Exhibit 99.2
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“[…] we believe that the Dissident has made a sufficiently compelling case to warrant supporting its proposed overhaul of the board. In our view, the Dissident has
clearly highlighted a number of key concerns that we believe a wholly refreshed board can better address […].”
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“[…] the Dissident has given due thought to how each of its nominees can meaningfully contribute to the Company’s immediate needs. We also believe that the Dissident
has outlined a reasonably detailed initial transition plan and a medium-term plan aimed at creating shareholder value.”
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“Beyond divesting non-core assets to pay down debt, the Dissident believes that it can reduce overhead costs through meaningful reductions in executive pay (in our
engagement with the Dissident, Mr. Gorzynski indicated that he would not take any pay if he were to be appointed interim CEO), a 50% reduction in annual director fees, cuts of up to $3 million in annual real estate and related party fees
and cuts of up to $5 million in what the Dissident considers to be ‘opaque administrative overhead.’"
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“We believe that the Dissident has made a convincing case to reasonably justify a wholesale shake-up of the Company’s board.”
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“We observed that, on balance, the Company has significantly underperformed its proxy peer group and the broader market indices over a substantial majority of the
selected relevant periods, including all the selected periods up through the Dissident's 13D filing.”
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“[…] the Company has undertaken a leveraged acquisition strategy that we believe, to date, has failed to generate meaningful value for shareholders and has left the
Company scrambling to pare down its substantial and expensive debt burden.”
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“[…] we believe that the board still deserves a fair deal of criticism for enabling management to embark on what appears to us to have been a leveraged acquisition
strategy that has largely generated below-market returns for shareholders.”
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“Based on this review, we believe that shareholders have reason to be concerned with the relative TSR underperformance and levered acquisition strategy of the Company.
The Company's share price has underperformed relative to a peer composite and broader market indices, over a range of relevant historical periods.”
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“Considering the Company’s corporate structure, we understand that NAV return can be a useful measure for assessing the cash flow generation and the value appreciation
of the Company’s underlying business investments. However, we believe the benefits of this metric may be somewhat diminished by the Company’s historically opaque disclosures in relation thereto.”
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“We also find it curious that the compensation committee has not incorporated a market-based metric, such as TSR, into its executive incentive compensation program,
particularly considering the substantial and persistent NAV trading discount in the Company’s shares.”
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“This suggests to us that more substantive corrective action may need to be taken at the holdco level to address the Company’s performance-based executive compensation
program.”
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“[…] we believe the board’s decision to raise its own compensation represents poor optics and undercuts the board’s argument that it has been taking proactive steps to
earnestly reduce costs.”
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“[…] we believe that the Dissident has highlighted several notable concerns regarding the board’s efforts in prior years to potentially marginalize the Company’s
common shareholders.”
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“In our view, the seriousness of the aforementioned SEC charges and the subsequent admission of guilt by Mr. Falcone raises significant questions regarding his track
record and judgment, a view that Glass Lewis first expressed back when Mr. Falcone initially joined the board.”
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“The fact that Mr. Falcone continues to face personal legal allegations regarding matters stemming from that settlement is certainly far from ideal, to say the least,
from the perspective of the Company and its shareholders.”
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“[…] each of the foregoing proposed amendments point to problematic examples of the directors requesting shareholder approval of provisions that seemingly would
result in greater harm than benefit to unaffiliated common shareholders.”
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“[…] we are inclined to agree with the Dissident’s view that Mr. Falcone’s continued presence with the Company may be casting a shadow over some of the Company’s more
heavily-regulated businesses, particularly CIG, as regulators may be even more wary and scrutinizing in making certain decisions relating to the Company’s businesses.”
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“[…] two of the Company’s current directors (Messrs. Gfeller and Leffler, Jr.) had lengthy overlapping board tenures with Mr. Glazer at Zapata, and we again note that
Mr. Glazer sold Zapata to Mr. Falcone.”
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“The Glazer family was also heavily scrutinized for a series of arguably questionable deals in which they sold several of their businesses to Zapata, leading to
allegations from some Zapata minority shareholders that those transactions were merely a way for the family to enrich themselves and raise proceeds that the family needed for their personal purchase of the Tampa Bay Buccaneers football
team.”
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“We can certainly observe some parallels in the investment approach that Mr. Glazer took with respect to Zapata versus the approach that Mr. Falcone has taken with the
Company.”
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Remove all six of HC2’s incumbent directors, including CEO Philip Falcone; and
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Elect MG Capital’s six highly-qualified, independent director nominees.
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