<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 (Amendment No. )
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 Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
CPI CORP.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
CPI CORP.
PRODUCTS AND SERVICES FOR CONSUMERS
1706 WASHINGTON AVENUE
ST. LOUIS, MISSOURI 63103
TELEPHONE (314) 231-1575
May 2, 1997
DEAR CPI CORP. STOCKHOLDER:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of CPI Corp. The meeting will be held on Thursday, June
12, 1997, 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 12, 1997, 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 7, 1998; 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 24, 1997, 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 2, 1997
<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 12, 1997
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being mailed beginning
May 2, 1997, to holders of common stock of CPI Corp., a Delaware corporation
(referred to herein collectively with its predecessor corporations as the
"Corporation" or the "Company"), in connection with the solicitation of
Proxies by the Board of Directors for the Annual Meeting of Stockholders to be
held on June 12, 1997, 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 and
voting at the Meeting in person; 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 1998 Annual Meeting must be
received by the Company no later than January 2, 1998 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 24, 1997, 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 24, 1997, 11,727,040 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 1994, 1995 and 1996 annual meetings 84.3%, 90.88% and 88.3%
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 1997.
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)
Nine 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. The following eight nominees are presently directors of the
Corporation: Messrs. Bohm, Essman, Isaak, Liberman, Reding, Sneider and Virgil
and Ms. Krey. The ninth nominee is Patrick J. Morris. 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 75
investments
Alyn V. Essman 1968 Chairman and Chief Executive Officer of the Corporation 65
Russell Isaak 1992 President of the Corporation 54
Mary Ann Krey 1994 Chief Executive Officer, Krey Distributing Co., an 49
Anheuser-Busch beer distributor in St. Charles and
Lincoln Counties, Missouri
Lee M. Liberman 1982 Chairman Emeritus of the Board of Laclede Gas Company, a 75
St. Louis, Missouri public utility
Patrick J. Morris -- Senior Executive Vice President of the Corporation 57
Nicholas L. Reding 1992 Vice Chairman of Monsanto Company, a St. Louis, Missouri 62
based manufacturer of chemicals, pharmaceuticals,
agricultural and food products
Martin Sneider 1994 Adjunct Professor of Retailing at Washington University of 54
St. Louis, Missouri
Robert L. Virgil 1982 Principal, Edward D. Jones, a full service retail brokerage 62
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 his 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 Falcon Products, Inc., INTERCO Incorporated and DT
Industries.
Mr. Morris has served as Senior Executive Vice President of the Corporation
and as member of the Office of the President since February 1992. He joined the
Corporation in 1985 as Executive Vice President--
Marketing. He also serves on the Corporation's Executive Committee of officers.
Mr. Reding is Vice Chairman of Monsanto Company, a St. Louis, Missouri
based manufacturer of chemicals, pharmaceuticals, agricultural and food
products sold 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.
4
<PAGE> 7
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 also serves as a director of Dave
& Buster's, Inc., and is Chairman of the 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, Maritz, Inc. and OmniQuip
International, Inc.
EXECUTIVE OFFICERS
Following is a list of all individuals who served as Corporate Executive
Officers during 1996:
<TABLE>
<S> <C>
Alyn V. Essman (65)........... 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 (54)............ 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--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 (54)........... 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 served as a
member of the Office of the President and of the Executive
Committee of officers until his retirement on February 2,
1997.
Patrick J. Morris (57)........ 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. Mr. Morris is a
member of the Office of the President and of the Executive
Committee of officers.
Barry C. Arthur (54).......... 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 (47)........... 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.
