Aetrium, Activist Investor Group Settle Dispute

Five members of the investor group were permitted to immediately join Aetrium’s board, thus temporarily boosting its size to 11 members; directors from both parties will then see if they can agree on a slate of directors to be presented for a shareholder vote in May, at which time the size of the board will shift to five members.

Aetrium, Inc., and a group of dissident investors that had been attempting to overthrow the company’s board have settled their dispute.
North St. Paul-based Aetrium and the investor group, which bills itself as “Concerned Aetrium Shareholders” (CAS), jointly announced that they have reached an agreement under which five members of CAS can immediately join the board of Aetrium, a public company that makes equipment used by the semiconductor industry. In conjunction with the agreement, the company’s six-member board will increase in size to 11 members—but only temporarily.
Douglas Hemer, who retired late last year from his post as Aetrium’s chief administrative officer but continues to serve as a company consultant, told Twin Cities Business on Monday that the board will consist of five members following Aetrium’s annual shareholder meeting scheduled for May 15. He said the five board seats awarded to CAS represent an “initial-stage settlement,” and between now and mid-March, all 11 directors from both parties will see if they can agree on a common direction for Aetrium and a slate of five directors to be presented for a shareholder vote. If not, the company and the investor group will be able to nominate competing five-member slates. (The reason for shifting the size of the board to five members rather than the previous six is that one current board member plans to retire, Hemer said.)
Hemer said Aetrium directors are elected on an annual basis. If Aetrium and CAS cannot agree on five directors and do in fact nominate separate slates, the five directors elected could still represent a mixture of the two slates, as shareholders must vote on each individual nominee; the five nominees who receive the most votes will serve as directors for the subsequent year.
“This settlement will allow the company to focus on its operations and will let the shareholders choose the ongoing directors at the May annual shareholder meeting,” Aetrium CEO Joseph Levesque said in a prepared statement.
The agreement, which also calls for Aetrium to pay CAS $85,000, settles outstanding litigation between the parties.
“We are pleased to have reached an accommodation with the incumbent directors that provides our immediate participation on the Aetrium Board and will allow the shareholders to elect directors at the 2013 annual meeting without further complications,” CAS spokesman Jeffrey Eberwein said in a statement.
The just-resolved disagreement between Aetrium and CAS dates back to the fall. News surfaced in September that CAS, which owns about 17 percent of Aetrium’s shares, was fighting for control of the company’s board. The investor group had claimed that it was necessary to replace Aetrium’s leadership because the existing board had been unable to halt a drop in the company’s stock price, poor financial performance, and excessive compensation, among other accusations. In 2011, Aetrium recorded a $4.7 million net loss on revenue totaling $9 million—down 45 percent from the previous year; the company hasn’t yet reported its 2012 financial results, but for the quarter that ended September 30, it reported a $4.1 million net loss on revenue totaling $796,000.
Aetrium’s leaders have pointed out that demand for semiconductors has been down since the recession, but industry forecasters are predicting a rebound. Additionally, Levesque has refuted accusations that the company’s leaders are overpaid and said that he’s been voluntarily working under a reduced salary.
CAS sued Aetrium in late November after the two sides couldn’t agree on the results of a vote that took place at a special shareholder meeting on November 26—a meeting that was called by CAS. (Following the meeting, Eberwein told Twin Cities Business that about 45 percent of the company’s shareholders voted in the proxy battle, and the dissident group received roughly 88 percent of the votes cast. But Aetrium, citing a company bylaw, said that no official business was conducted at the meeting, and the vote was moot, because 50 percent of shareholders must participate to constitute a quorum.)