SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED NOVEMBER 12, 1994
COMMISSION FILE NUMBER 1-10204
CPI CORP.
____________________________________________________________
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 43-1256674
- - - ---------------------------------- --------------------
(State of Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1706 WASHINGTON AVENUE, ST. LOUIS, MISSOURI 63103-1790
- - - ------------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314)231-1575
-------------
Indicate by check mark whether the registrant has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and has been subject to such filing requirements for
the past 90 days.
Yes ______X______ No ____________
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Common Stock $.40 par value 13,699,717 shares
- - - --------------------------- ---------------------------------
Class Outstanding at December 21, 1994
EXHIBIT INDEX ON PAGE 27
DOCUMENT 1, PAGE 1 OF 54
<PAGE>
<TABLE>
CPI CORP.
INDEX
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Interim Condensed Consolidated Balance 4,5
Sheets - November 12, 1994,
November 13, 1993 and February 5, 1994
Interim Condensed Consolidated Statements 6,7
of Earnings - For the 16 and 40 Weeks
Ended November 12, 1994 and
November 13, 1993
Interim Condensed Consolidated Statements 8-10
of Changes in Stockholders' Equity - For
the 52 Weeks Ended February 5, 1994 and
for the 40 Weeks Ended November 12, 1994
Interim Condensed Consolidated Statements 11,12
of Cash Flows - For the 40 Weeks Ended
November 12, 1994 and November 13, 1993
Notes to Interim Condensed Consolidated 13-15
Financial Statements
Item 2. Management's Discussion and Analysis of 16-23
Financial Condition and Results of
Operations
Item 6.(a) Exhibits
Exhibit 11 - Computation of Earnings 28,29
per Common Share
Exhibit 27 - Financial Data Schedule 30
</TABLE>
2
<PAGE>
<TABLE>
CPI CORP.
INDEX
<CAPTION>
PAGE NO.
<S> <C>
PART II. OTHER INFORMATION:
Item 5. Other Information 24
Item 6(a). Exhibits
Exhibit 10 - Material Contracts 31-54
Item 6(b). Reports on Form 8-K 25
Signature 26
</TABLE>
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CPI CORP.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - ASSETS
<CAPTION>
UNAUDITED AUDITED
--------------------------- -------------
November 12, November 13, February 5,
1994 1993 1994
------------- ------------- -------------
<S> <C> <C> <C>
Current assets:
Cash $ 5,577,392 $ 4,342,046 $ 4,304,171
Short-term
investments 12,138,025 45,830,603 62,051,741
Receivables 35,391,861 28,480,779 21,057,245
Inventories 37,102,782 31,565,514 28,530,382
Deferred costs
applicable to unsold
portraits 795,551 8,680,353 2,822,123
Prepaid expenses and
other current assets 14,830,336 11,108,419 9,005,393
------------- ------------- -------------
Total current assets 105,835,947 130,007,714 127,771,055
------------- ------------- -------------
Net property and
equipment 157,110,816 112,308,857 114,328,773
Other assets:
Intangible assets 57,319,447 62,044,249 60,944,867
Other long-term
assets 3,039,224 2,654,633 2,751,641
------------- ------------- -------------
$323,305,434 $307,015,453 $305,796,336
============= ============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
UNAUDITED UNAUDITED AUDITED
Nov. 12, 1994 Nov. 13, 1993 Feb. 5, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Current liabilities:
Short-term borrowings $ 29,050,000 $ --- $ ---
Current maturities of
long-term obligations 146,516 331,195 292,468
Accounts payable 39,350,326 43,390,315 32,849,291
Accrued expenses and
other liabilities 28,767,001 21,855,872 21,046,068
Income taxes 3,380,763 4,512,527 8,767,222
Deferred income taxes,
net 1,980,948 1,176,677 2,232,429
------------- ------------- -------------
Total current liab. 102,675,554 71,266,586 65,187,478
------------- ------------- -------------
Long-term obligations,
less current maturities 59,738,368 59,840,894 59,810,789
Other liabilities 3,844,962 4,748,023 4,848,151
Deferred income taxes,
net 458,676 1,553,030 441,445
Stockholders' equity:
Preferred stock, no par
value. 1,000,000
shares authorized;
no shares outstanding --- --- ---
Preferred stock, Series
A, no par value --- --- ---
Common stock, $.40 par
value, 50,000,000
shares authorized;
17,002,180,
16,978,880 and
16,978,869 shares
outstanding at
Nov. 12, 1994, Nov.
13, 1993 and Feb.
5, 1994, respectively 6,800,872 6,791,552 6,791,548
Add'l paid-in capital 29,641,751 29,262,689 29,262,531
Retained earnings 196,511,584 193,358,981 199,547,800
Cumm. foreign currency
translation adj. (1,744,767) (1,073,420) (1,381,524)
------------- ------------- -------------
231,209,440 228,339,802 234,220,355
Treasury stock at cost,
3,302,463, 2,363,808
and 2,363,808 shares
at Nov. 12, 1994,
Nov. 13, 1993 and
Feb. 5, 1994,
respectively (74,531,219) (58,556,032) (58,556,032)
Unamortized deferred
compensation -
restricted stock (90,347) (176,850) (155,850)
------------- ------------- -------------
Total stockholders'
equity 156,587,874 169,606,920 175,508,473
------------- ------------- -------------
$323,305,434 $307,015,453 $305,796,336
============= ============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
16 Weeks Ended November 12, 1994 and November 13, 1993
<CAPTION>
16 Weeks Ended
-----------------------------
November 12, November 13,
1994 1993
------------- -------------
<S> <C> <C>
Net Sales $175,404,243 $145,319,804
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 49,546,700 42,677,252
Selling, administrative and
general expenses 106,197,381 86,005,508
Depreciation 10,384,855 8,494,609
Amortization of intangibles 1,704,375 2,070,378
------------- -------------
167,833,311 139,247,747
------------- -------------
Income from operations 7,570,932 6,072,057
Net interest expense (1,435,864) (615,555)
Other income 90,975 131,896
------------- -------------
Earnings before income taxes 6,226,043 5,588,398
Income tax expense 2,394,393 2,235,834
------------- -------------
Net earnings $ 3,831,650 $ 3,352,564
============= =============
Net earnings $ 0.28 $ 0.23
============= =============
Weighted average number of
common and common equivalent
shares outstanding 13,829,014 14,673,156
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
40 Weeks Ended November 12, 1994 and November 13, 1993
40 Weeks Ended
---------------------------
November 12, November 13,
1994 1993
------------- -------------
<S> <C> <C>
Net Sales $380,159,731 $329,496,089
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 113,350,422 96,488,673
Selling, administrative and
general expenses 231,227,123 201,311,826
Depreciation 24,070,230 20,330,891
Amortization of intangibles 4,255,430 5,022,809
Severance and early
retirement expense --- 1,400,000
------------- -------------
372,903,205 324,554,199
------------- -------------
Income from operations 7,256,526 4,941,890
Net interest expense (2,751,923) (563,104)
Other income 295,173 423,422
------------- -------------
Earnings before income taxes
and cumulative effect of
accounting change 4,799,776 4,802,208
Income tax expense 1,823,915 1,920,681
------------- -------------
Earnings before cumulative
effect of accounting change 2,975,861 2,881,527
Cumulative effect of accounting
change --- 2,120,000
------------- -------------
Net earnings $ 2,975,861 $ 5,001,527
============= =============
Earnings before cumulative
effect of accounting change $ 0.21 $ 0.20
Cumulative effect of accounting
change --- 0.14
------------- -------------
Net earnings $ 0.21 $ 0.34
============= =============
Weighted average number of
common and common equivalent
shares outstanding 14,208,617 14,672,102
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
(UNAUDITED)
52 Weeks Ended February 5, 1994 and
40 Weeks Ended November 12, 1994
<CAPTION>
Additional
Common Paid-In
Stock Capital
------------- -------------
<S> <C> <C>
Balance at February 6, 1993 $ 6,782,292 $ 28,833,326
Issuance of common stock:
Profit sharing plan and trust 6,190 303,000
Stock bonus plan 1,466 71,805
Employee stock plans 1,600 54,400
Foreign currency translation --- ---
Dividends ($.56 per
common share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at February 5, 1994 6,791,548 29,262,531
Issuance of common stock:
Profit sharing plan and trust 7,955 327,182
Stock bonus plan 1,476 55,764
Employee stock plans (107) (3,726)
Foreign currency translation --- ---
Dividends ($.42 per common
share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation - restricted
stock --- ---
------------- -------------
Balance at November 12, 1994 $ 6,800,872 $ 29,641,751
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
8
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - RETAINED EARNINGS AND CUMULATIVE FOREIGN
CURRENCY TRANSACTION ADJUSTMENT (UNAUDITED)
52 Weeks Ended February 5, 1994 and
40 Weeks Ended November 12, 1994
Cumulative
Foreign
Currency
Retained Transaction
Earnings Adjustment
------------- -------------
<S> <C> <C>
Balance at February 6, 1993 $194,509,469 $ (89,601)
Issuance of common stock:
Profit sharing plan and trust --- ---
Stock bonus plan --- ---
Employee stock plans --- ---
Foreign currency translation --- (1,291,923)
Dividends ($.56 per
common share) (8,198,125) ---
Net earnings 13,236,456 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at February 5, 1994 199,547,800 (1,381,524)
