<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
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
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(4) Date filed:
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<PAGE> 2
CPI CORPORATION LOGO
May 1, 2000
DEAR CPI CORP. STOCKHOLDER:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of CPI Corp. The meeting will be held on Thursday, June 1, 2000, 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 LOGO]
NOTICE OF ANNUAL STOCKHOLDERS' MEETING
TO OUR STOCKHOLDERS:
The annual meeting of the stockholders of CPI Corp. (the "Corporation")
will be held on June 1, 2000, 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 LLP as the
Corporation's independent certified public accountants for the fiscal
year ending February 3, 2001;
3. To act upon a proposed annual incentive program for key executives to
further strengthen the alignment of executive compensation with
shareholder interests; and
4. 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, 2000, 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 1, 2000
<PAGE> 4
[CPI CORP. LOGO]
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 1, 2000
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being mailed beginning
May 1, 2000, 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 1, 2000, at
10:00 a.m. (CDT) 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, or other means, for which they will
receive no compensation in addition to their normal compensation. The
Corporation has also retained Harris Trust and Savings Bank, 111 West Monroe,
P.O. Box 755, Chicago, Illinois 60690-0755, to assist in the solicitation of
Proxies from stockholders, including brokerage houses and other custodians,
nominees, and fiduciaries and will pay that firm out-of-pocket expenses.
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.
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.
OTHER MATTERS
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
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<PAGE> 5
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.
PROPOSALS BY HOLDERS OF SHARES OF COMMON STOCK
Any proposals of stockholders intended to be presented at the 2001 Annual
Meeting must be received by the Company no later than January 1, 2001 for
inclusion in the Company's Proxy Statement and form of Proxy.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of common stock of the Corporation of record at the close of
business on April 25, 2000, 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, 2000, there were 8,067,319 shares of common stock
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 1997, 1998 and 1999 annual meetings 89.06%, 82% and 86.9%
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;
(2) THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT
AUDITORS FOR THE CORPORATION'S FISCAL YEAR 2000; AND
(3) APPROVAL OF AN ANNUAL INCENTIVE PROGRAM FOR KEY EXECUTIVES TO FURTHER
STRENGTHEN ALIGNMENT OF EXECUTIVE COMPENSATION WITH SHAREHOLDER
INTERESTS.
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 Corporation 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)
The Corporation's By-laws provide that the number of directors constituting
the full Board of Directors shall be no more than nine (9). Throughout fiscal
1999, nine Directors served on the Board, including all of the nominees. Mary
Ann Krey resigned from the Board as of February 28, 2000. After considering
recent and current issues presented to the Board and the time required to select
a qualified director, the Nominating and Governance Committee recommended, and
the Board of Directors concurred, that eight (8) directors be elected at the
Meeting, each to serve for a term of one year and thereafter until their
successors are duly elected and qualified. Proxies may not be cast for more than
eight (8) nominees. The following eight nominees are presently directors of the
Corporation: Messrs. Bohm, Essman, Isaak, Liberman, Morris, Reding, Sneider and
Virgil.
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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.
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 78
Associates, personal investments
Alyn V. Essman 1968 Chairman and Chief Executive Officer 68
of the Corporation
Russell Isaak 1992 President of the Corporation 57
Lee M. Liberman 1982 Chairman Emeritus of the Board of 78
Laclede Gas Company, a St. Louis,
Missouri public utility
Patrick J. Morris 1997 Senior Executive Vice President of the 60
Corporation and President of the
Corporation's Portrait Studio
Division
Nicholas L. Reding 1992 Chairman of the Board of the Nidus 65
Center for Scientific Enterprise, a
St. Louis, Missouri, incubator for
entrepreneurs focused on plant
science and biotechnology
Martin Sneider 1994 Adjunct Professor of Retailing at 57
Washington University of St. Louis,
Missouri
Robert L. Virgil 1982 Principal, Edward Jones, a full 65
service retail 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 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.
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 July 1, 1993. He was also
Chief Executive Officer of Laclede Gas Company from April 23, 1976 until July 1,
1991. He is a director of Falcon Products, Inc., Furniture Brands, Inc. and DT
Industries.
