Document:

10.1 Third Forbearance Agreement

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	THIRD FORBEARANCE AGREEMENT

	 
	 

This Third Forbearance Agreement dated as of January 29, 2013 (the “Third Forbearance Agreement”), is entered into by and among: (i) CPI Corp., a Delaware corporation (the “Borrower” also referred to herein as the “Company”); (ii) Consumer Programs Incorporated, a Missouri corporation (“CP Inc.”), CPI Canadian Holdings, Inc., a Delaware corporation (“CPI Canada”), CPI Images, L.L.C., a Missouri limited liability company (“Images”), CPI International Holdings, Inc., a Delaware corporation (“CPI International”), Texas Portraits L.P., a Delaware limited partnership (“Texas”), Centrics Technology, Inc., a Delaware corporation (“Centrics”), and Image Source Inc., a Missouri corporation (“ISI,” and, with CP Inc., CPI Canada, Images, CPI International, Texas and Centrics, each an “Original Guarantor” and, collectively, the “Original Guarantors”); (iii) Bella Pictures Holdings, LLC, a Delaware limited liability company (“Bella”), and Sandy Realty Holdings, LLC, a Missouri limited liability company (“Sandy” and, with Bella, each an “Additional Guarantor” and collectively, the “Additional Guarantors”); (iv) CPI Corp., an unlimited liability company organized under the laws of Nova Scotia (“CPI Canada”), CPI Portrait Studios of Canada Corp., an unlimited liability company organized under the laws of Nova Scotia (“Studios Canada”), CPI Canadian Images, an Ontario partnership (“Images Canada” and with CPI Canada and Studios Canada, each a “Canadian Guarantor”, and collectively, the “Canadian Guarantors”); and (v) Bank of America, N.A., as Administrative Agent (“Administrative Agent”) for the various financial institution parties identified as Lenders in the Credit Agreement (collectively, “Lenders”).  Borrower, the Original Guarantors, the Additional Guarantors and the Canadian Guarantors are collectively referred to herein as the “Borrower Parties.”
RECITALS
A.Lenders extended a loan to Borrower (the “Loan”) pursuant to that certain Credit Agreement dated as of August 30, 2010, as amended by that certain First Amendment to Credit Agreement dated December 16, 2011 (the “First Amendment”), as further amended by that certain Forbearance Agreement dated May 18, 2012 (the “Forbearance Agreement”), as further amended by that certain Second Amendment to Credit Agreement dated as of June 6, 2012 (“Second Amendment”), as further amended by that certain Third Amendment to Credit Agreement dated as of August 28, 2012 (“Third Amendment”), as further amended by that certain Fourth Amendment to Credit Agreement dated as of November 9, 2012 (“Fourth Amendment”), and as further amended by that certain Second Forbearance Agreement dated December 28, 2012 (the “Second Forbearance Agreement”), and collectively with the above, the “Credit Agreement”).  
B.The Company and the Original Guarantors executed and delivered that certain Guaranty and Collateral Agreement dated as of August 30, 2010 (the “Guaranty/Collateral Agreement”), pursuant to which, among other things, the Original Guarantors guaranteed the Company’s payment and performance of its obligations under the Credit Agreement and the Company and the Original Guarantors granted Administrative Agent a security interest in the Collateral (as defined therein).  The Additional Guarantors executed and delivered a Joinder Agreement to the Guaranty/Collateral Agreement dated as of May 23, 2012, pursuant to which the Additional Guarantors assumed, jointly and severally with the Original Guarantors, all of the obligations of the Company and the Original Guarantors arising under the Guaranty/Collateral 

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Agreement.  The Canadian Guarantors executed and delivered a Joinder Agreement to the Guaranty/Collateral Agreement dated as of December 28, 2012, pursuant to which the Canadian Guarantors assumed, jointly and severally with the Original Guarantors and the Additional Guarantors, all of the obligations of the Company.  The Credit Agreement and the Guaranty/Collateral Agreement, together with any and all other instruments and agreements that evidence, relate to, or secure the Loan (including this Third Forbearance Agreement), as such instruments and agreement have been amended or are amended pursuant to this Third Forbearance Agreement, are hereinafter collectively referred to as the “Loan Documents.”
C.The Second Forbearance Agreement identified certain Events of Default that existed under the Loan Documents as of the date of Second Forbearance Agreement  (collectively, the “Existing Defaults”).  As of the date of this Third Forbearance Agreement, the Existing Defaults are continuing and have not been cured and the “Forbearance Period” (as defined in the Second Forbearance Agreement) has expired and Administrative Agent has no obligation of any kind to continue from forbearing or otherwise refrain from enforcing all of its legal rights and remedies with respect to each of the Borrower Parties.  
D.As of January 28, 2013, the amount of the indebtedness owing under the Loan Documents (exclusive of attorneys’ fees and other fees, expenses, advances, and costs of collection, all of which are due and owing and not waived) totaled $97,640,294.81, consisting of unpaid principal of $76,200,242.00, accrued and unpaid interest of $189,963.11, accrued and unpaid PIK Obligations of $7,395,515.97, letter of credit fees of  $54,815.73 and L/C Obligations totaling $13,799.758.00.
E.Since July 2012, the Company has been marketing the operations of the Borrower Parties. As of the date hereof, the Company has no firm commitment or contract for the sale of all or any material portion of the assets of the Borrower Parties.  However, the Company is negotiating with at least two parties regarding the sale of some or substantially all of the assets of the Company.  The Borrower Parties need additional time to continue marketing their assets and otherwise continue in their restructuring efforts.
F.The Canadian Guarantors are affiliates of the Company.  Images Canada is governed completely by its sole partners, which are CPI Canada and Studios Canada.  Each of CPI Canada and Studios Canada has its own boards of directors (the “Canadian Boards”).  The Company believes the Canadian Guarantors own and control assets and property rights that have significant value for the owners of the Canadian Guarantors. 
G.The Administrative Agent, for itself and for the benefit of each Lender, is under no obligation of any kind to provide the Borrower Parties with any financial accommodation of any kind or any further forbearance.  But for this Third Forbearance Agreement, the Administrative Agent, for itself and for the benefit of each Lender, would be legally entitled to pursue all of its right and remedies and each of the Borrower Parties and its collateral owned by each of the Borrower Parties.
H.The Company on behalf of each of the Borrower Parties has requested that the Administrative Agent, for itself and for the benefit of each Lender, agree to additional forbearance and, although it is under no obligation to do so, Administrative Agent is willing to forebear from 

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exercising its rights and remedies by extending the “Forbearance Period” for a period of time as specified herein and strictly pursuant to the terms and conditions set forth herein.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual agreements contained herein, the parties agree as follows:

