PITTSBURGH, Oct. 3, 2011 /PRNewswire/ -- LCV Capital Management, LLC ("LCV Capital") issued today an open letter to the independent directors of ModusLink Global Solutions, Inc. (Nasdaq: MLNK) ("ModusLink" or the "Company") announcing its support for Peerless Systems Corporation's (Nasdaq: PRLS) two nominees to the ModusLink Board of Directors at the Company's upcoming annual meeting of stockholders.

In its letter, LCV Capital Management also demands that the ModusLink Board of Directors remove Joseph C. Lawler as Chairman, President and Chief Executive Officer of the Company, initiate a review of all strategic alternatives and return capital to shareholders through significant open-market share repurchase. Among the reasons for its demands, LCV Capital cites the precipitous decline in the Company's stock price, misuse of its balance sheet through disastrous acquisitions and investments, and poor operating performance during Mr. Lawler's tenure.

The full text of the letter follows:

October 3, 2011

LCV Capital Management, LLC
Centre City Tower, Suite 705
650 Smithfield Street
Pittsburgh, PA 15222

Dear Independent Directors of ModusLink:

LCV Capital Management, LLC is currently one of the largest shareholders of ModusLink Global Solutions, Inc. (Nasdaq: MLNK), beneficially owning approximately 3.5% of the Company's common shares. We are well-informed, long-term investors in ModusLink who have met with senior management and several Board members on several occasions since we began investing in the Company in 2010.

Please, by no means interpret our longstanding ownership of ModusLink common stock as an indication of confidence or support for the current management team. In fact, we are writing to express our profound disappointment with Joseph C. Lawler and his management team, as well as the Board, for their abject failure to safeguard shareholder value.  We can no longer wait patiently for the Board to act to unlock the persistently discounted value of ModusLink's stock and we cannot stand by and watch the continued destruction of shareholder value.

In our view, the financial performance of ModusLink under the stewardship of Mr. Lawler and the entrenched Board has been abysmal.  We also believe the Company lags behind its peers in nearly every financial metric, leaving ModusLink as a chronic underperformer in the marketplace despite Mr. Lawler and his management team being richly compensated as if the Company were a star performer.

We believe that there is significant unrealized value in ModusLink and demand that the Board take immediate actions to safeguard and enhance shareholder value.

We continue to believe that there is significant unrealized value in the Company and believe that the Board has the power to unlock and deliver shareholder value immediately.  We further want to remind and caution ModusLink's independent directors that their primary duties and responsibilities are to ModusLink shareholders and will always include: (1) good corporate governance, (2) management oversight with suitable compensation arrangements, and (3) the ongoing evaluation for increasing share value through the examination of various strategic alternatives.

Therefore, as significant shareholders of ModusLink, we demand that the independent directors exercise their primary duties and take decisive actions that should include the following:

• Remove Mr. Lawler from his positions as Chairman, President and Chief Executive Officer due to, in our view, an appalling track record of disastrous acquisitions and investments, and dismal operating and stock price performance during his tenure, and replace him with an experienced President and CEO who is able to restore shareholder and stakeholder confidence.  We recommend that the Board consider appointing current Board member, Mr. Jeffrey J. Fenton, as interim President and CEO due to his extensive and accomplished management track record, tireless commitment to improving corporate governance inside the Company's board room, and thorough familiarity with the business of ModusLink;
• Separate the titles of Chairman of the Board of Directors and Chief Executive Officer;
• Appoint an experienced independent director as Chairman of the Board of Directors; and
• Initiate a review of all strategic alternatives, including a sale of all or parts of ModusLink, and return of capital to shareholders through a significant open-market share repurchase.

Our demands are clear, reasonable and, most importantly, in the best interest of all ModusLink shareholders.

It is our sincere hope that the independent directors of ModusLink will seize this critical opportunity to do what is best for all shareholders. Coming to an affirmative resolution that is based on our demands, as outlined above, should be the top priority of each independent director, consistent with his and her fiduciary duties. Any director who fails to recognize this should be held accountable by the Company's shareholders.

We support Peerless Systems Corporation’s commitment to positive change in ModusLink and believe that the time has come for a change on the Board.

In light of their continued failure to seize on opportunities to protect and enhance shareholder value, we have serious questions regarding management’s and the Board’s commitment and ability to prevent further destruction of shareholder value. Accordingly, we intend to support Peerless Systems Corporation’s (Nasdaq: PRLS) nomination of two highly qualified director candidates for election to the Board at the Company’s 2011 annual meeting.

Based on our own experiences of working with current management and the Board we feel that a good faith attempt to work constructively with current management and the Board would be an exercise in futility.

Throughout the tenure of our investment, we met with management and the Board on several occasions to discuss and suggest alternatives for creating material and sustainable value for all shareholders. When our initial attempts to work constructively failed to produce any positive results, we nominated three candidates for election to the Board at the Company's 2010 annual meeting.  Through our actions we wanted to reiterate our proposals for value enhancement, to remind management and the Board of their duties to safeguard and enhance share value, and to appoint three highly qualified independent members to the Board who would have represented the interests of all shareholders.  After lengthy negotiations with the Company, we chose to extend Mr. Lawler and his management team the benefit of the doubt by entering into a Settlement and Standstill Agreement with the Company. We did not enter into this Agreement lightly, but only after we felt that our voice on behalf of all shareholders was heard, and that initiatives would be taken to eliminate excess costs and to improve the financial performance of the Company. The Agreement called for the appointment of one of our nominees, Mr. Jeffrey J. Fenton, to an expanded Board and a $40 million return of capital to shareholders. We expressed a strong preference that this return of capital take the form of an investment in the Company through a significant open-market share repurchase on the back of material cost reductions and improved operating results.  We also agreed not to tender our shares into such repurchase. We attempted to further aid management and the Board by suggesting further shareholder-friendly alternatives for the return of capital and cautioned against the disadvantages of a one-time dividend distribution on the back of a business as usual approach.  The Company responded to our suggestions by threatening legal action under the standstill if we attempted to make any of our suggestions known to the public, or even attempted to discuss them privately with any other shareholders.  At the end of this process, to our dismay and disappointment, management and the Board chose to ignore all of our recommendations and announced a one-time dividend distribution on the back of declining operating results and increasing costs. This irresponsible action drained essential balance sheet liquidity and caused the market value of ModusLink to decline by almost twice the amount of the special dividend within 90 days of its announcement.

The shareholders of ModusLink can no longer afford the status quo.

While we agree with the Company's statement that a proxy campaign may be costly and disruptive to the status quo, we also believe that continuing to maintain the status quo would prove even more costly and disruptive to all shareholders.  We strongly believe in the potential prospects of ModusLink and feel the status quo is unacceptable and has been destroying shareholder value for far too long.  As significant shareholders of ModusLink, our objective is to see the full value of our shares recognized in the marketplace.

Please address any correspondence or questions to: LCV Capital Management, LLC, Centre City Tower, Suite 705, 650 Smithfield Street, Pittsburgh, PA 15222, Attn: Lodovico de Visconti, Managing Member, telephone (412) 281-7000.

Sincerely,

/Lodovico de Visconti/

Lodovico de Visconti
Managing Member
LCV Capital Management, LLC

About LCV Capital Management, LLC

LCV Capital Management, LLC manages a group of shareholder activist hedge funds, which invest in small- and mid-cap public companies in the United States and seek to assist those companies in realizing their full potential for the benefit of all shareholders and stakeholders. Through our active and constructive ownership approach, we aim to help our portfolio companies out-perform their peers and the market.

SOURCE LCV Capital Management, LLC