Enercorp, Inc.
7001 Orchard Lake Road Suite 424 West Bloomfield, MI 48322
(248) 851-5651 (248) 851-9080 (Fax)
February 15, 1999
Dear Shareholder:
On January 29, 1999, Enercorp held its Annual Meeting at the company's
headquarters in West Bloomfield, Michigan. At the meeting, there were five
proposals, including one with three separate sub-proposals, on which
shareholders were to vote.
At the meeting, shareholders elected management's slate of directors (Proposal
1), approved a proposal to limit the monetary liability of the company's
directors (Proposal 4a), and ratified the company's independent auditors
(Proposal 5).
A vote was not taken on Proposals 4b and c (quorum and voting requirement
changes), and on Proposal 2 (sale of stock at less than Net Asset Value) and
Proposal 3 (withdrawal of the BDC election). The meeting was adjourned on these
four matters until February 25, 1999. Only 44% of the eligible shares were
present on these open items, but of those present, more than 95% indicated they
intend to vote in favor of these proposals. This is why I am writing to you
today.
You are one of Enercorp's largest shareholders who did not vote your shares.
While I would encourage you to vote in favor of all the proposals on the
enclosed proxy ballot, the most important thing is that you vote your shares.
All proposals are fully described in the company's Proxy Statement dated
December 23, 1998, but let me take a minute to summarize Proposals 2 and 3:
Proposal #2 authorizes the company to sell shares of its stock at prices
below the current Net Asset Value (NAV). The company's stock price has
historically been below its NAV, making it nearly impossible to raise
additional capital to fund Enercorp's growth. Generally, stock sold in
private or public offerings is priced based on market prices, rather than
NAV, but this is not currently the case with Enercorp.
Presently, the company depends primarily on its bank loan for working
capital, but we do not anticipate being able to obtain substantial
increases in our credit line in the future. The money raised from the
stock sale would be used to repay bank indebtedness and provide working
capital, either to purchase additional portfolio securities or to buy a
controlling interest in an operating company.
For these reasons, the Board believes it would be in the best interest of
the company and its shareholders to raise additional equity capital by
selling Enercorp's stock at prices that may be less than NAV.
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Proposal #3 authorizes the company to change the nature of its business
and withdraw its election as a Business Development Company. Over the
years that the company has operated as a BDC, the business, regulatory and
financial climates have gradually shifted, making operations as a BDC more
challenging and difficult.
The most important reason for changing to an operating company format is
to avoid the many restrictions placed on BDCs. Generally, BDCs do not
generate cash flow from operations, as operating companies do, because a
BDC's business is to invest in and own securities. With the limitations
for capital raising and cash generation, it is difficult for BDCs to have
sufficient cash flow and capital to compete in the marketplace.
Many of these constraints on Enercorp's growth would be removed if an
operating company format were selected. We may also be able to have the
company valued more like traditional operating companies, as opposed to
the discount to NAV at which the company's stock is currently priced. For
these reasons, the company is considering this change in business form and
is asking for shareholder approval to do so.
I hope you will agree that there is good reason to vote in favor of all these
proposals, including Proposals 2 and 3, as 95% of the shares present in person
or by proxy at the meeting indicated their intent to approve.
Whether or not you agree to vote in favor of these proposals, please take a
minute to vote your shares so your voice is heard. Just complete the following
three steps:
1. On the enclosed Proxy Card, vote your preference on all proposals
shown, by placing an "X" in the appropriate box in front of your
selections. Please vote on all proposals.
2. Sign and date the Proxy Card at the bottom.
3. Mail in the proxy card using the envelope that is provided.
Thank you for your consideration and immediate attention on this important
matter. If you have any questions, you can reach me at 248-851-5651.
Sincerely,
s/Robert R. Hebard
Robert R. (Rick) Hebard
Chairman and President
