Calgary, Alberta--(Newsfile Corp. - May 29, 2017) - Daniel Gundersen and Kingsway Financial Services Inc. (together, the "Concerned Shareholders") announce today that their information circular (the "Circular") and BLUE form of proxy have been mailed to all shareholders of Eagle Energy Inc. ("Eagle" or the "Company"; TSX: EGL) in connection with Eagle's annual general meeting scheduled to be held at 10:00 a.m. (Calgary time) on Tuesday, June 27, 2017 (the "Meeting"). A copy of the Circular is available on SEDAR under Eagle's profile and at our website www.SaveEagle.ca.
The Concerned Shareholders urge Eagle shareholders to vote for change by voting FOR the Concerned Shareholder nominees on the BLUE form of proxy or voting instruction form in accordance with the instructions set out in the Concerned Shareholders' meeting materials.
In addition, the Concerned Shareholders have also issued today the following letter to Eagle shareholders:
May 29, 2017
Dear Fellow Shareholders,
You have or will soon receive an information circular from the current management of Eagle Energy Inc. ("Eagle" or the "Company"). We have just read it. IT IS AN INSULT TO ALL SHAREHOLDERS. Eagle's management wants you to believe that we are behind a hostile takeover with inexperienced oil & gas personnel and a financial partner with questionable motives and, if that were not enough, management has told you that if they lose, an immediate event of default will be triggered and the future of the Company will be at risk. These are lies made up by a management group desperate to pursue its high-risk business plan in an attempt to justify its excessive overhead levels so that Eagle can continue to pay exorbitant salaries to management. It's that simple.
Eagle is attacking us and making baseless allegations about our motives in an attempt to mislead the shareholders of the Company. Instead, Eagle should have answered the following important questions:
Why is the stock down over 70% since 2015?
Why was the dividend cancelled in March 2017?
Why did CEO Richard Clark receive compensation of $778,646 in 2016?
What will management do to fix Eagle's unsustainable cost structure?
What will management do to fix Eagle's debt problems?
Why has Eagle been abandoned by the investment community?
Who approved the recent increase in severance payments to management?
Who approved directors and management receiving approximately 4% of Eagle for free?
The existing board and management have betrayed the shareholders of Eagle.
We, Daniel Gundersen and Kingsway Financial Services Inc. ("Kingsway"), are Concerned Shareholders of Eagle Energy Inc. WE HAVE ONLY ONE MOTIVE AND ONE OBJECTIVE: MAXIMIZE SHAREHOLDER VALUE. We have no ulterior motives and no hidden agenda. We believe that the Company needs a plan that will benefit ALL shareholders, not just current management. We have that plan and we have the right people to execute it.
Eagle has high quality assets, but it also has three serious problems:
- Failed leadership
- Excessive overhead costs including management salaries
- Expensive and onerous debt
On March 17, 2017, the last brokerage firm in Calgary that is providing research coverage on Eagle wrote that it was concerned about "management's lack of alignment with shareholder interests". This is the consensus in the Calgary investment community. There is no trust. CEO Richard Clark, a former lawyer, is believed to have lost focus on Eagle and is pursuing other interests. However, this did not prevent him from receiving total compensation of $778,646 in 2016. We remind you that Eagle's market capitalization is less than $25 million. This is madness.
We also question the existing board's justification and authority for dramatically increased severance and other payments if there is a change of control. In 2015, the aggregate payments were $2.2 million. Eagle's current information circular indicates that change of control payments would now total $4.0 million. This number is excessive relative to Eagle's current market capitalization of less than $25 million. This is an absolute affront to shareholders. Eagle is completely out of touch with reasonable corporate governance practices. This is not acceptable.
Our director nominees offer leadership that will be wholly aligned with shareholders. It is a group that will terminate the practice of excessive management compensation. Our director nominees will be stewards of good governance and will hold management as well as themselves accountable.
Excessive Overhead Costs Including Management Salaries and Free Shares
Eagle's overhead costs including management salaries are triple those of comparable companies. This level of costs is unsustainable. The same brokerage firm that was worried about shareholder alignment wrote that they "struggle with EGL's cost structure". In its current information circular, management fails to even acknowledge this problem. We believe Eagle's plan is designed to justify these excessive overhead costs. This is a prescription for failure. This is not acceptable.