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Icahn, Antioco Tout Securities Adviser's Support

3 May, 2005 By: Erik Gruenwedel

One week prior to Blockbuster shareholders' pivotal board of directors vote, rebel investor Carl Icahn and Blockbuster management, led by chairman and CEO John Antioco, each proclaimed moral victory following an endorsement of sorts from an influential securities advisory company.

Institutional Shareholder Services (ISS), which advises shareholders on proxy and regulatory issues, today reportedly recommended Blockbuster shareholders vote in two of Icahn's three board candidates: Strauss Zelnick and Edward Bleier.

The company, however, did not endorse the third candidate, Icahn himself, and instead recommended Antioco be re-elected to the board. ISS claimed Blockbuster's largest individual shareholder would be a disruptive presence on the board and that “[Icahn] is simply using the proxy fight to promote his own personal agenda.”

While expressing disappointment at ISS' lack of support for the re-election of current board members Peter Bassi and Linda Griego, Antioco hailed the news as confirmation of Big Blue's overall business strategy.

“I'm pleased ISS has recommended that shareholders withhold their vote from Mr. Icahn and believes that my removal from the board is not warranted,” said Antioco, in a statement. “I intend to continue acting aggressively to do everything necessary to change our business model and better position Blockbuster for the future.”

Antioco, who has stated he would leave the company should he not be re-elected chairman of the board, said he was unsure of his actions should he and one or two of Icahn's nominees be elected to the six-member board.

Antioco said his decision would depend on “several factors.”

Icahn, in a letter to shareholders, reiterated his desire to work with Antioco to “enhance shareholder value,” and denied that his election to the board posed any sort of disruptive force.

If elected, Icahn said he would bring “financial acumen … unmatched by any of management's nominees.”Icahn has been highly critical of what he called Antioco's “blackmail” attempt to coerce shareholder votes by invoking his right to resign and invoke a $54 million severance package.

Blockbuster responded that it would “cure any default in Mr. Antioco's employment.”

Icahn said he intended to cooperate with Blockbuster's management, but remained concerned that current initiatives — notably the discontinue of late fees — “continue to be inadequate,” and that if earnings and cash flow continue to fall, “management should be held accountable.”

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