<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
CPI CORP.
(NAME OF THE ISSUER)
CPI CORP.
SPS INTERNATIONAL HOLDINGS, INC.
SPS ACQUISITION, INC.
ALYN V. ESSMAN
RUSSELL ISAAK
PATRICK J. MORRIS
(NAME OF PERSON(S) FILING STATEMENT)
------------------------
COMMON STOCK, PAR VALUE $0.40 PER SHARE
(TITLE OF CLASS OF SECURITIES)
0000805647
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
ALYN V. ESSMAN
RUSSELL ISAAK
PATRICK J. MORRIS SPS INTERNATIONAL HOLDINGS, INC.
C/O CPI CORP. SPS ACQUISITION, INC.
1706 WASHINGTON AVENUE 122 EAST 42ND STREET
ST. LOUIS, MISSOURI 63103 NEW YORK, NEW YORK 10168
(314) 231-1575 ATTENTION: (212) 476-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
------------------------
Copies to:
WILLIAM F. WYNNE, JR., ESQ. RICHARD CAPELOUTO, ESQ.
WHITE & CASE LLP SIMPSON THACHER & BARTLETT
1155 AVENUE OF THE AMERICAS 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10036 NEW YORK, NEW YORK 10017
(212) 819-8200 (212) 455-2000
JOHN A. RAVA, ESQ.
HUSCH & EPPENBERGER, LLC
100 NORTH BROADWAY, SUITE 1300
ST. LOUIS, MISSOURI 63102-2789
(314) 421-4800
This statement is filed in connection with (check the appropriate box):
/x/ a. The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or
Rule 13e-3(c) under the Securities Exchange Act of 1934.
/ / b. The filing of a registration statement under the Securities
Act of 1933.
/ / c. A tender offer.
/ / d. None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. /x/
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION(1) AMOUNT OF FILING FEE
<S> <C>
$386,717,154.48 $77,343.43
</TABLE>
/x/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $77,343.43 Filing party: CPI Corp.
Form or registration no.: Schedule 14-A, no. 1-10204 Date filed: July 12, 1999
</TABLE>
(1) Based upon Exchange Act Rule 0-11(b). Includes $37.00 per share for
9,918,800 shares of common stock of the Issuer plus an aggregate of
$19,721,554.48 in consideration of 1,401,987 outstanding options to purchase
common stock of the Issuer.
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<PAGE>
INTRODUCTORY NOTE
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") relates to the proposed merger (the "Merger") of SPS
Acquisition, Inc., a Delaware corporation ("Sub"), with and into CPI Corp., a
Delaware corporation (the "Corporation"), pursuant to the Agreement and Plan of
Merger dated as of June 15, 1999, by and among the Corporation, Sub and SPS
International Holdings, Inc., a Delaware corporation ("Parent"). In connection
with the Merger, certain officers and employees of the Corporation, including
Alyn V. Essman, Russell Isaak and Patrick J. Morris, have agreed to invest cash,
shares of the Corporation's common stock or options to purchase the
Corporation's common stock or a combination thereof in Parent in return for
equity interests in Parent.
The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement
(the "Proxy Statement"), filed by the Corporation with the Securities and
Exchange Commission on July 9, 1999 of the information required to be included
in response to the items of Schedule 13E-3. The information set forth in the
Proxy Statement (including the appendixes thereto) is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the information contained in the Proxy Statement.
2
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO GENERAL INSTRUCTION F
TO SCHEDULE 13E-3
<TABLE>
<CAPTION>
SCHEDULE 13E-3 RESPONSE/CAPTION IN
ITEM NUMBER AND CAPTION PROXY STATEMENT
- ------------------------ --------------------
<S> <C>
</TABLE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<TABLE>
<S> <C>
(a) Cover Page;
SUMMARY--General--The Parties to the Transaction; Management Investors;
SUMMARY--General--The Merger.
(b) SUMMARY--General--The Special Meeting;
INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required for Approval.
(c) SUMMARY--Comparative Market Price Data.
(d) SUMMARY--Dividends.
(e) Not applicable.
(f) TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS.
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
(a)-(d) and Cover Page;
(g)
SUMMARY--General--The Parties to the Transaction;
SPECIAL FACTORS--Interests of Certain Persons in the Merger--Equity Investment by
Management Investors.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(b) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) SUMMARY;
INTRODUCTION;
SPECIAL FACTORS;
THE MERGER;
THE MERGER AGREEMENT;
Appendix A.
(b) SUMMARY;
SPECIAL FACTORS--Certain Effects of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)-(g) SUMMARY--Certain Effects of the Merger;
SPECIAL FACTORS--Certain Effects of the Merger;
THE MERGER--Effects of the Merger;
THE MERGER--Plans or Proposals After the Merger.
</TABLE>
3
<PAGE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) SUMMARY--Financing of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger;
THE MERGER--Financing of the Merger.
(b) THE MERGER AGREEMENT--Termination Fees; Expenses.
(c) THE MERGER--Financing of the Merger.
(d) Not applicable.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a)-(d) SUMMARY--Certain Effects of the Merger;
SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors;
SPECIAL FACTORS--Certain Effects of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger;
SPECIAL FACTORS--Certain U.S. Federal Income Tax Consequences of
the Merger to Our Stockholders.
</TABLE>
ITEM 8. FAIRNESS TO THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) SUMMARY;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
SPECIAL FACTORS--CPI and the Key Management Investors' Belief as to the
Fairness of the Merger;
SPECIAL FACTORS--SPS Acquisition and SPS International's Belief as to the
Fairness of the Merger;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
(c) INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For Approval.
(d)-(f) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors.
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(c) SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
Appendix C.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) SPECIAL FACTORS--Interests of Certain Persons in the Merger;
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS;
TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS.
(b) Not applicable.
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
SUMMARY--Interests of Certain Persons in the Merger;
INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required for Approval;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
</TABLE>
4
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF
CERTAIN PERSONS WITH REGARD TO THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For Approval;
SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of
Our Board of Directors;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--Rights of Dissenting Stockholders;
Appendix B.
(b) Not applicable.
(c) Not applicable.
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) SUMMARY--Our Financial Information and
Annual Report on Form 10-K for the fiscal year ended February 6, 1999 for the Corporation,
which is incorporated by reference in the Proxy Statement.
(b) Not applicable.
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) SUMMARY;
SPECIAL FACTORS--Background of the Merger;
SPECIAL FACTORS--Opinion of Financial Advisor;
SPECIAL FACTORS--Interests of Certain Persons in the Merger.
(b) INTRODUCTION--Solicitation of Proxies;
EXPENSES OF SOLICITATION.
</TABLE>
ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
Proxy Statement (and the Appendixes thereto) generally
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility dated
June 15, 1999.
(2) Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15,
1999.
(b)(1) Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C
to the Proxy Statement).
(2) Written Materials distributed to Board of Directors at May 26, 1999 meeting by
Credit Suisse First Boston Corporation.
(c)(1) Agreement and Plan of Merger, dated as of June 15, 1999, among Parent, Sub and the Corporation.
(Attached as Appendix A to the Proxy Statement).
(2) Form of Subscription Agreement for Accredited Investors.
(3) Guarantee of American Securities Capital Partners, L.P. dated June 15, 1999.
(d)(1) A copy of the Proxy Statement (incorporated herein by reference).
(e)(1) Section 262 of the Delaware General Corporation Law (Attached as Appendix B
to the Proxy Statement).
(f)(1) Not applicable.
</TABLE>
5
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth on the cover page and the headings
"SUMMARY--General--The Parties to the Transaction; Management Investors" and "The Merger" of the
Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SUMMARY--General--The
Special Meeting" and "INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For
Approval" in the Proxy Statement, which information is incorporated herein by reference.
(c) Reference hereby is made to the information set forth under the heading "SUMMARY--Comparative
Market Price Data" in the Proxy Statement, which information is incorporated herein by
reference.
(d) Reference hereby is made to the information set forth under the heading "SUMMARY--Dividends" in
the Proxy Statement, which information is incorporated herein by reference.
(e) Not applicable.
(f) Reference hereby is made to the information set forth under the heading "TRANSACTIONS IN COMMON
STOCK BY CERTAIN PERSONS" in the Proxy Statement, which information is incorporated herein by
reference.
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
(a)-(d) and The persons filing this statement are the Corporation, SPS International Holdings, Inc. a
(g) Delaware corporation, SPS Acquisition, Inc., a Delaware corporation, Alyn V. Essman, Russell
Isaak and Patrick J. Morris. The address of each of SPS International Holdings, Inc. and SPS
Acquisition, Inc. and their officers, directors and controlling affiliates is 122 East 42nd
Street, New York, New York 10168. SPS International Holdings, Inc. has been organized for the
purpose of holding the capital stock of SPS Acquisition, Inc. has been formed for the purpose of
consummating the merger. Reference hereby is made to the information set forth on the Cover Page
and under the heading "SUMMARY--General--The Parties to the Transaction" and "SPECIAL
FACTORS--Interests of Certain Persons in the Merger--Equity Investment by Management Investors"
in the Proxy Statement, which information is incorporated herein by reference.
(e)-(f) None of the Corporation, SPS International Holdings, Inc., SPS Acquisition, Inc., any executive
officer, director or person controlling the Corporation, SPS International Holdings, Inc. or SPS
Acquisition, Inc. has during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SPECIAL
FACTORS--Background of the Merger" and "SPECIAL FACTORS--Interests of Certain Persons in the
Merger" in the Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SPECIAL
FACTORS--Background of Merger" and "SPECIAL FACTORS--Interest of Certain Persons in the Merger"
in the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
6
<PAGE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SUMMARY,"
"INTRODUCTION," "SPECIAL FACTORS," "THE MERGER," "The Merger Agreement" and Appendix A in the
Proxy Statement, which information is incorporated herein by reference.
(b) Reference hereby is made to the information set forth under the headings "SUMMARY," "SPECIAL
FACTORS--Certain Effects of the Merger" and "SPECIAL FACTORS--Interests of Certain Persons in
the Merger" in the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a)-(g) Reference hereby is made to the information set forth under the headings "SUMMARY-- Certain
Effects of the Merger," "SPECIAL FACTORS--Certain Effects of the Merger," "THE MERGER--Effects
of the Merger" "THE MERGER--Plans or Proposals After the Merger," and "THE MERGER--Plans or
Proposals After the Merger" in the Proxy Statement, which information is incorporated herein by
reference.
</TABLE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information set forth under the headings "SUMMARY-- Financing of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger" and "THE
MERGER--Financing of the Merger" in the Proxy Statement, which information is incorporated
herein by reference.
(b) Reference hereby is made to the information set forth under the heading "THE MERGER
AGREEMENT--Termination Fees; Expenses" in the Proxy Statement, which information is incorporated
herein by reference.
(c)-(d) Reference hereby is made to the information set forth under the heading "THE MERGER--Financing
of the Merger" in the Proxy Statement, which information is incorporated herein by reference.
None of Alyn V. Essman, Russell Isaak or Patrick J. Morris expects to borrow any funds in
connection with the Merger.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a)-(d) Reference hereby is made to the information set forth under the headings "SUMMARY-- Certain
Effects of the Merger," "SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--CPI's
Reasons for the Merger; Recommendation of Our Board of Directors," "SPECIAL FACTORS--Certain
Effects of the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger" and
"SPECIAL FACTORS--Certain U.S. Federal Income Tax Consequences of the Merger to Our
Stockholders" in the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to the information under the headings "SUMMARY," "SPECIAL
FACTORS--CPI's Reasons for the Merger; Recommendation of Our Board of Directors," "SPECIAL
FACTORS--CPI and the Key Management Investors' Belief as to the Fairness of the Merger,"
"SPECIAL FACTORS--SPS Acquisition and SPS International's Belief as to the Fairness of the
Merger" and "SPECIAL FACTORS--Interests of Certain Persons in the Merger" in the Proxy
Statement, which information is incorporated herein by reference.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(c) The Merger is not structured to require approval by a majority of unaffiliated stockholders.
Reference hereby is made to the information under the heading "INTRODUCTION--Voting Rights;
Agreements to Vote; Vote Required For Approval" in the Proxy Statement, which information is
incorporated herein by reference.
(d)-(f) Reference is hereby made to the information under the headings "SPECIAL FACTORS--Background of
the Merger" and "SPECIAL FACTORS--CPI's Reasons for the Merger; Recommendation of Our Board of
Directors" in the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to Exhibit (b)(2) hereto, the information in Appendix C of the Proxy
Statement and under the headings "SPECIAL FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Financial Advisor" and "SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors," in the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "SPECIAL FACTORS-- Interests of
Certain Persons in the Merger," "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and
"TRANSACTIONS IN COMMON STOCK BY CERTAIN PERSONS" in the Proxy Statement, which information is
incorporated herein by reference.
(b) None.
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
Reference hereby is made to the information under the headings "SUMMARY--Interests of Certain
Persons in the Merger," "INTRODUCTION--Voting Rights; Agreements to Vote; Vote Required For
Approval" and "SPECIAL FACTORS--Interests of Certain Persons in the Merger" in the Proxy
Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
<TABLE>
<S> <C>
(a)-(b) Reference hereby is made to the information under the headings "INTRODUCTION--Voting Rights;
Agreements to Vote; Vote Required for Approval," "SPECIAL FACTORS--CPI's Reasons for the Merger;
Recommendation of Our Board of Directors" and "SPECIAL FACTORS--Interests of Certain Persons in
the Merger" of the Proxy Statement, which information is incorporated herein by reference.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "THE MERGER--Rights of Dissenting
Stockholders" and in Appendix B in the Proxy Statement, which information is incorporated herein
by reference.
(b) Not applicable.
(c) Not applicable.
</TABLE>
8
<PAGE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the heading "SUMMARY--Our Financial
Information and Projections" in the Proxy Statement, which information is incorporated herein by
reference. Reference is hereby made to the Annual Report on Form 10-K for the fiscal year ended
February 6, 1999 for the Corporation, which is incorporated in the Proxy Statement by reference
and incorporated herein by reference. Book value per share as of February 6, 1999 was $11.81 per
share of the Corporation's common stock.
(b) Not applicable.
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) Reference hereby is made to the information under the headings "SUMMARY," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Opinion of Financial Advisor" and "SPECIAL
FACTORS--Interests of Certain Persons in the Merger" in the Proxy Statement, which information
is incorporated herein by reference.
(b) Reference hereby is made to the information under the heading "INTRODUCTION--Solicitation of
Proxies" and "EXPENSES OF SOLICITATION" in the Proxy Statement, which information is
incorporated herein by reference.
</TABLE>
ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
Reference hereby is made to the Proxy Statement, the Appendixes thereto and the exhibits hereto,
which contain additional information regarding the Merger, which information is incorporated
herein by reference.
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a) (1) Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility Loan dated
June 15, 1999.
(2) Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15, 1999.
(b) (1) Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C to the Proxy Statement
and incorporated herein by reference).
(2) Written Materials distributed to Board of Directors at May 26, 1999 meeting by Credit Suisse
First Boston Corporation.
(c) (1) Agreement and Plan of Merger, dated as of June 15, 1999, among Parent, Sub and the Corporation
(Attached as Appendix A to the Proxy Statement and incorporated herein by reference).
(2) Form of Subscription Agreement for Accredited Investors.
(3) Guarantee of American Securities Capital Partners, L.P dated June 15, 1999.
(d) (1) Proxy Statement (filed by CPI Corp. on July 9, 1999 and incorporated herein by reference).
(e) (1) Section 262 of the Delaware General Corporation Law (Attached as Appendix B to the Proxy
Statement and incorporated herein by reference).
(f) (1) Not applicable.
</TABLE>
9
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Date: July 9, 1999
CPI CORP.
By: /s/ Russell Isaak
Name: Russell Isaak
Title: President
SPS INTERNATIONAL HOLDINGS, INC.
By: /s/ Mark Bandeen
Name: Mark Bandeen
Title: Co-President
SPS ACQUISITION, INC.
By: /s/ Mark Bandeen
Name: Mark Bandeen
Title: Co-President
/s/ Alyn V. Essman
Alyn V. Essman
/s/ Russell Isaak
Russell Isaak
/s/ Patrick J. Morris
Patrick J. Morris
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)(1) -- Commitment letter from Credit Suisse First Boston for Senior Secured Credit Facility Loan
dated June 15, 1999.
(2) -- Commitment letter from Credit Suisse First Boston for Bridge Loan Facility dated June 15,
1999.
(b)(1) -- Opinion of Credit Suisse First Boston Corporation (Attached as Appendix C
to the Proxy Statement and incorporated herein by reference).
(2) -- Written Materials distributed to Board of Directors at May 26, 1999 meeting by
Credit Suisse First Boston Corporation.
(c)(1) -- Agreement and Plan of Merger, dated as of June 15, 1999, among SPS International Holdings,
Inc., SPS Acquisition, Inc. and CPI Corp. (Attached as Appendix A to the Proxy Statement
and incorporated herein by reference.)
(2) -- Form of Subscription Agreement for Accredited Investors.
(3) -- Guarantee of American Securities Capital Partners, L.P. dated June 15, 1999.
(d)(1) -- Proxy Statement filed by CPI Corp. on July 9, 1999 and incorporated herein by reference.
(e)(1) -- Section 262 of the Delaware General Corporation Law. (Attached as Appendix B to the Proxy
Statement and incorporated herein by reference).
(f)(1) -- Not applicable.
</TABLE>
11
<PAGE>
CREDIT SUISSE FIRST BOSTON
Eleven Madison Avenue
New York, NY 10010
American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, NY 10169
June 15, 1999
Senior Secured Credit Facility
------------------------------
Commitment Letter
-----------------
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB" or "us")
that American Securities Capital Partners, L.P. ("ASCP" or "you") intend to (A)
acquire, through one or more wholly owned subsidiaries ("Mergerco"), all of the
stock of CPI Corporation ("CPI") pursuant to a merger of Mergerco with and into
CPI, with CPI as the surviving corporation (the "Company") and (B) redeem
certain of CPI outstanding indebtedness (the "Existing Debt") (such acquisitions
and merger together with the redemption of Existing Debt and the transactions
contemplated thereby are referred to herein collectively as the "Acquisition").
You have advised us that the total amount necessary to
consummate the Acquisition and to pay related fees and expenses will be
approximately $482.8 million. The approximate sources and uses of such amount
are set forth on Annex I to the Summary of Principal Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet"). Such amount will be provided by
(i) either (x) the issuance and sale by the Company of senior subordinated notes
(the "Notes") for gross proceeds of $150.0 million or (y) the borrowing by the
Company of $150.0 million under a bridge term loan facility (the "Bridge Loan
Facility"), (ii) term borrowings of $145.0 million by the Company under a senior
secured term loan and revolving credit facility aggregating $185.0 million plus
the borrowing of up to $10.0 million under the revolving facility of the Credit
Facility (the "Credit Facility"), (iii) an aggregate equity contribution of
$123.8 million, which shall include the rollover of equity by management of at
least $10.0 million (the "Equity Contribution"), and (iv) the application of
available cash of CPI, currently estimated at between $62.0 million and $66.0
million (the "Cash Application"). The
<PAGE>
-2-
(a) Acquisition, (b) issuance and sale of the Notes, if any, (c) borrowings
under the Bridge Loan Facility, if any, (d) initial borrowings under the Credit
Facility, (e) the Equity Contribution and (f) the Cash Application are
collectively referred to herein as the "Transactions."
