(PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)

EXHIBIT 10.89

EXECUTION VERSION

LETTER AMENDMENT NO. 1
to Note Purchase Agreements

April 15, 2005

The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201

The Guardian Life Insurance Company of America
7 Hanover Square
New York, New York  10004-2616

Ladies and Gentlemen:

                We refer to the Note Purchase Agreements, each dated as of June
16, 1997 (the “Agreements”), among the undersigned, CPI Corp., a Delaware
corporation (the ”Company”), and each of you, respectively. Unless otherwise
defined in this Letter Amendment No. 1 to Note Purchase Agreements (this
”Amendment”), the terms defined in the Agreements, as amended hereby, shall be
used herein as therein defined.

                The Company has requested and, subject to the terms and
conditions specified herein, the undersigned holders of the Notes are willing to
make, certain amendments to the Agreements, all as more particularly set forth
herein.

                1.               Amendments to the Agreements. Subject to the
accuracy of the representations and warranties set forth in paragraph 2 hereof
and satisfaction of the conditions set forth in paragraph 3(c) hereof, the
undersigned holders of the Notes hereby agree with the Company to amend,
effective as of the date first above written, each of the Agreements as follows:

 

                      (a)          Section 7. Information as to Company.  

 
            (I)           Clause (a) of Section 7.1 is amended by deleting such
clause (a) in its entirety and replacing it with the following:
 

 
                “(a)         Monthly and Quarterly Statements – within 45 days
after the end of each monthly fiscal period, and within 45 days after the end of
each quarterly fiscal period, in each case in each fiscal year of the Company
(other than the last monthly and quarterly fiscal periods of each such fiscal
year) duplicate copies of,
 

 
                (i)          a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such month or quarter, as applicable, and

 

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                (ii)           consolidated statements of earnings and cash
flows and changes in stockholders’ equity of the Company and its Subsidiaries,
for such month or for such quarter, as applicable, and (in the case of each
month other than the first month and in the case of the second and third
quarters) for the portion of the fiscal year ending with such month or quarter,
as applicable,
 

 
setting forth in each case in comparative form the consolidated figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared (in the case of such quarterly statements) in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery of such quarterly statements within the time
period specified above of copies of the Company’s Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of this Section 7.1(a) with respect to such quarterly statements;”
 

           (II)           Clause (b) of Section 7.1 is amended by replacing
“105” with “90” in the first line thereof.
 
           (III)           Section 7.1 is further amended by relabeling existing
clause (g) thereof as clause (i) and adding new clauses (g) and (h) immediately
prior thereto, such new clauses (g) and (h) to read as follows:
 

 
                “(g)         promptly, but in no event later than three Business
Days after becoming aware of any of the following, written notice describing the
same and the steps being taken by the Company or any affected Subsidiary with
respect thereto:
 

 
                (i)            any litigation, arbitration or governmental
investigation or proceeding not previously disclosed by the Company to the
holders of Notes which has been instituted or, to the knowledge of the Company,
is threatened against the Company or any Subsidiary or to which any of the
properties of any thereof is subject which might reasonably be expected to have
a Material Adverse Effect;
   
                (ii)           any event which might reasonably be expected to
have a Material Adverse Effect; and
   
                (iii)          any material default or any termination, or
notice (written or oral) thereof, under any of the Sears Agreements;

 

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                (h)           concurrently with the delivery thereof to the Bank
Agent or any Bank Lender, copies of all documents, reports or other deliverables
furnished to the Bank Agent or any Bank Lender pursuant to any of Sections
10.1.6, 10.1.7, 10.1.9 and 10.1.10 of the Bank Agreement; and”
 

 
                (IV)         Clause (a) of Section 7.2 is amended by replacing
“Sections 10.1 through 10.6” therein with “Sections 10.1 through 10.15”.
   
                (V)           Section 7.3 is amended by deleting such Section
7.3 in its entirety and replacing it with the following:
 

  “7.3        Books, Records and Inspections.    
                                The Company will and will cause each of its
Subsidiaries to (a) keep its books and records in accordance with sound business
practices sufficient to allow the preparation of financial statements in
accordance with GAAP, (b) permit any holder of Notes or any representative
thereof to inspect the properties and operations of the Company and the
Subsidiaries and (c) permit at any reasonable time and with reasonable notice
(or at any time without notice if an Event of Default exists), any holder of
Notes or any representative thereof to visit any or all of its offices, to
discuss its financial matters with its officers and its independent auditors
(and the Company hereby authorizes such independent auditors to discuss such
financial matters with any holder of Notes or any representative thereof), and
to examine (and, at the expense of the Company, photocopy extracts from) any of
its books or other records. All such inspections or examinations by the holders
of Notes shall be at the Company’s expense; provided that so long as no Default
or Event of Default exists, the Company shall not be required to reimburse the
holders of Notes for inspections or examinations more frequently than once each
Fiscal Year.
 

 
                (b)        Section 8.7. Prepayment Relating to Disposition
Payment. Section 8.7 is amended by deleting such Section in its entirety and
replacing it with the following:
 

  “8.7        Prepayment Relating to Asset Dispositions.    
                (a)           Concurrently with the receipt by the Company or
any Subsidiary of any Net Cash Proceeds from any Asset Disposition, the Company
shall make a prepayment of the Notes, in a proportional amount equal to the
proportional amount the Designated Proceeds (as defined below) represent to the
aggregate principal amount of the Notes and all Bank Debt at the time
outstanding.
   
                (b)           For purposes of this Section 8.7, “Designated
Proceeds” means 100% of the Net Cash Proceeds received by the Company and its
Subsidiaries from any Asset Disposition (it being understood that this

 

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Section 8.7 shall not apply to proceeds of Dispositions not constituting “Asset
Dispositions”).
   
                (c)           Each prepayment of Notes pursuant to this Section
8.7 shall be at the principal amount thereof, together with interest accrued
thereon to the date of such prepayment, plus the Make-Whole Amount determined
for the prepayment date with respect to such principal amount.
   
                (d)           Each prepayment of Notes pursuant to this Section
8.7 shall be made in the same manner (as to notice and all other provisions) as
a prepayment made under Section 8.2, provided that the holder of any Note so to
be prepaid may, by notice given to the Company at least two Business Days prior
to the prepayment date, elect that the Notes of such holder to be prepaid (or
any portion thereof) shall not be prepaid, and the Company shall not prepay the
Notes of such holder. Any notice of prepayment given under this Section 8.7
shall clearly and prominently make reference to the provisions of this Section
8.7 permitting the holders of Notes to elect that their respective Notes not be
prepaid.”
 

                  (c)        Section 9. Affirmative Covenants.  

 
                (I)             Section 9.5 is amended by replacing “Sections
10.5 and 10.6” therein with “Section 10.5”.
   
                (II)           Section 9 is further amended by inserting the
following new Section 9.7 at the end thereof:
 

  “9.7        Further Assurances.    
                                The Company will and will cause each of its
Subsidiaries to take such actions as are necessary or as the Required Holders
may reasonably request from time to time to ensure that the Guaranteed
Obligations (as defined in the Guaranty Agreement) are guarantied by each
domestic Subsidiary (including, upon the acquisition or creation thereof, any
Subsidiary acquired or created after the Closing), other than the Dormant
Entities, in each case as the Required Holders may determine.”
 

