Building North America's Next Primary Cobalt Mine

June 18, 2013

Formation Metals Exposes Dissident Nominees' Governance and Compensation History and Lack of Relevant Experience

Vancouver, B.C. June 18, 2013 - Formation Metals Inc. (FCO-TSX) (Formation) announced today that it brings to shareholder’s attention important details regarding the nominees proposed by dissident shareholder, Dundee Corporation, namely Messrs. Paul Carroll and David Christie, regarding Mr. Carroll’s governance and compensation record and Mr. Christie’s lack of relevant public company experience. Formation also announces the positive recommendation from leading proxy advisory firm, Institutional Shareholder Services Inc. (ISS).

Paul Carroll- Executive Compensation?

The following information concerning Mr. Carroll’s tenure as a director of Hollinger Inc. should be carefully considered by shareholders.

Paul Carroll became a director of Hollinger Inc. in 2004 and was a director in October 2004 when the court removed Conrad Black and others as directors. Mr. Carroll and the other remaining directors subsequently awarded themselves compensation that included Mr. Carroll being entitled to a $600,000 payment when he ceased to be a director for any reason. For the first five months of 2005, Mr. Carroll was paid director’s fees of $1,227,554 (inclusive of the $600,000 termination payment). These directors’ fees and termination bonuses attracted media and shareholder criticism. In a March 10, 2005 article from the Bloomberg Service—-“Hollinger Inc. Directors get Paid More than Exxon’s”—-Professor Dan Capscott of the Rotman School of Business at the University of Toronto and author of a book on corporate governance, is quoted as saying “It is quite extraordinary for board members to charge such hourly rates.”

An oppression action was commenced by a shareholder, which culminated in a deal to remove directors (including Mr. Carroll) from the board and appoint new directors. The deal included releases for the departing directors and a Consent Order of the court ratifying the arrangement. After the newly constituted board was appointed and had reviewed the previous board’s compensation, the new board caused Hollinger to bring an application to vary the terms of the Consent Order, so that it could challenge the termination payment to Mr. Carroll and other aspects of his compensation. The court allowed the matter to proceed [Catalyst Fund General Partner I Inc. v. Hollinger Inc., 2005 CanLII 20810 (ON SC)]. In view of the serious nature of the allegations against the directors, the court declined to presume good faith conduct and denied Mr. Carroll from receiving indemnification of legal costs in advance of hearing the full factual background in a hearing [Catalyst Fund General Partner I Inc. v. Hollinger Inc., 2006 CanLII 63696 (ON SC)]. The matter was settled without further court adjudication.

In contrast, each of Formation’s executives earn total compensation that is well within the range of total compensation paid to executives by our benchmark group of companies based on latest available public information. Further, the compensation paid to our named executive officers in the financial year ended February 28, 2013 decreased, both in terms of total compensation and salaries, from the previous financial year. Unlike Mr. Carroll’s exceptional Hollinger termination payment, the change of control payments payable to Formation executives in certain circumstances (which do not include any change resulting from Dundee contesting two board seats) are within industry norms. Dundee’s assertions that executive compensation at Formation is inappropriate and has been “ramping up” are simply false.

Paul Carroll- Corporate Governance?

Dundee says that its nominees will be “committed to adhering to appropriate governance practices”, and has made various statements of opinion as to alleged breaches of laws by Formation. Let’s take a look at what the Supreme Court of Nova Scotia had to say about Mr. Carroll’s legal opinion.

