NOTICE OF ANNUAL AND SPECIAL MEETING
AND SPECIAL CONFIRMATORY MEETING OF
COOLBRANDS INTERNATIONAL INC.
NOTICE IS HEREBY GIVEN that the annual and special meeting (the "Annual
and Special Meeting") of holders (the "Shareholders") of subordinate voting
shares and multiple voting shares of CoolBrands International Inc. (the
"Corporation") will be held at The Sheraton Parkway (Thornhill Room), 600
Highway 7 East, Richmond Hill, Ontario, L4B 1B2, on February 27, 2006 at 10:00
a.m. (Toronto time), for the following purposes:
1. to receive the financial statements of the Corporation for the year ended
August 31, 2005, together with the report of the auditor thereon;
2. to elect directors of the Corporation;
3. to appoint the auditor of the Corporation and to authorize the directors
to fix the auditor's remuneration;
4. to consider and, if deemed advisable, to pass with or without variation, a
special resolution (the "Continuance Resolution"), the form of which is
set forth in Schedule B to the accompanying Management Information
Circular (the "Circular"), approving the discontinuance of the Corporation
pursuant to section 133(5) of the Companies Act (Nova Scotia) (the "NSCA")
and the continuance (the "Continuance") of the Corporation pursuant to
section 187 of the Canada Business Corporations Act (the "CBCA") and the
adoption of a general by-law, all as more particularly described in the
Circular;
5. to consider and, if deemed advisable, to pass with or without variation, a
special resolution (the "Share Capital Restructuring Resolution"), the
form of which is set forth in Schedule D to the Circular, approving the
share capital restructuring of the Corporation as more particularly
described in the Circular; and
6. to transact such other business as may properly come before the Annual and
Special Meeting or any adjournments or postponements thereof.
NOTICE IS HEREBY FURTHER GIVEN that a subsequent special confirmatory
meeting of the Shareholders (the "Confirmatory Meeting") will be held at 8300
Woodbine Avenue, 5th Floor, Markham, Ontario, L3R 9Y7 on March 20, 2006 at 10:00
a.m. (Toronto time), for the sole purpose of passing resolutions confirming the
Continuance Resolution (the "Continuance Confirmatory Resolution") and the Share
Capital Restructuring Resolution (the "Share Capital Confirmatory Resolution")
to be passed at the Annual and Special Meeting. Pursuant to the NSCA, because
the Continuance Resolution and the Share Capital Restructuring Resolution must
be passed as special resolutions for the purposes of the NSCA, they must also be
confirmed by greater than 50% of the votes cast by Shareholders present in
person or represented by
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proxy at the Confirmatory Meeting by way of the Continuance Confirmatory
Resolution and Share Capital Confirmatory Resolution, respectively, the forms of
which are set forth in Schedules C and E, respectively, to the accompanying
Circular.
Shareholders are invited to attend the Annual and Special Meeting and the
Confirmatory Meeting (which are collectively referred to as the "Meetings").
Shareholders who are unable to attend the Meetings in person are requested to
sign and return the enclosed form of proxy in the envelope provided for that
purpose. To be effective in respect of the Annual and Special Meeting, proxies
must be received before 5:00 p.m. (Toronto time) on February 24, 2006 by Equity
Transfer Services Inc., 120 Adelaide Street West, Suite 420, Toronto, Ontario,
M5H 3V1, or by facsimile at 416-361-0470, or by the close of business on the
second business day preceding the date of any adjournment or postponement
thereof, or be presented prior to the commencement of the Annual and Special
Meeting or any adjournment or postponement thereof. To be effective in respect
of the Confirmatory Meeting, proxies must be received before 5:00 p.m. (Toronto
time) on March 16, 2006 by Equity Transfer Services Inc., 120 Adelaide Street
West, Suite 420, Toronto, Ontario, M5H 3V1, or by facsimile at 416-361-0470, or
by the close of business on the second business day preceding the date of any
adjournment or postponement thereof, or be presented prior to the commencement
of the Confirmatory Meeting or any adjournment or postponement thereof.
The Corporation's Annual Report for the year ended August 31, 2005,
Circular and form of proxy are enclosed with this notice of meeting.
Only Shareholders of record on January 9, 2006 will be entitled to vote at
the Meetings except to the extent that a person has transferred any of his or
her shares after that date and the transferee of such shares establishes proper
ownership and requests, not later than ten days before the relevant Meeting,
that his or her name be included in the list of Shareholders for such Meeting,
in which case the transferee will be entitled to vote his or her shares at the
Annual and Special Meeting or the Confirmatory Meeting, as the case may be.
DATED at Markham, Ontario this 13th of January, 2006.
BY ORDER OF THE BOARD OF
DIRECTORS
"Francis Orfanello"
--------------------------------
Francis X. Orfanello
Secretary
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If the Continuance Resolution and the Continuance Confirmatory Resolution
are passed in accordance with the provisions of the relevant legislation and the
Continuance becomes effective, a registered holder of shares who dissents (a
"Dissenting Shareholder") from the Continuance Resolution or the Continuance
Confirmatory Resolution, as the case may be, will be entitled to be paid the
fair value of his or her shares if the Secretary of the Corporation shall have
received from such Dissenting Shareholder at or before the Annual and Special
Meeting or at or before the Confirmatory Meeting a notice of dissent or a
written objection (each a "Notice of Dissent") to the Continuance Resolution or
the Continuance Confirmatory Resolution, as the case may be, and the Dissenting
Shareholder shall have otherwise complied with the dissent procedures (which are
described in the Circular under the heading "Dissenting Shareholder Rights" and
in Schedule F to the Circular). Failure to comply strictly with such dissent
procedures may result in the loss or unavailability of any right of dissent. A
Dissenting Shareholder need not have dissented at the Annual and Special Meeting
in order to be able to dissent at the Continuance Confirmatory Meeting.
COOLBRANDS INTERNATIONAL INC.
MANAGEMENT INFORMATION CIRCULAR
Solicitation of Proxies
This management information circular is furnished in connection with the
solicitation of proxies by or on behalf of the management of CoolBrands
International Inc. (the "Corporation") for use at the annual and special meeting
(the "Annual and Special Meeting") and confirmatory meeting (the "Confirmatory
Meeting") of shareholders of the Corporation to be held at the times and places
and for the purposes set forth in the attached notice of annual and special
meeting and special confirmatory meeting of shareholders (the "Notice of
Meeting"). While it is expected that the solicitation will be primarily by mail,
proxies may be solicited personally or by telephone by the regular employees of
the Corporation at nominal cost. The costs of solicitation will be borne by the
Corporation. The Annual and Special Meeting and the Confirmatory Meeting are
collectively referred to herein as the "Meetings". All references in this
management information circular to the Meetings include references to any
adjournments or postponements thereof.
The Corporation may pay the reasonable costs incurred by persons who are
the registered but not beneficial owners of voting shares of the Corporation
(such as brokers, dealers, other registrants under applicable securities laws,
nominees and/or custodians) in sending or delivering copies of the Notice of
Meeting, this Information Circular and the form of proxy (collectively, the
"Meeting Materials") to the beneficial owners of such shares. The Corporation
will provide, without cost to such persons, upon request to the Secretary of the
Corporation, additional copies of the foregoing documents required for this
purpose.
Appointment and Revocation of Proxies
The persons named in the enclosed form of proxy are directors of the
Corporation. A shareholder has the right to appoint a person (who need not be a
shareholder) to attend and act for him and on his behalf at the Meetings other
than the persons designated in the enclosed form of proxy. Such right may be
exercised by striking out the names of the persons designated in the enclosed
form of proxy and by inserting in the blank space provided for that purpose the
name of the desired person or by completing another proper form of proxy. To be
effective, proxies to be exercised at the Meetings must be deposited at the
offices of Equity Transfer Services Inc., 120 Adelaide Street West, Suite 420,
Toronto, Ontario, M5H 3V1, or by facsimile at 416-361-0470, (i) in the case of
the Annual and Special Meeting, prior to 5:00 p.m. (Toronto time) on February
24, 2006 or, with the Secretary of the Corporation at any time prior to the
Annual and Special Meeting, or (ii) in the case of the Confirmatory Meeting,
prior to 5:00 p.m. (Toronto time) on March 16, 2006 or, with the Secretary of
the Corporation at any time prior to the Confirmatory Meeting, or (iii) in any
other manner permitted by law. A shareholder forwarding the enclosed proxy may
indicate the manner in which the appointee is to vote with respect to any
specific item by checking the appropriate
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space. If the shareholder giving the proxy wishes to confer a discretionary
authority with respect to any item of business then the space opposite the item
is to be left blank.
In accordance with the Company Act (Nova Scotia) (the "Act") and
applicable securities laws, a shareholder who has given a proxy may revoke it at
any time to the extent that it has not been exercised. A proxy may be revoked,
as to any manner on which a vote shall not already have been cast pursuant to
the authority conferred by such proxy, by instrument in writing executed by the
shareholder or by his attorney authorized in writing or, if the shareholder is a
body corporate, under its corporate seal or by an officer or attorney thereof
duly authorized, and deposited either with the Corporation or its transfer agent
at any time up to and including the last business day preceding the day of the
relevant Meeting or any adjournment of such Meeting at which the proxy is to be
used, or with the Chairman of the Meeting prior to the commencement of the
Meeting on the day of the Meeting or any adjournment of the Meeting. A proxy may
also be revoked in any other manner permitted by law.
Exercise of Discretion Of Proxies
The persons named in the enclosed form of proxy will vote the shares in
respect of which they are appointed in accordance with the direction of the
shareholders appointing them. Where no choice is specified, such shares will be
voted in favour of the nominees proposed below for election as directors, in
favour of the appointment of BDO Seidman, LLP as the auditor of the Corporation,
in favour of the Continuance Resolution (as defined below), in favour of the
Share Capital Restructuring Resolution (as defined below), in favour of the
Continuance Confirmatory Resolution (as defined below), and in favour of the
Share Capital Confirmatory Resolution (as defined below). The enclosed form of
proxy confers discretionary authority upon the persons named therein to vote
with respect to amendments or variations to matters identified in the Notice of
Meeting and with respect to other matters which may properly come before the
Meetings in such manner as such nominee in his judgment may determine. As at the
date of this management information circular, management knows of no such
amendments, variations or other matters to come before the Meetings other than
the matters referred to in the Notice of Meeting.
Date of Information
Unless otherwise specified, information in this Information Circular is
given as of January 9, 2006.
Voting Securities and Principal Holders Thereof
As of January 9, 2006, the Corporation had outstanding 6,027,864 multiple
voting shares and 50,005,069 subordinate voting shares.
Only shareholders of record at the close of business on January 9, 2006
(the "Record Date"), who either personally attend the Meetings or who have
completed and delivered a form of proxy in the manner and subject to the
provisions described above shall be entitled to vote or to have their shares
voted at the Meetings, except to the
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extent that such shareholder has transferred the ownership of any shares after
the Record Date and the transferee of such shares establishes proper ownership
thereof and demands, not later than ten days before the relevant Meeting, to be
included in the list of shareholders entitled to vote at such Meeting, in which
case such transferee is entitled to vote.
Each multiple voting share entitles the registered holder thereof to ten
votes at all meetings of shareholders. Each subordinate voting share entitles
the registered holder thereof to one vote at all meetings of shareholders.
Holders of subordinate voting shares exercise in the aggregate 45.3% of the
voting rights attached to all voting securities of the Corporation.
In the event that an offer to purchase multiple voting shares is made to
holders of such shares, and the offer is required by securities legislation or
stock exchange rule to be made to all, or substantially all, of the holders of
multiple voting shares in Canada, holders of subordinate voting shares have an
option to convert their subordinate voting shares into multiple voting shares.
This option commences on the eighth day after the date the offer is made to
holders of multiple voting shares and ends on the date of expiry of the offer.
This conversion right will not apply if, within seven days of the date of the
offer, registered shareholders owning more than 50% of the then outstanding
multiple voting shares confirm to the transfer agent and secretary of the
Corporation, among other items, that they will not tender any multiple voting
shares in acceptance of the offer without having given the transfer agent and
secretary written notice of their acceptance or intended acceptance of the offer
at least seven days prior to the expiry date of the offer. If the right of
conversion to multiple voting shares is available to holders of subordinate
voting shares and is duly exercised, all multiple voting shares so converted
will be deemed to be deposited to the offer. If any converted multiple voting
shares are withdrawn, or are not ultimately taken up by the offeror, such
converted multiple voting shares shall be automatically reconverted to
subordinate voting shares.
To the knowledge of the directors and executive officers of the
Corporation, there are no persons or companies who beneficially own, directly or
indirectly, or exercise control or direction over securities of the Corporation
carrying more than 10% percent of the voting rights attached to any class of
outstanding voting securities of the Corporation, except as follows:
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Name Designation of Class Number Percentage of Class
- -----------------------------------------------------------------------------------------------
The Serruya Family Trust Multiple voting shares 4,233,332(1) 70.2
The Estate of Richard E. Smith Multiple voting shares 1,419,467(2) 23.5
Krevlin Advisors, L.L.C.(3) Subordinate Voting Shares 5,074,000 10.15
Notes:
1. The 4,233,332 multiple voting shares represents approximately 38.4% of the
votes attaching to all outstanding shares of the Corporation. The Serruya
Family Trust was created and settled for the benefit of certain members of
the Serruya family of Toronto, Ontario. Certain members of the Serruya
family serve as directors and officers of the Corporation.
