EXHIBIT 10.40
--------------
STOCK PURCHASE AGREEMENT
By and Between
Ridgedale Prints Plus, Inc.
And
TRU Retail, Inc.
Dated as of July 21, 2001
PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY
TABLE OF CONTENTS
RECITALS.........................................................1
AGREEMENT........................................................1
1. DEFINITIONS.................................................1
2. SALE AND TRANSFER OF SHARES; CLOSING........................5
2.1 Shares..................................................5
2.2 Purchase Price..........................................5
2.3 Closing.................................................6
2.4 Closing Obligations.....................................6
2.5 Purchase Price Adjustment, Closing Estimate.............7
2.6 Closing Balance Sheet; Purchase Price Adjustment........8
3. REPRESENTATIONS AND WARRANTIES OF SELLER....................8
3.1 Organization of the Acquired Company Qualification......9
3.2 Authority; No Violation or Consent......................9
3.3 Capitalization; Ownership of Common Stock..............10
3.4 Financial Statements...................................10
3.5 ERISA; Benefit Plans...................................10
3.6 Disclosure.............................................12
4. REPRESENTATIONS AND WARRANTIES OF BUYER....................12
4.1 Organization and Good Standing.........................12
4.2 Authority; Execution and Delivery and Enforceability...12
4.3 No Conflicts; Consent..................................12
4.4 Investment Intent......................................13
4.5 Certain Proceedings....................................13
4.6 Brokers or Finders.....................................13
4.7 Disclosure.............................................13
5. COVENANTS OF SELLER........................................13
5.1 Access and Investigation...............................13
5.2 Operation of the Business of the Acquired Company......13
5.3 No Dividends, Interest or Extraordinary Charges........14
5.4 Required Approvals.....................................14
5.5 Notification...........................................14
5.6 Best Efforts...........................................14
5.7 Section 338(h)(10) Election and Allocation of
Purchase Price........................................14
5.8 Taxes..................................................15
5.9 Non-Competition........................................17
5.10 Landlord Consents......................................17
5.11 Transfer of Assets to Acquired Company.................17
5.12 Intercompany Accounts..................................17
5.13 Post-Closing Payments.................................17
TABLE OF CONTENTS (continued)
5.14 Further Assurances.....................................18
6. COVENANTS OF BUYER.........................................18
6.1 Approvals of Governmental Entities.....................18
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6.2 Best Efforts...........................................18
6.3 Landlord Consents......................................18
6.4 Accountants............................................18
6.5 Section 338(h)(10) Election and Allocation of
Purchase Price........................................18
6.6 Further Assurance......................................18
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE........19
7.1 Accuracy of Representations............................19
7.2 Seller's Performance...................................19
7.3 Consents...............................................19
7.4 Additional Documents...................................19
7.5 No Injunction..........................................19
7.6 Preferred Stock Designation............................19
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.......19
8.1 Accuracy of Representations............................20
8.2 Buyer's Performance....................................20
8.3 Consents...............................................20
8.4 Additional Documents...................................20
8.5 No Injunction..........................................20
8.6 CPI Corp. Board Approval...............................20
8.7 Preferred Stock Designation............................20
9. TERMINATION................................................20
9.1 Termination Events.....................................20
9.2 Effect of Termination..................................21
9.3 Termination Fees.......................................21
10. INDEMNIFICATION REMEDIES...................................21
10.1 Survival; Right to Indemnification Not Affected
by Knowledge.........................................22
10.2 Indemnification and Payment of Damages by Seller.......22
10.3 Indemnification and Payment of Damages by Buyer........23
10.4 Time Limitations.......................................23
10.5 Employee Matters.......................................23
10.6 Procedure for Indemnification -- Third-Party Claims....24
10.7 Procedure for Indemnification -- Other Claims..........26
11. GENERAL PROVISIONS.........................................26
TABLE OF CONTENTS (continued)
11.1 Expenses...............................................26
11.2 Public Announcements...................................26
11.3 Confidentiality........................................26
11.4 CPI Corp. Guaranty.....................................26
11.5 Notices................................................26
11.6 Jurisdiction; Service of Process.......................27
11.7 Further Assurances.....................................27
11.8 Waiver.................................................27
11.9 Entire Agreement and Modification......................28
11.10 Assignment.............................................28
11.11 Severability...........................................28
11.12 Section Headings; Construction.........................28
11.13 Time of Essence........................................28
11.14 Governing Law..........................................28
11.15 Counterparts...........................................28
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SCHEDULES
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Schedule 2.4(a)(iii) - Form of Employment Agreement
Schedule 2.4(a)(iv) - Settlement and Satisfaction Agreement
Schedule 3.1 - Good Standing
Schedule 3.4 - Unaudited Balance Sheets
Schedule 3.5 - Employee Benefit Plans
Schedule 10.2 - Prints Plus, Inc. Litigation
EXHIBITS
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Exhibit A - Limited Guaranty and Pledge Agreement
Exhibit B - Certificate of Designations of Preferred Stock of Buyer
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of
July 21, 2001, by Ridgedale Prints Plus, Inc., a Minnesota corporation
("Seller"), and TRU Retail, Inc., a California corporation ("Buyer"),
and, solely to the extent specified herein, CPI Corp., a Delaware
corporation ("CPI").
RECITALS
Seller is the owner of 100% of the issued and outstanding
shares of Prints Plus, Inc., a California corporation. Prints Plus,
Inc. is sometimes referred to in this Agreement as the
"Acquired Company." CPI is the owner of 100% of the issued and
outstanding shares of CPI Prints Plus, Inc., which is the owner of
100% of the issued and outstanding shares of the Seller.
The Seller desires to sell, and the Buyer desires to purchase,
all of the issued and outstanding stock of Prints Plus, Inc. (the
"Shares") for the consideration and on the terms set forth in this
Agreement.
The Seller and the Buyer have agreed, upon the terms and
subject to the conditions of this Agreement, to make a joint election
under Section 338(h)(10) of the Code (the "Section 338(h)(10)
Election") to treat the transaction for federal income
tax purposes and state income tax purposes, if any applicable state
recognizes such an election as applicable to the Acquired
Company, as a purchase of the assets of the Acquired Company .
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Acquired Company" -- as defined in the Recitals of this Agreement.
"Allocation Schedule" -- as defined in Section 5.7.
"Applicable Law" -- any statute, law, ordinance, rule or regulation
applicable to CPI, the Seller, the Buyer or the Acquired Company.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would reasonably use in similar circumstances to
ensure that such result is achieved as expeditiously as possible;
provided, however, that an obligation to use Best Efforts under this
Agreement does not require the Person subject to that obligation to
take actions that would result in a materially adverse change in the
benefits to such Person of this Agreement and the Contemplated
Transactions.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been (a) any inaccuracy in or breach
of, or any failure to perform or comply with, such representation,
warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is
or was inconsistent with such representation, warranty, covenant,
obligation, or other provision, and the term "Breach" means
any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Buyer Retirement Plan" -- as defined in Section 10.5(d).
"Closing" -- as defined in Section 2.3.
"Closing Balance Sheet" -- as defined in Section 2.6.
"Closing Estimate" -- as defined in Section 2.6.
"Closing Date" -- the date and time as of which the Closing
actually takes place.
"Code" -- the Internal Revenue Code of 1986, as amended.
"Consent" -- as defined in Section 3.2.