In the 1980s, Mr. Carroll served as corporate counsel and subsequently a director of Nova Scotia Savings and Loan Co., a Halifax-based financial institution. In a court decision related to a proposed hostile takeover of Nova Scotia Savings and Loan Co., the Supreme Court of Nova Scotia had the following to say about Mr. Carroll’s legal opinion as to whether a certain director could be considered “associated” with a certain entity for regulatory purposes:

“Although Carroll did attempt to recant this opinion during the trial it is my view that such attempt was borne out of expediency rather than a genuine change of mind. …

It was on this point that Carroll attempted to rationalize his opinion respecting association with that which he had given in 1982 respecting the shares of Avon Foods and HDHL. This is the time that Carroll in response to a question about the apparent inconsistency in his legal opinions made the now famous (at least in the context of this action) statement, “sometimes you suck and sometimes you whistle”. …

Carroll’s further rationalization of the apparent inconsistency does not stand up to close scrutiny. I will here review at some length Carroll’s opinion and his involvement in this meeting since I am of the view that he is largely responsible for the direction which the directors took at this meeting. I have thought about this very carefully and I conclude that Carroll’s attitude, as counsel to NSS&L, was to the effect - “you tell me where you want to be and I’ll provide a legal opinion to support you”. I suppose this is just another way of saying “sometimes you suck and sometimes you whistle”.” [underlining added]

[Exco Corporation Limited et al. v. Nova Scotia Savings & Loan Co. et al 1987 CanLII 135 (NS SC)]

In the same decision, the Court found the appointment of Mr. Carroll and two other directors to be void.

The fact is that none of Dundee’s allegations of Formation having failed to comply with laws is true. Dundee’s latest accusation is that Formation “obstructed” Dundee by failing to provide a Non Objecting Beneficial Owners list of shareholders (the “NOBO list”) until faced with a court filing. What Dundee doesn’t say is that Formation voluntarily provided the NOBO list well in advance of the time required by law and despite Dundee’s request being based on a materially improper undertaking that did not comply with the requirements of the applicable securities laws.

David Christie- Relevant Experience?

After extensive research, Formation could not confirm that dissident nominee, David Christie, has any prior experience as a public company director or officer. As an analyst, Mr. Christie’s areas of expertise were gold, diamonds or precious metals — not cobalt.

This is not the time, nor the market to allow a novice to try his hand at being a director, particularly when the experiment would come at the expense of a seasoned and proven director. Being a public company director takes experience that Mr. Christie does not have.

“Formation’s current board is 100% committed to the company,” said Mari-Ann Green, CEO of Formation. “We always have and will continue to act in the best interests of all shareholders. We know we’re heading in the right direction. In contrast, it is evident that the dissident nominees are not suitable for your board.”

Following Dundee’s proposal to elect Mr. Carroll and Mr. Christie, ISS issued a second report, reiterating its support FOR Formation’s management nominees, Mari-Ann Green and Scott Bending. As announced on June 13, 2013, ISS recommended shareholders vote FOR the re-election of the current board members. Most recently on June 17, 2013, ISS reaffirmed its support reporting that “the dissidents [Dundee] have not made a compelling case that a change to the composition of the board is warranted at this time. Shareholder support for the management slate, therefore, continues to be warranted.”


Attention Formation Shareholders:

Shareholders are urged to vote their WHITE proxy before the deadline of Wednesday, June 19, 2013 at 10:00am (Pacific Time). Regardless of how many shares you own it is imperative that you vote your WHITE proxy in order to keep Formation on track.

Discard any blue proxy forms which you may receive from Dundee.

If you have any questions or need assistance in voting your proxy, please call Kingsdale Shareholder Services Inc. at 1-866-229-8214 (toll free) or 1-416-867-2271 (collect calls accepted), or by email at

Formation Metals Inc.
“Mari-Ann Green”
Mari-Ann Green

For further information please contact:
E.R. (Rick) Honsinger, P.Geo., V.P. Corporate Communications
Formation Metals Inc., 1810 - 999 West Hastings Street, Vancouver, BC, V6C 2W2
Tel: 604-682-6229 - Email: - Web:

View the Previous News Release:
June 17th, 2013, Formation Dispels Dissident's Claims and Urges Shareholders to Re-Elect Their Strong, Dedicated Board of Directors
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June 20th, 2013, Formation Metals Announces Dismissal of Dundee's Injunction Application