Athabasca Potash Inc.

Athabasca Potash Inc.

August 28, 2009 15:01 ET

Athabasca Shareholders Should Not Hand Control to Former CEO Zhou Slate

Shareholders Urged to Support Incumbent Board with Robust Strategic Process and High Governance Standards

SASKATOON, SASKATCHEWAN--(Marketwire - Aug. 28, 2009) - Athabasca Potash Inc. ("API" or the "Company") (TSX:API)

The annual and special meeting of the Company scheduled for 2:00 p.m. on September 3, 2009 will determine the future of the Company and is now only days away. Shareholder votes are important to the outcome, regardless to the number of shares that you hold, and API wants to help shareholders ensure that all shareholder votes are counted.

Shareholders are invited to attend the meeting in person at the Delta Bessborough Hotel, 601 Spadina Crescent East, Saskatoon, Saskatchewan. Whether a shareholder can be there in person or not, shareholders are encouraged to vote by completing and signing the proxy form provided to them by management and returning it following the instructions on the form. Please disregard the proxy received from CSIT and sign on the proxy titled "THIS PROXY IS SOLICITED BY MANAGEMENT OF ATHABASCA POTASH INC." To be sure votes are counted, please return your proxy prior to 4:30 p.m., Toronto time, on Monday, September 1, 2009.

If you have misplaced your proxy or require assistance in voting your proxy, please contact Laurel Hill Advisory Group for assistance, toll free at 1-800-316-9827 or outside North America (416) 637-4661.

Shareholders are being asked to vote on a few questions at the meeting, but the central issue shareholders must decide is the composition of the Board of Directors of API since that will set the direction and determine the future of API. If shareholders vote for the management nominated directors, API can continue the strategic process announced in its July 16, 2009 press release. The slate proposed by dissident shareholders led by Dawn Zhou, the former CEO of API and her company (the "Zhou Group ") are challenging the management proposed slate.

Among the vague and misleading claims in the dissident circular is that the current Board of Directors (the nominees proposed for election by management) "are not adequately exploring all of the options which may be available to the Company with respect to the development of the Burr Project." This is an absolutely false statement.

It is the view of the independent directors that one thing is clear and that is that the goal of the dissident is the return of control of API to Dawn Zhou.

The independent directors of the incumbent Board have no objective other than to provide good governance and act in the best interests of the Company and its shareholders.

The Board, except Ms. Zhou, does not believe the dissidents present a favourable option to API shareholders. Shareholders are urged not to sign and return any forms of proxy that may be sent to them by the Zhou Group.

The Role of Dawn Zhou

On June 25, 2009, after serious and lengthy deliberation by the Board of Directors over a period of time that commenced in mid 2008, Dawn Zhou was removed from her role as President and CEO of API.

The CEO dismissal was the result of a deliberative process of the Board over a year's duration. It involved consultations with Dawn Zhou and numerous others, including with lawyers and professional search and compensation advisors.

On October 8, 2008, after months of observation and deliberation by the Board, the Board advised Ms. Zhou during a performance evaluation at a full Board meeting that they were of the opinion that she was not qualified to hold the position of President and CEO of the Company. By this time, the Board, except Ms. Zhou, but including Ken MacNeill, formally concluded that Ms. Zhou was too inexperienced and unqualified and that she suffered a lack of major transaction and major project development experience. In short, it was the entire Board's opinion that she did not possess sufficient knowledge of business process. The Board concluded that Ms. Zhou, albeit a highly entrepreneurial founder who had acquired a large share position as a result of a property vend in and share option awards, did not perform or demonstrate the executive capacity and experience to continue to run the Company and deliver the best long term value for shareholders.

The performance evaluation at the October, 2008 Board meeting was presented to Ms. Zhou by the Board, led by then Board Chair, Ken MacNeill. Mr. MacNeill is now part of the Zhou Group slate. Mr. MacNeill resigned from the Board shortly after this review was presented.

During and subsequent to the observation period, the Board had to deal with a litany of decision and management issues created by the former CEO. These issues included:

- The Board had to intervene to stop the CEO's unauthorized multi-million dollar plans to lease new corporate headquarters.

- The Board had to redefine the Company's project plans with proper budget constraints.

- The Board had to force the CEO, on threat of dismissal, to answer questions raised by the Board. The Board also had to force her to provide the Company's geological information for a review to a Board member, who is a PhD geologist.

- The Board determined that the Company had to retain advisors to organize its partner search for the Company's Burr Project and instructed the lead director to supervise that effort. Ms. Zhou ignored the structure of the engagement with the lead director and failed to keep the lead director or the Board informed on significant process developments up to the time of her termination.

- The Board had to re-write and/or cause to be edited most material information releases the Company issued.

- As CEO, she bridled at any constraints on her management autonomy and efforts by the Board to put in place accounting and authorization limit policies controlling expenditure and payment limits, especially as related to the authority to make, and the manner of accounting for, future expenditure commitments.