1.RECITALS.  All of the foregoing recitals and statements are hereby affirmed by the Borrower Parties as true statements of fact and may be used as binding admissions in a court of law or equity, or other judicial or non-judicial proceedings.
2.    DEFINED TERMS.  Unless otherwise defined in this Third Forbearance Agreement, all capitalized terms used herein as defined terms shall have the meanings given to them in the Loan Documents.
3.    AMENDMENTS TO CREDIT AGREEMENT; EFFECT ON FORBEARANCE AGREEMENT.  The amendments to the terms of the Credit Agreement set forth in any of the prior amendments or any of the prior forbearance agreements (including the Forbearance Agreement and the Second Forbearance Agreement) shall remain in full force and effect and survive (without restatement in this Third Forbearance Agreement), except to the extent that such provisions have been subsequently amended by a later amendment.  It is the intent of this Third Forbearance Agreement to amend the Credit Agreement and to extend the term of the Forbearance Period (as defined in the Second Forbearance Agreement), which forbearance shall remain in effect until the expiration of the Extended Forbearance Agreement (as defined in this Third Forbearance Agreement).  To the extent there are conflicting provisions in this Third Forbearance Agreement compared to the Second Forbearance Agreement or any other Loan Document, the terms of this Third Forbearance Agreement shall control.    
4.    TERMS OF FORBEARANCE.  Unless the Extended Forbearance Period (as defined below) is sooner terminated as provided herein, Administrative Agent, for itself and for the benefit of each Lender, agrees to forbear from exercising its rights and remedies under the Loan Documents through the close of business on February 15, 2013 (the “Extended Forbearance Period”) on the following terms and conditions:
4.1    Notwithstanding the Lenders’ agreement to forbear from exercising its rights and remedies, as consideration for this Third Forbearance Agreement, the Lenders shall have no further commitment to make Revolving Loans under the terms of the Loan Documents.  Any provisions in the Loan Documents to the contrary are modified to be consistent with the prior sentence.  
4.2    Upon the termination of the Extended Forbearance Period for any reason, Administrative Agent shall have the full right and power immediately and unconditionally to exercise all rights and remedies granted to it under the Loan Documents without further notice to the Borrower Parties (other than any notice otherwise required in the Loan Documents or under applicable law (including any applicable UCC)) and subject to no other conditions precedent.

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4.3    The Borrower Parties acknowledge that Administrative Agent’s obligations under this Third Forbearance Agreement are in the nature of a conditional forbearance only, and that, except as expressly provided herein, Administrative Agent has made no agreement or commitment to extend the Loan or to modify the Loan Documents.
5.    AMENDMENTS TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.  Effective as of the Third Forbearance Effective Date, the Credit Agreement and the other Loan Documents are amended as follows:
5.1    Amended Definitions.  The following definitions in Section 1.1 of the Credit Agreement are amended as follows:
5.1.1    Agreement.  The definition of “Agreement” as set forth in the preamble to the Credit Agreement is amended to specifically include: (i) the First Amendment to Credit Agreement dated as of December 16, 2011, entered into between the Company and the Administrative Agent, on its own behalf and on behalf of the Lenders; (ii) the Forbearance Agreement dated as of May 18, 2012, entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders; (iii) the Second Amendment to Credit Agreement dated as of June 6, 2012, entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders; (iv) the Third Amendment to Credit Agreement dated as of August 28, 2012, entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders; (v) the Fourth Amendment to Credit Agreement dated as of November 9, 2012, (vi) the Second Forbearance Agreement dated as of December 28, 2012, entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders, and (vii) the Third Forbearance Agreement dated as of January 29, 2013 entered into among the Company, several of the Loan Parties, the Administrative Agent and the Lenders, as such may be further amended, modified, supplemented, and replaced and/or restated from time to time. 
5.1.2    Loan Parties.  The definition of “Loan Parties” as set forth in Section 1.1 of the Credit Agreement is hereby amended to clarify that such definition includes, without limitation, each of the Borrower Parties defined in the Third Forbearance Agreement.
5.1.3    Termination Date.  The definition of “Termination Date” as set forth in Section 1.1 of the Credit Agreement is hereby amended and restated to mean:  “the earlier to occur of (a) February 15, 2013, (b) the Extended Forbearance Period Termination Date (as defined in the Third Forbearance Agreement dated as of January 29, 2013, or (c) such other date on which the Commitments terminate pursuant to Section 6 or Section 13.”
5.2    Supplemental Definitions.  Section 1.1 of the Credit Agreement is supplemented by the addition of the following definitions:

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5.2.1    “Canadian Board” shall have the meaning assigned to such term in Recital F of the Third Forbearance Agreement.
5.2.2    “Canadian Counsel” shall have the meaning assigned to such term in Section 10.21 of the Credit Agreement.
5.2.3    “Extended Forbearance Period” shall have the meaning assigned to such term in the Third Forbearance Agreement.”
5.2.4    “Third Forbearance Agreement” means that certain Third Forbearance Agreement dated as of January 29, 2013, among the Borrower Parties (as defined in the Third Forbearance Agreement), the Lenders, and the Administrative Agent.
5.2.5     “Third Forbearance Effective Date” means the date upon which all conditions precedent to the effectiveness of the Third Forbearance Agreement have been satisfied or waived in accordance with the terms of the Third Forbearance Agreement. 
5.3    Amended Provisions.
5.3.1    Section 2.1.1 of the Credit Agreement is amended to reflect that the Lenders shall have no further commitment to make any Revolving Loans.
5.3.2    Section 10.1.5(f) of the Credit Agreement is amended and restated to read as follows:
“(f)    notwithstanding anything to the contrary in this Section 10.1.5, the Loan Parties shall promptly, within one (1) Business Day, provide the Administrative Agent with written notice of any default or any termination or notice (written or oral) thereof received by any of the Loan Parties, under any of the Sears Agreements, under any of the Wal-Mart Agreements, under any of the Toys R US Agreements or under any Material Acquisition Agreement.  

5.3.3    Section 10 of the Credit Agreement is amended by the addition of the following covenants to be inserted into the Agreement as Sections 10.19 through 10.20:
10.19  Canadian Guarantors Observation Rights.  So long as any of the Obligations remain outstanding:
(a)    the Administrative Agent, acting at the direction of the Required Lenders, shall have the right to appoint one representative (which may be a representative of FTI Consulting or such other firm selected by the Administrative Agent) who shall, (i) receive written notice of all meetings (both regular and special) of the boards of 

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directors or of the partnership (or similar body) of the Canadian Guarantors and each committee of any such board or of partners at the same time and in the same manner as notice is given to the members of any such board and/or committee and/or partners, (ii) be entitled to attend (or, in the case of telephone meetings, join) all such meetings, (iii) receive all notices, information and reports which are generally furnished by the Canadian Guarantors to all of the members of any applicable board, and/or committee and/or partnership (in their capacity as a member of such board or committee or partner) at the same time and in the same manner as the same is furnished to such members or partners in connection with any such meetings, and (iv) be entitled to participate in all discussions conducted at such meetings and receive copies of the minutes of all such meetings concurrently and in the same manner as all of the other members of the board or partners;
(b)    if any action is proposed to be taken by any such board and/or committee and/or partners by written consent in lieu of a meeting, the Canadian Guarantors will give written notice thereof to each such representative, which notice shall describe in reasonable detail the nature and substance of such proposed action and shall be delivered concurrently as notice is given to the members of any such board and/or committee and/or partners;
(c)    the Canadian Guarantors will furnish each such representative with a copy of each such written consent not later than five days after it has been signed by its last signatory;
(d)    each such representative shall not constitute a member of any such board and/or committee or constitute a partner and shall not be entitled to vote on any matters presented at meetings of any such board and/or committee and/or partnership or to consent to any matter as to which the consent of any such board and/or committee and/or partnership shall have been requested;
(e)    the board of directors (or similar body) of CPI Canada and Studios Canada and the partnership of Images Canada (each as defined in the Third Forbearance Agreement) shall meet not less frequently than weekly during each Fiscal Year during the term of the Third Forbearance Agreement and such meeting may be held telephonically;
(f)    promptly upon receipt of an invoice therefor, the Canadian Guarantors shall reimburse each such designated representative (or the employers of such representatives) for the reasonable out-of-pocket costs and expenses of such representative in attending any meeting (other than a telephonic meeting); 