 
                (d)        Section 10. Negative Covenants. Section 10 of the
Agreement is amended by deleting such Section 10 in its entirety and replacing
it with the following:
 

  “10.        NEGATIVE COVENANTS.    
                                The Company covenants that so long as any of the
Notes are outstanding, it will:

 

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  10.1        Debt.    
                                Not, and will not permit any Subsidiary to,
create, incur, assume or suffer to exist any Debt, except:
 

 
                (a)           obligations under this Agreement and the other
Note Documents;
   
                (b)           Debt secured by Liens permitted by Section
10.2(d), and extensions, renewals and refinancings thereof; provided that the
aggregate amount of all such Debt at any time outstanding shall not exceed
$2,500,000, provided that the foregoing limit shall not include the Sale
Leaseback if the Sale Leaseback is consummated in an arm’s-length manner on
market terms and conditions;
   
                (c)           Debt of the Company to any domestic Wholly-Owned
Subsidiary or Debt of any domestic Wholly-Owned Subsidiary to the Company or
another domestic Wholly-Owned Subsidiary; provided that, upon the reasonable
request of the Required Holders, such Debt shall be evidenced by a demand note
in form and substance reasonably satisfactory to the Required Holders and the
obligations under such demand note shall be subordinated to the obligations of
the Company hereunder in a manner reasonably satisfactory to the Required
Holders;
   
                (d)           Debt (excluding the Bank Debt) described on
Schedule 10.1(d) attached hereto, and any extension, renewal or refinancing
thereof so long as the principal amount thereof is not increased in excess of
the amount set forth on such Schedule 10.1(d);
   
                (e)           the Debt to be Repaid (so long as such Debt is
repaid on the Amendment No. 1 Effective Date with the proceeds of the initial
loans under the Bank Agreement);
   
                (f)            Contingent Liabilities arising with respect to
customary indemnification obligations in favor of purchasers in connection with
dispositions permitted under Section 10.5;
   
                (g)           the Bank Debt, so long as each mandatory payment
of principal and interest thereunder is timely made in accordance with the terms
of the Bank Debt Documents;
   
                (h)           Contingent Liabilities listed on Schedule 10.1(d);
   
                (i)            Guaranties by the Company and/or its Subsidiaries
in respect of Debt of the Company or its domestic Subsidiaries permitted by this
Section 10.1;

 

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                (j)            Hedging Obligations incurred in favor of the Bank
Agent, any Bank Lender or any of their Affiliates for bona fide hedging purposes
and not for speculation;
   
                (k)           Debt owing to any trust created under a
supplemental executive retirement program of the Company; and
   
                (l)            Debt of the Company owing to any Canadian Entity
so long as such Canadian Entity remains a Wholly-Owned Subsidiary.
 

  10.2        Liens.    
                                Not, and will not permit any Subsidiary to,
create or permit to exist any Lien on any of its real or personal properties,
assets or rights of whatsoever nature (whether now owned or hereafter acquired),
except:
 

 
                (a)           Liens for taxes or other governmental charges not
at the time delinquent or thereafter payable without penalty or being contested
in good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
   
                (b)           Liens arising in the ordinary course of business
(such as (i) Liens of carriers, warehousemen, mechanics and materialmen and
other similar Liens imposed by law and (ii) Liens in the form of deposits or
pledges incurred in connection with worker’s compensation, unemployment
compensation and other types of social security (excluding Liens arising under
ERISA) or in connection with surety bonds, bids, performance bonds and similar
obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any advances or borrowed money or the
deferred purchase price of property or services and, in each case, for which it
maintains adequate reserves;
                    (c)           Liens described on Schedule 10.2 as of the
Amendment No. 1 Effective Date;    
                (d)           subject to the limitation set forth in Section
10.1(b), (i) Liens arising in connection with Capital Leases (and attaching only
to the property being leased), (ii) Liens existing on property at the time of
the acquisition thereof by the Company or any Subsidiary (and not created in
contemplation of such acquisition) and (iii) Liens that constitute purchase
money security interests on any property securing debt incurred for the purpose
of financing all or any part of the cost of acquiring such property, provided
that any such Lien attaches to such property within 20 days of the acquisition
thereof and attaches solely to the property so acquired;
   
                (e)           attachments, appeal bonds, judgments and other
similar Liens, for sums not exceeding $250,000 arising in connection with court
proceedings, provided that the execution or other enforcement of such

 

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Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
   
                (f)            easements, rights of way, restrictions, minor
defects or irregularities in title and other similar Liens not interfering in
any material respect with the ordinary conduct of the business of the Company or
any Subsidiary;
   
                (g)           Liens in favor of landlords with respect to assets
located at locations leased by the Company or any Subsidiary if such provisions
granting a Lien are in existence on the Amendment No. 1 Effective Date in leases
that are in existence on the Amendment No. 1 Effective Date; provided that, with
respect to any locations leased by the Company or any Subsidiary after the
Amendment No. 1 Effective Date, the related lease shall not contain any
provisions granting a landlord a Lien on any assets of the Company or any
Subsidiary or grant the landlord the right to dispose of any assets of the
Company or any Subsidiary and to the extent any location leased after the
Amendment No. 1 Effective Date is in a jurisdiction with a statutory lien in
favor of a landlord, such lease shall contain a waiver of such statutory
landlord lien;
   
                (h)           Liens (i) on cash collateral provided by the
Company to secure obligations in respect of Bank Letters of Credit and
(ii) pursuant to Section 10 of the Master Letter of Credit Agreement dated as of
the Amendment No. 1 Effective Date by the Company in respect of Bank Letters of
Credit; provided that the liabilities secured by all such Liens specified in the
foregoing clauses (i) and (ii) do not exceed an aggregate of $15,000,000 at any
time; and
   
                (i)            the replacement, extension or renewal of any Lien
permitted by clause (c) above upon or in the same property subject thereto
arising out of the extension, renewal or replacement of the Debt secured thereby
(without increase in the amount thereof).
 