2. The 1,419,467 multiple voting shares represents approximately 12.9% of the
votes attaching to all outstanding shares of the Corporation. Mr. Richard
E. Smith, the Corporation's former Co-Chairman and Co-Chief Executive
Officer, passed away on January 29, 2005. The sole executrix of the Estate
of Richard E. Smith is Susan Smith.
3. Krevlin Advisors, L.L.C. acts as investment advisor to Glenhill Capital,
LP, Glenhill Capital Overseas Master Fund, LP and Glenhill Concentrated
Long Absolute Fund, LP. This information is based on a report dated
December 9, 2005 filed by Krevlin Advisors, L.L.C. with Canadian
securities regulators under National Instrument 62-103.
Notwithstanding the existence of a board representation agreement dating
to March 1998 (the "Board Representation Agreement") pursuant to which The
Serruya Family Trust, Michael Serruya, Aaron Serruya, Richard E. Smith, David M.
Smith and David J. Stein agreed with each other to vote all of their respective
shares of the Corporation, representing in the aggregate approximately 54.4% of
the votes attaching to all outstanding shares of the Corporation, in favour of
nominees proposed for election as directors, such parties have agreed pursuant
to a voting agreement as of December 13, 2005 (the "Voting Agreement") that all
nominations for membership on the board of directors of the Corporation (the
"Board") made in the Corporation's management information circulars or otherwise
will be made by the Corporate Governance Committee of the Board. For details
relating to the Board Representation Agreement and the Voting Agreement, see
"Election of Directors - Board Representation Agreement and Voting Agreement".
Advice To Beneficial Shareholders
The information set forth in this section is of significant importance to
holders of subordinate voting shares and multiple voting shares who hold their
shares in "book-entry" form, meaning that they are held through brokers and
nominees and not in their own name. Holders of shares who do not hold their
shares in their own name (referred to in this circular as beneficial
shareholders) should note that only proxies deposited by holders of shares whose
names appear on the records of the Corporation as the registered holders of
subordinate voting shares or multiple voting shares can be recognized and acted
upon at the Meetings. If shares are listed in an account statement provided to a
holder of shares by a broker, then in almost all cases those shares will not be
registered under the name of the holder on the records of the Corporation. Such
shares will more likely be registered under the name of the beneficial
shareholder's broker, or an agent or nominee of that broker. Shares held by
brokers or their agents and nominees can only be voted for, or withheld from
voting, or voted against, any resolution, upon the instructions of the
beneficial shareholder. Without specific instructions, brokers and their agents
and nominees are prohibited from voting the securities for their clients.
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Applicable Canadian regulatory policy requires intermediaries and brokers
to seek voting instructions from beneficial shareholders in advance of a meeting
of shareholders of the Corporation. Every intermediary and broker has its own
mailing procedures and provides its own return instructions, which should be
carefully followed by beneficial shareholders in order to ensure that their
shares are voted at the Meetings. Often, the form of proxy supplied to a
beneficial shareholder by its broker is identical to the form of the proxy
provided to registered holders of shares; however, its purpose is limited to
instructing the registered holder of shares how to vote on behalf of the
beneficial shareholder. A beneficial shareholder receiving a proxy from an
intermediary cannot use that proxy to vote shares directly at the Meetings,
rather the proxy must be returned to the intermediary well in advance of the
Meetings in order to have the shares voted.
BUSINESS TO BE CONDUCTED AT THE MEETING
Audited Financial Statements
The Corporation's consolidated financial statements for the financial year
ended August 31, 2005 and the report of the auditors thereon will be submitted
to the Annual and Special Meeting. Receipt at the Annual and Special Meeting of
the consolidated financial statements for the financial year ended August 31,
2005 and the auditor's report thereon will not constitute approval or
disapproval of any matters referred to therein.
Election of Directors
The table below describes the people who have been nominated as directors
and the voting securities that they own directly or indirectly. The articles of
the Corporation provide that the Board shall consist of a minimum of 5 and a
maximum of 15, with the actual number to be determined from time to time by the
Board. The Board has determined that, at the present time, there will be nine
directors. Management does not contemplate that any of the nominees will be
unable to serve as a director but if that should occur for any reason prior to
the Annual and Special Meeting, it is intended that discretionary authority
shall be exercised by the persons named in the enclosed form of proxy to vote
the proxy for the election of any other person or persons in place of any
nominee or nominees unable to serve. Each director elected will hold office
until the close of business of the annual meeting of shareholders of the
Corporation following his or her election unless his or her office is earlier
vacated in accordance with the Corporation's constating documents and the
Corporation's governing statute.
Shares listed below include shares over which a director has or shares,
directly or indirectly, voting or investment power.
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Number of Number of
Multiple Subordinate
Voting Voting
Name, Position with the Principal Occupation and, if not at Present an Shares Shares
Corporation and Municipality Director Elected Director, Occupation during the Past Five Beneficially Beneficially
of Residence(1) Since Years(1) Held(2) Held(2)
- --------------------------------------------------------------------------------------------------------------------------------
Robert E. Baker(4)(5) 2005 President of Puroast Coffee, Inc., a private company - -
Lead Director manufacturing low acid coffee.
Smyrna, Georgia, U.S.A.
- --------------------------------------------------------------------------------------------------------------------------------
Beth L. Bronner(3)(5) 2005 Senior Vice President & Chief Marketing Officer of Jim - -
Director Beam Brands Co., a division of Fortune Brands, Inc., a
Deerfield, Illinois, U.S.A. publicly traded leading consumer products company.
- --------------------------------------------------------------------------------------------------------------------------------
Romeo DeGasperis(3) 2000 Vice President Con-Drain Company Limited, a watermain - -
Director and sewer contracting business.
Concord, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------------------
William R. McManaman(3) N/A Business consultant. From March 2004 to January 2005, - -
Nominee for Director Senior Vice President and Chief Financial Officer of
La Grange, Illinois, U.S.A. First Health Group Corp., a national health-benefits
services company. Prior thereto, Executive Vice
President and Chief Financial Officer of Aurora Foods,
Inc., a manufacturer, marketer and distributor of dry
and frozen branded food products from 2002. Vice
President, Finance and Chief Financial Officer of Dean
Foods Company, a dairy products company, from 1995 to
2000.
- --------------------------------------------------------------------------------------------------------------------------------
Aaron Serruya 1994 President and Chief Executive Officer of International 4,233,332(6) 56,149
Director Franchise Corp.
Thornhill, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------------------
Michael Serruya 1994 Co-Chairman of the Corporation 4,233,332(6) 56,000
Co-Chairman and Director
Thornhill, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------------------
David M. Smith 1998 Vice-Chairman and Chief Operating Officer of the 288,106 -
Vice-Chairman, Chief Operating Corporation
Officer and Director
Manhasset, New York, U.S.A.
- --------------------------------------------------------------------------------------------------------------------------------
L. Joshua Sosland(4)(5) 2005 Vice Chairman of Sosland Publishing Co., a publisher - 4,030
Director of business-to-business periodicals for the
Kansas City, Missouri, U.S.A. grain-based and food processing industries.
- --------------------------------------------------------------------------------------------------------------------------------
David J. Stein 1998 Co-Chairman, President and Chief Executive Officer of 45,138 -
Co-Chairman, President, Chief the Corporation
Executive Officer and
Director
Southampton, New York, U.S.A.
- --------------------------------------------------------------------------------------------------------------------------------
Notes:
1) Individual directors have provided information as to municipality of
residence and principal occupation.
2) The individual directors have provided this information, not being within
the knowledge of the Corporation.
3) Member of the Audit Committee. It is expected that Mr. McManaman will join
the Audit Committee following his election at the Annual and Special
Meeting.
4) Member of the Compensation Committee.
5) Member of the Corporate Governance Committee.
6) Includes 155,031 multiple voting shares held directly by The Serruya
Family Trust and 4,078,301 multiple voting shares held by 1082272 Ontario
Inc., a wholly-owned subsidiary of the The Serruya Family Trust.
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Corporate Cease Trade Orders or Bankruptcies
Michael Serruya, the Corporation's Co-Chairman, by virtue of his role as a
director of Moneysworth & Best Shoe Care Inc., was subject to a cease trade
order issued by the Ontario Securities Commission in June 2000 concerning
Moneysworth & Best Shoe Care Inc. securities when Moneysworth failed to comply
with certain continuous disclosure requirements. Moneysworth & Best Shoe Care
Inc. filed for voluntary assignment into bankruptcy on July 11, 2000. The cease
trade order is no longer in effect.
William R. McManaman, a nominee for election as director at the Annual and
Special Meeting, was the Executive Vice-President and Chief Financial Officer of
Aurora Foods, Inc. ("Aurora") from April 2002 until March 2004. Aurora filed for
voluntary assignment into bankruptcy under Chapter 11 on December 8, 2003.
Aurora emerged from bankruptcy March 19, 2004 and merged the same day with
Pinnacle Foods Corporation.
Penalties or Sanctions
No proposed director has, during the ten years prior to the date hereof:
(a) been subject to any penalties or sanctions imposed by a court
relating to Canadian securities legislation or by a Canadian
securities regulatory authority or has entered into a settlement
agreement with a Canadian securities regulatory authority; or
(b) been subject to any other penalties or sanctions imposed by a court
or regulatory body that would be likely to be considered important
to a reasonable investor making an investment decision.
Personal Bankruptcies
No proposed director, has, during the ten years prior to the date thereof,
become bankrupt, made a proposal under any legislation relating to bankruptcy or
insolvency, or has been subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver, receiver manager or trustee
appointed to hold his or her assets.
Board Representation Agreement and Voting Agreement
Board Representation Agreement
In connection with the acquisition on March 18, 1998 of Integrated Brands
by a wholly-owned subsidiary of the Corporation, Messrs. Richard E. Smith, David
M. Smith and David J. Stein ("Integrated Brands Principal Shareholders") and
Integrated Brands Inc., on the one hand, and the Corporation and The Serruya
Family Trust, 1082272 Ontario Inc., Michael Serruya and Aaron Serruya
("CoolBrands Principal Shareholders"), on the other hand, entered into the Board
Representation Agreement.
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Each of the CoolBrands Principal Shareholders and the Integrated Brands
Principal Shareholders have agreed to vote against: (i) the sale of all or
substantially all of the Corporation's assets; (ii) a merger, consolidation or
similar transaction involving the Corporation; or (iii) an amendment to the
Memorandum of the Association and/or the Articles of Association of the
Corporation which would adversely affect the rights of the Integrated Brands
Principal Shareholders or the CoolBrands Principal Shareholders, unless the
Integrated Brands Principal Shareholders and the CoolBrands Principal
Shareholders agree in writing to vote for any such matters.
Pursuant to the terms of the Board Representation Agreement, each of the
CoolBrands Principal Shareholders and the Integrated Brands Principal
Shareholders agreed to certain restrictions relating to resales of voting
securities of the Corporation. Subject to certain exemptions, until the first to
occur of: (i) the termination of the Board Representation Agreement; or (ii) the
21st anniversary of the Board Representation Agreement; the CoolBrands Principal
Shareholders and the Integrated Brands Principal Shareholders have each agreed
not to sell any voting securities of the Corporation to an unrelated third party
without the prior written consent of the CoolBrands Principal Shareholders or
the Integrated Brands Principal Shareholders, as the case may be, and to first
offer such voting securities to the CoolBrands Principal Shareholders or the
Integrated Brands Principal Shareholders, as the case may be, at the market
price for such voting securities as of the date of the offer. Pursuant to the
Board Representation Agreement, prior to any sale to a third party, any multiple
voting shares must be converted to subordinate voting shares. In addition, the
CoolBrands Principal Shareholders and the Integrated Brands Principal
Shareholders have agreed not to convert, or cause to be converted, any multiple
voting shares into subordinate voting shares, without the prior written consent
of the CoolBrands Principal Shareholders or the Integrated Brands Principal
Shareholders, as the case may be. The CoolBrands Principal Shareholders and the
Integrated Brands Principal Shareholders have deposited with an escrow agent the
multiple voting shares held by them.
Each of the CoolBrands Principal Shareholders and the Integrated Brands
Principal Shareholders have agreed not to accept an offer to sell any voting
securities at a price in excess of the market price of the voting securities on
the date of such offer, except: (i) sales made on The Toronto Stock Exchange
("TSX") or any other regional or national exchange, outside or inside Canada, on
which such securities are regularly traded; (ii) to another principal
shareholder; or (iii) pursuant to an offer made proportionately and at the same
price to all other shareholders of the Corporation.
The Board Representation Agreement may be terminated: (i) by the
CoolBrands Principal Shareholders in the event that the Integrated Brands
Principal Shareholders are the beneficial owners, in the aggregate, of fewer
than 750,000 voting securities (including voting securities issuable upon the
conversion or exercise of convertible securities); and (ii) by the Integrated
Brands Principal Shareholders, in the event the CoolBrands Principal
Shareholders are the beneficial owners, in the aggregate, of fewer
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than 1,500,000 voting securities (including voting securities issuable upon the
conversion or exercise of convertible securities).
Voting Agreement
Notwithstanding the Board Representation Agreement, Aaron Serruya, Michael
Serruya, David Smith and David Stein, and entities affiliated with them
(collectively, the "Management MVS Holders"), have each entered into the Voting
Agreement with the Corporation pursuant to which they each agreed to vote all of
the shares that they beneficially own or control in favour of the Continuance
Resolution (as defined below) and in favour of the Share Capital Restructuring
Resolution (as defined below). Further notwithstanding the Board Representation
Agreement, the parties to the Voting Agreement agreed pursuant to the terms of
the Voting Agreement, the Management MVS Holders have agreed that (i) the Board
Representation Agreement shall be terminated on the date on which articles of
amendment in respect of the Share Capital Restructuring have become effective;
and (ii) from the date of the Voting Agreement until the termination of the
Board Representation Agreement, all nominations for membership on the Board made
in the Corporation's management information circulars or otherwise will be made
by the Corporate Governance Committee of the Board.
