TSX - SVY
CALGARY, April 27 /CNW/ - Savanna Energy Services Ltd. ("Savanna" or the
"Company"), announced today that it has reached a settlement (the
"Settlement") with shareholder Brian Fenn ("Fenn") in relation to legal action
commenced by Fenn in March, 2008 (the "Action") against Savanna and several
current and former directors. The Action alleged that stock options granted by
the Company to current and former directors had been back-dated such that they
were made at an exercise price that was less than fair market value as of the
date of the stock option grant.
The Settlement fully and finally resolves all outstanding allegations
against Savanna and its current and former directors set out in the Action and
has been approved by the Court of Queen's Bench of Alberta pursuant to
sub-section 243(2) of the Alberta Business Corporations Act, R.S.A. 2000, c.
As a result of the Action, the Governance and Nomination Committee of
Savanna (the "Committee"), comprised of independent directors (none of whom
received any stock option grants), conducted a comprehensive review of the
Company's historical stock option granting practices with the assistance of
outside counsel and independent financial consultants.
In its review, the Committee determined that, while there was no evidence
of deliberate back-dating, the administrative practices relating to the
granting of stock options between 2005 and 2007 resulted in the incorrect
pricing of certain stock options. As a consequence, certain of the option
grants made by the Company were made at an exercise price that was less than
fair market value as of the date determined to be the grant date for the
award. None of the currently serving executive officers of the Company
exercised any options which were determined to have been granted at less than
fair market value.
At the conclusion of the review process, the Company took immediate steps
to rectify the incorrect option grants. All unexercised option grants that
were identified as having been issued using incorrect grant dates were
re-priced according to correct grant dates and the TSX Rules relating to stock
option granting practices. In addition, certain Executive Officers of the
Company have agreed to forego 2008 bonuses to which they were otherwise
entitled under their respective employment contracts with the Company in the
aggregate amount of $394,060.00.
Working closely with its counsel (Stikeman Elliott LLP) and counsel for
Mr. Fenn (Siskinds LLP and May Jensen Shawa Solomon LLP) the Committee has
recommended the Board of Directors (the "Board") adopt certain additional
enhanced corporate governance measures designed to augment the effectiveness
of the Company's stock option granting process, and to address oversight
deficiencies that may have contributed to the problems in the Company's stock
option practices. Counsel for Mr. Fenn received considerable assistance in
this regard from Dr. Richard Leblanc, an external corporate governance expert.
The Board has adopted these recommendations of the Committee. The Board, as
part of its ongoing mandate, will continue to identify, assess and if
appropriate implement, further measures to enhance overall corporate
governance, including in relation to its stock option granting procedures.
In October 2007, and prior to the commencement of the Action, the
Committee concluded that the Company did not maintain adequate internal
controls with respect to the issuance of stock options. The Committee noted
that the grant process was characterized by informality and by a lack of
definitive documentation, especially during a period of time when the Company
experienced rapid growth in the first few years after going public, which
resulted in errors relating to the grant dates for certain options. As a
result, the Committee recommended, and the Board accepted, a number of
recommendations to improve the stock option granting processes of the Company.
As a result, no stock options granted after March 19, 2007 required
The Board has adopted and implemented significant changes to the
Company's corporate governance structure, including as it relates to the grant
of stock options to officers and employees. Savanna is satisfied that its
stock option granting program, in light of the enhanced corporate governance
measures articulated above, is fully compliant with all Savanna internal
policies and by-laws, as well as all applicable TSX Rules and statutory
As a result of the Committee's review and the confirmation of the
Company's auditors, it has been determined that no adjustment to, or
restatement of the Company's historical financial statements will be required.
For further information:
For further information: Ken Mullen, President & Chief Executive
Officer, Telephone: (403) 503-9990, Fax: (403) 267-6749