  10.3        Operating Leases.    
                                Not permit the aggregate amount of all rental
payments under Operating Leases made (or scheduled to be made) by the Company
and the Subsidiaries (on a consolidated basis) to exceed $3,000,000 in any
Fiscal Year; provided that the foregoing limit shall not include (a) a Sale
Leaseback if such Sale Leaseback is consummated in an arm’s-length manner on
market terms and conditions, (b) if the St. Louis, Missouri headquarters (and
related parking facilities) is sold, transferred or assigned, the rental
payments with respect to any replacement location if such rental payments are on
an arm’s-length basis on market terms and conditions, or (c) if the Brampton,
Ontario facility is sold, transferred or assigned, the rental payments with
respect to any replacement

 

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location if such rental payments are on an arm’s-length basis on market terms
and conditions.
    10.4        Restricted Payments.    
                                Not, and will not permit any Subsidiary to,
(a) make any distribution or pay any dividend to any holders of its Capital
Securities, (b) purchase or redeem any of its Capital Securities, (c) pay any
management fees or similar fees to any of its equity holders or any Affiliate
thereof, (d) make any redemption, prepayment, defeasance, repurchase or any
other payment in respect of any Debt, not including the Bank Debt or the Notes,
prior to its stated maturity or amortization schedule (in each case as such
amortization schedule exists on the date hereof) or (e) set aside funds for any
of the foregoing. Notwithstanding the foregoing, (x) any Subsidiary may pay
dividends or make other distributions to the Company or to a domestic
Wholly-Owned Subsidiary and (y) so long as no Default or Event of Default exists
or would result therefrom, the Company may pay dividends or make other
distributions to the holders of its Capital Securities and may purchase,
repurchase or redeem the Company’s Capital Securities up to an aggregate (for
all such dividends, distributions, purchases, repurchases and redemptions) of
$5,500,000 in each Fiscal Year.
    10.5        Mergers, Consolidations, Sales.    
                                Not, and will not permit any Subsidiary to,
(a) be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any Capital Securities of any class
of, or any partnership or joint venture interest in, any other Person, (b) sell,
transfer, convey or lease all or any substantial part of its assets or Capital
Securities (including the sale of Capital Securities of any Subsidiary) except
for sales of inventory, excess equipment and obsolete equipment in the ordinary
course of business, (c) sell, transfer or assign the St. Louis, Missouri
headquarters (and related parking facilities) and/or the Brampton, Ontario
facility except, in each case, on an arm’s-length basis and on market terms and
conditions or (d) sell or assign with or without recourse any receivables,
except for (x) any such merger, consolidation, sale, transfer, conveyance, lease
or assignment of or by any Wholly-Owned Subsidiary into the Company or into any
other domestic Wholly-Owned Subsidiary and (y) any such purchase or other
acquisition by the Company or any domestic Wholly-Owned Subsidiary of the assets
or Capital Securities of any Wholly-Owned Subsidiary.
    10.6        Modification of Organizational Documents.    
                                Not permit the charter, by-laws or other
organizational documents of the Company or any Subsidiary to be amended or
modified in any way which could reasonably be expected to materially adversely
affect the interests of the holders of Notes; not change, or allow the Company
or any Subsidiary to change, its State of formation or its organizational form.

 

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  10.7        Transactions with Affiliates.    
                                Not, and will not permit any Subsidiary to,
enter into, or cause, suffer or permit to exist any transaction, arrangement or
contract with any of its other Affiliates (other than the Company and the
Subsidiaries) which is on terms which are materially less favorable than are
reasonably obtainable from any Person which is not one of its Affiliates and
excluding any employment agreements with any officers and directors of the
Company or any Subsidiary to the extent approved by the Board of Directors of
the Company or such Subsidiary, as applicable, and disclosed by the Company in
accordance with all applicable public reporting laws, rules, and regulations.
    10.8        Inconsistent Agreements.    
                                Not, and will not permit any Subsidiary to,
enter into, or be a party to, any agreement containing any provision which would
(a) be violated or breached by the performance by the Company or any Subsidiary
of any of its obligations hereunder or under any other Note Document,
(b) prohibit the Company or any Subsidiary from granting to any holder of Notes,
a Lien on any of its assets (other than the Bank Debt Documents) or (c) create
or permit to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i) pay dividends or make other distributions to
the Company or any other Subsidiary, or pay any Debt owed to the Company or any
other Subsidiary, (ii) make loans or advances to the Company or any Subsidiary
or (iii) transfer any of its assets or properties to the Company or any
Subsidiary, other than (A) customary restrictions and conditions contained in
agreements relating to the sale of all or a substantial part of the assets of
any Subsidiary pending such sale, provided that such restrictions and conditions
apply only to the Subsidiary to be sold and such sale is permitted hereunder,
(B) restrictions or conditions imposed by any agreement relating to purchase
money Debt, and Capital Leases permitted by this Agreement if such restrictions
or conditions apply only to the property or assets securing such Debt and
(C) customary provisions in leases and other contracts restricting the
assignment thereof.
    10.9        Business Activities; Issuance of Equity.    
                                Not, and will not permit any Subsidiary to,
(a) engage in any line of business other than the businesses engaged in on the
Amendment No. 1 Effective Date and businesses reasonably related thereto or
(b) issue any Capital Securities other than, in the case of this clause (b),
(i) any issuance of shares of the Company’s common Capital Securities pursuant
to any employee or director option program, benefit plan or compensation
program, and (ii) any issuance by a Subsidiary to the Company or another
Subsidiary in accordance with Section 10.4.

 

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  10.10      Investments.    
                                Not, and will not permit any Subsidiary to, make
or permit to exist any Investment in any other Person, except the following:
 

 
                (a)           contributions by the Company to the capital of any
domestic Wholly-Owned Subsidiary, or by any Subsidiary to the capital of any
other domestic Wholly-Owned Subsidiary, so long as the recipient of any such
capital contribution has guaranteed the obligations of the Company and the
Subsidiaries hereunder and under the Notes and the other Notes Documents, as
required by this Agreement;
   
                (b)           Investments constituting Debt permitted by Section
10.1;
   
                (c)           Contingent Liabilities constituting Debt permitted
by Section 10.1 or Liens permitted by Section 10.2;
                    (d)           bank deposits in the ordinary course of
business;    
                (e)           Investments in securities of account debtors
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors; and
   
                (f)            Investments listed on Schedule 10.10 as of the
Amendment No. 1 Effective Date;
 

 
provided that (x) any Investment which when made complies with the requirements
of the definition of the term “Cash Equivalent Investment” may continue to be
held notwithstanding that such Investment if made thereafter would not comply
with such requirements; and (y) no Investment otherwise permitted by clause (b)
or (c) shall be permitted to be made if, immediately before or after giving
effect thereto, any Default or Event of Default exists.
    10.11      Most Favored Lender.    
                                Not enter into, assume or otherwise be bound or
obligated under any agreement creating or evidencing Debt in excess of $250,000
containing one or more Additional Covenants or Additional Defaults, without the
prior written consent of the Required Holders; provided, however, in the event
the Company or any Subsidiary shall enter into, assume or otherwise become bound
by or obligated under any such agreement without the prior written consent of
the Required Holders, the terms of this Agreement shall, without any further
action on the part of the Company or any Subsidiary or any holder of Notes, be
deemed to be amended automatically to include each Additional Covenant and each
Additional Default contained in such agreement. The Company further covenants to
promptly execute and deliver at its expense (including, without limitation, the
reasonable fees and expenses of counsel for the holders of Notes) an amendment
to this Agreement in form and substance satisfactory to the Required Holders

 

