<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CPI Corp.
---------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
CPI CORP.
PRODUCTS AND SERVICES FOR CONSUMERS
1706 WASHINGTON AVENUE
ST. LOUIS, MISSOURI 63103
TELEPHONE (314) 231-1575
May 3, 1996
DEAR CPI CORP. STOCKHOLDER:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders of CPI Corp.
The meeting will be held on Thursday, June 6, 1996, at 10:00 a.m.
(CDT) at CPI Corp., 1706 Washington Avenue, St. Louis, Missouri 63103.
I urge you to attend the meeting, if at all possible, since it
provides an opportunity for you to discuss CPI Corp. with its
management, in person. If you cannot personally attend, please vote
your preference on the enclosed proxy card and return it promptly.
It is important that your shares be voted, whether in person or by
proxy. Your participation in CPI Corp.'s business through its annual
meetings is an essential part of the Corporation's governance.
I look forward to seeing you.
Sincerely,
/S/ ALYN V. ESSMAN
---------------------------------
ALYN V. ESSMAN
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
CPI CORP.
NOTICE OF ANNUAL STOCKHOLDERS MEETING
TO OUR STOCKHOLDERS:
The annual meeting of the stockholders of CPI Corp. (the
``Corporation'') will be held on June 6, 1996, at 10:00 a.m., central
daylight savings time, at CPI Corp., 1706 Washington Avenue, St. Louis,
Missouri 63103. The items of business to be transacted at this meeting
are as follows:
1. To elect a Board of Directors for the ensuing year;
2. To act upon a proposal to ratify the appointment of KPMG Peat
Marwick LLP as the Corporation's independent certified public
accountants for the fiscal year ending February 1, 1997; and
3. To act upon such other and further business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has specified April 25, 1996, at the close
of business, as the record date for the purpose of determining the
stockholders who are entitled to receive notice of and to vote at the
annual meeting. A list of the stockholders entitled to vote at the
annual meeting will be available for examination by any stockholder at
the meeting. For ten days prior to the annual meeting, this stockholder
list will also be available for inspection by stockholders at the
Corporation's offices at 1706 Washington Avenue, St. Louis, Missouri
63103, during ordinary business hours.
The Proxy Statement for the annual meeting is set forth on the
following pages.
SO THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THIS
MEETING, WE URGE YOU TO PROMPTLY SIGN, DATE, AND RETURN YOUR PROXY
EVEN IF YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING,
YOU MAY VOTE YOUR SHARES IN PERSON, THEREBY CANCELING THE PROXY. THE
PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A
RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES, IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
/S/ JANE E. NELSON
JANE E. NELSON
Secretary and General Counsel
Dated and mailed: May 3, 1996
<PAGE> 4
CPI CORP.
1706 WASHINGTON AVENUE
ST. LOUIS, MISSOURI 63103
PROXY STATEMENT OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS OF CPI CORP.
TO BE HELD ON JUNE 6, 1996
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being mailed beginning
May 3, 1996, to holders of common stock of CPI Corp., a Delaware corporation
(referred to herein collectively with its predecessor corporations as the
``Corporation''), in connection with the solicitation of Proxies by the Board
of Directors for the Annual Meeting of Stockholders to be held on June 6, 1996,
at 10:00 a.m., central daylight savings time, at CPI Corp., 1706 Washington
Avenue, St. Louis, Missouri 63103, or at any adjournment thereof (the
``Meeting''). Proxies are solicited to provide all stockholders of the
Corporation with the opportunity to vote. Shares may only be voted at the
Meeting if the stockholder is present in person or represented by a Proxy.
The cost of preparing, mailing, and soliciting Proxies will be borne by the
Corporation. In addition to solicitations by the Corporation by mail,
directors, officers, and regular employees of the Corporation may solicit
Proxies personally and by telephone, facsimile, telegraph, or other means, for
which they will receive no compensation in addition to their normal
compensation. The Corporation has also retained Boatmen's Trust Company, 510
Locust, P.O. Box 14737, St. Louis, Missouri 63178-4737, to assist in the
solicitation of Proxies from stockholders, including brokerage houses and other
custodians, nominees, and fiduciaries and will pay that firm no more than
$3,000 in fees. Arrangements will also be made with brokerage houses and other
custodians, nominees, and fiduciaries for the forwarding of solicitation
material to the beneficial owners of common stock held of record by such
persons, and the Corporation may reimburse them for their reasonable
out-of-pocket and clerical expenses.
The stockholder giving the Proxy may revoke it by (i) delivering a written
notice of revocation to the Secretary of the Corporation at the principal
office of the Corporation at the address set forth above at any time before the
commencement of the Meeting or any adjournment thereof; (ii) attending the
Meeting in person and voting thereat; or (iii) executing and delivering to the
Secretary of the Corporation a Proxy bearing a date and time later than that of
the Proxy to be revoked. Revocation of the Proxy will not affect any vote
previously taken.
The Meeting has been called for the purposes set forth in the Notice of
Annual Meeting (the ``Notice'') to which this Proxy Statement is appended. The
Board of Directors does not anticipate that matters other than those described
in the Notice will be brought before the Meeting for stockholder action, but if
any other matters properly come before the Meeting, votes thereon will be cast
by the Proxy holders in accordance with their best judgment. Any proposals of
stockholders intended to be presented at the 1997 Annual Meeting must be
received by the Company no later than January 3, 1997 for inclusion in the
Company's Proxy Statement and form of proxy.
If a stockholder wishes to give a Proxy to someone other than the persons
indicated on the accompanying Proxy, the stockholder must cross out both names
appearing on the Proxy and insert the name or names of another person or
persons to act as Proxies. The signed Proxy must be presented at the Meeting by
the person or persons representing the stockholder.
2
<PAGE> 5
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of common stock of the Corporation of record at the close of
business on April 25, 1996, are entitled to notice of, and to vote at, the
Meeting. Each share of common stock outstanding on the record date is entitled
to one vote on all matters properly coming before the Meeting. As of the close
of business on April 25, 1996, 13,914,244 shares of common stock were issued
and outstanding, and 50% of these shares constitutes a quorum, which must be
present in person or by Proxy at the Meeting to conduct business. At the
Corporation's 1993, 1994 and 1995 annual meetings 93.7%, 84.3% and 90.88%
respectively, of the issued and outstanding shares of common stock were present
and voting. The Corporation has no issued and outstanding shares of any other
class of stock.
Unless you indicate to the contrary, the persons named in the accompanying
Proxy will vote for:
(1) THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED HEREIN; AND
(2) THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS FOR THE CORPORATION'S FISCAL YEAR 1996.
When a Proxy is returned to the Corporation properly signed and dated, the
persons designated as Proxies shall vote the shares represented by the Proxy in
accordance with the stockholder's directions. If a Proxy is signed, dated, and
returned without specifying choices on one or more matters presented to the
stockholders, the shares will be voted on such matter or matters as recommended
by the Corporation's Board of Directors.