Issuance of common stock:
Profit sharing plan and trust --- ---
Stock bonus plan --- ---
Employee stock plans --- ---
Foreign currency translation --- (363,243)
Dividends ($.42 per common
share) (6,012,077) ---
Net earnings 2,975,861 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation - restricted
stock --- ---
------------- -------------
Balance at November 12, 1994 $196,511,584 $ (1,744,767)
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
9
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - TREASURY STOCK AT COST, UNAMORTIZED DEFERRED
COMPENSATION-RESTRICTED STOCK AND TOTAL (UNAUDITED)
52 Weeks Ended Feb. 5, 1994 and 40 Weeks Ended Nov. 12, 1994
Unamortized
Deferred
Treasury Compensation-
Stock, Restricted
At Cost Stock Total
------------- ------------ -------------
<S> <C> <C> <C>
Balance at Feb. 6, 1993 $(57,898,854) $ (190,850) $171,945,782
Issuance of common stock:
Profit sharing plan
and trust --- --- 309,190
Stock bonus plan --- --- 73,271
Employee stock plans --- (56,000) ---
Foreign currency
translation --- --- (1,291,923)
Dividends ($.56 per
common share) --- --- (8,198,125)
Net earnings --- --- 13,236,456
Purchase of treasury
stock, at cost (657,178) --- (657,178)
Amortization of deferred
compensation-restricted
stock --- 91,000 91,000
------------ ------------ -------------
Balance at Feb. 5, 1994 (58,556,032) (155,850) 175,508,473
Issuance of common stock:
Profit sharing plan
and trust --- --- 335,137
Stock bonus plan --- --- 57,240
Employee stock plans --- 3,833 ---
Foreign currency
translation --- --- (363,243)
Dividends ($.42 per
common share) --- --- (6,012,077)
Net earnings --- --- 2,975,861
Purchase of treasury
stock, at cost (15,975,187) --- (15,975,187)
Amortization of deferred
compensation-restricted
stock --- 61,670 61,670
------------- ------------ -------------
Balance at Nov. 12, 1994 $(74,531,219) $ (90,347) $156,587,874
============= ============ =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 40 WEEKS ENDED NOV. 12, 1994 AND NOV. 13, 1993 (UNAUDITED)
<CAPTION>
40 Weeks Ended
---------------------------
November 12, November 13,
1994 1993
------------- -------------
<S> <C> <C>
Cash flows provided by
operating activities $ 10,661,757 $ 12,303,064
Cash flows provided by (used
in) financing activities:
Proceeds from issuance of
short-term debt 29,050,000 ---
Proceeds from issuance of
long-term debt --- 60,372,660
Repayment of long-term debt (277,259) (292,567)
Issuance of common stock to
employee stock plans 388,544 438,623
Cash dividends (6,012,077) (6,152,015)
Purchase of treasury stock (15,975,187) (657,178)
------------- -------------
Cash flows provided by
financing activities 7,174,021 53,709,523
------------- -------------
Cash flows before investing
activity 17,835,778 66,012,587
------------- -------------
Cash flows provided by (used in)
investing activities:
Purchases of short-term
investments (9,171,808) (27,142,600)
Proceeds from maturing of
short-term investments 34,395,342 ---
Additions to property and
equipment (66,644,091) (21,436,874)
Acquisitions:
Property and equipment (208,182) (13,629,943)
Intangible assets 551,465 (1,169,216)
Long-term investments --- (22,109)
Restricted stock --- (56,000)
------------- -------------
Cash flows used in investing
activities (41,077,274) (63,456,742)
------------- -------------
Effect of exchange rate changes
on cash and equivalents (160,838) (503,874)
------------- -------------
Net increase (decrease) in cash
and cash equivalents (23,402,334) 2,051,971
Cash and cash equivalents at
beginning of year 35,915,114 20,978,078
------------- -------------
Cash and cash equivalents at
end of period $ 12,512,780 $ 23,030,049
============= =============
Supplemental cash flow
information:
Interest paid $ 3,539,437 $ 1,643,457
============= =============
Income taxes paid $ 6,338,116 $ 7,874,118
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
11
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 40 WEEKS ENDED NOV. 12, 1994 AND NOV. 13, 1993 (UNAUDITED)
(continued)
<CAPTION>
40 Weeks Ended
---------------------------
November 12, November 13,
1994 1993
------------- -------------
<S> <C> <C>
Reconciliation of net earnings
to cash flows provided by
(used in) operating
activities:
Net earnings $ 2,975,861 $ 5,001,527
Adjustments for items not
requiring cash:
Depreciation and amortization 28,325,660 25,192,162
Deferred income taxes (234,251) (3,608,039)
Deferred compensation (1,003,189) (747,316)
Other (1,532,449) (2,183,319)
Decrease (increase) in current
assets:
Receivables and inventories (22,907,014) (19,999,294)
Deferred costs applicable to
unsold portraits 2,026,572 (4,907,636)
Prepaid expenses and other
current assets (5,824,943) (2,751,727)
Increase (decrease) in current
liabilities:
Accounts payable, accrued
expenses and other
liabilities 14,221,969 20,576,222
Income taxes (5,386,459) (4,269,516)
------------- -------------
Cash flows used in operating
activities $ 10,661,757 $ 12,303,064
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
12
<PAGE>
CPI CORP.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary for a fair presentation of the Company's
financial position as of November 12, 1994, November 13, 1993
and February 5, 1994 and the results of its operations and
changes in its cash flows for the 16 and 40 weeks ended November
12, 1994 and November 13, 1993. These financial statements
should be read in conjunction with the financial statements and
the notes included in the Company's annual report on Form 10-K
for its fiscal year ended February 5, 1994. Certain accounts
have been reclassified within the 1993 financial statements to
conform with the presentation in 1994.
2. Short-term investments are comprised of money market instruments
which aggregated $12,138,025, $45,830,603 and $62,051,741 as of
November 12, 1994, November 13, 1993, and February 5, 1994,
respectively, and are stated at cost which approximates market.
Total interest income for the 16 weeks ended November 12, 1994
and November 13, 1993 was $170,043 and $779,864, respectively,
and for the 40 weeks ended November 12, 1994 and November 13,
1993 was $787,514 and $1,080,353, respectively.
.
3. Inventories consist of the following components:
<TABLE>
CPI CORP. INVENTOIES AT NOV. 12, 1994, NOV. 13, 1993, AND
FEB. 5, 1994
Nov. 12, Nov. 13, Feb. 5,
1994 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Raw materials
and supplies $36,938,809 $30,648,256 $27,981,589
Portraits-in-process 163,973 917,258 548,793
----------- ----------- -----------
$37,102,782 $31,565,514 $28,530,382
=========== =========== ===========
</TABLE>
4. On May 30, 1993, CPI Corp. finalized the acquisition of the
Prints Plus wall decor chain from the Melville Corporation,
originally disclosed on May 10, 1993. The 103 store chain,
13
<PAGE>
located in malls throughout the United States, operates a
prints, posters and framing business with annual sales in excess
of $40 million. Prints Plus was acquired for approximately
$14.7 million. In addition, the Company entered into a non-
compete agreement with Melville Corporation for cash
consideration aggregating $1,050,000 which is being amortized
over a three-year period. Stores will continue to be operated
under the trade name "Prints Plus".
The acquisition was recorded using the purchase method of
accounting and the results of operations of Prints Plus have
been included in the Company's consolidated financial statements
since the effective date of the acquisition.
5. Effective February 7, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Accordingly, the Company has
changed its method of computing income taxes from the deferred
method used in prior years to the asset and liability method
prescribed by SFAS 109. Adoption of this statement increased
fiscal year 1993 net earnings by $2.12 million and increased
earnings per share by $0.14. Prior years data have not been
restated as management elected to adopt the statement on a
prospective basis.
6. On August 31, 1993, the Company placed privately senior notes
in the amount of $60 million (the "Note Agreement") with two
insurance companies. The notes, issued pursuant to the Note
Agreement, mature over a seven-year period with an average
maturity of 5.42 years and with the first principal payment due
at the end of the third year. Interest on the notes is payable
semi-annually at an average effective fixed rate of 6.44%. The
Note Agreement requires the Company to maintain certain
financial ratios and comply with certain restrictive covenants.
Under one covenant, dividend payments, purchase of treasury
stock and certain restricted investments are not to exceed $25
million plus 50% of net earnings (or less 100% of net losses)
credited at the end of each fiscal year.
On June 14, 1994, the Company amended its $25.0 million
Revolving Credit Agreement, extending its term until August 31,
1996. In addition, on November 9, 1994, the company again
amended its $25.0 million Revolving Credit Agreement, changing
the principal amount that can be borrowed to $50.0 million and
modifying certain financial covenants. See Part II, Item 5,
Other Information, and Item 6(a), Exhibits, Exhibits 10(b) and
10(c), Material Contracts, of this Form 10-Q for further
details.
