News! - 5th Press Release on Sedar July 22nd, 2020 - CSG Concerned Shareholders Request Independent Investigation
Time to Stop the Oppression of Karnalyte Shareholders by
Gujarat State Fertilizers & Chemicals Limited and the Interim CEO
• Concerned Shareholders have formally asked Karnalyte and the Karnalyte Board (the “Board”) to undertake an independent investigation into the conduct of Gujarat State Fertilizers & Chemicals Limited’s (“GSFC”) nominees (“GSFC Nominees”) to the Board and the Interim CEO
• Concerned Shareholders believe shareholders are entitled to an independent review of the GSFC Nominees’ and the Interim CEO’s actions with respect to compliance with Karnalyte’s Code of Conduct
• If the review discloses breaches of the Code of Conduct, the Concerned Shareholders expect immediate resignations from all parties in breach of the Code of Conduct
• Concerned Shareholders believe it is time to stop GSFC’s, its nominees on the Board, and the Interim CEO’s oppression of Karnalyte shareholders by appointing a qualified, experienced and independent board of directors Saskatoon, SK, July 22, 2020 — A group of Karnalyte Resources Inc. (TSX: KRN) (“Karnalyte” or the "Company") shareholders (the “Concerned Shareholders”), owning not less than 5% of the issued and outstanding shares of the Company, thank those shareholders who have reached out to express support for the Concerned Shareholders’ four (4) nominees (the “Nominees”) for election to the Karnalyte board of directors (the “Board”).
On July 7, 2020, the Concerned Shareholders requisitioned (the “Requisition”) the Board to call and hold a special meeting (the "Special Meeting") of shareholders for the purpose of replacing the Board 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 requested that the Board be constituted with six (6) members, four (4) of whom are highly qualified nominees to be proposed by the Concerned Shareholders, and two (2) of whom will be nominees (the “GSFC Nominees”) of Gujarat State Fertilizers & Chemicals Limited (“GSFC”), in accordance with GSFC’s contractual rights to appoint nominees to the Board.
The Concerned Shareholders have requested that the Special Meeting be called and held promptly, and that it be called no later than July 28, 2020, as required by the Business Corporations Act (Alberta).
Request for Independent Investigation
The Concerned Shareholders have today delivered a formal request to the Board to undertake an independent investigation into the conduct of the GSFC Nominees and the Interim CEO with respect to potential breaches of Karnalyte’s Code of Conduct.
The Concerned Shareholders expect the Board to promptly initiate the investigation and to conduct it thoroughly and expeditiously. If members of the Board and management are found to be in breach of the Code of Conduct, then the Concerned Shareholders expect such individuals to tender their resignations forthwith.
Peter Matson, one of the Concerned Shareholders and amongst the five largest shareholders of Karnalyte, noted that “We believe Karnalyte shareholders are entitled to a board of directors and management with
unquestioned integrity and ethics, and who conduct business in accordance with Karnalyte’s Code of Conduct. Mr. Matson also noted: “We believe that the facts set out by the Concerned Shareholders regarding the Interim CEO’s and the GSFC Nominees’ actions are more than sufficient to warrant an independent investigation.” Independent Investigation
The Facts – Breaches of the Code of Conduct
The Concerned Shareholders intend to focus on the facts.
In prior press releases, the Concerned Shareholders have detailed the facts that the Concerned Shareholders believe constitute breaches of Karnalyte’s Code of Conduct, including:
• Failure to comply with provisions of contractual agreements
• Failure to comply with Canadian securities laws and Toronto Stock Exchange rules and regulations
• Disclosure of material non-public information by the Interim CEO to outsiders
• Avoidance of conflicts of interest
• Full and accurate disclosure in financial communications
The Interim CEO has provided details of the GSFC prepared pre-feasibility study (the “Study”) on the Company’s nitrogen project to the Concerned Shareholders, however, the Concerned Shareholders are not aware of any prior public disclosure made by Karnalyte to the other shareholders or to the capital markets with respect to the Study.
The Concerned Shareholders believe that full, true and plain disclosure, rather than selective disclosure, of the author(s), qualified persons, and the cost of the Study, should be made to all shareholders and to the capital markets, and that such disclosure should be made in the Company’s financial communications, as mandated by the Code of Conduct.
The Concerned Shareholders also believe that the Study:
• is not independent
• is a related-party transaction
• is a conflict of interest
• is not in the best interests of all of the shareholders; and
• is, by Karnalyte paying GSFC to prepare the Study, not in accordance with the use of proceeds for the rights offering conducted by Karnalyte in 2018
The Concerned Shareholders believe that none of these actions by the Interim CEO and the GSFC Nominees are in compliance with the Code of Conduct.
The Concerned Shareholders would like to know why:
• the Interim CEO disclosed details of the Study to the Concerned Shareholders before disclosing such details to the balance of the shareholders or to the capital markets?
• details of the Study, including the author(s), the qualified persons and the cost of the Study, have not been disclosed in Karnalyte’s financial statements and management discussion & analysis?
• the Interim CEO and the Board do not consider the Study to be a related-party transaction and have not provided related-party disclosure in Karnalyte’s financial statements and management discussion and analysis?
• the Interim CEO and the Board do not consider the Study to be material to Karnalyte and therefore, not requiring disclosure to the capital markets and inclusion in Karnalyte’s financial communications? Potential Derivative Action
Depending on the response of the Board to the Concerned Shareholders’ request for a formal investigation, the Concerned Shareholders may have to consider whether they will apply to the courts for leave to commence a derivative action if Karnalyte and the Board do not:
• promptly initiate the independent investigation; and
• if the results of the investigation reveal breaches of the Code of Conduct, require the immediate resignation of the parties found to be in breach.
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.
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 0B4. A copy of this press release may be obtained on the Company’s SEDAR profile at www.sedar.com.