Directors of the Company shall be elected by a plurality vote. All other
questions shall be determined by a majority of the votes cast thereon. Proxies
for shares marked ``abstain'' on a matter will be considered to be represented
at the meeting, but not voted, for these purposes. Shares registered in the
names of brokers or other ``street name'' nominees for which Proxies are voted
on some but not all matters will be considered to be represented at the
meeting, but will be considered to be voted only as to those matters actually
voted.
ELECTION OF DIRECTORS (PROXY ITEM NO. 1)
Eight directors are to be elected at the Meeting, each to serve for a term
of one year and thereafter until their successors are duly elected and
qualified. All of the nominees are presently directors of the Corporation.
Unless authority to vote is withheld, the enclosed Proxy will be voted for
the election of the nominees as directors of the Corporation. If any one or
more of the nominees becomes unavailable for election, which is not
anticipated, the holders of the Proxies, acting pursuant to the authority
granted by the Proxy, will vote for such person or persons as may be designated
by the Board of Directors.
3
<PAGE> 6
The name of each nominee, the year each present director first joined the
Board, and the nominees' principal occupations and ages are:
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE PRINCIPAL OCCUPATION AGE
---- -------- -------------------- ---
<S> <C> <C> <C>
Milford Bohm 1942 Managing Partner of Milford Bohm and Associates, personal 74
investments
Alyn V. Essman 1968 Chairman and Chief Executive Officer 64
of the Corporation
Russell Isaak 1992 President of the Corporation 53
Mary Ann Krey 1994 Chief Executive Officer, Krey Distributing Co., an 48
Anheuser-Busch beer distributor in St. Charles and
Lincoln Counties, Missouri
Lee M. Liberman 1982 Chairman Emeritus of the Board of Laclede Gas 74
Company, a St. Louis, Missouri public utility
Nicholas L. Reding 1992 Vice Chairman of Monsanto Company, a St. Louis, Missouri 61
based manufacturer of chemicals, pharmaceuticals, and
other products
Martin Sneider 1994 Adjunct Professor of Retailing at Washington 53
University, St. Louis, Missouri
Robert L. Virgil 1982 Principal, Edward D. Jones, a full service retail 61
brokerage firm located in St. Louis, Missouri
</TABLE>
Mr. Bohm founded the predecessor of the Corporation in 1942 and was
employed by the Corporation from that time until retirement in February 1988 in
various positions, including Chief Executive and Chairman until 1973, and then
as Chairman of an officers' committee until his election as Chairman Emeritus
in 1978. Since his retirement from CPI, Mr. Bohm has served as Managing Partner
of Milford Bohm & Associates.
Mr. Essman joined the Corporation in 1956 as Controller. He was appointed
President in 1969 and has served as Chairman and Chief Executive Officer of the
Corporation since 1973. He currently chairs the Corporation's Executive
Committee of officers.
Mr. Isaak joined the Corporation as Controller in 1972. He became the
Corporation's Chief Financial Officer in 1978 and was appointed Vice
President/Finance in 1979 and Executive Vice President-
Finance/Administration in February 1982. Effective February 1992, he was
appointed President of the Corporation and is also a member of the
Corporation's Executive Committee of officers.
Ms. Krey has served as Chief Executive Officer of Krey Distributing Co., an
Anheuser-Busch beer distributor in the metropolitan St. Louis market since
1986. She is a trustee of Washington University in St. Louis and serves as a
director of Commerce Bancshares, Inc., Laclede Gas Company, and a number of
other organizations in Missouri.
Mr. Liberman is Chairman Emeritus of Laclede Gas Company, a St. Louis,
Missouri public utility. He served as Chairman of the Board of that company
from April 23, 1976 until his retirement from the Board on January 27, 1994. He
is also a director of Angelica Corporation, Falcon Products, Inc., INTERCO
Incorporated and DT Industries.
Mr. Reding is Vice Chairman of Monsanto Company, a St. Louis, Missouri
based manufacturer of chemicals, pharmaceuticals and other products distributed
worldwide. From 1990 through 1992 he served as Executive Vice President of
Monsanto, with responsibility for environment, safety, health and manufacturing
operations. From 1986 until 1990, he served as President of Monsanto
Agricultural Company, an operating unit of Monsanto Company. Mr. Reding joined
Monsanto in 1956. He also serves as a director of Monsanto Company, Multifoods
Corp. and Meredith Corp.
Mr. Sneider, Adjunct Professor of Retailing at Washington University of St.
Louis, Missouri, served as President of Edison Brothers Stores, Inc., a St.
Louis, Missouri based company that operates numerous specialty chains
nationwide, from 1987 until April of 1995. He has been a Director of Edison
Brothers since 1978 and also serves as a director of Angelica Corporation and
Dave & Buster's, Inc. He is Chairman of the
4
<PAGE> 7
Board of Trustees of St. Louis Children's Hospital. In November of 1995, Edison
Brothers filed for protection under Chapter 11 of the federal bankruptcy code.
Mr. Virgil is a principal with Edward D. Jones, a full service retail
brokerage firm located in St. Louis, Missouri. Prior to accepting that position
in 1993, Mr. Virgil served as Executive Vice Chancellor of University Relations
and Dean of the John M. Olin School of Business of Washington University in St.
Louis. He joined the Washington University faculty in 1964. He also serves as a
director of General American Life Insurance Company and Maritz, Inc.
EXECUTIVE OFFICERS
Following is a list of all individuals who served as Corporate Executive
Officers during 1995:
<TABLE>
<CAPTION>
<S> <C>
Alyn V. Essman (64)........... Chief Executive Officer. Mr. Essman joined the Corporation in
1956 as Controller. He was appointed President in 1969 and has
served as Chairman and Chief Executive Officer of the
Corporation since 1973. He currently chairs the Corporation's
Executive Committee of officers.
Russell Isaak (53)............ President. Mr. Isaak joined the Corporation as Controller in
1972. He became the Corporation's Chief Financial Officer in
1978 and was appointed Vice President/Finance in 1979 and
Executive Vice President-Finance/Administration in February
1982. In February, 1992 he was appointed President of the
Corporation and is also a member of the Corporation's
Executive Committee of officers.
David E. April (53)........... Senior Executive Vice President. Mr. April joined the
Corporation in 1963 as a supervisor trainee and subsequently
became Vice President of Laboratory Operations. In 1981, he
became Vice President and General Manager of Laboratory
Operations. In February 1984, he became President of
Laboratory Operations, and in February 1987, he was named
President of Manufacturing. Effective February 1992, Mr. April
was appointed Senior Executive Vice President and is a member
of the Office of the President and of the Executive Committee
of officers.
Patrick J. Morris (56)........ Senior Executive Vice President. Mr. Morris joined the
Corporation in May 1985 as its Executive Vice
President-Marketing. Effective February 1992, he was appointed
Senior Executive Vice President and is a member of the
Office of the President and of the Executive Committee
of officers.