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<PAGE> 7
Mr. Morris has served as Senior Executive Vice President of the Corporation
and as a member of the Office of the President since February 1992. He became
President of the Corporation's Portrait Studio Division in October 1997. 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 Chairman of the Board of Directors of the Nidus Center for
Scientific Enterprise, a business incubator in St. Louis, Missouri, which
focuses on plant science and biotechnology. He served as Vice Chairman of the
Board of Monsanto Company, a St. Louis, Missouri based manufacturer of
pharmaceuticals, agricultural and food products sold worldwide from 1992 until
his retirement in 1998. 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 International
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 also serves as a director of
Agribrands International and is a member 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 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 GenAmerica Corporation and Maritz, Inc.
EXECUTIVE OFFICERS
Following is a list of all individuals who served as Corporate Executive
Officers during 1999, together with their respective ages and the positions in
which they have served the Corporation:
Alyn V. Essman (68)......... 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 (57).......... 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.
Patrick J. Morris (60)...... Senior Executive Vice President and President,
Portrait Studio Division. Mr. Morris joined the
Corporation in May 1985 as its Executive Vice
President-Marketing. Effective February 1992, he
was appointed Senior Executive Vice President. In
October 1997, he became President of the
Corporation's Portrait Studio Division. Mr.
Morris is a member of the Office of the President
and of the Executive Committee of officers.
Barry C. Arthur (57)........ Executive Vice President-Finance and Chief
Financial Officer. Mr. Arthur joined the
Corporation in 1965 as an accountant and
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<PAGE> 8
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 (50)......... 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.
Fran Scheper (54)........... 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the Company's best knowledge, the following table sets forth beneficial
owners of more than five percent (5%) of the common stock of the Corporation.
<TABLE>
<CAPTION>
(3)
(1) (2) AMOUNT AND (4)
TITLE NAME AND ADDRESS OF NATURE OF PERCENT
OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------- ------------------- -------------------- --------
<S> <C> <C> <C>
Common Stock NewSouth Capital Management, Inc. 1,463,174(1) 16.5%
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
Common Stock First Pacific Advisors, Inc. 1,409,400(2) 15.7%
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
Common Stock Alyn V. Essman 531,913(3)(4) 6.3%(5)
1706 Washington Avenue
St. Louis, Missouri 63103
</TABLE>
- ---------------
(1) As reported on Amendment No. 7 to its Schedule 13G, dated February 10, 2000,
NewSouth Capital Management, Inc., ("NewSouth") an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940, was the
owner of 1,463,174 shares as of December 31, 1999, representing
approximately 16.5% of the total shares outstanding on that day. NewSouth
has sole voting power for 1,445,674 of the shares, shared voting power for
17,500 shares and sole dispositive power for all the shares.
(2) As reported on Amendment No. 3 to its Schedule 13G, dated February 8, 2000,
First Pacific Advisors, Inc. ("First Pacific"), an Investment Adviser
registered under Section 203 of the Investment Advisers Act of 1940,
beneficially owned 1,409,400 shares, or approximately 15.7% of the total
shares outstanding on December 31, 1999. First Pacific has shared voting
power with respect to 665,400 of the shares and shared dispositive power
with respect to all the shares.
(3) Includes 366,798 shares which Mr. Essman has the right to acquire within 60
days after April 25, 2000 upon the exercise of employee stock options. The
exercise prices for Mr. Essman's options exercisable within 60 days range
from $14.75 to $35.00.
(4) Excludes 40,000 shares beneficially owned by Mr. Essman's wife and 111,100
shares held by the Essman Family Charitable Foundation as to which Mr.
Essman expressly disclaims beneficial ownership.
(5) Percentage determined as of April 25, 2000.
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<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT
Information is set forth below regarding beneficial ownership of Common
Stock of the Company as of April 25, 2000 by (i) each person who is a director
and nominee; (ii) each executive officer named in the Summary Compensation Table
on page 13; 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 (4)
(1) (2) OF BENEFICIAL PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ------------------------ ----------------- --------
<S> <C> <C> <C>
Common Stock Barry C. Arthur 66,857(a)(b) *
Common Stock Milford Bohm 30,000(c) *
Common Stock Alyn V. Essman 531,913(a)(d) 6.30%
Common Stock Russell Isaak 333,380(a)(b) 4.03%
Common Stock Lee Liberman 400(c) *
Common Stock Patrick J. Morris 183,374(a)(b) 2.23%
Common Stock Nicholas Reding 1,200(c) *
Common Stock Fran Scheper 31,098(a)(b) *
Common Stock Martin Sneider 500(c) *
Common Stock Robert Virgil 600(c) *
Common Stock Directors and Executive Officers as a Group 1,192,785(a)(b)(d) 13.37%
</TABLE>
- ---------------
* Percentage does not exceed one percent.
