TORONTO, Nov. 17 /PRNewswire-FirstCall/ -- CoolBrands International Inc. ("CoolBrands") (TSX: COB.A) announces today that 2118769 Ontario Inc. ("2118769"), a company controlled by Mr. Michael Serruya, has entered into an agreement to acquire, at par, all of the indebtedness of the senior lenders under the credit facility provided to Americana Foods, L.P. ("Americana") which is guaranteed by CoolBrands. Americana is CoolBrands' 50.1% owned joint venture facility based in Dallas, Texas, which is currently in U.S. bankruptcy proceedings and is in default of its obligations to the senior lenders. In connection with the purchase, 2118769 has entered into a forbearance agreement with CoolBrands pursuant to which 2118769 has agreed for a period of six months not to take any action to demand repayment of the indebtedness on account of existing defaults under the Americana credit facility. The terms of the Americana credit facility remain unchanged and JPMorgan Chase Bank N.A. continues in its capacity as administrative agent under the credit facility. In addition, as part of this transaction, the senior lenders have provided a forbearance agreement relating to the remaining debt of CoolBrands that they hold, pursuant to which they agree for a period of six months not to take any action to demand repayment of the indebtedness on account of existing defaults under the CoolBrands credit facility. The total debt of CoolBrands is approximately US$25 million of which approximately US$21.7 million is debt of Americana and was acquired by 2118769. CoolBrands' credit facility continues to be held by JPMorgan Chase Bank N.A. and the other senior lenders. The transaction documents have all been signed in escrow pending the completion of the transaction which is expected to occur on Monday, November 20, 2006.
JPMorgan Chase Bank N.A. and the other senior lenders have also agreed to continue to make available to CoolBrands a US$8 million revolving line of credit. In connection therewith, 2118769 has provided a US$5 million letter of credit from which the senior lenders can draw in the event that CoolBrands does not repay such revolving line of credit. The debt acquired by 2118769 is subordinated to this revolving line of credit.
Effective today, CoolBrands' independent directors were replaced by Romeo DeGasperis, Garry Macdonald and Ronald W. Binns. Each of the audit committee, the corporate governance committee and the compensation committee were also reconstituted and are now comprised of the three new independent directors. At the request of 2118769, CoolBrands' four current independent directors and the current Co-Chairman, President and Chief Executive Officer, David J. Stein, have resigned as directors to facilitate the agreement by the lenders to forbear from exercising their rights under the credit facilities. CoolBrands thanks the directors for their services. Michael Serruya has agreed to assume the positions of President and Chief Executive Officer of CoolBrands, on an interim basis, replacing Mr. Stein who will continue as Head of Strategic Planning of CoolBrands. A brief biography of each of the new independent directors is set out below.
In consideration of 2118769 agreeing to enter into the forbearance arrangement with CoolBrands and providing the line of credit to the senior lenders, the newly reconstituted board of directors of CoolBrands has authorized the issuance by CoolBrands to 2118769 of warrants to purchase 5,500,000 subordinate voting shares of CoolBrands, which represents approximately 9.8% of the shares currently outstanding. The exercise price of the warrants is Cdn$0.50, and the term of the warrants is five years from the date of grant. CoolBrands has received conditional approval from the TSX for the listing of the 5,500,000 shares that may be issued to 2118769 upon exercise of the warrants. Although the transaction is considered to be a "related party transaction", CoolBrands is relying on the financial hardship exemption contained in section 604(e) of the TSX Company Manual in connection with the issuance of these warrants at an exercise price that is below market price.
The newly constituted board of directors of CoolBrands believes that these transactions should provide CoolBrands with sufficient time to restructure its financial affairs and address its liquidity issues. In deciding to approve the transactions described above, the new independent directors of CoolBrands and the board of directors as a whole determined that CoolBrands is in serious financial difficulty, the transactions are designed to improve the financial position of CoolBrands, and the terms of the transactions are reasonable in the circumstances.
