Indemnification Agreement between CPI Corp. and Lee Liberman dated February 27, 2004

EXHIBIT 10.78

INDEMNIFICATION AGREEMENT

        THIS AGREEMENT, made and entered into this 27th day of February, 2004 by and between CPI Corp., a Delaware corporation (the “Company”) and Lee Liberman (the “Indemnitee”).

        WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available;

        WHEREAS, Indemnitee is a director of the Company;

        WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies in today’s environment;

        WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability and to enhance Indemnitee’s continued service to the Company in an effective manner and in part to provide Indemnitee with specific contractual assurance that the indemnification protection will be available to Indemnitee (regardless of, among other things, any changes in the composition of the Company’s Board of Directors), and to induce Indemnitee to continue to provide services to the Company as a director, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies;

        NOW, THEREFORE, in consideration of the premises and of Indemnitee’s continuing to serve the Company directly or, at its request, another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:

        1. Certain Definitions. As used herein the following terms shall have the following meanings:

        (a) Board of Directors: the Board of Directors of the Company.

        (b) Change of Control: a change of control of a nature that would be required to be reported in response to Item 1(a) of the Current Report of Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) or would have been required to be so reported but for the fact that such event had been “previously reported” as that term is defined in Rule 12b-2 of Regulation 12B of the Exchange Act unless the transactions that give rise to the change of control are approved or ratified by a majority of the individuals who constitute the Board of Directors on the date hereof (the “Incumbent Board”) who are not employees of the Corporation; provided that, without limitation, notwithstanding anything herein to the contrary, such a change of control shall be deemed to have occurred if, (i) any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined Voting Securities, (ii) individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board, or (iii) approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own, directly or indirectly, more than 50%of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, or a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company.

        (c) Claim: any threatened, pending or completed action, suit, proceeding, arbitration or alternate dispute resolution proceeding, whether civil, criminal, administrative, investigative, or other, or any inquiry hearing or investigation (whether conducted by the Company or any other party or authority) that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding, arbitration or alternate dispute resolution proceeding.

        (d) Expenses: include attorneys’ fees, expenses and charges and all other costs, travel expenses, fees of experts, transcript costs, filing fees, witness fees, telephone charges, postage, delivery service fees, expenses and obligations of any nature whatsoever paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event.

        (e) Indemnifiable Event: any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity.

        (f) Independent Legal Counsel: Independent Legal Counsel shall refer to an attorney, selected by the Indemnitee and approved by the Board of Directors (which approval shall not be unreasonably withheld), who shall not have otherwise performed services for the Company or Indemnitee within the last five years. Independent Legal Counsel shall be a member of or of counsel to a firm having no fewer than fifty attorneys as of the date such Independent Legal Counsel is designated by the Indemnitee. Independent Legal Counsel shall not be counsel to the Indemnitee in any Claims arising in whole or in part from any Indemnifible Event and shall not be Indemnitee’s counsel in any proceeding to determine Indemnitee’s rights hereunder. Independent Legal Counsel shall also not be any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement, nor shall Independent Legal Counsel be any person who has been sanctioned or censured for ethical violations of applicable standards of professional conduct. In the event an Independent Legal Counsel resigns, becomes disabled, dies, or is otherwise unable in such counsel’s opinion to serve as Independent Legal Counsel, Indemnitee shall select, subject to the approval of the Board of Directors (which approval shall not be unreasonably withheld) a successor Independent Legal Counsel.

        (g) Person: any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Exchange Act, other than the Company or any corporation (or other business entity) controlling, controlled by or under common control with the Company or any employee benefit plan(s) sponsored or maintained by the Company or any corporation (or other business entity) controlling, controlled by or under common control with the Company.

        (h) Voting Securities: all outstanding shares of capital stock of all classes and series of the Company entitled to vote generally in the election of directors of the Company, in each case hereunder voting together as a single class.