Baker Street Issues Open Letter to Tix Corporation Stockholders

LOS ANGELES, June 27, 2011 /PRNewswire/ -- Baker Street Capital, L.P. announced today that it has issued an open letter to all stockholders of Tix Corporation (OTCQX: TIXC).  Baker Street is the largest stockholder of Tix, with current ownership of approximately 22% of the shares outstanding.  

The full text of the letter follows:

June 27, 2011

Fellow Tix Stockholders:

IT'S TIME TO CREATE VALUE AT TIX CORPORATION

THE STATUS QUO IS NOT ACCEPTABLE

Baker Street Capital, L.P. ("Baker Street") intends to nominate a slate of highly-qualified director nominees for election to the Board of Directors of Tix Corporation ("Tix" or the "Company") at the 2011 Annual Meeting of Stockholders of the Company.  As Tix's largest stockholder, owning approximately 22% of the outstanding voting stock, we have a vested interest in ensuring that the Tix Board and management are acting responsibly as stewards of our investment.  We are dedicated to ensuring that the significant value of Tix is realized for the benefit of all stockholders.

We have taken a long-term approach with respect to our investment.  For quite some time it has been our view that Tix is substantially undervalued. Although we were initially pleased with certain actions taken by the Company and its financial performance, recent actions taken by the Tix Board have raised serious concerns on our part.  Our concerns were heightened when we learned in March 2011 that senior management may have been exploring a buyout of Tix without conducting a formal process to assure that stockholders received the highest possible value for their shares.  After we attempted to engage in discussions with the Tix Board and management regarding an alternative transaction that we believed would yield full value to the stockholders, the Company proceeded to put in place a series of stockholder-unfriendly anti-takeover devices.  

WE OFFERED TO BUY THE COMPANY AT A 56.7% PREMIUM, WHICH TIX REJECTED WITHOUT PROPOSING ALTERNATIVES TO MAXIMIZE STOCKHOLDER VALUE

On March 30, 2011, we submitted a letter to the independent directors of Tix expressing our deep concern that senior management may have been exploring an acquisition of the Company at a small premium to the then depressed value of the shares, thereby denying stockholders the opportunity to realize the full value of their investment.  We offered, subject to certain conditions, to acquire all of the shares of common stock of the Company not already owned by us for a minimum of $2.10 per share in cash.  The purchase price represented a premium of 56.7% over the Company's closing price of $1.34 as of March 30, 2011.  We subsequently met with the Tix Special Committee's financial advisors and expressed our significant financial commitment and ability to take the steps necessary to consummate the transaction.  We made it clear publicly and privately that we were willing to participate in a full and fair process to fully explore strategic alternatives that would deliver maximum value to all stockholders.

Unfortunately, we never heard back from Tix or its advisors.  On May 10, 2011, we learned from a press release issued by Tix that the Company had rejected our proposal.  The press release did not announce any strategic alternatives or value enhancing plans.  These events reinforced our concerns that the Tix Board and management appeared to prioritize their own interests over those of the stockholders.  

WE BELIEVE THE TIX BOARD HAS IMPLEMENTED ONEROUS ANTI-TAKEOVER PROVISIONS

The Tix Board's decisions over the past 90 days add to our concern that it is not acting in the best interests of stockholders.  Consider the following:

Adoption of Poison Pill - On April 1, 2011, the Company announced that it had adopted a stockholder rights plan, or "poison pill".  We believe the poison pill will force any would-be acquirers to negotiate any bids for Tix with management, instead of making their offers directly to the stockholders of the Company.  The poison pill appears to protect the incumbent directors and management at the expense of stockholders.  

Unilateral Amendment of Bylaws - On May 10, 2011, the Tix Board adopted amendments to the Company's bylaws making it more difficult for stockholders to nominate directors.  Specifically, the bylaw amendments require stockholders seeking to nominate directors to submit a notice to the Company that includes, among other things, all information regarding the nominating stockholder and its nominees that would be required to be disclosed in a proxy statement filed with the SEC under the proxy rules applicable to SEC reporting companies.  Tix is no longer an SEC reporting company.  As a result, the amount of disclosure nominating stockholders are now required to submit regarding their nominees far exceeds the amount of disclosure Tix is required to provide to stockholders regarding its incumbent directors in the election of directors.  In our opinion, the bylaw amendments impose undue burdens on stockholders who wish to challenge incumbent directors.  

WE ARE EXTREMELY CONCERNED THAT THE TIX BOARD HAS PERMITTED TRANSACTIONS INTENDED TO GIVE IT VOTING POWER OVER LARGE BLOCKS OF STOCK

In December 2010, Tix entered into what we believe are a series of unorthodox agreements with managers of a subsidiary, TIX Productions, Inc. ("TPI").  Through these transactions, large blocks of TIX common stock were acquired by Tix and then placed in the control of undisclosed persons, subject to undisclosed terms, to be voted on corporate matters.  Specifically, Tix entered into agreements (a) to purchase 2,333,333 shares of common stock from members of TPI's management in exchange for Tix's interest in TPI; and (b) to purchase approximately another 3.9 million shares of common stock from members of TPI's management in exchange for approximately $4.8 million, payable in installments over two years.  The agreements provide that the 6,266,524 shares involved (or about 20% of the outstanding shares) would be placed in escrow as collateral for Tix's ongoing payment obligations.  We are extremely concerned that Tix will assert that the Tix Board or CEO has the right to vote this significant block of shares in the election of directors at the next annual meeting of stockholders.  These shares have been booked by Tix in its own financial statements as treasury stock and should be treated as such.  Any attempt by the Tix Board or CEO to gain an unfair advantage in corporate voting matters should not be tolerated by stockholders.

