UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
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CPI
CORP.
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CPI CORRECTS MISLEADING
STATEMENTS BY RAMIUS GROUP
CPI’s
slate of directors offers CPI stockholders continuing, strong oversight and
strategic leadership that have built CPI into the industry leader in our
category and enhanced the value of your investment.
In
contrast, Ramius brings no ideas, plans, strategies or legitimate business
criticisms and acknowledges that the Company is performing well under the
current board and management. Ramius has resorted to making distorted
claims and accusations about CPI nominees that grossly mischaracterize the
facts.
ITEM: Ramius criticizes the
board for the decline in stock price from the high of May 2007 to the low of
December 2008.
FACTS:
The board
and management drove a nearly 65% increase from the lows of 2004 to today’s
price amid very difficult industry and now broader market
conditions.
The stock
price increased
more
than 400%
from year end 2008 to today during a time when Ramius was
advocating a sale of the Company.
ITEM: Ramius now
claims involvement in the Company’s successful strategies of the last five
years
.
FACTS:
Ramius in
fact played no meaningful role in either phase of the Company’s
transformation. Ramius’s sole representative during this period, Mark
Mitchell, sat on only the Nominating and Governance Committee since October 2004
and did little more than attend regular board meetings.
ITEM: Ramius
borrows from the Company’s strategic plan, which Ramius played no role in
developing, and makes only generic assertions about what the Company needs to do
in its next phase.
FACTS:
Even as
Ramius borrows talking points from Company materials, it betrays a lack of
understanding of the business. Ramius falsely attributes our rise in
average transaction to increased prices even though the Company has become more
not less promotional, the value proposition for customers has been substantially
improved, and the average sales per transaction has been increased by selling
additional content.
ITEM: Ramius
criticizes CPI’s renewal agreement with Sears and charges that the Company came
“precariously close to breaking minimum EBITDA covenants.”
FACTS:
Sears
contract was concluded on terms that benefited both parties. The
renewal of the Sears contract for a minimum term of six years and the operating
savings allowed under the new contract are extremely beneficial to
CPI.
During
negotiations of the Sears renewal agreement, Ramius expressed extreme anxiety
and placed pressure to concede on operational objectives important to
CPI. Irrespective of the pressure applied by Ramius, the Sears
agreement was successfully concluded on terms very beneficial to
CPI. Like many negotiations, the deal took perseverance to achieve
the objectives the Company originally laid out. In addition, as
disclosed in a Form 8-K filed with the Securities and Exchange Commission in
December 2008, claims from the prior agreement were settled in connection with
the new agreement in exchange for an $8 million cash payment to Sears and the
issuance to Sears of 3
2
5,000 shares of
CPI stock having a value of $1.12 million on the date of issuance.
FACTS:
The Company
never faced the liquidity crisis that Ramius claims.
Contrary
to assertions made by Ramius, the Company never faced a liquidity
crisis. The Company maintained compliance with its debt covenants,
forecasted continued compliance, and also ensured that it could obtain any
necessary covenant relief by maintaining an open and constructive dialogue with
lenders. In view of unsettled market conditions and the potential of
a near-miss on a financial covenant in a downside scenario, the Company did
obtain more favorable terms from its lenders. As with the Sears
contract, Ramius expressed impatience for a deal at almost any
cost.
ITEM:
Ramius mischaracterizes its
discussions with the Company leading up to the proxy contest
FACTS:
Ramius’s own
representative on the board, Peter Feld, voted with the rest of the board to
re-nominate the incumbent slate for re-election at the annual
meeting.
The next
day, Mr. Feld’s superior called up and demanded more “representation” for
Ramius. Ramius did not seek to “improve” the board or add relevant
“retail” experience. Instead, Ramius demanded that the board accept
two additional Ramius nominees and remove one incumbent director without even
identifying the names of its proposed candidates. Ramius continued to
refuse to identify the name of any proposed nominee until forced to disclose the
name by the nomination deadline.
In an
effort to avoid a costly and distracting proxy contest, CPI proposed to
re-nominate the Ramius representative on the board and identify an additional
value-adding independent director that would be acceptable to both the board and
to Ramius. Ramius rejected this proposal. Far from seeking
to improve the quality of the board, the board believes Ramius solely seeks
additional influence to pursue its interests in controlling the timing of an
exit for their stake in the Company through a sale of the Company.
ITEM: Ramius
distorts the record on Mr. Meyer’s compensation as Chairman.
FACTS:
David
Meyer’s compensation has been pursuant to plans approved by all directors
(including the Ramius director) after a rigorous process conducted by the
compensation committee with the active assistance from an independent
compensation consultant.
All
compensation for Mr. Meyer’s service as Chairman has been in restricted stock,
none of which has been sold (in contrast to Ramius which has a 575,000 share
SELL plan at prices as low as $10.00).