"Contemplated Transactions" -- all of the transactions contemplated
by this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the performance by Buyer and Seller of their
respective covenants and obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the Shares.
"Contract" -- any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement,
commitment or license.
"CPI"--as defined in the first paragraph of this Agreement.
"Damages" -- as defined in Section 10.2.
"ERISA" -- the Employee Retirement Income Security Act of 1974.
"ERISA Affiliates" -- as defined in Section 3.5(a).
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"Governmental Entity" -- means any federal, state, local or foreign
government or any court of competent jurisdiction, administrative
agency or commission or other governmental authority or
instrumentality, domestic or foreign.
"Guaranty" -- means Upland's personal guaranty of $500,000 of the
principal amount due under the Revolving Loan Agreement.
"Indemnified Person" -- as defined in Section 10.2.
"IRS" -- the United States Internal Revenue Service or any
successor agency.
"Knowledge" -- an individual will be deemed to have "Knowledge" of
a particular fact or other matter if such individual is actually aware
of such fact or other matter. A Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other
matter if any individual who is serving as a director or officer of
such Person has Knowledge of such fact or other matter.
"Lien" -- any pledge, lien (including, without limitation, any tax
lien), charge, claim, community property interest, condition,
equitable interest, encumbrance, security interest, mortgage, option,
restriction on transfer (including, without limitation, any
buy-sell agreement or right of first refusal or offer), forfeiture,
penalty, equity or other right of another Person of every nature and
description whatsoever.
"Limited Guaranty and Pledge Agreement" -- means the Limited
Guaranty and Pledge Agreement executed by Upland pledging Buyer's
stock as sole security for Buyer's performance of the Buyer's
obligation to redeem Preferred Stock (with such guaranty limited to
the stock pledged and permitting no further recourse against Upland),
in the form attached as Exhibit A.
"Material Adverse Effect" -- a material adverse effect on the
business, financial condition or results of operation of the Acquired
Company.
"Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Entity or by any
arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only
if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of
Persons exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such Person;
and
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(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day
consolidated operations of other Persons that are in the same line of
business as such Person.
"Permitted Liens" -- (i) those Liens securing any liabilities on
the Acquired Company's balance sheet at the time of Closing incurred
in the Ordinary Course of Business, (ii) mechanics', carriers',
workmens', repairmens' or other like Liens arising or incurred in the
Ordinary Course of Business, Liens arising under original purchase
price conditional sales contracts and equipment leases with third
parties entered into in the Ordinary Course of Business and liens for
Taxes that are not due and payable or that may thereafter be paid
without penalty or that are being contested in good faith by
appropriate proceedings, (iii) other imperfections of title or
encumbrances, if any, that do not, individually or in the aggregate,
materially impair the continued use and operation of the Acquired
Company's assets in the conduct of their respective businesses as
presently conducted, (iv) easements, covenants, rights-of-way and
other similar restrictions of record, and (v) any conditions that may
be shown by a current, accurate survey or physical inspection of any
property made prior to Closing.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Entity.
"Preferred Stock" -- the Series A preferred stock, par value $1,000
per share, of the Buyer as more fully described on Exhibit B.
"Proceeding" -- any action, arbitration, mediation, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Entity or arbitrator or mediator.
"Purchase Price" -- as defined in Section 2.2.
"Related Person" -- with respect to a particular Person, any other
Person who controls such Person, is controlled by such Person or is
under common control with such Person.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"Revolving Loan Agreement" -- means the $6,400,000 revolving loan
agreement among Consumer Programs Incorporated, the Buyer and the
Acquired Company to be entered into at Closing.
"Section 338(h)(10) Election" -- as defined in the Recitals of this
Agreement.
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"Securities Act" -- the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any
successor law.
"Seller" -- as defined in the first paragraph of this Agreement.
"Seller Retirement Plan " -- as defined in Section 10.5(d).
"Shares" -- as defined in the Recitals of this Agreement.
"Straddle Period" -- as defined in Section 5.7(b).
"Store" -- means any of the 158 retail stores owned or operated by
the Acquired Company as of the date of this Agreement.
"Store Lease" -- means any lease pursuant to which the Acquired
Company has the right to occupy a Store.
"Tax Return" -- any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"Tax" -- means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security,
unemployment; disability, property, sales, use, transfer,
registration, value added, escheat or other tax of any kind,
including any interest, penalty or addition to tax.
"Tax Sharing Arrangement" -- shall mean any written or unwritten
agreement or arrangement for the allocation or payment of Tax
liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Tax Return which Tax Return
includes the Acquired Company.
"Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing to a Person's
directors or officers) or any notice has been given (orally or in
writing to a Person's directors or officers), that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Upland" -- Xxxxxxxx X. Upland III.
2. SALE AND TRANSFER OF SHARES; CLOSING.
2.1 Shares. Subject to the terms and conditions of this
Agreement, at the Closing, Seller will sell and transfer the Shares to
Buyer, and Buyer will purchase the Shares from Seller.
2.2 Purchase Price. The purchase price (the "Purchase
Price") for the Shares will be:
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(a) $4,000,000, in cash, payable at closing by wire
transfer or other immediately available funds (as adjusted as set
forth in Sections 2.5 and 2.6); and
(b) Preferred Stock of Buyer with an aggregate
liquidation and redemption value of $12,011,000, having the rights and
terms specified in the Certificate of Designation set forth as Exhibit
B with the redemption obligations of the Buyer under the terms of the
Preferred Stock secured pursuant to the Limited Guaranty and Pledge
Agreement.
2.3 Closing. The purchase and sale (the "Closing") provided
for in this Agreement will take place at the offices of Seller's
counsel at 000 Xxxxx Xxxxxxxx, Xxxxx 0000, Xx. Xxxxx, Xxxxxxxx, at
10:00 a.m. (local time) on July 21, 2001, or at such other time and
place as the parties may agree, and shall be effective as of the close
of business on July 21, 2001.
2.4 Closing Obligations. At the Closing:
(a) Seller will deliver or cause to be delivered to
Buyer:
(i) certificates representing the Shares, duly
endorsed (or accompanied by duly executed stock powers) for
transfer to Buyer; and
(ii) a certificate executed by Seller representing
and warranting to Buyer that each of Seller's representations and
warranties in this Agreement was accurate in all material
respects as of the date of this Agreement and is accurate in all
material respects as of the Closing Date as if made on the
Closing Date; and
(iii) a duly executed Employment Agreement between
Buyer and Upland in the form attached hereto as Schedule
2.4(a)(iii), and approved by Seller; and
(iv) a duly executed settlement and satisfaction
agreement between CPI Prints Plus, Inc. and Upland terminating
Upland's Employment Agreement with CPI Prints Plus, Inc., dated
as of September 30, 1997, as amended by the First Amendment
to Employment Agreement dated as of May 31, 1998, together
with a payment to Upland in the amount of Two Hundred Thirteen
Thousand Eighty-six Dollars ($213,086.00), less applicable tax
withholding amounts, from CPI Prints Plus, Inc. to Upland to
satisfy and discharge the fully vested SERP obligation to Upland
in the form attached hereto as Schedule 2.4(a) (iv);
(v) Limited Guaranty and Pledge Agreement
executed by Seller;
(vi) the Revolving Loan Agreement executed by
Consumer Programs Incorporated; and
(b) Buyer will deliver or cause to be delivered to
Seller:
(i) the cash portion of the Purchase Price;
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(ii) the shares of the Preferred Stock described
above.