WE WERE FORCED TO FILE A LAWSUIT AGAINST TIX FOR ITS FAILURE TO COMPLY WITH OUR BOOKS AND RECORDS REQUEST UNDER DELAWARE LAW

On May 16, 2011, we sent demand letters to Tix requesting a stockholders list along with related stockholder information and books and records relating to the TPI sale agreements discussed above.  We requested the stockholders list and related stockholder information in order to allow us to communicate with other stockholders in connection with the election of our slate of nominees at the next annual meeting of stockholders.  We requested the records relating to the TPI sale agreements in order to allow us to investigate what voting rights, if any, attach to the shares currently being held in escrow and whether these arrangements put in place by the Tix Board are lawful.  

Tix refused to comply with our request for the materials concerning the TPI sale transactions.  Instead we received letters from one of the Company's law firms making absurd accusations that we were going on a "fishing expedition" and that we were using Delaware law to "extract greenmail" from the Company.  To set the record straight, Baker Street has never sought to extract greenmail from Tix or any other company.  Accusing us of being greenmailers defies logic under these circumstances, especially given the fact that we have just recently made a proposal to acquire Tix for a substantial premium and have openly urged Tix to create value for all stockholders by, among other things, inviting the Company to conduct a robust, full and fair sales process.  On June 20, 2011, we filed a lawsuit in Delaware Chancery Court in order to enforce our right to receive the information.  

After withholding the stockholders list and related information requested in our demand letter for over one month, Tix hand-delivered these materials to us only hours after it was informed that we had filed the lawsuit.  Unfortunately, Tix has yet to furnish the information we requested concerning the TPI sale transactions.  What is the Tix Board trying to hide?  It is extremely unfortunate that the Tix Board is inclined to deploy stockholders' cash (and to force its largest stockholder to deploy its cash) on litigation it could have easily avoided by merely complying with our requests.  

THE TIX BOARD HAS RECENTLY PERMITTED NEW TRANSACTIONS WE BELIEVE WERE DESIGNED TO SECURE VOTING RIGHTS

Recently, the Tix Board negotiated new agreements that involve the use of corporate resources to shift votes into the hands of Tix employees, shortly after learning that we intend to nominate directors for election at the next annual meeting.  On June 17, 2011, Tix announced that certain of its employees purchased an aggregate of 1,215,367 shares from one or more stockholders for $2.00 per share (representing a 14% premium to the then current market price) payable in installments over five years.  Tix has guaranteed the employees' obligations to pay for the shares and will acquire the shares if they default.  Tix has also agreed to loan to the employees the funds necessary to make each installment payment.  The shares appear to be held in escrow until the payment of the final installment of the purchase price to the sellers although the employees have the ability to vote all the escrowed shares.  

Tix has publicly stated that these transactions serve several important benefits, including strengthening employee relations.  Stockholders should not be fooled - we believe these transactions were designed to place another large block of voting securities in the hands of employees over which the Tix Board may exert significant influence.  These arrangements are also fraught with corporate governance issues:

• Have the Tix employees involved in these purchases breached their fiduciary duties by usurping what should have been a corporate opportunity?  
• Has the Tix Board breached its fiduciary duties by misappropriating stockholders' cash to finance these purchases solely for the purpose of placing a significant block of voting securities in "friendly hands"?
• Why did the Tix Board favor the undisclosed selling stockholders over all other stockholders by providing financing to employees to buy stock from the sellers at a 14% premium to the then current market price?  

If Tix were still an SEC reporting company and the purchasers were executive officers of the Company, we believe the Company's loans to these officers in connection with the purchases would be illegal under the Sarbanes-Oxley Act.  

We have submitted to Tix a new demand letter under Delaware law requesting all books and records relating to these agreements.  

IT IS TIME FOR FRESH PERSPECTIVES IN THE TIX BOARDROOM

REPLACE THE INCUMBENT DIRECTORS WITH INDIVIDUALS WHO WILL FOCUS ON MAXIMIZING VALUE

We are challenging the incumbent directors at Tix's next annual meeting of stockholders because we have concluded that a reconstituted board is necessary.  We are concerned that the Tix Board has lost its way, as evidenced by the anti-takeover provisions, escrow agreements and recent transactions that, in our opinion, were put in place to silence stockholders.  In our view, the Tix Board must be comprised of directors whose interests are aligned with those of all stockholders in order to steer Tix back on the path of creating value for all stockholders.  If our director nominees are elected, their focus will be to maximize stockholder value by immediately taking the following actions:

• reducing any significant operating costs and expenses deemed to be unnecessary, including the closure of Tix's California headquarters and consolidation of all activities in the Las Vegas offices.
• aggressively pursuing incremental revenue opportunities by better monetizing Tix's significant customer traffic and transaction volumes in Las Vegas.
• exploring all strategic alternatives available to Tix, including a full and fair process to sell the Company or other means to return capital to stockholders.  

If you share our dissatisfaction with the Tix Board, please disregard any phone calls, proxy cards or other solicitation materials you may have already received from Tix. We will continue to update you on developments relating to the upcoming election contest and invite you to contact us with any questions you may have.  

Sincerely,

Vadim Perelman

ABOUT BAKER STREET CAPITAL, L.P.

Baker Street Capital, L.P. is a value-focused investment fund modeled after the partnerships managed by Warren Buffett from 1956 to 1969.  Baker Street Capital, L.P. is headquartered in Los Angeles, California.

CONTACT:

Vadim Perelman, 310-246-0345, [email protected]

SOURCE Baker Street Capital, L.P.

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