<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996
REGISTRATION NO. 333-12099
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REGIS CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 7231 41-0749934
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industry Code) Identification Number)
7201 METRO BOULEVARD, EDINA, MINNESOTA 55439
TELEPHONE: (612) 947-7777
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
PAUL D. FINKELSTEIN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
REGIS CORPORATION
7201 METRO BOULEVARD
EDINA, MINNESOTA 55439
TELEPHONE: (612) 947-7777
(Name, address, including zip code and telephone number, including
area code, of agent for service)
--------------------------
COPIES OF COMMUNICATIONS TO:
BERT M. GROSS JAMES C. MELVILLE JACK H. NUSBAUM
Phillips & Gross, P.A. Kaplan, Strangis and Willkie Farr & Gallagher
5420 Norwest Center Kaplan, P.A. One Citicorp Center
90 South Seventh Street 5500 Norwest Center 153 East 53rd Street
Minneapolis, MN 55402 90 South Seventh Street New York, NY 10022-4669
Telephone: (612) 349-6664 Minneapolis, MN 55402 Telephone: (212) 821-8760
Telephone: (612) 375-1138
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.05 per share...... 4,920,590 Shares $9.3125 $114,557,495.30 $(2)
</TABLE>
(1) The amount to be registered is the maximum number of shares of common stock,
par value $.05 per share ("Regis Common Stock"), of Regis Corporation
("Regis") issuable upon consummation of the merger (the "Merger") of RGIS
Merger Corp., a wholly-owned subsidiary of Regis, with and into Supercuts,
Inc. ("Supercuts"), at the conversion ratio of 0.4 of one share of Regis
Common Stock for one share of common stock, par value $.01, of Supercuts
("Supercuts Common Stock"), assuming that Supercuts had 11,259,309 shares of
Supercuts Common Stock outstanding on September 13, 1996 and options to
purchase 1,042,167 shares of Supercuts Common Stock outstanding on September
13, 1996. Pursuant to Rule 457(f)(1) and (c), the registration fee was
calculated based on the average of the high and low price per share
($9.3125) of Supercuts Common Stock as reported on the Nasdaq National
Market System on September 13, 1996, multiplied by the maximum number of
shares of such stock to be canceled in the Merger (12,301,476 shares).
(2) Previously paid.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE>
REGIS CORPORATION
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE JOINT PROXY STATEMENT/PROSPECTUS OF THE
RESPONSES TO THE ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
PART A -- INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Outside front cover page of Prospectus; Facing Page
and Cross-Reference Sheet
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................... Summary, -- Selected Historical and Unaudited Pro
Forma Combined Financial Data, -- Comparative
Unaudited Per-Share Data, -- Comparative Market
Price Data
4. Terms of the Transaction............................. Summary; The Merger; The Merger Agreement;
Description of Regis Capital Stock; Comparison of
Shareholders Rights
5. Pro Forma Financial Information...................... Unaudited Pro Forma Combined Financial Information
6. Material Contracts with the Company Being Acquired... The Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... *
8. Interests of Named Experts and Counsel............... Legal Matters; Tax Opinion; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
PART B -- INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.......... Incorporation of Certain Documents by Reference;
Summary; The Merger
11. Incorporation of Certain Information by Reference.... Incorporation of Certain Documents by Reference;
Summary; The Merger; Description of Regis Capital
Stock
12. Information with Respect to S-2 or S-3 Registrants... *
13. Incorporation of Certain Information by Reference.... *
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants.............................. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
PART C -- INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............ Incorporation of Certain Documents by Reference
16. Information with Respect to S-2 or S-3 Companies..... *
17. Information with Respect to Companies Other Than S-3
or S-2 Companies.................................... *
PART D -- VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................. Summary; Shareholder Meetings; Information of Regis
and Supercuts; The Merger
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer..... *
</TABLE>
- ------------------------
*Not applicable.
<PAGE>
[LOGO]
7201 METRO BOULEVARD, EDINA, MN 55439
(612) 947-7777
September 24, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders (the
"Meeting") of REGIS Corporation ("Regis") which will be held at the offices of
Regis, 7201 Metro Boulevard, Minneapolis, Minnesota 55439, on Wednesday, October
23, 1996, at 9:00 a.m. local time. Enclosed are a Notice of Special Meeting of
Regis Shareholders, a Joint Proxy Statement/Prospectus and a proxy relating to
the Meeting.
At the Meeting you will be asked to consider and vote upon a proposal
described in the accompanying Joint Proxy Statement/Prospectus to approve the
issuance by Regis of up to 4,920,590 shares of common stock, $.05 par value, of
Regis (the "Regis Common Stock") in connection with the proposed (i) merger (the
"Merger") of RGIS Merger Corp., a wholly-owned subsidiary of Regis ("Merger
Sub"), with and into Supercuts, Inc. ("Supercuts") and (ii) the conversion of
each outstanding share of common stock, $.01 par value, of Supercuts (the
"Supercuts Common Stock") into the right to receive 0.4 of one share of Regis
Common Stock (the ratio of 0.4 of one share of Regis Common Stock to one share
of Supercuts Common Stock is referred to herein as the "Conversion Ratio")
pursuant to an Agreement and Plan of Merger, dated as of July 14, 1996, as
amended (the "Merger Agreement"), by and among Regis, Merger Sub and Supercuts.
Approval of such issuance by the shareholders of Regis is required by the rules
of the National Association of Securities Dealers, Inc. because shares of Regis
Common Stock are traded on the Nasdaq National Market and the number of shares
proposed to be issued in the Merger will exceed 20% of the issued and
outstanding shares of Regis Common Stock.
As of June 30, 1996, Supercuts and its subsidiaries owned and operated 386
hair salons, franchised to independent owners 661 hair salons and managed 121
salons which were owned by investors/franchisees. The Supercuts salons are
located primarily in strip centers. Approval by Regis' shareholders of the
issuance of shares of Regis Common Stock in connection with the Merger (the
"Merger Shares") is a condition to consummation of the Merger. The terms of the
Merger, including the method for determining the number of shares of Regis
common stock to be issued, as well as other important information relating to
Regis, Supercuts and the combined company, are explained in detail in the
accompanying Joint Proxy Statement/Prospectus and we urge you to read it
carefully. Please give this document your prompt attention. A proposal is
included to authorize adjournment of the Meeting, if necessary, to obtain
sufficient votes for approval of the issuance of the Merger Shares. In order to
avoid the expense of adjournment, we urge you to return your proxy card as soon
as possible.
The Board of Directors of Regis has carefully considered the terms and
conditions of the proposed Merger. In addition, in connection with its approval
of the proposed transaction with Supercuts, the Board of Directors of Regis has
received written opinions from its financial advisor Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") dated as of July 14, 1996 (the
date upon which the Board of Directors approved the Merger) and dated the date
hereof, to the effect that the Conversion Ratio is fair, from a financial point
of view, to the holders of Regis Common Stock. A copy of Merrill Lynch's written
opinion dated the date hereof, which sets forth a description of the assumptions
made, matters considered and limits of its review is attached to the
accompanying Joint Proxy Statement/Prospectus as Appendix B and Regis
shareholders are urged to read carefully the opinion in its entirety. Curtis
Squire, Inc. ("Curtis Squire"), a corporation controlled by Myron Kunin who is
Chairman of the Board of Regis, owns approximately 33.3% of the outstanding
Regis Common Stock and has entered into an agreement with Supercuts pursuant to
which Curtis Squire has agreed to vote all of its shares of Regis Common Stock
in favor of the issuance of the Regis Common Stock pursuant to the Merger
Agreement.
<PAGE>
Consummation of the Merger is subject to certain conditions, including among
other things, approval of the Merger by the requisite votes of the Supercuts
shareholders, approval by the requisite vote of Regis shareholders of the
issuance of the Merger Shares, and the effectiveness of a registration statement
filed under the Securities Act of 1933, as amended, relating to the Merger
Shares.
THE BOARD OF DIRECTORS OF REGIS HAS CONCLUDED THAT THE ISSUANCE OF SHARES OF
REGIS COMMON STOCK IN THE MERGER IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
REGIS, HAS UNANIMOUSLY APPROVED THE ISSUANCE OF REGIS COMMON STOCK IN THE MERGER
AND RECOMMENDS THAT YOU VOTE IN FAVOR OF SUCH ISSUANCE.
Your vote is important, regardless of the number of shares you own. On
behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you plan to attend the Meeting.
If you receive more than one proxy card because you have multiple accounts with
Regis Common Stock, please sign, date and return each proxy card so that all
your shares will be voted. This will not prevent you from voting in person, but
will assure that your vote is counted if you are unable to attend the Meeting.
Sincerely,
[SIGNATURE] [SIGNATURE]
Myron Kunin Paul D. Finkelstein
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
7201 METRO BOULEVARD, EDINA, MN 55439
(612) 947-7777
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 23, 1996
------------------------
TO THE SHAREHOLDERS OF REGIS CORPORATION
A Special Meeting of the Shareholders (the "Meeting") of Regis Corporation
("Regis") will be held at the offices of Regis, 7201 Metro Boulevard,
Minneapolis, Minnesota 55439, on Wednesday, October 23, 1996, commencing at 9:00
a.m. local time for the following purposes:
1. To consider and vote upon a proposal to approve the issuance of up
to 4,920,590 shares of common stock, par value $.05 per share, of Regis (the
"Regis Common Stock") in connection with the proposed merger (the "Merger")
of RGIS Merger Corp., a wholly-owned subsidiary of Regis ("Merger Sub"),
with and into Supercuts, Inc. ("Supercuts") pursuant to an Agreement and
Plan of Merger, dated as of July 14, 1996, as amended (the "Merger
Agreement") among Regis, Merger Sub and Supercuts, as more fully described
in the accompanying Joint Proxy Statement/Prospectus. The Merger Agreement
is attached as Appendix A to the accompanying Joint Proxy
Statement/Prospectus and is incorporated by reference herein. Approval of
such issuance by the shareholders of Regis is required by the rules of the
National Association of Securities Dealers, Inc. because shares of Regis
Common Stock are traded on the Nasdaq National Market and the number of
shares proposed to be issued in the Merger will exceed 20% of the issued and
outstanding shares of Regis Common Stock; and
2. To adjourn the Meeting to solicit additional proxies, if necessary;
and
3. To transact such other business, if any, as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of Regis' Common Stock at the close of business on
September 19, 1996, are entitled to notice of and to vote at the Meeting or any
adjournment or postponement thereof.
A list of Regis' shareholders entitled to vote at the Meeting will be
available for examination, for any purpose germane to the Meeting, at Regis'
executive offices located at 7201 Metro Boulevard, Edina, Minnesota, during
ordinary business hours for at least ten days prior to the Meeting and for the
duration of the Meeting itself.
Whether or not you plan to attend the Meeting in person, please fill in,
sign and date the enclosed proxy and mail it promptly. Should you nevertheless
attend the Meeting, you may revoke your proxy and vote in person. A return
envelope, which requires no postage if mailed in the United States, is enclosed
for your convenience.
Remember, if your shares are held in the name of a broker, only your broker
can vote your shares and only after receiving your instructions. Please contact
the person responsible for your account and instruct him/her to execute a proxy
card on your behalf.
<PAGE>
If you have any questions or require assistance, please call Morrow & Co.,
Inc., which is assisting us in the solicitation of proxies, at (800) 662-5200.
By Order of the Board of Directors
[SIGNATURE]
Frank E. Evangelist
SECRETARY
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE
UNITED STATES.
Minneapolis, Minnesota
September 24, 1996
<PAGE>
SUPERCUTS, INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
September 24, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the stockholders
(the "Meeting") of Supercuts, Inc. ("Supercuts") to be held on Wednesday,
October 23, 1996 at 10:00 a.m., at the offices of Supercuts, 550 California
Street, San Francisco, California 94104.
The Meeting has been called to consider and vote on a proposal to approve
and adopt the Agreement and Plan of Merger dated as of July 14, 1996, as
amended, ("the Merger Agreement") by and among Regis Corporation ("Regis"), RGIS
Merger Corp. ("RGIS") and Supercuts. The Merger Agreement provides for, among
other things, (i) the merger of RGIS, a newly formed, wholly-owned subsidiary of
Regis, with and into Supercuts ("the Merger") and (ii) the conversion of each
outstanding share of common stock, par value $.01 per share, of Supercuts
("Supercuts Common Stock") into the right to receive 0.4 of one share of common
stock, par value $.05 per share, of Regis ("Regis Common Stock") as described in
the accompanying Joint Proxy Statement/Prospectus (the ratio of 0.4 of one Regis
Share to one Supercuts share is referred to herein as the "Conversion Ratio").
Upon consummation of the Merger, Supercuts will become a wholly-owned subsidiary
of Regis. Approval of the Merger Agreement and the Merger requires the
affirmative vote of a majority of the outstanding shares of Supercuts Common
Stock. At the Meeting, stockholders will also consider any other such matters as
may properly come before the Meeting.
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES
THERETO, WHICH YOU ARE URGED TO READ CAREFULLY IN THEIR ENTIRETY.
The Board of Directors of Supercuts has carefully considered the terms and
conditions of the proposed Merger. In addition, in connection with its approval
of the transaction with Regis, the Board of Directors of Supercuts has received
written opinions from its financial advisor, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") dated as of July 14, 1996 (the date on which the
Board of Directors approved the Merger) and dated as of September 23, 1996, to
the effect that the Conversion Ratio is fair, from a financial point of view, to
the holders of Supercuts Common Stock. A copy of DLJ's written opinion dated the
date hereof, which sets forth a description of the assumptions made, matters
considered and limits of its review is attached to the accompanying Joint Proxy
Statement/Prospectus as Appendix C and Supercuts shareholders are urged to read
carefully the opinion in its entirety.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST
INTERESTS OF, SUPERCUTS AND THE SUPERCUTS STOCKHOLDERS. ACCORDINGLY, THE BOARD
RECOMMENDS THAT SUPERCUTS STOCKHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
In view of the importance of the action to be taken at this important
Meeting of Supercuts shareholders, we urge you to review carefully the
accompanying Notice of Special Meeting of stockholders and the Joint Proxy
Statement/Prospectus, including the annexes thereto, which also include
information on Regis and Supercuts. Whether or not you expect to attend the
Meeting, please complete, sign and date the enclosed proxy and return it as
promptly as possible.
SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
Sincerely,
[SIGNATURE] [SIGNATURE]
Thomas L. Gregory Steve Price
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
SUPERCUTS, INC.
550 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 1996
------------------------
TO THE STOCKHOLDERS OF SUPERCUTS, INC.:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the stockholders ("the
Meeting") of Supercuts, Inc., a Delaware corporation ("Supercuts"), will be held
on Wednesday, October 23, 1996 at the offices of Supercuts, 550 California
Street, San Francisco, California 94104, commencing at 10:00 a.m. local time,
for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of July 14, 1996, as amended (the
"Merger Agreement"), by and among Supercuts, Regis Corporation, a Minnesota
corporation ("Regis"), and RGIS Merger Corp., a Delaware corporation and
wholly-owned subsidiary of Regis ("RGIS"). Pursuant to the Merger Agreement,
(i) RGIS will merge with and into Supercuts, the separate existence of RGIS
will cease and Supercuts will become a wholly-owned subsidiary of Regis (the
"Merger"); and (ii) each outstanding share of common stock, par value $.01
per share, of Supercuts will be converted into the right to receive 0.4 of
one share of common stock, par value $.05 per share, of Regis, as more fully
set forth in the Merger Agreement and described in the attached Joint Proxy
Statement/ Prospectus.
(2) To transact any other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only those shareholders of record at the close of business on September 24,
1996 will be entitled to notice of and to vote at the Meeting or any adjournment
or postponement thereof.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE, WHETHER OF NOT YOU PLAN TO BE PRESENT AT THE MEETING.
Proxies are revocable at any time prior to the time they are voted, and
shareholders who are present at the meeting may withdraw their proxies and vote
in person if they so desire.
By Order of the Board of Directors,
[SIGNATURE]
Lawrence D. Imber
SECRETARY
<PAGE>
REGIS CORPORATION SUPERCUTS, INC.
JOINT PROXY STATEMENT
for
Special Meeting of Shareholders of Regis Corporation
to be held on
October 23, 1996
and
Special Meeting of Stockholders of Supercuts, Inc.
to be held on
October 23, 1996
------------------------
REGIS CORPORATION
PROSPECTUS
for
Up to 4,920,590 Shares of Common Stock, $.05 par value
of Regis Corporation
to be issued pursuant to the
Agreement and Plan of Merger dated July 14, 1996, as amended,
among
Regis Corporation,
RGIS Merger Corp.
and
Supercuts, Inc.
------------------------
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Board of Directors of Regis Corporation
("Regis") to be used at a special meeting of its shareholders to be held on
Wednesday, October 23, 1996 (the "Regis Special Meeting"), and the solicitation
of proxies by the Board of Directors of Supercuts, Inc. ("Supercuts") to be used
at a special meeting of its shareholders to be held on Wednesday, October 23,
1996 (the "Supercuts Special Meeting"). The Regis Special Meeting and the
Supercuts Special Meeting are collectively referred to as the "Shareholder
Meetings." At the Supercuts Special Meeting, Supercuts shareholders will be
asked to consider and vote upon the Agreement and Plan of Merger dated July 14,
1996, as amended (the "Merger Agreement"), among Regis, RGIS Merger Corp., a
wholly-owned subsidiary of Regis ("Merger Sub"), and Supercuts and the
transactions contemplated thereby, including the merger (the "Merger") of Merger
Sub into Supercuts. Upon consummation of the Merger, Supercuts will be operated
as a direct, wholly-owned subsidiary of Regis. At the Regis Special Meeting,
shareholders of Regis will be asked to consider and vote upon, among other
things, a proposal to approve the issuance of up to 4,920,590 shares of the
common stock, $.05 per share par value, of Regis (the "Regis Common Stock") in
connection with the Merger (such number of shares or any portion thereof are
referred to herein as the "Merger Shares"). Approval of such issuance by the
shareholders of Regis is required by the rules of the National Association of
Securities Dealers, Inc. (the "NASD") because shares of Regis Common Stock are
traded on the Nasdaq National Market Tier of the Nasdaq Stock Market (the
"Nasdaq National Market") and the number of shares of Regis Common Stock to be
issued in the Merger will exceed 20% of the issued and outstanding shares of
Regis Common Stock. Shareholders of Regis are not voting upon approval of the
Merger Agreement because such approval is not required
1
<PAGE>
under Minnesota law. The Boards of Directors of Regis and Supercuts are also
soliciting their respective shareholders for authority to adjourn the respective
Shareholder Meetings to solicit additional proxies, if necessary. A copy of the
Merger Agreement is attached as Appendix A to this Joint Proxy
Statement/Prospectus and incorporated by reference herein.
In accordance with the terms of the Merger Agreement, upon approval by the
Regis shareholders of the issuance of the Merger Shares, approval by the
Supercuts shareholders of the Merger Agreement, the receipt of all requisite
regulatory approvals, the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the satisfaction or waiver of all other conditions, the Merger will
occur. In connection with the Merger, each share of common stock of Supercuts,
par value $.01 per share (the "Supercuts Common Stock"), outstanding immediately
prior to consummation of the Merger will be converted into the right to receive
0.4 of one share (the "Conversion Ratio") of Regis Common Stock. No fractional
shares of Regis Common Stock will be issued and cash will be paid in lieu
thereof. Upon consummation of the Merger, Regis will also assume the obligation
to issue Regis Common Stock upon exercise of the outstanding employee and
director options to purchase Supercuts Common Stock ("the Supercuts Options")
pursuant to certain Supercuts' option plans ("the Option Plans"). In addition,
Regis will grant restricted shares of Regis Common Stock to certain Directors of
Supercuts (the "Regis Restricted Shares") in exchange for services to be
rendered to Regis by such Directors in connection with their service on an
advisory committee (the "Advisory Committee") to be established upon the
consummation of the Merger to advise Regis on the business of Supercuts. See
"The Merger -- Interests of Certain Persons in the Merger" and "Description of
Regis Capital Stock." Upon consummation of the Merger, Merger Sub will be merged
with and into Supercuts with Supercuts as the surviving corporation and
Supercuts will be operated as a direct wholly-owned subsidiary of Regis.
Regis has filed a Registration Statement on Form S-4 pursuant to the
Securities Act of 1933, as amended, covering up to 4,920,590 Merger Shares to be
issued in connection with the Merger, the assumption of the Supercuts Options
and the issuance of the Regis Restricted Shares upon consummation of the Merger.
The actual number of Merger Shares issued upon the Merger will depend on the
number of Supercuts Options exercised prior to the Effective Time. The maximum
number of Merger Shares which could be issued under the Conversion Ratio is
4,920,590 shares assuming all outstanding Supercuts Options are exercised prior
to the Merger. The Conversion Ratio and adjustments thereto, and the
determination of the maximum number of Merger Shares are explained in the
accompanying Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus constitutes a Prospectus of Regis with
respect to the shares of Regis Common Stock to be issued in connection with the
Merger upon exercise of the Supercuts Options and in respect of the Regis
Restricted Shares.
This Joint Proxy Statement/Prospectus, the accompanying notice and form of
proxy are first being mailed to shareholders of Regis and Supercuts on or about
September 24, 1996.
Supercuts stock certificates should not be returned to Supercuts until after
receipt of a letter of transmittal to be provided to Supercuts shareholders upon
consummation of the Merger.
------------------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS SEPTEMBER 24, 1996.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 5
SUMMARY................................................................... 7
The Shareholder Meetings................................................ 8
The Parties to the Merger............................................... 8
Terms of the Merger..................................................... 8
Opinions of Financial Advisors.......................................... 8
Recommendations of the Boards of Directors of Regis and Supercuts....... 9
Effective Time of the Merger............................................ 9
No Solicitation of Third-Party Acquisition Proposals.................... 9
Conditions to Obligation to Close....................................... 10
Termination............................................................. 10
Dissenters' Rights...................................................... 10
Comparison of Shareholder Rights........................................ 10
Certain Federal Income Tax Consequences................................. 11
Accounting Treatment of the Merger...................................... 11
Interests of Certain Persons in the Merger.............................. 11
Supercuts Rights Agreement Amendment.................................... 12
Comparative Market Price Data........................................... 12
Comparative Unaudited Per Share Data.................................... 13
Selected Historical and Unaudited Pro Forma Combined Financial Data..... 14
SHAREHOLDER MEETINGS INFORMATION OF REGIS AND SUPERCUTS................... 17
Special Meeting of Regis Shareholders................................... 17
Special Meeting of Supercuts Stockholders............................... 18
Expenses................................................................ 19
THE MERGER................................................................ 20
General................................................................. 20
Background of the Merger................................................ 20
Regis' Reasons for the Merger; Recommendation of Regis' Board of
Directors.............................................................. 22
Supercuts' Reasons for the Merger; Recommendation of Supercuts' Board of
Directors.............................................................. 22
Opinion of Regis' Financial Advisor..................................... 23
Opinion of Supercuts' Financial Advisor................................. 27
Terms of the Merger..................................................... 32
Effective Time of the Merger............................................ 32
Regulatory Approval..................................................... 32
Interests of Certain Persons in the Merger.............................. 33
Management of Supercuts After the Merger................................ 34
Voting Agreement........................................................ 35
Accounting Treatment.................................................... 35
Certain Federal Income Tax Consequences................................. 35
Nasdaq National Market Listing.......................................... 36
Exchange Procedures..................................................... 37
Dissenters' Rights of Appraisal......................................... 37
Resales of Regis Common Stock Issued in the Merger; Affiliate
Agreements............................................................. 38
THE MERGER AGREEMENT...................................................... 38
General................................................................. 38
Certain Representations and Warranties.................................. 39
Certain Covenants....................................................... 39
Limitation on Solicitation by Supercuts................................. 40
Treatment of Supercuts Stock Options and Supercuts Restricted Shares.... 40
</TABLE>
3
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Indemnification......................................................... 41
Conditions to Obligation to Close....................................... 41
Termination............................................................. 42
Amendment............................................................... 42
Fees and Expenses....................................................... 42
THE COMPANIES............................................................. 42
Regis................................................................... 43
Supercuts............................................................... 43
DESCRIPTION OF REGIS CAPITAL STOCK........................................ 43
General................................................................. 43
Regis Common Stock...................................................... 43
Authorized and Undesignated Capital Stock............................... 43
Anti-Takeover Provisions................................................ 44
Limited Liability and Indemnification................................... 44
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 44
Stockholders' Dissenters' Rights........................................ 44
Board of Directors...................................................... 45
Removal of Directors.................................................... 45
Amendments to Bylaws.................................................... 45
Amendments to Certificate or Articles................................... 46
Indemnification......................................................... 46
Liability of Directors.................................................. 47
Shareholder Meetings.................................................... 47
Mergers and Consolidation............................................... 48
Business Combinations................................................... 48
Other Anti-Takeover Provisions.......................................... 49
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION........................ 50
ADJOURNMENT OF SHAREHOLDER MEETINGS....................................... 57
LEGAL MATTERS............................................................. 57
TAX OPINION............................................................... 57
EXPERTS................................................................... 57
APPENDIX A: Agreement and Plan of Merger dated as of July 14, 1996, as
amended among Regis Corporation, RGIS Merger Corp. and
Supercuts, Inc................................................ A-1
APPENDIX B: Opinion of Merrill Lynch, Pierce, Fenner & Smith.............. B-1
APPENDIX C: Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation................................................... C-1
</TABLE>
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY REGIS OR SUPERCUTS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION
OF A PROXY, AND IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF
THIS JOINT PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES
OFFERED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF REGIS OR SUPERCUTS OR ANY OF
THEIR RESPECTIVE SUBSIDIARIES SINCE THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.
------------------------
4
<PAGE>
AVAILABLE INFORMATION
Regis has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Regis Common Stock which may be issued in
connection with the transactions described herein. As permitted by the rules and
regulations of the Commission, this Joint Proxy Statement/Prospectus omits
certain information, exhibits and undertakings contained in the Registration
Statement. For further information, reference is made to the Registration
Statement, including all amendments to the Registration Statement, and all the
exhibits and schedules filed as part of the Registration Statement. Statements
contained herein concerning provisions of documents are necessarily summaries of
the documents and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission. The Registration
Statement can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and 7 World Trade Center, New York, New York 10048 or
at the Commission's Internet site at http://www.sec.gov/edgarhp.htm.
Regis and Supercuts are currently subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports, proxy and information statements and other
information with the Commission. Copies of such materials may be obtained at
prescribed rates from the Commission. The Regis Common Stock and the Supercuts
Common Stock are quoted on the Nasdaq National Market. Consequently, reports,
proxy and information statements and other information concerning Regis and
Supercuts can also be inspected at the offices of Nasdaq, 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Regis (File No. 0-11230) with the
Commission pursuant to the Exchange Act and by Supercuts (File No. 0-019533)
with the Commission pursuant to the Exchange Act are incorporated herein by
reference:
(1) Regis' Annual Report on Form 10-K for the year ended June 30, 1996.
(2) Regis' Current Report on Form 8-K dated July 15, 1996.
(3) The information contained in Regis' Proxy Statement dated September
14, 1995 for its Annual Meeting of Shareholders held on October 10,
1995.
(4) Supercuts' Annual Report on Form 10-K for the year ended December
31, 1995.
(5) Supercuts' Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1995 and Amendment No. 1 thereto on Form 10-Q/A
dated June 14, 1996.
(6) Supercuts' Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1996.
(7) Supercuts' Current Report on Form 8-K dated January 4, 1996.
(8) Supercuts' Current Report on Form 8-K dated January 8, 1996.
(9) Supercuts' Current Report on Form 8-K dated January 30, 1996.
(10) Supercuts' Current Report on Form 8-K dated February 16, 1996.
(11) Supercuts' Current Report on Form 8-K dated March 14, 1996.
(12) Supercuts' Current Report on Form 8-K dated April 2, 1996.
(13) Supercuts' Current Report on Form 8-K dated July 14, 1996.
5
<PAGE>
(14) The information contained in Supercuts' Proxy Statement dated April
18, 1996 for its Annual Meeting of Shareholders held on May 9, 1996.
(15) The description of Supercuts Common Stock contained in Supercuts'
Registration Statement on Form 8-A filed on September 17, 1991.
(16) All other documents filed by either Regis or Supercuts pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to
the date of this Joint Proxy Statement/Prospectus and prior to the
Shareholder Meetings.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/ Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. ALL OF SUCH DOCUMENTS WITH
RESPECT TO REGIS ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST FROM MR. FRANK E.
EVANGELIST, SECRETARY, REGIS CORPORATION, 7201 METRO BOULEVARD, EDINA, MINNESOTA
55439; TELEPHONE NUMBER (612) 947-7777. ALL OF SUCH DOCUMENTS WITH RESPECT TO
SUPERCUTS ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST FROM LAWRENCE D. IMBER,
SECRETARY, SUPERCUTS, INC., 550 CALIFORNIA STREET, SAN FRANCISCO, CALIFORNIA
94104; TELEPHONE NUMBER (415) 693-4884. COPIES WILL BE FURNISHED (WITHOUT
EXHIBITS UNLESS THE EXHIBITS HAVE BEEN SPECIFICALLY INCORPORATED BY REFERENCE)
FREE OF CHARGE. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY
REQUEST SHOULD BE MADE BEFORE OCTOBER 12, 1996.
6
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS JOINT PROXY STATEMENT/ PROSPECTUS AND IS NOT INTENDED TO BE A COMPLETE
STATEMENT OF THE MATTERS DESCRIBED HEREIN. REFERENCE IS MADE TO, AND THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED
ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS AND IN THE APPENDICES
ATTACHED HERETO, INCLUDING THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED
HERETO AS APPENDIX A. REGIS SHAREHOLDERS AND SUPERCUTS STOCKHOLDERS ARE URGED TO
READ AND CONSIDER CAREFULLY ALL OF THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
THE SHAREHOLDER MEETINGS
REGIS SPECIAL MEETING. The Regis Special Meeting will be held at Regis
Corporation, 7201 Metro Boulevard, Minneapolis, Minnesota 55439, on October 23,
1996 at 9:00 a.m., local time. Only the holders of record of the outstanding
shares of Regis Common Stock at the close of business on September 19, 1996 (the
"Regis Record Date") will be entitled to notice of and to vote at the Regis
Special Meeting. At the Regis Record Date, 18,080,155 shares of Regis Common
Stock were outstanding and entitled to vote.
