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 July 22, 1995
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 13,862,980 shares
--------------------------- -------------------------------
Class Outstanding at August 31, 1995
<PAGE>
CPI CORP.
INDEX
Part I. Financial Information:
Item 1. Financial Statements:
Interim Condensed Consolidated Balance
Sheets - July 22, 1995, July 23, 1994
and February 4, 1995
Interim Condensed Consolidated Statements
of Earnings - For the 12 and 24 Weeks
Ended July 22, 1995 and July 23, 1994
Interim Condensed Consolidated Statements
of Changes in Stockholders' Equity - For
the 52 Weeks Ended February 4, 1995 and
for the 24 Weeks Ended July 22, 1995
Interim Condensed Consolidated Statements
of Cash Flows - For the 24 Weeks Ended
July 22, 1995 and July 23, 1994
Notes to Interim Condensed Consolidated
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Item 6.(a) Exhibits
Exhibit 11 - Computation of Earnings
per Common Share
Exhibit 27 - Financial Data Schedule
Part II. Other Information:
Item 4 Submission of Matters to a Vote of Security Holders
Item 6.(a) Exhibits
Exhibit 10 - Material Contracts
Item 6.(b) Reports on Form 8-K
Signature
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - ASSETS
(UNAUDITED)
<CAPTION>
July 22, July 23, February 4,
1995 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash $ 2,424,485 $ 4,435,484 $ 4,023,435
Short-term investments 7,335,343 17,198,827 10,326,347
Receivables 20,230,752 18,774,959 23,119,562
Inventories 31,306,713 28,579,782 33,943,140
Deferred costs applicable
to unsold portraits --- 4,125,891 172,645
Deferred income taxes, net 685,293 --- 244,910
Prepaid expenses and other
current assets 10,384,053 7,683,074 10,152,414
------------ ------------ ------------
Total current assets 72,366,639 80,798,017 81,982,453
------------ ------------ ------------
Net property and equipment 170,103,202 139,861,924 159,125,536
Other assets:
Intangible assets 54,515,691 58,576,756 56,362,451
Other long-term assets 3,471,844 3,184,410 3,010,636
------------ ------------ ------------
Total assets $300,457,376 $282,421,107 $300,481,076
============ ============ ============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
LIABILITIES (UNAUDITED)
<CAPTION>
July 22, July 23, February 4,
1995 1994 1995
------------- ------------ ------------
<S> <C> <C> <C>
Current liabilities:
Short-term borrowings $ 19,300,000 $ --- $ 6,850,000
Current maturities of
long-term
obligations 18,193 194,203 127,506
Accounts payable 30,525,741 37,066,977 27,137,106
Accrued expenses and
other liabilities 18,966,684 19,042,386 25,884,038
Income taxes 1,765,351 1,585,486 9,768,352
Deferred income taxes,
net --- 1,967,851 ---
------------- -------------- -------------
Total current
liabilities 70,575,969 59,856,903 69,767,002
------------- -------------- -------------
Long-term obligations,
less current
maturities 59,777,818 59,727,718 59,742,426
Other liabilities 3,524,842 3,310,058 4,346,139
Deferred income taxes,
net 1,423,045 150,983 625,388
------------- -------------- -------------
Total liabilities 135,301,674 123,045,662 134,480,955
------------- ------------- -------------
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
STOCKHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
July 22, 1995 July 23, 1994 Feb. 4, 1995
------------- ------------- ------------
<S> <C> <C> <C>
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;
17,165,487,
17,002,365 and
17,123,599 shares
outstanding at July
22, 1995, July 23,
1994 and February 4,
1995, respectively 6,866,195 6,800,946 6,849,440
Additional paid-in
capital 32,005,400 29,644,209 31,277,872
Retained earnings 204,141,840 194,625,170 206,439,841
Cumulative foreign
currency translation
adjustment (1,864,805) (1,855,595) (2,279,278)
Treasury stock, at
cost, 3,302,507,
3,040,263 and
3,302,463 shares at
July 22, 1995,
July 23, 1994
and February 4,
1995, respectively (74,531,857) (69,720,437) (74,531,219)
Unamortized deferred
compensation -
restricted stock (1,461,071) (118,848) (1,756,535)
------------- ------------- -------------
Total stockholders'
equity 165,155,702 159,375,445 166,000,121
------------- ------------- -------------
Total liabilities and
stockholder's equity $300,457,376 $282,421,107 $300,481,076
============= ============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
12 Weeks Ended
----------------------------
July 22, July 23,
1995 1994
------------- -------------
<S> <C> <C>
Net Sales $110,786,794 $104,651,813
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 30,789,196 32,900,575
Selling, administrative and
general expenses 65,630,105 60,037,082
Depreciation 8,445,209 7,078,576
Amortization 1,433,689 1,236,335
------------- -------------
Total cost and expense 106,298,199 101,252,568
------------- -------------
Income (loss) from operations 4,488,595 3,399,245
Net interest expense 992,674 786,585
Other income 77,923 107,983
------------- -------------
Earnings (loss) before
income taxes 3,573,844 2,720,643
Income tax expense (benefit) 1,322,377 1,089,300
------------- -------------
Net earnings (loss) $ 2,251,467 $ 1,631,343
============= =============
Net earnings (loss) per share $ 0.16 $ 0.11
============= =============
Weighted average number of
common and common equivalent
shares outstanding 13,930,322 14,342,019
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
24 Weeks Ended
----------------------------
July 22, July 23,
1995 1994
------------- -------------
<S> <C> <C>
Net Sales $218,232,553 $204,755,488
Cost and expenses:
Cost of sales (exclusive of
depreciation expense shown
below) 60,949,821 63,803,722
Selling, administrative and
general expenses 133,435,129 125,029,742
Depreciation 16,745,613 13,685,375
Amortization 2,804,330 2,551,055
------------- -------------
Total cost and expense 213,934,893 205,069,894
------------- -------------
Income (loss) from operations 4,297,660 (314,406)
Net interest expense 1,966,491 1,316,059
Other income 173,289 204,198
------------- -------------
Earnings (loss) before
income taxes 2,504,458 (1,426,267)
Income tax expense (benefit) 926,688 (570,478)
------------- -------------
Net earnings (loss) $ 1,577,770 $ (855,789)
============= =============
Net earnings (loss) per share $ 0.11 $ (0.06)
============= =============
Weighted average number of
common and common equivalent
shares outstanding 13,913,751 14,461,486
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<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 4, 1995 and 24 Weeks Ended July 22, 1995
<CAPTION>
Additional
Common Paid-In
Stock Capital
------------ -------------
<S> <C> <C>
Balance at February 5, 1994 $ 6,791,548 $ 29,262,531
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) 7,955 327,182
Stock bonus plan (3,694 shares) 1,476 55,764
Employee stock plans
(121,150 shares) 48,461 1,632,395
Foreign currency translation --- ---
Dividends ($0.56 per
common share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------ -------------
Balance at February 4, 1995 6,849,440 31,277,872
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) 16,183 707,021
Stock bonus plan (1,429 shares) 572 20,507
Foreign currency translation --- ---
Dividends ($0.28 per common
share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at July 22, 1995 $ 6,866,195 $ 32,005,400
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<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 4, 1995 and 24 Weeks Ended July 22, 1995
<CAPTION>
Cumulative
Foreign
Currency
Retained Transaction
Earnings Adjustment
------------ -------------
<S> <C> <C>
Balance at February 5, 1994 $199,547,800 $ (1,381,524)
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) --- ---
Stock bonus plan (3,694 shares) --- ---
Employee stock plans
(121,150 shares) --- ---
Foreign currency translation --- (897,754)
Dividends ($0.56 per
common share) (7,930,037) ---
Net earnings 14,822,078 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------ -------------
Balance at February 4, 1995 206,439,841 (2,279,278)
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) --- ---
Stock bonus plan (1,429 shares) --- ---
Foreign currency translation --- 414,473
Dividends ($0.28 per common
share) (3,875,771) ---
Net earnings 1,577,770 ---
Purchase of treasury stock,
at cost --- ---
Amortization of deferred
compensation-restricted stock --- ---
------------- -------------
Balance at July 22, 1995 $204,141,840 $ (1,864,805)
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - TREASURY STOCK AT COST AND DEFERRED
COMPENSATION-RESTRICTED STOCK (UNAUDITED)
52 Weeks Ended February 4, 1995 and 24 Weeks Ended July 22, 1995
<CAPTION>
Deferred
Treasury Compensation-
Stock, Restricted
At Cost Stock
------------- -------------
<S> <C> <C>
Balance at February 5, 1994 $(58,556,032) $ (155,850)
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) --- ---
Stock bonus plan (3,694 shares) --- ---
Employee stock plans
(121,150 shares) --- (1,680,856)
Foreign currency translation --- ---
Dividends ($0.56 per
common share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost (15,975,187) ---
Amortization of deferred
compensation-restricted stock --- 80,171
------------- ------------
Balance at February 4, 1995 (74,531,219) (1,756,535)
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) --- ---
Stock bonus plan (1,429 shares) --- ---
Foreign currency translation --- ---
Dividends ($0.28 per common
share) --- ---
Net earnings --- ---
Purchase of treasury stock,
at cost (638) ---
Amortization of deferred
compensation-restricted stock --- 295,464
------------- -------------
Balance at July 22, 1995 $(74,531,857) $ (1,461,071)
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY - TOTAL (UNAUDITED)
52 Weeks Ended February 4, 1995 and 24 Weeks Ended July 22, 1995
<CAPTION>
Total
-------------
<S> <C>
Balance at February 5, 1994 $175,508,473
Issuance of common stock:
Profit sharing plan and trust
(19,887 shares) 335,137
Stock bonus plan (3,694 shares) 57,240
Employee stock plans
(121,150 shares) ---
Foreign currency translation (897,754)
Dividends ($0.56 per
common share) (7,930,037)
Net earnings 14,822,078
Purchase of treasury stock,
at cost (15,975,187)
Amortization of deferred
compensation-restricted stock 80,171
-------------
Balance at February 4, 1995 166,000,121
Issuance of common stock:
Profit sharing plan and trust
(40,459 shares) 723,204
Stock bonus plan (1,429 shares) 21,079
Foreign currency translation 414,473
Dividends ($0.28 per common
share) (3,875,771)
Net earnings 1,577,770
Purchase of treasury stock,
at cost (638)
Amortization of deferred
compensation-restricted stock 295,464
-------------
Balance at July 22, 1995 $165,155,702
=============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
24 Weeks Ended
----------------------------
July 22, 1995 July 23, 1994
------------- -------------
<S> <C> <C>
Cash flows provided by
operating activities $ 13,635,676 $ 9,335,308
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of
short-term debt 12,450,000 ---
Repayment of long-term debt (113,057) (214,312)
Issuance of common stock to
employee stock plans 744,283 391,076
Cash dividends (3,875,771) (4,066,842)
Purchase of treasury stock (638) (11,164,405)
------------- -------------
Cash flows provided by
(used in) financing
activities 9,204,817 (15,054,483)
------------- -------------
Cash flows provided by (used in)
investing activities:
Purchases of short-term
investments (5,105,615) (3,991,619)
Proceeds from maturing of
short-term investments 4,982,921 28,088,702
Additions to property and
equipment (27,723,279) (39,010,344)
Acquisitions:
Property and equipment --- (208,182)
Intangible assets --- 551,465
------------- -------------
Cash flows used in investing
activities (27,845,973) (14,569,978)
------------- -------------
Effect of exchange rate changes
on cash and equivalents 292,831 (335,365)
------------- -------------
Net decrease in cash and cash
equivalents (4,712,649) (20,624,518)
Cash and cash equivalents at
beginning of year 9,213,908 36,070,354
------------- -------------
Cash and cash equivalents at
end of period $ 4,501,259 $ 15,445,836
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
24 Weeks Ended
----------------------------
July 22, July 23,
1995 1994
------------- -------------
<S> <C> <C>
Reconciliation of net earnings
to cash flows provided by
(used in) operating activities:
Net earnings (loss) $ 1,577,770 $ (855,789)
Adjustments for items not
requiring cash:
Depreciation and amortization 19,549,943 16,236,430
Deferred income taxes 357,274 (555,040)
Deferred compensation (821,297) (1,538,093)
Other (962,537) (1,235,907)
Decrease (increase) in current
assets:
Receivables and inventories 5,525,237 2,232,888
Deferred costs applicable to
unsold portraits 172,645 (1,303,768)
Prepaid expenses and other
current assets (231,639) 1,322,319
Increase (decrease) in current
liabilities:
Accounts payable, accrued
expenses and other
liabilities (3,528,719) 2,214,004
Income taxes (8,003,001) (7,181,736)
------------- -------------
Cash flows provided by
operating activities $ 13,635,676 $ 9,335,308
============= =============
Supplemental cash flow
information:
Interest paid $ 2,524,876 $ 1,933,529
============= =============
Income taxes paid $ 8,660,927 $ 6,153,271
============= =============
<FN>
See notes to interim condensed consolidated financial statements.
</FN>
</TABLE>
<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 July 22, 1995, July 23, 1994 and
February 4, 1995 and the results of its operations and changes
in its cash flows for the 12 and 24 weeks ended July 22, 1995
and July 23, 1994. 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 4, 1995.
2. Short-term investments are comprised of money market instruments
which aggregated $7.3 million, $17.2 million and $10.3 million
as of July 22, 1995, July 23, 1994, and February 4, 1995,
respectively, and are stated at cost which approximates market.
Total interest income for the 12 and 24 weeks ended July 22,
1995 and July 23, 1994 was $214,000 versus $246,000, and
$349,000 versus $617,000, respectively.
3. Inventories consist of the following components (amounts in
thousands)
<TABLE>
CPI CORP. INVENTORIES AT July 22, 1995, July 23, 1994 AND
FEBRUARY 4, 1995
<CAPTION>
July 22, July 23, February 4,
1995 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Raw materials and supplies $31,307 $28,025 $33,887
Portraits-in-process --- 554 56
-------- -------- --------
$31,307 $28,579 $33,943
======== ======== ========
</TABLE>
4. On April 28, 1995, Consumer Programs Incorporated, a wholly-
owned subsidiary of CPI Corp., entered into two separate $5.0
million credit agreements with two domestic banks. Both $5.0
million credit agreements expired on July 31, 1995 and had
interest charged at the lower of a quoted interest rate or the
bank's prime lending rate.
<PAGE>
On July 13, 1995, the Company terminated its existing $50.0
million revolving credit agreement and the two separate $5.0
million credit agreements of its wholly-owned subsidiary,
Consumer Programs Incorporated, and entered into a new, $60.0
million revolving credit agreement ("the agreement") with three
domestic banks. The new agreement, which will expire on August
31, 1997, has interest charged at the lower of a quoted
interest rate or the banks' prime lending rate. A commitment
fee of 0.1875% per annum is payable on the unused portion of
the agreement. The Company is not required to maintain
compensating balances in connection with the new agreement and
has substantially the same financial covenants in the agreement
as those set forth in the Company's $60.0 million Senior
Notes held by two insurance companies. One additional covenant
the Company has in the new agreement is the Company will pay
down to $5.0 million the balance held under the agreement for
30 consecutive days at a specified point during the year.
Total interest expense for the 12 weeks ended July 22,
1995 and July 23, 1994 was $1.2 million and $1.0 million
respectively and for the 24 weeks ended July 22, 1995 and July
23, 1994, was $2.3 million and $1.9 million, respectively.
Total interest expense for the second fiscal quarter and first
fiscal half of 1995 was reduced by $101,000 in connection with
the Company's $40 million interest rate swap agreement as the
Company had recorded the swap agreement at its market value as
of February 4, 1994 and favorable changes in the interest rate
environment have occurred since that date. In the second
fiscal quarter and first fiscal half of 1994, interest expense
was increased $129,000 and $112,000, respectively, by the swap
agreements. While the Company has credit risk associated with
this financial instrument, no loss is anticipated due to
nonperformance by the counterparties to these agreements. This
swap agreement is due to mature on August 28, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
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 12 and 24 weeks
ended July 22, 1995 and July 23, 1994, respectively, representing
the second fiscal quarter ("second quarter") and the first fiscal
half ("first half"), are presented in the following table and are
discussed in greater detail on subsequent pages.
<TABLE>
<CAPTION>
12 Weeks Ended
---------------------------------------
(in thousands except per share amounts)
July 22, July 23,
1995 1994
---------- ----------
<S> <C> <C>
Net sales:
Portrait Studios $ 49,411 $ 45,797
Photofinishing 46,170 46,111
Wall Decor 11,301 8,958
Other Products and Services 3,905 3,785
--------- ---------
$110,787 $104,651
========= =========
Operating earnings:
Portrait Studios $ 5,165 $ 4,663
Photofinishing 2,937 2,747
Wall Decor 54 (387)
Other Products and Services (473) (771)
--------- ---------
7,683 6,252
General corporate expenses 3,195 2,851
--------- ---------
Income from operations 4,488 3,401
Net interest expense 992 788
Other income 78 108
--------- ---------
Earnings before income taxes 3,574 2,721
Income tax expense 1,322 1,089
--------- ---------
Net earnings $ 2,252 $ 1,632
========= =========
Earnings per common share $ 0.16 $ 0.11
========= =========
Weighted average number of
common and common equivalent
shares outstanding 13,930 14,342
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
24 Weeks Ended
---------------------------------------
(in thousands except per share amounts)
July 22, July 23,
1995 1994
---------- ----------
<S> <C> <C>
Net sales:
Portrait Studios $104,713 $ 95,565
Photofinishing 83,908 83,900
Wall Decor 21,489 17,518
Other Products and Services 8,123 7,772
--------- ---------
$218,233 $204,755
========= =========
Operating earnings:
Portrait Studios $ 11,414 $ 8,210
Photofinishing 1,179 527
Wall Decor (546) (734)
Other Products and Services (885) (1,297)
--------- ---------
11,162 6,706
General corporate expenses 6,865 7,019
--------- ---------
Income (loss) from operations 4,297 (313)
Net interest expense 1,966 1,317
Other income 173 204
--------- ---------
Income (loss) before income taxes 2,504 (1,426)
Income tax expense (benefit) 927 (570)
--------- ---------
Net earnings (loss) $ 1,577 $ (856)
========= =========
Earnings (loss) per common share $ 0.11 $ (.06)
========= =========
Weighted average number of
common and common equivalent
shares outstanding 13,914 14,462
========= =========
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
---------------------
REVENUES: Sales increased 5.9% to $110.8 million in the second
quarter of 1995 from $104.7 million in the second quarter of 1994.
For the first half, sales increased 6.6% to $218.2 million from
$204.8 million recorded in the same period last year. The sales
increase for both the second quarter and first half is attributable
to increased sales in the Portrait Studio, Wall Decor and Other
Products and Services segments, while the Photofinishing segment
sales remained consistent for both the second quarter and first
half when compared to the prior year's results.
Portrait Studio segment sales increased 7.9% and 9.6% for the
second quarter and first half over the comparable periods last
year. The Company believes the installation of the new digital
imaging technology, completed in the United States in September of
1994 and Canada in June of 1995, coupled with the introduction of
the Custom Portraits by Sears program, introduced in the latter
part of fiscal year 1994, have contributed to the higher sales
levels in the United States.
In the Photofinishing segment, sales were relatively unchanged at
$46.2 million for the second quarter of 1995 from the $46.1 million
recorded in the corresponding period last year. Sales for the
Photofinishing segment for the first half 1995 compared to the
first half 1994 were unchanged at $83.9 million. The consistent
sales levels were due to an increase in sales per roll, attributed
to a modified advertising program, offset by a decrease in the
number of store locations.
Sales in the Wall Decor segment were $11.3 million in the second
quarter of 1995, increasing 26.1% from the $9.0 million in sales
recorded in the comparable period last year. For the first half,
sales increased 22.7% to $21.5 million in the first half of 1995
from $17.5 million recorded in the first half of 1994. The
increase in both the second quarter and first half sales is due
largely to the opening of 32 new locations since last year's first
quarter.
Other Products and Services, which includes the electronic
publishing business, also experienced a sales improvement,
increasing 3.2% to $3.9 million in the second quarter of 1995 from
$3.8 million in the second quarter of 1994. The segment's first
half sales also showed an increase of 4.5% to $8.1 million in 1995
from $7.8 million in the comparable period last year. Average
weekly sales per store for the electronic publishing locations has
increased 23.5% and 20.9% for the second quarter and the first
half, respectively, from the comparable periods of 1994, reflecting
the improving performance of comparable existing stores and the
closure of six marginal locations late in 1994 and early in 1995.
<PAGE>
OPERATING INCOME: Income from operations increased 32.0% to $4.5
million in the second quarter of 1995 from $3.4 million in the
comparable period last year. In the first half of 1995, income
from operations increased to $4.3 million compared to a loss from
operations of $314,000 for the first half of 1994.
Portrait Studio operating earnings increased 10.8% and 39.0% for
the second quarter and first half, respectively, from the
comparable periods last year. These results reflect strong United
States operations, which had increased sales and decreased
manufacturing costs resulting from a substantial reduction in the
number of portraits produced. The increased operating earnings of
the United States operations were partially offset by a
deterioration in earnings in the Company's Canadian operations,
which were influenced by the start-up and installation of the new
digital imaging equipment. In addition, the increased earnings
reflect the impact of increased depreciation and studio employment
costs. Additional depreciation for the new freeze-frame digital
imaging system in the second quarter and first half of 1995
exceeded the comparable periods last year by $1.1 million and $2.5
million, respectively.
Photofinishing operating earnings for the second quarter and first
half ended July 22, 1995 were $2.9 million and $1.2 million,
respectively, increasing $190,000 and $652,000 from the comparable
prior year periods. The first half increase is due primarily to
improved results in certain test markets. In addition, a reduction
in roll volume in the first half was offset by higher average sales
per roll and lower depreciation expense.
The Wall Decor segment showed an operating profit of $54,000 for
the second quarter of 1995 compared to an operating loss of
$387,000 for the second quarter of 1994. In addition, the first
half reflected an operating loss of $546,000, a decrease from the
$734,000 operating loss recorded in the first half of 1994. These
results reflect the seasonal nature of the operations of the
segment and are consistent with expected results.
Other Products and Services operating losses were also reduced for
both the second quarter and the first half due to the closure of
several unprofitable stores during the latter part of 1994 and
first part of 1995, in addition to improved sales per store.
NET EARNING (LOSS): Net earnings (loss) amounted to $2.3 million
and $1.6 million for the second quarter and first half, an increase
of $620,000 and $2.4 million, respectively, from the $1.6 million
and ($856,000), respectively, recorded in comparable periods last
year, reflecting improved operating income in all segments offset
slightly by increased borrowing costs due to increases in short-
term borrowings. Interest expense for the second quarter and first
half of 1995 was reduced by $101,000 in connection with the
Company's $40 million interest rate swap agreement, as the Company
<PAGE>
had recorded the swap agreement at its market value in fiscal year
1994 and favorable changes in the interest rate environment have
occurred since that date. In the second quarter and first half of
1994, interest expense increased $129,000 and $112,000,
respectively, in connection with the swap agreement.
Earnings per share amounted to $0.16 in the second quarter of 1995
compared to $0.11 per share recorded in the prior year's second
quarter. For the first half of 1995, earnings per share amounted
to $0.11 per share compared to a $0.06 loss per share incurred in
last year's first half. Weighted average number of common and
common equivalent shares outstanding for second quarter and first
half of 1995 and 1994 were 13,930,322 versus 14,342,019 and
13,913,751 versus 14,461,486, respectively. The reduction in
weighted average number of common and common equivalent shares
outstanding was a result of shares purchased in fiscal 1994 under
the Company's stock repurchase program.
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
On July 13, 1995, the Company terminated its existing $50.0 million
revolving credit agreement and the two separate $5.0 million credit
agreements of its wholly-owned subsidiary, Consumer Programs
Incorporated, and entered into a new, $60.0 million revolving
credit agreement ("the agreement") with three domestic banks. The
new agreement, which will expire on August 31, 1997, has interest
charged at the lower of a quoted interest rate or the banks' prime
lending rate. A commitment fee of 0.1875% per annum is payable on
the unused portion of the agreement. The Company is not required
to maintain compensating balances in connection with the new
agreement and has substantially the same financial covenants in the
agreement as those set forth in the Company's $60.0 million Senior
Notes held by two insurance companies. One additional covenant the
Company has in the new agreement is the Company will pay down to
$5.0 million the balance held under the agreement for 30
consecutive days at a specified point during the year.
Cash, cash equivalents and short-term investments were $9.8
million, $21.6 million and $14.3 million on July 22, 1995, July 23,
1994 and February 4, 1995, respectively. Short-term borrowings
amounted to $19.3 million and $6.9 million on July 22, 1995 and
February 4, 1995 respectively. There were no short-term borrowings
on July 23, 1994.
The decline in cash, cash equivalents, short-term investments and
available short-term borrowings from fiscal year-end was due to
capital expenditures amounting to $27.7 million in the first half
of 1995. These capital expenditures included the installation of
the new digital imaging technology in the Canadian Portrait Studio
operations, the previously announced studio renovation program and
the planned opening of 15 new Prints Plus locations.
<PAGE>
The Company believes it has sufficient liquidity and capital
resources to meet planned capital expenditures and normal working
capital requirements.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 6(a). EXHIBITS
Exhibit 11 - Computation of Earnings per Common Share
for 12 and 24 weeks.
Exhibit 27 - Financial Data Schedule
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held in
St. Louis, Missouri on Tuesday June 13, 1995. The
following items were voted on and the results are
listed below:
a) The following individuals were elected to the Company's
Board of Directors:
<TABLE>
RESULTS OF VOTES FOR DIRECTORS
<CAPTION>
Against or
In Favor Withheld
---------- ----------
<S> <C> <C>
Milford Bohm 12,280,886 317,665
Alyn V. Essman 12,402,666 195,886
Russell Isaak 12,402,997 195,554
Mary Ann Krey 12,419,978 178,573
Lee Liberman 12,295,775 302,776
Nicholas Reding 12,418,578 179,973
Martin Sneider 12,419,978 178,573
Robert L. Virgil 12,419,698 178,853
</TABLE>
b) The Board of Directors' appointment of KPMG Peat
Marwick LLP to audit the Company's accounts for the 1995
fiscal year was approved by a vote of 12,546,461 shares
in favor, 42,997 shares opposed and 9,093 shares
abstained.
c) The Board of Directors' proposed Annual Incentive
Program for Key Executives was approved by a vote of
11,624,653 shares in favor, 645,680 shares opposed and
219,294 shares abstained.
<PAGE>
PART II. OTHER INFORMATION
(continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Item 6(a). Exhibits
Exhibit 10 - Material Contracts:
(10.1) $60 Million Revolving Credit Agreement.
(10.2) $25 Million Revolving Credit Note with
Mercantile Bank of St. Louis National
Association.
(10.3) $20 Million Revolving Credit Note with
Harris Trust and Savings Bank.
(10.4) $15 Million Revolving Credit Note with
The Daiwa Bank, Limited.
(b) There have been no reports on Form 8-K filed during the
quarter for which this report on Form 10-Q is being
filed.
<PAGE>
SIGNATURE
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: September 1, 1995 By: /s/ Barry Arthur
---------------------------
Barry Arthur
Authorized Officer and
Principal Financial Officer
<PAGE>
EXHIBIT INDEX
PART I.
Item 6(a). Exhibits
Exhibit 11 - Computation of Earnings
Per Share - 12 and 24 weeks
Exhibit 27 - Financial Data Schedule
PART II.
Item 6(a). Exhibits
Exhibit 10 - Material Contracts:
(10.1) $60 Million Revolving Credit Agreement.
(10.2) $25 Million Revolving Credit Note with
Mercantile Bank of St. Louis National
Association.
(10.3) $20 Million Revolving Credit Note with
Harris Trust and Savings Bank.
(10.4) $15 Million Revolving Credit Note with
The Daiwa Bank, Limited.
