TORONTO, Jan. 6 /CNW/ - Augen Capital Corp. (Augen Capital) (TSX-V: AUG) announced today that it has demanded the resignation of Joe Leeder from the Board of Directors of Augen Gold Corporation (Augen Gold) (TSX-V: AUJ).
Augen Capital is the largest shareholder of Augen Gold and has submitted a proposal that would allow Augen Gold to complete a debt-for-shares conversion that would repay $1.1 million owed to Augen Capital, while conserving cash for the benefit of all shareholders.
Mr. Leeder is Chief Financial Officer of Envoy Capital Group Inc. ("Envoy") which is a significant shareholder of Augen Gold. He has repeatedly rejected the terms of the debt-for-shares conversion during negotiations over several months. On January 3, 2009, the Chief Executive Officer of Envoy e-mailed David Mason, the Chairman and CEO of Augen Capital attacking both the conversion and Mr. Mason personally.
Augen Capital has demanded Mr. Leeder's resignation because it believes that, as a Director of Augen Gold, Mr. Leeder is acting of behalf of Envoy rather than fulfilling his fiduciary duty to Augen Gold.
The full text of the letter to Mr. Leeder from Augen Capital's legal counsel, Stikeman Elliott LLP, follows:
BY E-MAIL January 6, 2009
Mr. Joe Leeder
Director
Augen Gold Corp.
The Exchange Tower, Suite 720
130 King Street West
Toronto, ON M5X 1A6
Dear Mr. Leeder:
Re: Augen Gold Corp. (the "Augen Gold")
On behalf of Augen Capital Corp. ("Augen"), we are writing in response to
e-mail correspondence received by David Mason on Saturday, January 3,
2009 from Geoffrey Genovese of Envoy Capital Group Inc. ("Envoy"). We
understand that you are Chief Financial Officer as well as Vice President
of Mergers and Acquisitions of Envoy.
As you know, Augen has requisitioned a special meeting of Augen Gold
shareholders to consider, among other things, a proposed debt for share
conversion of an amount owing to Augen. Such a conversion, Augen
believes, is in the best interests of all Augen Gold shareholders, since
it would conserve their company's cash.
Your employer, Envoy, is attempting to obstruct and exploit this
democratic process for its own financial gain.
Envoy is not "fighting on behalf of all the shareholders" as Mr. Genovese
claims. Rather, based on the correspondence from him, Envoy's real
objective is to coerce Augen into buying out Envoy's interest at the
expense of the other Augen Gold shareholders. Envoy has engaged legal
counsel to "oppose the conversion" and has even been soliciting several
of the other large shareholders of Augen Gold for support, without
issuing a proxy circular.
Envoy's e-mail raises the possibility of a "long messy legal battle or a
costly shareholder vote." This is clearly a threat to waste Augen Gold's
limited resources in order to oppose Augen and to seek to remove Augen's
nominee, David Mason, from the board. We remind you that Augen remains
the largest shareholder of Augen Gold.
Envoy wants to dump their Augen Gold shares. Mr. Genovese concludes his
e-mail with an alternative to a proxy contest as follows: "Perhaps
another solution is (for) Augen Capital (to) buy us out of our position.
If this is an avenue you would like to pursue please contact me."
Consistent with the position taken by your employer's correspondence, you
have opposed the debt for share conversion, which would see Augen acquire
additional Augen Gold shares at more than three times the current market
price. Shareholder approval is being sought to do so through an open and
transparent process to help Augen Gold move forward. The contrast with
your employer's methods is striking.
Envoy's e-mail was unsolicited and improper. It is also a personal attack
on Augen's nominee on the Augen Gold board, David Mason, and contains
threats and scurrilous accusations against him.
In light of Mr. Genovese's e-mail, it is apparent to Augen that, as a
member of the board of Augen Gold as well as an employee of Envoy, you
have been acting only in Envoy's interest, in breach of your fiduciary
duty. You have not acted in good faith with a view to the best interests
of Augen Gold.
On behalf of Augen, we demand your immediate resignation as a director of
Augen Gold.
Yours truly,
Darin R. Renton
DRR:ajs
c.c.: James Stephenson
Text of the letter ends.
About Augen Capital
Augen Capital Corp. ("Augen") (TSX-V: AUG) is a Toronto-based public merchant bank specializing in the financing of and investment in emerging resource companies. Augen manages a merchant banking hard dollar portfolio of emerging resource stocks including private companies and is an industry performance leader in tax-advantaged flow-through investments in Canada's resource sector having raised over $80 million in flow-through limited partnership assets since inception. Augen holds over one hundred gold, base metals and uranium exploration and development public and private companies with direct holdings in its merchant banking portfolio and consulting assets in flow-through limited partnerships.
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