At the Regis Special Meeting, Regis shareholders will be asked to consider
and vote upon (i) a proposal to approve the issuance of 4,920,590 shares of
Regis Common Stock pursuant to the Merger Agreement, (ii) a proposal to adjourn
the Regis Special Meeting if necessary to solicit additional proxies, and (iii)
the transaction of such other business as may properly come before the Regis
Special Meeting and any adjournments or postponements thereof. The quorum
required to hold the Regis Special Meeting is a majority of shares of Regis
Common Stock entitled to vote at the Regis Special Meeting in person or by
proxy. The approval of issuance of Regis Common Stock in the Merger requires the
affirmative vote of the majority of the total votes cast at the Regis Special
Meeting on such proposal in person or by proxy. The affirmative vote, in person
or by proxy, of a majority of shares of Regis Common Stock present and entitled
to vote at the Regis Special Meeting, will be required to adjourn the Regis
Special Meeting to solicit additional proxies. See "Shareholder Meetings
Information of Regis and Supercuts -- Special Meeting of Regis Shareholders" and
"Adjournment of Shareholder Meetings."
As of the Regis Record Date, the directors and executive officers of Regis
and their affiliates beneficially owned in the aggregate 6,578,402 shares, or
36.4%, of the issued and outstanding Regis Common Stock, excluding shares
subject to options. Curtis Squire, Inc. ("Curtis Squire"), a corporation
controlled by Myron Kunin who is Chairman of the Board of Regis, owned 6,024,925
shares of Regis Common Stock at the Regis Record Date or 33.3% of the then
outstanding Regis Common Stock and has entered into an agreement with Supercuts
pursuant to which Curtis Squire has agreed to vote all of its shares of Regis
Common Stock in favor of the issuance of the Regis Common Stock pursuant to the
Merger Agreement. See "The Merger -- Voting Agreement."
SUPERCUTS SPECIAL MEETING. The Supercuts Special Meeting will be held at
Supercuts, Inc., 550 California Street, San Francisco, California 94014, on
October 23, 1996 at 10:00 a.m., local time. Only the holders of record of the
outstanding shares of Supercuts Common Stock at the close of business on
September 24, 1996 (the "Supercuts Record Date") will be entitled to notice of
and to vote at the Supercuts Special Meeting. At the Supercuts Record Date,
11,259,309 shares of Supercuts Common Stock were outstanding and entitled to
vote.
At the Supercuts Special Meeting, Supercuts shareholders will be asked to
consider and vote upon (i) a proposal to approve the Merger Agreement and the
transactions contemplated thereby, and (ii) the transaction of such other
business as may properly come before the Supercuts Special Meeting and any
adjournments or postponements thereof. The affirmative vote of the holders of a
majority of the outstanding shares of Supercuts Common Stock, voting in person
or by proxy, is required to approve the Merger Agreement. See "Shareholder
Meetings Information of Regis and Supercuts -- Special Meeting of Supercuts
Shareholders."
7
<PAGE>
THE PARTIES TO THE MERGER
REGIS. Regis is the largest owner and operator of mall-based hair and
retail hair product salons in the world. At June 30, 1996, the Company operated
1,963 salons (1,891 owned and 72 franchised) offering high-quality haircare
services and products in 50 states and certain foreign countries, principally
the United Kingdom. Regis operates its salons primarily under the names Regis
Hairstylists, MasterCuts and Trade Secret. Regis' executive offices are located
at 7201 Metro Boulevard, Edina, Minnesota 55439, and its telephone number is
(612) 947-7777. At June 30, 1996, Regis had total assets of approximately $221.2
million, total liabilities of approximately $113.0 million and shareholders'
equity of approximately $108.2 million. See "The Companies -- Regis."
SUPERCUTS. Supercuts is one of the largest publicly held owners, operators
and franchisors of hair salons in the country. The Supercuts system includes
over 1,150 company-owned and franchised stores in 39 states and Puerto Rico.
Supercuts owns, or manages for others, over 500 salons and franchises over 650
salons. Supercuts' executive offices are located at 550 California Street, San
Francisco, California 94104, and its telephone number is (415) 693-4700. At June
30, 1996, Supercuts had total assets of approximately $97.7 million, total
liabilities of approximately $55.9 million and shareholders' equity of
approximately $41.8 million. See "The Companies -- Supercuts."
All information contained in this Joint Proxy Statement/Prospectus relating
to Regis has been provided by Regis, and all information contained herein
relating to Supercuts has been provided by Supercuts.
TERMS OF THE MERGER
In accordance with the terms of the Merger Agreement, Merger Sub will be
merged into Supercuts, with Supercuts as the surviving corporation in the Merger
(Supercuts, as the surviving corporation, sometimes referred to herein as the
"Surviving Corporation"). Upon consummation of the Merger, Supercuts will be
operated as a direct wholly-owned subsidiary of Regis.
The Merger Agreement provides that, at the effective time of the Merger (the
"Effective Time"), all of the issued and outstanding shares of Supercuts Common
Stock will be cancelled and each share of Supercuts Common Stock will be
converted into 0.4 of one share of Regis Common Stock. In addition, all
Supercuts Options to purchase Supercuts Common Stock that are outstanding at the
Effective Time will thereafter entitle the holder to purchase the number of
shares of Regis Common Stock equal to the Conversion Ratio multiplied by the
number of shares of Supercuts Common Stock subject to the respective Supercuts
Options. Assuming that no exercise of stock options or other issuance of shares
occurs subsequent to the Regis Record Date and the Supercuts Record Date and
prior to the Effective Time and based on 18,080,155 shares of Regis Common Stock
outstanding on the Regis Record Date and 11,259,309 shares of Supercuts Common
Stock outstanding on the Supercuts Record Date, immediately after the Effective
Time, former Supercuts shareholders would hold approximately 19.9% of the
outstanding shares of Regis Common Stock.
No fractional shares of Regis Common Stock will be issued in the Merger to
holders of Supercuts Common Stock. Each holder of Supercuts Common Stock who
otherwise would have been entitled to a fraction of a share of Regis Common
Stock will receive in lieu thereof, at the time of surrender of the certificate
or certificates representing such holder's shares of Supercuts Common Stock, an
amount of cash (without interest) equal to the value of such fraction of a share
based on the Conversion Ratio.
OPINIONS OF FINANCIAL ADVISORS
REGIS. The Board of Directors of Regis received a written opinion from
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") on July 14,
1996, to the effect that, based on and subject to the assumptions, factors and
limitations set forth therein, the consideration proposed to be exchanged by
Regis in the Merger pursuant to the Merger Agreement is fair to the shareholders
of Regis from a financial point of view. Merrill Lynch also delivered to the
Board of Directors of Regis a written opinion as to such matters and subject to
such limitations, dated the date of this Joint Proxy Statement/Prospectus (the
"Merrill Lynch Opinion"). The Merrill Lynch Opinion was prepared for
8
<PAGE>
the Board of Directors of Regis and is directed only to the fairness to the
Regis' shareholders, from a financial point of view, of the consideration to be
paid by Regis pursuant to the Merger. The Merrill Lynch Opinion does not
constitute a recommendation to any Regis' shareholder as to how such shareholder
should vote at the Regis Special Meeting nor does it constitute an opinion as to
the price at which Regis Common Stock or Supercuts Common Stock will actually
trade at any time. The Merger was negotiated at arm's-length by Regis and
Supercuts. See "The Merger -- Opinions of Financial Advisors." A copy of the
Merrill Lynch Opinion, which sets forth the assumptions made, general procedures
followed, matters considered, and limitations on the review undertaken, is
attached as Appendix B to this Joint Proxy Statement/Prospectus. Regis'
shareholders are urged to read the Merrill Lynch Opinion carefully in its
entirety.
SUPERCUTS. The Board of Directors of Supercuts received a written opinion
from Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") on July 14,
1996, to the effect that, based on and subject to the assumptions, factors and
limitations set forth therein, the Conversion Ratio is fair to the stockholders
of Supercuts from a financial point of view. DLJ also delivered to the Board of
Directors of Supercuts a written opinion as to such matters and subject to such
limitations, dated as of September 23, 1996 (the "DLJ Opinion"). The DLJ Opinion
was prepared for the Board of Directors of Supercuts and is directed only to the
fairness of the consideration to be received by Supercuts' stockholders from a
financial point of view. The DLJ Opinion does not constitute a recommendation to
any Supercuts' stockholder as to how such stockholder should vote at the
Supercuts Special Meeting nor does it constitute an opinion as to the price at
which Supercuts Common Stock or Regis Common Stock will actually trade at any
time. The Merger was negotiated at arm's-length by Supercuts and Regis. See "The
Merger -- Opinions of Financial Advisors." A copy of the DLJ Opinion is attached
hereto as Appendix C. Supercuts' stockholders are urged to read the DLJ Opinion
carefully in its entirety for assumptions made, other matters considered and
limits of the review by DLJ in connection with such opinion.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF REGIS AND SUPERCUTS
The Board of Directors of Regis has determined that the issuance of Regis
Common Stock in the Merger is in the best interests of its shareholders and has
unanimously approved the issuance of such shares. THE BOARD OF DIRECTORS OF
REGIS UNANIMOUSLY RECOMMENDS THAT THE REGIS SHAREHOLDERS VOTE FOR THE ISSUANCE
OF THE REGIS COMMON STOCK TO BE ISSUED IN THE MERGER. The Board of Directors of
Supercuts has determined that the Merger is in the best interests of its
shareholders and has unanimously approved the Merger. THE BOARD OF DIRECTORS OF
SUPERCUTS UNANIMOUSLY RECOMMENDS THAT THE SUPERCUTS SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER -- BACKGROUND OF
AND REASONS FOR THE MERGER."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of Merger
with the Delaware Secretary of State. Such filing will occur only after all
applicable waiting periods (and extensions thereof) under the HSR Act shall have
expired or been terminated (counsel has been advised that early termination of
the waiting period has been granted), the approval of the issuance of the Merger
Shares by the requisite vote of Regis' shareholders, the approval of the Merger
Agreement by the requisite vote of Supercuts' stockholders and the satisfaction
or waiver of all other conditions to the Merger. See "The Merger -- Effective
Time of the Merger; Conditions to Obligation to Close."
NO SOLICITATION OF THIRD-PARTY ACQUISITION PROPOSALS
The Merger Agreement includes a "no solicitation" provision that prohibits
Supercuts from soliciting or encouraging submission of third-party acquisition
proposals, but permits Supercuts to furnish non-public information to third
parties if, prior to the Effective Time, Supercuts receives an acquisition
proposal that the Supercuts Board of Directors, based upon the advice of its
outside counsel, reasonably believes that it has a fiduciary duty to consider,
and which it reasonably and in
9
<PAGE>
good faith believes is more favorable to Supercuts and its shareholders than the
transactions contemplated in the Merger Agreement. If, thereafter, Supercuts'
Board of Directors reasonably and in good faith determines that such acquisition
proposal is more favorable to Supercuts and its shareholders than the
transactions contemplated in the Merger Agreement and, based upon the advice of
outside counsel, that the failure to recommend or accept such proposal would
violate the fiduciary duties of the Board of Directors, then upon written notice
to Regis, Supercuts may terminate the Merger Agreement and the transactions
contemplated therein. See "The Merger Agreement -- Limitation on Solicitation by
Supercuts."
CONDITIONS TO OBLIGATION TO CLOSE
The obligations of each party to effect the Merger are subject to various
conditions, including the following, unless waived to the extent permitted by
applicable law: (i) the holders of Regis Common Stock shall have approved the
issuance of the Merger Shares by the requisite vote; (ii) the holders of
Supercuts Common Stock shall have approved the Merger and the Merger Agreement
by the requisite vote; (iii) no preliminary or permanent injunction or other
order by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect; (iv) all applicable waiting
periods or any extension thereof under the HSR Act shall have expired or been
terminated; and (iv) the Registration Statement shall have been declared
effective by the Commission. See "The Merger Agreement -- Conditions to
Obligation to Close."
TERMINATION
The Merger Agreement may be terminated prior to the Effective Time, either
before or after and notwithstanding approval by Regis' shareholders and
Supercuts' stockholders under certain circumstances, including (i) by mutual
written agreement of Regis and Supercuts, (ii) by either Regis or Supercuts if
the Merger has not occurred by January 1, 1997 provided that the terminating
party is not in material breach of its representations, warranties or
obligations under the Merger Agreement, (iii) by either Regis or Supercuts if
any court of competent jurisdiction in the United States has issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger or declaring the Merger invalid or unlawful and such
order, decree, ruling or action shall have become final and nonappealable, or
(iv) by Supercuts if the Supercuts Board of Directors reasonably and in good
faith determines that an unsolicited acquisition proposal which it received from
another party is more favorable to Supercuts and its shareholders than the
transactions under the Merger Agreement and, based upon the advice of outside
counsel, that the failure to recommend or accept such acquisition proposal would
violate the fiduciary duties of the Supercuts Board of Directors to the
shareholders of Supercuts under the applicable law. Upon termination by
Supercuts pursuant to clause (iv) of this paragraph, Supercuts shall pay to
Regis a breakup fee of $3,750,000. See "The Merger -- Effective Time of the
Merger; Termination." Under certain additional circumstances of termination, a
termination fee is payable to Regis. See "The Merger -- Fees and Expenses." See
"The Merger Agreement -- Fees and Expenses."
DISSENTERS' RIGHTS
Holders of shares of either Regis Common Stock or Supercuts Common Stock do
not have dissenters' rights of appraisal in connection with the Merger. See "The
Merger -- Dissenters' Rights."
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, Supercuts' stockholders will become Regis'
shareholders. As a result, their rights as holders of common stock, which are
now governed by Delaware corporate law and Supercuts' Certificate of
Incorporation and Bylaws, will be governed by Minnesota corporate law and Regis'
Articles of Incorporation and Bylaws. See "Comparison of Shareholder Rights" for
a summary of certain material differences between the rights of holders of Regis
Common Stock and the rights of holders of Supercuts Common Stock.
10
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for United States
Federal income tax purposes. In general, therefore, the Supercuts shareholders
will not recognize gain or loss upon the exchange of shares of Supercuts Common
Stock for Regis Common Stock in the Merger, except to the extent of cash
received in lieu of fractional shares.
The obligation of Supercuts to consummate the Merger is subject to the prior
receipt by Supercuts of an opinion from Willkie Farr & Gallagher, counsel to
Supercuts, that the Merger will qualify as a "reorganization" for United States
Federal income tax purposes. For a further discussion of the tax consequences of
the Merger, see "The Merger -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT OF THE MERGER
It is the intention of Regis and Supercuts that the Merger be accounted for
as a pooling-of-interests for accounting and financial reporting purposes. See
"The Merger -- Accounting Treatment of the Merger" and "The Merger -- Conditions
to the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Supercuts' Board of Directors and management may be deemed to have certain
interests in the Merger in addition to their interests as shareholders of
Supercuts generally. The Merger Agreement requires Regis to elect two members of
the current Board of Directors of Supercuts, Thomas L. Gregory, currently
Chairman of the Board of Supercuts, and Steve Price, currently Chief Executive
Officer of Supercuts, as directors of Regis as soon as practicable after the
Effective Time and to nominate them for re-election at the three annual meetings
of shareholders of Regis subsequent to the Effective Time and to use its best
efforts to re-elect them as directors at such meetings. In addition, Regis has
agreed that, following consummation of the Merger and their election as
directors of Regis (i) Mr. Gregory will be appointed to the Audit Committee of
the Regis Board of Directors, and (ii) Messrs. Gregory and Price will be the
majority of a new committee of the Regis Board of Directors that will control
the current litigation of Supercuts being assumed by Regis (and related
litigation that subsequently ensues, if any) in the Merger. See "The Merger --
Management of Supercuts after Merger."
Regis and each current Director of Supercuts (excluding Messrs. Gregory and
Price) will, promptly after the Effective Time, execute Advisory Agreements
providing that such Directors shall receive from Regis restricted stock in Regis
(equal to the number of shares of Supercuts Common Stock subject to the
director's cancelled restricted stock agreement times the Conversion Ratio) in
exchange for advisory services as members of a newly established Advisory
Committee that will advise Regis and the President of the Surviving Corporation
with respect to the operation of the Surviving Corporation for a period of two
years from the Effective Time. The members of the Advisory Committee will meet
(either in person or by telephone) quarterly to review the status of the
business of the Surviving Corporation and Regis and the litigation in which
Supercuts is currently engaged and to advise the President of the Surviving
Corporation in respect of the business of the Surviving Corporation and the
committee of Board of Directors of Regis that is controlling the Surviving
Corporation litigation in respect of such litigation.
Steve Price will receive compensation at and after a change in control of
Supercuts pursuant to an employment agreement with Supercuts. Mr. Price's
employment agreement is dated January 29, 1996 and terminates four years from
that date. However, pursuant to the agreement, upon a change in control, Mr.
Price is free to terminate his employment under the employment agreement, and
still receive his salary under the employment agreement for the remainder of the
four year term. The employment agreement provides for a base salary of $350,000
per year subject to periodic discretionary upward adjustments by the Supercuts
Board of Directors. Thus, Mr. Price could terminate his employment at the
Effective Time and continue to be paid at an annual rate of $350,000 per year
through January 29, 2000. Pursuant to the employment agreement, Mr. Price also
received options to purchase 500,000 shares of Supercuts stock at an exercise
price of $5.875. Options with respect to
11
<PAGE>
300,000 shares vested on January 29, 1996. Options with respect to 100,000
shares shall become vested on January 29, 1997 and options with respect to
100,000 shares shall become vested on January 29, 1998, except upon a change of
control of Supercuts any options which have not vested shall immediately vest
and be exercisable. Thus, upon the Effective Time, options with respect to
200,000 shares will vest and become immediately exercisable by Mr. Price.
Pursuant to a consulting agreement with Supercuts, Thomas L. Gregory, upon a
change of control of Supercuts, will receive $400,000 and will serve as a
consultant to the successor corporation to Supercuts for a period of forty-eight
months during which time he will receive compensation of $8,333.33 per month as
well as health insurance benefits, tax preparation reimbursement and other
similar forms of compensation.
Pursuant to the Merger Agreement, Regis has agreed to indemnify and hold
harmless the directors and officers of Supercuts against claims based on the
Merger Agreement, this Joint Proxy/ Prospectus or the Merger, subject to certain
exceptions. Regis has also agreed to assume, to the fullest extent permitted by
law, the obligations of Supercuts to indemnify its current officers and
directors.
Upon consummation of the Merger, Regis will assume the obligation to issue
Regis Common Stock upon exercise of the Supercuts Options. The Supercuts Options
will be exercisable for a number of shares of Regis Common Stock equal to the
number of Supercuts shares subject to such stock options outstanding multiplied
by the Conversion Ratio. Supercuts executive officers and directors currently
hold in the aggregate approximately 783,000 Supercuts Options.
SUPERCUTS RIGHTS AGREEMENT AMENDMENT
In connection with the execution of the Merger Agreement, Supercuts and U.S.
Stock Transfer Corporation (the "Rights Agent") executed Amendment No. 1 to the
Rights Agreement, dated as of July 14, 1996 (the "Rights Agreement Amendment"),
amending the Rights Agreement, dated as of April 2, 1996 (the "Rights
Agreement"), between Supercuts and the Rights Agent, so as to provide that none
of Regis and its affiliates will become an "Acquiring Person" and that no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) will occur as a result of the execution of the Merger
Agreement or the consummation of the Merger.
COMPARATIVE MARKET PRICE DATA
Regis Common Stock is quoted on the Nasdaq National Market under the symbol
"RGIS" and Supercuts Common Stock is quoted on the Nasdaq National Market under
the symbol "CUTS." The following table sets forth the last reported sale price
per share of Regis Common Stock and Supercuts Common Stock and the equivalent
per-share price of Supercuts Common Stock giving effect to the Merger on July
12, 1996 which is the last trading day preceding public announcement that Regis
and Supercuts had entered into the Merger Agreement. The sale prices do not
include adjustment for retail mark-ups, mark-downs or commissions. The
equivalent per-share price of Supercuts Common Stock at July 12, 1996 represents
the closing market price of a share of Regis Common Stock on such date ($33.00)
multiplied by the Conversion Ratio of 0.4 of one share of Regis Common Stock for
one share of Supercuts Common Stock. See "The Merger -- The Conversion Ratio."
<TABLE>
<CAPTION>
SUPERCUTS
REGIS SUPERCUTS EQUIVALENT
COMMON COMMON PER-SHARE
STOCK STOCK PRICE
----------- ----------- -----------
<S> <C> <C> <C>
Market Value Per Share at:
July 12, 1996....................................................... $ 33.00 $ 8.75 $ 13.20
</TABLE>
Supercuts stockholders are advised to obtain current market quotations for
Regis Common Stock. No assurance can be given concerning the market price of
Regis Common Stock before or after the Effective Time. The market price for
Regis Common Stock may fluctuate between the date of this Joint Proxy
Statement/Prospectus and the Effective Time.
12
<PAGE>
In connection with the Merger, Supercuts Common Stock will be cancelled and,
as a result, will no longer be quoted on the Nasdaq National Market.
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share data
for Regis Common Stock on an historical and a pro forma combined basis and for
Supercuts Common Stock on an historical and a pro forma equivalent basis giving
effect to the Merger using the pooling-of-interests method of accounting. For a
description of the pooling-of-interests method of accounting with respect to the
Merger and the related effects on the historical financial statements of Regis,
see "The Merger -- Accounting Treatment." The information is derived from the
consolidated financial statements of Regis and Supercuts and the Unaudited Pro
Forma Combined Financial Information. The financial statements of Regis and
Supercuts are incorporated by reference into this Joint Proxy
Statement/Prospectus and the Unaudited Pro Forma Combined Financial Information
appears elsewhere herein. This information should be read in conjunction with
such historical and pro forma financial statements and the related notes
thereto. See "Incorporation of Certain Documents by Reference" and "Unaudited
Pro Forma Combined Financial Information."
Regis' fiscal year ends on June 30; Supercuts' fiscal year ends on December
31. Regis' annual financial reporting period ending June 30 will be adopted by
the combined entity. Accordingly, for purposes of the following Historical and
Pro Forma Equivalent information, Supercuts information has been recast to
conform to the Regis fiscal year end. The accounting policies of Regis and
Supercuts differ in certain respects. As required in a pooling-of-interests
business combination, the unaudited per share data presented on a pro forma
combined basis reflects certain adjustments to conform Supercuts' accounting
policies to those of Regis. See "Unaudited Pro Forma Combined Financial
Information." The per share data is not necessarily indicative of the results of
future operations of the combined entity or the actual results that would have
been achieved had the Merger been consummated prior to the dates or periods
indicated.
<TABLE>
<CAPTION>
SUPERCUTS
REGIS COMMON STOCK COMMON STOCK
------------------------ --------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Book Value Per Common Share (1):
June 30, 1996................................................. $ 5.99 $ 5.58 $ 3.73 $ 2.23
Cash Dividends Declared Per Common Share (2):
Year Ended:
June 30, 1996................................................. 0.07 0.07 0.00 0.03
June 30, 1995................................................. 0.00 0.00 0.00 0.00
June 30, 1994................................................. 0.00 0.00 0.00 0.00
June 30, 1993................................................. 0.00 0.00 0.00 0.00
June 30, 1992................................................. 0.00 0.00 0.00 0.00
Net Income (Loss) from Continuing Operations Per Common Share (3):
Year Ended:
June 30, 1996................................................. 1.05 0.47 (0.57) 0.19
June 30, 1995................................................. 0.84 0.59 0.52 0.24
June 30, 1994................................................. 0.26 0.28 0.63 0.11
June 30, 1993................................................. 0.27 0.51 0.74 0.20
June 30, 1992................................................. 0.31 0.54 0.61 0.22
</TABLE>
13
<PAGE>
NOTES TO COMPARATIVE UNAUDITED PER SHARE DATA
1. The pro forma combined book value per share of Regis Common Stock
represents the historical combined common stockholders' equity for Regis and
Supercuts (as adjusted for retroactive changes in certain accounting policies of
Supercuts in order to conform them to those of Regis) divided by total pro forma
common shares of the combined entity, assuming a Conversion Ratio of 0.4. The
pro forma equivalent book values per share of Supercuts Common Stock represent
the pro forma combined book value per share amounts multiplied by 0.4, the
Conversion Ratio. See "The Merger -- The Conversion Ratio."
2. The pro forma combined cash dividends declared per common share assume
no changes in the historical cash dividends declared per share of Regis Common
Stock.
3. The pro forma combined income (loss) from continuing operations per
common share (based on the weighted average number of common and common
equivalent shares outstanding) is based upon the combined historical income
(loss) from continuing operations for Regis and Supercuts (as adjusted for
retroactive changes in certain accounting policies of Supercuts in order to
conform them to those of Regis) divided by the average pro forma common shares
of the combined entity. The pro forma equivalent income (loss) from continuing
operations per share of Supercuts Common Stock represents the pro forma combined
income (loss) from continuing operations per common share multiplied by 0.4, the
Conversion Ratio. See "The Merger -- The Conversion Ratio".
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial information for Regis and Supercuts and certain selected unaudited pro
forma combined financial information giving effect to the Merger using the
pooling-of-interests method of accounting. For a description of the
pooling-of-interests method of accounting with respect to the Merger and the
related effects on the historical financial statements of Regis, see "The Merger
- -- Accounting Treatment of the Merger."
The financial data included in the Selected Historical Financial Data as of
and for the five years ended June 30, 1996 for Regis and as of and for the five
years ended December 31, 1995 for Supercuts is derived from the audited
consolidated financial statements of Regis and Supercuts, including the related
notes thereto. The financial data for the six months ended June 30, 1996 and
1995 for Supercuts is derived from the unaudited consolidated financial
statements of Supercuts and in the opinion of management of Supercuts, includes
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such data. Certain historical information of Supercuts
has been reclassified to conform to Regis' financial statement presentation. The
consolidated financial statements of Regis and Supercuts are incorporated by
reference into this Joint Proxy Statement/Prospectus. This information should be
read in conjunction with such financial statements and in conjunction with the
Unaudited Pro Forma Combined Financial Information, including the notes thereto,
appearing elsewhere in this Joint Proxy Statement/Prospectus. See "Incorporation
of Certain Documents by Reference" and "Unaudited Pro Forma Combined Financial
Information."
The accounting policies of Regis and Supercuts differ in certain respects.
As required in a pooling-of-interests business combination, the financial data
included in the Selected Unaudited Pro Forma Combined Financial Data reflects
certain adjustments to conform Supercuts accounting policies to those of Regis.
Regis' fiscal year ends on June 30; Supercuts' fiscal year ends December 31.
Regis' annual financial reporting period ending June 30 will be adopted by the
combined entity. Accordingly, for purposes of the following Unaudited Pro Forma
Combined Statements of Operations, Supercuts Statements of Operations have been
recast to conform to the Regis fiscal year end. See "Unaudited Pro Forma
Combined Financial Information."
Pursuant to the Merger Agreement, Regis expects that certain adjustments
will be recorded, primarily to accrue for specific, identified costs related to
the Merger and to conform Supercuts'
14
<PAGE>
accounting policies to those of Regis. The amounts of such merger-related costs
included or disclosed in the Selected Unaudited Pro Forma Combined Financial
Data may change as more information becomes available.
Regis expects to achieve operating cost savings post-Merger primarily
through reductions in staff and the consolidation of certain corporate
administrative and operations functions at Supercuts. The operating cost savings
are expected to be achieved in various amounts at various times during the years
subsequent to the consummation of the Merger and not ratably over or at the
beginning or end of such periods. No adjustment has been reflected in the
Unaudited Pro Forma Combined Statements of Operations for the anticipated cost
savings.
The Selected Unaudited Pro Forma Combined Financial Data included herein is
not necessarily indicative of the results of future operations of the combined
entity or the actual results that would have been achieved had the Merger been
consummated prior to the periods indicated.
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF REGIS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales............................................. $ 499,442 $ 422,188 $ 376,971 $ 340,966 $ 305,989
Income from continuing operations................. 19,124 14,651 4,053 3,858 4,417
Income from continuing operations per common
share............................................ 1.05 0.84 0.26 0.27 0.31
Total assets...................................... 221,174 166,323 165,999 143,152 127,933
Long-term debt, current portion................... 13,668 11,990 10,199 13,463 6,127
Long-term debt and capital lease obligations...... 49,717 37,969 54,309 51,822 54,911
Total shareholders' equity........................ 108,214 76,427 59,656 39,028 35,619
Cash dividends per share.......................... 0.07 0.00 0.00 0.00 0.00
</TABLE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF SUPERCUTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNAUDITED
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
-------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................................... $ 53,532 $ 49,498 $ 100,823 $ 82,097 $ 59,217 $ 35,558 $ 32,116
Income (loss) from continuing
operations.............................. 3,115 2,404 (7,084) 7,296 6,476 6,443 3,602
Income (loss) from continuing operations
per common share........................ 0.28 0.22 (0.63) 0.66 0.63 0.69 0.48
Total assets............................. 97,726 84,970 97,366 83,113 57,139 36,827 26,250
Long-term debt, current portion.......... 22,288 360 371 33 0 0 0
Long-term debt and capital lease
obligations............................. 4,050 22,316 25,300 23,500 12,576 3,439 2,170
Total shareholders' equity............... 41,792 47,913 38,566 45,352 33,795 22,326 14,949
Cash dividends per share................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
15
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
OF REGIS AND SUPERCUTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
---------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales........................................... $ 617,481 $ 524,253 $ 453,561 $ 388,862 $ 339,225
Income from continuing operations............... 10,697 12,855 5,623 9,104 9,371
Income from continuing operations per common
share.......................................... 0.47 0.59 0.28 0.51 0.54
Total assets.................................... 305,834 241,392 229,154 184,957 155,415
Long-term debt, current portion................. 39,006 12,350 10,199 13,463 6,127
Long-term debt and capital lease obligations.... 53,767 63,726 72,400 56,788 54,911
Total shareholders' equity...................... 125,695 108,863 93,332 62,925 53,281
Cash dividends per share........................ 0.07 0.00 0.00 0.00 0.00
</TABLE>
16
<PAGE>
SHAREHOLDER MEETINGS INFORMATION OF REGIS AND SUPERCUTS
This Joint Proxy Statement/Prospectus is being furnished to Regis
shareholders in connection with the solicitation of proxies by the Board of
Directors of Regis for use at the Regis Special Meeting to be held on October
23, 1996, and at any adjournments or postponements thereof, and to Supercuts
stockholders in connection with the solicitation of proxies by the Board of
Directors of Supercuts for use at the Supercuts Special Meeting to be held on
October 23, 1996, and at any adjournments or postponements thereof.