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evidencing the amendment of this Agreement to include such Additional Covenants
and Additional Defaults, provided that the execution and delivery of such
amendment shall not be a precondition to the effectiveness of such amendment as
provided for in this Section, but shall merely be for the convenience of the
parties hereto. Notwithstanding the foregoing, the Bank Debt Documents as they
exist on the Amendment No. 1 Effective Date are not implicated by this Section.
    10.12      Restriction of Amendments to Certain Documents.    
                                Not amend or otherwise modify, or waive any
rights under, (a) any of the Sears Agreements, if, in any case, such amendment,
modification or waiver could reasonably be expected to be adverse to the
interests of the holders of Notes or be materially adverse to the Company or
(b) the Bank Debt Documents, except to the extent such change could not
reasonably be expected to materially adversely effect any holder of Notes or
except to the extent such change is not more restrictive to the Company or any
Subsidiary.
    10.13      Dormant Entities.    
                                Not allow or permit any Dormant Entity to
(a) have or hold any assets of any kind or nature other than the Capital
Securities of any Subsidiary, (b) have or incur any liabilities, obligations or
Debt of any kind other than incidental corporate maintenance items, incidental
tax liabilities, or (c) have any operations or employees.
    10.14      Fiscal Year.    
                                Not change its Fiscal Months, Fiscal Quarters or
Fiscal Years from what is set forth on Schedule 10.14.

 

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  10.15      Financial Covenants.  

  10.15.1  Minimum EBITDA.    
                                Not permit, as of the last day of any
Computation Period, EBITDA for such Computation Period to be less than the
amount set forth below for such Computation Period:
 

   Computation 
Periods Ending     Minimum 
EBITDA  

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            April 30, 2005 and July 23, 2005   $24,000,000              
 November 12, 2005   $25,000,000               February 4, 2006, April 29, 2006
and July 22, 2006    $28,000,000               November 11, 2006, February 3,
2007
and April 28, 2007   $30,000,000            

  10.15.2  Total Debt to EBITDA Ratio.    
                                Not permit, as of the last day of any Fiscal
Quarter, the ratio of Total Debt to EBITDA, for the Computation Period ended on
the last day of such Fiscal Quarter, to exceed 2.00 to 1.00.
    10.15.3  Minimum Net Worth.    
                                The Company’s Net Worth as of the last day of
each Fiscal Quarter shall not be less than the following, plus with respect to
each of the following, 90% of the net proceeds of any issuance of equity or
equity securities in the Company issued after the Amendment No. 1 Effective
Date:
 

 Fiscal Quarter Ending     Minimum
Net Worth

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         April 30, 2005   $17,000,000   July 23, 2005    $13,000,000   November
12, 2005   $7,000,000   February 4, 2006   $20,000,000   April 29, 2006  
$18,000,000   July 22, 2006   $14,000,000   November 11, 2006   $10,000,000  
February 3, 2007   $25,500,000   April 28, 2007   $25,500,000”  

 

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  10.15.4  Capital Expenditures.    
                                Not permit the aggregate amount of all Capital
Expenditures made by the Company and the Subsidiaries in any Fiscal Year to
exceed the amount set forth below for such Fiscal Year:
 

  Fiscal Year   Maximum
Capital Expenditures    

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              2005 Fiscal Year   $30,000,000.00     2006 Fiscal Year  
$25,000,000.00      2007 Fiscal Year   $20,000,000.00”  

                      (e)             Section 11. Events of Default.  

 
                (I)             Clauses (c), (d) and (e) of Section 11 are
deleted in their entirety and replaced with the following:
 

 
                “(c)         the Company defaults in the performance of or
compliance with any term contained in Section 7.1(d) or Section 10; or
   
                (d)           the Company or any Subsidiary defaults in the
performance of or compliance with any term contained herein (other than those
referred to in paragraphs (a), (b) and (c) of this Section 11) or in any other
Note Document, and such default is not remedied within 20 days after the
occurrence of such default; or
   
                (e)           any representation or warranty made in writing by
or on behalf of the Company or any Subsidiary or by any officer of the Company
or any Subsidiary in this Agreement, in any Note Document or in any writing
furnished in connection with the transactions contemplated hereby or thereby
proves to have been false or incorrect on the date as of which made; or”
 

 
                (II)           Clause (f) of Section 11 is amended by replacing
each occurrence of “$5,000,000” therein with “$200,000”.
   
                (III)          Clause (i) of Section 11 is amended by
(A) replacing “$1,000,000” therein with “$250,000” and (B) replacing each
occurrence of “120 days” therein with “30 days”.
   
                (IV)         Clause (j) of Section 11 is amended by replacing
“$1,000,000” therein with “$100,000”.

 

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                (V)           Section 11 is further amended by (A) replacing the
“.” at the end of clause (j) thereof with “; or” and adding the following new
clauses (k) and (l) at the end thereof:
 

 
                “(k)         a default by the Company or any Subsidiary in the
payment when due, or in the performance or observance of, any obligation of, or
condition agreed to by, any of them with respect to any agreement, contract or
lease, where such default, singly or in the aggregate with all other such
defaults, might reasonably be expected to have a Material Adverse Effect; or
   
                (l)            any material default or material breach, or
notice (written or oral) of any default or breach, under any of the Sears
Agreements, or any termination of any of the Sears Agreements (except for a
termination of the Sears Canada Agreement not arising from a breach or default
by the Company or any Subsidiary of such agreement) or any notice (written or
oral) of any intent to terminate any of the Sears Agreements (except for a
termination of the Sears Canada Agreement not arising from a breach or default
by the Company or any Subsidiary of such agreement), or any of the Sears
Agreements shall cease to be in full force and effect (except for a termination
of the Sears Canada Agreement not arising from a breach or default by the
Company or any Subsidiary of such agreement) whether by their terms or due to an
early termination; or the Company or any of its Subsidiaries or any other Person
shall contest in any manner the validity, binding nature or enforceability of
any guaranty of the obligations of the Company or any Subsidiary under the Note
Documents (including the Guaranty Agreement) or shall assert the invalidity or
unenforceability of, or deny any liability under, any such guaranty or the
Company or any Subsidiary fails to comply with any of the terms or provisions of
any such guaranty, or any representation or warranty is false or any covenant is
breached of the Company or any Subsidiary herein or in any such guaranty.”
 

                  (f)        Schedule A. Names and Addresses of Purchasers.  

 
                Schedule A to the Agreements is amended by deleting the address
provided under each of “(3) Address for all notices relating to payments and
written confirmation of such wire transfers:” and “(4) Address for all other
communications and notices:” with respect to The Guardian Life Insurance Company
of America, and replacing it with the following:
 

  The Guardian Life Insurance Company of America    7 Hanover Square   New York,
NY   10004-2616   Attn:       Brian Keating                   Investment
Department 20-D                   Fax #:  (212) 919-2658

 

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                  (g)        Schedule B. Defined Terms.  

 
                (I)             The definitions of “Affiliate”, “Capital Lease”,
“Consolidated Net Income”, “EBITDA”, “Lien” and “Material Adverse Effect” in
Schedule B are amended by deleting such definitions in their entirety and
replacing them with the following:
 

 
                “Affiliate” of any Person means (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any officer or director of such Person and (c) with
respect to any Bank Lender, any entity administered or managed by such Bank
Lender or an Affiliate or investment advisor thereof and which is engaged in
making, purchasing, holding or otherwise investing in commercial loans. A Person
shall be deemed to be “controlled by” any other Person if such Person possesses,
directly or indirectly, power to vote 10% or more of the securities (on a fully
diluted basis) having ordinary voting power for the election of directors or
managers or power to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an “Affiliate” is a reference to an
Affiliate of the Company.
   