(iii) the Limited Guaranty and Pledge Agreement
executed by Upland;
(iv) the Guaranty executed by Upland;
(v) the Revolving Loan Agreement executed by the
Buyer and the Acquired Company;
(vi) a certificate executed by Buyer to the effect
that each of Buyer's representations and warranties in this
Agreement was accurate in all material respects as of the date of
this Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date;
(vii) a duly executed Employment Agreement between
Buyer and Upland in the form attached hereto as Schedule
2.4(a)(iii), and approved by Seller; and
(viii) a duly executed settlement and satisfaction
agreement between CPI Prints Plus, Inc. and Upland terminating
Upland's Employment Agreement with CPI Prints Plus, Inc., dated
as of September 30, 1997, as amended by the First Amendment
to Employment Agreement dated as of May 31, 1998, together
with evidence of a payment to Upland in the amount of Two Hundred
Thirteen Thousand Eighty-six Dollars ($213,086.00), less
applicable tax withholding amounts, from CPI Prints Plus, Inc. to
Upland to satisfy and discharge the fully vested SERP obligation
to Upland in the form attached hereto as Schedule 2.4(a) (iv).
2.5 Purchase Price Adjustment, Closing Estimate. The cash
portion of the Purchase Price shall be:
(a) reduced by:
(i) the net decrease, if any, from February 3,
2001 to the close of business on July 21, 2001 of any
intercompany loan from Seller or any Related Person to the
Acquired Company;
(ii) $172,380 to offset the satisfaction of
Upland's SERP as of the Closing Date;
(iii) $3,565 (representing CPI Corp.'s entire
obligation for contribution to its 401(k) Plan for the period
from January 1, 2001 through February 3, 2001);
(iv) an amount equal to $175,000;
(v) an amount equal to forty percent (40%) of the
estimated tax loss realized by CPI Corp. as the result of the
operation of the Acquired Company, the Seller and CPI Prints
Plus, Inc., after February 3, 2001 and through July 21, 2001, if
any; and
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(b) increased by:
(i) the net increase, if any, from February 3,
2001 through the close of business on July 21, 2001 of any
intercompany loan from Seller or any Related Person to the
Acquired Company; and
(ii) an amount equal to forty percent (40%) of
the estimated taxable income realized by CPI Corp. as the result
of the operation of the Acquired Company, the Seller and CPI
Prints Plus, Inc., after February 3, 2001 and through July 21,
2001, if any.
At the option of the Buyer, in lieu of increasing or decreasing the
cash portion of the Purchase Price by the net amount under subsections
(a) and (b) above, the Buyer may elect to adjust the aggregate
liquidation and redemption value of the Preferred Stock issued as a
portion of the Purchase Price, as described in Section 2.6(c). The
cash portion, or the aggregate liquidation and redemption value of the
Preferred Stock portion, as the case may be, of the Purchase Price
shall be estimated by the parties at the Closing, in good faith and
consistent with past accounting practices and procedures (the "Closing
Estimate"), and finalized after the Closing in accordance with Section
2.6.
2.6 Closing Balance Sheet; Purchase Price Adjustment.
(a) Within sixty (60) days following the Closing, the
Seller shall deliver to the Buyer a consolidated balance sheet of the
Acquired Company immediately prior to the Closing ("Closing Balance
Sheet").
(b) In the event of any disagreement among the parties
regarding the Closing Balance Sheet, the disagreement shall be
resolved by an independent certified public accountant selected by
agreement of Seller's and Buyer's respective certified public
accountants, with the costs of such third accountant borne equally by
Buyer and Seller.
(c) The final cash portion of the Purchase Price (or
the liquidation value of the Preferred Stock portion of the Purchase
Price) shall be based on the Closing Balance Sheet. In the event the
Closing Estimate is less than the amount determined by the Closing
Balance Sheet, the Buyer will pay the difference to the Seller (or, at
the Buyer's option, issue additional shares of Preferred Stock with an
aggregate liquidation and redemption value equal to such difference
plus cash in an amount equal to the dividends that would have
accrued on such shares had such shares been issued at Closing), and if
the Closing Estimate is more than the amount determined by the Closing
Balance Sheet, the Seller shall refund such difference to the Buyer
(or, at the Buyer's option, tender shares of Preferred Stock to the
Buyer with an aggregate liquidation and redemption value equal to such
difference and waive any accrued but unpaid dividends on such
shares).
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer as follows:
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3.1 Organization of the Acquired Company; Qualification.
(a) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state
where organized, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on
its business as now being conducted.
(b) The Acquired Company is a corporation duly organized
and validly existing and in good standing under the laws of the state
where organized, and has all requisite corporate power and authority
to own, lease and operate its properties and to carry its business as
now being conducted. Except as set forth on Schedule 3.1, the
Acquired Company is duly qualified or licensed to do business as
foreign corporations and/or entities and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good
standing will not have a Material Adverse Effect.
3.2 Authority; No Violation or Consent. The Seller has the
requisite corporate power and authority to enter into this Agreement
and to carry out the Contemplated Transactions and all proceedings
required to be taken by the Seller to authorize the execution,
delivery and performance of this Agreement have been duly and properly
taken. This Agreement has been duly and validly executed and
delivered by the Seller, and this Agreement constitutes a legal,
valid and binding agreement of the Seller enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting the
enforcement of creditors' rights generally and general equitable
principles. The execution and delivery of this Agreement, the
consummation of the Contemplated Transactions and the compliance with
the terms of this Agreement do not and will not:
(a) conflict with or result in any Breach of any provision
of any agreement or other instrument to which the Seller or the
Acquired Company is a party or by which it or the Acquired Company or
any of its or the Acquired Company's property may be bound (excluding,
however, any real estate leases), or conflict with or result in any
Breach of any provision of the Seller's or the Acquired Company's
Certificate of Incorporation or Bylaws;
(b) result in the creation of any Lien upon, or any
Person obtaining the right to acquire, any of the Shares or any of the
Acquired Company's assets;
(c) violate or conflict with any law, ordinance, code,
rule, regulation, decree, Order or ruling of any court or Governmental
Entity, to which the Seller or the Acquired Company or any of their
respective assets are subject, except such violation as would not
have a Material Adverse Effect;
(d) require any authorization, consent, Order, permit
or approval of, or notice to, or filing, registration or qualification
with ("Consent"), any governmental, administrative or judicial
authority; or
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(e) except for Consents required by the Store Leases,
the corporate office lease or the warehouse leases, require any
Consent of any Person to the execution, delivery or performance of
this Agreement or to the consummation of the Contemplated
Transactions.
3.3 Capitalization; Ownership of Common Stock.
(a) The authorized capital stock of the Acquired Company
consists of 60,000 shares of common stock, no par value, of which
50,000 shares are validly issued and outstanding, fully paid and
nonassessable and comprise the Shares to be sold to Buyer. The Seller
is the lawful owner, of record and beneficially, of the Shares and has
good title to Shares, free and clear of any and all Liens.
(b) There are no outstanding options, warrants, rights,
calls, agreements, convertible securities or other commitments or
rights to purchase or acquire any unissued stock or other securities
from the Acquired Company, and no other securities of the Acquired
Company are reserved for any purpose.
3.4 Financial Statements. The unaudited balance sheets of
the Acquired Company, the Seller and CPI Prints Plus, Inc. as of
February 3, 2001, attached hereto as Schedule 3.4, have been prepared
in accordance with the books and records of such companies and present
fairly in all material respects the financial position of such
companies for the fiscal year then ended.