14
<PAGE>
7. To manage its exposure to fluctuations in interest rates, the
Company has entered into an interest rate swap agreement for a
notional principal amount of $40.0 million, maturing August 28,
1995. Interest rate swap agreements involve the exchange of
interest obligations on fixed and floating interest rate debt
without the exchange of the underlying principal amount. The
differential paid or received on the interest rate swap
agreement is recognized as an adjustment to interest expense.
The Company's interest rate swap agreement states the Company
will receive a fixed rate of 4.54% and will pay a floating rate
equal to the 6-month LIBOR rate as of a specific date. For the
first three quarters of fiscal 1994, the rate realized averaged
5.43% and, for the 16 and 40 week periods ended November 12,
1994, net interest expense was increased by $184,000 and
$296,000, respectively. While the Company has credit risk
associated with this financial instrument, no loss is
anticipated due to nonperformance by the counterparties to these
agreements. The Company has not entered into any other
derivative instruments or off-balance sheet transactions.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
To establish a framework for discussion, selected financial data
summarizing the Company's operating results for the 16 and 40 weeks
ended November 12, 1994 and November 13, 1993, respectively, are
presented in the following tables and are discussed in greater
detail on subsequent pages.
16
<PAGE>
<TABLE>
CPI CORP. SELECTED FINANCIAL DATA FOR THE 16 WEEKS ENDED NOVEMBER
12, 1994 AND NOVEMBER 13, 1993 (IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
16 Weeks Ended
----------------------
Nov. 12, Nov. 13,
1994 1993
----------- ----------
<S> <C> <C>
Net sales:
Portrait studios $ 96,477 $ 68,670
Photofinishing 59,448 58,519
Other products and services 19,479 18,131
---------- ----------
$ 175,404 $ 145,320
========== ==========
Operating earnings:
Portrait studios $ 11,975 $ 8,705
Photofinishing 1,033 3,325
Other products and services (36) (270)
---------- ----------
12,972 11,760
General corporate expenses 5,401 5,688
Severance and early retirement benefits --- ---
---------- ----------
Income from operations 7,571 6,072
Net interest expense 1,436 616
Other income 91 132
---------- ----------
Earnings before income taxes and
cumulative effect of accounting change 6,226 5,588
Income tax expense 2,394 2,235
---------- ----------
Earnings before cumulative effect of
accounting change 3,832 3,353
Cumulative effect of accounting change --- ---
---------- ----------
Net earnings $ 3,832 $ 3,353
========== ==========
Earnings per common share:
Earnings before cumulative
effect of accounting change $ .28 $ .23
Cumulative effect of accounting change --- ---
---------- ----------
Net earnings $ .28 $ .23
========== ==========
Weighted average number of common and
common equivalent shares outstanding 13,829 14,673
========== ==========
</TABLE>
17
<PAGE>
<TABLE>
CPI CORP. SELECTED FINANCIAL DATA FOR THE 40 WEEKS ENDED NOVEMBER
12, 1994 AND NOVEMBER 13, 1993 (IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
40 Weeks Ended
----------------------
Nov. 12, Nov. 13,
1994 1993
----------- ----------
<S> <C> <C>
Net sales:
Portrait studios $ 192,043 $ 156,497
Photofinishing 143,348 141,222
Other products and services 44,769 31,777
---------- ----------
$ 380,160 $ 329,496
========== ==========
Operating earnings:
Portrait studios $ 20,184 $ 16,172
Photofinishing 1,559 5,238
Other products and services (2,067) (1,908)
---------- ----------
19,676 19,502
General corporate expenses 12,420 13,160
Severance and early retirement benefits --- 1,400
---------- ----------
Income from operations 7,256 4,942
Net interest expense 2,751 563
Other income 295 423
---------- ----------
Earnings before income taxes and
cumulative effect of accounting change 4,800 4,802
Income tax expense 1,824 1,920
---------- ----------
Earnings before cumulative effect of
accounting change 2,976 2,882
Cumulative effect of accounting change --- 2,120
---------- ----------
Net earnings $ 2,976 $ 5,002
========== ==========
Earnings per common share:
Earnings before cumulative
effect of accounting change $ .21 $ .20
Cumulative effect of accounting change --- .14
---------- ----------
Net earnings $ .21 $ .34
========== ==========
Weighted average number of common and
common equivalent shares outstanding 14,209 14,672
========== ==========
</TABLE>
18
<PAGE>
REVENUES: Sales increased 20.7% to $175.4 million in the third
quarter of 1994, from $145.3 million in the comparable period last
year. A 40.5% increase in Portrait Studio sales during the third
quarter of 1994 was the primary reason for the overall year-to-year
sales increase. For the 40 weeks ended November 12, 1994, sales
increased 15.3% to $380.2 million from $329.5 million recorded in
the comparable period last year. Major factors contributing to the
sales increase are an improvement in the sales performance of the
Portrait Studio segment and the inclusion of the Prints Plus
operations for the entire 40 week period in fiscal 1994. The
Prints Plus operation was acquired May 30, 1993, operating for 24
weeks of the 40 week period ended November 13, 1993.
Portrait Studio sales increased 40.5% and 22.7% for the 16 and 40
week periods ended November 12, 1994, respectively, over the
comparable period last year. A major portion of the sales increase
for both the 16 and 40 week periods ended November 12, 1994, can be
attributed to the new freeze-frame digital imaging system, which
has been installed during the first three quarters of 1994 in all
U.S. Sears Portrait Studio locations. Installation of the system
in the remaining Canadian Sears Portrait Studios is planned for
early next year. Additionally, under the Company's new Portrait
Preview System, customers view and order their portraits during the
photography session. Since the Company records sales upon customer
acceptance, the sales transaction now takes place at the time of
photography, accelerating sales by about two weeks.
Photofinishing sales rose 1.6% in the third quarter of 1994 to
$59.4 million and 1.5% in the first three quarters of 1994 to
$143.3 million, due to a slight increase in roll volume for both
the 16 and 40 week periods ended November 12, 1994, over the
comparable periods last year.
Other Products and Services includes the electronic publishing
business, the newly acquired wall decor business operating under
the names "Prints Plus" and "Prints and Posters" and the digital
imaging business. Sales in the Other Products and Services segment
increased 7.4% to $19.5 million and 40.9% to $44.8 million for the
16 and 40 week periods ended November 12, 1994, respectively, from
the comparable prior year periods. The sales increase primarily
resulted from the inclusion of Prints Plus operations for the
entire 40 week period this year compared to only 24 weeks of the
comparable period last year.
OPERATING INCOME: Segment operating earnings for the prior years
have been restated to conform with the current year's presentation.
Certain employee benefit costs, which in prior years were recorded
as part of corporate expense, have been reclassified to the
operating segments to better reflect the operating contribution of
the segments. Income from operations increased 24.7% to $7.6
19
<PAGE>
million and 46.8% to $7.3 million for the 16 and 40 week periods
ended November 13, 1994, respectively, primarily due to the
improved operating earnings in the Portrait Studio operations,
partially offset by a decline in photofinishing operating earnings.
Operating earnings for the 40 weeks ended November 13, 1993 were
also adversely affected by a $1.4 million charge for severance and
early retirement benefits.
Portrait Studio operating earnings increased 37.6% and 24.8% for
the 16 and 40 week periods ended November 12, 1994, respectively,
from the comparable periods last year, as higher sales offset the
increased costs of higher depreciation, training expenses and
studio employment costs. Additional depreciation for the new
freeze-frame digital imaging system amounted to $2.2 million and
$3.6 million and incremental training amounted to $273,000 and
$846,000 for the 16 and 40 week periods ended November 12, 1994,
respectively.
Photofinishing operating earnings were $1.0 million and $1.6
million, declining $2.3 million and $3.7 million for the 16 and 40
week periods ended November 12, 1994, respectively, from the
comparable period last year. Factors contributing to the decline
in operating earnings include a reduction in gross profit margins,
the increased expense of testing and developing new marketing
concepts, which together were partially offset by a reduction in
operating costs. The decline in gross profit margins resulted from
more aggressive pricing used to address competitive pressures,
increased employment costs and increased sales of lower margin
products. The increased cost of testing and developing two new
major marketing concepts amounted to $800,000 and $2.0 million for
the 16 and 40 week periods ended November 12, 1994, respectively.
The Other Products and Services segment performance improved for
the third quarter of 1994, reflecting an increase in profits in the
newly acquired Prints Plus operations. Operating losses in the
segment for the 40 weeks ended November 12, 1994, reflect the
seasonal operating results of the Prints Plus operations for the
entire 40 week period and the continuing operating losses of the
electronic publishing business.
NET EARNINGS: Net earnings increased 14.3% to $3.8 million in the
third quarter of 1994, reflecting the improved results of the
Portrait Studio operation. The higher net interest expense
reflects high seasonal borrowings, the increased borrowings costs
associated with the $60 million Note Agreement entered into by the
Company in August 1993 and a net expense of $184,000 recorded on
the $40 million interest rate swap agreement. The Company will
continue to be impacted by the $40 million interest rate swap
agreement until August 28, 1995, based on fluctuations in short-
term interest rates. (see Footnote 7 for details).
