Keweenaw Land Association, Limited ('KEWL') Investor Ronald S. Gutstein Sends Letter to the Board
April 20 2010 - 11:41AM
Business Wire
The following is a letter from Keweenaw Land Association,
Limited investor Ron Gutstein to shareholders:
Re: Validity of Supermajority Voting Provisions in the Company’s
Articles of Incorporation and Bylaws
Dear Board of Directors:
We are writing because we believe Article X of the Articles of
Incorporation and Article IX of the Bylaws of Keweenaw Land
Association, Limited (the “Company”) may be invalid and should be
repealed.
In 1999, the Board of Directors (the “Board”) asked shareholders
to approve certain changes to the Company’s Articles of
Incorporation and Bylaws. Among them, the Board recommended
adoption of current Article X, which requires an 80% supermajority
vote of outstanding voting shares to approve a merger or sale of
the Company, and current Article IX, which similarly requires an
80% supermajority shareholder vote to amend, appeal, or adopt new
Bylaws, unless first approved by 75% of the Board.
At the time these proposals were first put forth to
shareholders, it is our understanding that a trust for the Ayer
family controlled approximately 30% of the shares of the Company.
Those shares are now controlled by Essex Street Associates
(“Essex”). Essex is an investment company whose management includes
Mr. David Ayer, President and Chairman of the Board, and Mr. James
Totten, a Board director. Furthermore, Mr. Ayer, Mr. Totten, and
certain other family members, acting through Essex, have the right
to vote the Company’s shares in Company shareholder meetings.
The Company should have disclosed that Mr. Ayer was the
beneficial owner of Company shares when the Board asked
shareholders to approve the supermajority voting provisions.
Because Mr. Ayer controls such a sizeable block of Company shares,
it is mathematically impossible for unaffiliated shareholders to
overcome the supermajority threshold. Mr. Ayer’s beneficial
ownership of such a large voting interest was material information
relevant to a shareholder’s voting decision whether to approve the
supermajority provisions. Since they were not informed of Mr.
Ayer’s beneficial ownership, unaffiliated shareholders cast their
vote without full knowledge of the consequences of their
actions.
These unaffiliated shareholders, had they known of the existence
of Mr. Ayer’s controlling interest in the Company, probably would
not have approved adoption of the Articles and Bylaws that
installed the supermajority voting requirement. The supermajority
provisions clearly have a negative impact on Company shares, as
they severely limit the ability of shareholders to influence the
management of the Company. They also limit the attractiveness of
the Company to potential acquirers, which depresses the value of
the Company’s stock. The supermajority voting provisions entrench
the Company’s current management, and it is impossible for
unaffiliated shareholders to effect any change without the consent
of Mr. Ayer and his relatives.
We believe the Company’s failure to disclose Mr. Ayer’s
controlling interest in the Company renders the supermajority
voting provisions invalid. The Company obtained shareholder consent
for these provisions without disclosing material information.
The Company should take immediate action to remedy this
injustice. Since the supermajority provisions are invalid, the
Board, in accordance with the Michigan Business Corporation Act,
should (i) repeal Article X, in accordance with the Articles of
Incorporation, and (ii) repeal Article IX, in accordance with the
Bylaws.
Please call if you have any questions.
Very truly yours,
Ronald S. Gutstein
Keweenaw Land Association (PK) (USOTC:KEWL)
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