PR Newswire
NEW YORK, April 19, 2013
NEW YORK, April 19, 2013 /PRNewswire/ -- Red Oak Partners and the Red Oak Fund L.P. (collectively "Red Oak") release the following letter to Shareholders of Digirad Corporation (Nasdaq: DRAD) from Red Oak's Founder and Managing Member, David Sandberg:
Dear Fellow Digirad Shareholders,
Red Oak has been one of Digirad's large shareholders for the better part of the past 4 ½ years. We are in the midst of an important proxy contest against Digirad's current Directors, whom we believe have not been fully honest with you about their qualifications, and have instead dodged discussion about core issues while making un-substantiated representations about their skills and experience.
Additionally, Digirad has stated in its latest fight letter that "Red Oak just wants to seize control without paying a premium". This is blatantly misleading. Red Oak is NOT seeking control of Digirad's business. Our only objective it to ensure that Digirad has a Board of independent directors that have a vested interest in protecting shareholder value (and are not affiliated with one another like Messrs. Eberwein, Gillman and Climaco). Red Oak publicly commits to running an open independent process to review all strategic alternatives. Moreover, shareholders have the right to know how it was possible for Messrs. Gillman, Eberwein and Climaco, who we believe are very close associates, to get control of Digirad's board without having to spend any money of their own to buy Digirad shares. Who should shareholders trust: the current Board, who not only lacks relevant experience and received board control without investing a penny of their own funds, or Red Oak, a long term shareholder that has invested over $2.5 million of our own capital in buying Digirad shares?
A Brief History:
In late 2011 Red Oak, owning more shares than Digirad's collective Board (both then and now), challenged Digirad's Board to effect overdue change given material share price erosion while Directors enriched themselves and owned little stock. After Digirad received Red Oak's nomination letter, Digirad offered Red Oak three Board seats, provided incumbents retained control. Red Oak rejected this offer. At the same time, Charles Gillman – an individual claiming to work at a Tulsa family office – cold-called and solicited Red Oak, asking to lead a contest against Digirad's Board using Red Oak's shares because he owned none himself. Red Oak rejected Mr. Gillman's solicitation.
Shortly after this solicitation, Digirad's Board appointed four new Directors - Charles Gillman, Jeff Eberwein, John Climaco, and Jim Hawkins. It is important to note that none of the new Directors had any history of challenging the then-incumbent Board nor sought any improvements in Digirad's corporate governance as a condition to serving.
At the time of their appointment, not one of these four Directors:
a) Owned a single share of stock in Digirad – they were each new to the Company, and we don't believe any of them had owned any Digirad stock at any point in the past, either, through which they might have followed and learned about the Company
b) Had any industry experience regarding Digirad's main business: digital imaging
c) Led any strategic review process at a public micro-cap company
d) Had any track record or history turning around any company, whether public or private
e) Had any track record of effecting meaningful governance improvements or adopting insider ownership policies to align insiders with Shareholders
f) Had any expertise or meaningful experience regarding the utilization of tax loss assets via IRS Section 382 (Digirad has $125 million in tax loss assets)
Below we ask – publicly and in an open forum - relevant questions about and to these Directors:
Charles Gillman, as the Chair of the Governance Committee:
Charles Gillman and Jeff Eberwein:
Jeff Eberwein:
Digirad Board:
Red Oak took nearly a year to consider and recruit the appropriate slate of directors to turn around the Digirad business. Please read our proxy: we go into detail about our turn-around plan (far more detail than Messrs Eberwein or Gillman have in any of their proxies in contests where they've sought to replace a majority of the Board). Red Oak has worked with only one of our director nominees before; the additional proposed directors came after a thoughtful "needs and fits" process. Tony Snow too worked at Soros, but unlike Eberwein, he has real experience within operating companies at a prestigious private equity firm. Chris Iorillo was a Paul Hastings Securities attorney before working inside companies at Platinum Equity and then co-founding private equity firm CounterPoint Capital Partners which specifically focuses on turnaround and internal operating improvements and investments. Raymond Brooks was a Managing Director at the prestigious turnaround firm Alvarez and Marsal and has been a full-time and interim CEO many times, including CEO of a $500 million (in assets) company which specifically financed digital imaging systems sold into hospitals. J. Randall Waterfield is an owner of Cappello Waterfield & Co., which has led investment banking healthcare transactions in excess of $1 billion. Previously, he sold two large private companies for $750 million, and has significant and successful public Board experience in creating long-term value and overseeing turnarounds at public companies. Lastly, my experience is public record as a Chair and Director of many companies, adopting best governance practices, leading the charge for most of the improvements seen at Digirad today, and having already "done this before" (referring to leading a micro-cap turnaround), which is something no incumbent Digirad director has done.
AS SHAREHOLDERS OUR INTEREST IS ALIGNED WITH ALL SHAREHOLDERS.
We believe it is time for change at Digirad. The current Board has failed to present a credible turnaround plan because it is inexperienced and unqualified to do so, and has overseen continued deterioration in Digirad's core business. Moreover, it has acted only when pressured by Red Oak. We have assembled a highly qualified team of nominees who have the right knowledge and skill-set to turn around Digirad and create value for all shareholders.
Time is very short. No matter how many or how few shares you own, it is very important that you vote the enclosed BLUE proxy card today and vote in Favor of electing us to represent you in the boardroom. PLEASE DO NOT RETURN THE WHITE PROXY CARD or any other proxy card furnished to you on behalf of Digirad. Not even to vote against them. Doing so may cancel your vote on the BLUE card.
If you have already returned a WHITE proxy card, you have every right to change your vote by voting a later-dated BLUE proxy card. Just please do so today.
Please VOTE THE BLUE CARD FOR RED OAK's SLATE of nominees and Against the Auditor and Say on Pay Proposals.
For information or help with voting the BLUE card, please contact:
Alliance Advisors LLC
200 Broadacres Drive 3rd Floor
Bloomfield, NJ 07003
Shareholders Call Toll Free: (888)-991-1289
Banks and Brokers Call Collect: 973-873-7721
You may also contact me at:
David Sandberg
304 Park Avenue South, 11th Floor
New York, NY 10010
Direct phone: (212) 614-8952
Sincerely,
David Sandberg
I URGE YOU TO VOTE TO CHANGE DIGIRAD FOR THE BETTER AND TO PROTECT YOUR INVESTMENT. VOTE FOR ALL OF OUR DIRECTOR NOMINEES ON THE BLUE PROXY CARD TODAY.
SOURCE Red Oak Partners
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