Napier International Technologies NIR
Shares issued 18,530,248 Sep 2 close $1.58
Wed 2 Sept 98 Street Wire
by Brent Mudry
For most companies listed on the Toronto Stock Exchange, timely disclosure
of material news is fairly standard. For Napier International Technologies,
however, timely disclosure meets a different standard. Napier, one of the
most successful Howe Street penny stock promotions this year, waited more
than three months before revealing that its main deal, a much-hyped
technology acquisition, was clouded by serious litigation. Napier shares
soared from 20 cents to a high of $4.88 this spring, largely based on the
proposed acquisition of Aquasol International, a private Calgary-based
company which features former Newfoundland premier Brian Peckford as a
director.
The heavy-volume promotion came soon after Napier chairman Brad Aelicks,
associate of the Howe Street promoter, and secretive Swiss financier Carlo
Civelli, acquired millions of shares in cheap-stock placements at between
15 cents and 30 cents a share. Napier officially publicized its Aquasol
deal on Apr. 21, with its stock at $1.41. The tiny Surrey-based company
planned to acquire Aquasol for 5.93 million shares, 16 per-cent of its
total shares, fully-diluted. The value of the deal rose from $8.4-million
to $29-million, as the stock soared from $1.41 to its $4.88 high.
Aquasol's main product, an environmentally friendly cleansing solution for
metal surfaces, has reportedly received significant interest from ICI
Paint's ICI Devoe line, a unit of global chemicals giant ICI. "The Aquasol
solution is unique enough that the largest coatings company in the world,
ICI Paint. . . has recently signed a private labeling agreement to market
Aquasol under its own brand name, Hydrosol 700," stated Mr Aelicks. Napier
shares rose 80 cents to $2.10 that day on heavy volume of 1.7 million
shares. The next day the heavily-promoted stock peaked at $3.15 on volume
of almost three million shares, more than doubling in two trading sessions.
Three weeks later, on May 15, another Alberta company, claiming to be the
true owner of Aquasol's technology, filed a $55-million suit against
Aquasol and its insiders in the Court of Queen's Bench of Alberta in
Edmonton. (More than 20.5 million shares of Napier traded in this
three-week period. The stock peaked at $4.88 on May 6 and fell 35 cents to
$3.20 on the day the suit was filed.) Although Napier was not named as a
defendant, both it and Aquasol were served with the legal documents within
a day of the suit being filed.
Napier's public shareholders, however, were left in the dark for three
months. Mr Aelicks finally revealed the litigation, which caused Napier to
put the Aquasol acquisition on hold, on Aug. 14. More than 11.5 million
shares traded in this period, while the $55-million suit remained
undisclosed. "During the period of due diligence agreed upon by the
companies and the subsequently approved extension by the TSE, a legal claim
was filed against Aquasol. Aquasol has rigorously contested the claim and
continues to pursue clearance of the issue," stated Mr Aelicks in an Aug.
14 press release.
Three of Napier's key insiders cannot recall exactly when the company found
out about the lawsuit, repeating the "sometime during due diligence"
refrain and referring calls to Mr Aelicks. "I was involved in due
diligence, but not that part of it," chief financial officer James Grinnell
told Stockwatch. "We were just about finished due diligence" when we found
out, says president Stephen Davis, the president and chief executive of
Prime Spot Media, Mr Aelicks' other main stock promotion this spring. "I
have no idea when it was filed," says Mike Muzylowski. "What does it matter
when the lawsuit was filed?," asked the irate long-time Napier director and
Howe Street promoter. Napier secretary Chris Theodoropoulos, a Vancouver
securities lawyer, could not be reached. "He is off to catch a plane. . .
he does not know when he will be back," said an assistant.
Napier president and chief executive Brad Aelicks cannot recall specific
dates without reviewing his notes, but he says Napier found out about the
suit "presumably sometime in June." The stock promoter is quick to downplay
the impact on his company. "Obviously the lawsuit had nothing to do with
Napier. . . we did not know whether it would affect Napier's ability to
proceed or not," says Mr Aelicks. The promoter asserts that after Napier
consulted with its lawyers, it felt no rush to disclose news of the suit.
Mr Aelicks points out that Napier even informed the TSE and consulted with
exchange officials, who granted a 30-day due diligence extension and did
not urge the company to reveal the suit to shareholders. The promoter calls
the suit "frivolous."
