ISS Recommends That Shareholders Vote the WHITE Proxy Card in Support of All Qualstar Board Nominees

SIMI VALLEY, CA--(Marketwired - Jun 20, 2013) -  Qualstar Corporation ( NASDAQ : QBAK ), a manufacturer of data storage solutions and high-efficiency power supplies, today announced that Institutional Shareholder Services (ISS), a leading 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' very experienced and highly 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. ISS' clients include institutional investors, mutual funds, pension funds and other fiduciaries. In addition, last week, Glass Lewis & Co., another leading independent proxy advisory service, also recommended that shareholders vote FOR all five of Qualstar's Board nominees on the WHITE proxy card. With ISS and Glass Lewis making the same recommendation, both of the leading proxy advisory firms have now advised Qualstar's shareholders to support Qualstar's Board nominees and reject the attempts by BKF Capital Group, Inc. and its controlling shareholder, Steven N. Bronson, to take control of the Qualstar board.

In recommending that shareholders vote the WHITE proxy card FOR all five of the director nominees recommended by the Qualstar Board, ISS recognized that the replacement of the entire Qualstar Board being sought by BKF and Bronson was unwarranted given all the changes that have already been made to the composition of Qualstar's Board over the past year. If shareholders elect the Qualstar Board's highly qualified and very experienced nominees -- Allen H. Alley, Chester Baffa, Lawrence D. Firestone, Gerald J. Laber and Daniel C. Molhoek, the entire membership of the Qualstar Board, other than Mr. Firestone, Qualstar's Chief Executive Officer, will have been replaced since the 2012 Annual Meeting.

In its report, ISS referenced the "transformative changes that have taken place in the boardroom and throughout the company since June 2012" and highlighted the failure of BKF and Bronson to "make a compelling case that further change in the reconstituted board and management team is warranted." ISS also noted the risk to shareholders if BKF and Bronson were to replace the entire membership of the Qualstar Board, stating as follows:

"In this case, the disruptive risk to shareholders caused by further sweeping change at the board level may be real and could jeopardize management's recently implemented strategic plan."

Discussing the failure of BKF and Bronson to make a "compelling case" and articulate a detailed plan or strategy that would be likely to deliver greater shareholder value than the continued execution of the strategy being followed by Qualstar's Board and management, the ISS report stated as follows:

"[N]or did BKF provide detailed plan or strategy that is likely to deliver greater shareholder value than the continued execution of the reconstituted management team's strategy

"In this case, it is both clear that the board has been responsive to shareholders, and unclear what else the board and new management team can do."

"It is perhaps especially telling that the key parts of the dissidents plan appear to be actions the new board has already identified and begun implementing."

ISS also commented on the adoption by the Qualstar Board of a shareholder rights plan following the commencement by BKF and Mr. Bronson of its unsolicited, coercive, partial tender offer last January and recommended that shareholders vote the WHITE proxy card FOR the ratification of the rights plan. While BKF's and Mr. Bronson's abrupt termination of their unsolicited, coercive, partial tender offer eliminated the need for the Qualstar Board to make a recommendation, it was the unanimous view of the Qualstar 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 ISS report stated:

"In light of the company's implementation of its strategic turnaround plan, BKF's solicitation efforts to replace Qualstar's board with its proposed slate of nominees, its prior attempts to gain control of the company and our support for management's nominees, ratification of the proposed rights plan warrants support."

"We are very pleased that both of the leading independent, third-party proxy advisory firms have carefully reviewed the voting alternatives and recommend that shareholders vote for Qualstar's director nominees, selected by Qualstar for their extensive governance experience and outstanding qualifications," said Lawrence D. Firestone, Qualstar's President and Chief Executive Officer. "We are also gratified that both of the ISS and Glass Lewis reports support 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 strongly recommends that all shareholders vote for their Board's highly qualified nominees on the WHITE proxy card TODAY -- by telephone, Internet, or by signing, dating and returning the WHITE proxy card. 

Shareholders that need assistance in voting their shares or have any questions are urged to call Qualstar's proxy solicitor, Mackenzie Partners, Inc., at (800) 322-2885 (Toll Free) or at (212) 929-5500.

About Qualstar Corporation

Qualstar, founded in 1984, is a diversified electronics manufacturer specializing in data storage and power supplies. Qualstar's products are known throughout the world for high quality and Simply Reliable designs that provide years of trouble-free service. More information is available at www.qualstar.com or www.n2power.com or by phone at 805-583-7744.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains forward-looking statements relating to expectations, plans or prospects for Qualstar Corporation that are based upon the current expectations and beliefs of Qualstar's management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Qualstar does not expect to, and disclaims any obligation to, publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Qualstar, however, reserves the right to update such statements or any portion thereof at any time for any reason. In particular, the following factors, among others, could cause actual or future results to differ materially from those suggested by the forward-looking statements: Qualstar's ability to successfully execute on its strategic plan and meet its long-term financial goals; Qualstar's ability to successfully implement and recognize cost savings; Qualstar's ability to develop and commercialize new products; industry and customer adoption and acceptance of Qualstar's new products; Qualstar's ability to increase sales of its products; the rescheduling or cancellation of customer orders; unexpected shortages of critical components; unexpected product design or quality problems; adverse changes in market demand for Qualstar's products; increased global competition and pricing pressure on Qualstar's products; and the risks related to actions of activist shareholders, including the amount of related costs.

For further information on these and other and other cautionary statements, please refer to the risk factors discussed in Qualstar's filings with the U.S. Securities and Exchange Commission including, but not limited to, Qualstar's Annual Report on Form 10-K for the fiscal year ended June 30, 2012, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of such Form 10-K, and any subsequently filed reports. All documents also are available without charge through the SEC's website (www.sec.gov) or from Qualstar's website (www.qualstar.com).

Additional Information and Where To Find It

In connection with its 2013 Annual Meeting of Shareholders, Qualstar has filed a definitive proxy statement and a WHITE proxy card with the SEC on June 4, 2013, and has mailed the definitive proxy statement and WHITE proxy card to its shareholders. WE URGE INVESTORS AND SHAREHOLDERS TO READ THE DEFINITIVE PROXY STATEMENT AND WHITE PROXY CARD FOR THE 2013 ANNUAL MEETING OF SHAREHOLDERS (INCLUDING ANY SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT QUALSTAR WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Shareholders will be able to obtain, free of charge, copies of the definitive proxy statement and any other documents filed by Qualstar with the SEC in connection with the 2013 Annual Meeting at the SEC's website (www.sec.gov), at Qualstar's website (www.qualstar.com) or by writing to Mr. Lawrence D. Firestone, President and Chief Executive Officer, Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, CA 93063. In addition, copies of the definitive proxy materials may be requested from the Company's proxy solicitor, MacKenzie Partners, Inc., 105 Madison Avenue, New York, NY 10016 or toll-free at (800) 322-2885.

Certain Information Regarding Participants in the Solicitation

Qualstar, its directors, nominees for director and certain officers, employees and other persons are deemed to be participants in the solicitation of proxies from shareholders in connection with the 2013 Annual Meeting of Shareholders. Information regarding the interests of such participants is included in the definitive proxy statement and other relevant documents filed and to be filed by Qualstar with the SEC in connection with the proxy solicitation.