On January 14, 2009, as a response to
the urging of members of the Ramius Group that the Company explore a potential
sale of the company, the Board resolved to ask its investment banker to prepare
an assessment of strategic alternatives. The board designated Mr. Glazer as
the primary point of contact for the investment banker during the process. The
Ramius Group had pushed for establishment of a committee to oversee the process
that would exclude Messrs. Meyer and Koeneke.
On January 23, 2009, the Ramius Group
filed a sale plan with the SEC to sell 575,000 shares of CPI Corp. common
stock.
On February 27, 2009, the Ramius Group
filed a statement on Schedule 13D terminating membership in the Knightspoint
Group on the basis that the respective parties were no longer working as a
group. On the same day, the Ramius Group sent notice to Knightspoint Partners
terminating their broader advisory relationship but reaffirming the Ramius
Groups obligation to pay Knightspoint Partners a fee based on the Net Profits
of its investment in CPI Corp.
On March 3, 2009, the Board reviewed a
presentation by the Companys investment bankers regarding a potential sale. The
bankers advised that the timing of a sale was inopportune.
On April 14, 2009, the Nominating and
Corporate Governance Committee, of which Mr. Feld is a member, discussed the
size and composition of the board and voted unanimously to recommend the
re-nomination of all the incumbent directors.
On April 15, 2009, The Board, including
Mr. Feld, voted unanimously to re-nominate all the incumbent
directors.
On April 17, 2009, Mr. Mitchell of the
Ramius Group contacted Mr. Meyer and proposed to reconstitute the Board by
removing one incumbent director from the Board slate and adding two new nominees
identified by the Ramius Group. The Ramius Group refused to identify the names
of their nominees indicating that they sought agreement on structure prior to
discussing actual candidates.
On April 21, 2009, the Company reported
favorable fourth quarter results and strong trends through the first 10 weeks of
the first quarter of 2009. The Company also announced an amendment to its credit
agreement which increased the Companys financial flexibility.
On April 21, 2009, Mr. Meyer contacted
Mr. Mitchell and expressed the Boards openness to considering additional
directors but that the process should be conducted by the Nominating and
Governance Committee which would need to know the identities of their proposed
candidates. The Ramius Group again refused to identify the names of their
nominees.
On April 22, 2009, the Ramius Group
filed a statement on Schedule 13D disclosing that the Ramius Group was seeking
changes in the composition of the Board and that it reserved the right to
nominate candidates for election to the Board at the Annual Meeting.
From April 22, 2009 through May 6,
2009, according to amendments to its Schedule 13D, the Ramius Group sold 111,579
shares of CPI Corp. common stock in the open market pursuant to its previously
filed sale plan.
On April 24, 2009, Mr. Meyer met with
certain members of the Ramius Group at the Ramius Groups offices. At the
meeting, the Ramius Group modified its proposal to provide for (1) the addition
of two directors with at least one identified by Ramius Group and the other
identified by the board but acceptable to Ramius; and (2) the removal of an
incumbent director. Ramius clarified that they would expect the incumbent to be
removed to be either Michael Koeneke or Turner White but that they were open to
other suggestions. When asked why they sought removal of a board member, Ramius
responded that it is addition by subtraction and asserted that the board is
only as strong as its weakest link. Mr. Meyer reiterated the boards openness
to considering candidates that could add value to the board and asked Ramius to
identify their candidates. Ramius again refused to identify their nominees
despite having an impending nomination deadline which would force disclosure of
the names. Later that same day, the Ramius Group delivered a letter to the
Company nominating Peter Feld, Joseph Izganics, John Serino and Paul White for
election to the Board at the Annual Meeting.
On April 24, 2009, at the request of
the Board, the investment bankers provided an updated presentation on the
prospects for a potential sale of the Company. Despite a higher stock price and
an improved financing environment, the bankers continued to counsel against a
sale process. Mr. Feld suggested that the bankers approach potential financial
buyers of the Company to gauge their interest level in a transaction.
5
On April 27, 2009, Mr. Meyer returned
again to the Ramius Group offices to discuss a potential settlement with Mr.
Glazer participating by telephone. Ramius confirmed its proposal to nominate one
of their named candidates in addition to Mr. Feld. Mr. Meyer communicated the
Boards offer to (1) include Mr. Feld on the Company slate and (2) identify a
qualified, genuinely independent seventh director through the Nominating and
Governance Committee that would be acceptable to both the board and the Ramius
Group in time to be slated for the Annual Meeting subject to Ramius entering
into a limited standstill agreement barring a proxy contest through the 2010
annual meeting.
On May 5, 2009, during a joint meeting
of the Nominating and Governance Committee and the Board of Directors, the
Committee and Board resolved to commence a search process, with the assistance
of an executive search firm, to identify potential nominees for election as an
additional director. Mr. Feld abstained as both a member of the Nominating and
Governance Committee and of the Board of Directors. During the course of the
meeting, the board discussed the presentation by the Companys investment
bankers. Mr. Feld again urged the board to instruct the investment banker to
approach potential financial buyers of the Company.
On May 15, 2009, Mr. Abel as Chairman
of the Nominating and Governance Committee contacted Mr. Mitchell to reiterate
the boards settlement proposal previously communicated by Mr. Meyer.
On May 16, 2009, Mr. Abel clarified the
proposal in an email communication.
On May 18, 2009, Mr. Mitchell replied
to the email that he rejected the proposal.
On May 19, 2009, a joint session of the
Board and Nominating Committee was convened to designate a slate of six
directors consisting of Mr. Abel, Mr. Glazer, Mr. Koeneke, Mr. Meyer, Mr. White
and a sixth director to be identified through the recently commenced search
process.
The Ramius Group has not
cooperated with the Boards nomination process
In the Ramius proxy and in a letter
dated May 27, 2009 from Mr. Feld to Mr. Meyer, the Chairman of the CPI Board,
Mr. Feld states that the Ramius nominees are not directly affiliated with
Ramius. However, the Ramius Group itself admits that it paid these nominees to
serve as Ramius nominees. Mr. Feld and the Ramius Group also refused to follow
the established CPI procedures to submit nominations through the Boards
Nominating and Governance Committee. In his letter, Mr. Feld states that the
Ramius nominees were identified by a third-party search firm, and yet the Ramius
Group has refused to identify either the third-party search firm or the context
underlying the search. In contrast, as a CPI director, Mr. Feld voted against
the Nominating and Governance Committees retention of a search firm to identify
value-adding independent board members.
The Company believes that the
Ramius Groups interests are misaligned with those of other
shareholders
While Mr. Feld states in his letter
that Ramius has shown long-term commitment to the Company, the Company
believes that Ramius Groups actions in the last six months demonstrate that
Ramius Group will pursue liquidity for its CPI stake even at the expense of the
longer-term interests of other shareholders.
-
In July 2008, upon joining the board of directors,
Mr. Feld told members of both the Board and management that
Ramius Group desired to exit their stake in the
Company.
-
From December 2008 to March 2009, in conversations
with Board members, Ramius Group advocated engaging an
investment bank to explore a sale of the Company despite difficult
market conditions and the Companys depressed
stock price valuation.
-
In January 2009, the Ramius Group filed a 575,000
share SELL plan and has sold 111,579 shares of stock pursuant to
the plan.
-
From March 2009 to May 2009, in further
conversations with Board members, Mr. Feld continued to press for a
sale
effort even after the investment banker
advised against pursuing a sale in the current environment. During this
time,
Mr. Feld repeatedly requested that the
Board direct the investment banker to pursue discussions with potential
financial
buyers.
In his letter, Mr. Feld defends his
advocacy of a sale of the Company with the claim that it was a response to a
potential breach of the companys financial covenants in the period from
September 2008 to February 2009 amid a difficult financing environment. The
Board believes these circumstances would tend to make it an even less opportune
time to pursue a sale process with financial
6
buyers as was contemplated by the
Ramius Group. Nevertheless, this new explanation does not address why Mr. Feld
continued to urge a sale process in March, April and May of 2009, even after the
Company secured an amendment to its financial covenants. The Board furthermore
believes it is reckless, irresponsible and untrue of Mr. Feld to assert as a
defense that the Company faced an impending liquidity crisis. At the time, the
Company faced a potential, narrow miss on a single, particularly stringent
covenant calculation while having accumulated a considerable cash position.
Indeed, the Chief Financial Officer kept the Board well apprised of discussions
with lenders and provided assurance that a waiver or amendment could be obtained
if necessary or desirable.
The Ramius Group wants more
control over the Company
In the Ramius proxy and Mr. Felds
letter, the Ramius Group tries to convince stockholders that Ramius is not
trying to gain more influence. However, this is belied by the Ramius Groups
attempt to force the Board to agree to permit the Ramius Group to appoint two
new directors and remove one incumbent director without even identifying the
names and qualifications of their nominees. Ramius sought to control the
selection of two director nominees (in addition to Mr. Feld) without the input
of or consultation with members of CPIs Nomination and Governance Committee.
Ramiuss refusal to initially identify its potential nominees reflects Ramiuss
goal to make unilateral decisions regarding the composition of CPIs Board which
we believe demonstrates Ramiuss desire to have more influence over the
corporate governance of the Company.
The Ramius Group has repeatedly
endorsed the directors and compensation arrangements that it now
attacks
The Ramius Group implies that Mr.
Koenekes presence on the Board is somehow detrimental but does not identify a
single instance where this has been the case. In fact, the Ramius Group has
supported Mr. Koenekes election to the board in each of the past five years,
and Mr. Feld, as a director, even voted to re-nominate him for the upcoming
annual meeting. Mr. Koeneke in fact has been a vital contributor to the
development and oversight of strategies that have transformed the Sears Portrait
Studio business and then the PictureMe Portrait Studio® business. Mr. Koenekes
experience as the former Global Head of Mergers & Acquisitions for Merrill
Lynch & Co. where he managed a high performing, professional services
organization and advised corporate boards is, in the Boards view, particularly
valuable to the Company. Mr. Feld, by contrast, was an investment banking
analyst at Bank of America Securities only five years ago, and his brief tenure
on the CPI board since July 2008, when he was appointed to stand in for a more
senior Ramius Group colleague, represents his only substantial board level
experience.
Mr. Feld and the Ramius Group
additionally have referred to Mr. Meyers and Mr. Koenekes 2007 and 2008
compensation as members of the board in a misleading manner. The facts are as
follows:
-
Mr. Koenekes compensation has been consistent
with the compensation of other Board members including that of
Messrs. Feld and Mitchell, the Ramius group representatives
who have served on the Board.
-
Mr. Meyers additional compensation arrangements
as Chairman were payable solely in restricted stock, none of which
has been sold, and were in every instance determined
and approved unanimously by the entire Board (including the
Ramius Group representative).
-
The amounts recorded in the 2007 and 2008 proxy
disclosure in accordance with FAS 123R overstate substantially the
cash value of the share grants in each year and also
do not correspond with the compensated years of service. Due to the
timing of grants, the 2008 figure includes
compensation paid in connection with both the 2007 and 2008 fiscal
years. The 2007 figure includes compensation
paid in connection with the 2006 fiscal year as well as a special award
granted
in connection with Mr. Meyers work on
the acquisition of the PictureMe business which avoided the costs of hiring
an
investment banker.
The Ramius Groups nominees do
not bring relevant experience or capabilities
One nominee, Mr. Feld, has served only
since July 2008 when he replaced a more senior Ramius executive. Mr. Feld was
nominated to represent Ramiuss interests and not due to any special
qualifications. He was an investment banking analyst at Bank of America
Securities five years ago and does not possess substantial board or managerial
experience. The other nominee, Mr. Izganics, appears to have spent his entire
professional career with Home Depot, a do-it-yourself home improvement retailer,
rising from assistant store manager to a regional president before he ceased to
be an employee of Home Depot in January 2009.
7
Mr. Izganics additionally appears to
bring no corporate board experience. From their biographies in the Ramius
proxy, it appears that neither nominee brings experience in professional
services or in operating licensed businesses in a hosted environment whereas
most of the incumbent board members bring five years of successful, and highly
relevant, experience as directors of the Company.
The Board is committed to
strong and effective corporate governance
The Company believes that the director
nomination process should be conducted by its Nominating and Governance
Committee to ensure that nominees are independent, provide additional value to
the governance of the Company and do not represent the interests of one
stockholder over the interests of others.
-
Michael Glazer, previously CEO of KB Toys, was
appointed to the Board last November by a unanimous vote of the
directors including the Ramius representative after a
deliberative search process conducted by the Nominating and
Governance Committee.
-
Paul Finkelstein, currently Chairman and CEO of
Regis Corporation, was nominated to stand for election to the Board
through a process led by our Nominating and Governance
Committee, which consists solely of independent directors.
The process was conducted with the assistance of Herbert
Mines Associates, a well-regarded executive search firm. The
Chairman of the Board identified Mr. Finkelstein as a
potential director nominee to the Nominating and Governance
Committee. Mr. Finkelstein is an independent director
nominee who is not being paid to serve as the Companys
nominee and he will only receive our standard director
compensation if he is elected. The Nominating and Governance
Committee believes that Mr. Finkelstein brings highly
relevant and valuable operating and board experience and
understands intimately the challenges of operating a
consumer-centric, professional services organization in a hosted
environment. Regis Corporation operates hair salons under
various brand names including Supercuts and Smartstyle
and generated revenue of $2.5 billion during its fiscal year ended June
30, 2008. Under the Smartstyle and Cost Cutter
nameplates, Regis Corporation operates 2,400 salons in Wal-Mart stores,
which generated approximately $500 million
in
sales during its fiscal year ended June 30, 2008.
