DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”)
(NASDAQ: DRTT, TSX: DRT) today announced that 22NW Fund, LP’s
(“22NW”) attempt to take over its board of directors (the “Board”)
is opposed by the leading independent proxy advisor Institutional
Shareholder Services Inc. (“ISS”), which has recommended AGAINST a
full Board change.
22NW Has No Articulated Plan and No Case for a Full
Board Change
In its report, ISS stated that 22NW “has not presented a clear
go-forward plan,” that it was “vague on details,” and “has not met
the threshold” for a full Board change.
ISS also stated 22NW’s slate lacked “racial diversity and there
would only be one female on the board,” highlighting 22NW’s poor
focus on corporate governance. 22NW’s pledge of 30% female
representation on the Board by 2023 would also potentially require
one of its nominees to step down after only one year, which
suggests further changes and instability. Furthermore, 22NW has not
identified a new management team, which ISS called “ironic” given
22NW accused the Board of a lack of proper succession planning.
ISS Recognizes DIRTT’s Refreshed Board and Relevant
Industry Experience
DIRTT recognizes the value of strategic and deliberate Board
refreshment, balanced with historical continuity given the unique
nature of DIRTT’s business. This process is supported by robust
analysis of the functional, experiential and personal attributes
required to add value in the context of DIRTT’s strategic
priorities.
DIRTT is pleased that its efforts were recognized by ISS, who
stated in its report that “The board's refreshment over the last
few years is apparent, with four directors with one year of tenure
and a new nominee at this meeting…” In contrast to 22NW’s slate,
which lacks diversity, ISS noted that DIRTT’s Board is “fairly
diverse, with three female directors of seven total, each board
committee is chaired by a woman, and there is racial diversity on
the board.”
Also, the Board’s directors are highly qualified with relevant
industry expertise. ISS highlighted in its report that “Incumbent
directors [Todd] Lillibridge, [Jim] Lynch, and [Michael T.] Ford
have relevant experience at important industry verticals and
potential partners for the company, and [Diana] Rhoten has relevant
design experience.”
The Board is also pleased that ISS recognized its call for
operational change within the business. These changes have been
well underway and has gathered meaningful momentum under the
guidance of the Board, and more specifically, under the leadership
of interim CEO Todd Lillibridge.
Since his appointment as interim CEO on January 18, 2022, Mr.
Lillibridge, together with the rest of the Board, has:
- Reduced operating expenses by 14%;
- Revised the pricing strategy;
- Reconfigured and rationalized the manufacturing footprint;
- Sharpened the sales focus on high margin products;
- Strengthened relationships with partners;
- Streamlined how DIRTT goes to market; and
- Rebranded and repositioned the Company.
A wholesale change of the Board could reverse this progress and
create significant risk. Mr. Lillibridge is key to DIRTT’s success
during this critical time and ISS stated, “the company could
benefit from continuity at the executive level until the next CEO
is hired.”
ISS Agrees with Additional Directors as Recommended by
DIRTT
The Board previously announced that based on feedback received
and as part of its commitment to shareholder engagement and
openness to resolving this proxy fight for the benefit of all, it
was prepared to expand its size to eight members and to include Mr.
Aron English and another 22NW nominee. ISS agreed with having
additional directors as first proposed by DIRTT, and following
their recommendation, the Board is now prepared to include Mr.
English as well as Mr. Kenneth Sanders and Ms. Mary Garden.
In order for shareholders to have a further refreshed Board that
(i) can provide both continuity and fresh perspectives, (ii)
includes the Company’s largest shareholder, and (iii) fully aligns
with ISS’ recommendation, they must only vote on the BLUE proxy FOR
DIRTT’s nominees. As ISS stated in their report, voting on 22NW’s
proxy would prevent shareholders “from electing the most
appropriate management nominees to serve on the reconstituted
board.”
ISS Also Rejects 22NW’s Other Arguments and Recommends
Voting in Favour of All Other Resolutions Supported by the
Company
ISS recommended a vote in favour of the change of the Company’s
name, rejecting the rationale of 22NW by stating that “empirical
evidence suggests that changing a company's name can impact its
value. Name changes should be evaluated on a case-by-case basis. In
this case, there is little danger that sales would suffer due to a
loss of name recognition and associated goodwill.”
ISS also recommended a vote in favour of the Company’s
shareholder rights plan, once again rejecting 22NW’s expressed
concerns in concluding that “the rights plan is a "new generation"
plan structured to protect shareholders' interests in the event of
a take-over bid for their voting shares”.
Keep DIRTT’s Momentum – Vote the BLUE Proxy
Today
The best way to protect your investment and keep DIRTT’s
momentum is to vote the BLUE proxy. Voting otherwise could cause a
wholesale change of the Board and reverse progress.
Voting is fast and easy. Please vote on the BLUE proxy well in
advance of the voting deadline of Friday, April 22, 2022, at 10:00
a.m. (MDT).
If you have mistakenly voted on 22NW’s proxy or would like to
change your vote for any other reason, 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 SolutionsDIRTT 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
SolicitationDIRTT 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 its annual and special meeting of shareholders to be
held on Tuesday, April 26, 2022 at 10:00 a.m. (MDT) (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, INCLUDINGTHE 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, www.dirtt.com/investors.
Special Note Regarding Forward-Looking
StatementsThis 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 notundertake 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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