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Windland Electronics, Inc.
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(Name of Registrant as Specified in Its Charter)
Dyna Technology, Inc., and the Winland Shareholders' Protective Committee,
consisting of Ralph I. Call, James J. Kamp, Thompson H. Davis,
Robert L. Ring, Gerald E. Brown
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RALPH I. CALL, CHAIRMAN
WINLAND SHAREHOLDERS' PROTECTIVE COMMITTEE
C/O DYNA TECHNOLOGY, INC.
225 SOUTH CORDOVA AVENUE
LECENTER, MN 56057
COMMITTED TO PROTECTING YOUR INVESTMENT
WITH OUR TALENT AND BUSINESS EXPERIENCE.
November 28, 2001
Dear Fellow Shareholders:
Over this past summer, you received several communications from the Winland
Shareholders' Protective Committee (the "Committee"). You know of our concern
over the condition of the investments we have made in Winland Electronics, Inc.
(the "Company"). Any shareholder who invested in the Company in the past few
years has seen their investment produce the same large, negative returns that we
have experienced. The stock price of the Company's shares has dropped
precipitously in the past two years alone.
Although you have not heard from the Committee since the special meeting of
the Company held on August 21, 2001 (the "Special Meeting"), the Committee has
been working hard to protect your interests. As the Company has reported in its
proxy materials, the Committee tried to negotiate a settlement with the Board of
Directors of the Company (the "Board"). Our Committee representatives met with
the Board on August 30, 2001. We found that no dialogue was possible with the
Board; the Board has rejected each and every proposal we offered. The Board
offered no proposals of their own. We want every shareholder to understand our
position:
SHAREHOLDERS OWN THE COMPANY. MANAGEMENT DOES NOT. SHAREHOLDERS SHOULD
REASONABLY EXPECT MANAGEMENT TO BE HELD ACCOUNTABLE TO COMPANY'S
SHAREHOLDERS. WE EXPECT MANAGEMENT TO CREATE A RETURN ON OUR INVESTMENT.
We believe the Board is controlled by management. The Board has refused to
fill Board seats proportional to the results of the Special Meeting shareholder
vote. In September, we submitted our candidates to fill the existing two vacant
Board seats. Thereafter, Mr. James Legus and Mr. David Ewert resigned and the
Board reduced the number of its members from seven to five and appointed R.
Terren Dunlap and James L. Reissner to fill the two vacancies. The Company's
Nominating Committee did not interview our candidates.
In our view, two groups of shareholders emerged at the Special Meeting.
According to public filings made by the Company, the Company's President and
CEO, Lorin E. Krueger, together with W. Kirk Hankins and Kirk P. Hankins hold
488,359 shares of the Company's common stock (the "Management Shareholders").
The other group of shareholders is made up of all shareholders of the Company
who voted in favor of the proposal made at the Special Meeting (the "Outside
Shareholders"). As of June 25, 2001, the record date for the Special Meeting,
2,952,313 shares of Company stock were issued and outstanding. An average of
1,349,278 shares were voted at the Special Meeting against the Committee's
proposal to replace the incumbent Board and an average of 1,162,076 shares were
voted in favor. HOWEVER, IF A NUMBER OF THE COMPANY'S SHARES EQUAL TO THE NUMBER
OF SHARES HELD BY MANAGEMENT SHAREHOLDERS IS DISREGARDED, A REASONABLE INVESTOR
COULD CONCLUDE THAT THE OUTSIDE SHAREHOLDERS AS A GROUP VOTED OVERWHELMINGLY TO
REPLACE THE BOARD AT THE SPECIAL MEETING. Some of the Outside Shareholders
apparently did side with Management Shareholders. We can only assume that those
shareholders were persuaded by the stories that have been told by management.
Consequently, the votes cast by those shareholders, in combination with shares
voted by Management Shareholders, were sufficient to block the Committee's
proposal to remove the incumbent Board EVEN THOUGH INSTITUTIONAL SHAREHOLDER
SERVICES IN ITS REPORT DATED AUGUST 13, 2001 RECOMMENDED THAT WINLAND'S
SHAREHOLDERS VOTE TO REPLACE THE INCUMBENT BOARD.