-
Joseph Izganics, the Ramius Group nominee was
identified by the Ramius Group which declined to follow established
CPI procedures for submitting nominees and has refused
repeatedly to reveal the name of the third party search firm
that identified Mr. Izganics or even provide the parameters
of their search. According to Ramiuss proxy materials,
Mr. Izganics is being paid $20,000 for serving as Ramiuss
nominee. Mr. Izganic ceased to be an employee of Home
Depot in January 2009.
The longer serving incumbent board
members have delivered significant value to CPI shareholders. In 2004, they
initiated a turnaround process that saved what was then a deeply troubled
company. In the face of extraordinarily challenging industry conditions that
have devastated competitors, the Board led the successful conversion and upgrade
first of the Sears Portrait Studio operations and then of the PictureMe Portrait
Studio® operations that were purchased out of bankruptcy. In the process, the
Board has helped to build a performance-oriented culture and establish the
management systems necessary for continuing success. Having overseen a
top-to-bottom transformation of the business, the current Board members possess
an unusually keen understanding of the Company and the challenges and
opportunities it faces.
As reported in its recent earnings
release, the Company believes that it has momentum and the right strategic and
operating plans for its future. The Company believes that the successful
integration and digitization of the PictureMe Portrait Studio business combined
with the implementation of numerous improvement initiatives across the
organization has positioned the Company for significant gains in earnings and
cash flow. The Company believes the Ramius Groups actions threaten to disrupt
the execution of these plans.
The Ramius Groups interest in
liquidating its position presents a fundamental misalignment of their interests
with the interests of other stockholders. The addition of directors not clearly
independent from the Ramius Group could unduly increase the Ramius Groups
ability to influence a transaction or effect changes in management or the
Companys direction that may not be in the interests of all
stockholders.
The name of each nominee, the nominees
principal occupations, and certain other information is set forth below. Messrs.
Abel, Koeneke, Meyer and White first joined the Board in March 2004, while Mr.
Glazer joined in November 2008.
8
Name
|
|
Principal Occupation, Business Experience
and Directorships
|
James J. Abel
|
|
Mr. Abel, age 63, served as
President and Chief Executive Officer of Financial Executives
International (FEI) from May 2008 to February 2009. FEI is the preeminent
organization representing senior financial executives in dealing with the
regulatory agencies involved with corporate financial reporting and
internal controls. Mr. Abel retired on December 31, 2007 from positions of
Executive Vice President, Secretary, Treasurer and Chief Financial Officer
of The Lamson & Sessions Co., a diversified manufacturer and
distributor of a broad line of thermoplastic electrical, consumer,
telecommunications and engineered sewer products for major domestic
markets. Mr. Abel served as an executive officer of The Lamson &
Sessions Co. from December 1990 and a director from 2000 until his
retirement. Mr. Abel received a B.S. from Purdue University and an MBA
from St. Johns University (N.Y.).
|
|
|
|
Paul Finkelstein
|
|
Mr. Finkelstein, age 66, has
served as President and Chief Executive Officer of Regis Corporation, an
operator of hair salons, since July 1996 and Chairman of the Board of
Regis Corporation since May 2004, and was Chief Operating Officer of Regis
Corporation from December 1987 until June 1996. Mr. Finkelstein has served
as a director of Regis Corporation since 1987.
|
|
|
|
Michael Glazer
|
|
Mr. Glazer, age 61, has served as
Managing Director of Team Neu, a private equity investment firm, located
in Pittsfield, MA since August 2005. From May 1996 until August 2005, he
served as President and Chief Executive Officer of KB Toys, Inc. He has
served as director of Stage Stores (NYSE: SSI) since 2001. Mr. Glazer
received a B.A. from the University of California Berkley and an MBA
from Columbia University.
|
|
|
|
Michael Koeneke
|
|
Mr. Koeneke, age 62, is a
Managing Member of Knightspoint Partners LLC, a firm which he co-founded
in March 2003 that is engaged in the business of acquiring, holding or
disposing of investments in various companies. He served as a member of
the Board of Directors of Ashworth, Inc., a golf apparel company formerly
listed on Nasdaq, from 2008 to 2009 and served on the Board of Directors
of the Sharper Image Corporation, a multi-channel specialty retailer
formerly listed on Nasdaq, from 2006 until May 2008.
From 1997 through 2002, Mr. Koeneke was the Co-Head and
then the Chairman of Global Mergers and Acquisitions at Merrill Lynch
& Co., Inc. Mr. Koeneke received a B.A. from the University of
Michigan and an MBA from the Harvard Business School.
|
|
|
|
David Meyer
|
|
Mr. Meyer, age 40, has served as
Chairman of the Board since April 2004. From October 2004 until August
2005, he served in the Companys interim Office of the Chief Executive.
Since 2003, Mr. Meyer has served as a Managing Member of Knightspoint
Partners LLC, a firm which he co-founded, that is engaged in the business
of acquiring, holding or disposing of investments in various companies.
From 1995 to 2002, Mr. Meyer served in various capacities in the
investment banking department of Credit Suisse First Boston, including as
a director in the Mergers and Acquisitions and Global Industrial and
Services Groups in the firms London office. From 2007 to 2008, Mr. Meyer
served as Chairman of the Board of Directors of Ashworth, Inc., a golf
apparel company formerly listed on Nasdaq. From 2006 to 2007, Mr. Meyer
served as Chairman of the Compensation Committee of the Board of Directors
of the Sharper Image Corporation, a multi-channel specialty retailer
formerly listed on Nasdaq. Mr. Meyer received a B.S.E. from Princeton
University and an MBA from Stanford University.
|
|
|
|
Turner White
|
|
Since May 2004, Mr. White, age
60, has served as owner of White and Company, LLC, a consulting and
investment firm located in Kansas City, Missouri, and as visiting
assistant professor of management, Helzberg School of Management,
Rockhurst University in Kansas City, Missouri. From May 2000 to May 2004,
Mr. White served as President and Chief Executive Officer of Union Station
Kansas City, Inc.
He was a Vice President
and East region general manager of Cell Net Data Systems, an
investor-owned data management and metering supplier to the electric
energy industry, from September 1998 through February 2000. From June 1989
to September 1998, Mr. White was Executive Vice President, Corporate
Development, of Kansas City Power & Light Company. Mr. White received
a B.A. from Colorado College and an MBA from Rockhurst
University.
|
The Board of Directors recommends a vote
FOR each of these nominees as directors.
9
Executive Officers
The name of each of the Companys
executive officers as of May 9, 2009, who are not directors, along with their
respective ages, positions and descriptions of their professional experience is
set forth below.
Renato Cataldo
|
|
President and Chief Executive
Officer. Dr. Cataldo, age 49, joined the Company as its Chief Operating
Officer in July 2005 after serving as a consultant to the Company since
August 2004. Effective October 10, 2006, he was appointed President and
Chief Executive Officer of the Company. From 1998 until his resignation in
August 2004, he served as Chief Executive Officer and Chief Technology
Officer of Publicis eHealth Solutions, a division of the Publicis Groupe,
S.A., an international communications company.
|
|
|
|
Thomas Gallahue
|
|
Executive Vice President,
Operations. Mr. Gallahue, age 58, joined the Company in April 2002 in the
position of Vice President, Sales Development and Operations and was
appointed to his current position in November 2002. Prior to joining CPI,
Mr. Gallahue enjoyed a thirty-year career with Sears, Roebuck & Co.
where he held various positions, including Store Manager, Region Product
Service Manager, Director of Sales Development for Home Appliances and
District General Manager.
|
|
|
|
Dale Heins
|
|
Senior Vice President, Finance,
Chief Financial Officer and Treasurer of the Company. Mr. Heins, age 46,
was promoted to his current position in April 2008. From July 2005 until
April 2008, Mr. Heins served as Vice President, Corporate Controller,
Principal Accounting Officer and Assistant Treasurer, after serving the
Company in various other financial positions since 1987.
|
|
|
|
Keith Laakko
|
|
Chief Marketing Officer. Mr.
Laakko, age 43, joined the Company in his current position in January
2006. He served as Category Marketing Director for Consumer Controls
Brands of Spectrum Brands from 2004 until he joined CPI. From 2000 until
2004, Mr. Laakko held marketing positions with Eastman Kodak Company,
including Director of New Business Development, Business to Business, and
Director of Corporate Branding from 2003 to 2004, Director of Global Brand
Communication from 2001 to 2003 and Marketing Director, Strategic Web
Partnerships and Online Community from 2000 to 2001. He has also held
marketing positions with The Coca-Cola Company, Hasbro Toys and
Mattel.
|
|
|
|
James Mills
|
|
Executive Vice President, Field
Operations. Mr. Mills, age 44, joined the Company in September 2008,
following a distinguished career with RadioShack Corporation that spanned
more than twenty years. His most recent responsibilities with RadioShack,
leading consumer electronics retailer, included Vice President Wholesale
Channels (2007-2008), with responsibility for coordinating and
implementing the overall strategy for RadioShack Franchise, Franchise
International, Retail Solutions Kiosks, Direct Sales and provided
executive oversight for RadioShack deMexico. In 2006, Mr. Mills served as
Vice President of RadioShack Segmentation and Vice President of Visual
Merchandising, and, from 2004 to 2005, he was Vice President of the
Southeast Region for RadioShack.
|
|
|
|
Jane Nelson
|
|
General Counsel and Corporate
Secretary. Ms. Nelson, age 59, joined the Company in 1988 as Assistant
General Counsel and subsequently served as Associate General Counsel and
Assistant Secretary. She was promoted to her current position in
1993.
|
|
|
|
Rose OBrien
|
|
Vice President,
Finance/Controller and Principal Accounting Officer. Ms. OBrien, age 48,
joined the Company in August 2005 as Assistant Controller and was promoted
to her current position in April 2008.
Prior to joining the Company, Ms. OBrien was the Director of
Special Projects at Insituform, Inc., a provider of trenchless technology
from September 2004 until July 2005. She was the Controller at Growing
Family, Inc., a baby portrait photography company from November 2000 until
September 2004. Prior to that, Ms. OBrien held financial management
positions with both public and privately held companies in the St. Louis
area. Ms. OBrien also served for seven years in the Audit Department of
Price Waterhouse.
|
|
|
|
Richard Tarpley
|
|
Executive Vice President,
Manufacturing. Mr. Tarpley, age 63, has served as Executive Vice
President, Manufacturing since 1995. Since joining the Company as Cost
Control supervisor in 1970, he has held other positions within the
manufacturing department.
|
10
Security Ownership of Certain
Beneficial Owners
To the Companys knowledge, based upon
information contained in Schedules 13D and 13G filed with the Securities and
Exchange Commission, the following table sets forth beneficial owners of five
percent (5%) or more of the common stock of the Company as of May 9,
2009.
Name
|
Number of Shares
|
Percent
|
Ramius Group
|
|
|
1,217,150
|
(1)
|
|
|
17.4%
|
Van Den Berg Management
|
|
|
1,086,461
|
(2)
|
|
|
15.5%
|
Lafitte Capital Management LP
|
|
|
508,265
|
(3)
|
|
|
7.3%
|
(1)
|
|
As reported in Amendment No. 14
to Schedule 13D, dated May 1, 2009, and Form 4s filed on May 5, 2009, and
May 8, 2009, by Ramius Enterprise Master Fund Ltd; Starboard Value and
Opportunity Fund, LLC; Ramius Merger Arbitrage Master Fund Ltd; Ramius
Multi-Strategy Master Fund Ltd; Ramius Value and Opportunity Master Fund
Ltd; Ramius Leveraged Multi-Strategy Master Fund Ltd; Ramius Advisors,
LLC, who serves as the investment advisor of Ramius Multi-Strategy Master
Fund Ltd, Ramius Merger Arbitrage Master Fund Ltd, Ramius Leveraged
Multi-Strategy Master Fund Ltd and Ramius Enterprise Master Fund Ltd; RCG
Starboard Advisors, LLC, who serves as the investment manager of Ramius
Value and Opportunity Master Fund Ltd and the managing member of Starboard
Value and Opportunity Fund, LLC; Ramius LLC, who serves as the sole member
of RCG Starboard Advisors, LLC and Ramius Advisors, LLC; C4S & Co.,
L.L.C., who serves as managing member of Ramius LLC; Peter A. Cohen, one
of the managing members of C4S & Co., L.L.C.; Morgan B. Stark, one of
the managing members of C4S & Co., L.L.C.; Thomas W. Strauss, one of
the managing members of C4S & Co., L.L.C.; Jeffrey M. Solomon, one of
the managing members of C4S & Co., L.L.C.; Peter A. Feld, a director
of the Company and a Managing Director of Ramius LLC; Joseph C. Izganics;
John Serino; and Paul G. White (collectively, the Ramius Group). Under
the rules of the Securities and Exchange Commission, each member of the
Ramius Group may be deemed to beneficially own shares of common stock
beneficially owned by each of the other members of the Ramius Group. The
address of each member of the Ramius Group is 599 Lexington Avenue, 21st
Floor, New York, New York 10022.
|
|
|
|
|
|
As required by the Companys
Rights Agreement, as amended, each member of the Ramius Group granted an
irrevocable proxy to the Secretary of the Company to vote the common stock
of the Company beneficially owned by the Ramius Group that reflects the
Ramius Groups pro rata portion of the 1,864,201 shares held collectively
by the Ramius Group and Knightspoint Partners LLC, Knightspoint Capital
Management I LLC, Knightspoint Partners I, L.P., Michael Koeneke and David
Meyer, that were in excess of 20% of the Companys common shares
outstanding (the Excess Shares). The proxy provides that the Excess
Shares will be voted by the Secretary of the Company in the same
proportion as the votes of all stockholders of the Company. As of May 9,
2009, the Ramius Groups pro rata portion of the Excess Shares was 86.9%.