PART I. ITEM 6(a) EXHIBITS EXHIBIT 11
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<CAPTION>
12 Weeks Ended
---------------------
July 22, July 23,
1995 1994
--------- ---------
<S> <C> <C>
Primary:
Net earnings (loss) applicable
to common shares $ 2,252 $ 1,632
========= =========
Shares:
Weighted average number of
common shares outstanding 17,166 17,002
Shares issuable under employee
stock plans - weighted average 13 3
Dilutive effect of exercise of
certain stock options 54 ---
Less: Treasury stock - weighted
average (3,303) (2,663)
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding 13,930 14,342
========= =========
Earnings (loss) per common and
common equivalent shares $ 0.16 $ 0.11
========= =========
</TABLE>
<PAGE>
PART I. ITEM 6(a) EXHIBITS EXHIBIT 11
<TABLE>
CPI CORP. COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Amounts)
<CAPTION>
24 Weeks Ended
---------------------
July 22, July 23,
1995 1994
--------- ---------
<S> <C> <C>
Primary:
Net earnings (loss) applicable
to common shares $ 1,577 $ (856)
========= =========
Shares:
Weighted average number of
common shares outstanding 17,166 17,002
Shares issuable under employee
stock plans - weighted average 24 10
Dilutive effect of exercise of
certain stock options 27 ---
Less: Treasury stock - weighted
average (3,303) (2,550)
--------- ---------
Weighted average number of common
and common equivalent shares
outstanding 13,914 14,462
========= =========
Earnings (loss) per common and
common equivalent shares $ 0.11 $ (0.06)
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> JUL-22-1995
<CASH> 2,424
<SECURITIES> 7,335
<RECEIVABLES> 21,947
<ALLOWANCES> 1,716
<INVENTORY> 31,307
<CURRENT-ASSETS> 72,367
<PP&E> 332,031
<DEPRECIATION> 161,928
<TOTAL-ASSETS> 300,457
<CURRENT-LIABILITIES> 70,576
<BONDS> 0
<COMMON> 6,866
0
0
<OTHER-SE> 158,290
<TOTAL-LIABILITY-AND-EQUITY> 300,457
<SALES> 218,233
<TOTAL-REVENUES> 218,233
<CGS> 60,950
<TOTAL-COSTS> 213,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,315
<INCOME-PRETAX> 2,504
<INCOME-TAX> 927
<INCOME-CONTINUING> 1,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,577
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
PART II. ITEM 6(a) EXHIBITS EXHIBIT (10.1)
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is
made and entered into this 13th day of July, 1995, by and among
CPI CORP., a Delaware corporation ("Borrower"), and the
undersigned Banks, including Mercantile Bank of St. Louis
National Association in its capacity as a Bank and as agent for
the Banks under this Agreement.
WITNESSETH:
WHEREAS, Borrower has applied for a revolving credit
facility from the Banks consisting of revolving credit loans and
letters of credit in an aggregate amount of up to $60,000,000.00;
and
WHEREAS, the Banks are willing to extend said revolving
credit facility to Borrower upon, and subject to, the terms,
provisions 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, the parties hereto
hereby covenant and agree as follows:
SECTION 1. TERM.
The "Term" of this Agreement shall commence on the date
hereof and shall end on August 31, 1997, or, if later, when all
of the Letters of Credit issued by Mercantile under this
Agreement have expired or been terminated and all of the
Borrower's Obligations have been paid in full.
SECTION 2. DEFINITIONS.
2.01 Definitions. In addition to the terms defined
elsewhere in this Agreement or in any Exhibit or Schedule hereto,
when used in this Agreement, the following terms shall have the
following meanings (such meanings shall be equally applicable to
the singular and plural forms of the terms used, as the context
requires):
Acceptable Acquisition shall mean any Acquisition which
has been (a) in the event a corporation is the subject of such
Acquisition, either (i) approved by the Board of Directors of the
corporation which is the subject of such Acquisition or (ii)
recommended by such Board of Directors to the shareholders of
<PAGE>
such corporation, (b) in the event a partnership is the subject
of such Acquisition, approved by a majority (by percentage of
voting power) of the partners of the partnership which is the
subject of such Acquisition, (c) in the event an organization or
entity other than a corporation or partnership is the subject of
such Acquisition, approved by a majority (by percentage of voting
power) of the governing body, if any, or by a majority (by
percentage of ownership interest) of the owners of the
organization or entity which is the subject of such Acquisition
or (d) in the event the corporation, partnership or other
organization or entity which is the subject of such Acquisition
is in bankruptcy, approved by the bankruptcy court or another
court of competent jurisdiction.
Acquisition shall mean any transaction or series of
related transactions, consummated on or after the date of this
Agreement, by which Borrower or any of its Subsidiaries
(a) acquires any going business or all or substantially all of
the assets of any corporation, partnership or other organization
or entity, whether through purchase of assets, merger or
otherwise or (b) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of
transactions) at least (i) a majority (in number of votes) of the
stock and/or other securities of a corporation having ordinary
voting power for the election of directors (other than stock
and/or other securities having such power only by reason of the
happening of a contingency), (ii) a majority (by percentage of
voting power) of the outstanding partnership interests of a
partnership or (iii) a majority of the ownership interests in any
organization or entity other than a corporation or partnership.
Adjusted Consolidated Capitalization shall mean, as of
the date of any determination thereof, the sum of (a)
Consolidated Capitalization plus (b) the lesser of (i) the book
value of all Intangibles of Borrower and its Subsidiaries as of
such date or (ii) $75,000,000.00, all determined on a
consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.
Adjusted Consolidated Operating Earnings shall mean,
for the period in question, the sum of (a) Consolidated Net
Income during such period plus (b) to the extent deducted in
determining Consolidated Net Income, the sum of (i) all
depreciation and amortization expenses of Borrower and its
Subsidiaries during such period, plus (ii) all provisions for any
Federal, state, local and/or foreign income taxes made by
Borrower and its Subsidiaries during such period (whether paid or
deferred) plus (iii) Consolidated Fixed Charges during such
period, all determined on a consolidated basis for Borrower and
its Subsidiaries and in accordance with GAAP.
<PAGE>
Affiliate shall mean any Person (other than a
Subsidiary) (a) which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common
control with Borrower or any Subsidiary, (b) which beneficially
owns or holds or has the power to direct the voting power of five
percent (5%) or more of any class of Voting Stock of Borrower or
any Subsidiary, (c) which has five percent (5%) or more of its
Voting Stock (or, in the case of a Person which is not a
corporation, five percent (5%) or more of its equity interest)
beneficially owned or held, directly or indirectly, by Borrower
or any Subsidiary or (d) who is a director, officer, employee or
agent of Borrower or any Subsidiary. For purposes of this
definition, "control" shall mean the power to direct the
management and policies of a Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise.
Agent shall mean Mercantile Bank of St. Louis National
Association in its capacity as agent for the Banks hereunder and
its successors in such capacity.
Asset Percentage Value of any asset (including Capital
Stock of a Subsidiary) disposed of by Borrower or a Subsidiary
shall mean the greater of (a) the percentage such asset (or
assets of the transferred Subsidiary) constitutes (valued at the
net book value thereof at the time of Disposition in accordance
with GAAP) of Consolidated Capitalization as determined for
either of the two fiscal years of Borrower most recently ended
before the date of such Disposition, whichever yields the greater
percentage and (b) the percentage of Consolidated Operating
Income generated by or otherwise attributable to such asset (or
the transferred Subsidiary) as determined for either of the two
fiscal years of Borrower most recently ended before the date of
such Disposition, whichever yields the greater percentage.
Available Cash shall mean and include, as of any date
of determination thereof, the sum of (i) cash plus (ii) Cash
Equivalents plus (iii) all amounts available under all committed
revolving credit facilities of Borrower which, as of the date of
determination, (a) Borrower is not in default thereunder, (b)
Borrower could satisfy all conditions required in order to make
a borrowing thereunder and (c) have a scheduled termination or
expiration date of at least ninety (90) days after the date of
determination.
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 the Agent or any of the
Banks (including, without limitation, attorneys and paralegals
who are employees of the Agent or any of the Banks or of any
<PAGE>
direct or indirect parent corporation, subsidiary or affiliate of
the Agent or any of the Banks) 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 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 the Agent or any of the
Banks 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 the Agent, any of the Banks,
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 the rights
and/or remedies of the Agent or any of the Banks to collect any
of Borrower's Obligations.
Borrower's Obligations shall mean any and all
indebtedness (principal, interest, fees and other amounts),
liabilities and obligations (including, without limitation,
funding losses and reimbursement obligations with respect to
standby and/or commercial letters of credit issued by Mercantile
for the account of, or which have been guaranteed by, Borrower)
of Borrower to the Agent or any one or more of the Banks
evidenced by or arising under this Agreement, the Notes, the
Letter of Credit Application(s) or any of the other Transaction
Documents, and any and all costs of collection and/or Attorneys'
Fees incurred or to be incurred in connection therewith.
Capital Stock shall mean any and all shares of any
class of capital stock of Borrower or any Subsidiary and any
warrant, right or option to purchase or acquire any shares of any
such capital stock.
Capitalized Lease shall mean and include at any time
any lease of Property, whether real and/or personal, by a Person
as lessee which in accordance with GAAP would at such time be
required to be capitalized on the balance sheet of such Person.
Capitalized Lease Obligations of any Person shall mean,
as of the date of any determination thereof, the amount at which
the aggregate rental obligations due and to become due under all
Capitalized Leases under which such Person is a lessee would be
reflected as a liability on a balance sheet of such Person in
accordance with GAAP.
<PAGE>
Cash Equivalents shall mean cash equivalents as
determined in accordance with GAAP.
CERCLA shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Section 9601 et seq., and future amendments.
Change of Control Event means the beneficial ownership
or acquisition by any Person or group of Persons who are
Affiliates (in any transaction or series of related transactions)
of (i) more than fifty percent (50%) of the Voting Stock of
Borrower, (ii) the power to elect, appoint or cause the election
or appointment of at least a majority of the members of the Board
of Directors of Borrower or (iii) all or substantially all of the
assets and Properties of Borrower.
Code shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from
time to time. References to sections of the Code shall be
construed to also refer to any successor sections.
Commitment shall mean, subject to termination or
reduction as set forth in Section 3.07: with respect to
Mercantile, $25,000,000.00; with respect to Harris Trust and
Savings Bank, $20,000,000.00; and with respect to The Daiwa Bank,
Limited, $15,000,000.00.
Consolidated Capitalization shall mean, as of the date
of any determination thereof, the sum of (a) Consolidated Funded
Debt plus (b) Consolidated Tangible Net Worth, all determined on
a consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.
Consolidated Debt shall mean all Debt of Borrower and
its Subsidiaries, determined on a consolidated basis and in
accordance with GAAP.
Consolidated Fixed Charges shall mean, for the period
in question, without duplication, the sum of (a) Consolidated
Interest Expense during such period plus (b) Consolidated Lease
Rental Expense during such period, all determined on a
consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.
Consolidated Funded Debt shall mean all Funded Debt of
Borrower and its Subsidiaries, determined on a consolidated basis
and in accordance with GAAP.
<PAGE>
Consolidated Indebtedness shall mean all Indebtedness
of Borrower and its Subsidiaries, determined on a consolidated
basis and in accordance with GAAP.
Consolidated Interest Expense shall mean, for the
period in question, without duplication, all gross interest
expense of Borrower and its Subsidiaries (including, without
limitation, all commissions, discounts and/or related
amortization and other fees and charges owed by Borrower and its
Subsidiaries with respect to letters of credit and bankers'
acceptance financing, the net costs associated with interest swap
obligations of Borrower and its Subsidiaries, capitalized
interest expense, the interest portion of Capitalized Lease
Obligations and the interest portion of any deferred payment
obligation) during such period, all determined on a consolidated
basis for Borrower and its Subsidiaries and in accordance with
GAAP.
Consolidated Lease Rental Expense shall mean, for the
period in question, the aggregate amount of operating lease
expense (i.e. all minimum rental payments plus all additional
rentals payable under percentage Operating Leases) during such
period under all Operating Leases, all determined on a
consolidated basis for Borrower and its Subsidiaries but
excluding any amounts required to be paid by Borrower or a
Subsidiary (whether or not designated as rent or additional rent)
on account of maintenance, repairs, insurance, taxes,
assessments, amortization and/or similar charges.
Consolidated Net Income and Consolidated Net Loss shall
mean, for the period in question, the net income or loss of
Borrower and its Subsidiaries during such period, determined on
a consolidated basis and in accordance with GAAP, but excluding
in any event the following:
(a) any gains (net of expenses and taxes
applicable thereto) in excess of losses resulting from
the sale, transfer or other disposition of fixed or
capital assets (i.e., assets other than current
assets);
(b) any gains resulting from any reappraisal,
revaluation or write-up of assets;
(c) any equity of Borrower or any Subsidiary in
the undistributed earnings of any corporation which is
not a Subsidiary;
(d) undistributed earnings of any Subsidiary to
the extent that the declaration or payment of
Restricted Payments by such Subsidiary is not at the
<PAGE>
time permitted by the terms of its charter documents or
any agreement, document, instrument, judgment, decree,
order, statute, rule or governmental regulation
applicable to such Subsidiary;
(e) any earnings of any Person acquired by
Borrower or any Subsidiary through purchase, merger or
consolidation or otherwise for any fiscal period prior
to the fiscal period in which the acquisition occurs;
(f) any deferred credit representing the excess
of equity in any Subsidiary at the date of acquisition
over the cost of the investment in such Subsidiary;
(g) gains from the acquisition or disposition of
Investments (other than Investments of the types listed
in clauses (c), (d), (e), (f), (g), (h), (i) and (j) of
the definition of Restricted Investments) or from the
retirement or extinguishment of Debt;
(h) gains on collections from insurance policies
or settlements (net of premiums paid or other expenses
incurred with respect to such gains during the fiscal
period in which the gain occurs, to the extent such
premiums or other expenses are not already reflected in
Consolidated Net Income for such fiscal period);
(i) any restoration to income of any contingency
reserve, except to the extent that provision for such
reserve was made out of income accrued during such
period;
(j) any net income or gain (but not any net loss)
during such period from any change in accounting
principles, from any discontinued operations or the
disposition thereof of from any prior period
adjustments;
(k) any extraordinary items; and
(l) in the case of a successor to Borrower by
consolidation or merger or as a transferee of its
assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of
assets;
all determined in accordance with GAAP. If the preceding
calculation results in a number less than zero, such amount shall
be considered a Consolidated Net Loss.
<PAGE>
Consolidated Net Worth shall mean, as of the date of
determination thereof, the amount of the capital stock accounts
(net of treasury stock, at cost) plus (or minus in the case of a
deficit) the surplus and retained earnings of Borrower and its
Subsidiaries, determined on a consolidated basis and in
accordance with GAAP.
Consolidated Operating Income shall mean, for the
period in question, the sum of (a) Consolidated Net Income during
such period plus, (b) to the extent deducted in determining
Consolidated Net Income, the sum of (i) all amortization expenses
of Borrower and its Subsidiaries during such period relating to
the amortization of Intangibles, plus (ii) all provisions for any
Federal, state, local and/or foreign income taxes made by
Borrower and its Subsidiaries during such period, plus (iii)
Consolidated Interest Expense during such period, all determined
on a consolidated basis for Borrower and its Subsidiaries and in
accordance with GAAP.
Consolidated Tangible Net Worth shall mean, as of the
date of determination thereof, the sum of (a) Consolidated Net
Worth minus (b) the book value of all Intangibles of Borrower and
its Subsidiaries minus (c) to the extent not reflected as a
liability on the consolidated balance sheet of Borrower and its
Subsidiaries as of such date, all Indebtedness of Borrower and
its Subsidiaries of the types described in clauses (b) and (c) of
the definition of Indebtedness, all determined on a consolidated
basis and in accordance with GAAP.
Current Debt of any Person shall mean all Debt of such
Person other than Funded Debt.
Debt of any Person shall mean, as of the date of
determination thereof, the sum of (a) all Indebtedness of such
Person for borrowed money or which has been incurred in
connection with the acquisition of Property or assets plus (b)
all Capitalized Lease Obligations of such Person plus (c) all
Guarantees by such Person of Debt of others.
Default shall mean any event or condition the
occurrence of which would, with the lapse of time or the giving
of notice or both, become an Event of Default as defined in
Section 8 hereof.
Direct Subsidiaries shall mean, collectively, CPI Photo
Finish, Inc., a Missouri corporation, Consumer Programs Holding
Inc., a Delaware corporation, CPI Corp., an Ontario corporation,
CPI Copy Services, Inc., a Missouri corporation, CPI Technology
Corp., a Missouri corporation, and any other corporation a
majority of the shares of any class of capital stock of which is
now or hereafter directly owned by Borrower, and Direct
Subsidiary shall mean any one of them.
<PAGE>
Disposition shall have the meaning specified in Section
7.02(g).
Domestic Business Day shall mean any day except a
Saturday, Sunday or legal holiday observed by the Agent or by
commercial banks in St. Louis, Missouri or Chicago, Illinois.
Environmental Claim shall mean any administrative,
regulatory or judicial action, judgment, order, consent decree,
suit, demand, demand letter, claim, Lien, notice of noncompliance
or violation, investigation or other proceeding arising (a)
pursuant to any Environmental Law or governmental or regulatory
approval issued under any such Environmental Law, (b) from the
presence, use, generation, storage, treatment, Release,
threatened Release, disposal, remediation or other existence of
any Hazardous Substance, (c) from any removal, remedial,
corrective or other response action pursuant to an Environmental
Law or the order of any governmental or regulatory authority or
agency, (d) from any third party seeking damages, contribution,
indemnification, cost recovery, compensation, injunctive or other
relief in connection with a Hazardous Substance or arising from
alleged injury or threat of injury to health, safety, natural
resources or the environment or (e) from any Lien against any
Property owned, leased or operated by Borrower or any Subsidiary
in favor of any governmental or regulatory authority or agency in
connection with a Release, threatened Release or disposal of a
Hazardous Substance.
Environmental Law shall mean any international,
Federal, state or local statute, law, rule, regulation, order,
consent decree, judgment, permit, license, code, covenant, deed
restriction, common law, treaty, convention, ordinance or other
requirement relating to public health, safety or the environment,
including, without limitation, those relating to Releases,
discharges or emissions to air, water, land or groundwater, to
the withdrawal or use of groundwater, to the use and handling of
polychlorinated biphenyls or asbestos, to the disposal,
treatment, storage or management of hazardous or solid waste,
Hazardous Substances or crude oil, or any fraction thereof, to
exposure to toxic or hazardous materials, to the handling,
transportation, discharge or release of gaseous or liquid
Hazardous Substances and any rule, regulation, order, notice or
demand issued pursuant to such law, statute or ordinance, in each
case applicable to any of the Property owned, leased or operated
by Borrower or any Subsidiary or the operation, construction or
modification of any such Property, including, without limitation,
the following: CERCLA, the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and the
Hazardous and Solid Waste Amendments of 1984, the Hazardous
Materials Transportation Act, as amended, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976,
<PAGE>
the Safe Drinking Water Control Act, the Clean Air Act of 1966,
as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1977, as amended, the
Emergency Planning and Community Right-to-Know Act of 1986, the
National Environmental Policy Act of 1975, the Oil Pollution Act
of 1990 and any similar or implementing state or local law, and
any state or local statute and any further amendments to these
laws providing for financial responsibility for cleanup or other
actions with respect to the Release or threatened Release of
Hazardous Substances or crude oil, or any fraction thereof and
all rules, regulations, guidance documents and publication
promulgated thereunder.
Environmental Lien shall have the meaning ascribed
thereto in Section 7.01(j)(vi).
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute of
similar import, together with the regulations thereunder, in each
case as in effect from time to time. References to sections of
ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate shall mean any corporation, trade or
business that is, along with Borrower, a member of a controlled
group of corporations or a controlled group of trades or
businesses, as described in Sections 414(b) and 414(c),
respectively, of the Code or Section 4001 of ERISA.
Eurodollar Business Day shall mean any Domestic
Business Day on which commercial banks are open for international
business (including dealings in dollar deposits) in London.
Event of Default shall have the meaning ascribed
thereto in Section 8.
Existing Letters of Credit shall have the meaning
ascribed thereto in Section 4.02.
Fed Funds Base Rate shall mean a rate per annum equal
to Mercantile's quoted rate as of the opening of business by
Mercantile on each Domestic Business Day for purchasing overnight
federal funds in the national market, which rate shall fluctuate
as and when said quoted rate shall change.
Fed Funds Margin shall mean One Percent (1%) per annum.
Fed Funds Rate shall mean the Fed Funds Base Rate plus
the Fed Funds Margin. The Fed Funds Rate shall be adjusted
automatically on and as of the effective date of any change in
the Fed Funds Base Rate.
<PAGE>
Floating Rate shall mean the lesser of (determined as
of the opening of business by Mercantile on each Business Day)
(a) the Prime Rate or (b) the Fed Funds Rate. The Floating Rate
shall be determined daily on each Domestic Business Day as of the
opening of business by Mercantile on such Domestic Business Day.
Floating Rate Loan shall mean any Revolving Credit Loan
bearing interest at the Floating Rate.
Funded Debt of any Person shall mean the sum of,
without duplication, (a) all Debt of such Person having a final
maturity of more than one (1) year from the date of origin
thereof (or which is renewable or extendible at the option of the
obligor for a period or periods more than one (1) year from the
date of origin thereof), excluding all payments in respect
thereof that are required to be made within one (1) year from the
applicable date of determination of Funded Debt, plus (b) all
Debt of such Person which has been incurred under a revolving
credit or similar agreement which obligates the lender or lenders
to extend credit over a period of more than one (1) year from the
applicable date of determination of Funded Debt (regardless of
whether such Debt by its terms matures on demand or within one
(1) year from the date or origin thereof) plus (c) all
Capitalized Lease Obligations of such Person other than that
portion of Capitalized Lease Obligations which are due within one
(1) year from the date of determination of Funded Debt plus (d)
all Guarantees of such Person of Funded Debt of others, all
determined in accordance with GAAP.
GAAP shall mean, as to a particular Person, such
accounting principles as, in the opinion of the "Big 6"
accounting firm regularly retained by such Person, conform at the
time to generally accepted accounting principles; provided that
as to any Person who has not regularly retained such an
accounting firm, "GAAP" shall mean generally accepted accounting
principles at the time in the United States.
Guarantee by any Person shall mean any obligation
(other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person
guaranteeing, or in effect guaranteeing, any Indebtedness,
liability, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation incurred through an
agreement, contingent or otherwise, by such Person: (a) to
purchase such Indebtedness or obligation or any Property or
assets constituting security therefor, (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness or
obligation, (ii) to maintain working capital or other balance
sheet condition or otherwise to advance or make available funds
<PAGE>
for the purchase or payment of such Indebtedness or obligation,
(iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the
owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation
or (iv) otherwise to assure the owner of the Indebtedness or
obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this
Agreement, a Guarantee in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the
then outstanding principal amount of such Indebtedness for
borrowed money which has been guaranteed or such lesser amount to
which the maximum exposure of the guarantor shall have been
specifically limited, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend or such lesser amount to which
the maximum exposure of the guarantor shall have been
specifically limited. Guarantee when used as a verb shall have
a correlative meaning.
Hazardous Substance shall mean any hazardous or toxic
material, substance or waste, pollutant or contaminant which is
regulated under any statute, law, ordinance, rule or regulation
of any local, state, regional, Federal or international authority
having jurisdiction over any of the Property owned, leased or
operated by Borrower or any Subsidiary or its use, including,
without limitation, any material, substance or waste which is:
(a) defined as a hazardous substance under Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317), as
amended; (b) regulated as a hazardous waste under Section 1004 or
Section 3001 of the Federal Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act (42 U.S.C. Section
6901 et seq.), as amended; (c) defined as a hazardous substance
under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.),
as amended; or (d) defined or regulated as a hazardous substance
or hazardous waste under any rules or regulations promulgated
under any of the foregoing statutes.
Indebtedness shall mean, with respect to any Person,
without duplication, all indebtedness, liabilities and
obligations of such Person (other than contingency reserves and
reserves for deferred income taxes) which in accordance with GAAP
should be classified upon a balance sheet of such Person as
liabilities of such Person, and in any event shall include all
(a) obligations of such Person for borrowed money or which have
been incurred in connection with the acquisition of Property or
assets, (b) obligations secured by any Lien on, or payable out of
the proceeds of production from, any Property or assets owned by
such Person, whether or not such Person has assumed or become
<PAGE>
liable for the payment of such obligations, (c) indebtedness,
liabilities and obligations of third parties, including joint
ventures and partnerships of which such Person is a venturer or
general partner, recourse to which may be had against such
Person, (d) obligations created or arising under any conditional
sale or other title retention agreement with respect to Property
acquired by such Person, notwithstanding the fact that the rights
and remedies of the seller, lender or lessor under such agreement
in the event of default are limited to repossession or sale of
such Property, (e) Capitalized Lease Obligations of such Person,
(f) indebtedness, liabilities and obligations of such Person
under Guarantees and (g) reimbursement obligations of such Person
with respect to letters of credit.
Intangibles shall mean all patents, trademarks, service
marks, copyrights, trade names, goodwill (including any amounts,
however designated, representing the cost of acquisition of
business and investments in excess of the book value thereof),
unamortized debt discount and expense, unamortized deferred
charges, deferred research and development costs, any write-up of
asset value after the date of this Agreement, non-competition
covenants, signing bonuses and any other assets treated as
intangible assets under GAAP.
Interest Period shall mean with respect to each LIBOR
Loan:
(a) initially, the period commencing on the date
of such Loan and ending 1, 2 or 3 months thereafter
(or such other period agreed upon in writing by
Borrower and all of the Banks), as the Borrower may
elect in the applicable Notice of Borrowing; and
(b) thereafter, each period commencing on the last
day of the next preceding Interest Period applicable to
such Loan and ending 1, 2 or 3 months thereafter (or
such other period agreed upon in writing by Borrower
and all of the Banks), as Borrower may elect pursuant
to Section 3.04;
provided that:
(c) subject to clauses (d) and (e) below, any
Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business Day
unless such Eurodollar Business Day falls in another
calendar month, in which case such Interest Period
shall end on the next preceding Eurodollar Business
Day;
<PAGE>
(d) subject to clause (e) below, any Interest
Period which begins on the last Eurodollar Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Eurodollar Business Day of a calendar month; and
(e) no Interest Period shall extend beyond the
last day of the Revolving Credit Period.
Investment shall mean any investment by the Borrower
or any Subsidiary in any Person, whether payment therefor is made
in cash or Capital Stock of Borrower or any Subsidiary, and
whether such investment is by acquisition of stock or
Indebtedness, or by loan, advance, transfer of property out of
the ordinary course of business, capital contribution, equity or
profit sharing interest, extension of credit on terms other than
those normal in the ordinary course of business, Guarantee or
otherwise becoming liable (contingently or otherwise) in respect
of the Indebtedness of any Person, or otherwise.
Letter of Credit and Letters of Credit shall have the
meanings ascribed thereto in Section 4.01(a), and shall include,
in any event, the Existing Letters of Credit, as the same may
from time to time be amended, modified, extended or renewed.
Letter of Credit Application shall mean an application
and agreement for irrevocable standby letter of credit in the
form of Exhibit C attached hereto and incorporated herein by
reference or an application and agreement for irrevocable
commercial letter of credit in the form of Exhibit D attached
hereto and incorporated herein by reference, as the case may be,
in either case executed by Borrower, as account party, and
delivered to Mercantile pursuant to Section 4.01(a), as the same
may from time to time be amended, modified, extended or renewed,
and shall include, in any event, the Letter of Credit
Applications executed by Borrower, as account party, with respect
to the Existing Letters of Credit, as the same may from time to
time be amended, modified, extended or renewed.
Letter of Credit Commitment shall have the meaning
ascribed thereto in Section 4.01(a).
Letter of Credit Commitment Fee shall have the meaning
ascribed thereto in Section 4.01(d).
Letter of Credit Issuance Fee shall have the meaning
ascribed thereto in Section 4.01(d).
Letter of Credit Loan shall have the meaning ascribed
thereto in Section 4.01(c).
<PAGE>
Letter of Credit Negotiation Fee shall have the meaning
ascribed thereto in Section 4.01(d).
Letter of Credit Period shall mean the period
commencing on the date of this Agreement and ending August 30,
1997.
Letter of Credit Request shall have the meaning
ascribed thereto in Section 4.01(a).
LIBOR Base Rate shall mean, with respect to the
applicable Interest Period, the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the respective
rates per annum of interest at which deposits in dollars are
offered to Mercantile in the London interbank market by two (2)
Eurodollar dealers of recognized standing, selected by Mercantile
in its sole discretion, at such time on the date two (2)
Eurodollar Business Days before the first day of such Interest
Period as Mercantile in its sole discretion elects, for delivery
on the first day of the applicable Interest Period for a number
of days comparable to the number of days in such Interest Period
and in an amount approximately equal to the principal amount of
the LIBOR Loan to which such Interest Period is to apply.
LIBOR Loan shall mean any Revolving Credit Loan bearing
interest at the LIBOR Rate.
LIBOR Margin shall mean One Percent (1%) per annum.
LIBOR Rate shall mean (a) the quotient of the (i) LIBOR
Base Rate divided by (ii) one minus the applicable LIBOR Reserve
Percentage plus (b) the LIBOR Margin.
LIBOR Reserve Percentage shall mean for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor), for determining the maximum
reserve requirement for a member bank of the Federal Reserve
System in St. Louis, Missouri with respect to "Eurocurrency
liabilities" (or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate
on LIBOR Loans is determined or any category of extensions of
credit or other assets which include loans by a non-United States
office of any Bank to United States residents). The LIBOR Rate
shall be adjusted automatically on and as of the effective date
of any change in the LIBOR Reserve Percentage.