You have requested that CSFB (i) commit to provide the Credit
Facility and (ii) agree to structure, arrange and syndicate the Credit Facility.
In connection with the foregoing, CSFB is pleased to advise
you of its commitment (i) to provide the entire amount of the Credit Facility
and (ii) to act as administrative agent, advisor and lead arranger for the
Credit Facility, in each case upon the terms and subject to the conditions set
forth or referred to in this commitment letter and in the Term Sheet (together,
the "Commitment Letter") and Annex II hereto.
As consideration for CSFB's commitment hereunder and agreement
to perform the services described herein, you agree to pay to CSFB the
nonrefundable fees set forth in the Term Sheet and in the fee letter dated the
date hereof and delivered herewith (the "Fee Letter").
CSFB's commitment hereunder and agreement to perform the
services described herein are subject to the satisfaction of each of the
conditions set forth or referred to in the Term Sheet. None of such conditions
will be waived without your prior consent.
You agree that CSFB will act as the administrative agent,
advisor and lead arranger for the Credit Facility, and will, in such capacities,
perform the duties and exercise the authority customarily performed and
exercised by it in such roles. CSFB, in consultation with you, may appoint one
or more collateral agents for the Credit Facility (which may include CSFB and
its affiliates). You agree that no other agents, advisors, co-agents or
arrangers will be appointed, no other titles will be awarded and no compensation
(other than that expressly contemplated by the Term Sheet and the Fee Letter)
will be paid in connection with the Credit Facility unless you and we shall so
agree.
We intend to syndicate the Credit Facility to a group of
financial institutions (together with CSFB, the "Lenders") identified by us in
consultation with you (it being understood that as a Lender CSFB currently
intends to hold $15.0 million of the loans under the Credit Facility but there
can be no assurance what amount, if any, of such loans CSFB may hold from time
to time). CSFB intends to commence syndication efforts promptly upon the
execution of this Commitment Letter, and you agree to assist, and to cause CPI
to assist, CSFB in completing a syndication satisfactory to it. Such assistance
shall include (i) ASCP and, to the extent reasonably practicable, CPI using
commercially reasonable efforts to ensure that the syndication efforts benefit
materially from their respective existing lending relationships, (ii) direct
contact between ASCP's and, to the extent reasonably practicable, CPI's sen-
<PAGE>
-3-
ior management and advisors and the proposed Lenders, (iii) assistance in the
preparation of a Confidential Information Memorandum and other marketing
materials to be used in connection with the syndication and (iv) the hosting,
with CSFB, of one or more meetings with prospective Lenders.
It is understood and agreed that CSFB shall be entitled, after
consultation with you, to change the pricing, terms and structure of the Credit
Facility, if CSFB determines that such changes are necessary to ensure the
successful syndication of the Credit Facility (provided, that the aggregate
principal amount of the Credit Facility remains the same and the interest rates
set forth on Exhibit A hereto are not increased more than 100 basis points, and
provided, further, CSFB shall use its best efforts to not increase the amount
set forth in Exhibit A for the Term Loan A (as defined) and to allocate any such
increase, to the extent possible, to the latest amortization dates).
CSFB will manage all aspects of the syndication in
consultation with you, including decisions as to the selection of institutions
to be approached and when they will be approached, when their commitments will
be accepted, which institutions will participate, what titles (if any) they will
be awarded, the allocations of the commitments among the Lenders and the amount
and distribution of fees among the Lenders. To assist CSFB in its syndication
efforts, ASCP agrees to promptly provide to CSFB all material information in the
possession of ASCP with respect to the Company and the Transactions and the
other transactions contemplated hereby, including all material financial
information and projections (the "Projections") and use its best efforts to
cause CPI to promptly prepare and provide to CSFB all information (subject to
necessary consents) with respect to the Company and the Transactions (including
the Projections), in each case as we may reasonably request in connection with
the arrangement and syndication of the Credit Facility. ASCP hereby represents
and covenants that to its knowledge all written information other than the
Projections (the "Information") that has been or will be made available to CSFB
by ASCP or its representatives in connection with the Transactions, when taken
as a whole, is or will be complete and correct in all material respects and does
not or will not contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such statements
are made. ASCP agrees to supplement the Information from time to time until the
completion of the syndication so that the representation and covenant in the
preceding sentence remain correct without regard to when such Information and
Projections were furnished. You understand that in arranging and syndicating the
Credit Facility we may use and rely on the Information and Projections without
responsibility for independent verification thereof. All representations and
covenants in this paragraph will be superseded by the representations and
covenants contained in the definitive documentation of the Transactions.
<PAGE>
-4-
ASCP hereby agrees (i) to indemnify and hold harmless CSFB,
its affiliates and the respective officers, directors, employees, advisors, and
agents of each (each, an "indemnified person") from and against any and all
losses, claims, damages and liabilities to which any such indemnified person may
become subject arising out of or in connection with this Commitment Letter, the
Credit Facility, the use of the proceeds thereof, the Transactions or any
related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any indemnified person
is a party thereto, and to reimburse each indemnified person upon demand for any
reasonable legal or other expenses incurred in connection with investigating or
defending any of the foregoing; provided, however, that the foregoing indemnity
will not, as to any indemnified person, apply to losses, claims, damages,
liabilities or related expenses to the extent they have resulted from the
willful misconduct or gross negligence of such indemnified person, and (ii) to
reimburse CSFB and its affiliates on demand for all reasonable out-of-pocket
expenses (including reasonable due diligence expenses, reasonable syndication
expenses, reasonable consultants' fees and expenses (it being understood that
the retention of any such consultant will be made with your prior approval),
reasonable travel expenses, and reasonable fees, charges and disbursements of
counsel) incurred in connection with the Credit Facility and any related
documentation (including, without limitation, this Commitment Letter, the Fee
Letter and the definitive financing documentation) or the administration,
amendment, modification or waiver thereof, provided, no reimbursement shall be
available under clause (ii) if the Acquisition is not consummated or if CSFB is
not prepared to fund the Credit Facility. No indemnified person shall be liable
for or entitled to any indirect or consequential damages in connection with its
activities related to the Credit Facility.
This Commitment Letter and CSFB's commitment hereunder shall
not be assignable by you without the prior written consent of CSFB (and any
purported assignment without such consent shall be null and void) and is
intended to be solely for the benefit of the parties hereto and is not intended
to confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto; provided, however, that CSFB may perform any of its
duties hereunder through any of its affiliates and you will owe any related
duties hereunder to any such affiliate. This Commitment Letter may not be
amended or waived except by an instrument in writing signed by you and CSFB.
This Commitment Letter may be executed in any number of counterparts, each of
which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be as effective as delivery of
a manually executed counterpart hereof. This Commitment Letter and the Fee
Letter are the only agreements that have been entered into between us with
respect to the Credit Facility and set forth the entire understanding of the
parties with respect thereto.
<PAGE>
-5-
This Commitment Letter shall be governed by and construed in
accordance with the laws of the State of New York. EACH OF THE PARTIES HERETO
IRREVOCABLY AGREES TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF
THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER. ASCP
irrevocably and unconditionally submits to the jurisdiction of any state or
federal court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to this Commitment Letter. Service of any
process, summons, notice or document by registered mail addressed to ASCP at its
address set forth above shall be effective service of process against ASCP for
any such suit, action or proceeding brought in any such court. ASCP irrevocably
and unconditionally waives any objection to the laying of venue of any such
suit, action or proceeding brought in any such court and any claim that any such
suit, action or proceeding has been brought in any such court and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum. A
final judgment in any such suit, action or proceeding brought in any such court
may be enforced in any other courts to whose jurisdiction ASCP is or may be
subject, by suit upon judgment.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter nor the Fee Letter nor any of
their terms or substance shall be disclosed after the date hereof, directly or
indirectly, to any other person except (i) on a confidential basis to your
respective officers, agents and advisors who are directly involved in the
consideration of this matter or (ii) as may be compelled in a judicial or
administrative proceeding or as otherwise required by law (in which case you
agree to inform us promptly thereof); provided, however, that you may disclose
this Commitment Letter and its terms and substance (but not the Fee Letter or
its terms and substance), (x) on a confidential basis, to CPI and its directors,
officers, employees, agents and advisors and (y) in the proxy statement and
Schedule 13E-3 relating to the Acquisition.
The reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or CSFB's commitment hereunder; provided, that upon the consummation of
the Acquisition you shall cause the Company to assume each of your obligations
and liabilities under this Commitment Letter and the Fee Letter and upon such
assumption by the Company you shall be automatically released from all your
obligations and liabilities hereunder and thereunder.
<PAGE>
S-1
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Fee Letter by returning
to us executed counterparts hereof and of the Fee Letter, not later than 5:00
p.m., New York City time, on June 16, 1999. CSFB's commitment and agreements
contained herein will expire at such time in the event CSFB has not received
such executed counterparts in accordance with the immediately preceding
sentence. In the event that the initial borrowing in respect of the Credit
Facility does not occur on or before October 29, 1999, then this Commitment
Letter and CSFB's commitment and undertakings hereunder shall automatically
terminate unless CSFB shall, in its sole discretion, agree to an extension.
CSFB is pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ CHRISTOPHER G. CUNNINGHAM
-------------------------------------------
Name: CHRISTOPHER G. CUNNINGHAM
Title: DIRECTOR
By: /s/ LAURI A. SIVASLIAN
-------------------------------------------
Name: LAURI A. SIVASLIAN
Title: DIRECTOR
Accepted and agreed to as of the date first written above by:
AMERICAN SECURITIES CAPITAL PARTNERS, L.P.
By: AMERICAN SECURITIES CAPITAL PARTNERS G. P. CORP., its General Partner
By: /s/ Mark E. Bandeen
--------------------------------
Name: Mark E. Bandeen
Title: Managing Director
<PAGE>
-2-
By: /s/ Michael G. Fisch
--------------------
Name: Michael G. Fisch
Title: Managing Director
<PAGE>
EXHIBIT A
Senior Secured Credit Facility
------------------------------
Summary of Principal Terms and Conditions(1)
------------------------------------------
Borrower: CPI after giving effect to the Acquisition (the
"Company" or the "Borrower").
Advisor and Lead Arranger CSFB will act as advisor and
lead arranger for the Credit
Facility (the "Arranger"),
and will perform the duties
customarily associated with such roles.
Agent: CSFB will act as administrative and collateral
agent for the Credit Facility (the "Agent"), and
will perform the duties customarily associated
with such roles.
Lenders: CSFB and a syndicate of other financial
institutions (the "Lenders") reasonably
acceptable to the Borrower and the Agent.
Type of Facility: Senior secured credit facility aggregating
$185.0 million (the "Credit Facility"),
comprised of (i) a revolving credit facility of
$40.0 million (the "Revolving Credit Facility"),
and (ii) a term loan facility (the "Term Loan
Facility") consisting of term loan A of $40.0
million ("Term Loan A") and term loan B of
$105.0 million ("Term Loan B"). One or more
Lenders will make available a portion of the
Revolving Credit Facility not in excess of an
amount to be agreed upon for letters of credit.
In addition, one or more Lenders will make
available a portion of the Revolving Credit
Facility not in excess of an amount to be agreed
upon for Swingline Loans (the "Swingline
Loans"). Any such Swingline Loans will reduce
availability under the Re-
- --------------------------
(1) All capitalized terms used but not defined herein have the meanings given
to them in the Commitment Letter to which this term sheet is attached.
<PAGE>
-2-
volving Credit Facility on a dollar-for-dollar
basis.
Availability and Maturity: The Term Loan Facility will be available in a
single drawing on the date of closing of the
Acquisition (the "Closing Date"). Term Loan A
will mature six years from the Closing Date and
Term Loan B will mature eight years from the
Closing Date and each such Term Loan will
amortize pursuant to a schedule to be agreed
upon.
The Revolving Credit Facility will be available
on a revolving basis during the period
commencing on the Closing Date and ending on the
sixth anniversary thereof (the "Termination
Date").
Purpose: On the Closing Date, proceeds aggregating $145.0
million from the term borrowing under the Credit
Facility will be used to finance, in part, the
Transactions and to pay related fees and
expenses. The additional amounts necessary to
consummate the Transactions and Refinancing will
be provided by (a) either (x) the issuance and
sale by the Company of the Notes or (y) the
borrowing by the Company under the Bridge Loan
Facility, (b) the Equity Contribution, (c) the
Cash Application and (d) borrowings under the
Revolving Credit Facility of up to $10.0
million. The approximate sources and uses of
such funds are set forth on Annex I.
Following the closing of the Transactions, the
Revolving Credit Facility will be used to
provide for working capital and general
corporate purposes, including acquisitions, and,
subject to a sublimit to be agreed upon, letter
of credit requirements.
<PAGE>
-3-
Guarantees: All obligations of the Borrower under the Credit
Facility will be unconditionally guaranteed by
each existing and subsequently acquired or
organized domestic subsidiary of Guarantees:
Borrower as fully as is permitted by applicable
law.
Security: The Credit Facility will be secured as fully as
is permitted by applicable law, and subject to
third party consents (it being understood that
the Borrower shall use its reasonable commercial
efforts to obtain any such consents, provided
that, in the case of the license agreements with
Sears Roebuck & Co., if the Borrower fails to
obtain such consents the granting of security
interests with respect thereto shall not be a
condition to closing), by a perfected first
priority security interest in substantially all
of the tangible and intangible assets of
Borrower and each existing and subsequently
acquired or organized domestic subsidiary of
Borrower, including all of the capital stock of
each existing and subsequently acquired or
organized domestic subsidiary of the Borrower
(collectively, the "Collateral").
All the above-described security interests shall
be created on terms, and pursuant to
documentation, reasonably satisfactory to the
Lenders and, subject to limited exceptions to be
agreed upon, none of the Collateral shall be
subject to any other pledges, security interests
or mortgages, except those in favor of Sears,
Roebuck & Co. and its affiliates.
<PAGE>
-4-
Interest Rates and Fees: The interest rate under the Credit Facility will
be, at the Borrower's option, either Alternate
Base Rate (as defined below) or LIBOR plus, in
either case, a specified amount (the "Applicable
Margin"). The Applicable Margin for the
Revolving Credit Facility and the Term Loan A
will initially be 250 basis points. For Term
Loan B the Applicable Margin will initially be
300 basis points. After an initial period to be
agreed upon, the Applicable Margins described in
the prior two sentences will be determined by a
grid based on the Borrower's performance based
on one more financial measures to be agreed to.
The Borrower may elect interest periods of 1, 3,
6, 9 or, if available, 12 months for LIBOR
borrowings, as long as no interest period
extends beyond the Termination Date. Calculation
of interest shall be on the basis of the actual
number of days elapsed in a 360-day year and
interest shall be payable at the end of each
interest period and, in any event, at least
every three months. Adjusted LIBOR will at all
times include statutory reserves.
"Alternate Base Rate" will be the higher of (i)
CSFB's Prime Rate and (ii) the Federal Funds
Effective Rate plus 1/2 of 1%, computed on the
basis of a 365 or 366 day year, as the case may
be, for the actual number of days elapsed during
which interest accrues at such rate.
During the continuance of any payment default or
any Event of Default, interest will accrue at
the applicable interest rate plus 2.0% per
annum.
The definitive documentation for the Credit
Facility (the "Credit Documents") will include
customary protective provisions for such matters
as increased costs, funding losses, illegality,
capital adequacy, taxes and "breakage" costs.
Mandatory Prepayments Usual for facilities and transactions of this
type and
<PAGE>
-5-
and Reductions in others to be agreed upon, including but not
Commitments: limited to, prepayment with agreed-upon
percentages of net proceeds from asset sales,
warranty or insurance claims and any debt or
equity securities issuances and 50% of excess
cash flow (to be defined). Such prepayments will
be applied towards amortization of the Term Loan
Facility.
Voluntary Prepayments Loans under the Term Loan Facility may be
and Reductions in prepaid, at any time in whole or in part at the
Commitments: option of the Borrower, in a minimum principal
amount and in multiples to be agreed upon,
without premium or penalty (except breakage
costs). Such prepayments will be applied toward
amortization payments of the Term Loan Facility,
as directed by Borrower.
The unutilized portion of the Revolving Credit
Facility may be reduced at any time at the
option of the Borrower and loans may be repaid
at any time at the option of the Borrower, in a
minimum principal amount and in multiples to be
agreed upon, without premium or penalty (except
breakage costs).
Conditions Precedent Usual for facilities and transactions of this
to Initial Extension type including the conditions set forth on Annex
of Credit: II.
Conditions to All Each extension of credit under the Credit
Extension of Credit: Facility will be subject to the (i) absence of
any Default or Event of Default, (ii) continued
accuracy of representations and warranties in
all material respects (except representations
and warranties which are made only as of a prior
date) and (iii) absence of any material adverse
change with respect to the financial condition,
operations or assets of the Borrower and its
subsidiaries, taken as a whole, or their
respective abilities to perform their
obligations under the Credit Documents.
Representations Usual for facilities and transactions of this
type with materiality and other customary
qualifications to be
<PAGE>
-6-
and Warranties: agreed upon, including but not limited to
accuracy of financial statements and
information; no material adverse change; absence
of litigation; no violation of agreements or
instruments; compliance with laws; payment of
taxes; ownership of properties; solvency;
effectiveness of regulatory approvals; labor
matters; and environmental matters.
Affirmative Covenants: Usual for facilities and transactions of this
type with materiality and other customary
qualifications to be agreed upon, including but
not limited to maintenance of corporate
existence and rights; performance of
obligations; delivery of audited financial
statements, other financial information and
notices of default and litigation; maintenance
of properties in good working order; maintenance
of insurance; compliance with laws; inspection
of books and properties; further assurances; and
payment of taxes.
Negative Covenants: Usual for facilities and transactions of this
type with exceptions to be agreed upon,
including but not limited to limitations on
dividends on, and redemptions and repurchases
of, capital stock; limitations on prepayments,
redemptions or repurchases of debt; limitations
on liens and sale-leaseback transactions;
limitations on loans and investments;
limitations on debt issuances (including,
without limitation, convertible indebtedness and
preferred stock of subsidiaries); limitations on
mergers, acquisitions and asset sales;
limitations on transactions with affiliates;
limitations on dividend and other restrictions
affecting subsidiaries; limitations on issuance
of subsidiary capital stock; limitations on
changes in business; limitations on amendment of
debt and other material agreements; and
limitations on capital expenditures.
Selected Financial Covenants: Usual for facilities and transactions of this
type including but not limited to (i) maximum
ratio of total debt to EBITDA, (ii) minimum
ratio of EBITDA to cash interest expense, (iii)
minimum ratio of
<PAGE>
-7-
EBITDA to fixed charges, and (iv) maximum
capital expenditures.
Events of Default: Usual for facilities and transactions of this
type with customary provisions for notice, grace
periods and threshold levels to be agreed upon,
including but not limited to nonpayment of
principal, interest, fees or letter of credit
reimbursement obligations; violation of
covenants; incorrectness of representations and
warranties in any material respect; cross
default and cross acceleration; bankruptcy;
material judgments; ERISA; actual or asserted
invalidity of the guarantees or the security
documents; and Change of Control.