As a result, the 1,217,150 shares included in the table above exclude
402,347 shares held by the Ramius Group for which the Ramius Group does
not have the right to vote.
|
|
|
|
(2)
|
|
As reported in its Amendment 11
to Schedule 13G/A, dated as of December 31, 2008, Van Den Berg Management
has beneficial ownership of 1,086,461 shares, shared voting power for
1,084,451 shares and shared dispositive power for 1,084,451 shares. The
address of this stockholder is 805 Las Cimas Parkway, Suite 43C, Austin,
Texas 78746.
|
|
(3)
|
|
As reported on Schedule 13G,
dated February 15, 2008, as of January 31, 2008, Lafitte Capital
Management LP has shared voting power for 508,265 shares and shared
dispositive power for 508,265 shares. The address of this stockholder is
701 Brazos, Suite 375, Austin, Texas 78701.
|
11
Security Ownership of
Management
Information is set forth below
regarding beneficial ownership of common stock of the Company, as of May 9,
2009, by (i) each person who is a director or a director nominee; (ii) each
person listed in the Summary Compensation Table set forth below and (iii) all
directors and executive officers. Except as otherwise noted, each person has
sole voting and investment power as to his or her shares.
|
|
|
|
|
|
|
Percent
|
|
|
|
|
Profit
|
Vested
|
|
of Shares
|
|
Amount of
|
Indirect
|
Restricted
|
Sharing
|
Options
|
|
Outstanding
|
|
Record
|
Shares
|
Shares (1)
|
Plan (2)
|
(3)
|
Total
|
in Proxy
|
James Abel
|
11,954
|
-
|
7,353
|
-
|
-
|
19,307
|
*
|
Renato Cataldo
|
18,718
|
-
|
2,976
|
514
|
-
|
22,208
|
*
|
Gary Douglass
|
14,081
|
-
|
-
|
853
|
-
|
14,934
|
*
|
Peter Feld (4)
|
1,336
|
-
|
5,252
|
-
|
-
|
6,588
|
*
|
Paul Finkelstein
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Thomas Gallahue
|
3,573
|
-
|
2,451
|
1,056
|
15,046
|
22,126
|
*
|
Michael Glazer
|
6,903
|
-
|
5,252
|
-
|
-
|
12,155
|
*
|
Dale Heins
|
2,309
|
-
|
2,451
|
2,059
|
-
|
6,819
|
*
|
Michael Koeneke (5)
|
6,989
|
102,321
|
5,252
|
-
|
-
|
114,562
|
1.6%
|
David Meyer (5)
|
117,242
|
102,321
|
12,900
|
-
|
-
|
232,463
|
3.3%
|
Keith Laako
|
2,556
|
-
|
3,157
|
425
|
-
|
6,138
|
*
|
Jane Nelson
|
3,767
|
-
|
2,101
|
2,400
|
-
|
8,268
|
*
|
Turner White
|
7,357
|
-
|
6,303
|
-
|
-
|
13,660
|
*
|
|
Directors and Executive
|
|
|
|
|
|
|
|
Officers as a group
|
|
|
|
|
|
|
|
(15 persons)
|
206,808
|
102,321
|
59,650
|
9,519
|
15,046
|
393,344
|
5.6%
|
* Less than one
percent.
|
|
|
(1)
|
For directors, this
includes restricted shares awarded in lieu of cash compensation for the
2009 Board retainer and committee chair retainers made on February 25,
2009, and March 3, 2009, and includes an award of 8,296 shares to Mr.
Meyer for his performance as Chairman of the Board in 2008 made on April
27, 2009. For executive officers, these restricted shares were awarded in
fiscal year 2009 as part of fiscal year 2008 incentive
compensation.
|
|
|
(2)
|
Shares are held
under the CPI Corp. Employees Profit Sharing Plan and Trust. The
executives do not have voting power with respect to these
shares.
|
|
(3)
|
Includes shares,
which such persons have the right to acquire upon the exercise of employee
stock options within 60 days after May 9, 2009.
|
|
(4)
|
The shares listed
in the table above for Mr. Feld exclude the 1,612,909 shares held by
members of the Ramius Group other than Mr. Feld, of which 400,710 shares
are voted by the Secretary of the Company pursuant to an irrevocable proxy
in connection with the Companys Rights Agreement. Peter Feld is a
Managing Director of the Ramius Group; see the Security Ownership of
Certain Beneficial Owners table set forth above for information on the
Ramius Group. As such, Mr. Feld may be deemed to beneficially own shares
of common stock beneficially owned by each of the other members of the
Ramius Group. Mr. Feld disclaims ownership of all such shares. Mr. Felds
amount of record shares and restricted shares in the table above include
332 and 1,305 shares, respectively, which are voted by the Secretary of
the Company pursuant to an irrevocable proxy in connection with the
Companys Rights Agreement.
|
|
(5)
|
Mr. Koenekes
amount of record shares and restricted shares in the table above include
1,736 and 1,305 shares, respectively, which are voted by the Secretary of
the Company pursuant to an irrevocable proxy in connection with the
Companys Rights Agreement as discussed in footnote 1 under the Security
Ownership of Certain Beneficial Owners table set forth above. Mr. Meyers
amount of record shares and restricted shares in the table above include
29,128 and 3,205 shares, respectively, which are voted by the Secretary of
the Company pursuant to an irrevocable proxy in connection with the
Companys Rights Agreement. Messrs. Koenekes and Meyers indirect shares
include 102,321 shares of common stock owned by
Knightspoint
|
12
|
Partners I, L.P. Michael Koeneke
and David Meyer are Managing Members of the sole member of the general
partner of Knightspoint Partners I, L.P. and have shared voting and
dispositive power with respect to the 102,321 shares of common stock owned
by Knightspoint Partners I, L.P. The 102,321 shares of common stock owned
by Knightspoint Partners I, L.P. include 25,421 shares that are voted by
the Secretary of the Company pursuant to an irrevocable proxy in
connection with the Companys Rights Agreement. Messrs. Koeneke and Meyer
disclaim beneficial ownership of the shares held by Knightspoint Partners
I, L.P., except to the extent of their respective pecuniary interest
therein.
|
Section 16(a) Beneficial
Ownership Reporting Compliance
The federal securities laws require our
directors and executive officers, and persons who own more than 10% of the
Companys common stock, to file initial reports of ownership and reports of
changes in ownership of any of the Companys securities with the Securities and
Exchange Commission, the New York Stock Exchange and the Company.
Based solely upon a review of filings
with the Securities and Exchange Commission and written representations that no
other reports were required, the Company believes that, with the exception of
one filing by Rose OBrien that was filed two days late on January 15, 2009, all
of its directors and executive officers complied during fiscal year 2008 with
their reporting requirements.
Corporate
Governance
Corporate Governance
Guidelines
The Company maintains a corporate
governance section on its website which contains copies of the Companys
principal governance documents. The Corporate Governance Guidelines, the
charters of the Compensation, Audit and Finance and Nominating and Governance
committees, the Code of Business Conduct and Ethics and the Companys By-laws
are available at www.cpicorp.com by first clicking INVESTOR and then
highlights. These documents are also available, without charge, in print upon
request to the Corporate Secretary at 1706 Washington Avenue, St. Louis,
Missouri 63103-1717. The principles contained in the Companys governance
documents were adopted by the Board to ensure that the Board is independent from
management, to ensure that the Board adequately performs its function as the
overseer of management and to ensure that the interests of the Board and
management align with the interests of the stockholders.
Certain Relationships and
Related Transactions
The Companys practice has been to
refer any proposed related person transaction to the Companys Audit and Finance
Committee for consideration and approval. The Companys Code of Ethics, which
sets forth standards applicable to all directors, officers and senior management
of the Company, prohibits the giving or accepting of personal benefits that
could result in a conflict of interest. Any waiver of this Code for a director
or an officer may only be granted by the Board of Directors. The Company may in
the future adopt a separate related person transactions policy.
Director
Independence
In accordance with New York Stock
Exchange rules, the Board affirmatively determines the independence of each
Director and nominee for election as a Director in accordance with all elements
of independence set forth in the New York Stock Exchange listing standards. The
Board of Directors has determined that throughout fiscal year 2008 each of James
Abel, Peter Feld, Michael Glazer, Michael Koeneke, David Meyer and Turner White
were independent under the NYSE corporate governance rules, a non-employee
director within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, and an outside director for purposes of
Section 162(m) of the Internal Revenue Code.
Nominations for
Directors
The Nominating and Governance Committee
is charged with nominating qualified members to serve on the Companys Board of
Directors. The Nominating and Governance Committee considers educational
background, business experience and the ability to complement the skills and
experience of other Board members. In making recommendations, the Nominating and
Governance Committee further considers each nominees involvement at Board
meetings and in providing strategic direction during the preceding
year.
13
It is the policy of the Nominating and
Governance Committee to consider nominees for election to the Board of Directors
recommended by stockholders. Any stockholder 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 nominees
qualifications and relevant business and personal experience, to the Corporate
Secretary at the Companys address set forth at the end of this Proxy Statement
and, if relevant, comply with the procedures set forth above under the caption
Stockholder Proposals for the 2010 Annual Meeting. Notice of a nomination must
include the reasons for making the nomination of a director or directors, your
name, your address, the class and number of shares you own; a description of all
arrangements and understandings between you and each nominee and any other
person (naming such person or persons) pursuant to which the nomination or
nominations are made; the name, age, business address and residence address of
the nominee; and the class and number of shares beneficially owned by the
nominee. It must also include the information that would be required to be
disclosed in the solicitation of proxies for election of directors under the
federal securities laws. You must submit the nominees consent to be elected and
to serve. As described in the Companys Corporate Governance Guidelines, a
majority of directors must be independent under the criteria established by the
New York Stock Exchange.
Communications with the
Board
Any interested party, including any
stockholder, who wishes to communicate with the Board, the presiding director,
the independent directors as a group or with individual directors may send his
or her communication to the Corporate Secretary at 1706 Washington Avenue, St.
Louis, Missouri 63103-1717. The Board has instructed the Corporate Secretary to
review all communications so received, and to exercise her discretion not to
forward to the Board correspondence that is inappropriate such as business
solicitations, frivolous communications and advertising, routine business
matters (i.e. business inquiries, complaints or suggestions) and personal
grievances. However, any director may at any time request the Corporate
Secretary to forward any and all communications received by the Corporate
Secretary but not forwarded to the directors.
Code of Business Conduct and
Ethics
The Companys Code of Business Conduct
and Ethics, which applies to Company employees and directors, reflects the
standards CPI employees, officers and directors are expected to observe to
maintain and enhance quality business practices. The Company intends to promptly
disclose (i) the nature of any amendment to this code of ethics that applies to
the Companys principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions and (ii) the nature of any waiver, including an implicit waiver, from
a provision of this code of ethics that is granted to one of these specified
individuals, the name of such person who is granted the waiver and the date of
the waiver on the Companys website, if any. The Code of Business Conduct and
Ethics is available at www.cpicorp.com by first clicking INVESTOR and then
ethics. This document is also available, without charge, in print upon request
to the Corporate Secretary at 1706 Washington Avenue, St. Louis, Missouri
63103-1717. Underlying this Code are the fundamental requirements of honesty and
good faith in all actions that reflect on the Company and its people. The
Company has established a fraud hotline for employees to submit confidential
reports of suspected or actual violations of the Companys Code of Business
Conduct and Ethics, and the Audit Committee maintains a second hotline
(www.openboard.info/cpy) specifically for accounting complaints which is
maintained by an independent vendor and for which complaints are handled
anonymously and confidentially.
Board and Committee
Meetings
During fiscal year 2008, the Companys
Board of Directors met eighteen times. All directors attended more than 75% of
all Board and committee meetings that they were eligible to attend. The members
of the Board conferred without management present as part of each regularly
scheduled Board meeting. The Chairman of the Nominating and Governance
Committee, James Abel, presides over executive sessions of the directors, all of
whom are independent. Although the Company does not have a formal policy on
attendance at annual stockholder meetings, the Company encourages each member of
the Board to attend the Annual Meeting of Stockholders. All of the Companys
then current directors attended the 2008 Annual Meeting of
Stockholders.
In fiscal year 2008, the Board of
Directors had the following committees: Audit and Finance (the Audit
Committee), Compensation, Nominating and Governance and Executive Committees.
The Board of Directors dissolved the Executive Committee on September 22,
2008.
14
The Audit Committee
The Audit Committee consists of James
Abel (Chairman), Michael Koeneke and Turner White. The Board of Directors has
determined that all members of the Audit Committee are independent, as that term
is defined in the New York Stock Exchanges listing standards and the rules of
the Securities and Exchange Commission. The Board of Directors has also
determined that Mr. Abel, is qualified to serve as the Audit Committee financial
expert. The Audit Committee held nine meetings during fiscal year
2008.