Lien shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner
of the Property, whether such interest is based on common law,
statute or contract, including, without limitation, any security
<PAGE>
interest, mortgage, deed of trust, pledge, hypothecation,
judgment lien or other lien or encumbrance of any kind or nature
whatsoever, any conditional sale or trust receipt, any lease,
consignment or bailment for security purposes and any Capitalized
Lease. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances
affecting Property.
Loan shall mean each Revolving Credit Loan (whether a
Floating Rate Loan or a LIBOR Loan) and each Letter of Credit
Loan and Loans shall mean any or all of the foregoing.
Material Adverse Effect shall mean (a) a material
adverse effect on the Properties, assets, liabilities, business,
operations, prospects, income or condition (financial or
otherwise) of Borrower and its Subsidiaries taken as a whole, (b)
material impairment of Borrower's ability to perform any of its
obligations under this Agreement, any of the Notes, any of the
Letter of Credit Applications or any of the other Transaction
Documents or (c) material impairment of the enforceability of the
rights of, or benefits available to, the Agent or any of the
Banks under this Agreement, any of the Notes, any of the Letter
of Credit Applications or any of the other Transaction Documents.
Moody's shall mean Moody's Investors Service, Inc.
Multiemployer Plan shall mean any Pension Plan which is
a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA
which is maintained for employees of Borrower, any ERISA
Affiliate or any Subsidiary.
Net Proceeds shall mean the net cash proceeds from the
sale, transfer or issuance at fair market value of any Qualified
Stock (other than from the sale or issuance of Qualified Stock
pursuant to employee stock option or other stock-based employee
incentive plans or programs or to a Subsidiary) or other
Properties or assets, net of all underwriters' discounts and
commissions, other marketing and selling expenses, attorneys'
fees and expenses and other expenses in connection with
reconditioning, preparing for sale, shipping or otherwise
transferring such Qualified Stock or such Properties and assets
(which net cash proceeds shall be deemed to include an amount
equal to the principal amount of any Debt of Borrower actually
converted after the date of this Agreement into Qualified Stock).
Notes shall have the meaning ascribed thereto in
Section 3.03(a).
Note Agreement shall mean that certain Note Agreement
dated August 31, 1993, by and among Borrower, The Prudential
<PAGE>
Insurance Company of America and Principal Mutual Life Insurance
Company, as amended by certain amendments thereto dated February
24, 1994, June 14, 1994, and November 9, 1994, and as the same
may from time to time be further amended, modified, extended or
renewed.
Notice of Borrowing shall have the meaning ascribed
thereto in Section 3.02.
Obligor shall mean Borrower and each other Person who
is or shall at any time hereafter become primarily or secondarily
liable on any of Borrower's Obligations or who grants the Agent
or any of the Banks a Lien upon any of the Property or assets of
such Person as security for any of Borrower's Obligations.
Occupational Safety and Health Laws shall mean the
Occupational Safety and Health Act of 1970, as amended, and any
other Federal, state or local statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee
health and/or safety, as now or at any time hereafter in effect.
Operating Lease shall mean any lease of real and/or
personal property under which Borrower or a Subsidiary is lessee
other than Capitalized Leases.
PBGC shall mean the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its
functions under ERISA.
Pension Plan shall mean any "employee pension benefit
plan" (as such term is defined in Section 3 of ERISA), which is
or has been established or maintained by, or to which
contributions are or have been made by, Borrower, any ERISA
Affiliate or any Subsidiary.
Permitted Liens shall mean any of the following:
(a) Liens for property taxes and assessments or
governmental charges or levies and Liens securing
claims or demands of mechanics and materialmen,
provided payment thereof is not at the time required by
Section 7.01(d)(i) and/or Section 7.01(d)(ii);
(b) Liens (other than any Liens imposed by ERISA)
incidental to the conduct of business or the ownership
of Properties and assets (including Liens in connection
with worker's compensation, unemployment insurance and
other like laws, warehousemen's and attorneys' liens
and statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to
<PAGE>
secure statutory obligations, surety or appeal bonds or
other Liens of like general nature incurred in the
ordinary course of business and not in connection with
the borrowing of money or the acquisition of inventory
or other Property; provided in each case the obligation
secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or
proceedings being diligently conducted and for which
adequate reserves in accordance with GAAP have been set
aside;
(c) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the
activities of Borrower and its Subsidiaries or which
customarily exist on properties of corporations
engaged in similar activities and similarly situated
and which do not in any event materially impair the use
of such real properties in the operation of the
business of the Borrower and its Subsidiaries;
(d) Liens on Property or assets of a Subsidiary to
secure obligations of such Subsidiary to Borrower or
another Subsidiary;
(e) Liens existing as of the date of this
Agreement and listed on Schedule 6.12 attached hereto;
(f) Liens existing on any real or personal
property of any corporation at the time it becomes a
Subsidiary, or existing prior to the time of
acquisition upon any real or personal property acquired
by Borrower or any Subsidiary through purchase, merger
or consolidation or otherwise, whether or not expressly
assumed by Borrower or such Subsidiary, or placed on
real or personal property at the time of acquisition by
Borrower or any Subsidiary to secure all or a portion
of (or to secure Debt incurred to pay all or a portion
of) the purchase price thereof; provided, however, that
(i) except in the case of purchase money Liens, such
Lien shall not have been created, incurred or assumed
in contemplation of such purchase, merger,
consolidation or other event, (ii) at the time of
acquisition of such Property, the aggregate amount
remaining unpaid on all Indebtedness secured by Liens
on such Property whether or not assumed by Borrower or
a Subsidiary shall not exceed an amount equal to the
lesser of the total purchase price or fair market value
at the time of acquisition of such Property (as
<PAGE>
determined in good faith by the Board of Directors of
Borrower), (iii) such Lien shall be confined solely to
the item(s) of Property so acquired and, if required by
the terms of the agreement originally creating such
Lien, other Property which is an improvement to, or is
acquired for specific use in connection with, such
acquired Property and (iv) in the case of a purchase
money Lien, such Lien shall have been created or
incurred at the time of, or within thirty (30) days
after, the acquisition or completion of construction of
such Property; and
(g) 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 (g) 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 (g) 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 (g) plus the aggregate
amount of all Debt secured by Liens permitted by
clauses (e) and/or (f) above does not exceed ten
percent (10%) of Consolidated Capitalization as of the
end of the fiscal quarter immediately preceding the
date of determination.
Person shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity or government
(whether national, Federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
Prime Rate shall mean the interest rate announced from
time to time by Mercantile as its "prime rate" on commercial
loans (which rate shall fluctuate as and when said prime rate
shall change). Borrower acknowledges that such "prime rate" is
a reference rate and does not necessarily represent the lowest or
best rate offered by Mercantile or any of the other Banks to
their respective customers.
Property shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible. Properties shall mean the plural of Property.
For purposes of this Agreement, Borrower and each Subsidiary
shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement,
<PAGE>
financing lease or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person
for security purposes.
Pro Rata Share shall mean: with respect to Mercantile,
41.6666667%; with respect to Harris Trust and Savings Bank,
33.3333333%; and with respect to The Daiwa Bank, Limited, 25%.
Qualified Stock shall mean any Capital Stock of
Borrower that does not have any of the following rights or
features: (a) mandatory or scheduled dividends; (b) redemption,
retirement, repurchase or other acquisition (or establishment of
a sinking fund for such purpose) of such Capital Stock prior to
the final maturity of the Note, whether mandatory, scheduled or
at the option of the holder thereof; or (c) being convertible
into or exchangeable for, or having rights, warrants or options
to acquire, Debt or any similar obligation.
RCRA shall mean the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section
6901 et seq., and any future amendments.
Regulation D shall mean Regulation D of the Board of
Governors of the Federal Reserve System, as from time to time
amended.
Regulatory Change shall have the meaning ascribed
thereto in Section 3.13.
Release shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment, including,
without limitation, the abandonment or discarding of barrels,
drums, containers, tanks and/or other receptacles containing or
previously containing any Hazardous Substance.
Reportable Event shall have the meaning given to such
term in ERISA.
Required Banks shall mean at any time Banks having
Sixty Percent (60%) of the aggregate amount of Loans and Letters
of Credit then outstanding or, if no Loans or Letters of Credit
are then outstanding, Sixty Percent (60%) of the total
Commitments of all of the Banks.
Responsible Officer shall mean the chief executive
officer, chief operating officer, chief financial officer or
chief accounting officer of Borrower or any other officer of
Borrower involved principally in the financial administration or
controllership function of Borrower.
<PAGE>
Restricted Investments shall mean any Investment, or
any expenditure or any incurrence of any liability to make any
expenditure for an Investment, other than:
(a) loans and/or advances by Borrower or a
Subsidiary to a Subsidiary;
(b) loans and/or advances by any Subsidiary to
Borrower which are subordinated in writing to the
payment of the Borrower's Obligations in form and
substance satisfactory to the Required Banks;
(c) direct obligations of the United States of
America or Canadian Government or any instrumentality
or agency thereof, the payment of which is
unconditionally guaranteed by the United Stated of
America or Canadian Government or any instrumentality
or agency thereof (all of which Investments must mature
within twelve (12) months from the time of acquisition
thereof);
(d) Investments in readily marketable commercial
paper which, at the time of acquisition thereof by
Borrower or any Subsidiary, is rated A-1 or better by
S&P or P-1 or better by Moody's and which matures
within 270 days from the date of acquisition thereof,
provided that the issuer of such commercial paper
shall, at the time of acquisition of such commercial
paper, have a senior long- term debt rating of at least
A by S&P and Moody's;
(e) preferred stocks of corporations organized and
existing under the laws of the United States of America
or any state thereof having ratings of AAA from S&P and
Aaa from Moody's;
(f) negotiable certificates of deposit or
negotiable bankers acceptances issued by any of the
Banks or any other bank or trust company organized
under the laws of the United States of America or any
state thereof, which bank or trust company (excluding
the Banks to which such requirements shall not apply)
is a member of both the Federal Deposit Insurance
Corporation and the Federal Reserve System and is
rated A or A/B by Keefe, Bruyette and Woods' Bank Watch
Service (all of which Investments must mature within
twelve (12) months from the time of acquisition
thereof);
(g) repurchase agreements, which shall be
collateralized for at least 102% of face value, issued
<PAGE>
by any of the Banks or any other bank or trust company
organized under the laws of the United States or any
state thereof, which bank or trust company (excluding
the Banks to which such requirements shall not apply)
is a member of both the Federal Deposit Insurance
Corporation and the Federal Reserve System and is rated
A or A/B by Keefe, Bruyette and Woods' Bank Watch
Service (all of which Investments must mature within
twelve (12) months for the time of acquisition
thereof);
(h) short-term interest bearing deposits in, or
negotiable bankers acceptances or mortgage corporation
investment certificates issued by, any bank or trust
company organized under the laws of Canada or any
province thereof (all of which Investments must mature
within twelve (12) months from the time of acquisition
thereof); provided, however, that the aggregate amount
of all Investments under this clause (h) in any one
bank or trust company shall not exceed $1,000,000.00
Canadian Dollars at any one time outstanding;
(i) short-term deposits not in excess of
$2,500,000.00 in the aggregate at any time in The
Boatmen's National Bank of St. Louis (such amounts to
be determined based on the collected funds available to
Borrower or a Subsidiary in accordance with the normal
banking practice of The Boatmen's National Bank of St.
Louis and not on the ledger balances of such accounts);
(j) shares of Shearson Lehman Hutton Fed Fund,
Centerland Short-Term Diversified Assets Portfolio,
Centerland Short-Term Tax Exempt Portfolio, Roy Fund
Canadian Treasury Bill Fund and Roy Fund Money Market
Fund (all of which Investments shall mature within
twelve (12) months from the time of acquisition
thereof);
(k) Investments existing as of the date hereof as
described in Schedule 7.02(e), and any future retained
earnings in respect thereof;
(l) loans or advances to officers or employees of
Borrower or a Subsidiary which are usual and in the
ordinary course of business pursuant to plans approved
by all of the directors of Borrower who are not
otherwise employees of Borrower or any Subsidiary;
(m) Investments in a corporation which immediately
becomes a Subsidiary as a result of such Investments;
and
<PAGE>
(n) additional Investments which in the aggregate
do not exceed ten percent (10%) of Consolidated
Tangible Net Worth as of any date of determination.
Restricted Payment means (a) any dividend (except a
dividend payable in Qualified Stock) on, or any distribution
(except a distribution in Qualified Stock) in respect of, any
shares of Capital Stock or (b) the redemption, repurchase,
retirement or other acquisition of any shares of Capital Stock
(except that the provisions of clause (b) of this definition
shall not apply to the retirement of any shares of Capital Stock
by exchange for, or from Net Proceeds of a concurrent sale of,
shares of Qualified Stock).
Revolving Credit Loan and Revolving Credit Loans shall
have the meanings ascribed thereto in Section 3.01(a).
Revolving Credit Period shall mean the period
commencing on the date of this Agreement and ending August 31,
1997.
Sale and Leaseback Transaction shall have the meaning
ascribed thereto in Section 7.02(k).
S&P shall mean Standard and Poor's Ratings Group.
Subsidiary shall mean any corporation incorporated
under the laws of any state of the United States, Canada or any
province of Canada, which conducts the major portion of its
business in, and makes the major portion of its sales to Persons
located in, the United States or Canada, and all of the shares of
stock of every class of which, except directors' qualifying
shares, shall, at the time as of which any determination is being
made, be owned by Borrower either directly or through other
Subsidiaries.
Term shall have the meaning ascribed thereto in
Section 1.
Total Outstandings shall mean, as of any date, the sum
of (i) the aggregate principal amount of all Revolving Credit
Loans outstanding as of such date, plus (ii) the aggregate
principal amount of all Letter of Credit Loans outstanding as of
such date plus (iii) the aggregate undrawn face amount of all
Letters of Credit outstanding as of such date.
Transaction Documents shall mean this Agreement, the
Notes, the Letter of Credit Application(s) and all other
agreements, documents and instruments heretofore, now or
hereafter delivered to the Agent or any of the Banks with respect
to or in connection with or pursuant to this Agreement, any Loans
<PAGE>
made hereunder, any Letters of Credit issued hereunder or any
other of Borrower's Obligations, and executed by or on behalf of
Borrower, all as the same may from time to time be amended,
modified, extended or renewed.
Voting Stock shall mean, with respect to any
corporation, any shares of stock of such corporation whose
holders are entitled under ordinary circumstances to vote for the
election of directors of such corporation (irrespective of
whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any
contingency).
2.02 Accounting Terms and Determinations. Except as
otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder
shall be made and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time, applied on a basis consistent
(except for changes approved by the Required Banks and by
Borrower's independent certified public accountants) with the
most recent audited financial statements of Borrower delivered to
Banks.
SECTION 3. THE REVOLVING CREDIT LOANS.
3.01 Commitments To Lend. Subject to the terms and
conditions set forth in this Agreement and so long as no Default
or Event of Default under this Agreement has occurred and is
continuing, during the Revolving Credit Period, each Bank
severally agrees to make such loans to Borrower (individually, a
"Revolving Credit Loan" and collectively, the "Revolving Credit
Loans") as Borrower may from time to time request pursuant to
Section 3.02. Each Revolving Credit Loan under this Section 3.01
which is a Floating Rate Loan shall be for an aggregate principal
amount of at least $200,000.00 or any larger multiple of
$25,000.00. Each Revolving Credit Loan under this Section 3.01
which is a LIBOR Loan shall be for an aggregate principal amount
of at least $2,000,000.00 or any larger multiple of $500,000.00.
The aggregate principal amount of Revolving Credit Loans which
each Bank shall be required to have outstanding hereunder at any
one time shall not exceed the lesser of (a) such Bank's
Commitment or (b) such Bank's Pro Rata Share of the sum of (i)
the total Commitments of all of the Banks, 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. Each Revolving Credit Loan under
this Section 3.01 shall be made from the several Banks ratably in
proportion to their respective Pro Rata Shares. Within the
foregoing limits, Borrower may borrow under this Section 3.01,
prepay under Section 3.08 and reborrow at any time during the
<PAGE>
Revolving Credit Period under this Section 3.01; provided,
however, that Borrower covenants and agrees to cause the
aggregate principal amount of all Revolving Credit Loans
outstanding under this Agreement to be equal to or less than
$5,000,000.00 for at least thirty (30) consecutive days during
each period commencing December 1 and ending February 28 during
the Revolving Credit Period. The failure of any Bank to make any
Revolving Credit Loan required under this Agreement shall not
release any other Bank from its obligation to make Revolving
Credit Loans as provided herein.
3.02 Method of Borrowing. (a) Borrower shall give
notice (a "Notice of Borrowing") to the Agent by 11:30 a.m. (St.
Louis time) on the Domestic Business Day of each Floating Rate
Loan, and by 11:30 a.m. (St. Louis Time) at least three (3)
Eurodollar Business Days before each LIBOR Loan, specifying:
(i) the date of such Revolving Credit Loan, which
shall be a Domestic Business Day in the case of a
Floating Rate Loan and a Eurodollar Business Day in the
case of a LIBOR Loan,
(ii) the aggregate principal amount of such
Revolving Credit Loan,
(iii) whether such Revolving Credit Loan is to be
a Floating Rate Loan or a LIBOR Loan,
(iv) in the case of a LIBOR Loan, the duration of
the initial Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period,
(v) that on the date of, and after giving effect
to, such Revolving Credit Loan, no Default or Event of
Default under this Agreement has occurred and is
continuing, and
(vi) that on the date of, and after giving effect
to, such Revolving Credit Loan, all of the
representations and warranties of Borrower contained in
this Agreement are true and correct in all material
respects on and as of the date of such Revolving Credit
Loan as if made on and as of the date of such Revolving
Credit Loan.
(b) Upon receipt of a Notice of Borrowing given to it,
the Agent shall notify each Bank by 12:30 p.m. (St. Louis time)
on the date of receipt of such Notice of Borrowing by the Agent
(which must be a Domestic Business Day) of the contents thereof
and of such Bank's Pro Rata Share of such Revolving Credit Loan.
A Notice of Borrowing shall not be revocable by Borrower.
<PAGE>
(c) Not later than 2:00 p.m. (St. Louis time) on the
date of each Revolving Credit Loan, each Bank shall (except as
provided in subsection (d) of this Section) make available its
Pro Rata Share of such Revolving Credit Loan, in Federal or other
funds immediately available in St. Louis, Missouri, to the Agent
at its address specified in or pursuant to Section 10.07. Unless
the Agent determines that any applicable condition specified in
Section 5 has not been satisfied, the Agent will make the funds
so received from the Banks available to Borrower immediately
thereafter at the Agent's aforesaid address by crediting such
funds to a demand deposit account (or such other account mutually
agreed upon in writing between Agent and Borrower) of Borrower
with the Agent.
(d) If any Bank makes a new Revolving Credit Loan
hereunder on a day on which Borrower is required to or has
elected to repay all or any part of an outstanding Revolving
Credit Loan from such Bank, such Bank shall apply the proceeds of
its new Revolving Credit Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (c) of this
Section, or remitted by Borrower to the Agent as provided in
Section 3.09, as the case may be.
(e) Borrower hereby authorizes the Agent 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 hereunder or to
make a repayment hereunder, and on any signature which the Agent
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 the Agent and each of the Banks and to hold the Agent
and each of the Banks 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
repayments hereunder.
3.03 Notes. (a) The Revolving Credit Loans of each
Bank to Borrower shall be evidenced by a Revolving Credit Note of
Borrower dated the date hereof and payable to the order of such
Bank in a principal amount equal to its Commitment in
substantially the form of Exhibit A attached hereto (with
appropriate insertions) (collectively, as the same may from time
to time be amended, modified extended or renewed, the "Notes").
(b) Each Bank shall record, and prior to any transfer
of its Note shall endorse on the schedules forming a part
<PAGE>
thereof, appropriate notations to evidence the date and amount of
each Revolving Credit Loan made by it and the date and amount of
each payment of principal made by Borrower with respect thereto.
Each Bank is hereby irrevocably authorized by Borrower to so
endorse its Note and to attach to and make a part of any such
Note a continuation of any such schedule as and when required;
provided, however that the obligation of Borrower to repay each
Revolving Credit Loan made hereunder shall be absolute and
unconditional, notwithstanding any failure of any Bank to endorse
or any mistake by any Bank in connection with endorsement on the
schedules attached to its Note. The books and records of each
Bank (including, without limitation, the schedules attached to
its Note) showing the account between such Bank and Borrower
shall be admissible in evidence in any action or proceeding and
shall constitute prima facie proof of the items therein set forth
in the absence of manifest error.
3.04 Duration of Interest Periods and Selection of
Interest Rates. (a) The duration of the initial Interest Period
for each LIBOR Loan shall be as specified in the applicable
Notice of Borrowing. Borrower shall elect the duration of each
subsequent Interest Period applicable to such LIBOR 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
Floating Rate Loan, to elect that such Loan become a LIBOR Loan
and the Interest Period to be applicable thereto, and (ii) in the
case of any LIBOR Loan, to elect that such Loan become a Floating
Rate Loan), by giving notice of such election to the Agent by
11:30 a.m. (St. Louis time) on the Domestic Business Day of, in
the case of the election of the Floating Rate, and by 11:30 a.m.
(St. Louis time) at least three (3) Eurodollar Business Days
before, in the case of the election of the LIBOR Rate, the end 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
Agent and the Banks 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 LIBOR
Loan as a LIBOR Loan or to convert any Floating Rate Loan into a
LIBOR Loan.
(b) If the Agent does not receive a notice of election
for a Revolving Credit Loan pursuant to subsection (a) above
within the applicable time limits specified therein, Borrower
shall be deemed to have elected to pay such Revolving Credit Loan
in whole pursuant to Section 3.08 on the last day of the current
Interest Period with respect thereto and to reborrow the
principal amount of such Revolving Credit Loan on such date as a
Floating Rate Loan.
<PAGE>
3.05 Interest Rates. (a) Each Floating Rate Loan
shall bear interest on the outstanding principal amount thereof,
for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Floating Rate. Such
interest shall be payable monthly in arrears on the tenth (10th)
day of each month, commencing on the first such date after such
Floating Rate Loan is made, and at maturity (whether by reason of
acceleration or otherwise). Any overdue principal of and, to the
extent permitted by law, overdue interest on, any Floating Rate
Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of Two Percent (2%)
plus the otherwise applicable rate for such day.
(b) Each LIBOR Loan shall bear interest on the
outstanding principal amount thereof for each Interest Period
applicable thereto at a rate per annum equal to the applicable
LIBOR Rate. Interest shall be payable for each Interest Period
on the last day thereof and at maturity (whether by reason of
acceleration or otherwise). Any overdue principal of and, to the
extent permitted by law, overdue interest on, any LIBOR Loan
shall bear interest, payable on demand, for each day until paid,
at a rate per annum equal to the sum of Two Percent (2%) plus the
higher of (i) the LIBOR Rate for the immediately preceding
Interest Period applicable to such LIBOR Loan or (ii) the rate
applicable to Floating Rate Loans for such day.
(c) The Agent shall determine each interest rate
applicable to the Loans hereunder and its determination thereof
shall be conclusive in the absence of manifest error.
3.06 Fees. (a) From the date of this Agreement to
but excluding the last day of the Revolving Credit Period,
Borrower shall pay to the Agent for the account of each Bank a
nonrefundable commitment fee on the unused portion of the
Commitment of such Bank (determined by subtracting such Bank's
Pro Rata Share of the Total Outstandings from such Bank's
Commitment) at the rate of Three-Sixteenths of One Percent
(3/16%) per annum. Such commitment fee shall be (i) calculated
on a daily basis, (ii) payable quarterly in arrears on each
January 5, April 5, July 5 and October 5 during the Revolving
Credit Period commencing July 5, 1995, and on the last day of the
Revolving Credit Period and (iii) calculated on an actual day,
360-day year basis.
(b) Contemporaneously with the execution of this
Agreement, Borrower shall pay to the Agent for the ratable
benefit of each of the Banks a nonrefundable facility fee in the
amount of $50,000.00.
(c) Borrower shall also pay to the Agent for its own
account a nonrefundable agent's fee in an amount equal to
<PAGE>
$10,000.00 per year, which fee shall be due and payable on the
date of this Agreement and on each anniversary date of this
Agreement during the Revolving Credit Period.
3.07 Termination or Reduction of Commitments. Borrower
may, upon three (3) Domestic Business Days' prior written notice
to the Agent, terminate entirely at any time, or proportionately
reduce from time to time on a pro rata basis among the Banks
based on their respective Pro Rata Shares by an aggregate amount
of $5,000,000.00 or any larger multiple of $1,000,000.00 the
unused portions of the Commitments; provided, however, that
(i) at no time shall the Commitments be reduced to a figure less
than the Total Outstandings, (ii) at no time shall the
Commitments be reduced to a figure greater than zero but less
than $20,000,000.00 and (iii) any such termination or reduction
shall be permanent and Borrower shall have no right to thereafter
reinstate or increase, as the case may be, the Commitment of any
Bank.
3.08 Early Payments. (a) Borrower may, upon notice to
the Agent specifying that it is paying its Floating Rate Loans,
pay without penalty or premium its Floating Rate Loans in whole
at any time, or from time to time in part in amounts aggregating
$200,000.00 or any larger multiple of $25,000.00, by paying the
principal amount to be paid together with all accrued and unpaid
interest thereon to and including the date of payment; provided,
however, that in no event may Borrower make a partial payment of
Floating Rate Loans which results in the total outstanding
Floating Rate Loans being greater than zero but less than
$200,000.00. Each such optional payment shall be applied to pay
the Floating Rate Loans of the several Banks in proportion to
their respective Pro Rata Shares.
(b) Borrower may, upon at least one (1) Eurodollar
Business Day's notice to the Agent specifying that it is paying
its LIBOR Loans, pay without penalty or premium on the last day
of any Interest Period its LIBOR Loans to which such Interest
Period applies, in whole, or in part in amounts aggregating
$2,000,000.00 or any larger multiple of $500,000.00, by paying
the principal amount to be paid together with all accrued and
unpaid interest thereon to and including the date of payment and
any funding losses and other amounts payable under Section 3.10;
provided, however, that in no event may Borrower make a partial
payment of LIBOR Loans which results in the total outstanding
LIBOR Loans with respect to which a given Interest Period applies
being greater than zero but less than $2,000,000.00. Each such
optional payment shall be applied to pay such LIBOR Loans of the
several Banks in proportion to their respective Pro Rata Shares.
(c) Upon receipt of a notice of payment pursuant to
this Section, the Agent shall promptly notify each Bank of the
<PAGE>
contents thereof and of such Bank's Pro Rata Share of such
payment and such notice shall not thereafter be revocable by
Borrower.
3.09 General Provisions as to Payments. Borrower shall
make each payment of principal of, and interest on, the Revolving
Credit Loans and of fees and all other amounts payable hereunder,
not later than 12:00 p.m. (St. Louis time) on the date when due,
in Federal or other funds immediately available in St. Louis,
Missouri, to the Agent at its address referred to in Section
10.07. The Agent will promptly distribute to each Bank in
immediately available funds its Pro Rata Share of each such
payment received by the Agent for the account of the Banks.
Whenever any payment of principal of, or interest on, the
Revolving Credit Loans or of fees shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall
be extended to the next succeeding Domestic Business Day. If the
date for any payment of principal is extended by operation of law
or otherwise, interest thereon, at the then applicable rate,
shall be payable for such extended time.
3.10 Funding Losses. Notwithstanding any provision
contained herein to the contrary, if Borrower makes any payment
of principal with respect to any LIBOR Loan (pursuant to Sections
3 or 8 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 LIBOR Loan after notice has been given to the
Agent in accordance with Section 3.02, 3.04 or 3.08(b), Borrower
shall reimburse each Bank on demand for any resulting losses and
expenses incurred by it, including, without limitation, any
losses incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period
after any such payment, provided that such Bank 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.
3.11 Basis for Determining Interest Rate Inadequate or
Unfair. If with respect to any Interest Period:
(i) the Agent is advised by Mercantile that
deposits in dollars (in the applicable amounts) are not
being offered to Mercantile in the relevant market for
such Interest Period, or
(ii) Banks holding Notes evidencing 50% or more
in aggregate principal amount of the affected LIBOR
Loans (or having 50% or more of the aggregate amount
of the total Commitments of all of the Banks, if no
LIBOR Loans are then outstanding) advise the Agent that
the LIBOR Rate as determined by the Agent will not
<PAGE>
adequately and fairly reflect the cost to such Banks of
maintaining or funding their LIBOR Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to Borrower and the
Banks, whereupon until the Agent notifies Borrower that the
circumstances giving rise to such suspension no longer exist, (a)
the obligations of the Banks to make LIBOR Loans shall be
suspended and (b) Borrower shall repay in full the then
outstanding principal amount of each of its LIBOR Loans together
with all accrued and unpaid interest thereon, on the last day of
the then current Interest Period applicable to such Loan.
Concurrently with repaying each such LIBOR Loan of each Bank
pursuant to this Section, Borrower may borrow a Floating Rate
Loan in an equal principal amount from such Bank, and, if
Borrower so elects, such Bank shall make such a Floating Rate
Loan to Borrower.