Barry C. Arthur (53).......... Executive Vice President-Finance and Chief Financial Officer.
Mr. Arthur joined the Corporation in 1965 as an accountant and
subsequently became Controller. In 1981, he was appointed
Treasurer, and in July 1983, he was named Vice
President-Finance. Mr. Arthur was appointed to his current
position effective February 1992. He is a member of the
Executive Committee of officers.
Jane E. Nelson (46)........... Secretary and General Counsel. Ms. Nelson joined the
Corporation in 1988 as Assistant General Counsel and
subsequently served as Associate General Counsel and Assistant
Secretary. She was promoted to her current position in
February 1993 and is a member of the Corporate Development
Council.
Fran Scheper (50)............. Executive Vice President-Human Resources. Ms. Scheper joined
the Corporation in 1967 as Personnel Assistant. She was
promoted to Assistant Personnel Director in 1982 and in
January 1987 became Vice President-Human Resources. She was
appointed to her current position in February 1992 and is a
member of the Executive Committee of officers.
</TABLE>
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the Company's best knowledge, the following table sets forth beneficial
owners of more than five percent of the common stock of the Corporation.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
TITLE NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock New South Capital Management 2,002,768<F1> 14.4%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
Common Stock Systematic Financial Management, L.P. 814,415<F2> 5.87%
Two Executive Drive
Fort Lee, New Jersey 07024
<FN>
- -------
<F1> New South Capital Management, an Investment Advisor registered under
Section 203 of the Investment Advisers Act of 1940, was the owner of
2,002,768 shares as of December 31, 1995, representing approximately 14.4%
of the total shares outstanding on that day. New South Capital Management
has sole voting power for 1,912,768 of the shares and sole dispositive
power for all of the shares.
<F2> As reported on its Schedule 13G, dated February 12, 1996, Systematic
Financial Management, L. P. (``Systematic''), an investment advisor
registered under Section 203 of the Investment Advisers Act of 1940,
beneficially owns 814,415 shares, or approximately 5.87% of the total
shares outstanding on that day. Systematic has shared voting power with
respect to 96,520 of the shares and sole dispositive power with respect to
all of the shares. Systematic's Schedule 13G amended the Schedule 13D
dated December 7, 1994 and filed by Systematic Financial Management, Inc.,
Cash Flow Investors, Inc. and Kenneth S. Hackel. The group comprised of
Systematic Financial Management, Inc., Cash Flow Investors, Inc. and
Kenneth S. Hackel was dissolved as of May 16, 1995 and the group's assets
were transferred to Systematic.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
Information is set forth below regarding beneficial ownership of Common
Stock of the Company as of April 25, 1996 by (i) each person who is a director
and nominee; (ii) each executive officer named in the Summary Compensation
Table on page 12; and (iii) all directors and executive officers as a group.
Except as otherwise noted, each person has sole voting and investment power as
to his or her shares.
<TABLE>
<CAPTION>
(3)
AMOUNT
AND
NATURE OF
(1) (2) BENEFICIAL (4)
TITLE NAME OF OWNERSHIP PERCENT
OF CLASS BENEFICIAL OWNER <Fa><Fb> OF CLASS
-------- ---------------- ---------- --------
<S> <C> <C> <C>
Common Stock David E. April........................................ 106,064<Fc> .76
Common Stock Barry C. Arthur....................................... 31,734 .23
Common Stock Milford Bohm.......................................... 30,000 <F*>
Common Stock Alyn V. Essman........................................ 480,115<Fd> 3.45
Common Stock Russell Isaak......................................... 217,027 1.56
Common Stock Mary Ann Krey......................................... 1,000 <F*>
Common Stock Lee Liberman.......................................... 400 <F*>
Common Stock Patrick J. Morris..................................... 94,714<Fe> .68
Common Stock Nicholas Reding....................................... 1,200 <F*>
Common Stock Martin Sneider........................................ 500 <F*>
Common Stock Robert Virgil......................................... 600 <F*>
Common Stock 20 Directors and Executive Officers as a Group........ 1,028,639<Ff> 7.39
<FN>
- -------
<F*>Percentage owned by directors does not exceed one percent.
<Fa> Includes the following shares which such persons have the right to acquire
within 60 days after April 25, 1996 upon the exercise of employee stock
options: Mr. April: 60,000; Mr. Arthur: 26,000; Mr. Essman: 155,000; Mr.
Isaak: 90,000; Mr. Morris: 70,000; and directors and executive officers as
a group: 439,358.
6
<PAGE> 9
The exercise prices for all options exercisable within 60 days range from
$18.375 to $30.00. Market Value as of April 25, 1996 was $16.25.
<Fb> Excludes 5,301 shares for Mr. April, 2,284 shares for Mr. Arthur, 79
shares for Mr. Isaak, 1,101 shares for Mr. Morris, and 20,921 shares for
directors and executive officers as a group, all held by the CPI Corp.
Employees' Profit Sharing Plan and Trust. With respect to such shares, the
executives have neither voting power nor investment power.
<Fc> Excludes 70 shares beneficially owned by Mr. April's wife in an IRA, as to
which he expressly disclaims beneficial ownership.
<Fd> Excludes 40,000 shares beneficially owned by Mr. Essman's wife, as to
which he expressly disclaims beneficial ownership.
<Fe> Excludes 1,000 shares beneficially owned by Mr. Morris' daughter as to
which he expressly disclaims beneficial ownership.
<Ff> Excludes 44,719 shares beneficially owned by members of the immediate
family of certain executive officers, as to which those executives
expressly disclaim beneficial ownership.
</TABLE>
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended February 3, 1996 (``fiscal year 1995''), the
Corporation's Board of Directors met 11 times. All directors attended more than
75% of the meetings that they were eligible to attend. The Board of Directors
also acted by unanimous written consent on four other occasions and held one
meeting by teleconference.
The Board of Directors has four committees: the Audit, the Compensation,
the Nominating and Governance, and the Finance and Investment Committees. The
Audit Committee's members are Messrs. Virgil (Chairman) and Bohm and Ms. Krey.
The Committee held four meetings during the last fiscal year. The Audit
Committee is responsible for reviewing the financial statements of the
Corporation and the scope of work of its independent auditors. The Committee
also evaluates recommendations of the auditors, recommends areas of review to
the Corporation's management, and reviews and evaluates the Corporation's
accounting policies, reporting practices, and internal controls.
The Compensation Committee's members are Messrs. Liberman (Chairman),
Reding and Sneider. The Committee held three meetings during the last fiscal
year and acted by unanimous consent on three occasions. The Compensation
Committee reviews annually the performance of principal officers, establishes
annual salaries and incentives for principal officers and reviews periodically
compensation and benefit programs. The Compensation Committee also serves as
the Stock Option Committee under the Corporation's 1991 Stock Option Plan and
under the Voluntary Stock Option Plan.