SPECIAL BUSINESS TO BE CONDUCTED AT THE MEETING
1. Continuance under the Canada Business Corporations Act / Adoption of New
By-Law
Shareholders will be asked at the Meeting to consider, and, if deemed
advisable, to pass a resolution (the "Continuance Resolution"), the text of
which is set out in Schedule B to this circular, authorizing the continuance of
the Corporation (the "Continuance") from the Companies Act (Nova Scotia) (the
"NSCA") to the Canada Business Corporations Act (the "CBCA"), subject to receipt
of all necessary regulatory approvals. If the Continuance Resolution is passed
and the requisite filings made in order to effect the Continuance, the
Corporation will continue its corporate existence governed by the laws of the
CBCA rather than the NSCA.
Reason for the Continuance
The primary impetus for the Continuance is to permit the Corporation to be
governed by the CBCA, a more modern statute than the NSCA. A brief overview of
some of the key differences in terms of shareholder rights between the two
statutes follows.
Summary Comparison of Shareholder Rights
In the event that shareholders approve the Continuance and the Continuance
is effected under the CBCA, the Corporation will be treated as if it had been
incorporated under the federal laws of Canada, rather than under the NSCA which
now governs the
- 10 -
Corporation's affairs. The relevant provisions of the CBCA are similar to those
of the NSCA and, accordingly, the fundamental rights of the Corporation's
shareholders, the rights, powers and obligations of the directors and the power
and authority of the Corporation will not significantly change as a result of
the Continuance. However, there are some material differences between the NSCA
and the CBCA.
The following is a summary of some of the material differences between the
NSCA and the CBCA. This summary is not intended to be exhaustive and
shareholders should consult their own legal advisors regarding implications of
the Continuance which may be of particular importance to them.
Special Resolutions
A resolution is deemed to be a "special resolution" under the NSCA when it
has been passed by a majority of not less than three-fourths of such
shareholders entitled to vote as are present in person or by proxy at any
general meeting and such resolution has been confirmed by a majority of such
shareholders entitled to vote as are present in person or by proxy at a
subsequent confirmatory meeting held at an interval of not less than 14 days,
and not more than one month, from the date of the first meeting. Alternatively,
a resolution which has been unanimously passed by all of the shareholders of a
company shall be deemed to be a special resolution.
Under the CBCA, subject to such greater number as may be provided in the
articles, a special resolution means a resolution passed by a majority of not
less than two-thirds of the votes cast by shareholders who voted in respect of
the that resolution. Alternatively, a resolution which has been unanimously
passed by all of the shareholders of a corporation shall be deemed to be a
special resolution.
Fundamental Changes
A special resolution is required under the NSCA for a company to effect
fundamental changes, including altering its memorandum of association or
articles of association, increasing its authorized capital in certain ways or
sub-dividing, consolidating or changing its shares, purchasing its own shares
other than redeemable shares, being wound-up voluntarily, changing its name or,
with court approval, reducing its paid-up capital or being amalgamated.
A special resolution is required under the CBCA in order that a
corporation amend its articles, approve a voluntary liquidation, dissolution,
amalgamation, arrangement, extraordinary sale or continuance.
Under both the NSCA and the CBCA, class votes may be required in
connection with certain fundamental changes. Under both statutes, the vote must
be by a majority of not less than two-thirds of the votes cast by shareholders
of the class who vote in respect of that resolution. Both statutes provide for
class voting in similar circumstances
- 11 -
although under the NSCA, class vote rights arise even where the holders of the
class are not treated differently than others in respect of the matter at issue.
Authorized Capital
Under the NSCA, the memorandum of association must state the number of
shares a company is authorized to issue. Under the CBCA, the articles may
provide for the issuance of an unlimited number of shares.
Share Purchase
Under the NSCA, a company is permitted to purchase, or otherwise acquire
its shares, subject to certain solvency tests and certain exceptions, only upon
authorization of the shareholders of the company by special resolution. Under
the CBCA, a corporation is permitted to purchase, or otherwise acquire its
shares subject to its articles and certain solvency tests, without shareholder
approval.
Board of Directors
The NSCA imposes no restrictions on the composition of a company's board
of directors or on the means by which persons are elected or appointed to the
board and the NSCA does not require companies to have audit committees. In the
case of the Corporation, directors are to be elected by motion carried by at
least two-thirds of the votes entitled to be cast on such motion and any motion
to elect a director which is not carried by such majority shall be considered
not to have been carried.
Under the CBCA, at least 25% of a corporation's directors must be
Canadians. In addition, an "offering corporation" must have an audit committee
composed of not fewer than three directors, a majority of whom are not officers
or employees of the corporation or any of its affiliates. The directors of a
CBCA corporation are elected by a majority vote of shareholders.
Both the NSCA and CBCA provide for the removal of a director. Under the
NSCA, a director may be removed by special resolution. This differs from the
requirement under the CBCA where a director may be removed by ordinary
resolution at a special meeting of shareholders.
- 12 -
Amending Capital
Under the NSCA, capital is amended by passing a special resolution or, in
the case of a decrease in authorized capital and certain other changes, by
ordinary resolution of the shareholders which is effective immediately; only
notice must be provided to the Office of the Registrar of Joint Stock Companies,
through filing a copy of the resolution in most cases or, where no special
resolution is required, by other written notice.
Under the CBCA, capital is amended by filing articles of amendment
subsequent to the passing of a special resolution.
Ability to Pay Dividends
The common law tests applicable in Nova Scotia allow payment of dividends
in certain circumstances where dividends could not be paid because of the
solvency test in the CBCA.
Guarantees or Other Financial Assistance
No restrictions exist under the NSCA upon a company giving guarantees or
providing other financial assistance except where the shares of the company
itself are being purchased, in which case financial assistance is restricted.
The CBCA provides that subject to the articles and by-laws, the directors of a
corporation may give a guarantee on behalf of the corporation to secure
performance of an obligation to any person.
Directors' Liability
Directors' liability provisions in the NSCA are limited and generally only
apply where directors knowingly involve themselves in unlawful activities of the
company. A number of provisions in the CBCA impose liability on directors,
including liability for certain wages due by a corporation.
Ability of Shareholders to Require Investigation of the Company
Under the CBCA, any shareholder may apply to the court for an order
directing an investigation to be made of the corporation, whereas under the NSCA
not less than 10% of the shareholders may apply to the Governor-in-Council to
appoint inspectors to investigate the affairs of the company.
Articles of Continuance
If the Continuance is approved by shareholders, the Corporation intends to
file with the Director under the CBCA articles of continuance.
- 13 -
Adoption of New By-Law
The Board of Directors of the Corporation has passed a resolution
adopting, upon the effective date of the Continuance, By-Law No. 1 of the
Corporation in the form attached as Schedule G to this circular (the "CBCA
By-Law"). As a Nova Scotia company, the Corporation's constating documents
currently consist of a memorandum of association and articles of association.
Therefore, while the Corporation does not currently have a by-law which the CBCA
By-Law will repeal and replace, the CBCA By-Law contains provisions similar to
some of those in the Corporation's current articles of association, including
provisions relating to, among other things, directors, officers, and shareholder
meetings. If the Continuance is approved, the CBCA By-Law will be adopted as a
by-law of the Corporation.
Votes Required to Pass the Continuance Resolution
In order to approve the Continuance, the Continuance Resolution in the
form attached as Schedule B must be approved at the Meeting by (i) not less than
75% of the votes cast by shareholders who attend the Meeting, in person or by
proxy, and (ii) by not less than 66 2/3% of the votes cast by each class of
shareholders who attend the meeting, in person or by proxy. The Continuance must
also be confirmed by a majority of the votes cast by shareholders who attend the
Confirmatory Meeting, present in person or by proxy. The Board of Directors
unanimously recommends that shareholders vote in favour of the Continuance
Resolution. PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED IN FAVOUR OF
THE CONTINUANCE RESOLUTION, UNLESS THE SHAREHOLDER HAS SPECIFIED IN THE PROXY
THAT HIS OR HER SHARES ARE TO BE VOTED AGAINST THIS RESOLUTION.
As noted above, the Management MVS Holders have agreed to vote all of the
shares that they beneficially own or control in favour of the Continuance
Resolution. As at the date hereof, the Management MVS Holders beneficially own
or control, directly or indirectly, an aggregate of 5,986,043 multiple voting
shares and 120,449 subordinate voting shares.
The Continuance Resolution provides that the Board of Directors is
authorized, in its sole discretion, to abandon the application for a certificate
of continuance, or determine not to proceed with the Continuance, without
further approval of the Corporation's shareholders. In particular, the Board of
Directors may determine not to present the Continuance Resolution to the Meeting
or, if the Continuance Resolution is presented to the Meetings and approved, may
determine not to proceed with completion of the Continuance and filing the
articles of continuance under the CBCA.
If the Continuance is approved, the CBCA By-Law will be adopted as a
by-law of the Corporation. See Schedule G for the full text of the CBCA By-Law.
- 14 -
Right to Dissent
In this section, a reference to a shareholder means a registered holder of
shares. Persons who are beneficial owners of shares registered in the name of a
broker, custodian, nominee or other intermediary who wish to dissent should be
aware that only the registered owner of the shares is entitled to dissent.
The NSCA provides shareholders with a statutory right to dissent from
certain resolutions of a company which effect fundamental corporate changes.
Specifically, shareholders may dissent from the Continuance Resolution or the
Confirmatory Resolution by exercising their right of dissent pursuant to section
2 of the third schedule of the NSCA (the "Third Schedule"). In general, any
shareholder who dissents from the Continuance Resolution or the Confirmatory
Resolution in compliance with the Third Schedule will be entitled, in the event
the Continuance Resolution is confirmed and the Continuance becomes effective,
to be paid by the Corporation the fair value of the shares held by such
dissenting shareholder determined as of the close of business on the day before
the resolution approving the Continuance is deemed adopted. A shareholder need
not have dissented at the Meeting in order to be able to dissent at the
Confirmatory Meeting.
The dissent provisions under the NSCA provide that a shareholder may only
make a claim thereunder with respect to all the shares of a class held by the
shareholder on behalf of any one beneficial owner and registered in the
shareholder's name. One consequence of this provision is that a shareholder may
only exercise the right to dissent under the dissent procedures in respect of
shares that are registered in that holder's name.
A shareholder who wishes to dissent from the Continuance Resolution or the
Confirmatory Resolution must provide written notice of his or her dissent or a
written objection to such resolution (each a "Notice of Dissent") to the
Corporation by depositing such Notice of Dissent with the Secretary of the
Corporation at 8300 Woodbine Avenue, 5th Floor, Markham, Ontario, Canada, L3R
9Y7, to arrive at or before the Meeting in the case of the Continuance
Resolution or at or before the Confirmatory Meeting in the case of the
Confirmatory Resolution.
The filing of a Notice of Dissent does not deprive a shareholder of the
right to vote at the Meeting or the Confirmatory Meeting; however, a shareholder
who has submitted a Notice of Dissent in respect of the Continuance Resolution
or the Confirmatory Resolution who then votes in favour of such resolution will
no longer be considered a dissenting shareholder with respect to that class of
shares voted in favour of such resolution. The Corporation will not assume that
a vote against the Continuance Resolution or the Confirmatory Resolution or an
abstention constitutes a Notice of Dissent. However, a shareholder need not vote
his or her shares against either such resolution in order to dissent. Similarly,
the revocation of a proxy conferring authority on the proxy holder to vote in
favour of either such resolution does not constitute a Notice of Dissent;
however, any proxy granted by a shareholder who
- 15 -
intends to dissent, other than a proxy that instructs the proxy holder to vote
against the Continuance Resolution or the Confirmatory Resolution, as the case
may be, should be validly revoked (see "Appointment and Revocation of Proxies")
in order to prevent the proxy holder from voting such securities in favour of
such resolution and thereby causing the shareholder to forfeit his or her right
to dissent.
The Corporation is required, within 10 days after the Continuance
Resolution is unanimously passed or confirmed at the Confirmatory Meeting, as
the case may be, to notify each of the dissenting shareholders that the
Continuance Resolution and the Confirmatory Resolution have been unanimously
passed or confirmed at the Confirmatory Meeting, as the case may be. Such notice
is not required to be sent to any shareholder who voted in favour of the
resolution from which he or she submitted a Notice of Dissent nor to any
shareholder who has withdrawn his or her Notice of Dissent.
A dissenting shareholder who has not withdrawn his or her Notice of
Dissent must then, within 20 days after receipt of notice that the Continuance
Resolution or the Confirmatory Resolution, as the case may be, from which he or
she dissented, as the case may be, has been adopted or, if the dissenting
shareholder does not receive such notice, within 20 days after he or she learns
that such resolution has been adopted, send to the Corporation a written notice
(a "Demand for Payment"), containing his or her name and address, the number of
shares in respect of which he or she dissents, and a demand for payment of the
fair value of such shares. Within 30 days after sending a Demand for Payment,
the dissenting shareholder must send to the Corporation or its transfer agent
the certificates representing the shares in respect of which he or she dissents.
A dissenting shareholder who fails to send certificates representing the shares
in respect of which he or she dissents forfeits his or her right to dissent. The
Corporation or its transfer agent will endorse on any share certificate received
from a dissenting shareholder a notice that the holder is a dissenting
shareholder and will forthwith return the share certificates to the dissenting
shareholder.