SUPERCUTS STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
This Joint Proxy Statement/Prospectus, the Notice of Special Meeting of
Shareholders of Regis and the Notice of Special Meeting of Stockholders of
Supercuts and the accompanying proxies solicited by the Boards of Directors of
Regis and Supercuts, respectively, are first being mailed to shareholders of
Regis on or about September 24, 1996 and shareholders of Supercuts on or about
September 24, 1996.
The principal executive offices of Regis are located at 7201 Metro
Boulevard, Minneapolis, Minnesota 55439 and its telephone number is (612)
947-7777. The principal executive offices of Supercuts are located at 550
California Street, San Francisco, California 94104 and its telephone number is
(415) 693-4700.
SPECIAL MEETING OF REGIS SHAREHOLDERS
The Regis Special Meeting will be held on Wednesday, October 23, 1996,
commencing at 9:00 a.m., local time, at Regis Corporation, 7201 Metro Boulevard,
Minneapolis, Minnesota 55439.
PURPOSES OF MEETING. The purposes of the Regis Special Meeting are to
consider and vote upon (i) a proposal to approve the issuance of shares of Regis
Common Stock in connection with the Merger; (ii) a proposal to adjourn the Regis
Special Meeting to solicit additional proxies, if required; and (iii) such other
business as may properly come before the Regis Special Meeting and any
adjournments or postponements thereof.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE. The close of business
on September 19, 1996 has been fixed by the Board of Directors of Regis as the
Regis Record Date for the determination of holders of Regis Common Stock
entitled to notice of and to vote at the Regis Special Meeting and any
adjournments or postponements thereof. At the close of business on the Regis
Record Date, there were 18,080,155 shares of Regis Common Stock outstanding and
entitled to vote, held by approximately 191 holders of record. Each share of
Regis Common Stock entitles the holder thereof to one vote on each matter to be
submitted to Regis shareholders at the Regis Special Meeting.
QUORUM; VOTE REQUIRED. A quorum, consisting of a majority of the voting
power of the issued and outstanding stock of Regis entitled to vote at the Regis
Special Meeting, must be present in person or by proxy before any action may be
taken at the Regis Special Meeting. Abstention will be treated as shares present
at the Regis Special Meeting for purposes of determining the presence of a
quorum. Broker non-votes (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owners or other
persons as to certain proposals on which such beneficial owners or persons are
entitled to vote their shares and with respect to which the brokers or nominees
have no discretionary power to vote without such instructions) will be treated
as shares present at the Regis Special Meeting for purposes of determining the
presence of a quorum only with respect to those items of business for which the
proxy has the authority to vote. The approval of issuance of Regis Common Stock
in the Merger requires the affirmative vote of the majority of the total votes
cast at the Regis Special Meeting on such proposal in person or by proxy.
Assuming a quorum is present, the affirmative vote of a majority of the shares
of Regis Common Stock present and entitled to vote in person or by proxy at the
Regis Special Meeting is required to approve or take the other actions to be
presented for a vote of the Regis shareholders at the Regis Special Meeting.
17
<PAGE>
As of the Regis Record Date, the directors and executive officers of Regis
and their affiliates in the aggregate beneficially owned and are entitled to
vote 6,578,402 shares, or 36.4%, of the outstanding shares of Regis Common Stock
(exclusive of shares of Regis Common Stock which may be acquired upon the
exercise of outstanding stock options), including 6,024,925 shares representing
33.3% of the outstanding Regis Common Stock owned by Curtis Squire which has
agreed to vote its shares for approval of issuance of Regis Common Stock in the
Merger Agreement and the transactions contemplated thereby. As of the Regis
Record Date, neither Supercuts and its subsidiaries, nor the directors and
executive officers of Supercuts and their affiliates, beneficially owned any
outstanding shares of Regis Common Stock.
VOTING; SOLICITATION AND REVOCATION OF PROXIES. A proxy for use at the
Regis Special Meeting accompanies this Joint Proxy Statement/Prospectus and is
solicited by the Board of Directors of Regis. Any Regis shareholder executing a
proxy may revoke it at any time before it is voted by filing with the Secretary
of Regis, at the address of Regis set forth on the Notice of Special Meeting of
Shareholders, written notice of such revocation; by executing a later-dated
proxy; or by attending the Regis Special Meeting and giving notice of such
revocation in person. Attendance at the Regis Special Meeting will not, in and
of itself, constitute revocation of a proxy.
Each proxy returned to Regis (and not revoked) will be voted in accordance
with the instructions indicated thereon. IF NO INSTRUCTIONS ARE INDICATED, THE
PROXY WILL BE VOTED: (1) FOR APPROVAL OF THE ISSUANCE OF REGIS COMMON STOCK
PURSUANT TO THE MERGER AGREEMENT; AND (2) FOR ADJOURNMENT OF THE REGIS SPECIAL
MEETING TO SOLICIT ADDITIONAL PROXIES, IF NECESSARY. While the Board of
Directors of Regis knows of no other matters to be presented at the Regis
Special Meeting, if any other matter properly comes before the meeting or any
adjournment thereof, all proxies returned to Regis will be voted on any such
matter in accordance with the best judgment of the proxy holders.
BENEFICIAL OWNERSHIP OF REGIS COMMON STOCK. This information is
incorporated by reference from Regis' Annual Report on Form 10-K for the year
ended June 30, 1996. See "Incorporation of Certain Documents by Reference."
SPECIAL MEETING OF SUPERCUTS SHAREHOLDERS.
The Supercuts Special Meeting will be held at Supercuts' corporate offices
at 550 California Street, San Francisco, California 94014 on October 23, 1996,
at 10:00 a.m., local time, for the following purposes:
1. To consider and approve the Merger, and
2. To consider such other matters as may properly come before the
Supercuts Special Meeting
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE. Only holders of
record of Supercuts Common Stock at the close of business on September 24, 1996,
the Supercuts Record Date, are entitled to notice of and to vote at the
Supercuts Special Meeting. As of the close of business on the Supercuts Record
Date, there were 11,259,309 shares of Supercuts Common Stock outstanding and
entitled to vote, held of record by approximately 907 shareholders. Each
Supercuts shareholder is entitled to one vote for each share of Supercuts Common
Stock held as of the Record Date.
A list of the stockholders entitled to vote at the Supercuts Special Meeting
will be available 10 days before the date of the Supercuts Special Meeting and
will be open to the examination of any stockholder, for any purpose germane to
the meeting, for 10 days prior to the meeting. The list will specify the address
of each stockholder and the number of shares registered in the name of such
stockholder.
QUORUM; VOTE REQUIRED. The presence, in person or by proxy, of a majority
of the shares of Supercuts Common Stock outstanding on the Record Date is
necessary to constitute a quorum for the
18
<PAGE>
transaction of business at the Supercuts Special Meeting. If the persons present
in person or represented by proxy at the Supercuts Special Meeting constitute
less than a majority of the outstanding shares, the Supercuts Special Meeting
may be adjourned to a subsequent date for the purposes of obtaining a quorum.
Under the General Corporation Law of Delaware and the Bylaws of Supercuts,
the approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Supercuts Common
Stock. Because approval of the Merger Agreement requires the affirmative vote of
a majority of the outstanding stock of the Supercuts Common Stock, abstentions
and broker non-votes will have the effect of negative votes.
VOTING; SOLICITATION AND REVOCATION OF PROXIES. A proxy card for use at the
Supercuts Special Meeting accompanies this Joint Proxy Statement/Prospectus. A
Supercuts shareholder may use the proxy card if he or she is unable to attend
the Supercuts Special Meeting in person or wishes to have his or her share voted
by proxy even if he or she does attend the Supercuts Special Meeting. A proxy
may be revoked by the person giving it at any time before it is exercised by
providing written notice of such revocation to the Secretary of Supercuts, by
submitting a proxy having a later date, or by appearing at the Supercuts Special
Meeting and electing to vote in person. The mere presence at the Supercuts
Special Meeting of the person who has given the proxy does not revoke the
appointment. Any proxy validly submitted and not revoked will be voted in the
manner specified therein by the stockholder. IF A PROXY IS SUBMITTED BUT NO
SPECIFICATION IS MADE THEREIN, SHARES OF SUPERCUTS COMMON STOCK REPRESENTED BY
PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT. If you have already
submitted a previously distributed proxy card, you do not need to submit the
accompanying proxy card unless you wish to change your vote. Because approval of
the Merger Agreement by Supercuts stockholders requires the affirmative vote of
a majority of the shares of Supercuts Common Stock outstanding as of the
Supercuts Record Date, failure to submit a proxy, abstentions and broker
non-votes will have the effect of a vote against approval of the Merger
Agreement. Supercuts' Board of Directors does not know of any other matter that
will be presented for action at the Supercuts Special Meeting. If, however, any
other matter properly comes before the Supercuts Special Meeting, the persons
named in the proxy or their substitutes will vote thereon in accordance with
their judgment.
BENEFICIAL OWNERSHIP OF SUPERCUTS COMMON STOCK. This information is
incorporated by reference from Supercuts' Annual Report on Form 10-K for the
year ended December 31, 1995. See "Incorporation of Certain Documents by
Reference."
EXPENSES
Regis and Supercuts will bear the expenses of printing and mailing this
Joint Proxy Statement/ Prospectus, the accompanying proxies and all other
expenses incurred in connection with the solicitation of proxies from Regis and
Supercuts shareholders on behalf of the Regis Board of Directors and the
Supercuts Board of Directors, respectively. Regis and Supercuts have retained
Morrow & Co., Inc. to assist in the solicitation of proxies for their respective
shareholder meetings. Such firm will receive fees of approximately $10,000, plus
reimbursement for reasonable expenses. In addition to solicitation by mail,
directors, officers and employees of Regis and Supercuts, who will not be
specifically compensated for such services, may solicit proxies from the
shareholders of Regis and Supercuts, respectively, personally or by telephone,
telegram or other forms of communication. Regis and Supercuts will also pay the
standard charges and expenses of brokerage houses, voting trustees, banks,
associations and other custodians, nominees and fiduciaries, who are record
holders of Regis Common Stock and Supercuts Common Stock, respectively, not
beneficially owned by them, for forwarding such materials to and obtaining
proxies from the beneficial owners of Regis Common Stock and Supercuts Common
Stock entitled to vote at the Regis Special Meeting and the Supercuts Special
Meeting, respectively.
19
<PAGE>
THE MERGER
The following is a brief summary of the Merger. This description does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement included as Appendix A to this Proxy Statement/Prospectus and
incorporated herein by reference. All shareholders are urged to read the Merger
Agreement in its entirety. See also "The Merger Agreement."
GENERAL
The Merger Agreement provides for the merger of Merger Sub with and into
Supercuts, with Supercuts surviving the Merger as a direct, wholly-owned
subsidiary of Regis. The obligations of the parties to consummate the Merger are
subject to the satisfaction of certain conditions, including the approval of the
Merger Agreement by the shareholders of Supercuts and the approval of the
issuance of shares of Regis Common Stock in connection with the Merger by
shareholders of Regis. See "The Merger Agreement -- Conditions to the Merger"
and "The Merger -- Regulatory Approvals."
BACKGROUND OF THE MERGER
The first contact between the two companies in which a possible business
combination was broached occurred in the fall of 1995 when Paul Finkelstein,
President of Regis, had a brief conversation with the then-Chairman and Chief
Executive Officer of Supercuts, who has since left Supercuts, in which the
potential for a business combination between the two companies was first
discussed, without any discussion about terms, form or conditions of any such
possible business combination.
On January 8, 1996, Mr. Finkelstein called Thomas Gregory, chairman and, at
that date, interim CEO of Supercuts, to introduce himself. Mr. Finkelstein told
Mr. Gregory that Mr. Finkelstein had a brief conversation with Mr. Gregory's
predecessor in the fall of 1995 and that Mr. Finkelstein thought that it was
possible that the two companies would make a good match. Mr. Gregory advised Mr.
Finkelstein that Supercuts was not for sale but that he would advise the
Supercuts Board of Directors of Mr. Finkelstein's comments.
There were no further contacts until February 15, 1996 when Mr. Finkelstein
called Mr. Gregory to encourage Mr. Gregory to meet him at some time in the
future to explore the possibility of a business combination between the two
companies. Mr. Gregory informed the Board of Directors of Supercuts that Mr.
Finkelstein had extended such an invitation. The view of the Board was that
Supercuts was not for sale.
On February 20, 1996, Supercuts engaged DLJ to act as its exclusive
financial advisor with respect to Supercuts' general financial strategy and
planning.
The next contact between Regis and Supercuts was on March 14, 1996, when Mr.
Finkelstein contacted Mr. Gregory to reiterate Regis' invitation to meet and
discuss a possible business combination and asked if such a meeting could be
arranged. Mr. Gregory informed the Board of Directors of Supercuts that Regis'
invitation had been re-extended and the Board of Directors concurred that Mr.
Gregory should meet with Mr. Finkelstein and hear what Regis wanted to discuss
but reiterated that Supercuts was not for sale.
On March 18, 1996, Mr. Gregory called Mr. Finkelstein and they arranged a
get-acquainted meeting to be held on April 9, 1996 in Denver, Colorado among
Messrs. Myron Kunin, Steve Price, Finkelstein and Gregory.
On April 9, 1996 Messrs. Kunin, Price, Finkelstein and Gregory met in
Denver. Mr. Kunin reiterated Regis' interest in exploring a possible business
combination and observed that Messrs. Price and Gregory were the type of people
with whom Regis would like to do business. Messrs. Price and Gregory reiterated
that Supercuts was not for sale. Up until this point, no terms, structure or
conditions for a possible business combination were discussed, except that the
parties mutually acknowledged that a stock for stock merger that could be
accounted for as a pooling of interests was the most economically viable
structure for a possible transaction.
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In April, the companies determined that each party had sufficient interest
in a possible merger to warrant an exchange of confidential information
regarding the operations of the two companies and on April 29, 1996, the
companies executed and delivered to each other confidentiality agreements and
then commenced the exchange of confidential information. In May, Regis retained
Merrill Lynch to act as Regis' financial advisor.
Throughout May and June, the companies through their respective management,
financial advisors and legal counsel, conducted thorough business, financial and
legal due diligence reviews and engaged in general discussions about the terms
of a transaction. On June 4, 1996, Mr. Finkelstein called Mr. Gregory to discuss
briefly how the status of due diligence and other matters of that nature were
progressing generally. No specific terms of the Merger were discussed.
Throughout the last week of June to July 2, 1996, discussions ensued among
Messrs. Gregory and Price at Supercuts' headquarters and Messrs. Kunin and
Finkelstein at Regis' headquarters. On July 2, 1996, the two parties determined
that a stock for stock merger transaction in which Supercuts stockholders would
receive approximately 19.5% of the stock of the combined entity on a fully
diluted basis should be presented to the respective boards of directors of the
two companies during the following week.
On July 8, the Regis Board of Directors met to consider the possible merger.
At this meeting, representatives of Merrill Lynch presented the Regis Board of
Directors with its analysis of a merger from Regis' standpoint and gave its
opinion that a merger based upon the terms negotiated by the senior managements
of the two companies was fair, from a financial point of view, to Regis'
shareholders. The Board of Directors then unanimously adopted resolutions
approving in principle a merger of the two companies on the terms previously
negotiated by management, subject to approval by the Regis Board of Directors of
a definitive merger agreement. On July 11, the Board of Supercuts met to
consider the possible merger. At this meeting, DLJ presented the Supercuts Board
of Directors with its analysis of the merger from Supercuts' standpoint and gave
its opinion that the consideration to be received by Supercuts' stockholders in
the merger was fair, from a financial point of view, to Supercuts stockholders.
The Board then unanimously adopted resolutions approving in principle the Merger
subject to completion of a definitive agreement. On July 14, 1996, Regis and
Supercuts agreed to a stock for stock merger in which Supercuts' stockholders
would receive approximately 19.65 % of the stock of the combined entity and the
definitive Merger Agreement was executed by the two companies and Merger Sub.
On July 3, 1996 (prior to execution of the Merger Agreement), Mr. Gregory
was contacted by a third party (the "Third Party") that sought to engage in
discussions regarding a possible acquisition of Supercuts. The Third Party
requested due diligence access to Supercuts to formulate a specific proposal.
Supercuts agreed to give the Third Party full due diligence access to the books,
records and management personnel of Supercuts from open of business on July 5,
1996 through the close of business on July 9, 1996 and informed the Third Party
that if the Third Party could make a proposal to acquire the Company that was
superior to the transaction then being discussed with Regis, Supercuts would
pursue a transaction with the Third Party instead of with Regis.
On July 9, 1996, after the Third Party had spent approximately five full
days conducting a financial, business and legal due diligence review of
Supercuts, the management of Supercuts, together with its financial advisor and
legal counsel, had a conference call with the Third Party in which the Third
Party discussed a possible cash bid for Supercuts stock at a price between $11
and $11.50 per share that was subject to, among other things, further due
diligence and a financing contingency. Supercuts requested that the Third Party
make a specific proposal in writing and provide specific information about the
nature and possible source of the necessary financing so that Supercuts could
evaluate whether the proposal was credible and whether it was desirable to
pursue. The Third Party responded to Thomas Gregory later that day that such a
writing would not be forthcoming at that time and the Third Party was
withdrawing at that time.
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On July 16, 1996, two days after the Merger Agreement had been executed, the
Third Party indicated in a letter addressed to Thomas Gregory its possible
interest in acquiring all of Supercuts stock at $11 per share, subject to a
financing contingency and further due diligence. On July 19, 1996, Mr. Gregory
responded in writing that he had referred the Third Party's July 16, 1996 letter
to Supercuts' financial advisor and legal counsel and Mr. Gregory informed the
Third Party that Supercuts was prohibited by the terms of the Merger Agreement
from soliciting, initiating or encouraging any interest on any third party's
part in acquiring Supercuts.
Before Supercuts had responded to the Third Party's July 16, 1996 letter,
the Third Party, in a letter dated July 24, 1996, reduced to $9.25 per share the
price for Supercuts Common Stock that it was willing to pay and indicated that
it had eliminated the financing contingency but its potential proposal was still
subject to additional due diligence (including financial due diligence and
certain legal due diligence). On July 29, 1996, Mr. Gregory, after conferring
with legal counsel, financial advisors and Daniel Good, a Supercuts' Director
who with Mr. Gregory comprised the Negotiating Committee of the Board of
Directors of Supercuts, informed the Third Party that the Third Party's letter
dated July 24, 1996 did not constitute an acquisition proposal that the Board of
Directors of Supercuts believed it had a fiduciary duty to consider and that it
reasonably and in good faith believed to be more advantageous to Supercuts and
its shareholders than the Merger.
As of the date hereof, Supercuts has not received any further communication
from the Third Party or from any other party (excluding Regis) expressing an
interest in acquiring Supercuts.
REGIS' REASONS FOR THE MERGER; RECOMMENDATION OF REGIS' BOARD OF DIRECTORS
The terms of the Merger Agreement, including the consideration to be paid to
Supercuts' stockholders, were the result of arms-length negotiations between the
representatives of Regis and Supercuts. Among the factors considered by the
board of directors of Regis in deciding to approve and recommend the terms of
the Merger were: (i) the potential to expand the combined operations into strip
centers, (ii) the opportunity to increase product sales and margins in Supercuts
salons, (iii) the opportunity to expand the Supercuts franchise operations, (iv)
the consideration to be paid to Supercuts' stockholders in relation to the
market value, book value, earnings per share and dividend rates of the Regis
common stock and the Supercuts common stock, (v) information concerning the
financial condition, results of operations, capital levels, asset quality and
prospects of Regis and Supercuts, (vi) the short-term and long-term impact the
Merger will have on the Regis consolidated results of operations, (vii) the
general structure of the transaction and the compatibility of management and
business philosophy, (viii) the general tax-free nature of the Merger to the
shareholders of Supercuts, and (ix) the opinion of Regis' advisor as to the
fairness, from a financial point of view of the consideration to be paid to
Supercuts' stockholders. In making their determination, the boards of directors
of Regis did not ascribe relative weights to the factors which they considered.
THE REGIS DIRECTORS UNANIMOUSLY RECOMMEND THAT REGIS SHAREHOLDERS VOTE FOR
THE ISSUANCE OF SHARES OF REGIS COMMON STOCK IN CONNECTION WITH THE MERGER.
SUPERCUTS' REASONS FOR THE MERGER; RECOMMENDATION OF SUPERCUTS' BOARD OF
DIRECTORS
In the course of its evaluation of the Merger, Supercuts Board of Directors
considered a number of factors prior to approving the Merger, including the
following:
- ECONOMIES OF SCALE. The Supercuts Board of Directors believes that there
are significant economies of scale in the hair care industry and that a
larger company has more opportunity to spread administrative and corporate
overhead costs over a larger revenue base. The Supercuts Board of
Directors concluded that the Merger should result in a strong combined
entity and that the combination of the two companies should enhance
shareholder value through efficiency of operations.
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- COMPLEMENTARY STRENGTHS. The Supercuts Board of Directors believes that
Supercuts' successful, primarily strip center-based United States business
is an excellent complement to Regis' successful, primarily mall-based
United States and international business and that combining the two will
produce a stronger, more competitive company.
- REGIS FINANCIAL CONDITION. The Supercuts Board of Directors analyzed
information with respect to financial condition, business and prospects of
Regis; including, among other things, Regis' recent and historic stock and
earnings performance, the strength of Regis' management, and the ability
of Regis to access capital markets.
- STOCK COMPENSATION. The Supercuts Board of Directors considered that,
because the Merger consideration consists of Regis Common Stock and not
cash (except in the case of fractional shares), the Merger will offer the
opportunity for Supercuts shareholders to continue to participate in the
growth and appreciation of the business conducted by the combined company.
- OPINION OF FINANCIAL ADVISOR. The Supercuts Board of Directors considered
the opinion of DLJ to the Supercuts Board of Directors that, as of July
14, 1996, the Conversion Ratio was fair from a financial point of view to
holders of Supercuts Common Stock as well as the data and analysis
underlying that opinion. See "The Merger -- Opinion of Supercuts Financial
Advisor."
- TERMS OF THE MERGER AGREEMENT. The Supercuts Board of Directors
considered the financial and other terms of the Merger Agreement,
including (a) the Conversion Ratio, (b) that the Merger would generally be
tax-free to Supercuts shareholders to the extent they receive Regis stock
in the merger, and (c) that the Merger would be subject to approval by
Supercuts' stockholders.
The foregoing discussion of the information and factors considered by the
Supercuts Board of Directors is not intended to be exhaustive but is believed to
include all material factors considered by the Supercuts Board of Directors. In
reaching its decision to approve and recommend the Merger, the Supercuts Board
of Directors did not assign any relative or specific weights to the foregoing
factors and individual directors may have given differing weights to different
factors. The Supercuts Board of Directors is, however, unanimous in its
recommendation to Supercuts' stockholders that the Merger be approved.
THE BOARD OF DIRECTORS OF SUPERCUTS UNANIMOUSLY RECOMMENDS APPROVAL OF THE
MERGER BY THE SUPERCUTS SHAREHOLDERS.
OPINION OF REGIS' FINANCIAL ADVISOR
Regis retained Merrill Lynch, by letter dated May 6, 1996, as financial
advisor in connection with the Merger. On July 8, 1996, Merrill Lynch rendered
an oral opinion to Regis' Board of Directors, which opinion was subsequently
confirmed in writing, to the effect in each case that, as of such date, and
based upon the assumptions made, matters considered and limits of review set
forth in such opinion, the Conversion Ratio is fair to the holders of Regis
Common Stock (other than Supercuts and its affiliates) from a financial point of
view. Merrill Lynch updated its written opinion in the form of the Merrill Lynch
Opinion.
A COPY OF THE MERRILL LYNCH OPINION WHICH SETS FORTH THE ASSUMPTIONS MADE,
GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX B, TO THIS JOINT PROXY STATEMENT/PROSPECTUS.
REGIS' SHAREHOLDERS ARE URGED TO READ THE MERRILL LYNCH OPINION IN ITS ENTIRETY.
THE MERRILL LYNCH OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, TO THE HOLDERS OF REGIS COMMON STOCK OF THE CONVERSION RATIO AND
DOES NOT ADDRESS REGIS' UNDERLYING BUSINESS DECISION TO EFFECT THE MERGER OR
CONSTITUTE A RECOMMENDATION TO ANY REGIS STOCKHOLDER AS TO HOW SUCH SHAREHOLDER
SHOULD VOTE WITH RESPECT TO THE MERGER. THE SUMMARY OF THE MERRILL LYNCH OPINION
SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
SUCH OPINION ATTACHED HERETO AS APPENDIX B.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other things,
(i) reviewed Regis' Annual Reports, Forms 10-K, and related financial
information for the five fiscal years ended June 30,
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1995 and Regis' Forms 10-Q and the related unaudited financial information for
the quarterly periods ending September 30, 1995, December 31, 1995, and March
31, 1996; (ii) reviewed Supercuts' Annual Reports, Forms 10-K, and related
financial information for the five fiscal years ended December 31, 1995 and
Supercuts' Form 10-Q and the related unaudited financial information for the
quarterly period ending March 31, 1996; (iii) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash flow,
assets, and prospects of Regis and Supercuts, furnished to Merrill Lynch by
Regis and Supercuts, respectively; (iv) reviewed certain information, including
financial forecasts, relating to the combined business, earnings, cash flow,
assets, and prospects of the combined operations of Supercuts furnished to
Merrill Lynch by Regis; (v) conducted discussions with members of senior
management of Regis and Supercuts concerning their aforementioned financial
forecasts; (vi) conducted discussions with certain members of Regis' management
and its representatives concerning Regis' views as to the anticipated effects of
the Merger on Regis' business, assets, liabilities, operations; (vii) reviewed
the historical market prices and trading activity for Regis Common Stock and
Supercuts Common Stock; (viii) compared the results of operations of Regis and
Supercuts with those of certain companies which Merrill Lynch deemed to be
reasonably similar to Regis and Supercuts, respectively; (ix) compared the
proposed financial terms of the transaction contemplated by the Merger Agreement
with the financial terms of certain other mergers and acquisitions which Merrill
Lynch deemed to be relevant; (x) considered the pro forma effect of the Merger
on certain of Regis' balance sheet, income statement including earnings per
share and cash flow items; (xi) reviewed a draft of the Merger Agreement dated
July 14, 1996; and (xii) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Merrill Lynch deemed necessary or appropriate for the Merrill Lynch Opinion,
including Merrill Lynch's assessment of general economic, market, and monetary
conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch by Regis and Supercuts and Merrill Lynch did not independently
verify such information or any underlying assumptions. Merrill Lynch did not
undertake an independent appraisal or physical inspection of the assets or
liabilities (contingent or otherwise) of Regis or Supercuts. With respect to the
financial forecasts furnished by Regis and Supercuts, Merrill Lynch assumed,
with the consent of the Board of Directors of Regis, that such forecasts had
been reasonably prepared in accordance with accepted industry practices and
reflected the best currently available estimates and judgments of Regis' and
Supercuts' management as to the expected future financial performance of Regis,
Supercuts, or their combined operations, as the case may be, and that such
forecasts would be realized in the amounts and the time periods estimated by the
Regis and Supercuts management. The Merrill Lynch Opinion was necessarily based
upon market, economic, and other conditions as they existed and could be
evaluated, and the information made available to it, as of July 14, 1996. The
Merrill Lynch Opinion is directed to the Conversion Ratio only and does not
constitute a recommendation to any Regis stockholder as to how such stockholder
should vote with respect to the issuance of shares of Regis Common Stock in the
Merger.
The following is a summary of the financial and comparative analyses
performed by Merrill Lynch in connection with the Merrill Lynch Opinion which
were described by Merrill Lynch in connection with a presentation to Regis'
Board on July 8, 1996.
(i) TRANSACTION SUMMARY. Merrill Lynch reviewed with the Regis Board
the key financial terms of the proposed Merger. Each share of Supercuts
Common Stock will be converted to 0.4 of one share of Regis Common Stock
based upon a Regis stock price of $31.00 per share (approximately the 20 day
trailing average preceding July 14, 1996). This would imply an equity
purchase price to Regis' shareholders of $12.40 per share of Supercuts
Common Stock. Following the Merger, holders of shares of Supercuts Common
Stock will own in the aggregate approximately 19.65% of the pro forma fully
diluted common stock of Regis.
(ii) HISTORICAL STOCK PRICE. Merrill Lynch reviewed the performance of
the per share daily closing market price of Regis Common Stock over the
period from July 5, 1991 to July 2, 1996 and compared such daily closing
prices with the performance of the Standard & Poor's 500 Index.
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Merrill Lynch also reviewed the performance of the per share daily closing
market price of Supercuts Common Stock from November 1, 1991 to July 2, 1996
and compared such daily closing prices with the Standard & Poor's 500 Index.
