RE:News! Please check Sedar updates to Karnalyte - July 9th. Concerned Shareholders Requisition a Special Meeting to Elect an Independent Board of
Directors of Karnalyte Resources Inc.
Time to Stop the Oppression of Karnalyte Shareholders by Gujarat State Fertilizers & Chemicals Limited and the Interim CEO
Concerned Shareholders believe it is time to stop Gujarat State Fertilizers & Chemicals Ltd.'s (“GSFC"), its nominees on the Karnalyte Board ("GSFC Nominees"), and the Interim CEO's oppression of Karnalyte shareholders by appointing a qualified, experienced and independent board of directors
Concerned Shareholder's four nominees bring superior business, agricultural, fertilizer, public company and financial expertise to Karnalyte and will help to create value for long-suffering Karnalyte shareholders
Opportunities in the fertilizer industry in Saskatchewan that have the ability to create both short term and long-term value for the benefit of all shareholders are available to Karnalyte, however, GSFC, the GSFC Nominees and the Interim CEO continue to mis-manage, squander and sabotage such opportunities
GSFC, the GSFC Nominees and the Interim CEO have, over the past 18 months, demonstrated an abject failure of basic corporate governance for a Canadian publicly listed company, as well as a total inability to put the interests of all KRN shareholders ahead of GSFC's interests in order to create value for KRN shareholders
Saskatoon, SK, July 7, 2020 — A group of Karnalyte Resources Inc. (TSX: KRN) (“Karnalyte" or the "Company") shareholders (the “Concerned Shareholders" or "we"), including Peter Matson, Greg Szabo and Mark Zachanowich, together owning not less than 5% of the issued and outstanding shares of the Company, announces that they have requisitioned (the “Requisition”) a special meeting (the "Special Meeting”) of shareholders for the purpose of replacing the board of directors (the “Board”) of the Company with a new independent board capable of pursuing opportunities in the Saskatchewan agricultural and fertilizer industry available to the Company that have the potential to create value for all shareholders.
The Concerned Shareholders are requesting that the Board be constituted with six (6) members, four (4) of whom are highly qualified nominees proposed by the Concerned Shareholders, and two (2) of whom will be nominees of GSFC, in accordance with GSFC's contractual rights to appoint nominees to the Board
The Requisition will result in a Board that will be qualified, experienced and the majority of whom will be independent within the meaning of “independent" under Canadian securities laws and Toronto Stock Exchange (“TSX") rules and regulations requiring a majority of independent directors of a Canadian publicly listed company.
The Concerned Shareholders have requested that the Special Meeting be called and held promptly, and that it be called no later than July 27, 2020, as required by the Business Corporations Act (Alberta).
Concerned Shareholder Nominees
Independent and Highly-Qualified Nominees
The Concerned Shareholders are seeking the Karnalyte shareholders' support to elect four (4) highly qualified and experienced independent director candidates (the “Nominees”) to the Board at the Special Meeting
The Nominees, three of whom are fully independent of Karnalyte, and the fourth of whom is a former Director and Interim CEO of Karnalyte, have impeccable credentials and possess the relevant, diverse and global experience to provide much-needed oversight of strategy in order to create long-term shareholder value at Karnalyte.
Three of the Nominees have Bachelor Degrees in Agriculture from the University of Saskatchewan, while the fourth Nominee holds a Bachelor of Commerce from the University of Saskatchewan, and all four Nominees have a deep understanding of and ties to the agricultural industry in Saskatchewan.
Each of the Nominees has held senior leadership positions at leading private and public Canadian and international companies and all have significant business, agricultural, fertilizer, manufacturing, financial and public company expertise. Some of these companies include: Hitachi, Enterra Energy, Bioriginals, Royal Bank of Canada, AGT, Agri-Tech, Lallemand Inc., Koch, Monsanto and Bayer.
While the Nominees will act as independent fiduciaries, they have all indicated support for the Concerned Shareholders' strategic plan to pursue opportunities in the agriculture and fertilizer industry in Saskatchewan that are available to Karnalyte order to create value for all shareholders.