Assignments and Participations: Lenders will be permitted to assign loans and
commitments to other Lenders (or their
affiliates) without restriction (except the
consent of the Borrower if such assignment would
result in increased costs or involves less than
$2.0 million in aggregate principal amount of
loans), or to other financial institutions with
the consent of the Agent and the Borrower, which
is not to be unreasonably withheld. The Agent
will receive a customary processing and
recordation fee, payable by the assignor and/or
the assignee, with each assignment. Assignments
will be by novation.
Lenders will be permitted to participate loans
and commitments to other financial institutions
without restriction. Voting rights of
participants shall be limited to matters in
respect of (i) reductions of principal, interest
or fees, (ii) extensions of final maturity and
(iii) certain releases of collateral or
guarantees.
<PAGE>
-8-
Expenses and Indemnification: All reasonable out-of-pocket expenses of the
Lenders for enforcement costs and documentary
taxes associated with the Credit Facility are to
be paid by the Borrower.
The Borrower and the guarantors will, jointly
and severally, indemnify the Arranger, the
Agent, the Lenders and their respective
officers, directors, employees, affiliates,
agents and controlling persons and hold them
harmless from and against all costs and expenses
(including reasonable fees, disbursements and
other reasonable charges of counsel) and all
liabilities of any such indemnified person
arising out of or relating to any claim or any
litigation or other proceedings (regardless of
whether any such indemnified person is a party
thereto) that relate to the Credit Documents or
any documents related thereto, any extension of
credit thereunder, the Transactions or any
transactions connected therewith; provided,
however, that none of the Arranger, the Agent or
any Lender will be indemnified for costs,
expenses or liabilities which have resulted from
its own gross negligence or willful misconduct.
Governing Law and Forum: New York.
Waiver of Jury Trial: In customary form.
Counsel to Agent: Cahill Gordon & Reindel
<PAGE>
ANNEX I
Sources and Uses of Funds
(in millions of U.S. dollars (except footnotes))
(all figures are approximate)
- ------------------------------------- -----------------------------------------
SOURCES OF FUNDS USES OF FUNDS
- ------------------------------------- -----------------------------------------
Revolving Credit Facility(1) $0.0 Redemption of Senior Notes(2) $62.2
Term Loan A 40.0 Debt Repurchase Premium 3.6
Term Loan B 105.0 Purchase of Equity(3) 388.2
Notes/Bridge Loan Facility 150.0 Estimated Transaction Costs 28.8
----
Equity Contribution 123.8
Cash Application 64.0
----
Total Sources $482.8 Total Uses $482.8
====== ======
- --------------------------------------
(1) $40.0 million available on the Closing Date (up to $10.0 million of
which may be drawn upon on the Closing Date).
(2) Includes $2.2 million of accrued interest payment due June 15, 1999.
(3) Purchase of equity at $37.0 per share (includes options).
<PAGE>
ANNEX II
CONDITIONS
The commitments of Credit Suisse First Boston ("CSFB")
pursuant to the Senior Secured Credit Facility Commitment Letter dated June 15,
1999 (the "Commitment Letter"), between CSFB and American Securities Capital
Partners, L.P., ("ASCP") shall be subject to the following conditions
(capitalized terms used but not defined herein shall, unless otherwise
specified, have the meanings assigned to such terms in the Commitment Letter and
other letters between ASCP and CSFB or its affiliates (the "Letters") relating
to the Transactions):
(i) after the date of the Letters, no information or other
matter becomes known to CSFB that CSFB reasonably determines is
inconsistent in a material and adverse manner with (a) any information
or other matter disclosed to CSFB prior to the date of the Letters or
(b) any information or other matter obtained by CSFB during its due
diligence investigation;
(ii) there shall not have occurred any event or events,
adverse condition or change in or affecting the Company, that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(iii) the preparation, execution and delivery of definitive
documentation reasonably satisfactory to CSFB, in connection with (a)
the Bridge Loans or the Notes, as the case may be and, (b) the Credit
Facility;
(iv) the Transactions shall have been consummated or shall be
consummated simultaneously on the Closing Date, in each case in all
material respects in accordance with the terms hereof and the terms of
the relevant documentation therefor (and without the waiver of any
material terms);
(v) CSFB shall be reasonably satisfied as of the Closing Date
with the material terms and conditions of each agreement entered into
in connection with the Transactions;
(vi) CSFB shall be reasonably satisfied as to the amount and
nature of any environmental expenses to which the Company may be
subject, and the plans of the Company with respect thereto;
(vii) all requisite governmental authorities (including any
antitrust authorities) and third parties shall have approved or
consented to the Transactions and the other transactions contemplated
by the Commitment Letter to the extent required, in each case to the
extent failure to obtain such consent or approval, singly or in the
ag-
<PAGE>
-2-
gregate, could reasonably be expected to have a Material Adverse
Effect, and there shall be no governmental or judicial action, actual
or threatened, that has a reasonable likelihood of restraining,
preventing or imposing materially burdensome conditions on the
Transactions or the other transactions contemplated hereby;
(viii) CSFB shall have received a certificate reasonably
satisfactory in all respects to CSFB from the chief financial officer
of the Company to the effect that, after giving effect to the
Transactions, the Company will not (a) be insolvent, (b) be rendered
insolvent by the indebtedness incurred in connection therewith, (c) be
left with unreasonably small capital with which to engage in its
business or (d) have incurred debts beyond its ability to pay such
debts as they mature;
(ix) after giving effect to the Transactions and the
affiliation agreements to be entered into in connection therewith, the
ratio of (a) consolidated total debt of the Company as of the Closing
Date to (b) EBITDA (to be defined to exclude certain non-recurring
expenses as shall be agreed to by CSFB) of the Company for the
twelve-month period ending with the fiscal quarter immediately
preceding the Closing Date must be less than 5.0 to 1.0;
(x) after giving effect to the Transactions and the other
transactions contemplated by the Letters, the Company and its
subsidiaries shall have outstanding no indebtedness for borrowed money
or preferred stock other than (a) the loans under the Credit Facility
and (b) the Bridge Loan Facility or the Notes, as the case may be and
the Company shall have received at least a B- rating or higher from S&P
and at least a B3 rating or higher from Moody's;
(xi) customary closing conditions for transactions similar to
the Credit Facility, including without limitation (a) the accuracy in
all material respects of all representations and warranties, (b) the
absence of any defaults, prepayment events or creation of liens under
debt instruments or other agreements as a result of the Transactions
and the other transactions contemplated by the Letters, (c)
first-priority perfected security interests in the Collateral, (d) the
execution and delivery of the guarantees, (e) compliance in all
material respects with applicable laws and regulations (including
employee health and safety, margin regulations and environmental laws),
(f) obtaining reasonably satisfactory insurance, (g) evidence of
authority and (g) the receipt by CSFB of reasonably satisfactory legal
opinions;
(xii) there shall not have occurred after the date of the
Letters (a) any general suspension of trading in, or limitation on
prices for, securities on any national securities exchange or in the
over-the counter market in any Applicable Jurisdiction, (b) the
declaration of a banking moratorium or any suspension of payments in
respect of
<PAGE>
-3-
banks in any Applicable Jurisdiction, (c) the commencement
of a war, armed hostilities or other international or national calamity
or emergency, directly or indirectly involving any Applicable
Jurisdiction, (d) any limitations (whether or not mandatory) imposed by
any governmental authority on the nature or extension of credit or
further extension of credit of the type contemplated in connection with
the Transactions by banks or other lending institutions, (e) in the
case of the foregoing clauses (c) and (d), a material escalation or
worsening thereof, or (f) any other material adverse change in banking
or capital market conditions that has had or reasonably could have a
material adverse effect on the syndication of leveraged bank credit
facilities similar to the Credit Facility, that, in any such case
described in the foregoing clauses (a) through (f), CSFB shall
reasonably determine makes it impracticable to consummate the
syndication of the Credit Facility, prior to the termination date
provided for in the Letters;
(xiii) CSFB's reasonable satisfaction that, immediately prior
to and during the marketing period for the Credit Facility, there shall
be no competing issues of debt securities (other than the Notes) or
commercial bank facilities of the Company or any of its subsidiaries;
and
(xiv) payment of fees and expenses earned and due upon the
Closing Date.
"Applicable Jurisdiction" means the United States and New York
State.
"Material Adverse Effect" shall mean a material adverse effect
on the business, results of operations or financial condition of the Company and
its subsidiaries taken as a whole.
<PAGE>
CREDIT SUISSE FIRST BOSTON
Eleven Madison Avenue
New York, NY 10010
American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, NY 10169
June 15, 1999
Bridge Term Loan Facility
Commitment Letter
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB" or "us")
that American Securities Capital Partners, L.P. ("ASCP" or "you") intend to (A)
acquire, through one or more wholly owned subsidiaries ("Mergerco"), all of the
stock of CPI Corporation ("CPI") pursuant to a merger of Mergerco with and into
CPI, with CPI as the surviving corporation (the "Company") and (B) redeem
certain of CPI outstanding indebtedness (the "Existing Debt") (such
acquisitions and merger together with the redemption of Existing Debt and the
transactions contemplated thereby are referred to herein collectively as the
"Acquisition").
You have advised us that the total amount necessary to
consummate the Acquisition and to pay related fees and expenses will be
approximately $482.8 million. The approximate sources and uses of such amount
are set forth on Annex I to the Summary of Principal Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet"). Such amount will be provided
by (i) either (x) the issuance and sale by the Company of senior subordinated
notes (the "Notes ") for gross proceeds of $150.0 million or (y) the borrowing
by the Company of $150.0 million under a bridge term loan facility (the "Bridge
Loan Facility"), (ii) term borrowings of $145.0 million by the Company under a
senior secured term loan and revolving credit facility aggregating $185.0
million (the "Credit Facility") plus the borrowing of up to $10.0 million under
the revolving facility of the Credit Facility, (iii) an aggregate equity
contribution of $123.8 million, which shall include the rollover of equity by
management of at least $10.0 million (the "Equity Contribution"), and (iv) the
application of available cash of CPI, currently estimated at between $62.0
million and $66.0 million (the "Cash Application"). The (a) Acquisition, (b)
issuance and sale of the Notes, if any, (c) borrowings under the
<PAGE>
-2-
Bridge Loan Facility, if any, (d) initial borrowings under the Credit Facility,
(e) the Equity Contribution and (f) the Cash Application are collectively
referred to herein as the "Transactions."
You have requested that CSFB commit to provide the Bridge
Loan Facility. You have received from us (or one of our affiliates), by
separate letters, commitments with respect to the Credit Facility.
In connection with the foregoing, CSFB is pleased to commit
to provide the entire amount of the Bridge Loan Facility upon the terms and
subject to the conditions set forth or referred to in this commitment letter
and in the Term Sheet (together, the "Commitment Letter").
As consideration for CSFB's commitment hereunder and
agreement to perform the services described herein, you agree to pay to CSFB
the nonrefundable fees set forth in the Term Sheet and in the fee letter dated
the date hereof and delivered herewith (the "Fee Letter") and to perform the
obligations set forth in the warrant letter dated the date hereof and delivered
herewith (the "Warrant Letter").
CSFB's commitment hereunder and agreement to perform the
services described herein are subject to the satisfaction of each of the
conditions set forth or referred to in the Term Sheet. None of such conditions
will be waived without your prior consent.
You agree that CSFB will act as the administrative agent,
advisor and lead arranger for the Bridge Loan Facility, and will, in such
capacities, perform the duties and exercise the authority customarily performed
and exercised by it in such roles. You agree that no other agents, advisors,
co-agents or arrangers will be appointed, no other titles will be awarded and
no compensation will be paid in connection with the Bridge Loan Facility unless
you and we shall so agree.
We reserve the right to syndicate the Bridge Loan Facility
(syndicated loans being referred to herein as "Bridge Loans") to a group of
financial institutions (together with CSFB, the "Lenders") identified by us in
consultation with you. You hereby agree to assist, and to use your best efforts
to cause CPI to assist, CSFB in completing a syndication satisfactory to it in
the event CSFB elects to do so. Such assistance shall include (i) ASCP and,
subject to the immediately preceding sentence, CPI using commercially
reasonable efforts to ensure that the syndication efforts benefit materially
from their respective existing lending relationships, (ii) direct contact
between ASCP's and, subject to the immediately preceding sentence, CPI's senior
management and advisors and the proposed Lenders, (iii) assistance in the
preparation of a Confidential Information Memorandum and other marketing
materials to be used in connection with the syndication and (iv) the hosting,
with CSFB, of one or more meetings with prospective Lenders. In addition, CSFB
reserves the right to employ the serv-
<PAGE>
-3-
ices of Credit Suisse First Boston Corporation ("CSFBC") in providing services
incidental to the provision of the Bridge Loan Facility and any resale of the
Bridge Loans or Exchange Notes (as defined in the Term Sheet attached hereto),
and you agree that, in connection with the provision of such services, CSFB and
CSFBC may share with each other any confidential or other information relating
to any of you, the Company and your respective affiliates as from time to time
you may possess.
It is understood and agreed that CSFB shall be entitled,
after consultation with you, to change the pricing, terms and structure of the
Bridge Loan Facility, including requiring additional funding of a maximum $15.0
million equity contribution to the Company contributed as equity to the Company
(the "Additional Equity Contribution")(which Additional Equity Contribution it
is anticipated would be placed into an escrow account to provide for payments
of principal and interest on the Bridge Loans) if CSFB determines that such
changes are necessary in connection with the funding of the Bridge Loan
Facility (provided, that the aggregate principal amount of the Credit Facility
remains the same and the interest rates set forth on Exhibit A hereto are not
increased more than 100 basis points; provided, in no event shall the interest
rate applicable to the Bridge Loans or Exchange Notes exceed 17.0% per annum,
and to the extent such rate exceeds 15.0% per annum, such interest may be paid
in-kind).
CSFB will manage all aspects of the syndication in
consultation with you, including decisions as to the selection of institutions
to be approached and when they will be approached, when their commitments will
be accepted, which institutions will participate, what titles (if any) they
will be awarded, the allocations of the commitments among the Lenders and the
amount and distribution of fees among the Lenders. To assist CSFB in its
syndication efforts, ASCP agrees to promptly prepare and provide to CSFB all
material information in the possession of ASCP with respect to the Company and
the Transactions and the other transactions contemplated hereby, including all
material financial information and projections (the "Projections") and use its
best efforts to cause CPI to promptly prepare and provide to CSFB all
information (subject to necessary consents) with respect to the Company and the
Transactions (including the Projections), in each case as we may reasonably
request in connection with the arrangement and syndication of the Bridge Loan
Facility. ASCP hereby represents and covenants that to its knowledge all
written information other than the Projections (the "Information") that has
been or will be made available to CSFB by ASCP or its representatives in
connection with the Transactions, when taken as a whole, is or will be complete
and correct in all material respects and does not or will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made. ASCP agrees to
supplement the Information and the Projections from time to time until the
completion of the syndication so that the representation and covenant in the
preceding sentence remain correct without regard to when such Information and
Projections
<PAGE>
-4-
were furnished. You understand that in arranging and syndicating the Bridge
Loan Facility we may use and rely on the Information and Projections without
responsibility for independent verification thereof. All representations and
covenants in this paragraph will be superseded by the representations and
covenants contained in the definitive documentation of the Transactions.
ASCP hereby agrees (i) to indemnify and hold harmless CSFB,
its affiliates and the respective officers, directors, employees, advisors, and
agents of each (each, an "indemnified person") from and against any and all
losses, claims, damages and liabilities to which any such indemnified person
may become subject arising out of or in connection with this Commitment Letter,
the Bridge Loan Facility, the use of the proceeds thereof, the Transactions or
any related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any indemnified person
is a party thereto, and to reimburse each indemnified person upon demand for
any reasonable legal or other expenses incurred in connection with
investigating or defending any of the foregoing; provided, however, that the
foregoing indemnity will not, as to any indemnified person, apply to losses,
claims, damages, liabilities or related expenses to the extent they resulted
from the willful misconduct or gross negligence of such indemnified person, and
(ii) to reimburse CSFB and its affiliates on demand for all reasonable
out-of-pocket expenses (including reasonable due diligence expenses, reasonable
syndication expenses, reasonable consultants' fees and expenses (it being
understood that the retention of any such consultant will be made with your
prior approval), reasonable travel expenses, and reasonable fees, charges and
disbursements of counsel) incurred in connection with the Bridge Loan Facility
and any related documentation (including, without limitation, this Commitment
Letter, the Fee Letter, the Warrant Letter and the definitive financing
documentation) or the administration, amendment, modification or waiver thereof
provided, no reimbursement shall be available under clause (ii) if the
Acquisition is not consummated or if CSFB is not prepared to fund the Bridge
Loan Facility. No indemnified person shall be liable for any indirect or
consequential damages in connection with its activities related to the Bridge
Loan Facility.
This Commitment Letter and CSFB's commitment hereunder shall
not be assignable by you without the prior written consent of CSFB (and any
purported assignment without such consent shall be null and void), is intended
to be solely for the benefit of the parties hereto and is not intended to
confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto. This Commitment Letter may not be amended or waived
except by an instrument in writing signed by you and CSFB. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Commitment Letter by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof. This Commitment Letter, the Fee Letter and the Warrant
Letter are the only agreements that have been entered into between us with
<PAGE>
-5-
respect to the Bridge Loan Facility and set forth the entire understanding of
the parties with respect thereto.
This Commitment Letter shall be governed by and construed in
accordance with the laws of the State of New York. EACH OF THE PARTIES HERETO
IRREVOCABLY AGREES TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF
THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER. ASCP
irrevocably and unconditionally submits to the jurisdiction of any state or
federal court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to this Commitment Letter. Service of any
process, summons, notice or document by registered mail addressed to ASCP at
its address set forth above shall be effective service of process against ASCP
for any such suit, action or proceeding brought in any such court. ASCP
irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding has been brought in any such court and
any claim that any such suit, action or proceeding has been brought in an
inconvenient forum. A final judgment in any such suit, action or proceeding
brought in any such court may be enforced in any other courts to whose
jurisdiction ASCP is or may be subject, by suit upon judgment.
This Commitment Letter is delivered to you on the
understanding that none of this Commitment Letter, the Fee Letter, the Warrant
Letter or any of their terms or substance shall be disclosed after the date
hereof, directly or indirectly, to any other person except (i) on a
confidential basis to your respective officers, agents and advisors who are
directly involved in the consideration of this matter or (ii) as may be
compelled in a judicial or administrative proceeding or as otherwise required
by law (in which case you agree to inform us promptly thereof); provided,
however, that, after your acceptance of this Commitment Letter, the Fee Letter
and the Warrant Letter, you may disclose this Commitment Letter and its terms
and substance (but not the Fee Letter or the Warrant Letter or their terms and
substance), (x) on a confidential basis, to CPI and its directors, officers,
employees, agents and advisors and (y) in the proxy statement and Schedule
13E-3 relating to the Acquisition.
The reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter and the Warrant Letter shall
remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or CSFB's commitment hereunder; provided,
that upon the consummation of the Acquisition you shall cause the Company to
assume each of your obligations under this Commitment Letter, the Fee Letter
and the Warrant Letter and upon such assumption by the Company you shall be
automatically released from all your obligations and liabilities hereunder and
thereunder.