(iii) COMPARABLE PUBLIC COMPANY ANALYSIS. Merrill Lynch compared certain
publicly available financial and operating data and projected financial
performance of selected service retail companies with similar financial and
operating data and projected financial performance of each of Regis based on
estimates provided by Regis' management and Supercuts based on estimates
provided by Supercuts' and Regis' management. Merrill Lynch compared
Supercuts to eight service retail companies deemed by Merrill Lynch to be
reasonably similar to Supercuts: American Studios Inc., Barbers Hairstyling
for Men, CPI Corp., Jenny Craig Inc., Mail Boxes Etc., National Vision
Associates, Ltd., New West Eyeworks and Regis (collectively, the "Comparable
Companies").
Merrill Lynch determined multiples for the Comparable Companies of market
capitalization (defined as the product of primary shares outstanding and
market price plus net debt) to latest twelve months sales, earnings before
interest, taxes, depreciation, and amortization ("EBITDA"), and earnings
before interest and taxes ("EBIT"), and multiples for the Comparable
Companies of market value (defined as the product of primary shares
outstanding and market price) to the latest financial quarter book value,
latest twelve months net income and 1996 and 1997 estimated net income
(based on estimates prepared by the Institutional Brokerage Earnings Service
("IBES")). IBES is a data service which monitors and publishes a compilation
of earnings estimates produced by selected research analysts on companies of
interest to investors. An analysis of the multiples for the Comparable
Companies, as adjusted to exclude certain multiples which were negative, not
available, or which Merrill Lynch determined were not meaningful, produced
the following results: (a) market capitalization to sales yielded a range of
0.43x to 1.28x; (b) market capitalization to EBITDA yielded a range of 4.2x
to 17.2x; (c) market capitalization to EBIT yielded a range of 10.2x to
18.6x; (d) market value to net income yielded a range of 14.4x to 31.7x; (e)
market value to book value yielded a range of 1.3x to 5.8x; (f) market value
to estimated calendar year 1996 net income yielded a range of 7.9x to 27.8x,
and (g) market value to estimated calendar year 1997 net income yielded a
range of 10.3x to 23.8x. Merrill Lynch then compared the results of such
analyses for the Comparable Companies to the corresponding latest twelve
months results for Supercuts. Applying the range of multiples for EBITDA,
Merrill Lynch calculated an implied value range of between $3.07 to $19.50
per share of Supercuts. Applying the range of multiples for EBIT, Merrill
Lynch calculated an implied value range of between $5.34 and $11.56 per
share of Supercuts. Applying the range of multiples for book value, Merrill
Lynch calculated an implied value range of between $4.71 and $20.35 per
share of Supercuts stock. Applying the range of multiples for latest twelve
months' net income, Merrill Lynch calculated an implied value range of
between $6.49 and $14.32 per share of Supercuts stock. Applying the range of
multiples for estimated 1996 net income, Merrill Lynch calculated an implied
value range of between $4.35 and $15.30 per share of Supercuts stock and for
estimated 1997 net income, Merrill Lynch calculated an implied value range
of between $8.66 and $19.96 per share of Supercuts stock.
Merrill Lynch considered the companies utilized in the above analysis to be
reasonably similar to Supercuts, because each participates in the service
retail industry, but none of these companies is identical to Supercuts. An
analysis of the results of the foregoing is not purely mathematical. It
involves complex considerations and judgments concerning differences in
historical and projected financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being
compared. Because of the effect of Supercuts' recent financial results and
the small number of companies deemed by Merrill Lynch to be the most
comparable to Supercuts, Merrill Lynch determined that its comparable public
company analysis was of limited utility in rendering the Merrill Lynch
Opinion.
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(iv) ANALYSIS OF SELECTED COMPARABLE ACQUISITION TRANSACTIONS. Merrill
Lynch reviewed certain publicly available information regarding selected
business combinations involving service retail and specialty retail
companies. None of these business combinations included companies with
recent financial performance sufficiently similar to Supercuts and Regis to
provide meaningful comparison.
(v) DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted
cash flow analysis of Supercuts, based upon estimates of projected financial
performance prepared by Regis, for fiscal years 1996, 1997, 1998, 1999 and
2000 under four scenarios -- Conservative Without Synergies, Conservative
With Synergies, Reasonable Without Synergies, and Reasonable With Synergies.
The Reasonable Case assumes higher growth and profitability than does the
Conservative Case. Utilizing these projections, Merrill Lynch calculated a
range of values for Supercuts common stock based upon the discounted net
present value of Supercuts' five-year stream of projected unlevered
after-tax free cash flow and its projected calendar year 2000 terminal value
based on a range of multiples of its projected calendar year 2000 EBITDA. In
performing this analysis, Merrill Lynch utilized discount rates reflecting a
weighted average cost of capital ranging from 12.0% to 14.0% and terminal
value multiples of calendar year 2000 EBITDA, ranging from 7.0x to 9.0x.
Based on this analysis, Merrill Lynch calculated a range of values per share
of Supercuts common stock for each of the four cases as follows: $7.50 to
$11.00 for the Conservative Case Without Synergies, $11.00 to $15.50 for the
Conservative Case With Synergies, $9.50 to $13.00 for the Reasonable Case
Without Synergies and $12.50 to $17.50 for the Reasonable Case With
Synergies.
(vi) PRO FORMA MERGER ANALYSIS. Merrill Lynch analyzed certain pro forma
effects resulting from the Merger including the effect on certain Regis'
balance sheet and income statement items including earnings per share
("EPS"), and on the projected capitalization for the years ending December
31, 1996 through 2000 for both the Conservative Case With and Without
Synergies and the Reasonable Case With and Without Synergies.
The analysis showed that the Merger under the Conservative Case With
Synergies would be dilutive to Regis' estimated 1996 and 1997 EPS, but
accretive to estimated 1998, 1999, and 2000 EPS. The analysis showed that
the Merger under the Conservative Case Without Synergies would be dilutive
to Regis' estimated 1996, 1997 and 1998 EPS, but accretive to estimated 1999
and 2000 EPS. The analysis showed that under the Reasonable Case With
Synergies, the Merger would be dilutive to Regis' estimated 1996 and 1997
EPS, but accretive to estimated 1998, 1999, and 2000 EPS. The analysis
showed that under the Reasonable Case Without Synergies, the Merger would be
dilutive to Regis' estimated 1996 and 1997 EPS, have no effect on estimated
1998 EPS, but would be accretive to estimated 1999 and 2000 EPS.
(vii) CONTRIBUTION ANALYSIS. Merrill Lynch determined the relative
contributions of the pre-Merger operations of each of Regis and Supercuts to
the combined company for the years ending June 30, 1996 through 2000 to
EBITDA and net income for the years ending June 30, 1996 through 2000 (based
upon Regis' projections for each of the four cases described above)
(Conservative and Reasonable Cases, each with and with synergies). Merrill
Lynch compared these relative contributions to the pro forma ownership of
the combined companies (19.65% for Supercuts shareholders and 80.35% for
continuing Regis shareholders). This analysis indicates that the relative
contributions to the combined operations in the years ending June 30, 1996
to June 30, 2000 by Supercuts would range from 17.4% to 23.5% of EBITDA of
the combined entity and nil to 28.0% of net income of the combined entity,
Conservative Case With Synergies; range from 16.2% to 18.8% of EBITDA of the
combined entity and nil to 21.1% of net income of the combined entity,
Conservative Case Without Synergies; range from 17.4% to 25.0% of EBITDA of
the combined entity and nil to 30.5% of net income, Reasonable Case With
Synergies; and range from 16.9% to 20.4% of EBITDA of the combined entity
and nil to 24.3% of net income, Reasonable Case Without Synergies.
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The foregoing summary does not purport to be a complete description of the
analyses performed by Merrill Lynch or of their presentation to Regis' Board of
Directors. The preparation of financial analyses and fairness opinions is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Merrill Lynch believes that its analyses (and the summary
set forth above) must be considered as a whole, and that selecting portions of
such analyses and of the factors considered by them, without considering all
such analyses and factors, could create an incomplete and misleading view of the
processes underlying the analyses conducted by Merrill Lynch and set forth in
the Merrill Lynch Opinion. Merrill Lynch did not make any attempt to assign
specific weights to particular analyses in preparing and setting forth the
Merrill Lynch Opinion. In performing its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of Regis or
Supercuts. Any estimates contained in Merrill Lynch's analysis is not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals or to reflect the prices at which such
companies may actually be sold. Because such estimates are inherently subject to
uncertainty, none of Merrill Lynch, Regis, Supercuts or any other person assumes
responsibility for their accuracy. Merrill Lynch did not express any opinion as
to the prices at which Regis Common Stock will trade following the announcement
or consummation of the Merger, which Merrill Lynch noted, might vary depending
upon, among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions, and other factors that generally
influence the price of securities.
As part of its investment banking business, Merrill Lynch is continuously
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions. The Board of Directors of Regis retained Merrill Lynch
to act as its financial advisor because Merrill Lynch is an internationally
recognized investment banking firm with substantial experience in transactions
similar to the Merger.
Merrill Lynch has not in the past provided financial advisory and financing
services to Regis or Supercuts. In addition, in the ordinary course of business,
Merrill Lynch may actively trade Regis Common Stock as well as Supercuts Common
Stock and other securities of Regis or Supercuts for Merrill Lynch's own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
For its financial advisory services in connection with the Merger, Regis has
paid Merrill Lynch $100,000 on May 6, 1996, and has agreed to pay $1,100,000
upon the consummation of the Merger. Regis has also agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses, including fees and expenses of
its legal counsel, and to indemnify Merrill Lynch and certain related persons
against certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
OPINION OF SUPERCUTS' FINANCIAL ADVISOR
In its role as financial advisor to Supercuts, DLJ was asked to render an
opinion to Supercuts as to the fairness, from a financial point of view, of the
consideration to be received by Supercuts' stockholders, pursuant to the Merger.
On July 14, 1996, DLJ issued to Supercuts its written opinion that, based upon
and subject to the provisions set forth in such opinion, the Conversion Ratio is
fair to the stockholders of Supercuts from a financial point of view. DLJ, as of
September 23, 1996, also delivered to the Board of Directors of Supercuts the
DLJ Opinion.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX C. SUPERCUTS'
STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION CAREFULLY IN ITS ENTIRETY FOR
ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ IN
CONNECTION WITH SUCH OPINION.
Supercuts selected DLJ as its financial adviser because DLJ is a nationally
recognized investment banking firm that has substantial experience in Supercuts'
industry and is familiar with Supercuts and its business. In addition, DLJ, as
part of its investment banking services, is regularly engaged in
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the valuation of businesses and securities in connection with mergers,
acquisitions, underwritings, sales and distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
The DLJ Opinion was prepared for the Board of Directors of Supercuts and is
directed only to the fairness of the Conversion Ratio from a financial point of
view. The DLJ Opinion does not constitute a recommendation to any Supercuts
stockholder as to how such stockholder should vote at Supercuts' Special Meeting
nor does it constitute an opinion as to the price at which Supercuts' Common
Stock or Regis' Common Stock will actually trade at any time. The Merger was
negotiated at arm's-length by Supercuts and Regis. No restrictions or
limitations were imposed by Supercuts upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering the DLJ
Opinion. DLJ was requested by Supercuts' Board of Directors not to, and it did
not, solicit the interest of any other party in acquiring Supercuts.
In arriving at its opinion, DLJ reviewed the Merger Agreement and the
exhibits thereto. DLJ also reviewed financial and other information that was
publicly available or furnished to it by or on behalf of Supercuts and Regis,
including information provided during discussions with their respective
managements, and (i) consolidated financial statements and other information of
Supercuts for the fiscal years 1990 through 1995 and (ii) consolidated financial
statements and other information of Regis for the fiscal years 1990 through
1995. Included in the information provided were (a) certain financial
projections for Supercuts for the fiscal years 1996 to 2001 prepared by the
management of Supercuts and (b) certain financial projections for Regis for the
fiscal years 1996 and 1997 that were supplied by Regis and for fiscal years 1998
through 2001 that were developed by Supercuts' management. In addition, DLJ
compared certain financial and securities data of Supercuts and Regis with
selected companies whose securities are traded in public markets; reviewed the
historical stock prices and trading volumes of Supercuts' Common Stock and
Regis' Common Stock; reviewed prices and premiums paid in certain other selected
business combinations; and performed a discounted cash flow analysis of
Supercuts' and Regis' continuing operations. DLJ also conducted such other
financial studies, analyses and investigations as DLJ deemed appropriate for
purposes of rendering its opinion. DLJ also reviewed with the management of
Supercuts and Regis the assumptions on which its analyses were based and other
factors, including historical and projected financial results of such companies.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, and that was provided to it by Supercuts
and Regis or their respective representatives, or that was otherwise reviewed by
it. With respect to the financial projections supplied to DLJ, it assumed that
they had been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Supercuts and Regis as to
the future operating and financial performance of Supercuts and Regis,
respectively. DLJ has not assumed any responsibility for making any independent
evaluation of Supercuts' or Regis' assets or liabilities or for making an
independent verification of any of the information reviewed by DLJ.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. It should be understood that although
subsequent developments may have affected its opinion, DLJ is not obligated to
update, review or reaffirm the DLJ Opinion, except as contemplated in the
engagement letter, dated February 20, 1996, between Supercuts and DLJ.
The following is a summary of certain factors considered and financial
analyses performed that were included in a presentation to the Supercuts Board
of Directors.
ANALYSIS OF SUPERCUTS
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. DLJ compared selected
historical share prices, earnings, and operating and financial ratios for
Supercuts to the corresponding data and ratios
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of certain other companies whose securities are publicly traded, which companies
were selected for comparison because as a group they possess business, operating
and financial characteristics that are generally representative of companies in
the industry in which Supercuts operates. The selected companies were: American
Studios, Inc.; The Barbers Hairstyling for Men & Women, Inc.; Cole National
Corporation; CPI Corporation; General Nutrition Companies, Inc.; Jenny Craig,
Inc.; Mail Boxes Etc.; National Vision Associates, Ltd.; New West Eyeworks,
Inc.; Regis Corporation; Speedy Muffler King Inc.; and Sunglass Hut
International, Inc. (the "Public Comparables"). Such data and ratios included,
among others, Enterprise Value (defined as the product of the common stock price
and total shares outstanding plus Net Debt (debt and preferred stock, less cash
and cash equivalents)) as a multiple of gross revenue and EBITDA (earnings
before interest, taxes, depreciation and amortization) for the latest reported
twelve months ("LTM"), and the growth rates of revenues, net income and earnings
per share ("EPS") for the three most recent fiscal years and LTM operating
margins. Additional ratios examined included the ratios of recent stock prices
("Stock Prices") to LTM EPS and projected calendar year 1996 and 1997 EPS
(determined on the basis of estimates provided by First Call Corporation and
Institutional Brokers Estimating Service). This analysis indicated that the
average multiples (excluding high and low values and Sunglass Hut International)
of Enterprise Value to LTM revenues and LTM EBITDA were 0.9x and 7.1x,
respectively. The average multiples for the Public Comparables (excluding high
and low values and Sunglass Hut International) of Stock Prices to LTM EPS and
projected calendar year 1996 and 1997 EPS were 20.0x, 16.8x and 13.4x,
respectively. DLJ derived the valuation range for Supercuts by concentrating on
projected EPS multiples, which DLJ determined to be the most relevant basis for
valuing publicly traded retail companies, and by comparing Supercuts' businesses
and performance to the Public Comparables (with particular emphasis on recent
historical results of operations and margins, age and viability of underlying
retail concepts and prospects for future growth). DLJ used a range of projected
calendar year 1997 EPS multiples of 10.0x to 13.4x. DLJ then calculated the
imputed valuation ranges for Supercuts by applying these multiples to Supercuts'
projected calendar year 1997 net income, which yielded a valuation range for
Supercuts of $6.25 to $8.40 per share.
CONTROL PREMIUM ANALYSIS. DLJ also prepared a comparison of the value per
share of Supercuts' Common Stock to be received in the Merger of $13.00 (based
on a Regis last bid stock price of $32.50 per share as of July 12, 1996) to the
implied price per share of Supercuts' Common Stock based on a per share price of
Supercuts' Common Stock of $8.75 (last bid price as of July 12, 1996) and the
LTM high and low prices per share of $10.00 and $4.13, and assumed control
premiums of 30%, 40% and 50%. By multiplying the price per share times the
applicable control premium, DLJ arrived at a range of implied prices of $11.38
to $13.13 based on a price per share of $8.75, a range of implied prices of
$13.00 to $15.00 based on the LTM high price per share of $10.00, and a range of
implied prices of $5.36 to $6.19 based on the LTM low price per share of $4.13.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for
selected transactions completed since July 1990 involving the combination of
retail companies. The comparative transactions reviewed (the "Comparative
Transactions") included 19 transactions that were proposed and completed during
the period. The Comparative Transactions selected are not intended to represent
a complete list of retail company transactions that have occurred since July
1990; rather, they include only transactions involving combinations of companies
with operating size or financial performance characteristics believed to be
comparable to Supercuts' characteristics. DLJ reviewed the consideration paid in
such transactions in terms of the Enterprise Value as a multiple of LTM revenue,
EBITDA and EBIT (earnings before interest and taxes) and Equity Value (defined
as the product of the price paid per share of common stock and the total number
of shares outstanding) to net income. For the Comparative Transactions, the
average ratios of Enterprise Value to LTM revenues, LTM EBITDA and LTM EBIT were
0.7x, 8.2x and 12.1x, respectively, while the average ratio of Equity Value to
LTM net income was 21.1x. DLJ determined that multiples of LTM EBITDA, LTM EBIT
and LTM net income provided the most relevant measures for evaluating the
Comparative Transactions. DLJ used a range of LTM EBITDA multiples of 6.1x to
8.2x, LTM EBIT multiples of 9.0x to 12.1x, and LTM net income multiples of 12.5x
to 21.1x. DLJ then calculated the imputed valuation range for Supercuts by
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applying its LTM EBITDA, LTM EBIT and LTM net income to the relevant multiple
ranges and then taking the average of the three approaches to determine the high
and low end of the range. This analysis yielded a range of Equity Values for
Supercuts of $66.7 to $105.1 million, which resulted in a valuation range of
$5.88 to $9.26 per share.
DISCOUNTED CASH FLOW ANALYSIS. DLJ also performed a discounted cash flow
analysis of Supercuts using a weighted average cost of capital approach and an
internal rate of return approach. In conducting this analysis, DLJ relied on
certain assumptions, financial forecasts and other information provided by
Supercuts' management. Using the information set forth in Supercuts' forecast,
DLJ calculated the estimated "Free Cash Flow" based on projected unleveraged net
income adjusted for: (i) certain projected non-cash items (E.G., depreciation
and amortization and fees and royalties received with respect to the managed
store program); (ii) projected changes in cash working capital; and (iii)
projected capital expenditures and costs associated with funding the managed
store program.
Using the weighted average cost of capital approach, DLJ analyzed Supercuts'
forecast and discounted the stream of Free Cash Flows from fiscal year 1997 to
fiscal year 2001 (after adjusting Supercuts' fiscal year to a June 30 year end)
provided in such forecast back to June 30, 1996 using discount rates ranging
from 12% to 16%. To estimate the residual value of Supercuts at the end of the
forecast period, DLJ applied terminal multiples of 4.0x to 8.0x to the projected
fiscal year 2001 EBITDA and discounted such value back to June 30, 1996 using
discount rates ranging from 12% to 16%. DLJ then summed the present value of the
Free Cash Flows and the present value of the residual value to derive a range of
implied Enterprise Values for Supercuts of $116.0 million to $216.5 million. The
range of implied Enterprise Values of Supercuts was then adjusted for debt (net
of cash and cash equivalents of $1.5 million) by deducting $29.8 million from
the implied Enterprise Values to yield an implied Equity Value of Supercuts of
$86.2 million to $186.7 million, which equates to a valuation range of $10.61 to
$12.85 per share (assuming a weighted average cost of capital ranging from 12%
to 16% and a midpoint exit multiple of 6.0x).
Using the internal rate of return approach, DLJ assumed a buyer purchased
Supercuts for $8.00 to $12.00 per share, financing the transaction with $87.8
million of debt and the remainder in the form of new equity and the assumption
of certain liabilities. To estimate the terminal value of Supercuts at the end
of fiscal year 2001, DLJ applied exit multiples of 5.0x to 7.0x to Supercuts'
projected fiscal year 2001 EBITDA. This analysis resulted in an implied annual
internal rate of return to the buyer in a range from 13.9% to 55.4%. DLJ did not
attribute to the results of this methodology a meaningful degree of importance
because consummating a $87.8 million financing on favorable terms would be
difficult in light of the current financing environment for leveraged purchases
of retail companies.
COMBINED COMPANY ANALYSIS
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. DLJ compared selected
historical share prices, earnings, and operating and financial ratios for Regis
after giving effect to the acquisition of Supercuts on a PRO FORMA basis
("Newco") to the corresponding data and ratios of the Public Comparables.
Newco's PRO FORMA results of operations and projections were adjusted to reflect
the consolidation of Supercuts' managed store program and the realization of
certain cost synergies. Such data and ratios included, among others, Enterprise
Value as a multiple of LTM gross revenue and EBITDA, and the growth rates of
revenues, net income and EPS for the three most recent fiscal years and LTM
operating margins. Additional ratios examined included the ratios of Stock
Prices to LTM EPS and projected calendar year 1996 and 1997 EPS (determined on
the basis of estimates provided by First Call Corporation and Institutional
Brokers Estimating Service). This analysis indicated that the average multiples
(excluding high and low values) of Enterprise Value to LTM revenues and LTM
EBITDA were 1.0x and 7.1x, respectively. The average multiples for the Public
Comparables of Stock Prices to LTM EPS and projected calendar year 1996 and 1997
EPS were 21.8x, 17.7x and 14.0x, respectively. DLJ derived the valuation range
for Newco by concentrating on projected EPS multiples, which DLJ determined to
be the most relevant basis for valuing publicly traded retail companies, and
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by comparing Newco's businesses and performance to the Public Comparables (with
particular emphasis on recent historical results of operations and margins, age
and viability of underlying retail concepts and prospects for future growth).
DLJ determined that the relevant range of projected calendar year 1997 EPS
multiples was 14.0x to 23.0x. DLJ then calculated the imputed valuation ranges
for Newco by applying these multiples to Newco's projected calendar year 1997
net income, which yielded a valuation range for Newco of $21.09 to $34.60 per
share.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for the
Comparative Transactions involving combinations of companies with operating size
or financial performance characteristics believed to be comparable to Newco's
characteristics. DLJ reviewed the consideration paid in such transactions in
terms of the Enterprise Value as a multiple of LTM revenue, EBITDA and EBIT. For
the Comparative Transactions, the average ratios of Enterprise Value to LTM
revenues, LTM EBITDA and LTM EBIT were 0.7x, 8.2x and 12.1x, respectively, while
the average ratio of Equity Value to LTM net income was 21.1x. DLJ determined
that multiples of LTM EBITDA, LTM EBIT and LTM net income provided the most
relevant measures for evaluating the Comparative Transactions. DLJ used a range
of LTM EBITDA multiples of 8.2x to 11.2x, LTM EBIT multiples of 12.1x to 23.7x,
and LTM net income multiples of 21.1x to 45.2x. DLJ then calculated the imputed
valuation range for Newco by applying its LTM EBITDA, LTM EBIT and LTM net
income to the relevant multiple ranges and then taking the average of the three
approaches to determine the high and low end of the range. This analysis yielded
a range of Equity Values for Newco of $615.6 million to $1,169.4 million, which
resulted in a valuation range for Newco of $26.14 to $49.65 per share.
DISCOUNTED CASH FLOW ANALYSIS. DLJ also performed a discounted cash flow
analysis of Newco using a weighted average cost of capital approach and an
internal rate of return approach. In conducting this analysis, DLJ relied on
certain assumptions, financial forecasts and other information provided by
Regis' and Supercuts' management. Using the information set forth in the
forecast information provided to DLJ, DLJ calculated the estimated "Free Cash
Flow" based on projected unleveraged net income adjusted for: (i) certain
projected non-cash items (E.G., depreciation and amortization); (ii) projected
changes in cash working capital; and (iii) projected capital expenditures.
Using the weighted average cost of capital approach, DLJ analyzed Supercuts'
Newco forecast and discounted the stream of Free Cash Flows from fiscal year
1997 to fiscal year 2001 provided in such forecast back to June 30, 1996 using
discount rates ranging from 11% to 15%. To estimate the residual value of Newco
at the end of the forecast period, DLJ applied terminal multiples of 8.0x to
12.0x to the projected fiscal year 2001 EBITDA and discounted such values back
to June 30, 1996 using discount rates ranging from 11% to 15%. DLJ then summed
the present value of the Free Cash Flows and the present value of the residual
values to derive a range of implied Enterprise Values for Newco of $680.5
million to $1,107.0 million. The range of implied Enterprise Values of Newco was
then adjusted for debt (net of cash and cash equivalents of $3.1 million) by
deducting $90.9 million from implied Enterprise Value to yield an implied Equity
Value of Newco of $589.6 million to $1,016.1 million, which equates to a
valuation range for Newco of $30.51 to $36.61 per share (assuming a weighted
average cost of capital ranging from 11% to 15% and a midpoint exit multiple of
10.0x).
Using the internal rate of return approach, DLJ assumed a buyer purchased
Newco for $22.00 to $30.00 per share, financing the transaction with $423.8
million of debt and the remainder in the form of new equity and the assumption
of certain liabilities. To estimate the terminal value of Newco at the end of
fiscal year 2001, DLJ applied exit multiples of 9.0x to 11.0x to Newco's
projected fiscal year 2001 EBITDA. This analysis resulted in an implied internal
rate of return to the buyer in a range from 18.5% to 43.4%. DLJ did not
attribute to the results of this methodology a meaningful degree of importance
because consummating a $423.8 million financing on favorable terms would be
difficult in light of the current financing environment for leveraged purchases
of retail companies.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to
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the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Accordingly, notwithstanding the separate
factors summarized above, DLJ believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all such analyses and factors, could create an
inadequate view of the evaluation process underlying its opinion. In performing
the analyses, DLJ made numerous assumptions with respect to industry
performance, business and economic conditions and other markets. The analyses
performed by DLJ are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses.
Pursuant to the terms of an engagement letter dated February 20, 1996,
Supercuts has agreed to pay DLJ a retainer of up to $400,000, a fee of $300,000
upon the delivery of the DLJ Opinion and an additional fee to be paid upon
consummation of the Merger equal to 1.25% of the total consideration to be paid
by an acquiror in connection with the acquisition of Supercuts (including the
assumption or refinancing of any debt or preferred stock), less the amounts paid
with respect to the retainer and fairness opinion fees. Supercuts has also
agreed to reimburse DLJ promptly for all out-of-pocket expenses (including the
reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in
connection with its engagement, and to indemnify DLJ and certain related persons
against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws.
In the ordinary course of business, DLJ actively trades public securities,
which may include both Supercuts' and Regis' securities, for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
TERMS OF THE MERGER
At the Effective Time, Merger Sub will be merged with and into Supercuts,
and each share of Supercuts Common Stock issued and outstanding immediately
prior to the Effective Time will, on and after the Effective Time, be converted
into 0.4 of one share of Regis Common Stock. Upon consummation of the Merger,
Supercuts will become a direct, wholly-owned subsidiary of Regis. No fractional
shares will be issued in the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will be effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware. Such filing will occur
only after all applicable waiting periods (and extensions thereof) under the HSR
Act shall have expired or been terminated, the approval of the issuance of the
Merger shares by the requisite vote of Regis' shareholders, the approval of the
Merger Agreement by the requisite vote of Supercuts' stockholders and the
satisfaction or waiver of all other conditions to the Merger. See "The Merger --
Conditions to Obligation to Close."
REGULATORY APPROVAL
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions may not be consummated
unless notice has been given and certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The Merger is subject to these requirements.
Regis and Supercuts each filed with the Antitrust Division and the FTC a
Notification and Report Form with respect to the Merger on August 15, 1996.
Under the HSR Act, the Merger may not be consummated until the expiration of a
waiting period of at least 30 days following the receipt of each filing, unless
the waiting period is earlier terminated by the FTC and the Antitrust Division.
Counsel for Regis and counsel for Supercuts have been advised that early
termination of the waiting period has been granted.
The FTC and the Antitrust Division frequently scrutinize the legality of
transactions such as the Merger under the antitrust laws. At any time before or
after the Effective Time, the FTC or the Antitrust Division could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the Merger or seeking the divestiture of
Supercuts
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by Regis, in whole or in part, or the divestiture of substantial assets of
Supercuts, Regis or their respective subsidiaries. State Attorneys General and
private parties may also bring legal actions under the federal or state
antitrust laws under certain circumstances. Based upon an examination of
information available to Regis and Supercuts relating to the businesses in which
Regis, Supercuts and their respective subsidiaries are engaged, Regis and
Supercuts believe that the consummation of the Merger will not violate the
antitrust laws. Nevertheless, there can be no assurance that a challenge to the
proposed Merger on antitrust grounds will not be made or, if such a challenge is
made, that Regis and Supercuts will prevail.
Neither Regis nor Supercuts is aware of any other material governmental
approvals or actions that may be required for consummation of the Merger except
as described above. Should any such approval or action be required, it is
presently contemplated that such approval or action would be sought. There can
be no assurance, however, that any such approval or action, if needed, could be
obtained and would not be conditioned in a manner that would cause the parties
to abandon the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of Supercuts
with respect to the Merger Agreement, shareholders should be aware that certain
members of the management and the Board of Directors of Supercuts have certain
interests in the Merger that are in addition to the interests of shareholders in
Supercuts generally.