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(g)    if an issue is to be discussed or otherwise arises at any meeting of the board of directors or of the partnership of the Canadian Guarantors or any committee thereof which, in the reasonable judgment of such board of directors or partnership, cannot be discussed in the presence of such representative in order to avoid a conflict of interest on the part of such representative or to preserve an attorney-client privilege, then such issue may be discussed without such representative being present and may be deleted from any materials being distributed in connection with any meeting at which such issues are to be discussed, so long as (x) such representative is given notice of the occurrence of such meeting and the deletion of such materials and (y) notice of the occurrence of such meeting and the deletion of such materials is given to the Administrative Agent.
10.20.  Counsel to Canadian Guarantors.  No later than February 1, 2013, the Canadian Guarantors shall retain counsel (“Canadian Counsel”) to serve as independent legal counsel of the Canadian Guarantors and to advise the Canadian Board on matters involving their fiduciary duties in connection with the restructuring efforts of the other Loan Parties, which Canadian Counsel shall not during the course of its engagement for the Canadian Guarantors represent any of the Loan Parties other than the Canadian Guarantors. 
6.    TERMINATION OF EXTENDED FORBEARANCE PERIOD.  The Extended Forbearance Period shall end on the first of the following to occur (the “Extended Forbearance Period Termination Date”):
6.1    February 15, 2013;
6.2    The date on which a petition is filed by or against any Borrower Party under Title 11 of the United States Code (the “Bankruptcy Code”) or under the Canadian Bankruptcy and Insolvency Act, or the Canadian Companies' Creditors Arrangement Act (or any similar act or law); or any Borrower Party makes any assignment for the benefit of creditors; or any Borrower Party voluntarily or involuntarily becomes the subject of any other case or proceeding for the relief or protection of debtors under any other law or statute or under any provision of common or provincial law;
6.3    The date on which (a) any Event of Default, other than any Existing Default existing as of the date of this Third Forbearance Agreement, occurs or is determined to have occurred under any Loan Document, including this Third Forbearance Agreement, (b) any Borrower Party fails to timely perform and observe any of the covenants, agreements, and obligations contained in this Third Forbearance Agreement, or (c) or any of the representations or warranties contained in this Third Forbearance Agreement shall prove to be false or misleading in any material respect; and
6.4    The date on which any Borrower Party initiates any judicial, administrative or arbitration proceeding against Administrative Agent or any Lender.

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7.    REMEDIES.  On the Extended Forbearance Period Termination Date, Administrative Agent’s agreement to forbear shall immediately terminate, without notice to any Borrower Party, and Administrative Agent shall be immediately entitled to exercise any and all rights and remedies available to Administrative Agent or any Lender under the Loan Documents, this Third Forbearance Agreement and at law or in equity, without notice to any Borrower Party (other than any notice otherwise required in the Loan Documents or under applicable law (including any applicable UCC)), including, without limitation, the right to conduct any judicial or non-judicial sales of any Collateral or Real Estate Collateral.  The releases contained in Section 16 of this Third Forbearance Agreement and the amendments to the Credit Agreement contained in Section 5 of this Third Forbearance Agreement shall survive the termination of this Third Forbearance Agreement and shall continue in full force and effect from and after the Extended Forbearance Period Termination Date.
8.    REPRESENTATIONS AND WARRANTIES. Each Borrower Party represents and warrants to Administrative Agent and Lenders that:
8.1    Recitals.  The recitals set forth above are true, complete, accurate, and correct and are part of this Third Forbearance Agreement, and such recitals are incorporated herein by this reference.
8.2    Loan Documents.  Except to the extent disclosed on amended schedules to the Credit Agreement attached hereto as Exhibit A (or previously disclosed to Administrative Agent or any Lender in writing) and except with respect to the representations and warranties contained in Sections 9.5 and 9.14, and 9.22 of the Credit Agreement and in Sections 5(iv), (v) and (vi) of the First Amendment to Credit Agreement, all representations and warranties made and given by each Borrower Party in the Loan Documents are true, complete, accurate, and correct, as if given on the Effective Date.

8.3    No Claims or Defenses. Each Borrower Party has no claims, offsets, counterclaims, or defenses (other than payment) with respect to:  i) the payment of the Loan; ii) the payment of any other sums due under the Loan Documents; iii) the performance of each Borrower Party’s obligations under the Loan Documents; or iv) any liability of any Borrower Party under any of the Loan Documents.
8.4    No Breach by Administrative Agent or Lenders.  Administrative Agent and each Lender (including all of their respective predecessors):  i) have not breached any duty to any Borrower Party in connection with the Loan; and ii) have fully performed all obligations they may have had or now have to any Borrower Party.
8.5    Assistance of Counsel. Each Borrower Party has had the assistance of independent counsel of its own choice, or has had the opportunity to retain such independent counsel, in reviewing, discussing, and considering all the terms of this Third Forbearance Agreement; and if counsel was retained, counsel for such Borrower Party has read and considered this Third Forbearance Agreement and advised such Borrower Party to execute the same.  Before execution of this Third Forbearance Agreement, each Borrower Party has had adequate opportunity to make whatever investigation or inquiry it may deem necessary or desirable in connection with the subject matter of this Third Forbearance Agreement.

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8.6    No Representations or Coercion.  No Borrower Party is acting in reliance on any representation, understanding, or agreement not expressly set forth herein. Each Borrower Party acknowledges that neither Administrative Agent nor any Lender has made any representation with respect to the subject of this Third Forbearance Agreement except as expressly set forth herein.  Each Borrower Party has executed this Third Forbearance Agreement as its free and voluntary act, without any duress, coercion, or undue influence exerted by or on behalf of any person.
8.7    Interest and Other Charges.  All interest or other fees or charges which have been imposed, accrued or collected by Administrative Agent (including all of its predecessors) under the Loan Documents or in connection with the Loan through the date of this Third Forbearance Agreement, and the method of computing the same, were and are proper and agreed to by each Borrower Party, and were properly computed and collected.
8.8    No Novation.  This Third Forbearance Agreement is not intended by the parties to be a novation of the Loan Documents and, except as expressly modified herein, all terms, conditions, rights, and obligations as set out in the Loan Documents are hereby reaffirmed and shall otherwise remain in full force and effect as originally written and agreed.
8.9    Loan Documents Still in Force.  Notwithstanding anything to the contrary in this Third Forbearance Agreement, except as modified herein, the Loan Documents are in full force and effect in accordance with their respective terms, remain valid and binding obligations of Borrower Parties, have not been modified or amended, and are hereby reaffirmed and ratified by each Borrowers Party.  Each Original Guarantor, Additional Guarantor and Canadian Guarantor has read and understands the terms of this Third Forbearance Agreement and each hereby ratifies and confirms the Guaranty/Collateral Agreement and their continuing obligations and duties thereunder and consents to the terms of this Third Forbearance Agreement.  After the Extended Forbearance Period Termination Date, each Borrower Party (either individually, collectively, or in concert with others) shall cooperate fully with the exercise by Administrative Agent of any of its rights and remedies pursuant to the Loan Documents or at law or in equity, including in connection with the transfer of possession of the Collateral and/or the Real Estate Collateral to the successor bidder at any judicial or non-judicial sale of the Collateral and/or the Real Estate Collateral.
8.10    No Pending Bankruptcies.  No action or proceeding, including, without limitation, a voluntary or involuntary petition for bankruptcy under any chapter of the Bankruptcy Code, has been instituted by such Borrower Party or, to the knowledge of such Borrower Party, against such Borrower Party.
8.11    Due Authorization.  The individuals signing this Third Forbearance Agreement on behalf of each Borrower Party are duly authorized to enter into this Third Forbearance Agreement.
8.12    Existing Defaults.  To the knowledge of each Borrower Party, other than the specific defaults identified in Recital D of this Third Forbearance Agreement, no Events of Default exist under the Loan Documents as of the Effective Date.

