(PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)
 
EXHIBIT 10.31

CPI CORP.
NON-EMPLOYEE DIRECTORS RESTRICTED STOCK POLICY
PURSUANT TO
THE CPI CORP. OMNIBUS INCENTIVE PLAN
EFFECTIVE AS OF AUGUST 14, 2008
 

1.  Purpose
 
The Company believes it to be in the best interests of the Company, its
subsidiaries and its stockholders for Non-Employee Directors of the Company’s
Board of Directors to obtain or increase their stock ownership interest in the
Company, thereby attracting, retaining and rewarding such directors and
strengthening the mutuality of interest between the directors and the Company's
stockholders.  The purpose of this policy (the “Policy”), which is adopted
pursuant to Section 12.1 of the CPI Corp. Omnibus Incentive Plan, as approved by
the Company’s shareholders on July 17, 2008 (the “Plan”), is to advance the
interests of the Company and its stockholders by enabling Non-Employee Directors
to elect to receive Restricted Shares in lieu of a portion of the Annual
Retainer that they receive as Directors of the Company.

2.  Definitions
 
Unless the context clearly indicates otherwise, the following capitalized terms
shall have the following meanings:
 
(a)  
“Annual Retainer” shall mean the sum of (1) the annual cash retainer fee payable
by the Company to a Non-Employee Director for services as a director of the
Company, and (2) the annual cash retainer fee payable by the Company to a
Non-Employee Director for serving as the chairman of a standing committee of the
Board, as such amount may be determined from time to time.

 
(b)  
“Annual Retainer Period” shall mean a fiscal year of the Company; provided that
in the event a Non-Employee Director shall become a member of the Board after
the first day of a fiscal year of the Company, such Non-Employee Director’s
Annual Retainer Period shall, solely for purposes of this Policy, mean the
period beginning on the date that is thirty (30) days after such Non-Employee
Director is notified by the Company, in writing, that he or she is eligible to
participate in this Policy for such fiscal year and ending on the last day of
such fiscal year.

 
(c)  
“Fair Market Value” shall mean, with respect to any date, the last sale price of
the Company’s Common Stock on the New York Stock Exchange on a particular date
as reported in the Wall Street Journal; provided that if there shall be no sales
of shares of Common Stock reported on such date, the Fair Market Value of a
share of Common Stock on such date shall mean the last sale price of the
Company’s Common Stock on the New York Stock Exchange on the last preceding date
on which sales of such shares were reported.

 
 

 
 
(d)  
“Non-Employee Director” shall mean a member of the Board who is not an employee
of the Company or any of its Subsidiaries.

 
(e)  
“Normal Retirement” shall mean a Non-Employee Director’s voluntary or
involuntary termination of membership on the Board on or after attainment of age
sixty-five (65).

 
(f)  
“Plan” shall have the meaning set forth in Section 1 hereof.

 
(g)  
“Restricted Shares” shall mean Shares issued to a Non-Employee Director under
the Plan pursuant to this Policy that are subject to the Restrictions imposed by
Section 5 hereof.

 
(h)  
“Restrictions” shall have the meaning set forth in Section 5(a) hereof.

 
(i)  
“Shares” shall mean shares of Common Stock of the Company.

 
(j)  
“Subsidiary” or “Subsidiaries” shall mean any corporation, partnership, joint
venture or other business entity in which a fifty percent (50%) or greater
interest is, at the time, directly or indirectly, owned by the Company and one
or more Subsidiaries.

 
(k)  
“Total and Permanent Disability” shall mean a disability as described in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended, or any successor
provisions.

 
All other capitalized terms not otherwise defined herein shall have the meanings
for such terms set forth in the Plan.
 
