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Waterous Energy Fund is withdrawing its request for a special shareholder meeting at Osum Oil Sands Corp. after two Osum board members who oppose a hostile takeover by Waterous agreed to resign if the bid succeeds.

Board members who oppose a hostile takeover typically resign if the bid succeeds. Waterous had taken the unusual step of asking Osum directors who oppose the fund’s $126-million bid for an additional 40-per-cent stake in the energy company to resign ahead of the deal. When they refused to do so, Waterous requisitioned a special shareholder meeting to replace several board members.

Waterous, run by Calgary financier Adam Waterous, already owns 45 per cent of Osum and controls four of the nine seats on its board. Privately held Osum is opposing the takeover and has asked the Alberta Securities Commission to halt the bid process.

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Osum said Thursday that it had come to an agreement with Waterous to have the fund withdraw its request for a special shareholder meeting. In return, two Osum directors have signed binding agreements to step down if the deal goes through.

“The voluntary resignation of directors is a customary method of ensuring an orderly and timely transition of control after a bid is successful,” said William Friley, the chairman of Osum’s board, in a news release. “However, Waterous’ original expectation … that two directors resign so that Waterous’ directors would constitute the majority of the Board prior to the successful completion of the offer was inconsistent with sound corporate governance and presumptuous given the hostile nature of the bid.

“Waterous subsequently proposed a compromise, which we accepted … that it withdraw the requisition in exchange for undertakings from two directors to resign in the event that the ASC allows the hostile bid to proceed and the bid is successful.”

Waterous released a statement Friday saying the agreement “marks a significant milestone towards the successful completion of WEF’s takeover-bid.”

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