NEW YORK, June 25 /PRNewswire/ -- RCG Starboard Advisors, LLC, a
subsidiary of Ramius LLC (collectively, "Ramius"), today announced
that it has mailed the following letter to the stockholders of CPI
Corp. ("CPI" or the "Company") (NYSE:CPY). Ramius is the largest
stockholder of CPI, owning approximately 23% of the Company's
outstanding shares of Common Stock. Ramius' nominees for election
at the Annual Meeting include Peter A. Feld, a Ramius
representative and an existing Director of CPI, and Joseph
Izganics, a new independent director nominee with extensive
experience in the retail industry. The full text of the letter
follows: June 25, 2009 Dear Fellow CPI Corp. Stockholder: The
Ramius Group is the largest stockholder of CPI and has been one of
the largest stockholders of the Company for the last five years.
Ramius currently owns approximately 23% of the total common stock
outstanding and we believe our interests are completely aligned
with the best interests of all stockholders. Our objective for CPI
has not changed since the inception of our investment - achieve
maximum long-term value for our shares. We are asking for your
support to help us achieve this unified goal. Please support our
efforts to improve the board by voting the GOLD proxy. We firmly
believe that the current Board is no longer acting with the best
interests of ALL stockholders in mind. Instead, we believe the
current Board is allowing Knightspoint Partners, a 3.5%
stockholder, to exert undue influence over the Company. Contrary to
the Company's assertions, we are not looking to control CPI. We are
merely looking to compose a fair and balanced Board with the
appropriate mix of independent directors with relevant industry
experience and direct stockholder representatives whose interests
are aligned with all stockholders. Do not be fooled or misled into
voting for the Company's proposed slate. The Company's slate
includes nominees who are heavily influenced by Knightspoint and
are not acting independently with the best interests of all
stockholders in mind. Ramius has been working hard to create value
on the Board of CPI for over five years and, as the Company's
largest shareholder, our interests are directly aligned with yours.
We are seeking your support to elect only two directors at the
Company's July 8, 2009 Annual Meeting: Peter A. Feld, a Ramius
representative and an existing Director of CPI; and Joseph
Izganics, a new independent director nominee with extensive
experience in the retail industry. The election of these two
individuals would create a new Board composed of one (1) Ramius
direct representative, one (1) Knightspoint direct representative,
and four (4) independent directors, three (3) of whom have relevant
industry expertise. This compares to the Company's slate which
would result in a Board composed of no Ramius direct
representative, two (2) Knightspoint direct representatives, and
four (4) independent directors, only two (2) of which have relevant
industry experience. The table below specifically outlines the
candidates who would be elected if stockholders vote on Ramius'
GOLD Proxy Card in accordance with Ramius' recommendations and on
the Company's White Proxy Card in accordance with the Company's
recommendation. Ramius Gold Proxy Company White Proxy
----------------- ------------------- David Meyer David Meyer (No
retail exp / Knight direct) (No retail exp / Knight direct) James
Abel James Abel (Ind / No retail exp / Knight rec) (Ind / No retail
exp / Knight rec) Michael Glazer Michael Glazer (Ind / Retail exp /
Knight rec) (Ind / Retail exp / Knight rec) Paul Finkelstein Paul
Finkelstein (Ind / Retail exp / CPI rec) (Ind / Retail exp / CPI
rec) Joseph Izganics Mike Koeneke --------------- ------------ (Ind
/ Retail exp / Ramius rec) (No retail exp / Knight direct) Peter
Feld Turner White ---------- ------------ (No retail exp / Ramius
direct) (Ind / No retail exp / Knight rec) Legend: Ind -
Independent Knight rec - Knightspoint recommended Retail exp -
Retail experience Knight direct - Knightspoint direct
representative No retail exp - No retail Ramius rec - Ramius
recommended experience CPI rec - CPI recommended Ramius direct -
Ramius direct representative Help us bring balance and true
stockholder representation to the CPI Board. If elected, we will be
your advocate in the boardroom. Help us reduce the undue influence
that Knightspoint has over the Company, while at the same time
bringing desperately needed retail experience to the Board. Vote
your GOLD proxy today, by phone or Internet by following the
instructions on the enclosed GOLD card, or by signing, dating and
returning it today in the envelope provided. KNIGHTSPOINT'S
OBJECTIVES AT CPI HAVE CHANGED OUR INTERESTS ARE STILL ALIGNED WITH
YOURS In 2003, Ramius, along with Knightspoint Partners, founded by
David Meyer and Michael Koeneke, agreed to an investment in CPI
Corp. We recognized the opportunity to increase earnings and
improve stockholder value by exiting non-core businesses and by
substantially reducing costs. In March 2004, Ramius and
Knightspoint completed a consent solicitation that resulted in the
removal of seven incumbent directors and the election of six new
directors. As a new Board, the group replaced certain members of
the prior management team, including the CEO, restructured the
business, converted the studios to a digital platform, and
purchased the assets of PCA out of bankruptcy to expand into
Wal-Mart. These changes resulted in an improvement in EBITDA from
$25 million in fiscal year 2005 to $41 million in fiscal year 2009.
