Aerojet Rocketdyne Executive Chairman Warren Lichtenstein Comments on Court Victory with Finding that CEO Eileen Drake Acted Unlawfully
June 17 2022 - 6:30AM
Business Wire
Delaware Court Rules Ms. Drake Knowingly
Acted Without Proper Authority and Misused Corporate Resources to
Support Board Takeover Efforts
Court Orders Rare Corrective Disclosures
Forcing Formal Retraction of False and Misleading Statements Ms.
Drake and Her Three Boardroom Allies Caused the Company to
Make
Questions How
Shareholders, Customers and Employees Can Trust Ms. Drake and Her
Hand-Picked Board When She is the Only CEO in Recent Memory Found
to Have Acted Unlawfully by Misappropriating Company Assets and
Making Misleading Disclosures
Urges Shareholders to Vote on the
GREEN Proxy Card to Elect Chairman’s
Refreshed Slate of Eight Highly Qualified Nominees, Which Possesses
the Right CEO and a Superior Strategy
Aerojet Rocketdyne Holdings, Inc. (NYSE: AJRD) (“Aerojet
Rocketdyne” or the “Company”) Executive Chairman Warren
Lichtenstein, who collectively with his affiliates and the
participants in his solicitation owns approximately 5.6% of the
Company's outstanding shares, issued the below statement in
connection with his campaign to elect a recently refreshed slate of
highly qualified candidates to the Company’s Board of Directors
(the “Board”) at a special meeting of shareholders (the “Special
Meeting”) on June 30, 2022.
Key points from Vice Chancellor Lori W. Will’s ruling include
the following:
- The Delaware Court of Chancery (the
“Court”) found that Eileen Drake improperly and unlawfully used
Company resources against half the Board, including bringing
litigation against them utilizing corporate funds. Vice
Chancellor Will wrote that “The defendants were not permitted to
act on the Company’s behalf in an election contest involving
competing halves of the Board” and noted that “The defendants do
not refute that the challenged actions were taken without Board
Approval.”
- The Court found that Ms. Drake
violated its Temporary Restraining Order (“TRO”), and then falsely
testified to the contrary. The Court concludes: “…the
plaintiffs succeeded on the merits of their claims.” The Court
rejected Ms. Drake’s trial testimony that she did not violate the
TRO, thereby concluding that Ms. Drake’s sworn testimony to the
contrary was false. For example, the Court wrote that “Drake
testified that Aerojet did not meaningfully facilitate the transfer
of Aerojet shares into her personal Computershare account. She
claims that she did nothing more than ask for Aerojet employees to
provide ministerial assistance in unlocking her Computershare
password. The evidence indicates greater support was provided by
the Company.”
- The Court ordered corrective
disclosures – a rare move in such a situation. The
ruling states that “[l]est there be any doubt about the propriety
of the February 1 Press Release and February 2 Disclosures,
however, corrective disclosures must issue in the form of a press
release and a corresponding Form 8-K”…“The disclosure should
retract the statements in the February 1 Press Release, state that
neither the February 1 Press Release nor February 2 Disclosures
were authorized by the Board, and explain that the Company takes no
position on the outcome of the pending director election.”
- The Court found that Mr. Lichtenstein
is not an “activist,” an “insurgent” or a “threat” to the
Company. The ruling noted that “[c]orporate democracy is
not an attack.” Further, the Court wrote that “Steel, which has
held a position in Aerojet (or its predecessor) since 2000, cannot
be described as an archetypal ‘activist.’”
- The Court found that Ms. Drake
unlawfully sought to rig the election. Rather than trust
shareholders to make an informed decision in a fair election
contest, Ms. Drake misappropriated the Company’s name and assets in
an unlawful effort to falsely discredit Mr. Lichtenstein. As the
Court explained: “The Company, which is necessarily guided by the
Board, could not (and cannot) take sides pending the outcome of the
election. To hold that one stockholder-nominated slate comprising
half of the incumbent directors can advantage itself with access to
the company’s name, funds, and employees because it includes
management would unfairly tip the scales in that slate’s favor.”
The Court also found that Ms. Drake’s efforts “were unauthorized”;
that Ms. Drake and her Board allies could not “deploy the company’s
resources in support of their slate or to discredit the
[Lichtenstein] slate”; and that declaratory, injunctive and
corrective relief is required to undo the harm caused by Ms.
Drake’s unlawful actions.
- The Court found that Ms. Drake
weaponized the internal investigation of Mr. Lichtenstein in order
to impugn his credibility. The Court wrote: “[e]ven if
management believed that the law required disclosure of the
investigation, the [February 1] press release went well beyond
disclosing the fact of the investigation.” According to the Vice
Chancellor, “the weight of the evidence indicates that [the
February 1 press release] was a negotiating lever to pressure
Lichtenstein to withdraw his slate.”
- The Court found that Mr. Lichtenstein
made no effort to interfere with the investigation into Ms. Drake’s
contrived claims of harassment and breach of fiduciary
duty. The Court concluded “[D]efendants’ argument that
the Company was not required to remain neutral because Lichtenstein
was motivated by a unique conflict of ‘freezing’ the Investigation
is unsuccessful. In terms of the Investigation, Lichtenstein was
cooperative. There is no evidence that he attempted to interfere
with it reaching its conclusion. Lichtenstein also proposed that
his spot on the Board could be taken by another Steel
representative if the Non-Management Committee’s recommendations
called for him to step down.” Vice Chancellor Will also noted that
“I have not found that the plaintiffs endeavored to force the Board
to guarantee Lichtenstein’s seat on the board regardless of the
outcome of the Investigation. Nor have I found that Lichtenstein
was motivated by a singular goal of ousting senior
management.”
Mr. Lichtenstein commented:
“Since the onset of this contest, I have said that shareholders
should focus on credibility and vision to inform their voting
decisions. I question how any shareholder can see Ms. Drake as
remotely credible now that she has been found to have violated a
Court order, misused corporate resources and made misleading
disclosures that require correction. Moreover, I doubt that any of
Aerojet Rocketdyne’s customers and employees – many of whom have
made public complaints over the past 18 months – will be able to
take Ms. Drake at her word going forward. Indeed, Ms. Drake said
she was ‘extremely pleased by the opinion’ in a press release last
night, effectively validating my view that she is more focused on
spin than sincerity. It is hard to imagine how anyone could be
pleased when the premier business court in the country rules
against them.
There was a time when Ms. Drake was a credible corporate
executive, but everything changed when she saw the opportunity to
obtain a more than $25 million change-in-control payment through a
sale of the Company. This is why I have invested millions of
dollars of my own money in a campaign to protect all shareholders
by effecting boardroom refreshment and installing a high-integrity
CEO in Mark Tucker. The Court’s decision reinforces that it is time
for a new day at Aerojet Rocketdyne.”
***
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