Pursuant to its Charter, the Audit
Committee reviews annual and quarterly financial statements of the Company,
selects and oversees the Companys independent auditors and approves the scope
of their work. The Audit Committee also reviews and discusses with management
and the independent auditors significant accounting policies, reporting
practices and internal controls and approves the annual internal audit plan. The
Audit Committee has established procedures for reporting concerns about auditing
or accounting practices to the Audit Committee on an anonymous, confidential
basis at www.openboard.info/cpy. The Audit Committee also oversees managements
implementation and maintenance of effective systems of internal and disclosure
controls and reviews and evaluates the Companys investment policies and
performance.
The Compensation
Committee
The Compensation Committee is comprised
of Turner White (Chairman), James Abel, Peter Feld, Michael Glazer and Michael
Koeneke. The Board of Directors has determined that all of the members of the
Compensation Committee are independent, as that term is defined in the rules of
the New York Stock Exchange.
The Compensation Committee held five
meetings during fiscal year 2008. Decisions of the committee are made after
discussion of relevant facts and in accordance with the opinion of the majority
of the committee. Primary actions taken in these meetings include the
determination of 2007 incentive awards, 2008 executive compensation, 2008
director compensation awards of restricted stock and stock options and the
evaluation of the performance of the Chief Executive Officer (CEO). The CEO
participates in Compensation Committee meetings when requested. His involvement
is generally to advise concerning incentive awards and executive compensation
other than his own.
Meetings of the Compensation Committee
are set by the Compensation Committee chairman in consultation with management
and other members of the committee. Compensation Committee agendas are
determined by the chairman of the committee. The Compensation Committee also
served as the stock option committee under the Companys Stock Option Plan as
amended and restated and as the governing committee for the Restricted Stock
Plan. The Compensation Committee now serves as the Committee charged with
administration of the Omnibus Incentive Plan, which was approved at the 2008
annual meeting of stockholders.
The Compensation Committee is required
to consist of no fewer than three members, all of whom meet the independence
requirements of the New York Stock Exchange. The members of the Compensation
Committee are appointed by the Board on the recommendation of the Nominating and
Governance Committee and serve until their successors are appointed.
The Chairman of the Board generally
attends Compensation Committee meetings in an advisory capacity. He is an active
participant as the Compensation Committee considers the various decisions that
it has to make, but it makes final decisions.
The Compensation Committee consults
with the CEO for recommendations as to salary and incentive levels, but retains
the authority to make any final decisions. The CEOs recommendations include a
detailed listing by individual of recommended salary and incentives based on
internal performance reviews and consultation with appropriate management
personnel. Executives are included in Compensation Committee meetings as invited
and do not participate in executive sessions. The Compensation Committee
delegates to the CEO the responsibilities of communicating and implementing
decisions that are made by the Compensation Committee.
Outside consulting services are
obtained on a project-by-project basis, including matters that concern
compensation of members of the Board of Directors. During 2007 and 2008, the
Compensation Committee retained an independent consultant, who provided outside
consulting services to determine compensation for the Chairman of the Board. The
independent consultant was commissioned by the Committee and does not provide
other services to the Company. Management does not retain a compensation
consultant.
15
The Nominating and Governance
Committee
The Nominating and Governance Committee
is comprised of James Abel (Chairman), Peter Feld, Michael Koeneke, and Turner
White. Under its Charter, the Nominating and Governance Committee is charged
with nominating qualified members to serve on the Companys Board of Directors,
reviewing and assessing the adequacy of the Companys Corporate Governance
Guidelines and making recommendations for changes to the Guidelines as
appropriate. The Nominating and Governance Committee also leads the annual Board
and committee evaluation process. The Board of Directors has determined that all
of the members of the Nominating and Governance Committee meet the independence
requirements for companies listed on the New York Stock Exchange. The Nominating
and Governance Committee met six times during fiscal year 2008.
The Executive
Committee
The Executive Committee, comprised of
Michael Koeneke, David Meyer and Turner White, was dissolved by the Board on
September 22, 2008. The Executive Committee was authorized to carry out all the
functions of the Board of Directors to the extent permitted under Delaware law.
The Executive Committee did not meet during fiscal year 2008.
Compensation Committee
Interlocks and Insider Participation
During fiscal year 2008, no executive
officer of the Company served on the Board of Directors or Compensation
Committee of any other corporation with respect to which any member of the
Compensation Committee was engaged as an executive officer. No member of the
Compensation Committee was an officer or employee of the Company during fiscal
year 2008, and no member of the Compensation Committee was formerly an officer
of the Company.
Executive
Compensation
Compensation Discussion and
Analysis
This Compensation Discussion and
Analysis outlines our compensation philosophy, policy and practices as they
relate to our named executive officers.
Compensation philosophy and
goal
The Companys compensation philosophy
is based on two principles:
-
Exceptional individual and team performance should
be recognized and rewarded (and thereby encouraged) at all
levels of the organization.
-
Rewards should be tied to the creation of
stockholder value and its underlying drivers.
The goal of the Companys compensation
programs is to promote the financial interests and growth of the Company by
creating an incentive for designated officers and key employees of the Company
to remain in the employ of the Company and to work to the best of their
abilities for the achievement of the Companys strategic growth objectives.
Compensation packages are determined upon hire based on consideration of the
Companys strategic and financial goals, competitive forces, fairness,
individual responsibilities and challenges and economic factors. This includes
review of published compensation reports, as needed. Formal benchmarking is not
used for management compensation purposes. Compensation packages are reviewed
annually by the Compensation Committee.
Compensation Components and
Related Policies
The Companys Chief Executive Officer,
the persons who served as Chief Financial Officer in fiscal year 2008 and the
three other most highly compensated executive officers during the fiscal year
are considered the named executive officers or NEOs for purposes of this
discussion. For fiscal year 2008, the NEOs were:
Dr. Renato
Cataldo, President and Chief Executive Officer
Mr. Dale Heins, Senior Vice President, Finance, Treasurer and, effective
April 19, 2008, Chief Financial Officer
Mr.
Gary Douglass, Executive Vice President, Finance, Chief Financial Officer and
Treasurer, through April 18, 2008
Mr. Thomas
Gallahue, Executive Vice President, Operations
Mr. Keith Laakko, Chief Marketing Officer
Ms. Jane Nelson, General Counsel and Corporate Secretary
16
The components of compensation
described below and their relative weightings were selected because they are
considered fair, competitive and in line with the Companys compensation
philosophy. Outside of employment agreements, benefits are provided on a
Company-wide basis with selections of specific plans made based on management
analysis of plans available in the marketplace (and Board of Director approval
when needed) as well as the necessary elements to attract and retain employees.
The stockholders are required to approve any stock plans. The compensation and
benefit structure is considered appropriate for the Companys size and
industry.
Base Compensation
The Compensation Committee annually
reviews compensation based on consideration of the Companys strategic and
financial goals, competitive forces, fairness, individual responsibilities and
challenges and economic factors. This includes a review of published
compensation reports, as needed. Base salaries for our named executive officers
reflect each executive officers level of experience, responsibilities and
expected future contributions to our success. We review base salaries on an
annual basis, or as responsibilities change, and we consider factors such as
individual and Company performance and the competitive environment in our
industry in determining whether salary adjustments are warranted.
Base salaries for Messrs. Cataldo,
Douglass, Gallahue and Laakko were increased by the Compensation Committee,
effective February 26, 2008. Mr. Heins base salary was increased to $235,000
when he was promoted to Chief Financial Officer on April 19, 2008. Ms. Nelsons
base salary did not change in fiscal year 2008.
Incentive and Restricted Stock
Compensation
The CPI Corp. Performance Plan is an
annual incentive plan that is applied to a broad pool of employees including the
NEOs. Under the Companys performance plan, executives and other participants
have the potential to earn significant supplemental compensation if
pre-established, objective targets are met or exceeded. The performance plan is
not exempt under section 162(m) of the Internal Revenue Code. The Board of
Directors establishes the targets each year to provide performance awards
designed to yield corresponding growth in stockholder value.
During fiscal 2008, all named executive
officers participated in this plan. The Board establishes the formula(s) or
other criteria for determining the amount of the annual plan payouts (Incentive
Compensation Pool) for each fiscal year (Plan Year) based on the Companys
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) or
such other performance measurement(s) or criteria as the Board may establish in
its sole discretion. Not later than ninety (90) days following the end of a Plan
Year, the Board calculates the Incentive Compensation Pool for the Plan Year
based on the formula(s) or criteria established by the Board for such Plan Year.
Once the amount of the Incentive Compensation Pool for the Plan Year is
calculated, participants are designated for that year and are awarded an annual
bonus based on performance.
Performance expectations are
established through the budgeting process and approved by the Board of
Directors. Once the budget is final, EBITDA and/or other targets for the year
are determined by the Board of Directors at levels deemed to be achievable but
challenging. Participants and payouts are designated and awards made based on an
assessment of individual and team contributions not later than ninety (90) days
following the end of the Plan Year. In fiscal 2008, any payouts of $10,000 or
more pursuant to the plan were weighted evenly between cash and restricted
stock, allowing high-impact employees at multiple levels of the organization to
participate in the long-term success of the Company through stock ownership. The
plan provides that the incentive compensation payable to executive officers of
the Company in any Plan Year shall not, in the aggregate, exceed thirty three
and one-third percent (33 1/3%) of the established Incentive Compensation Pool.
The restricted stock awarded to date for performance has a vesting period ending
upon completion of the subsequent fiscal year, thus encouraging retention of key
employees.
The Company did not meet
pre-established EBITDA and sales targets for fiscal year 2008. Accordingly,
bonus levels were limited to the minimum total available for the year, but
covered recipients throughout the organization were rewarded for their
individual and team contributions. These awards are distributed among employees
at the discretion of the Compensation Committee. A substantial portion of the
total was paid in restricted shares that will not vest until the end of fiscal
year 2009.
17
Stock Option Plan
The Company previously had an amended
and restated non-qualified stock option plan, under which certain officers and
key employees received options to acquire shares of the Companys common stock.
All outstanding options vested in connection with the 2004 consent solicitation
through which a majority of the Board of Directors was replaced (the 2004
Change of Control). No options have been granted under that plan since the 2004
Change of Control. The Omnibus Incentive Plan which was approved at the 2008
Annual Meeting replaced this plan.
Omnibus Incentive
Plan
The CPI Corp. Omnibus Incentive Plan
(the Plan) was approved by the stockholders July 17, 2008. The Plan replaced
the CPI Corp. Stock Option Plan and the CPI Corp. Restricted Stock Plan. The
Plan provides the Company with flexibility to award employees, directors and
consultants of the Company (the Service Providers) both short-term and
long-term equity-based and cash incentives. The purposes of the Plan are (i) to
attract and retain highly competent persons; (ii) to provide incentives to
Service Providers that align their interests with those of the Companys
stockholders; and (iii) to promote the success of the business of the Company.
Awards under the Plan are granted by the Compensation Committee, provided that
the Board shall be responsible for administering this Plan with respect to
awards to non-employee directors. The Compensation Committee has the authority,
among other things, to (i) select the Service Providers to whom awards may be
granted and the types of awards to be granted to each; (ii) to determine the
number of shares to be covered by each award; (iii) to determine whether, to
what extent, and under what circumstances an award may be settled in cash,
common stock, other securities, or other awards; (iv) to prescribe, amend, and
rescind rules and regulations relating to the Plan; and (v) to make all other
determinations and take all other action described in the Plan or as the
Compensation Committee otherwise deems necessary or advisable. Total shares of
common stock approved for delivery pursuant to awards under the Plan are 800,000
shares. At May 9, 2009, 469,139 of these shares were available for future
grant.
Types of awards authorized under the
Plan include (i) stock options to purchase shares of common stock, including
incentive stock options (ISOs) and non-qualified stock options, which will be
granted with an exercise price not less than 100% of the fair market value of
the common stock on the date of grant; (ii) stock appreciation rights (SARs),
which confer the right to receive an amount, settled in cash, common stock or
other awards, equal to the excess of the fair market value of a share of common
stock on the date of exercise over the exercise price of the SAR; (iii)
restricted stock, which is common stock subject to restrictions on
transferability and other restrictions, such as payment of respective taxes,
with respect to which a participant has the voting rights of a stockholder
during the period of restriction; (iv) restricted stock units, which are awards
of a right to receive shares of the Companys common stock and are subject to
restrictions on transferability and other restrictions; such as payment of
respective taxes, (v) performance awards, including performance shares or
performance units, which are settled after an applicable performance period has
ended to the extent to which corresponding performance and/or market goals have
been achieved and (vi) other awards, including awards that are payable in shares
of common stock or the value of which is based on the value of shares of common
stock, and awards to be settled in cash or other property other than common
stock.
In order to encourage a focus in
long-term stockholder value creation, executives are awarded equity incentives.
As shown in the Grants of Plan-Based Awards in Fiscal Year 2008 table, the
named executive officers were awarded stock options on August 14,
2008.
Supplemental Retirement
Benefits
In December 2008, Mr. Douglass and Ms.
Nelson amended their Employment Agreements to delete the provisions related to
the supplemental retirement benefits under the Supplemental Retirement Plan (the
SERP) in their agreements in exchange for negotiated cash payments of $400,000
and $375,000, respectively. Prior to these amendments, the employment agreements
for Mr. Douglass and Ms. Nelson provided for supplemental retirement benefits up
to 40% of the highest base salary from and after fiscal year 1997, not to exceed
$150,000 annually, for twenty years. Supplemental retirement benefit payments
were to commence on the later of (i) age 65 or (ii) the date of
retirement.
