Napster Inc’s (NASDAQ:NAPS) directors today
mailed stockholders a letter underscoring that the three dissident board
candidates are unqualified, and urged the re-election of experienced,
independent directors Richard J. Boyko, Philip J. Holthouse and Robert
In the letter, Napster directors noted that:
The complete text of the board of directors’
letter to stockholders is below. Napster’s
annual stockholder meeting will be held at 10 a.m. on Sept. 18 at the
company’s headquarters at 9044 Melrose Ave.,
Los Angeles, Calif., 90069.
Napster, the pioneer of digital music, offers the ultimate in
interactive music experiences, creating better ways to discover, share,
acquire and enjoy music – anytime, anywhere.
The company’s offerings include “Napster”
the most popular, on-demand music subscription service in the world and
the largest, most comprehensive MP3 download store on the market; “Freenapster”
(www.freenapster.com), a unique
Web experience offering free, on-demand music legally in the U.S.; and “Napster
Mobile,” one of the industry’s
fastest growing mobile music platforms, providing the premier mobile
music experience for customers in 11 global markets. Headquartered in
Los Angeles, Napster's services are available in markets across the
Americas, Europe and Japan.
Copyright (C) 2008 Napster, LLC. All rights reserved. Napster, Napster
Mobile, Napster To Go and Napster Light are either trademarks or
registered trademarks of Napster, Inc. or its subsidiaries in the United
States and/or other countries. All other trademarks are owned by their
IMPORTANT NOTICE FROM YOUR BOARD OF DIRECTORS
August 29, 2008
Dear Fellow Stockholder:
At Napster, Inc.’s September 18, 2008 Annual
Meeting of Stockholders, you will be asked to make a critical decision
regarding the future of Napster. You and your fellow stockholders will
be electing three directors to serve for a three-year term on the
Napster Board of Directors.
As you may know, three dissident stockholders with no significant
ownership in your company and who, in fact, have recently been frequent
sellers of shares proposed that they be elected in lieu of
the three experienced members nominated for re-election by your Board.
The proxy materials filed by the dissident group with the Securities and
Exchange Commission make abundantly clear that all three are unqualified
to serve on the board of a publicly-traded company.
Their SEC filings describe work experiences—musician,
nursing home executive, ice cream franchisee, middle management banking
executive and other positions—that
are irrelevant to a company like Napster competing in the highly
sophisticated digital music industry. In addition, not one of the three
nominees provided evidence they have ever served on the board of a
public company. Finally, the dissident group’s
proxy materials put forth no substantive plan for how its nominees
will enhance value for our stockholders if elected to the Board,
suggesting only a vague review of our business. Accordingly, we
strongly believe that the dissident group’s
initiation of this proxy contest is unnecessarily costly, disruptive to
the company, and not in the best interests of our stockholders.
Your Board of Directors unanimously recommends that you vote your
shares FOR the Board’s director nominees --
Messrs. Richard J. Boyko, Philip J. Holthouse and Robert Rodin -- by
signing, dating and returning the enclosed WHITE proxy card today.
We urge you to immediately discard and not return any blue proxy card
you may receive from the dissident group.
CONTRARY TO THE DISSIDENT GROUP’S
ASSERTION, YOUR BOARD IS FIRMLY COMMITTED TO ENHANCING VALUE FOR ALL
The press release recently filed by the dissident group appears to imply
that your Board is not willing to consider a sale of the company. This
is not true. Your Board has been, and will continue to
be, committed to enhancing value for all Napster stockholders. Each of
your Board’s nominees, like the rest of your
Board, is open to all opportunities for building value for our
stockholders by objectively evaluating all options for maximizing your
investment in Napster, including by exploring possible strategic
alternatives. To that end, Napster has retained UBS Investment Bank
to assist the company with that process, and UBS has been actively
advising the company with regard to possible strategic alternatives.
UNLIKE THE DISSIDENT GROUP, YOUR BOARD’S
NOMINEES ARE EXPERIENCED, HIGHLY QUALIFIED AND REQUIRE NO ON-THE-JOB
Each of the Board’s director nominees has
demonstrated exceptional qualifications in representing our stockholders
and, collectively, in bringing a valuable and broad-based set of
business experience that will continue to serve the long-term interests
of our stockholders.
As detailed above, our Board’s director
nominees combined have more than 34 years of relevant
experience serving on public company boards, while the
dissident group’s director nominees have 0
years of experience serving on public company boards. Further,
the dissident group has offered no proof of any management, operational
or other experience in the digital music industry. While we appreciate
that the dissidents are music enthusiasts and subscribe to Napster’s
service, such interests hardly qualify any of them to serve on your
Board. It is not in the best interest of Napster’s
stockholders to elect three unproven candidates who will require
on-the-job training to serve as directors of a public company. This is
especially the case where, as here, the nominees are unable to offer
any evidence that they can
contribute to enhancing stockholder value if they are elected to our
THE DISSIDENT GROUP HAS SELECTIVELY MISREPRESENTED FACTS AND
The dissident group has made assertions that we believe are misleading
in an attempt to gain support for its director nominees. These
misleading assertions only reinforce your Board’s
determination that the dissident group’s
director nominees are the wrong choices for your Board.