<PAGE>
S-1
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of each of the Fee Letter and
the Warrant Letter by returning to us executed counterparts hereof and of the
Fee Letter and the Warrant Letter not later than 5:00 p.m., New York City time,
on June 16, 1999. CSFB's commitment and agreements contained herein will expire
at such time in the event CSFB has not received such executed counterparts in
accordance with the immediately preceding sentence. In the event that the
initial borrowing in respect of the Bridge Loan Facility does not occur on or
before October 29, 1999, then this Commitment Letter and CSFB's commitment and
undertakings hereunder shall automatically terminate unless CSFB shall, in its
sole discretion, agree to an extension.
CSFB is pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /S/ CHRISTOPHER B. CUNNNINGHAM
--------------------------------
Name: CHRISTOPHER B. CUNNNINGHAM
Title: DIRECTOR
By: /S/ LAURI A. SIVASLIAN
--------------------------------
Name: LAURI A. SIVASLIAN
Title: DIRECTOR
Accepted and agreed to as of the
date first written above by:
AMERICAN SECURITIES CAPITAL PARTNERS, L.P.
By: AMERICAN SECURITIES CAPITAL PARTNERS G.P. CORP.,
its General Partner
By: /s/ MARK E. BANDEEN
-------------------------
Name: Mark E. Bandeen
Title: Managing Director
<PAGE>
S-2
By: /s/ MICHAEL G. FISCH
------------------------
Name: Michael G. Fisch
Title: Managing Director
<PAGE>
EXHIBIT A
Bridge Loan Facility
Summary of Principal Terms and Conditions(1)
Borrower: CPI after giving effect to the
Acquisition (referred to in this Exhibit
A as the "Borrower").
Facility: $150,000,000 aggregate principal amount
bridge term loan facility ("Bridge Loan
Facility")
Lead Arranger and Administrative
Agent: Credit Suisse First Boston ("CSFB" or
"Agent").
Rank: The loans under the Bridge Loan Facility
(the "Bridge Loans") will be subordinated
to all Senior Debt (to be defined),
including the Credit Facility, and will
rank pari passu with all senior
subordinated debt of the Borrower.
Guarantees: All obligations of the Borrower under the
Bridge Loan Facility will be
unconditionally guaranteed on a senior
subordinated basis by each subsidiary of
the Borrower providing guarantees under
the Credit Facility.
Use of Proceeds: On the date of closing of the Acquisition
(the "Closing Date"), proceeds from
either (x) the issuance and sale of the
Notes or (y) the borrowing under the
Bridge Loan Facility will be used to
finance, in part, the Acquisition and to
pay related fees and expenses. The
additional funds necessary to consummate
the Acquisition will be provided by the
Credit Facility, the Equity Contribution
and the Cash Application. The approximate
sources and uses of such funds are set
forth on Annex I.
Funding: The Lenders will fund the Bridge Loans
simultaneously with the consummation of
the other Transactions on the Closing
Date.
Notes: The Borrower will use its reasonable
efforts to issue ap-
- ---------
(1) all capitalized terms used but not defined herein have the meanings given to
them in the commitment Letter to which this term sheet is attached.
<PAGE>
-2-
proximately $150,000,000 principal amount
of the Notes in lieu of borrowing the
Bridge Loans. In the event that the
Borrower has not issued the Notes prior
to the Closing Date, the Borrower will
use its reasonable efforts to refinance
the Bridge Loans as promptly as
practicable after the Closing Date.
Maturity/Exchange: The Bridge Loans will mature on the date
which is 364 days after the Closing Date
(the "Maturity Date"). If the Bridge
Loans are not repaid in full on or prior
to the Maturity Date, the Lender thereof
will have the option at any time or from
time to time on or after the Maturity
Dateto receive, in exchange for such
Bridge Loans or portion thereof, exchange
notes (the "Exchange Notes") having the
terms set forth in the Exchange Notes
Term Sheet below. If any Lender does not
exchange its Bridge Loan for Exchange
Notes on the Maturity Date, such Lender
shall be required to extend the maturity
of such Bridge Loan to the tenth
anniversary of the Closing Date (the
"Final Maturity Date").
Interest Rates: Prior to the Maturity Date, the Bridge
Loans will accrue interest at the greater
of a rate per annum equal to (i) 3 month
Adjusted LIBOR plus the applicable spread
(as described below) or (ii) the CSFBC
Single-B High Yield Index Rate plus the
applicable spread.
The applicable spread will initially be
(i) for the Adjusted LIBOR, 700 basis
points and (ii) for the CSFBC Single-B
High Yield Index Rate, 100 basis points,
and in either case will increase by 50
basis points at the end of each
subsequent three-month period subsequent
to the Closing Date until the Maturity
Date, as extended.
In the event CSFB shall not have
completed its syndication of the Bridge
Loan Facility on or prior to the Closing
Date, the Borrower may elect that the
Bridge Loans bear interest at the
Alternative Base Rate (as defined below).
If the Borrower elects at such time for
the Bridge Loans to bear interest based
on LIBOR, the Borrower will reimburse
CSFB for breakage costs associated with
its syndication activities. In no event
shall the interest
<PAGE>
-3-
rate on the Bridge Loan Facility exceed
the highest lawful rate permitted under
applicable law.
Adjusted LIBOR will at all times include
statutory reserves.
In the event that Adjusted LIBOR cannot
be determined, or any Lender is unable to
maintain a loan accruing interest at
Adjusted LIBOR, the affected Bridge Loan
will accrue interest until the Maturity
Date at the "Alternate Base Rate," which
will be the higher of (i) CSFB's Prime
Rate, (ii) the secondary market rate for
three-month certificates of deposit
(adjusted for statutory reserves
requirements) plus 1% and (iii) the
Federal Funds Effective Rate plus 1/2 of
1%, plus in each case the applicable
spread less 100 basis points.
Notwithstanding the foregoing paragraphs,
(i) in no event shall the interest rate
on the Bridge Loans in effect at any time
prior to the Maturity Date exceed 17.0%
per annum and (ii) to the extent that the
interest rate on the Bridge Loans exceeds
15.0% per annum, the Borrower may, at its
option, cause such excess to be paid
in-kind.
Following the Maturity Date, all
outstanding Bridge Loans will accrue
interest at the rates provided for the
Exchange Notes in Exhibit A Annex,
subject to the absolute and cash caps
therein.
Calculation of interest shall be on the
basis of actual days elapsed in a year of
360 days (or 365 or 366 days, as the case
may be, in the case of Bridge Loan based
on the Alternate Base Rate).
<PAGE>
-4-
Interest Payments: Interest will be payable in arrears (i)
for Adjusted LIBOR loans, at the end of
each Adjusted LIBOR period (which shall
be one, two or three months, at the
option of the Company) and on the
Maturity Date, (ii) for Alternate Base
Rate loans, at the end of each fiscal
quarter following the Closing Date and on
the Maturity Date and (iii) for Bridge
Loans outstanding after the Maturity
Date, at the end of each fiscal quarter
following the Maturity Date and the date
on which such Bridge Loans are repaid in
full.
Mandatory Prepayments: So long as no event of default under the
Credit Facility has occurred and is
continuing, the Bridge Loans will be
required to be prepaid, subject to the
provisions of the Credit Facility and
other exceptions to be mutually agreed,
by the Borrower with:
(i) 100% of the net proceeds of the
issuance or incurrence of debt; and
(ii) 100% of the net proceeds from any
issuance of equity securities in any
public offering or private placement or
from any capital contribution.
Optional Prepayments: Bridge Loans may be repaid at any time
upon ten days' prior notice to the Agent,
in whole or in part at the option of the
Borrower, in a minimum principal amount
and in multiples to be agreed upon,
without premium or penalty (except
breakage costs).
Conditions to Closing: The conditions set forth on Annex II.
Representations and Warranties: Usual for facilities and transactions of
this type with materiality and other
customary qualifications to be agreed
upon, including but not limited to
accuracy of financial statements and
information; no material adverse change;
absence of litigation; no violation of
agreements or instruments; compliance
with laws; payment of taxes; ownership of
properties; solvency; effectiveness of
regulatory approvals; labor matters; and
environmental matters.
<PAGE>
-5-
Affirmative Covenants: Usual for facilities and transactions of
this type with materiality and other
customary qualifications to be agreed
upon, including but not limited to
maintenance of corporate existence and
rights; performance of obligations;
delivery of audited financial statements,
other financial information and notices
of default and litigation; maintenance of
properties in good working order;
maintenance of insurance; compliance with
laws; inspection of books and properties;
further assurances; and payment of taxes.
In addition, the Borrower will use its
reasonable efforts to file a registration
statement under the Securities Act or
prepare an offering memorandum covering
the issuance or sale of debt securities
(the "Securities") to be issued in a
public offering or private placement to
refinance in full the Bridge Loan
Facility (the "Loan Refinancing") and use
its reasonable efforts to the extent
within its power to consummate such Loan
Refinancing as soon as possible after the
Closing Date in an amount sufficient to
refinance all amounts outstanding under
the Bridge Loan Facility documents and on
such terms and conditions (including,
without limitation, interest rate, yield,
redemption prices and dates) as CSFBC may
in its reasonable judgment determine to
be appropriate in light of prevailing
circumstances and market conditions and
the financial condition and prospects of
the Borrower. The indenture for the
Securities will be in form and substance
reasonably satisfactory to CSFBC and the
Borrower; provided, that so long as the
Borrower has received at least a B-
rating or higher from S&P and at least a
B3 rating or higher from Moody's, the
Borrower will not be obligated to issue
any such Securities having an interest
rate in excess of the lesser of (x) CSFBC
Single-B High Yield Index Rate plus 300
basis points and (y) 18 1/2% per annum;
and provided, further, regardless of the
ratings received by the Borrower, in no
event will the Borrower be obligated to
issue any Securities having an interest
rate in excess of 18 1/2% per annum. If
the Securities are issued in a
transaction not registered under the
Securities Act to effect the Loan
Refinancing, the Secu-
<PAGE>
-6-
rities shall be entitled to the benefit
of a registration rights agreement to be
entered into by the Borrower in customary
form reasonably acceptable to CSFBC, the
Borrower and any guarantors of such
Securities.
Negative Covenants: Usual for facilities and transactions of
this type with exceptions to be agreed
upon, including but not limited to
limitations on dividends on, and
redemptions and repurchases of, capital
stock; limitations on prepayments,
redemptions or repurchases of parri passu
and subordinated debt; limitations on
liens and sale-leaseback transactions;
limitations on loans and investments;
limitations on debt issuances (including,
without limitation, convertible
indebtedness and preferred stock of
subsidiaries); limitations on mergers,
acquisitions and asset sales; limitations
on transactions with affiliates;
limitations on dividend and other
restrictions affecting subsidiaries;
limitations on issuance of subsidiary
capital stock; limitations on changes in
business; limitations on amendment of
debt and other material agreements; and
limitations on capital expenditures;
provided, certain of such covenants shall
contain provisions adjusting the terms
thereof for Bridge Loans outstanding
after the Maturity Date to reflect the
same terms as shall be applicable to the
Exchange Notes, if any.
Events of Default: Usual for facilities and transactions of
this type with customary provisions for
notice, grace periods and threshold
levels to be agreed upon, including but
not limited to nonpayment of principal,
interest, fees or letter of credit
reimbursement obligations; violation of
covenants; incorrectness of
representations and warranties in any
material respect; cross default and cross
acceleration; bankruptcy; material
judgments; ERISA; actual or asserted
invalidity of the guarantees; provided,
certain of the events of default shall
contain provisions adjusting the terms
thereof for Bridge Loans outstanding
after the Maturity Date to reflect the
same terms as shall be applicable to the
Exchange Notes, if any.
Yield Protection and Increased
Costs: Usual for facilities and transactions of
this type.
<PAGE>
-7-
Assignments and Participations: Neither the Borrower nor any guarantor
may assign its rights or obligations in
connection with the Bridge Loan Facility
without the prior written consent of all
the Lenders.
Lenders will have the absolute and
unconditional right to assign Bridge
Loans and commitments without restriction
(except the consent of the Borrower if
such assignment would result in increased
costs or involves less than $2.0 million
in aggregate principal amount of loans).
Assignments will be by novation which
will release the obligation of the
assigning Lender. During the syndication
process, CSFB will inform the Borrower of
the names of potential Lenders that it is
approaching. CSFB will act as Agent for
all assignees (if any) holding Bridge
Loans from time to time.
Lenders will be permitted to participate
their Bridge Loans to other financial
institutions without restriction.
Participants will have the same benefits
as the selling Lenders would have with
regard to yield protection and increased
costs and provision of information on the
Borrower.
Voting: Amendments and waivers of any provision
of any Bridge Loan document will require
the approval of Lenders holding Bridge
Loans and commitments representing a
majority of the aggregate amount of the
Bridge Loans and commitments under the
Bridge Loan Facility, except that the
consent of all affected Lenders shall be
required with respect to (a) increases in
commitments, (b) reductions of principal,
interest or fees, (c) extensions of the
date on which principal, interest or fees
are due and (d) release of any guarantor.
Expenses and Indemnification: In addition to those reasonable
out-of-pocket expenses reimbursable under
the Commitment Letter, all reasonable
out-of-pocket expenses of the Agent (and
the Lenders for enforcement costs and
documentary taxes) associated with the
preparation, execution and delivery of
any waiver or modification (whether or
not effective) of, and
<PAGE>
-8-
the enforcement of, any Bridge Loan
document or any document relating to the
refinancing of the Bridge Loans
(including the reasonable fees,
disbursements and other charges of
counsel for the Agent) are to be paid by
the Borrower. The Borrower will indemnify
the Agent and the other Lenders and hold
them harmless from and against all
reasonable costs, expenses (including
reasonable fees, disbursements and other
charges of counsel) and liabilities
arising out of or relating to any
litigation or other proceeding
(regardless of whether the Agent or any
such other Lender is a party thereto)
that relate to the Transactions or any
transactions related thereto or the
refinancing of the Bridge Loan, provided
that neither the Agent nor any such other
Lender will be indemnified for costs,
expenses or liabilities which have
resulted from such person's own gross
negligence or willful misconduct.
Governing Law and Forum: New York
Waiver of Jury Trial: In customary form.
Counsel to Agent: Cahill Gordon & Reindel
<PAGE>
Exchange Notes Term Sheet
Issuer: The Company will issue Exchange Notes
under an indenture which complies with
the Trust Indenture Act (the
"Indenture"). The Company in its capacity
as issuer of Exchange Notes is referred
to as the "Issuer."
Principal Amount: The Exchange Notes will be available only
in exchange for the Bridge Loans. The face
amount of any Exchange Note will equal
100% of the aggregate principal amount
(including any accrued interest not
required to be paid in cash) of the Bridge
Loan for which it is exchanged.
Maturity Date: The Exchange Notes will mature at the end
of the tenth year after the Closing Date.
Interest Rate: Exchange Notes will bear interest at a
rate equal to the Initial Rate (as
defined below) plus the Exchange Spread
(as defined below). Notwithstanding the
foregoing, the interest rate on Exchange
Notes in effect at any time shall not
exceed 17.0% per annum, and to the extent
that the interest payable on Exchange
Notes exceeds a rate of 15.0% per annum,
the Issuer may, at its option, cause such
excess interest to be paid by issuing
additional Exchange Notes in a principal
amount equal to such excess portion of
interest. Interest on Exchange Notes will
be payable semiannually in arrears.
In no event shall the interest rate on
the Exchange Notes exceed the highest
lawful rate permitted under applicable
law.
"Exchange Spread" shall mean 50 basis
points during the 3 month period
commencing on the Maturity Date and shall
increase by 50 basis points at the
beginning of each subsequent 3 month
period.
"Initial Rate" shall be determined on the
Maturity Date and shall equal the greater
of (a) the interest rate borne by Bridge
Loans on the day immediately preceding
the
<PAGE>
-2-
Maturity Date or (b) the Treasury Rate
(as defined below), on the Maturity Date,
plus the 500 basis points or (c) the
CSFBC Single-B High Yield Index Rate on
the Maturity Date, plus 200 basis points.
"Treasury Rate" means (i) the rate borne
by direct obligations of the United
States maturing on the tenth anniversary
of the Closing Date and (ii) if there are
no such obligations, the rate determined
by linear interpolation between the rates
borne by the two direct obligations of
the United States maturing closest to,
but straddling, the tenth anniversary of
the Closing Date, in each case as
published by the Board of Governors of
the Federal Reserve System.
Rank: Exchange Notes will rank pari passu with
Bridge Loans.
Change of Control Offer: The Borrower will be required to make an
offer to purchase all Exchange Notes upon
the occurrence of a Change of Control (to
be defined).
Optional Redemption: The Exchange Notes will be subject to
redemption restrictions and premiums
typical for high yield securities.
Registration Rights: The Issuer will use its reasonable
efforts to file an exchange offer
registration statement or a shelf
registration statement no later than the
30th day after issuance of the Exchange
Notes, and the Issuer will use its
reasonable efforts to cause such
registration statement to become
effective within 150 days after issuance
and remain effective and available
(subject to customary exceptions) until
it is no longer needed to permit
unrestricted resales of such Exchange
Notes, but in no event longer than two
years from the date of issuance of any
such Exchange Notes. If the registration
statement ceases to be effective or
ceases to be useable in connection with
resales of such Exchange Notes (subject
to customary exceptions), cash interest
will accrue and be payable (in addition
to interest otherwise accruing on the
Exchange Notes) at a rate of 0.5% per
annum until such default shall be
cured.The Issuer agrees, at its expense,
to use its reasonable
<PAGE>
-3-
best efforts to assist CSFB in connection
with resales of any of the Exchange
Notes, including making its senior
officers available to CFSB to assist in
the preparation of marketing materials
relating to any resales, to participate
in due diligence sessions and to
participate in road shows or other
presentations to prospective purchasers
of such Exchange Notes.
Right to Transfer Exchange Notes: The holders of the Exchange Notes shall
have the absolute and unconditional right
to transfer such Exchange Notes to any
third parties (including affiliates of
such holders) in compliance with
applicable law.
Covenants: Those typical for an indenture governing
a high-yield senior subordinated note
issue with the same negative covenants as
shall be applicable to the Bridge Loans
after the Maturity Date.
Events of Default: Those typical for an indenture governing
a high-yield subordinated note issue.
Governing Law and Forum: New York.
<PAGE>
ANNEX I
Sources and Uses of Funds
(in millions of U.S. dollars (except footnotes))
(all figures are approximate)
<TABLE>
<CAPTION>
- ----------------------------------------- -------------------------------------------
SOURCES OF FUNDS USES OF FUNDS
- ----------------------------------------- -------------------------------------------
<S> <C> <C> <C>
Revolving Credit Facility(1) $0.0 Redemption of Senior Notes(2) $62.2
Term Loan A 40.0 Debt Repurchase Premium 3.6
Term Loan B 105.0 Purchase of Equity3 388.2
Notes/Bridge Loan Facility 150.0 Estimated Transaction Costs 28.8
Equity Contribution 123.8 ------
Cash Application 64.0
------
Total Sources $482.8 Total Uses $482.8
====== ======
</TABLE>
- ---------
(1) $40.0 million available on the Closing Date (up to $10.0 million of which
may be drawn upon Closing Date).
(2) Includes $2.2 million of accrued interest payment due June 15, 1999.