                “Capital Lease” means, with respect to any Person, any lease of
(or other agreement conveying the right to use) any real or personal property by
such Person that, in conformity with GAAP, is accounted for as a capital lease
on the balance sheet of such Person.
   
                “Consolidated Net Income” means, with respect to any period, the
net income (or loss) of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP, excluding any gains
or losses from Asset Dispositions described in clauses (a) and (c) of the
definition of Asset Dispositions.
   
                “EBITDA” means, for any period, Consolidated Net Income for such
period plus, to the extent deducted in determining such Consolidated Net Income,
(a) Interest Expense, (b) income tax expense, (c) depreciation and amortization,
(d) non-cash charges not exceeding an aggregate of $3,000,000 from and after the
Amendment No. 1 Effective Date for such period and (e) cash charges for
severance expenses not exceeding a cumulative aggregate of $2,0000,000 from and
after the Amendment No. 1 Effective Date, for such period and (f) if applicable,
the Special Adjustment Amount. Without duplication of the Special Adjustment
Amount, “EBITDA” shall be recomputed for all relevant Computation Periods to
exclude any gains or losses from Asset Dispositions described in clauses (a) and
(c) of the definition of Asset Dispositions and any extraordinary gains or
losses (as defined under GAAP).

 

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                “Lien” means, with respect to any Person, any interest granted
by such Person in any real or personal property, asset or other right owned or
being purchased or acquired by such Person (including an interest in respect of
a Capital Lease) which secures payment or performance of any obligation and
shall include any mortgage, lien, encumbrance, title retention lien, charge or
other security interest of any kind, whether arising by contract, as a matter of
law, by judicial process or otherwise.
   
                “Material Adverse Effect” means (a) a material adverse change
in, or a material adverse effect upon, the financial condition, operations,
assets, business, properties or prospects of the Company and its Subsidiaries
taken as a whole, (b) a material impairment of the ability of the Company or any
of its Subsidiaries to perform any of its obligations under any Note Document or
(c) a material adverse effect upon any substantial portion of the assets of the
Company and its Subsidiaries, taken as a whole, or upon the legality, validity,
binding effect or enforceability of any Note Document against the Company or any
of its Subsidiaries.
 

 
               (II)           The following definitions are inserted in Schedule
B in the appropriate alphabetical order:
 

 
                “Acquisition” means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of all or
substantially all of any business or division of a Person, (b) the acquisition
of in excess of 50% of the Capital Securities of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or consolidation or
any other combination with another Person (other than a Person that is already a
Subsidiary).
   
                “Additional Covenant” means any affirmative or negative covenant
or similar restriction applicable to the Company or any Subsidiary (regardless
of whether such provision is labeled or otherwise characterized as a covenant)
the subject matter of which either (a) is similar to that of the covenants in
Section 9 and Section 10 of this Agreement, or related definitions of this
Agreement, but contains one or more percentages, amounts or formulas that is
more restrictive than those set forth in this Agreement or more beneficial to
the holder or holders of the Debt created or evidenced by the document in which
such covenant or similar restriction is contained (and such covenant or similar
restriction shall be deemed an Additional Covenant only to the extent that it is
more restrictive or more beneficial) or (b) is different from the subject matter
of the covenants in Section 9 and Section 10 of this Agreement, or related
definitions of this Agreement.
   
                “Additional Default” means any provision contained in any
document or instrument creating or evidencing Debt of the Company or

 

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any Subsidiary that permits the holder or holders of such Debt to accelerate
(with the passage of time or giving of notice or both) the maturity thereof or
otherwise requires the Company or any Subsidiary to purchase such Debt prior to
the stated maturity thereof and which either (a) is similar to the Events of
Default contained in Section 11 of this Agreement, or related definitions of
this Agreement, but contains one or more percentages, amounts or formulas that
is more restrictive or has a shorter grace period than those set forth herein or
is more beneficial to the holders of such other Debt (and such provision shall
be deemed an Additional Default only to the extent that it is more restrictive,
has a shorter grace period or is more beneficial) or (b) is different from the
subject matter of the Events of Default contained in Section 11 of this
Agreement, or related definitions of this Agreement.
                    “Amendment No. 1 Effective Date” means April 15, 2005.    
                “Asset Disposition” means the sale, lease, assignment or other
transfer for value (each, a ”Disposition”) by the Company or any Subsidiary to
any Person (other than the Company or any Subsidiary) of any asset or right of
the Company or such Subsidiary (including, the loss, destruction or damage of
any thereof or any actual or threatened (in writing to the Company or any
Subsidiary) condemnation, confiscation, requisition, seizure or taking thereof)
other than (a) the Disposition of any asset which is to be replaced, and is in
fact replaced, within 180 days with another asset performing the same or a
similar function or that is otherwise useful in the business of the Company or a
Subsidiary, (b) the sale or lease of inventory or obsolete equipment, including,
without limitation, any excess equipment, in the ordinary course of business and
(c) other Dispositions in any Fiscal Year the Net Cash Proceeds of which do not
in the aggregate exceed 20% of Consolidated Assets (as of the last day of the
immediately preceding Fiscal Year).
   
                “Bank Agent” means LaSalle Bank National Association, as
administrative agent under the Bank Agreement, together with any successor or
replacement administrative agent from time to time thereunder.
   
                “Bank Agreement” means the Credit Agreement, dated as of the
Amendment No. 1 Effective Date, among the Company, the various financial
institutions party thereto, as lenders, and the Bank Agent, as such agreement
may be amended, restated, supplemented or otherwise modified from time to time.
   
                “Bank Debt” means Debt incurred by the Company pursuant to
the Bank Agreement.

 

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                “Bank Debt Documents” means all documents and instruments
relating to the Bank Debt, executed or delivered from time to time (including,
without limitation, the Bank Agreement), as any of the foregoing may be amended,
modified, restated or supplemented from time to time.
                    “Bank Lender” means a Lender under the Bank Agreement.    
                “Bank Letter of Credit” means a letter of credit issued by the
“Issuing Lender” (as such term is defined in the Bank Agreement) under and
pursuant to the terms of the Bank Agreement.
   
                “Canadian Entities” means (a) CPI Corp., a Nova Scotia unlimited
liability company, and (b) CPI Portrait Studios of Canada Corp., a Nova Scotia
unlimited liability company.
   
                “Capital Expenditures” means all expenditures which, in
accordance with GAAP, would be required to be capitalized and shown on the
consolidated balance sheet of the Company, including expenditures in respect of
Capital Leases, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed
(a) from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (b) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
   
                “Capital Securities” means, with respect to any Person, all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person’s capital, whether outstanding on
the Amendment No. 1 Effective Date or issued or acquired after the Amendment No.
1 Effective Date, including common shares, preferred shares, membership
interests in a limited liability company, limited or general partnership
interests in a partnership, interests in a trust, interests in other
unincorporated organizations or any other equivalent of such ownership interest.
   
