GRAF Graf Industrial Corp

PROPOSAL NO. 3

THE REMOVAL PROPOSAL

Mr. Hall and Mrs. Hall are seeking the removal of Mr. Michael Dee from the Board for cause. Since the Board is classified, under Delaware law and the Company’s Amended and Restated Certificate of Incorporation (the “Charter”), and the Bylaws, stockholders can only remove a director for cause and only by the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of Common Stock of the Company. We believe cause exists to remove Mr. Dee from the Board and are therefore requesting stockholders to approve of the following resolution:

“RESOLVED, that Mr. Michael Dee is hereby removed as a director of Velodyne Lidar, Inc. for cause pursuant to Article Fifth, Section F of Velodyne Lidar, Inc.’s Amended and Restated Certificate of Incorporation and Article II, Section 2.8 of Velodyne Lidar, Inc.’s Amended and Restated Bylaws, effective immediately.”

The term “cause” is not clearly defined under either Delaware law or the Company’s Charter or Bylaws. While relevant Delaware case law is sparse on what constitutes “cause,” there are two relevant cases on point that have found that actions that indicate clear and serious breaches of fiduciary duties, as well as actions that indicate a deliberate scheme of harassment of company management or other directors, to the detriment of the Company, constitute “cause” under Delaware law. For instance, in Campbell v. Loew’s, Inc., the Delaware Court of Chancery found that stockholders had shown “cause” to remove directors of a corporation who had been “engaged in a calculated plan of harassment to the detriment of the corporation.” Further, in Rohe v. Reliance Training Network, Inc., the directors to be removed were accused of “serious breaches of fiduciary duty,” including use of company credit cards for personal expenses, giving themselves, friends, and family members improper raises and bonuses, and usurpation of corporate opportunities. The Delaware Court of Chancery in that case concluded that those allegations “would constitute ‘cause’ for removal if true.” In sum, whether “cause” exists is a factual determination that will be found when a director has put their own individual economic or personal interests ahead of the Company’s in such a manner sufficient to breach their fiduciary.

We believe Mr. Dee has engaged in conduct that constitutes “cause” for removal under relevant Delaware law. Under Mr. Dee’s tenure, including as Chairman of the Board since August 2021, we believe Mr. Dee has controlled the Board and directed it to take actions to the detriment of all stockholders in breach of his fiduciary duties. Below are just a few examples:

⁸ From February 19, 2021, the last trading day prior to the press release announcing the censure to March 9, 2022.

In sum, we believe the foregoing actions constitute sufficient cause to remove Mr. Dee as a director of the Company. Accordingly, we urge stockholders to support our resolution to remove Mr. Dee for cause.

Notwithstanding our strong belief that based on the above actions, among others, Mr. Dee can be removed for cause, there is no certainty that a Delaware court will conclude that cause exists and no guarantee that Mr. Dee will ultimately be removed. However, we believe obtaining the requisite votes of 66 2/3% of the outstanding share of Common Stock, will send a strong message to the Board and Mr. Dee that stockholders believe cause exists to remove Mr. Dee and that he should resign from the Board with immediate effect.

As discussed above, we believe that Mr. Dee’s conduct is sufficient to constitute “cause” for removal and urge stockholders to vote FOR the Removal Proposal

WE URGE YOU TO VOTE “FOR” THE REMOVAL PROPOSAL ON THE ENCLOSED BLUE PROXY CARD.

VOTING AND PROXY PROCEDURES

Only stockholders of record on the Record Date will be entitled to notice of and to vote at the Annual Meeting. Stockholders who sell their shares of Common Stock before the Record Date (or acquire them without voting rights after the Record Date) may not vote such shares. Stockholders of record on the Record Date will retain their voting rights in connection with the Annual Meeting even if they sell such shares after the Record Date. Based on publicly available information, the Halls believe that the only outstanding class of securities of the Company entitled to vote at the Annual Meeting is the Common Stock.

Shares of Common Stock represented by properly executed BLUE proxy cards will be voted at the Annual Meeting as marked and, in the absence of specific instructions, will be voted FOR the election of the Nominees, FOR the ratification of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, FOR the Removal Proposal, and in the discretion of the persons named as proxies on all other matters as may properly come before the Annual Meeting, as described herein.

