Park City Capital, LLC, the beneficial owner of approximately
5.7% of the shares of ARI Network Services, Inc. (Nasdaq Capital
Market: ARIS) that has initiated a proxy contest to elect two new
directors to ARI’s six-member staggered board at ARI’s annual
meeting to be held on January 5, 2017, notes that ISS has confirmed
ARI audit chair William C. Mortimore’s troubling track record of
financial oversight.
In its recently issued report, ISS noted with respect to
Mortimore that “the fact pattern surrounding his departure from
Merge—a company that he founded and which experienced serious
accounting irregularities at the latter part of his tenure—is
unlikely to inspire confidence among ARI shareholders.”
ISS included the following in its report:
“Mortimore served as director of Merge from
1987-2006, including as chairman and chief strategist from
2000-2006, and interim CEO during 2006. In January 2006, Merge
started to receive anonymous whistleblower letters alleging
accounting improprieties, specifically that the company was
‘improperly reporting its financial position in order to make the
company look successful,’ according to a September 2012 court
opinion. Merge’s audit committee retained outside counsel to
conduct an investigation of the allegations. In June 2006, counsel
concluded, according to the court opinion, that ‘Mortimore
interfered with Merge’s audit confirmation process.’ The Merge
board subsequently sought his resignation, and Mortimore resigned
from the board on July 2, 2006.”
ISS further notes that “It seems that while Mortimore may not
have been directly accountable for the problems at Merge, that
board did not feel he was part of the solution, either.”
Park City Capital believes that ARI continues to be dishonest
with shareholders regarding Mortimore’s questionable track record,
as indicated by the following:
• ARI continues to state that the allegations against Mortimore
are “baseless,” despite knowing that an arbitrator determined
that Mortimore’s conduct was a “material violation of company
policy” and constituted “willful misconduct” and despite knowing
that Mortimore agreed to issue a “statement of regret” to the Merge
board and to pay legal fees incurred by Merge in the litigation
that Mortimore himself instituted against Merge.
• ARI continues to state that Mortimore was not charged by the
SEC, even after being forced by the SEC to retract its statement
that this “effectively exonerated” Mortimore. ARI was forced to
issue the following retraction: “As a point of clarification, we
wish to note that…the SEC’s decision not to pursue an enforcement
action did not constitute an ‘exoneration’ of Mr. Mortimore.”
• ARI continues to state that the Merge board “did not request
Mr. Mortimore to resign because it believed he had been part of any
scheme to defraud,” despite knowing that Merge stated in
litigation documents (and the court opinion cited by ISS states)
that Merge’s board of directors “sought” and received Mortimore’s
resignation from all positions with the company due to the board’s
conclusion that he was involved in the accounting fraud. The
law firm that represented Merge has publicly stated: “Upon
discovery of his conduct, Merge’s board of directors gave Mortimore
the choice to resign or to be terminated for cause. Mr.
Mortimore chose to resign from all positions with the
company…”
Park City Capital finds it to be quite astonishing that the
ARI board either did not know about Mortimore’s questionable track
record, or decided to make him audit chair anyway. Park City
Capital asks shareholders to consider one straightforward
question—who would appoint Mortimore as their audit chair knowing
his background?
In its press releases dated November 30, 2016 and December 8,
2016, Park City Capital provided carefully supported facts about
Mortimore’s involvement at Merge Healthcare, none of which were or
can be disputed by the ARI board. We encourage shareholders to
review the facts set out in our prior press releases.
If shareholders would like to receive copies of the documents
detailing the above facts regarding Mortimore’s history at Merge
Healthcare and additional prior SEC charges against him, and what
Park City Capital believes are the ARI board’s false and deceptive
statements regarding Mortimore, please contact Park City Capital or
its proxy advisor, Alliance Advisors.
Park City Capital notes that ISS also concluded that “To be
sure, ARI’s governance provisions fall short of best practices in a
number of areas, including the company’s classified board
structure.”
Shareholders of ARI should have received Park City Capital’s
proxy statement and BLUE proxy card in
the mail. Please vote our BLUE
proxy card in favor of our director nominees in support of our
efforts to effect positive change at ARI for all
shareholders.
We urge you not to return any proxy
card provided by ARI. To
support Park City Capital, you should return our BLUE proxy card
and discard any proxy card you receive from ARI.
You do not need to (and should not) vote
“withhold” on ARI’s proxy card to vote for our director
candidates. You should not vote
for any of the director candidates nominated by ARI, or on any
other matter, by returning ARI’s proxy card. If you have already
provided ARI with an executed proxy, you may revoke it by executing
a later dated BLUE proxy card.
If you have not received our BLUE proxy
card, or need any assistance with voting, please contact Alliance
Advisors, our proxy advisor, toll-free at
855-737-3183.
If you would like to speak with Michael
J. Fox of Park City Capital, we urge you to contact him directly at
214-855-0801.
Park City Capital, LLC and Park City Capital Offshore Master,
Ltd. have filed with the Securities and Exchange Commission, and
mailed to shareholders on or about November 29, 2016, a definitive
proxy statement and a blue proxy card in connection with their
solicitation of votes for the election of director nominees at the
“2017” annual meeting of shareholders of ARI Network Services,
Inc.
Park City Capital Offshore Master, Ltd. beneficially owns
1,000,000 shares of common stock of ARI. Park City Capital, LLC,
which is the investment manager of Park City Capital Offshore
Master, Ltd., and Michael J. Fox, who serves as the managing member
of Park City Capital, LLC, also beneficially own these shares.
Park City Capital, LLC, Park City Capital Offshore Master, Ltd.,
their control persons, and their nominees to the ARI board are the
participants in this proxy solicitation. Information regarding the
participants and their interests in the solicitation is included in
Park City Capital’s definitive proxy statement and other materials
filed with the SEC. SHAREHOLDERS OF ARI SHOULD READ SUCH PROXY
STATEMENT AND OTHER PROXY MATERIALS CAREFULLY AND IN THEIR ENTIRETY
AS THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION
RELATING TO THE ANNUAL MEETING AND PARK CITY CAPITAL’S NOMINEES TO
THE BOARD AND SOLICITATION OF PROXIES. SUCH PROXY MATERIALS ARE
AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT WWW.SEC.GOV OR FROM
ALLIANCE ADVISORS, LLC.
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version on businesswire.com: http://www.businesswire.com/news/home/20161227005176/en/
Alliance AdvisorsPeter Casey, 973-873-7710Toll-free number:
855-737-3183
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