5
<PAGE> 8
Fran Scheper (51)............. 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>
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>
<F1> <F2> <F3> <F4>
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 1,396,919<F1> 11.96%
1000 Ridegeway Loop Road, Suite 233
Memphis, Tennessee 38120
Common Stock First Pacific Advisors, Inc. 1,242,850<F2> 10.6%
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
Common Stock Ryback Management Corporation 956,100<F3> 6.87%
7711 Carondelet Avenue
St. Louis, Missouri 63105
Common Stock FMR Corp. 694,100<F4> 5.94%
82 Devonshire Street
Boston, Massachusetts 02109
<FN>
- -------
<F1> New South Capital Management, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, was the owner of
1,396,919 shares as of December 31, 1996, representing approximately
11.96% of the total shares outstanding on that day. New South Capital
Management has sole voting power for 1,328,986 of the shares and sole
dispositive power for all of the shares.
<F2> As reported on its Schedule 13G, dated January 9, 1997, First Pacific
Advisors, Inc. ("First Pacific"), an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, beneficially owns
1,242,850 shares, or approximately 10.6% of the total shares outstanding
on December 31, 1996. First Pacific has shared voting power with respect
to 501,550 of the shares and shared dispositive power with respect to all
of the shares.
<F3> Ryback Management Corporation, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, held sole voting and
dispositive power as to 956,100 shares as of December 31, 1996,
constituting 6.87% of the outstanding shares on that date.
<F4> As reported on its Schedule 13G, dated February 14, 1997, FMR Corp., a
parent holding company in accordance with Section 240.13d-1(b)(ii)(G),
was, through its wholly owned subsidiary Fidelity Management and Research
Company ("Fidelity"), the beneficial owner of 694,100 shares,
representing 5.94% of the total shares outstanding on December 31, 1996.
Fidelity is an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940. FMR, Fidelity, Edward C. Johnson 3rd and
the Fidelity Funds each has sole power to dispose of all of the shares.
Fidelity votes the shares under written guidelines established by the
Fidelity Funds' Board of Trustees.
</TABLE>
6
<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
Information is set forth below regarding beneficial ownership of Common
Stock of the Company as of April 24, 1997 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>
<F3>
AMOUNT
AND
NATURE OF
<F1> <F2> BENEFICIAL <F4>
TITLE NAME OF OWNERSHIP PERCENT
OF CLASS BENEFICIAL OWNER <Fa><Fb> OF CLASS
-------- ---------------- ---------- --------
<S> <C> <C> <C>
Common Stock David E. April........................................ 188,050<Fc> 1.6%
Common Stock Barry C. Arthur....................................... 57,734 <F*>
Common Stock Milford Bohm.......................................... 30,000 <F*>
Common Stock Alyn V. Essman........................................ 635,115<Fd> 5.4%
Common Stock Russell Isaak......................................... 307,027 2.6%
Common Stock Mary Ann Krey......................................... 1,000 <F*>
Common Stock Lee Liberman.......................................... 400 <F*>
Common Stock Patrick J. Morris..................................... 164,714 1.4%
Common Stock Nicholas Reding....................................... 1,200 <F*>
Common Stock Martin Sneider........................................ 500 <F*>
Common Stock Robert Virgil......................................... 600 <F*>
Common Stock 19 Directors and Executive Officers as a Group........ 1,486,414<Fe> 12.7%
<FN>
- -------
<F*> Percentage does not exceed one percent.
<Fa> Includes the following shares which such persons have the right to acquire
within 60 days after April 24, 1997 upon the exercise of employee stock
options: Mr. April: 141,986; Mr. Arthur: 52,000; Mr. Essman: 310,000; Mr.
Isaak: 180,000; Mr. Morris: 140,000; and directors and executive officers
as a group: 903,127. The exercise prices for all options exercisable
within 60 days range from $14.75 to $35.00. Market Value as of April 24,
1997 was $16.125.
<Fb> Excludes 2,821 shares for Mr. April, 1,332 shares for Mr. Arthur, 39
shares for Mr. Isaak, 637 shares for Mr. Morris, and 11,833 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 42,595 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 1, 1997 ("fiscal year 1996"), the
Corporation's Board of Directors met 10 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 one other occasion and held two
meetings 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
7
<PAGE> 10
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 six meetings during the last fiscal year
and acted by unanimous consent on four 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 and as the governing committee under the
Restricted Stock Plan.
