RAMIUS
599
LEXINGTON AVENUE, NEW YORK, NY 10022
TEI
212 845 7900 x/ww.RAmius.cum
June 11,
2009
Mr. David
M. Meyer
Chairman
of the Board CPI Corp.
1706
Washington Avenue St. Louis, MO 63103
Dear
David:
I am
writing with regard to the meeting of the Board of Directors of CPI Corp. (“CPY”
or the “Company”) that took place on June 9, 2009. As you know, the first item
on the agenda was the approval of meeting minutes (“Minutes”) for Board meetings
held on April 15, 2009, May 19, 2009, and June 5, 2009. I first received these
Minutes at 12:41AM on June 9, 2009 approximately twelve hours prior to the
scheduled Board meeting. As I explained during the Board meeting, I had not yet
had an opportunity to fully review the Minutes given such short notice. I
therefore requested that we defer approval of the Minutes until the next Board
meeting, which would allow me sufficient time to properly review the Minutes and
provide any comments or changes. I was obviously quite disappointed that the
Board denied my request and instead chose to vote on the approval of the
Minutes. For that reason, I voted against the approval of the
Minutes.
Upon
detailed review of the April 15, 2009 Meeting Minutes (the “April 15 Minutes”),
I am concerned that the following paragraph does not reflect the in depth
discussion that took place regarding the independence of each member of the
Board.
“The
Nominating and Governance Committee also reviewed the relationships between each
director and management and with the Company and considered all relevant factors
of such relationships in the context of NYSE standards. As a result of their
review, the Committee determined that all Directors should be deemed independent
and recommended that the Board affirm the independence of each director. On
motion of the Nominating and Governance Committee, the Board unanimously
approved the recommendation of the Committee and
determined
that all Directors are independent of the Company and authorized the officers of
the Corporation to certify the independence of all directors to the New York
Stock Exchange.”
As you
will recall, during our Board discussion regarding Board member independence, I
specifically expressed my serious concern to the Board that I did not feel that
you qualified as “independent” in the context of NYSE standards. According to
Section 303A.02 (Independence Tests) of the NYSE Listed Company
Manual:
(a) No
director qualifies as “independent” unless the board of directors affirmatively
determines that the director has no material relationship with the listed
company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the company). Companies must identify
which directors are independent and disclose the basis for that
determination.
I called
into question your “independence” under NYSE standards based on my belief that
you have a “material relationship” with the Company stemming from your active
role as Chairman of the Board combined with your compensation arrangement with
the Company that entitles you to significant compensation, which totaled over
$600,000 in 2008 alone.
Upon
subsequent investigation, I believe the following excerpt from Section 303A.02
of the NYSE Listed Company Manual is also relevant to the question of your
“independence”. The
commentary
for Section 303A.02 provides the following:
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.
As you
know, the Company’s outside counsel is McDermott Will & Emery (“McDermott”).
Stanley H. Meadows, a Partner of McDermott, is lead counsel for CPY on a wide
range of corporate issues. In addition to his role advising CPY on legal
matters, Mr. Meadows has also represented Knightspoint Partners in several other
proxy situations and, to our knowledge, Mr. Meadows has had a long-standing
relationship with you and your family. From our experience on the Board of CPY
for the past 5 years, we have witnessed first-hand the close relationship
between Mr. Koeneke, you and Mr. Meadows, and we have stated our discomfort with
this arrangement to the independent members of the Board of CPY on many
occasions. We believe your relationship with the Company’s outside counsel
provides another basis for a finding that you have a “material relationship”
with the Company and are not “independent” under NYSE standards.
In
response to the concerns I raised, the Chairman of the Compensation Committee,
Turner White, and the General Counsel, Jane Nelson, advised me that although the
compensation paid to you exceeded the allowable amount under applicable NYSE
independence standards, the compensation arrangement with you had been
specifically structured as Board fees to avoid NYSE independence implications.
Further, they informed me that the Company had been counseled by Stanley Meadows
of McDermott Will & Emery, the Company’s outside counsel, that in fact you
could technically be deemed “independent” due to the creative structuring of the
compensation arrangement. As you will recall, after substantial debate, I
conceded that from a purely technical standpoint, based on the materials
provided to the Board at that time, you
could
be deemed
“independent”. However, I clearly stated that from a fundamental, real world
standpoint, I did not believe that you were in fact “independent” of the
Company.
Please
inform Jane Nelson, as Secretary of the Board, that I would like the record to
reflect this substantial dialogue and, once reflected in the April 15 Minutes, I
would request the Board re- review the April 15 Minutes and vote to approve them
in the amended form.
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Best
Regards,
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|
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/s/
Peter A. Feld
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|
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Peter
A. Feld Ramius
LLC
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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
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.
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.