20
<PAGE>
Net earnings for the 40 weeks ended November 12, 1994 amounted to
$3.0 million compared to net earnings of $5.0 million for the 40
weeks ended November 13, 1993. Year to date results were impaired
by the increased borrowing costs associated with the $60 million
Note Agreement previously mentioned and a net expense of $296,000
for the 40 weeks ended November 12, 1994, recorded on the $40
million interest rate swap agreement also previously mentioned.
Prior year results include a before tax provision of $1.4 million
for severance and early retirement benefits and a $2.1 million
benefit to earnings from an accounting change. The accounting
change resulted from adopting the provisions of Statement of
Accounting Standards No. 109, "Accounting for Income Taxes". In
accordance with the Standard, the Company has changed its method of
accounting for income taxes from the deferred method to the asset
and liability method. The Company adopted Statement 109 on a
prospective basis.
Earnings per share increased 21.7% to $0.28 in the third quarter of
1994, from $0.23 recorded in the prior year's third quarter. For
the 40 week period ended November 12, 1994, earnings per share
amounted to $0.21 compared to $0.20 earned in the comparable period
last year before the cumulative effect of the accounting change.
Net earnings amounted to $0.34 per share in the 40 weeks ended
November 13, 1993, after consideration of the accounting change.
For the full 1994 fiscal year, management believes earnings should
fall in the range of $0.80 to $1.00 per share, short of the more
recently announced increased projections. Although portrait studio
sitting volume has exceeded expectations, sales levels are running
below expectations as the increased sitting volume has impeded the
ability to realize expected sales averages. Costs are also higher
than planned primarily due to the increase in volume. Less than
expected growth in Portrait Studio earnings coupled with
disappointing Photofinishing results and increased interest cost,
caused in part by a sharp rise in interest rates, have resulted in
a tempering of earnings expectations. While the new digital
imaging freeze-frame system has been installed in most of the
Portrait Studio locations, management believes we have not been
able to fully realize the benefits this new technology can
ultimately provide.
CAPITAL RESOURCES AND LIQUIDITY: Cash and short-term investments
were $17.7 million, $50.2 million and $66.4 million on November 12,
1994, November 13, 1993 and February 5, 1994, respectively.
Capital expenditures amounted to $66.6 million for the 40 weeks
ended November 12, 1994, of which approximately $43.8 million
related to the new freeze-frame digital imaging system and related
point-of-sale equipment.
21
<PAGE>
The Company has increased from $75 million to $85 million the total
estimated planned capital expenditure for installing the new
digital freeze-frame imaging system and studio renovation program.
Included in this estimate are $55 million for the acquisition of
freeze-frame digital imaging systems, $5 million for point-of-sale
registers and $25 million for studio renovations. The digital
imaging system and point-of-sale registers were fully installed by
September 1994 in the United States, with the remaining
installation in Canada scheduled for completion in early 1995. The
studio renovation program, begun in early fiscal 1994, is expected
to take about five years to complete. The Company expects to fund
this capital expenditure program through proceeds of maturing
short-term investment balances, borrowing against lines of credit
and utilizing operating cash flow. Portrait Studio depreciation
expense is expected to increase by $1.7 million and interest
expense by $750,000 in the fourth quarter of 1994 over the
comparable period in 1993. In addition, as a result of this
program, depreciation expense will increase by approximately $4.8
million and $8.0 million and interest expense will increase by $2.5
million and $4.0 million in fiscal years 1994 and 1995,
respectively, over fiscal year 1993 levels.
During the first three quarters of fiscal year 1994, the Company
purchased 938,655 shares of its common stock for $16.0 million
under the previously announced stock repurchase program bringing
the total to 3,302,463 shares for $74.5 million as of November 12,
1994. The Company's Board of Directors has authorized the purchase
of up to 4,500,000 shares of CPI Corp. common stock.
During the second quarter of 1994, the Company renegotiated one of
its debt covenants with all its major lenders. Under the revised
debt covenant, dividend payments, purchase of treasury stock and
certain restricted investments are not to exceed $25 million plus
50% of net earnings (or less 100% of net losses) credited at the
end of each fiscal year.
During the third quarter of 1994, the Company negotiated an
increase in its line of credit from $25 million to $50 million.
Interest will be at the lower of a quoted interest rate or the
bank's prime lending rate. Borrowings amounted to $29.1 million
under the credit agreements as of November 12, 1994.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENT: In May 1993, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115
expands the required use of fair value accounting for investments
in debt and equity securities, and allows debt securities to be
classified as "held-to-maturity" and reported in the financial
statements at amortized cost only if the reporting entity has the
positive intent and ability to hold those securities to maturity.
22
<PAGE>
Furthermore, SFAS No. 115 clarifies that securities which might be
sold in response to changes in market interest rates, changes in
the security's prepayment risk, increases in liquidity needs, or
other similar factors cannot be classified as "held-to-maturity."
SFAS No. 115 is effective for fiscal years beginning after December
15, 1993. The Company adopted SFAS No. 115 on February 6, 1994.
The adoption of SFAS No. 115 did not have an effect on the
financial position of the Company as securities in the Company's
portfolio are short-term in nature and were classified as "held-to-
maturity".
23
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On November 9, 1994, the Collateral Agency and Intercreditor
Agreement dated August 31, 1994, filed with the Securities and
Exchange Commission on Form 10-Q Part II Item 6(a) Exhibit 4(c),
dated July 24, 1993, was amended to increase from $40 million to
$60 million the amount of the Revolving Credit Note. A copy of
this amendment is attached to this report on Form 10-Q as Part II
Item 6 Exhibit 10 (a), Material Contracts.
In addition, on November 9, 1994, the Revolving Credit Agreement
(the "Agreement") and Revolving Credit Note (the "Note") dated
August 31, 1994, filed with the Securities and Exchange Commission
on Form 10-Q Part II Item 6(a) Exhibits 4(g) and (h), respectively,
dated July 24, 1993, were amended to increase the principal amount
which can be borrowed under the Agreement and Note from $25 million
to $50 million and modifying certain covenants. A copy of the
Agreement and Note are attached to this report on Form 10-Q as Part
II Item 6 Exhibit 10 (b) and (c), respectively, Material Contracts.
The Company is also presently negotiating a modification to its
contract with Sears Roebuck and Co., which will eliminate certain
adjustments to the license fee regarding strategic plan
implementation, while retaining other material commitments to such
implementation. The Company will file a Report 8K, Current Report,
when the contract is executed.
24
<PAGE>
ITEM 6(B) REPORTS ON FORM 8-K
On September 9, 1994, CPI Corp. reported the issuance of a press
release on September 1, 1994 announcing: a earning per share of 11
cents vs. 14 cents for the second quarter 1994 and 1993,
respectively; sales increase of 9.7% from 1993 due to new marketing
programs boosting portrait studio results; lower Photofinishing
earnings reflecting industry softness and investments in new
marketing projects; and Management's anticipation of meeting, and
possibly exceeding, high end of full-year EPS range.
On October 11, 1994, CPI Corp. reported the issuance of a press
release on October 10, 1994 announcing the successful completion of
digital imaging installations in the U.S. portrait studios and a
one-time, non-comparable earnings increase of seven cents expected
in the second half.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CPI Corp.
Date: December 22, 1994 By: /s/ Barry Arthur
___________________________
Barry Arthur
Executive Vice President -
Finance
Principal Financial Officer
26
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Sequentially
Numbered Page
<S> <C>
PART I.
Item 6(a). Exhibits
Exhibit 11 - Computation of Earnings
Per Share - 16 Weeks 28
Exhibit 11 - Computation of Earnings
Per Share - 40 Weeks 29
Exhibit 27 - Financial Data Schedule 30
PART II.
Item 6(a). Exhibits
Exhibit 10 - Material Contracts
a. Second Amendment to Revolving Credit
Agreement dated November 9, 1994 31-44
b. Second Amendment to Revolving Credit
Note dated November 9, 1994 45-48
c. First Amendment to Collateral Agency
and Intercreditor Agreement
dated November 9, 1994 49-54
</TABLE>
27
<PAGE>
PART I
ITEM 6(a). EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE 16 WEEKS ENDED
NOBEMBER 12, 1994 AND NOVEMBER 13, 1993 (IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<CAPTION>
16 Weeks Ended
----------------------
Nov. 12, Nov. 13,
1994 1993
--------- ---------
<S> <C> <C>
Primary:
Net earnings applicable
to common shares $ 3,832 $ 3,353
========= =========
Shares:
Weighted average number of
common shares outstanding 17,002 16,979
Shares issuable under
employee stock plans -
weighted average 10 25
Less: Treasury stock -
weighted average (3,183) (2,331)
--------- ---------
Weighted average number of
common and common
equivalent shares 13,829 14,673
========= =========
Earnings per common and
common equivalent shares $ .28 $ .23
========= =========
</TABLE>
28
<PAGE>
PART I
ITEM 6(a). EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE 40 WEEKS ENDED
NOBEMBER 12, 1994 AND NOVEMBER 13, 1993 (IN THOUSANDS EXCEPT PER
SHARE AMOUNTS)
<CAPTION>
40 Weeks Ended
----------------------
Nov. 12, Nov. 13,
1994 1993
--------- ---------
<S> <C> <C>
Primary:
Net earnings applicable
to common shares $ 2,976 $ 5,002
========= =========
Shares:
Weighted average number of
common shares outstanding 17,002 16,973
Shares issuable under
employee stock plans -
weighted average 10 25
Less: Treasury stock -
weighted average (2,803) (2,326)
--------- ---------
Weighted average number of
common and common
equivalent shares 14,209 14,672
========= =========
Earnings per common and
common equivalent shares $ .21 $ .34
========= =========
</TABLE>
29
<PAGE>
PART I
ITEM 6(a). EXHIBIT 27 - FINANCIAL DATA SCHEDULE
See accompanying document.