The Nominating and Governance Committee's members are Messrs. Reding
(Chairman), and Liberman and Ms. Krey. During fiscal year 1996, this Committee
acted by consent on one occasion and held informal discussions regarding
corporate governance and board size. 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 three times during fiscal year 1996. 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.
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 may 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, 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 1996, Mr. Liberman deferred a total of $25,300 in
retainer and fees and received dividend equivalents in the amount of $10,546.94
(reflecting payments on deferrals over a period of 6 years). During fiscal year
1996, Mr. Reding deferred his retainer of $10,000 and received dividend
equivalents in the amount of $2,008.70. In fiscal year 1996, Mr. Virgil
deferred $25,300 in retainer and fees and received dividend equivalents in the
amount of $1,642.69. During fiscal year 1996, Mr. Bohm deferred a total of
$25,300 in retainer and fees and received dividend equivalents in the amount of
$1,617.81. During fiscal year 1996, Ms. Krey deferred a total of $21,900 in
retainer and fees and received dividend equivalents in the amount of $1,375.73.
In fiscal year 1996, Mr. Sneider did not defer any fees and accordingly did not
receive dividend equivalents. Growth Units on deferred amounts were credited at
$12.64 per unit for deferrals during fiscal year 1996 and will be credited at
$11.98 for deferrals during the current fiscal year.
Under the Directors' Plan, the participants also receive 400 Phantom Stock
Rights ("Rights") annually for service as a non-management director. As of
June 1996, Messrs. Bohm, Liberman, Reding, Sneider and Virgil
8
<PAGE> 11
and Ms. Krey were each credited with 400 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 1996, 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 $17.564 per
Right and, accordingly, $7,025.60 was credited to Mr. Liberman's deferred
compensation account. Growth Units on the deferred amounts were credited at
$12.64 per unit. The 400 Rights credited to Mr. Bohm in 1996 automatically
matured and were paid out to Mr. Bohm in cash. Mr. Bohm's Rights matured at
$17.564 per Right and, accordingly, Mr. Bohm received payment of $7,025.60.
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.
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 and base salary deferred from prior years under the Corporation's
Deferred Compensation and Stock Appreciation Rights Plan and the Corporation's
Key Executive Deferred Compensation Plan.
The Compensation Committee, with the support of the Board, continued to
adhere to the following objectives in awarding executive compensation in 1996,
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 1996 were in concert with the principles
identified in the Corporation's General Compensation Policy described above. In
particular, compensation awarded in 1996 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.
9
<PAGE> 12
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, and frozen at
that level for fiscal years 1996 and 1997. The sole exception was made at end
of fiscal year 1996 when the base salary of one of the Senior Executive Vice
Presidents was increased in recognition of his assumption of additional duties.
Towers Perrin further reported that compensation paid to other Company
executives generally fell below the median paid for comparable positions in
comparable general industry, consumer products and specialty retail
organizations.
Base Salary Deferral
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. 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. 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 then credited with annual earnings on the Growth Units,
based on increases in the Corporation's book value, as adjusted for any
dilutive effect of the Company's repurchase of stock. Interest paid in the year
of deferral and earnings on Growth Units are subject to an interest rate floor
based on the average U.S. Treasury bond rate for the deferral period. Dividend
equivalents are paid on the Growth Units at the same rate dividends are paid to
stockholders. Book value increased from $12.12 at the end of fiscal 1994 to
$12.64 in 1995 and then decreased to $11.98 for year end 1996.Growth units were
credited in fiscal year 1996 for base salary deferral in 1995 as follows: Mr.
Arthur--1,288; Mr. Essman--24,227; and Mr. Morris--12,113. Of the named
executives, only Mr. Arthur deferred base salary in 1996.
