In response to the Nov. 15 press statement of Pete Pappas, I [Timothy P. Vick] sent a letter to Vari-L's board of directors asking them to clarify several inconsistencies in Mr. Pappas' statement. The letter is reproduced below.
Shareholders should be aware that nearly all of the questions posted to Pete Pappas in our Oct. 20 letter (see our Oct. 20 post) have gone unanswered. Mr. Pappas responded by saying that he didn't believe the information requested of him was material and, therefore, would not be disclosed. He further indicated that he would not hold any conference calls with investors, as we had requested.
For more information about the Vari-L Shareholders' Committee, contact me at tvick@netnitco.net or at (219) 838-5087.
Timothy P. Vick
Senior Analyst,
Arbor Capital Management
*******************
Nov. 17, 2000
To the members of the board:
We find the Nov. 15, 2000 public statement by Pete Pappas to be alarming and ask that the Board of Directors clarify his report of plans to abandon Vari-L’s military business. Shareholders are particularly concerned about the following issues:
1. Why is the board allowing an interim manager to dismantle its core business without an assessment or recommendation from a permanent executive team? Pete Pappas was hired only to stabilize operations and orchestrate the correction of Vari-L’s accounting problems while permanent managers were located. It goes beyond prudent business judgment for directors to let transition officers, with no experience in the industry, make irreversible strategic decisions that will define the company’s future.
2. Even if it makes sense for Vari-L to change its fundamental direction, why is Vari-L killing off a hard-won business rather than finding a strategic partner or selling it?
3. Was the decision to terminate the relationship with the Department of Defense (DOD) an attempt to shield the company’s officers and directors from liability related to any Pentagon investigation into Vari-L’s problems? As you should know, Pete Pappas has failed to answer shareholder questions on whether the DOD has initiated an investigation or has threatened to rescind Vari-L’s contracts. Shareholders have a need, and a right, to be fully apprised of this situation.
4. If Vari-L is yet unable to produce financial statements required by the SEC and that satisfy Nasdaq’s listing requirements, how could directors measure costs and per-unit profitability levels to conclude that the military business was not viable? You may recall that earlier this year senior officers made comments to investors that this division was flourishing and was a continuing source of R&D-related benefits.
While shareholders have been pleased to see the company continue its growth trajectory in the marketplace, we are growing concerned about the “bankruptcy mentality” that seems to permeate every material decision of the board and Mr. Pappas’ consultant team. To date, we have seen little progress in the issues most crucial to shareholders, including the reinstatement of an orderly market for our stock and the production of financial statements. Instead of hard information, we are served vague explanations of asset write-downs, legal calisthenics to shield the individuals responsible for Vari-L’s embarrassing problems, and questionable reasons to shutter lines of business.
It is the duty of the company’s Board of Directors to set Vari-L back on its growth path and restore credibility on Wall Street. The board does not have the right to hollow out the company to serve the legal interests of its individual directors.
Sincerely,
Timothy P. Vick
Representative, Vari-L Shareholders’ Committee |
