Zarlink Concerned Shareholders Demand End to Board's Misinformation and Obstruction

    OTTAWA, July 14 /CNW/ - The Concerned Shareholders of Zarlink
Semiconductor Inc. today wrote to the Company's Chairman and its Chief
Executive Officer demanding an end to Zarlink's apparent campaign of
misinformation, obstruction and entrenchment which threatens the fairness of
the shareholder vote at the Company's annual and special meeting scheduled for
July 23, 2008.
    Failure by the Company to retract its false claims or to comply with its
legal obligations will result in legal action to protect the rights of all
shareholders, the Concerned Shareholders warned.
    The Concerned Shareholders are Scott Leckie, individually and through
funds he manages, as well as David Banks and Daniel Owen. Collectively they
own or control more than 5.9% of Zarlink's common shares. On July 7, 2008,
they filed a Concerned Shareholder Proxy Circular nominating five new
directors to the Zarlink Board and calling for the removal of Kirk Mandy as
Chief Executive Officer as well as the implementation of a new strategy
designed to deliver enhanced shareholder value.
    The full text of the letter to Zarlink Chairman Henry Simon and CEO Kirk
Mandy follows:

             Concerned Shareholders of Zarlink Semiconductor Inc.

    July 14, 2008

    Henry Simon
    Chairman of the Board,
    Kirk Mandy
    Chief Executive Officer,
    Zarlink Semiconductor Inc.
    400 March Road
    Ottawa, Ontario
    K2K 3H4


    On behalf of all the shareholders of Zarlink, we demand that you
immediately retract the false statements you have repeatedly made about the
Concerned Shareholders' recommendations for nominees to the Company's Board of
    Since it is your failure to manage the Company that we are seeking to
correct, it is understandable that you would attempt to defend yourselves.
However, you are once again failing to serve the best interests of your
shareholders through your current campaign of misinformation and obstruction.
It is clear to us that, rather than presenting the facts that would allow
shareholders to decide the future direction of their Company, you are
attempting to entrench yourselves by any means possible.
    It is possible you may have the support of the other members of the
Board, whose investment in the Company is minimal, and of others who are not
shareholders at all. However, shareholders who have seen their investment
almost wiped out are not prepared to wait any longer for corrective action or
to tolerate your self-serving delays and diversions.


    You know - or should know - that Zarlink has made false claims alleging
that the Concerned Shareholders have somehow misled shareholders about the
three management nominees recommended in our Proxy Circular: Adam Chowaniec,
Hubert Lacroix and Spencer Lanthier. On this pretext, you have threatened to
invalidate the votes of shareholders seeking change at the July 23 annual
    As shareholders, it is our right to recommend that fellow shareholders
vote for certain management nominees. Our Proxy Circular explicitly states
that these three nominees had not formally consented to serve on a
reconstituted Board. It is abundantly clear in our Proxy Circular which
candidates are nominees of the Concerned Shareholders and which were nominated
by management. For you to claim otherwise is simply false and insults the
intelligence of your long-suffering shareholders.
    Further, as you should be aware, we spoke with each of these nominees
about our intentions prior to filing our Proxy Circular. We believed that,
freed from the influence of Henry Simon and Kirk Mandy, they could provide
valuable counsel and continuity to a new Board. At that time, not one of
Mr. Chowaniec, Mr. Lacroix or Mr. Lanthier indicated they would not serve with
the Concerned Shareholder Nominees. None requested that their names be
withheld from our recommendation.
    It is simply wrong for you to claim we are misleading Zarlink
shareholders when, in fact, it is your repeated false and malicious claims
that are an attempt to confuse shareholders and distract them from the real
issue they face: the dismal performance of their Company under your influence,
compared with the prospects for enhanced value under the detailed plan to be
implemented by the Concerned Shareholder Nominees.
    Since you seem intent on preventing an informed and balanced vote by the
shareholders to whom you are supposed to answer, shareholders could conclude
you are motivated by the personal enrichment you receive from them. Mr. Simon
has been paid an annual stipend that is 10 times higher than any other
non-management director. In addition, he has received a fee of more than
$2,400 per day for attending to unspecified "Company business".
    Mr. Mandy's generous compensation includes bonuses that are entirely
inappropriate for the CEO of an unprofitable company whose share value has
declined by 60% since his reappointment. We note that Mr. Mandy has served on
the Board throughout Zarlink's 95% decline in share value since 2002 and that
he also served on the Board of another company that has since declared
bankruptcy. We intend to prevent that from happening to Zarlink.
    We also note the long relationship between Mr. Simon and Mr. Mandy and
that, through his position on the Board's nominating committee, Mr. Simon
influences the selection of like-minded directors for Zarlink's Board.


