Inter-Tel board, Mihaylo continue to clash, exchange words in SEC filing

By Lisa Kerner

Charlotte, N.C., April 9 - Inter-Tel (Delaware) Inc. founder and investor Steven G. Mihaylo and board chairman Alexander Cappello continued to correspond regarding the board's actions and the investor's proposals to improve the company, according to a 8-K filing with the Securities and Exchange Commission.

In an April 5 letter included as part of the SEC filing, Cappello said the board was disappointed in Mihaylo's decision to "unilaterally escalate these matters into a public media campaign to advance your personal agenda of regaining control of the company - all at the expense of the shareholders."

Cappello pointed out that during the last several years of Mihaylo's tenure as the company's chief executive officer, Mihaylo "refused to develop and adopt a formal strategic plan for the company."

The letter also accused Mihaylo of "selective recollection of events" and conveniently ignoring a "simple fact such as notice of the April board meeting."

"In our opinion, your silence and failure to participate in the board room discussions of the very subjects about which you purportedly care speak volumes about your real motives. In short, I urge you to consider carefully the continuing harm to the company of conducting a public media campaign over issues that should be and are being discussed in the board room," Cappello's said in the letter.

Mihaylo's April 3 letter to the board, also included in the SEC filing, stated that he did not know and was not notified of the exact April meeting date and time.

"I believe this is typical of the way that I, as the company's founder, largest stockholder and a member of the board, as well as my two nominees on the board, have been treated for the past several months," Mihaylo said in his letter.

Mihaylo said he believes a proxy contest is necessary because "the board failed to consider my proposals until after I filed a proxy statement, and I still have not received any written indication that the board is serious about implementing any of my seven proposals or any written plan of action."

The investor will not withdraw his proposed slate of directors unless the board "puts forth a written plan of action satisfactory to me which either includes my proposals or provides a plan that will provide similar or greater value to the company's stockholders," the letter stated.

On March 30, Mihaylo filed a preliminary proxy statement listing resolutions for the company's 2007 annual meeting that included the election of himself and four addition nominees to Inter-Tel's board. He is also recommending that the board be reduced to seven members from 11 members.

In addition, Mihaylo wants the company to consider hiring a financial adviser to study the feasibility of a Dutch auction tender offer to repurchase between $200 million and $250 million of common stock.

Additional resolutions include disbanding the special committee of Inter-Tel's board and the sale of Inter-Tel's Irish subsidiary.

Mihaylo is the beneficial owner of 5,189,748 shares, or 19.4%, of Inter-Tel's outstanding stock, according to a recent schedule 13D filed with the SEC.

Inter-Tel is a Tempe, Ariz.-based provider of converged voice and data business communications.

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