According to the Company’s proxy statement for the Annual Meeting, the current Board intends to nominate three (3) candidates for election as Class II directors at the Annual Meeting. This Proxy Statement is soliciting proxies to elect only our three (3) Nominees as Class II directors. Accordingly, the enclosed BLUE proxy card may only be voted for the Nominees and does not confer voting power with respect to the Company’s nominees. The participants in this solicitation intend to vote the Hall Shares in favor of the Nominees. Stockholders should refer to the Company’s proxy statement for the names, backgrounds, qualifications and other information concerning the Company’s nominees.

Stockholders should understand, however, that all shares of Common Stock represented by the enclosed BLUE proxy card will be voted at the Annual Meeting as marked.

QUORUM; BROKER NON-VOTES; DISCRETIONARY VOTING

A quorum is the minimum number of shares of Common Stock that must be represented at a duly called meeting in person or by proxy in order to legally conduct business at the meeting. For the Annual Meeting, a quorum will be present if a majority of all shares outstanding on the Record Date are represented at the meeting by stockholders present in person or by proxy. On the record date, there were in the aggregate [________] shares of Common Stock outstanding and entitled to vote. Thus [________] shares must be represented by stockholders present at the Annual Meeting or by proxy to have a quorum.

According to the Company’s proxy statement, abstentions are counted as present and entitled to vote for purposes of determining a quorum. According to the Company’s proxy statement, shares represented by “broker non-votes” also are counted as present and entitled to vote for purposes of determining a quorum. However, if you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote (a “broker non-vote”). Under applicable rules, your broker will not have discretionary authority to vote your shares at the Annual Meeting on any of the proposals.

If you are a stockholder of record, you must deliver your vote by mail, attend the Annual Meeting in person and vote in order to be counted in the determination of a quorum.

If you are a beneficial owner, your broker will vote your shares pursuant to your instructions, and those shares will count in the determination of a quorum. Brokers do not have discretionary authority to vote on any of the proposals at the Annual Meeting. Accordingly, unless you vote via proxy card or provide instructions to your broker, your shares of Common Stock will count for purposes of attaining a quorum, but will not be voted on the proposals.

VOTES REQUIRED FOR APPROVAL

Election of Directors ─ The Company has adopted a plurality vote standard for director elections. Therefore, the three nominees receiving the most “FOR” votes will be elected. A properly executed proxy card marked “WITHHOLD” with respect to the election of a director nominee will be counted for purposes of determining if there is a quorum at the Annual Meeting, but will not be considered to have been voted “for” or “against” the director nominee. Abstentions and broker non-votes are not considered votes cast on this proposal and will not have any effect on the election of directors.

Ratification of the Selection of Accounting Firm ─ According to the Company’s proxy statement, although the vote is non-binding, assuming that a quorum is present, the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 requires the affirmative vote of the holders of a majority of the votes cast at the Annual Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum, but will not be considered as votes cast for or against this proposal and will therefore have no effect on the outcome of the vote. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.

Removal of the Chairman of the Board – Pursuant to Delaware law, the Charter and the Bylaws, because the Board is classified, stockholders can only approve the removal of Mr. Dee from the Board for cause and only by the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of Common Stock of the Company. Abstentions and broker non-votes will have the same effect as a vote “Against” the Removal Proposal.

Under applicable Delaware law, none of the holders of Common Stock is entitled to appraisal rights in connection with any matter to be acted on at the Annual Meeting. If you sign and submit your BLUE proxy card without specifying how you would like your shares voted, your shares will be voted in accordance with the Halls’ recommendations specified herein and in accordance with the discretion of the persons named on the BLUE proxy card with respect to any other matters that may be voted upon at the Annual Meeting.

REVOCATION OF PROXIES

Stockholders of the Company may revoke their proxies at any time prior to exercise by attending the Annual Meeting and voting in person (although, attendance at the Annual Meeting will not in and of itself constitute revocation of a proxy) or by delivering a written notice of revocation. The delivery of a subsequently dated proxy which is properly completed will constitute a revocation of any earlier proxy. The revocation may be delivered either to the Halls in care of Saratoga at the address set forth on the back cover of this Proxy Statement or to the Company at 5521 Hellyer Avenue, San Jose, California 95138 or any other address provided by the Company. Although a revocation is effective if delivered to the Company, we request that either the original or photostatic copies of all revocations be mailed to the Halls in care of Saratoga at the address set forth on the back cover of this Proxy Statement so that we will be aware of all revocations and can more accurately determine if and when proxies have been received from the holders of record on the Record Date of a majority of the shares entitled to be voted at the Annual Meeting. Additionally, Saratoga may use this information to contact stockholders who have revoked their proxies in order to solicit later dated proxies for the election of the Nominees. 