After sending a Demand for Payment, a dissenting shareholder ceases to
have any rights as a holder of the shares in respect of which the shareholder
has dissented other than the right to be paid the fair value of such shares as
determined under the dissent procedures, unless (i) the dissenting shareholder
withdraws the Demand for Payment before the Corporation makes an offer to pay
(the "Offer to Pay"); (ii) the Corporation fails to make a timely Offer to Pay
to the dissenting shareholder and the dissenting shareholder withdraws his or
her Demand for Payment; or (iii) the Continuance does not proceed in which case
the dissenting shareholder's rights as a shareholder are reinstated as of the
date he or she sent the Demand for Payment and the shareholder will be entitled
to receive his or her shares back.
The Corporation is required, not later than 7 days after the later of the
Effective Date or the date on which the Corporation receives a Demand for
Payment from a dissenting shareholder, to send such dissenting shareholder an
Offer to Pay for his or
- 16 -
her shares in an amount considered by the Board to be the fair value thereof,
accompanied by a statement showing the manner in which such fair value was
determined. Every Offer to Pay must be on the same terms. The Corporation must
pay for the shares of a dissenting shareholder within 10 days after an Offer to
Pay has been accepted by such dissenting shareholder, but any such offer lapses
if the Corporation does not receive an acceptance thereof within 30 days after
the Offer to Pay has been made.
If the Corporation fails to make an Offer to Pay for a dissenting
shareholder's shares or if a dissenting shareholder fails to accept an Offer to
Pay which has been made, the Corporation may, within 50 days after the Effective
Date or within such further period as a court may allow, apply to the court to
fix a fair value for the shares of dissenting shareholders. If the Corporation
fails to apply to the court, a dissenting shareholder may apply to the court for
the same purpose within a further period of 20 days or within such further
period as the court may allow. A dissenting shareholder is not required to give
security for costs in such an application.
Upon an application to the court, all dissenting shareholders whose shares
have not been purchased by the Corporation will be joined as parties and bound
by the decision of the court, and the Corporation will be required to notify
each affected dissenting shareholder of the date, place and consequences of the
application and of his or her right to appear and be heard in person or by
counsel. Upon any such application to the court, the court may determine whether
any other person is a dissenting shareholder who should be joined as a party,
and the court will then fix a fair value for the shares of all dissenting
shareholders. The court may in its discretion appoint one or more appraisers to
assist the court to fix a fair value for the shares of all dissenting
shareholders. The final order of the court will be rendered against the
Corporation in favour of each dissenting shareholder and for the amount of the
fair value of his or her shares as fixed by the court. The court may, in its
discretion, allow a reasonable rate of interest on the amount payable to each
dissenting shareholder from the Effective Date until the date of payment.
Please note that the foregoing is only a summary of the dissent procedures
under the NSCA, which are technical and complex. A complete copy of Section 2 of
the Third Schedule, which provides the full text of the dissent rights under the
NSCA, is attached to this circular as Schedule F. It is recommended that any
shareholder wishing to avail himself or herself of his or her dissent rights
under the dissent procedures of the NSCA seek legal advice as failure to comply
strictly with the provisions of the NSCA may prejudice the right of dissent.
2. Special Resolution Authorizing Restructuring of Share Capital
The Corporation's authorized capital consists of 200,000,000 subordinate
voting shares and 200,000,000 multiple voting shares of which, as at the date
hereof, there are 6,027,864 multiple voting shares and 50,005,069 subordinate
voting shares issued and outstanding.
- 17 -
The Board has determined that it would be in the best interests of the
shareholders to simplify its share capital structure by (1) creating a new class
of shares unlimited in number and designated as common shares ("Common Shares"),
(2) changing each issued and outstanding subordinate voting share and each
multiple voting share into one Common Share, (3) cancelling all authorized and
unissued subordinate voting shares and multiple voting shares in the capital of
the Corporation, and (4) removing all of the rights, privileges, restrictions
and conditions attaching to the subordinate voting shares and multiple voting
shares such that the authorized capital consists of an unlimited number of
Common Shares.
In light of the extraordinary events facing the Corporation during fiscal
2005, including the loss of the Weight Watchers product line and the untimely
passing of former Co-Chairman and Co-Chief Executive Officer Richard E. Smith,
the Corporation has determined that the immediate continuation of its dual class
structure is desirable, in order to provide the Corporation with some stability
during the time when it refocuses its business plan and strategy. Accordingly,
the Corporation and the principal holders of the multiple voting shares have
determined that the appropriate date at which to effect the Share Capital
Restructuring is May 31, 2007, subject to the discretion granted to the
independent directors of the Corporation to effect the change earlier than May
31, 2007. Unless circumstances change, the independent directors currently do
not intend to exercise this discretion. However, the Board has determined to
seek the requisite shareholder approval at this time, so that the Share Capital
Restructuring can be effected automatically on May 31, 2007 (or earlier at the
decision of the independent directors) without further corporate approvals
required.
If the Share Capital Restructuring Resolution is passed and upon the
effective date of the articles of amendment, each holder of subordinate voting
shares and/or multiple voting shares, as the case may be, will then hold one (1)
Common Share for each subordinate voting share and/or each multiple voting share
previously held. The Corporation will adopt a new form of certificate
representing the Common Shares. Although the current certificates representing
the subordinate voting shares and the multiple voting shares will continue to
represent the Common Shares, shareholders will be entitled to replace their
subordinate voting share certificates and multiple voting share certificates for
Common Share certificates upon surrendering their certificates and providing
such other documentation as may be required by the Corporation to Equity
Transfer Services Inc., the transfer agent of the Corporation. Forthwith
following the effective date of the articles of amendment in respect of the
Share Capital Restructuring, the Corporation will send to each shareholder a
form providing details on how to exchange certificates representing subordinate
voting shares and/or multiple voting shares for certificates representing Common
Shares.
Votes Required to Pass the Share Capital Restructuring Resolution
In order to approve the Share Capital Restructuring Resolution which is
attached as Schedule D, it must be approved at the Meeting by (i) not less than
75% of the votes
- 18 -
cast by shareholders who attend the Meeting, in person or by proxy, and (ii) by
not less than 66 2/3% of the votes cast by each class of shareholders who attend
the meeting, in person or by proxy. The Share Capital Restructuring Resolution
must also be confirmed by a majority of the votes cast by shareholders who
attend the Confirmatory Meeting, present in person or by proxy. PROXIES RECEIVED
IN FAVOUR OF MANAGEMENT WILL BE VOTED IN FAVOUR OF THE SHARE CAPITAL
RESTRUCTURING RESOLUTION, UNLESS THE SHAREHOLDER HAS SPECIFIED IN THE PROXY THAT
HIS OR HER SHARES ARE TO BE VOTED AGAINST THIS RESOLUTION.
As noted above, each of the Management MVS Holders have agreed to vote all
of the shares that they beneficially own or control in favour of the Share
Capital Restructuring Resolution. As at the date hereof, the Management MVS
Holders beneficially own or control, directly or indirectly, an aggregate of
5,986,043 multiple voting shares and 120,449 subordinate voting shares.
Termination of Trust Agreement
On March 18, 1998, Richard E. Smith, David M. Smith, David J. Stein,
Michael Serruya, Aaron Serruya, 1082272, the Serruya Trust, Yogen Fruz Worldwide
Incorporated and the Chase Manhattan Bank entered into a trust agreement (the
"Trust Agreement"). The Trust Agreement governs the voting, transfer and
conversion of the Multiple Voting Shares. The parties to the Voting Agreement
have agreed that the Trust Agreement be terminated on the date that the Share
Capital Restructuring is effective. A copy of the Trust Agreement is available
on the Internet at www.sedar.com.
Termination of Board Representation Agreement
The parties to the Voting Agreement have also agreed that the Board
Representation Agreement be terminated on the date that the Share Capital
Restructuring is effective.
STATEMENT OF EXECUTIVE COMPENSATION
Compensation of Named Executive Officers
The following table sets forth all compensation earned for the years ended
August 31, 2005, August 31, 2004 and August 31, 2003 by the Corporation's
Co-Chief Executive Officers, its Chief Financial Officer and the Corporation's
next three highest paid executive officers whose salary and bonus during the
fiscal year ended August 31, 2005 was equal to or greater than $150,000
(collectively, the "Named Executive Officers"). Amounts are in U.S. dollars,
except for amounts related to Michael Serruya and Aaron Serruya which are stated
in Canadian dollars.
- 19 -
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Year Other Annual Securities Under All Other
Name and Ended Salary Bonus Compensation(1) Options Granted(2) Compensation(3)
Principal Position August 31 ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------
Richard E. Smith 2005 (4) - - - -
Co-Chairman & 2004 (4) - 8,350,678 709,983 -
Co-Chief Executive 2003 (4) - - 225,000 -
Officer(4)
- ------------------------------------------------------------------------------------------------------------------------
David J. Stein 2005 520,000 - 7,571 2,100
President, Chief 2004 490,000 60,000 10,604,365 709,983 1,950
Executive Officer 2003 326,442 60,000 7,571 225,000 1,820
- ------------------------------------------------------------------------------------------------------------------------
Gary P. Stevens 2005 185,000 50,000 134,363 1,958
Chief Financial 2004 145,800 20,000 10,363 - 1,312
Officer 2003 145,800 20,000 10,363 20,000 1,604
- ------------------------------------------------------------------------------------------------------------------------
Michael Serruya 2005 CAD$420,000 - CAD$59,588
Co-Chairman 2004 CAD$408,461 - CAD$4,695,312 CAD$599,275 -
2003 CAD$320,000 - CAD$26,031 CAD$191,666 -
- ------------------------------------------------------------------------------------------------------------------------
Aaron Serruya 2005 CAD$420,000 - CAD$30,222 -
Secretary(5) 2004 CAD$408,461 - CAD$4,700,550 CAD$599,275 -
2003 CAD$320,000 - CAD$31,269 CAD$191,666 -
- ------------------------------------------------------------------------------------------------------------------------
J. Leo Glynn 2005 245,577 92,000 16,000 100,000 -
President, Eskimo 2004 230,000 39,100 16,000 - -
Pie Frozen 2003 17,692 - - 50,000 -
Distribution
Inc.
- ------------------------------------------------------------------------------------------------------------------------
Notes:
1) These amounts also include the difference in value between the exercise
price of options and the fair market value of the shares at the time of
purchase, for options exercised in the fiscal years ended August 31, 2004
and 2005. Certain amounts are paid in U.S. dollars, and have been
converted for purposes of the table presentation based upon U.S.$1.00
purchasing CAD$1.2040 and CAD$1.3166 at August 31, 2005 and 2004,
respectively.
2) Options to purchase subordinate voting shares granted pursuant to the
Corporation's stock option plan.
3) These amounts represent the Corporation's contribution to employee's 401K
plans.
4) Mr. Richard E. Smith, the former Co-Chairman and Co-Chief Executive
Officer of the Corporation who passed away on January 29, 2005, was paid
by Calip Dairies, Inc. ("Calip") (an ice cream distributor owned then by
Mr. Richard E. Smith and members of his family) pursuant to the terms of a
management agreement effective July 1, 2003 between Calip and Integrated
Brands. Calip received a fixed fee of $1,300,000 per year for providing a
variety of management services, including making available Mr. Richard
Smith for the positions of Co-Chairman and Co-Chief Executive Officer of
the Corporation. The management agreement was terminated following the
passing of Mr. Smith on January 29, 2005. The fees paid to Calip in fiscal
2005 prior to its termination amounted to $542,000.
5) Mr. Aaron Serruya resigned from the position of Executive Vice President
of the Corporation in connection with sale by the Corporation in December
2005 of its franchise division to International Franchise Corp., a company
controlled by Mr. Aaron Serruya.
- 20 -
Option Grants During The Most Recently Completed Financial Year
The following table sets forth the grants of options made to Named
Executive Officers during the most recently completed financial year.
Market Value of
Securities Securities
Under % of Total Underlying
Options Options Granted Options on Date
Granted to Employees In Exercise or Base of Grant
Name (#)(1) Fiscal Year Price ($/Security) ($/Security) Expiration Date
- -------------------------------------------------------------------------------------------------------
Gary P. Stevens 75,000(2) 7.3 4.03 4.03 June 7, 2015
- -------------------------------------------------------------------------------------------------------
J. Leo Glynn 100,000(2) 9.7 4.03 4.03 June 7, 2015
- -------------------------------------------------------------------------------------------------------
Notes:
1) Options granted were to purchase subordinate voting shares.
2) Options vest as to 33% on the date of the grant and 33% on subsequent
anniversary dates.
Aggregated Option Exercises During the Most Recently Completed Financial Year
and Financial Year-End Option Values
The following table sets out details of the exercise of stock options
during the financial year ended August 31, 2005 by the Named Executive Officers
and the financial year-end values of unexercised options held, on an aggregate
basis.
Shares Value of Unexercised
Acquired on Aggregate Value Unexercised Options in-the-Money Options
Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name (#) ($) (#) ($)(1)
- -------------------------------------------------------------------------------------------------------
David J. Stein - - 709,983/NIL NIL/NIL
- -------------------------------------------------------------------------------------------------------
Gary P. Stevens 20,000 124,000 34,000/87,000 9,250/44,250
- -------------------------------------------------------------------------------------------------------
Michael Serruya - - 599,275/NIL NIL/NIL
- -------------------------------------------------------------------------------------------------------
Aaron Serruya - - 599,275/NIL NIL/NIL
- -------------------------------------------------------------------------------------------------------
J. Leo Glynn - - 53,333/96,667 NIL/NIL
- -------------------------------------------------------------------------------------------------------
Note:
1) Market value of underlying subordinate voting shares as at August 31,
2005, being CAD$3.00 minus the exercise price of the options.