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9.    CONDITIONS PRECEDENT.  This Third Forbearance Agreement shall become effective on the earliest date (the “Effective Date”) that each of the following has occurred:
9.1    Administrative Agent has received counterpart originals of this Third Forbearance Agreement executed by all Borrower Parties listed on the signature page(s) hereof.
9.2    Borrower Parties shall have provided Administrative Agent with a budget for Borrower Parties’ business operations through and including February 15, 2013, which shall be satisfactory to Administrative Agent.
9.3    All actions required to be taken by each Borrower Party in connection with the transactions contemplated by this Third Forbearance Agreement have been taken in form and substance satisfactory to Administrative Agent.
9.4    Administrative Agent has received originals or certified or other copies of such other documents as Administrative Agent may reasonably request.
9.5    Borrower shall have provided Administrative Agent with evidence satisfactory to Administrative Agent, in its sole discretion, that the execution, delivery, and performance by all Borrower Parties of this Third Forbearance Agreement, and any agreement or instrument required by this Third Forbearance Agreement, have been duly authorized.
9.6    The execution and delivery of this Third Forbearance Agreement by Administrative Agent shall have been authorized by the Required Lenders.
10.    CONFIRMATION OF COLLATERAL/FURTHER ASSURANCES.  Each Borrower Party hereby:  i) confirms to Administrative Agent that all security interests and liens heretofore granted by it to Administrative Agent, for the benefit of the Lenders, securing the obligations of any Borrower Party to Administrative Agent or any Lender arising out of the Loan Documents; ii) acknowledges and agrees that all such obligations shall continue to be secured by any and all such security interests and liens except as expressly provided herein; and iii) agrees to execute and deliver to Administrative Agent and each Lender any and all agreements and other documentation and to take any and all actions reasonably requested by Administrative Agent and each Lender at any time to assure the perfection, protection, priority, and enforcement of Administrative Agent and each Lender’s rights under the Loan Documents, including this Third Forbearance Agreement, with respect to all such security interests and liens, at Borrower Parties’ sole cost and expense.
11.    BINDING EFFECT.  This Third Forbearance Agreement shall be binding upon each Borrower Party and Administrative Agent, and their respective successors and assigns, and shall inure to the benefit of such parties and their respective successors and assigns; provided, however, that no Borrower Party may assign any rights arising from this Third Forbearance Agreement or any Loan Documents without Administrative Agent’s prior written consent, and any prohibited assignment shall be null and void.

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12.    COUNTERPARTS; EFFECTIVENESS.  This Third Forbearance Agreement may be executed in any number of counterparts and by the different parties on separate counterparts.  Each such counterpart, whether delivered by facsimile, email, or other electronic delivery, shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement.  This Third Forbearance Agreement shall be deemed to have been executed and delivered on the Effective Date.
13.    AMENDMENT AND WAIVER.  No amendment or waiver of any provision of this Third Forbearance Agreement shall be effective unless set forth in a writing signed by the parties hereto.
14.    GOVERNING LAW.  This Third Forbearance Agreement shall be governed by and construed in accordance with the provisions of Section 15.7 of the Credit Agreement.
15.    SEVERABILITY.  Any provision of this Third Forbearance Agreement that is held to be inoperative, unenforceable, voidable, or invalid in any jurisdiction shall, as to that jurisdiction, be ineffective, unenforceable, void, or invalid without affecting the remaining provisions in that or any other jurisdiction, and to this end the provisions of this Third Forbearance Agreement are declared to be severable.      
16.    RELEASE. As a material part of the consideration for Administrative Agent entering into this Third Forbearance Agreement, each Borrower Party (collectively “Releasor”) agrees as follows (the “Release Provision”):
16.1    Releasor hereby releases and forever discharges Administrative Agent and each Lender and such parties’ predecessors, successors, assigns, officers, managers, directors, shareholders, employees, agents, attorneys, representatives, parent corporations, subsidiaries, and affiliates (hereinafter all of the above collectively referred to as “Lender Group”) jointly and severally from any and all claims, counterclaims, demands, damages, debts, agreements, covenants, suits, contracts, obligations, liabilities, accounts, offsets, rights, actions, and causes of action of any nature whatsoever, including, without limitation, all claims, demands, and causes of action for contribution and indemnity, whether arising at law or in equity, whether presently possessed or possessed in the future, whether known or unknown, whether liability be direct or indirect, liquidated or unliquidated, whether presently accrued or to accrue hereafter, whether absolute or contingent, foreseen or unforeseen, and whether or not heretofore asserted, which Releasor may have or claim to have against any of the Lender Group, in each case to the extent arising or accruing prior to and including the Effective Date; provided, however, that Administrative Agent and each Lender shall not be released hereby from any obligation to pay to Releasor any amounts that Releasor may have on deposit with Administrative Agent or such Lender, in accordance with applicable law and the terms of the documents establishing any such deposit relationship.
16.2    Releasor agrees not to sue any of the Lender Group or in any way assist any other person or entity in suing any of the Lender Group with respect to any claim released herein. The Release Provision may be pleaded as a full and complete defense to, and may be used as the basis for an injunction against, any action, suit, or other proceeding which may be instituted, prosecuted, or attempted in breach of the release contained herein.

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16.3    Releasor is the sole owner of the claims released by the Release Provision, and Releasor has not heretofore conveyed or assigned any interest in any such claims to any other person or entity.
16.4    Releasor understands that the Release Provision was a material consideration in the agreement of Administrative Agent to enter into this Third Forbearance Agreement on behalf of itself and each Lender. 
16.5    It is the express intent of Releasor that the release and discharge set forth in the Release Provision be construed as broadly as possible in favor of the Lender Group so as to foreclose forever the assertion by Releasor of any claims released hereby against any of the Lender Group.
16.6    If any term, provision, covenant, or condition of the Release Provision is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the remainder of the provisions shall remain in full force and effect.
17.    NOTICES.  Any notice, demand or other communications which any party hereto may desire or may be required to give to any other party hereto shall be in writing, and shall be deemed given if and when personally delivered (personal delivery shall include delivery by messenger or expedited delivery service, regularly providing proof of delivery, such as Federal Express or Airborne), or when delivered (whether accepted or refused) by United States registered or certified mail, postage prepaid and return receipt requested addressed to a party at its address set forth in the Credit Agreement and/or the Guaranty/Collateral Agreement.
18.    FINAL AGREEMENT.  THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
19.    Missouri Revised Statute §432.045.  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, TOGETHER WITH THE LOAN DOCUMENTS, IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

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IN WITNESS WHEREOF, the parties hereto have caused this Third Forbearance Agreement to be duly executed and delivered as of the day and year first above written.
BORROWER:

CPI CORP, a Delaware corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

ORIGINAL GUARANTORS:

CONSUMER PROGRAMS INCORPORATED, a Missouri corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

CPI CANADIAN HOLDINGS, INC., a Delaware corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    
CPI IMAGES, L.L.C., a Missouri limited liability company

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

CPI INTERNATIONAL HOLDINGS, INC., a Delaware corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

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CONFIDENTIAL                        

TEXAS PORTRAITS L.P., a Delaware limited partnership

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

CENTRICS TECHNOLOGY, INC., a Delaware corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

