FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

This FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT (this
“Agreement”) is entered into and effective as of January 25, 2006 (or such other
date as expressly set forth herein), by and among CPI Corp., a Delaware
corporation (Company) and LaSalle Bank National Association (LaSalle), as
Administrative Agent, and LaSalle and each of the other lenders, as Lenders.

 

Recitals:

 

A.

Company, Administrative Agent and LaSalle are party to that certain Amended and
Restated Credit Agreement dated as of November 30, 2005 (as amended, the “Loan
Agreement”).

 

B.

As a condition to the execution and delivery of this Agreement, the Company, the
Administrative Agent, and the Lenders have executed a Master Assignment and
Acceptance Agreement, of even date herewith (the “Master Assignment and
Acceptance Agreement”), which Master Assignment and Acceptance Agreement is
effective simultaneously with the effectiveness of this Agreement, and pursuant
to which the New Lender (as defined in the Master Assignment and Acceptance
Agreement”) has become a Lender under the Loan Agreement.

 

C.

Administrative Agent, Lenders and Company have agreed to the provisions set
forth herein on the terms and conditions contained herein.

 

Agreement

 

Therefore, in consideration of the mutual agreements herein and other sufficient
consideration, the receipt of which is hereby acknowledged, Company,
Administrative Agent and the Lenders hereby agree as follows:

 

1.            Definitions.  All references to the “Agreement” or the “Loan
Agreement” in the Loan Agreement and in this Agreement shall be deemed to be
references to the Loan Agreement as it is amended hereby and as it may be
amended, restated, extended, renewed, replaced, or otherwise modified from time
to time. Capitalized terms used and not otherwise defined herein have the
meanings given them in the Loan Agreement.

 

2.    Effectiveness of Agreement.  This Amendment shall become effective as of
the date first written above, but only if this Amendment has been executed by
the Company, Administrative Agent and the Lenders, and only if all of the
documents listed on Exhibit A to this Amendment have been delivered and, as
applicable, executed, sealed, attested, acknowledged, certified, or
authenticated, each in form and substance reasonably satisfactory to
Administrative Agent on or before the date first written above (unless otherwise
specifically noted on Exhibit A) and the Lenders, and payment of such fees that
may be owing to Administrative Agent and any Lender pursuant to any fee letter
or other arrangement.

 

3.

Amendment.

3.1.         Agent Fee Letter.  The defined term “Agent Fee Letter” set forth in
Section 1.1 of the Loan Agreement is deleted and replaced with the following:

 

“Agent Fee Letter means, collectively, the Fee letter dated as of November 30,
2005 between the Company and the Administrative Agent, the Fee Letter dated as
of January 11, 2006 between the

 

 

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Company and the Administrative Agent, and any other fee letter or similar
agreement executed from time to time between the Company and the Administrative
Agent.”

 

3.2.         Applicable Margin.  The table in the defined term “Applicable
Margin” set forth in Section 1.1 of the Loan Agreement is deleted and replaced
with the following:

 

Level

Total Funded Debt to EBITDA Ratio

LIBOR Margin Revolving Loans

Base Rate Margin Revolving Loans

LIBOR Margin Term Loans

Base Rate Margin Term Loans

Non-Use Fee Rate

L/C Fee Rate

I

Greater than or equal to 1.50 to 1.00

2.750%

0.500%

3.250%

1.000%

0.500%

2.750%

II

Less than 1.50 to 1.00 but greater than or equal to 1.00 to 1.00

2.500%

0.250%

3.000%

0.750%

0.500%

2.500%”

 

3.3.         First Amendment Date.  A new defined term "First Amendment Date" is
added in alphabetical order to Section 1.1. of the Loan Agreement as follows:

"First Amendment Date means January 25, 2006."

 

3.4.         Fixed Charges.  A new defined term of “Fixed Charges” is added in
alphabetical order to Section 1.1 of the Loan Agreement as follows:

 

“Fixed Charges means, for any period of calculation, the sum of (i) cash
Interest Charges, (ii) the sum of all scheduled principal payments on long term
Debt of all Loan Parties (including the Term Loan and other interest-bearing
Debt and all payments on Capital Leases), (iii) all dividends and distributions
(but excluding any redemption, purchase or repurchase of the Company’s Capital
Securities to the extent permitted by this Agreement), and (iv) all Capital
Expenditures not proceeds of the Loans, but excluding for the fiscal quarter
ending the following amounts (A) fiscal quarter ending February 5, 2005,
$1,150,000, (B) fiscal quarter ending April 30, 2005, $5,887,000, (C) fiscal
quarter ending July 23, 2005, $6,388,000, and (D) fiscal quarter ending November
12, 2005, $4,346,000.