Termination of Employment, Change in Responsibilities and Employment Contracts
Integrated Brands, a wholly owned subsidiary of the Corporation, has
entered into an employment agreement with David J. Stein, which was amended in
fiscal 2003. The amended agreement provides for an annual salary of $520,000 in
calendar 2005, and provides for an annual $20,000 increase in each calendar year
through 2013, and for an annual salary of $700,000 in any calendar year
subsequent to 2013. The contract also provides for annual bonuses at the
discretion of the Board. No bonus was paid in fiscal 2005 under the employment
agreement. The agreement may be terminated after December 31, 2013, with or
without cause, on 90 days' notice. In the event that the agreement is terminated
by Integrated Brands after December 31, 2013 without cause, Integrated Brands
must pay Mr. Stein a severance amount equal to 36 months salary at
- 21 -
the annual rate in effect as of the date of termination. The obligations of
Integrated Brands under the agreement are guaranteed by the Corporation.
The Corporation has entered into five-year employment agreements with
Michael Serruya dated April 9, 1999, which was amended in fiscal 2004. The
amended agreement provides for a base salary of CAD$420,000 per annum,
increasing by the rate of inflation annually on the anniversary of the
employment agreement, and a bonus of up to CAD$100,000 per year, paid on the
anniversary of the employment agreement, determined as follows: (A) 50% of such
bonus based on earnings of the Corporation; and (B) 50% of such bonus based on
reasonable standards of personal performance and earnings performance of the
Corporation. The employment agreement provides for a severance payment in the
amount of CAD$500,000 to be made to Mr. Serruya on the termination for any
reason of the employment agreement or on the failure of the Corporation to renew
the employment agreement upon the expiration of its term. In fiscal 2005, the
base salary for Mr. Serruya was CAD$420,000. No bonus was paid for in fiscal
2005 under the employment agreement.
Composition of the Compensation Committee
During the most recently completed financial year, the Compensation
Committee was comprised of the following three independent directors: L. Joshua
Sosland (Chair), Arthur Waldbaum and Robert E. Baker.
Report on Executive Compensation
The Compensation Committee (the "Committee") is, at present, composed of
three independent directors. The Committee was reconstituted with independent
directors on April 1, 2005 and held one meeting in the last fiscal year and an
additional four meetings from September 1, 2005 until January 11, 2006.
The Committee's primary function is to assist the Board in fulfilling its
responsibilities by overseeing the Corporation's compensation of senior officers
and preparing an annual report on executive compensation for the Board and for
inclusion in the Corporation's annual proxy circular. Specific responsibilities
of the Committee include:
(1) in consultation with senior management of the Corporation,
establishing the Corporation's compensation policies and/or
practices, seeking to ensure such policies and practices are
designed to recognize and reward performance and establish a
compensation framework which is industry competitive, and which
results in the creation of shareholder value over the long-term;
(2) reviewing and approving corporate goals and objectives relevant to
the compensation of the Chief Executive Officer, evaluating the
performance of the Chief Executive Officer in light of these goals
and objectives, and
- 22 -
setting the Chief Executive Officer's total compensation level based
on this evaluation and other factors as the Committee deems
appropriate and in the best interests of the Company;
(3) reviewing the evaluation of other senior officers' performance and
setting the compensation of these senior officers, based on their
evaluations and other factors as the Committee deems appropriate and
in the best interests of the Corporation;
(4) overseeing the Corporation's incentive compensation plans and
equity-based plans;
(5) reviewing and recommending to the Board the compensation of the
members of the Board, including any annual retainer, committee
membership fees, meeting fees, and other benefits conferred upon the
directors; and
(6) reviewing the Committee's charter and recommending to the Board
changes to it, as considered appropriate from time to time.
The executive compensation policies of the Corporation are designed with
the objective of attracting and retaining qualified executives by providing
compensation packages which are competitive within the marketplace and by
compensating them in a manner that encourages individual performance consistent
with shareholder expectations. The Corporation's philosophy is to reward both
adequately and competitively its executives for their short-term compensation.
Base salaries and salary ranges for each position are determined by evaluating
the responsibilities of each executive's position as well as the experience and
knowledge of the individual. The above are periodically reviewed and adjusted
accordingly. Individual salary increases to executives within the set ranges
take into account their current performance against expected targets, overall
contribution to the Corporation and market conditions. Base salary levels for
all executive officers (excluding those officers who are subject to long-term
employment agreements) are determined based upon performance, and are intended
to achieve the following objectives:
(a) to attract and retain executives and senior management required for
the success of the Corporation;
(b) to motivate performance;
(c) to provide fair and competitive compensation commensurate with an
individual's experience and expertise; and
(d) to reward individual performance and contribution to the achievement
of the Corporation's objectives.
- 23 -
The cash compensation paid by the Corporation to Mr. David J. Stein, the
Chief Executive Officer, is set through an employment agreement, which is
described above. The Committee assesses the performance of Mr. David J. Stein on
an annual basis when awarding bonuses pursuant to his employment agreement.
There is no pension plan of the Corporation in which executive officers or
other employees may participate.
Submitted on behalf of the Compensation Committee: L. Joshua Sosland,
Arthur Waldbaum and Robert E. Baker.
Performance Graph
On August 31, 2005, the closing price of a subordinate voting share of the
Corporation on The Toronto Stock Exchange was CAD$3.00 per subordinate voting
share. The following graph compares the Corporation's cumulative total
shareholder return from September 1, 2000 to August 31, 2005 with cumulative
returns of the S&P/TSX Composite and the TSX Consumer Products Index for the
same period.
[PERFORMANCE GRAPH]
Relative Performance Graph
S&P/TSX Consumer
Composite Staples COB.SV.A
Aug-00 100 100 100
Sep-00 91 107 89
Oct-00 92 114 80
Nov-00 89 120 63
Dec-00 87 120 61
Jan-01 83 113 106
Feb-01 79 122 110
Mar-01 76 124 90
Apr-01 74 125 93
May-01 73 127 127
Jun-01 70 129 145
Jul-01 69 137 153
Aug-01 69 142 155
Sep-01 61 147 127
Oct-01 61 141 118
Nov-01 66 147 216
Dec-01 68 152 241
Jan-02 68 154 279
Feb-02 68 164 316
Mar-02 70 173 386
Apr-02 68 179 390
May-02 68 184 433
Jun-02 64 177 493
Jul-02 59 164 466
Aug-02 59 166 510
Sep-02 55 164 492
Oct-02 56 161 407
Nov-02 58 156 370
Dec-02 59 154 370
Jan-03 58 152 355
Feb-03 58 149 341
Mar-03 56 148 497
Apr-03 59 152 544
May-03 61 164 652
Jun-03 62 167 928
Jul-03 65 170 1,137
Aug-03 67 168 1,210
Sep-03 66 167 1,099
Oct-03 69 175 1,277
Nov-03 70 172 1,148
Dec-03 73 183 1,169
Jan-04 76 179 1,514
Feb-04 78 182 1,748
Mar-04 76 182 1,577
Apr-04 73 176 1,555
May-04 75 181 1,662
Jun-04 76 183 1,510
Jul-04 75 180 827
Aug-04 74 176 700
Sep-04 77 183 638
Oct-04 79 184 466
Nov-04 80 194 582
Dec-04 82 200 629
Jan-05 82 207 531
Feb-05 86 211 615
Mar-05 85 210 617
Apr-05 83 210 397
May-05 85 212 281
Jun-05 88 211 284
Jul-05 93 212 219
Aug-05 96 213 207
- 24 -
Compensation of Directors
Non-independent Directors of the Corporation did not receive any fees
and/or any other type of compensation in fiscal 2005 for acting as such.
Independent directors each received a $25,000 retainer and $2,000 for each board
or committee meeting attended in person and $250 for each board or committee
meeting attended via telephone. In respect of fiscal 2006, the Lead Director,
Robert E. Baker, receives a retainer of $50,000. Directors also received a
$5,000 retainer ($10,000 in the case of the Chair of each committee) for being a
member of a committee. Each independent director also received 10,000 stock
options during the fiscal year ended August 31, 2005.
Directors' And Officers' Liability Insurance
The Corporation carries directors' and officers' liability insurance
coverage with an annual policy limit of $10,000,000, subject to a deductible of
$250,000 per claim plus additional umbrella coverage of $10,000,000. The premium
paid for the renewal of the coverage during the fiscal year ended August 31,
2005 was $143,640, all of which was paid by the Corporation.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The Corporation has three equity compensation plans: a stock option plan
established in 1998 (the "1998 Stock Option Plan"), a plan established in 1994
(the "Predecessor Plan"), and the 2002 Stock Option Plan, as amended (the "2002
Stock Option Plan"). The Predecessor Plan, the 1998 Stock Option Plan and the
2002 Stock Option Plan have each been approved by the shareholders of the
Corporation, or its predecessor corporate entities. The following table provides
aggregated information as of August 31, 2005 with respect to these plans.
Number of Common Shares Weighted Average Number of Securities
to be Issued Upon Exercise Exercise Price of Remaining Available for
of Outstanding Options, Outstanding Options, Future Issuance under
Plan Category Warrants and Rights Warrants and Rights Equity Compensation Plans
- ---------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Approved
by Securityholders 3,917,000 $14.89 452,985
- ---------------------------------------------------------------------------------------------------------------
Equity Compensation Plans Not
Approved by Securityholders N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No individual who was a director, executive officer or senior officer of
the Corporation at any time during the fiscal year ended August 31, 2005, or any
associate or affiliate thereof, was indebted to the Corporation. As of the date
of this Information
- 25 -
Circular, no officers, directors or employees of the Corporation or their
associates were indebted to the Corporation.
CORPORATE GOVERNANCE DISCLOSURE
The Board is focused on new threshold regulatory standards of corporate
governance as well as best practices that go beyond the requirements mandated by
regulation.
On June 30, 2005 the Canadian Securities Administrators ("CSA")
implemented National Policy 58-201 - Corporate Governance Guidelines (the
"Policy") and National Instrument 58-101 - Disclosure of Corporate Governance
Practices (the "Instrument"). Together, the Policy and the Instrument replaced
the corporate governance guidelines of the Toronto Stock Exchange and provide
mandated disclosure under the Instrument, as well as best practices under the
Policy.
To comply with these various standards and achieve best practices, we have
adopted comprehensive corporate governance policies and procedures. Our key
policies and documents include the following:
o Code of Business Conduct
o Audit Committee Charter
o Corporate Governance Committee Mandate
o Compensation Committee Mandate
o Terms of Reference for the Co-Chairs of the Board of Directors
o Terms of Reference of the Lead Director of the Board of
Directors
The text of these documents can be found on our website at
www.coolbrandsinc.com and are available in print to any shareholder who requests
them.
Our current governance practices are substantially in compliance with the
Instrument and Policy. Set out in Schedule A is a discussion of our practices.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
No director or executive officer of the Corporation or a subsidiary, or
any person who beneficially owns, directly or indirectly, or exercises control
or direction over, more than 10% of the voting rights attached to all
outstanding voting securities of the Corporation has had any interest, direct or
indirect, in any material transaction involving the Corporation or a subsidiary
since the commencement of the Corporation's most recently completed financial
year that has materially affected or will materially affect the Corporation
other than:
(a) 701587 Ontario Ltd., a corporation whose sole shareholder is The
Serruya Family Trust, a significant shareholder of the Corporation,
routinely
- 26 -
entered into leases with commercial landlords for the premises used
by the Corporation's Canadian franchisees and sublets such premises
to such franchisees. 701587 Ontario Ltd. did not earn any fees or
premium on such leases. Subsequent to the year ended August 31,
2005, the Corporation sold substantially all of its franchising
division;
(b) The Corporation sold substantially all of its franchising division
on December 23, 2005 to International Franchise Corp., a company
controlled by Mr. Aaron Serruya, the Secretary and a director of the
Corporation, for cash consideration of $8 million;
(c) Integrated Brands, a wholly owned subsidiary of the Corporation, has
entered into a distribution agreement with Calip, a company
controlled by David M. Smith, the Vice-Chairman and Chief Operating
Officer of the Corporation. Pursuant to the agreement, Integrated
Brands has appointed Calip as its exclusive distributor for any ice
cream or other frozen dessert product manufactured by, on behalf of,
or under authority of Integrated Brands, its subsidiaries,
affiliates or successors in the State of New Jersey and certain
areas in the State of New York and the State of Connecticut. The
agreement continues until December 31, 2007 and thereafter renews
automatically on December 31 of each year for an additional one year
term, provided that as of such date at least 50% of the issued and
outstanding shares of Calip are beneficially owned by the Smith
Family and/or David Stein, unless Calip gives Integrated Brands
written notice on or before September 30th of that same year that
Calip will not renew the agreement, in which event the agreement
terminates effective on December 31 following such notice. The
Corporation has agreed to guarantee the performance of the
distribution agreement; and
(d) Prior to his death on January 29, 2005, Mr. Richard E. Smith, the
former Co-Chairman and Co-Chief Executive Officer of the
Corporation, was paid by Calip (an ice cream distributor owned then
by Mr. Richard E. Smith and members of his family) pursuant to the
terms of a management agreement effective July 1, 2003 between Calip
and Integrated Brands. Calip received a fixed fee of $1,300,000 per
year for providing a variety of management services, including
making available Mr. Richard Smith for the positions of Co-Chairman
and Co-Chief Executive Officer of the Corporation. The management
agreement was terminated following the passing of Mr. Smith on
January 29, 2005. The fees paid to Calip in fiscal 2005 prior to its
termination amounted to $542,000.