REPRESENTATION ON REGIS' BOARD OF DIRECTORS. The Merger Agreement requires
Regis to elect two members of the current Board of Directors of Supercuts,
Thomas L. Gregory, currently Chairman of the Board of Directors of Supercuts,
and Steve Price, currently Chief Executive Officer of Supercuts, as directors of
Regis as soon as practicable after the Effective Time and to nominate them for
re-election at the three annual meetings of shareholders of Regis subsequent to
the Effective Time and to use its best efforts to re-elect them as directors at
such meetings. In addition, Regis has agreed that, following consummation of the
Merger and their election as directors of Regis (i) Mr. Gregory will be
appointed to the Audit Committee of the Regis Board of Directors, and (ii)
Messrs. Gregory and Price will be the majority of a new committee of the Regis
Board of Directors that will control the current litigation of Supercuts being
assumed by Regis (and related litigation that subsequently ensues, if any) in
the Merger. See "The Merger -- Management of Supercuts after Merger."
ADVISORY AGREEMENT BETWEEN SUPERCUTS AND CERTAIN DIRECTORS. Regis and each
of Edward E. Faber, Paul W. Geraldson, Daniel J. Good, and Agnieszka Winkler
will, promptly after the Effective Time, execute Advisory Agreements providing
that such current Directors of Supercuts shall receive from Regis restricted
stock in Regis (equal to the number of shares of Supercuts Common Stock subject
to the Directors' canceled Supercuts restricted stock agreement multiplied by
the Conversion Ratio) in exchange for advisory services as members of a newly
established Advisory Committee that will advise Regis and the President of the
Surviving Corporation with respect to the operation of the Surviving Corporation
for a period of two years from the Effective Time. The members of the Advisory
Committee will meet (either in person or by telephone) quarterly to review the
status of the business of the Surviving Corporation and Regis and the litigation
in which Supercuts is currently engaged and to advise the President of the
Surviving Corporation in respect of the business of the Surviving Corporation
and the committee of the Board of Directors of Regis that is controlling
Surviving Corporation litigation in respect of such litigation.
EMPLOYMENT AGREEMENT BETWEEN SUPERCUTS AND STEVE PRICE. Steve Price will
receive compensation at and after a change in control of Supercuts pursuant to
an employment agreement with Supercuts. Mr. Price's employment agreement is
dated January 29, 1996 and terminates four years from that date. However,
pursuant to the agreement, upon a change in control, Mr. Price is free to
terminate his employment under the employment agreement, and still receive his
salary under the employment agreement for the remainder of the four year term.
The employment agreement provides for a base salary of $350,000 per year subject
to periodic discretionary upward adjustments by the
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Supercuts Board of Directors. Thus, Mr. Price could terminate his employment at
the Effective Time and continue to be paid at an annual rate of $350,000 per
year through January 29, 2000. Pursuant to the employment agreement, Mr. Price
also received options to purchase 500,000 shares of Supercuts stock at an
exercise price of $5.875. Options with respect to 300,000 shares vested on
January 29, 1996. Options with respect to 100,000 shares shall become vested on
January 29, 1997 and options with respect to 100,000 shares shall become vested
on January 29, 1998, except upon a change of control of Supercuts any options
which have not vested shall immediately vest and be exercisable. Thus, upon the
Effective Time, options with respect to 200,000 shares will vest and become
immediately exercisable by Mr. Price.
CONSULTING AGREEMENT BETWEEN SUPERCUTS AND THOMAS L. GREGORY. On January 4,
1996, Supercuts entered into a consulting agreement with Thomas Gregory,
pursuant to which he agreed to act as Chairman of the Board of Directors of
Supercuts and interim President and Chief Executive Officer and was paid a rate
of $25,000 a month plus expenses. Beginning in June 1996, the Board of Directors
of Supercuts began to formulate a proposal to extend Mr. Gregory's involvement
in the management of the Company. Through June and July, Supercuts engaged in
discussions in this connection. Mr. Gregory subsequently entered a Consulting
Agreement, dated as of July 13, 1996, with Supercuts (the "Gregory Consulting
Agreement") subject to which Mr. Gregory will receive certain benefits upon a
change in control of Supercuts. Mr. Gregory will receive $400,000 at the time of
the change of control and will provide consulting services to Supercuts'
successor for a period of forty-eight months from the date of control. Mr.
Gregory will be paid $8,333.33 per month for his consulting services and will
also receive health benefits and reimbursement for tax preparation expenses
during the duration of the consulting period.
INDEMNIFICATION; INSURANCE. In the Merger Agreement, Regis has agreed that,
from and after the Effective Time, it will indemnify and hold harmless the
current and future directors, officers, agents, and other representatives of
Supercuts who have acted in such capacity prior to or after the date of the
Merger Agreement against any claim or similar action, which is based on or
relates to the Merger Agreement, this Joint Proxy Statement, or any transactions
relating to the Merger, excluding any successful claim based on violation of
Section 16(b) of the Exchange Act or Section 10(b) of the Exchange Act, or Rule
10b-5 thereunder.
Regis has also agreed to indemnify the officers and directors of Supercuts
in connection with the enforcement of the indemnification obligations of Regis
and to assume, from and after the Effective Time, any and all obligations of
Supercuts to indemnify the current officers and directors of Supercuts, whether
pursuant to applicable law, Supercuts' Certificate of Incorporation or Bylaws,
or by agreement between Supercuts and the officers and directors of Supercuts.
SUPERCUTS OPTIONS. Upon consummation of the Merger, Regis will assume the
obligation to issue Regis Common Stock upon exercise of the Supercuts Options.
Accordingly, effective at the Effective Time, Supercuts Shares shall no longer
be deliverable upon exercise thereof and in lieu of Supercuts Shares, such stock
options shall be exercisable for a number of shares of Regis Common Stock equal
to the number of Supercuts 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 Supercuts Share divided by
the Conversion Ratio.
As of the date hereof, each of the Supercuts executive officers and
directors currently hold Supercuts options which will become Regis options. In
the aggregate, the executive officers and directors of Supercuts hold options to
buy approximately 783,000 shares of Supercuts stock.
MANAGEMENT OF SUPERCUTS AFTER THE MERGER
Regis intends to operate the Supercuts business as a separate subsidiary
after the Merger. Regis and Steve Price have reached an agreement in principle
pursuant to which Mr. Price, the present Chief Executive Officer of Supercuts,
will be responsible for the operations of the Supercuts subsidiary, under the
direction and control of Regis' Chief Executive Officer and the Supercuts and
Regis Boards of Directors. Each current Supercuts' director (excluding Messrs.
Gregory and Price) will
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become a member of the Supercuts Advisory Committee and will advise Supercuts'
management regarding the operations of Supercuts. The Advisory Committee will
continue for at least two years after the date of the Merger. Each of the
directors on the Advisory Committee will receive restricted shares of Regis
Common Stock equal to the number of Supercuts Restricted Shares now held by such
directors multiplied by the Conversion Ratio.
It is also anticipated that, after the Merger, Thomas Gregory and Steve
Price, who are currently directors of Supercuts, will be elected to the Regis
Board of Directors, and Mr. Gregory will be appointed to the Regis Board of
Directors Audit Committee and that Messrs. Gregory and Price will be the
majority of a new committee of Regis' Board of Directors that will control the
current Supercuts litigation.
VOTING AGREEMENT
Myron Kunin, Chairman of the Board of Directors of Regis and the holder of
the majority voting power of Curtis Squire, the holder of 33.3% of the
outstanding shares of Regis Common Stock, has agreed that he will cause all of
the Regis shares owned by Curtis Squire to be voted in favor of the issuance of
shares of Regis Common Stock in connection with the Merger.
ACCOUNTING TREATMENT
Regis and Supercuts intend that the Merger qualify as a pooling of interests
for accounting and financial reporting purposes. The obligation of each of Regis
and Supercuts to consummate the Merger is conditioned upon Regis not having
received a final objection to the qualification of the Merger for pooling of
interests treatment from the Securities and Exchange Commission (the
"Commission"). For information concerning certain restrictions to be imposed on
the transferability of the Regis Common Stock received by affiliates of
Supercuts in the Merger in order, among other things, to assure the availability
of pooling of interests accounting treatment, see "The Merger -- Resales of
Regis Common Stock Issued In The Merger; Affiliate Agreements."
Under the pooling of interests method of accounting, the historical basis of
the assets and liabilities of Supercuts and Regis will be combined when the
Merger becomes effective and carried forward at their previously recorded
amounts, the shareholders' equity accounts of Supercuts and Regis will be
combined on Regis' consolidated balance sheet, and no goodwill or other
intangible assets will be created. Pursuant to the pooling of interests method
of accounting in accordance with Accounting Principles Board Opinion No. 16,
conforming accounting adjustments will be recorded to adjust the historical
combined financial statements to the same basis of accounting alternatives that
would have otherwise been appropriate for the separate combined Company,
consistent with the intent to present the financial statements of the combined
entities as though they have always been combined. These adjustments relate to
the consolidation of the investor/franchisee stores managed by Supercuts;
amortization of goodwill associated with acquired stores over 15 years, which
was previously amortized by Supercuts over 40 years; and to expense as incurred
certain store leasehold, software and systems development costs, which were
previously capitalized and amortized by Supercuts over the estimated useful
lives. Financial statements of Regis issued after consummation of the Merger
will be restated retroactively to reflect the consolidated operations of
Supercuts and Regis as if the Merger had been in effect for the periods
presented therein.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material Federal income tax
consequences of the Merger. The discussion does not address all aspects of
Federal income taxation that may apply to shareholders subject to special rules,
including foreign persons, insurance companies, tax-exempt entities, retirement
plans and persons who acquired their Supercuts Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation. In addition,
the following discussion does not address either the effect of applicable state,
local or foreign tax laws or the effect of any Federal tax laws other than those
pertaining to Federal income tax.
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Supercuts expects to receive an opinion from Willkie Farr & Gallagher to the
effect that, assuming that the Merger occurs in accordance with the Merger
Agreement, the Merger will constitute a "reorganization" within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"). Such opinion will be based on the Code, regulations and
rulings then in effect, current administrative rulings and practice and judicial
precedent, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences discussed herein. The
opinion will also be based on certain assumptions regarding the factual
circumstances at the Effective Time, including certain representations made by
Regis, Supercuts and certain Supercuts shareholders. The inaccuracy of any of
these factual assumptions may affect the tax consequences of the Merger. The
discussion below applies to Supercuts shareholders who hold their shares of
Supercuts Common Stock as a "capital asset" within the meaning of Section 1221
of the Code.
Assuming that the Merger qualifies as a "reorganization":
1. Neither Regis, Merger Sub nor Supercuts will recognize any gain or
loss in the Merger.
2. A holder of Supercuts Common Stock who exchanges shares of Supercuts
Common Stock for shares of Regis Common Stock pursuant to the Merger will
not recognize any gain or loss upon such exchange, except that (as noted in
paragraph 5 below) gain or loss may be recognized with respect to cash
received in lieu of a fractional share interest.
3. The aggregate adjusted tax basis of the shares of Regis Common Stock
received in such exchange (including a fractional share interest deemed
received, as explained in paragraph 5 below) will be equal to the aggregate
adjusted tax basis of the shares of Supercuts Common Stock surrendered
therefor.
4. The holding period of the shares of Regis Common Stock will include
the holding period of the shares of Supercuts Common Stock exchanged
therefor.
5. A holder of shares of Supercuts Common Stock who receives cash in
the Merger in lieu of a fractional share of Regis Common Stock will be
treated as having received such fractional share in such exchange and then
having received cash in redemption of such fractional share interest by
Regis. The receipt of such cash should cause the recipient to recognize
capital gain or loss equal to the difference between the amount of cash
received and the portion of such holder's adjusted tax basis in the shares
of Supercuts Common Stock allocable to the fractional share interest.
The Merger Agreement provides that Supercuts is not obligated to consummate
the Merger unless it shall have received the opinion from Willkie Farr &
Gallagher, counsel to Supercuts, substantially to the effect that under
applicable law, for Federal income tax purposes, the Merger will constitute a
"reorganization" under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
THE FOREGOING DISCUSSION OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION PURPOSES ONLY. THE OPINION OF WILLKIE FARR & GALLAGHER IS
NOT BINDING ON THE INTERNAL REVENUE SERVICE. BECAUSE OF THE COMPLEXITY OF THE
TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES OF ANY PARTICULAR SHAREHOLDER MAY BE
AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH SUPERCUTS SHAREHOLDER IS URGED TO
CONSULT HIS OWN TAX ADVISER WITH RESPECT TO HIS OWN PARTICULAR CIRCUMSTANCES AND
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX
LAWS AND PROPOSED CHANGES IN APPLICABLE TAX LAWS.
NASDAQ NATIONAL MARKET LISTING
Regis will file an application to list the shares of Regis to be issued in
the Merger on the Nasdaq National Market. A condition to the consummation of the
Merger is that such Regis Common Stock be authorized for listing, upon notice of
issuance, on the Nasdaq National Market.
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EXCHANGE PROCEDURES
As soon as practicable after the Effective Time, Norwest Bank Minnesota,
N.A., the financial institution appointed to effect the exchange (the "Exchange
Agent"), will mail to each holder of record of outstanding shares of Supercuts
Common Stock a letter of transmittal which is to be used by each shareholder to
return to the Exchange Agent the stock certificates representing the Supercuts
Common Stock owned by him (the "Old Certificates"), which certificates should be
duly endorsed in blank by such Supercuts shareholder. As soon as practicable
after receiving such Old Certificates from a Supercuts shareholder together with
the duly executed letter of transmittal and any other items specified by the
letter of transmittal, the Exchange Agent will deliver to such shareholder new
certificates ("New Certificates") representing the appropriate number of shares
of Regis Common Stock, together with checks for payment of cash in lieu of
fractional shares. No dividends or other distributions that are declared on
Regis Common Stock will be paid to persons otherwise entitled to receive the
same until the Old Certificates have been surrendered in exchange for New
Certificates, but upon such surrender, such dividends or other distributions,
from and after the Effective Time, will be paid to such persons in accordance
with the terms of Regis Common Stock. No interest will be paid to the Supercuts
shareholders on the cash or the value of the Regis Common Stock into which their
shares of Supercuts Common Stock will be converted.
If the Regis Common Stock and/or the cash, or any part thereof, are to be
delivered to a person other than the record holder of the Old Certificates of
Supercuts Common Stock surrendered in exchange therefor, (i) the certificate so
surrendered must be properly endorsed or accompanied by appropriate stock powers
and otherwise be in proper form of transfer, and (ii) the person requesting the
transfer must pay to the Exchange Agent any transfer or other taxes payable by
reason of the transfer or must establish to the satisfaction of Regis that such
taxes have been paid or are not required to be paid.
DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to the Minnesota Business Corporations Act (the "MBCA"), holders of
shares of Regis Common Stock will have no dissenters' rights of appraisal in
connection with the Merger. Under the MBCA, a shareholder may, under certain
circumstances, dissent and exercise appraisal rights if a proposed merger is to
be submitted for approval by such shareholder. The approval by holders of Regis
Common Stock of the issuance of the shares of Regis Common Stock pursuant to the
Merger Agreement is required by the rules of NASD because Regis Common Stock is
traded on the Nasdaq National Market and the number of shares of Regis Common
Stock to be issued in the Merger will exceed 20% of the outstanding Regis Common
Stock. Approval of the Merger by Regis shareholders is not required under NASD
rules or Minnesota law and Regis shareholders are not being asked to approve the
Merger.
Pursuant to the Delaware General Corporation Law (the "DGCL"), holders of
Supercuts Common Stock will have no dissenters' rights of appraisal in
connection with the Merger. Under the DGCL, appraisal rights are available to
dissenting shareholders in connection with certain mergers or consolidations.
However, unless the certificate of incorporation otherwise provides, the DGCL
does not provide for appraisal rights (i) if the shares of the corporation are
listed on a national securities exchange or designated as a national market
systems security on an interdealer quotations system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 shareholders
(as long as the shareholders receive in the merger shares of the surviving
corporation or of any other corporation the shares of which are listed on a
national securities exchange or designated as a national market systems security
on an interdealer quotations system by the NASD or held of record by more than
2,000 shareholders) or (ii) if the corporation is the surviving corporation and
no vote of its shareholders is required for the merger. The Supercuts Amended
Certificate of Incorporation (the "Supercuts Certificate") does not provide for
any appraisal rights. Accordingly, the Supercuts shareholders will not be
entitled to dissenter's appraisal rights under DGCL or any other statute in
connection with the Merger.
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RESALES OF REGIS COMMON STOCK ISSUED IN THE MERGER; AFFILIATE AGREEMENTS
Regis stock to be issued to shareholders of Supercuts in connection with the
Merger has been registered under the Securities Act of 1933, as amended (the
"Securities Act"). Regis Common Stock received by shareholders of Supercuts upon
consummation of the Merger will be freely transferable under the Securities Act,
except for shares issued to any person who may be deemed to be an Affiliate of
Supercuts or Regis within the meaning of Rule 145 under the Securities Act.
"Affiliate" is generally defined as a person who controls, is controlled by, or
is under common control with Supercuts or Regis at the time of the Meetings
(generally, directors, certain executive officers and major stockholders).
Affiliates of Supercuts or Regis may not sell their shares of Regis Common Stock
acquired in connection with the Merger, except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 or another applicable exemption from the registration
requirements of the Securities Act. In general, under Rule 145, for two years
following the Effective Time, an Affiliate (together with certain related
persons) would be entitled to sell shares of Regis Common Stock acquired in
connection with the Merger only through unsolicited "broker transactions" or in
transactions directly with a "market maker," as such terms are defined in Rule
144 under the Securities Act. Additionally, the number of shares to be sold by
an Affiliate (together with certain related persons and certain persons acting
in concert) within any three-month period during such two-year period for
purposes of Rule 145 may not exceed the greater of 1% of the outstanding shares
of Regis Common Stock or the average weekly trading volume of such stock during
the four calendar weeks preceding such sale. Rule 145 would remain available to
Affiliates only if Regis remained current with its informational filings with
the Commission under the Securities Exchange Act of 1933, as amended (the
"Exchange Act"). Two years after the Effective Time, an Affiliate would be able
to sell such Regis Common Stock without such manner of sale or volume
limitations, provided that Regis was current with its Exchange Act informational
filings and such Affiliate was not then an affiliate of Regis. Three years after
the Effective Time, an Affiliate would be able to sell such shares of Regis
Common Stock without any restrictions as long as such Affiliate had not been an
Affiliate of Regis for at least three months prior thereto.
It is a condition to the obligation of Regis to consummate the Merger that
Supercuts cause each current executive officer or director identified as a
possible Affiliate of Supercuts to execute and deliver to Regis, on or prior to
the Effective Time, an agreement (the "Affiliate Agreements") providing that
such Affiliate will not sell, pledge, transfer or otherwise dispose of any Regis
Common Stock obtained as a result of the Merger (i) unless (a) such sale,
transfer or other disposition is made in compliance with Rule 145, or (b) in the
opinion of counsel reasonably acceptable to Regis, such sale, transfer or other
disposition is otherwise exempt from registration under the Securities Act; and
(ii) until after such time as results covering at least 30 days of post-Merger
combined operations of Regis and Supercuts have been published. See "The Merger
Agreement -- Conditions."
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the Merger
Agreement. This description does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement included as Appendix A to this
Proxy Statement/Prospectus and incorporated herein by reference. All
shareholders are urged to read the Merger Agreement in its entirety. See also
"THE MERGER."
GENERAL
The Merger Agreement provides that, upon the satisfaction or waiver of
certain conditions, Merger Sub will be merged with and into Supercuts, Supercuts
will continue as the Surviving Corporation, and the separate existence of Merger
Sub will cease. Following the Merger, the Surviving Corporation will be a
wholly-owned subsidiary of Regis. Pursuant to the Merger Agreement, at the
Effective Time, (i) each outstanding share of common stock of Merger Sub will be
converted into one share of the common stock of the Surviving Corporation and
(ii) each outstanding share of Supercuts
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Common Stock will be converted into 0.4 of one share of Regis Common Stock,
subject to adjustments for, among other things, stock dividends by either
Supercuts or Regis occurring after the date of the Merger Agreement.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Regis and Supercuts relating to, among other things, the following matters
(which representations and warranties are subject, in certain cases, to
specified exemptions): (i) the due organization, power and standing of, and
similar corporate matters with respect to, each of Regis and Supercuts; (ii)
each of Regis' and Supercuts' capital structure; (iii) the authorization,
execution, delivery and performance by, and enforceability of, the Merger
Agreement against each such party; (iv) the absence of any governmental or
regulatory authorization, consent or approval required to consummate the Merger;
(v) the absence of any conflict between the Merger and either party's Articles
or Certificate of Incorporation or Bylaws, or with applicable law; (vi) the
filing of reports and other documents with the Commission and other regulatory
authorities and the accuracy of the information contained therein; (vii) the
absence of certain changes or events having a material adverse effect on the
financial condition, business or results of operations of Regis and its
subsidiaries (a "Regis Material Adverse Effect") and Supercuts and its
subsidiaries (a "Supercuts Material Adverse Effect"), as the case may be; (viii)
the absence of knowledge of Supercuts after review and discussion with Arthur
Andersen LLP, its independent public accountants, of any fact pertaining to
Supercuts that would prevent the Merger from being effected as a pooling of
interests for accounting and financial reporting purposes or that would prevent
the Merger from qualifying as a tax-free reorganization under the Internal
Revenue Code of 1986, as amended (the "Code"); (ix) the absence of any
brokerage, finder's or other fees due in connection with the Merger (other than
the fees payable to DLJ and to Merrill Lynch & Co. as financial advisors to the
parties to the Merger); (x) the absence of material pending or threatened
litigation having a Supercuts Material Adverse Effect or a Regis Material
Adverse Effect; (xi) each of Regis' and Supercuts' ownership of all outstanding
shares of their respective subsidiaries; (xii) material contracts; (xiii)
financial statements; (ix) employee benefit plans, and the absence of pending or
threatened labor disputes, strikes, work stoppages and unfair labor practice
charges; and (x) certain tax matters.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, Supercuts has agreed that, prior to the
Effective Time, except as expressly permitted by the Merger Agreement or as
otherwise consented to by Regis, Supercuts will, and will cause its subsidiaries
to, among other things (subject to certain exceptions), (i) conduct its business
only in, and not take any action except in the ordinary and usual course of
business consistent with past practice; (ii) use reasonable efforts to preserve
intact its business organization, keep available the services of its present
officers and key employees and preserve the goodwill of third parties with whom
it has business relationships; (iii) not amend or change its articles of
incorporation or bylaws (or comparable governing instruments); (iv) not issue or
sell any shares of capital stock or any other securities (other than pursuant to
stock options or employee stock purchase plans) or issue any securities
convertible into or exchangeable for, or options, warrants to purchase, script,
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 its capital stock or other securities
or purchase or enter into any arrangement or contract with respect to the
purchase or voting of shares of its capital stock, or adjust, split, combine or
reclassify any of its capital stock or other securities or make any other
changes in its capital structure; (v) not declare, set aside, pay or make any
dividend or distribution or payment with respect to, or purchase or redeem, any
shares of its capital stock; (vi) not amend or adopt any benefit plan or
increase the compensation or fringe benefits of any director, officer or
employee or pay or grant any benefit not required under any existing
arrangement; (vii) not assume or incur any indebtedness, except in the ordinary
course of business and expenses incurred in connection with the consummation of
the Merger or, except in the ordinary course of business consistent with past
practice, make any loans, advances or capital contributions to or investments
in, any other person other by Supercuts to, in or from a wholly-owned
subsidiary; (viii) not acquire (a) any business organization or division thereof
or (b) any assets, except
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purchases of inventory or supplies or other purchases in the ordinary course of
business consistent with past practice; (ix) not sell, lease, mortgage or
otherwise encumber or dispose of any of its properties or assets, except sales
of inventory in the ordinary course of business consistent with past practices
and strategic sales of corporate stores to franchisees; (x) not make any
material tax election other than tax elections in the ordinary course of
business and consistent with past practices or settle or compromise any material
income tax or other tax liability or refund; (xi) not pay, discharge or satisfy
any claims, liabilities or obligations other than in the ordinary course of
business consistent with past business practice or in accordance with their
terms except for existing litigation; and (xii) not take any action that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a)(1)(A) and 368(a)(2)(E) of the Code.
LIMITATION ON SOLICITATION BY SUPERCUTS
Under the Merger Agreement, Supercuts has agreed not to directly or
indirectly solicit, initiate or encourage (including by way of furnishing
information) any Acquisition Proposal (as hereinafter defined) from any person,
or engage in or continue discussions or negotiations relating to any Acquisition
Proposal and to 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. As defined in the Merger
Agreement, Acquisition Proposal means any bona fide proposal which proposes a
(i) merger, consolidation or similar transaction involving Supercuts, (ii) sale,
lease or other disposition directly or indirectly, by merger, consolidation,
share exchange or otherwise, of substantially all of the assets of Supercuts and
its subsidiaries taken together, (iii) 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 Supercuts or (iv) a transaction in which any person, including,
without limitation, Supercuts and any subsidiary, or any affiliate thereof
(other than Regis) 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 Supercuts, 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 of Supercuts. Notwithstanding the foregoing, if, prior to the
Effective Time, Supercuts shall receive an Acquisition Proposal that the Board
of Directors of Supercuts, based upon the advice of its outside counsel,
reasonably believes it has a fiduciary duty to consider, and which it reasonably
and in good faith believes is more favorable to Supercuts and its shareholders
than the Merger then, after notification to Regis, Supercuts may furnish
information to the party making such Acquisition Proposal. If thereafter,
Supercuts' Board of Directors reasonably and in good faith determines (i) that
such Acquisition Proposal is more favorable to Supercuts and its Shareholders
than the Merger and (ii) based upon the advice of outside counsel, that the
failure to recommend or accept such Acquisition Proposal would violate its
fiduciary duties to Supercuts shareholders under applicable law (a "Competing
Acquisition Event"), then upon written notice to Regis, Supercuts may terminate
the Merger Agreement. Supercuts shall pay to Regis a break up fee in the amount
of $3,750,000. See "The Merger Agreement -- Fees and Expenses."
TREATMENT OF SUPERCUTS STOCK OPTIONS AND SUPERCUTS RESTRICTED SHARES
Each Supercuts Stock Option issued and outstanding immediately prior to the
Effective Time will, on and after the Effective Time, be assumed by and be
deemed to be an option granted by the Surviving Corporation to purchase the
number of shares of Regis Common Stock equal to the Conversion Ratio times the
number of shares of Supercuts Common Stock subject to such option. The per share
exercise price for such stock option shall be the current exercise price per
share of Supercuts Common Stock divided by the Conversion Ratio.
The Restricted Share Award agreements between Supercuts and each of Mr.
Faber, Mr. Geraldson, Mr. Good and Ms. Winkler will be cancelled prior to the
Effective Time. At the Effective
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Time, each of Mr. Faber, Mr. Geraldson, Mr. Good and Ms. Winkler will enter into
Advisory Agreements with Regis providing for the issuance of the number of
restricted shares of Regis Common Stock equal to the Conversion Ratio times the
number of shares of Supercuts Common Stock subject to such director's cancelled
Restricted Stock Agreement. See "The Merger -- Interests of Certain Persons in
the Mergers."
INDEMNIFICATION
Regis has agreed that, from and after the Effective Time, Regis will
indemnify and hold harmless the officers, directors, agents and other
representatives of Supercuts or any of its subsidiaries as of the date of the
Merger Agreement who have acted in such capacity prior to the Effective Time
(the "Indemnified Parties") against any and all claims, damages, liabilities,
losses, costs, charges and expenses asserted against, incurred by or imposed
upon any Indemnified Party which is based upon, arises out of or relates to the
Merger, the Merger Agreement, this Joint Proxy Statement or any transaction
contemplated therein or herein.
Regis has also agreed that, from and after the Effective Time, Regis will
assume and perform to the fullest extent permitted by law, any and all
obligations of Supercuts to indemnify the officers and directors of Supercuts as
of the date of the Merger Agreement, whether pursuant to applicable law,
Supercuts' Certificate of Incorporation or Bylaws, or by agreement between
Supercuts and such officers and directors. See "The Merger -- Interests of
Certain Persons in the Merger."
CONDITIONS TO OBLIGATION TO CLOSE
Each party's respective obligations to effect the Merger are subject to
various conditions, including the following, unless waived to the extent
permitted by applicable law: (i) the holders of Regis Common Stock shall have
approved the issuance of the Merger Shares by the requisite vote; (ii) the
holders of Supercuts Common Stock shall have approved the Merger and the Merger
Agreement by the requisite vote; (iii) no preliminary or permanent injunction or
other order by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect; (iv) all applicable waiting
periods and any extension thereof under the HSR shall have expired or been
terminated; and (v) the Registration Statement shall have been declared
effective by the SEC.
The obligations of Regis and Merger Sub to effect the Merger are subject to
the satisfaction of the following conditions unless waived by Regis and Merger
Sub: (i) the representations and warranties of Supercuts set forth in the Merger
Agreement shall be true and correct in all material respects at and as of the
closing date of the Merger (the "Closing Date") as though made on and as of such
date (provided those representations or warranties made as of a particular date
need only be true and correct as of such date), except for such inaccuracies
which do not have a Supercuts Material Adverse Effect; (ii) Supercuts shall have
performed in all material respects all covenants required to be performed by it
under the Merger Agreement through the closing of the Merger; (iii) Regis shall
not have received a final objection from the SEC to the accounting for the
Merger as a pooling of interests; (iv) Regis shall have received Affiliate
Agreements from each current executive officer and director of Supercuts
identified as a possible Affiliate of Supercuts; and (v) there shall have been
no material adverse change from the date of the Merger Agreement in the
business, financial condition or operation of Supercuts, except changes
contemplated, permitted or required by the Merger Agreement and changes
resulting from a change in general economic conditions.