IF YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE BOARD, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED BLUE PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.

SOLICITATION OF PROXIES

The solicitation of proxies pursuant to this Proxy Statement is being made by the Halls. Proxies may be solicited by mail, facsimile, telephone, telegraph, Internet, in person and by advertisements.

We have retained Saratoga for solicitation and advisory services in connection with solicitations relating to the election of the Nominees and the Removal Proposal. Saratoga will receive a fee not to exceed $150,000, together with reimbursement for its reasonable out-of-pocket expenses for it services to the Halls in connection with solicitations relating to the election of the Nominees and the Removal Proposal. Arrangements will also be made with custodians, nominees and fiduciaries for forwarding proxy solicitation materials to beneficial owners of common stock held as of the record date for the Annual Meeting. The Halls will reimburse such custodians, nominees and fiduciaries for reasonable expenses incurred in connection with such arrangements. It is anticipated that Saratoga will employ approximately 15 persons to solicit stockholders in connection with the nomination of the Nominees and the Removal Proposal.

The entire expense of soliciting proxies is being borne by the Halls. Costs of this solicitation of proxies are currently estimated to be approximately $[___________] (including, but not limited to, fees for attorneys, solicitors and other advisors, and other costs incidental to the solicitation). The Halls estimate that through the date hereof their expenses in connection with this solicitation are approximately $[___________]. To the extent legally permissible, if the Halls are successful in their proxy solicitation, the Halls intend to seek reimbursement from the Company for the expenses it incurs in connection with this solicitation. The Halls do not intend to submit the question of such reimbursement to a vote of security holders of the Company.

ADDITIONAL PARTICIPANT INFORMATION

The participants in the solicitation for the election of the Nominees and the Removal Proposal are anticipated to be the Mr. Hall, Mrs. Hall and Dr. Amato (collectively, the “Participants”).

The principal business address of Mr. and Mrs. Hall is 2517 Blanding Avenue, Alameda, California 94501. The principal business address of Dr. Amato is 201 N. Goodwin Avenue, Urbana, Illinois 61801.

As of the date hereof, Mr. Hall may be deemed to beneficially own 19,971,257 shares of Common Stock, consisting of (i) 13,653,225 shares of Common Stock beneficially owned directly and (ii) 6,318,032 shares of Common Stock held by other stockholders of the Company over which, except under limited circumstances, Mr. Hall holds an irrevocable voting proxy pursuant to the terms of those certain Proxy and Lock-Up Agreements. As of the date hereof, Mr. Hall has entered into two Proxy and Lock-Up Agreements, consisting of: (i) that certain Proxy and Lock-Up Agreement granted by Mr. Bruce Hall, referencing 835,883 shares of Common Stock and (ii) that certain Proxy and Lock-Up Agreement granted by Mrs. Hall, referencing 5,482,149 shares of Common Stock. The Halls have not contacted or consulted with Mr. Bruce Hall with respect to this solicitation and Mr. Bruce Hall is not a participant in this solicitation. As of the date hereof, Mrs. Hall may be deemed to beneficially own 5,482,149 shares of Common Stock. As described above, Mr. Hall holds an irrevocable voting proxy over all the share of Common Stock beneficially owned by Mrs. Hall pursuant to the terms of the Proxy and Lock-Up Agreement granted by Mrs. Hall, therefore Mrs. Hall has no power to vote any of the share of Common Stock she beneficially owns, but has the sole power to dispose of all shares of Common Stock that she is deemed to beneficially own, subject to appropriate vesting provisions set forth in her equity awards. Mr. Hall has sole power to vote all shares of Common Stock that he is deemed to beneficially own. Mr. Hall has sole power to dispose of 13,653,225 shares of Common Stock. For information regarding transactions in shares of Common Stock during the past two years by the Participants, please see Schedule I.

As of the date hereof, Dr. Amato does not own, beneficially or of record, any securities of the Company.

Mrs. Hall may be deemed to be a member of a “group” with Mr. Hall for the purposes of Section 13(d)(3) of the Exchange Act, and such group may be deemed to beneficially own the 19,971,257 shares of Common Stock beneficially owned in the aggregate by Mr. and Mrs. Hall.