- 27 -
APPOINTMENT OF AUDITOR
Unless authority to do so is withheld, the persons named in the enclosed
proxy intend to vote for the appointment of BDO Seidman, LLP, Melville, New
York, U.S.A., as auditor of the Corporation, to hold office until the next
annual meeting of shareholders, at a remuneration to be fixed by the directors.
BDO Dunwoody LLP, the Canadian member firm of BDO World Wide, was the auditor of
the Corporation since February 28, 2001 and it is proposed that it be replaced
with the U.S. member firm of BDO World Wide. In addition to the majority of the
Corporation's business being located in the United States, during the past year
the Corporation has changed its financial reporting from Canadian generally
accepted accounting principles to United States generally accepted accounting
principles and has divested itself of the franchise division, the only
significant Canadian-based operation of the Corporation. BDO Seidman, LLP is
able to serve the Corporation more efficiently from its office in Melville, New
York, U.S.A. than BDO Dunwoody LLP in Toronto, Canada. In this regard, in order
to comply with National Instrument 51-102 - Continuous Disclosure Obligations, a
copy of the Notice of Change of Auditor, the response letter of BDO Dunwoody
LLP, and the response letter of BDO Seidman, LLP are attached hereto as Appendix
"1".
Information relating to the service fees paid to the Corporation's
external auditor in each of the last two financial years is included in the
Annual Information Form of the Corporation dated December 13, 2005 under the
heading "External Auditor Service Fees (By Category)".
MANAGEMENT CONTRACTS
The management functions of the Corporation are performed by directors,
executive officers or senior officers of the Corporation and not, to any
substantial degree, by any other person with whom the Corporation has
contracted. However, as noted above, Mr. Richard E. Smith, the former
Co-Chairman and Co-Chief Executive Officer of the Corporation who passed away on
January 29, 2005, was paid by Calip pursuant to the terms of a management
agreement effective July 1, 2003 between Calip and Integrated Brands. Calip
received a fixed fee of $1,300,000 per year for providing a variety of
management services, including making available Mr. Richard Smith for the
positions of Chairman and Co-Chief Executive Officer of the Corporation. The
management agreement was terminated following the passing of Mr. Smith on
January 29, 2005. The fees paid to Calip in fiscal 2005 prior to its termination
amounted to $542,000.
PARTICULARS OF MATTERS TO BE ACTED UPON
Management of the Corporation is unaware of any matters to come before the
Meeting other than those referred to in the Notice of Meeting accompanying this
Information Circular. However, if any other matters which are not now known to
management should properly come before the Meeting, the proxy solicited hereby
will
- 28 -
be voted on such matters in accordance with the best judgment of the persons
voting the proxy.
AUDIT COMMITTEE INFORMATION
Information relating to the Corporation's Audit Committee, including the
text of the Corporation's Audit Committee charter, is included in the Annual
Information Form of the Corporation dated December 13, 2005 under the heading
"Audit Committee".
ADDITIONAL INFORMATION
Additional information relating to the Corporation is available on the
System for Electronic Document Analysis and Retrieval (SEDAR) on the Internet at
www.sedar.com. Any shareholder may request copies of the Corporation's annual or
interim financial statements and accompanying management's discussion and
analysis ("MD&A") by contacting the Corporation at (905) 479-8762. Financial
information regarding the Corporation's most recently completed financial year
is provided in the Corporation's comparative annual financial statements and
accompanying MD&A.
DIRECTORS' APPROVAL
The contents and the sending of this management information circular to
shareholders of the Corporation have been approved by the Board of Directors.
DATE: January 13th, 2006
By: /s/ Michael Serruya
----------------------------------
Michael Serruya
Co-Chairman of the Board
SCHEDULE "A"
Corporate Governance Disclosure
Board of Directors
Independence
The Board is comprised of nine directors, a majority of whom (Mr. Robert
E. Baker, Ms. Beth L. Bronner, Mr. Romeo DeGasperis, Mr. L. Joshua Sosland and
Mr. Arthur Waldbaum) are independent. Pursuant to the Canadian Securities
Administrators' Multilateral Instrument 52-110 - Audit Committees and National
Instrument 58-101 - Disclosure of Corporate Governance Practices, independent
directors are directors who free from any direct or indirect material
relationship which could, in the view of the Board, reasonably interfere with a
director's independent judgment.
Messrs. Michael Serruya, David Smith and David Stein are not independent
under these standards as each is an executive officer of the Corporation. Mr.
Aaron Serruya is not independent as his brother (Mr. Michael Serruya) is an
executive officer of CoolBrands, and he himself was an executive officer and
employee of the Corporation until December 2005.
Other Directorships
Ms. Beth L. Bronner is a director of The Hain Celestial Group, Inc., Reddy
Ice Holding, Inc. and Assurant, Inc. L. Joshua Sosland is a director of UMB
Financial Corporation. Mr. William R. McManaman, a nominee for election to the
Board, is a director of Amcore Financial, Inc. Other than these directors, none
of the directors of CoolBrands currently is also a director of another reporting
issuer (or the equivalent) in Canada or in a foreign jurisdiction.
Common Board Memberships
The Board has not adopted a formal policy limiting the number of directors
who sit on the same board of directors of another public company but believes
disclosure of common board memberships is important. There are no directors who
are members of the same board of another public company.
Meetings of Independent Directors
As a result of the Corporation's review of its corporate governance
practices completed in November 2005, the Corporation has instituted the
practice whereby the independent directors on the Board and each of the
committees meet regularly without management present. The Lead Director of the
Board conducts these sessions at Board meetings (and, on occasion, during
separate meetings of the independent directors) and the chair of each committee
conducts them at committee meetings. Since September 1,
- A2 -
2004, the independent directors have met a total of 4 times without management
present.
During the year ended August 31, 2005, the Board and the committees met as
follows:
-----------------------------------------------------------------------
Meetings held Meetings held without
management
-----------------------------------------------------------------------
Board 12 1
-----------------------------------------------------------------------
Audit Committee 5 --
-----------------------------------------------------------------------
Corporate Governance Committee 4 2
-----------------------------------------------------------------------
Compensation Committee 1 1
-----------------------------------------------------------------------
Co-Chairs of the Board
Mr. Michael Serruya and Mr. David Stein are Co-Chairs of the Board. The
Corporation has a written mandate which sets out and expands upon the role of
the Co-Chairs, which is primarily to provide leadership to enhance Board
effectiveness and, with the assistance of the Lead Director, to assist in
running Board meetings.
The responsibilities of the Co-Chairs include ensuring that the Board
works as a cohesive group and providing the leadership essential to achieve this
objective, setting Board meeting agendas, adopting procedures allowing the board
to conduct its work effectively and efficiently, taking all reasonable steps to
ensure the conduct of the Board meetings provides adequate time for serious
in-depth discussion or relevant issues, representing the Corporation to external
groups such as shareholders, and overseeing the decision-making process with
respect to acquisitions and divestitures, financings and similar activities.
The position description of the Co-Chairs was established this past year,
and is expected to be reviewed by the Corporate Governance Committee and
considered by the Board for approval each year. For more detailed information on
the Co-Chairs' responsibilities, the position description for the Co-Chairs of
the Board is available on our website at www.coolbrandsinc.com.
Lead Director
Mr. Robert E. Baker is the Lead Director. The Lead Director is an
independent director of the Board who is designated by the Board. The
Corporation has a written mandate describing the key roles and responsibilities
of the Lead Director. As neither of the Corporation's Co-Chairs is independent,
the Lead Director's key role is to work with the Co-Chairs and ensure that the
Board (i) discharges its responsibilities, (ii) has structures and procedures in
place to enable it to function independently of management, and (iii) clearly
understands and respects the boundaries between the Board and management's
responsibilities. The responsibilities of the Lead Director include recommending
and chairing periodic special meetings of the independent directors of the
Board, chairing Board meetings when neither Co-Chair is in attendance,
- A3 -
providing input to the Co-Chairs on the preparation of agendas for Board
meetings, serving as Board ombudsman so as to ensure that questions or comments
of individual directors are heard and addressed, recommending committee chairs
to the Board, in consultation with the Corporate Governance Committee, and
acting as liaison between the Board and management.
The position description of the Lead Director was established this past
year, and is expected to be reviewed by the Corporate Governance Committee and
considered by the Board for approval each year. For more detailed information on
the Lead Director's responsibilities, the position description of the Lead
Director is available on our website at www.coolbrandsinc.com.
Attendance Record
The following table provides a summary of attendance for Board members
since September 2004.
-------------------------------------------------
Director Board Meetings Attended
-------------------------------------------------
Richard Smith 2 of 3(1)
-------------------------------------------------
Romeo DeGasperis(2)(3) 17 of 21
-------------------------------------------------
Robert E. Baker(2)(3) 18 of 18
-------------------------------------------------
Arthur Waldbaum(2)(3) 18 of 18
-------------------------------------------------
Beth L. Bronner(2)(3) 17 of 18
-------------------------------------------------
L. Joshua Sosland(2)(3) 18 of 18
-------------------------------------------------
Michael Serruya 18 of 18
-------------------------------------------------
Aaron Serruya 17 of 18
-------------------------------------------------
David J. Stein 18 of 18
-------------------------------------------------
David M. Smith 18 of 18
-------------------------------------------------
Notes:
1) As noted elsewhere in the Circular, Mr. Richard Smith passed away on
January 29, 2005.
2) Three of the Board meetings held since September 2004 were meetings to
which only the independent directors were invited.
3) Other than Mr. DeGasperis, the independent members of the Board were
elected to the Board in February 2005.
Mandate of the Board of Directors
The Board is responsible for supervising the management of the
Corporation's business and affairs. The Board's principal responsibilities
relate to the stewardship of management and are summarized below:
o Strategic planning - the Board reviews and approves the
Corporation's strategic planning process and annual strategic
plan in light of management's assessment of emerging trends,
the competitive environment, risk issues and significant
business practices and products;
o Risk management - the Board (with assistance from the Audit
Committee) reviews management reports on material risks
associated with our businesses and operations, the
implementation by management of
- A4 -
systems to manage these risks and material deficiencies in the
operation of these systems;
o Human resources management - the Board (through the
Compensation Committee) reviews the Corporation's approach to
human resource management and executive compensation, the
extent to which senior management fosters a culture of
integrity and succession planning for the Chief Executive
Officer and key senior management positions;
o Financial corporate governance - the Board (with assistance
from the Corporate Governance Committee) reviews the
Corporation's approach to corporate governance, director
independence, the Corporation's code of conduct, and policies
relating to reputation and legal risk;
o Information - the Board (with assistance from the Audit
Committee) reviews the integrity of the Corporation's
financial information and systems;
o Communications - the Board reviews the Corporation's overall
communications strategy, measures for receiving shareholder
feedback and compliance with the Corporation's disclosure
policy;
o Board committees - the Board establishes committees and their
mandates and requires committee chairs to present a report to
the Board on material matters considered by the committee at
the next Board meeting;
o Director development and evaluation - the Board (with
assistance from management, the Co-Chairs of the Board and the
committees) develops director orientation programs and
continuing development programs for directors and evaluates
the performance of the Board, its committees and each
director.
Position Descriptions
As described above, the Board has developed written position descriptions
for the Co-Chairs and Lead Directors. The Board has not developed written
position descriptions for the chairs of each of its standing committees,
although it expects these chairs to provide the leadership on these committees
to ensure that these committees fulfill their roles and responsibilities as set
out in the written mandates for these committees.
The Board has not at this time developed a written position description
for the Chief Executive Officer; however, in the written charter recently
adopted for the Corporate Governance Committee it has delegated the
responsibility to develop such a written position description to this committee.
- A5 -
Orientation and Continuing Education
The Corporation elected a number of new independent directors to the Board
in fiscal 2005, and presented a comprehensive orientation meeting for these new
directors at which the head of each principal business function provided a
detailed description of his area of responsibility, and his short and medium
term goals and objectives. This meeting has been followed over the course of the
year with shorter presentations from these executives on their contribution to
the Corporation's overall strategy and direction.
Ethical Business Conduct
The Board adopted a Code of Business Conduct that applies to all
employees, officers and directors of the Corporation and its subsidiaries from
time to time. The principles outlined in the code are intended to:
o establish a minimum standard of conduct by which all employees
are expected to abide;
o protect the business interests of CoolBrands, its employees
and customers;
o maintain CoolBrands' reputation for integrity; and
o facilitate compliance by CoolBrands employees with applicable
legal and regulatory obligations.
The Code of Business Conduct addresses honesty and integrity, conflicts of
interest, gifts and entertainment, political activities, protection and use of
the Corporation's assets, records and document retention, information security,
corporate opportunities, confidentiality of corporate information, fair dealing
with other people and organizations, diversity and harassment-free environment,
complying with the law, whistleblowing procedures, and compliance standards and
procedures. The Code of Conduct requires that each officer and employee in a
supervisory role annually certify that he or she has reviewed the Code of
Conduct and has reported any relationship or circumstance that could place that
person in a potential conflict of interest with the Corporation. The text of our
Code of Business Conduct is available on our website at www.coolbrandsinc.com.
Nomination of Directors
The Corporation has a Corporate Governance Committee which is comprised of
Ms. Beth L. Bronner (Chair), and Messrs. L. Joshua Sosland and Robert E. Baker,
each of whom is independent within the meaning of applicable securities laws.
The responsibility for overseeing the Corporation's nomination process has been
delegated by the Board to the Corporation's Corporate Governance Committee.
The Board has established a written charter that describes the role and
function of the Corporate Governance Committee. The written charter is available
on our website at www.coolbrandsinc.com.