The obligation of Supercuts to affect the Merger is subject to the
satisfaction of the following conditions, unless waived by Supercuts: (i) the
representations and warranties of Regis set forth in the Merger Agreement shall
be true and correct in all material respects as of the Closing Date, as though
made on and as of such date (provided that those representations and warranties
made as of a particular date need only be true and correct as of such date),
except for an inaccuracies which do not have a Regis Material Adverse Effect;
(ii) Regis shall have performed in all material respects all covenants required
to be performed by it under the Merger Agreement through the closing of the
Merger; (iii) the shares of Regis Common Stock to be issued in connection with
the Merger shall have been approved for listing on Nasdaq National Market,
subject to official notice of issuance; and
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(iv) Supercuts shall have received from Willkie Farr & Gallagher a written
opinion 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.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, either before or after and notwithstanding approval of the issuance of the
Merger Shares by the shareholders of Regis or adoption of the Merger Agreement
by the stockholders of Supercuts (i) by mutual written consent of Supercuts and
Regis; (ii) by either Regis or Supercuts if the Effective Time shall not have
occurred on or before January 1, 1997, provided, however, such right to
terminate the Merger Agreement shall not be available to any party that is then
in material breach of its representations, warranties or obligations under the
Merger Agreement, (iii) by either Regis or Supercuts 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 or
declaring the Merger invalid or unlawful and such order, decree, ruling or other
action shall have become final and nonappealable; or (iv) by Supercuts in the
event of a Competing Acquisition Event and payment of a breakup fee to Regis.
See "The Merger Agreement -- Limitation on Solicitation by Supercuts."
In the event of termination of the Merger Agreement by either Regis or
Supercuts, the Merger Agreement will become void and there will be no liability
on the part of Regis, Merger Sub or Supercuts except that (1) under certain
circumstances, Supercuts will be required to pay to Regis a breakup fee, as
described under "Fees and Expenses," and (2) all remedies available to any party
resulting from the breach of any covenant in the Merger Agreement will be
preserved if the Merger Agreement is terminated. See "The Merger Agreement --
Fees and Expenses."
AMENDMENT
Subject to applicable law, the Merger Agreement may be amended by action
taken by or on behalf of the respective Boards of Directors of Regis, Merger Sub
or Supercuts at any time prior to the Effective Time. After adoption of the
Merger Agreement by the stockholders of Supercuts and Regis, however, any
amendment will be subject to the restrictions contained in Delaware General
Corporation Law.
FEES AND EXPENSES
Under the Merger Agreement, except as provided below, all expenses incurred
by Regis or Supercuts shall be borne solely and entirely by the party that has
incurred the same. Notwithstanding the foregoing, Supercuts has agreed to pay
Regis a termination fee of $3,750,000 (i) if the Merger Agreement is terminated
by Supercuts because a Competing Acquisition Event exists or (ii) if (a) the
Merger Agreement is terminated because of the failure of the Board of Directors
of Supercuts to receive an opinion from DLJ to the effect that the terms of the
Merger are fair to the Supercuts shareholders from a financial point of view by
January 2, 1997 and (b) within six months of such termination Supercuts executes
a definitive agreement to sell Supercuts to another person or entity, at a price
per share that exceeds the price per share payable under the Merger Agreement
(calculated as of the date of the Merger Agreement), which person had, prior to
the date of the Merger Agreement, submitted to the Company a specific proposal
in a principal capacity and conducted a substantial due diligence review of
Supercuts.
THE COMPANIES
REGIS
Regis is the largest owner and operator of mall-based hair and retail
product salons in the world. At June 30, 1996, the Company operated 1,963 salons
(1,891 owned and 72 franchised) offering high-quality haircare services and
products in 50 states and certain foreign countries, principally the United
Kingdom. Regis operates its salons primarily under the names Regis Hairstylists,
MasterCuts and Trade Secret. Regis' executive offices are located at 7201 Metro
Boulevard, Edina, Minnesota
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55439, and its telephone number is (612) 947-7777. At June 30, 1996, Regis had
total assets of approximately $221.2 million, total liabilities of approximately
$113.0 million and shareholders' equity of approximately $108.2 million.
SUPERCUTS
Supercuts is one of the largest publicly-held owners, operators and
franchisors of hair salons in the country. Supercuts and its subsidiaries own or
manage over 500 salons and franchises over 650 in 39 states and Puerto Rico.
Supercuts' executive offices are located at 550 California Street, San
Francisco, CA 94104, and its telephone number is (415) 693-4700. At June 30,
1996, Supercuts had total assets of approximately $97.7 million, total
liabilities of approximately $55.9 million and shareholders' equity of
approximately $41.8 million.
DESCRIPTION OF REGIS CAPITAL STOCK
GENERAL
Regis is authorized to issue 25,000,000 shares of capital stock, par value
$.05 per share. As of the Regis Record Date, there were issued and outstanding
18,080,155 shares of Regis Common Stock, and 1,535,026 shares of Regis Common
Stock were reserved for issuance upon the exercise of stock options under the
Regis 1991 Stock Option Plan
REGIS COMMON STOCK
GENERAL. Holders of Regis Common Stock have no preemptive rights. The
outstanding shares of Regis Common Stock are, and the Regis Common Stock offered
hereby will be, fully paid and nonassessable.
VOTING. Regis common shareholders are entitled to one vote for each share
held on each matter submitted to a vote of the holders of Regis Common Stock.
Cumulative voting for the election of directors is not permitted.
DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. Subject to the preferential
dividend rights of any issued and outstanding preferred stock, holders of Regis
Common Stock are entitled to receive dividends as and when declared by the Board
of Directors of Regis. Regis declared its fifth consecutive quarterly dividend
on August 6, 1996, payable on September 10, 1996, to common shareholders of
record on August 23, 1996. Regis increased its dividend from $.067 per share
annually to $.08 per share annually in May, 1996. Under Minnesota corporate law,
Regis may declare and pay dividends if the Regis Board of Directors determines
that Regis will be able to pay its debts in the ordinary course of business
after making the dividend. No dividends on Regis Common Stock may be declared,
however, if payment of the dividend would reduce the remaining net assets of
Regis below the aggregate preferential amount payable in the event of
liquidation to holders of shares having preferential rights.
If Regis were liquidated, the holders of Regis Common Stock would be
entitled to receive, pro rata, all assets available for distribution to them
after full satisfaction of Regis' liabilities and any payment applicable to any
preferential shares then outstanding.
TRANSFER AGENT AND REGISTRAR. The transfer agent and registrar for the
Regis Common Stock is Norwest Bank Minnesota, N.A.
AUTHORIZED AND UNDESIGNATED CAPITAL STOCK
As of the Regis Record Date, there were 5,384,819 shares of unissued
authorized capital stock, $.05 par value, which had not been designated by the
Regis Board of Directors. The Board of Directors is authorized, without further
action of the shareholders, to establish classes or series of stock from the
authorized and unissued shares and to fix the relative rights and preferences of
any such class or series. The Company has no present plans to establish any
other classes or series of stock.
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ANTI-TAKEOVER PROVISIONS
Regis' Articles of Incorporation require a vote of at least 80% of the
outstanding voting shares for certain mergers, sales or transfers of
substantially all of Regis' assets, or a liquidation, unless such transaction is
first approved by a majority of Regis' directors who were directors prior to the
time any shareholder (except Curtis Squire) became the owner of 10% of Regis
Common Stock. If such director approval is obtained, a simple majority of the
outstanding shares will be sufficient to effect these transactions. An 80%
shareholders' vote is also required to amend this provision. The effect of these
provisions may be to deter or discourage hostile takeover attempts by making it
more difficult for a person who has gained a substantial equity interest in
Regis effectively to exercise control.
LIMITED LIABILITY AND INDEMNIFICATION
Regis' Articles of Incorporation include a provision permitted by the
Minnesota Business Corporation Act which limits the liability of directors of
Regis. The provision provides that no director shall be personally liable to
Regis or its stockholders for monetary damages for breach of fiduciary duty as a
director, excluding, however, liability for the breach of a director's duty of
loyalty, acts or omissions not in good faith, intentional violations of law,
transactions where the director derived an improper personal benefit, illegal
distributions or violations of securities laws. In addition, Minnesota law and
Regis' Bylaws provide for broad indemnification by Regis of officers, directors
and employees. Accordingly, the shareholders will have more limited recourse
against those individuals than would be the case in the absence of such
provisions.
Insofar as the indemnity for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Regis pursuant to
the foregoing provisions, Regis has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and therefore unenforceable. Regis believes that its Articles of
Incorporation and Bylaws provisions are necessary to attract and retain
qualified persons as directors and officers.
COMPARISON OF STOCKHOLDER RIGHTS
The rights of the stockholders of Supercuts are governed by the DGCL, the
Certificate of Incorporation (the "Supercuts Certificate"), and the Bylaws of
Supercuts, as amended (the "Supercuts Amended Bylaws"). The rights of the
shareholders of Regis are governed by the MBCA, the Articles of Incorporation of
Regis, as amended (the "Regis Articles"), and the Bylaws of Regis (the "Regis
Bylaws"). The following is a summary of certain material differences between the
rights of shareholders of Supercuts and the rights of shareholders of Regis, as
contained in provisions of the DGCL and the MBCA, the Supercuts Certificate and
Supercuts Amended Bylaws, and the Regis Articles and Regis Bylaws.
The following does not purport to be a complete statement of the rights of
Supercuts' stockholders under applicable Delaware law and the Supercuts
Certificate and Supercuts Amended Bylaws as compared with the rights of Regis
shareholders under applicable Minnesota law and the Regis Articles and Regis
Bylaws. The identification of certain specific differences is not meant to
indicate that other equally or more significant differences do not exist.
STOCKHOLDERS' DISSENTERS' RIGHTS
Under both the DGCL and the MBCA, stockholders may exercise a right of
dissent from certain corporate actions and obtain payment of the fair value of
their shares. This remedy is an exclusive remedy, except where the corporate
action involves fraud or illegality.
Under the DGCL, appraisal rights are available to dissenting shareholders in
connection with certain mergers or consolidations. However, unless the
certificate of incorporation otherwise provides, the DGCL does not provide for
appraisal rights (i) if the shares of the corporation are listed on a national
securities exchange or designated as a national market systems security on an
interdealer quotations system by the NASD or held of record by more than 2,000
shareholders (as long as the
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shareholders receive in the merger shares of the surviving corporation or of any
other corporation the shares of which are listed on a national securities
exchange or designated as a national market systems security on an interdealer
quotations system by the NASD or held of record by more than 2,000 shareholders)
or (ii) if the corporation is the surviving corporation and no vote of its
shareholders is required for the merger. The Supercuts Amended Certificate of
Incorporation (the "Supercuts Certificate") does not provide for any appraisal
rights. Accordingly, the Supercuts shareholders will not be entitled to
dissenter's appraisal rights under DGCL or any other statute in connection with
the Merger.
Under the MBCA, the categories of transaction subject to dissenters' rights
are broader than those in the DGCL. A shareholder of a Minnesota corporation may
exercise dissenter's rights in connection with an amendment to the articles of
incorporation which materially and adversely affects the rights or preferences
of shares held by the dissenting shareholder, a disposition of all or
substantially all of the corporation's property and assets not in the usual
course of business, a plan of merger on which the shareholder is entitled to
vote under the MBCA, and a plan of exchange involving the acquisition of the
corporation's shares if the shareholder is entitled to vote on the plan. Because
Regis shareholders are not being asked to vote to approve the Merger, such
shareholders do not have the right to dissent from the Merger or receive payment
for the full value of their shares.
BOARD OF DIRECTORS
The DGCL provides that the board of directors of a Delaware corporation
shall consist of one or more directors as fixed by the certificate of
incorporation or bylaws. Under the Supercuts Certificate, the number of
directors of the Corporation shall be fixed exclusively by the board of
directors, pursuant to a resolution adopted by a majority of the total number of
directors if there were no vacancies on the board. Currently, the Supercuts
board consists of six members.
The MCBA provides that the board of directors of a Minnesota corporation
shall consist of one or more directors as fixed by the Articles of Incorporation
or Bylaws. Regis Bylaws provide that the board shall consist of five or more
directors as determined by the board at least 31 days prior to each annual
meeting of shareholders. Although permitted under the MBCA, Regis' Board of
Directors is not classified.
REMOVAL OF DIRECTORS
The DGCL provides that directors may be removed from office with or without
cause, by the holders of a majority of the voting power of all outstanding
voting stock, unless the corporation has a classified board and its certificate
does not otherwise provide, in which case directors may be removed only for
cause. The Supercuts Certificate permits removal of a director with or without
cause on the affirmative vote of the holders of at least 66 2/3% of the Voting
Stock of Supercuts, voting together as a single class.
The MBCA provides that, unless modified by the articles or bylaws of the
corporation or by shareholder agreement, the directors may be removed with or
without cause by the affirmative vote of that proportion or number of the voting
power of the shares of the classes or series the director represents which would
be sufficient to elect such director. If a corporation has cumulative voting,
the MBCA provides that, unless the entire board is removed simultaneously, a
director is not removed from the board if there are cast against removal of the
directors the votes of proportion of the voting power sufficient to elect the
director at an election of the entire board under cumulative voting. The Regis
Articles and Regis Bylaws do not modify the provision of the MBCA regarding the
vote necessary in order to remove a director from office. Regis does not have
cumulative voting.
AMENDMENTS TO BYLAWS
Under the DGCL, holders of a majority of the voting power of a corporation
and, when provided in the certificate of incorporation, the directors of the
corporation, have the power to adopt, amend and repeal the bylaws of a
corporation. The Supercuts Certificate grants the Directors of Supercuts such
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power. In addition, the Supercuts Certificate requires that any adoption,
amendment or repeal of or to the Supercuts Amended Bylaws by the Supercuts
shareholders be approved by at least 66 2/3% of the voting power of the
outstanding shares entitled to vote in the election of directors.
The MBCA and the Regis Bylaws provide that the power to adopt, amend or
repeal the bylaws shall be vested in the board, except that the board shall not
adopt, amend, or repeal a bylaw fixing a quorum for a meeting of shareholders,
prescribing procedures for removing directors or filling vacancies in the board,
or fixing the number of directors or their classifications, qualifications, or
terms of office, but may adopt or amend a bylaw to increase the number of
directors. Notwithstanding the above, under the MBCA a shareholder or
shareholders holding 3% or more of the voting shares entitled to vote may
propose a resolution to amend or repeal bylaws adopted, amended or repealed by
the board, in which event such resolution must be approved pursuant to the
procedures for amending the articles of incorporation.
AMENDMENTS TO CERTIFICATE OR ARTICLES
Under the DGCL, amendment of the certificate of incorporation shall be made
by a resolution of the board of directors setting forth the amendment, declaring
its advisability, and either calling a special meeting of the shareholders
entitled to vote or directing that the amendment proposed be considered at the
next annual meeting of the shareholders. The DGCL requires that, unless a
different percentage is provided for, a majority of the voting power of the
corporation is required to approve the amendment of the certificate of
incorporation at the shareholders meeting. The Supercuts Certificate does not
provide for a different percentage, except that it does require the affirmative
vote of two-thirds of the outstanding shares entitled to vote in the election of
directors in order to amend the provisions of the Supercuts Certificate relating
to amendment of the Supercuts Amended Bylaws.
The MCBA provides that an amendment to a corporation's articles must be by
resolution approved by the affirmative vote of a majority of the directors
present or proposed by a shareholder or shareholders holding 3% or more of the
voting shares entitled to vote thereon. Under the MBCA, any such amendment must
be approved by the affirmative vote of a majority of the shareholders entitled
to vote thereon, except that the articles may provide for a specified proportion
or number larger than a majority. The Regis Articles provide that the
affirmative vote of the holders of 80% of the outstanding shares of capital
stock entitled to vote is required in order to amend provisions concerning
certain mergers, consolidations and other business combinations and
reorganizations with certain affiliates.
INDEMNIFICATION
The DGCL and the MBCA both contain provisions setting forth conditions under
which a corporation may indemnify its directors, officers, and employees. While
indemnification is permitted only if certain statutory standards of conduct are
met, the DGCL and the MBCA are substantially similar in providing for
indemnification if the person acted in good faith and in a manner the personal
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The statutes differ,
however, with respect to whether there is a distinction between third-party
actions and actions by or in the right of the corporation, and whether, and to
what extent, reimbursement of judgments, fines, settlements, and expenses is
allowed.
The DGCL permits a Delaware corporation to indemnify directors, officers,
employees, and agents under certain circumstances and mandates indemnification
under certain circumstances. The DGCL permits a corporation to indemnify an
officer, director, employee or agent for fines, judgments, or settlements, as
well as expenses in the context of actions other than derivative actions, if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation. Indemnification
against expenses incurred by a director, officer, employee, or agent in
connection with a proceeding against such person for actions in such capacity is
mandatory to the extent that such person has been successful on the merits or
otherwise. The DGCL grants express power to a Delaware corporation to purchase
liability insurance for its directors, officers, employees, and agents,
regardless of whether any such person is otherwise eligible for
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indemnification by the corporation. Advancement of expenses is permitted, but a
person receiving such advances must repay those expenses if it is ultimately
determined that he is not entitled to indemnification.
The Supercuts Certificate and Supercuts Amended Bylaws provide for
indemnification of any and all persons (including Supercuts Directors) whom it
shall have power to indemnify under, and to the fullest extent permitted by, the
DGCL. Provided, however, that except in suits to enforce rights to
indemnification, Supercuts shall indemnify an eligible person in connection with
a suit initiated by such person only if the action was authorized by the
Supercuts Board of Directors. In addition, Supercuts has entered into indemnity
agreements with certain of its current and former directors and officers which
generally provide for indemnification by Supercuts to the fullest extent
permitted under applicable law.
Regis is required by the MBCA to indemnify all officers and directors of
Regis for expenses and liabilities (including attorneys' fees) incurred as the
result of proceedings against them in connection with their capacities as
officers or directors. In order to be entitled to indemnification with respect
to a purported act or omission, an officer or director must (i) have acted in
good faith, (ii) have received no improper personal benefit, (iii) in the case
of a criminal proceeding, have had no reasonable cause to believe the conduct to
be unlawful, and (iv) reasonably believed that the conduct was in the best
interests of Regis.
Although the MBCA allows broader indemnification than under the DGCL, the
MBCA requires that a corporation report any indemnification payments to its
shareholders no later than the next meeting of stockholders. The DGCL and the
Supercuts Amended Bylaws contain no such similar provision.
LIABILITY OF DIRECTORS
Under the DGCL, a corporation's certificate of incorporation may contain a
provision limiting or eliminating a director's personal liability to the
corporation or its stockholders for monetary damages for a director's breach of
fiduciary duty subject to certain limitations. The Supercuts Certificate
provides that, to the fullest extent permitted by the DGCL, no director shall be
liable to Supercuts or its shareholders for monetary damages for breach of
fiduciary duties as director.
The Regis Articles contain a provision that limits the liability of Regis'
directors as permitted by MBCA. The provision eliminates personal liability of a
director to Regis or its shareholders for monetary damages for a breach of
fiduciary duty. The provision does not change the liability of a director for a
breach of duty of loyalty to Regis or to shareholders, acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, or an act or omission for which the liability of a director is expressly
provided for in an applicable statute, or in respect of any transaction from
which a director received an improper personal gain. Pursuant to the Regis
Articles, the liability of directors will be further limited or eliminated
without action by shareholders if Minnesota law is amended to further limit or
eliminate the personal liability of directors.
SHAREHOLDER MEETINGS
The DGCL permits special meetings of shareholders to be called by the board
of directors and such other persons, including shareholders, as the certificate
of incorporation or bylaws may provide. The DGCL does not require that
shareholders be given the right to call special meetings. The Supercuts
Certificate provides that special meetings may be called only by the Chairman of
the Board, the President or the Board of Directors pursuant to a resolution
adopted by a majority of the Board of Directors. The Certificate further
provides that the Board of Directors must call a special meeting upon receiving
a written request of shareholders representing at least 66 2/3% of all of the
outstanding shares entitled to vote in the election of directors.
The MBCA and the Regis Bylaws provide that the Chief Executive Officer, the
Chairman of the Board, the Chief Financial Officer, any two directors, or a
shareholder or shareholders holding 10% or more of shares entitled to vote at
such meeting may call a special meeting. However, under the MBCA,
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if the meeting involves a business combination, including an action to affect
the composition of the Board of Directors, then at least 25% of the shares
entitled to vote at such meeting are required to call the meeting. If the
meeting is demanded by shareholders, the meeting, on notice, must occur between
30 and 90 days after receipt of the demand.
MERGERS AND CONSOLIDATION
The DGCL requires approval of mergers, consolidations and dispositions of
all or substantially all of a corporation's assets (other than so-called
parent-subsidiary mergers) by a majority of the voting power of the corporation,
unless the certificate of incorporation specifies a different percentage. The
Supercuts Certificate does not provide for a different percentage.
The MCBA provides that a resolution containing a plan of merger or exchange
must be approved by the affirmative vote of a majority of the directors present
at a meeting and submitted to the shareholders and approved by the affirmative
vote of the holders of a majority of the voting power of all shares entitled to
vote. Unlike the DGCL, the MBCA requires that any class of shares of a Minnesota
corporation must approve the plan if it contains a provision which, if contained
in a proposed amendment to the corporation's articles of incorporation, would
entitle such class to vote as a class. The Regis Articles require the
affirmative vote of not less than 80% of the outstanding shares entitled to vote
for approval of certain mergers, consolidations or other combinations with
affiliated entities. See "Business Combinations" below.
BUSINESS COMBINATIONS
Section 203 of the DGCL provides generally that any person who acquires 15%
or more of a corporation's voting stock (thereby becoming an "interested
shareholder") may not engage in a wide range of "business combinations" with the
corporation for a period of three years following the date the person became an
interested shareholder, unless (i) the board of directors of the corporation has
approved, prior to that acquisition date, either the business combination or the
transaction that resulted in the person becoming an interested shareholder, (ii)
upon consummation of the transaction that resulted in the person becoming an
interested shareholder, that person owns at least 85% of the corporation's
voting stock outstanding at the time the transaction commenced (excluding shares
owned by persons who are directors and also officers and shares owned by
employee stock plans in which participants do not have the right to determine
confidentially whether shares will be tendered in a tender or exchange offer),
or (iii) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 66 2/3% of the outstanding voting stock not owned
by the interested shareholder.
These restrictions on interested shareholders do not apply under certain
circumstances, including, but not limited to, the following (i) if the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203 of the DGCL, or (ii) if the
corporation, by action of its shareholders, adopts an amendment to its bylaws or
certificate of incorporation expressly electing not to be governed by such
section. The Supercuts Amended Bylaws contain a provision explicitly electing to
be governed by Section 203.
The MBCA contains a provision which restricts certain business combination
transactions with an interested stockholder for four years after such
shareholder has acquired 10% of the voting power of a publicly traded
corporation having 50 or more stockholders. Although a Minnesota corporation may
elect, pursuant to its articles or bylaws, not to be governed by this provision,
the Regis Certificate and the Regis Bylaws contain no such election. Under the
Regis Articles, if a business combination (including a merger, disposition of
substantial assets, issuance of securities and other similar transactions)
occurs with a person, who together with its affiliates, owns 10 to 20% or more
of the outstanding capital stock of Regis (a "Related Person"), then the
combination must be approved by 80% of the outstanding capital stock entitled to
vote. However, the combination may occur without such a vote if, among other
exceptions, those directors who were directors of Regis before the acquiring
party became a Related Person approve the combination by a unanimous vote.
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OTHER ANTI-TAKEOVER PROVISIONS
The DGCL does not contain a control share acquisition statute which
restricts the voting rights of a person who acquires a controlling interest in
the corporation to those voting rights which are conferred by the stockholders
at a meeting. The MBCA contains a control share acquisition statute which
requires approval by disinterested shareholders of any acquisition of voting
power above specified levels of ownership of Regis Common Stock.
The MBCA provides that during any tender offer, a publicly held corporation
may not enter into or amend an agreement (whether or not subject to
contingencies) that increases the current or future compensation of any officer
or director. Delaware law has no equivalent provision. In addition, under the
MBCA, a publicly held corporation is prohibited from purchasing any voting
shares owned for less than two years from a 5% shareholder for more than the
market value unless the transaction has been approved by the affirmative vote of
the holders of a majority of the voting power of all shares entitled to vote or
unless the corporation makes a comparable offer to all holders of shares of the
class or series of stock held by the 5% shareholder and to all holders of any
class or series into which such securities may be converted. Delaware law has no
equivalent provision.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
June 30, 1996 combines the historical consolidated balance sheets of Regis and
Supercuts as if the Merger had been effective on June 30, 1996, after giving
effect to certain pro forma adjustments described in the accompanying notes.
The following Unaudited Pro Forma Combined Statements of Operations are
presented as if the Merger had been effective July 1, 1993. Regis' fiscal year
ends on June 30; Supercuts' fiscal year ends on December 31. Regis' financial
reporting period ending June 30 will be adopted by the combined entity.
Accordingly, for purposes of the following Unaudited Pro Forma Combined
Statements of Operations, Supercuts' Statements of Operations have been recast
to conform to Regis' fiscal year end.
The Unaudited Pro Forma Combined Financial Information and notes thereto
reflect the application of the pooling-of-interests method of accounting for the
acquisition of Supercuts. Under this method of accounting, the recorded assets,
liabilities, income and expenses of Regis and Supercuts are combined and
recorded at their historical cost amounts, except as noted below. Certain
historical information of Supercuts has been recast to conform to Regis'
financial statement presentation.
The significant accounting policies of Regis and Supercuts differ in certain
respects, as described below. As required in a pooling-of-interests business
combination, the Unaudited Pro Forma Combined Financial Information reflects
certain adjustments to conform Supercuts' accounting policies to those of Regis.
These adjustments retroactively conform, for all periods presented, Supercuts'
accounting policies to those of Regis, consistent with the intent to present
both entities as though they had always been combined. The following describes
the nature of these conforming adjustments:
- Supercuts has developed and provided partial financing to approximately
200 investor/franchisee Supercuts salons which are managed by Supercuts.
Under the terms of the financing and management agreements for these
salons, Supercuts, as part of its salon expansion program, has acquired
approximately 90 of these salons subsequent to their development and
start-up. Pursuant to the terms of the agreements between Supercuts and
these investors/franchisees, Supercuts has an option to acquire the
remaining salons owned by such investors/franchisees and, upon the sale in
1996 by the former Chairman and CEO of Supercuts of a substantial portion
of his shares of Supercuts Common Stock, the investors/franchisees of
these salons obtained the right to require Supercuts to acquire the salons
owned by them. Supercuts is also required to acquire such salons upon the
occurrence and continuation of an event of default under the financing
agreements. Supercuts is in continuing discussions with the investors/
franchisees with respect to any future obligation Supercuts may have to
acquire salons and Supercuts believes that, based upon its discussions, it
is unlikely that such investors/franchisees would exercise such option or
require Supercuts to acquire such salons. Regis consolidates all salon
expansion programs and any intercompany items are eliminated in
consolidation, all start-up period losses are consolidated and expensed as
incurred, and all developmental and operating financings are recorded as
debt in the consolidated balance sheet. Promptly after consummation of the
Merger, Regis will cause Supercuts to acquire the remaining approximately
110 salons not previously acquired by Supercuts for an aggregate net
amount payable to the investors/franchisees of approximately $3,500,000.
- Supercuts has capitalized certain store leasehold, systems and software
development costs. These costs are amortized using the straight-line
method over three to ten years. Under the accounting policies of Regis,
these costs are expensed as incurred.
- Supercuts amortizes goodwill associated with acquired salons on a
straight-line basis over 40 years. Regis amortizes goodwill associated
with acquired salons in the same line of business on a straight-line basis
over a period approximating 15 years which approximates the expected lease
periods remaining on the acquired salons.
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Pursuant to the Merger Agreement, Regis expects that certain adjustments
will be recorded primarily to accrue for specific, identified costs related to
the Merger and, as described above, to conform Supercuts' policies to those of
Regis. The amounts of such merger-related costs and conforming accounting
adjustments included or disclosed in the Unaudited Pro Forma Combined Financial
Data may change as more information becomes available.
Regis expects to achieve operating cost savings primarily through reductions
in staff and the consolidation of certain functions associated with corporate
level, administrative and operational level duplication at Supercuts. The
operating cost savings are expected to be achieved in various amounts at various
times during the years subsequent to the consummation of the Merger and not
ratably over, or at the beginning or end of, such periods. No adjustments have
been reflected in the Unaudited Pro Forma Combined Statements of Operations for
the anticipated cost savings.
The Unaudited Pro Forma Combined Financial Information included herein is
not necessarily indicative of the consolidated financial position or results of
future operations of the combined entity or the actual results that would have
been achieved had the Merger been consummated at the beginning of the periods
indicated. The Unaudited Pro Forma Combined Financial Information should be read
in conjunction with and are qualified in their entirety by the separate
historical consolidated financial statements and notes thereto of Regis and
Supercuts, which are incorporated by reference herein. See "Incorporation of
Certain Documents by Reference."