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 (Mr. Essman) and executives in the Office
of the President (Messrs. Isaak, April and Morris) from 30% to 80% of base
salary. 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. Of the named executives,
only Mr. Arthur received a bonus for fiscal year 1996 ($12,500).
Restricted Stock
No restricted stock was granted to the named executives in fiscal year
1996.
Stock Options
The named executive officers were not awarded any options in fiscal year
1996 because the Company's earnings performance targets were not achieved.
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
10
<PAGE> 13
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. Earnings adjustments are subject
to an interest rate floor based on the average U. S. Treasury bond rate for the
years of deferral. 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
1996 on bonuses earned for 1995 as follows: Mr. Arthur--989; Mr. Essman--5,936;
and Mr. Morris--2,968.
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.
The Corporation matches each participant's voluntary contributions up to an
amount equal to a maximum of 5% of salary with corporate stock in an amount
equal to 50% of the participant's contributions. An employee who contributed 5%
or more of base compensation would receive stock equal to 2.5% of his or her
compensation. Although each of the named executive officers was eligible to
participate in the Program, only Mr. Morris, Mr. April and Mr. Arthur
participated in 1996. Participation in the Profit Sharing Plan is subject to
discrimination testing prescribed by federal regulations. As a result of this
testing, participation by highly compensated executives is limited to a very
small percentage of base compensation. Accordingly, the remaining named
executives have elected not to participate in the plan.
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 1996, his base salary remained frozen at $600,000, after
reduction 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 did not earn a bonus for 1996, nor was he
awarded any options.
Compliance with IRC Section 162(m)
While the Compensation Committee believes the $1 million limitation on
deductibility imposed by Section 162(m) will have limited application to
compensation paid to the Company's executives, the Committee's current intent
remains to preserve full deductibility of executive compensation. The overall
compensation program, as earlier described, has been designed to be heavily
related to the Corporation's earnings performance, and the annual incentive
component approved by shareholders in 1995, should enable the Company to avail
itself of deductions for all executive compensation paid in the foreseeable
future. The annual incentive plan approved by shareholders in 1995 shifted
emphasis to at-risk compensation by increasing bonus potential from 30% to 80%
of base compensation. The Corporation's Key Executive Deferred Compensation
Plan, adopted in 1995, should also enhance the Corporation's ability to
maintain full deductibility of executive compensation.
THE CPI CORP. COMPENSATION COMMITTEE
Lee Liberman, Chair Nicholas Reding Martin Sneider
11
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for each of the last three years:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- --------------------------------------
<F5> SECURITIES
<F4> RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) SARs COMPENSATION
------------------------- ---- ------ ----- ------------ ---------- ---------- ------------
($) ($) ($) ($) (#) ($)
(A) (B) (C) (D) (E) (F) (G) (H)
<S> <C> <C> <C> <C> <C> <C> <C>
Alyn V. Essman, Chairman 1996 600,000 0 0 0 0 173<F10>
and Chief Executive Officer 1995 600,000<F1> 150,000<F3> 0 0 13,136<F6> 161<F10>
1994 581,250<F2> 87,187<F3> 9,594 656,250 77,500<F7> 167<F10>
43,662<F8>
Russell Isaak, President 1996 400,000 0 0 0 0 173<F10>
1995 400,000 100,000<F3> 0 0 8,475<F6> 161<F10>
1994 400,000<F2> 56,250<F3> 4,946 375,000 40,000<F7> 167<F10>
19,718<F8>
4,225<F9>
Patrick J. Morris, Senior 1996 312,980 0 0 0 0 1,788<F11>
Executive Vice President 1995 300,000<F1> 75,000<F3> 0 0 5,932<F6> 679<F12>
1994 262,500<F2> 39,375<F3> 0 187,500 35,000<F7> 1,519<F13>
19,718<F8>
4,225<F9>
David E. April, Senior 1996 225,000 0 0 0 0 3,851<F11>
Executive Vice President 1995 225,000 56,250<F3> 3,081 0 5,085<F6> 1,063<F12>
1994 225,000<F2> 33,750<F3> 18,977 281,250 30,000<F7> 3,065<F13>
16,901<F8>
Barry C. Arthur, Executive 1996 170,980<F1> 12,500 0 0 0 3,710<F11>
Vice President--Finance 1995 150,000<F1> 25,000<F3> 0 0 2,542<F6> 881<F12>
1994 135,000<F2> 55,478<F3> 0 34,688 6,000<F7> 2,614<F13>
8,451<F8>
<FN>
- --------
<F1> Cash amounts earned in fiscal year, 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 year 1994,
