Glass Lewis Recommends Shareholders Vote for Qualstar Board Nominees

Qualstar Corp. announced that Glass Lewis & Co., LLC, an independent proxy advisory service, has recommended to its clients that shareholders vote the white proxy card for all five of the Qualstar board of directors’ experienced and qualified director nominees, Allen H. Alley, Chester Baffa, Lawrence D. Firestone, Gerald J. Laber and Daniel C. Molhoek, at Qualstar’s annual meeting of shareholders to be held on June 28, 2013.

Glass Lewis’ clients include institutional investors, mutual funds, pension funds and other fiduciaries.

In recommending that shareholders vote the white proxy card for all five of the director nominees recommended by the Qualstar board, Glass Lewis recognized that the replacement of the entire Qualstar board being sought by BKF Capital Group, Inc. and its controlling shareholder, Steven N. Bronson, was unwarranted.

Glass Lewis also took note of the substantial changes that have been made to the composition of the Qualstar board and management team over the past year. If shareholders elect the Qualstar board’s qualified and experienced nominees – Alley, Baffa, Firestone, Laber and Molhoek, the entire membership of the Qualstar board, other than Firestone, Qualstar’s CEO, will have been replaced since the 2012 annual meeting.

The Glass Lewis report also recommended that shareholders vote the white proxy card for the ratification of a shareholder rights plan adopted by the Qualstar board following the commencement by BKF and Bronson of its unsolicited, coercive, partial tender offer last January.

While BKF’s and Bronson’s abrupt termination of their unsolicited, coercive, partial tender offer eliminated the need for the Qualstar board to make a recommendation at the time, it was the unanimous view of the the board that the partial tender offer was inadequate and was not in the best interests of Qualstar and all of its shareholders.

In recommending that shareholders vote the white proxy card for the ratification of the shareholder rights plan, the Glass Lewis report stated: "Although we would ordinary recommend that shareholders vote against the adoption of a poison pill, here, we recognize that the company was facing some mitigating circumstances. Specifically, had the partial offer been completed and fully subscribed, BKF would have owned over 43% of the company’s common stock, giving them significant voting power over all matters requiring shareholder approval. Further, we believe that the partial offer could have been detrimental to non-tendering shareholders, as they would have been left holding an illiquid equity stake in a company effectively controlled by BKF. In our view, the partial offer would not have treated all Qualstar shareholders in an equitable manner. In light of this issue, coupled with the relatively low market premium implied by the partial offer (14.7%), we believe that the implementation of the Rights Agreement here was a reasonable course of action for the board to take. It’s also worth noting that the Rights Agreement only has a term of one year (expiration date of no later than January 31, 2014), which we believe is acceptable. In light of these factors, we believe that the proposed Rights Agreement is in the best interests of shareholders."

"We are very pleased that a well-respected, independent third party such as Glass Lewis has carefully reviewed the voting alternatives and recommends that shareholders vote for Qualstar’s director nominees, selected by Qualstar for their extensive governance experience and outstanding qualifications," said Firestone. "We are also gratified that the Glass Lewis report supports the decision of our board, after careful consideration, to adopt a rights plan so as to protect our shareholders against BKF’s and Mr. Bronson’s unsolicited, coercive, partial tender offer. This board and our nominees remain committed to taking the actions necessary to protect our shareholders against abusive or coercive tactics used by a potential acquirer seeking to gain control of Qualstar without paying all shareholders a fair price for their shares."

To protect the value of their investment, Qualstar recommends that all shareholders vote for their board’s qualified nominees on the white proxy card.

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