The following is a brief summary of the backgrounds of our new directors:
Romeo DeGasperis is the CEO and a Vice-President of Con-Drain Company
Limited, a private company operating in Ontario. He is also a director of
Futureway Communications (FCI Broadband), a full service provider of
local and long distance telephone, high-speed Internet and data center
service to homes and businesses in the Greater Toronto Area. Mr.
DeGasperis was also an independent director of CoolBrands from February
2000 to August 2006.
Garry Macdonald is currently the President and Principal of Maccess
Management Inc., a private company providing strategic planning, business
development and consultancy services. From 1998 to 2002, he served as
President and CEO of Country Style Food Services Inc. Between 1989 and
1998, Mr. Macdonald was the President and CEO of the Franchise Operations
Division of Maple Leaf Foods Inc.
Ronald W. Binns is currently the CFO of Nevada Capital Corporation Ltd.
From 1989 to 2002, he served as the CFO of Franco-Nevada Mining
Corporation Ltd. Mr. Binns obtained his Chartered Accountancy with
Coopers & Lybrand in 1984, has lectured extensively for the B.C.
Institute of Chartered Accountants and "Big Four" accounting firms and
has been a director of several public and private companies.
CoolBrands also announces today that it has entered into a letter of intent with Healthy Food Holdings, LLC (the "Buyer") with respect to a sale of its CoolBrands Dairy, Inc. subsidiary, for consideration of US$45 million in cash, a US$5 million subordinated note and a warrant to purchase up to 2,000,000 shares of stock. CoolBrands Dairy, Inc. manufactures and markets Breyers yogurt products. Healthy Foods Holdings, LLC, controlled by Catterton Partners, also owns The Yofarm Company which manufactures and markets the YoCrunch family of yogurt products. The transaction remains subject to the entering into of definitive agreements, which the parties intend to negotiate and execute on or before November 30, 2006. There can be no assurance that definitive agreements will be agreed to, or that the transaction will ultimately be consummated. The letter of intent provides that CoolBrands will not engage in discussions with any other party regarding a potential sale involving CoolBrands Dairy, Inc. for the period ending November 30, 2006 (the "Exclusive Period"). The Exclusive Period will continue for successive 10 day periods unless terminated by either party. CoolBrands has agreed to reimburse the Buyer's transaction expenses, to a maximum of US$350,000, in certain circumstances where a definitive agreement is not reached, and also has agreed to pay, in certain circumstances, a "break fee" of US$2 million if the transaction is not completed.
CoolBrands also announces the closing today of the previously-announced sale by its subsidiary, Eskimo Pie Frozen Distribution, Inc. of its "direct store door" frozen distribution assets in Florida, California, Oregon and Washington to Southwest Traders, Inc. for net consideration of approximately US$5 million. Net proceeds from the sale will be used to repay a portion of CoolBrands' borrowings.
About CoolBrands International: CoolBrands International Inc. markets a broad range of ice creams and frozen snacks under a family of brands, including Eskimo Pie(R), Godiva(R) Ice Cream, Whole Fruit(TM) Sorbet, Snapple(R) On Ice Pops, Tropicana(R) Fruit Bars, No Pudge! (TM) Frozen Snacks, Crayola(R) Color Pops, Yoplait(R) Frozen Yogurt and many other well recognized brand names. CoolBrands also markets fresh yogurt products, including Breyers(R) Fruit on the Bottom, Probiotics Plus Light and Creme Savers(R) cup yogurt varieties. Eskimo Pie and Whole Fruit are trademarks of CoolBrands, all other marks are used under license.
For more information about CoolBrands, visit http://www.coolbrandsinc.com/.
Forward Looking Statements
This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans and projections regarding the Company's financial position and business strategy. These statements may be identified by the fact that they use such words as "anticipate," "estimate," "expect," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. These factors include, among other things, market factors, competitive product development and promotional activity, the level of consumer interest in the Company's products, product costing, the weather, the performance of management, including management's ability to implement its plans as contemplated, the Company's relationship with its customers, franchisees, licensees and licensors, governmental regulations and legislation and litigation. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