DETAILS OF THE SUIT
The $55-million lawsuit, filed by Dell Chemical & Marketing and 420708
Alberta, two companies controlled by Alberta businessman Gary McPeak, names
Aquasol, directors Dale Storey, Bernd Heinz, David Bjornson and Brian
Peckford, and shareholders Mr. Storey, Mr. Heinz, Pat Hogan, Karen Leecock,
S.A. Mitrad, John Doe and Jane Doe as defendants. Dell and 420708 claim
they are the sole and exclusive owners of all rights, title and interest to
certain cleaning compounds known as "Value 100" (or "V100") and "Modified
Value 100" (or "MV100"), having purchased all rights, title and interest
from the predecessor owners of the compounds, Mr Heinz, Mr Storey and
Robert Beesley. The suit notes that MV100 cannot be manufactured without
first or concurrently manufacturing V100.
The suit claims that Messrs. Storey, Heinz and Beesley each agreed with
Dell in writing to keep all information and knowledge of the two compounds
in the "strictest confidence and secrecy," including all information
relating to the manufacture, blending and chemical formulations. Dell
lawyer Mark Lesniak claims the trio owe Dell a fiduciary duty to maintain
secrecy and not to use the information in any way for the benefit of
themselves or others. Mr Lesniak notes that Mr Storey was enjoined by the
Alberta court on May 20, 1994. "The defendant Storey is hereby prevented
and restrained from disclosing to anyone, in any manner, or making use of,
in any way, the formula or the blending procedure for Value 100, or any
part thereof, until the trial of this action," stated the court order.
Dell claims Mr Storey and Mr Heinz breached the court order by disclosing
some or all of the referenced information and knowledge of V100 and MV100
to Aquasol and its directors and shareholders. The suit further alleges
that Aquasol and its directors and shareholders knowingly engaged in the
manufacture and sale of the two products under the name "Aquasol Solution."
Dell asserts that Aquasol Solution is either V100 or MV100, or it cannot be
manufactured without first manufacturing the pair of compounds. The suit
specifically notes that Aquasol has agreed to sell the Aquasol Solution
formula to Napier, in breaches of contract, trust and fiduciary duty.
The plaintiffs claim assorted injunctions, $25-million in
breach-of-contract damages, $25-million in general damages and $5-million
in punitive and exemplary damages. "The defendants' actions, or those of
any one or more of them, constitute a wanton and outrageous disregard for
their fiduciary duties and the plaintiff'' property," states Mr Lesniak.
In their joint statement of defence, filed on June 5, Aquasol, Mr Storey
and Mr Heinz deny all of Dell's allegations. "The defendant specifically
deny that Aquasol Solution is V100 or MV100, or, in the alternative, the
defendants deny that Aquasol Solution is a chemical product which cannot be
manufactured without first or concurrently manufacturing V100 or MV100,"
states the defence. Mr Storey and Mr Heinz claim that the formulas and
blending procedures for MV100 or Aquasol Solution remain their exclusive
property, as they developed them.
Further complicating the legal fight is the nature of Napier's deal with
Aquasol. "The defendants specifically deny that the defendant Aquasol
International has agreed to sell the Aquasol Solution formula to Napier
International Technologies as alleged in the statement of claim or at all,"
states the defence. "The defendants state and the case is that the
defendant Aquasol International has no proprietary interest in the chemical
formula nor the blending procedure for Aquasol Solution," the lead
defendants state.
Mr Muzylowski is particularly angry when asked about the Dell suit against
Aquasol, claiming Mr McPeak just crawled out of the woodwork and launched
the legal action. "I think McPeak sued because he saw someone credible
coming into the picture," says Mr Muzylowski, referring to Napier. The Howe
Street promoter was even less flattering about the Stockwatch reporter.
"You have as much credibility as that stone in my patio," says Mr.
Muzylowski, who vigorously complains about previous articles critical of
Napier and its insiders, including secretive Swiss financier Carlo Civelli.
Mr Aelicks claims the lawsuit does little to alter Napier's potential
business plans with Aquasol. "We have the doors still open with Aquasol,"
says Mr Aelicks. "Everything is still on the table, including an outright
merger."
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com |