18
Company-wide Benefits
Benefits such as profit sharing 401(k),
medical and dental are available to executives under plans and policies that
apply Company-wide. Management reviews the performance and cost of these plans
on an annual basis and makes changes as necessary. For the profit sharing plan,
the Board of Directors appoints a plan committee made up of executive officers.
That committee is responsible for approving and making any necessary changes to
the plan.
The Company has a defined benefit
pension plan that applied Company-wide until April 1, 2004 (the Retirement
Plan), when the Company implemented a freeze of future benefit accruals.
Employees with at least ten years of service who attained age 50 as of April 1,
2004 were grandfathered and benefits continued to accrue for those
grandfathered individuals until February 20, 2009, when such benefits were
frozen. Certain employees, including Ms. Nelson, who met the minimum age and
years of service to be grandfathered, were excluded from the grandfathering
provision as a result of discrimination testing that required exclusion of
certain highly compensated employees (HCE). A non-qualified plan was
established to provide the equivalent benefits for certain HCEs, including Ms.
Nelson.
Employment
Agreements
Senior executives, including all of the
named executive officers, are generally hired under employment agreements which
establish base compensation and eligibility for annual performance-based awards,
long-term equity awards, severance and other benefits. The agreements are used
to document the employment terms, promote retention and provide for various
covenants that protect the Company. The agreements are prepared based on a
standard template that does not include special provisions for change of
control. The Compensation Committee reviews and approves executive employment
agreements before they are executed.
Upon his promotion to CFO on April 19,
2008, Dale Heins entered into an employment agreement that follows the standard
template, as further described in the discussion following the executive
compensation tables.
In connection with the Release and
Settlement Agreement for Gary Douglass in December 2008, all provisions related
to the SERP plan were eliminated.
In connection with entering into the
Settlement and Release Agreement with Jane Nelson on December 31, 2008, her
previous employment agreement terminated and she entered into a new employment
agreement that uses the standard template discussed above.
Further descriptions of employment
agreements are provided in the discussion following the executive compensation
tables.
Termination
Agreements
Upon termination of the employment of a
key executive, the Company and executive generally enter into a separation or
resignation agreement to clarify the terms of the separation. Gary Douglass,
Executive Vice President and Chief Financial Officer, resigned in April 2008
without a separation agreement.
Tax and Accounting
Implications
Named executives officers do not have
any tax gross-up benefits in their employment agreements.
Equity awards are primarily in the form
of restricted stock or stock options, for which the expensing of equity awards
under FAS 123R has had little impact. New rules applicable to cash incentive
compensation have also had little impact on the Companys compensation decisions
related to these awards.
Although the $1 million limitation on
deductibility imposed by Section 162(m) has had limited application to
compensation paid to the Companys executives, the Compensation Committee
intends to preserve full deductibility of executive compensation. Since each
executive had compensation lower than the $1 million limitation in the last
year, Section 162(m) was not applicable.
The Companys policy is to meet all the
requirements of Internal Revenue Code Section 409A.
The Omnibus Incentive Plan, approved by
stockholders in 2008, was drafted to meet the requirements of Section 162(m) and
409A of the Internal Revenue Code.
19
Stock Ownership
Guidelines
The Company does not have stock
ownership guidelines pertaining to executive ownership of company stock or stock
retention guidelines applicable to equity awards to executives. These are not
considered necessary since awards upon hire and through the Omnibus Incentive
Plan provide adequate ownership of Company stock to allow a vested interest in
the success of the Company.
Compensation Committee
Report
We, the Compensation Committee of the
Board of Directors of CPI Corp., have reviewed and discussed the Compensation
Discussion and Analysis set forth above with the management of the Company, and,
based on such review and discussion, have recommended to the Board of Directors
inclusion of the Compensation Discussion and Analysis in this Proxy Statement
and, through incorporation by reference to this Proxy Statement, the Companys
Annual Report on Form 10-K for the year ended February 7, 2009.
THE CPI CORP. COMPENSATION
COMMITTEE
Turner
White, Chairman
|
James
Abel
|
Peter
Feld
|
Michael
Glazer
|
Michael
Koeneke
|
20
Summary Compensation
Table
The following table sets forth the
information required by SEC Regulation S-K Item 402 as to the compensation
expense for fiscal years 2008, 2007 and 2006 for services rendered in all
capacities, by the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
Incentive Plan
|
Compensation
|
All Other
|
|
|
Name and
Principal
|
|
|
|
|
|
|
Stock Awards
|
Awards
|
Compensation
|
Earnings
|
Compensation
|
|
|
Position
|
Year
|
Salary ($)
|
Bonus
($)
|
($)(1)
|
($)(2)
|
($)(3)
|
($)(4)
|
($)(5)
|
Total
($)
|
Renato Cataldo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
(6)
|
2008
|
$
|
484,135
|
$
|
-
|
|
$
|
27,113
|
(7)
|
$
|
23,666
|
|
$
|
21,250
|
$
|
-
|
$
|
2,879
|
|
$
|
559,043
|
|
2007
|
$
|
385,000
|
$
|
-
|
|
$
|
182,997
|
(8)
|
$
|
-
|
|
$
|
35,000
|
$
|
-
|
$
|
4,499
|
|
$
|
607,496
|
|
2006
|
$
|
275,000
|
$
|
-
|
|
$
|
180,657
|
(9)
|
$
|
-
|
|
$
|
150,000
|
$
|
-
|
$
|
6,833
|
|
$
|
612,490
|
Dale Heins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
Finance,
|
2008
|
$
|
228,806
|
$
|
-
|
|
$
|
13,556
|
(7)
|
$
|
11,833
|
|
$
|
17,500
|
$
|
-
|
$
|
3,149
|
|
$
|
274,844
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Treasurer (10)
|
2007
|
$
|
163,654
|
$
|
-
|
|
$
|
90,247
|
(8)
|
$
|
-
|
|
$
|
17,500
|
$
|
-
|
$
|
4,265
|
|
$
|
275,666
|
|
2006
|
$
|
150,000
|
$
|
-
|
|
$
|
18,935
|
(9)
|
$
|
-
|
|
$
|
40,000
|
$
|
-
|
$
|
3,586
|
|
$
|
212,521
|
Gary Douglass
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Finance,
|
2008
|
$
|
79,212
|
$
|
-
|
|
$
|
23,242
|
|
$
|
-
|
|
$
|
-
|
$
|
-
|
$
|
400,318
|
(11)
|
$
|
502,772
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Treasurer (10)
|
2007
|
$
|
275,000
|
$
|
-
|
|
$
|
200,496
|
(8)
|
$
|
-
|
|
$
|
30,000
|
$
|
15,717
|
$
|
5,513
|
|
$
|
526,726
|
|
2006
|
$
|
275,000
|
$
|
-
|
|
$
|
-
|
(9)
|
$
|
-
|
|
$
|
100,000
|
$
|
11,289
|
$
|
3,151
|
|
$
|
389,440
|
Thomas Gallahue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
2008
|
$
|
305,770
|
$
|
-
|
|
$
|
23,242
|
(7)
|
$
|
9,149
|
|
$
|
17,500
|
$
|
-
|
$
|
4,837
|
|
$
|
360,498
|
|
2007
|
$
|
220,721
|
$
|
-
|
|
$
|
29,933
|
(8)
|
$
|
-
|
|
$
|
30,000
|
$
|
638
|
$
|
3,754
|
|
$
|
285,046
|
|
2006
|
$
|
151,779
|
$
|
100,000
|
(12)
|
$
|
39,478
|
(13)
|
$
|
71,280
|
(13)
|
$
|
30,000
|
$
|
477
|
$
|
3,529
|
|
$
|
396,543
|
Keith Laakko
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
2008
|
$
|
203,846
|
$
|
-
|
|
$
|
25,490
|
(7)
|
$
|
9,466
|
|
$
|
15,000
|
$
|
-
|
$
|
2,853
|
|
$
|
256,655
|
|
2007
|
$
|
175,000
|
$
|
-
|
|
$
|
34,951
|
|
$
|
-
|
|
$
|
20,000
|
$
|
-
|
$
|
4,729
|
|
$
|
234,680
|
|
2006
|
$
|
175,000
|
$
|
-
|
|
$
|
60,015
|
|
$
|
-
|
|
$
|
25,000
|
$
|
-
|
$
|
2,366
|
|
$
|
262,381
|
Jane Nelson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Counsel and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary
of the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
2008
|
$
|
211,615
|
$
|
-
|
|
$
|
15,484
|
(7)
|
$
|
9,466
|
|
$
|
15,000
|
$
|
-
|
$
|
379,162
|
(11)
|
$
|
630,727
|
|
2007
|
$
|
210,000
|
$
|
-
|
|
$
|
50,113
|
(8)
|
$
|
-
|
|
$
|
20,000
|
$
|
63,821
|
$
|
5,015
|
|
$
|
348,949
|
|
2006
|
$
|
195,000
|
$
|
-
|
|
$
|
-
|
(9)
|
$
|
-
|
|
$
|
25,000
|
$
|
22,183
|
$
|
6,011
|
|
$
|
248,194
|
(1)
|
|
Stock awards issued under the CPI
Performance Plan. See Note 13 in the Companys Annual Report to the
Securities and Exchange Commission on Form 10-K for the fiscal year ended
February 7, 2009, for discussion of valuation methods related to stock
awards. Dividends are earned on restricted stock not yet vested. Such
dividends are included in All Other Compensation as they are earned. 2007
Stock Awards column also includes $100,718 awarded to Mr. Douglass,
$50,336 awarded to Mr. Heins and $25,168 awarded to Ms. Nelson as a
special bonus for their roles in the completion of the acquisition of
assets from Portrait Corporation of America, Inc.
|
|
(2)
|
|
Under the CPI Corp. Omnibus
Incentive Plan, the Company issued options to the NEOs in the third
quarter of fiscal year 2008 as follows: Mr. Cataldo, 50,000; Mr. Gallahue,
17,500; Mr. Heins, 25,000; Mr. Laakko, 20,000; and Ms. Nelson, 20,000.
These options vest in three equal increments on their anniversary dates,
with the exception of Mr. Gallahues options, which vest 7,500 on the
first anniversary date and 5,000 both on the second and third anniversary
dates. The first increment vests on the first anniversary date and is
exercisable when the common stock trades in excess of $25.00 for a minimum
of 20 consecutive trading days, the second increment vests on the second
anniversary date and is exercisable when the common stock trades in excess
of $45.00 for a minimum of 20 consecutive trading days and the third
increment vests on the third anniversary and is exercisable when the
common stock trades in excess of $65.00 for a minimum of 20 consecutive
trading
|
21
|
|
days. If the target common stock price is
met for a minimum of 20 consecutive trading days prior to the vesting
schedule, the exercise dates would be the vesting schedule dates. See the
Outstanding Equity Awards at 2008 Fiscal Year End table for exercise
prices and expiration dates. Additional disclosure of these options,
including valuation method, is included in Note 13 in the Companys Annual
Report to the Securities and Exchange Commission on Form 10-K for the
fiscal year ended February 7, 2009.
|
|
|
|
(3)
|
|
Value of cash portion of
performance bonus awarded under the CPI Corp. Omnibus Incentive Plan for
the fiscal year listed in the table. Amounts are granted and paid in the
fiscal year subsequent to the fiscal year for which the performance
relates. The balance of the bonus was awarded in restricted stock and is
reflected in the Stock Awards column.
|
|
(4)
|
|
Amounts relate to actuarial
changes in pension values related to the pension plan and supplemental
retirement plan. The table does not include negative values of $11,551,
$520 and $795, in fiscal year 2008, 2007 and 2006, respectively, for Mr.
Heins and $2,814, $2,692 and $74,495 in 2008 for Mr. Douglass, Mr.
