Star Metro - Caravan Announces Settlement of Litigation and Initiation of Winding-Up

Litigation Settlement

The litigation impacting the Company was initially commenced by Mr. Herbert Styles and two other minority Shareholders against the Company and its previous management and directors (the "Defendants"). That litigation (the "Original Action") was originally dealt with by way of an initial consent order by the Court of Queen's Bench (now Court of King's Bench) of Alberta (the "Court") in January of 2019, which was supplemented by an additional consent order in May 2019 (collectively, the "Original Consent Orders"). Those Original Consent Orders removed the old Board of Directors and replaced it with a new Board of three members (consisting of a nominee of Mr. Styles, a nominee of the Cowper-Smith family and an agreed upon independent director). The newly appointed Board was tasked with taking various matters forward, with the primary objective of getting the Company back to functioning normally. The Original Action also sought leave from the Court to pursue a derivative action and Mr. Styles was granted the right to pursue that action on behalf of the Company (the "Derivative Action"). The permitted Statement of Claim was filed on March 5, 2021, and served on June 6, 2021. As most of the claims against the defendants were claims of the Company against its former officers and directors, in June of 2023, the Board resolved to convert the Derivative Action to direct litigation, whereby the Company would take over the pursuit of its claims against the former directors and officers. A Consent Order permitting Caravan to take over conduct of the Derivative Action against the former officers and Directors was issued by the Court on August 16, 2024, thereby converting the Derivative Action into a direct action against the Defendants (other than the Company itself) (the "Caravan Action"). At that time the Company formed a Special Committee, comprised of Calum Stewart and Bev McKenzie (both of whom are current Directors of the Company), to run the Caravan Action and to instruct counsel on behalf of the Company. The Special Committee was tasked with attempting to resolve the Caravan Action by way of settlement out of Court (if deemed possible), but was also empowered to prosecute the Caravan Action against the Defendants if a reasonable settlement in the best interests of Caravan could not be obtained by negotiation.

After an extensive review of all claims and potential claims against the Defendants under the Caravan Action, the Special Committee entered into settlement discussions with the Defendants, which culminated with the execution of a formal settlement agreement among the Company, the Defendants and Mr. Styles. The Settlement Agreement does not constitute an admission of liability by or on behalf of any party thereto. It sets forth certain agreed upon payments to be made in order to resolve all outstanding litigation. Under the Settlement Agreement, the Defendants agreed to jointly pay to Caravan the amount of $380,000 in consideration of the Settlement Agreement and on account of all allegations and claims made in both the Original Action and the Caravan Action (the "CSF Payment"). The CSF Payment will be a payment from the Defendants to Caravan for eventual distribution exclusively to minority Class A shareholders (other than the Defendants). The Defendants, as Class A and as Class B shareholders, will not share in the distribution of the CSF Payment funds. The CSF Payment will be made as part of the distribution of Caravan's assets during the course of its winding up (or other distribution of funds to shareholders) by way of reducing the amount that the Defendants are entitled to receive from Caravan by $380,000, with such reduction being distributed among the remaining shareholders of Caravan. The Settlement Agreement also provides for a payment by Mr. Styles to Caravan in the amount of $186,340 (the "Styles Payment") to settle Caravan's claims against Mr. Styles, including an order for costs against Mr. Styles in connection with a failed receivership application (whereby the Court ordered the payment of costs by Mr. Styles to Caravan). The Styles Payment will be deducted from the value of the amounts distributed to Mr. Styles for his pro rata share of Class A shares of Caravan as part of the distribution of Caravan's assets during the course of its winding up (or other distribution of funds to shareholders). The Styles Payment will be distributed, pro rata, separately to all Class B shareholders and all Class A shareholders other than Mr. Styles at the time of liquidation and/or winding up.

The Settlement Agreement has been filed with and approved by the Court. In connection with such approval the Caravan Action has been discontinued. Though the Original Action has been settled pursuant to the Settlement Agreement, the Original Consent Orders remain in effect and will continue to govern the Company's winding up process and any distribution of assets to shareholders.

Initiation of Winding-up Process

The Company is pleased to report that it has paid all taxes and completed all purchase price adjustments and sales commission payments in connection with the previously announced sale of the Company's 10.25 acre parcel of land located at 2787 - 86^th Avenue S.E., Calgary, Alberta (which was completed in September 2024). The Company is in the process of completing its tax returns and audited financial statements for the year ended October 31, 2024.

With the progress in respect of all of these milestones, the Company is now in a position to commence the process of moving forward toward the winding-up of the Company and distributing its remaining assets to its shareholders. These actions will require the approval of the shareholders at a duly called meeting. The Company has instructed its counsel to commence the process of the proposed winding up of the Company and expects to call a formal meeting of shareholders in the coming months. Shareholders will be notified of the meeting date and will be provided with a management proxy circular in connection with that meeting.

Forward Looking Statements

Except for statements of historical fact relating to the Company, certain information contained herein constitutes forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Calum Stewart
Chairman, President and Director
[email protected]

Legal Inquiries can also be directed to Caravan's independent counsel, Tingle Merrett LLP, attention: Brett Code K.C. (ph: (403)571-8014) (re litigation matters); or Paul Bolger (ph: (403)571-8006) (re corporate matters).

SOURCE: Caravan Trailer Lodges of Alberta Ltd.

View the original press release on ACCESS Newswire

P.M.Martin--SMC