30
<PAGE>
PART II
ITEM 6(a) - EXHIBIT 10 - MATERIAL CONTRACTS
a.) Second Amendment to Revolving Credit Agreement dated
November 9, 1994.
31
<PAGE>
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this
"Amendment") is made and entered into this 9th day of November,
1994, by and between CPI CORP., a Delaware corporation
("Borrower"), and MERCANTILE BANK OF ST. LOUIS NATIONAL
ASSOCIATION, a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower and Bank have heretofore entered into
that certain Revolving Credit Agreement dated August 31, 1993, as
amended by that certain First Amendment to Revolving Credit
Agreement dated June 14, 1994 (as so amended, the "Agreement"); and
WHEREAS, Borrower and Bank desire to amend the Agreement
in the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Bank hereby agree as
follows:
1. The first "WHEREAS" clause on page 1 of the Agreement
is hereby deleted in its entirety and the following substituted in
lieu thereof:
"WHEREAS, Borrower has applied for a revolving credit
facility from Bank consisting of revolving credit loans
and commercial and standby letters of credit in an
aggregate amount of up to Fifty Million Dollars
($50,000,000.00); and"
2. The definition of "Attorneys' Fees" set forth in
Section 2.01 of the Agreement is hereby deleted in its entirety and
the following substituted in lieu thereof:
"Attorneys' Fees shall mean the reasonable value of
the services (and costs, charges and expenses related
thereto) of the attorneys (and all paralegals, accountants
and other staff employed by such attorneys) employed by
Bank or Participant (including, without limitation,
attorneys and paralegals who are employees of Bank,
Participant or any direct or indirect parent corporation
or subsidiary of Bank or Participant) from time to time
(a) in connection with the negotiation, preparation,
execution, delivery, amendment, modification, extension,
renewal, administration and/or enforcement of this
Agreement and/or any of the other Transaction Documents,
(b) in connection with the preparation, negotiation or
32
<PAGE>
execution of any waiver or consent with respect to this
Agreement or any of the other Transaction Documents, (c)
in connection with any Default or Event of Default under
this Agreement, (d) to represent Bank or Participant in
any litigation, contest, dispute, suit or proceeding, or
to commence, defend or intervene in any litigation,
contest, dispute, suit or proceeding, or to file any
petition, complaint, answer, motion or other pleading or
to take any other action in or with respect to any
litigation, contest, dispute, suit or proceeding (whether
instituted by Bank, Participant, Borrower or any other
Person and whether in bankruptcy or otherwise) in any way
or respect relating to this Agreement or any of the other
Transaction Documents, Borrower, any Subsidiary or any
other Obligor and/or (e) to enforce any of Bank's or
Participant's rights and/or remedies to collect any of
Borrower's Obligations."
3. Clause (h) of the definition of "Permitted Liens" set
forth in Section 2.01 of the Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
"(h) other Liens created or incurred by Borrower or
any Subsidiary after the date of this Agreement on any
Property or assets of Borrower or any Subsidiary, provided
that (i) all Debt secured by Liens permitted by this
clause (h) shall have been incurred within the limitations
provided in Section 7.02(a), (ii) the aggregate amount of
all Debt secured by Liens permitted by this clause (h)
does not exceed five percent (5%) of Consolidated
Capitalization as of the end of the fiscal quarter
immediately preceding the date of determination and (iii)
the aggregate amount of all Debt secured by Liens
permitted by this clause (h) plus the aggregate amount of
all Debt secured by Liens permitted by clauses (f) and/or
(g) above does not exceed ten percent (10%) of
Consolidated Capitalization as of the end of the fiscal
quarter immediately preceding the date of determination."
4. The following new definitions of "Participant" and
"Participation Agreement" are hereby added to Section 2.01 of the
Agreement:
"Participant shall mean Harris Trust and Savings Bank,
an Illinois banking corporation, in its capacity as a
participant in the Borrower's Obligations under the
Participation Agreement.
33
<PAGE>
"Participation Agreement shall mean that certain
Participation Agreement dated November 9, 1994, by and
between Bank and Harris Trust and Savings Bank, as the
same may from time to time be amended, modified, extended
or renewed."
5. Section 3.01 of the Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
"3.01 Commitment of Bank. Subject to the terms and
conditions of this Agreement, during the Revolving Credit
Period of this Agreement, and so long as no Default or
Event of Default under this Agreement has occurred and is
continuing, Bank hereby agrees to make such loans
(individually, a "Revolving Credit Loan" and collectively,
the "Revolving Credit Loans") to Borrower as Borrower may
from time to time request pursuant to Section 3.02. The
aggregate principal amount of Revolving Credit Loans which
Bank shall be required to have outstanding hereunder at
any one time shall not exceed the sum of (i) Fifty Million
Dollars ($50,000,000.00) minus (ii) the aggregate
principal amount of all outstanding Letter of Credit Loans
minus (iii) the aggregate undrawn face amount of all
outstanding Letters of Credit (the "Bank's Commitment").
Each Revolving Credit Loan shall be for an aggregate
principal amount of $100,000.00 or any larger integral
multiple of $25,000.00. Subject to the terms and
conditions of this Agreement, Borrower may borrow, repay
and reborrow such sums from Bank, provided, however, that
the aggregate principal amount of all Revolving Credit
Loans outstanding hereunder at any one time shall not
exceed the Bank's Commitment."
6. Paragraph (a) of Section 3.02 of the Agreement is
hereby deleted in its entirety and the following
substituted in lieu thereof:
"3.02 Method of Borrowing. (a) Borrower shall give
oral or written notice (a "Notice of Borrowing") to Bank
by 1:30 p.m. (St. Louis time) on the day of each Revolving
Credit Loan which is to be a Prime Loan, or by 12:00 noon
(St. Louis time) on the day of each Revolving Credit Loan
which is to be a Quoted Rate Loan, specifying:
(i) the date of such Revolving Credit Loan, which
shall be a Business Day,
34
<PAGE>
(ii) the aggregate principal amount of such Revolving
Credit Loan,
(iii) whether such Revolving Credit Loan is to be a
Prime Loan or a Quoted Rate Loan,
(iv) in the case of a Quoted Rate Loan, the duration
of the initial Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period,
(v) that all of the representations and warranties of
the Borrower contained in this Agreement are true and
correct on the date of such Revolving Credit Loan as if
made on the date of such Revolving Credit Loan, and
(vi) that on the date of, and as a result of, such
Revolving Credit Loan, no Default or Event of Default
under this Agreement has occurred and is continuing.
Borrower hereby authorizes Bank to rely on telephonic,
telegraphic, telecopy, telex or written instructions of
any Person identifying himself or herself as a person
authorized to request a Revolving Credit Loan or make a
repayment hereunder, and on any signature which Bank
believes to be genuine, and Borrower shall be bound
thereby in the same manner as if such Person were actually
authorized or such signature were genuine. Borrower also
hereby agrees to indemnify Bank and hold Bank harmless
from and against any and all claims, demands, damages,
liabilities, losses, costs and expenses (including,
without limitation, reasonable attorneys' fees and
expenses) relating to or arising out of or in
connection with the acceptance of instructions for making
Revolving Credit Loans or accepting repayments hereunder."
7. Paragraph (a) of Section 3.03 of the Agreement is
hereby deleted in its entirety and the following
substituted in lieu thereof:
"(a)The Revolving Credit Loans of Bank to Borrower
shall be evidenced by that certain Revolving Credit Note
of Borrower dated August 31, 1993, and payable to the
order of Bank in the principal amount of Twenty-Five
Million Dollars ($25,000,000.00), as amended by that
certain First Amendment to Revolving Credit Note dated
June 14, 1994, and that certain Second Amendment to
Revolving Credit Note dated November 9, 1994, pursuant to
which the principal amount of said Revolving Credit Note
35
<PAGE>
was increased from Twenty-Five Million Dollars
($25,000,000.00) to Fifty Million Dollars ($50,000,000.00)
(as so amended and as the same may from time to time be
further amended, modified extended or renewed, the
"Note")."