3.5 ERISA; Benefit Plans.
(a) The Acquired Company and its ERISA Affiliates have
satisfied the minimum funding requirements of Section 302 of ERISA,
and Section 412 of the Code. For purposes of this Agreement, "ERISA
Affiliate" means each business or entity which is a member of a
"controlled group of corporations" under "common control" or an
"affiliated service group" with the Acquired Company within the
meaning of Section 414(b) or (c). Except to the extent that any
Breach of the representations set forth in this Section 3.5,
individually or in the aggregate, would not have a Material Adverse
Effect, with respect to each "employee benefit plan" (as defined in
Section 3(3) of ERISA) listed in Schedule 3.5:
(i) the Acquired Company and each of its ERISA
Affiliates have performed all obligations required to be performed by
them under each such employee benefitplan and neither the Acquired
Company nor any of its ERISA Affiliates is in default under or
in violation of the terms of any such employee benefit plan;
(ii) each such employee benefit plan was established
and has been maintained in compliance in all material respects with
the applicable provisions of ERISA, the Code and any other Applicable
Law;
(iii) no "prohibited transaction" as defined in Section
406 of ERISA and Section 4979 of the Code has occurred in respect of
any such plan;
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(iv) no civil or criminal action brought pursuant
to Part 5 of Subtitle B of Title I of ERISA is pending or, to the
Knowledge of the Seller, Threatened against any fiduciary of any such
plan;
(v) no action or failure to act and no transaction or
holding of any asset by, or with respect to, any such employee benefit
plan has or may reasonably be expected to subject the Acquired Company
or any of its ERISA Affiliates or any fiduciary, to any Tax, penalty
or other liability, whether by way of indemnity or otherwise;
(vi) to the Knowledge of Seller, there are no
Proceedings pending or Threatened (other than routine claims for
benefits) against the Acquired Company or any of its ERISA Affiliates,
or to the Knowledge of the Seller, pending or Threatened against any
administrator, trustee or other fiduciary of any such employee
benefit plan with respect to any such employee benefit plan, or
against any such plan or against the assets of any such plan;
(vii) the Acquired Company and its ERISA Affiliates
have made all payments with respect to all periods through December
31, 2000, and will make a pro-rata payment for the period from January
1, 2001 through February 3, 2001 by the reduction of the Purchase
Price, in each case which are due and required by each employee
benefit plan, each related trust, each collective bargaining agreement
or by law to be made to, or with respect to each such employee benefit
plan (including all insurance premiums or intercompany charges with
respect to each such employee benefit plan);
(viii) all group health plans covering employees of
the Acquired Company have been operated in compliance with the
continuation coverage requirements of Section 4980B of the Code (and
any predecessor provisions) and Part 6 of Title I of ERISA; and
(ix) to the Knowledge of the Seller, no employee
benefit plan listed in Schedule 3.5 is under audit or investigation by
the IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation, and no such audit or investigation has been threatened.
Neither the execution and delivery of this Agreement nor the
consummation of the Contemplated Transactions will directly or
indirectly result in any payment made or to be made on behalf of
any Person which constitutes a "parachute payment" within the
meaning of Section 280G of the Code. The Acquired Company has no
liabilities with respect to any employee benefit plan except
those listed on Schedule 3.5 which is now sponsored, maintained,
contributed to, or required to be contributed to by the Acquired
Company or any of its ERISA Affiliates.
The Acquired Company has had no obligation to contribute to
any "multiemployer plan" as defined in Section 3(37) of ERISA or any
"multiple employer plan" as defined in ERISA or the Code. The
Acquired Company has not incurred any material liability under Title
IV of ERISA (excluding liability for required premium payments) to the
Pension Benefit Guaranty Corporation in connection with any employee
pension benefit plan which is subject to Title IV of ERISA.
(b) Schedule 3.5 contains a complete list of all deferred
compensation, severance, pension, profit-sharing, stock option and
retirement plans, and all material bonus and
11
other employee benefit or fringe benefit plans maintained or with
respect to which contributions are made by the Acquired Company.
Accurate and complete copies of all such plans have been provided to
the Buyer. Neither the Acquired Company nor any of its ERISA
Affiliates has any plan or commitment, whether legally binding or not,
to establish any new employee benefit plan, to enter into any employee
agreement or to modify or to terminate any employee benefit plan or
employee agreement (except to the extent required by law or to
conform any such plan or agreement to the requirements of any
Applicable Law or as required by this Agreement), nor has
any intention to do any of the foregoing been communicated to
employees.
(c) Except as set forth on Schedule 3.5, the Acquired
Company does not maintain or contribute to any employee benefit plan
which provides, or has any liability to provide, life insurance or
medical benefits to any employee upon his retirement or termination
of employment, except as may be required by Section 4980B of the
Code.
3.6 Disclosure. No representation or warranty of Seller in
this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were
made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. The Buyer represents
and warrants to Seller as follows:
4.1 Organization and Good Standing. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of California, and has full corporate power and authority
to carry on its business as presently conducted and as contemplated
after the Closing.
4.2 Authority; Execution and Delivery and Enforceability.
The Buyer has the requisite power and authority to enter into this
Agreement and to carry out the Contemplated Transactions and all
Proceedings required to be taken by it to authorize the execution,
delivery and performance of this Agreement have been duly and properly
taken. This Agreement has been duly and validly executed and
delivered by the Buyer, and this Agreement constitutes a valid and
binding agreement of the Buyer, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws affecting
the enforcement of creditors' rights generally and general equitable
principles.
4.3 No Conflicts; Consent. The execution and delivery by
the Buyer of this Agreement does not and the consummation of the
Contemplated Transactions will not conflict with, or result in any
violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or a loss of a material benefit under,
or result in the creation of any Lien upon any of the properties
or assets of the Buyer under any provision of (a) its Articles or
Certificate of Incorporation or Bylaws, (b) any Contract to which the
Buyer is a party or by which any of its properties or assets
is bound, or (c) any judgment applicable to the Buyer or its
properties or assets or Applicable Law. No Consent of any
Governmental Entity is required to be obtained or made by or with
respect to the Buyer in
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connection with the execution, delivery and performance of this
Agreement or the consummation of the Contemplated Transactions.
4.4 Investment Intent. The Buyer acknowledges that the
Shares have not been registered under the Securities Act and that the
Shares may not be resold absent such registration or unless an
exception is available. The Buyer is acquiring the Shares for its own
account, for investment purposes only and not with a view toward
distribution thereof. The Buyer qualifies as an "accredited investor"
as such term is defined in Rule 501(a) promulgated pursuant to the
Securities Act.
4.5 Certain Proceedings. There is no pending or Threatened
Proceeding that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
4.6 Brokers or Finders. Neither the Buyer nor its officers
or agents have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or
other similar payment in connection with this Agreement and will
indemnify and hold Seller and its Related Persons harmless from any
such payment alleged to be due by or through Buyer or any of its
Related Persons as a result of the action of Buyer or any of its
Related Persons or their officers or agents.
4.7 Disclosure. No representation or warranty of Buyer in
this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were
made, not misleading.
