Chap-Cap Activist Partners joins Third Point in blasting Glenayre's CEO James Caparro

By Lisa Kerner

Charlotte, N.C., May 7 - Glenayre Technologies, Inc. investor Robert L. Chapman Jr. took aim at company president and chief executive officer James M. Caparro, whose "greed has tested our collective patience too long, and too far;" in an e-mail included as part of a schedule 13D filing with the Securities and Exchange Commission.

"I must opine that you have Guinness Book of World Records-qualified genitalia of steel to attempt, after watching Glenayre's stock tumble from nearly $6/share to under $2/share during your CEO tenure, to exchange these 'free' and potentially worthless EDC (Entertainment Distribution Co. LLC) equity options (profits interests) for actual common shares in Glenayre - the same shares that Chapman Capital and other owners have purchased with their investors' own, hard-earned money," Chapman wrote.

Chapman beneficially owns 6,883,446 shares, or 9.9%, of the company's stock while his company, Chap-Cap Activist Partners Master Fund, Ltd. reports a 5.9% stake in the company with ownership of 4,068,706 shares.

It's not the first time Chapman has blasted Caparro, having referred to the CEO as a "washed-up entertainment industry executive" in a December 2006 SEC filing, "who was hoisted (by fellow Glenayre 'siphoner' and chairman, Mr. Clarke Bailey) from recent un/self-employment into a public-company position that paid you nearly $2 million annual compensation, plus 'EDC profit interests,' in exchange for your supervisory oversight."

Chapman cited Caparro's refusal to buy company stock over the past two years, after "Glenayre's owners have beseeched you to use your own personal retained earnings (from decades of 'success' in the entertainment industry) to purchase, on the open market, the same Glenayre common shares that have been purchased by your nearly $2 million/year compensating benefactors, Glenayre's true owners," the e-mail stated.

The investor is also upset about the use of Caparro's EDC equity options. "It is with the utmost seriousness that I caution you and 'your' board against further 'evaluating whether to exchange the EDC profits interests for equity of the company' ... 'in order to align the equity compensation received by all executive officers."

Chapman said that "under no circumstances should you expect to avoid litigation by Glenayre's owners should you exchange your EDC Equity Options for actual Glenayre common stock. Do not force Glenayre's owners to squander their own and Glenayre's cash resources on prosecuting and defending respective lawyers to rake you over smoldering, white-hot legal coals (figuratively) in response to any further attempt by owners of EDC Equity Options to misappropriate the equity, cash and other assets of the company owned by holders of Glenayre common shares (that excludes you, of course)."

Last week's schedule 13D filing by Third Point LLC served as the company's "first official warning" that Caparro's siphoning off of value from Glenayre "had forced yet another large owner to defend its investment via activist, corporate warfare."

Third Point's Daniel S. Loeb cited concerns about Glenayre that included management and board compensation. In addition, the investor wants the board to put the company up for sale and will explore all legal and other options should the company's board and management "attempt a different, value-destructive course," a schedule 13D filing stated.

Third Point beneficially owns 4,415,000 shares, or 6.3%, of the New York-based pre-recorded multi-media products company's outstanding stock. Between March 7 and May 2, the investor purchased 2,143,300 shares priced from $1.94 per share to $2.46 per share.

"If by now you have not realized that the days of your being paid an annual compensation exceeding $1.8 million (based on the board's awarding you a 100% bonus for 2006 performance) for the service of driving Glenayre's owners' collective investment into the ground, it's high time for a reality check," Chapman concluded.

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