At the time of our initial investment in CPI, Knightspoint's
objective for its own firm was to build an investment business
based on developing a track record of successful investments.
Knightspoint specifically wanted to invest alongside Ramius given
its reputation in the investment community and long-standing track
record of delivering value to its clients. Unfortunately,
Knightspoint was unable, to our knowledge, to build a material
investment business after a series of failed investments.
Unfortunately for CPI stockholders, Knightspoint's failure to build
its investment business has caused Knightspoint to change its
interest in CPI from an investment opportunity into a career
opportunity. Over the last two years, Mr. Meyer and Mr. Koeneke
reaped compensation of $2.2 million from CPI for providing
part-time consulting "services" even while the stock price fell
74%. Ramius on the other hand has continued its long tradition of
fulfilling its commitments to improve stockholder value. We still
view CPI as an investment, and one which we believe could still
generate substantial returns for all stockholders. However, we
believe that in order for stockholders to realize the full value of
their CPI investment, we must elect a Board composed of nominees
that (i) have the necessary experience and skill sets to help CPI
transform itself into a best of breed specialty retailer and (ii)
provide for fair and balanced stockholder representation. We are
not seeking control of the Board. Since we only proposed two
candidates, Peter Feld and Joseph Izganics, you will have the
ability to vote on Ramius' GOLD proxy card for a full slate of
directors to include our two director nominees and the Company's
four director nominees who Ramius believes are the most qualified
to serve your best interests. We believe our director nominees
offer stockholders significantly more balance and retail expertise
than the status quo. We urge you to vote your shares on the
enclosed GOLD proxy card today. WE WANT STOCKHOLDERS TO HAVE ALL
THE FACTS REGARDING THIS ELECTION CONTEST BEFORE MAKING A FINAL
DECISION ON HOW TO VOTE PLEASE CONSIDER THE FOLLOWING: They claim
that "Ramius offers no new ideas, plans or strategies and, indeed,
acknowledges that the Company is performing well" The Facts: Ramius
has been an active participant on the Board of CPI for over five
years and has played a crucial role in helping to guide and oversee
the strategy of the Company including the initiatives being
implemented today. This election contest is not about high-level
business strategy, it is about ensuring the Board has the
appropriate skill sets to oversee the successful implementation of
these strategies in order to drive improved performance at CPI.
Ramius has continually expressed its concerns surrounding the
negative sittings trends and the need for improved field execution
at the Company to stem these losses. In fact, the Ramius director
was instrumental in pushing the Company to identify and hire a new
head of field operations. To date, CPI has been able offset these
declines in sittings through increases in price. However, the
recent material decline in sales at Sears confirms our view that
raising prices can only benefit the Company in the short term. Once
prices hit a ceiling and start to fall, CPI faces both a decline in
sittings as well as prices, which magnifies the drop in sales and
hurts operating profits. In order for the Company to truly address
this problem, it must add experienced retail executives to the
Board that can help to institute retail best practices and
stabilize sittings. These include: -- Enhancing the relationship
and cross-promotion activities with the hosts -- Enriching the
customer experience -- Improving field execution -- Strengthening
the quality of the marketing and loyalty programs We firmly believe
that stronger retail experience on the Board would help drive all
of these initiatives and significantly improve the long-term
profitability and value of CPI. The current board's lack of retail
experience prohibits it from adequately addressing these
retail-specific problems. Our nominees have the experience
necessary to help oversee the implementation of these strategies.