 

3.5.         Required Lenders.  The defined term “Required Lenders” set forth in
Section 1.1 of the Loan Agreement is deleted and replaced with the following:

 

“Required Lenders means, at any time, Lenders whose Pro Rata Shares exceed
66.66666667% as determined pursuant to clause (b) of the definition of “Pro Rata
Share” provided, however, if there are two Lenders, then Required Lenders shall
mean both Lenders.”

 

3.6.         Definition of Term Loan Commitment.  The defined term “Term Loan
Commitment” set forth in Section 1.1 of the Loan Agreement is deleted and
replaced with the following:

 

“Term Loan Commitment means $25,000,000 subject to increase as provided in
Section 2.1.2.1. hereof.”

 

 

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3.7.         Term Loan Commitment.  Section 2.1.2 of the Loan Agreement is
deleted and replaced with the following:

 

“2.1.2. Term Loan Commitment. Each Lender with a Term Loan Commitment agrees to
make one or more loans to the Company (each such loan, a “Term Loan”) from and
after the Closing Date through and including December 30, 2006, in such Lender’s
Pro Rata Share of the Term Loan Commitment. The Commitments of the Lenders to
make Term Loans shall expire on the First Amendment Date, subject to Section
2.1.2.1 herein. The Company and each Lender acknowledge and agree that
$18,000,000 of the Term Loan Commitment was fully funded on the Closing Date and
such amount is no longer available to the Company to be readvanced to the
Company. Subject to the terms and conditions contained herein, $7,000,000 of the
Term Loan Commitment shall be funded on the First Amendment Date and thereafter,
subject to Section 2.1.2.1., the Term Loan Commitment shall be fully funded.”

 

3.8.         Increase in Term Loan Commitment.  A new Section 2.1.2.1. is hereby
added to the Loan Agreement as follows:

 

“2.1.2.1. Increases in Term Loan Commitment. The Company may one time, at its
option at any time on or before December 30, 2006, seek to increase the Term
Loan Commitment by an aggregate amount of no less than Ten Million Dollars
($10,000,000) and no greater than Fifteen Million Dollars ($15,000,000)
(resulting in maximum Term Loan Commitment of up to Forty Million Dollars
($40,000,000)) upon written notice to the Administrative Agent, which notice
shall be delivered at a time when no Unmatured Event of Default or Event of
Default has occurred and is continuing. The ability to request an increase in
the Term Loan Commitment may be exercised only one time by the Company prior to
December 30, 2006, must be closed and funded prior to December 30, 2006, and
must be in an amount of no less than Ten Million Dollars ($10,000,000) and no
greater than Fifteen Million Dollars ($15,000,000) and only in whole One Million
Dollar ($1,000,000) increments. The Administrative Agent, subject to the consent
of the Company, which shall not be unreasonably withheld or delayed, may
allocate, as it determines in Administrative Agent’s sole discretion, the
incremental increase in the Term Loan Commitment on either a ratable basis to
the Lenders (which may be declined by any Lender in its sole discretion) or on a
non pro-rata basis to one or more Lenders (which may be declined by any Lender
in its sole discretion) and/or to other banks or entities reasonably acceptable
to the Administrative Agent and the Company which have expressed a desire to
accept the increase in the Term Loan Commitment. The Administrative Agent will
then notify each existing and potentially new Lender of such revised allocations
of the Term Loan Commitment, including the desired increase. No increase in the
Term Loan Commitment shall become effective until each of the existing or new
Lenders extending such incremental increase in its Term Loan Commitment and the
Company shall have delivered to the Administrative Agent one or more documents,
notes, opinions, and other agreements reasonably requested by Administrative
Agent, each in form reasonably satisfactory to the Administrative Agent pursuant
to which any such existing Lender states, inter alia, the amount of its Term
Loan Commitment increase, any such new Lender states its Term Loan Commitment
amount and agrees to assume and accept the obligations and rights of a Lender
hereunder, the Company accepts such new Term Loan Commitments, and Company
certifies that no Unmatured Event of Default or Event of Default has occurred
and is continuing. After giving effect to such increase in the Term Loan
Commitment, all Loans and all such other credit exposure shall be held ratably
by the Lenders in proportion to their respective Term Loan Commitments, as
revised to accommodate the increase in the Term Loan Commitment. Upon any
increase in the Term Loan Commitment pursuant to this Section, the Company shall
pay Administrative Agent for the ratable benefit of only the Lenders (including
any new Lender) whose Term Loan Commitments are increased an upfront commitment
fee in an amount equal to