(a) Includes the following shares which such persons have the right to acquire
within 60 days after April 25, 2000 upon the exercise of employee stock
options: Mr. Arthur: 62,993; Mr. Essman: 366,798; Mr. Isaak: 212,418; Mr.
Morris: 169,875; Ms. Scheper: 29,993; and directors and executive officers
as a group: 854,033. The exercise prices for all options exercisable within
60 days range from $13.875 to $35.00. Market Value as of April 25, 2000 was
$23.94.
(b) Includes 960 shares for Mr. Arthur; 19 shares for Mr. Isaak; 450 shares for
Mr. Morris; 854 shares for Ms. Scheper; and 2,621 shares for directors and
executive officers as a group, all held under the CPI Corp. Employees'
Profit Sharing Plan and Trust. With respect to such shares, the executives
have neither voting power nor investment power.
(c) Excludes Phantom Stock Rights, which are based on value of common stock, and
Growth Units for Deferred Compensation, which are based on book value, as
follows: Mr. Bohm: 12,396 Growth Units; Mr. Liberman: 46,993 Growth Units;
Mr. Reding: 2,400 Phantom Stock Rights and 7,892 Growth Units; Mr. Sneider:
2,000 Phantom Stock Rights; and Mr. Virgil: 4,400 Phantom Stock Rights and
12,138 Growth Units. See page 9 for further explanation of Phantom Stock
Rights and Growth Units.
(d) Excludes 40,000 shares beneficially owned by Mr. Essman's wife, as to which
he expressly disclaims beneficial ownership, and 111,100 shares held by the
Essman Family Charitable Foundation.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended February 5, 2000 ("fiscal year 1999"), the
Corporation's Board of Directors met fourteen (14) 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 six (6) other occasions.
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<PAGE> 10
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 during fiscal year 1999 were Messrs. Virgil (Chairman)
and Bohm and Ms. Krey. Current members are Messrs. Virgil (Chairman), Bohm and
Sneider. All of the members of the Audit Committee are independent. The
Committee held five 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 two meetings during the last fiscal year
and acted by unanimous consent on one occasion. 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 during fiscal year 1999
were Messrs. Reding (Chairman), and Liberman and Ms. Krey. Current members of
the Nominating and Governance Committee are Messrs. Reding, Liberman and Virgil.
During fiscal year 1999, this Committee held one meeting. The Nominating and
Governance 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 and Governance 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 1999. 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"). It was amended and restated as of June 6, 1996 and subsequently amended
and restated as of January 28, 2000. Participation in the Directors' Plan is
limited to directors who are not employees of the Corporation. It 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 Directors' Plan at any time. The amendment
adopted in fiscal year 1999 conforms the Directors' Plan to the plan governing
deferred compensation for executives in the event of a change of control.
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, fees, and other compensation for such fiscal
year, select a deferral period of not less than three years and choose to
receive the deferred
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<PAGE> 11
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 1999 the Directors deferred income and received dividend
equivalents as follows: Mr. Bohm deferred a total of $29,550 in retainer and
fees and received dividend equivalents in the amount of $4,234. Ms. Krey
deferred a total of $25,300 in retainer and fees and received dividend
equivalents in the amount of $3,765. Mr. Liberman deferred a total of $23,600 in
retainer and fees and received dividend equivalents in the amount of $15,529.
Mr. Reding deferred a total of $26,150 in retainer and fees and received
dividend equivalents in the amount of $3,485. Mr. Virgil deferred $27,000 in
retainer and fees and received dividend equivalents in the amount of $4,580.
Growth Units (which are based on book value) on deferred amounts were credited
at $11.81 per unit for deferrals during fiscal year 1999 and will be credited at
approximately $9.28 for deferrals during the current fiscal year. Mr. Sneider
did not defer his retainer or any fees for 1999 and did not receive any dividend
equivalents. He received a total of $26,150 in retainer and fees.
