be
delivered to BUYER an opinion of legal counsel of the COMPANY, identifying all
persons who were in its opinion, as of the date of the COMPANY Proxy Statement,
"affiliates" of the COMPANY as that term is used in Paragraphs (c) and (d) of
Rule 145 under the Securities Act (the "Affiliates"). The COMPANY shall cause
the person rendering such opinion to deliver to BUYER at the Closing a second
opinion updating such opinion to the time at which the holders of Common Stock
vote on the Merger.
(b) The COMPANY shall obtain a written agreement from each current
executive officer and director who is identified as a possible Affiliate in the
opinions referred to in clause (a) above, in a form reasonably acceptable to
BUYER, that (i) such person will not offer to sell, sell or otherwise dispose of
any of the BUYER Common Stock issued to such person pursuant to the Merger,
except in compliance with Rule 145 or another exemption from the registration
requirements of the Securities Act and (ii) such person will not sell or in any
other way reduce such person's risk relative to any shares of BUYER Common Stock
received in the Merger (within the meaning of the SEC's rules and relating to
pooling of interest accounting), until such time as financial results (including
combined sales and net income) covering at least 30 days of post-merger
operations have been published. The COMPANY shall deliver such written
agreements to BUYER on or prior to the Closing.
5.9 Additional Agreements. (a) Subject to the terms and conditions
herein provided each of the parties hereto agrees to
34
use its best efforts to take promptly, or cause to be taken, all actions and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using its best efforts to
obtain all necessary actions or non-actions, extensions, waivers, consents and
approvals from all applicable Governmental Entities, effecting all necessary
registrations and filings (including without limitation filings under the
Xxxx-Xxxxx-Xxxxxx Act) and obtaining any required contractual consents. If, at
any time after the Effective Time, the Surviving Corporation considers or is
advise that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either of the
Constituent Corporations acquire or to be acquired by the Surviving Corporation
as a result of, or in connection with the Merger or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of each of the Constituent Corporations or otherwise, as such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of the Constituent Corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
(b) The COMPANY and BUYER shall use their best efforts to file as
soon as reasonably practicable notifications under the HSR Act in connection
with the Merger and the transactions contemplated hereby and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters. The COMPANY and BUYER shall take such actions as are
necessary to overcome any objections which may be raised by the FTC or Antitrust
Division.
5.10 Certain Covenants.
(a) No Solicitation. COMPANY shall not directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) any
Takeover Proposal (as hereinafter defined) from any person, or engage in or
continue discussions or negotiations relating to any Takeover Proposal, and will
use its reasonable best efforts to prevent any of its directors, officers,
attorneys, financial advisors and other authorized representatives from,
directly or indirectly, taking any such action, provided,
35
however, that if, prior to the Effective Time, COMPANY shall receive an
Acquisition Proposal that the Board of Directors of COMPANY, based upon the
advice of its outside counsel, reasonably believes that it has a fiduciary duty
to consider, and which it reasonably and in good faith believes is more
favorable to COMPANY and its shareholders than the transactions herein
contemplated then COMPANY shall notify BUYER and thereupon, COMPANY, without
violating this Agreement, may thereafter furnish information to such third party
and, if thereafter, COMPANY's Board of Directors reasonably and in good faith
determines that such Acquisition Proposal is more favorable to COMPANY and its
shareholders than the transactions herein contemplated, then upon written notice
to BUYER, COMPANY may terminate this Agreement and the transactions contemplated
thereby.
(b) Break-Up Fee. Upon any termination by COMPANY of this Agreement
permitted by subsection (a) hereof COMPANY shall within ten (10) days after such
termination pay to BUYER the sum of $1,500,000 ("Break-Up Fee").
(c) Certain Actions. BUYER and COMPANY shall not, nor shall either
permit any of its Subsidiaries to, take or consent to be taken any action,
whether before or after the Effective Time, which would disqualify the Merger as
"reorganization" within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
5.11 Best Efforts to List Shares. BUYER shall use its best efforts
to ensure that, prior to the Effective Time, the BUYER Shares that will be
issued in the Merger will be approved for trading on the NASDAQ National Market
System subject to official notice of issuance.
5.12 Updated Schedules. Fifteen (15) business days prior to the
Effective Time and at the Effective Time, BUYER and COMPANY will each update
their respective Schedules referred to in this Agreement in the event that
changes with respect to items required to be set forth in any such Schedule
result in any such Schedule omitting or misstating information. A Schedule to
this Agreement shall be updated only for the purpose of making the
representations and warranties contained in this Agreement to which such
Schedule relates true and correct in all material respects as of the date such
Schedule is updated, and an updated Schedule shall not have the effect of making
any representation or warranty contained in this Agreement true and correct in
all material respects as of a date prior to the date of such updated Schedule.