The Nominees include:
Mr. Joe Vidal (Independent)
O Seasoned CEO with national and international leadership experience in manufacturing, power generation, technology and finance o President & CEO of Bioriginal Food & Science Corp., a global leader in delivering complete nutritional solutions to the food and nutraceutical industries since 2005 o Corporate governance experience at Chairman level for NYSE and TSX listed companies
Holds a Bachelor of Commerce from the University of Saskatchewan (1984) and a CA designation (1986) now (CPA)
Mr. Neil Yelland (Independent)
o More than 25 years of broad sales, marketing and consulting experience in the agricultural sector, including agronomics, fertilizer, chemicals, precision agriculture and fuel o Prior positions with Agrotrain International LLC/Koch Fertilizer, Agri-Trend/Trimble, Llalemand Inc., Monsanto Canada and Bayer Cropscience Inc. O Holds a Bachelor of Science (Agronomy / Economics) from the University of Saskatchewan
Mr. Joe Clavelle (Independent)
OOO
o Senior Business Executive with a 25-year track record of successful business development, results and team leadership
20 years' experience in corporate and commercial banking with RBC Royal Bank
14 years' experience with Government/Toll/Infrastructure/Public Sector Industry O Holds a Bachelor of Agriculture, Economics from the University of Saskatchewan
Mr. Todd Rowan (Not Independent)
o More than 25 years' sales, marketing, grain and pulse experience in the Saskatchewan agricultural industry for some of Saskatchewan's largest agricultural companies and growers o Principal of Trendmax Agribusiness Group, a private consulting firm proving agricultural marketing services to the Saskatchewan agricultural industry
Previously served as a Director of Karnalyte (2017 to 2019)
Previously served as the Interim CEO of Karnalyte (2018 to 2019) o Director of Procurement with AGT Grain Traders, one of largest global suppliers of value-added pulses, staple foods and food ingredients (2006 to 2013) o Holds a Bachelor of Agriculture, Economics from the University of Saskatchewan
Concerned Shareholders Selection Criteria for the Nominees
The Concerned Shareholders believe that, as a basic principle, all candidates for nomination to the Board must be honest, have integrity and ethics beyond reproach, and a majority must meet all standards of independence applicable to Karnalyte by having no direct or indirect material relationships with the Company or its shareholders.
In addition, the Concerned Shareholders believe that all nominees must have the competencies, skills, background and experience to advance the Company's projects in a timely manner to the next stage of their development. The skills matrix used by the Concerned Shareholders to identify and select the Nominees includes such items as direct experience in the Canadian and Saskatchewan agriculture and fertilizer industry, manufacturing in Canada, senior executive experience in both private and public company settings, capital markets and project financing expertise, together with corporate governance expertise in meeting all legal and regulatory requirements applicable to a Canadian public company.
The Concerned Shareholders believe applying their skills matrix to the Nominees indicates:
Joe Vidal
Neil Yelland
Joe Clavelle
Todd Rowan
Skills and Experience
Senior Executive Public Company Experience Agriculture Experience Fertilizer Experience Manufacturing Experience Project Finance / Capital Markets Experience Financial/Accounting Expertise Government Relations
Information Concerning the Nominees
As set out in the Requisition, the Nominees are Joe Vidal, Neil Yelland, Joe Clavelle and Todd Rowan. The table below sets out, in respect of each Nominee, his name, province and country of residence, his principal occupation, business or employment within the five preceding years, and the number of shares beneficially owned, or controlled or directed, directly or indirectly, by such Nominee.
