Namaste says firm is 'solid' as ex-CEO launches legal battle against termination
TORONTO - Namaste Technologies Inc.'s interim chief executive is urging its shareholders to "ignore the rumours" as its ex-CEO commenced legal action against the cannabis company to prohibit his termination unless a "proper process" is followed.
According to court documents, Sean Dollinger on Feb. 5 applied to the Ontario Superior Court of Justice for a permanent, mandatory injunction requiring Namaste and board members Laurens Feenstra and Branden Spikes to retract a news release that announced his termination from Namaste.
Lawyers for Dollinger also called for an injunction prohibiting Namaste's board, or a committee or subset of the board, from removing him as a director or terminating him as CEO unless a "proper process in compliance with relevant statutes" is adopted and followed.
"I strongly object to the special committee purporting to have the authorization to remove me... I am of the view that the special committee has exceeded its mandate and is purporting to take control of the board," Dollinger said in an affidavit.
Shares of the Toronto-based firm on the TSX Venture Exchange plunged on Monday after Namaste announced Dollinger's firing, its plans to commence legal action against him and the launch of a strategic review process to examine its options including a potential sale.
Namaste, which operates an e-commerce platform and a portal that connects patients to doctors, said the termination came after an investigation by a special committee of its board of directors, who looked into allegations raised in October by prominent short seller Citron Research. The company said it concluded there were breaches of fiduciary duty by Dollinger and evidence of self-dealing, and his termination as CEO and removal from the board was in the best interest of Namaste.
Dollinger, who co-founded Namaste with Kory Zelickson, on Monday threatened to take legal action against the company's board to "begin setting the record straight."
On Friday, Namaste's interim CEO Meni Norim wrote a letter to shareholders, calling on them to disregard "rumour and speculation."
"I'd urge you to focus on communications that you receive from the company and ignore the rumours even though I know they can get loud," Norim wrote in the letter.
Namaste is "moving full-steam ahead" with a "strong, talented management team in place" and is a "solid business," he added. The letter cited, among other things, Namaste's license to distribute medical cannabis in Canada, a "healthy pipeline of partnerships" and a "strong cash position," Norim wrote.
"I'm incredibly humbled and excited by the opportunity I have as Interim CEO to lead this company forward, but it's truly not about me; Namaste is bigger than any one individual," he wrote in the letter.
Dollinger said in his affidavit that the special committee's actions and Monday's news release has "created confusion" in the marketplace and potentially caused harm to the share price.
The Namaste co-founder alleges in the application that the decision to remove him was made "unilaterally" by the special committee and was not made, authorized or approved by the board. Two other board directors also believe the special committee has exceeded its mandate, Dollinger said in his affidavit.
"I am very concerned about the damage caused to Namaste by the unauthorized actions ... They have caused harm to my reputation and to the reputation of the company."