Exhibit
17.2
STATEMENT
OF THE BOARD OF DIRECTORS OF THORIUM POWER, LTD.
IN
RELATION TO CORNELIUS J. MILMOE
Introduction
The
board
of directors of Thorium Power, Ltd. (the “Company”) is providing this statement
in connection with the recent resignation of Cornelius J. Milmoe from the
board
of directors of the Company and the board’s removal of Mr. Milmoe from the
office of Chief Operating Officer of the Company. On October 17, 2006, in
connection with his resignation from the board of directors of the Company,
Mr.
Milmoe delivered to the Company a letter outlining certain disagreements
that
Mr. Milmoe has with the Company. This statement also responds to Mr. Milmoe’s
letter.
Background
Mr.
Milmoe was originally asked to be a director of the Company in December of
2005
before the current management team was put in place. The Company filed a
current
report on Form 8-K announcing his appointment as a director on December 23,
2005
in which the Company stated that his position as a director became effective
on
December 20, 2005. To the Company’s knowledge, Mr. Milmoe had consented to being
appointed as a director and never objected to the filing of the current report
on Form 8-K. However, thereafter, when board action was required on various
matters, it is the Company’s understanding that Mr. Milmoe refused to
participate as a board member notwithstanding his appointment to the board
because the Company did not have directors and officers liability insurance
in
place. Mr. Milmoe continued to refuse to participate in board meetings until
April 2, 2006 after the current management of the Company was put into place
and
after directors and officers liability insurance had been obtained.
Mr.
Milmoe was reappointed to the board on April 2, 2006 and was appointed by
the
board to the position of Chief Operating Officer on April 4, 2006. The terms
of
Mr. Milmoe’s employment as Chief Operating Officer are governed by the terms of
an employment agreement, dated June 6, 2006. The employment agreement was
filed
by the Company as Exhibit 10.1 to a current report on Form 8-K filed by the
Company with the SEC on June 13, 2006.
After
some months of operation, however, on several occasions during the period
from
April, 2006 through October, 2006, Seth Grae, the Chief Executive Officer
of the
Company, had conversations with Mr. Milmoe regarding his position as a director
and his employment as Chief Operating Officer. During these conversations,
Mr.
Grae suggested that Mr. Milmoe resign from the board and take on a consulting,
instead of an employment, role with the Company. Mr. Grae explained to Mr.
Milmoe that management of the Company desired to have more independent directors
on the board and fewer employee directors like Mr. Milmoe. Mr. Grae also
explained to Mr. Milmoe that the Company is developing into a nuclear energy
company with a broader potential business scope than had been previously
anticipated. Mr. Grae explained to Mr. Milmoe that the Company is changing
and
would now need a Chief Operating Officer with more operations experience
than
Mr. Milmoe, who, to the Company’s knowledge, had never been employed in the role
of Chief Operating Officer or its equivalent before.
During
the same period that Mr. Grae had meetings with Mr. Milmoe to discuss the
modification of his relationship with the Company, members of the board of
directors and management also met to discuss Mr. Milmoe’s performance as Chief
Operating Officer of the Company. The conclusion of management and all of
the
board members (other than Mr. Milmoe) was that it was in the best interests
of
the Company to remove Mr. Milmoe from his position as Chief Operating Officer
and ask Mr. Milmoe for his resignation from the board. The Company was also
prepared to seek stockholder approval of Mr. Milmoe’s removal from the board in
the event that Mr. Milmoe would have refused to resign from his position
as a
board member.
Accordingly,
on October 9, 2006, Mr. Grae asked Mr. Milmoe to meet with him and Louis
Bevilacqua of Thelen Reid & Priest LLP, the Company’s outside legal counsel,
at the offices of Thelen Reid & Priest LLP. At this meeting, Mr. Grae told
Mr. Milmoe again that management and all of the board members (other than
Mr.
Milmoe himself) believed it necessary that Mr. Milmoe no longer act as Chief
Operating Officer of the Company nor as a director of the Company. Mr. Grae
told
Mr. Milmoe that the Company had every intention of paying Mr. Milmoe the
full
severance amount that he is entitled to under his employment agreement. The
Company then told Mr. Milmoe that if he were to resign from his position
as a
director and Chief Operating Officer, the Company would pay him his full
severance, put out a press release thanking him for his service to the Company,
and provide Mr. Milmoe with a recommendation letter. Mr. Grae stated, however,
that if Mr. Milmoe refused to resign from these positions that the board
of
directors would hold a meeting the following week to remove Mr. Milmoe from
his
position as Chief Operating Officer and would adopt resolutions authorizing
the
Company to hold a stockholders meeting at which the stockholders of the Company
would vote on Mr. Milmoe’s removal as a director of the Company. The Company
also provided Mr. Milmoe with notice of the board meeting, which was to be
held
on October 16, 2006, and copies of the resolutions that were proposed to
be
adopted at such meeting by the board.
Mr.
Milmoe thereafter retained a legal counsel to review this matter for him.
