Second City Capital Partners

June 21, 2011 09:00 ET

Second City to Support a New Injunction Effort if Bennett Environmental Declares a Dividend and Calls on Shareholders to Oppose a Payout

Second City also announces that Shareholders with more than 50% of shares eligible to vote at Bennett's AGM have voted proxies in favour of Second City's Nominees

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 21, 2011) - Bennett Environmental Inc.'s (TSX:BEV) largest shareholder, Second City Capital Partners I, Limited Partnership ("Second City"), today announced that it will support a new injunction application against Bennett if a majority of the company's Board votes to declare a dividend prior to the Annual General Meeting ("AGM") on June 29, 2011.

Second City has also informed Bennett directors Jack Shaw, J. Mark MacDonald and Ralph Neville that if they declare a dividend in advance of the AGM, Second City intends to hold them personally accountable for damages on behalf of all shareholders for their oppressive conduct.

Second City added that Bennett's shareholders should voice their own opposition, and also announced that shareholders with more than 50% of shares eligible to vote at Bennett's AGM have now voted proxies in favour of Second City's dissident nominees. Second City said the dividend issue is yet another reason why shareholders should vote the Blue proxy in support of Second City's nominees for the Bennett Board of directors.

"There is simply no good business reason for Bennett to pay a dividend at this time and many reasons why it is not in the best interests of shareholders" said Jamie Farrar, managing director of Second City and a Bennett director who opposes a dividend. "If the other three members of the Board declare a dividend, it would just be a scorched earth effort to weaken the company before they are voted out by shareholders next week."

Continued Mr. Farrar, "I oppose a dividend at this time as it would reduce Bennett's attractiveness as an acquisition candidate and would destroy any opportunity to use the cash to fund acquisitions, which has been Bennett's stated objective."

"We are one week away from a change in the Board of Directors, and Second City is looking forward to replacing the current directors with an outstanding group of directors to lead the Company going' forward."

Last week's court application

Second City said Mr. Farrar filed a court application last week seeking to restrain Bennett from declaring a dividend. The application said Mr. Farrar received notice on June 15, 2011 that Bennett called a meeting of the board for June 17, 2011 for the "review and approval" of a dividend payment of $0.90 per common share.

According to the application, the proposed $0.90 dividend would pay out approximately $35 million of Bennett's roughly $64 million of cash reserves and significantly weaken the Company's stated acquisition strategy. The proposed resolution provided for the payment of the dividend on June 28, 2011, one day prior to the AGM. Mr. Farrar believes that the proposed dividend payment violates the stated capital aspect of the applicable solvency test in the Canada Business Corporations Act.

Mr. Farrar stated in his application, "This resolution would strip the company of the majority of its excess cash and leave it unable to pursue its longstanding strategy of using that cash to leverage advantageous transactions… The proposed declaration of a dividend is oppressive, unfairly prejudicial and unfairly disregards the interests of Bennett Environmental shareholders."

Ruling by the Ontario Superior Court of Justice

On Friday, after a hearing, Madame Justice Ruth Mesbur of the Ontario Superior Court of Justice declined to issue a restraining order at the time, but her ruling was not based on the business reasons for paying or not paying a dividend. Rather, she noted, among other factors, that a dividend has not yet been declared, and that Bennett took the position that "the Board has not yet decided whether to declare a dividend or not."

Madame Justice Mesbur, in her decision, also commented to the existing directors: "I assume all will be particularly careful to proceed in the scrupulous fashion Mr. Shaw has sworn they will. If they do not, oppression may occur."

"I close with a comment about the timing of the board meeting, and the proposed timing of any proposed dividend," said Madame Justice Mesbur. "Clearly the timing is what has created the current litigation. It is reflective of the power struggle going on. I recognize that a Board need not curtail its activities in the case of a fight for control. The directors are empowered to manage the company and have a duty to do so."

"That said, just because the Board has the power to make decisions, does not mean it necessarily should do so, in the face of an AGM in two weeks that may alter the course of the company's future. There would be no prejudice to anyone if this afternoon's board meeting were adjourned until after the AGM. There could be prejudice if decisions were taken that could not be undone, such as declaring a dividend."

A copy of Second City's application and the court judgement have been posted to the internet at

Next steps

While Bennett has not yet made any announcements with regard to a dividend, Second City encouraged shareholders to make their opposition to a payout clear. Second City suggested that shareholders provide their views by calling or emailing Bennett's CEO Jack Shaw.

With regard to a renewed court application if a dividend is declared, Second City said it would support such action by Mr. Farrar in his role as a current director of Bennett. Mr. Farrar's initial court application did not result in an injunction, however Madame Justice Mesbur's ruling provided for a renewed hearing "if further evidence develops that would warrant an injunction being granted."

Voting Instructions

Second City urges shareholders to read the dissident materials and vote the BLUE proxy for Second City's nominees. To ensure the BLUE proxy is received in time to be voted at the meeting, shareholders are asked to return their proxies no later than Friday, June 24, 2011 at 5:00 P.M. (Eastern Time). For assistance contact Phoenix Advisory Partners (toll-free) 1-888-687-7516 or

About Second City

Second City is a private equity fund managed by Vancouver-based Second City Capital Partners, a multi-fund private equity group.


This news release shall operate as an amendment to Second City's June 6, 2011 dissident proxy circular.

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