3.  Election to Receive Restricted Shares
 
(a)           Under this Policy, each Non-Employee Director shall have the right
to elect to receive up to 100% of his or her Annual Retainer in the form of
Restricted Shares; provided however that an election under this Policy shall not
be valid unless the Non-Employee Director shall have elected to receive at least
50% of his or her Annual Retainer for the Annual Retainer Period in the form of
Restricted Stock pursuant to this Policy.  Upon making a valid and timely
election under this Policy, the Non-Employee Director will be awarded that
number of Restricted Shares determined by dividing (1) one hundred twenty-five
percent (125%) of that portion of the Non-Employee Director’s Annual Retainer
for the Annual Retainer Period 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 such
Annual Retainer Period.  To the extent that the application of the foregoing
formula would result in fractional Shares being issuable, cash will be paid to
the Non-Employee Director in lieu of such fractional shares.

(b)           To be valid, an election by a Non-Employee Director to receive any
portion of his or her Annual Retainer for an Annual Retainer Period in
Restricted Shares must be made in writing on or before the first day of the
Annual Retainer Period to which such election applies.  Any such election (1)
shall specify the percentage of the Non-Employee Director’s Annual Retainer
 
 
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to be paid in Restricted Shares (which percentage shall not be less than 50%)
and (2) shall be irrevocable for the Annual Retainer Period for which such
election is made.

4.  Restricted Shares
 
(a)           Each Non-Employee Director who elects to receive Restricted Shares
under this Policy shall execute and deliver to the Company an agreement
evidencing the terms, conditions and Restrictions applicable to such Restricted
Shares.  Each Non-Employee Director receiving Restricted Shares may be issued a
stock certificate or certificates with respect to such Restricted Shares.  Any
such certificate, if issued, shall be registered in the name of such
Non-Employee Director and shall bear an appropriate legend referring to the
terms, conditions, and Restrictions applicable to such Restricted Shares.  The
Committee may require that the stock certificates evidencing such Restricted
Shares be held in escrow by the Company until the Restrictions thereon shall
have terminated in accordance with Section 5 hereof and that, as a condition to
delivery of any certificate relating to Restricted Shares, the Non-Employee
Director deliver to the Company a stock power, endorsed in blank, relating to
such Restricted Shares.  Notwithstanding anything to the contrary herein whether
express or implied, the Company in its sole discretion may issue Restricted
Shares in uncertificated format pursuant to procedures established between the
Company and the Company’s stock transfer agent and in accordance with Section
158 of the Delaware General Corporation Law.

(b)           Promptly after the termination of the Restrictions, without a
prior forfeiture, with respect to a Non-Employee Director’s Restricted Shares, a
certificate for such shares shall be delivered to the Non-Employee Director free
of all restrictions and legends.  If a stock certificate was previously
delivered to the Non-Employee Director, the replacement certificate will not be
delivered to the Non-Employee Director until the previously delivered
certificate is returned to the Company in a form acceptable for transfer, free
and clear of all liens, claims and encumbrances.

(c)           Subject to the Restrictions, a Non-Employee Director will be
given, with respect to his or her Restricted Shares, all rights of a stockholder
of the Company, including the right to vote the Restricted Shares, and the right
to receive any cash or stock dividends thereon.  Any stock dividends issued with
respect to Restricted Shares shall be treated as additional shares of Restricted
Shares that are subject to the same Restrictions and other terms and conditions
that apply to the Restricted Shares with respect to which such dividends are
issued.

(d)           The Committee may impose such other restrictions on any Restricted
Shares issued under the Plan as a result of an election pursuant to this Policy
as it may deem advisable including, without limitation, restrictions under
applicable federal laws, under the requirements of any stock exchange upon which
such shares or shares of the same class are then listed, and under any blue sky
or securities laws applicable to such shares.  The Committee, if it deems it
appropriate, may condition the delivery of Restricted Shares under the Plan upon
receipt of an appropriate investment representation from the recipient
thereof.  The Company, in its discretion, may postpone the issuance and delivery
of Shares pursuant to the Plan until completion of registration or other
qualification of the Shares under any state or federal law, rule, or regulation
as the Company may consider appropriate.  The Company may further require any
Non-Employee Director or other person receiving shares of Common Stock under the
Plan to make
 
 
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such representations and furnish such information as it may consider appropriate
in connection with the issuance of the shares in compliance with applicable law.