3.12 Illegality. If, after the date of this Agreement,
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 any
Bank 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 shall make it unlawful or
impossible for any Bank to make, maintain or fund its LIBOR Loans
to Borrower and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and
Borrower. Upon receipt of such notice, Borrower shall repay in
full the then outstanding principal amount of each of its LIBOR
Loans from such Bank, together with all accrued and unpaid
interest thereon, on either (a) the last day of the then current
Interest Period applicable to such LIBOR Loan if such Bank may
lawfully continue to maintain and fund its LIBOR Loans to such
day or (b) immediately if such Bank may not lawfully continue to
fund and maintain its LIBOR Loan to such day. Concurrently with
repaying each LIBOR Loan of such Bank, Borrower may borrow a
Floating Rate Loan in an equal principal amount from such Bank,
and, if Borrower so elects, such Bank shall make such a Floating
Rate Loan to Borrower.
3.13 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 any Bank with any request or directive (whether or not having
<PAGE>
the force of law) of any such governmental or regulatory
authority, central bank or comparable agency (a "Regulatory
Change"):
(A) shall subject any Bank to any tax, duty or
other charge with respect to its LIBOR Loans, its Note
or its obligation to make LIBOR Loans, or shall change
the basis of taxation of payments to any Bank of the
principal of or interest on its LIBOR Loans or any
other amounts due under this Agreement in respect of
its LIBOR Loans or its obligation to make LIBOR Loans
(except for taxes on or changes in the rate of tax on
the overall net income of such Bank); 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, any Bank or shall, with respect to any
Bank or the London interbank market, impose, modify or
deem applicable any other condition affecting its LIBOR
Loans, its Note or its obligation to make LIBOR Loans;
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) such Bank of making or maintaining any LIBOR Loan,
or to reduce the amount of any sum received or receivable by such
Bank under this Agreement or under its Note with respect thereto,
by an amount deemed by such Bank, in its good faith judgment, to
be material, and if such Bank is not otherwise fully compensated
for such increase in cost or reduction in amount received or
receivable by virtue of the inclusion of the reference to "LIBOR
Reserve Percentage" in the calculation of the interest rate
applicable to LIBOR Loans, then, within fifteen (15) days after
notice by such Bank to Borrower together with a copy of the
official notice of the applicable change in law (if applicable)
and a work sheet showing how the increase in cost or reduction in
amount received or receivable was calculated (with a copy to the
Agent and all of the other Banks), Borrower shall pay for the
account of such Bank as additional interest, such additional
amount or amounts as will compensate such Bank for such increased
cost or reduction. Each Bank will promptly notify Borrower, the
Agent and all of the other Banks of any event of which it has
knowledge, occurring after the date hereof, which will entitle
such Bank to compensation pursuant to this Section. The
determination by any Bank under this Section of the additional
amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and
attribution methods.
<PAGE>
(b) If any Bank demands compensation under this
Section, Borrower may at any time, upon at least two (2) Domestic
Business Days' prior notice to such Bank and the Agent, repay in
full its then outstanding LIBOR Loans from such Bank, together
with all accrued and unpaid interest thereon to the date of
prepayment and any funding losses and other amounts due under
Section 3.10. Concurrently with repaying such LIBOR Loans of
such Bank, Borrower may borrow from such Bank a Floating Rate
Loan in an amount equal to the aggregate principal amount of such
LIBOR Loans, and, if Borrower so elects, such Bank shall make
such a Floating Rate Loan to Borrower.
3.14 Floating Rate Loans Substituted for Affected LIBOR
Loans. If notice has been given by a Bank pursuant to Sections
3.11 or 3.12 or by Borrower pursuant to Section 3.13 requiring
LIBOR Loans of any Bank to be repaid, then, unless and until such
Bank notifies Borrower that the circumstances giving rise to such
repayment no longer apply, all Loans which would otherwise be
made by such Bank to Borrower as LIBOR Loans shall be made
instead as Floating Rate Loans. Such Bank shall promptly notify
Borrower if and when the circumstances giving rise to such
repayment no longer apply.
3.15 Capital Adequacy. If, after the date of this
Agreement, any Bank shall have determined in good faith 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 such Bank 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
such Bank's capital in respect of its obligations hereunder to a
level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such
Bank's policies with respect to capital adequacy), then from time
to time Borrower shall pay to such Bank upon demand such
additional amount or amounts as will compensate such Bank for
such reduction. All determinations made in good faith by such
Bank of the additional amount or amounts required to compensate
such Bank in respect of the foregoing shall be conclusive in the
absence of manifest error. In determining such amount or
amounts, such Bank may use any reasonable averaging and
attribution methods.
3.16 Survival of Indemnities. All indemnities and all
provisions relating to reimbursement to Bank of amounts
sufficient to protect the yield to Bank with respect to the
Revolving Credit Loans, including, without limitation, Sections
<PAGE>
3.11, 3.12, 3.13 and 3.15 hereof, shall survive the payment of
the Notes and the other Borrower's Obligations and the
termination of this Agreement.
3.17 Discretion of Bank as to Manner of Funding.
Notwithstanding any provision contained in this Agreement to the
contrary, each of the Banks shall be entitled to fund and
maintain its funding of all or any part of its LIBOR 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 each Bank's funding
losses and expenses under Section 3.10) shall be made as if such
Bank had actually funded and maintained each LIBOR Loan through
the purchase of deposits having a maturity corresponding to the
maturity of the applicable Interest Period relating to the
applicable LIBOR Loan and bearing an interest rate equal to the
applicable LIBOR Rate.
3.18 Late Payment Fees. If Borrower fails to make any
payment of any principal of or interest on any Revolving Credit
Loan within ten (10) days after the date the same shall become
due and payable, whether by reason of maturity, acceleration or
otherwise, in addition to all of the other rights and remedies of
the Agent and the Banks under this Agreement and at law or in
equity, Borrower shall pay the Agent for the ratable benefit of
the Banks on demand with respect to each such late payment a late
fee in an amount equal to the greater of $100.00 or five percent
(5%) of the amount of each such late payment.
3.19 Computation of Interest. Interest on Floating
Rate Loans hereunder shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day). Interest
on LIBOR Loans shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed, calculated
as to each Interest Period from and including the first day
thereof to but excluding the last day thereof.
3.20 Maturity. All Revolving Credit Loans not paid
prior to August 31, 1997, together with all accrued and unpaid
interest thereon and all fees and other amounts owing by Borrower
to the Banks with respect thereto, shall be due and payable on
August 31, 1997.
3.21 Sharing of Payments. The Banks agree among
themselves that, in the event that any of the Banks shall
directly or indirectly obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off,
banker's lien or counterclaim, through the realization,
collection, sale or liquidation of any collateral or otherwise)
on account of or in respect of any of the Loans or any of the
<PAGE>
other Borrower's Obligations in excess of its Pro Rata Share of
all such payments, such Bank(s) shall immediately purchase from
the other Bank(s) participations in the Loans or other Borrower's
Obligations owed to such other Bank(s) in such amounts, and make
such other adjustments from time to time, as shall be equitable
to the end that the Banks share such payment ratably in
accordance with their respective Pro Rata Shares of the
outstanding Loans and other Borrower's Obligations. The Banks
further agree among themselves that if any such excess payment to
a Bank shall be rescinded or must otherwise be restored, the
other Bank(s) which shall have shared the benefit of such payment
shall, by repurchase of participation theretofore sold, or
otherwise, return its share of that benefit to the Bank whose
payment shall have been rescinded or otherwise restored. Borrower
agrees that any Bank(s) so purchasing a participation in the
Loans or other Borrower's Obligations owed to the other Bank(s)
may exercise all rights of set-off, banker's lien and/or
counterclaim as fully as if such Bank(s) were a holder of such
Loan or other Borrower's Obligations in the amount of such
participation. If under any applicable bankruptcy, insolvency or
other similar law any of the Banks receives a secured claim in
lieu of a set-off to which this Section 3.21 would apply, such
Bank(s) shall, to the extent practicable, exercise their rights
in respect of such secured claim in a manner consistent with the
rights of the Bank(s) entitled under this Section 3.21 to share
in the benefits of any recovery of such secured claim.
SECTION 4. LETTERS OF CREDIT.
4.01 Letter of Credit Commitment. (a) Subject to the
terms and conditions of this Agreement and so long as no Default
or Event of Default under this Agreement has occurred and is
continuing (provided, however, that Mercantile shall have no
liability to any of the other Banks for issuing a Letter of
Credit while a Default or Event of Default under this Agreement
has occurred and is continuing unless Mercantile, prior to
issuing such Letter of Credit, had received notice in writing
from Borrower or any of the other Banks of the occurrence and
continuance of such Default or Event of Default or Mercantile
otherwise had actual knowledge of the occurrence and continuance
of such Default or Event of Default), during the Letter of Credit
Period, Mercantile hereby agrees to issue irrevocable commercial
and/or standby letters of credit for the account of Borrower
(individually, a "Letter of Credit" and collectively, the
"Letters of Credit") (the "Letter of Credit Commitment") in an
amount and for the term specifically requested by Borrower by
notice in writing to Mercantile in the form of Exhibit B attached
hereto and incorporated herein by reference (a "Letter of Credit
Request") at least three (3) Domestic Business Days prior to the
requested issuance thereof; provided, however, that:
<PAGE>
(i) Borrower shall have executed and
delivered to Mercantile a Letter of Credit Application with
respect to such Letter of Credit;
(ii) the term of any such Letter of Credit
shall not extend beyond the date one (1) year after the date of
issuance thereof;
(iii) any Letter of Credit may only be
utilized to guaranty the payment of obligations of Borrower or
any Subsidiary to third parties;
(iv) the Total Outstandings shall not at any
one time exceed the total Commitments of all of the Banks as of
such time;
(v) 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 shall not at any one time exceed the lesser of (A) the
total Commitments of all of the Banks as of such time or (B)
$9,000,000.00; and
(vi) the text of any such Letter of Credit is
provided to Mercantile no less than three (3) Domestic Business
Days prior to the requested issuance date, which text must be
acceptable to Mercantile in its sole and absolute discretion.
(b) The acceptance or payment of drafts under each
Letter of Credit shall be made in accordance with the terms
thereof and, in that connection, Mercantile shall be entitled to
honor any drafts and accept any documents presented to it by the
beneficiary of such Letter of Credit in accordance with the terms
of such Letter of Credit and believed in good faith by Mercantile
to be genuine. Mercantile shall not have any duty to inquire as
to the accuracy or authenticity of any draft or other drawing
document that may be presented to it other than the duties
contemplated by the applicable Letter of Credit Application. If
Mercantile shall have received documents that in its good faith
judgment constitute all of the documents that are required to be
presented before payment or acceptance of a draft under a Letter
of Credit, it shall be entitled to pay or accept such draft
provided such documents conform on their face to the requirements
of such Letter of Credit.
(c) In the event of any payment by Mercantile of
a draft presented or accepted under a Letter of Credit, Borrower
agrees to pay to Mercantile in immediately available funds at the
time of such drawing an amount equal to the sum of such drawing
plus Mercantile's customary negotiation, processing and other
fees related thereto. Borrower hereby authorizes Mercantile to
<PAGE>
charge or cause to be charged Borrower's bank accounts at
Mercantile to the extent there are balances of immediately
available funds therein, in an amount equal to the sum of such
drawing plus Mercantile's customary negotiation, processing and
other fees related thereto, and Borrower agrees to pay the amount
of any such drawing (and/or Mercantile's customary negotiation,
processing and other fees related thereto) not so charged prior
to the close of business of Mercantile on the day of such
drawing. In the event any payment under a Letter of Credit is
made by Mercantile prior to receipt of payment from Borrower,
such payment by Mercantile shall constitute a loan (a "Letter of
Credit Loan") by Mercantile to Borrower, payable on demand of
Mercantile. Borrower agrees to pay interest on demand of
Mercantile on any unpaid Letter of Credit Loan at a rate per
annum equal to Two Percent (2%) over and above the Floating Rate
until such Letter of Credit Loan is paid in full, calculated on
an actual day, 360-day year basis.
(d) Borrower hereby further agrees to pay to the
order of Mercantile:
(i) with respect to each Letter of Credit
which is a standby Letter of Credit, a nonrefundable issuance fee
in the amount of $125.00 and with respect to each Letter of
Credit which is a commercial Letter of Credit, a nonrefundable
issuance fee in the amount of $135.00 (the "Letter of Credit
Issuance Fees"), which Letter of Credit Issuance Fees shall be
due and payable on the date of issuance of each such Letter of
Credit;
(ii) with respect to each Letter of Credit
which is a standby Letter of Credit, a nonrefundable commitment
fee in an amount equal to Three-Quarters of One Percent (3/4%)
per annum (calculated on an actual day, 360-day year basis) of
the face amount (taking into account any scheduled increases or
decreases therein during the period in question) of each such
Letter of Credit ("Letter of Credit Commitment Fee"), which
Letter of Credit Commitment Fee shall be due and payable annually
in advance on the date of issuance of each such Letter of Credit
and on each anniversary date of such Letter of Credit;
(iii) with respect to each Letter of Credit
which is a commercial Letter of Credit, a nonrefundable
negotiation fee in an amount equal to Three-Eighths of One
Percent (3/8%) of the amount of each draw on each such Letter of
Credit ("Letter of Credit Negotiation Fee"), which Letter of
Credit Negotiation Fee shall be due and payable on the date of
each draw of each such Letter of Credit; and
(iv) with respect to each Letter of Credit,
such other fees as may be charged by Mercantile from time to time
in accordance with Mercantile's published schedule of fees in
<PAGE>
effect from time to time, which fees shall be due and payable on
demand by Mercantile.
4.02 Existing Letters of Credit. Notwithstanding any
provision contained in this Agreement to the contrary, (i) all
references in this Agreement to Letters of Credit shall include
the irrevocable standby and commercial letters of credit listed
on Schedule 4.02 attached hereto which have heretofore been
issued by Mercantile for the account of Borrower (the "Existing
Letters of Credit") and (ii) all references in this Agreement to
the Letter of Credit Applications shall include the applications
and agreements for irrevocable standby and commercial letters of
credit heretofore executed by Borrower, as account party, with
respect to the Existing Letters of Credit.
4.03 Participation by Other Banks. Upon the issuance
of a Letter of Credit by Mercantile, an undivided participation
interest therein (including, without limitation, an undivided
participation interest in the reimbursement risk relating to such
Letter of Credit, in all payments and Letter of Credit Loans made
by Mercantile in connection with such Letter of Credit and in all
collateral securing such Letter of Credit and/or such Letter of
Credit Loans) shall automatically be granted by Mercantile to and
accepted by each of the other Banks in an amount based on each
such other Bank's Pro Rata Share of the face amount of such
Letter of Credit, which participation shall be evidenced by a
single Letter of Credit Participation Certificate executed by
Mercantile in favor of such Bank in the form attached hereto as
Exhibit E and incorporated herein by reference. If Mercantile
shall make payment on any draft presented or accepted under a
Letter of Credit, Mercantile shall give notice of such payment to
the other Banks, and each of the other Banks hereby authorizes
and requests Mercantile to advance for their respective accounts,
pursuant to the terms hereof, their respective shares of any such
payment based upon their respective Pro Rata Shares. If such
drawing is not paid by Borrower in immediately available funds
prior to the close of business of Mercantile on the date of such
drawing, Mercantile shall promptly so notify the other Banks and
each of the other Banks agrees to immediately reimburse
Mercantile in immediately available funds for its Pro Rata Share
of the amount of such drawing, plus interest calculated on its
Pro Rata Share of such amount at a rate per annum equal to Two
Percent (2%) over and above the Floating Rate calculated from the
date of such payment by Mercantile to but excluding the date of
reimbursement by such other Bank and on an actual-day, 360-day
year basis (and upon such payment (including any required
interest), such Bank's participation in the resulting Letter of
Credit Loan shall be dated the date such drawing was paid by
Mercantile and not the date such Bank reimbursed Mercantile for
its Pro Rata Share of such drawing). Each of the other Banks
will be entitled to its Pro Rata Share of any Letter of Credit
<PAGE>
Commitment Fees and any Letter of Credit Negotiation Fees paid by
Borrower, but such other Banks shall have no right to share in
any Letter of Credit Issuance Fees or any other fees paid by
Borrower to Mercantile in connection with any of the Letters of
Credit.
4.04 Replacement or Collateralization of Letters of
Credit. Notwithstanding any provision contained in this
Agreement or any of the Letter of Credit Applications to the
contrary: (a) if any of the Letters of Credit remain outstanding
on the last day of the Letter of Credit Period, Borrower shall,
on or before 12:00 noon (St. Louis time) on the last day of the
Letter of Credit Period, (i) surrender the originals of the
applicable Letter(s) of Credit to Mercantile for cancellation or
(ii) provide Mercantile with cash collateral (or other collateral
acceptable to Mercantile in its sole and absolute discretion) in
an amount at least equal to the aggregate undrawn face amount of
all Letter(s) of Credit which remain outstanding at such time and
execute and deliver to Mercantile such agreements as Mercantile
may require to grant Mercantile a first priority perfected
security interest in such cash or other collateral; and (b) upon
the occurrence of any Event of Default under this Agreement
(including, without limitation, Borrower's failure to comply with
the requirements of clause (a) above), at Mercantile's option and
without demand or further notice to Borrower, an amount equal to
the aggregate undrawn face amount of all Letter(s) of Credit then
outstanding shall be deemed (as between Mercantile and Borrower)
to have been paid or disbursed by Mercantile (notwithstanding
that such amounts may not in fact have been so paid or disbursed
by Mercantile), and a Letter of Credit Loan to Borrower in such
amount to have been made and accepted by Borrower, which Letter
of Credit Loan shall be immediately due and payable. In lieu of
the foregoing, at the election of Mercantile, Borrower shall,
upon Mercantile's demand, deliver to Mercantile cash, or other
collateral acceptable to Mercantile in its sole and absolute
discretion, having a value, as determined by Mercantile, at least
equal to aggregate undrawn face amount of all outstanding Letters
of Credit. Any such collateral and/or any amounts received by
Mercantile in payment of the Letter of Credit Loan made pursuant
to this Section 4.04 shall be held by Mercantile in a separate
account at Mercantile appropriately designated as a cash
collateral account in relation to this Agreement and the Letters
of Credit and retained by Mercantile as collateral security for
the payment of the Borrower's Obligations. Cash amounts
delivered to Mercantile pursuant to the foregoing requirements of
this Section 4.04 shall be invested, at the request and for the
account of Borrower, in investments of a type and nature and with
a term acceptable to Mercantile. Such amounts, including in the
case of cash amounts invested in the manner set forth above, any
investment realized thereon, shall not be used by Mercantile to
pay any amounts drawn or paid under or pursuant to any Letter of
<PAGE>
Credit, but may be applied to reimburse Mercantile for drawings
or payments under or pursuant to the Letters of Credit which
Mercantile has paid, or if no such reimbursement is required to
the payment of such other of Borrower's Obligations as Mercantile
shall determine. Any amounts remaining in any cash collateral
account established pursuant to this Section 4.04 after the
payment in full of all of the Borrower's Obligations and the
expiration or cancellation of all of the Letters of Credit shall
be returned to Borrower (after deduction of Mercantile's
expenses, if any).
SECTION 5. PRECONDITIONS TO LOANS AND LETTERS OF CREDIT.
5.01 Initial Revolving Credit Loan or Letter of Credit.
Notwithstanding any provision contained herein to the contrary,
none of the Banks shall have any obligation to make the initial
Revolving Credit Loan hereunder and Mercantile shall have no
obligation to issue the initial Letter of Credit hereunder unless
the Agent shall have first received:
(a) this Agreement, executed by a duly authorized
officer of Borrower;
(b) the Notes, each executed by a duly authorized
officer of Borrower;
(c) a copy of resolutions of the Board of
Directors of Borrower, duly adopted, which authorize
the execution, delivery and performance of this
Agreement, the Notes, the Letter of Credit
Application(s) and the other Transaction Documents,
certified by the Secretary of Borrower;
(d) a copy of the Certificate of Incorporation of
Borrower, including any amendments thereto, certified
by the Secretary of State of the State of Delaware;
(e) a copy of the By-Laws of Borrower, including
any amendments thereto, certified by the Secretary of
Borrower;
(f) an incumbency certificate, executed by the
Secretary of Borrower, which shall identify by name
and title and bear the signatures of all of the
officers of Borrower executing any of the Transaction
Documents;
(g) certificates of corporate good standing of
Borrower issued by the Secretaries of State of the
States of Delaware and Missouri;
<PAGE>
(h) an opinion of counsel of Husch & Eppenberger,
independent counsel for Borrower, in the form of
Exhibit F attached hereto and incorporated herein by
reference;
(i) the Notice of Borrowing required by Section
3.02 and/or the Letter of Credit Request and the Letter
of Credit Application required by Section 4.01(a), as
the case may be;
(j) a letter agreement executed by Borrower
terminating its right to obtain any additional loans or
letters of credit under its existing revolving credit
facility with Mercantile;
(k) a letter agreement executed by Consumer
Programs Incorporated, a Subsidiary of Borrower,
terminating its right to obtain any additional loans or
letters of credit under its existing line of credit
facility with Mercantile;
(l) a letter agreement executed by Consumer
Programs Incorporated, a Subsidiary of Borrower,
terminating its right to obtain any additional loans or
letters of credit under its existing line of credit
facility with Harris Trust and Saving Bank;
(m) evidence in form and substance satisfactory to
the Agent that the Revolving Credit Note of Borrower
dated August 31, 1993, and payable to the order of
Mercantile in the principal amount of $25,000,000.00,
as amended, has been paid in full;
(n) evidence in form and substance satisfactory to
the Agent that the Demand Note of Consumer Programs
Incorporated, a Subsidiary of Borrower, dated April
27, 1995, and payable to the order of Mercantile in the
principal amount of $5,000,000.00 has been paid in
full;
(o) evidence in form and substance satisfactory to
the Agent that the Demand Note of Consumer Programs
Incorporated, a Subsidiary of Borrower, dated April 27,
1995, and payable to the order of Harris Trust and
Savings Bank in the principal amount of $5,000,000.00
has been paid in full; and
(p) such other agreements, documents, instruments
and certificates as the Agent or any of the Banks may
reasonably request.
<PAGE>
5.02 All Revolving Credit Loans. Notwithstanding any
provision contained herein to the contrary, none of the Banks
shall have any obligation to make any Revolving Credit Loan
hereunder unless:
(a) the Agent shall have received a Notice of
Borrowing for such Revolving Credit Loan as required by
Section 3.02;
(b) on the date of and immediately after such
Revolving Credit Loan, no Default or Event of Default
under this Agreement shall have occurred and be
continuing;
(c) no material adverse change in the Properties,
assets, liabilities, business, operations, prospects,
income or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole shall
have occurred since the date of this Agreement and be
continuing; and
(d) all of the representations and warranties of
Borrower contained in this Agreement shall be true and
correct in all material respects on and as of the date
of such Revolving Credit Loan as if made on and as of
the date of such Revolving Credit Loan (and for
purposes of this Section 5.02(d), the representations
and warranties made by Borrower in Section 6.04 shall
be deemed to refer to the most recent financial
statements of Borrower delivered to the Banks pursuant
to Section 7.01(a)).
Each request for a Revolving Credit Loan by Borrower
hereunder shall be deemed to be a representation and warranty by
Borrower on the date of such Revolving Credit Loan as to the
facts specified in clauses (b), (c) and (d) of this Section 5.02.
5.03 All Letters of Credit. Notwithstanding any
provision contained herein to the contrary, Mercantile shall have
no obligation to issue any Letter of Credit hereunder unless:
(a) Mercantile shall have received a Letter of
Credit Request for such Letter of Credit as required by
Section 4.01(a);
(b) Mercantile shall have received a Letter of
Credit Application for such Letter of Credit as
required by Section 4.01(a), duly executed by an
authorized officer of Borrower as account party;
(c) Borrower shall have complied with all of the
procedures and requirements set forth in Section 4.01;
<PAGE>
(d) on the date of and immediately after the
issuance of such Letter of Credit, no Default or Event
of Default under this Agreement shall have occurred and
be continuing;
(e) no material adverse change in the Properties,
assets, liabilities, business, operations, prospects,
income or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole shall
have occurred since the date of this Agreement and be
continuing;
(f) all of the representations and warranties of
Borrower contained in this Agreement shall be true and
correct in all material respects on and as of the date
of the issuance of such Letter of Credit as if made on
and as of the date of the issuance of such Letter of
Credit(and for purposes of this Section 5.03(f), the
representations and warranties made by Borrower in
Section 6.04 shall be deemed to refer to the most
recent financial statements of Borrower delivered to
the Banks pursuant to Section 7.01(a)); and
(g) Mercantile shall have received such other
documents, certificates and agreements as it may
reasonably request.
Each request for the issuance of a Letter of Credit by Borrower
hereunder shall be deemed to be a representation and warranty by
Borrower on the date of the issuance of such Letter of Credit as
to the facts specified in clauses (d), (e) and (f) of this
Section 5.03.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to the Agent and each
of the Banks that:
6.01 Corporate Existence and Power. Borrower and each
Subsidiary: (a) is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate powers and all
material governmental and regulatory licenses, authorizations,
consents and approvals required to carry on its business as now
conducted; and (c) is duly qualified to do business in all
jurisdictions in which the nature of the business conducted by it
makes such qualification necessary and where failure to so
qualify could reasonably be expected to have a Material Adverse
Effect.
6.02 Corporate Authorization. The execution, delivery
and performance by Borrower of this Agreement, the Notes, the
<PAGE>
Letter of Credit Application(s) and the other Transaction
Documents are within the corporate powers of Borrower and have
been duly authorized by all necessary corporate action.
6.03 Binding Effect. This Agreement, the Notes, the
Letter of Credit Application(s) and the other Transaction
Documents executed prior to or contemporaneously with the
execution of this Agreement have been duly executed and delivered
by Borrower and constitute the legal, valid and binding
obligations of Borrower enforceable in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors'
rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law) and the Letter of Credit Application(s) and the
other Transaction Documents not executed prior to or
contemporaneously with the execution of this Agreement, when
executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
6.04 Financial Statements. Borrower has furnished each
of the Banks with the following financial statements, identified
by the principal financial officer of Borrower: (1) consolidated
and consolidating balance sheets and statements of income,
retained earnings and cash flows of Borrower and its Subsidiaries
as of February 4, 1995, all certified by Borrower's independent
certified public accountants, which financial statements have
been prepared in accordance with GAAP; and (2) unaudited
consolidated and consolidating balance sheets and statements of
income, retained earnings and cash flows of Borrower and its
Subsidiaries as of April 29, 1995, certified by the principal
financial officer of Borrower as being true and correct to the
best of his knowledge and as being prepared in accordance with
GAAP. Borrower further represents and warrants to Bank that:
(1) said balance sheets and their accompanying notes fairly
present the condition of Borrower and its Subsidiaries as of the
dates thereof; (2) there has been no material adverse change in
the Properties, assets, business, operations or condition,
financial or otherwise, of Borrower and its Subsidiaries taken as
a whole since April 29, 1995; and (3) neither Borrower nor any of
its Subsidiaries has any direct or contingent liabilities which
are not disclosed on said financial statements or the notes
thereto (to the extent such disclosure is required by GAAP).
6.05 Litigation. Except as disclosed on Schedule 6.05
attached hereto, there is no action or proceeding pending or, to
<PAGE>
the knowledge of Borrower, threatened against or affecting
Borrower or any Subsidiary before any court, arbitrator or any
governmental, regulatory or administrative body, agency or
official which could reasonably be expected to have a Material
Adverse Effect, and neither Borrower nor any Subsidiary is in
default with respect to any order, writ, injunction, decision or
decree of any court, arbitrator or any governmental, regulatory
or administrative body, agency or official, a default under which
could reasonably be expected to have a Material Adverse Effect.
6.06 Pension and Welfare Plans. Each Pension Plan
complies in all material respects with all applicable statutes
and governmental rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan;
neither Borrower nor any ERISA Affiliate nor any Subsidiary has
withdrawn from any Multiemployer Plan in a "complete withdrawal"
or a "partial withdrawal" as defined in Sections 4203 or 4205 of
ERISA, respectively; no steps have been instituted by Borrower,
any ERISA Affiliate or any Subsidiary to terminate any Pension
Plan; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which
could result in the incurrence by Borrower, any ERISA Affiliate
or any Subsidiary of any material liability, fine or penalty; and
neither Borrower nor any ERISA Affiliate nor any Subsidiary is a
"contributing sponsor" as defined in Section 4001(a)(13) of ERISA
of a "single-employer plan" as defined in Section 4001(a)(15) of
ERISA which has two or more contributing sponsors at least two of
whom are not under common control. Except as disclosed on
Schedule 6.06 attached hereto, neither Borrower nor any
Subsidiary has any contingent liability with respect to any
"employee welfare benefit plan", as such term is defined in
Section 3(1) of ERISA, which covers retired employees and their
beneficiaries.
