WASHINGTON, March 17 /PRNewswire-FirstCall/ -- Crown EMAK Partners, LLC today sent the following letter to shareholders of EMAK Worldwide, Inc. (OTC: EMAK):
CROWN EMAK PARTNERS, LLC
1775 PENNSYLVANIA AVENUE, NW
WASHINGTON, DC 20006
TEL (202) 466-5919
March 17, 2010
Dear Fellow Stockholders:
To those of you who do not know me, let me introduce myself. I am Peter Ackerman. I control Crown EMAK Partners, LLC, which owns EMAK's preferred stock. Crown bought that stock for $25 million in 2000, which means that Crown has been an EMAK investor for a decade and that we have by far the biggest single investment in the Company.
I write for two purposes. First, to update you on the current situation at EMAK. Second, I want to lay out briefly my thoughts on the Company, and explain why I believe that we have a management and employee team in place that can build substantial value for all shareholders.
As you might know, the Company is currently awaiting a Court decision on who won the competing stockholder consent solicitations last December. In the meantime, it is being governed by a Court-supervised board that has four nominees of the Take Back EMAK (TBE) group, and two nominees of Crown -- Jeff Deutschman and Jordan Rednor. Jeff has been a director of EMAK for almost 10 years, was formerly a partner at Crown, and is now a partner at a leading asset management firm. Jordan was a director on the previous board and is universally respected for his business knowledge and integrity. When Crown offered Jordan the position, we told him that we wanted him not to serve as a "Crown" director, but to continue to represent all stockholders equally to the best of his ability. Jordan wouldn't have had it any other way -- which is precisely why we wanted him to continue as a director.
Putting the current Court fight aside, in early March Crown delivered stockholder consents from holders of over 60% of the company's stock supporting our proposed bylaw amendments. These shares represent approximately 75% of the common shares not held by the TBE group. This overwhelming support is significant because we had previously delivered consents from holders of over 50% of the stock, and in response the TBE nominees (with the honorable exception of Mr. Kleweno) voted to increase the vote required to amend the bylaws to 60%. While we believe this action was not legal -- moving the goalposts in the middle of the game seldom is -- I believe that the support of the stockholders has rendered that a moot point. We can't say for certain how events will turn out, but I am confident that either the consents or the court process will return control of this company to a majority of the stockholders.
Unfortunately, I have some very unpleasant news as well. As some of you may have heard, Don Kurz's personal lawyers submitted to the Court what they called an "interim" fee application seeking to have EMAK pay them a contingent "success" fee of $2.4 million. This fee covers only the period from late October through early December and is a multiple of standard hourly rates. They also requested that their application be heard immediately – in other words, they wanted it heard before control of the company was resolved. That staggering amount is between 10-15% of the Company's entire enterprise value according to Mr. Kurz's own valuation. I was shocked at the size and timing of this request.
The Company is entitled to oppose this request, but Don's nominees (again with the exception of Mr. Kleweno) refused to take any action to oppose this application. Who was the lawyer advising them on their response? It was none other than one of the lawyers seeking the fee. Not surprisingly, they decided not to disclose this fee -- or their refusal to contest it -- to you, the shareholders.
I instructed Crown's lawyers to ask the court to delay this request until after the control of the company is resolved so that the company can respond appropriately. Thankfully, the Court declined to schedule the request immediately. But, I expect that the company will receive a second request for another substantial amount. If that happens, we will again respond.
Nevertheless, there is a lot to be grateful for at EMAK. Over the last year, I have made a special effort to dig in and access the quality of EMAK's management. With $25 million invested, I thought it prudent to make sure we had the right people, and if we didn't I intended to push to replace them. Consequently, I have had numerous visits and phone conversations with our CEO, Jim Holbrook. Together, we have also had lengthy sessions with Brian Kristofek, the President of Upshot. And I have introduced Jim to several investors and senior executives in the advertising and marketing services industry.
My conclusion (reinforced by the industry experts who met Jim) is that we have an excellent management team with creative professionals who continue to provide terrific service to our clients. Our employees are true marketing experts, seasoned in the marketing services industry, share a vision for what EMAK can become, and have done a tremendous job in building the marketing services business at EMAK. Already this team has launched a successful agency (Neighbor) and doubled the size of Upshot despite the turmoil and difficulty at the Company. Think what they will be able to do with a clear mandate from the shareholders!
We also have a client list that would be the envy of anyone in our industry. The team has continued to land new clients, develop new business, and provide fresh and exciting ideas to our clients. I see a lot of business plans and am skeptical about the vast majority of them, but I am excited about the future of EMAK and look forward to building it with you and with our talented management and employees.
The only way to achieve success for all stakeholders (employees and common and preferred stockholders) is to grow our core businesses. In my 35 years in business I have come to understand that the foundation of all great companies is focus and more focus. Don Kurz threatens to divert the company away from its primary mission by re-entering the products business. One of the reasons our consents received overwhelming support is that most shareholders no longer want to be involved in that dying, low-margin, high-risk industry, which EMAK should have exited years ago. With marketing services, we are in the right space, at the right time, and with the right people to create an enterprise of lasting value of which we can all be proud.
Finally, and most importantly, I want to express my personal gratitude to EMAK's management team and employees. I can't imagine how difficult this has been for them and yet they have performed their jobs with great professionalism. The support of our consent by 100% of senior management means a great deal to me.
I also realize that some of the senior management will be leaving EMAK because of the elimination of the centralized management structure. The other stockholders should know that it was senior management itself that determined that this change was the best for EMAK even though it meant that they were terminating their own employment. What type of dedication and loyalty does that show? On behalf of all the stakeholders in EMAK, I want to thank the departing managers for their hard work, and the many contributions they have made to EMAK. We are a better company because of their efforts.
If any of you have any questions please contact me. I thank all of you who voted for our consents for their support. And for those of you who voted for TBE I'd be glad to speak with you as well. It's time to put these disputes in the past and move forward to build our Company.
SOURCE Crown EMAK Partners, LLC