February 8, 1995
Dear Mr. Govaerts,
This is in further regard to your previous letter to Richard Bozulich.
It is clear that you have misinterpreted the bylaws of Ishi Press International. These bylaws were not drafted by your law firm. Rather, they are the model bylaws which were copied by your firm directly from California Legal Forms, Transaction Guide, Matthew Bender & Co., pages 4-41 to 4-193. I am sure that this book is available in your law library. Copies of some of the relevant pages are enclosed.
Since the Ishi Press International bylaws were copied directly out of this law book, word for word, the explanation and interpretations found in that book as to what these bylaws mean are authoritative.
Section 4.04 (b) of the model bylaws, which are also the bylaws of Ishi Press International, state:
"Special meetings of the shareholders may be called by the Board of Directors, the Board Chairman, the President, or the holders of shares entitled to cast not less than 10 percent of the votes at the meeting."
On page 4-192 of California Legal Forms, Transaction Guide, Matthew Bender & Co., there is a comment that there is a form of bylaw provision that may be used to expand the list of persons who may call a special meeting of stockholders. However, the commentary makes it clear that, under the California Corporation Code, the bylaws may not reduce the list of persons entitled to call a meeting. Thus, even if the Ishi Press International bylaws had not included a provision giving the right of a 10% stockholder to call a meeting, such a stockholder would have the right to do so anyway, as that right is embodied in California Corporation law.
Accordingly, it is clear that your interpretation of the law is wrong and ours is right. The stockholders meeting which took place on November 7, 1994 was clearly a properly called and constituted meeting. As you are well aware, our slate of directors won the election, and your slate lost.
We are well aware, however, of the fact that the opposing side has often stated that it would prefer to scuttle the company altogether rather than to accede to the will of the majority of the stockholders. Mr. Berkowitz, in particular, has directly stated that he is prepared in his own words to "destroy the company" rather than to accept his own removal from the board. In view of the fragile financial condition of the company, we have been extremely concerned about this threat, as well as the threat contained in your letter to bring an action under Corporations Code Section 709 to have our election declared invalid, considering the legal costs and expenses involved, which you will undoubtedly try to charge to the corporation.
It is noteworthy that Mr. Berkowitz and his associates have only a very nominal stake in Ishi Press International. The reason for this is that they voluntarily chose to transfer their financial interest to Ishi International (London). Then, when that company failed shortly thereafter, they suddenly became interested in re-asserting their rights to Ishi Press International.
It is legally clear that Mr. Berkowitz only owns 10,000 shares of Ishi Press International and the 158,000 shares which he claims that he (or you) issued to himself were issued illegally.
We have been trying for several months to resolve these matters, in recognition of the obvious fact that a full scale court battle will likely result in the decimation of the company. We believe that there has been some superficial improvement in the situation. Nevertheless, we feel that further progress is unlikely, as long as you continue to assert your specious claim that our stockholders election is invalid.
Very Truly Yours,
Samuel H. Sloan, President