1362 OF THE CODE AND ALL APPLICABLE TREASURY REGULATIONS PROMULGATED THEREUNDER,
AND UNDER EACH ANALOGOUS OR SIMILAR PROVISION OF STATE OR LOCAL LAW IN EACH
JURISDICTION WHERE THE CORPORATION IS REQUIRED TO FILE AN INCOME OR FRANCHISE
TAX RETURN AND IS PERMITTED TO SO ELECT, TO BE TREATED AS AN "S" CORPORATION FOR
ALL TAXABLE PERIODS SINCE ITS FORMATION.
THERE HAS NOT BEEN ANY VOLUNTARY OR
INVOLUNTARY TERMINATION OR REVOCATION OF ANY SUCH ELECTION BEFORE THE CLOSING
DATE AND NO TAXING AUTHORITY HAS CHALLENGED OR IS CHALLENGING CORPORATION'S
QUALIFICATION AS AN S CORPORATION.
THE CORPORATION HAS COMPLIED WITH ALL LAWS
NECESSARY TO MAINTAIN ITS ELECTION AS AN S CORPORATION AT ALL TIMES SINCE
FORMATION AND THE CORPORATION WILL BE VALIDLY AN S CORPORATION WITHIN THE
MEANING OF CODE SECTIONS 1361 (AND ANY COMPARABLE PROVISION OF STATE OR LOCAL
LAW) UP TO AND INCLUDING THE CLOSING DATE.
26
5.7.21
EACH OF THE SHAREHOLDERS IS, AND HAS BEEN AT ALL TIMES DURING THE
PERIOD IN WHICH BOTH: (I) THE CORPORATION HAS BEEN AN S CORPORATION WITHIN THE
MEANING OF SECTION 1361(A) OF THE CODE; AND (II) SUCH SHAREHOLDER HAS BEEN A
SHAREHOLDER OF THE CORPORATION, AN ELIGIBLE SHAREHOLDER OF AN S CORPORATION
WITHIN THE MEANING OF SECTION 1361(A) OF THE CODE (AND ANY COMPARABLE PROVISION
OF STATE AND LOCAL TAX LAW IN EACH JURISDICTION IN WHICH THE CORPORATION IS
OBLIGATED TO FILE INCOME OR FRANCHISE TAX RETURNS).
5.7.22
CORPORATION DOES NOT HAVE ANY POTENTIAL LIABILITY FOR ANY TAX UNDER
SECTION 1374 OF THE CODE (OR ANY COMPARABLE PROVISION OF STATE OR LOCAL LAW) IN
CONNECTION WITH THE SALE OR DEEMED SALE OF THE CORPORATION'S ASSETS. THE
CORPORATION HAS NOT, IN THE PAST TEN (10) YEARS: (A) ACQUIRED ASSETS FROM
ANOTHER CORPORATION IN A TRANSACTION IN WHICH THE CORPORATION'S TAX BASIS FOR
THE ACQUIRED ASSETS WAS DETERMINED, IN WHOLE OR IN PART, BY REFERENCE TO THE TAX
BASIS OF THE ACQUIRED ASSETS IN THE HANDS OF THE TRANSFEROR; OR (B) ACQUIRED THE
STOCK OF ANY CORPORATION WHICH IS A QUALIFIED SUBCHAPTER S SUBSIDIARY.
5.8
No Material Adverse Effect.
Since August 31, 2009, there has not
been any Material Adverse Effect.
5.9
Title to Assets.
Except as disclosed on Schedule 5.9, Corporation
owns and has good title to, and is the lawful owner of, all Assets used in
connection with the Schoeneman Beauty Supply Business and all of the Assets
reflected in the respective Financial Statements (other than assets leased under
any lease listed on Schedules 5.10.1(a) or (b) and assets disposed of in the
ordinary course of business consistent with customary past practices and not
disposed of in violation of any provision hereof), free and clear of all Liens,
except Permitted Liens.
5.10
Leases.
5.10.1
SCHEDULE 5.10.1(A) LISTS ALL OF THE LEASES OF PERSONAL PROPERTY TO
WHICH THE CORPORATION IS A PARTY OR IS OTHERWISE BOUND (INCLUDING ALL AMENDMENTS
AND MODIFICATIONS THERETO) AND REFLECTS FOR EACH THE NAMES OF THE LESSOR AND
LESSEE AND THE ADDRESS OF THE STORE, WAREHOUSE OR OTHER