 

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the accordion feature committed to by such Lender(s), based on then-prevailing
market conditions and as mutually agreed to among the Company, the Lenders whose
Term Commitments are increased and the Administrative Agent. Upon any such
increase, Annex A shall be deemed to be amended to reflect such increase and the
Administrative Agent shall promptly deliver a copy of the revised Annex A to
each Lender and the Company.”

 

3.9.         Term Loan Principal Payments.  Section 6.4.2 is deleted in its
entirety and replaced with the following:

 

“6.4.2 Term Loans. The Term Loan of each Lender shall be paid in installments
equal to such Lender’s Pro Rata Share of the aggregate principal amount of the
installments of the Term  Loan as follows: (A) $4,167,000 payable on each of
June 30, 2006 and December 31, 2006, and (B) an amount equal to twenty five
percent (25%) of the outstanding principal balance of the Term Loan on January
1, 2007, payable on each of June 30, 2007, December 31, 2007, June 30, 2008 and
the Term Loan Maturity Date.”

3.10.       Use of Proceeds.  Section 10.6 of the Loan Agreement is deleted in
its entirety and replaced with the following:

 

“10.6 Use of Proceeds. Use the proceeds of the Revolving Loans, solely to pay
Debt to be Repaid, for working capital purposes and general business purposes,
for Capital Expenditures (including retail store expansions), other general
business purposes, and to fund the purchase, the repurchase or the redemption of
the Company’s Capital Stock to the extent permitted by this Agreement; use of
the proceeds of the Term Loan to fund the purchase, the repurchase or the
redemption of the Company’s Capital Stock to the extent permitted by this
Agreement and to pay the Debt to be Repaid and if such proceeds of the Term Loan
are not needed to fund the purchase, the repurchase or the redemption of the
Company’s Capital Stock to the extent permitted by this Agreement then such
proceeds may be used for working capital purposes and general business purposes;
use of the Letters of Credit for general business purposes; and not use or
permit any proceeds of any Loan to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of “purchasing or
carrying” any Margin Stock.”

3.11.       Restricted Payments.  Section 11.4 of the Loan Agreement is deleted
in its entirety and replaced with the following:

 

“11.4. Restricted Payments. Not, and not permit any other Loan Party 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 equityholders or any Affiliate
thereof, (d) make any redemption, prepayment, defeasance, repurchase or any
other payment in respect of any Debt (but not including the Obligations), 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, (i) any Subsidiary may pay
dividends or make other distributions to the Company or to a domestic
Wholly-Owned Subsidiary; and (ii) so long as no Event of Default or Unmatured
Event of Default exists or would result therefrom, the Company, (A) may pay
dividends or make other distributions to the holders of its Capital Stock up to
an aggregate of $5,500,000 in each Fiscal Year, and (B) subject to the proviso
to this clause (B), may expend to purchase, repurchase or redeem the Company’s
Capital Stock (i) at any time prior to December 30, 2006, up to $35,000,000 in
the aggregate, (ii) from and including January 1, 2007 through and including
December 31, 2007, $15,000,000 in the aggregate, and (iii) from and including
January 1, 2008 through and including December 31, 2008, $5,000,000 in the
aggregate, minus with respect to  

 

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each of the foregoing clauses (B)(i), (B)(ii) and (B)(iii) the amount actually
expended by the Company to purchase, repurchase or redeem the Company’s Capital
Stock from November 30, 2005 through and including the First Amendment Date;
provided, however, the aggregate amount that the Loan Parties may expend to
purchase, repurchase or redeem the Company’s Capital Stock from November 30,
2005 through and including the Term Loan Maturity Date shall not exceed
$35,000,000 in the aggregate. The reference in clause (B)(i) of the foregoing
sentence to “$35,000,000” and in the proviso to the foregoing sentence to
“$35,000,000” shall each be increased to “$40,000,000” if and only if the
Company requests an increase in the Term Loan Commitment as set forth in Section
2.1.2.1 of this Agreement and such request is committed to as set forth in
Section 2.1.2.1.”