Gallahue and Ms. Nelson, respectively.
|
|
(5)
|
|
Detail of All Other
Compensation follows.
|
|
|
|
Dividends
|
Company
|
Life
|
|
|
|
|
|
|
|
Paid on Stock
|
401 (k)
|
Insurance
|
|
|
|
|
|
|
|
not yet vested
|
Contribution
|
Premiums
|
|
|
|
|
|
Name
|
Year
|
($)
|
($)
|
($)
|
Other ($)
|
Total ($)
|
Renato Cataldo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
824
|
|
$
|
1,363
|
$
|
692
|
$
|
-
|
|
$
|
2,879
|
|
2007
|
|
$
|
1,331
|
|
$
|
2,494
|
$
|
674
|
$
|
-
|
|
$
|
4,499
|
|
2006
|
|
$
|
3,682
|
|
$
|
2,087
|
$
|
1,064
|
$
|
-
|
|
$
|
6,833
|
Dale Heins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
412
|
|
$
|
1,363
|
$
|
414
|
$
|
960
|
|
$
|
3,149
|
|
2007
|
|
$
|
531
|
|
$
|
2,494
|
$
|
280
|
$
|
960
|
|
$
|
4,265
|
|
2006
|
|
$
|
519
|
|
$
|
2,087
|
$
|
580
|
$
|
400
|
|
$
|
3,586
|
Gary Douglass
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
-
|
|
$
|
-
|
$
|
318
|
$
|
400,000
|
(11)
|
$
|
400,318
|
|
2007
|
|
$
|
1,239
|
|
$
|
2,494
|
$
|
1,380
|
$
|
400
|
|
$
|
5,513
|
|
2006
|
|
$
|
-
|
|
$
|
2,087
|
$
|
1,064
|
$
|
-
|
|
$
|
3,151
|
Thomas Gallahue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
706
|
|
$
|
1,363
|
$
|
1,268
|
$
|
1,500
|
|
$
|
4,837
|
|
2007
|
|
$
|
266
|
|
$
|
2,494
|
$
|
994
|
$
|
-
|
|
$
|
3,754
|
|
2006
|
|
$
|
649
|
|
$
|
2,087
|
$
|
793
|
$
|
-
|
|
$
|
3,529
|
Keith Laakko
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
1,147
|
|
$
|
1,363
|
$
|
343
|
$
|
-
|
|
$
|
2,853
|
|
2007
|
|
$
|
1,911
|
|
$
|
2,494
|
$
|
324
|
$
|
-
|
|
$
|
4,729
|
|
2006
|
|
$
|
1,689
|
|
$
|
-
|
$
|
677
|
$
|
-
|
|
$
|
2,366
|
Jane Nelson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
470
|
|
$
|
1,363
|
$
|
2,329
|
$
|
375,000
|
(11)
|
$
|
379,162
|
|
2007
|
|
$
|
310
|
|
$
|
2,494
|
$
|
2,211
|
$
|
-
|
|
$
|
5,015
|
|
2006
|
|
$
|
-
|
|
$
|
2,087
|
$
|
3,924
|
$
|
-
|
|
$
|
6,011
|
(6)
|
|
Dr. Cataldo was
appointed President and Chief Executive Officer on October 10,
2006.
|
|
(7)
|
|
The number of
restricted shares awarded to named executive officers for fiscal year 2008
performance was determined by dividing 50% of the value of their total
bonuses by the closing price of the Companys common stock at the end of
fiscal year 2008 ($7.14). The same formula was used for all other
recipients of restricted shares pursuant to the Omnibus Incentive Plan.
The Compensation Committee selected the closing price of the Companys
common stock on the last trading day of the fiscal year because the awards
were for fiscal year 2008 performance. The awards were not made until
completion of the year-end audit of the Companys financial statements and
allocation of the incentive pool determined upon completion of the audit,
which occurred on April 27, 2009. The amounts in the table reflect the
amount expensed under FAS 123R in fiscal year 2008.
|
|
(8)
|
|
The number of
restricted shares awarded to the named executive officers for fiscal year
2007 performance was determined by dividing 50% of the value of their
total bonuses by the closing price of the Companys common stock at the
end of fiscal year 2007 ($20.40). The same formula was used for all other
recipients of restricted shares pursuant to the Performance
Plan.
|
22
|
|
The Compensation Committee
selected the closing price of the Companys common stock on the last
trading day of the fiscal year because the awards were for fiscal year
2007 performance. The awards were made on March 5, 2008. The amounts in
the table reflect the amount expensed under FAS 123R in fiscal year
2007.
|
|
|
|
(9)
|
|
The number of
restricted shares awarded to named executive officers for fiscal year 2006
performance was determined by dividing 50% of the value of their total
bonuses by the closing price of the Companys common stock at the end of
fiscal year 2006 ($54.12). The same formula was used for all other
recipients of restricted shares pursuant to the Performance Plan. The
Compensation Committee selected the closing price of the Companys common
stock on the last trading day of the fiscal year because the awards were
for fiscal year 2006 performance. The awards were not made until
completion of the year-end audit of the Companys financial statements and
allocation of the incentive pool determined upon completion of the audit
which occurred on April 10, 2007. The amounts in the table reflect the
amount expensed under FAS 123R in fiscal year 2006.
|
|
(10)
|
|
Mr. Douglass resigned
as Chief Financial Officer on April 18, 2008, and was replaced as Chief
Financial Officer by Mr. Heins, effective April 19, 2008.
|
|
(11)
|
|
Previous employment
agreements for Mr. Douglass and Ms. Nelson provided for supplemental
retirement benefits that vested at the rate of 10% for each year of
service. Mr. Douglass and Ms. Nelson were fully vested in this plan, but
negotiated cash payments of $400,000 and $375,000, respectively, to settle
the Companys liability with them under this plan in December
2008.
|
|
(12)
|
|
Mr. Gallahue entered
into a retention agreement on January 12, 2006, which was amended on
August 29, 2006 and October 26, 2006. Pursuant to his retention agreement,
Mr. Gallahue received $100,000.
|
|
(13)
|
|
On June 7, 2006, the
Board of Directors approved the vesting of Mr. Gallahues restricted stock
despite his planned retirement, which would have resulted in forfeiture of
unvested shares. As a result of this change, his restricted stock was
revalued and expense of $15,818 was recognized in fiscal year 2006.
Additionally, Mr. Gallahue had 15,046 vested options outstanding at the
end of fiscal year 2005. In connection with his retention agreement, the
term available to him to exercise his options was extended and accordingly
the options outstanding were revalued and the Company recognized expense
of $71,280. Mr. Gallahue subsequently agreed to resume full-time service
for the Company effective February 4, 2007. Accordingly, his options are
subject to the Stock Option Plan, which allows exercise up to the original
expiration date in 2010 or three months after termination of employment,
whichever occurs earlier. Additionally, Mr. Gallahue was awarded 1,352
shares with a value of $23,660 as a 2005 performance bonus which was
expensed in fiscal year 2006.
|
23
Grants of Plan-Based Awards in Fiscal
Year 2008
|
|
|
|
Estimated Future Payouts Under
|
Estimated Future Payouts
|
Grant
Date
|
|
|
|
|
Non-Equity Incentive Plan
|
Under Equity Incentive Plan
|
Fair Value
|
|
|
|
|
Awards
|
Awards
|
of Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Option
|
|
|
|
Grant
|
Threshold
|
Target
|
Max
|
Threshold
|
Target
|
Max
|
Awards
|
Name
|
Plan
Name
|
Date (1)
|
($)
|
($)(2)
|
($)
|
(#)
|
(#)(3)
|
(#)
|
($)(3)
|
Renato Cataldo
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
35,000
|
$
|
-
|
-
|
1,716
|
|
-
|
$
|
27,113
|
|
Omnibus Incentive Plan
|
|
8/14/08
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
50,000
|
|
-
|
$
|
179,501
|
|
Dale Heins
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
17,500
|
$
|
-
|
-
|
858
|
|
-
|
$
|
13,556
|
|
Omnibus Incentive Plan
|
|
8/14/08
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
25,000
|
|
-
|
$
|
89,751
|
|
Gary Douglass
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
30,000
|
$
|
-
|
-
|
1,471
|
(5)
|
-
|
$
|
23,242
|
|
Thomas Gallahue
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
30,000
|
$
|
-
|
-
|
1,471
|
|
-
|
$
|
23,242
|
|
Omnibus Incentive Plan
|
|
8/14/08
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
17,500
|
|
-
|
$
|
64,505
|
|
Keith Laakko
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
20,000
|
$
|
-
|
-
|
980
|
|
-
|
$
|
15,484
|
|
Omnibus Incentive Plan
|
|
8/14/08
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
20,000
|
|
-
|
$
|
71,801
|
|
Jane Nelson
|
Restricted Stock Plan
|
(4)
|
3/5/08
|
$
|
-
|
$
|
20,000
|
$
|
-
|
-
|
980
|
|
-
|
$
|
15,484
|
|
Omnibus Incentive Plan
|
|
8/14/08
|
$
|
-
|
$
|
-
|
$
|
-
|
-
|
20,000
|
|
-
|
$
|
71,801
|
(1)
|
|
Restricted stock plan
grants were granted on March 5, 2008, and relate to 2007 service. Omnibus
Incentive Plan grants were granted on August 14, 2008, and relate to stock
options awarded pursuant to the Omnibus Incentive Plan. See footnote 2 to
the Summary Compensation Table for a description of the vesting of stock
options awarded pursuant to the Omnibus Incentive Plan.
|
|
(2)
|
|
Amounts are cash
bonuses for 2007 performance awards under the CPI Corp. Performance Plan
which were granted and paid in fiscal year 2008.
|
|
(3)
|
|
Under the Restricted
Stock Plan, the portion of a participants incentive compensation award is
calculated by dividing (1) that portion of the participants incentive
compensation award payable in restricted shares for the fiscal year by (2)
the fair market value of one share of common stock measured as of the last
day of the fiscal year. The restricted shares are subject to restrictions
on transferability, as well as vesting and forfeiture restrictions.
Termination due to normal retirement (65 or older) results in automatic
waiver of the uncompleted portion of restriction . The shares vest
automatically upon a change of control. The stock options granted under
the Omnibus Incentive Plan are described in footnote 2 under the Summary
Compensation table set forth above.
|
|
(4)
|
|
Includes grants made
in fiscal year 2008 only. Incentive plan grants in fiscal year 2008 relate
to fiscal year 2007 service. All cash awards and restricted stock granted
in fiscal year 2008 was paid or vested prior to fiscal year 2008 year-end.
Amounts related to 2008 service were granted subsequent to the fiscal
year-end and are not included in this table because such amounts are not
allocated until after the fiscal year-end. Amounts related to fiscal year
2008 service that are expensed in fiscal year 2009 are included in the
Summary Compensation Table above in the year earned, which includes cash
awards, as indicated in the Non-Equity Incentive Plan Compensation
column for fiscal year 2008 and restricted shares, as indicated in the
Stock Awards column for fiscal year 2008.
|
|
(5)
|
|
Mr. Douglass forfeited
his 1,471 restricted share awards as of April 18, 2008, when he resigned
as Executive Vice President, Finance, Chief Financial Officer and
Treasurer of the Company.
|
24
Outstanding Equity Awards at 2008
Fiscal Year-End
|
Option
Awards (outstanding at year end)
|
|
|
Equity Incentive
|
|
|
|
|
Number of
|
Plan Awards
|
|
|
|
|
Securities
|
Number of
|
|
|
|
|
Underlying
|
Securities
|
|
|
|
|
Unexercised
|
Underlying
|
|
|
|
|
Options
|
Unexercised
|
Option
|
Option
|
|
Exercisable
|
Unearned
|
Exercise
|
Expiration
|
Name
|
(#)
|
Options
(#)(1)
|
Price
($)
|
Date
|
Renato Cataldo
|
-
|
|
50,000
|
|
$
|
13.58
|
08/14/18
|
Dale Heins
|
-
|
|
25,000
|
|
$
|
13.58
|
08/14/18
|
Gary Douglass
|
-
|
|
-
|
|
$
|
-
|
-
|
Thomas Gallahue
|
-
|
|
17,500
|
|
$
|
13.58
|
08/14/18
|
|
10,046
|
(2)
|
-
|
|
$
|
12.96
|
10/21/10
|
|
5,000
|
(2)
|
-
|
|
$
|
17.00
|
04/15/10
|
Keith Laakko
|
-
|
|
20,000
|
|
$
|
13.58
|
08/14/18
|
Jane
Nelson
|
-
|
|
20,000
|
|
$
|
13.58
|
08/14/18
|
(1)
|
|
With the exception of Mr.
Gallahue, the stock options vest equally in three increments on the first
three anniversary dates after the August 14, 2008 grant date. Mr.
Gallahues options vest at 7,500 on the first anniversary date and 5,000
on each of the second and third anniversary dates. See footnote 2 to the
Summary Compensation Table for further description of the vesting of
stock options awarded pursuant to the Omnibus Incentive
Plan.
|
|
(2)
|
|
Mr. Gallahues options were
scheduled to expire on February 15, 2007, pursuant to his Retention
Agreement. In fiscal year 2007 Mr. Gallahue agreed to continue his
employment with the Company beyond his planned retirement. Accordingly,
his options remain exercisable and will expire in accordance with the
terms of the Stock Option Plan.
|
Stock Vested in Fiscal Year
2008
|
|
Stock
Awards
|
|
|
Number of Shares
|
|
|
|
|
Acquired Upon Vesting
|
Value Realized on
|
Name
|
(#)(1)
|
Vesting
($)
|
Renato Cataldo
|
|
1,716
|
|
$
|
12,252
|
Dale Heins
|
|
858
|
|
$
|
6,126
|
Gary Douglass
|
|
-
|
|
$
|
-
|
Thomas Gallahue
|
|
1,471
|
|
$
|
10,503
|
Keith Laakko
|
|
1,508
|
|
$
|
10,767
|
Jane
Nelson
|
|
980
|
|
$
|
6,997
|
(1)
|
|
Shares represent restricted stock
awarded as part of fiscal year 2007 bonuses, and, for Mr. Laakko, one
fifth of shares awarded upon his joining the
Company.
|
Pension Benefits
|
|
|
Present Value
|
Payments
|
|
|
Number of Years of
|
of Accumulated
|
During Last
|
Name
|
Plan Name
|
Credited Service (#)
|
Benefits ($)
|
Fiscal Year ($)
|
Renato Cataldo (1)
|
Retirement
Plan
|
-
|
|
$
|
-
|
$ -
|
Dale Heins (2)
|
Retirement Plan
|
17
|
|
$
|
39,079
|
$ -
|
Gary Douglass (2)
|
Retirement
Plan
|
2
|
|
$
|
23,013
|
$ -
|
Thomas Gallahue (2)
|
Retirement Plan
|
2
|
|
$
|
24,799
|
$ -
|
Keith Laakko (1)
|
Retirement
Plan
|
-
|
|
$
|
-
|
$ -
|
Jane Nelson (3)
|
Retirement Plan
|
16
|
|
$
|
126,474
|
$
-
|
25
(1)
|
|
Years of actual
service differ from the years of credited service because the plan was
frozen in 2004 and these employees were not yet employed. See description
of the retirement plan below.
|
|
(2)
|
|
Years of actual
service differ from the years of credited service because the plan was
frozen in 2004.
|
|
(3)
|
|
Employee is eligible
for early retirement. See descriptions of the retirement plan and
supplemental retirement plan below.
|
Retirement Plan
Effective April 1, 2004, the Company
amended the Retirement Plan to implement a freeze of future benefit accruals,
except for employees with at least ten years of service who attained age 50 as
of April 1, 2004, who were grandfathered and whose benefits continued to
accrue until February 20, 2009 when those benefits were frozen. Years of service
after the date of the benefit freeze are recognized for determination of whether
an employee attains five years of service for vesting purposes. Dr. Cataldo and
Mr. Laakko joined the Company after the Retirement Plan benefits were frozen
and, therefore, will receive no benefits under the Retirement Plan. Subject to
satisfaction of vesting requirements, the remaining NEOs are entitled to
receive the benefits under the Retirement Plan as described in the Pension
Benefits Table. Although Ms. Nelson met the service and vesting schedules to be
grandfathered, she was excluded from the grandfathering provisions as a result
of discrimination testing of highly compensated employees. Together with four
other highly compensated employees who were excluded from the grandfathering
provisions, commencing at age 65 she will receive the benefits of continued
accruals under a non-qualified plan. The accrual of benefits under this
non-qualified plan ceased on February 20, 2009 concurrent with the freezing of
grandfathered benefit accruals under the Retirement Plan.
