GrafTech Has Made Four Separate Settlement
Offers to the Milikowsky Group in the Best Interests of ALL
GrafTech Stockholders
GrafTech Board Stands Behind Prior
Investigation, Process and Findings
GrafTech International Ltd.’s (NYSE: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 Milikowsky822 Boylston Street, Suite 106Chestnut 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
PROPOSALApril 11, 2014
The Board of Directors (the “Board”) of GrafTech International
Ltd. (the “Company”) is open to a resolution of the pending proxy
contest that is in the best interests of all stockholders and seeks
to be as responsive as possible to the demands of the Daniel and
Nathan Milikowsky Group, consistent with its fiduciary duties to
all stockholders and taking into account views expressed by other
stockholders. The Board believes that the proposal below addresses
comprehensively all legitimate interests.
Save GrafTech Proposal
GrafTech Proposal Board
Save GrafTech proposes the following slate
(the “Slate”) for a newly constituted board of directors of
GrafTech International Ltd. (the “Company”) consisting of the
following directors:
• Three Save GrafTech Directors: Karen
Finerman, David Jardini and Nathan Milikowsky (“Save GrafTech
Directors”).
• One director mutually acceptable to the
board of directors of the Company and Save GrafTech (the “Jointly
Selected Director”).
• Two directors newly proposed by the
Company: Tom Danjczek and Catherine Morris.
• Four incumbent directors: Randy Carson,
Joel Hawthorne, Ferrell McClean and Steven Shawley.
• The newly constituted Board will
promptly retain an independent law firm acceptable to the Board and
Nathan Milikowsky. That law firm will not reinvestigate any of the
issues previously raised regarding Mr. Milikowsky. That law firm
will report to the Board, based on its review of the prior
investigations, whether those investigations cause it to conclude,
without qualification, that Nathan Milikowsky in fact did not meet,
in material respects, the then standards for membership on the
Board of Directors of GrafTech. If that law firm concludes
negatively with respect to Mr. Milikowsky, he will promptly offer
to resign from the Board. If the law firm does not conclude
negatively with respect to Mr. Milikowsky, he will be entitled to
remain a director of GrafTech.
Each of Craig Shular, Harold Layman and
Mary Cranston will resign effective immediately.
GrafTech proposes the following slate (the
“Slate”) for a newly constituted board of directors of GrafTech
International Ltd. (the “Company”) consisting of the following
directors:
- Two Save GrafTech Directors: Karen Finerman and David Jardini
(“Save GrafTech Directors”).
- If Nathan Milikowsky is not added to the board after the
Proceeding (defined below), one director mutually acceptable to the
board of directors of the Company and Save GrafTech.
- Two directors newly proposed by the Company: Tom Danjczek and
Catherine Morris.
- Five incumbent directors: Randy Carson, Mary Cranston, Joel
Hawthorne, Ferrell McClean, and Steven Shawley.
- Assuming each party provides adequate assurance that there has
been no destruction of documents or other spoliation of evidence
for any relevant period, the Company and Daniel and Nathan
Milikowsky will jointly promptly commence an expedited declaratory
or other appropriate action in Delaware chancery court (or, if full
subpoena power can be obtained therein, an arbitration under AAA
rules where the arbitrator is a mutually acceptable independent law
firm (whichever is selected, the “Proceeding”)), as to Nathan
Milikowsky’s qualifications to serve as a director and breach of
his fiduciary duties and as to the Milikowskys’ breach of the
Stockholders Agreement. In the Proceeding, each party shall have
full subpoena power to compel production of documents and testimony
(including electronic documents, hard drives, phone records,
recordings, notes, and other storage media), from third parties as
well as the Company and the Milikowskys, and each party shall fully
cooperate, including (subject to confidentiality as to disclosure
to third parties) waiver of any privilege. If the Proceeding
concludes that Nathan Milikowsky met those qualifications and did
not breach his fiduciary duties and the Milikowskys did not breach
the Stockholders Agreement, he will promptly be invited to join the
Board.
- Each of Craig Shular and Harold Layman will retire from the
Board at the 2014 Annual Meeting.
Standstill
Nathan Milikowsky will agree to support
election of the Slate at the 2014 Annual Meeting. Mr. Milikowsky
will support the Board nominated slate at the 2015 annual meeting
of shareholders if, sufficiently prior to January 1, 2015, taking
into account any changes to the director nomination time period,
Mr. Milikowsky is(1) nominated for election to the board of
directors at the 2015 Annual Meeting and(2) Mr. Milikowsky accepts
such nomination.
The Daniel and Nathan Milikowsky Group will agree to
support election of the Slate at the 2014 Annual Meeting.
Chairman The newly constituted board of directors will
select the chairman of the board of directors. The
newly constituted board of directors will select the chairman of
the board of directors.
Committees The board of directors
will agree that it will not use committees or any other device to
circumvent the decision making of the board of directors.
The Nominating and Governance committee
will have three members: (1) David Jardini, (2) a new director
elected in 2014 who is either a Jointly Selected Director or a Save
GrafTech Director and (3) another person selected by the newly
constituted board of directors.