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The result of the Special Meeting is that the Committee has not been able
to implement a turnaround of the Company. It appears that the market voiced its
disapproval of the outcome of the Special Meeting. The market price dropped from
$1.20 per share on the day before the Special Meeting to a new low of $.53 on
November 1, 2001.
The Company has just reported a loss of $434,161 for its third quarter
ending September 30, 2001. The Company has blamed much of that loss on the costs
it incurred in connection with the Special Meeting. In our view, had the Company
kept to its regular schedule for its annual meeting, as it should have, or had
management been willing to provide the Outside Shareholders with a voice on the
Board, as we believe it should, the Special Meeting would not have been
necessary at all. Furthermore, if you deduct the Company's estimated cost of
soliciting its proxies for the Special Meeting ($150,000 according to the
Company's Special Meeting proxy dated June 29, 2001), the Company still would
have reported a loss of $284,161 for its third quarter. For the first three
quarters of this year, the Company has accumulated losses of $770,933 according
to its published reports. The Company usually reports a weak fourth quarter. YOU
DO THE MATH. IF YOU ANNUALIZE THESE LOSSES, WHAT NUMBER DO YOU COME UP WITH? We
believe that it is not in the best interest of the Company's Outside
Shareholders to allow management to continue to operate the Company in this
manner.
In his public statements, Mr. Krueger claims that the actions Dyna
Technology, Inc. has taken to improve management accountability and to effect a
turnaround of the Company's performance are somehow designed to benefit only
Dyna Technology at the expense of all other shareholders. How can the loss of
over $500,000 of Dyna Technology's investment benefit us? We fail to see how the
Company's mounting losses benefit anyone but Company management itself.
We believe that the Company is in dire need of effective, pragmatic
leadership; the Company has many problems. We also believe that most of the
Company's problems are the direct result of years of entrenched management. At
present, the Company has a Chairman, a president and six vice-presidents,
including two vice-presidents of sales. What have they done? This past summer,
one of the Company's major customers significantly reduced its business with the
Company. A very large percentage of the Company's business now largely consists
of only two customers. We believe that a company with $15 million in sales can
be effectively led by a strong President/CEO and four or five directors. On
September 17, 2001, the Company reported that it reduced its executive
compensation through the elimination of all Company-leased vehicles for senior
management. Does your employer provide you with a car? In our opinion, these
people should have never been given company cars in the first place! Do you
consider this a bold turnaround move?
We view as positive the departure of Mr. Ewert and Mr. Legus from the
Board. We hope Messrs. Dunlap and Reissner will be more attentive to shareholder
concerns. However, we believe that if Winland is to be turned around the work
must begin now. To that end, we propose that Mr. Robert L. Ring and Mr. Gerald
E. Brown be elected to the Board.
The Board currently consists of five members. All five seats on the Board
are up for election at the Annual Meeting. At the Annual Meeting, the Committee
will seek to elect Mr. Ring and Mr. Brown to the Board. Since the Committee is
proposing only two nominees, three of the Company's nominees will also be
selected. We are also soliciting authority from you to vote for three of the
nominees being sponsored by management. If you grant us authority to vote for
three of the Company's nominees, we will NOT vote for either Mr. S. Robert
Dessalet or Mr. Thomas J. de Petra.
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It is important to work as expeditiously as possible to develop and
implement a plan to effect a turnaround of the Company. Key elements in any
turnaround plan have to be to first bring expenses in line with sales and then
get out and develop new business. Any hope or dream that existing management
could turn the Company around should have evaporated by now. It is in the best
interest of every shareholder to effect change NOW. Please vote FOR the
Committee's Shareholder Proposal and FOR Mr. Ring and Mr. Brown by properly
marking, signing and returning the enclosed BLUE proxy card.
Sincerely,
WINLAND SHAREHOLDERS' PROTECTIVE COMMITTEE
/s/ Ralph I. Call
Ralph I. Call
Chairman
YOUR VOTE IS VERY IMPORTANT! RETURN THE BLUE CARD TODAY. IF YOU HAVE ANY
QUESTIONS OR NEED ASSISTANCE IN VOTING YOUR SHARES, PLEASE CONTACT D.F. KING &
CO. AT (800) 290-6433.
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