DIRTT Environmental Solutions Inc. (“DIRTT” or the “Company”)
(Nasdaq: DRTT, TSX: DRT), a global leader in industrialized
construction that empowers organizations together with construction
and design leaders to build high-performing, adaptable, interior
environments, today announced it has mailed its definitive proxy
statement and a related letter to shareholders ahead of its annual
and special meeting of shareholders to be held on Tuesday, April
26, 2022 at 10:00 a.m. (MDT) (the “Meeting”).
The letter details the transformational change achieved under
the leadership of the Company’s refreshed and deeply committed
board of directors (the “Board”). It also informs shareholders
about the unnecessary risk associated with a wholesale change of
the Board as proposed by 22NW Fund, LP (“22NW”), along with their
hazardous agenda to overtake the Company with no articulated plan.
Nearly five months after waging a distracting and expensive proxy
fight, 22NW has only recently publicly disclosed its plan – which
is just a plan to create a plan.
Shareholders can read the full letter today at
www.DIRTTmomentum.com and are encouraged to vote only the BLUE
proxy FOR DIRTT’s qualified and experienced nominees: Todd W.
Lillibridge, Michael T. Ford, Charlie Chiappone, Denise E.
Karkkainen, Shauna R. King, James (Jim) A. Lynch and Diana R.
Rhoten.
Highlights from DIRTT’s Letter to
Shareholders
- Change is well underway and there is meaningful momentum. For
more than eight months, the Board had been working with management
to proactively respond to cash-flow concerns and excess capacity,
and redirecting sales efforts based on a review of results and
changing market.
- DIRTT is now becoming more focused, more strategic and more
responsive to the changing market. In the last two months, the
Board has replaced the CEO with an interim CEO, reduced operating
expenses by 14%, revised the pricing strategy, reconfigured and
rationalized DIRTT’s manufacturing footprint, completed an 18%
reduction in salaried workforce, and strengthened relationships
with partners.
- The Board is also sharpening the sales focus on high-margin
products, continuing its ongoing expansion of strategic account
initiatives, and streamlining how the Company goes to market and
rebranding and repositioning DIRTT.
- Ensuring the success of DIRTT and your investment requires a
Board specifically constructed to seize opportunities. DIRTT’s
Board has been strategically assembled to keep the momentum going.
Each Board member is an industry-leader, and as a whole, they
create a team with complementary, multi-disciplinary expertise and
world-class capabilities. DIRTT has the right people at all levels
who understand the business and vision for the Company, and are
committed to its success.
- Supporting a wholesale change of DIRTT’s methodically and
strategically refreshed Board can fracture the Company, reversing
the progress made to date.
22NW Attempts to Overtake the Entire Board with Slate of
Directors and No Articulated Plan
- 22NW is proposing to replace the entire Board without an
articulated plan. In fact, 22NW has impeded the Company’s progress
by pushing for a ‘stay-the-course’ strategy, which is completely
misaligned with DIRTT’s Board and other major shareholders. Unlike
typical proxy contests, this is one where the Board is seeking
change and the activist has not articulated a plan.
- 22NW’s nearly all-male slate has an insufficient understanding
of DIRTT’s business and what it takes to lead a public company. To
put the Company solely into the hands of largely untested directors
at this critical time in DIRTT’s journey – or at any time – would
be irresponsible and, based on the Board’s engagement with
shareholders, is not desired.
- 22NW launched its proxy fight at the expense of DIRTT’s
shareholders. 22NW and its founder, Aron English, have already
disclosed they will be claiming costs to reimburse themselves for
their proxy fight.
DIRTT’s Continued Openness and Commitment to Shareholder
Engagement and Value Creation; Expanding Board Size to Eight in
Response to Shareholder Feedback
DIRTT welcomes constructive shareholder engagement and remains
committed to working with all shareholders, including 22NW, to
increase the Company’s value.
Consistent with this commitment, the Company had several
meetings with Mr. English regarding his Board candidacy prior to
his unfortunate launch of his proxy fight. In fact, on November 5
and 12, 2021, the Board informed Mr. English that, consistent to
its approach with all shareholders interested in Board service, his
candidacy would be considered in February 2022 as part of its
normal course of review and director selection process; however,
Mr. English was not prepared to participate in the Board’s regular
and ongoing refreshment process and demanded a Board seat
immediately with no conditions. Following the requisition, the
Board again offered to speak with 22NW, reaching out on December
10, 2021, January 4, 2022, and January 7, 2022, including dates and
times to meet. 22NW refused each offer.
Board representatives have also had calls or meetings with a
significant number of shareholders – including those 22NW claimed
to have support from. As noted in DIRTT’s January 14, 2022 press
release, the Board questions the 50.4% support 22NW claims as the
documents indicating such support were non-binding and some of them
raised other questions as to their true meaning. Based on these
conversations between shareholders and Board representatives, and
as shareholders have learned more about the background of this
unnecessary proxy fight, the Board does not believe that a majority
of its shareholders will support a wholesale change of the
Board.
However, based on the feedback received from large shareholders,
including some Mr. English previously represented as supportive of
the 22NW slate, and a desire to efficiently resolve this proxy
fight in the interests of all shareholders, the Board is prepared
to consider increasing its size to eight members and to include Mr.
English and one other nominee from 22NW. This compromise would
balance shareholder feedback for further Board refreshment while
avoiding the risks associated with electing a wholly untested and
unproven Board with no articulated agenda.