- The Board had to revisit and renegotiate a number of employment contracts that, when reviewed by the Board, confirmed that the CEO had either negotiated or changed such agreements in ways that were not authorized or expected by the Board or in line with good governance practices for the Company.

After the October, 2008 performance evaluation, the Board defined a rapid succession plan to recruit an Executive Chairman ready to become CEO and requested Ms. Zhou's cooperation. As part of this plan Ms. Zhou was offered the position of Non-Executive Chairman in respect of her founding role and asked to cooperate in the search for a new CEO. Ms. Zhou rejected this offer and instead demanded that the Company design a more elaborate succession plan and that she would have control of the timing. Ms. Zhou was advised that she should be given time to decide but that if she did not cooperate that the offer of Non-Executive Board Chair would be removed and that she would be dismissed.

Ms. Zhou often pointed out to the Board that she and her consortia of shareholders controlled the Company and that with her own shareholding, she was in control of 50+% of the votes and that the independent Board could not dismiss her or force her to step down. The Board often advised Ms. Zhou that her shareholdings did not earn or entitle her to the position as CEO.

Over Ms. Zhou's objections, the Board hired a well regarded national executive search firm, to conduct a search for an Executive Chairman who could become the new CEO.

Ms. Zhou was fully aware that an executive search was underway and that the Board was intent on replacing her once a suitable candidate was found. At one point during the progress of the search, Ms. Zhou would not allow the retainer payments to the search firm to be made in a timely way and the lead director had to instruct Ms. Zhou to make the payments or face immediate dismissal.

During the interim period following her dismissal, the Executive Committee took responsibility for tasks normally undertaken by the CEO. During this time several important governance policies were finalized for API.

After Ms. Zhou's termination on June 25, 2009, the search for a new CEO was completed at the end of July, 2009. Mr. Robert Boyd, a mining professional with 35 years experience with both public and private companies was retained as the Company's new CEO effective August 1, 2009.

Your Board is made up of senior and professional executives and qualified professional technicians. We have deliberated carefully and fully. We have not rushed to judgment. We are confident that the policies and procedures and the personnel that are in place can take the Company forward.

Strategic Review Process Well Managed and Continuing

The Company publicly announced the establishment of it's strategic review process on July 16, 2009, including the creation of a special committee consisting of three directors, one of which is Ms. Zhou. In that press release, the Company advised on activities which had taken place in its process of soliciting expressions of interest from qualified third parties of strategic alliances to develop the Burr Project. The Company had retained two experienced financial advisors to assist in conducting its process; namely CIBC World Market; principally, through its office in Hong Kong, and Genuity Capital Markets, principally through its office in Vancouver.

API's financial advisors have recently confirmed in a briefing to the Board, which included Ms. Zhou, that their global search presented to interested parties not only a preferred structure of strategic management but a message that all options were open for consideration by API and that multiple parties are still actively engaged in the strategic review process.

For the Zhou Group to now suggest that the current Board is not adequately exploring options which may be available is profoundly misleading.

Independence of Zhou Group Proposed Board - Majority Not Independent?

The Zhou Group, in their dissident circular, assessed the independence of their various nominees, concluding that in accordance with their belief, five of seven directors will be independent within the meaning on National Instrument 58-101. On the basis of that instrument, Zhou's determination of whether they would or could reasonably be perceived to have relationships which would interfere with the exercise of independent judgement and carrying out their responsibilities as directors, only Ms. Zhou and Mr. Fettis are not considered independent.

It is important to also consider the relationships of Kenneth E. MacNeill and Charley X. Ye, two other nominees.

Each of Messrs. Ye and MacNeill, prior to the termination of Dawn Zhou, purported to have an ongoing consultancy relationship with API, although the Board and management of API (apart from Ms. Zhou) are unaware of any consulting services provided by either individual in the past year, and no payments have been made under any alleged consultant arrangement. API (while Ms. Zhou was President & CEO) appears to have allowed the purported consultant relationship to continue which, in turn, sustained certain stock options of each individual.

There were possible issues as to the validity of the options allegedly still held by each of these nominees of the Zhou Group, which raises possible issues of conflict of interest and independence.

Charley X. Ye was granted options in August and December of 2006 while he was a director and officer of the Company during its formative stages. These options were to expire on the 90th day following the date that Mr. Ye ceased to be a director, officer or consultant of the Corporation. Mr. Ye was a director and the corporate secretary for API until he resigned at a Board meeting on July 9, 2007. Mr. Ye recently requested an additional 15,000 options that he suggested were to be issued to him at or shortly following a Board meeting following the 2007 Annual General Meeting. There is no record of any such issuance, nor any directive to do so. In addition, Mr. Ye asserts that he holds 54,500 options at a strike price of $0.25, along with a further 44,139 options at a strike price of $0.45. The value of his award at today's price would be approximately $500,000.