IMAGE SOURCE INC., a Missouri corporation

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    

ADDITIONAL GUARANTORS:

BELLA PICTURES HOLDINGS, LLC, a Delaware limited liability company

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

SANDY REALTY HOLDINGS, LLC, a Missouri limited liability company

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

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CONFIDENTIAL                        

CANADIAN GUARANTORS:

CPI CORP., an unlimited liability company organized under the laws of Nova Scotia

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

CPI PORTRAIT STUDIOS OF CANADA CORP., an unlimited liability company organized under the laws of Nova Scotia 

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

CPI CANADIAN IMAGES, an Ontario partnership

By:  CPI PORTRAIT STUDIOS OF CANADA CORP., an unlimited liability company organized under the laws of Nova Scotia, its partner

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

By:  CPI CORP., an unlimited liability company organized under the laws of Nova Scotia, its partner

By: /s/ Dale Heins    
Name:  Dale Heins    
Title:  EVP Finance / CFO / Treasurer    
    

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PX01DOCS\733761.6

CONFIDENTIAL                        

BANK OF AMERICA, N.A., as
Administrative Agent for the various financial institution parties identified as Lenders, as Issuing lender, and as a Lender

By:  /s/ Colin J. McClary
Name:  Colin J. McClary
Title:  SVP

16
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CONFIDENTIAL                        

ASSOCIATED BANK, N.A., as a Lender

By:  /s/ Dan Maher
Name:  Dan Maher
Title:  SVP

17
PX01DOCS\733761.6

CONFIDENTIAL                        

FIFTH THIRD BANK, as a Lender
By:  /s/ Steven J. Englehart
Name:  Steven J. Engelhart
Title:  Vice President

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CONFIDENTIAL                        

THE PRIVATE BANK AND TRUST COMPANY, as a Lender

By:  /s/ Joseph G. Fudez
Name:  Joseph G. Fudez
Title:  Managing Director

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CONFIDENTIAL                        

EXHIBIT A

(Amended Schedules)

[NONE UNLESS OTHERWISE ATTACHED HERETO]

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PX01DOCS\733761.6Ex 10.19-2012.12.31

Exhibit 10.19

GENERAL DYNAMICS CORPORATION

SUPPLEMENTAL SAVINGS PLAN

Amended and restated as of December 31, 2012

GENERAL DYNAMICS CORPORATION
SUPPLEMENTAL SAVINGS PLAN

Table of Contents

		
	SECTION 1
	INTRODUCTION AND PLAN HISTORY    1

		
	SECTION 2
	DEFINITIONS    1

		
	SECTION 3
	SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS UNDER THE QUALIFIED PLAN    4

		
	SECTION 4
	CREDITED EARNINGS    5

		
	SECTION 5
	PAYMENT, NONFORFEITABILITY OF BENEFITS AND MAINTENANCE OF ACCOUNTS    6

		
	SECTION 6
	SPECIAL SUPPLEMENTAL BENEFITS    8

		
	SECTION 7
	MISCELLANEOUS PROVISIONS    8

		
	SECTION 8
	AMENDMENT AND TERMINATION OF THE PLAN    10

		
	SECTION 9
	SECTION 409A COMPLIANCE    11

SECTION 1 INTRODUCTION AND PLAN HISTORY
1.1    Introduction.  This Plan is maintained so as to strengthen the ability of the Company and its Subsidiaries to attract and retain persons of outstanding competence upon which, in large measure, continued growth and profitability depend.  The Plan is intended to supplement Qualified Salary Deferrals and Qualified Matching Contributions.  The Plan is intended to be an unfunded deferred compensation plan for a select group of management or highly compensated employees within the meanings of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and shall be construed and interpreted accordingly.  Effective December 31, 2012, the name of the Plan is changed from General Dynamics Corporation Supplemental Savings and Stock Investment Plan to General Dynamics Corporation Supplemental Savings Plan.
1.2    Effective Date.  This Plan was established effective January 1, 1983, and previously amended and restated as of January 1, 1987, January 1, 1998, and August 1, 2003.  The Plan was further amended as of March 1, 2005.  The Plan was amended and restated effective as of December 24, 2005, and conformed to include amendments through January 1, 2007.  The Plan was amended and restated effective as of January 1, 2009, and conformed to include amendments through March 31, 2011.  The Plan is hereby amended and restated effective as of December 31, 2012.
1.3    Plan Appendices.  From time to time, the Company may adopt Appendices to the Plan for the purpose of setting forth specific provisions or providing documentation necessary to determine benefits under the Plan for certain Employee groups.  Each such Appendix shall be attached to and form a part of the Plan.  Each such Appendix shall specify the population to which it applies and shall supersede the provisions of the Plan document to the extent necessary to eliminate any inconsistencies between the Plan document and such Appendix.
1.4    Applicability of Plan Provisions.  The provisions of this Plan shall apply to any person who is a Participant on or after January 1, 2005, and to any Account in existence on or after January 1, 2005.  Pre-2005 Accounts are considered to be “grandfathered” under Section 409A and, except as otherwise specifically provided under this Plan by reference to Pre-2005 Accounts, the benefits and rights existing as of October 3, 2004, under the prior version of the Plan applicable to any Pre-2005 Account shall continue to apply.  For purposes of clarity, except as otherwise specifically provided by this Plan by reference to Pre-2005 Accounts, to the extent that benefits or rights of Pre-2005 Accounts are governed by reference to corresponding Qualified Plan provisions, the Qualified Plan provisions in effect as of October 3, 2004, shall apply.  
SECTION 2    DEFINITIONS
Where the following words and phrases appear in the Plan, they shall have the respective meanings set forth below, unless the context clearly indicates to the contrary.  Some of the words and phrases used in the Plan are not defined in this Section 2, but, for convenience, are defined as they are introduced into the text.
2.1    Account shall mean the recordkeeping account to which Salary Deferrals, Matching Contributions and Credited Earnings are credited (or debited for Credited Earnings reflecting an investment loss) under the Plan.  An Account may be divided into two or more subaccounts to the extent necessary or desirable, as determined by the Company, for Plan recordkeeping and accounting purposes.  Such subaccounts are referred to herein collectively as the “Account” or “Accounts,” and sometimes individually as the “Account.”  
2.2    Accounting Date shall mean each day on which the U.S. financial markets are open for business.
2.3    Beneficiary shall mean the Participant’s beneficiary, who shall be determined by the following order: (1) the Participant’s designated beneficiary under the Qualified Plan, (2) the Participant’s spouse, and (3) the Participant’s estate.
2.4    Change of Control shall mean a “Change of Control” as that term is defined in the General Dynamics Corporation 2012 Equity Compensation Plan (or any successor thereto), as amended from time to time.