The Nominating and Governance Committee's members are Messrs. Reding
(Chairman) and Liberman and Ms. Krey. This Committee met once in fiscal year
1995. The Nominating Committee is charged with nominating qualified members for
the Corporation's Board of Directors and monitoring developments in governance
of publicly held companies. The Nominating Committee will consider nominees
recommended by security holders. Any security holder who desires to recommend a
prospective nominee should forward the name, address and telephone number of
such prospective nominee, together with a description of the nominee's
qualifications and relevant business and personal experience, to the
Corporation's Secretary.
The Finance and Investment Committee, whose members are Messrs. Bohm
(Chairman), Sneider and Virgil, met two times during fiscal year 1995. This
Committee reviews dividend policy, financing plans, investment policy and
investment performance. It also makes recommendations to management as
necessary to insure that the Company's pension and profit sharing plans meet
the business needs of the Company and are adequately funded.
COMPENSATION OF DIRECTORS
Each director who is not an officer receives a retainer of $10,000 per year
plus $850 for each Board and Committee meeting he or she attends. Directors who
are also officers receive no retainer or other compensation for service as
directors.
7
<PAGE> 10
Effective April 4, 1991, the Corporation established the CPI Corp. Deferred
Compensation and Retirement Plan for Non-Management Directors (the ``Directors'
Plan''). Participation in the Directors' Plan is limited to directors who are
not employees of the Corporation. The plan is administered by a committee
composed of directors who are employees and the Chief Financial Officer and the
General Counsel of the Company. The committee may amend, modify, or terminate
the plan at any time.
The Directors' Plan has compensation deferral and phantom stock components.
Under the deferral components, a participating director must irrevocably elect
before the beginning of a fiscal year to defer up to all (but not less than
$5,000) of his or her retainer, fee, and other compensation for such fiscal
year. The director also selects a deferral period of not less than three years,
although the deferral period will be shortened by the director's death, total
and permanent disability, or resignation or retirement from the Board or any
other termination of Board service. At the time of the election to defer, the
director must also choose to receive the deferred amount in a lump sum or in a
specified number of installments, not to exceed ten. All such amounts are
payable in cash.
During fiscal year 1995, Mr. Liberman deferred a total of $21,900 in
retainer and fees and received dividend equivalents in the amount of $9,336.
During fiscal year 1995, Mr. Reding deferred his retainer of $10,000 and
received dividend equivalents in the amount of $1,553. In fiscal year 1995, Mr.
Virgil deferred $10,950 in retainer and fees and received dividend equivalents
in the amount of $814. During fiscal year 1995, Mr. Bohm deferred a total of
$24,450 in retainer and fees and received dividend equivalents in the amount of
$438. During fiscal year 1995, Ms. Krey deferred a total of $21,050 in retainer
and fees and received dividend equivalents in the amount of $370. In fiscal
year 1995, Mr. Sneider did not defer any fees and accordingly did not receive
dividend equivalents. Growth Units on deferred amounts were credited at $12.12
per unit for deferrals during fiscal year 1995 and will be credited at $12.64
for deferrals during the current fiscal year.
Under the Directors' Plan, as amended by the Plan Committee, the
participants also receive 400 Phantom Stock Rights (``Rights'') for each year
of service as a non-management director. Prior to the amendment of the Plan as
of August 3, 1995, the Directors received 200 Phantom Stock Rights.
Accordingly, as of June 1995, Messrs. Bohm, Liberman, Reding, Sneider and
Virgil and Ms. Krey were each credited with 200 Rights. Upon amendment, each
non-management Director was awarded an additional 200 Rights. The Rights mature
on the earliest of the director's (i) death, (ii) total and permanent
disability, (iii) reaching age 65 if the participant is no longer a director,
(iv) resignation or retirement from the Board or any other termination of Board
service after age 65, or (v) reaching age 70 (but in no event in the case of
(iii) and (v) less than six months after the date of the award). At maturity,
the Rights are valued at the average of the daily closing sale price of the
Corporation's common stock on the New York Stock Exchange as reported in The
Wall Street Journal during the six month period immediately preceding the
maturity date multiplied by the number of Rights credited to the director's
account. Before the maturity of his or her Rights, a participant must
irrevocably elect to receive a lump sum payment or to defer payment of all or
part of the amount pursuant to the deferred compensation component of the plan
described above. Payments are made only in cash.
During fiscal year 1995, the 400 Rights credited to Mr. Liberman
automatically matured and, pursuant to his deferral election, were credited to
his deferred compensation account. Mr. Liberman's Rights matured at values of
$20.05 and $18.86 per Right and, accordingly, $4,010 and $3,772 respectively
was credited to Mr. Liberman's deferred compensation account. Growth Units on
the deferred amounts were credited at $12.12 per unit. The 400 Rights credited
to Mr. Bohm in 1995 automatically matured and were paid out to Mr. Bohm in
cash. Mr. Bohm's Rights matured at values of $20.05 and $18.86 per Right and,
accordingly, Mr. Bohm received payments of $4,010 and $3,772 respectively.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Corporation believes that the reporting executives and directors
complied with all reporting requirements of Section 16(a) of the Exchange Act.
8
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
To Our Stockholders:
General Compensation Policy
Executive compensation at CPI Corp. and its subsidiaries is based on a
variety of factors which reflect contributions to corporate performance and
enhance total return to stockholders. Executive compensation packages include
base salary, annual performance-based bonus, stock options, company
contributions to a stock ownership program, and earnings on Growth Units from
bonuses deferred from prior years under the Corporation's Deferred Compensation
and Stock Appreciation Rights Plan. In 1995, the Board also adopted a new
salary deferral plan under which key executives may defer base salary on
substantially the same terms as bonuses may be deferred pursuant to the
Corporation's Deferred Compensation and Stock Appreciation Rights Plan.
The Board, on the recommendation of the Compensation Committee, continued
to adhere to the following objectives in awarding executive compensation in
1995, each of which the Board believes contributes to stockholder value:
1. paying for performance, both long-term and short-term;
2. increasing emphasis on variable incentive compensation as opposed to
base compensation;
3. recognizing and rewarding the executive's contributions as reflected in
the performance of his or her unit and in the performance of the
Corporation as a whole;
4. providing a competitive and equitable compensation program to attract,
retain and motivate key executives; and
5. importantly, aligning stockholder, management and employee interests.
All compensation actions taken in 1995 were in concert with the principles
identified in the Corporation's General Compensation Policy described above. In
particular, compensation awarded in 1995 furthers the Compensation Committee's
desire to shift emphasis from base salaries to at-risk compensation which, in
the Committee's opinion, strengthens the alignment between executive
compensation and shareholder interests.
Executive compensation for 1995 conformed to the Committee's restructuring
of key components of CPI's executive compensation package to further strengthen
the link between executive compensation and performance and the alignment with
shareholder value. Those changes included a substantial decrease in base
salaries, a three year freeze on such salaries at the reduced level and
increased bonus potential.