8. Paragraph (a) of Section 3.04 of the Agreement is
hereby deleted in its entirety and the following substituted in
lieu thereof:
"(a)The duration of the initial Interest Period for
each Quoted Rate Loan shall be as specified in the
applicable Notice of Borrowing. Borrower shall elect the
duration of each subsequent Interest Period applicable to
such Revolving Credit Loan and the interest rate to be
applicable during such subsequent Interest Period (and
Borrower shall have the option (i) in the case of any
Prime Loan, to elect that such Revolving Credit Loan
become a Quoted Rate Loan and the Interest Period to be
applicable thereto, and (ii) in the case of any Quoted
Rate Loan, to elect that such Revolving Credit Loan become
a Prime Loan), by giving notice of such election to Bank
by 12:00 noon (St. Louis time) on the last day of the
immediately preceding Interest Period applicable thereto,
if any; provided, however, that notwithstanding the
foregoing, in addition to and without limiting the rights
and remedies of the Bank under Section 8 hereof, so long
as any Default or Event of Default under this Agreement
has occurred and is continuing, Borrower shall not be
permitted to renew any Quoted Rate Loan as a Quoted Rate
Loan or to convert any Prime Loan into a Quoted Rate
Loan."
9. Sections 3.09, 3.10, 3.11, 3.12 and 3.13 of the
Agreement are hereby deleted in their entirety and the following
substituted in lieu thereof:
"3.09 Funding Losses. Notwithstanding any provision
contained herein to the contrary, if Borrower makes any
payment of principal with respect to any Quoted Rate Loan
(pursuant to Sections 3 or 8 or otherwise and whether by
reason of acceleration or otherwise) on any day other than
the last day of an Interest Period applicable thereto, or
if Borrower fails to borrow or pay any Quoted Rate Loan
after notice has been given to Bank in accordance with
Section 3.02, 3.04 or 3.07(b), Borrower shall reimburse
Bank and Participant on demand for any resulting losses
and expenses incurred by Bank and/or Participant, as the
case may be, including, without limitation, any losses and
36
<PAGE>
expenses incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin
for the period after any such payment, provided that Bank
and/or Participant, as the case may be, shall have
delivered to Borrower a certificate as to the amount of
such losses and expenses, which certificate shall be
conclusive in the absence of manifest error.
3.10 Increased Cost. (a) If (i) Regulation D or
(ii) after the date hereof, the adoption of any applicable
law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by
any governmental or regulatory authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by Bank and/or
Participant with any request or directive (whether or not
having the force of law) of any such governmental or
regulatory authority, central bank or comparable agency (a
"Regulatory Change"):
(A) shall subject Bank and/or Participant to any tax,
duty or other charge with respect to the Quoted Rate
Loans, the Revolving Credit Note or its obligation to make
or participate in Quoted Rate Loans, or shall change the
basis of taxation of payments to Bank and/or Participant
of the principal of or interest on the Quoted Rate Loans
or any other amounts due under this Agreement in respect
of the Quoted Rate Loans or its obligation to make or
participate in Quoted Rate Loans (except for taxes on or
changes in the rate of tax on the overall net income of
Bank and/or Participant); or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve
imposed by the Board of Governors of the Federal Reserve
System), special deposit, capital or similar requirement
against assets of, deposits with or for the account of, or
credit extended or committed to be extended by, Bank
and/or Participant or shall, with respect to Bank and/or
Participant or the United States market for certificates
of deposit or the Interbank Eurodollar market, impose,
modify or deem applicable any other condition affecting
the Quoted Rate Loans, the Revolving Credit Note or its
obligation to make Quoted Rate Loans;
37
<PAGE>
and the result of any of the foregoing is to increase the
cost to (or in the case of Regulation D, to impose a cost
on or increase the cost to) Bank and/or Participant of
making or maintaining or participating in any Quoted Rate
Loan, or to reduce the amount of any sum received or
receivable by Bank and/or Participant under this Agreement
or under the Note with respect thereto, by an amount
deemed by Bank and/or Participant to be material, then,
within fifteen (15) days after notice by Bank and/or
Participant to Borrower together with a copy of the
official notice of the applicable change in law (if
applicable), Borrower shall pay to Bank as additional
interest, such additional amount or amounts as will
compensate Bank and/or Participant, as the case may be,
for such increased cost or reduction. The determination
by Bank and/or Participant under this Section of the
additional amount or amount to be paid to Bank hereunder
shall be conclusive in the absence of manifest error. In
determining such amount or amounts, Bank and Participant
may use any reasonable averaging and attribution methods.
(b) If Bank and/or Participant demands compensation
under this Section, Borrower may at any time, upon at
least one (1) Business Days' prior notice to Bank, repay
in full its then outstanding Quoted Rate Loans together
with all accrued and unpaid interest thereon to the date
of prepayment and any funding losses and other amounts due
under Section 3.09. Concurrently with repaying such
Quoted Rate Loans, Borrower may borrow from Bank a Prime
Loan in an amount equal to the aggregate principal amount
of such Quoted Rate Loans, and, if Borrower so elects,
Bank shall make such a Prime Loan to Borrower.
3.11 Capital Adequacy. If, after the date of this
Agreement, Bank and/or Participant shall have determined
that the adoption of any applicable law, rule, regulation
or guideline regarding capital adequacy, or any change
therein, or any change in the interpretation or
administration thereof by any governmental or regulatory
authority, central bank or comparable agency charged with
the interpretation or administration thereof, or
compliance by Bank and/or Participant with any request or
directive regarding capital adequacy (whether or not
having the force of law) of any such authority,
central bank or comparable agency , has or will have the
effect of reducing the rate of return on Bank's and/or
Participant's capital in respect of its obligations
hereunder or under the Participation Agreement to a level
below that which Bank and/or Participant could have
38
<PAGE>
achieved but for such adoption, change or compliance
(taking into consideration Bank's and Participant's
policies with respect to capital adequacy), then from time
to time Borrower shall pay to Bank upon demand additional
amount or amounts as will compensate Bank and Participant
for such reduction. All determinations made by Bank
and/or Participant of the additional amount or amounts
required to compensate Bank and Participant in respect of
the foregoing shall be conclusive in the absence of
manifest error. In determining such amount or amounts,
Bank and Participant may use any reasonable averaging and
attribution methods.
3.12 Survival of Indemnities. All indemnities and all
provisions relating to reimbursement to Bank and
Participant of amounts sufficient to protect the yield to
Bank and Participant with respect to the Revolving Credit
Loans, including, without limitation, Sections 3.10 and
3.11 hereof, shall survive the payment of the Note and the
termination of this Agreement.
3.13 Discretion of Bank and Participant as to Manner
of Funding. Notwithstanding any provision contained in
this Agreement to the contrary, each of Bank and
Participant shall be entitled to fund and maintain its
funding of all or any part of the Quoted Rate Loans in any
manner it elects, it being understood, however, that for
purposes of this Agreement all determinations hereunder
(including, without limitation, the determination of
Bank's and Participant's funding losses and expenses under
Section 3.09) shall be made as if Bank and Participant had
actually funded and maintained each Quoted Rate Loan
through the purchase of deposits having a maturity
corresponding to the maturity of the applicable Interest
Period relating to the applicable Quoted Rate Loan and
bearing an interest rate equal to the applicable Quoted
Rate."
10. Clause (iv) of paragraph (a) of Section 4.01 of the
Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof
"(iv) the sum of (A) the aggregate undrawn face
amount of all outstanding Letters of Credit plus (B) the
aggregate principal amount of all outstanding Letter of
Credit Loans plus (C) the aggregate principal amount of
39
<PAGE>
all outstanding Revolving Credit Loans shall not at any
one time exceed the sum of Fifty Million Dollars
($50,000,000.00);"
11. Section 7.02(a) of the Agreement is hereby deleted in
its entirety and the following substituted in lieu thereof:
"(a) Limitations on Debt. Borrower will not create,
assume or incur or in any manner be or become liable in
respect of any Debt, and will not cause or permit any
Subsidiary to create, assume or incur or in any manner be
or become liable in respect of any Debt, except:
(i) the Borrower's Obligations;
(ii) Debt of any Subsidiary to Borrower or any other
Subsidiary;
(iii) Debt of any Subsidiary to any Person other than
Borrower or any other Subsidiary, provided that after
giving effect thereto (A) the aggregate principal amount
of all Debt described in this Section 7.02(a)(iii) (other
than any Debt incurred solely to purchase or otherwise
acquire or construct Property) does not exceed five
percent (5%) of Consolidated Capitalization and (B) the
aggregate principal amount of all Debt described in this
Section 7.02(a)(iii) (including all Debt incurred solely
to purchase or otherwise acquire or construct Property)
does not exceed ten percent (10%) of Consolidated
Capitalization; and
(iv) other Debt of Borrower, provided that after
giving effect thereto (A) the aggregate principal amount
of Consolidated Funded Debt does not exceed forty percent
(40%) of Adjusted Consolidated Capitalization and (B) the
aggregate principal amount of Consolidated Debt does not
exceed forty-five percent (45%) of Adjusted Consolidated
Capitalization.
Any corporation which becomes a Subsidiary after the date
hereof shall for all purposes of this Section 7.02(a) be
deemed to have created, assumed or incurred at the time it
becomes a Subsidiary all Debt of such corporation existing
immediately after it becomes a Subsidiary. Any Debt of
Borrower or a Subsidiary to a former Subsidiary shall be
deemed to have been created, assumed or incurred
immediately after such Subsidiary is no longer a
Subsidiary."