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2.5    Code shall mean the Internal Revenue Code of 1986, as amended from time to time and the rules and regulations promulgated thereunder.
2.6    Company shall mean General Dynamics Corporation, a Delaware corporation, and any successor thereof.
2.7    Credited Earnings shall have the meaning set forth in Section 4.1.
2.8    Eligible Employee shall mean an Employee who satisfies the eligibility criteria described at Section 3.1.
2.9    Employee shall mean any person who is regularly employed as a full-time, salaried employee by the Company or its Subsidiaries, and who is not covered by a collective bargaining agreement (except where such collective bargaining agreement specifically provides for participation).  Individuals not initially treated and classified by the Company as common-law employees, including, but not limited to, leased employees, independent contractors or any other contract employees, shall be excluded from participation irrespective of whether a court, administrative agency or other entity determines that such individuals are common-law employees.
2.10    ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
2.11    Key Employee shall mean a “specified employee” as that term is used under Section 409A.
2.12    Matching Contributions shall mean amounts credited to a Participant’s Account with reference to the Participant’s Salary Deferrals pursuant to Section 3.4.
2.13    Participant shall mean any current or former Employee who has an Account that has not been fully paid or otherwise discharged.
2.14    Plan shall mean the General Dynamics Corporation Supplemental Savings Plan (formerly the General Dynamics Corporation Supplemental Savings and Stock Investment Plan), established January 1, 1983, as amended and restated as set forth herein, as it may be amended from time to time, and its Appendices.
2.15    Plan Year shall mean the 12 month period beginning on January 1st and ending on the following December 31st.
2.16    Post-2004 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited if not earned and vested by December 31, 2004, and any Credited Earnings with respect to such amounts.
2.17    Pre-2005 Account shall mean a Participant’s subaccount to which Salary Deferrals and Matching Contributions are credited to the extent they were earned and vested on or before December 31, 2004, and any Credited Earnings with respect to such amounts.
2.18    Qualified Matching Contributions shall mean amounts contributed to the Qualified Plan by the Company or its Subsidiaries which are determined with reference to amounts of Qualified Salary Deferrals.
2.19    Qualified Plan shall mean the General Dynamics Corporation 401(k) Plan 3.0, General Dynamics Corporation 401(k) Plan 4.5, General Dynamics Corporation 401(k) Plan 5.0, and General Dynamics Information Technology 401(k) Plan, as each may be amended from time to time.
2.20    Qualified Plan Limitations shall mean limitations imposed (i) pursuant to Code Sections 401(a)(17), 402(g), 415 or any other section of the Code or (ii) by the Company in order to assure compliance with the actual deferral percentage or actual contribution percentage requirements of the Qualified Plan.
2.21    Qualified Salary Deferrals shall mean pre-tax salary deferrals made by an Employee pursuant to the Qualified Plan.

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2.22    Salary shall mean an Employee’s “Deferral Pay,” as that term is used in the Qualified Plan, without taking into account the limitation on annual compensation under Code Section 401(a)(17) or any successor provision thereto, or any incentive plan payments, bonuses or commissions.
2.23    Salary Deferrals shall mean amounts credited to a Participant’s Account corresponding to Salary reductions elected pursuant to Section 3.2.
2.24    Section 409A shall mean Code Section 409A, including, without limitation, applicable transition guidance provided by the Internal Revenue Service.
2.25    Separation from Service shall mean a “separation from service” as that term is defined in Section 409A.
2.26    Subsidiary shall mean any corporation of which the Company owns, directly or indirectly, fifty percent (50%) or more of the outstanding voting stock.
SECTION 3    SUPPLEMENTAL BENEFITS DUE TO LIMITATIONS 
UNDER THE QUALIFIED PLAN
3.1    Eligibility.
(a)    Unless otherwise directed by the Chief Executive Officer of the Company (the “Chief Executive Officer”), eligibility for participation in any benefits provided under this Section 3 for a given Plan Year shall be extended to selected Employees (i) who are eligible to participate in the Qualified Plan, (ii) whose Qualified Salary Deferrals to the Qualified Plan are restricted due to any of the Qualified Plan Limitations, and (iii) whose Salary in effect on November 1 of the year immediately preceding the given Plan Year (or such other date prescribed by the Company from time to time) equals or exceeds the annual compensation limitation of Code Section 401(a)(17) for the Plan Year.
(b)    The selection of eligible Employees who may participate in the Plan shall be in the sole discretion of the Company, and participation may be limited to such otherwise eligible Employees as the Company shall determine by the application of minimum compensation levels or otherwise.  All determinations shall be made prior to the given Plan Year and may be made as of a given date at the sole discretion of the Company.
(c)    Notwithstanding anything to the contrary, to the extent that an Employee meets the requirements of this Section 3.1 during a Plan Year, such Employee shall not become an Eligible Employee during that Plan Year except as directed by the Chief Executive Officer or his or her duly authorized delegate.
3.2    Salary Deferral Elections.  Salary Deferrals shall be credited to an Eligible Employee’s Post-2004 Account in accordance with such Eligible Employee’s election and subject to the following rules:  
(a)    An Eligible Employee may elect to defer up to the maximum amount described in Section 3.3.  
(b)    An Eligible Employee’s Salary Deferral election under this Plan shall be irrevocable for the 2005 Plan Year after March 15, 2005.  
(c)    For Plan Years commencing after 2005, an Eligible Employee may make an irrevocable Salary Deferral election at the time and in the form prescribed by the Company, but in no event later than December 31 of the year preceding a given Plan Year (or such earlier time as provided by the Company).  
(d)    For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals, meaning that it may impose an automatic or default Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election.

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(e)    Notwithstanding the preceding requirements, in the event an Employee becomes eligible to participate during the Plan Year in accordance with Section 3.1(c) above, such Eligible Employee may make an irrevocable Salary Deferral election within 30 days from the date of eligibility with respect to any Salary earned after such election.  For purposes of clarity, and without limitation, the Company may prescribe a “negative” election for Salary Deferrals, meaning that it may impose an automatic Salary Deferral election, provided the Eligible Employee has an opportunity during the election period to affirmatively change such election.
3.3    Maximum Amount of Salary Deferrals.  The maximum amount of Salary Deferrals that an Eligible Employee may elect for a given Plan Year is equal to (X times Y) minus Z, where:
X is the Eligible Employee’s annual Salary in effect as of the November 1st of the year immediately preceding the Plan Year (or such other date prescribed by the Company from time to time).
Y is 10% (or such other grandfathered percentage as determined by the Company in its sole discretion, and communicated to such affected Eligible Employee).
Z is the Code Section 402(g) limit for such Plan Year.
3.4    Matching Contributions.  An Eligible Employee may be eligible for a Matching Contribution under this Plan, which shall be credited to an Eligible Employee’s Post-2004 Account, based on his or her Salary Deferrals under this Plan.  Eligibility for, and the amount of any Matching Contribution under this Plan, shall be determined by the Qualified Matching Contribution provisions in the Qualified Plan that are applicable to the business unit to which the Eligible Employee is assigned as of the end of the Salary Deferral election period prescribed by the Company for a given Plan Year.  
3.5    Transfer.  For purposes of clarity, should an Eligible Employee transfer business units during a Plan Year, such Eligible Employee’s Salary Deferrals and Matching Contributions, if any, shall not change during that Plan Year to account for different deferral or matching provisions under the Qualified Plan applicable to the Eligible Employee’s new business unit.
SECTION 4    CREDITED EARNINGS
4.1    Initial Credited Earnings.  Effective for the Plan Years commencing on and after January 1, 2006, Salary Deferrals and Matching Contributions credited to the Participant’s Post-2004 Account shall be deemed invested in the same investment funds that the Participant’s Qualified Salary Deferrals are invested in as of the December 15th of the preceding Plan Year (or such other date as determined from time to time by the Company) under the Qualified Plan.  For 2005, Credited Earnings shall be determined under the prior provisions of the Plan.  Effective April 22, 2011, Salary Deferrals and Matching Contributions credited to the Participant’s Post-2004 Account shall be deemed invested in the same investment funds as Qualified Salary Deferrals and Qualified Matching Contributions would be invested under the Qualified Plan as of the crediting date.  Notwithstanding anything to the contrary, effective for Plan Years commencing after December 31, 2012, Salary Deferrals and Matching Contributions shall be deemed invested in the investment funds selected by the Participant.  If a Participant fails to make a selection regarding how his or her Salary Deferrals and Matching Contributions are invested, such Participant shall be deemed to have elected to have his or her Salary Deferrals and Matching Contributions invested in the applicable default investment fund designated by the Company and communicated to Participants.  The investment funds shall be the investment funds offered under the Qualified Plan (but not including the investment funds offered under the General Dynamics Information Technology 401(k) Plan).  For purposes of clarity, Participants will not actually be invested in any actual fund, trust or account.  Rather, for purposes of this Plan, “investment funds” used herein refers to notional (phantom) investments used to credit earnings to Participants’ Accounts.  The investment returns (gains, losses and expenses) credited to Participants’ Accounts will match the investment returns that would actually be recognized had the money been invested in those funds in the Qualified Plan; provided, however, that investment returns (gains, losses and expenses) for notional (phantom) investments in the General Dynamics Stock Fund will instead be based on rules established by the Company for this Plan.