                “Capitalized Rentals” of any Person shall mean as of the date of
any determination thereof, the amount at which the aggregate present value of
future rentals due and to become due under all Capital Leases under which such
Person is a lessee would be reflected as a liability on a consolidated or
combined balance sheet of such Person in accordance with GAAP.
   
                “Cash Equivalent Investment” means, at any time, (a) any
evidence of Debt, maturing not more than one year after such time, issued or
guaranteed by the United States Government or any agency thereof, (b) commercial
paper, maturing not more than one year from the date of

 

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issue, or corporate demand notes, in each case (unless issued by a Bank Lender
or its holding company) rated at least A-l by Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s
Investors Service, Inc., (c) any certificate of deposit, time deposit or
banker’s acceptance, maturing not more than one year after such time, or any
overnight Federal Funds transaction that is issued or sold by any Bank Lender or
its holding company (or by a commercial banking institution that is a member of
the Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000), (d) any repurchase agreement entered
into with any Bank Lender (or commercial banking institution of the nature
referred to in clause (c)) which (i) is secured by a fully perfected security
interest in any obligation of the type described in any of clauses (a) through
(c) above and (ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of such Bank
Lender (or other commercial banking institution) thereunder, (e) money market
accounts or mutual funds which invest exclusively in assets satisfying the
foregoing requirements, (f) investments listed on Schedule 10.10 and similar
investments (other than foreign government bonds), (g) investments in money
market funds managed by or sponsored by the Bank Agent or any of its Affiliates
and (h) other short term liquid investments approved in writing by the Required
Holders (which approval shall not be unreasonably withheld).
   
                “Computation Period” means each period of four consecutive
Fiscal Quarters ending on the last day of a Fiscal Quarter.
   
                “Contingent Liability” means, with respect to any Person, each
obligation and liability of such Person and all such obligations and liabilities
of such Person incurred pursuant to any agreement, undertaking or arrangement by
which such Person (a) guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in any
manner (other than by endorsement of instruments in the course of collection),
including any indebtedness, dividend or other obligation which may be issued or
incurred at some future time, (b) guarantees the payment of dividends or other
distributions upon the Capital Securities of any other Person, (c) undertakes or
agrees (whether contingently or otherwise) (i) to purchase, repurchase, or
otherwise acquire any indebtedness, obligation or liability of any other Person
or any property or assets constituting security therefor, (ii) to advance or
provide funds for the payment or discharge of any indebtedness, obligation or
liability of any other Person (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, working

 

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capital or other financial condition of any other Person, or (iii) to make
payment to any other Person other than for value received, (d) agrees to lease
property or to purchase securities, property or services from such other Person
with the purpose or intent of assuring the owner of such indebtedness or
obligation of the ability of such other Person to make payment of the
indebtedness or obligation, (e) to induce the issuance of, or in connection with
the issuance of, any letter of credit for the benefit of such other Person or
(f) undertakes or agrees otherwise to assure a creditor against loss. The amount
of any Contingent Liability shall (subject to any limitation set forth herein)
be deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the indebtedness, obligation or other liability guaranteed
or supported thereby.
   
                “Debt” of any Person means, without duplication, (a) all
indebtedness of such Person that is non-contingent and liquidated in amount or
that should under GAAP be included in liabilities and not just as a footnote on
a balance sheet, (b) all borrowed money of such Person, whether or not evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
Person as lessee under Capital Leases including, without duplication,
Capitalized Rentals, which have been or should be recorded as liabilities on a
balance sheet of such Person in accordance with GAAP, (d) all obligations of
such Person to pay the deferred purchase price of property or services
(excluding trade accounts payable in the ordinary course of business), (e) all
indebtedness secured by a Lien on the property of such Person, whether or not
such indebtedness shall have been assumed by such Person, provided that if such
Person has not assumed or otherwise become liable for such indebtedness, such
indebtedness shall be measured as the lesser of the amount of any such
indebtedness or the fair market value of such property securing such
indebtedness at the time of determination, (f) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn), bankers’ acceptances and similar obligations issued for the account
of such Person (including the Bank Letters of Credit), (g) all Hedging
Obligations of such Person, (h) all Contingent Liabilities of such Person,
(i) all Debt of any partnership of which such Person is a general partner and
(j) any Capital Securities or other equity instrument, whether or not mandatory
redeemable, that under GAAP is or should be characterized as debt and not
equity, whether pursuant to financial accounting standards board issuance No.
150 or otherwise.
                    “Debt to Repaid” means Debt listed on Schedule 10.1(e)
attached hereto.                     “Designated Proceeds” is defined in Section
8.7.    
                “Dormant Entities” means each of the following: (a) Centrics
Technology, Inc., a Delaware corporation, (b) Consumer Programs

 

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Partner, Inc., a Delaware corporation, (c) CPI Portrait Studios de Mexico, S. de
R.L. de C.V., a Mexican corporation, (d) CPI Prints Plus, Inc., a Delaware
corporation, (e) CPI Research and Development, Inc., a Delaware corporation,
(f) CPI Technology Corp., a Missouri corporation, (g) LBP Partnership, a
Missouri general partnership, (h) myportraits.com, Inc., a Missouri corporation,
(i) P&W/LBP Partnership, a Missouri general partnership, (j) Ridgedale Prints
Plus, Inc., a Minnesota corporation, and (k) Texas Portraits, L.P., a Delaware
limited partnership.
                    “Fiscal Month” means a fiscal month of a Fiscal Year.    
                “Fiscal Quarter” means a fiscal quarter of a Fiscal Year.    
                “Fiscal Year” means the fiscal year of the Company and its
Subsidiaries, which period shall be the 12-month period ending on the date
specified in Schedule 10.14 attached hereto of each calendar year. References to
a Fiscal Year with a number corresponding to any calendar year (e.g., “Fiscal
Year 2004” or “2004 Fiscal Year”) refer to the Fiscal Year beginning in the
calendar year of such Fiscal Year as set forth in Schedule 10.14 (e.g. “Fiscal
Year 2004” began in calendar year 2004 and ends in calendar year 2005).
   
                “Guaranty Agreement” means the Guaranty Agreement dated as of
the Amendment No. 1 Effective Date executed and delivered by the Subsidiaries
(other than the Dormant Entities and the Canadian Entities), together with any
joinders thereto and any other guaranty executed by a Subsidiary, in each case
in form and substance reasonably satisfactory to the Required Holders.
   
                “Hedging Agreement” means any interest rate, currency or
commodity swap agreement, cap agreement or collar agreement, and any other
agreement or arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity prices.
   
                “Hedging Obligation” means, with respect to any Person, any
liability of such Person under any Hedging Agreement. The amount of any Person’s
obligation in respect of any Hedging Obligation shall be deemed to be the
incremental obligation that would be reflected in the financial statements of
such Person in accordance with GAAP.
   