Each non-management director also receives 400 Phantom Stock Rights
annually. This component of Directors' compensation is particularly important
because it is tied to shareholder value. The value of each Phantom Stock Right
as of the date of award is the fair market value of one share of common stock on
the date preceding the date of award. The value at maturity is equal to the
average fair market value of the common stock for the six month period
immediately preceding maturity. As of June 1999, Messrs. Bohm, Liberman, Reding,
Sneider and Virgil and Ms. Krey were each awarded 400 Phantom Stock Rights for
one year of Board service completed on the day prior to their reelection at the
1999 Annual Meeting of Stockholders.
The Phantom Stock 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, (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) or (vi) a change of control. Before the maturity of his or
her Phantom Stock 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 1999, 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 $29.22 (the
average fair market value of the Corporation's common stock for the six month
period preceding maturity); accordingly, $11,688 was credited to Mr. Liberman's
deferred compensation account. Growth Units on the deferred amounts were
credited at $11.81 per unit. The 400 Rights credited to Mr. Bohm in 1999
automatically matured at $29.22 per Right and Mr. Bohm elected to receive a
payment of $11,688.
In 1999 Mr. Reding also received $50,000 for his service as lead director
in overseeing the Board's search for potential acquisition or merger candidates
and in negotiating a proposed transaction. This special payment was approved by
the Board of Directors with Mr. Reding abstaining.
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.
9
<PAGE> 12
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 1999,
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 1999 were in concert with the principles
identified in the Corporation's General Compensation Policy described above. In
particular, compensation awarded in 1999 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.
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.
The base salaries paid to the Chief Executive Officer, the President and the
Senior Executive Vice President were reduced for fiscal year 1995. Base
compensation for the Chairman and Chief Executive Officer and the President was
frozen at the 1995 level through 1999. After reduction in 1995, the base salary
of the Senior Executive Vice President was increased in late 1996 and in 1997 in
recognition of his assumption of additional duties. His base salary was frozen
at its 1997 level through fiscal year 1999. Base salaries for the Chairman and
Chief Executive Officer, the President and the Senior Executive Vice President
were reduced by a total of $150,000 for fiscal year 2000, in conjunction with
the Corporation's profit improvement initiatives, while more emphasis was
shifted to bonus potential.
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 adjusted by the greater of (a) change in book value
or (b) the 30 year U.S. Treasury bond rate, net of dividend equivalents which
are paid on
10
<PAGE> 13
the Growth Units at the same rate dividends are paid to stockholders. Book value
decreased from $11.98 at fiscal year end 1996 to $10.33 at fiscal year end 1997.
It then increased to $11.81 at fiscal year end 1998 and decreased to $9.28 at
fiscal year end 1999. None of the named executives deferred base salary in 1999.
Non-dividend Growth Units were credited in 1999 to the following named
executives for base salary deferred in prior years: Mr. Arthur: 892 and Mr.
Morris: 3,261.
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 and Morris) for fiscal years 1994 through 1997.
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. Similar bonus plans for fiscal years 1998 and
1999 were approved by stockholders. The Compensation Committee establishes new
annual bonus targets based on the Corporation's earnings per share at the
commencement of each fiscal year. The Chairman and Chief Executive Officer, the
President and the Senior Executive Vice President did not earn a bonus for 1999.
STOCK OPTIONS
An annual stock option bonus plan, initiated in 1992, provides for an
annual award of options if targets established by the Compensation Committee at
the commencement of each fiscal year are achieved. No options were awarded to
any executives under this plan for fiscal 1999.
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 the greater of (a)
changes in the Corporation's book value and (b) the 30 year U.S. Treasury bond
rate, net of dividend equivalents which are paid at the same rate that dividends
are paid to stockholders. Non-dividend Growth Units were credited to the Chief
Executive Officer and other named executive officers in fiscal year 1999 for
bonuses earned in prior years and deferred as follows: Mr. Arthur--1,090; Mr.
Essman--14,153; Mr. Morris--4,595 and Ms. Scheper--1,192.
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 a
maximum of 5% of salary, with corporate stock in an amount equal to 50% of the
participant's contributions. Thus an employee who contributed 5% 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. Arthur and Ms. Scheper participated in the Profit Sharing Plan
in 1999.
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 1999, his base salary remained frozen at $600,000 (as it has
since 1995), after reduction from $775,000 as part of the Committee's
restructuring of compensation to shift emphasis to at-risk compensation. His
base salary was reduced to $500,000 for fiscal year 2000. Mr. Essman did not
receive a cash or option bonus for fiscal year 1999.