The Retirement Plan entitles a
participant to a monthly retirement benefit upon retirement at or after age 65
equal to 1% of average monthly gross earnings (including base salary and bonus)
from and after January 1, 1998, multiplied by the number of years of the
participants service. Until 2002, the maximum annual compensation recognized in
computing benefits was $100,000. Commencing with 2002, the maximum annual
compensation recognized in computing benefits increased to $200,000, subject to
adjustment by the Internal Revenue Service for cost-of-living increases in
future years.
In lieu of a monthly retirement
benefit, a participant may elect to convert to a contingent annuitant option
(which provides retirement benefits payable to the participant during his or her
lifetime and to his or her beneficiary after the participants death), or to an
option for life annuity with a guaranteed number of monthly payments, payable
first to the participant, with any remaining amounts payable to his or her
beneficiary. Benefits are fully vested after five years of service. The Company
periodically makes actuarially determined contributions to the Retirement Plan.
No deductions are made for social security benefits.
The Retirement Plan provides for a
reduced benefit for early retirement for employees age 55 or over with at least
15 years of service. The monthly early retirement benefit is equal to the
accrued (earned) benefit at the time of retirement, reduced by 1/180 for each of
the first 60 months and 1/360 for each of the next 60 months that the early
retirement date precedes the normal retirement date. The named executive officer
eligible for early retirement is Ms. Nelson.
Supplemental Retirement
Plan
Prior to December 2008, Mr. Douglass
and Ms. Nelson were entitled to benefits under the Supplemental Retirement Plan
pursuant to their then-existing employment agreements. In 2008, Mr. Douglas and
Ms. Nelson negotiated cash payments to settle the Companys obligations to them
under the SERP. Additional disclosure of the Retirement Plan and the
Supplemental Retirement Plan are included in Note 14 in the Companys Annual
Report to the Securities and Exchange Commission on Form 10-K for the fiscal
year ended February 7, 2009. Payments under the supplemental retirement plan
would have commenced on the later of (i) age 65 or (ii) the date of
retirement.
26
Potential Payments Upon
Termination
See discussion of employment contracts
and termination of employment that follow the Summary Compensation
Table.
All calculations in this table are at
the present value as of February 7, 2009, and are calculated at amounts as if
the terminating event occurred on that date.
|
Renato Cataldo
|
|
Dale Heins
|
|
Gary Douglass (1)
|
|
Thomas Gallahue
|
|
Keith Laakko
|
|
Jane Nelson
|
Termination with cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension (2)
|
$
|
-
|
|
$
|
39,079
|
|
$
|
-
|
|
$
|
24,799
|
|
$
|
-
|
|
$
|
126,474
|
|
Termination without cause (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
$
|
475,000
|
|
$
|
235,000
|
|
$
|
-
|
|
$
|
300,000
|
|
$
|
200,000
|
|
$
|
210,000
|
Pension (2)
|
|
-
|
|
|
39,079
|
|
|
-
|
|
|
24,799
|
|
|
-
|
|
|
126,474
|
Total
|
$
|
475,000
|
|
$
|
274,079
|
|
$
|
-
|
|
$
|
324,799
|
|
$
|
200,000
|
|
$
|
336,474
|
|
Retirement or resignation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension (2)
|
$
|
-
|
|
$
|
39,079
|
|
$
|
-
|
|
$
|
24,799
|
|
$
|
-
|
|
$
|
126,474
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension (2)
|
$
|
-
|
|
$
|
19,540
|
|
$
|
-
|
|
$
|
12,400
|
|
$
|
-
|
|
$
|
63,237
|
Life Insurance
|
|
650,000
|
|
|
470,000
|
|
|
-
|
|
|
600,000
|
|
|
400,000
|
|
|
420,000
|
Total
|
$
|
650,000
|
|
$
|
489,540
|
|
$
|
-
|
|
$
|
612,400
|
|
$
|
400,000
|
|
$
|
483,237
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability benefits (4)
|
$
|
1,346,257
|
|
$
|
1,331,808
|
|
$
|
-
|
|
$
|
710,824
|
|
$
|
1,383,707
|
|
$
|
640,570
|
Pension (2)
|
|
-
|
|
|
39,079
|
|
|
-
|
|
|
24,799
|
|
|
-
|
|
|
126,474
|
Total
|
$
|
1,346,257
|
|
$
|
1,370,887
|
|
$
|
-
|
|
$
|
735,623
|
|
$
|
1,383,707
|
|
$
|
767,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Mr. Douglass resigned as Chief
Financial Officer as of April 18, 2008, and therefore, has no future
payments.
|
|
|
|
(2)
|
|
Retirement is the voluntary or
involuntary termination of employment except for death or permanent
disability before attaining age 65. Employees who reach age 55 and have 15
years of service may elect early retirement benefits. Retirement benefits
are payable monthly for life. Options to cover spouses are available for a
reduced benefit. If an employee dies prior to retirement age, his or her
spouse is entitled to 50% of his benefits at the employees retirement
age. If an employee terminates prior to retirement age, he or she can
apply for vested pension benefits once they reach retirement
age.
|
|
(3)
|
|
Termination for cause is
triggered by an act in bad faith and to the detriment of the Company,
refusal or failure to act in substantial accordance with any written
material direction or order of the Company, repeated unfitness or
unavailability for service, disregard of the Companys rules or policies
after reasonable notice and opportunity to cure, conviction of a crime
involving dishonesty, breach of trust or physical or emotional harm to any
person, breach of the employment agreement or other contractual obligation
to the Company. These benefits are paid in a lump sum at the time of
termination.
|
|
(4)
|
|
Disability benefits for all NEOs
are under the same plan as all salaried
employees.
|
Employment Contracts and Termination
of Employment
The Company has employed the NEOs
under employment contracts that establish base compensation, bonus and other
benefits available to employees. The terms of all NEO employment agreements are
indefinite. The employment contracts provide that termination of employment of
any of the NEOs, other than for cause, requires the Company to make a lump sum
payment equal to 100% of their base salaries at time of severance.
Upon promotion to Chief Financial
Officer in April 2008, Dale Heins entered into an employment
agreement.
Previously, Mr. Douglass and Ms. Nelson
had employment agreements that provided for supplemental retirement and death
benefits as described above in the Compensation Discussion and Analysis. In
December 2008, Mr. Douglass and Ms. Nelson entered into agreements providing for
cash settlements as satisfaction of the Companys obligations related to the
supplemental retirement and death benefits. Concurrently, Ms. Nelson entered
into a new employment agreement that is in the form described in the first
paragraph above.
27
The NEOs are entitled to participate
in other active benefits and plans available to other employees, including
participation in the Companys 401(k) plan, health care and disability coverage,
life insurance and paid vacation. The NEOs are subject to customary
confidentiality, non-compete and insider obligations, which include an agreement
not to be employed by or act as a consultant for any direct competitor of the
Company.
Obligations applicable to the
receipt of termination benefits
All NEOs are subject to
non-competition covenants for one year after termination of employment. In their
employment agreements, all NEOs acknowledge that any ideas, concepts, graphics,
creative or other products of their work will be owned by the
Company.
Director Compensation in Fiscal Year
2008
|
|
|
|
All Other
|
|
|
Fees Earned or
|
Stock Awards
|
Option
|
Compensation
|
|
Name
|
Paid in Cash ($)
|
($)(1)
|
Awards ($)
|
($)(2)
|
Total ($)
|
David Meyer (3)
|
$
|
24,000
|
$
|
560,810
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$
|
16,439
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$
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11,288
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$
|
612,537
|
James Abel
|
$
|
55,500
|
$
|
40,669
|
$
|
-
|
$
|
1,236
|
$
|
97,405
|
Peter Feld (4)
|
$
|
24,000
|
$
|
20,628
|
$
|
-
|
$
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214
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$
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44,842
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Michael Glazer (5)
|
$
|
9,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
9,000
|
Michael Koeneke
|
$
|
54,000
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$
|
29,040
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$
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-
|
$
|
882
|
$
|
83,922
|
Turner White
|
$
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55,500
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$
|
34,855
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$
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-
|
$
|
1,059
|
$
|
91,414
|
Mark Mitchell (4)
|
$
|
38,228
|
$
|
-
|
$
|
-
|
$
|
588
|
$
|
38,816
|
(1)
|
|
The Board of Directors
maintains a CPI Corp. Non-Employee Directors Restricted Stock Policy (the
Policy) pursuant to the Omnibus Incentive Plan. Prior to the adoption of
the Omnibus Incentive Plan, the Policy was pursuant to the CPI Corp.
Restricted Stock Plan, as amended and restated as of April 14, 2005. The
purpose of the Policy is to advance the interests of the Company and its
stockholders by enabling the directors who are not employees of the
Company to elect each year to receive shares of restricted common stock of
the Company (Restricted Shares) in lieu of up to 100%, but not less than
50%, of the annual retainer they receive as directors of the Company.
Directors who chair committees of the Board may also elect to receive
restricted shares in lieu of an annual retainer in cash for their service
as committee chairmen.
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|
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|
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Upon making a valid and timely
election under the Policy, the non-employee director is awarded that
number of restricted shares determined by dividing (1) one hundred
twenty-five percent (125%) of that portion of the non-employee directors
annual retainer for Board service and/or service as a committee chair for
the fiscal year for which the election is being made by (2) the fair
market value of one share of common stock as of the first day of the
fiscal year. The restricted shares are not transferable and are subject to
other restrictions until the last day of the applicable fiscal
year.
Pursuant to the Policy, each of the directors elected to receive
restricted shares in lieu of 100% of their $30,000 annual cash retainer
for service on the Board in fiscal year 2008. Mr. Feld and Mr. Glazer
elected to receive restricted shares in lieu of cash compensation for the
prorated portion of the fiscal year they served as directors. Mr. Abel
also elected to receive restricted shares in lieu of his annual cash
retainers for serving as chairman of the Audit Committee ($6,000) and as
chairman of the Nominating and Governance Committee ($6,000). Mr. White
elected to receive Restricted Shares in lieu of his annual cash retainer
for serving as Chairman of the Compensation Committee ($6,000). In lieu of
cash compensation for their retainers, Messrs. Koeneke and Meyer both
received 1,838 restricted shares and Messrs. Abel, White, Glazer and Feld
received 2,574, 2,206, 2,403 and 1,336 restricted shares, respectively.
The stock awards to Mr. Meyer reported in this table include his
compensation for service as Chairman of the Board in fiscal year 2007, his
annual retainer for Board service in 2008 and his compensation for service
as Chairman of the Board in fiscal year 2008 pursuant to the Chairmans
Agreement described below.
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(2)
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Other compensation
represents dividends earned on restricted stock awards prior to
vesting.
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(3)
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Effective September
22, 2008, Mr. Meyer entered into a Chairmans Agreement with the Company.
This agreement provides compensation to Mr. Meyer for his services related
to his role as Chairman of the Board of Directors.
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Under the Chairmans Agreement,
Mr. Meyer receives an annual retainer of $200,000, payable in shares of
common stock of the Company. In fiscal year 2008, $150,000 of common
shares was paid upon execution of the agreement with $100,000 of those
shares being vested on that date. The remaining $50,000 of shares vested
on November 7, 2008. The final installment
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28
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|
of $50,000 for fiscal year 2008 was awarded on the first
trading day of the fourth quarter of fiscal year 2008, and vested on
February 7, 2009. Future retainer payments will be paid in four equal
installments of $50,000 of restricted shares on first trading day of each
quarter and such shares will vest on the last day of the quarter in which
the relevant award is made.
In
addition, Mr. Meyer receives an annual performance bonus for each fiscal
year during the term of the agreement in an amount up to 0.67% of the
Companys Adjusted EBITDA as reported in the applicable earnings release
of the Company for such fiscal year (the full award). The award is
segregated into five increments equal to 20% of the full award and each
increment is associated with a specific goal. Upon achievement of a
specific goal, Mr. Meyer will receive that increment. Payment of this
bonus is to be made within 90 days of the fiscal year end in the form of
shares of the Companys common stock which will be fully vested when
awarded.