Base Salary
The base salaries paid to the Corporation's executives are based on a
number of factors, including an evaluation of the individual's effectiveness in
performing his or her responsibilities, comparison to salaries paid by other
companies to their executives who hold similar positions, internal equity,
tenure in position, overall responsibility, knowledge, and special assignments.
A review of the Corporation's Executive Compensation package conducted by
Towers Perrin and completed in December 1994, included a comparison of the
Corporation's base salaries, bonuses and long-term incentives to market data
for general industry, consumer products and specialty retail organizations
relative to sales size. On the basis of that comparison, Towers Perrin reported
that base salaries paid to the Chief Executive Officer, the President and the
Senior Executive Vice Presidents were at the high end of the comparable range
as of the date of comparison. The base salaries of these executives were
subsequently reduced by a total of $400,000 for fiscal year 1995, as shown
below, and frozen at that level for fiscal years 1996 and 1997. Compensation
paid to other executives fell below the median.
The following table reflects base salaries of the Chairman and Chief
Executive Officer and executive's in the office of the President (the President
and two Senior Executive Vice Presidents) in 1994, before voluntary salary
reductions, and their annual base salaries for 1995 through 1997:
9
<PAGE> 12
<TABLE>
<CAPTION>
NAME 1994 BASE 1995-1997 BASE
---- --------- --------------
<S> <C> <C>
Alyn V. Essman $775,000 $600,000
Russell Isaak $500,000 $400,000
Patrick J. Morris $350,000 $300,000
David E. April $300,000 $225,000
</TABLE>
In 1995, the Compensation Committee adopted the Key Executive Deferred
Compensation Plan, under which certain key executives may defer up to 50% of
base salary on terms substantially the same as those previously available for
bonus compensation under the Deferred Compensation and Stock Appreciation
Rights Plan. For the year in which base salary is deferred, the executive will
earn interest on the amount deferred at a rate that mirrors the rate of growth
in book value for the preceding year. Book value increased from $12.01 at the
end of fiscal 1993 to $12.12 in 1994 and $12.64 in 1995. In the year subsequent
to the year of deferral, the amount deferred and interest are divided by book
value to determine the number of Growth Units to be credited to the executive.
The executive's account is subsequently credited with annual appreciation on
the Growth Units, and the executive earns dividend equivalents at the same rate
dividends are paid to shareholders.
Annual Bonus
In conjunction with lowering base salaries in 1995 and in furtherance of
efforts to align stockholder and executive interests, shareholders approved the
Compensation Committee's proposal to increase the bonus potential for the
Chairman and Chief Executive Officer and executives in the Office of the
President, all of whom are idenitified in the table set forth above showing
base salaries. This restructuring of base salary and annual incentives provided
for potential total compensation comparable to 1994, but with a significantly
greater emphasis on performance based compensation.
Restricted Stock
No restricted stock was granted to the named executives in fiscal year
1995.
Stock Options
The named executive officers were awarded options in fiscal year 1995 for
1994 performance pursuant to an annual bonus option program adopted by the
Compensation Committee in 1992. These options, which were issued under the
Corporation's 1991 Stock Option Plan, cliff vest in 1999 and expire in 2003.
The terms of these awards are reflected in the Summary Compensation Table and
the Option/SAR Grants Table for 1995. No performance options were awarded for
1995.
Growth Units on Deferred Compensation
Under the Corporation's Deferred Compensation and Stock Appreciation Rights
Plan, which was approved by shareholders in 1992, an executive who elects to
defer up to 50% of his or her annual incentive bonus receives Growth Units.
Executives earn appreciation on these Growth Units based on increases in the
Corporation's book value, as adjusted for any dilutive effect of the Company's
repurchase of stock. Executives also receive dividend equivalents at the same
rate that dividends are paid to stockholders. Growth Units were credited to the
Chief Executive Officer and the other named executive officers in fiscal year
1995 on bonuses earned for 1994 as follows: Mr. April - 1,392; Mr. Arthur -
2,289; Mr. Essman - 3,597; Mr. Isaak - 2,321; and Mr. Morris - 1,624.
Company Contributions to Stock Ownership Program
All employees, including the named executives, who meet minimum age and
service requirements, are eligible to contribute up to 15% of their base
salaries to their individual accounts in the Corporation's Profit Sharing Plan.
A maximum of 5% of each participant's voluntary contributions is matched by
corporate stock in an amount equal to 50% of the participant's contributions.
Although each of the named executive officers was eligible to participate in
the Program, only Mr. Morris, Mr. April and Mr. Arthur participated in 1995.
10
<PAGE> 13
Compensation of the Chief Executive Officer
Mr. Essman's compensation is based on the policies and programs described
above for all executives and includes base salary and annual and long-term
incentives. For 1995, his base salary was reduced to $600,000 from $775,000
(prior to voluntary reduction) in 1994 as part of the Committee's restructuring
of compensation to shift emphasis to at-risk compensation. Pursuant to that
restructuring, his base salary will remain frozen through 1997. Mr. Essman
deferred payment of 50% of his base salary for 1995 under the Corporation's Key
Executive Deferred Compensation Plan adopted by the Committee in 1995. On the
basis of a predetermined schedule, Mr. Essman earned a bonus of $150,000 for
1995. He was also awarded options on 13,136 shares in 1995 for 1994 fiscal year
performance under the Corporation's annual performance bonus option program for
key executives.
Compliance with IRC Section 162(m)
While the Compensation Committee believes the $1 million limitation on
deductibility imposed by Section 162(m) will have limited application to
compensation paid to the Company's executives, the Committee's current intent
remains to preserve full deductibility of executive compensation. The overall
compensation program, as earlier described, has been designed to be heavily
related to the Corporation's earnings performance, and the annual incentive
component approved by shareholders in 1995 should enable the Company to avail
itself of deductions for all executive compensation paid in the foreseeable
future. The Corporation's Key Executive Deferred Compensation Plan, adopted in
1995, should also enhance the Corporation's ability to maintain full
deductibility of executive compensation.