                “Insurance Proceeds” means any insurance and/or condemnation
proceeds payable as a consequence of damage to or destruction of any assets of
the Company or any Subsidiary.
   
                “Interest Expense” means for any period the consolidated
interest expense of the Company and its Subsidiaries for such period (including
all imputed interest on Capital Leases).

 

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                “Investment” means, with respect to any Person, any investment
in another Person, whether by acquisition of any debt or Capital Security, by
making any loan or advance, by becoming obligated with respect to a Contingent
Liability in respect of obligations of such other Person (other than travel and
similar advances to employees in the ordinary course of business) or by making
an Acquisition.
   
                “Net Cash Proceeds” means, with respect to any Asset
Disposition, the aggregate cash proceeds (including cash proceeds received
pursuant to policies of insurance or by way of deferred payment of principal
pursuant to a note, installment receivable or otherwise, but only as and when
received) received by the Company or any Subsidiary pursuant to such Asset
Disposition net of (a) the direct costs relating to such sale, transfer or other
disposition (including sales commissions and legal, accounting and investment
banking fees), (b) taxes paid or reasonably estimated by the Company to be
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements) and (c) amounts required to be
applied to the repayment of any Debt secured by a Lien on the asset subject to
such Asset Disposition (other than Bank Debt and the Notes);
   
                “Net Income” means the net income of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
   
                “Net Worth” means the consolidated net worth of the Company and
its Subsidiaries, determined in accordance with GAAP.
   
                “Note Documents” means, collectively, this Agreement, the Other
Agreements, the Notes, the Guaranty Agreement, the Sharing Agreement and each
other agreement, instrument or document executed at any time in connection with
the foregoing documents, as each such Note Document may be amended, restated,
supplemented or otherwise modified from time to time.
   
                “Operating Lease” means any lease of (or other agreement
conveying the right to use) any real or personal property by the Company or any
Subsidiary, as lessee, other than any Capital Lease.
   
                “Sale Leaseback” means (a) the sale or transfer by the Company
of its headquarters location (and related parking facilities) in St. Louis,
Missouri and the subsequent immediate leasing by the Company of all or a portion
of such location and (b) the sale or transfer by the Company of its facility in
Brampton, Ontario and the subsequent immediate leasing by the Company of all or
a portion of such location.

 

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                “Sears Agreements” means, collectively, (a) the License
Agreement dated as of January 1, 1999 by and between Sears, Roebuck and Co. and
Consumer Programs Incorporated, (b) the License Agreement (Off Mall) dated as of
January 1, 1999 by and between Sears, Roebuck and Co. and Consumer Programs
Incorporated, (c) the License Agreement dated as of January 1, 1999 by and
between Sears Roebuck de Puerto Rico, Inc. and Consumer Programs Incorporated,
(d) the Development and License Agreement dated as of January 31, 2001 by and
between Sears, Roebuck and Co. and Consumer Programs Incorporated and (e) the
Sears Canada Agreement, and all documents and agreements executed in connection
with any of the foregoing, from time to time, as any of the foregoing may be
amended, modified, restated, or replaced from time to time.
   
                “Sears Canada Agreement” means the Sears License Agreement dated
as of January 1, 2003 by and between Sears, Roebuck and Co., Sears Canada Inc.
and the Company.
   
                “Sharing Agreement” means the Sharing Agreement, dated as of the
Amendment No. 1 Effective Date, among the holders of Notes and the Bank Agent,
as amended, restated, supplemented or otherwise modified from time to time.
   
                “Special Adjustment Amount” means an amount equal to (a) for the
first Fiscal Quarter in the 2005 Fiscal Year, $21,851,106, (b) for the second
Fiscal Quarter in the 2005 Fiscal Year, $11,963,185, (c) for the third Fiscal
Quarter in the 2005 Fiscal Year, $612,383, and (d) for the fourth Fiscal Quarter
in the 2005 Fiscal Year, $0. The Special Adjustment Amount to be added to EBITDA
for the applicable Fiscal Quarter in the 2005 Fiscal Year shall only be the
amount set forth above for such Fiscal Quarter; such amounts are not cumulative.
   
                “Total Debt” means, as to any Person, without duplication,
(a) all Debt of such Person for borrowed money or which has been incurred in
connection with the acquisition of assets (excluding Operating Leases),
including, without limitation, Debt permitted by clause (k) of Section 10.1,
(b) all payments in respect of clause (a) above required to be made within one
year following the date of any determination of Total Debt, if the obligation to
make such payments shall constitute a current liability of the obligor under
GAAP, (c) all Capitalized Rentals of such Person, (d) any and all other Debt for
borrowed money (other than undrawn Bank Letters of Credit) and (e) the face
amount of all letters of credit (including, without limitation, Bank Letters of
Credit) on which the Company or any Subsidiary is the account party, unless any
such letters of credit (including, without limitation, Bank Letters of Credit)
and related fees are fully cash collateralized.

 

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                (III)          The definitions of “Attributable Debt”,
“Consolidated Assets”, “Consolidated Capitalization”, “Consolidated Fixed
Charges”, “Consolidated Indebtedness”, “Consolidated Interest Expense”,
“Consolidated Lease Rental Expense”, “Consolidated Net Worth”, “Disposition
Payment” and “Related Party Arrangement” in Schedule B are deleted in their
entirety.
 

                  (h)        Schedules.  

 
                The Schedules to the Note Agreements are amended by adding new
Schedules 10.1(d), 10.1(e), 10.2, 10.10 and 10.14, in the form of Schedules
10.1(d), 10.1(e), 10.2, 10.10 and 10.14 attached hereto.

 

                2.          Representations and Warranties. In order to induce
each of you to enter into this Amendment, the Company hereby represents and
warrants as follows:

 

 
                (a)          Due Authorization; Non-contravention. The
execution, delivery and performance by the Company and each Subsidiary a party
to the Guaranty Agreement (the “Subsidiary Guarantors”) of this Amendment, the
Agreements as amended hereby, the Guaranty Agreement and the Sharing Agreement,
as applicable, have in each case been duly authorized by all necessary
corporate, limited liability company or partnership action, as applicable, and
do not and will not (i) contravene the terms of the charter and by-laws or other
organizational documents of the Company or any Subsidiary Guarantor,
(ii) conflict with or result in any breach or contravention of, or the creation
of any Lien under, any document evidencing any contractual obligation to which
any such Person is a party or any order, injunction, writ or decree of any
governmental authority binding on any such Person or its property, or
(iii) violate any applicable law binding on or affecting any such Person.
   
                (b)          Binding Effect. This Amendment, the Agreements as
amended hereby, the Guaranty Agreement and the Sharing Agreement constitute the
legal, valid and binding obligations of the Company and the Subsidiary
Guarantors, enforceable against such Persons in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors’ rights
generally or by equitable principles of general applicability.
                    (c)          Representations and Warranties.  

 
                (I)             The representations and warranties of the
Company and the Subsidiary Guarantors set forth in the Agreements and the
Guaranty Agreement are true and correct on and as of the date hereof, both
before and after giving effect to this Amendment (except to the extent such
representations and warranties expressly are limited to an earlier date, in
which case such representations and warranties are true and correct on and as of
such earlier date).
   