11
<PAGE> 14
COMPLIANCE WITH IRC SECTION 162(M)
While the Compensation Committee believes the $1 million limitation on
deductibility imposed by Section 162(m) has had limited application to
compensation paid to the Company's executives, the Committee's current intent
remains to preserve full deductibility of executive compensation. The overall
compensation program, as earlier described, has been designed to be heavily
related to the Corporation's earnings performance, and the annual incentive plan
to be submitted to shareholders for approval at the 2000 Annual Meeting, if
approved, should enable the Company to avail itself of deductions for all
executive compensation paid through the current fiscal year. The Corporation's
Key Executive Deferred Compensation Plan, adopted in 1995, also enhances the
Corporation's ability to maintain full deductibility of executive Compensation.
THE CPI CORP. COMPENSATION COMMITTEE
LEE LIBERMAN, CHAIR NICHOLAS REDING MARTIN SNEIDER
12
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation of the named executive
officers for each of the last three years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ------------------------------------------------------
(4) SECURITIES
(3) RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) SARS COMPENSATION
- ------------------------- ---- ------ ----- ------------ ---------- ---------- ------------
($) ($) ($) ($) (#) ($)
(A) (B) (C) (D) (E) (F) (G) (H)
<S> <C> <C> <C> <C> <C> <C> <C>
Alyn V. Essman, 1999 600,000 0 0 0 0 0(7)
Chairman and Chief 1998 600,000 463,884(2) 0 0 22,626(5) 0(7)
Executive Officer 1997 600,000 494,182(2) 80,145 0 11,530(6) 48(7)
Russell Isaak, 1999 400,000 0 0 0 0 156(7)
President 1998 400,000 309,256 0 0 15,084(5) 168(7)
1997 400,000 329,455 0 0 7,687(6) 168(7)
Patrick J. Morris, 1999 375,000 0 0 0 0 156(7)
Senior Executive 1998 375,000 289,928 0 0 14,141(5) 168(7)
Vice President 1997 375,000 308,864 0 0 7,206(6) 2,980(10)
Barry C. Arthur, 1999 188,000 13,400 0 0 0 2,316(8)
Executive Vice 1998 179,000 90,000 0 0 6,751(5) 2,340(9)
President-Finance 1997 179,000(1) 86,380(2) 0 8,000 3,440(6) 4,698(10)
Fran Scheper, 1999 188,000 9,400 0 0 0 2,160(8)
Executive Vice 1998 179,000 90,000 0 0 6,751(5) 2,172(9)
President-Human 1997 179,000 86,380 0 6,000 3,440(6) 3,873(10)
Resources
</TABLE>
- ---------------
(1) Cash amounts earned in fiscal year, even if deferred under the Corporation's
Key Executive Deferred Compensation Plan adopted in 1995.
(2) Cash amounts earned for the respective fiscal year, even if deferred under
the Corporation's Deferred Compensation and Stock Appreciation Rights Plan
approved by stockholders in 1992.
(3) The amounts in this column represent above-market earnings on deferred
compensation paid during the fiscal year.
(4) Awarded at the close of fiscal year 1997 in recognition of executive's
contribution in the sale of the photofinishing segment. At the close of
fiscal 1999, Mr. Arthur held 112 restricted shares with a value of $2,723.
Ms. Scheper held 83 shares valued at $2,018. Dividends are paid on
restricted shares at the same rate paid to all holders of common stock.
(5) Options awarded on May 7, 1998 as part of a special award to all 60 officers
of the Corporation and options awarded for 1998 performance under an annual
option bonus program for key executives adopted in 1992.
(6) Options awarded for 1997 performance under an annual option bonus program
for key executives adopted in 1992.
(7) Life insurance premiums.
(8) Life insurance premiums of $705 for Mr. Arthur and $549 for Ms. Scheper plus
employer contributions of stock to the profit sharing plan in the following
amount: Mr. Arthur--$1,611 and Ms. Scheper--$1,611.
(9) Life insurance premiums of $699 for Mr. Arthur and $531 for Ms. Scheper plus
employer contributions of stock to the profit sharing plan in the following
amounts: Arthur--$1,641; and Scheper--$1,641.