Representations and warranties may only be updated as of a subsequent date on or
prior to the Effective Time only for occurrences or events subsequent to the
date hereof, or subsequent to the most recent updated representations and
warranties, as applicable. The parties hereby acknowledge that such update in
and of itself does not constitute a breach of any such representation or
warranty.
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6. Conditions to Obligation to Close.
6.1 Conditions to Obligation of BUYER and SUB. The obligation of
BUYER and SUB to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) Representations True. The representations and warranties set
forth in Article 3 above shall be true and correct in all material respects at
and as of the Closing Date (after giving effect to any updated Schedules as
contemplated by Section 5.13) except for any representation and warranty made
expressly with respect to a specific date and except for such failures to be
true and correct as do not have a Material Adverse Effect (after giving effect
to any insurance/indemnification) on the COMPANY and its Subsidiaries, taken as
a whole;
(b) Covenants. COMPANY shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) No Injunction. No preliminary or permanent injunction or other
order by any federal or state court in the United States which prevents the
consummation of the Merger shall have been issued and remain in effect (COMPANY
and BUYER agreeing to use their reasonable best efforts to have any such
injunction lifted).
(d) Stockholder Approval. This Agreement and the Merger shall have
received the Requisite COMPANY Stockholder Approval;
(e) HSR Waiting Period. All applicable waiting periods (and any
extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(f) Registration Statement. The Registration Statement shall have
become effective under the Securities Act;
(g) Legal Opinion. BUYER shall have received an acceptable opinion
from counsel to the COMPANY.
(h) Pooling of Interests Accounting. BUYER shall not have received a
final objection from the SEC to BUYER's accounting for the Merger as a "pooling
of interests."
(i) Lease Termination. The lease between the COMPANY and the Xxxxxxx
Family Limited Partnership for the COMPANY's headquarters shall be amended to
provide that the lease may be terminated at the option of the lessee upon six
(6) months' notice.
(j) Material Adverse Change. There shall have been no material
adverse change from the date hereof in the business, condition or operations of
COMPANY, except changes contemplated, permitted or required by this Agreement
and changes resulting from
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a change in general economic conditions;
(k) Officer's Certificate. COMPANY shall have delivered to BUYER a
certification of one of its executive officers in such person's capacity as an
officer and without personal liability to the effect that each of the conditions
specified in Section 6.1(a)-(d) is satisfied in all respects.
BUYER may waive any condition specified in this Section 6.1 if it
executes a writing so stating at or prior to the Closing.
6.2 Conditions to Obligations of COMPANY. The obligation of COMPANY
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) Representations True. The representations and warranties set
forth in Section 4 above shall be true and correct in all material respects at
and as of the Closing Date (after giving effect to any updated Schedules as
contemplated by Section 5.13) except for any representation and warranty made
expressly with respect to a specific date and except for such failures to be
true and correct as do not have a Material Adverse Effect (after giving effect
to any insurance/indemnification) on the BUYER and its Subsidiaries, taken as a
whole;
(b) Covenants. BUYER shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) No Injunction. No preliminary or permanent injunction or other
order by any federal or state court in the United States which prevents the
consummation of the Merger shall have been issued and remain in effect (COMPANY
and BUYER agreeing to use their reasonable best efforts to have any such
injunction lifted);
(d) Stockholder Approval. This Agreement and the Merger shall have
received the Requisite COMPANY Stockholder Approval;
(e) Xxxx-Xxxxx-Xxxxxx Act. All applicable waiting periods (and any
extension thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated and the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 3.4 and Section 4.4 above;
(f) Registration Statement. The Registration Statement shall have
become effective under the Securities Act;
(g) Listing of BUYER Shares. The BUYER Shares that will be issued in
the Merger shall have been approved for listing on the NASDAQ National Market
System, subject to official notice of issuance;
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(h) Legal Opinion. COMPANY shall have received an acceptable opinion
from BUYER's general counsel;
(i) Fairness Opinion. The Board of Directors of COMPANY shall have
received from Xxxxx Xxxxxxx, Inc. a written opinion, dated as of the date of
mailing the COMPANY Proxy Statement to holders of COMPANY Common Stock
reasonably satisfactory in form and substance to such board, to the effect that
the terms of the Merger are fair to the COMPANY Stockholders from a financial
point of view;
(j) Officer's Certificate. BUYER shall have delivered to COMPANY a
certificate of one of its executive officers in such person's capacity as an
officer and without personal liability to the effect that each of the conditions
specified above in Section 6.2(a)-(d), (g) is satisfied in all respects (other
than with respect to Requisite COMPANY Stockholder Approval);
(k) Tax Opinion. COMPANY shall have received from
Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, PA, dated as of the Closing Date and based
upon certain factual representations from officers of COMPANY, BUYER and SUB
that such counsel may reasonably request and upon such other facts,
representations, assumptions, and agreements as counsel may reasonably deem
relevant, a written opinion in a form reasonably satisfactory to COMPANY
confirming that the Merger will be treated as a "reorganization" within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code;
COMPANY may waive any condition specified in this Section 6.2 if it
executes a writing so stating at or prior to the Closing.