40
<PAGE>
12. Section 9.03 of the Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
"9.03 Cost and Expenses. Borrower agrees, whether or
not any Loan is made hereunder or any Letter of Credit is
issued hereunder, to pay Bank and/or Participant, as the
case may be, upon demand (i) all out-of-pocket costs and
expenses and all Attorneys' Fees of Bank and Participant
in connection with the preparation, documentation,
negotiation, execution, administration, amendment,
modification, extension and/or renewal of this Agreement,
the Note, the Letter of Credit Application(s), the Pledge
Agreement, the Intercreditor Agreement and the other
Transaction Documents, (ii) all recording and filing fees
incurred in connection with this Agreement and the other
Transaction Documents, (iii) all out-of-pocket costs and
expenses and all Attorneys' Fees of Bank and Participant
in connection with the preparation of any waiver or
consent hereunder or any amendment, modification,
extension or renewal hereof or any Default or Event of
Default hereunder, (iv) if any Default or Event of Default
occurs, all out-of-pocket costs and expenses and all
Attorneys' Fees incurred by Bank and Participant in
connection with such Default or Event of Default and
collection and other enforcement proceedings resulting
therefrom and (v) all other Attorneys' Fees incurred by
Bank and Participant relating to or arising out of or in
connection with this Agreement or any of the other
Transaction Documents. Borrower further agrees to pay or
reimburse Bank and Participant for any stamp or other
taxes which may be payable with respect to the execution,
delivery, recording and/or filing of this Agreement, the
Note, the Letter of Credit Application(s), the Pledge
Agreement, the Intercreditor Agreement or any of the other
Transaction Documents. All of the obligations of Borrower
under this Section 9.03 shall survive the satisfaction and
payment of Borrower's Obligations and the termination of
this Agreement."
13. All references in the Agreement to "this Agreement"
and any other references of similar import shall henceforth mean
the Agreement as amended by this Amendment. All capitalized terms
used and not otherwise defined in this Amendment shall have the
respective meanings ascribed to them in the Agreement as amended by
this Amendment.
14. All references in the Pledge Agreement and in the
Intercreditor Agreement to the "Revolving Credit Agreement" shall
41
<PAGE>
henceforth mean the Agreement as amended by this Amendment and as
the same may from time to time be further amended, modified,
extended or renewed as permitted by paragraph 3B of the
Intercreditor Agreement.
15. Contemporaneously with the execution of this
Amendment, Borrower shall pay Bank a nonrefundable amendment and
increase fee in the amount of Twenty-Five Thousand Dollars
($25,000.00).
16. Except to the extent specifically amended by this
Amendment, all of the terms, provisions, conditions, covenants,
representations and warranties contained in the Agreement shall be
and remain in full force and effect and the same are hereby
ratified and confirmed.
17. This Amendment shall be binding upon and inure to the
benefit of Borrower and Bank and their respective successors and
assigns, except that Borrower may not assign, transfer or delegate
any of its rights or obligations hereunder.
18. Borrower hereby represents and warrants to Bank that:
(a) the execution, delivery and performance by
Borrower of this Amendment are within the corporate powers of
Borrower, have been duly authorized by all necessary corporate
action and require no action by or in respect of, or filing with,
any governmental or regulatory body, agency or official or any
other third party. The execution, delivery and performance by
Borrower of this Amendment do not conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under or result in any violation of, the terms of the
Certificate of Incorporation or By-Laws of Borrower, any applicable
law, rule, regulation, order, writ, judgment or decree of any court
or governmental or regulatory agency or instrumentality, or any
agreement, document or instrument to which Borrower is a party or
by which it is bound or to which it is subject;
(b) this Amendment has been duly executed and
delivered by Borrower and constitutes the legal, valid and binding
obligation of Borrower enforceable in accordance with its terms;
and
(c) as of the date hereof, all of the representations,
warranties and covenants of Borrower set forth in the Agreement are
true and correct and no "Default" or "Event of Default" (as defined
therein) under or within the meaning of the Agreement has occurred
and is continuing.
19. Borrower hereby agrees to reimburse Bank and Harris
Trust and Savings Bank upon demand for all out-of-pocket costs and
expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by Bank and Harris Trust and Savings Bank in
42
<PAGE>
the preparation, negotiation and execution of this Amendment and
all other agreements, documents and instruments relating to the
amendment of Borrower's revolving credit facility with Bank
(collectively, the "Loan Documents"); provided, however, that the
maximum amount of the attorneys' fees and expenses of Harris Trust
and Savings Bank to be reimbursed by Borrower shall not exceed the
sum of $2,500.00. Borrower further agrees to pay or reimburse Bank
for any stamp or other taxes (excluding income or gross receipts
taxes) which may be payable with respect to the execution, delivery
or recording of the Loan Documents. All of the obligations of
Borrower under this Paragraph 19 shall survive the payment of the
Borrower's Obligations and the termination of the Agreement.
20. In the event of any inconsistency or conflict between
this Amendment and the Agreement, the terms, provisions and
conditions of this Amendment shall govern and control.
21. This Amendment shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
22. 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 BORROWER AND BANK FROM MISUNDERSTANDING OR DISAPPOINTMENT,
ANY AGREEMENTS REACHED BY BORROWER AND BANK COVERING SUCH MATTERS
ARE CONTAINED IN THE AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE
OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AS AMENDED BY THIS
AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND BANK,
EXCEPT AS BORROWER AND BANK MAY LATER AGREE IN WRITING TO MODIFY
THEM.
23. This Amendment shall not be effective unless and until
Bank shall have received a copy of that certain First Amendment to
Collateral Agency and Intercreditor Agreement dated as of November
9, 1994, by and among Borrower, Bank, The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company and
Bank in its capacity as Collateral Agent signed by all of the
parties thereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment to Revolving Credit Agreement this 9th day of
November, 1994.
CPI CORP.
By /s/ Alyn V. Essman
___________________________
Title: Chairman of the Board and
Chief Executive Officer
43
<PAGE>
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By /s/ John Holland
__________________________
Title: Vice President
44
<PAGE>
PART II
ITEM 6(a) - EXHIBIT 10 - MATERIAL CONTRACTS
b.) Second Amendment to Revolving Credit Note dated November
9, 1994.
45
<PAGE>
SECOND AMENDMENT TO
REVOLVING CREDIT NOTE
THIS SECOND AMENDMENT TO REVOLVING CREDIT NOTE (this
"Amendment") is made this 9th day of November, 1994, by CPI CORP.,
a Delaware corporation ("Borrower"), and is accepted by MERCANTILE
BANK OF ST. LOUIS NATIONAL ASSOCIATION, a national banking
association ("Bank").
WITNESSETH:
WHEREAS, Borrower has heretofore executed and delivered to
Bank its Revolving Credit Note dated August 31, 1993, and payable
to the order of Bank in the principal amount of Twenty-Five Million
Dollars ($25,000,000.00), as amended by that certain First
Amendment to Revolving Credit Note dated June 14, 1994 (as so
amended, the "Note"); and
WHEREAS, Borrower desires to amend the Note to increase
the maximum principal amount of the Note from Twenty-Five Million
Dollars ($25,000,000.00) to Fifty Million Dollars ($50,000,000.00),
and Bank is willing to consent thereto on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower hereby amends the Note
as follows:
1. The first and second sentences of the first full
paragraph on page 1 of the Note are hereby deleted in their
entirety and the following substituted in lieu thereof:
"FOR VALUE RECEIVED, on August 31, 1996, the
undersigned, CPI CORP., a Delaware corporation
("Borrower"), hereby promises to pay to the order of
MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, a
national banking association ("Bank"), the principal sum
of Fifty Million Dollars ($50,000,000.00), or such lesser
sum as may then constitute the aggregate unpaid principal
amount of all Revolving Credit Loans made by Bank to
Borrower pursuant to the Revolving Credit Agreement
referred to below. The aggregate principal amount which
Bank shall be committed to have outstanding hereunder at
any time shall not exceed Fifty Million Dollars
($50,000,000.00), which amount may be borrowed, paid,
reborrowed and repaid, in whole or in part, subject to the
terms and conditions hereof and of the Revolving Credit
Agreement referred to below."
46
<PAGE>
2. The fourth full paragraph commencing on page 1 of the
Note is hereby deleted in its entirety and the following
substituted in lieu thereof:
"This Note is the Revolving Credit Note referred to in
that certain Revolving Credit Agreement dated August 31,
1993, by and between Borrower and Bank, as amended by that
certain First Amendment to Revolving Credit Agreement
dated June 14, 1994, and that certain Second Amendment to
Revolving Credit Agreement dated November 9, 1994 (as so
amended and as the same may from time to time be further
amended, modified, extended or renewed, the "Revolving
Credit Agreement"), to which Revolving Credit Agreement
reference is hereby made for a statement of the terms and
conditions upon which the maturity of this Note may be
accelerated, and for other terms and conditions, including
prepayment, which may affect this Note. All capitalized
terms used and not otherwise defined in this Note shall
have the respective meanings ascribed to them in the
Revolving Credit Agreement."
3. Except to the extent specifically amended by this
Amendment, all of the terms, provisions and conditions contained in
the Note shall be and remain in full force and effect and the same
are hereby ratified and confirmed.