the VSOP awarded officers electing such reductions one stock option for
every $2.50 in salary reduction. Participating executives could elect a
reduction of 5% to 25% of their base salaries in exchange for the
options. See footnote 7 below, for corresponding award of options in
1994. The VSOP was not offered in 1995 or 1996.
<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 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 1996 were: Mr.
Essman--47,297 ($874,995); Mr. Isaak--27,027 ($500,000); Mr.
Morris--13,514 ($250,009); Mr. April--20,270 ($374,995); and Mr.
Arthur--2,500 ($46,250). 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. Vesting was accelerated on the final one-third
awarded to Mr. April on his retirement February 2, 1997. Fair Market
Value as of the close of fiscal year 1996 was $18.50 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 was the only
year for which options have been awarded under this program, to date.
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 stock 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> Life insurance premiums.
<F11> Life insurance premiums of $173 for Mr. Morris, Mr. April and Mr. Arthur
plus employer contributions of stock to the profit sharing plan in the
following amounts: Morris--$1,615; April--$3,678; and Arthur--$3,537.
<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: Mr. Morris--$518; Mr. April--$902; and Mr.
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--$2,447.
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No options or stock appreciations rights were granted to the named
executives in fiscal year 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning option and SAR
exercises in the last fiscal year, and options and SARs remaining unexercised
at February 1, 1997, by the individuals named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
<F1>
SHARES NUMBER OF VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED IN-THE-MONEY
ON EXERCISE OPTIONS/SARs OPTIONS/SARs
OF OPTIONS/ AT FISCAL AT FISCAL
# OF SECURITIES YEAR-END (#) YEAR-END ($)
UNDERLYING VALUE EXERCISABLE/ EXERCISABLE/
NAME SARs REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- --------------------
($)
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Alyn V. Essman 0/0 0/0 155,000/211,798<F2><F3> $9,688/$314,507<F4><F5>
Russell Isaak 0/0 0/0 90,000/122,418<F2><F3> $5,000/$166,570<F4><F5>
Patrick J. Morris 0/0 0/0 70,000/99,875<F2><F3> $4,375/$142,034<F4><F5>
David E. April 0/0 0/0 60,000/81,986<F2><F3> $3,750/$121,744<F4><F5>
Barry C. Arthur 0/0 0/0 26,000/36,993<F2><F3> $750/$33,871<F4><F5>
<FN>
- --------
<F1> No options were exercised by the named executives in 1996. There were no
outstanding SARs in fiscal year 1996.
<F2> Exercisable options include options acquired by the named executives in
exchange for voluntary salary reductions in 1993 pursuant to the
Corporation's Voluntary Stock Option Plan and those issued on February 2,
1992 with an exercise price of $30.00.
<F3> Unexercisable options include options acquired by the named executives in
exchange for voluntary salary reductions in 1994 pursuant to the
Corporation's Voluntary Stock Option Plan.
<F4> The exercisable options were acquired in exchange for voluntary salary
reduction at the rate of $2.50 for each option. Value of exercisable
options is based on exercise price of $18.375 and market price of $18.50
on February 1, 1997. As of April 24, 1997, market value was $16.125.