THE CPI CORP. COMPENSATION COMMITTEE
Lee Liberman, Chair Nicholas Reding Martin Sneider
11
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for each of the last three years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- --------------------------------------
<F5> SECURITIES
<F4> RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) SARS COMPENSATION
------------------------- ---- ------ ----- ------------ ---------- ---------- ------------
($) ($) ($) ($) (#) ($)
(A) (B) (C) (D) (E) (F) (G) (H)
<S> <C> <C> <C> <C> <C> <C> <C>
Alyn V. Essman, Chairman 1995 600,000<F1> 150,000<F3> 0 0 13,136<F6> 161<F11>
and Chief Executive Officer 1994 581,250<F2> 87,187<F3> 9,594 656,250 77,500<F7> 167<F11>
43,662<F8>
1993 581,250<F2> 0 0 0 77,500<F10> 192<F11>
Russell Isaak, President 1995 400,000 100,000<F3> 0 0 8,475<F6> 161<F11>
1994 400,000<F2> 56,250<F3> 0 375,000 40,000<F7> 167<F11>
19,718<F8>
4,225<F9>
1993 400,000<F2> 0 4,946 0 40,000<F10> 192<F11>
Patrick J. Morris, Senior 1995 300,000<F1> 75,000<F3> 0 0 5,932<F6> 679<F12>
Executive Vice President 1994 262,500<F2> 39,375<F3> 0 187,500 35,000<F7> 1,519<F13>
19,718<F8>
4,225<F9>
1993 262,500<F2> 0 0 0 35,000<F10> 539<F14>
David E. April, Senior 1995 225,000 56,250<F3> 3,081 0 5,085<F6> 1,063<F12>
Executive Vice President 1994 225,000<F2> 33,750<F3> 18,977 281,250 30,000<F7> 3,065<F13>
16,901<F8>
1993 225,000<F2> 0 24,485 0 30,000<F10> 2,053<F14>
Barry C. Arthur, Executive 1995 160,000<F1> 25,000<F3> 0 0 2,542<F6> 881<F12>
Vice President--Finance 1994 135,000<F2> 55,478<F3> 0 34,688 6,000<F7> 2,614<F13>
8,451<F8>
1993 135,000<F2> 9,000 3,722 0 6,000<F10> 1,577<F14>
<FN>
- --------
<F1> Cash amounts earned in fiscal year 1995, even if deferred under the
Corporation's Key Executive Deferred Compensation Plan adopted in 1995.
<F2> Reflects voluntary salary reductions by the named executive officers
under the corporation's Voluntary Stock Option Plan (the ``VSOP''), which
was approved by the stockholders on June 11, 1993. In fiscal years 1993
and 1994, the VSOP awarded officers electing such reductions one stock
option for every $2.50 in salary reduction. For those two fiscal years,
participating executives could elect a reduction of 5% to 25% of their
base salaries in exchange for the options. See footnotes 6 and 9, below,
for corresponding award of options.
<F3> Cash amounts earned for the respective fiscal year, even if deferred
under the Corporation's Deferred Compensation and Stock Appreciation
Rights Plan.
<F4> The amounts in this column represent above-market earnings on deferred
compensation paid during the fiscal year.
<F5> Awarded at the close of fiscal year 1994, in conjunction with base salary
reduction effective for fiscal years 1995 through 1997. Amounts reflect
total restricted stock holdings of each named executive as of the date of
the award. The number of shares awarded in 1994 and the respective
aggregate value as of the close of fiscal year 1995 were: Mr.
Essman--47,297 ($685,806); Mr. Isaak--27,027 ($391,892); Mr.
Morris--13,514 ($195,953); Mr. April--20,270 ($293,915); and Mr.
Arthur--2,500 ($36,250). Restricted stock vests as follows: one-third on
February 2, 1996, one-third on February 2, 1997, and the final one-third
on February 2, 1998. Fair Market Value as of the close of fiscal year
1995 was $14.50 per share. Dividends are paid on the restricted stock.
<F6> Options awarded in 1995 for 1994 performance under an annual option bonus
program for key executives adopted in 1992. Fiscal year 1994 is the only
year for which options have been awarded under this program.
12
<PAGE> 15
<F7> Options awarded under VSOP on February 6, 1994 become exercisable three
years after the date of award at an exercise price of $15.50 and expire
eight years after the date of award. One option awarded for each $2.50
voluntary salary reduction.
<F8> Options awarded on August 11, 1994 become exercisable four years after
date of award at an exercise price of $17.75 and expire eight years after
date of award.
<F9> Options awarded on October 6, 1994 become exercisable four years after
date of award at an exercise price of $18.625 and expire eight years
after date of award.
<F10> Options awarded under the VSOP on June 11, 1993 become exercisable three
years after date of award at an exercise price of $18.375 and expire
eight years after date of award. One option awarded for each $2.50
voluntary salary reduction.
<F11> Life insurance premiums.
<F12> Life insurance premiums of $161 for Mr. Morris, Mr. April and Mr. Arthur
plus employer contributions of stock to the profit sharing plan in the
following amounts: Morris--$518; April--$902; and Arthur--$720.
<F13> Life insurance premiums of $167 plus employer contributions of stock to
the profit sharing plan in the following amounts: Morris--$1,352;
April--$2,898; and Arthur--$2,447.
<F14> Life insurance premiums of $192 plus employer contributions of stock to
the profit sharing plan in the following amounts: Morris--$347;
April--$1,861; and Arthur--$1,385.
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The table below sets forth information concerning stock option grants made
in the last fiscal year to the named executives. No SARs were awarded in fiscal
year 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
% OF TOTAL
OPTIONS EXERCISE
GRANTED TO OR BASE POTENTIAL REALIZED VALUE
OPTIONS EMPLOYEES IN PRICE EXPIRATION ASSUMED ANNUAL RATE OF STOCK
NAME GRANTED FISCAL YEAR ($/SHARE) DATE APPRECIATION FOR OPTION TERM
---- ------- ------------ --------- ---------- ------------------------------------
0% 5%<F3> 10%<F3>
(#) ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h)
<S> <C> <C> <C> <C> <C> <C> <C>
Alyn V. Essman............ 13,136<F2> 13.1% $14.75 2/5/01 0 $92,477 $221,604
Russell Isaak............. 8,475<F2> 8.5% $14.75 2/5/01 0 $59,664 $142,973
Patrick J. Morris......... 5,932<F2> 5.9% $14.75 2/5/01 0 $41,761 $100,073
David E. April............ 5,085<F2> 5.1% $14.75 2/5/01 0 $35,798 $85,784
Barry C. Arthur........... 2,542<F2> 2.5% $14.75 2/5/01 0 $17,896 $42,884
All Stockholders<F1>...... n/a<F*> n/a n/a n/a 0 $97,300,797 $233,162,564
All 33 Optionees<F4>...... 100,139 100% <F2> <F2> 0 $704,979 $1,689,345
Gain for all 33
Optionees as % of All
Stockholder Gain........ n/a n/a n/a n/a 0 .0725% .0725%
<FN>
- --------
<F*> not applicable
<F1> Gain for all stockholders was determined based on the number of shares
outstanding on February 5, 1995, the date when the majority of options
were granted, a price per share equal to the exercise price for the
options granted to the named executives, $14.75, and an 8-year term.
<F2> Options awarded to the named executives on February 5, 1995 as part of an
annual performance option bonus plan adopted in 1992. No options were
earned or awarded prior to 1994 under the plan. The options become
exercisable four years after the date of grant and expire six years after
the date of grant. An additional 40,150 options were awarded to executives
not named in the table on the same terms as set forth above under the
plan.
<F3> Pre-tax gain. The amounts shown for 5% and 10% appreciation for named
executives are based on fair market value of $14.75 as of date of award
and eight year term. These percentage projections are required by SEC
rules and are not intended to forecast possible future appreciation, if
any, of the stock price of the Company. The Company did not use an
alternative formula for a grant date valuation, because the
13
<PAGE> 16
Company is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown factors.