5. COVENANTS OF SELLER.
5.1 Access and Investigation. Between the date of this
Agreement and the Closing Date, Seller will, and will cause the
Acquired Company and its Representatives to, (a) afford Buyer and its
Representatives (collectively, "Buyer's Advisors") full and free
access to the Acquired Company's personnel, properties, Contracts,
books and records, and other documents and data, (b) furnish Buyer and
Buyer's Advisors with copies of all such Contracts, books and records,
and other existing documents and data as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information as Buyer may
reasonably request.
5.2 Operation of the Business of the Acquired Company.
Between the date of this Agreement and the Closing Date, Seller will,
and will cause the Acquired Company to:
(a) conduct the business of the Acquired Company only in
the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current
business organization of the Acquired Company, keep available the
services of the current officers, employees, and agents of the
Acquired Company, and maintain the relations and good will
with suppliers, customers,
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landlords, creditors, employees, agents, and others having business
relationships with the Acquired Company;
(c) continue to fund the business of the Acquired
Company, including capital expenditures, in accordance with past
practice and in accordance with the 2001 budget prepared for the
Acquired Company; and
(d) maintain on behalf of the Acquired Company, or
cause the Acquired Company to maintain, general liability, property,
casualty, automobile and workers' compensation insurance at the levels
in effect on February 3, 2001.
5.3 No Dividends, Interest or Extraordinary Charges. The
Acquired Company will not pay any dividend or make other stock
distributions and the Seller will not charge the Acquired
Company for interest or other expenses except insurance and
collection of bad debts.
5.4 Required Approvals. Between the date of this Agreement
and the Closing Date, Seller will, and will cause the Acquired Company
to, cooperate with Buyer (a) with respect to all filings that Buyer
elects to make or is required by legal requirements to make in
connection with the Contemplated Transactions, and (b) in obtaining
all necessary Consents.
5.5 Notification. Between the date of this Agreement and
the Closing Date, Seller will promptly notify Buyer in writing if
Seller or the Acquired Company becomes aware of any fact or condition
that causes or constitutes a Breach of the of Seller's representations
and warranties as of the date of this Agreement, or if Seller or the
Acquired Company becomes aware of the occurrence after the date of
this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of
such fact or condition. During the same period, Seller will promptly
notify Buyer of the occurrence of any Breach of any covenant of
Seller in this Section 5 or of the occurrence of any event that may
make the satisfaction of the conditions in Section 7 impossible or
unlikely.
5.6 Best Efforts. Between the date of this Agreement and
the Closing Date, Seller will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
5.7 Section 338(h)(10) Election and Allocation of Purchase
Price. Seller and Buyer shall cooperate to make the Section
338(h)(10) Election (and any corresponding elections under
any applicable state, local or foreign laws, to the extent
available) with respect to the purchase and sale of the Shares.
Within thirty (30) days following the Closing Date, the Buyer shall
deliver to the Seller a proposed form of IRS Form 8023 (or other
applicable form), including any required schedules, and any similar
forms required by any state, local or foreign taxing authority.
The Seller and the Buyer shall in good faith use commercially
reasonable efforts to agree promptly on such forms and the allocation
of the "ADSP," as defined in Treasury Regulation Section 1.338-4T,
among the assets of the Seller (the "Allocation Schedule"), and shall
agree on such forms and the allocation of the "ADSP" within forty five
(45) days following the Closing Date. Buyer shall have the right to
review and approve before filing all elections, returns and other
documents to be filed in connection with the Section 338(h)(10)
Election.
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5.8 Taxes.
(a) Seller shall prepare and file with the appropriate
taxing authorities all Tax Returns for the Acquired Company for all
periods that end on or prior to the Closing Date, and shall remit to
the taxing authorities all Taxes due with respect to such Tax Returns.
If the due date for such Tax Returns is after the Closing Date, Buyer
shall cause the Acquired Company to execute and maintain in force a
power of attorney authorizing Seller's designated representatives
to sign and file such Tax Returns and take such other actions as
are contemplated by Section 5.8(c) with respect to such Tax Returns.
Buyer shall prepare and file with the appropriate taxing authorities
all Tax Returns for the Acquired Company for all periods that begin
after the Closing Date, and shall remit to the taxing authorities all
Taxes due with respect to such Tax Returns.
(b) Any Taxes (other than sales or use taxes) with
respect to the property or operations of the Acquired Company that
relate to a period that begins prior to and ends after the Closing
Date (a "Straddle Period ") shall be apportioned between the Seller
and the Buyer as determined from the books and records of the Acquired
Company during the portion of such period ending on the Closing Date
and the portion of such period beginning on the day following
the Closing Date, and based on accounting methods, elections and
conventions that do not have the effect of distorting income or
expenses as follows: (i) in the case of Taxes other than
withholding and employment Taxes, on a per diem basis, and (ii) in
the case of withholding and employment Taxes, as determined from the
books and records of the Acquired Company as though the taxable period
of the Acquired Company terminated at the close of business on the
Closing Date. Buyer shall prepare all Tax Returns for Straddle
Periods and shall provide Seller and its designated representatives
with the opportunity to review and comment on such Tax Returns at
least ten (10) days prior to filing. In the event that Seller objects
to the filing of any such Tax Return, Buyer shall not file such Tax
Return without the written consent of Seller. Prior to the due date
Seller shall remit to Buyer the amount of any Tax owed upon the filing
of a Tax Return for a Straddle Period that is properly apportionable
to Seller.
(c) The Seller and its duly appointed representatives
shall have the exclusive authority to control any audit or examination
by any taxing authority and contest, resolve and defend against any
assessment for additional Taxes, notice of tax deficiency or other
adjustment of Taxes of or relating to any liability of the Acquired
Company for Taxes for any tax period ending on and including the
Closing Date (including, with respect to any Straddle Period, the
portion of such period ending on and including the Closing Date)
except to the extent that such dispute relates to sales or use tax for
which Seller has no obligation to indemnify Buyer.
(d) The Buyer shall have the exclusive authority to
control any audit or examination by any taxing authority and contest,
resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of or relating to any
liability of the Acquired Company's Taxes for all periods beginning
after the Closing Date; provided, however, that (i) neither the Buyer
nor any Related Person of Buyer (including the Acquired Company) nor
their duly appointed representatives shall, without the prior written
consent of the Seller, enter into any settlement of any contest or
otherwise compromise any issue that affects or may affect the Tax
liability of the Seller, the Acquired Company or any of their
15
Related Persons for any period prior to the Closing Date (including,
with respect to any Straddle Period, the portion of such period that
ends on and includes the Closing Date), and (ii) neither the Buyer nor
any Related Persons of Buyer (including the Acquired Company) nor its
duly appointed representatives shall, without the prior consent of the
Seller, enter into any settlement of any contest or otherwise
compromise any issue that would require payment by the Seller of
any amount under this Agreement unless the Buyer shall have waived
or caused to be waived for itself and the Acquired Company and their
Related Persons any right to indemnification for any such amounts from
the Seller.
(e) The Seller shall be entitled to all refunds
(including, without limitation, interest with respect thereto) of
Taxes received by or on behalf of the Acquired Company relating
to any period ending on or prior to the Closing Date (including,
with respect to any Straddle Period, the portion of such period that
ends on and includes the Closing Date). The Buyer shall pay, or cause
to be paid, to the Seller any and all refunds promptly upon receipt
thereof by Buyer, the Acquired Company or their Related Persons.