(3) Purchase of equity at $37.0 per share (includes options).
<PAGE>
ANNEX II
CONDITIONS
The commitments of Credit Suisse First Boston ("CSFB")
pursuant to the Bridge Term Loan Facility Commitment Letter dated June 15, 1999
(the "Commitment Letter"), between CSFB and American Securities Capital
Partners, L.P., ("ASCP") shall be subject to the following conditions
(capitalized terms used but not defined herein shall, unless otherwise
specified, have the meanings assigned to such terms in the Commitment Letter
and other letters between ASCP and CSFB or its affiliates (the "Letters")
relating to the Transactions):
(i) after the date of the Letters, no information or other
matter becomes known to CSFB that CSFB reasonably determines is
inconsistent in a material and adverse manner with (a) any information
or other matter disclosed to CSFB prior to the date of the Letters or
(b) any information or other matter obtained by CSFB during its due
diligence investigation;
(ii) there shall not have occurred any event or events,
adverse condition or change in or affecting the Company, that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(iii) the preparation, execution and delivery of definitive
documentation reasonably satisfactory to CSFB, in connection with (a)
the Bridge Loans or the Notes, as the case may be and, (b) the Credit
Facility;
(iv) the Transactions shall have been consummated or shall be
consummated simultaneously on the Closing Date, in each case in all
material respects in accordance with the terms hereof and the terms of
the relevant documentation therefor (and without the waiver of any
material terms);
(v) CSFB shall be reasonably satisfied as of the Closing Date
with the material terms and conditions of each agreement entered into
in connection with the Transactions, including any Additional Equity
Contribution CSFB may request in accordance with the Commitment
Letter;
(vi) CSFB shall be reasonably satisfied as to the amount and
nature of any environmental expenses to which the Company may be
subject, and the plans of the Company with respect thereto;
(vii) all requisite governmental authorities (including any
antitrust authorities) and third parties shall have approved or
consented to the Transactions and the other transactions contemplated
by the Commitment Letter to the extent required, in
<PAGE>
-2-
each case to the extent failure to obtain such consent or approval,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, and there shall be no governmental or
judicial action, actual or threatened, that has a reasonable
likelihood of restraining, preventing or imposing materially
burdensome conditions on the Transactions or the other transactions
contemplated hereby;
(viii) CSFB shall have received a certificate reasonably
satisfactory in all respects to CSFB from the chief financial officer
of the Company to the effect that, after giving effect to the
Transactions, the Company will not (a) be insolvent, (b) be rendered
insolvent by the indebtedness incurred in connection therewith, (c) be
left with unreasonably small capital with which to engage in its
business or (d) have incurred debts beyond its ability to pay such
debts as they mature;
(ix) after giving effect to the Transactions and the
affiliation agreements to be entered into in connection therewith, the
ratio of (a) consolidated total debt of the Company as of the Closing
Date to (b) EBITDA (to be defined to exclude certain non-recurring
expenses as shall be agreed to by CSFB) of the Company for the
twelve-month period ending with the fiscal quarter immediately
preceding the Closing Date must be less than 5.0 to 1.0;
(x) after giving effect to the Transactions and the other
transactions contemplated by the Letters, the Company and its
subsidiaries shall have outstanding no indebtedness for borrowed money
or preferred stock other than (a) the loans under the Credit Facility
and (b) the Bridge Loan Facility or the Notes, as the case may be and
the Company shall have received at least a B- rating or higher from
S&P and at least a B3 rating or higher from Moody's;
(xi) customary closing conditions for transactions similar to
the Bridge Loan Facility, including without limitation (a) the
accuracy in all material respects of all representations and
warranties, (b) the absence of any defaults, prepayment events or
creation of liens under debt instruments or other agreements as a
result of the Transactions and the other transactions contemplated by
the Letters, (c) the execution and delivery of the guarantees, (d)
compliance in all material respects with applicable laws and
regulations (including employee health and safety, margin regulations
and environmental laws), (e) obtaining reasonably satisfactory
insurance, (f) evidence of authority and (g) the receipt by CSFB of
reasonably satisfactory legal opinions and accountants' comfort
letters;
(xii) there shall not have occurred after the date of the
Letters (a) any general suspension of trading in, or limitation on
prices for, securities on any national securities exchange or in the
over-the counter market in any Applicable Jurisdiction, (b) the
declaration of a banking moratorium or any suspension of payments in
respect of
<PAGE>
-3-
banks in any Applicable Jurisdiction, (c) the commencement of a war,
armed hostilities or other international or national calamity or
emergency, directly or indirectly involving any Applicable
Jurisdiction, (d) any limitations (whether or not mandatory) imposed
by any governmental authority on the nature or extension of credit or
further extension of credit of the type contemplated in connection
with the Transactions by banks or other lending institutions, (e) in
the case of the foregoing clauses (c) and (d), a material escalation
or worsening thereof, or (f) any other material adverse change in
banking or capital market conditions that has had or reasonably could
have a material adverse effect on the syndication of leveraged bank
credit facilities similar to the Bridge Loan Facility or the
consummation of high-yield offerings (or any securities offerings in
lieu thereof), that, in any such case described in the foregoing
clauses (a) through (f), CSFB shall reasonably determine makes it
impracticable to consummate the offering of the Notes or the
syndication of the Bridge Loans, in each case prior to the termination
date provided for in the Letters;
(xiii) CSFB's reasonable satisfaction that, immediately prior
to and during the marketing period for (a) the offering of the Notes
(or any securities offerings in lieu thereof) or the syndication of
the Bridge Loan Facility, as the case may be, there shall be no
competing issues of debt securities (other than the Credit Facility)
or commercial bank facilities of the Company or any of its
subsidiaries;
(xiv) payment of fees and expenses earned and due upon the
Closing Date; and
(xv) to the extent required by the Warrant Letter the
Warrants shall have been issued and placed into escrow for the benefit
of the Lenders in accordance with the terms of the Warrant Letter.
"Applicable Jurisdiction" means the United States and New
York State.
"Material Adverse Effect" shall mean a material adverse
effect on the business, results of operations or financial condition of the
Company and its subsidiaries taken as a whole.
<PAGE>
May 26, 1999 CONFIDENTIAL
Materials Prepared for the Board of Directors
CPI Corporation
<PAGE>
CONFIDENTIAL 1
- --------------------------------------------------------------------------------
CPI Corporation
Overview of Sale Process
- --------------------------------------------------------------------------------
The Board of Directors in July of 1998 authorized CSFB to
confidentially contact a limited number of potential strategic buyers
The strategic parties, which included Sears, Hallmark, American
Greetings, Jostens, GrandVision and Applied Graphics, all indicated
that they had no interest in pursuing a transaction with CPI
Following the lack of strategic buyer interest, the Board authorized
CSFB in January of 1999 to initiate a confidential auction process with
financial buyers
o 31 potential financial buyers were contacted
o 25 potential buyers executed confidentiality letters and received
the offering memorandum
o Five potential buyers submitted preliminary bids for the Company and
were invited to conduct in-depth due diligence including: (i) a
management presentation, (ii) access to a comprehensive data room,
and (iii) CSFB-chaperoned meetings with management.
o Four buyers submitted final offers for the Company, three with fully
committed financing
American Securities Capital Partner's final cash offer price of
$37.00 per share (backed by fully underwritten financing) is the
strongest offer received.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 2
- --------------------------------------------------------------------------------
CPI Corporation
Overview of Sale Process
- --------------------------------------------------------------------------------
Note: Information is subject to confidentiality agreements.
Overview of Financial Buyer Auction Process
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OFFERING PRELIMINARY MANAGEMENT
PARTICIPANTS MEMORANDUM BID PRESENTATION DUE DILIGENCE FINAL BID
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[Bidder No. 1]
------------------------------------------------------------------------------------
[Bidder No. 2] x $33-$35 x x x
------------------------------------------------------------------------------------
[Bidder No. 3] x
------------------------------------------------------------------------------------
[Bidder No. 4] x
------------------------------------------------------------------------------------
[Bidder No. 5]
------------------------------------------------------------------------------------
[Bidder No. 6] x
------------------------------------------------------------------------------------
[Bidder No. 7] x $34-$36 x x x
------------------------------------------------------------------------------------
[Bidder No. 8]
------------------------------------------------------------------------------------
[Bidder No. 9] x
------------------------------------------------------------------------------------
[Bidder No. 10] x
------------------------------------------------------------------------------------
[Bidder No. 11] x
------------------------------------------------------------------------------------
[Bidder No. 12]
------------------------------------------------------------------------------------
[Bidder No. 13] x
------------------------------------------------------------------------------------
[Bidder No. 14] x
------------------------------------------------------------------------------------
[Bidder No. 15]
------------------------------------------------------------------------------------
[Bidder No. 16] x
------------------------------------------------------------------------------------
[Bidder No. 17] x $33-$36 x x x
------------------------------------------------------------------------------------
[Bidder No. 18] x
------------------------------------------------------------------------------------
[Bidder No. 19] x
------------------------------------------------------------------------------------
[Bidder No. 20] x
------------------------------------------------------------------------------------
[Bidder No. 21] x
------------------------------------------------------------------------------------
[Bidder No. 22] x
------------------------------------------------------------------------------------
[Bidder No. 23] x
------------------------------------------------------------------------------------
[Bidder No. 24] x $32-$35 x x x
------------------------------------------------------------------------------------
[Bidder No. 25] x $33-$36 x x
------------------------------------------------------------------------------------
[Bidder No. 26]
------------------------------------------------------------------------------------
[Bidder No. 27] x
------------------------------------------------------------------------------------
[Bidder No. 28] x
------------------------------------------------------------------------------------
[Bidder No. 29] x
------------------------------------------------------------------------------------
[Bidder No. 30] x
------------------------------------------------------------------------------------
[Bidder No. 31] x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CREDIT | FIRST
SUISSE | BOSTON
[B
<PAGE>
CONFIDENTIAL 3
- --------------------------------------------------------------------------------
CPI CORPORATION
Overview of Sale Process
- --------------------------------------------------------------------------------
Note: Information is subject to confidentiality agreements.
Final Bid Results
(Dollars in Millions, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEBT/
CAPITALIZATION EBITDA
PURCHASE ------------------------------------ (INCLUDING
FINAL PRICE/ SENIOR SUBORDINATED FINANCING DEBT/ UNDRAWN DEBT/
POTENTIAL BUYER BID EBITDA DEBT DEBT EQUITY TOTAL STATUS EBITDA REVOLVER)(11) CAPITAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Securities
Capital Partners
Per Share $37.00 6.5X $151 $150 $116 $416 Fully committed 5.0X 5.4X 72%
Equity Purchase Price $387 with bridge
Adjusted Purchase Price $368 loan
Bidder #2
Per Share (2) $35.50 6.2X $160 $125 $100 $385 Fully committed 4.8X 5.4X 74%
Equity Purchase Price $374 with bridge
Adjusted Purchase Price $373 loan
Bidder #3
Approximate Per Share (3) $35.87 6.3X $135 $175 $89 $399 Committed Bank 5.2X 5.8X 78%
Equity Purchase Price $374 equity $66 Loan and Highly
contribution Confident
Adjusted Purchase Price $373 nominal senior $23 letter for
preferred Subordinated
Debt
Bidder #4
Per Share $33.00 5.7X $138 $150 $68 $356 Fully committed 4.8X 5.3X 81%
Equity Purchase Price $342 financing with
Adjusted Purchase Price $340 bridge loan
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes undrawn revolving credit facility to fund working capital
requirements of $19.3MM for ASCP, $35MM for Bidder #2, $35MM for
Bidder #3, and $2.5MM for Bidder #4.
(2) Per share offer of $35.00 in final bid letter, $35.50 verbally after the
final bid letter sent.
(3) Per share consideration of $35.00 cash and one share of senior preferred
stock with a $2.00 initial liquidation value. At a discount of 20%, the
12-year present value of the senior preferred is $0.87 (under certain
circumstances this security may pay off earlier). Preferred shares would be
owned by the current shareholders, comprising $22.7 million of the pro
forma equity. Management and Bidder #3 will contribute a total $66.3 milion
of equity to the pro forma capital structure.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 4
- --------------------------------------------------------------------------------
CPI Corporation
Overview of Proposed Transaction
- --------------------------------------------------------------------------------