Certain of the shares of Common Stock held directly by Mr. and Mrs. Hall (and not beneficially owned through irrevocable proxies) were received in connection with the Merger, through an exchange of shares held in the Predecessor Company. On the effective date of the Merger, the closing price of the shares of Common Stock was $24.75 per share. Mr. Hall received 208,847 shares of Common Stock for no consideration as an inheritance. Certain other shares of Common Stock were acquired by Mrs. Hall in connection with her service as a director of the Company.

Mrs. Hall is currently a director of the Company. Mr. Hall is a former director of the Company. In addition, Mr. Hall is the founder of the Company’s predecessor and served as the Company’s Executive Chairman from the closing of the Merger until January 7, 2021. Mrs. Hall was the Chief Marketing Officer of the Company from the closing of the Merger until February 2021. The Halls received compensation from the Company for their service as directors and named executive officers of the Company during the years ended December 31, 2020 and December 31, 2021. All compensation and equity awards payable to the Halls is disclosed in the Company’s proxy statement.

David Heeren, a son-in-law of Mr. and Mrs. Hall, has been employed by Velodyne since March 2017. Mr. Heeren serves as senior technical product marketing manager. Laurel Nissen, Mr. and Mrs. Hall’s niece, currently serves as a member of the Company’s Digital Sales Support team. Laura Wrisley, the sister-in-law of Mr. and Mrs. Hall’s daughter, currently serves as the Company’s Senior Vice President World-Wide Sales. The brother of Laura Tarman, the Company’s Vice President of Sales, is married to the daughter of Mrs. Hall.

Mr. Hall previously entered into promissory notes with the Company, pursuant to which Mr. Hall borrowed an aggregate of $3,512,097.08 from the Company (the “Loans”). Mr. Hall repaid the Loans in full, with the last payment made on December 31, 2019.

In January 2017, Velodyne entered into a five-year lease agreement with Hellyer-DMHall Properties, LLC, an affiliate of Mr. and Mrs. Hall. The lease was subsequently amended in February 2017 and, in October 2019, Velodyne extended the lease through 2027 and agreed to annual increases of 3% beginning in January 2020. Under the extended lease agreement, Velodyne leases approximately 205,000 square feet of office and manufacturing space in San Jose, California as its corporate headquarters. As of December 31, 2020, future minimum lease payments total $24.3 million related to this facility. Rent expense was $3.4 million, $3.1 million and $3.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Additional rent payments were made to Hellyer-DMHall Properties, LLC in 2021 prior to the sale of the property referenced below. In May 2021, Hellyer-DMHall Properties, LLC, transferred the real property and assigned the lease to W.P. Carey Inc., an unrelated third party.

On June 9, 2021, the Company initiated an arbitration proceeding against Mr. Hall, alleging breach of contract and misappropriation of the Company’s confidential, proprietary, and trade secret information. On July 2, 2021 the Company filed an application with the Santa Clara County Superior Court for a temporary restraining order and preliminary injunction against Mr. Hall related to the claims under the arbitration proceeding.

On September 7, 2021, the arbitrator issued a preliminary injunction against Mr. Hall. Mr. Hall subsequently provided an under-oath inventory pursuant to the preliminary injunction identifying personal devices that may contain Velodyne information. Mr. Hall did not consent to the special master conditionally appointed by the arbitrator, therefore Velodyne and Mr. Hall are negotiating on protocol by which to preliminarily review and inspect those personal devices. On October 26, 2021, Mr. Hall filed a motion for a protective order seeking to require the Company to segregate and return his personal, private, privileged, and confidential information from his Company-issued laptop. On November 30, 2021, the judge denied Mr. Hall’s protective order. On December 16, 2021, the judge ruled that Velodyne sufficiently identified 2,740 allegedly-misappropriated trade secrets. On February 17, 2022, the judge imposed sanctions in the amount of $5,000 on Mr. Hall for discovery abuse.

On July 27, 2021, Mrs. Hall filed a charge of employment discrimination under Title VII of the Civil Rights Act with the California Department of Fair Employment and Housing and the Equal Employment Opportunity Commission (EEOC), alleging sexual discrimination and retaliation against the Company. On February 15, 2022, the EEOC issued a determination that it will not proceed with an investigation of Ms. Hall’s claim. Prior to September 27, 2021, Mrs. Hall filed a complaint against the Company with the Occupational Safety and Health Administration (“OSHA”) alleging retaliation in violation of the Sarbanes-Oxley Act (“SOX”). On September 27, 2021, OSHA dismissed the complaint, finding that Ms. Hall had not engaged in a protected activity under SOX. On October 21, 2021, Ms. Hall submitted an objection to the findings and requested a hearing before an administrative law judge.

