SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 24, 2012
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry Into a Material Definitive Agreement.
On May 23, 2012, CPI Corp. (the “Company”) entered into a Forbearance Agreement (the “Forbearance Agreement”) dated as of May 18, 2012 and effective as of May 24, 2012 (the "Effective Date") with Bank of America, N.A., as Administrative Agent (the “Agent”) for the various financial institution parties identified as lenders (the “Lenders”) in the Credit Agreement dated as of August 30, 2010, as amended by that certain First Amendment to Credit Agreement dated December 16, 2011, by and among the Company, the Agent, the Lenders and certain subsidiaries of the Company (the “Loan Agreement”). Pursuant to the terms of the Loan Agreement, the Company has borrowed from the Lenders, as of May 10, 2012, a total of $90,075,681, including Letters of Credit totaling $13,811,758. As the Company has previously disclosed in its Annual Report on Form 10-K for fiscal 2011, the Company is in default of certain of its obligations under the Loan Agreement, which defaults include, among others, noncompliance with the interest coverage ratio covenant and the ratio of total funded debt to EBITDA covenant. As a result of the defaults, the Agent has the right to exercise its rights under the Loan Agreement and the Guaranty and Collateral Agreement dated August 30, 2010 by and among the Company, certain subsidiaries of the Company, the Agent and the Lenders (the “Guaranty/Collateral Agreement” and with the Loan Agreement and other documents and agreements executed in connection therewith, collectively, the “Loan Documents”), which rights include the right to enforce its security interest in the collateral under the Guaranty/Collateral Agreement and pursue collection from the Company for outstanding amounts owed under the Loan Documents.
Under the Forbearance Agreement, Agent, on behalf of itself and for the benefit of each Lender, agrees to forebear from exercising its rights and remedies under the Loan Documents through July 21, 2012 (unless terminated sooner under certain circumstances) subject to, among other things, reflect the following:
In addition, under the Forbearance Agreement, the Company agreed to use commercially reasonable efforts to deliver collateral assignments to the Lenders of its agreements with its host stores.
In connection with the Forbearance Agreement, a Joinder Agreement was executed by Bella Pictures Holdings, LLC and Sandy Realty Holdings, LLC, both subsidiaries of the Company, under which Bella Pictures Holdings, LLC and Sandy Realty Holdings, LLC each assumed the obligations of and became a grantor under the Guaranty/Collateral Agreement.
The foregoing summary of the Forbearance Agreement and Joinder Agreement is not complete and is qualified in its entirety by a copy of the Forbearance Agreement filed as Exhibit 10.1 and a copy of the Joinder Agreement filed as Exhibit 10.2 to this Form 8-K, which exhibits are incorporated herein by reference.
Item 2.04 Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The information included or incorporated by reference in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.04.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
May 30, 2012