6.07 Tax Returns and Payment. Except as disclosed on
Schedule 6.07 attached hereto, Borrower and its Subsidiaries have
filed all Federal, state, local and other tax returns which are
required to be filed and have paid all taxes which have become
due pursuant to such returns and all other taxes, assessments,
fees and other governmental charges upon Borrower and its
Subsidiaries and upon their respective Properties, assets, income
and franchises which have become due and payable by Borrower or
any of its Subsidiaries, except those (a) wherein the amount,
applicability or validity are being contested by Borrower or any
such Subsidiary by appropriate proceedings being diligently
conducted in good faith and in respect of which adequate reserves
in accordance with GAAP have been established or (b) the
nonpayment of which (i) by the Borrower or any Subsidiary was not
willful and (ii) could not reasonably expected to result in a
Material Adverse Effect. All material tax liabilities of
Borrower and its Subsidiaries were adequately provided for as of
April 29, 1995, and are now so provided for on the books of
<PAGE>
Borrower and its Subsidiaries. Except as disclosed on Schedule
6.07 attached hereto, there is no proposed, asserted or assessed
tax deficiency against Borrower or any of its Subsidiaries which,
if adversely determined, could reasonably be expected to have a
Material Adverse Effect.
6.08 Subsidiaries. Borrower has no Subsidiaries other
than as identified on Schedule 6.08 attached hereto, as the same
may from time to time be amended, modified or supplemented as
provided herein. Schedule 6.08 attached hereto correctly sets
forth, for each Subsidiary, the number of shares of each class of
common and preferred stock authorized for such Subsidiary, the
number of outstanding and the percentage of the outstanding
shares of each such class owned, directly or indirectly, by
Borrower or one or more of its Subsidiaries. The capital stock
of Borrower and each of its Subsidiaries is duly authorized,
validly issued and fully paid and nonassessable. Except as
disclosed on Schedule 6.08 attached hereto, neither Borrower nor
any of its Subsidiaries, individually or collectively, owns or
holds, directly or indirectly, any capital stock or equity
security of, or any equity interest in, any corporation or
business other than Borrower's Subsidiaries and other than
preferred stock of corporations to the extent permitted by clause
(e) of the definition of Restricted Investment. Borrower may at
any time amend, modify or supplement Schedule 6.08 by notifying
the Agent and each of the Banks in writing of any changes
thereto, including any formation, acquisition, merger or
liquidation of Subsidiaries or any change in the capitalization
of any Subsidiary, in each case, in accordance with the terms of
this Agreement, and thereby the representations and warranties
contained in this Section 6.08 shall be amended accordingly so
long as such amendment, modification or supplement is made within
thirty (30) days after the occurrence of any such changes in the
facts stated therein and that such changes reflect transactions
that are permitted under this Agreement.
6.09 Compliance With Other Instruments; None
Burdensome. Neither Borrower nor any Subsidiary is a party to
any contract or agreement or subject to any charter or other
corporate restriction which has or could reasonably be expected
to have a Material Adverse Effect; none of the execution and
delivery by Borrower of the Transaction Documents, the
consummation of the transactions therein contemplated or the
compliance with the provisions thereof will violate any law,
rule, regulation, order, writ, judgment, injunction, decree or
award binding on Borrower, or any of the provisions of Borrower's
Certificate of Incorporation or By-Laws or any of the provisions
of any indenture, agreement, document, instrument or undertaking
to which Borrower is a party or subject, or by which it or its
Property is bound, or conflict with or constitute a default
thereunder or result in the creation or imposition of any Lien
pursuant to the terms of any such indenture, agreement, document,
<PAGE>
instrument or undertaking. No order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental, regulatory,
administrative or public body or authority, or any subdivision
thereof, or any other Person is required to authorize, or is
required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or
enforceability of, any of the Transaction Documents.
6.10 Debt; Other Loans and Guarantees. Except as
disclosed on Schedule 6.10 attached hereto, neither Borrower nor
any Subsidiary has any Debt or is a borrower, guarantor or
obligor with respect to any loan transactions or Guarantees.
Borrower may at any time amend, modify or supplement Schedule
6.10 by notifying the Agent and each of the Banks in writing of
any changes thereto, and thereby the representations and
warranties contained in this Section 6.10 shall be amended
accordingly so long as such amendment, modification or supplement
is made within thirty (30) days after the occurrence of any such
changes in the facts stated therein and that such changes reflect
transactions that are permitted under this Agreement.
6.11 Labor Matters. Except as disclosed on Schedule
6.11 attached hereto, (a) no labor contract to which Borrower or
any Subsidiary is subject is scheduled to expire during the Term
of this Agreement and (b) on the date of this Agreement,
(i) neither Borrower nor any Subsidiary is a party to any labor
dispute and (ii) there are no strikes or walkouts relating to any
labor contract to which Borrower or any Subsidiary is subject.
6.12 Title to Property. Borrower and each Subsidiary
is the sole and absolute owner of, or has the legal right to use
and occupy, all Property it claims to own or which is necessary
for Borrower or such Subsidiary to conduct its business.
Borrower and its Subsidiaries enjoy peaceful and undisturbed
possession in all material respects under all leases under which
they are operating as lessees. Neither Borrower nor any
Subsidiary has signed any financing statements, security
agreements or chattel mortgages with respect to any of its
Property, has granted or permitted any Liens with respect to any
of its Property or has any knowledge of any Liens with respect to
any of its Property, except as disclosed on Schedule 6.12
attached hereto.
6.13 Regulation U. Borrower is not engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and
no part of the proceeds of any Revolving Credit Loan will be
used, whether directly or indirectly, and whether immediately,
incidentally or ultimately (i) to purchase or carry margin stock
<PAGE>
or to extend credit to others for the purpose of purchasing or
carrying margin stock, or to refund or repay indebtedness
originally incurred for such purpose or (ii) for any purpose
which entails a violation of, or which is inconsistent with, the
provisions of any of the Regulations of The Board of Governors of
the Federal Reserve System, including, without limitation,
Regulations G, U, T or X thereof, as amended. If requested by
Bank, Borrower shall furnish to the Agent a statement in
conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
6.14 Multi-Employer Pension Plan Amendments Act of
1980. Borrower and each Subsidiary is in compliance with the
Multi-Employer Pension Plan Amendments Act of 1980, as amended
("MEPPAA"), and has no liability for pension contributions
pursuant to MEPPAA.
6.15 Investment Company Act of 1940; Public Utility
Holding Company Act of 1935. Borrower is not an "investment
company" as that term is defined in, and is not otherwise subject
to regulation under, the Investment Company Act of 1940, as
amended. Borrower is not a "holding company" as that term is
defined in, and is not otherwise subject to regulation under, the
Public Utility Holding Company Act of 1935, as amended.
6.16 Patents, Licenses, Trademarks, Etc. Borrower and
each Subsidiary possesses all necessary patents, licenses,
trademarks, trademark rights, trade names, trade name rights and
copyrights to conduct its business without material conflict with
any patent, license, trademark, trade name or copyright of any
other Person.
6.17 Environmental and Safety and Health Matters.
Except as disclosed on Schedule 6.17 attached hereto: (i) the
operations of Borrower and each Subsidiary comply in all material
respects with (A) all applicable Environmental Laws and (B) all
applicable Occupational Safety and Health Laws; (ii) none of the
operations of Borrower or any Subsidiary are subject to any
Environmental Claim or any judicial, governmental, regulatory or
administrative proceeding alleging the violation of any
Occupational Safety and Health Law, which, if adversely
determined, could reasonably be expected to have a Material
Adverse Effect; (iii) to the best of Borrower's knowledge, none
of the operations of Borrower or any Subsidiary is the subject of
any Federal or state investigation evaluating whether any
remedial action is needed to respond to any unsafe or unhealthful
condition at any premises of Borrower or such Subsidiary;
(iv) neither Borrower nor any Subsidiary has filed any notice
under any Environmental Law or Occupational Safety and Health Law
indicating or reporting (A) any past or present spillage,
disposal or Release into the environment of, or treatment,
storage or disposal of, any Hazardous Substance or any other
<PAGE>
hazardous, toxic or dangerous waste, substance or constituent or
other substance or (B) any unsafe or unhealthful condition at any
premises of Borrower or such Subsidiary; and (v) neither Borrower
nor any Subsidiary has any known material contingent liability in
connection with (A) any spillage, disposal or Release into the
environment of, or otherwise with respect to, any Hazardous
Substances or any other hazardous, toxic or dangerous waste,
substance or constituent or other substance or (B) any unsafe or
unhealthful condition at any premises of Borrower or such
Subsidiary.
6.18 Disclosure. Neither this Agreement nor any of the
Exhibits or Schedules hereto nor any certificate or other data
furnished to the Agent or any of the Banks in writing by or on
behalf of Borrower in connection with the transactions
contemplated by this Agreement contains any untrue or incorrect
statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading. To the best knowledge of Borrower, there is no fact
peculiar to Borrower or any of its Subsidiaries which presently
has a Material Adverse Effect or in the future (so far as
Borrower can now reasonably foresee) could reasonably be expected
to have a Material Adverse Effect, which has not heretofore been
disclosed by Borrower to the Agent and each of the Banks.
SECTION 7. COVENANTS.
7.01 Affirmative Covenants of Borrower. Borrower
covenants and agrees that, so long as (i) any of the Banks has
any obligation to make any Loan hereunder, (ii) Mercantile has
any obligation to issue any Letter of Credit hereunder, (iii) any
Letter of Credit remains outstanding or (iv) any of Borrower's
Obligations remain unpaid:
(a) Information. Borrower will deliver to each of the
Banks:
(i) as soon as available and in any event within
ninety (90) days after the end of each fiscal year of
Borrower: (A) consolidated and consolidating balance
sheets of Borrower and its consolidated subsidiaries
(as determined in accordance with GAAP) as of the end
of such fiscal year and the related consolidated and
consolidating statements of income, retained earnings
and cash flows for such fiscal year, setting forth in
each case, in comparative form, the figures for the
previous fiscal year, all such financial statements to
be prepared in accordance with GAAP consistently
applied and reported on by and accompanied by the
unqualified opinion of independent certified public
accountants of nationally recognized standing selected
by Borrower and reasonably acceptable to the Required
<PAGE>
Banks together with (1) a certificate from such
accountants to the effect that, in making the
examination necessary for the signing of such annual
audit report, such accountants have not become aware
of any Default or Event of Default that has occurred
and is continuing, or, if such accountants have become
aware of any such event, describing it and the steps,
if any, being taken to cure it and (2) the computations
of such accountants evidencing Borrower's compliance
with the financial covenants contained in Sections
7.01(k), 7.01(l), 7.01(m), 7.02(a), 7.02(b), 7.02(c),
7.02(d), 7.02(e) and 7.02(g) of this Agreement (such
accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any
Default or Event of Default which would not be
disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards);
provided, however, that delivery pursuant to Section
7.01(a)(iii)below of copies of the Annual Report on
Form 10-K of Borrower for such fiscal year filed with
the Securities and Exchange Commission shall be deemed
to satisfy the requirements of this Section 7.01(a)(i)
with respect to consolidated and, so long as such
Annual Report on Form 10-K is prepared, as to business
segment information, in the same amount of detail as
the Annual Report on Form 10-K for Borrower's fiscal
year ended February 4, 1995, consolidating financial
statements; and (B) consolidated and consolidating
balance sheets of Borrower and its Subsidiaries as of
the end of such fiscal year and the related
consolidated and consolidating statements of income,
retained earnings and cash flows for such fiscal year,
including a column identifying the items added to or
subtracted from the consolidated and consolidating
financial statements delivered pursuant to clause (A)
immediately above, all in reasonable detail and
satisfactory in form to the Required Banks and
certified as to fairness of presentation, GAAP and
consistency by the principal financial officer of
Borrower;
(ii) as soon as available and in any event within
forty-five (45) days after the end of each of the first
three (3) fiscal quarters of each fiscal year of
Borrower: (A) consolidated balance sheets of Borrower
and its consolidated subsidiaries (as determined in
accordance with GAAP) as of the end of such fiscal
quarter and the related consolidated statements of
income, retained earnings and cash flows for such
fiscal quarter and for the portion of Borrower's fiscal
year ended at the end of such fiscal quarter, setting
forth in each case in comparative form, the figures for
<PAGE>
the corresponding fiscal quarter and the corresponding
portion of Borrower's previous fiscal year, all in
reasonable detail and satisfactory in form to the
Required Banks and certified (subject to normal year-
end adjustments) as to fairness of presentation, GAAP
and consistency by the principal financial officer of
Borrower; provided, however, that delivery pursuant to
Section 7.01(a)(iii) below of copies of the Quarterly
Report on Form 10-Q of Borrower for such fiscal quarter
filed with the Securities and Exchange Commission shall
be deemed to satisfy the requirements of this Section
7.01(a)(ii) with respect to consolidated financial
statements; and (B) consolidated balance sheets of
Borrower and its Subsidiaries as of the end of such
fiscal quarter and the related consolidated statements
of income, retained earnings and cash flows for such
fiscal quarter and for the portion of Borrower's fiscal
year ended at the end of such fiscal quarter,
including a column identifying the items added to or
subtracted from the consolidated financial statements
delivered pursuant to clause (A) immediately above, all
in reasonable detail and satisfactory in form to the
Required Banks and certified (subject to normal year-
end adjustments) as to fairness of presentation, GAAP
and consistency by the principal financial officer of
Borrower;
(iii) promptly upon transmission thereof, copies
of all such financial statements, proxy statements,
notices and reports as Borrower or any Subsidiary shall
send to its public stockholders and copies of all
registration statements (without exhibits) and all
reports which Borrower or any Subsidiary files with the
Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the
Securities and Exchange Commission);
(iv) simultaneously with the delivery of each set
of financial statements referred to in clauses (i) and
(ii) above, a certificate of the principal financial
officer of Borrower in the form attached hereto as
Exhibit G and incorporated herein by reference,
accompanied by supporting financial work sheets where
appropriate, (A) evidencing Borrower's compliance with
the financial covenants contained in Sections 7.01(k),
7.01(l), 7.01(m), 7.02(a), 7.02(b), 7.02(c), 7.02(d),
7.02(e) and 7.02(g) of this Agreement, (B) stating
whether there exists on the date of such certificate
any Default or Event of Default and, if any Default or
Event of Default then exists, setting forth the details
thereof and the action which Borrower is taking or
proposes to take with respect thereto and
<PAGE>
(C) certifying that all of the representations and
warranties of Borrower contained in this Agreement are
true and correct in all material respects on and as of
the date of such certificate as if made on and as of
the date of such certificate;
(v) promptly upon receipt thereof, any reports
submitted to Borrower or any Subsidiary (other than
reports previously delivered pursuant to Sections
701(a)(i) and (ii) above) by independent accountants in
connection with any annual, interim or special audit
made by them of the books of Borrower or any
Subsidiary;
(vi) as soon as available and in any event within
ninety (90) days after the beginning of each fiscal
year of Borrower, consolidated balance sheet, income
statement and cash flow projections for Borrower and
its Subsidiaries for such fiscal year and the
succeeding one (1) year period, all in form and detail
reasonably acceptable to the Required Banks; and
(vii) with reasonable promptness, such further
information regarding the business, affairs and
financial condition of Borrower or any Subsidiary as
the Agent or any of the Banks may from time to time
reasonably request.
Each of the Banks is hereby authorized to deliver a
copy of any financial statement or other information made
available by Borrower or any Subsidiary to any regulatory
authority having jurisdiction over such Bank pursuant to any
request therefor.
(b) Payment of Indebtedness. Borrower will, and will
cause each Subsidiary to, (i) pay any and all Indebtedness
payable or Guaranteed by Borrower or such Subsidiary, as the case
may be, and any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) in accordance with the agreement, document or
instrument relating to such Indebtedness or Guarantee and
(ii) faithfully perform, observe and discharge all covenants,
conditions and obligations which are imposed upon Borrower or
such Subsidiary, as the case may be, by any and all agreements,
documents and instruments evidencing, securing or otherwise
relating to such Indebtedness or Guarantee.
(c) Consultations and Inspections. Borrower will
permit, and will cause each Subsidiary to permit, the Agent and
each of the Banks (and any Person appointed by the Agent or any
of the Banks to whom Borrower does not reasonably object) to
discuss the affairs, finances and accounts of Borrower and each
<PAGE>
Subsidiary with the officers of Borrower and each Subsidiary and
their independent public accountants, all at such reasonable
times and as often as the Agent or any of the Banks may from time
to time reasonably request. Borrower will also permit, and will
cause each Subsidiary to permit, inspection of its Properties,
books and records by the Agent and each of the Banks during
normal business hours and at other reasonable times. Borrower
will reimburse the Agent and each of the Banks upon demand for
all costs and expenses incurred by the Agent or any of the Banks
in connection with any such inspection conducted by the Agent or
any of the Banks during the continuance of any Default or Event
of Default under this Agreement.
(d) Payment of Taxes; Payment of Claims; Corporate
Existence; Maintenance of Properties; Insurance. Borrower will,
and will cause each Subsidiary to:
(i) duly file all Federal, state and local income
tax returns and all other tax returns and reports of
Borrower and each Subsidiary which are required to be
filed and duly pay and discharge promptly all taxes,
assessments and other governmental charges imposed upon
it or any of its income, Property or assets before any
interest or penalty accrues thereon; provided, however,
that neither Borrower nor any Subsidiary shall be
required to pay any such tax, assessment or other
governmental charge the payment of which is being
contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate
reserves in accordance with GAAP have been provided,
except that Borrower and each Subsidiary shall pay or
cause to be paid all such taxes, assessments and
governmental charges forthwith upon the commencement of
proceedings to foreclose any Lien which is attached as
security therefor, unless such foreclosure is stayed by
the filing of an appropriate bond;
(ii) promptly pay and discharge (A) all trade
accounts payable in accordance with usual and
customary business practices and (B) all claims for
work, labor or materials which if unpaid might become
a Lien upon any Property or assets of Borrower or any
Subsidiary; provided, however, that neither Borrower
nor any Subsidiary shall be required to pay any such
account payable or claim the payment of which is being
contested in good faith and by appropriate proceedings
being diligently conducted and for which adequate
reserves in accordance with GAAP have been provided,
except that Borrower and each Subsidiary shall pay or
cause to be paid all such accounts payable and claims
forthwith upon the commencement of proceedings to
foreclose any Lien which is attached as security
<PAGE>
therefor, unless such foreclosure is stayed by the
filing of an appropriate bond;
(iii) do all things necessary to (A) preserve and
keep in full force and effect at all times its
corporate existence and all permits, licenses,
franchises and other rights material to its business
and (B) be duly qualified to do business in all
jurisdictions where the nature of its business or its
ownership of Property requires such qualification;
(iv) maintain, preserve and keep its Properties
and assets which are used or useful in the conduct of
its business (whether owned in fee or a leasehold
interest) in good repair and working order and from
time to time make all necessary repairs, replacements,
renewals and additions so that at all times the
efficiency thereof shall be maintained; provided,
however, that nothing in this subsection (iv) shall
prevent any abandonment of any Property which is not
disadvantageous in any material respect to any of the
Banks and which, in the good faith opinion of the
management of Borrower, is in the best interests of
Borrower or such Subsidiary, as the case may be; and
(v) insure all Property of Borrower and each
Subsidiary of the character usually insured by
corporations engaged in the same or similar businesses
similarly situated, against loss or damage of the kind
customarily insured against by such corporations,
unless higher limits or coverage are reasonably
required in writing by the Required Banks, and carry
adequate liability insurance and other insurance of a
kind and in an amount generally carried by corporations
engaged in the same or similar businesses similarly
situated, unless higher limits or coverage are
reasonably required in writing by the Required Banks.
All insurance required by this Section 7.01(d)(v) shall
be with insurers rated A- XII or better by A.M. Best
Company (or accorded a similar rating by another
nationally or internationally recognized insurance
rating agency of similar standing if A.M. Best Company
is not then in the business of rating insurers or
rating foreign insurers) or such other insurers as may
from time to time be reasonably acceptable to the
Required Banks. All such insurance may be subject to
reasonable deductible amounts. Simultaneously with
each delivery of financial statements under Section
7.01(a)(i), Borrower shall deliver to each of the Banks
a certificate of a Responsible Officer specifying the
<PAGE>
details of all insurance then in effect and evidence
of the payment of all premiums therefor.
(e) Accountant. Borrower shall give each of the Banks
prompt notice of any change of Borrower's independent certified
public accountants and a statement of the reasons for such
change. Borrower shall at all times utilize independent
certified public accountants of nationally recognized standing
reasonably acceptable to the Required Banks.
(f) ERISA Compliance. If Borrower or any Subsidiary
shall have any Pension Plan, Borrower will, and will cause each
Subsidiary to, comply with all requirements of ERISA relating to
such Pension Plan. Without limiting the generality of the
foregoing, Borrower will not, and it will not cause or permit any
Subsidiary to:
(i) permit any Pension Plan maintained by Borrower
or such Subsidiary, as the case may be, to engage in
any nonexempt "prohibited transaction," as such term is
defined in Section 4975 of the Code;
(ii) permit any Pension Plan maintained by
Borrower or such Subsidiary, as the case may be, to
incur any "accumulated funding deficiency", as such
term is defined in Section 302 of ERISA, 29 U.S.C.
Section 1082, whether or not waived;
(iii) terminate any such Pension Plan in a manner
which could result in the imposition of a Lien on any
Property of Borrower or any Subsidiary pursuant to
Section 4068 of ERISA, 29 U.S.C. Section 1368; or
(iv) take any action which would constitute a
complete or partial withdrawal from a Multiemployer
Plan within the meaning of Sections 4203 and 4205 of
Title IV of ERISA.
Notwithstanding any provision contained in this Section
7.01(f) to the contrary, an act by Borrower or any Subsidiary
shall not be deemed to constitute a violation of subparagraphs
(i) through (iv) hereof unless the Required Banks determine in
good faith that said action, individually or cumulatively with
other acts of Borrower and the Subsidiaries of Borrower, has or
could reasonably be expected to have a Material Adverse Effect.
Borrower shall have the affirmative obligation
hereunder to report to each of the Banks any of those acts
identified in subparagraphs (i) through (iv) hereof, regardless
of whether said act has or could reasonably be expected to have
a Material Adverse Effect, and failure by Borrower to report such
<PAGE>
act promptly upon Borrower's becoming aware of the existence
thereof shall constitute an Event of Default hereunder.
(g) Maintenance of Books and Records. Borrower will
maintain, and will cause each Subsidiary to maintain, its books
and records in accordance with GAAP consistently applied and in
which true, correct and complete entries will be made of all of
its dealings and transactions.
(h) Further Assurances. Borrower will execute any and
all further agreements, documents and instruments, and take any
and all further actions which may be required under applicable
law, or which the Agent or any of the Banks may from time to time
reasonably request, in order to effectuate the transactions
contemplated by this Agreement, the Notes, the Letter of Credit
Application(s) and the other Transaction Documents.
(i) Compliance with Law. Borrower will, and will cause
each Subsidiary to, comply with any and all laws, ordinances and
governmental and regulatory rules and regulations to which it is
subject (including, without limitation, all Occupational Safety
and Health Laws and all Environmental Laws) and obtain any and
all licenses, permits, franchises and other governmental and
regulatory authorizations necessary to the ownership of its
Properties or to the conduct of its business, which violation or
failure to obtain could reasonably be expected to have a Material
Adverse Effect.
(j) Notices. Borrower will notify each of the Banks in
writing of any of the following within two (2) Domestic Business
Days after learning of the occurrence thereof, describing the
same and, if applicable, the steps being taken by the Person(s)
affected with respect thereto:
(i) Default. The occurrence of any Default or
Event of Default under this Agreement or any default or
event of default by Borrower, any other Obligor or any
Subsidiary under any note, indenture, loan agreement,
mortgage, deed of trust, security agreement, lease or
other similar agreement, document or instrument to
which Borrower, any other Obligor or any Subsidiary, as
the case may be, is a party or by which it is bound or
to which it is subject;
(ii) Litigation. The institution of any
litigation, arbitration proceeding or governmental or
regulatory proceeding affecting Borrower, any other
Obligor or any Subsidiary, whether or not considered to
be covered by insurance, in which the prayer or claim
for relief seeks recovery of an amount in excess of
$100,000.00 (or, if no dollar amount is specified in
the prayer or claim for relief, in which there is a
<PAGE>
reasonable likelihood of recovery of an amount in
excess of $100,000.00) or any form of equitable
relief;
(iii) Judgment. The entry of any judgment or
decree against Borrower, any other Obligor or any
Subsidiary;
(iv) Pension Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the
filing of a notice of intent to terminate a Pension
Plan by Borrower, any ERISA Affiliate or any
Subsidiary; the institution of proceedings to terminate
a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205,
respectively, of ERISA by Borrower, any ERISA Affiliate
or any Subsidiary from any Multiemployer Plan; or the
incurrence of any material increase in the contingent
liability of Borrower or any Subsidiary with respect to
any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA which covers retired employees
and their beneficiaries;
(v) Change of Name. Any change in the name of
Borrower, any other Obligor or any Subsidiary;
(vi) Environmental Matters. Receipt of any
Environmental Claim; receipt of any notice that the
operations of Borrower, any other Obligor or any
Subsidiary are not in compliance in any material
respect with any of the requirements of any applicable
Environmental Law or Occupational Safety and Health
Law; receipt of notice that Borrower, any other Obligor
or any Subsidiary is subject to any Federal, state or
local investigation evaluating whether any remedial
action is needed to respond to the Release of any
Hazardous Substances or any other hazardous or toxic
waste, substance or constituent or other substance into
the environment; or receipt of notice that any of the
Properties or assets of Borrower, any other Obligor or
any Subsidiary are subject to an "Environmental Lien."
For purposes of this Section 7.01(j)(vi),
"Environmental Lien" shall mean a Lien in favor of any
governmental or regulatory agency, entity, authority or
official for (1) any liability under Environmental Laws
or (2) damages arising from or costs incurred by any
such governmental or regulatory agency, entity,
authority or official in response to a Release of any
Hazardous Substances or any other hazardous or toxic
waste, substance or constituent or other substance into
the environment;
<PAGE>
(vii) Material Adverse Change. The occurrence of
any material adverse change in the Properties, assets,
business, operations, income or condition, financial or
otherwise, of Borrower, any other Obligor or any
Subsidiary;
(viii) Change in Line(s) of Business. Any change
in Borrower's or any Subsidiary's line(s) of business;
(ix) Change of Control Event. The occurrence of
any Change of Control Event; and
(x) Other Notices. Any notices required to be
provided pursuant to other provisions of this Agreement
and notice of the occurrence of such other events as
the Agent or the Required Banks may from time to time
reasonably specify.
(k) Consolidated Net Worth. Borrower will at all times
keep and maintain a Consolidated Net Worth in an amount not less
than the sum of (i) $150,000,000.00 plus (ii) Fifty Percent (50%)
of the Consolidated Net Income for each fiscal quarter of
Borrower elapsed during the period from February 5, 1995, to and
including the last day of the fiscal quarter of Borrower
immediately preceding the date of determination hereof, computed
on a cumulative basis for said entire period, provided that for
purposes of the foregoing calculation, Consolidated Net Income
shall be deemed to be zero for any fiscal quarter for which
Consolidated Net Income is less than or equal to zero.
(l) Consolidated Fixed Charge Coverage Ratio. Borrower
shall have and maintain a ratio of Adjusted Consolidated
Operating Earnings to Consolidated Fixed Charges of at least 2.0
to 1.0 for each period of four (4) consecutive fiscal quarters
commencing with the four (4) consecutive fiscal quarter period
ending July 22, 1995.
(m) Consolidated Indebtedness to Consolidated Net Worth
Ratio. Borrower shall at all times have and maintain a ratio of
Consolidated Indebtedness to Consolidated Net Worth which is less
than or equal to 1.2 to 1.0.
(n) Covenant to Secure Borrower's Obligations Equally.
Borrower will, if it or any Subsidiary shall create or assume any
Lien upon any of its Property or assets, whether now owned or
hereinafter acquired, other than Permitted Liens (unless prior
written consent to the creation or assumption thereof shall have
been obtained pursuant to Section 10.10 of this Agreement), make
or cause to be made effective provision whereby all of the
Borrower's Obligations will be secured by such Lien equally and
ratably with any and all other Debt thereby secured so long as
<PAGE>
any such other Debt shall be so secured as evidenced by
documentation which is acceptable to the Required Banks.
(o) Amendment of Note Agreement. Borrower shall
provide each of the Banks with a written copy of any proposed
amendment to the Note Agreement at least fifteen (15) Domestic
Business Days prior to the effective date of such amendment and
shall promptly furnish each of the Banks with a copy of each
effective amendment to the Note Agreement.