<F4> Includes 40,150 options awarded to executives not named in the table on
February 5, 1995 under the annual bonus option program adopted in 1991 on
the same terms as those awarded to named executives and 23,388 options
awarded to mid-level managers at various times. The options awarded to
mid-level managers vest in increments of one-fourth of the total award
commencing 1996 and expire in 2003. They carry exercise prices of $15.50
to $21.63.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning option and SAR
exercises in the last fiscal year, and options and SARs remaining unexercised
at February 3, 1996, by the individuals named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
<F1> UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED OPTIONS/SARs OPTIONS/SARs<F*>
ON EXERCISE AT FISCAL AT FISCAL
OF OPTIONS/ YEAR-END (#) YEAR-END ($)
# OF SECURITIES VALUE EXERCISABLE/ EXERCISABLE/
NAME UNDERLYING SARs REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- --------------
($)
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Alyn V. Essman...................... 0/0 0/0 77,500/289,298<F2>,<F3> n/a
Russell Isaak....................... 0/0 0/0 50,000/162,418<F2>,<F3> n/a
Patrick J. Morris................... 0/0 0/0 35,000/134,875<F2>,<F3> n/a
David E. April...................... 0/0 0/0 30,000/111,986<F2>,<F3> n/a
Barry C. Arthur..................... 0/0 0/0 20,000/42,993<F2>,<F3> n/a
<FN>
- -------
<F*> No SARs were held at fiscal year end.
<F1> No options were exercised by the named executives in 1995.
<F2> All exercisable options were issued on February 2, 1992 with an exercise
price of $30.00. Market price on February 2, 1996 was $14.50 thus
requiring a market value increase of more than 100% to be of any value.
<F3> Unexercisable options include options received by the named executives in
exchange for voluntary salary reductions in 1993 and 1994 pursuant to the
Corporation's Voluntary Stock Option Plan.
</TABLE>
RETIREMENT PLAN
The following table shows the estimated annual pension benefit payable to a
covered participant at normal retirement age (65) under the Corporation's
qualified Retirement Plan and Trust.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
REMUNERATION 10 15 20 25 30 35 40
------------ -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 30,000.......... $3,000 $4,500 $ 6,000 $ 7,500 $ 9,000 $10,500 $12,000
50,000.......... 5,000 7,500 10,000 12,500 15,000 17,500 20,000
100,000.......... 5,012 7,518 10,025 12,531 15,037 17,543 20,049
150,000.......... 5,012 7,518 10,025 12,531 15,037 17,543 20,049
250,000.......... 5,012 7,518 10,025 12,531 15,037 17,543 20,049
</TABLE>
The Corporation maintains a defined benefit Retirement Plan (the ``Plan'')
for all qualifying employees of the Corporation. Remuneration in the Pension
Plan Table includes annual base salary and bonus as reported in the Summary
Compensation Table; executive earnings for 1995 in excess of $51,350 are not
included in calculation of the annual benefits payable under the Plan. As of the
end of the 1995 fiscal year, the years of credited service for purposes of
computing retirement benefits under the Plan for the named executives are as
follows: Alyn V. Essman--39, Russell Isaak--23, Patrick J. Morris--10, David E.
April--32, and Barry C. Arthur--30.
14
<PAGE> 17
The Plan entitles a participant to a normal monthly retirement benefit upon
retirement after age 65 equal to 1% of average monthly gross earnings from and
after January 1, 1985, multiplied by the number of years of the participant's
service; provided, however, that through 1994 compensation in excess of $50,000
in any year was not counted for purposes of determining such benefits.
Effective as of 1995, the $50,000 ceiling is increased annually to reflect a
cost of living adjustment. Alternatively, a participant may elect to convert
his normal form of benefit to a Contingent Annuitant Option, which provides for
an actuarially adjusted retirement benefit payable to the participant during
his lifetime and for the continuation of benefit payments to the beneficiary
after the participant's death, or an Option for Life Annuity with Guaranteed
Number of Monthly Payments, which provides for an actuarially adjusted
retirement benefit payable to the participant during his life with a guaranty
that not less than a guaranteed number of monthly retirement benefit payments
will be paid first to the participant and then to his beneficiary. The Plan
provides for a lesser benefit for early retirement beginning at age 55.
Benefits are fully vested after five years of service. The Corporation
periodically makes actuarially determined contributions to the Plan. No
deductions are made for social security benefits.
The named executive officers are also entitled to receive supplemental
retirement benefits pursuant to their employment agreements, as discussed more
fully below.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
During fiscal year 1995, the Corporation employed the named executives
under employment agreements that establish base compensation, bonus and
remuneration in the event of a Change of Control. Under these agreements, if
the Corporation terminates an executive's employment other than for cause
before a Change of Control, the Corporation is obligated to pay the executive
two years' base compensation over the two year period. The Corporation has no
such obligation if the executive resigns or is terminated for cause. If the
Corporation terminates an executive's employment other than for cause after a
Change of Control, the Corporation must pay the executive a lump sum equal to
two years' base compensation. In the event the named executive officers are
terminated (other than for cause) during fiscal 1996 as a result of a Change of
Control, the executives would receive the following lump sum payments: Alyn V.
Essman--$1,200,000; Russell Isaak--$800,000; Patrick J. Morris--$600,000; David
E. April--$450,000; and Barry C. Arthur--$340,000.
If a Change of Control occurs but employment is not terminated, the
executive is to continue in a position comparable to that held before the
change. The executive's base salary cannot be reduced at any time during the
term of the agreement, and after a Change of Control the executive's bonus
cannot be less than the highest bonus the executive received during any of the
three completed fiscal years preceding the Change of Control. The executive is
also entitled to continue to participate in compensation plans and programs and
benefit plans that are at least equivalent to those provided by the Corporation
before the Change of Control.
Under their employment agreements, the named executive officers are
entitled to receive supplemental retirement benefits equal to 40% of final base
salary, not to exceed $100,000, annually for ten years. The Corporation's
aggregate liability for these benefits will be offset in part by the proceeds
of life insurance. The Corporation made insurance premium payments in fiscal
year 1995 of $19,429, $9,730, $12,220, $11,239, and $17,780 on behalf of
Messrs. Essman, Isaak, Morris, April, and Arthur, respectively. Beneficiaries
of a named executive officer who dies receive annually 40% of the executive's
final base salary, not to exceed $100,000, until the later of (i) the date the
executive would have attained age 65, or (ii) ten years after the date of the
executive's death. If the officer retires at age 65 or after, he or she
receives annually 40% of his or her final base salary, not to exceed $100,000,
for ten years. An officer who becomes disabled receives annually, in addition
to the amount payable on death or retirement, 40% of his or her final base
salary, not to exceed $100,000, until the earlier of (i) the date of his or her
death or (ii) the date he or she attains age 65. Supplemental retirement, death
and disability benefits are pro rated if the qualifying event occurs prior to
the executive's tenth anniversary of employment by the Company. Mr. Bohm, a
director of the Corporation and a retired officer, received payment of $100,000
under this plan during fiscal 1995.
