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Seair Director Proxyholders Vote Down Amendment to Creditors' Proposal that would Preserve Shareholder Interests

CALGARY, AB / ACCESSWIRE / May 3, 2017 / Legal One Securities & Corporate Law, acting on behalf of a group of concerned shareholders who are also unsecured creditors ("Concerned Shareholders") of Seair Inc. (SDS.V) ("Seair" or the "Corporation"), announces that at the meeting of creditors held on April 26, 2017 ("Creditor Meeting"), a motion was made by the Concerned Shareholders to amend the creditors' restructuring proposal ("Creditor Proposal") filed on April 11, 2017 in respect of Seair. That motion was seconded and approved to be voted on by those in attendance at the Creditor Meeting but was ultimately defeated by Seair Directors, Christopher Morris and Bradley Meadows, who held the majority of creditor votes, as represented by proxy.

The motion to amend the Creditor Proposal contained terms that would, with the immediate financial assistance of shareholders and the conditional support of a 'white knight' investor VenX Ltd. ("VenX") (previously identified in a press release dated April 25, 2017), allow for the release of creditor claims against the Corporation and its assets (principally intellectual property). Readers should refer to the April 25 press release filed on behalf of the Concerned Shareholders for further details of the amendments to the Creditor Proposal put forward by the Concerned Shareholders (see https://ca.finance.yahoo.com/news/seair-inc-concerned-shareholder-creditors-003500440.html for a copy of the press release).

As observed by the Concerned Shareholders attending the Creditor Meeting, the conduct of Seair's current Directors and the Corporation's counsel in attendance at the Creditor Meeting projected, at best, an indifference and, at worst, hostility to allowing any alternative to the Creditor Proposal to be considered - even when the alternative provided a more immediately liquid option for Seair creditors and a more inclusive alternative for all stakeholders.

This behavior begs several important questions: the first being why Seair Directors, management and a small group of individuals owning and/or controlling $4.572 million of outstanding debentures (the "Debenture Control Group") are actively opposing efforts that would allow the Corporation to preserve its equity, properly value its assets, and to repay its debts in full?

To assist all Seair stakeholders (including related oversight bodies) in answering that and other material questions, the Concerned Shareholders offer the following for consideration. These facts and events should be considered against the backdrop of an uninterrupted history of shareholder support for the provision of working capital when needed by the Corporation (often on short notice), and the Creditor Proposal proponents' aggressive attempts, before and after the Creditor Proposal was circulated, to directly and indirectly: a) consolidate the first ranking security debt now held by 1979927 Alberta Ltd. ("197"), a company owned and controlled by a current Director of Seair, R. Christopher Morris of RC Morris & Company, Vancouver, British Columbia ("Morris"); b) consolidate support from resistant secured creditors to accept conversion of their debt to equity (as applicable); c) solicit support from unsecured creditors to accept a discounted debt payout; and d) dissuade certain affected parties from continuing their support of the Concerned Shareholders' amendments to the Creditor Proposal:

  1. Morris is a current Director of Seair and nominally the sole shareholder and director of 197 listed in the Creditor Proposal as a first-ranking secured creditor, owed an aggregate amount of $807,225, collectively by Seair and Seair Diffusion Inc.;
  2. On November 21, 2016, 197 provided Seair secured bridge financing, in the amount of $215,125 due February 21, 2017 (the "197 Loan");
  3. The 197 Loan was offered and accepted to bridge Seair in anticipation of receiving material purchase orders (the "Orders") that would allow repayment of the 197 Loan and provide several months of working capital;
  4. As the 197 Loan approached maturity, shareholders placed calls to management in mid-January 2017 to determine if the Corporation needed money to repay the loan; an officer of Seair replied to one shareholder at that time, "No. We are fine";
  5. The Corporation stopped communicating with certain outside parties soon thereafter (principally shareholders with a history of providing financing on short notice), but subsequent to informing several shareholders that the long-awaited Orders were received but not in the form expected (such Order amounts were apparently separated into three phases rather than one);
  6. The Board of Director's attempts in January and February 2017 to negotiate an extension of the 197 Loan and outstanding debentures were apparently unsuccessful; an officer at that time represented to the Board that there was "nothing in the pipeline", meaning no anticipated revenues were coming into the Corporation.
  7. Certain parties made it clear to the Board that the default on the 197 Loan would also cause a cross-default in the $4.572 million debentures ("Debentures") that were outstanding and coming due in June 2017. Consequently, on February 17, 2017 four of the six Seair Board members resigned and were replaced with Morris and his associate at RC Morris & Company, Bradley Meadows ("Meadows"); indeed, Seair announced the default on the 197 Loan and consequent cross default on the Debentures on February 24, 2017;
  8. Subsequent to the debt default, 197 made a further loan of $100,000 to the Corporation for working capital purposes;
  9. Just prior to the default on the 197 Loan, on February 14, 2017 a Seair shareholder received a management certified copy of the Corporation's "business plan summary" outlining a "project pipeline" that projected twelve to eighteen months of revenues between $10 million and $30 million with estimated 75-80% gross margins. The business plan document was received by the shareholder in connection with a submission he was undertaking for the Corporation to the Alberta Government in respect of available tax credits. The detailed analysis within the business plan summary set out the significant economic value to be realized by Seair's customers using the Corporation's technology (principally contained within de-oiling applications), inferring a materially substantive valuation of the Corporation's intellectual property;
  10. Clearly the statement made to the Board that there was "nothing in the pipeline" is inconsistent with "projected twelve to eighteen months of revenues between $10 million and $30 million".
  11. On March 3rd 2017 a conference call was held between a group of Seair shareholders, a debenture holder who was not part of the Debenture Control Group, and the principal of VenX, to discuss what was being proposed by Directors Morris and Meadows as a restructuring of the Corporation to be offered to creditors. The debenture holder informed shareholders on that call that individuals within the Debenture Control Group had retained RC Morris & Company in the summer of 2016 in anticipation of the Corporation becoming insolvent, and that RC Morris & Company was being instructed by those Debenture Control Group individuals. RC Morris & Company was to receive approximately $200,000 in fees for their efforts - fees that have never been disclosed. The shareholders were also informed that the Debenture Control Group would provide $3 million in new capital to the Corporation subsequent to affecting a creditor-led restructuring, which was to be orchestrated and executed by RC Morris & Company. In a subsequent call, the debenture holder and VenX informed the Concerned Shareholders that an Officer of Seair had recently informed them the "project pipeline" referred to above was essentially intact.
  12. RC Morris & Company states on their website that one of their specialties is hostile restructuring transactions;
  13. The Debenture Control Group includes two individuals that work as investment advisors with CIBC Wood Gundy in Calgary;
  14. At this point in time, certain shareholders came together to form the Concerned Shareholder group and retained counsel to seek legal advice as to their options. There was significant concern that certain creditors of the Corporation (individuals who were part of the Debenture Control Group) were carrying out a plan to unjustly seize control of the intellectual property assets of the Corporation without accounting to shareholders;
  15. The Concerned Shareholders requisitioned a meeting of shareholders on March 31, 2017 in order to depose Morris, Meadows and Francis McKeever as Directors and to put in their place two representatives from the Concerned Shareholder group. The requisition made reference to the possibility of an alternate financing plan; the new shareholder directors would give proper consideration to all alternatives for Seair. Under the Business Corporations Act (Alberta), in the face of a shareholder requisition, the directors of a company have twenty-one days to call a meeting. Subsequently, counsel to the Concerned Shareholders received a telephone call from counsel to Seair asking for clarity on the source and nature of the alternate financing referred to in the requisition;
  16. The meeting of shareholders was never called by the Directors of Seair. When a telephone call inquiry was made by a shareholder to an Officer of the Corporation, the reason given was that Seair did not have any money to cover the expense of holding a shareholder meeting;
  17. The white knight investor, VenX, submitted a non-binding letter to Seair on April 10, 2017 requesting a period of due diligence with the view to providing a significant capital investment (the "VenX Letter") to the Corporation, as an alternative to the restructuring plan that was being discussed amongst creditors;
  18. Also on April 10, 2017 one of the Concerned Shareholders was informed by a secured creditor that the creditor had been invited to attend a meeting at CIBC offices in Calgary where he was subsequently offered a cash buy-out of his debt (which then constituted a majority of the Corporation's first ranking debt). Morris and members of the Debenture Control Group were in attendance at the meeting;
  19. On April 11th the Corporation announced the Creditor Proposal which contemplates secured creditors receiving shares for their debt in a private company that would control the Seair assets. Unsecured creditors would receive 10% of proven claims. Shareholders are not included in the Creditor Proposal and would lose all of their shares;
  20. On April 18, 2017, VenX received a letter from the Corporation acknowledging receipt of the VenX Letter and imposing onerous terms VenX would be required to meet prior to April 21 in order for the VenX proposal to be considered;
  21. On April 24, 2017, the secured creditor whom was previously approached about taking a cash payout for his debt confirmed to one of the Concerned Shareholders that he had received payment in excess of $300,000 via a certified cheque issued by Seair;
  22. On April 25th the Concerned Shareholders announced their intent to attend the Creditor Meeting as creditors to present an amendment to the Creditor Proposal (based upon alternate financing to be provided by shareholders and VenX) ("Amendment Proposal") and to call for the meeting to be adjourned;
  23. Prior to the Creditor Meeting on April 26, one of the Concerned Shareholders received a call from the principal of VenX to inform him that Seair Directors were attempting to have VenX renounce Concerned Shareholder representations in the April 25th press release regarding its support of the Amendment Proposal to be presented at the Creditor Meeting later that day. VenX, instead, provided a letter that was more neutral in tone than the Corporation had asked for: essentially confirming that the VenX Letter had expired for Seair consideration as of April 21, 2017. Nevertheless, at the Creditor Meeting, counsel for Seair characterized the letter provided by VenX to the Corporation as a blanket withdrawal of support for the Amendment Proposal. This was not true and was misleading;
  24. In the Creditor Meeting on April 26th, amongst other questions the Concerned Shareholders queried how the Corporation was able to make a cash payment to a secured creditor in excess of $300,000 (and in excess of the deemed value of Seair intellectual property set out in the Creditor Proposal) as it plead poverty with respect to calling a shareholder meeting as requisitioned in March. Morris stated that he had purchased the debt as a Director of Seair and did not answer any further questions. The Concerned Shareholders note that Seair did not file a material change report or press release in respect of the Director-purchased debt;
  25. If the Creditor Proposal is approved by a Court, 197 will own between 15 and 20% of the restructured private corporation and the Debenture Control Group will own approximately 75%. Current shareholders of Seair will own nothing; and
  26. The Concerned Shareholders have also since come to learn that current management of Seair are to be granted a 5 to 10% equity interest in the newly formed Corporation for their support of the Creditor Proposal.