They claim that "Ramius' two nominees are substantially less
qualified than your board's nominees" and that "Mr. Izganics is a
former field employee of Home Depot." The Facts: Both Mr. Feld and
Mr. Izganics are highly qualified to represent your best interests
on the Board and will bring substantially more value to the Board
than both of the Company's nominees, Mr. Koeneke and Mr. White.
Joseph Izganics To characterize Mr. Izganics prior role at Home
Depot as a field employee is truly laughable. In reality, Mr.
Izganics was one of the most senior people in all of Home Depot and
was instrumental in driving and improving the stockholder value at
the Company for 20 years. As one of only three Division Presidents,
Mr. Izganics was directly responsible for over $20 billion in sales
and 110,000 associates. Mr. Izganics is widely credited at Home
Depot for: -- Developing and implementing operational and
merchandising programs company wide that enhanced the customer
experience within the store -- Implementing processes that improved
capital allocation and return on invested capital (ROIC) to the
highest in company history -- Developing and implementing marketing
campaigns that increased consumer and associate awareness to record
levels -- Pioneering two store prototypes that dramatically
improved sales per square foot and profitability throughout Home
Depot Mr. Izganics' significant accomplishments at Home Depot
demonstrate his considerable skill at operating a best of breed
retail business which is directly applicable to addressing the
critical business issues facing CPI. We believe Mr. Izganics would
represent a significant upgrade to the quality of the professionals
on the CPI Board. Mr. Feld Mr. Feld is a Managing Director at
Ramius LLC, an investment management firm which oversees more than
$7 billion of assets. Mr. Feld has been instrumental in the success
of Ramius. Mr. Feld has strong expertise in corporate finance,
restructuring, investment banking, and corporate governance. He has
been a director of CPI since July 2008. During his time on the
Board, Mr. Feld: -- Recognized the lack of retail expertise on the
Board and pushed for the process that ultimately resulted in
Michael Glazer, the Company's only director with relevant retail
experience, being appointed to the Board. Without Mr. Feld's hard
work, we firmly believe the board would still be comprised of zero
members with relevant retail expertise -- Led an initiative to
re-evaluate field compensation practices which resulted in field
personnel having the opportunity to earn substantially more money
by meeting certain financial goals -- Upon joining the Board, Mr.
Feld recognized the clear need for the current directors to spend
more time in the studios. Mr. Feld urged directors to contact their
closest district managers and go through the Company's score cards
and analytics to better understand the business -- Negotiated a
lower compensation package for Mr. Meyer's consulting "services,"
despite Mr. Koeneke's insistence that Mr. Meyer be paid substantial
compensation for part-time work On the other hand, Michael Koeneke
and Turner White provide little incremental value to the Board.
Michael Koeneke: -- Has no retail experience -- Negotiates Mr.