3.12.

Interest Rate Protection.  A new Section 10.11 is hereby added to the Loan
Agreement:

 

“10.11 Interest Rate Protection. The Company agrees to enter into with
Administrative Agent, not later than 90 days after the date hereof, a Hedging
Agreement with a term of at least three years on an ISDA standard form with a
qualified counter party to hedge the interest rate with respect to not less than
50% of the principal amount of the Term Loan then outstanding, in form and
substance reasonably satisfactory to the Administrative Agent.

3.13.

Debt.  Section 11.1(b) is deleted in its entirety and replaced with the
following:

 

“(b)         Debt secured by Liens permitted by Section 11.2(d), and extensions,
renewals and refinancings thereof; provided that the aggregate amount of all
such Debt at any time outstanding shall not exceed $5,000,000, provided,
however, the forgoing limit shall not include a Sale Leaseback if such Sale
Leaseback is consummated in an arm’s-length manner on market terms and
conditions;”

3.14.       Minimum Net Worth.  The first sentence (up to the table) of Section
11.15.3 of the Loan Agreement is deleted and replaced with the following:

 

“11.15.3 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 November 30, 2005, minus with respect to
each of the following, the aggregate amount spent by the Company to purchase,
repurchase or redeem the Company’s Capital Stock since November 30, 2005 as
permitted by Section 11.4 of this Agreement:”

 

3.15.

Fixed Charges.  A new Section 11.15.5 is hereby added to the Loan Agreement as
follows:

 

“11.15.5 Fixed Charges. Company shall cause the ratio, for Company and its
Subsidiaries, of (A) the net result of (i) EBITDA minus (ii) federal, state and
local income taxes paid, in each case, without duplication for the most recently
ended four fiscal quarters to (B) Fixed Charges for the most recent ended four
fiscal quarters, calculated as of the last day of each such fiscal quarter, to
not be less 1.10 to 1.00.”

 

3.16.       Exhibit A.  The Exhibit A attached to the Loan Agreement is deleted
and replaced with the Exhibit A attached hereto.

4.            Representations and Warranties of Company.  Company hereby
represents and warrants to Administrative Agent and the Lenders as of the date
hereof that (i) Company’s execution of this Agreement and each other document or
agreement to be executed in connection herewith (collectively,

 

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the “Amendment Documents”) has been duly authorized by all requisite action of
Company; (ii) no consents are necessary from any third parties for Company’s
execution, delivery or performance of this Agreement and each of the Amendment
Documents, (iii) this Agreement, the Loan Agreement, each of the Amendment
Documents and each of the other Loan Documents, constitute the legal, valid and
binding obligations of Company enforceable against Company in accordance with
their terms, except to the extent that the enforceability thereof against
Company may be limited by bankruptcy, insolvency or other laws affecting the
enforceability of creditors rights generally or by equity principles of general
application, (iv) except as disclosed on the supplemental disclosure schedule
attached hereto as Exhibit B, the disclosure schedule attached to the Loan
Agreement, and as disclosed by the terms of any amendments, consents or waivers
signed by Administrative Agent and the Lenders prior to the date hereof, all of
the representations and warranties contained in Section 9 of the Loan Agreement
are true and correct with the same force and effect as if made on and as of the
date of this Agreement except to the extent such representations and warranties
expressly by their terms relate only to an earlier date, (v) after giving effect
to this Agreement, there is no Unmatured Event of Default or Event of Default,
(vi) since February 5, 2005, there has been no event or occurrence that would
reasonably be likely to give rise to a Material Adverse Effect. Company hereby
further represents and warrants that it has disclosed to Administrative Agent
and the Lenders all material facts and circumstances relating to the Loan
Parties’ business, assets, liabilities, properties, condition (financial or
otherwise), results of operations or prospects of the Loan Parties and their
customers.