The proposed purchase price of $37.00 per share represents a significant
premium to CPI's current and historical trading levels:
o 21% premium to CPI's market price of $30.50 per share as of May 24, 1999.
o 39% premium to CPI's share price of only three weeks ago ($26.56 on
April 30, 1999).
o 53% premium to CPI's LTM volume weighted average closing price of $24.15
per share.
o 7% premium to CPI's all-time trading high of $34.75 achieved in June of
1991.
CPI Corp -- Stock Price
May 24, 1996 through May 24, 1999
[LINE GRAPH]
Date Price
5/21/96 17.5000
5/22/96 17.5000
5/23/96 17.5000
5/24/96 17.8750
5/28/96 18.2500
5/29/96 18.0000
5/30/96 17.1250
5/31/96 16.3750
6/3/96 15.5000
6/4/96 15.6250
6/5/96 15.7500
6/6/96 16.2500
6/7/96 16.2500
6/10/96 16.5000
6/11/96 16.8750
6/12/96 16.7500
6/13/96 16.5000
6/14/96 16.7500
6/17/96 16.5000
6/18/96 16.5000
6/19/96 16.3750
6/20/96 16.1250
6/21/96 16.3750
6/24/96 16.3750
6/25/96 16.3750
6/26/96 16.3750
6/27/96 16.5000
6/28/96 16.5000
7/1/96 16.5000
7/2/96 16.6250
7/3/96 16.6250
7/5/96 16.6250
7/8/96 16.5000
7/9/96 16.0000
7/10/96 15.6250
7/11/96 15.7500
7/12/96 15.7500
7/15/96 15.7500
7/16/96 14.8750
7/17/96 14.7500
7/18/96 15.2500
7/19/96 15.2500
7/22/96 15.0000
7/23/96 14.6250
7/24/96 14.1250
7/25/96 14.1250
7/26/96 13.8750
7/29/96 13.8750
7/30/96 14.5000
7/31/96 14.3750
8/1/96 14.2500
8/2/96 14.0000
8/5/96 14.2500
8/6/96 14.5000
8/7/96 15.0000
8/8/96 17.6250
8/9/96 18.2500
8/12/96 18.0000
8/13/96 17.7500
8/14/96 17.7500
8/15/96 17.8750
8/16/96 17.6250
8/19/96 19.0000
8/20/96 18.7500
8/21/96 18.5000
8/22/96 18.5000
8/23/96 18.6250
8/26/96 18.5000
8/27/96 18.5000
8/28/96 18.6250
8/29/96 18.5000
8/30/96 18.3750
9/3/96 18.5000
9/4/96 18.5000
9/5/96 18.5000
9/6/96 18.5000
9/9/96 18.5000
9/10/96 18.3750
9/11/96 18.3750
9/12/96 18.6250
9/13/96 18.6250
9/16/96 18.7500
9/17/96 18.6250
9/18/96 18.6250
9/19/96 18.5000
9/20/96 18.8750
9/23/96 18.6250
9/24/96 18.6250
9/25/96 18.5000
9/26/96 18.6250
9/27/96 18.7500
9/30/96 18.7500
10/1/96 18.8750
10/2/96 19.2500
10/3/96 19.3750
10/4/96 19.5000
10/7/96 20.6250
10/8/96 20.7500
10/9/96 20.7500
10/10/96 21.0000
10/11/96 21.1250
10/14/96 21.1250
10/15/96 21.1250
10/16/96 21.1250
10/17/96 21.0000
10/18/96 19.7500
10/21/96 19.5000
10/22/96 18.7500
10/23/96 19.0000
10/24/96 19.2500
10/25/96 19.1250
10/28/96 19.0000
10/29/96 19.0000
10/30/96 19.2500
10/31/96 19.0000
11/1/96 19.0000
11/4/96 18.6250
11/5/96 17.5000
11/6/96 17.6250
11/7/96 18.0000
11/8/96 17.6250
11/11/96 17.7500
11/12/96 17.6250
11/13/96 17.6250
11/14/96 17.5000
11/15/96 17.5000
11/18/96 17.5000
11/19/96 17.5000
11/20/96 17.5000
11/21/96 17.3750
11/22/96 17.2500
11/25/96 17.2500
11/26/96 17.0000
11/27/96 17.1250
11/29/96 17.0000
12/2/96 17.1250
12/3/96 17.1250
12/4/96 17.0000
12/5/96 16.8750
12/6/96 16.8750
12/9/96 17.0000
12/10/96 16.7500
12/11/96 17.0000
12/12/96 16.6250
12/13/96 16.7500
12/16/96 16.5000
12/17/96 16.3750
12/18/96 16.3750
12/19/96 16.6250
12/20/96 17.5000
12/23/96 16.7500
12/24/96 16.3750
12/26/96 16.3750
12/27/96 16.5000
12/30/96 16.7500
12/31/96 16.7500
1/2/97 16.8750
1/3/97 16.8750
1/6/97 17.1250
1/7/97 17.8750
1/8/97 17.7500
1/9/97 18.5000
1/10/97 18.2500
1/13/97 18.2500
1/14/97 18.2500
1/15/97 18.0000
1/16/97 17.8750
1/17/97 18.0000
1/20/97 18.0000
1/21/97 17.8750
1/22/97 18.2500
1/23/97 18.3750
1/24/97 18.3750
1/27/97 18.2500
1/28/97 18.2500
1/29/97 18.3750
1/30/97 18.3750
1/31/97 18.5000
2/3/97 18.8750
2/4/97 18.8750
2/5/97 18.7500
2/6/97 18.7500
2/7/97 18.8750
2/10/97 18.8750
2/11/97 19.2500
2/12/97 19.2500
2/13/97 19.1250
2/14/97 18.7500
2/18/97 19.3750
2/19/97 19.3750
2/20/97 19.2500
2/21/97 19.3750
2/24/97 19.3750
2/25/97 19.2500
2/26/97 19.1250
2/27/97 18.8750
2/28/97 18.3750
3/3/97 18.6250
3/4/97 18.5000
3/5/97 18.5000
3/6/97 18.5000
3/7/97 18.3750
3/10/97 18.7500
3/11/97 18.6250
3/12/97 18.5000
3/13/97 18.3750
3/14/97 18.0000
3/17/97 18.1250
3/18/97 17.7500
3/19/97 17.3750
3/20/97 17.5000
3/21/97 17.5000
3/24/97 17.2500
3/25/97 16.6250
3/26/97 16.8750
3/27/97 16.8750
3/31/97 16.8750
4/1/97 16.8750
4/2/97 17.0000
4/3/97 17.2500
4/4/97 17.5000
4/7/97 17.3750
4/8/97 17.6250
4/9/97 17.2500
4/10/97 17.5000
4/11/97 17.2500
4/14/97 17.1250
4/15/97 16.8750
4/16/97 17.0000
4/17/97 17.0000
4/18/97 16.8750
4/21/97 16.6250
4/22/97 16.8750
4/23/97 16.5000
4/24/97 16.1250
4/25/97 16.0000
4/28/97 16.0000
4/29/97 16.2500
4/30/97 16.1250
5/1/97 16.2500
5/2/97 17.0000
5/5/97 16.8750
5/6/97 17.1250
5/7/97 17.3750
5/8/97 16.8750
5/9/97 16.8750
5/12/97 17.1250
5/13/97 17.0000
5/14/97 17.6250
5/15/97 18.6250
5/16/97 18.6250
5/19/97 18.5000
5/20/97 18.2500
5/21/97 18.5000
5/22/97 18.8750
5/23/97 19.0000
5/27/97 19.1250
5/28/97 19.3750
5/29/97 19.2500
5/30/97 18.7500
6/2/97 18.7500
6/3/97 18.7500
6/4/97 18.6250
6/5/97 18.7500
6/6/97 18.7500
6/9/97 19.0000
6/10/97 18.7500
6/11/97 18.6250
6/12/97 18.5000
6/13/97 18.8750
6/16/97 18.7500
6/17/97 18.6250
6/18/97 18.8750
6/19/97 19.0000
6/20/97 18.8750
6/23/97 18.8750
6/24/97 19.2500
6/25/97 19.5625
6/26/97 20.3750
6/27/97 20.6250
6/30/97 21.0000
7/1/97 21.0625
7/2/97 21.1250
7/3/97 20.7500
7/7/97 21.0000
7/8/97 21.1250
7/9/97 21.2500
7/10/97 21.1250
7/11/97 22.0000
7/14/97 22.0625
7/15/97 21.6250
7/16/97 21.5625
7/17/97 21.3750
7/18/97 21.5000
7/21/97 21.1250
7/22/97 21.6250
7/23/97 21.3125
7/24/97 20.8750
7/25/97 20.6250
7/28/97 20.3750
7/29/97 19.9375
7/30/97 20.1250
7/31/97 20.3750
8/1/97 20.0625
8/4/97 19.9375
8/5/97 20.0625
8/6/97 19.7500
8/7/97 19.8750
8/8/97 20.1875
8/11/97 20.2500
8/12/97 20.2500
8/13/97 20.0625
8/14/97 20.4375
8/15/97 21.5625
8/18/97 21.1250
8/19/97 21.5000
8/20/97 23.3125
8/21/97 23.5625
8/22/97 23.4375
8/25/97 23.7500
8/26/97 24.3750
8/27/97 24.3750
8/28/97 24.3750
8/29/97 23.7500
9/2/97 25.2500
9/3/97 25.5000
9/4/97 25.0625
9/5/97 25.1250
9/8/97 25.3125
9/9/97 26.1250
9/10/97 26.0000
9/11/97 25.5000
9/12/97 25.6250
9/15/97 25.8750
9/16/97 25.6250
9/17/97 26.1250
9/18/97 26.3125
9/19/97 26.1875
9/22/97 26.3125
9/23/97 26.1875
9/24/97 26.5625
9/25/97 25.3125
9/26/97 25.1250
9/29/97 25.1250
9/30/97 25.5000
10/1/97 26.0625
10/2/97 26.8750
10/3/97 27.3125
10/6/97 27.0000
10/7/97 27.3125
10/8/97 27.3750
10/9/97 25.9375
10/10/97 24.7500
10/13/97 24.8750
10/14/97 26.0000
10/15/97 25.0000
10/16/97 25.5625
10/17/97 25.1250
10/20/97 25.4375
10/21/97 25.1250
10/22/97 24.0000
10/23/97 25.0000
10/24/97 26.1875
10/27/97 25.5625
10/28/97 24.5000
10/29/97 25.8750
10/30/97 26.5000
10/31/97 26.0000
11/3/97 27.5625
11/4/97 27.0000
11/5/97 26.8125
11/6/97 25.3750
11/7/97 25.0000
11/10/97 23.7500
11/11/97 23.6875
11/12/97 22.7500
11/13/97 20.1250
11/14/97 19.9375
11/17/97 20.0000
11/18/97 18.3125
11/19/97 17.7500
11/20/97 18.0000
11/21/97 18.9375
11/24/97 18.3125
11/25/97 18.1250
11/26/97 18.2500
11/28/97 18.6250
12/1/97 18.5625
12/2/97 17.9375
12/3/97 18.0000
12/4/97 18.2500
12/5/97 18.8750
12/8/97 19.5000
12/9/97 21.5625
12/10/97 21.5625
12/11/97 21.5625
12/12/97 21.5625
12/15/97 21.6250
12/16/97 21.5625
12/17/97 21.5625
12/18/97 21.7500
12/19/97 21.6875
12/22/97 22.0000
12/23/97 22.3125
12/24/97 22.1875
12/26/97 22.3750
12/29/97 22.5625
12/30/97 22.6250
12/31/97 22.6250
1/2/98 22.6250
1/5/98 22.6250
1/6/98 22.6875
1/7/98 22.5625
1/8/98 22.2500
1/9/98 21.9375
1/12/98 21.1250
1/13/98 21.0625
1/14/98 20.9375
1/15/98 22.2500
1/16/98 22.4375
1/20/98 22.2500
1/21/98 22.8750
1/22/98 22.8125
1/23/98 22.8750
1/26/98 23.0625
1/27/98 23.1875
1/28/98 23.3750
1/29/98 23.9375
1/30/98 24.0625
2/2/98 24.2500
2/3/98 24.1250
2/4/98 24.3125
2/5/98 24.5625
2/6/98 23.9375
2/9/98 24.2500
2/10/98 24.5000
2/11/98 24.5625
2/12/98 24.5000
2/13/98 24.4375
2/17/98 25.2500
2/18/98 24.6875
2/19/98 25.0000
2/20/98 24.5625
2/23/98 24.0625
2/24/98 24.5000
2/25/98 24.1875
2/26/98 24.1250
2/27/98 24.0625
3/2/98 24.1250
3/3/98 23.9375
3/4/98 23.8750
3/5/98 23.9375
3/6/98 23.6250
3/9/98 23.9375
3/10/98 24.0625
3/11/98 24.4375
3/12/98 24.4375
3/13/98 24.3125
3/16/98 24.3750
3/17/98 24.3125
3/18/98 24.3750
3/19/98 24.1875
3/20/98 24.3750
3/23/98 24.4375
3/24/98 24.6250
3/25/98 24.5625
3/26/98 24.3750
3/27/98 24.5000
3/30/98 24.6875
3/31/98 25.3125
4/1/98 25.8750
4/2/98 25.3125
4/3/98 25.2500
4/6/98 25.5625
4/7/98 25.3750
4/8/98 25.3125
4/9/98 26.1875
4/13/98 26.6250
4/14/98 27.2500
4/15/98 27.2500
4/16/98 26.5000
4/17/98 26.3750
4/20/98 26.0625
4/21/98 26.6250
4/22/98 26.3750
4/23/98 26.5625
4/24/98 26.5625
4/27/98 26.3125
4/28/98 26.1250
4/29/98 26.0000
4/30/98 25.9375
5/1/98 24.0000
5/4/98 25.7500
5/5/98 25.8125
5/6/98 25.9375
5/7/98 26.0625
5/8/98 26.2500
5/11/98 26.2500
5/12/98 25.9375
5/13/98 25.8125
5/14/98 25.5000
5/15/98 25.4375
5/18/98 25.0625
5/19/98 24.6875
5/20/98 24.5625
5/21/98 24.9375
5/22/98 25.1250
5/26/98 25.0000
5/27/98 25.5000
5/28/98 25.6250
5/29/98 25.6250
6/1/98 26.3750
6/2/98 27.0000
6/3/98 27.0000
6/4/98 26.5000
6/5/98 26.3125
6/8/98 26.0000
6/9/98 26.0000
6/10/98 25.9375
6/11/98 26.0625
6/12/98 25.8750
6/15/98 25.5000
6/16/98 25.7500
6/17/98 25.4375
6/18/98 25.3750
6/19/98 25.2500
6/22/98 25.1250
6/23/98 25.3750
6/24/98 24.5625
6/25/98 24.3750
6/26/98 24.2500
6/29/98 23.5000
6/30/98 23.8125
7/1/98 24.6250
7/2/98 25.7500
7/6/98 26.0000
7/7/98 26.3125
7/8/98 26.7500
7/9/98 26.6875
7/10/98 26.2500
7/13/98 26.6250
7/14/98 26.6875
7/15/98 26.6250
7/16/98 26.5625
7/17/98 26.6250
7/20/98 26.7500
7/21/98 26.6875
7/22/98 27.0625
7/23/98 27.0625
7/24/98 26.4375
7/27/98 26.3750
7/28/98 26.1875
7/29/98 25.6250
7/30/98 25.6875
7/31/98 25.0000
8/3/98 24.5000
8/4/98 24.7500
8/5/98 25.3750
8/6/98 25.3125
8/7/98 25.3750
8/10/98 25.0000
8/11/98 24.5625
8/12/98 24.7500
8/13/98 24.6250
8/14/98 24.6250
8/17/98 24.6875
8/18/98 25.1875
8/19/98 24.6250
8/20/98 24.7500
8/21/98 24.0000
8/24/98 23.8750
8/25/98 21.4375
8/26/98 20.8125
8/27/98 20.5625
8/28/98 20.7500
8/31/98 20.1250
9/1/98 20.1250
9/2/98 19.3750
9/3/98 18.1250
9/4/98 19.0625
9/8/98 18.8125
9/9/98 18.6250
9/10/98 18.3750
9/11/98 19.0000
9/14/98 19.5625
9/15/98 19.6875
9/16/98 20.4375
9/17/98 21.0000
9/18/98 22.8125
9/21/98 23.0625
9/22/98 23.6250
9/23/98 24.1875
9/24/98 24.0000
9/25/98 23.1250
9/28/98 23.4375
9/29/98 23.7500
9/30/98 23.6875
10/1/98 23.1250
10/2/98 22.7500
10/5/98 21.6875
10/6/98 21.5000
10/7/98 21.1875
10/8/98 20.6250
10/9/98 20.5000
10/12/98 21.1875
10/13/98 21.0625
10/14/98 22.1250
10/15/98 23.1250
10/16/98 23.0625
10/19/98 23.7500
10/20/98 23.3125
10/21/98 23.8750
10/22/98 23.9375
10/23/98 23.6250
10/26/98 23.8750
10/27/98 23.6250
10/28/98 23.7500
10/29/98 23.1250
10/30/98 22.9375
11/2/98 22.6250
11/3/98 22.5625
11/4/98 22.3125
11/5/98 21.9375
11/6/98 21.9375
11/9/98 21.8750
11/10/98 21.8125
11/11/98 21.5000
11/12/98 21.5000
11/13/98 21.4375
11/16/98 21.2500
11/17/98 21.3750
11/18/98 21.1875
11/19/98 21.3125
11/20/98 21.2500
11/23/98 21.2500
11/24/98 21.1250
11/25/98 21.5625
11/27/98 21.6250
11/30/98 21.3750
12/1/98 21.1250
12/2/98 21.0625
12/3/98 21.0625
12/4/98 21.6250
12/7/98 21.6875
12/8/98 21.6250
12/9/98 21.6250
12/10/98 21.5000
12/11/98 22.0000
12/14/98 21.6250
12/15/98 21.5000
12/16/98 21.2500
12/17/98 21.3125
12/18/98 21.9375
12/21/98 23.4375
12/22/98 23.8125
12/23/98 26.0000
12/24/98 26.0625
12/28/98 26.0625
12/29/98 26.4375
12/30/98 26.4375
12/31/98 26.5000
1/4/99 26.8750
1/5/99 26.9375
1/6/99 27.0000
1/7/99 26.9375
1/8/99 26.8750
1/11/99 27.0000
1/12/99 26.8750
1/13/99 27.0000
1/14/99 26.7500
1/15/99 26.9375
1/19/99 27.0000
1/20/99 26.9375
1/21/99 27.0000
1/22/99 26.8750
1/25/99 27.1250
1/26/99 27.1250
1/27/99 26.6250
1/28/99 26.5625
1/29/99 26.4375
2/1/99 26.3125
2/2/99 26.4375
2/3/99 27.0625
2/4/99 27.1250
2/5/99 27.1250
2/8/99 27.0625
2/9/99 26.6250
2/10/99 26.4375
2/11/99 26.2500
2/12/99 24.6250
2/16/99 25.1250
2/17/99 24.3125
2/18/99 23.9375
2/19/99 23.2500
2/22/99 22.8125
2/23/99 23.0000
2/24/99 22.8125
2/25/99 22.3750
2/26/99 21.8750
3/1/99 22.0000
3/2/99 21.5000
3/3/99 21.6875
3/4/99 21.7500
3/5/99 22.1875
3/8/99 23.0625
3/9/99 23.7500
3/10/99 23.6250
3/11/99 23.6250
3/12/99 23.8750
3/15/99 23.8125
3/16/99 23.7500
3/17/99 23.0000
3/18/99 23.0000
3/19/99 22.3750
3/22/99 22.3125
3/23/99 22.0000
3/24/99 21.8125
3/25/99 21.9375
3/26/99 23.6875
3/29/99 23.6250
3/30/99 23.6875
3/31/99 22.3750
4/1/99 22.8750
4/5/99 23.6250
4/6/99 23.8750
4/7/99 23.6875
4/8/99 23.6875
4/9/99 23.8125
4/12/99 24.3750
4/13/99 25.0625
4/14/99 25.6250
4/15/99 27.0625
4/16/99 28.8125
4/19/99 28.1250
4/20/99 27.5000
4/21/99 27.9375
4/22/99 28.2500
4/23/99 28.6875
4/26/99 28.7500
4/27/99 28.3750
4/28/99 28.1250
4/29/99 27.5625
4/30/99 26.5625
5/3/99 27.0000
5/4/99 27.0000
5/5/99 27.9375
5/6/99 28.8125
5/7/99 28.6875
5/10/99 28.9375
5/11/99 28.8125
5/12/99 28.5625
5/13/99 29.6250
5/14/99 29.5625
5/17/99 30.0000
5/18/99 31.0000
5/19/99 30.5625
5/20/99 30.3750
5/21/99 30.6875
5/24/99 30.5
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 5
- --------------------------------------------------------------------------------
CPI CORPORATION
OVERVIEW OF PROPOSED TRANSACTION
- --------------------------------------------------------------------------------
Transaction Multiples versus Recent Trading Multiples
(Dollars in Millions, except per share amounts)
- --------------------------------------------------------------------------------
Trading Levels as of:
---------------------
Proposed May 24 April 30
Transaction 1999 1999
- --------------------------------------------------------------------------------
Share Price $37.00 $30.50 $26.56
Equity Market Value $387 $309 $270
Adjusted Market Value $386 $293 $253
LTM Multiples of:
Sales 1.0x 0.8x 0.6x
EBITDA 6.5x 5.0x 4.3x
EBIT 12.8x 10.0x 8.6x
Net Income 20.6x 18.7x 16.3x
1999E Multiples of:
Sales 0.9x 0.7x 0.6x
EBITDA 6.1x 4.6x 4.0x
EBIT 12.7x 9.7x 8.4x
Net Income 20.9x 16.7x 14.5x
2000E Multiples of:
Sales 0.9x 0.7x 0.6x
EBITDA 5.3x 4.0x 3.5x
EBIT 10.0x 7.6x 6.6x
Net Income 15.2x 12.2x 10.6x
- --------------------------------------------------------------------------------
Note: Transaction multiples are based on LTM results and Management Projections
which exclude non-recurring income related to the amortization of the Kodak
non-compete agreement.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 6
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. - Historical Financial Performance
- --------------------------------------------------------------------------------
Historical Financial Summary - CPI Consolidated
(Dollars in Millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
'94 - '98 LTM as of
1994 1995 1996 1997 1998 CAGR 5/1/99
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $326.3 $338.2 $352.5 $366.7 $389.5 4.5% $393.6
% Growth 16.0% 3.6% 4.2% 4.0% 6.2% NMF
EBITDA $43.9 $53.1 $48.7 $58.1 $59.1 7.7% $59.6
% Margin 13.5% 15.7% 13.8% 15.8% 15.2% 15.1%
EBIT $25.8 $28.4 $20.3 $28.1 $29.4 3.3% $30.0
% Margin 7.9% 8.4% 5.8% 7.7% 7.5% 7.6%
Depreciation & Amortization 13.4 19.0 22.6 23.8 24.1
% of Sales 4.8% 6.8% 7.8% 7.8% 7.4%
Capital Expenditures $66.6 $35.4 $28.0 $22.3 $15.5 N/A
% of Sales 24.1% 12.7% 9.7% 7.3% 4.8% --
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Historical financial results include only continuing operations (i.e.