<F5> Value of unexercisable options includes voluntary stock options
exercisable at $15.50 and market value of $18.50 as of February 1, 1997.
Approximately 58% of unexercisable in-the-money options held by Messrs.
Essman, Isaak, Morris and April and 35% of the unexercisable in-the-money
options held by Mr. Arthur were acquired in exchange for voluntary salary
reduction at the rate of $2.50 for each option. As of April 24, 1997,
market value was $16.125.
</TABLE>
13
<PAGE> 16
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.......... 5,033 7,550 10,066 12,583 15,100 17,616 20,133
150,000.......... 5,033 7,550 10,066 12,583 15,100 17,616 20,133
250,000.......... 5,033 7,550 10,066 12,583 15,100 17,616 20,133
</TABLE>
(All dollar amounts in the above chart are annualized.)
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 1996 in excess of $52,634 are not
included in calculation of the annual benefits payable under the Plan. As of
the end of the 1996 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--40, Russell Isaak--24, Patrick J. Morris--11, David E.
April--33, and Barry C. Arthur--31.
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 is 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 1996, 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 1997 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--$750,000; and
Barry C. Arthur--$358,000. Mr. April retired on February 2, 1997.
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 of Control. 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
14
<PAGE> 17
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. These payments commence
on the later of (i) age 65 or (ii) the date of retirement. 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 1996 of $19,429, $9,730, $12,219, $11,239 and $17,781 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. 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.
The supplemental retirement and death benefits provided for under the
employment contracts survive the term of employment, unless the executive is
terminated for cause (as defined in the agreement). Mr. Bohm, a director of the
Corporation and a retired officer, received payment of $100,000 under this plan
during fiscal 1996.
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, the Deferred Compensation and Stock
Appreciation Rights Plan and the Key Executive Deferred Compensation 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 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.)
15
<PAGE> 18
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN<F*>
CPI CORP., S&P 500 STOCK INDEX, AND RUSSELL 2000
<TABLE>
<CAPTION>
YEAR S&P 500 RUSSELL 2000 CPI CORP.
<S> <C> <C> <C>
1/87 100 100 100
1/88 97 85 82
1/89 116 107 103
1/90 133 108 110
1/91 144 104 140
1/92 177 151 128
1/93 195 171 109
1/94 220 203 82
1/95 222 191 80
1/96 302 246 82
1/97 368 292 108
<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 7, 1998. 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 1, 1997.
16
<PAGE> 19
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR FISCAL 1997.
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
2, 1997, to stockholders of record as of April 24, 1997.
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 2, 1997
17
<PAGE> 20
CPI CORP.
PRODUCTS AND SERVICES FOR CONSUMERS
1706 WASHINGTON AVENUE
ST. LOUIS, MISSOURI 63103
TELEPHONE (314) 231-1575
May 2, 1997
DEAR CPI CORP. STOCKHOLDER:
You are cordially invited and encouraged to attend the 1997
Annual Meeting of Stockholders of CPI Corp. The meeting will be
held on Thursday, June 12, 1997, 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
1997 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 12, 1997
I, revoking all previous proxies, hereby appoint Alyn V. Essman and Russell
Isaak or either of them as my Proxy or Proxies, 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") which I held of record on April 24, 1997, at
the annual meeting of stockholders to be held at 10 a.m. central daylight time
on June 12, 1997, at CPI Corp., 1706 Washington, St. Louis, Mo. 63103, and at
any adjournment thereof.
ITEM 1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
vote for all nominees listed below) 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,
Patrick J. Morris, Nicholas L. Reding, Martin Sneider, Robert L. Virgil
ITEM 2. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK LLP 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 ___________________________________________
<PAGE> 22
APPENDIX
Page 16 of the printed Proxy contains a performance graph. The information
contained in the graph has been presented in a tabular format that may be
processed by the EDGAR system.