Meyer's compensation through his active participation on the
Compensation Committee -- Collects significant compensation through
Board fees and his potential participation in Mr. Meyer's CPI
compensation through the Knightspoint partnership -- Is one of two
direct representatives of Knightspoint Partners, a 3.5% stockholder
We believe that Mr. Meyer brings ample M&A experience to the
Board of CPI and the Company could access any of Mr. Koeneke's
relevant M&A relationships through Mr. Meyer's partnership with
Mr. Koeneke. Therefore Mr. Koeneke's limited skill set is redundant
on the CPI Board. Turner White: -- Has no retail experience -- Has
limited financial experience -- Knightspoint recommended director
-- As head of the Compensation Committee has proposed and supported
Mr. Meyer's generous compensation packages for part-time work We
strongly believe that the Ramius nominees, Peter Feld and Joseph
Izganics, are far more qualified than Michael Koeneke and Turner
White to represent the best interests of all stockholders. The
composition of the Board proposed by Ramius is balanced, fair, and
offers the right mix of stockholder representation and retail
industry expertise. They claim that Ramius' purpose in this
election contest is to seek additional representation and influence
over the Company. The Facts: Ramius' proposal does not include any
new candidates to the Board that are directly affiliated with
Ramius. Mr. Feld is already an incumbent member of the Board. The
other Ramius nominee, Mr. Izganics, was identified through a
third-party search firm and has absolutely no prior connection to
Ramius or its affiliates. Ramius' only desire throughout this
contest is to create a more balanced, independent, and experienced
Board that is free from the undue influence of Knightspoint
Partners. The changes to the Board that Ramius has proposed would
create a Board comprised of four independent directors, three of
whom have relevant retail experience; one direct Knightspoint
representative; and one direct Ramius representative. On the other
hand, Knightspoint has continued to assert additional influence on
the Board of CPI. The Company's proposed Board includes five out of
six directors that are either directly affiliated with Knightspoint
or previously recommended by Knightspoint, despite their only
owning 3.5% of the Company, and only two directors with any retail
experience. We believe these two directors would not have been
added to the Board without our outspoken concerns on the failure of
the Board to address this obvious weakness. In addition, over the
past two years, both Mr. Meyer and Mr. Koeneke have received
compensation totaling over $2.2 million for providing part-time
consulting "services", while the stock declined by 74%. This pay
package represents almost as much as the CEO, CFO, and all other
board members earned combined. Stockholders need to seriously
question Knightspoint's influence over CPI. They claim that the
Company is at the "forefront of corporate governance" and that "the
Board is structured for robust debate." The Facts: All aspects of
the Company's corporate governance are called into question by
Knightspoint Partners' outsized and undue influence in the
boardroom. The fact that Mr. Koeneke is allowed to serve on the
Compensation Committee and determine his partner's compensation is
appalling and represents a material conflict of interest. This
unchecked behavior has resulted in David Meyer and Michael Koeneke
personally profiting $2.2 million over the last two years while the
stock declined by 74%. Ask yourself why David Meyer, acting as non
executive Chairman and providing part-time consulting "services" to
CPI, makes substantially more than the full time CEO of the
Company? The Company also falsely states that Ramius has always
endorsed Mr. Meyer's compensation arrangements as Chairman and
"were in every instance determined and approved unanimously by the
entire Board (including the Ramius Group representative)." In 2008,
Mark Mitchell, the Ramius director representative at the time,
voted AGAINST Mr. Meyer's proposed compensation arrangement for
"services" for 2007. He did so on the basis that the compensation
awarded to the Chairman should be evaluated in the context of what
other executives received and that he thought the level proposed
was not warranted in light of the performance of the Company and
the stock. However, due to Knightspoint's undue influence over the
Board, Mr. Mitchell was over-ruled. The Company also fails to
mention that the Company's outside counsel, Stanley H. Meadows,
also represents Knightspoint Partners as its outside counsel, and
to our knowledge, has a long-standing relationship with Mr. Meyer
and his family. We seriously question the independence of the
advice the Board receives from Mr. Meadows, which includes his role
in the Company's settlement discussions as well as his view that
Mr. Meyer is "independent," despite the fact that Mr. Meyer
receives material compensation from the Company in excess of NYSE
independence standards. Further, the material relationship between
Mr. Meyer and Mr. Meadows is itself a factor to be considered in
any determination of whether Mr. Meyer is "independent" in
accordance with NYSE standards(1). To our knowledge, Mr. Meadows
has never advised the CPI Board about Section 303A.02 of the NYSE
Listed Company Manual. They claim that Ramius tried to force a
desperation sale of the Company. The Facts: This allegation is
highly misleading and the Company is trying to further its own
agenda by telling you only what it wants you to hear. Specifically,
during the period between September 2008 and February 2009, the
Company came precariously close to breaching a bank covenant that
required minimum EBITDA of $50 million. A covenant breach could
have triggered a mandatory repayment of all outstanding debt at a
time when the credit markets were effectively shut down and
refinancing could have proved extraordinarily difficult. Mr. Feld,
in doing the prudent thing to protect stockholder value, encouraged
the Board of CPI to evaluate any and all strategic and financial
options in the event that the Company's lenders were unreasonable.
