GrafTech International Ltd.'s GTI (“GrafTech”) Chief Executive Officer
and President, Joel Hawthorne, today sent a letter to Nathan Milikowsky to set
the record straight in response to the incomplete and misleading statements
made by the Milikowsky Group in its letter dated April 13, 2014.
The full text of Mr. Hawthorne's letter is included here:
Nathan Milikowsky
822 Boylston Street, Suite 106
Chestnut Hill, MA 02467
Nathan:
It is unfortunate that you are mischaracterizing our settlement proposal in
order to distract GrafTech stockholders from the key issues. Most importantly,
your proposed strategy for the Company is flawed and is not in the best
interest of all stockholders. In contrast, we are confident that we have the
right Board and management team with the right strategy to deliver value to
all GrafTech stockholders.
The GrafTech Board continues to demonstrate its commitment to working with the
Daniel and Nathan Milikowsky Group to reach a reasonable agreement and avoid a
proxy contest. That commitment was reaffirmed through GrafTech's third
settlement proposal, which I presented to you on April 9, 2014.
With respect to the counter-proposal you presented on April 11, 2014, the
GrafTech Board found one key aspect of it – namely that you immediately be
reinstated to the Board prior to a review of your qualifications and
eligibility to serve – to be unacceptable due to your prior governance
breaches and conduct that demonstrated you were not a qualified candidate.
Later that same day, we made a very reasonable counter-proposal on
substantially the same terms as those in your proposal, which addressed that
one key aspect in a method we believe is fair. Attached is a side-by-side
comparison of our proposals.
I want to make very clear that, as I've indicated to you in our conversations,
the GrafTech Board stands behind its prior investigation, process and
findings. The Board's initial investigation was thorough and thoughtful and
conducted with the assistance of well-recognized, highly experienced,
independent investigatory counsel, Morris, Nichols, Arsht & Tunnell LLP, which
reported to a Special Committee of the Board comprised entirely of independent
directors.
Counter to the rationale outlined in your letter, our Board remains resolute
in its position that you are not qualified. Accordingly, we could not accept
your proposal as presented. We are, however, open to allowing you the chance
to answer the questions that stockholders are asking me - did Nathan
Milikowsky really breach his fiduciary responsibilities as a board member? As
a result, we are willing to undertake another review – engaging another
independent law firm that is deemed to be acceptable to both parties, as you
proposed – for one reason only; to attempt to reach a mutually agreeable
resolution.
As communicated, the review that you proposed is limited in scope and not
designed to comprehensively address the reasons why you were not re-nominated
to the Board. Although there is no need for a review, we are willing to accept
a review to help resolve our differences; however under the circumstances,
what you proposed was insufficient for a governance matter of this import.
While we are willing to engage in another investigation, you should be aware
that we firmly believe any subsequent review will validate the previous
findings and conclusions of our Board. As you might suspect, we would require
your full cooperation, as you did not fully cooperate in the last
investigation and, as uncovered by the investigator and disclosed in our
proxy, you intentionally withheld information from the Board.
For the reasons mention above, we could not immediately appoint you to the
GrafTech Board. However, we proposed a proceeding under which you would answer
all of the questions raised in connection with the prior independent
investigation. In our proposal, you and the Company would jointly commence an
expedited proceeding, either through a court or arbitration process, with full
investigatory power.
These proceedings would review your qualifications to serve as a director
under the Company's corporate governance guidelines, code of conduct and
nominating committee charter, the breach of your fiduciary duties and the
breach of the Stockholders Agreement found in the prior investigation.
Assuming full cooperation of all parties, if that proceeding concludes that
you met those qualifications and did not breach your fiduciary duties, and the
Milikowskys did not breach the Stockholders Agreement, then you would promptly
be invited to join the Board. In our estimation, this process could be
accomplished in three to six months.
The April 11, 2014 GrafTech proposal would have resulted in four of nine
directors being newly appointed at the 2014 Annual Meeting. Further evidence
of our openness is the option of either you or a mutually agreed upon director
joining the Board as a tenth director – and fifth new director – following
completion of the review process described above. In addition, two
long-serving GrafTech Directors would retire from the Board at the 2014 Annual
Meeting. The fact that GrafTech is willing to give you a level of
representation on the Board more than double your ownership speaks volumes
about our commitment to resolving this matter.
You open your letter to me with a reference to questions that you believe have
recently been answered. I believe there are more significant questions to
which GrafTech stockholders deserve answers:
* Why, unlike every other member of the Board and management team, did you
refuse to fully cooperate with the Board's initial independent
investigation, especially when you yourself approved the special committee
for the investigation?
* Why, unlike every other current member of the Board and management team,
did you refuse to sign the legal hold?
* Why did you not disclose conflicts of interest you had with another Board
member?
* Why did you misrepresent your interactions with third parties, in clear
violation of the Stockholders Agreement, to the Board?
* Why did you present an agenda to take operational control of GrafTech,
which was in clear breach of the Stockholders Agreement and your fiduciary
responsibilities under Delaware law, to members of the Board?
* What, if you truly believe the prior investigation reached the wrong
conclusion, do you have to lose by cooperating? Why wouldn't you take
advantage of this opportunity?
Unfortunately, you continue to reject GrafTech's good-faith efforts to resolve
this proxy contest and instead persist in your campaign for control of
GrafTech without paying stockholders a premium.
GrafTech has a strong track record of success and the right board oversight
and management team to deliver long-term growth and drive stockholder value
creation. The Board and management team are focused on creating value for all
GrafTech stockholders through continued implementation of our strategy of
improving operating efficiencies, enhancing global competitiveness and driving
increased profitability and cash flows in 2014 and beyond.
Your personal quest to reinstate yourself to GrafTech's Board in spite of your
clear breaches of good corporate governance and ethics is at the heart of the
issue. We believe we have made a number of good faith efforts to resolve this
matter. While we do not believe it is in our stockholders' interest to have a
proxy contest at our Annual Meeting, your continued inflexibility prevents us
from finding a resolution.
GrafTech does not believe your strategy will drive value for all stockholders
and, more importantly, GrafTech's Board and management will not compromise on
good corporate governance and ethics, plain and simple. It is unfortunate that
you continue to mischaracterize our settlement offers and refuse to
acknowledge the key issues.
Best regards,
Joel L. Hawthorne
GRAFTECH INTERNATIONAL LTD.
SETTLEMENT PROPOSAL
April 11, 2014
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