The
compensation figures presented by Ramius for 2007 and 2008 vastly overstate the
real values involved by, among other things, combining multiple years in one and
including prior years of service. Furthermore, Ramius values this
compensation at a high stock price and then points to the stock fluctuating
lower without admitting that this stock-based compensation moves up and down in
lockstep with the CPI stock price and is completely aligned with the interests
of other shareholders.
ITEM: Ramius
minimizes the actual board experience of the non-“retail” board
members.
FACTS:
The longer
serving CPI board members have five years of specific experience with CPI’s
highly specialized business model: providing professional services within a
hosted environment. These board members’ efforts in engineering a
very successful two-phase transformation to industry leader have given them
superior insights into the Company’s operations. CPI’s business has
little in common with Home Depot, the only experience of Ramius’s “retail”
nominee.
ITEM: Ramius says
that CPI Nominee Koeneke needs to “earn a living off of”
CPI.
FACTS:
Michael Koeneke’s board
compensation is the same as every other director. Mr. Koeneke has
been a senior investment banker for decades, was formerly the Global Head of
Mergers & Acquisitions at Merrill Lynch, and has substantial income outside
of CPI.
ITEM: Ramius says
that CPI Nominee White “adds no incremental value.”
FACTS:
The success
of the major transformations of first the Sears Portrait Studio business and
then the PictureMe Portrait Studio business owe in large part to the
establishment of specific objectives, milestones and accompanying compensation
incentives. As Chairman of the CPI compensation committee, Turner
White led this effort at the board level.
ITEM: Ramius
asserts a level of Mr. Feld’s participation that is not
accurate. What Ramius claims are Mr. Feld’s contributions were, in
fact, actions taken by board committees.
FACTS:
Michael
Glazer was chosen as a director through a governance process led by the
Nominating and Governance Committee chaired by Jim Abel. Ramius
submitted two hand-picked candidates who did not have retail experience relevant
to CPI’s business. The Ramius nominees were aggressively pushed by
Mr. Feld’s bosses, Mark Mitchell and Jeff Smith.
Mr. Feld
played no role in the establishment of the current field
incentives. It is acknowledged that Mr. Feld did request that field
compensation be added to the agenda of a July 2008 board meeting when he first
joined the board. Mr. Feld did suggest that CPI consider paying
studio managers more like investment bankers (with bonus payments ranging from
50% to 100% or more of the base salary) which would be impractical considering
the unit economics of a store. As a result of the review by the board
and compensation committee led by Turner White as chairman, management did
recommend some adjustment in payout targets for each title class.
Mr. Feld
did not negotiate directly with Mr. Meyer on the Chairman’s compensation
package. Mr. Feld, as with all directors except for Mr. Koeneke, had
input into the determination of the compensation package. This effort
was led by the CPI compensation committee with the assistance of an outside
compensation consultant.
CPI’s
directors have made a point of visiting studios both prior to and after Mr. Feld
joined the board. It is acknowledged that Mr. Feld did suggest that
directors visit studios after he joined the board.
ITEM: Ramius
misrepresents the Ramius relationship with Knightspoint and engages in innuendo
about the Knightspoint directors.
FACTS:
The
Knightspoint directors, Mr. Meyer and Mr. Koeneke, originated the CPI investment
idea, developed the turnaround strategies and were, from the beginning, the
agents of change at the Company. Ramius was a passive investor with
no more than a monitoring role. That is why Knightspoint earns a
carried interest on Ramius's stake, and it is also why the 13D group always
filed under the name "Knightspoint Group" before Ramius split off in February of
this year after its interests shifted to obtaining liquidity through a sale,
likely occasioned by Ramius investor withdrawals.
Ramius’s
Nominees Are Substantially Less Qualified than CPI’s Nominees
-
Peter
Feld, 30, is five years out of the investment banking analyst program at Banc
of America Securities and fails to make even routine board decisions
independent of his bosses at Ramius.
-
Joseph
Izganics, 48, a former field employee of Home Depot, brings no relevant
industry, board or executive experience and is being paid by Ramius to serve
as their nominee. Mr. Izganics’ only significant professional
experience is with Home Depot, where he most recently served as Southern
region president for only 1 ½ years before departing last
January. Home Depot has little in common with CPI, which operates
portrait studios in a hosted environment. Ramius refused to submit
Mr. Izganics to review by the Company’s nominating and governance
committee.
-
Ramius
has a history of inappropriate board nominations at CPI. In 2004,
Ramius put up a nominee whose principal qualification was that he was related
to a Ramius partner. He resigned within six months and was not
replaced. Mark Mitchell, the Ramius representative on the board
between 2004 and 2008, did little more than monitor the
investment. Mr. Mitchell then, due to other priorities, stepped
down in favor of a colleague, Mr. Feld, significantly junior in experience and
whose actions have shown that he is incapable of independent
action.