exclude results of Photofinishing and CopyMat/CopyUSA) and exclude amortization
of non-compete agreement.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 7
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp -- Management Projections
- --------------------------------------------------------------------------------
Management Projections - CPI Consolidated
(Dollars in Millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
'99 - '05
1998A 1999P 2000P 2001P 2002P 2003P 2004P 2005P CAGR
------- ------- ------ ------ ------- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $389.5 $413.0 $436.4 $463.1 $477.3 $491.5 $505.8 $520.2 3.9%
% Growth 6.2% 6.0% 5.7% 6.1% 3.1% 3.0% 2.9% 2.8%
EBITDA 59.1 63.7 73.1 85.6 88.3 90.9 93.5 96.2 7.1%
% Margin 15.2% 15.4% 16.7% 18.5% 18.5% 18.5% 18.5% 18.5%
EBIT 29.4 30.3 38.5 50.3 53.1 58.8 65.6 75.3 16.4%
% Margin 7.5% 7.3% 8.8% 10.9% 11.1% 12.0% 13.0% 14.5%
Depreciation & Amortization 29.8 33.4 34.6 35.4 35.2 32.2 28.0 20.9
% of Sales 7.6% 8.1% 7.9% 7.6% 7.4% 6.5% 5.5% 4.0%
Capital Expenditures 15.5 28.2 38.2 20.5 17.7 18.3 18.8 19.3
% of Sales 4.0% 6.8% 8.8% 4.4% 3.7% 3.7% 3.7% 3.7%
Working Capital 1.9 (3.4) (4.6) (4.4) (4.5) (4.7) (4.8) (4.9)
% of Sales 0.5% -0.8% -1.0% -0.9% -0.9% -0.9% -0.9% -0.9%
Unlevered Free Cash Flow $19.7 $29.6 $21.8 $46.4 $51.0 $51.0 $50.6 $49.1
</TABLE>
Note: 1998 results and financial projections include only continuing operations
(i.e. exclude results of Photofinishing and CopyMat/CopyUSA) and exclude
amortization of non-compete agreement.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 8
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. - Discounted Cash Flow Analysis of Management Projections
- --------------------------------------------------------------------------------
Implied Enterprise Values and Per Share Equity Values
(Dollars in Millions, except per share values)
TERMINAL LTM EBITDA MULTIPLE
DISCOUNT ------------------------------------------
RATE 4.5X 5.0X 5.5X 6.0X 6.5X
- --------------------------------------------------------------------------------
10.0% $446 $466 $486 $506 $526 ENTERPRISE VALUE
$42.17 $43.94 $45.72 $47.49 $49.26 EQUITY VALUE PER SHARE
11.0% $418 $437 $455 $473 $492 ENTERPRISE VALUE
$39.71 $41.33 $42.95 $44.56 $46.18 EQUITY VALUE PER SHARE
12.0% $393 $409 $426 $443 $460 ENTERPRISE VALUE
$37.45 $38.93 $40.41 $41.89 $43.37 EQUITY VALUE PER SHARE
- --------------------------------------------------------------------------------
NOTE: Implied discounted cash flow values are based on Management Projections
provided to buyers and the indicated discount rates and terminal EBITDA
multiples. Per share equity values are based on fully-diluted shares outstanding
reflecting both vested and unvested options, and net adjustments totaling $32
million including existing debt, deferred compensation liability, option
proceeds and cash & marketable securities.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 9
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. -- Discounted Cas Flow Sensitivity Analysis
- --------------------------------------------------------------------------------
Implied Enterprise Values and Per Share Equity Values
(Dollars in Millions, except per share values)
EBITDA SECULAR SALES GROWTH RATE
----------------------------------------------
MARGIN 1.0% 2.0% 3.0% 4.0% 5.0%
17% $341 $345 $390 $416 $445 ENTERPRISE VALUE
$32.94 $34.98 $37.19 $39.56 $42.12 EQUITY VALUE PER SHARE
16% $318 $340 $363 $388 $415 ENTERPRISE VALUE
$30.87 $32.77 $34.83 $37.04 $39.42 EQUITY VALUE PER SHARE
15% $294 $314 $336 $359 $384 ENTERPRISE VALUE
$28.80 $30.56 $32.46 $34.51 $36.72 EQUITY VALUE PER SHARE
14% $271 $289 $309 $331 $354 ENTERPRISE VALUE
$26.73 $28.35 $30.10 $31.99 $34.02 EQUITY VALUE PER SHARE
13% $247 $264 $282 $302 $323 ENTERPRISE VALUE
$24.65 $26.14 $27.74 $29.46 $31.31 EQUITY VALUE PER SHARE
- --------------------------------------------------------------------------------
Note: Analysis based on an extrapolation of LTM results in accordance with the
indicated sales growth and EBITDA margin sensitivities. Implied discounted cash
flow values are based on an 11% discount rate and a terminal EBITDA multiple of
5.5x. Capital expenditures beyond 2001 are assumed to decline to 4% of sales
(in terminal year, depreciation and capital expenditures are roughly
equivalent). Per share equity values are based on fully-diluted shares
outstanding reflecting both vested and unvested options, and net adjustments
totaling $32 million including existing debt, deferred compensation liability,
option proceeds and cash marketable securities.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 10
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. -- Historical and Projected Operating Results
- --------------------------------------------------------------------------------
Historical and Projected Sales
[LINE GRAPH]
Year Management Projections 1% Growth 5% Growth
1994 326.3 326.3 326.3
1995 338.2 338.2 338.2
1996 352.54 352.54 352.54
1997 366.666 366.666 366.666
1998 389.547 389.547 389.547
1999 413 393.4425 409.0244
2000 436.3679 397.3769 429.4755675
2001 463.1115 401.3507 50.9493
2002 477.2845 405.3642 473.4968
2003 491.528 409.4178 497.171
2004 505.844 413.512 522.0302
2005 520.2346 417.6471 548.1317
Note: Shaded area represents a range of projected sales based on an assumed
compound annual growth rate in sales between 2% and 4%. This forms the
basis of the discounted cash flow sensitivity analysis.
Historical and Projected EBITDA Margins
[BAR GRAPH]
Year EBITDA Margin
1994 13.5%
1995 15.7%
1996 13.8%
1997 15.8%
1998 15.2%
1999 15.4%
2000 16.7%
2001 18.5%
2002 18.5%
2003 18.5%
2004 18.5%
2005 18.5%
Dotted Boxes:
15% - 17%
Note: Box outline areas represent projected EBITDA margins between 15% and 17%,
which form the basis of the discounted cash flow sensitivity analysis.
<PAGE>
CONFIDENTIAL 11
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. -- Comparable Company Trading Analysis
- --------------------------------------------------------------------------------
Comparable Company Trading Multiples
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADJUSTED MARKET
EQUITY ADJUSTED VALUE/EBITDA PRICE/EARNINGS(1)
MARKET MARKET ----------------- -------------------- LONG-TERM DEBT/
COMPANY VALUE VALUE LTM 1999E 1999E 2000E GROWTH RATE CAPITAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CPI Corp. $309 $293 5.0x 4.6x 14.0x 13.6x 10% 33.8%
Licensed Businesses
Cole National $182 $408 4.3x 4.1x 7.4x 7.4x 18% 65.6%
Finlay Fine Jewelry $136 $344 4.4x NA 6.7x 6.1x 17% 69.3%
Commemorative Products
Companies
Jostens, Inc $730 $822 6.8x 6.1x 12.5x 11.0x 10% 68.0%
American Greetings $1,974 $2,486 6.4x 7.9x 13.1x 10.9x 10% 28.9%
Photofinishing
Businesses
Moto Photo $8 $17 6.5x NA 12.9x 10.3x N/A 69.4%
Seattle Filmworks $52 $37 7.6x NA NMF 7.8x 18% 2.0%
</TABLE>
- --------------------------------------------------------------------------------
Source: Investext Equity Research and Management Projections.
Note: Valuation based on recent share prices as of 05/24/99.
(1) CPI's earnings multiples based on forecasted earnings that exclude
non-compete amortization and assume cash on the balance sheet earns 5%
interest pretax.
CPI's Recent LTM Enterprise Value/EBITDA Trading Multiples
[BAR GRAPH]
Date
2/7/98 4.013609
5/2/98 4.091328
7/25/98 4.44324
11/14/98 3.319324
2/6/99 3.971935
4/30/99 4.279169
5/24/99 4.953528
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 12
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. - Comparable Acquisitions Analysis
- --------------------------------------------------------------------------------
Acquisition Precedents In the Portrait Photography and Related Industries
(Dollars in Millions)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Adjusted Purchases
Price as a Multiple of LTM:
Announce- Equity Adjusted ---------------------------- Purchase Price
ment Acquiror/ Description Purchase Purchase Operating Operating as a Multiple of
Date Target of Target Price Price Sales Cash Flow Income LTM Net Income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TBD ASCP/ Operates portrait studios $387.2 $385.5 1.0x 6.5x 12.8x 20.6x
CPI Corp. in Sears stores nationwide.
- ------------------------------------------------------------------------------------------------------------------------------------
May-99 Hallmark/ Operates stand-alone one-hour N/A N/A N/A N/A N/A N/A
Picture People portrait studios.
Apr-98 Jupiter Partners/ Operates portrait studios $231.8 $277.6 1.2x 7.0x 12.4x 26.1x
PCA Internatioinal within Kmart and Wal-mart
stores.
Sep-97 PCA International/ Operates portrait studios $53.6 $66.0 0.6x 16.8x NMF NMF
American Studios locations.
Aug-96 Eastman Kodak/ Provides photofinishing $110.0(2) $110.0(2) 0.6x 9.6x NMF NA
Fox Photo services, wholesale and
retail photo supplies.
Aug-94 Eastman Kodak/ Provides photo processing $300.0 $568.0 0.7x NA NA NA
Qualex and finishing services.
May-93 CPI Corp./ Operates mall-based stores $14.8 $14.8 0.3x 2.7x 4.5x 6.9x
Prints Plus selling prints and custom
framing services.
Aug-91 CPI Corp./ Provides photofinishing $27.6 $62.9 0.9x 5.1x 9.0x 10.2x
Fox Photo services, wholesale and
retail photo supplies.
Jul-91 Qualex/ Provides photo processing $75.0 $75.0 0.8x NA NA NA
Guardian Photo services.
Apr-88 Jostens/ Provides portrait photography $24.7 $23.9 1.3x 5.3x 6.1x 10.1x
School Pictures services.
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MEDIAN 0.8x 6.1x 7.5x 10.1x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The cash flow multiples for the PGA/American Studios and Eastman Kodak/
Fox Photo transactions relevant as the targets were unprofitable in their LTM
periods.
(1) Multiple based on net income which excludes non0-compete amortization
(2) Nominal Implied consideration for a 100% stake based on a $56.1 million
purchase price for a 51% stake. the present value purchase price for all of
Fox Photo based o the amount and timing of the consideration ultimately
paid by Kodak for the remaining 49% was approximately $103 million.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 13
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. -- Leveraged Buyout Analysis
- --------------------------------------------------------------------------------
Leveraged Buyout Analysis - Analysis of ASCP Financing Structure
(Dollars in Millions)
- --------------------------------------------------------------------------------
USES OF FUNDS SOURCES OF FUNDS
- --------------------------------------------------------------------------------
Purchase of Equity$387.2 Revolving Credit
Redemption of Senior Note(1) 62.2 Facility (8.00%) $5.7
Debt Repurchase Premium 4.1 Term Loan A (8.00%) 40.0
Transactions Costs & Fees 26.7 Term Loan B (8.25%) 105.0
Subordinated Debt
Securities (12.00%) 150.0
Equity Contribution 115.6
Excess Cash 64.0
------ ------
TOTAL USES $480.3 TOTAL SOURCES $480.3
- --------------------------------------------------------------------------------
(1) Includes accrued interest payment due June 15, 1999 of $2.2 million.
Note: Based on proposed capital structure and estimated market interest rates.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 14
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. -- Leveraged Buyout Analysis (continued)
- --------------------------------------------------------------------------------
LTM Pro Forma Interest Coverage and Capitalization
--------------------------------------------------
EBIT/Total Interest 0.7x
EBITDA/Total Interest 2.0x
(EBITDA - Capex)/Total Interest 1.5x
Net Debt/EDITDA 5.0x
Net Debt/Total Capitalization 71.7%
--------------------------------------------------
Pre-Tax IRR to Equity Investors
-------------------------------
EXIT YEAR
TERMINAL EBITDA ------------------------------
MULTIPLE 2001 2003 2005
--------------------------------------------------
4.5x 3.9% 14.1% 15.7%
5.4x 23.0% 22.1% 20.1%
6.5x 37.6% 28.5% 23.7%
--------------------------------------------------
Note: Returns based on Management's Projections,
ASCP's proposed capital structure, estimated
interest rates, and illustrative exit multiples.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
CONFIDENTIAL 15
- --------------------------------------------------------------------------------
CPI Corporation
CPI Corp. - Valuation Summary
- --------------------------------------------------------------------------------
(Dollars in Millions, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ENTERPRISE PER SHARE IMPLIED VALUATION MULTIPIES
VALUATION EQUITY VALUATION
VALUATION METHODOLOGIES RANGE RANGE YEAR REVENUES EBITDA EBIT NET INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DISCOUNTED CASH FLOW ANALYSIS $315 - $490 $30.61 - $46.05 1999P 0.8x - 1.2x 4.9x - 7.7x 10.4x - 16.2x 16.5x - 25.7x
LTM 0.8x - 1.2x 5.3x - 8.2x 10.5x - 16.3x 16.7x - 25.9x
COMPARABLE COMPANY ANALYSIS $240 - $300 $23.99 - 29.29 1999P 0.6x - 0.7x 3.8x - 4.7x 7.9x - 9.9x 19.9x - 15.7x
LTM 0.6x - 0.8x 4.0x - 5.0x 8.5x - 10.0x 12.7x - 15.9x
COMPARABLE ACQUISTION
ANALYSIS $300 - $425 $29.29 - 40.31 1999P 0.7x - 1.0x 4.7x - 6.7x 9.9x - 14.0x 15.7x - 22.3x
LTM 0.8x - 1.1x 5.0x - 7.1x 10.0x - 14.2x 15.9x - 22.5x
LEVERAGED BUYOUT ANALYSIS
$325 - $400 $31.49 - 38.11 1999P 0.8x - 1.0x 5.1x - 6.3x 10.7x - 13.2x 17.0x - 21.0x
LTM 0.8x - 1.0x 5.5x - 6.7x 10.8x - 13.3x 17.2x - 21.2x
- ------------------------------------------------------------------------------------------------------------------------------------
CSFB REFERENCE VALUATION
$325 - $425 $31.49 - 40.31 1999P 0.8x - 1.0x 5.1x - 6.7x 10.7x - 14.0x 17.0x - 22.3x
LTM 0.8x - 1.1x 5.5x - 7.1x 10.8x - 14.2x 17.2x - 22.5x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PROPOSED TRANSACTION VALUE $366 $37.00 1999P 0.9x 6.1x 12.7x 10.9x
LTM 1.0x 6.5x 12.8x 20.6x
</TABLE>
Note: Discounted cash flow analysis based on Management Projections and
sensitivities thereof. Per share value ranges based on fully-diluted shares
outstanding including vested and unvested options, and net adjustment
totaling $32 million including existing debt, deferred compensation liability,
option proceeds and cash & marketable securities.
CREDIT | FIRST
SUISSE | BOSTON
<PAGE>
SUBSCRIPTION AGREEMENT, dated as of June 15, 1999 (this
"Agreement"), between SPS International Holdings, Inc., a Delaware corporation
(the "Company"), and the individual named on the signature page hereto (the
"Stockholder").
WHEREAS, concurrently herewith, the Company, SPS Acquisition,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company
("Acquisition"), and CPI Corp., a Delaware corporation ("CPI"), are entering
into an Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement") pursuant to which, among other things, Acquisition agrees to merge
(the "Merger") into CPI;
WHEREAS, as a condition to their willingness to enter into
the Merger Agreement, the Company and Acquisition have required the Stockholder
and certain other Management Investors referred to below to enter into this
Agreement and the Stockholders Agreement dated as of the date hereof (the
"Stockholders Agreement");
WHEREAS, as of the date hereof, Stockholder beneficially owns
directly or indirectly shares of CPI common stock, par value $0.40 per share
(the "CPI Common Stock");
WHEREAS, pursuant to a plan and arrangement between American
Securities Partners II, L.P. and American Securities Partners II(B), L.P.
(collectively, "ASP") and the Management Investors referred to below the
Company is being formed with ASP contributing cash and each Management Investor
contributing shares of CPI Common Stock (the "Rollover Shares") having a value
equal to the Merger Consideration (as defined in the Merger Agreement)
multiplied by the number of Rollover Shares (the "Rollover Shares Value") and
cash (the "Cash Consideration") in exchange for shares of common stock of the
Company, par value $.01 per share (the "Common Stock") in a transaction
intended by the parties to be governed by Section 351 of the Internal Revenue
Code of 1986, as amended;
WHEREAS, the Stockholder also owns options to purchase CPI
Common Stock (the "Rollover Options") having an aggregate value equal to the
excess of the Merger Consideration over the exercise price of all such Rollover
Options multiplied by the number of Rollover Options having such exercise price
being converted into Company Options, as hereinafter defined, (the "Rollover
Options Value", and together with the Rollover Shares Value and the Cash
Consideration, the "Aggregate Consideration") which the Stockholder intends to
convert into options to purchase Common Stock (the "Company Options");
WHEREAS, the Stockholder has agreed that the Aggregate
Consideration to be contributed by him or her will be at least equal to the
value set forth on Schedule I attached hereto (the "Minimum Aggregate
Consideration");
WHEREAS, Stockholder has agreed, among other things, to vote
the number of shares of CPI Common Stock owned directly or indirectly by him or
her listed on Merger (collectively, the "Shares"); and
<PAGE>
WHEREAS, this Agreement is one of several agreements being
entered into by the Company on or after the date hereof with certain persons
who are or will be key employees of the Company or one of its subsidiaries
(collectively with the Stockholder, the "Management Investors");
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
EXCHANGE AND PURCHASE
1.1 Delivery of Rollover Shares. On the terms and subject to
the conditions contained in this Agreement and the 351 transfer agreement in
substantially the form attached hereto as Exhibit A (the "Transfer Agreement"),
at the Closing (as defined in the Merger Agreement), the Stockholder shall
deliver stock certificates (duly endorsed to the Company) evidencing the
Rollover Shares to the Company.
1.2 Issuance and Delivery of Common Stock. On the terms and
subject to the conditions contained in this Agreement and the Transfer
Agreement, in consideration of the contribution and delivery of the Rollover
Shares referred to in Section 1.1, the Company shall, at the Closing, issue to
the Stockholder the number of shares of Common Stock (at a price per share
equal to the price per share paid by ASP and its affiliates for Common Stock)
equal in value to the Rollover Shares Value.
1.3 Conversion of Rollover Options. On the terms and subject
to the conditions contained in this Agreement, at the Closing, all of the
Rollover Options of the Stockholder shall automatically be converted into
Company Options equal in value to the Rollover Options Value and with an
exercise price per share of Common Stock determined by the Company and the
Stockholder in good faith which will (i) preserve the excess, if any, of the
Merger Consideration (as defined in the Merger Agreement) over the exercise
price of the Rollover Options and (ii) minimize the dilution to be suffered by
the non-management investors in the Company as of the Effective Time; provided,
however, that in no event shall the exercise price for a Company Option be less
per share than 30% of the price per share paid by ASP and its affiliates for
Common Stock pursuant to Section 1.4 hereof. The Company Options will be
subject to same terms and conditions as the Rollover Options except that the
Company Options will be fully vested and their duration will be ten (10) years
from the Effective Time.
1.4 Purchase of Common Stock. Pursuant to the terms and
subject to the conditions set forth in this Agreement, the Stockholder hereby
subscribes for and agrees to purchase, and the Company hereby agrees to issue
and sell to the Stockholder, the number of shares of Common Stock, at a price
per share equal to the price per share paid by ASP and its affiliates for
Common Stock, having a value equal to the Cash Consideration.
1.5 Minimum Aggregate Consideration. At the Closing, the
Aggregate Consideration contributed by Stockholder shall be at least equal to
the Minimum Aggregate
<PAGE>
Consideration. Stockholder shall provide written notice to the Company, no
more than thirty (30) days after the signing of this Agreement, indicating the
Rollover Shares Value, the Rollover Options Value and the amount of cash being
contributed by him or her.
ARTICLE II
CLOSING
2.1 Time and Place The closing hereunder shall take place
concurrently with the Closing of the Merger prior to the effective time of the
Merger (the "Closing Date") and at such time as the Company shall direct on at
least five business days' prior notice to the Stockholder and shall occur at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017, or at such other place as the parties may mutually agree.
2.2 Delivery At the Closing, the Stockholder (or the
Stockholder's representative) shall deliver to the Company (i) all stock
certificates evidencing the Rollover Shares, (ii) documents and/or instruments
representing the Rollover Options and (iii) the Cash Consideration by delivery
of a certified check or by wire transfer in immediately available funds (which
such Cash Consideration when added to the Rollover Shares Value and the
Rollover Options Value shall be at least equal to the Minimum Aggregate
Consideration).
ARTICLE III
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
3.1 Conditions to the Obligations of the Company. (a) The
obligations of the Company under this Agreement shall be subject to the
conditions that (i) the Stockholder shall have executed and delivered the
Stockholders Agreement in substantially the form attached hereto as Exhibit A,
(ii) the representations and warranties of the Stockholder in Sections 4.2 and
4.3 of this Agreement shall be true and correct as of the Closing Date in all
material respects, (iii) the Stockholder shall not have breached his
obligations under Section 5 of this Agreement and (iv) all conditions to the
obligation of the Company and Acquisition to consummate the Merger have been
satisfied or waived.
3.2 Conditions to the Obligations of the Stockholder The
obligations of the Stockholder under this Agreement shall be subject to the
conditions that (i) the Company shall have executed and delivered the
Stockholders Agreement and (ii) the representations and warranties of the
Company in Section 4.1 of this Agreement shall be true and correct as of the
Closing Date in all material respects.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
4.1 Representations and Warranties of the Company. The
Company represents and warrants to the Stockholder as follows:
(a) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute and deliver this Agreement and the
Stockholders Agreement and to perform its obligations hereunder and thereunder.