Certain of the Corporation's employee benefit plans provide for the
acceleration of the payment of certain benefits upon a Change of Control,
including the Restricted Stock Plan and the Deferred Compensation and Stock
Appreciation Rights Plan. The employment agreements provide that if such
accelerated benefits plus the amount payable under the employment agreement in
the event of a Change of Control result in the imposition
15
<PAGE> 18
of an excise tax under Section 4999 of the Internal Revenue Code or any similar
tax, the amount of such tax shall be added to the amount paid the executive
under the agreement. The amount of this additional payment is to be determined
by an independent certified public accounting firm selected by members of the
Corporation's Board of Directors who are Continuing Directors as defined in the
Corporation's Certificate of Incorporation. (Continuing directors are those
persons who were directors in 1987 or were nominated by Continuing Directors
and who are not affiliates or associates of the person or entity that effects
the Change of Control.)
<TABLE>
COMPARISON OF TEN-YEAR CUMULATIVE RETURN<F*>
CPI CORP., S&P 500 STOCK INDEX, AND RUSSELL 2000
[GRAPH]
<CAPTION>
YEAR S&P RUSSELL 2000 CPI CORP.
<S> <C> <C> <C>
1/86 100 100 100
1/87 134 116 177
1/88 129 99 145
1/89 155 124 182
1/90 178 126 195
1/91 193 121 249
1/92 237 175 228
1/93 261 199 194
1/94 295 236 145
1/95 297 222 143
1/96 404 286 146
<FN>
The Russell 2000 index was selected because it encompasses similarly-sized
companies to CPI, as well as diversified companies, like CPI.
- -------
<F*>Total return assumes reinvestment of dividends and $100 invested as of the
measurement date in the Corporation's common stock, the S&P 500 and the Russell
2000. The measurement dates for purposes of determining the stock price for CPI
Corp. correspond to the fiscal year-end (i.e. the Saturday preceding the first
Sunday in February of each year reflected). The corresponding measurement dates
for the S&P 500 and the Russell 2000 are January 31st of each of the years
reflected.
</TABLE>
RATIFICATION OF INDEPENDENT AUDITORS (PROXY ITEM NO. 2)
The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, to audit the accounts of the Corporation and its
subsidiaries for its current fiscal year ending February 1, 1997. Although the
appointment of independent public accountants is not required to be approved by
the stockholders, the Board believes that stockholders should participate in
the appointment through ratification. If a majority of the stockholders voting
do not ratify the appointment, the Board will reconsider the appointment. No
member of KPMG Peat Marwick LLP, or any associate thereof, has any financial
interest in the Corporation or in its subsidiaries.
A representative of KPMG Peat Marwick LLP will be present at the Meeting
and will be given the opportunity to make a statement and to answer any
questions any stockholder may have with respect to the financial statements of
the Corporation for the fiscal year ended February 3, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE ``FOR'' THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK AS INDEPENDENT AUDITORS FOR FISCAL 1996.
16
<PAGE> 19
The affirmative vote of the majority of the shares present in person or
represented by proxy at the Annual Meeting is required for ratification of this
appointment.
OTHER INFORMATION
Proxies, ballots, and voting tabulations identifying stockholders are
secret and will not be available to anyone, except as necessary to meet legal
requirements.
The Corporation's Annual Report to stockholders, including financial
statements, was mailed simultaneously with this Proxy Statement on or about May
3, 1996, to stockholders of record as of April 25, 1996.
A COPY OF THE CORPORATION'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K MAY BE OBTAINED WITHOUT CHARGE FROM THE SECRETARY OF
THE CORPORATION UPON WRITTEN REQUEST TO HER AT 1706 WASHINGTON, ST. LOUIS,
MISSOURI 63103.
By Order of the Board of Directors,
/S/ JANE E. NELSON
JANE E. NELSON
Secretary and General Counsel
Dated: May 3, 1996
17
<PAGE> 20
CPI CORP.
PRODUCTS AND SERVICES FOR CONSUMERS
1706 WASHINGTON AVENUE
ST. LOUIS, MISSOURI 63103
TELEPHONE (314) 231-1575
May 3, 1996
DEAR CPI CORP. STOCKHOLDER:
You are cordially invited and encouraged to attend the 1996
Annual Meeting of Stockholders of CPI Corp. The meeting will be
held on Thursday, June 6, 1996, at 10:00 a.m., central daylight
time at the offices of CPI Corp., 1706 Washington Avenue, St.
Louis, Missouri.
If you cannot personally attend the meeting, please vote your
preference on the proxy card attached below and return it
promptly. Your participation in CPI Corp.'s business, whether in
person or by proxy, is an important part of the Corporation's
governance.
I look forward to and appreciate your participation in CPI's
1996 Annual Meeting of Stockholders.
Very Truly Yours,
/S/ ALYN V. ESSMAN
------------------------------
ALYN V. ESSMAN
Chairman of the Board and
Chief Executive Officer
Detach Proxy Form Here
- --------------------------------------------------------------------------------
PROXY CPI CORP.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JUNE 6, 1996
The undersigned, revoking all previous proxies, hereby appoints Alyn V.
Essman and Russell Isaak or either of them as Proxy or Proxies of the
undersigned, each with the power to appoint his substitute, to vote, as
designated below, all of the shares of Common Stock of CPI Corp. (the
``Corporation'') held of record by the undersigned on April 25, 1996, at the
annual meeting of stockholders to be held at 10 a.m. central daylight time on
June 6, 1996, at CPI Corp., 1706 Washington, St. Louis, Mo. 63103, and at any
adjournment thereof.
ITEM 1. ELECTION OF DIRECTORS
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to vote
below (except as marked to for all nominees listed below
the contrary listed below)
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
Milford Bohm, Alyn V. Essman, Russell Isaak, Mary Ann Krey, Lee M. Liberman,
Nicholas L. Reding, Martin Sneider, Robert L. Virgil
ITEM 2. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK AS THE CORPORATION'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
/ / FOR / / AGAINST / / ABSTAIN
In their sole discretion, the Proxies are authorized to vote upon such
other business as may properly come before the annual meeting or any
adjournment thereof.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE.)
<PAGE> 21
Detach Proxy Form Here
- --------------------------------------------------------------------------------
This Proxy will be voted as specified in the spaces provided therefor or,
if no such specification is made, it will be voted for the election of
directors and for Item 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CPI CORP.
SIGN
HERE
--------------------------------------------
(Please sign exactly as name appears hereon)
SIGN
HERE
--------------------------------------------
Executors, administrators, trustees, etc.
should so indicate when signing
Dated
--------------------------------------------