7.02 Negative Covenants of Borrower. Borrower
covenants and agrees that, so long as (i) any of the Banks has
any obligation to make any Loan hereunder, (ii) Mercantile has
any obligation to issue any Letter of Credit hereunder, (iii) any
Letter of Credit remains outstanding or (iv) any of Borrower's
Obligations remain unpaid, unless the prior written consent of
the Required Banks is obtained:
(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;
(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.
<PAGE>
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.
(b) Maintenance of Cash Balances. Borrower shall not
permit its Available Cash to be less than $20,000,000.00 at any
time.
(c) Limitation on Liens. Borrower will not, and will
not cause or permit any Subsidiary to, create or incur, or suffer
to be incurred or to exist, any Lien on any of its or their
Property or assets, whether now owned or hereafter acquired, or
upon any income or profits therefrom (whether or not provision is
made for the equal and ratable securing of the Borrower's
Obligations in accordance with the provisions of Section 7.01(n),
except for Permitted Liens.
(d) Limitations on Restriction on Distributions from
Subsidiaries. Borrower will not, and will not cause or permit
any Subsidiary to, directly or indirectly, create or otherwise
cause or permit to exist or become effective any encumbrance or
restriction, except any such restrictions existing on the date of
this Agreement and listed on Schedule 7.02(d) attached hereto, on
the ability of any Subsidiary to: (i) pay dividends or make any
other distributions on such Subsidiary's Capital Stock or any
other interest or participation in such Subsidiary's profits;
(ii) pay any Debt owed by such Subsidiary to Borrower or to any
other Subsidiary; (iii) make any loans, advances or capital
contributions to Borrower or to any other Subsidiary; or (iv)
sell, lease or transfer any of its Property or assets to Borrower
or to any other Subsidiary.
(e) Limitation on Restricted Payments and Restricted
Investments. Borrower will not make, pay or declare, or commit
to make, pay or declare, any Restricted Payment, and Borrower
will not, and it will not cause or permit any Subsidiary to,
make, pay or declare, or commit to make, pay or declare, any
Restricted Investment if, immediately after giving effect to such
proposed Restricted Payment or Restricted Investment, (i) a
Default or Event of Default would exist, (ii) Borrower would not
be able to incur at least $1.00 of additional Funded Debt
pursuant to the provisions of Section 7.02(a)(iv) or (iii) the
aggregate amount of all Restricted Payments and Restricted
Investments made or committed to by Borrower and its Subsidiaries
after the date of this Agreement, including the Restricted
Payment and/or Restricted Investment in question, would exceed
the sum of: (A) $4,662,271.00 plus (B) 50% of Consolidated Net
<PAGE>
Income for each completed fiscal year of Borrower ended after
February 5, 1995, plus (C) Net Proceeds from the sale or other
issuance on or after February 5, 1995, of Qualified Stock minus
(D) 100% of any Consolidated Net Loss for any completed fiscal
year of Borrower ended after February 5, 1995; provided, however,
that, so long as no Default or Event of Default under this
Agreement has occurred and is continuing on the date of payment
of such dividend, the provisions of this Section 7.02(e) shall
not prevent or restrict the payment of any dividend that did not
violate the provisions of this Section 7.02(e) at the date of
declaration if such dividend is paid not more than ninety (90)
days after the date of declaration thereof.
(f) Merger and Consolidation. Borrower will not, and
it will not cause or permit any Subsidiary to, merge or
consolidate with or into any other Person, except:
(i) any Subsidiary may merge or consolidate with
or into Borrower (provided that Borrower shall be the
continuing or surviving corporation) or with or into
any one or more other Subsidiaries; and
(ii) any Subsidiary may merge or consolidate with
or into any other corporation, provided that,
immediately after giving effect to such merger or
consolidation (A) the continuing or surviving
corporation of such merger or consolidation shall be a
Subsidiary, (B) no Default or Event of Default shall
exist and (C) Borrower could incur at least an
additional $1.00 of Funded Debt under the provisions
of Section 7.02(a)(iv).
(g) Sale or Other Transfer of Assets. Borrower will
not, and it will not cause or permit any Subsidiary to, sell,
lease, transfer or otherwise dispose of (other than in the
ordinary course of business or in a transaction between
Subsidiaries) any Properties or assets of Borrower or any
Subsidiary or issue, sell or otherwise dispose of any shares of
Capital Stock of any Subsidiary (herein called a "Disposition")
in any twelve (12) month period unless, after giving effect
thereto (i) the aggregate Asset Percentage Value of all assets
disposed of in Dispositions during such twelve (12) month period
are less than five percent (5%), (ii) the consideration received
in such Disposition is equal to or greater than the fair market
value of the assets sold and at least eighty percent (80%) of
such consideration is in cash or Cash Equivalents and (iii) the
cash proceeds are either (1) reinvested in Borrower's business,
subject to the provisions of Section 7.02(e) or (2) used to make
an optional prepayment on any Debt, within one hundred eighty
(180) days after the date of the applicable Disposition;
provided, however, that notwithstanding the provisions of this
Section 7.02(g), Borrower will not, and it will not cause or
<PAGE>
permit any Subsidiary to, make a Disposition if the aggregate
Asset Percentage Value of all assets disposed of in Dispositions
since the date of this Agreement is equal to or exceeds thirty
percent (30%). Notwithstanding the foregoing, in no event may
Borrower sell, transfer or otherwise dispose of any shares of
Capital Stock of any Direct Subsidiary now owned or hereafter
acquired by Borrower.
(h) Sale or Discount of Receivables. Borrower will
not, and it will not cause or permit any Subsidiary to, sell or
discount any of its notes or accounts receivable.
(i) Transfer of Assets to Subsidiaries. Borrower will
not, and it will not cause or permit any Subsidiary to, transfer
any Property or assets to a Subsidiary for the purpose of
improving the credit position of such Subsidiary in order to
enable it to borrow money.
(j) Issuance of Stock by Subsidiaries. Borrower will
not cause or permit any Direct Subsidiary to issue, sell or
otherwise dispose of any shares of any class of its Capital Stock
(other than directors' qualifying shares) except to Borrower.
Borrower will not cause or permit any Subsidiary which is not a
Direct Subsidiary to issue, sell or otherwise dispose of any
shares of any class of its Capital Stock (other than directors'
qualifying shares) except to Borrower or another Subsidiary.
Borrower will not cause or permit any Direct Subsidiary to (i)
authorize or issue any new types, varieties or classes of Capital
Stock of such Direct Subsidiary, either preferred or common,
voting or nonvoting, or any stock warrants or options, (ii)
authorize or issue any additional shares of stock of any existing
class of Capital Stock of such Direct Subsidiary, or grant any
person any proxy for existing shares or (iii) declare any stock
dividends or stock splits or take any other action which could,
directly or indirectly, decrease Borrower's ownership interest in
such Direct Subsidiary.
(k) Limitations on Sale and Leasebacks. Borrower will
not, and it will not cause or permit any Subsidiary to, enter
into any arrangement, directly or indirectly, whereby Borrower or
such Subsidiary shall in one or more related transactions sell,
transfer or otherwise dispose of any Property owned by Borrower
or such Subsidiary and then rent or lease, as lessee, such
Property or any part thereof for a period or periods which in the
aggregate would exceed twelve (12) months from the date of
commencement of the lease term (a "Sale and Leaseback
Transaction").
(l) Transactions with Affiliates. Borrower will not,
and it will not cause or permit any Subsidiary to, enter into or
be a party to any transaction or arrangement with any Affiliate
(including, without limitation, the purchase from, sale to or
<PAGE>
exchange of Property with, or the rendering of any service by or
for, any Affiliate), except in the ordinary course of business
and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less
favorable to Borrower or such Subsidiary than would be obtained
in a comparable arm's-length transaction with a Person not an
Affiliate.
(m) Changes in Nature of Business. Borrower will not,
and it will not cause or permit any Subsidiary to, engage in any
business if, as a result, the general nature of the business
which would then be engaged in by Borrower and its Subsidiaries,
considered as a whole, would be substantially changed from the
general nature of the business engaged in by Borrower and its
Subsidiaries as of the date of this Agreement.
(n) Fiscal Year. Borrower will not, and it will not
cause or permit any Subsidiary to, change its fiscal year.
(o) Pension Plans. Borrower will not, and it will not
cause or permit any Subsidiary to, (a) permit any condition to
exist in connection with any Pension Plan which might constitute
grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such
Pension Plan, (b) engage in, or permit to exist or occur, any
other condition, event or transaction with respect to any Pension
Plan which could result in the incurrence by Borrower or any
Subsidiary of any material liability, fine or penalty, (c) incur
or suffer to exist any material accumulated funding deficiency
within the meaning of ERISA or incur any material liability to
the PBGC in connection with any Pension Plan established or
maintained by Borrower or any Subsidiary or (d) become obligated
to contribute to any Pension Plan or Multiemployer Plan other
than any such plan or plans in existence on the date hereof.
(p) Limitations on Acquisitions. Borrower will not,
and it will not cause or permit any Subsidiary to, make or suffer
to exist any Acquisition of any Person, except Acceptable
Acquisitions.
7.03 Use of Proceeds. Borrower agrees that (i) the
proceeds of the Revolving Credit Loans will be used solely (A)
for the general corporate purposes of Borrower and (B) to enable
Borrower to make loans to one or more of its Subsidiaries for
their respective general corporate purposes; (ii) none of such
proceeds will be used in violation of any applicable law or
regulation; and (iii) Borrower will not directly or indirectly
use the proceeds of any Revolving Credit Loan for the purpose of
purchasing or carrying "margin stock" within the meaning of
Regulation U of The Board of Governors of the Federal Reserve
System, as amended.
<PAGE>
SECTION 8. EVENTS OF DEFAULT.
If any of the following (each of the following herein
sometimes called an "Event of Default") shall occur and be
continuing:
8.01 Borrower shall fail to pay any of Borrower's
Obligations constituting interest within ten (10) days after the
date the same shall first become due and payable, whether by
reason of demand, maturity, acceleration or otherwise;
8.02 Borrower shall fail to pay any of Borrower's
Obligations (other than interest) as and when the same shall
become due and payable, whether by reason of demand, maturity,
acceleration or otherwise;
8.03 Any representation or warranty of Borrower made in
this Agreement, in any other Transaction Document to which
Borrower is a party or in any certificate, agreement, instrument
or statement furnished or made or delivered pursuant hereto or
thereto or in connection herewith or therewith, shall prove to
have been untrue or incorrect in any material respect when made
or effected;
8.04 Borrower shall fail to perform or observe any
term, covenant or provision contained in Section 3.01, 4.04,
Section 7.01(k), Section 7.01(l), Section 7.01(m), Section
7.01(n), Section 7.02 (other than Section 7.02(n)) or Section
7.03;
8.05 Borrower shall fail to perform or observe any
term, covenant or provision contained in Section 7.01(c), Section
7.01(d)(v) or Section 7.02(n) and any such failure shall remain
unremedied for ten (10) days after the earlier of (i) written
notice of default is given to Borrower by the Agent or any of the
Banks or (ii) a Responsible Officer of Borrower obtaining
knowledge of such default;
8.06 Borrower shall fail to perform or observe any
other term, covenant or provision contained in this Agreement
(other than those specified in Sections 8.01, 8.02, 8.03, 8.04 or
8.05 above) and any such failure shall remain unremedied for
thirty (30) days after the earlier of (i) written notice of
default is given to Borrower by the Agent or any of the Banks or
(ii) a Responsible Officer of Borrower obtaining knowledge of
such default;
8.07 This Agreement or any of the other Transaction
Documents shall at any time for any reason cease to be in full
force and effect or shall be declared to be null and void by a
court of competent jurisdiction, or if the validity or
enforceability thereof shall be contested or denied by Borrower,
<PAGE>
or if the transactions completed hereunder or thereunder shall be
contested by Borrower or if Borrower shall deny that it has any
or further liability or obligation hereunder or thereunder;
8.08 Borrower, any Subsidiary or any other Obligor
shall (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code
or any other Federal, state or foreign bankruptcy, insolvency,
receivership, liquidation or similar law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate
manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official of itself or
of a substantial part of its Property or assets, (iv) file an
answer admitting the material allegations of a petition filed
against itself in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any corporate or other action
for the purpose of effecting any of the foregoing;
8.09 An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of Borrower, any
Subsidiary or any other Obligor, or of a substantial part of the
Property or assets of Borrower, any Subsidiary or any other
Obligor, under Title 11 of the United States Code or any other
Federal, state or foreign bankruptcy, insolvency, receivership,
liquidation or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official of Borrower,
any Subsidiary or any other Obligor or of a substantial part of
the Property or assets of Borrower, any Subsidiary or any other
Obligor or (iii) the winding-up or liquidation of Borrower, any
Subsidiary or any other Obligor; and such proceeding or petition
shall continue undismissed for thirty (30) consecutive days or an
order or decree approving or ordering any of the foregoing shall
continue unstayed and in effect for thirty (30) consecutive days;
8.10 Any of the Letter of Credit Applications shall at
any time for any reason cease to be in full force and effect or
shall be declared to be null and void by a court of competent
jurisdiction, or if the validity or enforceability of any of the
Letter of Credit Applications shall be contested or denied by
Borrower, or if Borrower shall deny that it has any further
liability or obligation under any of the Letter of Credit
Applications or if Borrower shall fail to comply with or observe
any of the terms, provisions or conditions contained in any of
the Letter of Credit Applications;
8.11 Borrower, any Subsidiary or any other Obligor
shall be declared by Bank to be in default on, or pursuant to the
terms of, (1) any other present or future obligation to any of
<PAGE>
the Banks, including, without limitation, any other loan, line of
credit, revolving credit, guaranty or letter of credit
reimbursement obligation, or (2) any other present or future
agreement purporting to convey to any of the Banks a Lien upon
any Property or assets of Borrower, such Subsidiary or such other
Obligor, as the case may be;
8.12 The occurrence of any default or event of default
under or within the meaning of any agreement, document or
instrument evidencing, securing, guaranteeing the payment of or
otherwise relating to any Indebtedness of Borrower or any
Subsidiary for borrowed money (other than the Borrower's
Obligations) having an aggregate outstanding principal balance in
excess of $2,000,000.00;
8.13 Borrower, any Subsidiary or any other Obligor
shall have a judgment in excess of $2,000,000.00 entered against
it by a court having jurisdiction in the premises and such
judgment shall not be appealed in good faith or satisfied by
Borrower, such Subsidiary or such other Obligor, as the case may
be, within the time period permitted by applicable law for an
appeal of such judgment;
8.14 The occurrence of a Reportable Event with respect
to any Pension Plan; the filing of a notice of intent to
terminate a Pension Plan by Borrower, any ERISA Affiliate or any
Subsidiary; the institution of proceedings to terminate a Pension
Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any
ERISA Affiliate or any Subsidiary from any Multiemployer Plan; or
the incurrence of any material increase in the contingent
liability of Borrower or any Subsidiary with respect to any
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA which covers retired employees and their beneficiaries;
8.15 The institution by Borrower, any ERISA Affiliate
or any Subsidiary of steps to terminate any Pension Plan if, in
order to effectuate such termination, Borrower, such ERISA
Affiliate or such Subsidiary, as the case may be, would be
required to make a contribution to such Pension Plan, or would
incur a liability or obligation to such Pension Plan, in excess
of $1,000,000.00; or the institution by the PBGC of steps to
terminate any Pension Plan;
8.16 Any "Event of Default" (as defined therein) shall
occur under or within the meaning of the Note Agreement; or
8.17 The occurrence of any Change of Control Event;
THEN, and in each such event (other than an event
described in Sections 8.08 or 8.09), the Agent shall, if
<PAGE>
requested in writing by the Required Banks, and may, in its sole
and absolute discretion, upon the oral request of the Required
Banks, declare that the obligation of the Banks to make Loans
under this Agreement and the obligation of Mercantile to issue
Letters of Credit under this Agreement have terminated, whereupon
such obligations of the Banks and Mercantile shall be immediately
and forthwith terminated, and the Agent shall, if requested in
writing by the Required Banks, and may, in its sole and absolute
discretion, upon the oral request of the Required Banks, declare
the entire outstanding principal balance of and all accrued and
unpaid interest on the Notes and all of the other Loans under
this Agreement and all of the other Borrower's Obligations to be
forthwith due and payable, whereupon all of the unpaid principal
balance of and all accrued and unpaid interest on the Notes and
all of the other Loans under this Agreement and all such other
Borrower's Obligations shall become and be immediately due and
payable, without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived by
Borrower, and the Agent and each of the Banks may exercise any
and all other rights and remedies which they may have under any
of the other Transaction Documents or under applicable law;
provided, however, that upon the occurrence of any event
described in Sections 8.08 or 8.09, the obligation of the Banks
to make Loans under this Agreement and the obligation of
Mercantile to issue Letters of Credit under this Agreement shall
automatically terminate and the entire outstanding principal
balance of and all accrued and unpaid interest on the Notes and
all of the other Loans under this Agreement and all of the other
Borrower's Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by
Borrower, and the Agent and each of the Banks may exercise any
and all other rights and remedies which they may have under any
of the other Transaction Documents or under applicable law.
SECTION 9. AGENT
9.01 Appointment. Mercantile Bank of St. Louis
National Association is hereby appointed by the Banks as Agent
under this Agreement, the Notes and the other Transaction
Documents. The Agent agrees to act as such upon the express
conditions contained in this Agreement.
9.02 Powers. The Agent shall have and may exercise
such powers hereunder as are specifically delegated to the Agent
by the terms of this Agreement and the other Transaction
Documents, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Banks,
nor any obligation to the Banks to take any action under this
Agreement or any of the other Transaction Documents, except any
action specifically provided by the this Agreement or any of the
other Transaction Documents to be taken by the Agent. Without
<PAGE>
limiting the generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default or Event
of Default, except as expressly provided in Section 8.
9.03 General Immunity. Neither the Agent nor any of
its directors, officers, employees, agents or advisors shall be
liable to any of the Banks for any action taken or not taken by
it in connection with this Agreement or any of the other
Transaction Documents (i) with the consent or at the request of
the Required Banks or (ii) in the absence of its own gross
negligence or willful misconduct.
9.04 No Responsibility for Loans, Recitals, etc.
Neither the Agent nor any of its directors, officers, employees,
agents or advisors shall (i) be responsible for or have any duty
to ascertain, inquire into or verify any recitals, reports,
statements, representations, warranties or representations
contained in this Agreement or any of the other Transaction
Documents or furnished pursuant hereto or thereto; (ii) be
responsible for any Loans or Letters of Credit hereunder, (iii)
be bound to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement or any of the
other Transaction Documents; (iv) be responsible for the
satisfaction of any condition specified in Section 5, except
receipt of items required to be delivered to the Agent; (v) be
responsible for the validity, effectiveness, genuineness or
enforceability of this Agreement or any of the other Transaction
Documents; or (vi) be responsible for the creation, attachment or
perfection of any security interests or liens purported to be
granted to the Agent or any of the Banks pursuant to this
Agreement or any of the other Transaction Documents.
9.05 Right to Indemnity. Notwithstanding any other
provision contained in this Agreement to the contrary, to the
extent Borrower fails to reimburse the Agent pursuant to
Section 10.03, Section 10.04 or Section 10.05, or if any Default
or Event of Default shall occur under this Agreement, the Banks
shall ratably in accordance with their respective Pro Rata Shares
of the aggregate amount of Loans and Letters of Credit then
outstanding, or if no Loans or Letters of Credit are then
outstanding, their respective Pro Rata Shares of the total
Commitments of all of the Banks, indemnify the Agent and hold it
harmless from and against any and all liabilities, losses (except
losses occasioned solely by failure of Borrower to make any
payments or to perform any obligations required by this Agreement
(excepting those described in Sections 10.03, 10.04 and 10.05),
the Notes, the Letter of Credit Applications or any of the other
Transaction Documents), costs and/or expenses, including, without
limitation, any liabilities, losses, costs and/or expenses
arising from the failure of any Bank to perform its obligations
hereunder or in respect of this Agreement, and also including,
<PAGE>
without limitation, reasonable attorneys' fees and expenses,
which the Agent may incur, directly or indirectly, in connection
with this Agreement, the Notes or any of the other Transaction
Documents, or any action or transaction related hereto or
thereto; provided only that the Agent shall not be entitled to
such indemnification for any losses, liabilities, costs and/or
expenses directly and solely resulting from its own gross
negligence or willful misconduct. This indemnity shall be a
continuing indemnity, contemplates all liabilities, losses, costs
and expenses related to the execution, delivery and performance
of this Agreement, the Notes and the other Transaction Documents,
and shall survive the satisfaction and payment of the Loans, the
expiration or other termination of the Letters of Credit and the
termination of this Agreement.
9.06 Action Upon Instructions of Required Banks. The
Agent agrees, upon the written request of the Required Banks, to
take any action of the type specified in this Agreement or any of
the other Transaction Documents as being within the Agent's
rights, duties, powers or discretion. Notwithstanding the
foregoing, the Agent shall be fully justified in failing or
refusing to take any action hereunder, unless it shall first be
indemnified to its satisfaction by the Banks pro rata against any
and all liabilities, losses, costs and expenses (including,
without limitation, attorneys' fees and expenses) which may be
incurred by it by reason of taking or continuing to take any such
action, other than any liability which may arise out of Agent's
gross negligence or willful misconduct. The Agent shall in all
cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with written instructions signed by the
Required Banks, and such instructions and any action taken or
failure to act pursuant thereto shall be binding on all of the
Banks and on all holders of the Notes. In the absence of a
request by the Required Banks, the Agent shall have authority, in
its sole discretion, to take or not to take any action, unless
this Agreement or any of the other Transaction Documents
specifically requires the consent of the Required Banks or of all
of the Banks.
9.07 Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent hereunder by or through
employees, agents and attorneys-in-fact and shall not be
answerable to the Banks, except as to money or securities
received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it
in good faith and with reasonable care. The Agent shall be
entitled to advice and opinion of legal counsel concerning all
matters pertaining to the duties of the agency hereby created.
9.08 Reliance on Documents; Counsel. The Agent shall
be entitled to rely upon any note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document
<PAGE>
believed by it to be genuine and correct and to have been signed
or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of legal counsel selected by the Agent.
9.09 May Treat Payee as Owner. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any person, firm or corporation
who at the time of making such request or giving such authority
or consent is the holder of any such Note shall be conclusive and
binding on any subsequent holder, transferee or assignee of such
Note or of any Note issued in exchange therefor.
9.10 Agent's Reimbursement. Each Bank agrees to
reimburse the Agent pro rata in accordance with its Pro Rata
Share for any out-of-pocket expenses not reimbursed by Borrower
(a) for which the Agent is entitled to reimbursement by the
Borrower under this Agreement or any of the other Transaction
Documents and (b) for any other out-of-pocket expenses incurred
by the Agent on behalf of the Banks, in connection with the
preparation, execution, delivery, amendment, modification,
extension, renewal, administration and/or enforcement of this
Agreement and/or any of the other Transaction Documents.
9.11 Rights as a Bank. With respect to its commitment,
the Loans made by it, the Letters of Credit issued by it and the
Note issued to it, the Agent shall have the same rights and
powers hereunder as any Bank and may exercise the same as though
it were not the Agent, and the terms "Bank" and "Banks" shall,
unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend
money to, issue letters of credit for the account of and
generally engage in any kind of banking or trust business with
the Borrower and its Subsidiaries and Affiliates as if it were
not the Agent.
9.12 Independent Credit Decision. Each Bank
acknowledges that it has, independently and without reliance upon
the Agent or any other Bank and based on the financial statements
referred to in Section 6.04 and such other documents and
information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other
Transaction Documents. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and
the other Transaction Documents.
9.13 Resignation of Agent. Subject to the appointment
of a successor Agent, the Agent may resign as Agent for the Banks
<PAGE>
under this Agreement and the other Transaction Documents at any
time by thirty (30) days' notice in writing to the Banks and
Borrower. Such resignation shall take effect upon appointment of
such successor Agent. The Banks shall have the right to appoint
a successor Agent who shall be entitled to all of the rights of,
and vested with the same powers as, the original Agent under this
Agreement and the other Transaction Documents. In the event a
successor Agent shall not have been appointed within the thirty
(30) day period following the giving of notice by the Agent, the
Agent may appoint its own successor. Resignation by the Agent
shall not affect or impair the rights of the Agent under Sections
9.05 and 9.10 hereof with respect to all matters preceding such
resignation. Any successor Agent must be a national banking
association or a bank chartered in any State of the United
States.
9.14 Removal of Agent. Subject to the appointment of
a successor Agent, the Banks (by a unanimous vote), with the
consent of the Borrower (which consent will not be unreasonably
withheld), may remove the Agent for the Banks under this
Agreement and the other Transaction Documents at any time by
thirty (30) days' notice in writing to the Agent. Such removal
shall take effect upon appointment of such successor Agent. The
Banks shall have the right to appoint a successor Agent who shall
be entitled to all of the rights of, and vested with the same
powers as, the original Agent under this Agreement and the other
Transaction Documents. In the event a successor Agent shall not
have been appointed within the thirty (30) day period following
the giving of notice to the Agent, the Agent may appoint its own
successor. The removal of the Agent shall not affect or impair
the rights of the Agent under Sections 9.05 and 9.10 hereof with
respect to all matters preceding such removal. Any successor
Agent must be a national banking association or a bank chartered
in any State of the United States.
9.15 Duration of Agency. The agency established by
Section 9.01 hereof shall continue, and Sections 9.01 through and
including this Section 9.15 shall remain in full force and
effect, until all of the Borrowers' Obligations shall have been
paid in full, all of the Letters of Credit have expired or been
terminated and the Banks' commitments to make Loans, issue
Letters of Credit and/or extend credit to or for the benefit of
the Borrower shall have terminated or expired.
SECTION 10. GENERAL.
10.01 No Waiver. No failure or delay by the Agent or
any of the Banks in exercising any right, remedy, power or
privilege hereunder or under any other Transaction Document shall
operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege.
<PAGE>
The remedies provided herein and in the other Transaction
Documents are cumulative and not exclusive of any remedies
provided by law. Nothing herein contained shall in any way
affect the right of any of the Banks to exercise any statutory or
common law right of banker's lien or set-off.
10.02 Right of Set-Off. Upon the occurrence and during
the continuance of any Event of Default, each of the Banks is
hereby authorized at any time and from time to time, without
notice to Borrower (any such notice being expressly waived by
Borrower) and to the fullest extent permitted by law, to set-off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by such Bank(s)
and any and all other indebtedness at any time owing by such
Bank(s) to or for the credit or account of Borrower against any
and all of Borrower's Obligations irrespective of whether or not
such Bank(s) shall have made any demand hereunder or under any of
the other Transaction Documents and although such obligations may
be contingent or unmatured. Each of the Banks agrees to promptly
notify Borrower after any such set-off and application made by
such Bank(s), provided, however, that the failure to give such
notice shall not affect the validity of such set-off and
application. The rights of the Banks under this Section 10.02
are in addition to any other rights and remedies (including,
without limitation, other rights of set-off) which the Banks may
have. Nothing contained in this Agreement or any other
Transaction Document shall impair the right of any of the Banks
to exercise any right of set-off or counterclaim it may have
against Borrower and to apply the amount subject to such exercise
to the payment of indebtedness of Borrower unrelated to this
Agreement or the other Transaction Documents.
10.03 Cost and Expenses. Borrower agrees, whether or
not any Loan is made hereunder or any Letter of Credit is issued
hereunder, to pay the Agent and each of the Banks upon demand
(i) all reasonable out-of-pocket costs and expenses and all
Attorneys' Fees of the Agent and each of the Banks in connection
with the preparation, documentation, negotiation and execution of
this Agreement, the Notes, the Letter of Credit Application(s)
and the other Transaction Documents; provided, however, that such
Attorneys' Fees of Harris Trust and Savings Bank shall not exceed
the sum of $1,500.00 and such Attorneys' Fees of The Daiwa Bank,
Ltd. shall not exceed the sum of $1,500.00, (ii) all recording,
filing and search fees and expenses incurred in connection with
this Agreement and the other Transaction Documents, (iii) all
out-of-pocket costs and expenses and all Attorneys' Fees of the
Agent and each of the Banks in connection with the (A) the
preparation, documentation, negotiation and execution of any
amendment, modification, extension or renewal of this Agreement,
the Notes, the Letter of Credit Application(s) and/or any of the
other Transaction Documents, (B) the preparation of any waiver or
<PAGE>
consent hereunder or under any of the other Transaction Documents
or (C) any Default or Event of Default or alleged Default or
Event of Default hereunder, (iv) if an Event of Default occurs,
all out-of-pocket costs and expenses and all Attorneys' Fees
incurred by the Agent and each of the Banks in connection with
such Event of Default and collection and other enforcement
proceedings resulting therefrom and (v) all other Attorneys' Fees
incurred by the Agent or any of the Banks 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 the Agent and each of the Banks for any stamp or other
taxes which may be payable with respect to the execution,
delivery, recording and/or filing of this Agreement, the Notes,
the Letter of Credit Application(s) or any of the other
Transaction Documents. All of the obligations of Borrower under
this Section 10.03 shall survive the satisfaction and payment of
Borrower's Obligations and the termination of this Agreement.