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4.2    Account Adjustments.  Each Account shall be adjusted to reflect investment gain or loss on any balance in the Account as of the close of the immediately preceding Accounting Date.  The adjustment shall be the same as what would actually have been recognized if the Account had been invested in the Qualified Plan under the investment options actually selected (or deemed selected) by the Participant hereunder.
4.3    Investment Fund Transfers.  If a Participant makes an investment fund transfer pursuant to the provisions of the Qualified Plan, the identical investment fund transfer shall be performed in this Plan, but no such transfer shall be permitted in this Plan unless made in the Qualified Plan.  Notwithstanding the foregoing, the Company may, in its discretion, approve transfers in this Plan where no transfer is possible in the Qualified Plan due to loans and withdrawals.  Effective for Plan Years commencing after December 31, 2012, the preceding rules of this Section 4.3 will no longer apply, and Participants will be able to make investment fund transfers in the time and manner established by the Company.
SECTION 5    PAYMENT, NONFORFEITABILITY OF BENEFITS 
AND MAINTENANCE OF ACCOUNTS
5.1    Pre-2005 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts.  This Section 5.1 shall be effective as of January 1, 2005, and shall only apply to Pre-2005 Accounts.  Except as otherwise provided in this Plan, a Participant’s Pre-2005 Account, if any, shall be paid under the same conditions, rules and restrictions as would apply to the benefits as if they were provided under the Qualified Plan.  The following rules shall apply to such Pre-2005 Accounts, notwithstanding the conditions, rules and restrictions of the Qualified Plan:
(a)     Participants shall not be entitled to receive distributions or loans or to make withdrawals of any portion of their Pre-2005 Account balances while employed by the Company or any of its Subsidiaries.
(b)    Upon termination of employment with the Company and its Subsidiaries, the entire balance of a Participant’s Pre-2005 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable.  However, any Participant may, by a written statement (including internet and telephone methods approved by the Company for this purpose) filed with the Company or its delegated agent on or before one year prior to the termination of employment, irrevocably elect to defer commencement of such payments until a specific date which may be as late as the Participant attaining age 701⁄2.  If a deferral is elected, the Participant may choose to have his or her Pre-2005 Account balance subsequently paid in a lump sum or in such number of equal annual installments (not to exceed 15) as he or she may request (which will commence as soon as practicable, but no later than 60 days following the payment date(s) selected, after the conclusion of the deferral period and will be payable annually thereafter).  To the extent consistent with the above requirements, deferrals and installment payments of distributions shall be governed by the applicable provisions of the Qualified Plan.
(c)    All Pre-2005 Account balances shall be paid in cash.  No Participant shall have any right to receive payment in any other form.
(d)    Upon the death of a Participant prior to the entire balance of the Participant’s Pre-2005 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary.  Amounts shall be paid as soon as practicable, but no later than 60 days following the Participant’s death.
(e)    In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, such cessation shall not, by itself, be treated as a termination of employment by the Participants employed by such Subsidiary or business unit unless the Company shall so determine.  In those circumstances, the Company may also determine whether the Pre-2005 Accounts of the Participants employed by such Subsidiary or business unit will be vested or distributed.

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(f)    The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Pre-2005 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable.
(g)    Pursuant to transition guidance under Section 409A, Participants in the Plan (i) who are former Employees (as of November 30, 2005) and (ii) whose Pre-2005 Account is worth less than $100,000 (as of November 30, 2005), shall be terminated from participation in the Plan and such Participants shall be paid their respective Accounts in a single lump sum payment on or before December 31, 2005.
5.2    Post-2004 Accounts: Payment and Nonforfeitability of Benefits and Maintenance of Accounts.  This Section 5.2 shall be effective as of January 1, 2005, and shall apply to Post-2004 Accounts.
(a)    Six months following a Separation from Service from the Company and its Subsidiaries, the entire balance of a Participant’s Post-2004 Account (valued as of the Accounting Date coincident with or immediately preceding the date of payment) shall be paid to the Participant as soon as administratively practicable, but no later than 60 days following the six‐month anniversary of the Participant’s Separation from Service.  Notwithstanding the foregoing, in the event that a Participant’s Post-2004 Account is less than the applicable dollar amount under Section 402(g) of the Code, the Company shall have the discretion to distribute such amount in a single lump sum payment.  
(b)    All Post-2004 Account balances shall be paid in cash.  No Participant shall have any right to receive payment in any other form.
(c)    In the event that a Subsidiary ceases to meet the definition of Subsidiary (e.g., on account of a sale of its stock to an unrelated third party), or an unincorporated business unit ceases to be owned by the Company or a Subsidiary, the Company, in its sole discretion, may fully vest the Post-2004 Account balances of Participants employed by such Subsidiary or business unit and the Post-2004 Account shall be paid in accordance with Section 5.2(a).
(d)    The Company shall promulgate such other additional rules and procedures governing the operation of this Plan in relation to such Post-2004 Accounts as it may, from time to time and in its sole discretion, determine are necessary or desirable.
(e)    Notwithstanding, Section 5.2(a) above, upon the death of a Participant prior to the entire balance of the Participant’s Post-2004 Account having been paid, the remaining unpaid balance shall be payable to the Beneficiary as soon as practicable but no later than 60 days following the Participant’s death.
(f)    Notwithstanding anything to the contrary contained in this Section 5.2, payment to a Participant shall be delayed should the Company reasonably anticipate that the making of such payment would violate federal securities laws or other applicable law.  In such an event, payment shall be made at the earliest date at which the Company reasonably anticipates that the making of the payment would not cause such violation.
SECTION 6    SPECIAL SUPPLEMENTAL BENEFITS
6.1    Participation.  Recognizing the need to make special retirement and other compensation or employee benefit provisions for certain Employees, the Company may, from time to time and in its best judgment, designate such other individual Employees or groups of select management or highly compensated Employees as being eligible to receive benefits under this Plan.  Any such Employees or groups of Employees, and the benefits applicable to them, will be described in the Appendices attached to this Plan.
6.2    Benefits.  Such supplemental benefits may be provided in such amounts as the Company determines are appropriate.  Such benefits need not be uniform among such Employees.
SECTION 7    MISCELLANEOUS PROVISIONS