(f) Buyer agrees to indemnify Seller for any additional Tax
owed by Seller (including Tax owed by Seller due to this
indemnification payment) resulting from any transaction (other than
the deemed asset sale pursuant to the Section 338(h)(10) Election) not
in the Ordinary Course of Business occurring on the Closing Date after
Buyer's purchase of the Shares.
(g) Buyer and Seller agree to report all transactions
(other than the deemed asset sale pursuant to the Section 338(h)(10)
Election) not in the Ordinary Course of Business occurring on the
Closing Date after Buyer' s purchase of the Shares on Buyer's federal
income tax return to the extent permitted by Treasury Regulation
1.1502-76(b)(1)(B).
(h) Buyer and the Acquired Company and Seller shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and
(upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Acquired Company
and Seller agree to retain all books and records with respect to Tax
matters pertinent to the Acquired Company relating to any taxable
period beginning before the Closing Date until the expiration
of the statute of limitations (and, to the extent notified by Buyer
or Seller, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into
with any taxing authority. Neither the Seller nor the Buyer and
the Acquired Company (nor any of their Related Persons) shall destroy
or dispose of or allow the destruction or disposition of any books,
records or files relating to the business, properties, assets or
operations of the Acquired Company to the extent they pertain to the
operations of the Acquired Company on or prior to the Closing Date
without first having offered in writing to deliver such books, records
and files to the Seller.
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(i) If the Seller makes any indemnification payment under
Section 5.8(j) and such payment gives rise to a United States federal,
state, local or foreign Tax benefit to the Buyer or any of its Related
Persons (including any of the Acquired Company), then promptly
following the filing of the tax returns(s) reflecting such Tax
benefit, the Buyer shall pay to the Seller the amount of such Tax
benefit. The determination of any such Tax benefit shall be made in
good faith by the Buyer and, if requested by the Seller, such
determination shall be verified in writing by an independent certified
public accounting firm reasonably acceptable to both the Seller and
the Buyer (the fees of which shall be equally borne by the Buyer
and the Seller).
(j) Seller's obligation to pay or to indemnify Buyer or the
Acquired Company for Taxes incurred by or on behalf of the Acquired
Company shall be limited to the following: (i) Taxes (other than
sales or use taxes) relating to taxable periods ending on or prior to
the Closing Date, except for transactions subject to section 5.8(f);
(ii) any tax arising from purchases made prior to January 1, 1998 in
connection with the construction of new Stores; (iii) sales or use
tax, if any, arising from the stock purchase contemplated by this
Agreement; and (iv) Taxes (other than sales or use taxes) relating to
a Straddle Period to the extent apportioned to Seller pursuant to
section 5.8(b).
5.9 Non-Competition. From and after the Closing, CPI Corp.
and Seller agree that, until the mandatory redemption date for such
Preferred Stock, without the prior written consent of the Buyer,
directly or by ownership of an interest in another entity, neither CPI
Corp. nor Seller nor any of their Related Persons will compete with
the Acquired Company in the business conducted as of the Closing in
any location where the Acquired Company conducts business as
of the date of the Closing.
5.10 Landlord Consents. Seller will, and will cause the
Acquired Company to, use its Best Efforts to obtain any Consents to
the Contemplated Transactions required by Store Leases.
5.11 Transfer of Assets to Acquired Company. Between the
date of this Agreement and the Closing Date, CPI Corp. and Seller will
cause to be transferred to Acquired Company all assets held by them or
any Related Person used in the business of the Acquired Company,
including all right title and interest, however held, in the name
"Prints Plus" and any derivation thereof, subject only to Permitted
Liens.
5.12 Intercompany Accounts. As of the close of business on
the day before the Closing Date, Seller and CPI Corp. will cause (at
no cost to Acquired Company) the elimination of all intercompany
accounts between the Acquired Company and the Seller and any Related
Persons, including but not limited to, intercompany liabilities and
accruals for 401(k) matches, workmen's compensation, and general
liability or automobile liability insurance.
5.13 Post-Closing Payments. So long as the Preferred Stock
is outstanding, and Buyer has retained KPMG or another public
accounting firm at the request of the holder of the Preferred
Stock pursuant to Section 6.5, Seller shall reimburse the Buyer for
the amount by which the fees of KPMG (or such other designated public
accounting firm) exceed (a) $45,000, for the annual audit of Buyer's
financial statements, or (b) $28,000 for the audit of an opening
17
balance sheet of the Buyer effective immediately after Closing.
Seller shall make each such payment to Buyer within thirty (30) days
after the date Seller receives Buyer's invoice.
5.14 Further Assurances. After the Closing Date, Seller
shall execute and deliver to Buyer such further instruments and take
such action as Buyer may reasonably request to effectuate the
transactions contemplated by this Agreement.
6. COVENANTS OF BUYER.
6.1 Approvals of Governmental Entities. As promptly as
practicable after the date of this Agreement, Buyer will, and will
cause each of its Related Persons to, make all filings required by
Applicable Law to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, cooperate
with Seller with respect to all filings that Seller is required by
Applicable Law to make in connection with the Contemplated
Transactions, and (ii) cooperate with Seller in obtaining all required
Consents.
6.2 Best Efforts. Between the date of this Agreement and
the Closing Date, the Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
6.3 Landlord Consents. Buyer will use its Best Efforts to
obtain any Consents to the Contemplated Transactions required by Store
Leases.
6.4 Accountants. So long as any shares of Preferred Stock
are outstanding, and the holder of the Preferred Stock so requests,
Buyer shall retain KPMG (or such other public accounting firm as the
holder of the Preferred Stock designates) as its certified public
accountants for audit work.
6.5 Section 338(h)(10) Election and Allocation of Purchase
Price. Seller and Buyer shall cooperate to make the Section
338(h)(10) Election (and any corresponding elections under
any applicable state, local or foreign laws, to the extent
available) with respect to the purchase and sale of the Shares.
Within thirty (30) days following the Closing Date, the Buyer shall
deliver to the Seller a proposed form of IRS Form 8023 (or other
applicable form), including any required schedules, and any similar
forms required by any state, local or foreign taxing authority.
The Seller and the Buyer shall in good faith use commercially
reasonable efforts to agree promptly on such forms and the allocation
of the "ADSP," as defined in Treasury Regulation Section 1.338-4T,
among the assets of the Seller (the "Allocation Schedule"), and shall
agree on such forms and the allocation of the "ADSP" within forty five
(45) days following the Closing Date. Buyer shall have the right to
review and approve before filing all elections, returns and other
documents to be filed in connection with the Section 338(h)(10)
Election.
6.6 Further Assurances. After the Closing Date, Buyer shall
execute and deliver to Seller such further instruments and take such
action as Seller may reasonably request to effectuate the transactions
contemplated by this Agreement.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in
part):
7.1 Accuracy of Representations. All of Seller's
representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all
material respects as of the Closing Date as if made on the Closing
Date.
7.2 Seller's Performance.
(a) All of the covenants and obligations that CPI Corp. or
Seller is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually),
must have been duly performed and complied with in all material
respects.
(b) Each document required to be delivered by Seller
or the Acquired Company pursuant to Section 2.4 must have been
delivered.
7.3 Consents. All Consents identified in Section 3.2 (e)
must have been obtained and must be in full force and effect.