The execution, delivery and performance by the Company of this Agreement and the
Stockholders Agreement has been duly authorized by all necessary corporate and
legal action by the Company, and no other corporate proceeding by the Company is
necessary for the execution, delivery and performance by the Company of this
Agreement or the Stockholders Agreement. This Agreement and the Stockholders
Agreement have been duly executed and delivered by the Company and, assuming
they are duly executed and delivered by the Stockholder, constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(b) the Common Stock to be issued to the Stockholder pursuant
to this Agreement, when issued and delivered in accordance with the terms
hereof, will be duly and validly issued and, upon receipt by the Company of the
Purchase Price therefor, will be fully paid and nonassessable with no personal
liability attached to the ownership thereof and will not be subject to any
preemptive rights under the Delaware General Corporation Law; and
(c) the execution, delivery and performance by the Company of
this Agreement and the Stockholders Agreement will not (i) conflict with the
certificate of incorporation or by-laws of the Company or any of its
subsidiaries or (ii) result in any breach of any terms or conditions of, or
constitute a default under, any contract, agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or (iii) conflict with or violate any law, rule,
regulation, ordinance, writ, injunction, judgment or decree applicable to the
Company or any of its subsidiaries or by which any of their assets may be bound
or affected.
4.2 Representations, Warranties and Covenants of the
Stockholder. The Stockholder represents and warrant to the Company as follows:
(a) Competency; Power; Enforceability; Noncontravention. The
Stockholder is competent to and has sufficient capacity to execute and deliver
this Agreement and the Stockholders Agreement and to perform his obligations
hereunder and thereunder. This Agreement and the Stockholders Agreement have
been duly executed and delivered by the Stockholder.
(b) Assuming the due execution and delivery of this Agreement
and the Stockholders Agreement by the Company, this Agreement and the
Stockholders Agreement
<PAGE>
constitute valid and binding obligations of the Stockholder, enforceable
against the Stockholder in accordance with their terms.
(c) The execution, delivery and performance of this Agreement
and the Stockholders Agreement by the Stockholder will not (i) conflict with or
violate any law, rule, regulation, ordinance, writ, injunction, judgment or
decree applicable to the Stockholder or by which any of his assets may be bound
or affected or (ii) result in any breach of any terms or conditions of, or
constitute a default under, any contract, agreement or instrument to which the
Stockholder is a party or by which the Stockholder is bound.
(d) Investment Intention; No Resales. The Stockholder hereby
represents and warrants that he is acquiring the Common Stock for investment
solely for his own account and not with a view to, or for resale in connection
with, the distribution or other disposition thereof. The Stockholder agrees and
acknowledges that he will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any shares of Common Stock,
or solicit any offers to purchase or otherwise acquire or pledge any shares of
Common Stock, unless such offer, transfer, sale, assignment, pledge,
hypothecation or other disposition complies with the provisions hereof and of
the Stockholders Agreement.
(e) Common Stock Unregistered. The Stockholder acknowledges
and represents that he has been advised by the Company that:
(1) the offer and sale of the Common Stock have not been and
will not be registered under the Securities Act;
(2) the Common Stock must be held indefinitely and the
Stockholder must continue to bear the economic risk of the investment in the
Common Stock unless the offer and sale of such Common Stock is subsequently
registered under the Securities Act and all applicable state securities laws or
an exemption from such registration is available;
(3) there is no established market for the Common Stock and
it is not anticipated that there will be any public market for the Common Stock
in the foreseeable future;
(4) Rule 144 promulgated under the Securities Act is not
presently available with respect to the sale of any securities of the Company,
and, except as set forth in the Stockholders Agreement, the Company has made no
covenant to make such Rule available;
(5) when and if shares of Common Stock may be disposed of
without registration under the Securities Act in reliance on Rule 144, such
disposition can be made only in limited amounts in accordance with the terms
and conditions of such Rule;
(6) if the Rule 144 exemption is not available, public offer
or sale of Common Stock without registration will require compliance with some
other exemption under the Securities Act;
(7) if any shares of Common Stock are at any time disposed of
in accordance with Rule 144, the Stockholder will deliver to the Company at or
prior to the time of such disposition
<PAGE>
an executed Form 144 (if required by Rule 144) and such other documentation as
the Company may reasonably require in connection with such sale;
(8) a restrictive legend in the form set forth in the
Stockholders Agreement shall be placed on the certificates representing Common
Stock; and
(9) a notation shall be made in the appropriate records of
the Company indicating that the Common Stock is subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to the Common Stock.
4.3 Additional Investment Representations. The Stockholder
represents and warrants that:
(a) Ownership of Rollover Shares and Rollover Options. The
Stockholder (or accounts or trusts controlled or beneficially owned by
Stockholder) is the owner of the Rollover Shares and the Rollover Options and
has the power to dispose of the Rollover Shares and Rollover Options. To
Stockholder's knowledge, the Rollover Shares are validly issued, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof.
On the date hereof, the Rollover Shares are owned of record and beneficially by
Stockholder. Stockholder has sole voting power and sole power of disposition
with respect to all of the Rollover Shares, with no restrictions, subject to
applicable federal securities laws, on Stockholder's rights of disposition
pertaining thereto. On the date hereof, Stockholder has, and on the date of any
Closing hereunder Stockholder will have, good, valid and marketable title to
the Rollover Shares and Rollover Options free and clear of all claims, liens,
encumbrances, security interests and charges of any nature whatsoever (other
than the encumbrance created by this Agreement), and shall not be subject to
any preemptive right of any stockholder of CPI. The contribution of the
Rollover Shares to Company hereunder will transfer to Company good, valid and
marketable title to the Rollover Shares, free and clear of all claims, liens,
encumbrances, security interests and charges of any nature whatsoever.
(b) the Stockholder's financial situation is such that he can
afford to bear the economic risk of holding the Common Stock for an indefinite
period of time, has adequate means for providing for his current needs and
personal contingencies, and can afford to suffer a complete loss of his
investment in the Common Stock;
(c) the Stockholder's knowledge and experience in financial
and business matters are such that he is capable of evaluating the merits and
risks of the investment in the Common Stock, as contemplated by this Agreement;
(d) the Stockholder understands that the Common Stock is a
speculative investment which involves a high degree of risk of loss of his
investment therein, there are substantial restrictions on the transferability
of the Common Stock and, on the Closing Date and for an indefinite period
following the Closing, there will be no public market for the Common Stock and,
accordingly, it may not be possible for the Stockholder to liquidate his
investment in case of emergency, if at all;
<PAGE>
(e) the terms of the Stockholders Agreement provide that in
the event that the Stockholder ceases to be an employee of CPI, the Company,
ASP (as defined in the Stockholders Agreement) and their designated affiliates
have the right to repurchase the Common Stock at a price which may, in certain
circumstances, be less than the fair market value of such stock;
(f) the Stockholder understands and has taken cognizance of
all the risk factors related to the purchase of Common Stock and, other than as
set forth in this Agreement, no representations or warranties have been made to
the Stockholder or his representatives concerning the Common Stock or the
Company, its subsidiaries or their prospects or other matters;
(g) in making his decision to purchase the Common Stock
hereby subscribed for, the Stockholder has relied upon independent
investigations made by him or her and, to the extent believed by the
Stockholder to be appropriate, his representatives, including his own
professional, financial, tax and other advisors;
(h) the Stockholder has been given the opportunity to examine
all documents and to ask questions of, and to receive answers from, the Company
and its representatives concerning the Company and its subsidiaries and the
terms and conditions of the purchase of the Common Stock and to obtain any
additional information, in each case as the Stockholder or his representatives
deems necessary;
(i) all information which the Stockholder has provided to the
Company and its representatives concerning the Stockholder and his financial
position is complete and correct as of the date of this Agreement; and
(j) the Stockholder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act.
ARTICLE V
AGREEMENTS RELATING TO CPI COMMON STOCK
5.1 Voting of Shares. The Stockholder hereby agrees, so long
as the Merger Agreement has not been terminated, to vote all Shares (a) in
favor of the adoption of the Merger Agreement and the approval of the
transactions contemplated thereby and (b) against any action or agreement that
would result in a breach of any representation, warranty, covenant or agreement
of the Company contained in the Merger Agreement or would impede, interfere
with, delay or prevent the consummation of the Merger or the purchase of shares
of CPI Common Stock by Acquisition. The Stockholder shall not, so long as the
Merger Agreement has not been terminated, purport to vote (or execute a written
consent with respect to) Shares other than in accordance with this Agreement or
grant any proxy or power of attorney with respect to Shares, deposit any Shares
into a voting trust, or enter into any agreement, arrangement or understanding
with any person (other than this Agreement), directly or indirectly, to vote,
grant any proxy or give instructions with respect to the voting of Shares, or
agree to do any of the foregoing.
<PAGE>
5.2 Disposition of Shares. The Stockholder shall not, so long
as the Merger Agreement has not been terminated, sell, transfer or otherwise
dispose of, pledge or otherwise encumber, any Shares after the date hereof
(except as provided for in this Agreement), or agree to do any of the
foregoing.
5.3 Stop Transfer Order. The Stockholder hereby agrees to
cause CPI's transfer agent to be notified that there is a stop transfer order
with respect to all Shares so long as the Merger Agreement has not been
terminated.
ARTICLE VI
MISCELLANEOUS
6.1 Recapitalizations, Exchanges, Etc., Affecting Common
Stock. The provisions of this Agreement shall apply, to the full extent set
forth herein with respect to Common Stock, to any and all shares of capital
stock of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution for Common Stock, by reason of
any stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any of such events, amounts hereunder shall
be appropriately adjusted, in good faith, by the Board of Directors of the
Company.
6.2 Stockholder's Employment by the Company. Nothing
contained in this Agreement shall be deemed to obligate the Company or any
subsidiary of the Company to employ the Stockholder in any capacity whatsoever
or to prohibit or restrict the Company (or any such subsidiary) from
terminating the employment, if any, of the Stockholder at any time or for any
reason whatsoever, with or without Cause (as defined in the Stockholders
Agreement), it being understood that this Section 6.2 shall have no effect on
any separate written employment agreement between Stockholder and CPI.
6.3 Binding Effect. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns. No assignment
of any of the rights or obligations of the Stockholder shall be permitted
except as expressly contemplated hereby; any purported assignment in violation
of this provision shall be null and void ab initio.
6.4 Amendment; Waiver. This Agreement may be amended only by
a written instrument signed by the parties hereto. No waiver by either party
hereto of any of the provisions hereof shall be effective unless set forth in a
writing executed by the party so waiving.
6.5 Governing Law. This Agreement shall be governed by and
construed in all respects under the laws of the State of New York. Any action
to enforce which arises out of or in any way relates to any of the provisions
of this Agreement may be brought and prosecuted in such court or courts located
within the State of New York as provided by law; and the parties consent to the
jurisdiction of such court or courts located within the State of New York and
to
<PAGE>
service of process by registered mail, return receipt requested, or by any
other manner provided by New York law.
6.6 Notices. Any notices or communications permitted or
required hereunder shall be deemed sufficiently given if hand-delivered, or
sent by (x) registered or certified mail return receipt requested, (y) telecopy
or other electronic transmission service (to the extent receipt is confirmed)
or (z) by overnight courier, in each case to the parties at their respective
addresses and telecopy numbers set forth below, or to such other address of
which any party may notify the other party in writing.
(a) If to the Company, to it at the following address:
SPS International Holdings, Inc.
c/o American Securities Capital Partners, L.P.
122 East 42nd Street
Suite 2400
New York, NY 10168
Attention: Mark Bandeen
Telecopy: (212) 697-5524
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto, Esq.
Telecopy: (212) 455-2502
(b) If to the Stockholder, to him or her at the address or
telecopy number as shown on the stock register of the Company.
6.7 Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
6.8 Counterparts. This Agreement may be executed in two or
more counterparts, and by different parties on separate counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument.
6.9 Injunctive Relief. The Stockholder, on behalf of
Stockholder and his permitted transferees, and the Company, on its own behalf
and on behalf of its successors and assigns, each acknowledges and agrees that
a violation of any of the terms of this Agreement will cause the other
irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that the Company or the Stockholder, as the case may
be, shall be
<PAGE>
entitled to an injunction, restraining order or other equitable relief to
prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any
other remedy to which it or he may be entitled at law or equity.
6.10 Rights to Negotiate. Nothing in this Agreement shall be
deemed to restrict or prohibit the Company from purchasing shares of Common
Stock from the Stockholder at any time upon such terms and conditions and at
such price as may be mutually agreed upon between the Company and the
Stockholder, whether or not at the time of such purchase circumstances exist
which specifically grant the Company the right to purchase, or the Stockholder
the right to sell, shares of Common Stock pursuant to the terms of this
Agreement or the Stockholders Agreement.
6.11 Rights Cumulative; Waiver. The rights and remedies of
the Stockholder and the Company under this Agreement shall be cumulative and
not exclusive of any rights or remedies which either would otherwise have
hereunder or at law or in equity or by statute, and no failure or delay by
either party in exercising any right or remedy shall impair any such right or
remedy or operate as a waiver of such right or remedy, nor shall any single or
partial exercise of any power or right preclude such party's other or further
exercise or the exercise of any other power or right. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure by
either party to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SPS International Holdings, Inc.
By:
--------------------------------
Name:
Title:
<PAGE>
American Securities Capital Partners, L.P.
12 East 42nd Street
Suite 2400
New York, NY 10168
June 15, 1999
CPI Corp.
1706 Washington Avenue
St. Louis, MO 63103
GUARANTEE
Concurrently herewith CPI Corp. ("CPI") is entering into an Agreement
and Plan of Merger dated the date hereof (the "Agreement") with SPS
International Holdings, Inc., a Delaware corporation ("Parent"), and SPS
Acquisition, Inc., a Delaware corporation. Capitalized terms in this letter
shall have the meaning ascribed thereto in the Agreement.
In the event that the Agreement is terminated by CPI pursuant to
Section 5.01(e) of the Agreement or by Parent or CPI pursuant to Section 5.01(b)
of the Agreement, American Securities Capital Partners, L.P. ("ASCP") hereby
irrevocable guarantees (the "Guarantee") the payment to CPI of any and all
amounts which are finally judicially determined to be due to CPI from Parent by
reason of the willful breach of the terms of the Agreement (any such amount
so due on "Obligation"), up to a maximum of $80,000,000.
If Parent shall default in payment of any Obligation when such amount
becomes due pursuant to a final judicial determination, then ASCP, promptly upon
CPI's written demand, shall pay to CPI an amount equal to the unpaid Obligation
then due and owing, up to a maximum of $80,000,000. Any Obligation paid by ASCP
shall be paid in lawful currency of the United States of America and in
immediately available funds.
This Guarantee shall terminate upon the earlier of (i) the Closing Date
or (ii) the termination of the Agreement pursuant to the provisions of Section
5.01 thereof under circumstances which can not give rise to any Obligation.
This Guarantee is unconditional. ASCP hereby waives all notices
(including notice of acceptance of the Guarantee, of default or nonperformance,
demands and protests in connection with the enforcement of the obligation of
hereunder).
NO REMEDIES OTHER THAN AS PROVIDED BY THIS GUARANTEE SHALL BE AVAILABLE
AGAINST ASCP, DIRECTLY OR INDIRECTLY (INCLUDING THROUGH A CLAIM AGAINST PARENT),
WITH RESPECT TO THE AGREEMENT OR WITH RESPECT
<PAGE>
CPI Corp.
June 15, 1999
Page 2
TO THE COMTEMPLATED TRANSACTONS, OTHER THAN FOR FRAUD. IT IS UNDERSTOOD AND
AGREED THAT CPI WILL RECOVER ANY RECOVERABLE AMOUNTS ARISING OUT OF THE
AGREEMENT SOLELY FROM PARENT UNDER THE AGREEMENT OR FROM ASCP HEREUNDER (AS
PROVIDED HEREIN). CPI COVENANTS NOT TO SUE ASCP FOR ANY MATTER ARISING OUT OF
THE AGREEMENT OR OUT OF THE CONTEMPLATED TRANSACTIONS, OTHER THAN FOR FRAUD OR
TO ENFORCE THIS GUARANTEE. THIS GUARANTEE CONSTITUTES THE SOLE REMEDY OF CPI
AGAINST ASCP WITH RESPECT TO THE AGREEMENT OR WITH RESPECT TO THE CONTEMPLATED
TRANSACTIONS, OTHER THAN FOR FRAUD. CPI ACKNOWLEDGES AND AGREES THAT THE LIMITED
AMOUNT SET FORTH IN THIS GUARANTEE AS CPI'S SOLE REMEDY AGAINST ASCP (AND NOT
THE PARENT) EXCEPT AS SET FORTH ABOVE IS A REASONABLE ESTIMATE, AS LIQUIDATED
DAMAGES AND NOT A PENALTY, OF ACTUAL DAMAGES TO CPI RESULTING FROM A BREACH BY
PARENT.
ASCP hereby represents and warrants to CPI that it has all requisite
legal capacity, power and authority to enter into this Guarantee and to perform
its obligations hereunder. This Guarantee has been duly authorized, executed and
delivered by ASCP and constitutes a valid and binding obligation of ASCP
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. The execution and delivery of
this Guarantee do not, and the compliance by ASCP with the terms hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under, permit the termination of any provision
of or result in the termination of or the acceleration of the maturity or
performance of, or result in the creation or imposition of any Lien upon any of
the assets or properties of ASCP under, (i) any provision of any agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, stature, law, ordinance, rule or regulation applicable to ASCP or its
property or assets, (ii) the organizational documents of ASCP or (iii) any
mortgage, lease, franchise, license, permit, agreement, instrument, law, order,
arbitration award, judgment or decree to which ASCP is a party or by which it is
bound, except to the extent that any such events would not reasonably be
expected to have a material adverse effect on ASCP's ability to perform under
this Guarantee.
Neither this Guarantee nor any of the rights or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties. Subject to the preceding sentence, this Guarantee will be
binding upon, inure to the benefit of and be enforceable only by the parties
hereto and their respective permitted assigns.
Any attempted assignment in violation of the terms of this paragraph
shall be null and void.
This Guarantee constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings amount the parties with respect thereto. The waiver by any party
of a breach of any provision hereunder shall not operate or be construed as
waiver of any prior or subsequent breach of the same or any other provision. Any
term
<PAGE>
CPI Corp.
June 15, 1999
Page 3
or provision of this Guarantee which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforecability without rendering invalid or unenforceable
the remaining terms and provisions of this Guarantee or affecting the validity
of enforceability of any of the terms or provisions of this Guarantee in any
other jurisdiction.
Any party who is required to utilize legal process to recover any
amount owed to such party pursuant to this Guarantee may recover, if successful,
in addition to other amounts expressly provided for herein, such party's
reasonable out-of-pocket attorneys' fees and costs.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts executed and to be
performed entirely within such State.
AMERICAN SECURITIES CAPITAL
PARTNERS, L.P.
By: American Securities Capital
Partners G.P. Corp., its
general partner
By: /s/ Michael G. Fisch
----------------------------
Name: Michael G. Fisch
Title: President