To characterize his actions in any other manner is frankly
disingenuous and merely serves to inappropriately distract
stockholders from the significant governance issues that we have
highlighted. They claim that Ramius has "pressed for gaining
liquidity" for its investment in reference to the 10b-5 trading
plan that Ramius filed with the Securities and Exchange Commission
on January 23, 2009. The Facts: Alleging that the small amount of
stock that Ramius has sold, after continuing to be invested in the
Company as one of its largest stockholder for over five years,
somehow demonstrates our interest in gaining liquidity for our
entire investment is highly misleading. In fact, the purpose of the
plan is merely to allow Ramius to rebalance its portfolios, and the
shares subject to the plan represent but a small minority of our
total position. Ramius continues to own over 1.6 million shares,
representing over 23% of the outstanding shares, and expects to
remain the largest stockholder of the Company for the foreseeable
future, as long as the Company is properly governed. This compares
to the 102,321 shares directly purchased by Knightspoint Partners,
representing less than 1.5% of shares outstanding. Any implication
that our interests are somehow not aligned with those of all
stockholders of CPI Corp. is simply false. We are committed to the
long-term success of CPI and will continue to fight for the best
interests of all stockholders. DO NOT BE MISLED - CPI NEEDS A NEWLY
CONSTITUTED BOARD THAT IS DETERMINED TO OVERSEE THE COMPANY FOR THE
BENEFIT OF ALL STOCKHOLDERS YOU HAVE THE OPPORTUNITY TO ELECT
DIRECTORS THAT WILL ENSURE YOUR BEST INTERESTS ARE REPRESENTED IN
THE BOARDROOM Please do not be misled by the Company's attempt to
distract you from the real issues facing CPI. Ramius' sole
objective is to create a more balanced and experienced Board that
is aligned with the best interests of all stockholders. Please vote
for Mr. Feld and for Mr. Izganics on the enclosed GOLD proxy card.
We offer you the opportunity to elect to the CPI boardroom
stockholder representatives committed to building the value of your
investment. In the meantime, we urge you NOT to return any WHITE
proxy card CPI sends you. We look forward to your support at the
2009 Annual Meeting. Best Regards, Mark R. Mitchell Partner Ramius
LLC About Ramius LLC Ramius LLC is a registered investment advisor
that manages assets in a variety of alternative investment
strategies. Ramius LLC is headquartered in New York with offices
located in London, Tokyo, Hong Kong, Munich, and Vienna. Media
Contact: Peter Feld Ramius LLC (212) 201-4878 CERTAIN INFORMATION
CONCERNING PARTICIPANTS Ramius Value and Opportunity Master Fund
Ltd ("Value and Opportunity Master Fund"), together with the other
participants named herein, has made a definitive filing with the
Securities and Exchange Commission ("SEC") of a proxy statement and
accompanying GOLD proxy card to be used to solicit votes for the
election of a slate of director nominees at the 2009 annual meeting
of stockholders of CPI Corp., a Delaware corporation (the
"Company"). VALUE AND OPPORTUNITY MASTER FUND ADVISES ALL
STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER
PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO
CHARGE ON THE SEC'S WEB SITE AT http://www.sec.gov/. IN ADDITION,
THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF
THE PROXY STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR. The
participants in this proxy solicitation are Value and Opportunity
Master Fund, Ramius Enterprise Master Fund Ltd ("Enterprise Master
Fund"), Starboard Value & Opportunity Fund, LLC ("Starboard
Value & Opportunity Fund"), Ramius Merger Arbitrage Master Fund
Ltd ("Merger Arbitrage Master Fund"), Ramius Multi-Strategy Master
Fund Ltd ("Multi-Strategy Master Fund"), Ramius Leveraged
Multi-Strategy Master Fund Ltd ("Leveraged Multi-Strategy Master
Fund"), Ramius Advisors, LLC ("Ramius Advisors"), RCG Starboard
Advisors, LLC ("RCG Starboard Advisors"), Ramius LLC ("Ramius"),
C4S & Co., L.L.C. ("C4S"), Peter A. Cohen ("Mr. Cohen"), Morgan