7.4 Additional Documents. Seller must deliver to Buyer such
documents as Buyer may reasonably request for the purpose of (i)
evidencing the accuracy of any of CPI Corp.'s or Seller's
representations and warranties, (ii) evidencing the performance by
Seller or CPI Corp. of, or the compliance by Seller or CPI Corp. with,
any covenant or obligation required to be performed or complied with
by such party, (iii) evidencing the satisfaction of any condition
referred to in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 No Injunction. There must not be in effect or Threatened
any Proceeding , any legal requirement or any injunction or other
Order that prohibits the sale of the Shares by Seller to Buyer.
7.6 Preferred Stock Designation. Buyer and Seller shall
have agreed upon the Designations of Preferred Stock, in accordance
with the terms set forth in Exhibit B, and the California Secretary of
State shall have approved such form of Designations.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to sell the Shares and to take the other actions required
to be taken by Seller at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any
of which may be waived by Seller, in whole or in part):
19
8.1 Accuracy of Representations. All of the Buyer's
representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties
(considered individually), must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all
material respects as of the Closing Date as if made on the Closing
Date.
8.2 Buyer's Performance.
(a) All of the covenants and obligations that the Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) The Buyer must have delivered each of the documents
required to be delivered by the Buyer pursuant to Section 2.4 and the
Buyer must have made the cash payment and delivered the securities
required pursuant to Section 2.2.
8.3 Consents. All Consents identified in Section 3.2(e) must
have been obtained and must be in full force and effect.
8.4 Additional Documents. The Buyer must have delivered to
Seller such documents as Seller may reasonably request for the purpose
of (i) evidencing the accuracy of any representation or warranty of
Buyer, (ii) evidencing the performance by Buyer of, or the compliance
by Buyer with, any covenant or obligation required to be performed or
complied with by Buyer, (iii) evidencing the satisfaction of any
condition referred to in this Section 8, or (iv) otherwise
facilitating the consummation of any of the Contemplated Transactions.
8.5 No Injunction. There must not be in effect any legal
requirement or any injunction or other Order that (a) prohibits the
sale of the Shares by Seller to Buyer, and (b) has been adopted or
issued, or has otherwise become effective, since the date of this
Agreement.
8.6 CPI Corp. Board Approval. The board of directors of CPI
Corp. shall have approved this Agreement and the Contemplated
Transactions.
8.7 Preferred Stock Designation. Buyer shall have adopted and
have in effect Designations of Preferred Stock in accordance with the
terms set forth in Exhibit B, satisfactory to Seller.
9. TERMINATION.
9.1 Termination Events. This Agreement may, by notice given
prior to or at the Closing, be terminated:
(a) by either Buyer or Seller if a material Breach of
any provision of this Agreement has been committed by the other party
and such Breach has not been waived;
20
(b) (i) by Buyer if any of the conditions in Section
7 have not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of the Buyer to comply with its obligations under this
Agreement) and Buyer has not waived such condition on or before the
Closing Date; or (ii) by Seller if any of the conditions in Section 8
have not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of Seller to comply with its obligations under this Agreement)
and Seller has not waived such condition on or before the Closing
Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before July 21, 2001, or such later date as the
parties may agree.
9.2 Effect of Termination. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under
this Agreement or otherwise, and the exercise of a right of
termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement will terminate, except that the
obligations in Sections 9.3, 10, 11.1, 11.3 and 11.4 will survive;
provided, however, that if this Agreement is terminated by a party
because of the Breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's
failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive
such termination unimpaired.
9.3 Termination Fees.
(a) If all conditions precedent to Seller's obligation
to close set forth in Section 8 have been met and Seller breaches its
obligation to complete the Contemplated Transactions, Seller shall pay
Buyer the sum of $500,000; and
(b) If all the conditions precedent to Buyer's obligation
to close set forth in Section 7 have been met and Buyer breaches its
obligation to complete the Contemplated Transactions, Buyer shall pay
Seller the sum of $50,000;
provided, however, that neither party shall have any obligation to
pay termination fees pursuant to subsections 9.3 (a) or (b) in the
event of material impairment of the Acquired Company's projected cash
flow and neither party shall have an obligation to pay fees or
otherwise be liable for any Breach unless such breach remains uncured
for thirty days after its receipt of notice of an alleged Breach.
10. INDEMNIFICATION REMEDIES.
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10.1 Survival; Right to Indemnification Not Affected by
Knowledge. All representations, warranties, covenants, and
obligations in this Agreement will survive the Closing.
The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted, whether before or
after the execution and delivery of this Agreement with respect to the
accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based
on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will
not affect the right to indemnification, payment of Damages, or other
remedy based on such representations, warranties, covenants, and
obligations.
10.2 Indemnification and Payment of Damages by Seller.
Seller will indemnify and hold harmless the Buyer and its
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), expense (including
costs of investigation and defense and reasonable attorneys' fees) or
diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement;
(b) any Breach by Seller of any covenant or obligation of
Seller in this Agreement;
(c) any claims incurred by the Acquired Company prior to
the Closing that are covered under Seller's general liability,
automobile, workers' compensation, property or casualty insurance,
including any related deductible payments;
(d) any claims incurred by the Acquired Company (i) prior
to May 1, 2000, that are covered under Seller's medical insurance
policies, and (ii) prior to August 1, 2000, that are covered under
Seller's dental insurance policy;
(e) any litigation or other proceedings identified on
Schedule 10.2;
(f) except as limited by Section 5.8(j) or as set forth in
Section 10.2(c), any business conducted or other action or omission to
act by Seller, its Related Persons or Acquired Company and related to
the Acquired Company prior to February 3, 2001; or
(g) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller
or the Acquired Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
The remedies provided in this Section 10.2 will not be exclusive of
or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
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10.3 Indemnification and Payment of Damages by Buyer. The
Buyer will indemnify and hold harmless Seller, and will pay to Seller
the amount of any Damages arising, directly or indirectly, from or in
connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement, (b) any Breach by Buyer of any covenant or
obligation of a Buyer in this Agreement, (c) except as otherwise
specifically provided in this Article 10, any business conducted by
the Acquired Company after February 3, 2001, or (d) any claim by any
Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have
been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions.
10.4 Time Limitations. If the Closing occurs, Seller will
have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or
before the expiration of the applicable statute of limitations, Buyer
notifies Seller of a claim specifying the factual basis of that claim
in reasonable detail to the extent then known by Buyer. If the Closing
occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant
or obligation to be performed and complied with prior to the Closing
Date, unless on or before the expiration of the applicable statute of
limitations, Seller notifies Buyer of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by
Seller.
10.5 Employee Matters.
(a) Without limiting the Buyer's obligations under
this Article 10, the Buyer hereby agrees to indemnify the Seller and
its Related Persons and to defend and hold the Seller and its Related
Persons harmless from and against any and all losses incurred by the
Seller or any of its Related Persons arising out of or with respect to
any employees of the Acquired Company prior to the Closing, or such
earlier date as specified in this Article 10, including:
(i) the provision of continuation coverage after
February 3, 2001, for employees of the Acquired Company and their
covered dependents under any group health plan on account of any
qualifying event which occurs at any time (the terms "continuation
coverage", "group health plan", and "qualifying event" shall have the
meanings ascribed to them in Section 4980B of the Code);
(ii) termination by the Buyer or its Related Persons,
including the Acquired Company following the Closing Date, of the
employment of any employee of the Acquired Company;
(iii) failure of the Buyer or its Related Persons,
including the Acquired Company following the Closing Date, to continue
the employment of any employee of the Acquired Company on terms at
least equivalent to those such Acquired Company employees presently
enjoy;
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(iv) any claim made by any person who was an
employee of the Acquired Company as of February 3, 2001 for severance
pay or benefits; and
(v) any suit or claim of violation of any employment-
related law brought against the Seller or any Related Person of the
Seller, based upon any action taken by the Buyer or any of its Related
Persons, including the Acquired Company, following the Closing Date.