Less
than a half an hour before the scheduled board meeting, Mr. Milmoe’s legal
counsel provided the Company with a list of demands sought by Mr. Milmoe
in
exchange for his resignation from the positions of Chief Operating Officer
and
as a director of the Company. Mr. Milmoe is entitled to aggregate cash severance
payments under his employment agreement in the total amount of $200,000 made
in
regular installments over the course of a year; Mr. Milmoe demanded, however,
an
immediate lump sum payment and other payments that in the aggregate would
have
been in excess of $600,000.
Mr.
Milmoe’s list of demands was received just prior to the board meeting. The board
deferred the decision on the resolution regarding Mr. Milmoe’s removal to a
later time to consider the list of demands. The board then attended to other
company business at the meeting and did not further discuss Mr. Milmoe’s
removal. Management thereafter made attempts to negotiate with Mr. Milmoe
regarding the extent of his demands and even sought to structure an alternative
consulting relationship between Mr. Milmoe and the Company. These negotiations
failed and Mr. Milmoe sent the Company a letter resigning as a director of
the
Company. Immediately after receiving his resignation as a director, the board
of
directors convened a meeting at which it decided to accept Mr. Milmoe’s
resignation and approved the resolution removing Mr. Milmoe from his position
as
Chief Operating Officer. The Company also notified Mr. Milmoe that he would
be
paid severance in accordance with his employment agreement.
Response
to Statements in Mr. Milmoe’s Letter
Paragraph
2
Mr.
Milmoe begins his second paragraph with a description of his presumed role
at
the company. Mr. Milmoe implies in this paragraph that it is because of
his
experience and his
involvement that investors invested in the Company. We disagree with this
assertion. The Company’s management team and advisory board members include some
of the most experienced people in the nuclear power industry. This talented
group of people and the Company’s technology and business plan have allowed the
Company to attract capital. The Company believes it will ultimately be able
to
execute its business plan because of its management team and advisory board
members. Mr. Milmoe only attended meetings with potential investors over
a
two-day period. Other than those investors who had already invested in the
Company prior to Mr. Milmoe’s involvement, none of the investors attending those
meetings actually invested in the Company
Mr.
Milmoe also states in the second paragraph of his letter that, “This technology
has great promise for the elimination of weapons grade plutonium, particularly
in cooperation with US and Russian government agencies.” We agree with the
statement regarding the promise of the Company’s technology. However, we
disagree with Mr. Milmoe’s statement that since April, the Company has spent
virtually no money in Russia on technology development. The funds spent in
Russia relating to this technology in recent periods have largely been provided
by the United States government. The Company hopes and expects the U.S.
government will be supportive of its project and will help with its future
funding. The Company’s plan has always been to work cooperatively with the
government to fund technology development. The Company believes that it is
better to spend government funds, when available, on this project rather
than
using the monies raised from investors. The Company raised the money on this
basis and the investors and public are aware that this is the Company’s plan.
Since the Company’s technology can help meet United States policy goals of
eliminating plutonium and also U.S. government goals in the areas of nuclear
non-proliferations and waste mitigation, many key figures in the U.S. government
support our project and help to fund our project.
Technology
development in this area is of extreme importance to the Company. The Company
has always focused on its technology development and commercialization, and
will
continue to do so. In fact, during the period described in the second paragraph
of Mr. Milmoe’s letter, the Company’s Executive Vice President - International
Nuclear Operations, spent in total almost a month in Russia working on matters
relating to the development of the Company’s technology and has prepared reports
and other materials on the matter. Also, during such period, management and
the
board of directors of the Company have spent countless hours discussing
technology development and the status of the Company’s operations in Russia and
have taken steps toward progress in this area.
Paragraph
3
Mr.
Milmoe then states that the Company has spent funds on “Overhead expenses, such
as legal fees, investor relations, public relations and staff compensation
. .
.” The referenced overhead expenses were incurred in furtherance of the
Company’s business goals. The Company is in a period of growth and is poised to
utilize the talent of its experienced management team and advisory board
members
to become a significant participant in the nuclear power industry. The Company
has also just recently completed the acquisition of Thorium Power, Inc.
Management is working hard to execute on its business plan and also to provide
the public with information regarding the Company and its mission.
At
the
end of Mr. Milmoe’s statement about how corporate funds were spent, Mr. Milmoe
states that a “generous bonus” was paid to Mr. Grae. However, the Company has
not paid any cash bonus to Mr. Grae or any current officer or director of
the
Company. Under
the
terms of Mr. Grae’s employment with the Company, he received a share grant award
and stock options with an exercise price of $0.795 cents (an exercise price
that
is well above the current market price of the Company’s stock).
The
board
of directors disagrees with Mr. Milmoe’s statements about monies being spent on
the Texas and Polish projects showing little hope of financial success or
the
development of proprietary technology. The Company is working on these projects
with reputable strategic partners. The Company believes that these projects
will
benefit the Company’s mission of ultimately deploying its fuel designs for use
in reactors in several countries.
Regarding
Mr. Milmoe’s last comment, the board of directors generally agrees that the
Company’s core mission includes development of its patented technology. The
mission also includes commercialization of the Company’s patented technology and
nuclear non-proliferation goals.
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