Name and Province/State and Country of Residence
Present and Past 5 Years' Principal Occupation,
Business or Employment
Number of Common Shares Beneficially Owned or Controlled (Directly or
Indirectly)
Nil
Joe Vidal Saskatchewan, Canada
President & Chief Executive Officer Bioriginal Food & Science Corp (2005 to present)
207,750
Neil Yelland Saskatchewan, Canada
SK Divestures (Senior Consultant) (2018 to present) Royal Lepage (Agent) (2019 to present) Ag-Tech Consulting Inc. (2018) Silo Technology (2018) Lallemand Inc. (2017 – 2018) Agri-Trend / Trimble (2015 – 2017)
80,000
Joe Clavelle Saskatchewan, Canada
Vice President Business Development Providers and Partners, BESTPASS, Inc. (May 2014 to present)
333,000
Todd Rowan Saskatchewan, Canada
Independent Agricultural Consultant Trendmax Agribusiness Group (2013 to present) Interim CEO of Karnalyte Resources Inc. (2017 to 2019) Alliance Grain Traders (AGT) (2006 to 2013)
Notes:
(1) None of the Nominees has been or is currently a director of the Company, nor has any of the Nominees held any other position or office with the Company or any of its affiliates, except for Todd Rowan, who was a Director of the Company from May 2017 to December 2019 and who was the Interim Chief Executive Officer of the Company from July 2017 to April 2019. Mr. Rowan is currently an independent consultant to the Company. (2) The information concerning each of the Nominees in this table has been furnished by the respective Nominee.
Concerned Shareholders' Objective
The Concerned Shareholders' objective is simple - elect an independent Board with impeccable credentials, relevant skills and a track record of success to allow Karnalyte to realize on opportunities in the Saskatchewan agricultural, fertilizer and chemicals industry that have the potential to create both near-term, and long-term, shareholder value. The Concerned Shareholders look forward to effecting immediate, and critically necessary change at the Special Meeting in order to achieve greater accountability, transparency and value for all Karnalyte shareholders.
Concerned Shareholders' Strategic Plan for Karnalyte
The Concerned Shareholders' strategic plan for Karnalyte is focused on pursuing opportunities in the fertilizer and chemical industry in Saskatchewan that are available to Karnalyte to create shareholder value. This strategy, developed during the Concerned Shareholders' tenure as members of the Karnalyte Board, consists of pursuing opportunities in both potash and nitrogen fertilizer.
Potash
Karnalyte was founded on the Wynyard potash project (“Potash Project”), located in Wynyard, Saskatchewan. While Karnalyte has pursued the development of the Potash Project for the past 10 years, the unfortunate reality is that the Potash Project is not economically viable at the present time. As such, further development at this time does not hold the ability to create value for Karnalyte shareholders. The Potash Project has not disappeared, it is just on hold pending improvement in the potash market that will make the Potash Project economically viable.
While this is extremely disappointing, the Concerned Shareholders developed a strategic plan to pursue the development of a nitrogen fertilizer plant in Saskatchewan, as a near-term opportunity to create value for the Karnalyte shareholders, while development of the Potash Project remained on hold.
Nitrogen
The Concerned Shareholders, together with Karnalyte management at the time, created a strategic plan to investigate the development of a regional scale nitrogen fertilizer plant (the “Nitrogen Project”) in Central Saskatchewan. This plan was developed to pursue a near-term opportunity to satisfy the demand for a local, independent and alternate source of nitrogen fertilizer in the heart of the Canadian farm belt where the usage rates and prices for nitrogen fertilizer were the highest in the world. Coupled with the readily available supply of reliable and inexpensive natural gas in Saskatchewan, the Concerned Shareholders felt it was an opportunity worth investigating for the benefit of all Karnalyte shareholders.
Significant progress was made on investigating the potential nitrogen fertilizer plant during 2018 during the Concerned Shareholders' tenure on the Board, including an initial independent marketing study, identification of a suitable project site, and advanced discussions with potential strategic partners operating in the Saskatchewan agricultural sector. In addition, Karnalyte undertook a rights offering to raise funds specifically for purposes of the Nitrogen Project. Over the past 18 months the Concerned Shareholders believe that GSFC, the GSFC Nominees and the Interim CEO, have mis-managed, squandered and sabotaged this opportunity, to the detriment of all Karnalyte shareholders.
Concerned Shareholder's Background with Karnalyte
The Concerned Shareholders are all long-time shareholders of Karnalyte and have very significant "skin in the game". Peter Matson and Greg Szabo's individual shareholdings place each of them among the top five shareholders of Karnalyte. In 2017, all of the Concerned Shareholders were elected to the Board. During their tenure on the Board, the Concerned Shareholders engaged an experienced CEO and developed a strategic plan specifically tailored to opportunities available to Karnalyte.