13
<PAGE> 16
(10) Life insurance premiums of $168 for Mr. Morris, $698 for Mr. Arthur and
$538 for Ms. Scheper plus employer contributions of stock to the profit
sharing plan in the following amounts: Morris--$2,812; Arthur--$4,000; and
Scheper--$3,335.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No stock options or stock appreciation rights were awarded in the last
fiscal year to the individuals named in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning option and SAR
exercises in the last fiscal year, and options and SARs remaining unexercised at
February 5, 2000, by the individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
(1) UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON EXERCISE AT FISCAL AT FISCAL
OF OPTIONS/ YEAR-END (#) YEAR-END ($)
# OF SECURITIES VALUE EXERCISABLE/ EXERCISABLE/
NAME UNDERLYING SARS REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------------- --------------------
($)
(A) (B) (C) (D) (E)(3)
<S> <C> <C> <C> <C>
Alyn V. Essman 0/0 0/0 366,798/34,156(2) $1,555,270/$4,295
Russell Isaak 0/0 0/0 212,418/22,771(2) $824,471/$2,863
Patrick J. Morris 0/0 0/0 169,875/21,347(2) $726,404/$2,684
Barry C. Arthur 0/0 0/0 62,993/10,191(2) $168,268/$1,281
Fran Scheper 0/0 0/0 29,993/10,191(2) $254,830/$1,281
</TABLE>
- ---------------
(1) No options were exercised by the named executives in 1999. There were no
outstanding SARs in fiscal year 1999.
(2) Exercisable options include options acquired by the named executives in
exchange for voluntary salary reductions in 1993 and 1994 pursuant to the
Corporation's Voluntary Stock Option Plan and those issued on February 2,
1992 with an exercise price of $30.00 and $35.00. As of April 25, 2000,
market value was $23.94.
(3) Value of exercisable in-the-money options does not reflect voluntary salary
reductions in 1993 and 1994 in the following total amounts for which the
options were granted: Mr. Essman--$387,500; Mr. Isaak--$200,000; Mr.
Morris--$175,000; Mr. Arthur--$30,000; and Ms. Scheper--$22,500. After
factoring in the voluntary salary reductions, the net values of the
in-the-money exercisable options held by the named executives are: Mr.
Essman--$1,167,770; Mr. Isaak--$624,471; Mr. Morris--$551,404; Mr.
Arthur--$138,268; and Ms. Scheper--$232,330.
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.
PENSION PLAN TABLE
<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 and above 7,167 10,751 14,334 17,918 21,501 25,085 28,668
</TABLE>
(All dollar amounts in the above chart are annualized.)
14
<PAGE> 17
The Corporation maintains a defined benefit Retirement Plan (the "Plan")
for all qualifying employees of the Corporation. For purposes of the Pension
Plan, remuneration includes annual base salary and bonus as reported in the
Summary Compensation Table; through 1997, executive earnings in excess of
$54,371 are not included in calculation of the annual benefits payable under the
Plan; commencing in 1998, remuneration in excess of $100,000 annually is not
included. As of the end of the 1999 fiscal year, the years of credited service
for purposes of computing retirement benefits under the Plan for the named
executives are as follows: Mr. Essman--43, Mr. Isaak--27, Mr. Morris--14, Mr.
Arthur--34 and Ms. Scheper--32.
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, 1995, multiplied by the number of years of the participant's
service. Alternatively, a participant may elect to convert his normal monthly
benefit to a Contingent Annuitant Option (which provides retirement benefits
payable to the participant during his lifetime and to his or her beneficiary
after the participant's death), or to an Option for Life Annuity with guaranteed
number of monthly payments (which provides for retirement benefits payable for a
guaranteed number of months first to the participant, with any remaining amounts
payable to his or her 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 1999, the Corporation employed the named executives
under employment agreements that establish base compensation, bonus and
remuneration in the event of a Change of Control. In the event an executive's
employment is terminated (other than for Cause, as defined in the agreement)
prior to a Change of Control, the corporation must continue payment of that
executive's Base Salary for six months. 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. If the named executive officers are terminated (other than for
Cause) during fiscal 2000 as a result of a Change of Control, the executives are
entitled to the following lump sum payments: Alyn V. Essman--$1,000,000; Russell
Isaak--$750,000; Patrick J. Morris--$700,000; Barry C. Arthur--$376,000; and
Fran Scheper--$376,000.
An executive whose employment is not terminated after a Change of Control
is entitled to continue in a comparable position. The executive's base salary
cannot be reduced and after a Change of Control, his or her bonus cannot be less
than the highest bonus he or she 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 before the Change of Control.