#1: The dissident group implies that your Board recently
implemented a classified board structure requiring a nearly impossible
80% vote of the outstanding shares in order to change the bylaws
allowing for the annual election of all directors to further its own and
management’s deep entrenchment and control
over the company.
FACT: This is not true.
First, the classified board structure has been a part of Napster’s
certificate of incorporation (and bylaws) since Napster became a public
company in May 2001. This provision was not
recently implemented by your Board. Second, in this year’s
proxy materials, your Board has recommended a proposal to our
stockholders to amend Napster’s certificate
of incorporation to eliminatethe classified board provision. The dissident group’s
misleading assertions directly conflict with these recent actions by
#2: The dissident group alleges that your Board recently
implemented a change in control severance package, commonly referred to
as a golden parachute for the Chairman/CEO.
FACT: This is simply not true.
While we recently
amended the employment agreement for our Chairman/CEO in advance of the
pending expiration of the initial term of his agreement, no
changes were made to the so-called golden
parachute provision, which has been a part of his employment agreement
since it was originally entered into in August 2003, and is customary in
our view for public company chief executive officers.
#3: The dissident group implies that your Board recently
adopted a “poison pill”
stockholder rights plan.
FACT: This accusation also is just
not true. In fact, Napster’s
stockholder rights plan has been in place since May 2001. In addition,
your Board believes that the stockholder rights plan serves to enhance
stockholder value in the event of an unsolicited takeover attempt by
giving your Board bargaining power and time to consider other
alternatives and negotiate a superior offer.
YOUR VOTE IS IMPORTANT -- SUPPORT YOUR BOARD NOMINEES
SIGN, DATE AND RETURN THE WHITE PROXY CARD TODAY
DISCARD ANY BLUE CARD YOU RECEIVE
The dissident group’s nominees have no
relevant experience in the digital music industry, have no
public company board experience and the dissident group has not
put forth any substantive plan for how their nominees will enhance value
for our stockholders if elected to the Board. The dissident’s
proxy materials also include selective and distorted statements, which
further draw into question the suitability of the dissident group’s
nominees to serve as your directors. For those reasons, your
Board of Directors unanimously recommends that you vote your shares FOR
the Board’s director nominees -- Messrs.
Richard J. Boyko, Philip J. Holthouse and Robert Rodin -- by signing,
dating and returning the enclosed WHITE proxy card today. We urge
you to immediately discard and not return any blue proxy card you may
receive from the dissident group.
We thank you for your support.
THE NAPSTER, INC. BOARD OF DIRECTORS
Vernon E. Altman
Richard J. Boyko
Wm. Christopher Gorog
Philip J. Holthouse
Joseph C. Kaczorowski
Brian C. Mulligan
1. Your Board of Directors unanimously recommends that you
vote your shares FOR the Board’s director
nominees. Your Board has not endorsed any of the dissident group’s
director nominees or proposals.
2. Regardless of how many shares you own, your
vote is very important. Please sign, date and return the
enclosed WHITE proxy card. Please
sign, date and return each WHITE proxy card you receive in
order to ensure that all of your shares, including shares held in
separate accounts, are voted at the meeting. Only your latest
dated proxy counts.
3. We urge you NOT to sign any
blue proxy card sent to you by the dissident group.
4. If you have sent a blue proxy card to the dissident group,
you have every right to submit a new proxy card to change your vote. You
may revoke that proxy and vote as recommended by Napster’s
Board of Directors by signing, dating and returning the enclosed WHITE
proxy card in the postage-paid envelope provided.
If you have any questions about voting or need additional assistance,
please contact Laurel Hill Advisory Group, LLC the firm assisting us in
the solicitation of proxies, toll free at 1-888-742-1305.
Important Information. On July 29, 2008, Napster, Inc. filed a
definitive proxy statement with the Securities and Exchange Commission
(the “SEC”) in
connection with Napster’s 2008 Annual Meeting
of Stockholders. Napster’s stockholders are
strongly advised to read the definitive proxy statement carefully before
making any voting or investment decision because the definitive proxy
statement contains important information. Napster’s
proxy statement and any other materials filed by Napster with the SEC
can be obtained free of charge at the SEC’s
website at www.sec.gov or from Napster
Napster’s definitive proxy statement and
other materials will also be available by writing to Napster, Inc., 9044
Melrose Avenue, Los Angeles, CA 90069 or by contacting our proxy
solicitor, Laurel Hill Advisory Group, LLC by toll-free telephone at