PROXY
Governance, Inc. Recommends CPI Corp. Stockholders Withhold Votes From the
Chairmen of Two Key Committees Who Have Exercised Poor Judgment Regarding
Conflicts of Interest
Expresses
Significant Concerns With CPI Board’s Unwillingness Or Inability To Address
Corporate Governance Issues And Conflicts Of Interest
Joins
RiskMetrics Group as Second Independent Proxy Voting Advisory Firm to Criticize
CPI’s Corporate Governance Practices and to Question the “Independence” of
Chairman David Meyer
NEW YORK,
July 1 /PRNewswire/ --
RCG Starboard Advisors,
LLC, a subsidiary of Ramius LLC (collectively, “Ramius”), today announced that
PROXY Governance, Inc. (“PGI”), an independent proxy voting advisory firm, has
issued a proxy analysis in which it recommends that stockholders withhold their
votes for Turner White and James Abel, the Chairmen of the Compensation and the
Nominating and Governance Committees, respectively, who were nominated by
management. The PGI report expresses significant concerns with the unwillingness
or inability of the Board of Directors of CPI Corp. (“CPI” or the “Company”)
(NYSE:
CPY
-
News
) to
address corporate governance issues and conflicts of interest at the Company.
Earlier today, RiskMetrics Group (“RiskMetrics” or “RMG”), the leading
independent proxy voting advisory firm, issued a report recommending that CPI
stockholders vote on Ramius’s
GOLD
proxy card to elect
Ramius nominees Peter A. Feld and Joseph C. Izganics to the Board of Directors
of CPI to replace current CPI directors Michael Koeneke and Turner
White.
Excerpts
of PGI’s Proxy Analysis
On
the Board’s Flawed Judgment in Determining that Chairman David Meyer is
“Independent” and the Significant Conflicts of Interest It Has
Caused:
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“We
do agree with the chair of the Compensation Committee that it is
‘beneficial to the company that independence occurs,’ but we question
whether simply wishing it makes it so. We also agree that determining a
director’s independence is sometimes a business judgment issue. In this
case, however, that judgment seems seriously flawed. In declaring Meyer
independent the board papered over the serious conflict of letting his
business partner, Koeneke, continue to sit on the Compensation Committee
even as it negotiated Meyer’s contract. It also created the Kafka-esque
reality in which Meyer has a role in approving both sides of the
negotiation, making it substantially more difficult (and awkward) for a
truly independent director to question the wisdom or the terms of the
agreement. A good independent director would overcome those challenges. A
healthy dose of business judgment would never have allowed them to
fester.” (emphasis added)
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“Because
it classified him as an independent director, however, the board has
created significant, unnecessary, and enduring potential for conflicts of
interest, some of which have already become real.” (emphasis
added)
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On
Who Should Bear “Special Responsibility” for Decision to Classify Chairman Meyer
as “Independent”:
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“As
chairs of the Compensation Committee, which ignored these significant
governance issues in negotiating the contract, and the Governance
Committee, which holds a specific charter to identify and remedy such
issues, we believe directors White and Abel bear special responsibility
for this poor judgment...”
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On
Chairman David Meyer’s Troublesome Compensation Arrangements:
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“Other
directors who served for the entire year received 2008 compensation
ranging from $83,992 (Koeneke) to $97,405 (Abel). If as a true
non-executive chairman Meyer has no role in or responsibility for the
company’s operations, shareholders should rightly wonder why he receives
an annual retainer of more than twice those amounts - let alone an “annual
performance bonus” of up to 0.67% of adjusted
EBITDA.”
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“In
September 2008, however, the company also entered into a Chairman’s
Agreement which provides for base and incentive compensation to
non-executive chairman Meyer at levels roughly on par with the company’s
senior executives in a bad year and potentially significantly higher in a
good year. Under terms of the agreement Meyer will receive an annual
retainer of $200,000 in restricted stock (paid quarterly and vesting at
the end of the quarter in which the grant was made) and an “annual
performance bonus” equal to 0.67% of adjusted EBITDA, also in restricted
stock, which vests immediately .... PROXY Governance believes that
performance-based compensation is rarely appropriate for independent
directors, as it may create conflicts of interest through which they
become less likely to question risky decisions. Stock ownership among
directors may help align their interests with those of other shareholders.
Even if it is in the form of restricted shares, however, director
compensation which depends on achievement of financial and operating
targets risks turning independent directors from watchdogs into
cheerleaders.”
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Ramius
Partner Mark R. Mitchell stated, “We are gratified that a second independent
proxy advisory firm has expressed its significant concerns with the governance
practices at CPI and the serious conflicts of interest on the CPI Board. Over
the course of this election contest, CPI has repeatedly stated to stockholders
that it is ‘at the forefront of corporate governance.’ We urge all stockholders
to ask themselves whom they should trust, a Board who will say and do anything
to get its nominees elected or two independent proxy voting advisory firms who
have each separately expressed serious concerns with the Company’s governance
practices and with significant conflicts of interest. We hope and expect
stockholders can see why it is critical for there to be truly independent
directors on the CPI Board, including a representative of stockholders whose
interests are directly aligned with those of all stockholders. We believe
stockholders will suffer if Knightspoint Partners’ influence over the Board
continues unchecked.”
Concluded
Mitchell, “We urge our fellow stockholders to vote our
GOLD
proxy card today to elect
Ramius’s director nominees who are firmly committed to the future success of CPI
Corp.”
Important
Voting Information
Ramius
urges CPI stockholders to follow the
recommendation of
RiskMetrics and vote the
GOLD
proxy card to elect
Ramius’s two (2) nominees, Peter A. Feld and Joseph C. Izganics. Stockholders
voting on our
GOLD
proxy
card will also be able to vote for the candidates who have been nominated by the
Company other than Turner White and Michael Koeneke, giving stockholders who
wish to vote for Ramius’s nominees the ability to also vote for the total number
of directors up for election at the Annual Meeting. In certain of our proxy
solicitation materials we have presented a list of certain Company director
nominees below a heading entitled “Ramius Gold Proxy” in order to illustrate for
you who would be elected to the CPI Board in the event you vote on our
GOLD
proxy card in accordance
with our recommendations. Please note that the Company director nominees that we
included in this list have not consented to being named in our proxy statement
or related solicitation materials and do not support our slate of director
nominees. Also, there can be no assurance that any of CPI’s nominees will serve
as directors if our nominees are elected.
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
Luxembourg.
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.
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