- A6 -
The primary function of the Corporate Governance Committee is to assist
the Board in fulfilling its corporate governance oversight responsibilities by
assessing the effectiveness of the Board as a whole as well as well as
discussing the contribution of individual members; periodically assessing the
Corporation's governance; proposing to the Board for consideration and decision
nominees for appointment to the Board at each annual meeting of shareholders and
nominees for appointment to fill any vacancies on the Board; and proposing to
the Board for consideration and decision a nominee for appointment as Lead
Director, in the event that the Chair, or either of the Co-Chairs of the Board
is not independent within the meaning of securities laws.
The Corporate Governance Committee uses the network of personal contacts
in the consumer products and frozen dessert industries and capital markets of
the members of the Board for identifying potential new Board members. The
Corporate Governance Committee may also utilize the services of a professional
search firm to assist in the identification of director candidates when
necessary.
Compensation
The Corporation has a Compensation Committee which is comprised of Messrs.
L. Joshua Sosland (Chair), Robert E. Baker and Arthur Waldbaum, each of whom is
independent within the meaning of applicable securities laws.
The Board has established a written charter that describes the role and
function of the Compensation Committee. The written charter is available on our
website at www.coolbrandsinc.com.
The responsibilities, powers and operation of the Compensation Committee
include establishing the Corporation's senior officer compensation policy and
practices, reviewing and approving the corporate goals and objectives relevant
to the compensation of the Chief Executive Officer and other senior officers and
evaluating their performance in light of these goals and objectives; overseeing
the Corporation's incentive compensation plans and preparing an annual report on
executive compensation to the Board. The Compensation Committee is also
responsible for recommending to the Board any changes to director compensation.
Assessments of the Board
Part of the mandate of the Corporate Governance Committee is to evaluate
and review the Co-Chairs', the Lead Director's, the Chief Executive Officer's,
and the Board's performance and that of its committees and its directors
annually. Since most of the Corporation's independent directors have served on
the Board for less than one year, the Corporate Governance Committee has not yet
commenced this assessment process. The Corporate Governance Committee may retain
an external consultant to assist in conducting this assessment.
SCHEDULE "B"
Special Resolution Continuing Coolbrands International Inc. under the
Canada Business Corporations Act
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. subject to and conditional upon the authorization of the Nova Scotia
Registrar of Joint Stock Companies pursuant to Section 133(5) of the
Companies Act (Nova Scotia), CoolBrands International Inc. (the "Company")
make application to the Director of the Canada Business Corporations Act
for a certificate of continuance continuing the Company under the Canada
Business Corporations Act;
2. subject to and effective upon the issuance of such certificate of
continuance and without affecting the validity of the incorporation and
existence of the Company, the Company hereby approves and adopts, in
substitution for the existing memorandum of association and articles of
association of the Company, articles of continuance pursuant to the Canada
Business Corporations Act with such changes as are required to comply with
the Canada Business Corporations Act;
3. the adoption of General By-Law No. 1 substantially in form of the draft
General By-Law No. 1 attached as Schedule G to the Management Information
Circular of CoolBrands dated January 13, 2006 for use at the annual and
special meeting of shareholders of CoolBrands to be held on February 27,
2006, with such amendments and variations as the directors may approve,
effective on the date that CoolBrands is continued under the CBCA, adopted
by resolution of the board of directors of CoolBrands dated the 11th day
of January, 2006, is hereby confirmed;
4. notwithstanding that this resolution has been passed by the members of the
Company, the directors of the Company are hereby authorized and empowered
to not proceed with the application for continuance at any time prior to
the issue of a certificate of continuance giving effect to the application
for continuance without the further approval of the members of the Company
if they determine it appropriate in the exercise of their fiduciary duties
as the directors of the Company; and
5. any one of the directors or officers of the Company is hereby authorized,
acting for, in the name of and on behalf of the Company, to execute or
cause to be executed, under the seal of the Company or otherwise, and to
deliver or to cause to be delivered, all such documents, agreements and
instruments, and to do or cause to be done all such other acts and things,
as such person determines to be necessary or desirable in order to carry
out the intent of the foregoing paragraphs of this resolution and the
matters authorized thereby, such determination to be conclusively
evidenced by the execution and delivery of such document, agreement or
instrument or the doing of any such act or thing.
SCHEDULE "C"
CONFIRMATORY RESOLUTION
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. The resolution reproduced below be and is hereby confirmed; and
2. The secretary of the Company is hereby directed to file a true copy of the
attached resolution with the Nova Scotia Registrar of Joint Stock
Companies certified under the hand of the secretary of the Company as
being passed as a special resolution in accordance with section 87(l) of
the Companies Act (Nova Scotia).
**********
Special Resolution Continuing Coolbrands International Inc. under
the Canada Business Corporations Act
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. subject to and conditional upon the authorization of the Nova Scotia
Registrar of Joint Stock Companies pursuant to Section 133(5) of the
Companies Act (Nova Scotia), CoolBrands International Inc. (the "Company")
make application to the Director of the Canada Business Corporations Act
for a certificate of continuance continuing the Company under the Canada
Business Corporations Act;
2. subject to and effective upon the issuance of such certificate of
continuance and without affecting the validity of the incorporation and
existence of the Company, the Company hereby approves and adopts, in
substitution for the existing memorandum of association and articles of
association of the Company, articles of continuance pursuant to the Canada
Business Corporations Act with such changes as are required to comply with
the Canada Business Corporations Act;
3. the adoption of General By-Law No. 1 substantially in form of the draft
General By-Law No. 1 attached as Schedule G to the Management Information
Circular of CoolBrands dated January 13, 2006 for use at the annual and
special meeting of shareholders of CoolBrands to be held on February 27,
2006, with such amendments and variations as the directors may approve,
effective on the date that CoolBrands is continued under the CBCA, adopted
by resolution of the board of directors of CoolBrands dated the 11th day
of January, 2006, is hereby confirmed;
4. notwithstanding that this resolution has been passed by the members of the
Company, the directors of the Company are hereby authorized and empowered
to not proceed with the application for continuance at any time prior to
the issue of a certificate of continuance giving effect to the application
for continuance without the further approval of the members of the Company
if they determine it appropriate in the exercise of their fiduciary duties
as the directors of the Company; and
5. any one of the directors or officers of the Company is hereby authorized,
acting for, in the name of and on behalf of the Company, to execute or
cause to be executed, under the seal of the Company or otherwise, and to
deliver or to cause to be delivered, all such documents, agreements and
instruments, and to do or cause to be done all such other acts and things,
as such person determines to be necessary or desirable in order to carry
out the intent of the foregoing paragraphs of this resolution and the
matters authorized thereby, such determination to be conclusively
evidenced by the execution and delivery of such document, agreement or
instrument or the doing of any such act or thing.
SCHEDULE "D"
SHARE CAPITAL RESTRUCTURING RESOLUTION
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. CoolBrands International Inc. (the "Corporation") is hereby authorized,
following the time that the Corporation is continued under the Canada
Business Corporations Act (the "Act"), to amend the articles of the
Corporation by:
(a) increasing the authorized capital of the Corporation by creating a
new class of shares, unlimited in number, designated as Common
Shares;
(b) changing each issued and outstanding subordinate voting share and
each issued and outstanding multiple voting share into one of the
Common Shares created hereby;
(c) decreasing the authorized capital of the Corporation by cancelling
all authorized and unissued subordinate voting shares and multiple
voting shares in the capital of the Corporation;
(d) removing all of the rights, privileges, restrictions and conditions
attaching to the subordinate voting shares and multiple voting
shares;
(e) declaring that the authorized capital of the Corporation, after
giving effect to the foregoing, shall consist of an unlimited number
of Common Shares; and
(f) by making such conforming amendments to the certificate and articles
as may be required to reflect the foregoing resolution;
2. upon articles of amendment having become effective (the "Effective Date")
in accordance with the Act, the articles of the Corporation are hereby
amended accordingly;
3. the termination, as at the Effective Date, of the trust agreement among
Richard E. Smith, David M. Smith, David J. Stein, Michael Serruya, Aaron
Serruya, 1082272 Ontario Inc., The Serruya Family Trust, Yogen Fruz
World-Wide Incorporated and the Chase Manhattan Bank dated March 18, 1998
is hereby approved; and
4. any director or officer of the Corporation be and he or she is hereby
authorized and directed on behalf of the Corporation to deliver articles
of amendment in duplicate to the Director under the Act and to sign and
execute all documents and do all things necessary or advisable in
connection with the foregoing, provided that such director or officer
shall cause the articles of amendment to be effective on May 31, 2007 or
such earlier date as may be determined by unanimous consent of the
independent directors of the Corporation in their discretion.
SCHEDULE "E"
CONFIRMATORY RESOLUTION
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. The resolution reproduced below be and is hereby confirmed; and
2. The secretary of the Company is hereby directed to file a true copy
of the attached resolution with the Nova Scotia Registrar of Joint
Stock Companies certified under the hand of the secretary of the
Company as being passed as a special resolution in accordance with
section 87(l) of the Companies Act (Nova Scotia).
**********
Share Capital Restructuring Resolution
RESOLVED, AS A SPECIAL RESOLUTION, THAT:
1. CoolBrands International Inc. (the "Corporation") is hereby authorized,
following the time that the Corporation is continued under the Canada
Business Corporations Act (the "Act"), to amend the articles of the
Corporation by:
(a) increasing the authorized capital of the Corporation by creating a
new class of shares, unlimited in number, designated as Common
Shares;
(b) changing each issued and outstanding subordinate voting share and
each issued and outstanding multiple voting share into one of the
Common Shares created hereby;
(c) decreasing the authorized capital of the Corporation by cancelling
all authorized and unissued subordinate voting shares and multiple
voting shares in the capital of the Corporation;
(d) removing all of the rights, privileges, restrictions and conditions
attaching to the subordinate voting shares and multiple voting
shares;
(e) declaring that the authorized capital of the Corporation, after
giving effect to the foregoing, shall consist of an unlimited number
of Common Shares; and
(f) by making such conforming amendments to the certificate and articles
as may be required to reflect the foregoing resolution;
2. upon articles of amendment having become effective (the "Effective Date")
in accordance with the Act, the articles of the Corporation are hereby
amended accordingly;
3. the termination, as at the Effective Date, of the trust agreement among
Richard E. Smith, David M. Smith, David J. Stein, Michael Serruya, Aaron
Serruya, 1082272 Ontario Inc., The Serruya Family Trust, Yogen Fruz
World-Wide Incorporated and the Chase Manhattan Bank dated March 18, 1998
is hereby approved; and
4. any director or officer of the Corporation be and he or she is hereby
authorized and directed on behalf of the Corporation to deliver articles
of amendment in duplicate to the Director under the Act and to sign and
execute all documents and do all things necessary or advisable in
connection with the foregoing, provided that such director or officer
shall cause the articles of amendment to be effective on May 31, 2007 or
such earlier date as may be determined by unanimous consent of the
independent directors of the Corporation in their discretion.
SCHEDULE "F"
Section 2 of the Third Schedule of the NSCA
1. A holder of shares of any class of a company may dissent if the company is
subject to an order under clause (d) of Section 3 hereof that affects the
holder or if the company resolves to
(a) amend its memorandum or articles to add, change or remove any
provisions restricting or constraining the issue or transfer of the
shares of that class;
(b) amend its memorandum or articles to add, change or remove any
restriction upon the business or businesses that the company may
carry on;
(c) amalgamate with another company, other than any wholly-owned
subsidiary of the company;
(d) be continued under the laws of another jurisdiction under subsection
(5) of Section 133 of the Act; or
(e) sell, lease or exchange all or substantially all its property other
than in the ordinary course of business of the company.
2. A holder of shares of any class or series of shares entitled to vote
separately as a class or series upon any such amendment may dissent if the
company resolves to amend its memorandum or articles to
(a) increase or decrease any maximum number of authorized shares of such
class, or increase any maximum number of authorized shares of a
class having rights or privileges equal or superior to the shares of
such class;
(b) effect an exchange, reclassification or cancellation of all or part
of the shares of such class;
(c) add, change or remove the rights, privileges, restrictions or
conditions attached to the shares of such class and, without
limiting the generality of the foregoing,
(i) remove or change prejudicially rights to accrued dividends or
rights to cumulative dividends,
(ii) add, remove or change prejudicially redemption rights,
(iii) reduce or remove a dividend preference or a liquidation
preference, or
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(iv) add, remove or change prejudicially conversion privileges,
options, voting, transfer or pre-emptive rights, or rights to
acquire securities of the company, or sinking fund provisions;
(d) increase the rights or privileges of any class of shares having
rights or privileges equal or superior to the shares of such class;
(e) create a new class of shares equal or superior to the shares of such
class;
(f) make any class of shares having rights or privileges inferior to the
shares of such class equal or superior to the shares of such class;
(g) effect an exchange or create a right of exchange of all or part of
the shares of another class into the shares of such class; or
(h) constrain the issue or transfer of the shares of such class or
extend or remove such constraint.
3. Management's proxy circular or notice of meeting relating to a meeting of
shareholders at which a proposal or other resolution with respect to any
matter referred to in subsection (1) or (2) of this Section is to be
raised or voted on shall state that a dissenting shareholder is entitled
to be paid the fair value of his shares in accordance with this Section,
but failure to make that statement does not invalidate the meeting or
business thereat.
4. In addition to any other right he may have, but subject to subsection (26)
of this Section, a shareholder who complies with this Section is entitled,
when the action approved by the resolution from which he dissents or an
order made under clause (d) of Section 3 hereof becomes effective, to be
paid by the company the fair value of the shares held by him in respect of
which he dissents, determined as of the close of business on the day
before the resolution was adopted or the order was made.