 

5.            Effect of Amendment.  The execution, delivery and effectiveness of
this Agreement shall not operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under the Loan Agreement or any of the other
Loan Documents, nor constitute a waiver of any provision of the Loan Agreement,
any of the other Loan Documents or any existing Unmatured Event of Default or
Event of Default. Each reference in the Loan Agreement to "the Agreement",
"hereunder", "hereof", "herein", or words of like import, shall be read as
referring to the Loan Agreement as amended by this Amendment.

 

6.            Reaffirmation; Waiver of Claims.  Company hereby acknowledges and
confirms that as of the date hereof, (i) the Loan Agreement, the Amendment
Documents and the other Loan Documents remain in full force and effect, and (ii)
Company has no defenses to its obligations under the Loan Agreement, the
Amendment Documents and the other Loan Documents. As of the date hereof, the
Company has no claim against Administrative Agent or any Lender arising from or
in connection with the Loan Agreement, this Agreement, the Amendment Documents
or the other Loan Documents and any and all such claims are waived, released and
discharged (the foregoing is not intended to waive any manifest errors in the
Administrative Agent’s or any Lender’s records with respect to the Obligations).

 

7.            Governing Law.  This Agreement has been executed and delivered in
Chicago, Illinois, and shall be governed by and construed under the laws of the
State of Illinois without giving effect to choice or conflicts of law principles
thereunder.

 

8.            Section Titles.  The section titles in this Agreement are for
convenience of reference only and shall not be construed so as to modify any
provisions of this Agreement.

 

9.            Counterparts; Facsimile Transmissions.  This Agreement may be
executed in one or more counterparts and on separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Signatures to this Agreement may be given by facsimile or
other electronic transmission, and such signatures shall be fully binding on the
party sending the same.

 

10.          Patriot Act Notice.   Administrative Agent, each Lender and LaSalle
(for itself and not on behalf of any other party) hereby notifies each Company,
each Guarantor, each other Loan Party and each of

 

6

 

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their Subsidiaries that, pursuant to the requirements of the USA Patriot Act,
Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”), it is
required to obtain, verify and record information that identifies each Company,
each Guarantor, each other Loan Party and each of their Subsidiaries, which
information includes the name and address of the Company, each Guarantor, each
other Loan Party and each of their Subsidiaries and other information that will
allow Administrative Agent, such Lender or LaSalle, as applicable, to identify
the Company, each Guarantor, each other Loan Party and each of their
Subsidiaries in accordance with the Act.

 

11.          Fees and Expenses.  Company shall promptly pay to Administrative
Agent and each Lender executing this Amendment all fees, expenses and other
amounts owing to Administrative Agent under the Loan Agreement and the other
Loan Documents upon demand, including, without limitation, all reasonable fees,
costs and expenses incurred by Administrative Agent and such Lender in
connection with the preparation, negotiation, execution, and delivery of this
Amendment.

 

12.          Incorporation By Reference.  Administrative Agent, Lenders and
Company hereby agree that all of the terms of the Loan Documents are
incorporated in and made a part of this Agreement by this reference.
Administrative Agent, Lenders and Company hereby agree that this Agreement and
each of the Amendment Documents are “Loan Documents.”

 

 

13.

Statutory Notice - Insurance.  

The following notice is given pursuant to Section 10 of the Collateral
Protection Act set forth in Chapter 815 Section 180/1 of the Illinois Compiled
Statutes (1996); nothing contained in such notice shall be deemed to limit or
modify the terms of the Loan Documents:

 

UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT
WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN
YOUR COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE
COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT
IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY LATER CANCEL ANY
INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE
OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR
THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE,
INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN
CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE
CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE
ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE
INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON
YOUR OWN.

 

14.          Statutory Notice - Oral Commitments.  Nothing contained in the
following notice shall be deemed to limit or modify the terms of the Loan
Documents:

 

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND

 

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EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.

 

Company acknowledges that there are no other agreements between Administrative
Agent, Lenders, and Company, oral or written, concerning the subject matter of
the Loan Documents, and that all prior agreements concerning the same subject
matter, including any proposal or commitment letter, are merged into the Loan
Documents and thereby extinguished.

 

{Remainder of page intentionally left blank; signature page follows}

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
above written.