In consideration of these facts and events it appears evident to the Concerned Shareholders that the Creditor Proposal is nothing more than the culmination of a premeditated thinly-veiled attempt to gain control of the Corporation's intellectual property and future business opportunities (the "pipeline") without accounting to shareholders for its value. The Creditor Proposal restructuring plan contemplates that secured creditors be given equity in a private corporation that would own and control Seair's current intellectual property assets. Why would the secured creditors propose this if: (a) the value of Seair's intellectual property was insufficient to realize any significant recovery of cash to if sold on the open market; and (b) the new company would follow the same business plan and strategies that caused it to become insolvent in the first place? The Concerned Shareholders firmly believe that an undisclosed plan and/or pending transaction is the actual motivation behind the Corporation's attempts to approve and implement its Creditor Proposal in order for those who will benefit to realize the true value of Seair's intellectual property; in any event the Creditor Proposal as presented does not constitute the best recovery for the stakeholders, and the Concerned Shareholders do not believe that the vote for the Creditor Proposal was made with full disclosure of the facts.

The Concerned Shareholders wish to thank all parties who have joined their efforts to contest the premise and substance of the Creditor Proposal. The efforts made thus far will continue. The Concerned Shareholders also wish to advise all affected parties that formal complaints have been filed with the Alberta Securities Commission, the TSX Venture Exchange, the Investment Industry Regulatory Organization of Canada, CIBC Wood Gundy Calgary, CIBC Ombudsmen Toronto, the British Columbia Association of Chartered Professional Accountants and the Ontario Charted Professional Accountants organization.

ADDITIONAL INFORMATION

The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws.

The address for Seair currently listed on its website is P.O. Box 94099 Elbow River Postal Outlet, Calgary, Alberta, T2S 0S4. To obtain a copy of this press release or for further information about the matters set out herein you may contact Nino Plava (403) 999-9916 or nplava@telus.net or Legal One Securities & Corporate Law, counsel to the Concerned Shareholders, at 403-613-5573.

NOT FOR DISSEMINATION OR RELEASE IN THE UNITED STATES FOR IMMEDIATE RELEASE IN CANADA

SOURCE: Corrine M. Fiesel Professional Corporation