In early 2019, the Concerned Shareholders found themselves offside Karnalyte's Code of Business Conduct, took responsibility for their actions, and resigned from the Board as the appropriate and ethical course of action. The actions of the Concerned Shareholders while members of the Board do not disentitle them to fully exercise their rights as shareholders of Karnalyte to pursue a change in the current board and management of Karnalyte in order to create value for all Karnalyte shareholders.
Oppression by GSFC, GSFC Nominees and Interim CEO
Focus on the Facts
The Concerned Shareholders intend to focus on the facts. We believe that GSFC, the GSFC Nominees and the Interim CEO are on the wrong side of the facts. The Concerned Shareholders believe their assertions are supported by Karnalyte's own continuous disclosure record which can be found on Company's profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. The Concerned Shareholders are merely analyzing the facts and drawing the only logical and plausible conclusions from those facts.
The Facts: Abject Failure of Corporate Governance & Entrenchment
The Concerned Shareholders believe that the facts demonstrate that GSFC and the GSFC Nominees, facilitated by the Interim CEO, have over the past 18 months demonstrated an abject failure to follow basic corporate governance requirements for a Canadian publicly listed mining company. Instead, they have taken control of the Board, entrenched themselves as directors on the Board, hired an Interim CEO who lacks the skills, background and experience to run a public mining company, and pursued a strategy that does not create value for Karnalyte shareholders.
GSFC is not entitled to control the Board. GSFC is a 38% shareholder of Karnalyte and GSFC has the contractual right to appoint nominees to the Board only in proportion to its shareholdings in Karnalyte.
If the Board is reconstituted with six (6) directors, as set out in the Requisition, then GSFC would only be entitled to two (2) nominees on the Board, thereby holding only two (2) of six (6) Board positions. This would be consistent with GSFC's contractual rights to nominate individuals to the Board.
The Concerned Shareholders would like to know why, for the past 18 months:
GSFC and the GSFC Nominees have controlled the Board when they are not entitled to?
entrenched themselves as Board members?
failed to comply with the most basic corporate governance principles?
GSFC, the GSFC Nominees and the Interim CEO are no doubt aware that they are in breach of:
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their contractual agreements with Karnalyte;
Canadian securities laws;
TSX rules and regulations; and
their legal and fiduciary duties to Karnalyte shareholders.
The Concerned Shareholders believe that the time has come to stop the oppression of Karnalyte Shareholders by GSFC, the GSFC Nominees and the Interim CEO.
The Facts: Inexperienced Management
The Concerned Shareholders believe that the current Interim CEO, Danielle Favreau, does not have the skills, background or experience to run a Canadian public mining company and create value for all shareholders. As illustration of this lack of experience:
Ms. Favreau gave an interview to the Canadian Broadcasting Corporation (the “CBC”) where she stated “Generally speaking, men tend to sort of step into roles or go after roles that they maybe are uncomfortable with a little bit,"....... "They don't know everything they need to know but they just typically have the confidence to just try it and they know they'll figure it out. We're just as capable of doing that too."
Ms. Favreau purchased rights in Karnalyte's rights offering in December 2018 yet, according to her SEDI filings, appears to never have exercised or sold those rights.
Ms. Favreau is facilitating GSFC in undertaking a non-independent, GSFC in-house prepared pre feasibility study on the Nitrogen Project, a clear case of bias, conflict of interest and self-dealing.
The reconstituted Board will determine the best management to run Karnalyte, however the Concerned Shareholders believe that Karnalyte shareholders deserve a CEO that:
Has the skills, background and experience to create value for Karnalyte shareholders, rather than one who essentially admitted to the CBC that she doesn't really know what she is doing, but she will give it a try
Has the requisite project development and project finance experience to successfully undertake and complete major capital projects
Will not under any circumstances tolerate or facilitate bias, conflicts of interest or self-dealing by any party
The Facts: Squandered Opportunities to Create Shareholder Value
The Concerned Shareholders believe that GSFC, the GSFC Nominees and the Interim CEO have mis managed, squandered and sabotaged the opportunity to investigate the Nitrogen Project. All of the progress made by Karnalyte during the Concerned Shareholders' tenure on the Board has evaporated. Rather than acquiring a suitable project site and undertaking an independent feasibility study to prepare the Nitrogen Project for potential permitting, financing and construction, GSFC, the GSFC Nominees and the Interim CEO appear to be slow walking the Nitrogen Project as they pursue the preparation of a GSFC in-house prepared, non-independent pre-feasibility study.