 

CPI CORP., a Delaware corporation

 

By:        /s/ Gary W. Douglass                                

Name:    Gary W. Douglass                                    

Title:      Treasurer                                                   

 

 

LASALLE BANK NATIONAL ASSOCIATION,

as Administrative Agent and as a Lender

 

By:        /s/ Margaret C. Dierkes                            

Name:    Margaret C. Dierkes                                

Title:      Vice President                                          

 

 

FIFTH THIRD BANK

as a Lender

 

By:        /s/ Shawn D. Hagan                                  

Name:    Shawn D. Hagan                                      

Title:      Vice President                                          

 

{Unconditional Reaffirmation of Guaranty follows}

 

 

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UNCONDITIONAL REAFFIRMATION OF GUARANTY

 

Each of the undersigned has reviewed the First Amendment to Amended and Restated
Credit Agreement, of even date herewith (as defined herein), by and among CPI
Corp., a Delaware corporation (Company) and LaSalle Bank National Association
(LaSalle), as Administrative Agent, and LaSalle and the other lenders, as
Lenders (the “First Amendment”), and all other documents and financial
statements the undersigned deems necessary relating to the Borrower. Capitalized
terms used herein, but not defined herein, unless otherwise noted, shall have
the meanings set forth in the First Amendment or if not defined therein, as
defined in that certain Guaranty and Collateral Agreement dated as of November
30, 2005, to which the undersigned, the Company and the Administrative Agent are
a party to (the Guaranty and Collateral Agreement).

 

Each of the undersigned acknowledges and consents to all changes set forth in
the First Amendment, and agrees that all such changes are in the best interests
of Company and each of the undersigned. In consideration of financial
accommodations granted and which may hereafter be granted to Company by
Administrative Agent and the Lenders, in consideration of Administrative Agent’s
and the Lenders’ reliance on the Guaranty and Collateral Agreement and in
reliance on the Guaranty Agreement dated April 15, 2005 (the April Guaranty),
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, each of the undersigned irrevocably and
unconditionally reaffirms pursuant to the terms of the Guaranty and Collateral
Agreement and pursuant to the terms of the April Guaranty, each of which it is a
party to, its unconditional continuing guarantee of the payment and performance
of all Company Obligations, and the undersigned further agrees that the validity
and enforceability of the Guaranty and Collateral Agreement and the April
Guaranty to which it is a party is not and shall not be affected in any way or
manner by the First Amendment.

 

Dated: January 25, 2006

 

CONSUMER PROGRAMS INCORPORATED, a Missouri corporation, as a Guarantor

By     /s/ Gary W. Douglass                                                 

Name:     Gary W. Douglass                                                 

Title:     Vice President                                          
              

 

CPI CANADIAN HOLDINGS, INC., a Delaware corporation, as a Guarantor

By:     /s/ Margaret C. Dierkes                                             

Name:     Margaret C. Dierkes                                             

Title:     Vice President                                          
              

 

CPI IMAGES, L.L.C., a Missouri limited liability company, as a Guarantor

 

By: Consumer Programs Incorporated, its Manager

 

By:     /s/ Shawn D. Hagan                                                   

Name:     Shawn D. Hagan                                                   

Title:     Vice President                                          
              

 

 

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CPI INTERNATIONAL HOLDINGS, INC., a Delaware corporation, as a Guarantor

By:     /s/Gary W. Douglass                                                 

Name:     Gary W. Douglass                                                 

Title:     Treasurer                                          
                      

 

{end of signatures}

 

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Exhibit A

 

Documents and Requirements

 

1.

Master Assignment and Acceptance Agreement

2.

First Amendment to Amended and Restated Credit Agreement.

3.

Unconditional Reaffirmation of Guaranty from each Guarantor (attached to First
Amendment).

4.

Certificate signed by either the President or Chief Financial Officer of the
Company certifying that: (i) there no outstanding Revolving Loans or Swing Line
Loans as of the date of this Agreement, (ii) the Company holds at least
$30,000,000 in cash balances in commercial banks or investment accounts as of
the date of this Agreement, (iii) the minimum trailing twelve-month EBITDA (for
the period ending January 7, 2006) was no less than $31,000,000, (iv) the ratio
of funded debt to EBITDA was no more than 2.00 to 1.00, based on twelve-month
EBITDA (for the period ending January 7, 2006), and (v) the Company has
disclosed to Administrative Agent and the Lenders all material facts and
circumstances relating to the Loan Parties’ business, assets, liabilities,
properties, condition (financial or otherwise), and results of operations or
prospects of the Loan Parties and their customers..

