CUPERTINO, Calif., Nov. 29 /PRNewswire/ -- Scion Capital, LLC sent the following letter to the Board of Directors of Bolivar Gold Corp (TSX: BGC) on November 25, 2005, regarding management's involvement in CoalCorp (http://www.coalcorp.ca/).
Scion Capital, LLC
November 25, 2005
Mr. Serafino Iacono
Chairman of the Board
Bolivar Gold Corporation
Suite 1502, 110 Yonge Street, Toronto
Ontario Canada M5C 1T4
Re: CoalCorp and Employment Contracts of Senior Bolivar Gold Management
Dear Mr. Iacono,
Scion Capital controls roughly 15% of Bolivar Gold's common shares, and we seek more information on the activities of Bolivar Gold management in their apparent dual roles as executives of CoalCorp, as well as the apparent dual-role of Bolivar Gold's offices as headquarters of CoalCorp. We are particularly concerned about the implications for a possible conflict-of-interest affecting your negotiations with Gold Fields.
Specifically, it appears that you, Miguel de la Campa, Robert Doyle, Jose Arata, and Peter Volk -- the five Named Executive Officers of Bolivar Gold -- each have relatively new and similar positions with CoalCorp.
All five of you have employment agreements with Bolivar Gold that provide for the payment of three times annual salary in the event of a change of control. Each of you would receive in excess of C$500,000 in such a circumstance as a takeover.
Further, all five of you have phantom stock arrangements that result in payments to you -- only upon a takeover or substantial sale of the company -- as if you owned shares of Bolivar Gold with a zero cost basis. This would amount to more than C$10 million in payments split among you five should the Gold Fields transaction be consummated.
Such change-of-control payments seem unnecessary given that it appears Bolivar Gold management is orchestrating its own exit from Bolivar Gold and simultaneously starting up a new emerging markets natural resources company operated out of Bolivar Gold's own offices. I must wonder whether the Board of Directors considered shareholders' best interests when granting management such benefits.
Scion Capital questions the motives for management agreeing to the Gold Fields buyout offer amid so much recent market confusion and misunderstanding. Your initial willingness to seek an exemption from the independent valuation requirement as well as your rapid agreement to a C$12 million break-up fee payable to Gold Fields, with no definitive agreement yet signed, require shareholders to have a better understanding of management's financial motivations.
Please clarify for your shareholders the nature of the Bolivar management team's interest in CoalCorp. In addition, shareholders would be interested in how you are allocating time and expenses between Bolivar Gold and CoalCorp, and why shareholders should be expected to sacrifice monetary value to management upon management's well-planned transition to running CoalCorp full-time.
Sincerely,
(signed) Dr. Michael J. Burry
cc: Miguel de La Campa, President
Andres Carrera, Director
Perry Dellelce, Director
Robert Hines, Director
Stephen Wilkinson, Director
Robert Doyle, Chief Financial Officer
