VANCOUVER, Sept. 27, 2018
/CNW/ - Concerned shareholders, Kulwant
Malhi and BullRun Capital Inc. (the "Concerned
Shareholders") of GrowMax Resources Corp. (the
"Corporation" or "GrowMax") (GRO: TSX.V) today
commented on the unlawful postponement of the annual and special
meeting (the "Meeting") of GrowMax shareholders
("Shareholders") by GrowMax management ("Management")
and the incumbent board (the "Board"). The Meeting was
originally scheduled for September 25,
2018 and has now been postponed to October 4, 2018.
In a further illustration of management entrenchment, a mere
twelve hours before the Meeting was to be held, Management issued a
press release announcing the postponement of the Meeting to
October 4, 2018 citing the Concerned
Shareholders' purported 'non-compliance' with GrowMax's proposed
Advance Notice By-law (the "By-Law") (a by-law that has yet
to be approved by shareholders). The Meeting was unilaterally
postponed by Management and the Board, without the Meeting being
called to order, or a Shareholder vote on whether to postpone the
Meeting.
This latest delay tactic by Management is a clear sign that they
do not have Shareholder support or enough votes to push through
their self-serving resolutions. The postponement is nothing more
than an oppressive tactic adopted by Management to prevent
shareholders from electing the director nominees proposed by the
Concerned Shareholders.
Management's Postponement of the Meeting is Unlawful
The Concerned Shareholders note that Management's decision to
postpone the meeting is a clear violation of Alberta corporate law. Under the Business
Corporations Act (Alberta),
directors must call an annual meeting no later than 15 months after
the date of the last meeting. Any extension to this deadline must
be granted by the court.
As the Meeting is now scheduled for October 4, 2018, GrowMax will be in default of
the 15-month deadline to hold an annual meeting (the last annual
meeting was held on June 28, 2017).
There is no indication that GrowMax obtained a court order to
extend the deadline, and Management's impulsive decision to
postpone the Meeting just hours before it was scheduled shows that
they are willing to break the law and expose the Corporation to
liability to further their own self-interest.
The Postponement of the Meeting is a Delay Tactic
In their press release dated September
24, 2018, Management states that they postponed the meeting
because of purported 'inaccurate disclosure' provided in the
Concerned Shareholders' advance notice materials (the
"Notice") provided to GrowMax on August 21, 2018. Specifically, Management
states that our disclosure "deprived GrowMax and Shareholders of
accurate and timely disclosure of matters relevant to vote at the
Meeting".
The Concerned Shareholders point out that they provided the
Notice on August 21, 2018, over a
month ago. Management also states that it has "serious concerns"
about the Concerned Shareholders intention to declare a
$0.075 dividend (the
"Dividend") as part of their business plan for GrowMax. As
stated in the Concerned Shareholders' press release of on
September 18 2018, the Dividend would
be subject to the availability of funds and subject to shareholder
approval. The incumbent Board had sufficient time to address any
concerns with the Notice and the Dividend without compromising the
timing of the Meeting. Instead, Management decided to wait until
hours before the beginning of the Meeting to raise their concerns.
Coincidentally, Management waited until after receiving the
Concerned Shareholders' Yellow Proxies, and continued to solicit
proxies without announcing any extension of the proxy cut-off time,
before announcing the postponement of the Meeting.
The Concerned Shareholders note that only the Chair of the
Meeting can waive the proxy cut-off. Management should
announce the results of the proxies tallied as of the cut-off time,
so Shareholders are aware of the current status of the proxy
tabulation.
Clarification on Information Relating to the Dividend
Proposal
In a letter dated September 24,
2018 from Management to the Concerned Shareholders (the
"Letter"), Management asked the Concerned Shareholders to
clarify certain information relating to the dividend announced by
the Concerned Shareholders on September 18,
2018. A copy of the letter has been posted on the Concerned
Shareholder website. This information is totally unnecessary and
entirely extraneous to the matters to be decided upon at the
Meeting. Furthermore, management's queries are specious, and
are in many cases answered by management's own queries and prior
statements. However, in order to ensure that Management has no
basis to exclude the Concerned Shareholder Nominees, the Concerned
Shareholders advise that:
- Date of the Dividend: The date of the dividend is not yet
known. The dividend will not be declared until the Concerned
Shareholder Holder Nominees have had the opportunity to review the
books and records of the Company, confirm (as noted in our press
release of September 18, 2018) that
there are sufficient funds in the Corporation to satisfy the
dividend, and confirm that GrowMax will not be in position to
breach section 44 of the Business Corporations Act
(Alberta). The Concerned
Shareholders expect that the dividend would be declared and
distributed before the end of the 2018 fiscal year.
- Tax Efficient Manner: The intent, but not the obligation, of
the Concerned Shareholders, is, as set out in their September 18, 2018, that the dividend will be
treated as a return of capital. Such intent is subject to a review
of the corporate records, tax returns and financial position of the
Corporation, which the Concerned Shareholder Nominees cannot do
until elected.
- Shareholder Approval: Pursuant to the Business Corporations
Act (Alberta), a return of
capital is subject to the approval of the shareholders. Assuming
election, the Concerned Shareholder Nominees expect to convene a
further shareholder meeting to approve the return of capital.
If shareholder approval for the return of capital is not obtained,
the Concerned Shareholder Nominees may nonetheless proceed with the
dividend.