Under their employment agreements, the named executive officers are
entitled to receive supplemental retirement benefits equal to 40% of their
highest base salary from and after fiscal year 1997, not to exceed $150,000
annually, for twenty 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, for which the
Corporation is the named beneficiary. The Corporation made insurance premium
payments in fiscal year 1999 of $386,010, $73,200, $243,961, $17,784 and
$113,212 on Messrs. Essman, Isaak, Morris and Arthur and Ms. Scheper,
respectively. Beneficiaries of a named executive officer who dies prior to
retirement receive annually 40% of the executive's highest base salary from and
after 1997, not to exceed $150,000, for twenty years after the date of the
executive's death. An officer who becomes disabled is entitled to receive
annually (in addition to the amount payable on death or disability) 40% of his
or her highest base salary from and
15
<PAGE> 18
after 1997, not to exceed $150,000, until the earlier of (i) the date of his or
her death or (ii) the date he or she attains age 65. The supplemental retirement
and death benefits provided for under the employment contracts survive the term
of employment, unless the executive is terminated for Cause.
Certain of the Corporation's employee benefit plans provide for the
acceleration of the payment benefits upon a Change of Control, including the
Restricted Stock Plan, the Deferred Compensation and Stock Appreciation Rights
Plan, the Key Executive Deferred Compensation Plan and the Stock Option Plans.
If such accelerated benefits plus the severance amount payable 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 executive is also entitled
to the amount of such tax.
16
<PAGE> 19
COMPARISON OF TEN-YEAR CUMULATIVE RETURN*
CPI CORP., S&P 500 STOCK INDEX, AND RUSSELL 2000
[GRAPH]
The Russell 2000 index was selected because it encompasses similarly-sized
companies to CPI, as well as diversified companies, like CPI.
- ---------------
* 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.
RATIFICATION OF INDEPENDENT AUDITORS (PROXY ITEM NO. 2)
The Board of Directors has selected KPMG LLP, independent certified public
accountants, to audit the accounts of the Corporation and its subsidiaries for
its current fiscal year ending February 3, 2001. 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 LLP, or any associate thereof, has any financial interest in the
Corporation or in its subsidiaries.
A representative of KPMG 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 5, 2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS FOR FISCAL 2000.
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.
17
<PAGE> 20
PROPOSED ANNUAL INCENTIVE PLAN FOR KEY EXECUTIVES
(PROXY ITEM NO. 3)
In 1995, the Compensation Committee restructured executive compensation
packages to strengthen alignment of executive compensation with shareholder
value by increasing emphasis on at-risk compensation. The restructuring featured
potential for total compensation comparable to that for 1994, but with reduced
base salaries and an annual incentive plan for fiscal years 1995 through 1997
(which was approved by stockholders at the 1995 Annual Meeting) that increased
maximum bonus potential from 30% to 80% of base pay. Similar plans for fiscal
years 1998 and 1999 were also approved by stockholders.
For fiscal year 2000, the Compensation Committee has adopted, subject to
shareholder approval, an annual incentive bonus plan providing for a
pre-established, objective, earnings performance-based formula for awarding
annual incentives to the Chairman and Chief Executive Officer, the President and
the Senior Executive Vice President/President-Portrait Studio Division. The
proposed bonus plan provides for bonus potential ranges from 0% to 125% of base
salary; provided, however, that total potential compensation (base salary and
bonus) for fiscal 2000 cannot exceed total potential for fiscal 1999. Thus more
compensation is "at-risk" in fiscal 2000. The Compensation Committee believes
that the actual targets reflect confidential business information, the
disclosure of which would adversely affect the Corporation. The proposed annual
incentive plan will not be effective unless it is approved by shareholders.
Furthermore, no bonus will be paid to these executives except in accordance with
the pre-established formula adopted by the Committee, and the Committee will
certify attainment of the pre-established targets prior to payment of any
bonuses under this plan. The performance targets are based on earnings per
share. Any payments under the annual incentive plan will be made in cash. The
annual incentive plan will be in effect for fiscal year 2000.