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7.1    Construction.  In the construction of the Plan, the masculine shall include the feminine and the singular the plural in all cases where such meanings would be appropriate.  Except as may be governed by ERISA or other applicable federal law, this Plan shall be construed, governed, regulated and administered according to the laws of the Commonwealth of Virginia.
7.2    Employment.  Participation in the Plan shall not give any Employee the right to be retained in the employ of the Company or its Subsidiaries, or upon dismissal or upon his or her voluntary termination of employment, to have any right, legal or equitable, under the Plan or any portion thereof, except as expressly granted by the Plan.
7.3    Nonalienability of Benefits.  No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void, and no such benefit shall in any manner be liable for or subject to the debts, liabilities, engagements or torts of the person entitled to such benefit, except as specifically provided in the Plan.  
7.4    Facility of Payment.  If the Company judges any recipient of benefits, in its sole discretion, to be legally incapable of personally receiving and giving a valid receipt for any payment due him or her under the Plan, the Company may, unless and until claims shall have been made by a duly appointed guardian or committee of such person, make such payment or any part thereof to such person’s spouse, children or other legal entity deemed by the Company to have incurred expenses or assumed responsibility for the expenses of such person.  Any payment so made shall be a complete discharge of any liability under the Plan for such payment.
7.5    Obligation to Pay Amounts Hereunder.
(a)    No trust fund, escrow account or other segregation of assets need be established or made by the Company to guarantee, secure or assure the payment of any amount payable hereunder.  The Company’s obligation to make payments pursuant to this Plan shall constitute only a general contractual liability of the Company to individuals entitled to benefits hereunder and other actual or possible payees hereunder in accordance with the terms hereof.  Payments hereunder shall be made only from such funds of the Company as it shall determine, and no individual entitled to benefits hereunder shall have any interest in any particular asset of the Company by reason of the existence of this Plan.  No provision of the Plan shall be interpreted so as to give any individual any right in any assets of the Company greater than the rights of a general unsecured creditor of the Company.  It is expressly understood as a condition for receipt of any benefits under this Plan that the Company is not obligated to create a trust fund or escrow account or to segregate any asset of the Company in any fashion.
(b)    The Company may, in its sole discretion, establish segregated funds, escrow accounts or trust funds whose primary purpose would be for the provision of benefits under this Plan.  If such funds or accounts are established, however, individuals entitled to benefits hereunder shall not have any identifiable interest in any such funds or accounts nor shall such individuals be entitled to any preference or priority with respect to the assets of such funds or accounts.  These funds and accounts would still be available to judgment creditors of the Company and to all creditors in the event of the Company’s insolvency or bankruptcy.
7.6    Administration.  The Plan shall be administered by the Company.  The Company shall have the discretionary authority to construe and interpret the provisions of the Plan and make factual determinations thereunder, including the power to determine the rights or eligibility of Employees or Participants and any other persons, and the amounts of their benefits under the Plan, and to remedy ambiguities, inconsistencies or omissions, and any such determinations shall be binding on all parties.  Benefits will only be paid if the Company, in its sole discretion, determines that the Participant or Beneficiary is entitled to them.
The Company has the authority to delegate any of its powers under this Plan (including, without limitation, Section 7.7) to any other person, persons, or committee.  This person, persons, or committee may further delegate its reserved powers to another person, persons, or committee as they see fit.  Any delegation or subsequent delegation shall include the same full, final and discretionary authority that the Company has listed herein and any decisions, actions or interpretations made by any delegate shall have the same ultimate binding effect as if made by the Company.

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7.7    Claims Appeal Procedure.  Upon receipt of a claim for benefits under the Plan, the Company shall notify the Participant, Beneficiary or authorized representative of any action taken within 90 days of receiving the claim.  If the claim is denied, the denial shall be set forth in writing and shall include the specific reasons for the denial, with reference to pertinent Plan provisions on which the denial is based, and shall describe the procedure for perfecting the claim, or for requesting a review of the denial.  Within 60 days after receiving a notification of denial of a claim, a Participant, Beneficiary or authorized representative may request that the Company make a full and fair review of the denial.  In connection with this request, the Participant may review pertinent documents and submit issues or comments in writing.  The Company will make a final decision on the claim within 120 days of the request for review.  Any decision made by the Company in good faith shall be final and binding on all parties.
7.8    Change of Control.  Notwithstanding any provision herein to the contrary, immediately prior to the occurrence of a Change of Control, all allocations made to Accounts of Participants who are then active Employees shall become fully vested and nonforfeitable. 
7.9    Action by the Company.  Any action or authorization by the Company hereunder shall be made by the Chief Executive Officer or its Board of Directors, or any delegate of either. 
SECTION 8    AMENDMENT AND TERMINATION OF THE PLAN
8.1    Amendment.  The Company has the right to modify or amend this Plan in whole or in part, effective as of any specified date; provided, however, that the Company shall have no authority to modify or amend the Plan to:
(a)    Reduce any benefit accrued hereunder based on service and compensation to the date of amendment unless such action is necessary to prevent this Plan from being subject to any provision of Title 1, Subtitle B, Parts 2, 3 or 4 of ERISA;
(b)    Permit the accrual, holding or payment of actual shares of common stock of the Company under the Plan (such right to amend being reserved to the Board of Directors of the Company or its delegate); or
(c)    Adversely affect any accrued benefits hereunder (and any benefits that will accrue upon a Change of Control) and any rights attaching thereto after or in anticipation of the occurrence of a Change of Control.
No benefit hereunder shall be deemed to be adversely affected or otherwise reduced to the extent that any amendment or action affects the tax treatment of Plan benefits or an interest in future investment returns.

8.2    Termination.  
(a)    The Company reserves the right to terminate this Plan, in whole or in part.  This Plan shall be automatically terminated upon (i) a dissolution of the Company (but not upon a merger, consolidation, reorganization, recapitalization or acquisition of a controlling interest in the voting stock of the Company by another person or entity); (ii) the Company being legally adjudicated bankrupt; (iii) the appointment of a receiver or trustee in bankruptcy with respect to the Company’s assets and business if such appointment is not set aside within ninety (90) days thereafter; or (iv) the making by the Company of an assignment for the benefit of creditors.
(b)    Upon a termination of this Plan, (i) no additional Employees shall become entitled to benefits hereunder; (ii) all benefits accrued through the date of termination will become immediately nonforfeitable as to each Participant; and (iii) no additional benefits (except that the Company, in its sole discretion, may provide for an allocation of “income” or “earnings” on the Participant’s contributions) shall be accrued hereunder for subsequent payment.
(c)    Pre-2005 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable.

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(d)    Post-2004 Accounts accrued to the date of termination of the Plan shall be paid to the Participants as soon as practicable to the extent permitted under Section 409A and otherwise shall remain payable in accordance with Section 5.2.  
SECTION 9    SECTION 409A COMPLIANCE
It is intended that the Plan (and any payments) will comply with or be exempt from Section 409A, if applicable, and the Plan (and any payments) shall be interpreted and construed on a basis consistent with such intent.  The Plan (and any payments) may be amended (in accordance with Section 8.1 of the Plan) in any respect deemed necessary or desirable (including retroactively) by the Company with the intent to preserve compliance with or exemption from Section 409A.  The preceding shall not be construed as a guarantee of any particular tax effect for Plan benefits.  A Participant (or Beneficiary) is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on such person in connection with the Plan (including any taxes and penalties under Section 409A), and the Company shall have no obligation to indemnify or otherwise hold a Participant (or Beneficiary) harmless from any or all of such taxes or penalties.
Following a Change of Control or a “change in control” as defined under Section 409A, no action shall be taken under the Plan that will cause a Participant’s benefit that has previously been determined to be (or is determined to be) subject to Section 409A, to fail to comply in any respect with Section 409A without the written consent of such Participant.

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