Ken MacNeill was granted 150,000 options on December 13, 2007 at a strike price of $4.25 when he was Chairman and a Director of API. Mr. MacNeill resigned as a Chairman and a Director of API suddenly and without prior advice to the Board in October, 2008. API (at the direction of Dawn Zhou) entered into a consulting agreement with Ken MacNeill made effective shortly following his resignation, contrary to instructions of the Board. No cash payments have ever been paid to Mr. MacNeill and no invoices have been received following the execution of that consulting agreement. The current Option Plan allows Mr. MacNeill to continue his options only in circumstances where he is providing ongoing bona fide services to the Corporation under a written contract, whereupon he will spend a significant amount of time and attention on the affairs of the Corporation and only in circumstances where he has a relationship with the Corporation that enables him to be knowledgeable about the business and affairs of the Corporation. If Mr. MacNeill has provided any services to API, which the current Board and management are not aware, there is no record of such services except for the allegations of Dawn Zhou that Mr. MacNeill has provided advice to her. If Mr. MacNeill is successful in having the options ratified or continued, notwithstanding the foregoing, the value of his award would be in excess of $150,000.

It is the position of the current Board (with the exception of Dawn Zhou) that Mr. Ken MacNeill and Mr. Charley Ye stand to receive a potential gain by their election to the Board, and that they have a conflict of interest related to any decisions regarding their claims to options.

Once the Board became aware of the facts surrounding the MacNeill and Ye consulting arrangements, and given the uncertainty related to the issues of whether the individuals actually provided consulting services to API, API recently wrote to each individual in order to seek clarification. These communications sought to obtain a declaration from each of Mssrs. Ye and MacNeill that the requisite consulting services had actually been provided. Upon receipt of such certificates, API proposed to ratify the validity of the options. Mr. Ye today provided written confirmation that he maintained a consulting arrangement as a technical advisor since September of 2007 and up to July 24, 2009. The requested information and declaration has not yet been provided by Mr. MacNeill in the form requested by API.

Ken MacNeill and Charley Ye are not "independent" if elected directors, as Dawn Zhou asserts they have served, until very recently, as consultants to the Company. These consultancies were recently terminated by API. If, in fact, Messrs. MacNeill and Ye have been consultants, they would not be considered to be "independent" and qualify for service on the audit committee of API under the applicable securities policies.

As neither of Messrs. MacNeill or Ye are independent, the proposed Zhou Group Board is not comprised of a majority of independent directors.

General Observations

It remains the unanimous view of the independent directors, that Ms. Zhou does not have and has not demonstrated the experience and abilities to take the Company forward. The independence of a majority of the Zhou Group dissident slate must also be questioned.

The independent directors are of the view that changing the Board in a way that has Ms. Zhou in a position of control, which appears to be the Zhou Group's proposal, will not result in the optimal longer term return and results for shareholders and all stakeholders of the Company.

In removing Ms. Zhou from her position as CEO, the Board cleared the way and made possible the appointment of Robert Boyd as President and CEO of the Company. Mr. Boyd is an experienced mining executive with the abilities needed to take the Company through future steps. As part of his engagement, Mr. Boyd assumed the key responsibility of management representative on the Board of Directors. The Zhou Group slate of dissident directors has not articulated any plan on who would lead the Company. In the absence of any information on leadership roles, the independent directors are of the view that the dissident proposal puts the Company at risk. Capable and qualified management can not be expected to be recruited and retained without having a well qualified CEO in place as the corporate leader.

The current management slate of directors is well qualified, majority independent, and fully observant of its obligations to the Company and its shareholders.



Others share our view as to the preferred slate of directors.

Risk Metrics Group (Institutional Shareholder Services Canada Corp. (ISS)), prior to the Zhou Group dissident circular, had issued a recommendation that shareholders vote for the management nominees to the Board of Directors. ISS is recognized as a leading international authority on proxy voting and corporate governance issues.

Your vote is important. Regardless of the number of shares that you hold, please vote your Management proxy prior to 4:30 p.m. (Toronto time) on September 1, 2009. If shareholders have any questions or require any assistance in voting, please call the Company's solicitation agent:

Laurel Hill Advisory Group toll free 1-800-316-9827

About Athabasca Potash Inc.

API is a Canadian based corporation and was founded with a goal of establishing itself as a pre-eminent Canadian public company engaged solely in potash exploration and development with focus on the Company's wholly owned Burr Project in Saskatchewan, and to provide its shareholders with a unique investment opportunity focused entirely on potash.

Caution Regarding Forward-Looking Information

This press release contains forward-looking information within the meaning of applicable Canadian securities legislation, including statements with respect to the Company's governance and board of directors, strategic review process, and management. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of API, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. In addition, the forward-looking information contained in this press release are based upon what management believes to be reasonable assumptions, including, but not limited to, assumptions regarding the intentions of various persons who may influence decisions taken by the Company or the Board. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking information contained herein. Accordingly, readers are advised not to place undue reliance on forward-looking information. Except as required under applicable securities legislation, API undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new information, future events or otherwise.

Contact Information

  • Athabasca Potash Inc.
    Robert T. Boyd
    President and CEO
    1-800-976-8274 or (306) 933-4298