NEW PLAN BENEFITS
ANNUAL INCENTIVE PLAN FOR 2000
<TABLE>
<CAPTION>
DOLLAR VALUE
(MINIMUM AND MAXIMUM
NAME AND POSITION OF PAYMENTS)
- ----------------- --------------------
<S> <C>
Mr. Essman, Chairman and Chief Executive Officer $0 to $580,000
Mr. Isaak, President $0 to $345,000
Mr. Morris, Senior Executive Vice
President/President-Portrait Studio Division $0 to $325,000
</TABLE>
The foregoing table shows the maximum dollar amount of compensation that
could be paid to each eligible employee if the performance goals under the
annual incentive plan for fiscal year 2000 are achieved. No executives or
employees of the Corporation, other than those listed in the above table, will
be eligible for benefits under the proposed plan.
The Committee seeks shareholder approval on this annual incentive plan for
the three most highly compensated executives of the Corporation because it
believes that continuing to place greater emphasis on at-risk compensation will
best serve the interests of shareholders, as well as those of the Corporation.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the Federal income tax deduction for publicly held corporations
to $1,000,000 in any taxable year for compensation paid to each of the Chief
Executive Officer and the four other highest paid executive officers who are
employed by the corporation on the last day of the taxable year. This rule
applies to all deductible compensation including the deduction arising from the
payment of incentive compensation. Various forms of compensation are exempted
from this deduction limitation, including payments that are (1) subject to the
attainment of pre-established objective performance goals, (2) established
18
<PAGE> 21
and administered by a committee of outside directors, (3) approved by
stockholders and (4) payable only upon certification by the committee of outside
directors that the applicable performance goals were in fact satisfied. The
Board of Directors believes that payments made under the proposed annual
incentive plan, if approved by shareholders, will qualify for exemption from the
deduction limits of Section 162(m) of the Code, and, therefore, will be
deductible for Federal income tax purposes by the Corporation.
The Board of Directors will present the following resolution to the
stockholders for action at the 2000 Annual Meeting:
RESOLVED, that an annual incentive plan for fiscal year 2000 for the
Chairman and Chief Executive Officer, the President, and the Senior
Executive Vice President/President-Portrait Studio Division, authorizing
annual bonuses ranging from 0% to 125% of base salaries and with maximum
total potential compensation (base salary and bonus) equal to maximum total
potential for fiscal year 1999, provided that such bonuses shall not exceed
the following amounts: Mr. Essman--$580,000; Mr. Isaak--$345,000; and Mr.
Morris--$325,000; upon attainment of predetermined, objective earnings
targets established by the independent Directors who serve on the
Compensation Committee, is hereby approved by the stockholders of the
Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
The affirmative vote of the majority of the votes cast at the meeting by
the stockholders entitled to vote thereon shall be sufficient for the approval
of the proposed annual incentive plan for the Chairman and Chief Executive
Officer, the President, and the Senior Executive Vice President/
President-Portrait Studio Division, as described above.
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
1, 2000, to stockholders of record as of April 25, 2000.
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 AVENUE, ST. LOUIS,
MISSOURI 63103.
By Order of the Board of Directors,
/s/ JANE E. NELSON
JANE E. NELSON
Secretary and General Counsel
Dated: May 1, 2000
19
<PAGE> 22
PROXY PROXY
CPI CORP.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CPI CORP.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 1, 2000
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, 2000 at the annual
meeting of stockholders to be held at 10 a.m. central daylight time on June 1,
2000, at CPI Corp., 1706 Washington Avenue, St. Louis, Missouri 63103, and at
any adjournment thereof.
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 Items 2 and 3.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued, and to be signed, on the other side.)
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<PAGE> 23
CPI CORP.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<CAPTION>
<S><C>
[ ]
1. ELECTION OF DIRECTORS - For Withhold For All 2. Ratification of appointment of KPMG For Against Abstain
Nominees: 01 - Milford Bohm, All All Except LLP as the Corporation's Independent / / / / / /
02 - Alyn V. Essman, / / / / / / Certified Public Accountants.
03 - Russell Isaak,
04 - Lee M. Liberman,
05 - Patrick J. Morris,
06 - Nicholas L. Reding, 3. Approval of Resolution to provide for For Against Abstain
07 - Martin Sneider, Annual Incentive Program for Chairman / / / / / /
08 - Robert L. Virgil and Chief Executive Officer, President
and Senior Executive Vice President.
___________________________________________________________
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee(s) name above.)
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.
SIGN
HERE _____________________________________________________________
(Please sign exactly as name appears hereon)
SIGN
HERE _____________________________________________________________
Executors, administrators, trustees, etc. should
so indicate when signing
Dated: ___________________________________________________________
</TABLE>
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/\ FOLD AND DETACH HERE /\
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