At least one Save GrafTech nominee will
serve on all other committees.
The board of directors will agree that it will not
use committees or any other device to circumvent the decision
making of the board of directors and Save GrafTech will not seek to
control of any committee.
The Nominating and Governance committee
will have at least three members: (1) David Jardini and (2) other
persons selected by the newly constituted board of directors.
The Organization, Compensation, and
Pension Committee will have at least three members: (1) Karen
Finerman and (2) other persons selected by the newly constituted
board of directors.
The above committee assignments would be
subject to applicable SEC and NYSE qualification requirements.
Indemnification Nathan Milikowsky will be indemnified for
his past and future expenses to the extent he is entitled pursuant
to Delaware law and the Company’s organizational documents.
Nathan Milikowsky will be indemnified for his past and
future expenses to which he is entitled pursuant to Delaware law,
the Company’s organizational documents and the previously executed
agreement between GrafTech and Nathan Milikowsky.
Stockholders’
Agreement The parties will terminate all rights and provide a
mutual release of all causes of action under Sections 2 and 4 of
the Registration Rights and Stockholders’ Agreement.
The parties will terminate all rights and provide a mutual release
of all causes of action under Sections 2 and 4 of the Registration
Rights and Stockholders’ Agreement.
Expenses The Company
will pay one-half of the documented and out of pocket expenses of
Save GrafTech. The Company will pay up to $250,000 of
the documented, out of pocket third party expenses of Save GrafTech
in connection with the launching of its proxy campaign.
Non-Binding This term sheet is non-binding and for
discussion purposes only. Neither this term sheet, nor the
discussions, negotiations or other activities related to the
subject matter hereof create any obligations, liabilities or duties
with respect to any party. This term sheet is
non-binding and for discussion purposes only. Neither this term
sheet, nor the discussions, negotiations or other activities
related to the subject matter hereof create any obligations,
liabilities or duties with respect to any party.
GrafTech International is a global company that has been
redefining limits for more than 125 years. We offer innovative
graphite material solutions for our customers in a wide range of
industries and end markets, including steel manufacturing, advanced
energy applications and latest generation electronics. GrafTech
operates 20 principal manufacturing facilities on four continents
and sells products in over 70 countries. Headquartered in Parma,
Ohio, GrafTech employs approximately 3,000 people. For more
information, call 216-676-2000 or visit www.GrafTech.com.
NOTE ON FORWARD-LOOKING STATEMENTS: This release contains
forward-looking statements (within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934) about certain nominations for election of
directors, future or targeted operational and financial
performance; growth prospects and rates, the markets we serve,
strategic plans and our position in our industry. Our expectations
are not predictions of actual performance and historically our
performance has deviated, often significantly, from our
expectations. Actual future events, circumstances, performance and
trends could differ materially, positively or negatively, from
those set forth in these statements due to various factors,
including: unforeseen delays, costs or liabilities associated with
our initiatives as well as our growth and other plans, changes in
market prices of our securities, changes in business and economic
conditions and growth trends in the industry, changes in customer
markets and various geographic regions, uncertainties in the
geopolitical environment, and other risks and uncertainties,
including those detailed in our SEC filings, as well as future
decisions by us. Forward-looking statements speak only as of the
date they are made, and we undertake no obligation to publicly
update or revise any of them in light of new information, future
events or otherwise. This release does not constitute an offer or
solicitation as to any securities.
IMPORTANT ADDITIONAL INFORMATION: GrafTech and its
directors and executive officers may be deemed to be participants
in the solicitation of proxies in respect of the 2014 Annual
Meeting. GrafTech has filed a preliminary proxy statement with the
U.S. Securities and Exchange Commission (the “SEC”) in connection
with the solicitation of proxies from GrafTech stockholders for the
2014 Annual Meeting. When completed, a definitive proxy statement
and a form of proxy will be mailed to GrafTech stockholders.
STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE PRELIMINARY PROXY
STATEMENT, THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING WHITE
PROXY CARD WITH RESPECT TO THE 2014 ANNUAL MEETING AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION.
Detailed information regarding the identity of potential
participants, and their direct or indirect interests, by security
holdings or otherwise, is set forth in the proxy statement and
other materials to be filed with the SEC in connection with
GrafTech’s Annual Meeting. Information regarding the direct and
indirect beneficial ownership of GrafTech’s directors and executive
officers in GrafTech securities is set forth in the proxy statement
and other materials to be filed with the SEC in connection with
GrafTech’s 2014 Annual Meeting. Stockholders will be able to obtain
free copies of the proxy statement, any amendments or supplements
to the proxy statement and other documents filed with the SEC by
GrafTech through the web site maintained by the SEC
at www.sec.gov and on GrafTech’s web site at
http://ir.graftech.com/.
GrafTech InternationalQuinn Coburn, 216-676-2000Vice President,
FinanceorJoele Frank, Wilkinson Brimmer KatcherJamie Moser / Jed
Repko, 212-355-4449