    As part of your efforts to obstruct the holding of a fair annual meeting,
you have also failed to provide copies of shareholder lists to the Concerned
Shareholders that would allow us to communicate directly with fellow
shareholders on a question of vital importance to all of us. Clearly, you are
using certain requested shareholder information for your own purposes while
denying it to us, despite our repeated requests.
    In the threats against us from your legal counsel, you have claimed the
right to disenfranchise shareholders who may choose to oppose you. This is
more than bad corporate governance. Your tactics are shameful and not
appropriate for a Canadian public company.

    Corporate Governance Failure

    We note that the threats and harassment we have received have come from
Zarlink's corporate counsel and that the Board does not appear to have engaged
independent legal counsel or seen fit to create an independent committee. This
indicates that this Board has failed to differentiate between the interests of
the shareholders it is meant to serve and the interests of management, which
it is meant to oversee. Rather than controlling management, this Board, under
your leadership, is attempting to control shareholders.
    Should you fail to address your egregious campaign of misinformation,
manipulation, obstruction, and entrenchment, it will be noted by all
shareholders and will result in necessary legal action to protect the rights
of all Zarlink shareholders. You have 24 hours from receipt of this letter to
take full corrective action.
    Zarlink shareholders had a right to expect effective management from you
over the past decade. You failed to deliver. They now have a right to replace
you with new leadership that can realize the potential of their Company. You
have a fundamental responsibility to honour that right.

    Yours sincerely,

    The Concerned Shareholders of Zarlink Semiconductor Inc.

    (signed)                  (signed)                (signed)

    Scott Leckie              Daniel Owen             David Banks

    (Letter ends)

    Voting for Change

    The Concerned Shareholders remind their fellow Zarlink shareholders:

    -  Your vote is very important to the future of your investment in
       Zarlink. If, after reading the Concerned Shareholder Proxy Circular,
       you agree that the Concerned Shareholder Nominees, together with the
       three management nominees, will better serve your interests as a
       shareholder of Zarlink, please vote "FOR" the Concerned Shareholder
       Nominees on the BLUE form of proxy distributed with the Concerned
       Shareholder Proxy Circular.

    -  You may vote the BLUE proxy for change even if you have previously
       deposited a management proxy or other proxy. A timely delivered and
       later-dated BLUE proxy automatically revokes any earlier one.

    There is only a short time in which to make the needed change at Zarlink.

    -  In order to be deposited with Zarlink's registrar and transfer agent
       in time to be used at the meeting, your BLUE proxy should reach
       Kingsdale Shareholder Services Inc. before 5:00 p.m. (Eastern Time) on
       Friday, July 18, 2008.

    -  Please fax only your BLUE proxy to 416-867-2271 or toll free:
       1-866-545-5580. Hand delivered proxies should be returned to Kingsdale
       at the Exchange Tower, 130 King Street West, Suite 2950, P.O. Box 361,
       Toronto, Ontario, M5X 1E2.

    -  Non-registered shareholders are advised to refer to the information
       under "General Proxy Information - Non-Registered Shareholders" in the
       Concerned Shareholder Proxy Circular.

                           It's time for a change.
                   For new leadership. For a new direction.
                       For renewed shareholder value.

For further information:

For further information: Scott Leckie, (416) 363-3399

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