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REGIS CORPORATION
SUPERCUTS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
REGIS SUPERCUTS ADJUSTMENTS COMBINED
----------- --------- ----------------- -----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 5,471 $ 2,043 $ 44(1) $ 7,558
Accounts receivable.................................... 6,991 3,622 581(1) 11,194
Inventories............................................ 30,600 1,809 598(1) 33,007
Deferred income taxes.................................. 1,806 6,150 7,956
Other current assets................................... 4,501 2,909 228(1) 7,638
----------- --------- -------- -----------
Total current assets................................. 49,369 16,533 1,451 67,353
Non-current receivables.................................. 14,680 (13,754)(1) 926
Property and equipment, net.............................. 95,089 27,617 3,186(1) 123,837
(2,055)(3)
Goodwill................................................. 70,732 38,063 (10,366)(1) 94,628
(1,511)(2)
(2,290)(4)
Other assets............................................. 5,606 833 65(1) 6,504
Deferred tax assets...................................... 378 12,208(7) 12,586
----------- --------- -------- -----------
Total assets......................................... $ 221,174 $ 97,726 $ (13,066) $ 305,834
----------- --------- -------- -----------
----------- --------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current portion........................ $ 13,668 $ 22,288 $ 3,050(1) $ 39,006
Accounts payable....................................... 13,875 5,444 1,050(1) 20,369
Accrued expenses....................................... 29,392 18,469 1,145(1) 55,006
6,000(6)
----------- --------- -------- -----------
Total current liabilities............................ 56,935 46,201 11,245 114,381
Long-term debt........................................... 49,717 4,050 53,767
Deferred income taxes.................................... 3,558 3,558
Other noncurrent liabilities............................. 6,308 2,125 8,433
Commitments
Shareholders' equity:
Common stock........................................... 903 120 1(1) 1,024
Additional paid-in capital............................. 79,378 30,000 109,378
Retained earnings...................................... 27,933 16,313 (14,798)(1)(7) 19,934
(907)(2)(7)
(1,233)(3)(7)
(1,374)(4)(7)
(6,000)(6)
Treasury stock......................................... (4,641) (4,641)
----------- --------- -------- -----------
Total shareholders' equity........................... 108,214 41,792 (24,311) 125,695
----------- --------- -------- -----------
Total liabilities and shareholders' equity......... $ 221,174 $ 97,726 $ (13,066) $ 305,834
----------- --------- -------- -----------
----------- --------- -------- -----------
</TABLE>
See notes to unaudited pro forma combined financial statements.
52
<PAGE>
REGIS CORPORATION
SUPERCUTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
REGIS SUPERCUTS ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Sales:
Company-owned operations:
Service................................................ $ 355,880 $ 75,315 $ 11,168(1) $ 442,363
Product................................................ 138,813 8,699 2,014(1) 149,526
----------- ----------- ------------- -----------
494,693 84,014 13,182 591,889
Franchise revenues....................................... 4,749 20,843 25,592
----------- ----------- ------------- -----------
499,442 104,857 13,182 617,481
----------- ----------- ------------- -----------
Operating expenses:
Cost of sales:
Service................................................ 207,201 51,648 9,563(1) 268,412
Product................................................ 74,351 5,643 1,202(1) 81,196
Franchise.............................................. 3,864 6,951 10,815
Rent..................................................... 67,014 10,565 3,865(1) 81,444
Selling, general and administrative...................... 88,721 14,991 5,482(1) 110,363
535(3)
634(4)
Depreciation and amortization............................ 18,380 6,145 485(1) 24,924
441(2)
(232)(3)
(295)(4)
Provision for restructuring activities................... 18,925 (6,960)(1) 11,965
Other.................................................... 1,682 1,682
----------- ----------- ------------- -----------
461,213 114,868 14,720 590,801
----------- ----------- ------------- -----------
Operating income..................................... 38,229 (10,011) (1,538) 26,680
Other income (expense):
Interest................................................. (6,106) (1,130) (1,887)(1) (9,123)
MEI Salons nonrecurring gain (charge).................... 700 700
Other, net............................................... 155 1,037 2(1) 1,194
----------- ----------- ------------- -----------
Income before income taxes........................... 32,978 (10,104) (3,423) 19,451
Income taxes............................................... (13,854) 3,731 1,369(7) (8,754)
----------- ----------- ------------- -----------
Net income (loss).................................... $ 19,124 $ (6,373) $ (2,054) $ 10,697
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Net income (loss) per share:
Primary.................................................. $ 1.06 $ (0.57) $ 0.48
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Fully diluted............................................ $ 1.05 $ (0.57) $ 0.47
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Common and common equivalent shares outstanding:
Primary.................................................. 18,001 11,181 4,472(5) 22,473
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Fully diluted............................................ 18,291 11,181 4,472(5) 22,763
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
</TABLE>
See notes to unaudited pro forma combined financial statements.
53
<PAGE>
REGIS CORPORATION
SUPERCUTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
REGIS SUPERCUTS ADJUSTMENTS COMBINED
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Sales:
Company-owned operations:
Service............................................... $ 306,298 $ 65,413 $ 7,232(1) $ 378,943
Product............................................... 111,312 7,488 1,581(1) 120,381
----------- ----------- -------------- -----------
417,610 72,901 8,813 499,324
Franchise revenues...................................... 4,578 20,351 24,929
----------- ----------- -------------- -----------
422,188 93,252 8,813 524,253
----------- ----------- -------------- -----------
Operating expenses:
Cost of sales:
Service............................................... 179,501 44,956 8,658(1) 233,115
Product............................................... 59,309 4,135 1,019(1) 64,463
Franchise............................................. 4,242 7,229 11,471
Rent.................................................... 53,745 8,600 2,094(1) 64,439
Selling, general and administrative..................... 79,398 14,665 5,158(1) 101,390
1,047(3)
1,122(4)
Depreciation and amortization........................... 14,799 4,977 899(1) 20,809
352(2)
(132)(3)
(86)(4)
Other................................................... 865 865
----------- ----------- -------------- -----------
391,859 84,562 20,131 496,552
----------- ----------- -------------- -----------
Operating income.................................... 30,329 8,690 (11,318) 27,701
Other income (expense):
Interest................................................ (6,465) (861) (1,240)(1) (8,566)
MEI Salons nonrecurring gain (charge)................... 1,195 1,195
Other, net.............................................. 206 955 3(1) 1,164
----------- ----------- -------------- -----------
Income before income taxes.......................... 25,265 8,784 (12,555) 21,494
Income taxes.............................................. (10,614) (3,047) 5,022(7) (8,639)
----------- ----------- -------------- -----------
Net income (loss)................................... $ 14,651 $ 5,737 $ (7,533) $ 12,855
----------- ----------- -------------- -----------
----------- ----------- -------------- -----------
Net income (loss) per share:
Primary................................................. $ 0.86 $ 0.52 $ 0.60
----------- ----------- -------------- -----------
----------- ----------- -------------- -----------
Fully diluted........................................... $ 0.84 $ 0.52 $ 0.59
----------- ----------- -------------- -----------
----------- ----------- -------------- -----------
Common and common equivalent shares outstanding:
Primary................................................. 17,039 11,102 4,441(5) 21,480
----------- ----------- -------------- -----------
----------- ----------- -------------- -----------
Fully diluted........................................... 17,648 11,102 4,441(5) 22,089
----------- ----------- -------------- -----------
----------- ----------- -------------- -----------
</TABLE>
See notes to unaudited pro forma combined financial statements.
54
<PAGE>
REGIS CORPORATION
SUPERCUTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
REGIS SUPERCUTS ADJUSTMENTS COMBINED
----------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Sales:
Company-owned operations:
Service.................................................. $ 286,533 $ 44,384 $ 5,172(1) $ 336,089
Product.................................................. 88,535 5,264 1,194(1) 94,993
----------- --------- ------------- -----------
375,068 49,648 6,366 431,082
Franchise revenues......................................... 1,903 20,576 22,479
----------- --------- ------------- -----------
376,971 70,224 6,366 453,561
----------- --------- ------------- -----------
Operating expenses:
Cost of sales:
Service.................................................. 167,990 30,347 6,397(1) 204,734
Product.................................................. 48,276 3,066 893(1) 52,235
Franchise................................................ 1,894 8,486 10,380
Rent....................................................... 48,622 5,234 1,289(1) 55,145
Selling, general and administrative........................ 70,555 9,457 3,294(1) 84,518
861(3)
351(4)
Depreciation and amortization.............................. 13,583 2,695 974(1) 17,431
213(2)
(24)(3)
(10)(4)
Other...................................................... 1,013 1,013
----------- --------- ------------- -----------
351,933 59,285 14,238 425,456
----------- --------- ------------- -----------
Operating income....................................... 25,038 10,939 (7,872) 28,105
Other income (expense):
Interest................................................... (7,432) (105) (710)(1) (8,247)
MEI Salons nonrecurring gain (charge)...................... (10,000) (10,000)
Other, net................................................. (537) 42 (495)
----------- --------- ------------- -----------
Income before income taxes............................. 7,069 10,876 (8,582) 9,363
Income taxes................................................. (3,016) (4,157) 3,433(7) (3,740)
----------- --------- ------------- -----------
Net income (loss)...................................... $ 4,053 $ 6,719 $ (5,149) $ 5,623
----------- --------- ------------- -----------
----------- --------- ------------- -----------
Net income (loss) per share:
Primary.................................................... $ 0.26 $ 0.63 $ 0.28
----------- --------- ------------- -----------
----------- --------- ------------- -----------
Fully diluted.............................................. $ 0.26 $ 0.63 $ 0.28
----------- --------- ------------- -----------
----------- --------- ------------- -----------
Common and common equivalent shares outstanding:
Primary.................................................... 15,591 10,673 4,269(5) 19,860
----------- --------- ------------- -----------
----------- --------- ------------- -----------
Fully diluted.............................................. 16,166 10,673 4,269(5) 20,435
----------- --------- ------------- -----------
----------- --------- ------------- -----------
</TABLE>
See notes to unaudited pro forma combined financial statements.
55
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
For accounting purposes, the Merger will be treated as a pooling of
interests. Accordingly, the accompanying unaudited pro forma condensed combined
financial statements give retroactive effect to the Merger and include the
combined operations of Regis and Supercuts for all periods presented.
Upon consummation of the Merger, Regis' annual financial reporting period
which ends on June 30 will be adopted by the combined entity. Accordingly, for
purposes of the Unaudited Pro Forma Condensed Combined Financial Statements, the
historical financial information related to Supercuts has been recast to conform
to Regis' reporting period.
NOTE 2 -- PRO FORMA ADJUSTMENTS
The adjustments to the unaudited pro forma combined financial statements are
discussed below:
1. Represents the consolidation of the investor/franchisee stores of
Supercuts, to conform with Regis' accounting for salon expansion programs.
Subsequent to the Merger, Regis intends to acquire the remaining salons not
previously acquired by Supercuts, given the terms of certain agreements
described in the narrative immediately preceding the Unaudited Pro Forma
Condensed Combined Financial Statements.
2. Represents the adjustment to conform goodwill amortization periods
of Supercuts to that of Regis.
3. Represents the adjustment to conform Supercuts' leasehold
development costs to that of Regis' policy of expensing such costs as
incurred, and corresponding downward adjustment of annual amortization
expense.
4. Represents the adjustment to conform Supercuts' capitalized systems
and software development costs to Regis' policy of expensing such costs as
incurred, and corresponding downward adjustment of annual amortization
expense.
5. Includes the effect of shares to be issued in connection with the
acquisition of Supercuts.
6. Transaction costs of the Merger, representing investment banker and
other professional fees, are expected to be approximately $6.0 million. The
Unaudited Pro Forma Combined Statements of Operations do not reflect these
charges. The Unaudited Pro Forma Combined Balance Sheet reflects these
charges. It is anticipated that these charges will be incurred and
recognized by Regis and Supercuts and paid in the first half of fiscal year
ending June 30, 1997.
7. Represents tax effect of all conforming entries using Regis'
incremental tax rate.
NOTE 3 -- INCOME TAXES
Estimated provision for income taxes related to pro forma adjustments are
based on an assumed combined federal and state income tax rate of approximately
40%, adjusted for certain nondeductible items.
NOTE 4 -- NET INCOME (LOSS) COMMON SHARE
The pro forma combined per common share data has been computed based on the
combined historical income from continuing operations as adjusted for
retroactive changes in certain accounting methods of Supercuts in order to
conform them to those of Regis and on the combined historical weighted average
common shares outstanding. For purposes of this calculation, Supercuts' weighted
average common and common equivalent shares outstanding were multiplied by 0.4,
the assumed Conversion Ratio. See "The Merger -- The Conversion Ratio".
56
<PAGE>
ADJOURNMENT OF SHAREHOLDER MEETINGS
Each proxy solicited hereby by Regis or Supercuts provides for the authority
to vote for an adjournment of the Regis Special Meeting, in the case of Regis,
or the Supercuts Special Meeting, in the case of Supercuts, if an adjournment of
such respective meeting is deemed to be necessary. Regis may seek an adjournment
of the Regis Special Meeting and Supercuts may seek an adjournment of the
Supercuts Special Meeting, in each case for not more than 29 days, in order to
enable each such party to solicit additional votes in favor of the proposals to
be voted on at such meetings. If Regis or Supercuts desire to adjourn their
respective meeting with respect to any proposal, such party will request a
motion that the meeting be adjourned for up to 29 days with respect to such
proposal and no vote will be taken on proposal at the originally scheduled
meeting. Each proxy solicited hereby, if properly signed and returned to Regis
or Supercuts (as applicable) and not revoked prior to its use, will be voted on
any motion for adjournment in accordance with the instructions contained
therein. If no contrary instructions are given, each proxy received will be
voted in favor of any motion to adjourn the respective meeting. Unless revoked
prior to its use, any proxy solicited for the Regis Special Meeting or the
Supercuts Special Meeting will continue to be valid for any adjournment of such
meeting, and will be voted in accordance with instructions contained therein,
and if no contrary instructions are given, for the applicable proposal.
Any adjournment will permit Regis and/or Supercuts to solicit additional
proxies and will permit a greater expression of the shareholders' views with
respect to any proposal subject to such adjournment. Such an adjournment would
be disadvantageous to shareholders who are against the proposal, because an
adjournment will give Regis and/or Supercuts additional time to solicit
favorable votes and thus increase the chances of approving such proposal.
If a quorum is not present at the Regis Special Meeting and/or the Supercuts
Special Meeting, no proposal will be acted upon and the respective boards of
directors of Regis and Supercuts will adjourn their respective meeting to a
later date in order to solicit additional proxies on each of the proposals being
submitted to shareholders.
An adjournment for up to 29 days will not require either the setting of a
new record date or notice of the adjourned meeting as in the case of an original
meeting. Neither Regis nor Supercuts has any reason to believe that an
adjournment of the Regis Special Meeting and/or the Supercuts Special Meeting
will be necessary at this time.
LEGAL MATTERS
The validity of the Regis Common Stock offered hereby and certain other
matters will be passed upon for Regis by Phillips & Gross, P.A., Minneapolis,
Minnesota. Certain legal matters in connection with the Merger will be passed
upon for Supercuts by Willkie Farr & Gallagher, New York, New York.
TAX OPINION
The opinion described under "The Merger -- Certain Federal Income Tax
Consequences" will be rendered by Willkie Farr & Gallagher.
EXPERTS
The consolidated balance sheets of Regis as of June 30, 1996 and 1995, and
the consolidated statements of operations, changes in shareholders' equity and
cash flows for each of the three years in the period ended June 30, 1996,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement, have been incorporated herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing. See "Incorporation of Certain
Documents By Reference."
The consolidated balance sheets of Supercuts as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in
57
<PAGE>
the period ended December 31, 1995, incorporated by reference (from the 1995
Supercuts Form 10-K) into this Joint Proxy Statement/Prospectus and Registration
Statement, which are referred to and made a part hereof, have been audited by
Arthur Andersen LLP, independent public accountants, as set forth in their
report thereon in the 1995 Supercuts Form 10-K and incorporated by reference
herein. Such consolidated financial statements are included herein in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. See "Incorporation of Certain Documents By Reference."
58
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of July 14, 1996 by and between Regis Corporation,
a Minnesota corporation ("BUYER"), RGIS Merger Corp., a Delaware corporation
("SUB") and Supercuts, Inc., a Delaware corporation ("COMPANY"). BUYER 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 Sections 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 3.12 below.
"BREAK-UP FEE" has the meaning set forth in Section 5.13(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 Myron Kunin,
Paul D. Finkelstein, Frank E. Evangelist and/or Bert M. Gross.
"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 5.6(a) below.
"CLOSING" has the meaning set forth in Section 2.2 below.
"CLOSING AGREEMENT" has the meaning set forth in Section 3.10(s)(iv) below.
"CLOSING DATE" has the meaning set forth in Section 2.2 below.
A-1
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY SHARE" means any share of the Common Stock, $.01 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 Thomas L.
Gregory, Steve Price, Lawrence D. Imber and/or John R. Conlisk, Jr.
"CONVERSION RATIO" has the meaning set forth in Section 2.5 below.
"DELAWARE GENERAL CORPORATION LAW" means the General Corporation Law of the
State of Delaware, Title 8, Delaware Code 1953, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Article 3 below.
"EFFECTIVE TIME" has the meaning set forth in Section 2.4(a) below.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section 3.13(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.
"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.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"HAZARDOUS SUBSTANCE" has the meaning set forth in Section 3.13(b) below.
"INDEMNITEE" has the meaning set forth in Section 5.6(a) below.
"IRS" means the Internal Revenue Service.
"JOINT PROXY STATEMENT" has the meaning set forth in Section 3.18(ii) below.
"LOSS" and "LOSSES" have the meanings set forth in Section 5.6(a) below.
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 3.1 below.
"MATERIAL SUBSIDIARIES" means Supercuts Franchise Corp., Supercuts Corporate
Shops, Inc., SC Capital, Inc. and Supercuts (New York), 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 Sections 3.6
and 4.6 below.
"MULTIEMPLOYER PENSION PLANS" has the meaning set forth in Section 3.12(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.
A-2
<PAGE>
"PARTY" has the meaning set forth in the preface above.
"PENSION PLANS" has the meaning set forth in Section 3.12 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 BUYER STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of a majority of the BUYER Shares in favor of this Agreement and the
Merger.
"REQUISITE COMPANY STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of more than 50% of the votes present at a meeting at which a quorum is
present 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.
"SPECIAL BUYER MEETING" has the meaning set forth in Section 5.8 below.
"SPECIAL COMPANY MEETING" has the meaning set forth in Section 5.7 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 3.10(s)(i) below.
"TAX RETURN" has the meaning set forth in Section 3.10(s)(ii) below.
"TAX RULING" has the meaning set forth in Section 3.10(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 Delaware.
A-3
<PAGE>
2.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Phillips & Gross,
P.A., 5420 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota,
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)
SUB and COMPANY will file with the Secretary of State of the State of Delaware a
Certificate of Merger in such form as required by, and executed and certified in
accordance with, the relevant provisions of the Delaware General Corporation Law
(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 Delaware. The Merger shall have the effect set forth in
the Delaware General Corporation Law. 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. At and as of the Effective Time, each COMPANY Share shall
be canceled and retired and shall be converted into the right to receive .4000
of one BUYER Share (the ratio of .4000 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. In addition, the COMPANY's Board of
Directors shall take all actions required to ensure that the Rights (as defined
in the Rights Agreement, dated as of April 2, 1996, by and between COMPANY and
U.S. Stock Transfer Corporation) shall be inapplicable to the Merger and the
transactions contemplated by this Agreement.
2.6 STOCK OPTIONS 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 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 holders of
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restricted stock of COMPANY ("Restricted Stock") held pursuant to a May 1996
grant of such restricted stock (the "Restricted Stock Grant") 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.
As an accommodation to BUYER and without creating any implication that such
consent is required for such adjustments to be effective, COMPANY shall obtain
the written acknowledgement of Steve Price and Thomas Gregory, and shall use its
reasonable efforts to obtain the written acknowledgements of John R. Conlisk,
Gary Gapp, and Daniel Lechin, that the adjustment of Stock Options pursuant to
this section satisfies in full any obligation the COMPANY may have to such
holder with respect to such Stock Options. After the date hereof, COMPANY shall
not grant any additional Stock Options under any Option Plans or otherwise.
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 Conversion Ratio. 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.
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(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 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.
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
and 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
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the jurisdiction of its incorporation. Each of COMPANY 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 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 30,000,000 COMPANY Shares, of which as of June 30, 1996, 11,996,513
COMPANY Shares are issued and outstanding and 806,840 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.
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
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 Hart-Scott-Rodino Act, the Minnesota Business Corporation Act, the
Delaware General Corporation Law, 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.
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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 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.
3.6 FINANCIAL STATEMENTS. COMPANY has filed a Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1996 (the "MOST RECENT FISCAL
QUARTER END"), and an Annual Report on Form 10-K for the fiscal year ended
December 31, 1995. 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
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; PROVIDED,
HOWEVER, that the interim statements are subject to normal year-end adjustments.
3.7 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 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 material
change by the COMPANY in accounting principles or methods.
3.8 INTENTIONALLY LEFT BLANK.
3.9 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 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 as of the date hereof against the COMPANY or
any of its Subsidiaries except for lawsuits covered by insurance maintained by
the COMPANY.
3.10 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 Tax Returns, examination reports, statements of
deficiencies assessed against or agreed to by any of COMPANY and its
Subsidiaries since July 1, 1993 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 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.
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(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) EXPIRATION OF STATUTE OF LIMITATIONS. The statute of limitations
for the assessment of all Taxes has expired for all applicable material Tax
Returns of COMPANY and each of its Subsidiaries or those Tax Returns have
been examined by the appropriate taxing authorities for all Tax periods
ended before the date hereof, and no deficiency for any Taxes has been
proposed, asserted or assessed against COMPANY or any of its Subsidiaries
that has not been resolved and paid in full.
(i) 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.
(j) 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.
(k) 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 adverse effect after the Closing Date.
(l) TAX SHARING AGREEMENTS. Neither COMPANY nor any Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(m) 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 Section 162(m).
(n) LIABILITY FOR OTHERS. None of COMPANY or any of its Subsidiaries
(A) has any material 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.
(o) 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. Section 1.368-1(d).
(p) 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,
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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.
(q) INFORMATION. The COMPANY has delivered to the BUYER the following
information, which is materially correct and complete, with respect to each
of the COMPANY and its Subsidiaries (or, in the case of clause (b) below,
with respect to each of the Subsidiaries) as of the most recent practical
date (as well as on an estimated proforma basis as of the Closing giving
effect to the consummation of the transactions contemplated hereby):
(i) The amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit, or excess
charitable contribution allocable to the COMPANY or Subsidiary; and
(ii) The amount of any deferred gain or loss allocable to the COMPANY
or Subsidiary arising out of any deferred intercompany transaction.
(r) 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).
(s) 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 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.
3.11 LABOR MATTERS. Except as set forth in Schedule 3.11, 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 3.11, 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.
3.12 ERISA COMPLIANCE.
(a) Schedule 3.12 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 has delivered or made available to
BUYER true, complete and correct copies
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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 3.12, 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 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 3.12, 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
lability under Section 502(i) or (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.
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(d) With respect to any Benefit Plan that is an employee welfare benefit
plan, except as disclosed in Schedule 3.12, (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 186z(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 3.12, each Benefit Plan conforms in all
material respects 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 3.12, 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 3.12, 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 3.12, 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 3.12, 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) 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.
3.13 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.13, 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 3.13, 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, from 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, or any other property arising from the conduct of operations on the
COMPANY's or any of its Subsidiaries' properties, or (iii) received any written
notice (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
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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 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. No
lien has been placed upon any of the COMPANY's properties or its Subsidiaries'
properties under any Environmental Law.
3.14 MATERIAL CONTRACT AND AGREEMENTS.
(a) Except as listed on Schedule 3.14, 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 3.14, no
default in performance or failure to perform under, and no anticipatory breach
of, any of the contracts listed on Schedule 3.14 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 COMPANY'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 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 3.14, neither the COMPANY nor any
Subsidiary is subject to any material 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.
3.15 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 mark rights, copyrights and other proprietary intellectual property
rights and computer programs currently used in the business which are material
to the business, financial condition or results of operations of the COMPANY and
its Subsidiaries taken as a whole. Except as set forth on Schedule 3.15, 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 mark,
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 mark, copyright or other intellectual
property right.
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3.16 CERTAIN FEES. With the exception of the engagement of Donaldson,
Lufkin and Jenrette by COMPANY, 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.
3.17 COMPANY BOARD AND DIRECTORS ACTION. The Board of Directors of COMPANY
(at a meeting duly called and held) has by the requisite vote of all directors
present, based upon the trading price of BUYER's Shares as of the date hereof,
(a) determined that the Merger is advisable and in the best interest of the
COMPANY and its shareholders, subject to future exercise of its fiduciary duties
(b) resolved, subject to future exercise of fiduciary duties, to recommend the
approval of this Agreement and the Merger by the holders of the COMPANY Shares
and directed, subject to future exercise of its fiduciary duties, that the
Merger be submitted for consideration by the holders of the COMPANY Shares at
the Meeting and (c) adopted a resolution to elect not to be subject, to the
extent permitted by applicable law, to any state takeover law that may purport
to be applicable to the Merger and the transactions contemplated by this
Agreement.
3.18 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 joint proxy statement, in definitive form, relating to the
meetings of BUYER and COMPANY shareholders to be held in connection with the
Merger (the "JOINT PROXY STATEMENT") will, at the date(s) mailed to
shareholders and at the times of the meetings 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;
3.19 POOLING OF INTERESTS ACCOUNTING. After review and discussion with
Arthur Andersen & Co. SC, 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.
3.20 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
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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 25,000,000 BUYER Shares, of which as of July 9, 1996, 18,066,055 BUYER Shares
are issued and outstanding. The total number of shares subject to options is
1,166,868. 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 subject to receiving the Requisite BUYER 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 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 Requisite BUYER
Stockholder Approval and 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.
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
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 Hart-Scott-Rodino Act, the Minnesota Business Corporation Act, the Delaware
General Corporation Law, 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 March 31, 1996 (the "MOST RECENT FISCAL QUARTER
END"), and an Annual Report on Form 10-K for the fiscal year ended June 30,
1995. 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
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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 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. With the exception of the engagement of Merrill Lynch &
Co. by BUYER, 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. Section 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 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; PROVIDED, HOWEVER, that the Disclosure
Schedule lists all pending lawsuits against the BUYER or any of its Subsidiaries
except for lawsuits covered by products liability insurance maintained by the
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 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, 1993 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 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 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.
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(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) EXPIRATION OF STATUTE OF LIMITATIONS. The statute of limitations
for the assessment of all Taxes has expired for all applicable material Tax
Returns of BUYER and each of its Subsidiaries or those Tax Returns have been
examined by the appropriate taxing authorities for all Tax periods ended
before the date hereof, and no deficiency for any Taxes has been proposed,
asserted or assessed against BUYER or any of its Subsidiaries that has not
been resolved and paid in full.
(i) 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.
(j) POWERS OF ATTORNEY. No power of attorney currently in force has
been granted by BUYER or any of its Subsidiaries concerning any material Tax
matter.
(k) 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 adverse effect after the Closing Date.
(l) TAX SHARING AGREEMENTS. Neither BUYER nor any Subsidiary is a
party to any agreement relating to allocating or sharing of Taxes.
(m) 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 Section 162(m).
(n) 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 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.
(o) INFORMATION. The BUYER has delivered to the COMPANY the following
information, which is correct and complete, with respect to each of the
BUYER and its Subsidiaries (or, in the case of clause (b) below, with
respect to each of the Subsidiaries) as of the most recent practical date
(as well as on an estimated pro forma basis as of the Closing giving effect
to the transaction contemplated hereby):
(i) The amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax credit, or excess
charitable contribution allocable to the BUYER or Subsidiary; and
(ii) The amount of any deferred gain or loss allocable to the COMPANY
or Subsidiary arising out of any deferred intercompany transaction.
(p) 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.
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(q) 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).
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 COMPANY 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 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.
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 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
lability under Section 502(i) or (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 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 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 186z(b)(1) of the Social
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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 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 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) 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, 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, from 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, or any other
property arising from the conduct of operations on the BUYER's or any of its
Subsidiaries' properties, or (iii) received any written notice (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 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
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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. 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 4.15, 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 4.15, 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.
(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 mark 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 mark, 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 mark,
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 (i) determined that the Merger is
advisable and in the best interests of the BUYER and its shareholders, (ii)
resolved to recommend the approval of this Agreement and the Merger and the
issuance of BUYER Shares in connection therewith by the holders of the BUYER
Shares and directed that the Merger be submitted for consideration by the
holders of the Common Stock at the Meeting and (iii) adopted a resolution to
elect not to be subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement.
(b) The Board of Directors of SUB at a meeting duly called and held) has by
the requisite vote of all directors present (i) determined that the Merger is
advisable and in the best interests of the SUB and its shareholders, (ii)
resolved to recommend the approval of this Agreement and the Merger and
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the issuance of BUYER Shares in connection therewith by the holders of the BUYER
Shares and directed that the Merger be submitted for consideration by the
holders of the Common Stock at the Meeting and (iii) adopted a resolution to
elect not to be subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to the Merger and the
transactions contemplated by this Agreement.
4.18 JOINT 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 Joint Proxy Statement, in definitive form, relating to the meetings of the
COMPANY and BUYER shareholders to be held in connection with the Merger will, at
the date(s) mailed to shareholders and at the times of the meetings 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 and the Joint Proxy 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 NON-SURVIVAL OF CERTAIN REPRESENTATIONS AND WARRANTIES. No
representations or warranties contained in Section 4 of this Agreement shall
survive the Merger.
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. 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
arrangement or take any action
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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, provided that COMPANY may pay a "stay bonus" of up to three (3)
months salary to any employee.
(f) DEBT. The COMPANY and its Subsidiaries will not, (a) assume or
incur any indebtedness, except (i) in the ordinary course of business and
(ii) 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.
(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 to franchisees.
(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.
5.2 ACCESS AND INFORMATION. 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 Hart-Scott-Rodino
Act with respect to the Merger and the other transactions contemplated by this
Agreement and (b) cooperate with one another (i) in promptly
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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 STATE TAKEOVER STATUTES. The COMPANY will, upon the request of BUYER,
take all reasonable steps to exempt the Merger from the requirements of Delaware
General Corporation Law Section 203 by action of the COMPANY's Board of
Directors or otherwise.
5.5 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, indemnification, severance, termination,
consulting and retirement agreements to which the COMPANY or any of its
Subsidiaries is presently a party.
5.6 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, suits 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 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 Joint 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 5.6. This
Section 5.6(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 5.6.
