Kelman Technologies Inc. proposed going private transaction

CALGARY, March 9 /CNW/ - Kelman Technologies Inc. ("Kelman") announced today that it has entered into a letter of intent with Seyco Operations Ltd. ("Seyco"), a corporation controlled by Seymour Epstein, Chairman of the board of directors and major shareholder of Kelman. Pursuant to the letter of intent, the parties have agreed, subject to mutual agreement by Seyco and Kelman by March 31, 2010 to acceptable terms and conditions in definitive documentation, and requisite approvals, that Seyco will purchase all of the currently issued and outstanding common shares of Kelman at a cash purchase price of $2.00 per share. Furthermore, Seyco will purchase all of the issued and outstanding Series C Convertible Preferred Shares of Kelman for $0.30 per share (plus accrued and unpaid dividends on such shares), which is the redemption price for such shares. It is anticipated that the definitive documentation will contain customary covenants, representations, warranties and closing conditions, including "no-shop" provisions, a Seyco right to match any superior proposal, and break fees payable to Seyco if the transaction does not proceed (subject to limited exceptions), in the amount of 4% of the transaction value plus Seyco's out-of-pocket expenses, up to an aggregate maximum break fee of $100,000.

It is proposed that the going private transaction be effected by way of an amalgamation between Kelman and a newly-created subsidiary of Seyco. In order for the amalgamation to proceed, the amalgamation must be approved by special resolution of the holders of common shares and special resolution of the holders of Series C Convertible Preferred Shares, as well as by an ordinary resolution of the common shareholders on a "majority of the minority" basis, at a special meeting of the shareholders to be held at a time and date to be determined by the board of directors.

On November 17, 2009, the board of directors of Kelman established a special committee comprised of independent directors, namely Messrs. Peters, Van Every and Watson, to consider a proposed going private transaction with Mr. Epstein and his related entities. The special committee and the board of directors have received an opinion (subject to review of final documentation) from Meyers Norris Penny LLP ("MNP") that the acquisition price of $2.00 per common share is fair, from a financial point of view, to Kelman's minority shareholders. Copies of the final fairness opinion of MNP will be included in the management information circular that will be sent to Kelman shareholders in connection with the special meeting to consider the proposed going private transaction.

The special committee has unanimously recommended that the board of directors approve the proposed going private transaction and that the board recommend that shareholders vote in favour of the proposed going private transaction. The board of directors has unanimously (with conflicted directors abstaining) approved, and recommends that shareholders vote in favour of, the proposed going private transaction.

The acquisition price of $2.00 per common share represents a 32% premium over the volume weighted average trading price of the common shares (excluding non-board lots) on the TSX Venture Exchange for the 20 most recent days on which board lot trades actually occurred prior to and including March 8, 2010, during which period of time 12,300 common shares were traded (board lots only). The board believes that the proposed going private transaction, if approved, will provide liquidity to shareholders which is otherwise not available because of the low trading volume of the common shares on the TSX Venture Exchange. In addition, the board recognizes that Kelman has been dependent on Mr. Epstein for ongoing financings and believes that further financings may be facilitated if the company is wholly-owned by Mr. Epstein.

Mr. Epstein, through Seyco, has ownership and control over 195,180 (37%) of Kelman's issued and outstanding common shares and, through Seyco and Epstein Enterprises Inc. (which is owned by Mr. Epstein), owns securities convertible into a further 1,234,996 common shares of Kelman. Assuming the exercise by Seyco and Epstein Enterprises Inc. of all rights to acquire common shares of Kelman, Mr. Epstein indirectly owns or controls approximately 80% of the outstanding common shares of Kelman.

To the extent this press release includes forward-looking statements about future events, such statements are believed to be reasonable by the company but are based upon certain assumptions, including assumptions in respect of commodity pricing and oil and gas exploration activity levels over the next couple of years. The risks associated with future events are mitigated where possible by Kelman but are uncontrollable and no guarantee of the accuracy of the forward-looking information is offered.

Kelman Technologies Inc. is a publicly traded Canadian company listed on the TSX Venture Exchange under the trading symbol "KTI". With offices in Calgary and Toronto, Canada, Denver, Houston, and Oklahoma City, United States and Tripoli, Libya, KTI services oil and gas exploration companies with a full suite of seismic processing and on-line data management and data archival services.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information: visit our web site at http://www.kelman.com or contact Mr. Rene VandenBrand, President and CEO at [phone], or by email to [email protected]