(b) Following the Closing Date, (i) the Buyer shall ensure
that no limitations or exclusions as to preexisting conditions, proof
of insurability or waiting periods not currently applicable to
employees of the Acquired Company become applicable to any of them
under any welfare benefit plans in which such employees may be
eligible to participate, and (ii) the Buyer shall ensure that costs or
expenses incurred by employees of the Acquired Company (and their
dependents) up to (and including) the Closing Date shall be taken
into account for purposes of satisfying applicable deductible,
co-payment, coinsurance, maximum out-of-pocket provisions and
like adjustments or limitations on coverage under any such welfare
benefit plans.
(c) From and after the Closing Date, Buyer and its Related
Persons shall, as applicable, honor, pay, perform and satisfy any and
all liabilities, obligations and responsibilities to, or in respect
of, each employee of the Acquired Company and each former employee of
the Acquired Company arising under the terms of, or in connection
with, any employee benefit, fringe benefit, deferred compensation or
incentive compensation or vacation or other paid time off plan, policy
or arrangement maintained or contributed to by the Acquired Company,
or in which the Acquired Company participates, and any employment,
consulting, retention, severance or similar agreement to which the
Acquired Company is a party, in each case, in accordance with the
terms thereof in effect immediately from and after the Closing.
(d) Buyer shall use its Best Efforts, as soon as
practicable following the Closing Date, to establish or designate a
defined contribution plan that is intended to qualify under Sections
401(a) and 401(k) of the Code (the "Buyer Retirement Plan ") in which
employees of the Acquired Company shall be eligible to participate.
Following such establishment or designation of the Buyer Retirement
Plan and receipt by the Seller of a copy of a favorable
determination letter from the Internal Revenue Service regarding
the qualified status of the Buyer Retirement Plan under Section 401(a)
of the Code, or such earlier time as the Buyer and Seller may agree,
the Seller shall cause the trust maintained under the CPI Corp.
Employees Profit Sharing Plan and Trust (the "Seller Retirement
Plan ") to transfer to the trust maintained under the Buyer Retirement
Plan the assets attributable to the account balances under the Seller
Retirement Plan of the employees of the Acquired Company, in
accordance with Applicable Law, which amounts shall be credited to the
respective accounts established for such employees under the Buyer
Retirement Plan; provided that amounts in accounts under the Seller
Retirement Plan of such employees that are invested in loans to such
employees shall be transferred in kind. Following such asset
transfer, the Buyer Retirement Plan shall assume all liability for the
payment of the benefits attributable to such transferred assets, and
none of the Seller, the Seller Retirement Plan or the trust thereunder
shall have any obligation or liability with respect to such benefits.
10.6 Procedure for Indemnification -- Third-Party Claims.
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(a) Promptly after receipt by an indemnified party under
Section 10.2 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying
party of the commencement of such claim, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except
to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election
to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 10 for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable
costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in that Proceeding are within
the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the indemnifying party
without the indemnified party's consent unless (A) there is no
finding or admission of any violation of legal requirements or any
violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party
does not, within ten days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound
by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability
that a Proceeding may adversely affect it or its affiliates other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
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10.7 Procedure for Indemnification -- Other Claims. A claim
for indemnification for any matter not involving a third-party claim
may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS.
11.1 Expenses. Seller shall bear its expenses incurred in
connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants. Seller
shall cause the Acquired Company to pay the expenses of Buyer
incurred in connection with the preparation, execution, and
performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representative, counsel
and accountants.
11.2 Public Announcements. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such
manner as the Buyer and Seller agree. Except as necessary to
complete the Contemplated Transactions, unless consented to by the
other parties in advance in writing or required by legal
requirements, prior to the Closing the parties shall, and shall
cause their Related Person to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any
Person. Seller and Buyer will consult with each other concerning
the means by which the Acquired Company's employees, customers, and
suppliers and others having dealings with the Acquired Company will be
informed of the Contemplated Transactions.
11.3 Confidentiality. Except as required by Law and except
for disclosure to their respective officers, directors, agents, and
advisors as necessary to complete the Contemplated Transaction,
between the date of this Agreement and the Closing Date, Buyer and
Seller will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of the Buyer and the
Acquired Company to maintain in confidence, and not use to the
detriment of another party any written, oral, or other information
obtained in confidence from another party or the Acquired Company in
connection with this Agreement or the Contemplated Transactions,
unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing
or use of such information is required by legal proceedings.
If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the
other party may reasonably request.
11.4 CPI Corp. Guaranty. CPI Corp. hereby guarantees the
Seller's performance of its obligations under Sections 5.13, 9.3 and
10.
11.5 Notices. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be
deemed to have been duly given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by telecopier (with written
confirmation of
26
receipt), provided that a copy is mailed by registered mail, return
receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
(a) CPI or Seller: Ridgedale Prints Plus, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to: CPI Corp.
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile No.: (000) 000-0000
(b) Buyer: TRU Retail, Inc.
Attn: Xxxxxxxx X. Upland III
0000 Xxxxx Xxxx, Xxxxxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: 925/602-0495
with a copy to: Epstein, Englert, Xxxxxx & Xxxxxx
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telecopy No.: 000-000-0000
11.6 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Delaware, or, if it has or can
acquire jurisdiction, in the appropriate United States District Court
for Delaware, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
11.7 Further Assurances. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute
and deliver to each other such other documents, and (c) to do such
other acts and things, all as the other party may reasonably request
for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.8 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor
any delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this Agreement
will operate as a
27
waiver of such right, power, or privilege, and no single or partial
exercise of any such right, power, or privilege will preclude any
other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum
extent permitted by Applicable Law, (a) no claim or right arising out
of this Agreement or the documents referred to in this Agreement can
be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the
other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
11.9 Entire Agreement and Modification. This Agreement
supersedes all prior agreements between the parties with respect to
its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
11.10 Assignment. Neither party may assign this Agreement or
its rights or obligations under this Agreement without the consent of
the other party; provided, however, that in the event the Seller or
CPI Prints Plus, Inc. are liquidated or merged into any affiliate of
the Seller, then, for purposes of this Agreement, Seller shall mean
the successor to the assets of the Seller following such liquidation
or merger. No such liquidation or merger shall be deemed to relieve
CPI Corp of its obligations under this Agreement, including its
obligations under Section 11.4.
11.11 Severability. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction,
the other provisions of this Agreement will remain in full force and
effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 Section Headings; Construction. The headings of
Sections in this Agreement are provided for convenience only and will
not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
11.14 Governing Law. This Agreement will be governed by the
laws of the State of Delaware, without regard to conflicts of laws
principles.
11.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
[NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
RIDGEDALE PRINTS PLUS, INC.
By: /s/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: Vice President
TRU RETAIL, INC.
By: /s/ Xxxxxxxx X. Upland, III
---------------------------
Name: Xxxxxxxx X. Upland III
Title:
Agreed to and accepted.
CPI CORP.
By: /s/ Xxxxxxx Xxxxx
-----------------
Name: Xxxxxxx Xxxxx
Title: President
29