On January 18, 2022, Mr. and Mrs. Hall filed a complaint against various current and former officers and directors of Velodyne and other individuals in the Superior Court of California, Alameda County, entitled Hall v. Vetter, No. 22-cv-005713. The complaint alleges conspiracy to defraud, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, intentional misrepresentation, negligent misrepresentation, and securities fraud. The complaint alleges David and Marta Hall have suffered damages and seeks, among other things, compensatory and punitive damages.

On March 12, 2021, a putative shareholder derivative lawsuit entitled D’Arcy v. Gopalan, et al., No. 1:21-cv-00369-MN, was filed in the United States District Court for the District of Delaware against current and former directors and/or officers Mr. Gopalan, Mr. Hamer, Mr. Hall, Mrs. Hall, Mr. Culkin, Mr. Dee, Mr. Graf, Ms. Samardzich, and Mr. Thomas, and names the Company as a nominal defendant. The complaint asserts claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets against all of the individual defendants, and asserts a contribution claim under the federal securities laws against Mr. Gopalan and Mr. Hamer. On March 16, 2021, a second shareholder derivative lawsuit entitled Kondner, et al. v. Culkin, et al., No. 1:21-cv-00391-MN, was filed in the United States District Court for the District of Delaware against most of the same defendants named in the earlier derivative complaint, and asserts claims against the individual defendants for alleged breaches of fiduciary duty and waste of corporate assets. The Hall’s believe that their interests in the above derivative lawsuits may in the future be in conflict with certain of the named defendants who are currently affiliates of the Company.

Except as set forth in this Proxy Statement (including the Schedules hereto), (i) during the past ten (10) years, no Participant has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); (ii) no Participant directly or indirectly beneficially owns any securities of the Company; (iii) no Participant owns any securities of the Company which are owned of record but not beneficially; (iv) no Participant has purchased or sold any securities of the Company during the past two years; (v) no part of the purchase price or market value of the securities of the Company owned by any Participant is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities; (vi) no Participant is, or within the past year was, a party to any contract, arrangements or understandings with any person with respect to any securities of the Company, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies; (vii) no associate of any Participant owns beneficially, directly or indirectly, any securities of the Company; (viii) no Participant owns beneficially, directly or indirectly, any securities of any parent or subsidiary of the Company; (ix) no Participant or any of his, her or its associates was a party to any transaction, or series of similar transactions, since the beginning of the Company’s last fiscal year, or is a party to any currently proposed transaction, or series of similar transactions, to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeds $120,000; (x) no Participant or any of his, her or its associates has any arrangement or understanding with any person with respect to any future employment by the Company or its affiliates, or with respect to any future transactions to which the Company or any of its affiliates will or may be a party; (xi) no Participant has a substantial interest, direct or indirect, by securities holdings or otherwise, in any matter to be acted on at the Annual Meeting; (xii) no Participant holds any positions or offices with the Company; (xiii) no Participant has a family relationship with any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer; and (xiv) no companies or organizations, with which any of the Participants has been employed in the past five years, is a parent, subsidiary or other affiliate of the Company. Except as otherwise disclosed in this Proxy Statement (including the Exhibits hereto), there are no material proceedings to which any Participant or any of his, her or its associates is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. Except as disclosed herein, with respect to each of the Nominees, (a) none of the events enumerated in Item 401(f)(1)-(8) of Regulation S-K of the Exchange Act (“Regulation S-K”) occurred during the past ten years, (b) there are no relationships involving any Nominee or any of Nominee’s associates that would have required disclosure under Item 407(e)(4) of Regulation S- K had such Nominee been a director of the Company, and (c) none of the Nominees nor any of their associates has received any fees earned or paid in cash, stock awards, option awards, non-equity incentive plan compensation, changes in pension value or nonqualified deferred compensation earnings or any other compensation from the Company during the Company’s last completed fiscal year, or was subject to any other compensation arrangement described in Item 402 of Regulation S-K.

OTHER MATTERS AND ADDITIONAL INFORMATION

The Halls are unaware of any other matters to be considered at the Annual Meeting. However, should other matters, which the Halls are not aware of at a reasonable time before this solicitation, be brought before the Annual Meeting, the persons named as proxies on the enclosed BLUE proxy card will vote on such matters in their discretion.