The Concerned Shareholders believe that the opportunity for the Nitrogen Project remains, however, they believe that the opportunity will never be realized for the benefit of Karnalyte shareholders under the stewardship of GSFC, the GSFC Nominees and the Interim CEO.
The Concerned Shareholders would like to know why:
the Board and the Interim CEO authorized GSFC to undertake a non-independent, GSFC in-house prepared pre-feasibility study on the Nitrogen Project, rather than engaging a reputable, international and most importantly, independent, third-party engineering firm to undertake the study?
GSFC, the GSFC Nominees and the Interim CEO are apparently blind to the obvious bias, conflicts of interest and self-dealing inherent in such a pre-feasibility study?
it takes more than a year to undertake and complete such an in-house pre-feasibility study?
the Board and the Interim CEO are not using the proceeds from the rights offering that were specifically allocated to the Nitrogen Project, for the purposes represented to shareholders who invested in the rights offering, including all of the Concerned Shareholders?
Shareholder Warning: The Board is Likely to Reject the Requisition
The Concerned Shareholders fully expect the Board to reject the Requisition for spurious reasons. Even if the Board accepted the Requisition and called the Special Meeting, the Concerned Shareholders fully expect GSFC to vote against the Nominees, which would provide further evidence of GSFC's and the GSFC Nominees' continued:
oppression of Karnalyte shareholders;
entrenchment of the GSFC Nominees on the Board;
breaches of contractual rights, Canadian securities laws and TSX rules and regulations; and
breaches of their legal and fiduciary duties to shareholders.
The Concerned Shareholders urge the Board not to take any steps to deny the Concerned Shareholders their legitimate, legal rights as shareholders of Karnalyte and to not further oppress shareholders and entrench themselves on the Board.
Contacts
Peter Matson, on behalf of the Concerned Shareholders and the Nominees, welcomes the opportunity to engage with fellow shareholders. Mr. Matson can be reached at peter.matson.bell@gmail.com.
Additional Information
The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although the Concerned Shareholders have delivered the Requisition, there is currently no record or meeting date set for the Special Meeting and shareholders are not being asked at this time to execute a proxy in favor of the Nominees. In connection with the Special Meeting, the Concerned Shareholders may file a dissident information circular in due course in compliance with applicable securities laws.
Notwithstanding the foregoing, the Concerned Shareholders are voluntarily providing certain information regarding the Nominees in this press release under the section entitled "Information Concerning the Nominees".
The information contained herein and any solicitation made by the Concerned Shareholders in advance of the Special Meeting is, or will be, as applicable, made by the Concerned Shareholders and not by or on behalf of the management of Karnalyte. All costs incurred for any solicitation will be borne by the Concerned Shareholders, provided that, subject to applicable law, the Concerned Shareholders may seek reimbursement from Karnalyte of the Concerned Shareholders' out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board.
The Concerned Shareholders are not soliciting proxies in connection with the Special Meeting at this time. The Concerned Shareholders may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on behalf of the Concerned Shareholders. Any proxies solicited by or on behalf of the Concerned Shareholders, or by any other agent, may be solicited pursuant to a dissident information circular or by way of public broadcast, including through press releases, speeches or publications and by any other manner permitted under Canadian corporate and securities laws. Any such proxies may be revoked by instrument in writing executed by a shareholder or by his or her attorney authorized in writing or, if the shareholder is a body corporate, by an officer or attorney thereof duly authorized or by any other manner permitted by law.
The registered address of Karnalyte is located at 2100 Livingston Place, 222 3 Ave SW Calgary, AB T2P OB4. A copy of this press release may be obtained on the Company's SEDAR profile at www.sedar.com.