- Solvency Test: Pursuant to section 44 of the Business
Corporations Act (Alberta),
declaration of the dividend will be subject to the Concerned
Shareholder Nominees having no reasonable grounds for believing
that GrowMax is, or would after the payment be, unable to pay its
liabilities as they become due, or that the realizable value of the
Corporation's assets would thereby be less than the aggregate of
its liabilities and stated capital of all classes. The Board
of Directors, in their news release dated August 28, 2018 and in the management information
circular dated August 27, 2018 stated
that the GrowMax will have approximately $32.5 million in cash available if it completes
the PrimaSea Acquisition. The Concerned Shareholders are of the
view that this cash should be sufficient for the payment of the
dividend, although cannot guarantee that current Management will
not further deplete the treasury of the Corporation.
- Risk to the PrimaSea Acquisition: Management has
nonsensically suggested that the Concerned Shareholders should
apprise shareholders of the risks that the dividend may create for
GrowMax in connection with the PrimaSea Acquisition. For example,
as noted by management in their letter, under the share purchase
agreement between GrowMax and PrimaSea (the "SPA"), GrowMax
covenanted that it would neither make a commitment nor pay an
amount in excess of $50,000 (which is
not contemplated in GrowMax's budget furnished to the vendors)
without prior approval of the vendors. With respect to this
particular note, the Concerned Shareholders note that the
obligations of each party pursuant to the share purchase agreement
between GrowMax and PrimaSea (the "SPA") are conditional on
shareholder approval of the transaction. Based on the copy of the
SPA and all documents that have been filed by the Company in
connection with the PrimaSea Acquisition, there is no break fee
payable on the failure to obtain Shareholder approval for the
PrimaSea Acquisition. Approval of the PrimaSea Acquisition may
affect the ability of the Concerned Shareholder Nominees to declare
the dividend. Again, the Concerned Shareholders recommend that
shareholders vote against the PrimaSea Acquisition.
Clarification on Information Contained in the Notice
In their Letter, Management cites the Concerned Shareholders'
non-compliance with the Advance Notice-By-Law as grounds for
challenging their nominations. The Concerned Shareholders note that
the Advance Notice-By-Law is subject to Shareholder approval, and
Institutional Shareholder Services, Inc. ("ISS") has
recommended shareholders vote against the Advance Notice By-Law on
the basis that it provides the incumbent Board broad discretion in
determining whether to accept or reject nominees put forward by
Shareholders.
The ISS report states: "such disclosure requests may be of
little or no relevance to a potential director's abilities on the
board and could be used by management for strategic purposes." In
light of Management's Letter and postponement of the Meeting,
Shareholders should take these concerns very seriously.
The Concerned Shareholders advise that the determination that it
would propose the dividend was made based on the publicly available
information regarding GrowMax, including statements made by GrowMax
in its information circular and news releases in connection with
the Meeting.
Vote Yellow
As the proxy cut-off deadline has been extended to 8:00 a.m. (Calgary Time) on October 4, 2018, the Concerned Shareholders
encourage all shareholders to read the Concerned Shareholders'
meeting materials, which are available at
www.laurelhill.ca/abetter-growmax, and urge Shareholders to vote
only the YELLOW proxy. By voting only the YELLOW
proxy shareholders will be voting:
- AGAINST a highly-dilutive transaction that will result
in the handover of 60% of your company to GrowMax directors and
officers;
- AGAINST the re-election of a board of directors that has
destroyed shareholder value in favour of their own
self-interest;
- AGAINST the adoption of a new equity incentive plan that
will further increase the shareholdings of directors and officers
and further dilute your interest in the Corporation;
- AGAINST the adoption of an advance notice by-law that
gives the board of directors the sole discretion to dismiss
your shareholder nominees;
- FOR the new Concerned Shareholder nominees who will
rejuvenate the GrowMax board of directors and take the Corporation
in a new direction that will eliminate wasteful spending and
maximize shareholder value; and
- FOR the issuance of a dividend payment which will result
in a cash being paid directly to YOU instead of being used
to fund a money-losing operation.
Shareholders should discard any blue proxy they may
receive and should vote only their YELLOW proxy well in
advance of the proxy voting deadline. We urge shareholders to vote
prior to October 2, 2018 at
8:00 a.m. (Calgary time), to ensure that all YELLOW
proxies will be deposited in a timely manner.
Due to the essence of time, Shareholders are asked to vote
online or by telephone by following the instructions found on the
YELLOW proxy to ensure votes are received in a timely
manner. IF YOU HAVE ALREADY VOTED USING MANAGEMENT'S BLUE PROXY,
YOU CAN STILL SUPPORT THE CONCERNED SHAREHOLDERS BY USING THE
YELLOW PROXY. THE LATER DATED PROXY WILL SUPERSEDE.
The Concerned Shareholders would like to thank all GrowMax
shareholders who have already voted their YELLOW proxies. You have
no need to take any further action if you have already voted your
YELLOW proxy.
Remember every vote counts to protect your investment.
Regardless of the number of shares you own, please vote your
YELLOW proxy today.
Questions and requests for assistance may be directed to the
Concerned Shareholders' Proxy Solicitor:
Laurel Hill Advisory Group
North America Toll Free:
1-877-452-7184
Outside North America:
1-416-304-0211 (collect)
Email: assistance@laurelhill.com
SOURCE BullRun Capital Inc.