B. Stark ("Mr. Stark"), Thomas W. Strauss ("Mr. Strauss"), Jeffrey
M. Solomon ("Mr. Solomon"), Peter A. Feld ("Mr. Feld") and Joseph
C. Izganics ("Mr. Izganics"). As of the date hereof, Value and
Opportunity Master Fund beneficially owned 797,988 shares of Common
Stock, Starboard Value and Opportunity Fund beneficially owned
212,040 shares of Common Stock, Merger Arbitrage Master Fund
beneficially owned 192,000 shares of Common Stock, Leveraged
Multi-Strategy Master Fund beneficially owned 29,213 shares of
Common Stock, Multi-Strategy Master Fund beneficially owned 179,614
shares of Common Stock and Enterprise Master Fund beneficially
owned 202,054 shares of Common Stock. As of the date hereof, RCG
Starboard Advisors (as the investment manager of Value and
Opportunity Master Fund and the managing member of Starboard Value
and Opportunity Fund) is deemed to be the beneficial owner of the
(i) 797,988 shares of Common Stock owned by Value and Opportunity
Master Fund and (ii) 212,040 shares of Common Stock owned by
Starboard Value and Opportunity Fund. As of the date hereof, Ramius
Advisors (as the investment advisor of Multi-Strategy Master Fund,
Merger Arbitrage Master Fund, Leveraged Multi-Strategy Master Fund
and Enterprise Master Fund) is deemed to be the beneficial owner of
the (i) 179,614 shares of Common Stock owned by Multi-Strategy
Master Fund, (ii) 192,000 shares of Common Stock owned by Merger
Arbitrage Master Fund, (iii) 29,213 shares of Common Stock owned by
Leveraged Multi-Strategy Master Fund, and (iv) 202,054 shares of
Common Stock owned by Enterprise Master Fund. As of the date
hereof, Ramius (as the sole member of each of RCG Starboard
Advisors and Ramius Advisors), C4S (as the managing member of
Ramius) and Messrs. Cohen, Stark, Strauss and Solomon (as the
managing members of C4S) are deemed to be the beneficial owners of
the (i) 797,988 shares of Common Stock owned by Value and
Opportunity Master Fund, (ii) 212,040 shares of Common Stock owned
by Starboard Value and Opportunity Fund, (iii) 179,614 shares of
Common Stock owned by Multi-Strategy Master Fund, (iv) 192,000
shares of Common Stock owned by Merger Arbitrage Master Fund, (v)
29,213 shares of Common Stock owned by Leveraged Multi-Strategy
Master Fund, and (vi) 202,054 shares of Common Stock owned by
Enterprise Master Fund. Messrs. Cohen, Stark, Strauss and Solomon
share voting and dispositive power with respect to the shares of
Common Stock owned by Value and Opportunity Master Fund, Starboard
Value and Opportunity Fund, Multi-Strategy Master Fund, Merger
Arbitrage Master Fund, Leveraged Multi-Strategy Master Fund and
Enterprise Master Fund by virtue of their shared authority to vote
and dispose of such shares of Common Stock. As of the date hereof,
Mr. Feld holds 5,252 shares of restricted stock awarded under the
Company's Omnibus Incentive Plan that vest in full on February 6,
2010. As of the date hereof, Mr. Izganics directly owns 500 shares
of Common Stock. As members of a "group" for the purposes of Rule
13d-5(b)(1) of the Securities Exchange Act of 1934, as amended,
each of the participants in this proxy solicitation is deemed to
beneficially own the shares of Common Stock of the Company
beneficially owned in the aggregate by the other participants. Each
of the participants in this proxy solicitation disclaims beneficial
ownership of such shares of Common Stock except to the extent of
his or its pecuniary interest therein. (1) Per Section 303A.02 of
the NYSE Listed Company Manual (Independence Tests), "In
particular, when assessing the materiality of a director's
relationship with the listed company, the board should consider the
issue not merely from the standpoint of the director, but also from
that of persons or organizations with which the director has an
affiliation. Material relationships can include commercial,
industrial, banking, consulting, legal, accounting, charitable and
familial relationships, among others." DATASOURCE: Ramius LLC
CONTACT: Peter Feld of Ramius LLC, +1-212-201-4878
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