5.  Restrictions; Lapse of Restrictions
 
(a)           The Restricted Shares issued to a Non-Employee Director under the
Plan as a result of an election under this Policy shall be subject to the
following transfer and forfeiture restrictions (collectively, the
“Restrictions”):

(i)  Transfer.  Prior to the date that the Restrictions shall have lapsed under
Section 5(b) below, the Non-Employee Director may not directly or indirectly, by
operation of law or otherwise, voluntarily or involuntarily, anticipate,
alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer
all or any part of the Restricted Shares.

(ii)  Forfeiture.  Upon termination of a Non-Employee Director’s membership on
the Board, all Restricted Shares held by such Non-Employee Director at the
effective time of such termination of membership on the Board, as determined
after the application of Section 5(b) below, shall immediately thereafter be
returned to and/or canceled by the Company, and shall be deemed to have been
forfeited by the Non-Employee Director to the Company.  Upon any forfeiture of
Restricted Shares under this Section 5(a), the Company will pay the Non-Employee
Director a per share price for any such forfeited Restricted Shares equal to the
lesser of (i) the amount determined by dividing the aggregate amount of the
Non-Employee Director’s Annual Retainer that the Non-Employee Director elected
to receive in the form of the Restricted Shares, rather than in cash, by the
aggregate number of Restricted Shares awarded to the Non-Employee Director with
respect to such Annual Retainer, or (ii) an amount equal to the Fair Market
Value of a share of Common Stock on the date the Non-Employee Director’s
membership on the Board is terminated.

(b)           The Restrictions shall lapse with respect to the Restricted Shares
issued to a Non-Employee Director hereunder on the last day of the Annual
Retainer Period with respect to which such Restricted Shares were
issued.  Notwithstanding the preceding sentence, the Restrictions shall lapse
with respect to any Restricted Shares held by a Non-Employee Director upon (i) a
Change in Control of the Company prior to the last day of the relevant Annual
Retainer Period, (ii) a termination of the Non-Employee Director’s membership on
the Board prior to the last day of the relevant Annual Retainer Period as a
result of the Non-Employee Director’s death, Total and Permanent Disability, or
Normal Retirement, or (iii) a termination of the Non-Employee Director’s
membership on the Board prior to the last day of the relevant Annual Retainer
Period for any other reason as determined by the Committee in its sole
discretion.  Except as otherwise provided in Section 4(d), Restricted Shares
issued hereunder shall become freely transferable by the Non-Employee Director
after the Restrictions on such shares lapse in accordance with this Section
5(b).

(c)           In the event of a termination of a Non-Employee Director’s
membership on the Board the Non-Employee Director shall promptly deliver to the
Company the certificates representing the forfeited Restricted Shares to the
Company, as determined after the application
 
 
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of Section 5(b) hereof, together with any documents requested by the Company
necessary to effectuate such transfer, and the Company shall pay the
Non-Employee Director the consideration per share specified in Section 5(a)(ii)
above promptly following the Non-Employee’s deliveries under this Section 5(c).

6.       Miscellaneous Provisions
 
(a)  
Neither the Plan nor any action taken hereunder shall be construed as giving any
Non-Employee Director any right to be retained in the service of the Company.

 
(b)  
A participant’s rights and interest under the Policy may not be assigned or
transferred, hypothecated or encumbered in whole or in part either directly or
by operation of law or otherwise (except in the event of a participant’s death,
by will or the laws of descent and distribution), including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in
any other manner, and no such right or interest of any participant in the Plan
shall be subject to any obligation or liability of such participant.

 
(c)  
No Shares shall be issued hereunder unless counsel for the Company shall be
satisfied that such issuance will be in compliance with applicable federal,
state, local and foreign securities, securities exchange and other applicable
laws and requirements.

 
(d)  
By accepting any Restricted Shares pursuant to this Policy, each participant and
each person claiming under or through him or her shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to, any
action taken under the Plan by the Company or the Committee.

 
(e)  
The terms of this Policy and any Restricted Shares delivered hereunder are
subject to the terms and conditions of the Plan and may be amended by the
Committee.

 
(f)  
This Policy shall be effective as of August 14, 2008, and shall apply to Annual
Retainer Periods beginning after the effective date hereof.

 

 

 

  
 
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