Napster asks shareholders to support its board nominees, says dissident slate unqualified

By Lisa Kerner

Charlotte, N.C., Aug. 29 - Napster Inc. urged shareholders to reject the three "unqualified" dissident board candidates put forth by Okapi Partners and instead re-elect independent directors Richard J. Boyko, Philip J. Holthouse and Robert Rodin.

The company's annual stockholder meeting is set for Sept. 18 at 1 p.m. ET.

In a letter to shareholders, the company said the dissident nominees would require on-the-job training, having never served on the board of a public company.

Napster said the nominees' work experiences - including musician, assisted living executive and ice cream franchisee - "are irrelevant to a company in the highly competitive digital music business."

The company also accused the dissidents of misrepresenting facts, distorting statements and lacking a specific business plan.

In addition, the dissidents have no "significant" ownership in Napster, according to the letter.

In an Aug. 21 news release, Okapi asked Napster shareholders to vote for its nominees:

• Perry H. Rod, an independent professional investor and musician, who holds 73,001 shares of Napster;

• Thomas Sailors, managing member of Cloverdale Investments LLC, a Napster shareholder since 2005 who holds 626,000 shares; and

• Kavan P. Singh, president of Lindenwood Care Corp., a 109-bed assisted living facility, and beneficial holder of 9,179 shares.

Okapi noted the "dramatic" deterioration in the Los Angeles online music company's value after it transformed from Roxio into its present form as the Napster digital music service.

According to Okapi, Napster's per-share stock price has fallen from $10.00 on Dec. 6, 2004 to $1.36 on July 29, the date Okapi filed its proxy materials.

"We believe the current classified board structure, the board's continued support of its poison pill takeover defense, the dilution of shareholder ownership through restricted stock grants for 'performance' and the new 'change of control' severance package awarded to the chief executive officer/chairman have misaligned the interests of the board from those of stockholders," Okapi said.

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