Ramius
is a Self-Interested Stockholder and We Believe Electing Ramius’s Nominees Would
Not Benefit Stockholders
-
Ramius
advocated a sale of CPI beginning in January when the stock was less than
$4.00 per share which would have deprived shareholders of substantial gains in
value. The stock closed on June 26 at $18.80. Ramius
also filed a 575,000 share SELL plan with the SEC around the same time and has
sold recently at prices as low as $10.00 per share.
-
Ramius’s
defense that its pursuit of a sale process was due to a near-miss on a single
financial covenant strains credulity. It also would not explain why
Ramius continued to advocate a sale process with financial buyers in March,
April and May of this year even after the Company secured a covenant amendment
and contrary to the strong advice of the Company’s investment
banker.
-
In a
response to the stock price pressures of 2008, Ramius called for sudden
management changes without offering any plans and repeatedly disparaged key
members of management.
We
believe that putting Ramius’s self-serving representatives on the board would
not benefit stockholders and would destabilize the Company and be detrimental to
the continued, effective execution of the Company’s strategic plan.
CPI’s
Two Largest, Unaffiliated Stockholders Support the Board’s Director
Nominees
The
largest unaffiliated stockholders of CPI – Century Management, and its affiliate
Van Den Berg Management, Inc., and Lafitte Capital – have publicly announced
their strong support for the Company’s slate over Ramius’s director
candidates. Century Management and Lafitte Capital in the aggregate
owned approximately 23% of the Company’s outstanding shares as of the May 9,
2009 record date.
SUPPORT
YOUR COMPANY AND VOTE THE WHITE PROXY.
If
you have any questions, require assistance with voting your WHITE proxy
card,
or
need additional copies of the proxy materials, please contact:
105
Madison Avenue
New York,
NY 10016
proxy@mackenziepartners.com
(212)
929-5500 (Call Collect)
Or
TOLL-FREE
(800) 322-2885
Important
Information
CPI Corp.
has filed a definitive Proxy Statement with the Securities and Exchange
Commission (“SEC”) and has furnished to its stockholders a Proxy Statement in
connection with the solicitation of proxies for the 2009 Annual Meeting of
Stockholders. The Company advises its stockholders to read the Proxy Statement
relating to the 2009 Annual Meeting because it contains important information.
Stockholders may obtain a free copy of the Proxy Statement and other documents
that CPI files with the SEC at the SEC’s website at www.sec.gov. The Proxy
Statement and these other documents may also be obtained for free from CPI by
directing a request to CPI Corp., 1706 Washington Avenue, St. Louis, Missouri
63103-1717, Attn: Corporate Secretary, calling (314) 231-1575, or by contacting
MacKenzie Partners, Inc., by toll-free telephone at 800-322-2885 or by e-mail at
proxy@mackenziepartners.com.
Certain
Information Concerning Participants
CPI Corp.
and its directors and executive officers (other than Peter Feld) may be deemed
to be participants in the solicitation of proxies from stockholders in
connection with the Company’s 2009 Annual Meeting. Information concerning
persons who may be considered participants in the solicitation of the Company’s
stockholders under the rules of the SEC is set forth in public filings by the
Company with the SEC, including the proxy statement relating to the 2009 Annual
Meeting of Stockholders.
Forward-Looking
Statements
The
statements contained herein that are not historical facts are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, and involve risks and uncertainties. The Company identifies
forward-looking statements by using words such as “preliminary,” “plan,”
“expect,” “looking ahead,” “anticipate,” “estimate,” “believe,” “should,”
“intend” and other similar expressions. Management wishes to caution the reader
that these forward-looking statements, such as the Company’s outlook for
portrait studios, net income, future cash requirements, cost savings, compliance
with debt covenants, valuation allowances, reserves for charges and impairments
and capital expenditures, are only predictions or expectations; actual events or
results may differ materially as a result of risks facing the Company. Such
risks include, but are not limited to: the Company’s dependence on Sears and
Walmart, the approval of the Company’s business practices and operations by
Sears and Walmart, the termination, breach, limitation or increase of the
Company’s expenses by Sears under the license agreements, or Walmart under the
lease and license agreements, customer demand for the Company’s products and
services, the economic recession and resulting decrease in consumer spending,
compliance with the NYSE listing requirements, manufacturing interruptions,
dependence on certain suppliers, competition, dependence on key personnel,
fluctuations in operating results, a significant increase in piracy of the
Company’s photographs, widespread equipment failure, compliance with debt
covenants, high level of indebtedness, implementation of marketing and operating
strategies, outcome of litigation and other claims, impact of declines in global
equity markets to pension plans and impact of foreign currency translation. The
risks described above do not include events that the Company does not currently
anticipate or that it currently deems immaterial, which may also affect its
results of operations and financial condition. The Company undertakes no
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or
otherwise.
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