5.

Amended and Restated Note of $35,000,000 payable to LaSalle Bank National
Association.

6.

Note of $15,000,000 payable to Fifth Third Bank.

7.

Disbursement Letter regarding funding of the remaining $7,000,000 of the Term
Loan.

8.

First Amendment to Deed of Trust for the St Louis, Missouri real estate.

9.

First Amendment to Mortgage for the Thomaston, Connecticut real estate.

10.

Dated down endorsement to St Louis, Missouri real estate.

11.

Dated down endorsement to Thomaston, Connecticut real estate.

12.

Gap Indemnity to Chicago Title re: St Louis, Missouri real estate

13.

Gap Indemnity to Chicago Title re: Thomaston, Connecticut real estate

14.

Legal Opinion of Borrower’s outside counsel McDermott Will & Emery as to such
matters as may be required by the Administrative Agent.

15.

Legal Opinion of Borrower’s outside counsel Husch & Eppenberger LLC as to such
matters as may be required by the Administrative Agent.

16.

Copies of Audited consolidated financial statements for the Company and its
subsidiaries for the fiscal years ending February 1, 2003, February 7, 2004 and
February 5, 2005.

17.

(i) Copies of unaudited interim consolidated financial statements for the
Company and its subsidiaries for each fiscal month and quarterly period ended
after February 5, 2005, (ii) copies of internal management reports with
financial statements for the eleven month sales periods ending January 8, 2005
and January 7, 2006, respectively, and (iii) copies of such other financial

 

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information as may be reasonably requested by Administrative Agent, including
average invoice per sitting and number of sittings.

18.

Copies of projections (projected income statements, balance sheets and cash flow
statements prepared by the Company) for such periods as may be reasonably
requested by the Administrative Agent after giving effect to the transactions
contemplated by this Agreement and the use of proceeds therefrom.

19.

The Administrative Agent shall be satisfied that, since February 5, 2005, there
has been no material adverse change in the business, assets, liabilities,
properties, condition (financial or otherwise), results of operations or
prospects of the Loan Parties as well as their customers.

20.

The Administrative Agent shall have received such other documents, agreements,
certificates and opinions to be executed or delivered, or relating to the
transactions contemplated, on or prior to the closing date as the Administrative
Agent or the Lenders may request.

21.

Secretary’s Certificate certifying the Borrower’s Resolutions authorizing the
execution, delivery and performance of First Amendment to Amended and Restated
Credit Agreement and the Notes.

22.

Secretary’s Certificate certifying Consumer Programs Incorporated’s Resolutions
authorizing the execution, delivery and performance of Unconditional
Reaffirmation of Guaranty.

23.

Secretary’s Certificate certifying CPI Canadian Holdings, Inc.’s Resolutions
authorizing the execution, delivery and performance of Unconditional
Reaffirmation of Guaranty.

24.

Secretary’s Certificate certifying CPI Images, L.L.C.’s Resolutions authorizing
the execution, delivery and performance of Unconditional Reaffirmation of
Guaranty.

25.

Secretary’s Certificate certifying CPI International Holdings, Inc.’s
Resolutions authorizing the execution, delivery and performance of Unconditional
Reaffirmation of Guaranty.

 

 

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Exhibit B

 

Disclosure Schedule  

 

The Disclosure Schedule is revised as follows:

 

 

 

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ANNEX A

 

LENDERS AND PRO RATA SHARES

 

 

1.1.1.1.1.

Lender

Term Commitment Amount

Revolving Commitment Amount

Pro Rate Share/

LaSalle Bank National Association

$17,500,000

$17,500,000**/

70.000000000%

Fifth Third Bank.

$7,500,000

$7,500,000

30.000000000%

TOTALS

$25,000,000

$25,000,000

100.000000000%

 

 

**/          Revolving Commitment Amount reduces as set forth in the Credit
Agreement. Includes Swing Line Commitment Amount of $5,000,000

 

 

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