5.7 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, unless the Board of Directors of the
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COMPANY shall have determined, in the exercise of its fiduciary duties, not to
recommend that holders of COMPANY Common Stock approve the Merger and this
Agreement. The board of directors of the COMPANY will, subject to its fiduciary
obligations, recommend that holders of COMPANY Shares vote in favor of and
approve the Merger and this Agreement at the Special COMPANY Meeting.
5.8 SPECIAL BUYER MEETING. The BUYER shall take all action necessary, in
accordance with applicable law and its articles of incorporation and bylaws, to
convene a special meeting of the holders of BUYER Shares ("SPECIAL BUYER
MEETING") as promptly as practicable for the purpose of considering and taking
action upon this Agreement and approving the issuance of BUYER Shares as Merger
Consideration to the extent provided herein. The board of directors of BUYER
will recommend that holders of BUYER Shares vote in favor of and approve the
Merger, this Agreement and the issuance of such BUYER Shares at the Special
BUYER Meeting.
5.9 JOINT PROXY STATEMENT; REGISTRATION STATEMENT.
(a) As soon as practicable after the date hereof, BUYER and the COMPANY
shall prepare the Joint Proxy Statement, file it with the SEC, use their best
efforts to respond to comments of the Staff of the SEC and clear the Joint Proxy
Statement with the Staff of the SEC. Promptly after such clearance BUYER and the
COMPANY shall mail the Joint Proxy Statement to all holders of record of BUYER
Shares and COMPANY Shares who are holders on the record date for the respective
meetings of shareholders of BUYER and the COMPANY. BUYER and the COMPANY shall
cooperate with each other in the preparation of the Joint Proxy Statement and
the processing thereof with the SEC.
(b) BUYER shall prepare and file with the SEC as soon as is reasonably
practicable the Registration Statement following receipt of comments from the
Staff of the SEC on the Joint 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.
5.10 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 the general counsel of the COMPANY, identifying all persons
who were in his or its opinion, as of the date of the Joint 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.
5.11 ADDITIONAL AGREEMENTS. (a) Subject to the terms and conditions herein
provided each of the parties hereto agrees to use its best efforts to take
promptly, or cause to be taken, all actions and to
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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
Hart-Scott-Rodino 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.
5.12 INTENTIONALLY LEFT BLANK.
5.13 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, 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 and, based upon the advice of outside counsel, that the failure to
recommend or accept such Acquisition Proposal would violate the fiduciary duties
of the Board of Directors to COMPANY's Stockholders under the applicable law,
then upon written notice to BUYER, COMPANY may terminate this Agreement and the
transactions contemplated hereby.
(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 $3,750,000 ("Break-Up Fee"). Further, if (a)
the Agreement is terminated and the condition contained in Section 6.2(i) has
not been satisfied by January 2, 1997 and (b) within six months of such
termination the COMPANY executes a definitive agreement to sell the COMPANY to
another Person, at a price per share that exceeds the price per share payable
hereunder (calculated as of the date hereof) which Person (either alone or in
conjunction with other Persons) had, prior to the date hereof,
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submitted to the COMPANY a specific proposal in a principal capacity and
conducted substantial due diligence review of the COMPANY with respect to an
acquisition of the COMPANY, COMPANY shall pay to BUYER the 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 Date, which would disqualify the Merger as
"reorganization" within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
(d) TAX RETURNS. BUYER and COMPANY shall jointly prepare and file on a
timely basis any Tax Return required to be filed under the New York State Real
Property Transfer Gains Tax, the New York State Real Estate Transfer Tax, and
the New York City Real Property Transfer Tax by virtue of the transactions
contemplated by this Agreement and BUYER shall pay any Tax due in connection
therewith on behalf of COMPANY and its shareholders.
5.14 BUYER BOARD OF DIRECTORS. The Board of Directors of BUYER shall cause
two designees of COMPANY to be elected to BUYER's Board of Directors as soon as
practicable after the Effective Time and BUYER shall nominate such designees for
election at the subsequent three Annual Meetings of BUYER shareholders and shall
use its best efforts to cause such COMPANY representatives to be elected at such
meetings. Of the COMPANY's designees, one, Thomas Gregory, shall be appointed to
the Audit Committee of BUYER's Board and both Thomas Gregory and Steve Price
shall be the majority of a new Committee of Buyer's Board that will control the
current COMPANY litigation being assumed by BUYER (and related litigation that
subsequently ensues) in the Merger and be in existence until such litigation has
been finalized.
5.15 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.
5.16 SUB ADVISORY BOARD COMMITTEE. BUYER and each current non-employee
COMPANY Director will, promptly after the Effective Time, execute Consulting
Agreements providing that for a period of two years from the Effective Time in
exchange for consulting services as members of a newly established Advisory
Board Committee that will advise BUYER and the President of SUB with respect to
the operations of SUB, such Directors shall receive from BUYER an amount of
restricted stock in BUYER equal to the number of shares of restricted stock held
in COMPANY pursuant to the Restricted Stock Grant multiplied by the Conversion
Ratio. The terms of such restricted stock of BUYER shall be the same as the
terms of the Restricted Stock Grant except as set forth herein. The members of
the Advisory Board Committee will meet (either in person or by telephone)
quarterly to review the status of the business of the Surviving Corporation and
the BUYER and the litigation in which the COMPANY is currently engaged and to
advise the President of the SUB in respect of the business of the Surviving
Corporation and the committee of Board of Directors of BUYER that is controlling
SUB litigation in respect of such litigation, the SUB Advisory Board Committee
shall have reasonable access to information concerning BUYER and SUB.
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 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;
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(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 APPROVALS. This Agreement and the Merger shall have
received the Requisite COMPANY Stockholder Approval and the Requisite BUYER
Stockholder Approval;
(e) HSR WAITING PERIOD. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(f) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act;
(g) LEGAL OPINIONS. BUYER shall have received from counsel to COMPANY
an opinion in substantially the form of Exhibit A.
(h) BUYER shall not have received a final objection from the SEC to
BUYER's accounting for the Merger as a "pooling of interests" regardless of
any sales of COMPANY or BUYER Shares by the current COMPANY shareholder
holding more than 10% of the outstanding COMPANY Shares.
(i) MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change from the date hereof in the business, financial condition or
operations of COMPANY, except changes contemplated, permitted or required by
this Agreement and changes resulting from a change in general economic
conditions;
(j) 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
(other than with respect to Requisite BUYER Stockholder Approval).
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 Article 4 above shall be true and correct in all material respects at and
as of the Closing Date 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 APPROVALS. This Agreement and the Merger shall have
received the Requisite BUYER Stockholder Approval and Requisite COMPANY
Stockholder Approval;
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(e) HART-SCOTT-RODINO ACT. All applicable waiting periods (and any
extension thereof) under the Hart-Scott-Rodino 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;
(h) LEGAL OPINION. COMPANY shall have received from counsel to BUYER
an opinion, addressed to COMPANY, in substantially the form of Exhibit B,
and dated as of the Closing Date;
(i) FAIRNESS OPINION. The Board of Directors of COMPANY shall have
received from Donaldson, Lufkin and Jenrette a written opinion, dated as of
the date of mailing the Joint 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 Willkie Farr &
Gallagher, 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, 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,
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 January 1, 1997; provided that the terminating party is not
then in material breach of its representations, warranties or obligations
under this Agreement; or
(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 Section 5.13(a) hereof, upon payment of
the Break-Up Fee.
7.2 EFFECT OF TERMINATION.
If any Party terminates this Agreement pursuant to Section 7.1(a), (b) or
(c) above, all rights and obligations by the Parties hereunder shall terminate
without any liability of any Party to any other
A-28
<PAGE>
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 5.13(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
Article 2 above concerning issuance of the BUYER Shares and are intended for the
benefit of the COMPANY Stockholders and, (ii) the provisions in Section 5.13(c)
are intended for the benefit of the holders of COMPANY Shares, (iii) the
provisions in Section 5.6 above concerning indemnification are intended for the
benefit of the individuals specified therein and their respective legal
representatives.
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:
Supercuts, Inc.
550 California Street
San Francisco, CA 94104
Attention: President
Copy to:
Jack H. Nusbaum, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4669
Facsimile: (212) 821-8111
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<PAGE>
If to BUYER or SUB:
Regis Corporation
7201 Metro Boulevard
Minneapolis, MN 55439
Attention: President
Copy to:
Bert M. Gross, Esq.
Phillips & Gross, P.A.
5420 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Facsimile: (612) 349-2824
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 Delaware without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the applicable of the laws
of any jurisdiction other than the State of Delaware.
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 Delaware General Corporation Law. 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.
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 5.13 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.
A-30
<PAGE>
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.
SUPERCUTS, INC.
("COMPANY")
By: /s/ THOMAS GREGORY
-----------------------------------
Title: CHAIRMAN OF THE BOARD
REGIS CORPORATION
("BUYER")
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
RGIS MERGER CORP.
("SUB")
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
A-31
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
Amendment to Agreement entered into as of July 29, 1996 (the "Amendment") by
and between Regis Corporation, a Minnesota corporation ("BUYER"), RGIS Merger
Corp., a Delaware corporation ("SUB") and Supercuts, Inc. a Delaware corporation
("COMPANY"). BUYER and COMPANY are referred to individually herein as a "PARTY"
and collectively herein as the "PARTIES."
WHEREAS, the Parties desire to amend the Agreement and Plan of Merger, dated
as of July 14, 1996, by and between BUYER, SUB and COMPANY to clarify the
COMPANY stockholder vote required to approve the merger;
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. AMENDMENT TO DEFINITIONS. The defined term, "Requisite COMPANY
Stockholder Approval" is hereby amended and restated in its entirety to read as
follows:
"REQUISITE COMPANY STOCKHOLDER APPROVAL" means the affirmative vote of
the holders of a majority of the COMPANY Shares in favor of this Agreement
and the Merger.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY.
2.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. COMPANY is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
2.2 AUTHORIZATION OF TRANSACTION. COMPANY has full corporate power and
authority to execute and deliver this Amendment. The execution and delivery of
this Amendment have been duly approved and no other corporate proceedings on the
part of the COMPANY are necessary to authorize this Amendment. Assuming that
this Amendment constitutes a valid and binding obligation of BUYER, this
Amendment 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. REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. BUYER is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
3.2 AUTHORIZATION OF TRANSACTION. BUYER and SUB have full corporate power
and authority to execute and deliver this Amendment. The execution and delivery
of this Amendment have been duly approved and no other corporate proceedings on
the part of the BUYER are necessary to authorize this Amendment. Assuming that
this Amendment constitutes a valid and binding obligation of COMPANY, this
Amendment 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.
4. MISCELLANEOUS. Except as amended hereby, all terms and conditions of
the Merger Agreement shall remain in full force and effect.
A-32
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
SUPERCUTS, INC.
("COMPANY")
By: /s/ THOMAS GREGORY
-----------------------------------
Title: CHAIRMAN OF THE BOARD
REGIS CORPORATION
("BUYER")
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
RGIS MERGER CORP.
("SUB")
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
A-33
<PAGE>
AMENDMENT #2 TO AGREEMENT AND PLAN OF MERGER
Amendment to Agreement entered into as of August 26, 1996 (the "Amendment")
by and between Regis Corporation, a Minnesota corporation ("BUYER"), RGIS Merger
Corp., a Delaware corporation ("SUB") and Supercuts, Inc. a Delaware corporation
("COMPANY"). BUYER and COMPANY are referred to individually herein as a "PARTY"
and collectively herein as the "PARTIES."
WHEREAS, the Parties desire to amend the Agreement and Plan of Merger, dated
as of July 14, 1996, as amended on July 29, 1996 by and between BUYER, SUB and
COMPANY to clarify the BUYER stockholder vote required to approve the merger;
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. AMENDMENT TO DEFINITIONS. The defined term, "Requisite BUYER
Stockholder Approval" is hereby amended and restated in its entirety to read as
follows:
"REQUISITE BUYER STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of a majority of the total BUYER votes cast at the BUYER meeting in
person or by proxy.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY.
2.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. COMPANY is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
2.2 AUTHORIZATION OF TRANSACTION. COMPANY has full corporate power and
authority to execute and deliver this Amendment. The execution and delivery of
this Amendment has been duly approved and no other corporate proceedings on the
part of the COMPANY are necessary to authorize this Amendment. Assuming that
this Amendment constitutes a valid and binding obligation of BUYER, this
Amendment 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. REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. BUYER is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
3.2 AUTHORIZATION OF TRANSACTION. BUYER and SUB have full corporate power
and authority to execute and deliver this Amendment. The execution and delivery
of this Amendment has been duly approved and no other corporate proceedings on
the part of the BUYER are necessary to authorize this Amendment. Assuming that
this Amendment constitutes a valid and binding obligation of COMPANY, this
Amendment 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.
4. MISCELLANEOUS. Except as amended hereby, all terms and conditions of
the Merger Agreement shall remain in full force and effect.
A-34
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
SUPERCUTS, INC.
("COMPANY")
By: /s/ THOMAS GREGORY
-----------------------------------
Title:CHAIRMAN OF THE BOARD
REGIS CORPORATION
("BUYER")
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
RGIS MERGER CORP.
("SUB"]
By: /s/ PAUL FINKELSTEIN
-----------------------------------
Title: PRESIDENT
A-35
<PAGE>
APPENDIX B
[LOGO]
September 24, 1996
Board of Directors
Regis Corporation
7201 Metro Boulevard
Minneapolis, Minnesota 55439
Attention: Myron Kunin
Chairman of the Board
Gentlemen:
Regis Corporation (the "Company"), RGIS Merger Corporation, a wholly owned
subsidiary of the Company (the "Purchaser"), and Supercuts, Inc. (the "Subject
Company") have entered into an agreement (the "Agreement") pursuant to which the
Subject Company will be merged with the Purchaser in a transaction (the
"Merger") in which each share of the Subject Company's common stock, par value
$.01 per share (the "Shares"), will be converted into the right to receive 0.40
shares of the common stock par value $.05 of the Company (the "Company Shares").
The Merger is expected to be considered by the shareholders of the Subject
Company and the Company at shareholders' meetings to be held on or about October
23, 1996 and consummated on or shortly after the date of such meetings.
You have asked us whether, in our opinion, the proposed consideration to be
paid by the Company pursuant to the Merger is fair to the Company from a
financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's Annual Reports, Forms 10-K and
related financial information for the five fiscal years ended December 31,
1995 and the Subject Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 30, 1996 and
June 30, 1996;
(2) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended June 30, 1995 and the
Company's Forms 10-Q and the related unaudited financial information for the
quarterly periods ending September 30, 1995, December 31, 1995 and March 30,
1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Subject Company and the Company, furnished to us by the Subject Company and
the Company, respectively;
(4) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective businesses and
prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Company Shares and compared them with those of certain
publicly traded companies which we deemed to be reasonably similar to the
Subject Company and the Company, respectively;
B-1
<PAGE>
(6) Compared the results of operations of the Subject Company and the
Company with that of certain companies which we deemed to be reasonably
similar to the Subject Company and the Company, respectively;
(7) Compared the proposed financial terms of the transaction
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions;
(8) Considered the pro forma effect of the Merger on the Company's
capitalization ratios and earnings and cash flow;
(9) Reviewed the Agreement dated July 14, 1996; and
(10) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by the Subject
Company and the Company, and we have not independently verified such information
or undertaken an independent appraisal of the assets of the Subject Company or
the Company. With respect to the financial forecasts furnished by the Subject
Company and the Company, we have assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgment of the Subject
Company's or the Company's management as to the expected future financial
performance of the Subject Company or the Company, as the case may be.
On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be paid by the Company pursuant to the Merger is
fair to the Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED
By /s/ DEBORAH H. QUAZZO
-----------------------------------
Title: DIRECTOR INVESTMENT BANKING
GROUP
B-2
<PAGE>
[LOGO]
September 23, 1996
Board of Directors
Supercuts, Inc.
550 California Street
San Francisco, California 94104
Dear Sirs and Madam:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Supercuts, Inc. (the "Company") of the consideration
to be received by such shareholders pursuant to the terms of the Agreement and
Plan of Merger dated as of July 14, 1996 (the "Agreement") among Regis
Corporation ("Regis"), the Company and RGIS Merger Corp., a wholly owned
subsidiary of Regis, pursuant to which the Company will be merged (the "Merger")
with and into RGIS Merger Corp.
Pursuant to the Agreement, each share of common stock, par value $0.01 per
share of the Company will be converted into the right to receive 0.4 shares (the
"Conversion Ratio") of common stock, $0.05 par value per share of Regis ("Regis
Common Stock").
In arriving at our opinion, we have reviewed the Agreement and the exhibits
thereto. We also have reviewed financial and other information that was publicly
available or furnished to us by the Company and Regis including information
provided during discussions with their respective managements. Included in the
information provided during discussions with the respective managements were
certain financial projections of the Company for the period beginning January 1,
1996 and ending December 31, 1997 prepared by the management of the Company and
certain financial projections of Regis for the period beginning July 1, 1995 and
ending June 30, 1997 prepared by the management of Regis. In addition, we have
compared certain financial and securities data of the Company and Regis with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading volumes of the common stock of the
Company and Regis, reviewed prices and premiums paid in other business
combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion. We were
requested by the Company's Board of Directors not to, and we did not, solicit
the interest of any other party in acquiring the Company.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company and
Regis or its representatives, or that was otherwise reviewed by us. In
particular, we have relied upon the estimates of the management of the Company
of the operating synergies achievable as a result of the Merger. With respect to
the financial projections
C-1
<PAGE>
supplied to us, we have assumed that they have been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
managements of the Company and Regis as to the future operating and financial
performance of the Company and Regis. We have not assumed any responsibility for
making an independent evaluation of the Company's assets or liabilities or for
making any independent verification of any of the information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
price at which Regis Common Stock will actually trade at any time. Our opinion
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction.
DLJ, as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
has performed investment banking and other services for the Company in the past
and has been compensated for such services.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Conversion Ratio is fair to the shareholders of the
Company from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:______/s/ THOMAS M. BENNINGER______
Managing Director
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan; (2) acted in good faith; (3) received no
improper personal benefit and Section 302A.255 (with respect to director
conflicts of interest), if applicable, has been satisfied; (4) in the case of a
criminal proceeding, had no reasonable cause to believe the conduct was
unlawful; and (5) reasonably believed that the conduct was in the best interests
of the corporation in the case of acts or omissions in such person's official
capacity for the corporation or reasonably believed that the conduct was not
opposed to the best interests of the corporation in the case of acts or
omissions in such person's official capacity for other affiliated organizations.
Regis carries a directors' and officers' liability insurance policy.
ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<S> <C>
2 Agreement and Plan of Merger, dated as of July 14, 1996 and amendments thereto, among Regis
Corporation, RGIS Merger Corporation and Supercuts, Inc. (included as Appendix A to the Joint Proxy
Statement/Prospectus that forms a part of this Registration Statement on Form S-4 (schedules omitted
-- the Registrant agrees to furnish a copy of any schedule to the Commissioner upon request)).
3.1 Election of the Registrant to become governed by Minnesota Statutes Chapter 302A and Restated
Articles of Incorporation of the Registrant, dated March 11, 1983; Articles of Amendment to Restated
Articles of Incorporation, dated October 29, 1984; Articles of Amendment to Restated Articles of
Incorporation, dated August 14, 1987; Articles of Amendment to Restated Articles of Incorporation,
dated October 21, 1987. (Filed as Exhibit 3(a) to the Registrant's Registration Statement on Form
S-1 (Reg. No. 40142) and incorporated herein by reference.)
3.2 By-Laws of the Registrant. (Filed as Exhibit 3(c) to the Registrant's Registration Statement on From
S-1 (Reg. No. 40142) and incorporated herein by reference.)
5** Opinion of Phillips & Gross, P.A. regarding the validity of Regis Corporation's common stock to be
issued in the Merger.
8** Opinion of Willkie, Farr & Gallagher regarding certain tax matters relating to the Merger.
10.1 Employment and Deferred Compensation Agreement, dated October 13, 1988, between Regis Holding Corp.
and Paul D. Finkelstein. (Filed as Exhibit 10(c) to the Registrant's Registration Statement on From
S-1 (Reg. No. 40142) and incorporated herein by reference.)
10.2 Employment and Deferred Compensation Agreement, dated October 26, 1988, between Regis Holding Corp.
and Christopher A. Fox. (Filed as Exhibit 10(e) to the Registrant's Registration Statement on From
S-1 (Reg. No. 40142) and incorporated herein by reference.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.3 Employment and Deferred Compensation Agreement, dated October 13, 1988, between Regis Holding Corp.
and Frank E. Evangelist. (Filed as Exhibit 10(f) to the Registrant's Registration Statement on From
S-1 (Reg. No. 40142) and incorporated herein by reference.)
10.4 Northwestern Mutual Life Insurance Company Policy Number 10327324, dated June 1, 1987, face amount
$400,000 owned by the Registrant, insuring the life of Paul D. Finkelstein and providing for
division of death proceeds between the Registrant and the insured's designated beneficiary
(split-dollar plan). (Filed as Exhibit 10(g) to the Registrant's Registration Statement on Form S-1
(Reg. No. 40142) and incorporated herein by reference.)
10.5 Schedule of omitted split-dollar insurance policies. (Filed as Exhibit 10(h) to the Registrant's
Registration Statement on Form S-1 (Reg. No. 40142) and incorporated herein by reference.)
10.6 Note Agreement dated as of June 21, 1991 between the Registrant and The Prudential Insurance Company
of America (Filed as Exhibit 10(o) to the Registrant's Report on 10-K dated September 26, 1991 for
the year ended June 30, 1991 and incorporated herein by reference).
10.7 Modification of Note Agreement in 10(f) dated July 21, 1995 (Filed as Exhibit 10(g) to the
Registrant's Report on 10-K dated September 27, 1995 for the year ended June 30, 1995 and
incorporated herein by reference).
10.8 Note and Convertible Debenture Purchase Agreement dated as of December 31, 1992 between the
Registrant and T. Rowe Price Strategic Partners II, L.P., a Delaware limited partnership (Filed as
Exhibit 10(p) to the Registrant's Report on 10-K dated September 27, 1993 for the year ended June
30, 1993 and incorporated herein by reference).
10.9 Modification of Note and Convertible Debenture Purchase Agreement in 10(h) dated July 21, 1995 (Filed
as Exhibit 10(i) to the Registrant's Report on 10-K dated September 27, 1995 for the year ended June
30, 1995 and incorporated herein by reference).
10.10 Employee Stock Ownership Plan and Trust Agreement dated as of May 15, 1992 between the Registrant and
Myron Kunin and Paul D. Finkelstein, Trustees (Filed as Exhibit 20(q) to the Registrant's Report on
10-K dated September 27, 1993 for the year ended June 30, 1993 and incorporated herein by
reference).
10.11 Executive Stock Award Plan Trust Agreement dated as of July 1, 1992 between the Registrant and Myron
Kunin, Trustee (Filed as Exhibit 10(r) to the Registrant's Report on 10-K dated September 27, 1993
for the year ended June 30, 1993 and incorporated herein by reference).
10.12 Employment and Deferred Compensation Agreement, dated July 1, 1992, between the Company and William
E. Halfacre. (Filed as Exhibit 10(p) to the Registrant's report on 10-K dated September 28, 1994 for
the year ended June 30, 1994 and incorporated herein by reference).
10.13 Senior Revolving Credit Agreement as of June 21, 1994 between the Registrant and Lasalle National
Bank and Bank Hapoalim. (Filed as Exhibit 10(r) as part of the Registrant's Report on 10-K dated
September 28, 1994 for the year ended June 30, 1994 and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<S> <C>
10.14 Modification to Senior Revolving Credit Agreement in 10(m) dated July 20, 1995 (Filed as Exhibit
10(n) to the Registrant's Report of 10-K dated September 27, 1996 for the year ended June 30, 1995
and incorporated herein by reference).
10.15 Employee Profit Sharing Plan and Trust Agreement, amended June 22, 1994 between the Registrant and
Myron Kunin, Trustee. (Filed as Exhibit 10(t) to the Registrant's Report on 10-K dated September 28,
1994 for the year ended June 30, 1994 and incorporated herein by reference).
10.16 Compensation Contribution Agreement dated June 27, 1994 between the Company and Myron Kunin. (Filed
as Exhibit 10(t) to the Registrant's Report on 10-K dated September 28, 1994 for the year ended June
30, 1994 and incorporated herein by reference).
10.17 Agreements for Sale and Purchase of Shares dated as of August 19, 1995 between the Registrant and the
selling shareholders of Essanelle Limited and S&L du LAC, Inc. and the related product sale and
purchase agreement (Filed as Exhibit 10(q) to the Registrant's Quarterly Report on Form 10-Q dated
February 30, 1996 for the quarterly period ended December 31, 1995 and incorporated herein by
reference).
10.18 Agreements for Sale and Purchase dated as of December 29, 1995 between the Company and Steiner Salons
Limited and Steiner Hairdressing Limited (Filed as Exhibit 10(r) to the Registrant's Report on 10-K
dated September 27, 1995 for the year ended June 30, 1995 and incorporated herein by reference).
10.19 $10,000,000 Note drawn from Private Shelf Agreement dated as of February 21, 1996, between the
Registrant and the Prudential Insurance Company of America (Filed as Exhibit 10(s) to the
Registrant's Quarterly Report on Form 10-Q dated May 3, 1996 for the quarterly period ended March
31, 1996 and incorporated herein by reference).
10.20 Modification to Senior Revolving Credit Agreement between the Registrant and LaSalle National Bank
and Bank Hapoalim dated March 19, 1996 (Filed as Exhibit 10(s) to the Registrant's Quarterly Report
on Form 10-Q dated May 3, 1996 for the quarterly period ended March 31, 1996 and incorporated herein
by reference).
23.1* Consent of Coopers & Lybrand L.L.P. with respect to the financial statements of Regis Corporation
23.2* Consent of Arthur Andersen LLP with respect to the financial statements of Supercuts, Inc.
23.3* Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
23.4** Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.5** Consent of Phillips & Gross, P.A. (contained in Exhibit 5)
23.6** Consent of Willkie Farr & Gallagher (contained in Exhibit 8)
24** Powers of Attorney
99.1** Form of Regis Corporation Proxy Card
99.2** Form of Supercuts, Inc. Proxy Card
99.3** Voting Agreement dated as of July 14, 1996, among the Registrant, RGIS Merger Corp., Supercuts, Inc.
("Supercuts") and Myron Kunin
99.4 Consulting Agreement, dated July 13, 1996, between Supercuts and Thomas L. Gregory (Filed as Exhibit
10.39 to Supercuts' Quarterly Report on Form 10-Q for the period ended June 30, 1996 and
incorporated herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<S> <C>
99.5 Employment Agreement between Supercuts and Steve Price dated January 29, 1996 (Filed as Exhibit 10.39
to Amendment No. 1 to Supercuts' Quarterly Report for the period ended March 31, 1996 filed on Form
10-Q/A and incorporated herein by reference).
99.6** Form of Indemnification Agreement between Supercuts and Directors and Officers
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because the required information is not applicable
or is included in the Financial Statements of the Registrant and related notes.
(c) The opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated is
attached as Appendix B to the Joint Proxy Statement/Prospectus that forms a part
of this Registration Statement. The opinion of Donaldson, Lufkin & Jenrette
Securities Corporation is attached as Appendix C to the Joint Proxy
Statement/Prospectus that forms a part of this Registration Statement.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act, and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a)
II-4
<PAGE>
or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of the receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis, State of Minnesota, on September 20, 1996.
REGIS CORPORATION
By /s/ PAUL D. FINKELSTEIN
-----------------------------------
Paul D. Finkelstein
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
/s/ MYRON
KUNIN Chairman of the Board and September 20,
- ----------------------------------- Director 1996
Myron Kunin
/s/ PAUL D.
FINKELSTEIN President, Chief September 20,
- ----------------------------------- Executive Officer and 1996
Paul D. Finkelstein Director
Senior Vice President --
/s/ FRANK E. Finance, Chief Financial
EVANGELIST Officer and Director September 20,
- ----------------------------------- (Principal Financial 1996
Frank E. Evangelist Officer and Principal
Accounting Officer)
*
- ----------------------------------- Director September 20,
Christopher A. Fox 1996
*
- ----------------------------------- Director September 20,
Rolf F. Bjelland 1996
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
*
- ----------------------------------- Director September 20,
Van Zandt Hawn 1996
*
- ----------------------------------- Director September 20,
Susan Hoyt 1996
*By /s/ PAUL D. September 20,
FINKELSTEIN 1996
- -----------------------------------
Paul D. Finkelstein
ATTORNEY-IN FACT
</TABLE>
Paul D. Finkelstein, pursuant to Powers of Attorney executed by each of the
officers and directors listed above whose name is marked by an asterisk and
filed as an exhibit hereto, by signing his name hereto does hereby sign and
execute this Registration Statement of Regis Corporation on behalf of each of
such officers and directors in the capacities in which the names of each appear
above.
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
23.1 Consent of Coopers & Lybrand L.L.P. with respect to the financial statements of Regis
Corporation
23.2 Consent of Arthur Andersen LLP with respect to the financial statements of Supercuts, Inc.
23.3 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of Regis Corporation on Form S-4 of our reports dated August 20, 1996, on our
audits of the consolidated financial statements and financial statement schedule
of Regis Corporation. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Minneapolis, MN
September 19, 1996
<PAGE>
EXHIBIT 23.2
LETTERHEAD OF ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 31, 1996
included in the Supercuts, Inc. Form 10-K for the year ended December 31,
1995 and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Chicago, Illinois
September 19, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF MERRILL LYNCH
We hereby consent to the use of our opinion letter dated September 24,
1996 to the Board of Directors of Regis Corporation included as Appendix B
to the Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of RGIS Merger
Corp., a wholly owned subsidiary of Regis Corporation, with and into
Supercuts, Inc., and to the references to such opinion in such Proxy
Statement/Prospectus. In giving such consent, we do not admit and we hereby
disclaim that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder,
nor do we thereby admit that we are experts with respect to any part of
such Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations
of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Greg Dingens
------------------------------------
September 24, 1996