                (II)           The Company has heretofore furnished the holders
of Notes a true and correct copy of each of the Sears Agreements. The Company
and each Subsidiary and, to the Company’s knowledge, each other party to the
Sears Agreements, has duly taken all necessary corporate, partnership or other

 

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organizational action to authorize the execution, delivery and performance of
the Sears Agreements and the consummation of transactions contemplated thereby.
Each of the Sears Agreements is in full force and effect and is the legal, valid
and binding obligation of the Company and, to Company’s knowledge, each other
party to the Sears Agreements. None of the Sears Agreements have terminated or
been subject to early termination or expired or not been renewed past their
stated termination date.
   
                (III)          None of the Dormant Entities (A) have or hold any
assets of any kind or nature other than the Capital Securities of a Subsidiary,
(B) have any liabilities, obligations or Debt of any kind other than incidental
corporate maintenance items, incidental tax liabilities, or (C) have any
operations or employees. The complete and accurate legal name and state of
formation of each Dormant Entity is fully, completely and accurately listed in
the definition of “Dormant Entity.”
 

 
                (d)          No Defaults. No Default or Event of Default exists
under the Agreement, the Guaranty Agreement or any other agreement or instrument
executed in connection therewith and no default or event of default exists under
the Bank Agreement, any agreement or instrument executed in connection therewith
or any other material contract or agreement to which the Company or any of the
Subsidiary Guarantors is a party, and, to the Company’s knowledge, no such
default or event of default is imminent.

 

                3.            Miscellaneous.

 

 
                (a)          Effect on Agreement. On and after the effective
date of this Amendment, each reference in the Agreements to “this Agreement”,
“the Other Agreements”, “hereunder”, “hereof”, or words of like import referring
to the Agreements and each reference in the Notes and all other documents
executed in connection with the Agreements to “the Agreement”, “the Other
Agreements”, “the Note Agreements”, “thereunder”, “thereof”, or words of like
import referring to the Agreements shall mean the Agreements as amended by this
Amendment. The Agreements, as amended by this Amendment, each is and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed.
   
                (b)          Counterparts. This Amendment may be executed in any
number of counterparts (including those transmitted by facsimile) and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same Amendment. Delivery of this Amendment may be made by
facsimile transmission of a duly executed counterpart copy hereof.

 

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                (c)          Effectiveness. This Amendment shall become
effective, as of the date first written above, when and if each of the
conditions set forth in this subparagraph (c) shall have been satisfied.
 

 
                (I)             Amendment. Counterparts of this Amendment shall
have been executed by the Company and each holder of Notes and shall have been
delivered to each holder of Notes.
   
                (II)           Guaranty Agreement. Each holder of Notes shall
have received the Guaranty Agreement in substantially the form of Exhibit A
attached hereto, executed and delivered by each Subsidiary (other than the
Dormant Entities and the Canadian Entities).
   
                (III)          Sharing Agreement. Each holder of Notes shall
have received counterparts of the Sharing Agreement, executed and delivered by
each other holder of Notes and the Bank Agent.
   
                (IV)         Resolutions. Each holder of a Note shall have
received a certified copy of the resolutions of the Board of Directors of the
Company and each Subsidiary Guarantor, authorizing the execution and delivery of
this Amendment and the Guaranty Agreement, as applicable, and of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Amendment and the Guaranty Agreement.
   
                (V)           Secretary’s Certificate and Constitutive
Documents. Each holder of a Note shall have received a certificate of the
Secretary or an Assistant Secretary and one other officer of the Company and
each Subsidiary Guarantor, certifying (A) the names and true signatures of the
officers of the Company or such Subsidiary, as applicable, authorized to sign
this Amendment or the Guaranty Agreement, as applicable, and the other documents
to be delivered hereunder and (B) the Certificate of Incorporation and By-laws
(or equivalent organizational documents) of the Company or such Subsidiary
attached thereto.
   
                (VI)         Legal Opinion. Each holder of Notes shall have
received a favorable opinion of McDermott Will & Emery LLP (or such other
counsel designated by the Company and acceptable to the Required Holders),
reasonably satisfactory to such holder of Notes and as to such matters as such
holder of Notes or its counsel may reasonably request (including, without
limitation, an opinion as to the enforceability of this Amendment, the
Agreements as amended hereby, and the Guaranty Agreement). The Company hereby
directs such counsel to deliver such opinion, and understands and agrees that
each holder of Notes receiving such an opinion will and is hereby authorized to
rely on such opinion.
   
                (VII)        Bank Agreement. The Bank Agreement shall have been
executed by all parties thereto, a final copy and execution pages thereof shall
have been delivered to each holder of Notes, and the Bank Agreement and the
other Bank

 

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Debt Documents shall be in form and substance satisfactory to each holder of
Notes and in full force and effect.
   
                (VIII)      Representations and Warranties. Each of the
representations and warranties made in the Agreements and this Amendment shall
be true and correct on and as of the date hereof, both before and after giving
effect to this Amendment.
   
                (IX)         Amendment Fee. The Company shall have paid by wire
transfer of immediately available funds to each holder of Notes such holder’s
ratable portion of $38,520.
   
                (X)           Fees and Expenses of Counsel. The Company shall
have paid the fees, costs and expenses incurred by external counsel to the
holders of Notes in connection with the preparation, negotiation, execution and
delivery of this Amendment and all transactions contemplated hereby.
 

 
                (d)             Expenses. The Company confirms its agreement,
pursuant to Section 15 of the Agreements, to pay promptly, in addition to the
fees and expenses of counsel contemplated by the foregoing clause (c)(X), all
other expenses of the undersigned holders of Notes related to the preparation,
reproduction, execution and delivery of this Amendment and all matters
contemplated hereby, including without limitation all fees and expenses of
counsel to such parties.
   
                (e)             Governing Law. THIS AMENDMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK.
   
                (f)              Headings. The headings of the various
paragraphs and subparagraphs of this Amendment are for convenience of reference
only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
   
                (g)             FINAL AGREEMENT. THE AGREEMENTS, AS AMENDED BY
THIS AMENDMENT, TOGETHER WITH THE GUARANTY AGREEMENT, THE SHARING AGREEMENT AND
THE OTHER NOTE DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

 

[Remainder of this page blank; signature page follows.]

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                If you agree to the terms and provisions hereof, please evidence
your agreement by executing and returning a counterpart of this Amendment to CPI
Corp., 1706 Washington Avenue, St. Louis, Missouri 63103, Attention: Mr. Gary
Douglass, Executive Vice President/Chief Financial Officer.

 

  Very truly yours,       CPI CORP.       By: /s/    Gary W. Douglass  

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    Gary W. Douglass     Treasurer

      Agreed as of the date first above written:       THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA       By: /s/ William Bulmer  

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    William Bulmer     Vice President         THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA       By: /s/ Brian Keating  

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    Brian Keating     Director, Fixed Income  

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