10.04 Environmental Indemnity. Borrower hereby agrees
to indemnify the Agent and each of the Banks and hold the Agent
and each of the Banks harmless from and against any and all
losses, liabilities, damages, injuries, costs, expenses and
claims of any and every kind whatsoever (including, without
limitation, court costs and attorneys' fees and expenses) which
at any time or from time to time may be paid, incurred or
suffered by, or asserted against, the Agent or any of the Banks
for, with respect to or as a direct or indirect result of the
violation by Borrower or any Subsidiary of any Environmental
Laws; or with respect to, or as a direct or indirect result of
the presence on or under, or the Release from, properties
utilized by Borrower and/or any Subsidiary in the conduct of
their respective businesses into or upon any land, the atmosphere
or any watercourse, body of water or wetland, of any Hazardous
Substances or any other hazardous or toxic waste, substance or
constituent or other substance (including, without limitation,
any losses, liabilities, damages, injuries, costs, expenses or
claims asserted or arising under the Environmental Laws); and the
provisions of and undertakings and indemnification set out in
this Section 10.04 shall survive the satisfaction and payment of
Borrower's Obligations and the termination of this Agreement.
10.05 General Indemnity. In addition to the payment of
expenses pursuant to Section 10.03, whether or not the
transactions contemplated hereby shall be consummated, Borrower
hereby agrees to indemnify, pay and hold the Agent and each of
the Banks and any holder(s) of the Notes, and the officers,
directors, employees, agents and affiliates of the Agent, each of
the Banks and such holder(s) (collectively, the "Indemnitees")
harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable
<PAGE>
fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such
Indemnitees shall be designated a party thereto), that may be
imposed on, incurred by or asserted against the Indemnitees, in
any manner relating to or arising out of this Agreement, any of
the other Transaction Documents or any other agreement, document
or instrument executed and delivered by Borrower or any other
Obligor in connection herewith or therewith, the statements
contained in any commitment letters delivered by the Agent or any
of the Banks, the agreement of any of the Banks to make the Loans
hereunder, the agreement of Mercantile to issue the Letters of
Credit hereunder or the use or intended use of the proceeds of
any Loan hereunder (collectively, the "indemnified liabilities");
provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to indemnified liabilities arising from
the gross negligence or willful misconduct of that Indemnitee as
determined by a court of competent jurisdiction in a final
nonappealable order. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law
or public policy, Borrower shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all indemnified liabilities
incurred by the Indemnitees or any of them. The provisions of
the undertakings and indemnification set out in this Section
10.05 shall survive the satisfaction and payment of Borrower's
Obligations and the termination of this Agreement.
10.06 Authority to Act. The Agent shall be entitled to
act on any notices and instructions (telephonic or written)
believed by the Agent in good faith to have been delivered by any
person authorized to act on behalf of Borrower pursuant hereto,
regardless of whether such notice or instruction was in fact
delivered by a person authorized to act on behalf of Borrower,
and Borrower hereby agrees to indemnify the Agent and hold the
Agent harmless from and against any and all losses and expenses,
if any, ensuing from any such action.
10.07 Notices. Any notice, request, demand, consent,
confirmation or other communication hereunder shall be in writing
and delivered in person or sent by telecopy or registered or
certified mail, return receipt requested and postage prepaid, to
the applicable party at its address or telecopy number set forth
on the signature pages hereof, or at such other address or
telecopy number as any party hereto may designate as its address
for communications hereunder by notice so given. Such notices
shall be deemed effective on the day on which delivered or sent
if delivered in person or sent by telecopy, or on the third (3rd)
Domestic Business Day after the day on which mailed, if sent by
registered or certified mail; provided, however, that notices to
<PAGE>
the Agent under Section 3 and notices to Mercantile under Section
4 shall not be effective until actually received by the Agent or
Mercantile, as the case may be.
10.08 Consent to Jurisdiction; Waiver of Jury Trial.
BORROWER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY MISSOURI STATE COURT OR ANY UNITED STATES OF AMERICA COURT
SITTING IN THE EASTERN DISTRICT OF MISSOURI, AS THE AGENT MAY
ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO
SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY
OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, AND BORROWER FURTHER
IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. BORROWER HEREBY EXPRESSLY WAIVES ALL RIGHTS OF ANY OTHER
JURISDICTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE BY REASON
OF ITS PRESENT OR SUBSEQUENT DOMICILES. BORROWER AUTHORIZES THE
SERVICE OF PROCESS UPON BORROWER BY REGISTERED MAIL SENT TO
BORROWER AT ITS ADDRESS SET FORTH IN SECTION 10.07. BORROWER,
THE AGENT AND THE BANKS IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY
JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND THE AGENT
AND/OR ANY OF THE BANKS ARE PARTIES RELATING TO OR ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
TRANSACTION DOCUMENTS.
10.09 Governing Law. This Agreement, the Notes, the
Letter of Credit Application(s) and all of the other Transaction
Documents shall be governed by and construed in accordance with
the substantive laws of the State of Missouri (without reference
to conflict of law principles).
10.10 Amendments and Waivers. Any provision of this
Agreement, the Notes, the Letter of Credit Application(s) or any
of the other Transaction Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed
by Borrower and the Required Banks (and, if the rights or duties
of the Agent in its capacity as Agent are affected thereby, by
the Agent); provided that no such amendment or waiver shall,
unless signed by all of the Banks, (i) increase the Commitment of
any Bank, (ii) reduce the principal amount of or rate of interest
on any Loan or any fees hereunder (other than any fees relating
to the Letters of Credit other than Letter of Credit Commitment
Fees and Letter of Credit Negotiation Fees), (iii) postpone the
date fixed for any payment of principal of or interest on any
Loan or any fees hereunder, (iv) change the percentage of the
Commitments or of the aggregate principal amount of Loans or
Letters of Credit or the number of Banks which shall be required
<PAGE>
for the Banks or any of them to take any action or obligations
under this Section or any other provision of this Agreement or
(v) change the definition of "Required Banks".
10.11 References; Headings for Convenience. Unless
otherwise specified herein, all references herein to Section
numbers refer to Section numbers of this Agreement, all
references herein to Exhibits "A", "B", "C", "D", "E", "F" and
"G" refer to annexed Exhibits "A", "B", "C", "D", "E", "F" and
"G" which are hereby incorporated herein by reference and all
references herein to Schedules 4.02, 6.05, 6.06, 6.07, 6.08,
6.10, 6.11, 6.12, 6.17, 7.02(d) and 7.02(e) refer to annexed
Schedules 4.02, 6.05, 6.06, 6.07, 6.08, 6.10, 6.11, 6.12, 6.17,
7.02(d) and 7.02(e) which are hereby incorporated herein by
reference. The Section headings are furnished for the
convenience of the parties and are not to be considered in the
construction or interpretation of this Agreement.
10.12 Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
except that (i) Borrower may not assign or otherwise transfer any
of its rights or delegate any of its obligations under this
Agreement and (ii) without the prior written consent of the Agent
and the Borrower (which consent, in each case, shall not be
unreasonably withheld), no Bank may sell, assign or otherwise
transfer its Notes or its rights under this Agreement (other than
by way of participation to the extent permitted below) in whole
or in part to any Person other than another existing Bank;
provided, however, that, notwithstanding the foregoing, (i) any
Bank may assign, as collateral or otherwise, any of its rights
(but not any of its obligations) under this Agreement or its
Notes (including, without limitation, rights to payment of
principal and/or interest on its Notes) to any Federal Reserve
Bank without notice to or consent of the Agent or the Borrower,
(ii) any Bank may sell participations in its Notes or its rights
under this Agreement in whole or in part to any commercial bank
organized under the laws of the United States or any state
thereof that is a member of both the Federal Deposit Insurance
Corporation and the Federal Reserve System without the consent of
the Agent or the Borrower so long as each agreement pursuant to
which any such participation is granted provides that such
selling Bank shall retain the sole right to approve or disapprove
any amendment, modification or waiver of any provision of this
Agreement or any of the other Transaction Documents, (iii) from
and after the occurrence of any Default or Event of Default under
this Agreement, each Bank may sell, assign, grant a participation
in or otherwise transfer its Notes and its rights under this
Agreement in whole or in part to any Person without the consent
of the Borrower and (iv) from and after (A) the occurrence of any
Event of Default under this Agreement, (B) the termination of the
obligations of the Banks to make Loans and/or issue Letters of
<PAGE>
Credit under this Agreement and (C) the acceleration of the
entire outstanding principal balance of and all accrued and
unpaid interest on the Notes issued under this Agreement, each
Bank may sell, assign, grant a participation in or otherwise
transfer its Notes and its rights under this Agreement in whole
or in part to any bank or other financial institution without the
consent of the Agent or the Borrower.
(b) Any Bank which, in accordance with Section
10.12(a), grants a participation in, or sells, assigns or
otherwise transfers any interest in, any of its rights under this
Agreement or its Notes shall give prompt notice thereof to the
Agent and Borrower.
(c) Unless otherwise agreed to by Borrower in writing,
no Bank shall, as between Borrower and that Bank, be relieved of
any of its obligations under this Agreement as a result of such
Bank's granting of a participation in all or any part of such
Bank's Notes or all or any part of such Bank's rights under this
Agreement.
10.13 NO ORAL AGREEMENTS; ENTIRE AGREEMENT. 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, THE AGENT AND THE BANKS FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER, THE AGENT AND
THE BANKS COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT
AND THE OTHER TRANSACTION DOCUMENTS, WHICH AGREEMENT AND OTHER
TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF
THE AGREEMENTS AMONG BORROWER, THE AGENT AND THE BANKS, EXCEPT AS
BORROWER, THE AGENT AND THE BANKS MAY LATER AGREE IN WRITING TO
MODIFY THEM. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior
agreements and understandings (oral or written) relating to the
subject matter hereof.
10.14 Severability. In the event any one or more of
the provisions contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
10.15 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
10.16 Resurrection of Borrower's Obligations. To the
extent that any of the Banks receives any payment on account of
any of Borrower's Obligations, and any such payment(s) or any
part thereof are subsequently invalidated, declared to be
<PAGE>
fraudulent or preferential, set aside, subordinated and/or
required to be repaid to a trustee, receiver or any other Person
under any bankruptcy act, state or Federal law, common law or
equitable cause, then, to the extent of such payment(s) received,
Borrower's Obligations or part thereof intended to be satisfied
and any and all Liens upon or pertaining to any Property or
assets of Borrower and theretofore created and/or existing in
favor of such Bank(s) as security for the payment of such
Borrower's Obligations shall be revived and continue in full
force and effect, as if such payment(s) had not been received by
such Bank(s) and applied on account of Borrower's Obligations.
10.17 Independence of Covenants. All of the covenants
contained in this Agreement and the other Transaction Documents
shall be given independent effect so that if a particular action,
event or condition is prohibited by any one of such covenants,
the fact that it would be permitted by an exception to, or
otherwise be in compliance within the provisions of, another
covenant shall not avoid the occurrence of a Default or Event of
Default if such action is taken, such event occurs or such
condition exists.
<PAGE>
IN WITNESS WHEREOF, Borrower, the Agent and the Banks
have executed this Revolving Credit Agreement this 13th day of
July, 1995.
CPI CORP.
By /s/ Barry Arthur
-------------------------------
Title: Treasurer/CFO
1706 Washington Avenue
St. Louis, Missouri 63103
Attention: Chief Financial Officer
Telecopy number: (314) 878-4537
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By /s/ John Holland
-------------------------------
Title: Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy number: (314) 425-2162
HARRIS TRUST AND SAVINGS BANK
By /s/ Stephen Gray
-------------------------------
Title: Vice President
111 West Monroe - 2C
Chicago, Illinois 60690
Attention:
Telecopy number: (312) 461-2591
<PAGE>
THE DAIWA BANK, LIMITED
By /s/ Jayleen R. P. Hague
-------------------------------
Title: Vice President
By /s/ Teresa A. Lekich
-------------------------------
Title: Vice President
200 North Broadway
Suite 1625
St. Louis, Missouri 63102
Attention:
Telecopy number: (314) 241-0736
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION, as Agent
By /s/ John Holland
-------------------------------
Title: Vice President
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Telecopy number: (314) 425-2162
<PAGE>
SCHEDULE 4.02
Existing Letters of Credit
1. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706505 in the
amount of $276,829.00 issued for the account of CPI Corp.
and for the benefit of American Motorist Insurance, as
amended.
2. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706700 in the
amount of $340,563.00 issued for the account of CPI Corp.
and for the benefit of American Motorist Insurance, as
amended.
3. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706935 in the
amount of $325,207.00 issued for the account of CPI Corp.
and for the benefit of American Motorist Insurance, as
amended.
4. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2706936 in the
amount of $308,652.00 issued for the account of CPI Corp.
and for the benefit of American Motorist Insurance, as
amended.
5. Mercantile Bank of St. Louis National Association
Irrevocable Standby Letter of Credit No. 210-2707674 in the
amount of $2,900,000.00 issued for the account of CPI Corp.
and for the benefit of The Travelers Insurance Company, as
amended.
<PAGE>
SCHEDULE 6.05
Litigation
Following is a list of pending or threatened litigation or
proceedings that, absent insurance, could have a Material
Adverse Effect. There are no defaults with respect to any
order, decree, decision, or injunction.
<TABLE>
A. Pending Litigation:
<CAPTION>
DATE DAMAGES
CASE FILED ALLEGATION CLAIMED
-------------------------- -------- -------------------- ----------------------
<S> <C> <C> <C>
1. Aureau Velezquez 04/07/94 Negligence assault $1,000,000
v. ($100,000 deductible)
Sears Roebuck
2. Martha/Rose Lopez 09/02/92 Negligence resulting $1,000,000
v. in personal injury ($106,000 deductible)
Leland St. John & Wheels car accident
3. Zabatino 08/14/91 Negligence resulting $1,000,000 for infant
v. in personal injury & $100,000 for parent
Sears Roebuck & CPI ($115,000 deductible)
4. Guidry 05/02/91 Irreparable harm; Not specified
v. severe emotional ($115,000 deductible)
Sears Portrait Studio distress
5. Pierre 07/31/89 Negligence resulting $2,000,000 for child
v. in personal injury $50,000 for father
Sears Roebuck ($119,000 deductible)
6. Christie Bonczek 09/17/93 Invasion of Privacy Excess of $1,000,000
v.
CPI
</TABLE>
<PAGE>
SCHEDULE 6.06
<TABLE>
Retirees Covered Under CPI Benefit Plan Pursuant To Early
Retirement Program
<CAPTION>
Age 65
Name SS# Birth Date Stop Date Coverage
---------------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C>
Betty Abbett ###-##-#### 11/16/33 11/16/98 E/S
Ralph Baumhauff ###-##-#### 12/27/32 12/27/97 E/S
Mary Jo Blanks ###-##-#### 12/28/37 12/28/02 E
Arnold Blewer ###-##-#### 11/19/35 11/19/00 E/F
Elizabeth Boner ###-##-#### 03/26/32 03/26/97 E/S
Helena Brown ###-##-#### 07/01/35 07/01/00 E/S
Edward Cenatiempo ###-##-#### 12/10/38 12/10/03 E/S
Florence Coyne ###-##-#### 03/14/35 03/14/00 E
Lucy Duncan ###-##-#### 06/20/38 06/20/03 E
Barb Eberts ###-##-#### 09/17/33 09/17/98 E
Doris Holliday ###-##-#### 11/11/34 11/11/99 E
Bobbi Irvin ###-##-#### 03/04/33 03/04/98 E
Merline Jackson ###-##-#### 09/09/34 09/09/99 E
Laverne Johnson ###-##-#### 11/19/32 11/19/97 E
Mary Keel ###-##-#### 11/25/34 11/25/99 S
Gail Kershaw ###-##-#### 06/16/35 06/16/00 E
LaVerne Kilcullen ###-##-#### 04/20/35 04/20/00 E
Barb Kunz ###-##-#### 07/14/34 07/14/99 E
Duane Laird ###-##-#### 03/21/34 03/21/99 E/S
Doris Masters ###-##-#### 01/19/34 01/19/99 E
Bertha Mitchell ###-##-#### 03/12/36 03/12/01 E
Brucine Saifer ###-##-#### 11/19/37 11/19/02 E
Yvonne Shaw ###-##-#### 07/15/37 07/15/02 E
Lavern Taylor ###-##-#### 08/18/32 08/18/97 E/S
Myrna Weatherford ###-##-#### 12/10/36 12/10/01 S
Myron Webb ###-##-#### 04/23/31 04/23/96 E/S
Essie Williams ###-##-#### 08/27/39 08/27/04 S
<FN>
E = Employee Only
E/S = Employee & Spouse
E/F = Employee & Family
</FN>
</TABLE>
<PAGE>
SCHEDULE 6.07
Tax Matters
The IRS orally advised Borrower recently that it intends to propose
income tax deficiencies for Borrower's taxable years ended February
4, 1989, February 3, 1990, and February 2, 1991 relating to an
adjustment with respect to a partnership in which the Borrower was
a partner, but the IRS has not provided any computations of the
proposed deficiencies to Borrower. The Borrower's computations
suggest that in the worst and most unlikely case, the aggregate
deficiencies and interest would total approximately $3.6 million.
The Borrower intends to vigorously contest these proposed
deficiencies. In the Borrower's opinion, it is highly unlikely that
these tax deficiencies and the interest thereon will, when
ultimately resolved through administrative appeal, litigation, or
settlement, have a Material Adverse Effect.
In 1992 the IRS asserted income tax deficiencies of approximately
$1 million for taxable years ended February 4, 1989 and February 3,
1990 based on disputed issues unrelated to the recently proposed
partnership adjustment. Settlement negotiations are in progress,
and Borrower believes that the present value of the additional tax
liability attributable to these issues will ultimately be
determined to be substantially less than $500,000.
<PAGE>
SCHEDULE 6.08
<TABLE>
Subsidiaries - State/Providence/Country as of July 13, 1995
<CAPTION>
State/Province/Country
----------------------
<S> <C>
CPI Corp. Delaware, USA
Consumer Programs Holding, Inc. ("CPHI") Delaware, USA
Consumer Programs, Incorporated
("Programs") Missouri, USA
d/b/a Sears Portrait Studio
CPI Brands, Inc. Delaware, USA
Consumer Programs Partner, Inc. Delaware, USA
Fox Photo, Inc. ("Fox") Delaware, USA
d/b/a CPI Photo Finish One Hour
Photo, Inc.
d/b/a Fox Photo 1-Hour Lab, Inc.
Fox Photo Partner, Inc. Delaware, USA
Proex Photo Systems, Inc. Missouri, USA
d/b/a Proex Portrait & Photo
d/b/a Proex Photo & Lab
d/b/a Proex Photo
d/b/a Mainstreet Portraits
CPI Prints Plus, Inc. ("PP") Delaware, USA
Ridgedale Prints Plus, Inc. ("RPP") Minnesota, USA
d/b/a Prints Plus
Prints Plus, Inc. California, USA
d/b/a Prints Plus
Color Laser Corp. Delaware, USA
d/b/a Image Explosion
CPI Photo Finish, Inc. Missouri, USA
CPI Copy Services, Inc. ("Copy") Missouri, USA
d/b/a CopyMat
d/b/a Copy USA
d/b/a Raging Fingers
d/b/a Image Explosion
CPI Technology Corp. Missouri, USA
CPI Corp. Canada Ontario, Canada
d/b/a Sears Portrait Studios
</TABLE>
<PAGE>
SCHEDULE 6.08
<TABLE>
Subsidiaries - Number of Shares Authorized, Number of Shares
Outstanding and Holdings as of July 13, 1995
<CAPTION>
# of # of
Shares Shares
Auth. O/S Holdings
------- ------- --------
<S> <C> <C> <C>
CPI Corp. 4,000 4
Consumer Programs Holding,
Inc. ("CPHI") 1,000 100 CPI-100%
Consumer Programs,
Incorporated ("Programs") 3,000 50 CPHI-100%
d/b/a Sears Portrait Studio
CPI Brands, Inc. 1,000 100 Programs-90%
Copy -10%
Consumer Programs
Partner, Inc. 1,000 1 Programs-100%
Fox Photo, Inc. ("Fox") 1,000 1,000 CPHI-100%
d/b/a CPI Photo Finish One
Hour Photo, Inc.
d/b/a Fox Photo 1-Hour Lab,
Inc.
Fox Photo Partner, Inc. 1,000 1 Fox-100%
Proex Photo Systems, Inc. 5,000 500 CPHI-100%
d/b/a Proex Portrait
& Photo
d/b/a Proex Photo & Lab
d/b/a Proex Photo
d/b/a Mainstreet Portraits
CPI Prints Plus, Inc. ("PP") 3,000 3,000 CPHI-100%
Ridgedale Prints Plus,
Inc. ("RPP") 100 100 PP-100%
d/b/a Prints Plus
Prints Plus, Inc. 50,000 50,000 RPP-100%
d/b/a Prints Plus
Color Laser Corp. 2,400 2,280 CPI-100%
d/b/a Image Explosion
CPI Photo Finish, Inc. 30,000 100 CPI-100%
CPI Copy Services, Inc.
("Copy") 3,000 3,000 CPI-100%
d/b/a CopyMat
d/b/a Copy USA
d/b/a Raging Fingers
d/b/a Image Explosion
CPI Technology Corp. 3,000 3,000 CPI-100%
CPI Corp. Canada 4,000 4 CPI-100%
d/b/a Sears Portrait Studios
</TABLE>
<PAGE>
SCHEDULE 6.10
<TABLE>
Debt; Other Loans and Guarantees
<CAPTION>
Name Amount Description
--------------------- ------------ --------------------------
<S> <C> <C>
Senior Notes $60,000,000 Senior long-term debt--
see further disclosure
in Note A
CPI Corp. Revolving 14,225,000* CPI Corp. revolving
Credit Agreement credit agreement
with Mercantile
Bank of St. Louis
Consumer Programs Inc. 4,500,000* Consumer Programs
Line of Credit Incorporated line of
credit with Mercantile
Bank of St. Louis
Consumer Programs Inc. 4,500,000* Consumer Programs
Line of Credit Incorporated line of
credit with Harris Trust
and Savings Bank
St. Louis Equity Fund 76,678 Investment in St. Louis
Equity Fund 1990 Limited
Partnership
Fotomat 18,193 Leases on Konica Minilab
equipment
------------
$83,319,871
Issuance Costs (305,383) Senior long-term debt--see
------------ further disclosure in
Note A
Total as of
June 24, 1995 $83,014,488
============
<FN>
* To be repaid by initial advance under revolving credit
agreement dated July 13, 1995.
</FN>
</TABLE>
Note A
On August 31, 1993, CPI Corp. privately placed senior
notes in the amount of $60,000,000 (the "Note
Agreement") with two insurance companies. The notes,
<PAGE>
SCHEDULE 6.10 (continued)
Debt; Other Loans and Guarantees
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 maintain certain financial ratios and comply
with certain restrictive covenants including a
limitation on dividend payment, purchase of treasury
stock and certain restricted investments are not to
exceed $25,000,00 plus 50% of net earnings (or less
100% of net losses) credited a the end of each fiscal
year. The Company incurred $459,000 in issuance costs
associated with the private placement of the notes.
These costs are being amortized ratably over the seven-
year life of the notes.
The Company's performance of the conditions of the Note
Agreement and the underlying notes issued under the
agreement was originally secured by a pledge of the
stock of the Company's direct subsidiaries. As the
Company achieved the stipulated financial ratios
required by the agreement to release the pledge of
stock and pursuant to the direction of the lenders,
on June 5, 1995, the lien on the pledged shares of
the Company's direct, wholly owned subsidiaries was
released.
CPI Corp. guarantees all lines of credit to its subsidiaries and
routinely guarantees leases entered into by subsidiaries. There are
numerous intercompany accounts payable and notes arising in the
ordinary course of the business of the Company and its
subsidiaries.
The above information represents both short- and long-term debt
agreements of CPI Corp. as of its most recent fiscal period close,
June 24, 1995. No additional short- or long-term debt, loan or
guarantees agreements have been entered into as of July 13, 1995.
As of July 11, 1995, the CPI Corp. Revolving Credit Agreement had
a balance of $11,625,000.
<PAGE>
SCHEDULE 6.11
Labor Matters
None
<PAGE>
SCHEDULE 6.12
Consumer Programs Incorporated
<TABLE>
Pre-Closing UCC Searches - Consumer Programs Incorporated
<CAPTION>
Secured Type of Date &
Debtor Party Assignee Collateral Jurisdiction Filing File No.
------------------- -------- -------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
St. Louis UCC Liens-
City, MO Clear
St. Louis Federal Tax
City, MO & Liens-Clear
Missouri
St. Louis State Tax
City, MO Liens-Clear
St. Louis Judgment
City, MO Liens-Clear
Consumer Programs, SNET None Mitel Missouri Original 2/25/91
Incorporated Credit, SX 200 Secretary 1969559
1706 Washington Ave. Inc. and of State
St. Louis, MO 63103 6 Devine access-
(1) Street ories
N.Haven
CT,06473
<FN>
(1)
Consumer Programs purchased this formerly leased equipment in December 1992. Financing
statement revealed the item is secured. A letter is being written asking the secured party
to file a UCC-3 Termination.
</FN>
</TABLE>
<PAGE>
SCHEDULE 6.12
Consumer Programs Incorporated
<TABLE>
Pre-Closing UCC Searches - Consumer Programs Incorporated (continued)
<CAPTION>
Secured Type of Date &
Debtor Party Assignee Collateral Jurisdiction Filing File No.
------------------- -------- -------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Consumer Programs, Data None 400 Missouri Original 6/18/93
Incorporated Cash Ithaca Secretary 227977
1706 Washington Ave. Register 53P of State
St. Louis, MO 63103 Systems Printers
(2) Inc.
2605
Metro
Blvd.
Maryland
Heights,
MO,63043
St. Louis Fixture
City, MO & Filings-
Missouri Clear
<FN>
(2) Consumer Programs purchased this equipment in June 1993. Financing statement revealed the
items as secured. A letter is being written asking the secured party to file a UCC-3
termination.
</FN>
</TABLE>
<PAGE>
SCHEDULE 6.12
Fox Photo, Inc.
<TABLE>
Pre-Closing UCC Searches - Fox Photo, Inc.
<CAPTION>
Secured Type of Date &
Debtor Party Assignee Collateral Jurisdiction Filing File No.
------------------- -------- -------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
New Castle, UCC Liens-
DE and Clear
Delaware
New Castle, Federal Tax
DE and Liens-Clear
Delaware
New Castle, State Tax
DE and Liens-Clear
Delaware
New Castle, Judgment
DE and Liens-Clear
Delaware
New Castle, Fixture
DE - clear Filings-
Clear
Delaware Fixture
Filings-
Clear
</TABLE>
<PAGE>
SCHEDULE 6.12
CPI Corp.
<TABLE>
Pre-Closing UCC Searches - CPI Corp.
<CAPTION>
Secured Type of Date &
Debtor Party Assignee Collateral Jurisdiction Filing File No.
------------------- -------- -------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
New Castle, UCC Liens-
DE and Clear
Delaware
New Castle, Federal Tax
DE and Liens-Clear
Delaware
New Castle, State Tax
DE and Liens-Clear
Delaware
New Castle, Judgment
DE and Liens-Clear
Delaware
New Castle, Fixture
DE Filings-
Clear
Delaware Fixture
Filings-
Clear
</TABLE>
<PAGE>
SCHEDULE 6.17
Environmental And Health And Safety Matters
1. Fox Photo, Inc. d/b/a Fox Photo
Location: San Francisco, CA
The company is currently responding to a consent order
issued by the City and County of San Francisco Department of
Public Works for alleged violations of the silver limit.
The company has implemented corrective measures to eliminate
violations of the silver limit.
2. Consumer Programs, Incorporated
Location: Las Vegas, NV
The company is currently responding to a letter issued by
the Clark County Sanitation District requiring CPI to submit
a Salinity Control Plan (SCP) for the Las Vegas facility.
An SCP was formulated and submitted.
3. Fox Photo, Inc. d/b/a CPI Photo Finish
Location: Monroe, LA
The company is currently responding to a Notice of Violation
issued by the City of Monroe Pretreatment Department for
violation of their Pretreatment Ordinance. The company
disputed the violation on the basis of sampling and
requested that the Monroe Pretreatment Department pull
additional effluent samples from the location.
4. Fox Photo, Inc. d/b/a CPI Photo Finish
Location: Fort Collins, CO
The company is currently responding to a compliance order
issued by the City of Fort Collins Industrial Pretreatment
Department because the store was unable to demonstrate
consistent compliance with the local silver discharge limit.
The company made several changes to its silver recovery
system to address the problems cited by the City.
5. Fox Photo, Inc. d/b/a CPI Photo Finish
Location: Indianapolis, IN
The Indiana Occupational Safety and Health Administration
issued a Notice of Alleged Safety or Health Hazards (NASHH).