Mr.
Meyer was also awarded a one time grant of 60,000 share options under the
Chairmans Agreement. Of these options, 30,000 vested on February 7, 2009,
and are exercisable when three market conditions are met. The first 10,000
increment is exercisable when the common stock trades in excess of $25.00
for a minimum of 20 consecutive trading days, the second 10,000 increment
is exercisable when the common stock trades in excess of $45.00 for a
minimum of 20 consecutive trading days and the third 10,000 increment is
exercisable when the common stock trades in excess of $65.00 for a minimum
of 20 consecutive trading days. The remaining 30,000 shares vest on
February 6, 2010, and are exercisable in two equal increments when the
$45.00 and $65.00 market conditions noted above are met. If the target
common stock price is met for a minimum of 20 consecutive trading days
prior to the vesting schedule noted above, the exercise dates would be the
vesting schedule dates. These stock options expire on September 22, 2013.
Additional disclosure of the these options is included in Note 13 in the
Companys Annual Report to the Securities and Exchange Commission on Form
10-K for the fiscal year ended February 7, 2009.
The
Compensation Committee will periodically review, adjust and mutually agree
on the specific goals and guidelines for Mr. Meyers position as
Chairman.
Additionally, on May 29, 2008, Mr. Meyer was awarded an additional
14,706 shares for his service during fiscal year 2007. On September 22,
2008, and November 12, 2008, Mr. Meyer was awarded 12,285 and 8,636
shares, respectively, for his service during fiscal year 2008, pursuant to
the Chairmans Agreement. The value of these shares included in the table
above is $200,000.
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(4)
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Mr. Mitchell did not stand for
reelection at the Annual Meeting of Stockholders in July 2008, and was
replaced by Mr. Feld at that time.
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(5)
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Mr. Glazer was elected to the
Board of Directors in November 2008. On February 25, 2009, Mr. Glazer was
granted 2,403 shares of restricted stock related to fiscal year 2008
service, pursuant to the election he made upon joining the Board. This
expense was recognized in fiscal year 2009 and therefore is not included
in the table above.
|
Each of the Companys directors
received a $30,000 retainer for service on the Board in fiscal year 2008. In
addition, for fiscal year 2008, Mr. Abel received a payment of $6,000 for his
service as chairman of the Audit Committee and $6,000 for his service as
chairman of the Nominating and Governance Committee, and Mr. White received an
additional payment of $6,000 for service as Chairman of the Compensation
Committee. As described in footnote 1 to the Director Compensation in Fiscal
Year 2008 table above, each of the directors elected to receive restricted
shares in lieu of 100% of their director retainers for fiscal year 2008 pursuant
to the Companys Non-Employee Directors Restricted Stock Policy. The Company
also reimburses directors for expenses incurred in connection with attending
Board and committee meetings and pays each director $1,500 for each Board and
Committee meeting attended. As of the end of fiscal year 2008, no directors held
shares of unvested restricted stock and the only director holding stock options
was David Meyer, whose 60,000 options are described in footnote 3 to the
Director Compensation in Fiscal Year 2008 table above.
29
Audit Committee Report
To Our Stockholders:
In performing our duties, the Audit
Committee has:
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1.
|
|
reviewed and discussed
with the Companys management and KPMG LLP (KPMG), the Companys
independent registered accounting firm, the audited financial statements
of the Company contained in the Companys Annual Report to Stockholders
for the fiscal year ended February 7, 2009, as well as quarterly financial
statements, all prior to their issuance;
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2.
|
|
discussed with KPMG,
all matters required to be discussed by Statement on Auditing Standards
No. 114, The Auditors Communication with Those Charged with Governance,
which supersedes Statement on Auditing Standards No. 61, Communication
with Audit Committees, as amended;
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|
3.
|
|
received from KPMG
written disclosures and the letter required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committee, as
modified or supplemented;
|
|
|
|
4.
|
|
discussed with KPMG
its independence from the Company;
|
|
|
|
5.
|
|
conducted its meetings
allowing for executive sessions with KPMG and with the Companys internal
auditors, in each case without the presence of the Companys management;
and
|
|
|
|
6.
|
|
received periodic
updates from the Companys internal auditors regarding their test work
with respect to internal controls over financial reporting and reviewed
with management and the independent auditor, managements assessment of
the effectiveness of the Companys internal controls over financial
reporting.
|
Among other things, the Audit Committee
also oversees managements implementation and maintenance of effective systems
of internal and disclosure controls, including review of the Companys policies
relating to legal and regulatory compliance, ethics, conflicts of interest and
the Companys internal audit process.
Based on the review and discussions
described in 1 through 6 above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Companys
Annual Report on Form 10-K for fiscal year 2008 for filing with the Securities
and Exchange Commission.
Further, the Audit Committee has
appointed KPMG to audit the books of the Company for the fiscal year ending
February 6, 2010, and we recommend that you ratify that appointment.
THE CPI CORP. AUDIT
COMMITTEE
James Abel,
Chairman
|
|
Michael
Koeneke
|
|
Turner
White
|
|
|
|
|
|
Fees Paid to Independent Registered
Public Accounting Firm
Set forth below is a summary of fees
for professional services by our independent registered public accounting firm,
KPMG LLP (KPMG), in fiscal years 2008 and 2007.
|
Fiscal
2008
|
Fiscal
2007
|
Audit Fees
|
|
$
|
929,293
|
|
|
$
|
705,655
|
|
Audit-Related Fees
|
|
|
38,700
|
|
|
|
-
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
967,993
|
|
|
$
|
705,655
|
|
|
|
|
|
|
|
|
|
|
30
Audit Fees
In fiscal years 2008 and 2007, the
Company was billed approximately $929,293 and $705,655, respectively, for KPMGs
audit of the Companys annual financial statements and review of financial
statements included in the Companys interim reports on Form 10-Q. The Company
expects to receive additional bills in connection with the 2008 annual audit in
connection with financial reporting.
Audit-Related Fees
In fiscal year 2008, the Company was
billed $38,700 for audit-related services provided by KPMG. Such services
include work related to the purchase of the assets of Portrait Corporation of
America and assistance with a response to a comment letter from the Securities
and Exchange Commission. No audit-related services were billed by KPMG in fiscal
year 2007.
Tax Fees
No tax services were provided by KPMG
during fiscal year 2008 or 2007.
All Other Fees
The Company did not receive any
services from KPMG other than those described above in either of the last two
fiscal years.
Procedure for Approval of Non-Audit
Services
The Audit Committee has authorized the
Chairman of the Audit Committee to pre-approve KPMGs performance of non-audit
services, provided that the Chairman reports any such pre-approval to the full
Audit Committee at the next scheduled meeting. Upon receipt of any request for
pre-approval of non-audit services from management, the Chairman may accept or
reject the request or submit the request to the entire Audit Committee for
consideration. The Audit Committee approved all of the fees paid to KPMG for
fiscal year 2008.
Ratification of Appointment of
Independent Registered Public Accounting Firm
(Proposal 2)
The Audit Committee has selected KPMG,
an independent registered public accounting firm, to audit the books of the
Company and its subsidiaries for its current fiscal year ending February 6, 2010
(fiscal year 2009). Although the appointment of independent registered public
accounting firms 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 Audit Committee will reconsider the appointment. A
representative of KPMG LLP will be present at the Annual Meeting and will be
given the opportunity to make a statement and to answer questions any
stockholder may have.
The Board of Directors recommends a
vote FOR the ratification of the appointment of
KPMG LLP as the Companys
independent registered public accounting firm for fiscal year
2009.
The affirmative vote of a majority of
the shares present in person or represented by proxy at the Annual Meeting is
required for ratification of this appointment. Proxies for shares marked
Abstain will be considered to be represented, but not voted. Shares registered
in the name of brokers or other street name nominees will also be considered
represented at the meeting for purposes of a quorum but will be considered voted
only if actually voted on Item No. 2.
31
Other Information
A list of the stockholders entitled to
vote at the Annual Meeting will be available for examination by any stockholder
at the meeting for any purpose germane to the meeting. For ten days prior to the
Annual Meeting, this stockholder list will also be available for inspection by
stockholders at the Companys offices at 1706 Washington Avenue, St. Louis,
Missouri 63103-1717, during regular business hours.
Some banks, brokers, and other nominee
record holders may be participating in the practice of house holding proxy
statements and annual reports. This means that only one copy of this Notice of
Annual Stockholders Meeting and Proxy Statement and the 2008 Annual Report may
have been sent to multiple stockholders in your household. If you would prefer
to receive separate copies of a proxy statement or annual report either now or
in the future, please contact your bank, broker or other nominee. Upon written
or oral request to the Corporate Secretary, we will provide a separate copy of
the 2008 Annual Report or Notice of Annual Stockholders Meeting and Proxy
Statement.
The Companys 2008 Annual Report to
stockholders, including financial statements, was mailed simultaneously with
this Proxy Statement on or about June 18, 2009, to stockholders of record as of
May 9, 2009.
A COPY OF THE COMPANYS ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K MAY BE OBTAINED WITHOUT
CHARGE FROM THE CORPORATE SECRETARY, JANE NELSON, UPON WRITTEN REQUEST TO HER AT
1706 WASHINGTON AVENUE, ST. LOUIS, MISSOURI 63103-1717.
|
By Order of the Board of
Directors,
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|
|
|
Jane E.
Nelson
|
|
Secretary and
General Counsel
|
Dated: June 18,
2009
|
|
32
This Proxy Solicited on Behalf of the
Board of Directors of CPI Corp.
YOUR VOTE IS IMPORTANT
Please take a moment now to vote your
shares of Common Stock of CPI Corp.
for the upcoming Annual Meeting of
Stockholders.
PLEASE REVIEW THE PROXY STATEMENT
AND VOTE TODAY IN ONE OF THREE WAYS
(See reverse side for instructions)
WHITE PROXY CARD
CPI Corp.
2009 Annual Meeting of Stockholders
This Proxy is Solicited on Behalf of
the Board of Directors
The undersigned, revoking all previous
proxies, hereby appoints David Meyer and James Abel or either of them as Proxy
or Proxies of the undersigned, each with the power to appoint his substitute, to
vote, as designated on the reverse side, all of the shares of Common Stock of
CPI Corp. (the Company) held of record by the undersigned on May 9, 2009, at
the Annual Meeting of Stockholders to be held at 9:00 a.m., central daylight
time on July 8, 2009, at CPI Corp., 1706 Washington Avenue, St. Louis, Missouri,
63103, and at any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL
BE VOTED, AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR
DIRECTORS LISTED ON THE REVERSE SIDE; FOR THE RATIFICATION OF THE APPPOINTMENT
OF KPMG, LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. AND
IN THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
(CONTINUED AND TO BE SIGNED ON THE
REVERSE SIDE)
CPI CORP.
White Proxy Card
THERE ARE THREE WAYS TO VOTE: BY
INTERNET, TELEPHONE OR MAIL
Internet and telephone voting is
available 24 hours a day, 7 days a week through
11:59 PM Eastern Time the
day prior to annual meeting day.
Your Internet or telephone vote
authorizes the named proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
INTERNET
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TELEPHONE
|
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MAIL
|
www.cesvote.com
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1-888-693-8683
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·
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Go to the
website listed above.
|
|
·
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Use any
touch-tone telephone.
|
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·
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|
Mark, sign
and date your
WHITE PROXY CARD.
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·
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Have
your WHITE PROXY CARD ready.
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·
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Have
your WHITE PROXY CARD ready.
|
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·
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|
Detach your
WHITE PROXY CARD.
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·
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Follow the simple
instructions that appear on your computer screen.
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·
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Follow the simple
recorded instructions.
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·
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Return your
WHITE PROXY CARD
in the postage-paid envelope
provided.
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Please Vote, Sign, Date and Return Promptly in
the
Enclosed Postage-Paid Envelope
(continued from other side)
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DETACH
PROXY CARD HERE TO VOTE BY MAIL
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The Board of Directors recommends a vote
FOR
all the nominees and
FOR
Proposal 2.
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FOR
|
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AGAINST
|
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ABSTAIN
|
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PROPOSAL 1To elect: 1 James J.
Abel, 2 Paul Finkelstein,
3 Michael Glazer, 4
Michael Koeneke, 5 David Meyer, and 6 Turner White to the Board of Directors.
|
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2. Ratification
of appointment of KPMG LLP as the
Companys Independent Registered
Public
Accounting Firm.
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¨
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¨
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¨
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FOR
all
nominees
(except as
marked to the
contrary
below)
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AGAINST
with respect to all nominees
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FOR
ALL,
WITH EXCEPTIONS
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¨
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¨
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¨
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In their discretion, the Proxies are authorized to vote
upon
such other business as may properly come before the Annual
Meeting
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or any
adjournment or postponement thereof.
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INSTRUCTIONS: To vote against any
individual nominee(s) mark the "FOR ALL, WITH EXCEPTIONS" box and write
the number of the excepted nominee(s) in the space below
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Please sign exactly as
your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
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Dated:
___________________________________,
2009
|
|
Signature:
________________________________________
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Title or
Authority:
____________________________________
|
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Signature (if held
jointly):
________________________________
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|
PLEASE SIGN, DATE AND
RETURN THIS PROXY IN THE ENCLOSED POSTAGE-
PAID ENVELOPE
TODAY.
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