7. Termination.
7.1 Termination Prior to the Effective Time. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at any time
(except as provided in Section 7.1(e) below), notwithstanding approval thereof
by the stockholders, but prior to the Effective Time:
(a) By mutual written consent of each of BUYER and the COMPANY (upon
board approval of each); or
(b) By either the BUYER or the COMPANY, if the Merger has not
occurred on or before August 31, 1999; provided, however, if the reason that the
Merger has not occurred by such date is the failure of the Securities and
Exchange Commission to act promptly with respect to the Registration Statement
on Form S-4 filed by BUYER therewith, or the failure of the Federal Trade
Commission or the Justice Department to grant termination, or early termination,
of the waiting period under the Xxxx Xxxxx Xxxxxx Act, and such failure of the
Securities and Exchange Commission, the Federal Trade Commission or the Justice
Department is not the result of action or inaction of the parties hereto, then
the right to terminate pursuant to this Section 7.1(b) shall not be available
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until November 30, 1999.
(c) By the BUYER or the COMPANY if any court of competent
jurisdiction in the United States shall have issued an order, decree or ruling
or taken any other action restraining, enjoining or otherwise prohibiting the
Merger or declaring same invalid or unlawful and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) By the COMPANY pursuant to 5.10(a) hereof, upon payment of the
Break-Up Fee.
(e) By the COMPANY in the event that the closing price of the BUYER
Share closes below $31.60 on any five (5) consecutive trading days between the
execution of this Agreement and the Effective Time, provided that notice of
termination for such event shall be given by the COMPANY to the BUYER not more
than ten (10) days after the expiration of the five (5) day-trading period
referred to herein.
7.2 Effect of Termination.
If any Party terminates this Agreement pursuant to Section 7.1(a),
(b) (c) or (e) above, all rights and obligations by the Parties hereunder shall
terminate without any liability of any Party to any other Party; provided that
nothing in this Section 7.2 shall relieve either party hereto for liability
resulting from the breach of any covenant contained in this Agreement and except
for the provisions of Section 5.10(b) which shall survive such termination.
8. Miscellaneous.
8.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior approval of the other Party; provided,
however, each Party agrees not to unreasonably withhold consent to the other
Party's request to make any public disclosure that the requesting Party believes
in good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities.
8.2 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that (i) the
provision in Section 2 above concerning issuance of the BUYER Shares and are
intended for the benefit of the COMPANY Stockholders and, (ii) the provisions in
Section 5.11(c) are intended for the benefit of the holders of COMPANY Shares,
(iii) the provisions in Section 5.5 above concerning indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.
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8.3 Entire Agreement. No discussions regarding, or exchange of
drafts or comments in connection with, the transactions contemplated herein
shall constitute an agreement among the parties hereto. Any agreement among the
parties shall exist only when the parties have fully executed and delivered this
Agreement. This Agreement (including any other documents referred to herein)
constitutes the entire agreement between the Parties and supersedes any prior
understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
8.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to COMPANY:
The Barbers, Hairstyling for Men & Women, Inc.
000 Xxxxxxxxxx Xxxxxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attention: President
Copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A.
00 Xxxxx Xxxxx Xxxxxx
3400 City Center
Xxxxxxxxxxx, XX 00000
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If to BUYER or SUB:
Regis Corporation
0000 Xxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Attention: President
Copy to:
Xxxx X. Xxxxx, Esq.
Regis Corporation
0000 Xxxxx Xxxxxxxxx
Xxxxxxxxxxx, XX 00000
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Minnesota without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Minnesota or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Minnesota.
8.9 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective board of directors; provided, however,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the Minnesota Business Corporation Act. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by both of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
effect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
8.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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8.11 Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, except as otherwise
contemplated by Sections 5.11 and 7.2 hereof.
8.12 Specific Performance. The parties hereto agree that if for any
reason any party hereto shall have failed to perform its obligations under this
Agreement, then any other party hereto seeking to enforce this Agreement against
such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief.
8.13 Construction. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
8.14 Incorporation of Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
THE BARBERS, HAIRSTYLING FOR MEN & WOMEN, INC.
("COMPANY")
By:________________________________
Title: ____________________________
REGIS CORPORATION
("BUYER")
By:________________________________
Title: ____________________________
REGIS MERGER SUB, INC.
("SUB")
By:________________________________
Title: ____________________________
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