The company has installed local exhaust on the processing
machine and additional general exhaust fans to correct the
alleged problems.
<PAGE>
SCHEDULE 7.02(d)
Restrictions on Subsidiaries
None
<PAGE>
SCHEDULE 7.02(e)
<TABLE>
Investments
<CAPTION>
Purchase Balance as of
Description Face Value Price 7/11/95
------------------ ----------- ----------- -------------
<S> <C> <C> <C>
Meridian Market
Rate Fund due
7/12/95 @ 5.49% $ 8,070 $ 8,070 $ 8,070
Meridan Market
Rate Fund due
7/12/95 @ 5.49% 27,157 27,157 27,157
Bank of America
Horizon Shares of
the Prime Fund due
7/12/95 @ 5.49% 575,000 575,000 575,000
Prudential Money
Market Funds due
7/12/95 @ various
rates 431,936 431,936 431,936
Royal Bank of
Canada Term
Deposit due
7/13/95 @ 5.75% 295,520 295,520 295,520
Royal Bank of
Canada Term
Deposit due
7/20/95 @ 5.75% 369,400 369,400 369,400
Government of
Canada Treasury
bills due
9/7/95 @ 8.10% 5,337,830 5,130,615 5,271,795
---------- ---------- ----------
Total Money Market
Investments $7,044,913 $6,837,698 $6,978,878
========== ========== ==========
</TABLE>
<PAGE>
SCHEDULE 7.02(e)
<TABLE>
Investments (continued)
<CAPTION>
# of
Shares
O/S Holdings
------- --------
<S> <C> <C>
CPI Corp. 4
Consumer Programs Holding,
Inc. ("CPHI") 100 CPI-100%
Consumer Programs,
Incorporated ("Programs") 50 CPHI-100%
d/b/a Sears Portrait Studio
CPI Brands, Inc. 100 Programs-90%
Copy -10%
Consumer Programs
Partner, Inc. 1 Programs-100%
Fox Photo, Inc. ("Fox") 1,000 CPHI-100%
d/b/a CPI Photo Finish One
Hour Photo, Inc.
d/b/a Fox Photo 1-Hour Lab,
Inc.
Fox Photo Partner, Inc. 1 Fox-100%
Proex Photo Systems, Inc. 500 CPHI-100%
d/b/a Proex Portrait
& Photo
d/b/a Proex Photo & Lab
d/b/a Proex Photo
d/b/a Mainstreet Portraits
CPI Prints Plus, Inc. ("PP") 3,000 CPHI-100%
Ridgedale Prints Plus,
Inc. ("RPP") 100 PP-100%
d/b/a Prints Plus
Prints Plus, Inc. 50,000 RPP-100%
d/b/a Prints Plus
Color Laser Corp. 2,280 CPI-100%
d/b/a Image Explosion
CPI Photo Finish, Inc. 100 CPI-100%
CPI Copy Services, Inc.
("Copy") 3,000 CPI-100%
d/b/a CopyMat
d/b/a Copy USA
d/b/a Raging Fingers
d/b/a Image Explosion
CPI Technology Corp. 3,000 CPI-100%
CPI Corp. Canada 4 CPI-100%
d/b/a Sears Portrait Studios
</TABLE>
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$ St. Louis, Missouri
July 13, 1995
FOR VALUE RECEIVED, on the last day of the Revolving Credit Period,
the undersigned, CPI CORP., a Delaware corporation ("Borrower"),
hereby promises to pay to the order of
("Bank"), the principal sum of
Dollars ($ ), 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
of Revolving Credit Loans which Bank shall be committed to have
outstanding hereunder at any time shall not exceed
Dollars ($ ), 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. Borrower further promises to pay to
the order of Bank interest on the aggregate unpaid principal amount
of such Revolving Credit Loans on the dates and at the rate or
rates provided for in the Revolving Credit Agreement. All such
payments of principal and interest shall be made in lawful currency
of the United States in Federal or other immediately available
funds at the office of Mercantile Bank of St. Louis National
Association, 721 Locust Street, St. Louis, Missouri 63101.
All Revolving Credit Loans made by Bank and all repayments of the
principal thereof shall be recorded by Bank and, prior to any
transfer hereof, endorsed by Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a part
hereof; provided, however, that the obligation of Borrower to repay
each Revolving Credit Loan made hereunder shall be absolute and
unconditional, notwithstanding any failure of Bank to record or
endorse or any mistake by Bank in connection with recordation or
endorsement on the schedules attached to this Note. Bank's books
and records (including, without limitation, the schedules attached
to this Note) showing the account between Bank and Borrower shall
be admissible in evidence in any action or proceeding and shall
constitute prima facie proof of the items therein set forth.
This Note is one of the "Notes" referred to in the Revolving Credit
Agreement dated the date hereof by and among Borrower, the banks
listed on the signature pages thereof and Mercantile Bank of
St. Louis National Association, as agent (as the same may from time
to time be amended, modified, extended or renewed, the "Revolving
Credit Agreement"). The Revolving Credit Agreement, among other
<PAGE>
things, contains provisions for acceleration of the maturity hereof
upon the occurrence of certain stated events and also for
prepayments on account of principal hereof and interest hereon
prior to the maturity hereof upon the terms and conditions
specified therein. All capitalized terms used and not otherwise
defined in this Note shall have the respective meanings ascribed to
them in the Revolving Credit Agreement.
Upon the occurrence of any Event of Default under the Revolving
Credit Agreement, Bank's obligation to make additional Revolving
Credit Loans under this Note may be terminated in the manner and
with the effect as provided in the Revolving Credit Agreement and
the entire outstanding principal balance of this Note and all
accrued and unpaid interest thereon may be declared to be
immediately due and payable in the manner and with the effect as
provided in the Revolving Credit Agreement.
In the event that any payment due hereunder shall not be paid when
due, whether by reason of maturity, acceleration or otherwise, and
this Note shall be placed in the hands of an attorney or attorneys
for collection, or if this Note shall be placed in the hands of an
attorney or attorneys for representation of Bank in connection with
bankruptcy or insolvency proceedings relating hereto, Borrower
hereby agrees to pay to the order of Bank, in addition to all other
amounts otherwise due hereon, the costs and expenses of such
collection and representation, including, without limitation,
reasonable attorneys' fees and expenses (whether or not litigation
shall be commenced in aid thereof). Borrower hereby waives
presentment for payment, demand, protest, notice of protest and
notice of dishonor.
This Note shall be governed by and construed in accordance with the
substantive laws of the State of Missouri (without reference to
conflict of law principles).
CPI CORP.
By
Title:
<PAGE>
EXHIBIT B
Letter of Credit Request
[Borrower's Letterhead]
[Date]
Mercantile Bank of St. Louis
National Association
721 Locust Street
St. Louis, Missouri 63101
Attention: Large Corporate Accounts
Gentlemen:
Reference is hereby made to that certain Revolving Credit Agreement
dated July 13, 1995, by and among the undersigned, the banks listed
on the signature pages thereof and Mercantile Bank of St. Louis
National Association, as agent for the Banks (as the same may from
time to time be amended, modified, extended or renewed, the
"Revolving Credit Agreement"). All capitalized terms used and not
otherwise defined herein shall have the respective meanings
ascribed to them in the Revolving Credit Agreement.
Pursuant to Section 4.01 of the Revolving Credit Agreement, the
undersigned hereby requests that you issue an irrevocable [standby]
[commercial] Letter of Credit in the amount of $ for the
account of the undersigned and for the benefit of
upon the terms and conditions set forth in the attached
Application and Agreement for Irrevocable [Standby] [Commercial]
Letter of Credit.
The undersigned hereby represents and warrants to you that as of
the date hereof all of the representations and warranties of the
undersigned contained in the Revolving Credit Agreement are true
and correct in all material respects as if made on and as of the
date hereof and no Default or Event of Default under the Revolving
Credit Agreement has occurred and is continuing and that no such
Default or Event of Default will result from the issuance of the
Letter of Credit request hereby.
Very truly yours,
CPI CORP.
By
Title:
<PAGE>
EXHIBIT C
Form of Irrevocable Standby Letter of Credit Application
A six-page example of an "Application and Agreement for Irrevocable
Standby Letter of Credit" for Mercantile Bank of St. Louis, N.A.,
International Banking Division, 8th and Locust Streets, P.O. Box
14891, St. Louis, Missouri, 63178, U.S.A. was shown here in the
Revolving Credit Agreement.
<PAGE>
EXHIBIT D
Form of Irrevocable Commercial Letter of Credit Application
A four-page example of an "Application and Agreement for
Irrevocable Commercial Letter of Credit" for Mercantile Bank of St.
Louis, N.A., International Banking Division, 8th and Locust
Streets, P.O. Box 14891, St. Louis, Missouri, 63178, U.S.A. was
shown here in the Revolving Credit Agreement.
<PAGE>
EXHIBIT E
LETTER OF CREDIT PARTICIPATION CERTIFICATE
This Letter of Credit Participation Certificate is issued pursuant
to Section 4.02 of that certain Revolving Credit Agreement dated
July 13, 1995, by and among CPI Corp., the banks listed on the
signature pages thereof and Mercantile Bank of St. Louis National
Association, as agent for the Banks, as the same may from time to
time be amended, modified, extended or renewed (the "Revolving
Credit Agreement"). All capitalized terms used and not otherwise
defined herein shall have the respective meanings ascribed to them
in the Revolving Credit Agreement.
Subject to the terms, provisions and conditions contained in the
Revolving Credit Agreement, Mercantile hereby issues to
a Percent (
%) undivided participation interest in all Letters of Credit
issued by Mercantile from time to time under the Revolving Credit
Agreement (including, without limitation, an undivided
participation interest in the reimbursement risk relating to such
Letters of Credit, in all payments and Letter of Credit Loans made
by Mercantile in connection with such Letters of Credit and in all
collateral securing such Letters of Credit and such Letter of
Credit Loans).
This Certificate 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.
Executed this 13th day of July, 1995.
MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION
By:
Title:
The foregoing Letter of Credit Participation Certificate is hereby
accepted this 13th day of July, 1995.
By:
Title:
<PAGE>
EXHIBIT F
Form of Legal Opinion of Husch & Eppenberger
July 13, 1995
Mercantile Bank of St. Louis Harris Trust and Savings
National Association 111 West Monroe - 2C
721 Locust Street Chicago, Illinois 60690
St. Louis, Missouri 63101
The Daiwa Bank, Limited Mercantile Bank of St. Louis
200 North Broadway National Association, as Agent
Suite 1625 721 Locust Street
St. Louis, Missouri 63102 St. Louis, Missouri 63101
Re: CPI Corp.
Ladies and Gentlemen:
We have acted as counsel to CPI Corp, a Delaware corporation
("Borrower"), which is entering into a Revolving Credit Agreement
(the "Credit Agreement"), dated the date hereof, with Mercantile
Bank of St. Louis National Association("Mercantile"), Harris
Trust and Savings Bank ("Harris"), and The Daiwa Bank, Limited
("Daiwa") (with Mercantile, Harris, and Daiwa being collectively
referred to herein as the "Banks") and Mercantile as agent for
the Banks (in such capacity, the "Agent").
As such counsel, we have examined:
1. The Certificate of Incorporation of the Borrower and
all amendments thereto;
2. The By-Laws of the Borrower and all amendments thereto;
3. All relevant corporate minutes and other proceedings of
the Borrower;
4. An executed copy of the Credit Agreement;
5. Executed copies of each of the Notes (as such term is
defined in the Credit Agreement) (collectively, the "Revolving
Credit Notes");
6. All other related agreements, documents, instruments,
and certificates executed and/or delivered by Borrower to the
Agent or the Banks in connection with the execution and delivery
of the Credit Agreement (the "Related Documents") (the Credit
<PAGE>
Agreement, the Revolving Credit Notes, and the Related Documents
are sometimes hereinafter collectively referred to as the "Loan
Documents").
We have also examined (a) originals, or copies certified or
otherwise identified to our satisfaction, of such agreements,
documents, certificates, corporate and official records,
affidavits, and other instruments and (b) such laws and
regulations as we deemed necessary or appropriate for purposes of
this opinion. As to factual matters, we have, in certain
instances, examined and relied upon certificates of corporate
officials and certificates of public officials, copies of which
certificates, if any, are attached hereto. In such examinations
we have assumed the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to
us as copies. We have also assumed the due authorization,
execution, and delivery of the Loan Documents by all parties
thereto other than the Borrower.
When an opinion is provided herein to the best of our
knowledge after due inquiry, such inquiry shall be limited to our
inquiry of (i) the Borrower's General Counsel, and (ii) attorneys
of this firm who have handled substantive matters for the
Borrower and who have actual knowledge of matters included in the
opinion to which such inquiry relates.
When used in any opinion, the term "Material Contract" means
any indenture, mortgage, deed of trust, agreement, document, or
instrument that remains in force and effect, which the Borrower
has filed with the Securities and Exchange Commission as a
material contract as required by Item 601 of Regulation 8-K
(including, without limitation, the Note Agreement (as such term
is defined in the Credit Agreement), or into which the Borrower
has entered between the date of its most recently filed quarterly
report on Form 10-Q and the date of this letter.
Based upon such review and upon such inquiries and
investigations of Borrower as we deemed necessary or relevant,
and subject to the qualifications hereinafter set forth, we are
of the opinion that:
1. The Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware with perpetual corporate existence, has the corporate
power and authority to own its properties and to transact the
business in which it is engaged or presently proposes to engage,
and, to the best of our knowledge after due inquiry, holds all
licenses, permits and approvals that, if not obtained, could
reasonably be expected to have a material adverse effect on the
<PAGE>
Borrower's assets, business, operations, income, or condition,
financial or otherwise ("Material Adverse Effect").
2. The Borrower has full corporate right, power and
authority to execute, deliver and perform the terms and
provisions of the Loan Documents and has duly taken or caused to
be taken all necessary corporate actions to authorize the
execution, delivery and performance of the Loan Documents.
3. The execution, delivery and performance by Borrower of
the Loan Documents do not:
(i) violate any provision of any law, rule, or
regulation (including, without limitation, any usury law, rule or
regulation) or, to the best of our knowledge after due inquiry,
any order, writ, judgment, injunction, decree, determination, or
award presently in effect which affects or binds Borrower or nay
of its properties.
(ii) violate any provision of the Certificate of
Incorporation or By-Laws of Borrower;
(iii) conflict with, or result in the breach of,
or constitute a default under any Material Contract to which
Borrower is a party or by which it might be bound, or result in
the creation or imposition of any lien, charge, or other
encumbrance upon any of the property of Borrower thereunder;
(iv) to the best of our knowledge after due
inquiry, conflict with or result in a breach of, or constitute a
default under, any other indenture, mortgage, deed of trust,
agreement, document, or instrument to which Borrower is a party
or by which it might be bound, or result in the creation or
imposition of any lien, charge, or other encumbrance upon any of
the property of Borrower thereunder.
4. Each of the Loan Documents has been duly authorized,
executed, and delivered by Borrower, constitutes the legal,
valid, and binding obligation of Borrower and is enforceable
against Borrower in accordance with its terms (including, without
limitation, the choice of law provisions contained therein),
except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization, receivership,
or other similar laws affecting the enforcement of creditors'
rights and remedies generally and except as limited by general
principles of equity (regardless of whether such enforceability
is considered in a proceeding inquiry or at law).
5. To the best of our knowledge after due inquiry, no
judgments are outstanding against the Borrower. To the best of
our knowledge after due inquiry and except as set forth in the
<PAGE>
Schedules of the Credit Agreement, there is not now pending or
threatened any litigation, contested claim, or governmental or
regulatory proceeding by or against the Borrower, the adverse
resolution of which could reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect the
Borrower's ability to perform its obligations under the Loan
Documents. To the best of our knowledge after due inquiry, the
Borrower is not (i) in default with respect to any order, writ,
injunction, or decree of any court or (ii) in default under any
law, order, or regulation of any governmental or regulatory
agency or instrumentality, a default under which could reasonably
be expected to have a Material Adverse Effect or to materially
and adversely affect the Borrower's ability to perform its
obligations under the Loan Documents.
6. To the best of our knowledge after due inquiry, there
is no default by Borrower under any contract, lease, agreement,
document, instrument, or commitment to which Borrower is a party
or by which it is bound, a default under which could reasonably
be expected to have a Material Adverse Effect.
7. No action or consent of, or filing with, any
governmental, regulatory or public agency, body, or authority is
required to authorize, or is otherwise required in connection
with, the execution, delivery, and/or performance of the Loan
Documents.
Our opinion regarding enforceability in paragraph 4, above,
is qualified to exclude its applicability to the last sentence of
Section 10.08 of the Credit Agreement, which seeks to waive
rights to trial by jury.
Our opinions herein are provided only with respect to the
laws of the State of Missouri, the Delaware General Corporation
Law, and Federal law. This opinion is provided exclusively to the
Agent and the Banks and their respective successors and assigns,
and no other person or entity may rely on this opinion without
our prior written consent. Our opinions are given as of the date
of this letter, and we assume no obligation to provide you with
updated opinions to reflect changes of law or fact that
subsequently occur.
We confirm that the Borrower is qualified to conduct
business as a foreign corporation in the State of Missouri.
Very truly yours,
Husch & Eppenberger
<PAGE>
EXHIBIT G
, 19
Mercantile Bank of St. Louis
National Association
721 Locust Street
St. Louis, Missouri 63101
Harris Trust and Savings Bank
111 West Monroe - 2C
Chicago, Illinois 60690
The Daiwa Bank, Limited
200 North Broadway
Suite 1625
St. Louis, Missouri 63102
Mercantile Bank of St. Louis
National Association, as Agent
721 Locust Street
St. Louis, Missouri 63101
Gentlemen:
Reference is hereby made to that certain Revolving Credit
Agreement dated July 13, 1995, by and among the undersigned, the
banks listed on the signature pages thereof and Mercantile Bank
of St. Louis National Association, as agent for the Banks (as the
same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). All capitalized
terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
The undersigned hereby certifies to you that as of the date
hereof:
(a) all of the representations and warranties of the
Borrower contained in the Revolving Credit Agreement are true and
correct in all material respects as if made on and as of the date
hereof;
(b) no violation or breach of any of the affirmative
covenants of the Borrower contained in the Revolving Credit
Agreement has occurred and is continuing;
<PAGE>
(c) no violation or breach of any of the negative covenants
of the Borrower contained in the Revolving Credit Agreement has
occurred and is continuing;
(d) no Default or Event of Default under or within the
meaning of the Revolving Credit Agreement has occurred and is
continuing;
(e) the financial statements of Borrower and its
Subsidiaries delivered to you with this letter are true, correct
and complete and have been prepared in accordance with generally
accepted accounting principles consistently applied; and
(f) the financial covenant information set forth in
Schedule 1 to this letter is true and correct.
Very truly yours,
CPI CORP.
By
Title:
<PAGE>
SCHEDULE 1
Financial Covenant Information
as of , 19
Financial Covenant Actual Required 951800011/4
PART II. ITEM 6(a) EXHIBITS EXHIBIT (10.2)
REVOLVING CREDIT NOTE
$25,000.000.00 St. Louis, Missouri
July 13, 1995
FOR VALUE RECEIVED, on the last day of the Revolving
Credit Period, the undersigned, CPI CORP., a Delaware corporation
("Borrower"), hereby promises to pay to the order of MERCANTILE
BANK OF ST. LOUIS NATIONAL ASSOCIATION ("Bank"), the principal
sum of Twenty-Five Million Dollars ($25,000,000.00), 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 of Revolving Credit Loans which
Bank shall be committed to have outstanding hereunder at any time
shall not exceed Twenty-Five Million Dollars ($25,000,000.00),
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. Borrower
further promises to pay to the order of Bank interest on the
aggregate unpaid principal amount of such Revolving Credit Loans
on the dates and at the rate or rates provided for in the
Revolving Credit Agreement. All such payments of principal and
interest shall be made in lawful currency of the United States in
Federal or other immediately available funds at the office of
Mercantile Bank of St. Louis National Association, 721 Locust
Street, St. Louis, Missouri 63101.
All Revolving Credit Loans made by Bank and all
repayments of the principal thereof shall be recorded by Bank
and, prior to any transfer hereof, endorsed by Bank on the
schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided, however, that the
obligation of Borrower to repay each Revolving Credit Loan made
hereunder shall be absolute and unconditional, notwithstanding
any failure of Bank to record or endorse or any mistake by Bank
in connection with recordation or endorsement on the schedules
attached to this Note. Bank's books and records (including,
without limitation, the schedules attached to this Note) showing
the account between Bank and Borrower shall be admissible in
evidence in any action or proceeding and shall constitute prima
facie proof of the items therein set forth.
This Note is one of the "Notes" referred to in the
Revolving Credit Agreement dated the date hereof by and among
Borrower, the banks listed on the signature pages thereof and
Mercantile Bank of St. Louis National Association, as agent (as
<PAGE>
the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). The Revolving Credit
Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the occurrence of
certain stated events and also for prepayments on account of
principal hereof and interest hereon prior to the maturity hereof
upon the terms and conditions specified therein. All capitalized
terms used and not otherwise defined in this Note shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
Upon the occurrence of any Event of Default under the
Revolving Credit Agreement, Bank's obligation to make additional
Revolving Credit Loans under this Note may be terminated in the
manner and with the effect as provided in the Revolving Credit
Agreement and the entire outstanding principal balance of this
Note and all accrued and unpaid interest thereon may be declared
to be immediately due and payable in the manner and with the
effect as provided in the Revolving Credit Agreement.
In the event that any payment due hereunder shall not be paid
when due, whether by reason of maturity, acceleration or
otherwise, and this Note shall be placed in the hands of an
attorney or attorneys for collection, or if this Note shall be
placed in the hands of an attorney or attorneys for
representation of Bank in connection with bankruptcy or
insolvency proceedings relating hereto, Borrower hereby agrees to
pay to the order of Bank, in addition to all other amounts
otherwise due hereon, the costs and expenses of such collection
and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be
commenced in aid thereof). Borrower hereby waives presentment
for payment, demand, protest, notice of protest and notice of
dishonor.
This Note shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
CPI CORP.
By /s/ Barry Arthur
----------------------------
Barry Arthur
Title: Treasurer/CFO
PART II. ITEM 6(a) EXHIBITS EXHIBIT (10.3)
REVOLVING CREDIT NOTE
$20,000.000.00 St. Louis, Missouri
July 13, 1995
FOR VALUE RECEIVED, on the last day of the Revolving
Credit Period, the undersigned, CPI CORP., a Delaware corporation
("Borrower"), hereby promises to pay to the order of HARRIS TRUST
AND SAVINGS BANK ("Bank"), the principal sum of Twenty Million
Dollars ($20,000,000.00), 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 of Revolving Credit Loans which Bank shall be committed to
have outstanding hereunder at any time shall not exceed Twenty
Million Dollars ($20,000,000.00), 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. Borrower further promises to pay to the order
of Bank interest on the aggregate unpaid principal amount of such
Revolving Credit Loans on the dates and at the rate or rates
provided for in the Revolving Credit Agreement. All such
payments of principal and interest shall be made in lawful
currency of the United States in Federal or other immediately
available funds at the office of Mercantile Bank of St. Louis
National Association, 721 Locust Street, St. Louis, Missouri
63101.
All Revolving Credit Loans made by Bank and all
repayments of the principal thereof shall be recorded by Bank
and, prior to any transfer hereof, endorsed by Bank on the
schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided, however, that the
obligation of Borrower to repay each Revolving Credit Loan made
hereunder shall be absolute and unconditional, notwithstanding
any failure of Bank to record or endorse or any mistake by Bank
in connection with recordation or endorsement on the schedules
attached to this Note. Bank's books and records (including,
without limitation, the schedules attached to this Note) showing
the account between Bank and Borrower shall be admissible in
evidence in any action or proceeding and shall constitute prima
facie proof of the items therein set forth.
This Note is one of the "Notes" referred to in the
Revolving Credit Agreement dated the date hereof by and among
Borrower, the banks listed on the signature pages thereof and
Mercantile Bank of St. Louis National Association, as agent (as
<PAGE>
the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). The Revolving Credit
Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the occurrence of
certain stated events and also for prepayments on account of
principal hereof and interest hereon prior to the maturity hereof
upon the terms and conditions specified therein. All capitalized
terms used and not otherwise defined in this Note shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
Upon the occurrence of any Event of Default under the
Revolving Credit Agreement, Bank's obligation to make additional
Revolving Credit Loans under this Note may be terminated in the
manner and with the effect as provided in the Revolving Credit
Agreement and the entire outstanding principal balance of this
Note and all accrued and unpaid interest thereon may be declared
to be immediately due and payable in the manner and with the
effect as provided in the Revolving Credit Agreement.
In the event that any payment due hereunder shall not be paid
when due, whether by reason of maturity, acceleration or
otherwise, and this Note shall be placed in the hands of an
attorney or attorneys for collection, or if this Note shall be
placed in the hands of an attorney or attorneys for
representation of Bank in connection with bankruptcy or
insolvency proceedings relating hereto, Borrower hereby agrees to
pay to the order of Bank, in addition to all other amounts
otherwise due hereon, the costs and expenses of such collection
and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be
commenced in aid thereof). Borrower hereby waives presentment
for payment, demand, protest, notice of protest and notice of
dishonor.
This Note shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
CPI CORP.
By /s/ Barry Arthur
----------------------------
Barry Arthur
Title: Treasurer/CFO
PART II. ITEM 6(a) EXHIBITS EXHIBIT (10.4)
REVOLVING CREDIT NOTE
$15,000.000.00 St. Louis, Missouri
July 13, 1995
FOR VALUE RECEIVED, on the last day of the Revolving
Credit Period, the undersigned, CPI CORP., a Delaware corporation
("Borrower"), hereby promises to pay to the order of THE DAIWA
BANK, LIMITED ("Bank"), the principal sum of Fifteen Million
Dollars ($15,000,000.00), 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 of Revolving Credit Loans which Bank shall be committed to
have outstanding hereunder at any time shall not exceed Fifteen
Million Dollars ($15,000,000.00), 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. Borrower further promises to pay to the order
of Bank interest on the aggregate unpaid principal amount of such
Revolving Credit Loans on the dates and at the rate or rates
provided for in the Revolving Credit Agreement. All such
payments of principal and interest shall be made in lawful
currency of the United States in Federal or other immediately
available funds at the office of Mercantile Bank of St. Louis
National Association, 721 Locust Street, St. Louis, Missouri
63101.
All Revolving Credit Loans made by Bank and all
repayments of the principal thereof shall be recorded by Bank
and, prior to any transfer hereof, endorsed by Bank on the
schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided, however, that the
obligation of Borrower to repay each Revolving Credit Loan made
hereunder shall be absolute and unconditional, notwithstanding
any failure of Bank to record or endorse or any mistake by Bank
in connection with recordation or endorsement on the schedules
attached to this Note. Bank's books and records (including,
without limitation, the schedules attached to this Note) showing
the account between Bank and Borrower shall be admissible in
evidence in any action or proceeding and shall constitute prima
facie proof of the items therein set forth.
This Note is one of the "Notes" referred to in the
Revolving Credit Agreement dated the date hereof by and among
Borrower, the banks listed on the signature pages thereof and
Mercantile Bank of St. Louis National Association, as agent (as
<PAGE>
the same may from time to time be amended, modified, extended or
renewed, the "Revolving Credit Agreement"). The Revolving Credit
Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the occurrence of
certain stated events and also for prepayments on account of
principal hereof and interest hereon prior to the maturity hereof
upon the terms and conditions specified therein. All capitalized
terms used and not otherwise defined in this Note shall have the
respective meanings ascribed to them in the Revolving Credit
Agreement.
Upon the occurrence of any Event of Default under the
Revolving Credit Agreement, Bank's obligation to make additional
Revolving Credit Loans under this Note may be terminated in the
manner and with the effect as provided in the Revolving Credit
Agreement and the entire outstanding principal balance of this
Note and all accrued and unpaid interest thereon may be declared
to be immediately due and payable in the manner and with the
effect as provided in the Revolving Credit Agreement.
In the event that any payment due hereunder shall not be paid
when due, whether by reason of maturity, acceleration or
otherwise, and this Note shall be placed in the hands of an
attorney or attorneys for collection, or if this Note shall be
placed in the hands of an attorney or attorneys for
representation of Bank in connection with bankruptcy or
insolvency proceedings relating hereto, Borrower hereby agrees to
pay to the order of Bank, in addition to all other amounts
otherwise due hereon, the costs and expenses of such collection
and representation, including, without limitation, reasonable
attorneys' fees and expenses (whether or not litigation shall be
commenced in aid thereof). Borrower hereby waives presentment
for payment, demand, protest, notice of protest and notice of
dishonor.
This Note shall be governed by and construed in
accordance with the substantive laws of the State of Missouri
(without reference to conflict of law principles).
CPI CORP.
By /s/ Barry Arthur
----------------------------
Barry Arthur
Title: Treasurer/CFO
