Karnalyte dissidents receive support from 30% of shares Karnalyte dissidents receive support from 30% of shares
2015-01-20 14:40 MT - News Release
Mr. Robin Phinney, a concerned shareholder, reports
CONCERNED SHAREHOLDERS OF KARNALYTE RESOURCES INC. SUBMIT SHAREHOLDER PROPOSAL AND URGE INCUMBENT BOARD TO HEED THE CALL FOR CHANGE
Robin L. Phinney, a significant shareholder and the designated representative of a group of concerned shareholders of Karnalyte Resources Inc., urge the incumbent board of directors to heed the call for change to the company's board in order to restore shareholder confidence in the company's leadership and avoid the unnecessary delays, distractions and costs of a proxy contest.
Shareholders support the proposed board changes
Since announcing the concerned shareholder group's proposed director nominees and the reasons for requisitioning a special meeting of shareholders on Dec. 23, 2014, Mr. Phinney has received letters of support from many Karnalyte shareholders who, together with the concerned shareholder group, represent an aggregate of approximately 30 per cent of the issued and outstanding shares of Karnalyte in support of the board changes proposed by the concerned shareholder group.
Mr. Phinney commented: "As a co-founder and the second largest shareholder of the company, it is my sincere hope that the incumbent board will listen to the building wave of shareholder support and implement the board changes to avoid an unnecessary and disruptive proxy contest, and to enable the reconstituted board to refocus the company's resources on building long-term shareholder value for all shareholders. I am disappointed and saddened by the fact that, to date, the incumbent board has not addressed the concerns of a significant number of shareholders. The incumbent board appears to be primarily interested in taking steps to entrench itself."
Disappointment with delayed requisitioned meeting date
Mr. Phinney also expressed his disappointment with the incumbent board's failure to call the requisitioned meeting in a timely manner, and instead chose to delay the requisitioned meeting until May 12, 2015, three months later than the requested date of Feb. 13, 2015.
Mr. Phinney commented: "The stated reason for the delayed meeting -- 'to give the incumbent board more time to explore a potential $700-million (U.S.) financing' -- is particularly disconcerting because the requisitioned meeting is essentially a confidence vote on the incumbent board and shareholders should have full confidence in the individuals responsible for negotiating such a significant financing for the company. In my view, this is not a valid reason to delay the requisitioned meeting. Moreover, as stated in the company's Jan. 2, 2015 press release, the proposed financing may not even be presented to shareholders at the requisitioned meeting. This means that, while delaying its own confidence vote, the incumbent board is continuing to pursue and may commit the company to a significant financing without seeking shareholder approval."
Shareholder proposal for the protection of Karnalyte shareholders
In order to address the foregoing concerns and to ensure Karnalyte shareholders have meaningful input in the future of their company, Mr. Phinney has submitted a shareholder proposal to the company and has requested that the proposal and related supporting statement be included in the requisitioned meeting materials. The shareholder proposal contains proposed amendments to the company's general bylaws which, if adopted, would allow shareholders to have a say on certain material transactions of the company such as the proposed $700-million (U.S.) financing.
Mr. Phinney commented, "The proposed amendments are designed to protect the interests of shareholders by requiring the board to seek input and approval from shareholders on transactions involving changes to the strategic direction of the company, a significant capital investment or financial commitment by the company or dilutive share issuances."
The shareholder proposal and supporting statement submitted to the company are as follows:
Resolution No. 1 -- shareholder approval required for incurring significant indebtedness
"Be it resolved that bylaw No. 1 be amended by adding the sentence at the end of Section 3.01 (under borrowing and securities):
"3.01A borrowing power. Without limiting the borrowing powers of the corporation as set forth in the act, but subject to the articles or any unanimous shareholders agreement, the board may from time to time on behalf of the corporation, without authorization of the shareholders:
"(a) Borrow money upon the credit of the corporation in such amounts and on such terms as may be deemed expedient by obtaining loans or advances or by way of overdraft or otherwise;
"(b) Issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the corporation, whether secured or unsecured for such sums and at such prices as may be deemed expedient;
"(c) To the extent permitted by the act, give a guarantee on behalf of the corporation to secure performance of any present or future indebtedness, liability or obligation of any person;
"(d) Charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any present and future property, real and personal, immoveable and moveable, of the corporation, including its undertakings and rights, to secure any bonds, debentures, notes or other evidences of indebtedness or guarantee or any other indebtedness, liability or obligation of the corporation, present or future;
"(e) Delegate to a committee of the board, a director or an officer of the corporation all or any of the powers conferred aforesaid or by the act to such extent and in such manner as the directors may determine.
"Nothing in this section limits or restricts the borrowing of money by the corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the corporation. Notwithstanding anything contrary in the foregoing, whether or not strictly required under applicable laws or applicable rules of any stock exchange, the board shall obtain shareholder approval before permitting the corporation to enter into any agreement or commitment with respect to the types of transactions described in this clause 3.01 if such agreement or commitment involves the incurring of indebtedness or the assumption of liability by the corporation or its affiliates (including without limitation the giving of guarantees) outside the ordinary course of business (other than intercompany indebtedness among the corporation and its affiliates) and: (i) would be in an aggregate amount (whether committed or conditional) exceeding 100 per cent of the corporation's market capitalization at the relevant time; or (ii) containing terms and conditions that are not customary, including without limitation prices and interest rates, to the detriment of the corporation or its affiliates."
Resolution No. 2 -- shareholder approval required for significant transactions
"Be it resolved that bylaw No. 1 be amended by adding the following provision as Section 11.04 (under divisions and departments):
"11.04A shareholder approval for material transactions. The board shall obtain shareholder approval before entering into any transaction (or a series of related transactions) which:
(a) "Could impact or change the corporation's stated business strategy of exploring and developing high-quality agricultural and industrial potash and magnesium products; or
(b)"Involve a significant capital investment or financial commitment (whether absolute, contingent or otherwise) by the corporation or its affiliates in an amount exceeding 100 per cent of the corporation's market capitalization at the relevant time."
Resolution No. 3 -- shareholder approval required for significant equity issuances
"Be it resolved that bylaw No. 1 be amended by adding the following provision as Section 8.12 (under shares):
"8.12A shareholder approval for certain share issuances. The board shall obtain shareholder approval before issuing shares or securities exercisable, exchangeable or convertible into shares, in excess of 10 per cent of the corporation's then outstanding voting securities (except for such issuances where all shareholders have a right to participate on a pro rata basis)."
Supporting statement:
"Karnalyte shareholders are encouraged to vote for the foregoing resolutions which are intended to preserve and enhance shareholder value at Karnalyte by ensuring that that shareholders have a say on any proposed changes to Karnalyte's stated business strategy and by requiring shareholder approval in connection with proposed transactions involving the incurrence by Karnalyte of significant debt, the making of significant financial commitments by Karnalyte or the significant dilution of current Karnalyte shareholders."
Additional information
Except where otherwise stated herein, the statements contained in this press release are not made by or on behalf of the management of Karnalyte but are made by or on behalf of Mr. Phinney. Information concerning the business of the concerned shareholder group to be considered at the requisitioned meeting, including information relating to the nominees of the concerned shareholder group, are contained in the press release of Mr. Phinney dated Dec. 23, 2014, under the sections entitled "concerned shareholder nominees" and "additional information relating to public broadcast solicitations." The press release containing the additional information has been filed on the company's SEDAR profile. Additional information in respect of the requisitioned meeting will be contained in an information circular prepared by or on behalf of the concerned shareholder group and mailed to Karnalyte shareholders in advance of the requisitioned meeting or as otherwise required by law.
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