4. All references in the Note to this "Note" and any
other references of similar import shall henceforth mean the Note
as amended by this Amendment.
5. All references in the Pledge Agreement (as defined in
the Note) and in the Intercreditor Agreement (as defined in the
Pledge Agreement) to the "Revolving Credit Note" shall henceforth
mean the Note as amended by this Amendment and as the same may from
time to time be further amended, modified, extended or renewed as
permitted by paragraph 3B of the Intercreditor Agreement.
6. This Amendment shall be binding upon and inure to the
benefit of Borrower and Bank and their respective successors and
assigns, except that Borrower may not assign or delegate any of its
rights or obligations hereunder.
7. This Amendment shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
8. In the event of any inconsistency or conflict between
the Note and this Amendment, the terms, provisions and conditions
of this Amendment shall govern and control.
47
<PAGE>
9. Bank is hereby authorized to attach this Amendment to
the Note as a part thereof.
10. This Amendment shall not be effective unless and until
Bank shall have received a copy of that certain First Amendment to
Collateral Agency and Intercreditor Agreement dated as of November
9, 1994, by and among Borrower, Bank, The Prudential Insurance
Company of America, Principal Mutual Life Insurance Company and
Bank in its capacity as Collateral Agent signed by all of the
parties thereto.
IN WITNESS WHEREOF, Borrower has executed this Second
Amendment to Revolving Credit Note this 9th day of November, 1994.
CPI CORP.
By /s/ Alyn V. Essman
__________________________
Title: Chairman and
Chief Executive Officer
Accepted this 9th day of November, 1994.
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By /s/ John Holland
__________________________
Title: Vice President
48
<PAGE>
PART II
ITEM 6(a) - EXHIBIT 10 - MATERIAL CONTRACTS
c.) First Amendment to Collateral Agency and Intercreditor
Agreement.
49
<PAGE>
FIRST AMENDMENT TO COLLATERAL AGENCY
AND INTERCREDITOR AGREEMENT
THIS FIRST AMENDMENT TO COLLATERAL AGENCY AND
INTERCREDITOR AGREEMENT (this "Amendment") is made and entered into
as of the 9th day of November, 1994, by and among CPI CORP., a
Delaware corporation (the "Company"), THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation ("Prudential"),
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an Iowa corporation
("Principal"), MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION,
a national banking association ("Mercantile") (Prudential,
Principal and Mercantile are sometimes hereinafter individually
referred to as a "Secured Party" and collectively referred to as
the "Secured Parties") and MERCANTILE BANK OF ST. LOUIS NATIONAL
ASSOCIATION, a national banking association, in its capacity as
collateral agent for the Secured Parties (in such capacity, the
"Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Secured Parties and the
Collateral Agent have heretofore entered into that certain
Collateral Agency and Intercreditor Agreement dated as of August
31, 1993 (the "Intercreditor Agreement"); and
WHEREAS, the Company has requested Mercantile to increase
the maximum principal amount of its existing revolving credit
facility to the Company from Twenty-Five Million Dollars
($25,000,000) to Fifty Million Dollars ($50,000,000) and Mercantile
has agreed to such increase on the condition that, among other
things, the Company, the Secured Parties and the Collateral Agent
enter into this Amendment; and
WHEREAS, the Company, the Secured Parties and the
Collateral Agent desire to amend the Intercreditor Agreement in the
manner hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company, the Secured Parties
and the Collateral Agent hereby agree as follows:
1. Subparagraph (a) of paragraph 3B of the Intercreditor
Agreement is hereby deleted in its entirety and the following
substituted in lieu thereof:
"(a) Each Secured Party agrees with each other
Secured Party that no amendment will be made to (i) the
Revolving Credit Agreement which increases the aggregate
amount of (A) Exposures of the Secured Parties thereunder
to an aggregate amount greater than $60,000,000 or (B)
50
<PAGE>
Letters of Credit to be issued by the Secured Parties
thereunder to an aggregate undrawn face amount greater
than $9,000,000 and (ii) the Revolving Credit Note which
increases the aggregate principal amount of such Revolving
Credit Note to an amount in excess of $60,000,000."
2. The Company, the Secured Parties and the Collateral
Agent hereby acknowledge and agree that (a) all references in the
Intercreditor Agreement and the Pledge Agreement to the "Revolving
Credit Agreement" shall mean that certain Revolving Credit
Agreement dated August 31, 1993, by and between the Company and
Mercantile, as amended by that certain First Amendment to Revolving
Credit Agreement dated June 14, 1994, and that certain Second
Amendment to Revolving Credit Agreement dated November 9, 1994, and
as the same may from time to time be further amended, modified,
extended or renewed as permitted by paragraph 3B of the
Intercreditor Agreement as amended by this Amendment and (b) all
references in the Intercreditor Agreement and the Pledge Agreement
to the "Revolving Credit Note" shall mean that certain Revolving
Credit Note of the Company dated August 31, 1993, and payable to
the order of Mercantile in the principal amount of Twenty-Five
Million Dollars ($25,000,000), as amended by that certain First
Amendment to Revolving Credit Note dated June 14, 1994, and that
certain Second Amendment to Revolving Credit Note dated November 9,
1994, pursuant to which the maximum principal amount of said
Revolving Credit Note was increased from Twenty-Five Million
Dollars ($25,000,000) to Fifty Million Dollars ($50,000,000), and
as the same may from time to time be further amended, modified,
extended or renewed as permitted by paragraph 3B of the
Intercreditor Agreement as amended by this Amendment.
3. All capitalized terms used and not otherwise defined
in this Amendment shall have the respective meanings ascribed to
them in the Intercreditor Agreement as amended by this Amendment.
4. Except to the extent specifically amended by this
Amendment, all of the terms, provisions, conditions, covenants,
representations and warranties contained in the Intercreditor
Agreement shall be and remain in full force and effect and the same
are hereby ratified and confirmed.
5. This Amendment shall be binding upon and inure to the
benefit of the Company, each of the Secured Parties and the
Collateral Agent and their respective successors and assigns,
except that the Company may not assign, transfer or delegate any of
its rights or obligations hereunder.
6. The Company hereby represents and warrants to each of
the Secured Parties and the Collateral Agent that:
51
<PAGE>
(a) the execution, delivery and performance by the
Company of this Amendment are within the corporate powers of the
Company, have been duly authorized by all necessary corporate
action and require no action by or in respect of, or filing with,
any governmental or regulatory body, agency or official or any
other third party. The execution, delivery and performance by the
Company of this Amendment do not conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under or result in any violation of the terms of, the
Certificate of Incorporation or By-Laws of the Company, any
applicable law, any rule, regulation, order, writ, judgment or
decree of any court or governmental or regulatory agency or
instrumentality, or any agreement, document or instrument to which
the Company is a party or by which it is bound or to which it is
subject;
(b) this Amendment has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation
of the Company enforceable in accordance with its terms;
(c) as of the date of this Amendment, all of the
representations, warranties and covenants of the Company set forth
in the Intercreditor Agreement are true and correct;
(d) as of the date of this Amendment, (i) no "Default" or
"Event of Default" (as defined therein) under the Note Agreement
exists or is continuing and (ii) no "Default" or "Event of Default"
(as defined therein) under the Revolving Credit Agreement exists or
is continuing; and
(e) the representations and warranties of the Company set
forth in Paragraph 8 of the Note Agreement, the representations and
warranties of the Company set forth in Section 6 of the Revolving
Credit Agreement and the representations and warranties of the
Company set forth in each of the other Credit Documents are true
and correct and complete in all material respects as if made on and
as of the date of this Amendment, except as to those
representations and warranties made as of a specific date, which
are true and correct and complete in all material respects as of
such date.
7. The Company hereby agrees to reimburse each of the
Secured Parties and the Collateral Agent upon demand for all
reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by
such Secured Party or the Collateral Agent, as the case may be, in
the preparation, negotiation and execution of this Amendment. All
of the obligations of the Company under this Paragraph 7 shall
survive the termination of the Intercreditor Agreement.
8. In the event of any inconsistency or conflict between
this Amendment and the Intercreditor Agreement, the terms,
52
<PAGE>
provisions and conditions of this Amendment shall govern and
control.
9. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were on the same
instrument. This Amendment shall be not be effective unless and
until the Collateral Agent shall have received counterparts of this
Amendment duly executed by the Company, Prudential, Principal,
Mercantile and the Collateral Agent (or, in the case of any such
party as to which an executed counterpart shall not have been
received, receipt by the Collateral Agent in form satisfactory to
it of telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party).
10. This Amendment shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to Collateral Agency and Intercreditor Agreement as
of the day and year first above written.
CPI CORP.
By /s/ Alyn V. Essman
___________________________
Title: Chairman and
Chief Executive Officer
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By /s/ Randy Cob
___________________________
Title: Vice President
53
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By /s/ S. G. Hotz
___________________________
Title: Counsel
By /s/ Christopher J. Henderson
____________________________
Title: Counsel
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By /s/ John Holland
___________________________
Title: Vice President
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION, as Collateral
Agent
By /s/ John Holland
___________________________
Title: Vice President
54
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0
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