The Board has repeatedly tried to work with 22NW privately, to
no avail, leaving us no choice but to announce this proposed
compromise publicly. It is clear the only way for shareholders to
achieve their preference of a Board that balances shareholder
representation with the need for historical continuity at a pivotal
time in the Company’s history is to vote FOR the directors on the
BLUE proxy.
DIRTT thanks shareholders for their support and desire for a
responsible, practical approach to Board refreshment. As repeatedly
stated over the last few months, the Board remains open to engaging
with 22NW, considering qualified nominees, and achieving a mutually
agreeable resolution to the benefit of all shareholders.
The Choice is Clear: Vote BLUE FOR DIRTT’s
Board
Change is well under way. Don’t stop DIRTT’s momentum. The best
way to keep the momentum and to end this proxy fight is to vote the
BLUE proxy FOR DIRTT’s Board. Please vote well in advance of the
proxy voting deadline of Friday, April 22, 2022, at 10:00 a.m.
(MDT).
If you have mistakenly voted on 22NW’s proxy and would like to
change your vote, you may do so by voting on the BLUE proxy. This
will revoke and replace the previous vote.
If you have questions or need help voting, contact Kingsdale
Advisors at 1-866-851-2743 or at
contactus@kingsdaleadvisors.com.
About DIRTT Environmental Solutions
DIRTT is a global leader in industrialized construction. Its
system of physical products and digital tools empowers
organizations, together with construction and design leaders, to
build high-performing, adaptable, interior environments. Operating
in the commercial, healthcare, education and public sector markets,
DIRTT’s system provides total design freedom, and greater certainty
in cost, schedule and outcomes.
Headquartered in the US and Canada, DIRTT trades on Nasdaq under
the symbol “DRTT” and on the Toronto Stock Exchange under the
symbol “DRT”.
AdvisorsDIRTT has retained McMillan LLP as its
legal advisor and Kingsdale Advisors as its strategic shareholder
and communications advisor.
Important Additional Information Regarding Proxy
Solicitation
DIRTT has filed a definitive proxy statement (the “Definitive
Proxy Statement”) with the Securities and Exchange Commission (the
“SEC”) in connection with the solicitation of proxies for the
Meeting. DIRTT, its directors and certain of its executive officers
are participants in the solicitation of proxies from shareholders
in respect of the Meeting. Information regarding the names of
DIRTT’s directors and executive officers and their respective
interests in DIRTT by security holdings or otherwise is set forth
in DIRTT’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, as filed with the SEC on February 25, 2022, and
the Definitive Proxy Statement, as filed with the SEC on March 24,
2022. To the extent holdings of such participants in DIRTT’s
securities are not reported, or have changed since the amounts
described, in the Definitive Proxy Statement, such changes have
been reflected on Statements of Change in Ownership on Form 4 filed
with the SEC. Details concerning the nominees of DIRTT’s Board for
election at the Meeting are included in the Definitive Proxy
Statement and accompanying BLUE proxy card. BEFORE MAKING ANY
VOTING DECISION, INVESTORS AND SHAREHOLDERS OF THE COMPANY ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR FURNISHED TO THE
SEC, INCLUDING THE COMPANY’S DEFINITIVE PROXY STATEMENT,
ACCOMPANYING BLUE PROXY CARD AND ANY SUPPLEMENTS THERETO BECAUSE
THEY CONTAIN IMPORTANT INFORMATION. Investors and shareholders can
obtain a copy of the Definitive Proxy Statement and other relevant
documents filed by DIRTT free of charge from the SEC’s website,
www.sec.gov. DIRTT’s shareholders can also obtain, without charge,
a copy of the Definitive Proxy Statement and other relevant filed
documents by directing a request by mail to DIRTT Environmental
Solutions Ltd., 7303 30th Street S.E., Calgary, Alberta, Canada T2C
1N6 or at ir@dirtt.com or from the investor relations section of
DIRTT’s website, ww.dirtt.com/investors.
Special Note Regarding Forward-Looking
Statements
This news release contains forward-looking information within
the meaning of applicable securities legislation, which reflects
the Company’s current expectations regarding future events. In some
cases, forward-looking information can be identified by such terms
as “plans”, “anticipated”, “believe”, and “will”. Forward-looking
information is based on a number of assumptions and is subject to a
number of risks and uncertainties, many of which are beyond the
Company’s control that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking information. The Company’s estimates, beliefs
and assumptions, may prove to be incorrect. The risks and
uncertainties that may affect forward-looking information include,
but are not limited to, market conditions, the effect of
the COVID-19 pandemic on the Company’s operations,
business and financial results, and other factors discussed under
“Risks Factors” in the Company’s management’s discussion and
analysis in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2021, filed with the SEC and
applicable securities commissions or similar regulatory authorities
in Canada on February 23, 2022, which is available on SEDAR
(www.sedar.com) and on the SEC’s website (www.sec.gov). The Company
does not undertake any obligation to update such forward-looking
information, whether as a result of new information, future events
or otherwise, except as expressly required by applicable law. This
forward-looking information speaks only as of the date of this news
release.
For more information, contact
Media:
Hyunjoo Kim,
Vice President of Strategic Communications and Marketing
416-867-2357
hkim@kingsdaleadvisors.com
Investors:
Kim MacEachern
Investor Relations, DIRTT
403-618-4539
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