5. A dissenting shareholder may only claim under this Section with respect to
all the shares of a class held by him on behalf of any one beneficial
owner and registered in the name of the dissenting shareholder.
6. A dissenting shareholder shall send to the company, at or before any
meeting of shareholders at which a proposal or other resolution with
respect to any matter referred to in subsection (1) or (2) of this Section
is to be raised or voted on, a written objection to the resolution, unless
the company did not give notice to the shareholder of the purpose of the
meeting or of his right to dissent.
7. The company shall, within ten days after the shareholders adopt the
resolution, send to each shareholder who has filed the objection referred
to in subsection (6) of this Section notice that the resolution has been
adopted, but such notice is not
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required to be sent to any shareholder who voted for the resolution or who
has withdrawn his objection.
8. A dissenting shareholder shall, within twenty days after he receives a
notice under subsection (7) of this Section or, if he does not receive
such notice, within twenty days after he learns that the resolution has
been adopted, send to the company a written notice containing
(a) his name and address;
(b) the number and class of shares in respect of which he dissents;
(c) and a demand for payment of the fair value of such shares.
9. A dissenting shareholder shall, within thirty days after sending a notice
under subsection (8) of this Section, send the certificates representing
the shares in respect of which he dissents to the company or any
securities registrar of the company.
10. A dissenting shareholder who fails to comply with subsection (9) of this
Section has no right to make a claim under this Section.
11. A company or its securities registrar shall endorse on any share
certificate received under subsection (9) of this Section a notice that
the holder is a dissenting shareholder under this Section and shall
forthwith return the share certificates to the dissenting shareholder.
12. On sending a notice under subsection (8) of this Section, a dissenting
shareholder ceases to have any rights as a shareholder other than the
right to be paid the fair value of his shares as determined under this
Section except where
(a) the dissenting shareholder withdraws his notice before the company
makes an offer under subsection (13) of this Section;
(b) the company fails to make an offer in accordance with subsection
(13) of this Section and the dissenting shareholder withdraws his
notice; or
(c) the resolution to amend the memorandum or articles is revoked, the
Share Capital Restructuring or application for continuance
terminated, or the sale, lease or exchange abandoned, as the case
may be,
in which case his rights as a shareholder are reinstated as of the date he
sent the notice referred to in subsection (8) of this Section.
13. A company shall, not later than seven days after the later of the day on
which the action approved by the resolution is effective or the day the
company received
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the notice referred to in subsection (8) of this Section, send to each
dissenting shareholder who has sent such notice
(a) a written offer to pay for his shares in an amount considered by the
directors of the company to be the fair value thereof, accompanied
by a statement showing how the fair value was determined; or
(b) if subsection (26) of this Section applies, a notification that it
is unable lawfully to pay dissenting shareholders for their shares.
14. Every offer made under subsection (13) of this Section for shares of the
same class or series shall be on the same terms.
15. Subject to subsection (26) of this Section, a company shall pay for the
shares of a dissenting shareholder within ten days after an offer made
under subsection (13) of this Section has been accepted, but any such
offer lapses if the company does not receive an acceptance thereof within
thirty days after the offer has been made.
16. Where a company fails to make an offer under subsection (13) of this
Section, or if a dissenting shareholder fails to accept an offer, the
company may, within fifty days after the action approved by the resolution
or order made under clause (d) of Section 3 hereof becomes effective or
within such further period as the court may allow, apply to the court to
fix a fair value for the shares of any dissenting shareholder.
17. If a company fails to apply to the court under subsection (16) of this
Section, a dissenting shareholder may apply to the court for the same
purpose within a further period of twenty days or within such further
period as the court may allow.
18. A dissenting shareholder is not required to give security for costs in an
application made under subsection (16) or (17) of this Section.
19. Upon an application under subsection (16) or (17) of this Section
(a) all dissenting shareholders whose shares have not been purchased by
the company shall be joined as parties and are bound by the decision
of the court; and
(b) the company shall notify each affected dissenting shareholder of the
date, place and consequences of the application and of his right to
appear and be heard in person or by counsel.
20. Upon an application to the court under subsection (16) or (17) of this
Section, the court may determine whether any other person is a dissenting
shareholder who
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should be joined as a party, and the court shall then fix a fair value for
the shares of all dissenting shareholders
21. The court may in its discretion appoint one or more appraisers to assist
the court to fix a fair value for the shares of the dissenting
shareholders.
22. The final order of the court shall be rendered against the company in
favour of each dissenting shareholder and for the amount of his shares as
fixed by the court.
23. The court may in its discretion allow a reasonable rate of interest on the
amount payable to each dissenting shareholder from the date the action
approved by the resolution is effective until the date of payment.
24. If subsection (26) of this Section applies, the company shall, within ten
days after the pronouncement of an order under subsection (22) of this
Section, notify each dissenting shareholder that it is unable lawfully to
pay dissenting shareholders for their shares.
25. If subsection (26) of this Section applies, a dissenting shareholder, by
written notice delivered to the company within thirty days after receiving
a notice under subsection (24) of this Section, may
(a) withdraw his notice of dissent, in which case the company is deemed
to consent to the withdrawal and the shareholder is reinstated to
his full rights as a shareholder; or
(b) retain a status as a claimant against the company, to be paid as
soon as the company is lawfully able to do so or, in a liquidation,
to be ranked subordinate to the rights of creditors of the company
but in priority to its shareholders.
26. A company shall not make a payment to a dissenting shareholder under this
Section if there are reasonable grounds for believing that
(a) the company is or would after the payment be unable to pay its
liabilities as they become due; or
(b) the realizable value of the company's assets would thereby be less
than the aggregate of its liabilities.
27. Notwithstanding the foregoing, a shareholder is not entitled to dissent
under this Section if an amendment to the memorandum or articles of the
company is effected by court order made under any other Act that affects
the rights among the company, its shareholders and creditors or under
Section 5 hereof.
SCHEDULE "G"
By-Law No. 1 of CoolBrands International Inc.
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions.
As used in this by-law, the following terms have the following meanings:
"Act" means the Canada Business Corporations Act and the regulations under
the Act, all as amended, re-enacted or replaced from time to time.
"Authorized Signatory" has the meaning specified in Section 2.2.
"Corporation" means CoolBrands International Inc.
"person" means a natural person, partnership, limited partnership, limited
liability partnership, corporation, limited liability corporation,
unlimited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity or governmental or regulatory
entity, and pronouns have a similarly extended meaning.
"recorded address" means (i) in the case of a shareholder or other
securityholder, the shareholder's or securityholder's latest address as
shown in the records of the Corporation, (ii) in the case of joint
shareholders or other joint securityholders, the address appearing in the
records of the Corporation in respect of the joint holding or, if there is
more than one address in respect of the joint holding, the first address
that appears, and (iii) in the case of a director, officer or auditor, the
person's latest address as shown in the records of the Corporation or, if
applicable, the last notice filed with the Director under the Act,
whichever is the most recent.
"show of hands" means a show of hands by persons present at the meeting,
the functional equivalent of a show of hands by telephonic, electronic or
other means of communication and any combination of such methods.
Terms used in this by-law that are defined in the Act have the meanings given to
such terms in the Act.
Section 1.2 Interpretation.
The division of this by-law into Articles, Sections and other subdivisions
and the insertion of headings are for convenient reference only and do not
affect its interpretation. Words importing the singular number include the
plural and vice versa. Any reference in this by-law to gender includes all
genders. In this by-law the words
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"including", "includes" and "include" means "including (or includes or include)
without limitation".
Section 1.3 Subject to Act and Articles.
This by-law is subject to, and should be read in conjunction with, the Act
and the articles. If there is any conflict or inconsistency between any
provision of the Act or the articles and any provision of this by-law, the
provision of the Act or the articles will govern.
Section 1.4 Conflict With Unanimous Shareholder Agreement.
If there is any conflict or inconsistency between any provision of a
unanimous shareholder agreement and any provision of this by-law, the provision
of such unanimous shareholder agreement will govern.
ARTICLE 2
BUSINESS OF THE CORPORATION
Section 2.1 Financial Year.
The financial year of the Corporation ends on such date of each year as
the directors determine from time to time.
Section 2.2 Execution of Instruments and Voting Rights.
Contracts, documents and instruments may be signed on behalf of the
Corporation, either manually or by facsimile or by electronic means, (i) by any
one of the following: a director, the chair or, if there are co-chairs of the
board, either co-chair, the president, the chief executive officer, the chief
financial officer, the corporate secretary and the treasurer and (ii) by any
other person authorized by the directors from time to time, (each Person
referred to in (i) and (ii) is an "Authorized Signatory"). Voting rights for
securities held by the Corporation may be exercised on behalf of the Corporation
by any one Authorized Signatory. In addition, the directors or any two
Authorized Signatories may, from time to time, authorize any person or persons
(i) to sign contracts, documents and instruments generally on behalf of the
Corporation or to sign specific contracts, documents or instruments on behalf of
the Corporation and (ii) to exercise voting rights for securities held by the
Corporation generally or to exercise voting rights for specific securities held
by the Corporation. Any Authorized Signatory, or other person authorized to sign
any contract, document or instrument on behalf of the Corporation, may affix the
corporate seal, if any, to any contract, document or instrument when required.
As used in this Section, the phrase "contracts, documents and instruments"
means any and all kinds of contracts, documents and instruments in written or
electronic form, including cheques, drafts, orders, guarantees, notes,
acceptances and
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bills of exchange, deeds, mortgages, hypothecs, charges,
conveyances, transfers, assignments, powers of attorney, agreements, proxies,
releases, receipts, discharges and certificates and all other paper writings or
electronic writings.
Section 2.3 Qualifications
Each director shall be eighteen (18) or more years of age and no person
who is not an individual, who has the status of a bankrupt or who is of unsound
mind and has been so found by a court in Canada or elsewhere shall be a
director. If a director acquires the status of a bankrupt or becomes of unsound
mind and is so found, he shall thereupon cease to be a director.
Section 2.4 Banking Arrangements.
The banking and borrowing business of the Corporation or any part of it
may be transacted with such banks, trust companies or other firms or
corporations as the directors determine from time to time. All such banking and
borrowing business or any part of it may be transacted on the Corporation's
behalf under the agreements, instructions and delegations, and by the one or
more officers and other persons, that the directors authorize from time to time.
This paragraph does not limit in any way the authority granted under Section
2.2.
ARTICLE 3
DIRECTORS
Section 3.1 Number of Directors.
If the articles specify a minimum and a maximum number of directors, the
number of directors is the number within the minimum and maximum determined by
the directors from time to time. No decrease in the number of directors will
shorten the term of an incumbent director.
Section 3.2 Place of Meetings.
Meetings of directors may be held at any place in or outside Canada.
Section 3.3 Calling of Meetings.
The president or any director may call a meeting of the directors at any
time. Meetings of directors will be held at the time and place as the person(s)
calling the meeting determine.
Section 3.4 Regular Meetings.
The directors may establish regular meetings of directors. Any resolution
establishing such meetings will specify the dates, times and places of the
regular meetings and will be sent to each director.
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Section 3.5 Notice of Meeting.
Subject to this section, notice of the time and place of each meeting of
directors will be given to each director not less than 48 hours before the time
of the meeting. No notice of meeting is required for any regularly scheduled
meeting except where the Act requires the notice to specify the purpose of, or
the business to be transacted at, the meeting. Provided a quorum of directors is
present, a meeting of directors may be held, without notice, immediately
following the annual meeting of shareholders.
The accidental omission to give notice of any meeting of directors to, or
the non-receipt of any notice by, any person, or any error in any notice not
affecting the substance of the notice, does not invalidate any resolution passed
or any action taken at the meeting.
Section 3.6 Waiver of Notice.
A director may waive notice of a meeting of directors, any irregularity in
a notice of meeting of directors or any irregularity in a meeting of directors.
Such waiver may be given in any manner and may be given at any time either
before or after the meeting to which the waiver relates. Waiver of any notice of
a meeting of directors cures any irregularity in the notice, any default in the
giving of the notice and any default in the timeliness of the notice.
Section 3.7 Quorum.
A majority of the number of directors in office or such greater or lesser
number as the directors may determine from time to time, constitutes a quorum at
any meeting of directors. Notwithstanding any vacancy among the directors, a
quorum of directors may exercise all the powers of the directors.
Section 3.8 Meeting by Telephonic, Electronic or Other Communication Facility.
A director may, if all the directors of the Corporation consent,
participate in a meeting of directors by means of a telephonic, electronic or
other communication facility. A director participating in a meeting by such
means is deemed to be present at the meeting. Any consent is effective whether
given before or after the meeting to which it relates and may be given with
respect to all meetings of the directors.
Section 3.9 Chair.
The chair of any meeting of directors is the first mentioned of the
following officers that is a director and is present at the meeting:
a) the chair of the board, or, if there are co-chairs, either
co-chair of the board; or
b) the lead director, if any; or
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c) the president.
If no such person is present at the meeting, the directors present shall choose
one of their number to chair the meeting.
Section 3.10 Secretary.
The corporate secretary, if any, will act as secretary at meetings of
directors. If a corporate secretary has not been appointed or the corporate
secretary is absent, the chair of the meeting will appoint a person, who need
not be a director, to act as secretary of the meeting.
Section 3.11 Votes to Govern.
At all meetings of directors, every question shall be decided by a
majority of the votes cast. In case of an equality of votes, the chair of the
meeting is not entitled to a second or casting vote.
Section 3.12 Remuneration and Expenses.
The directors may determine from time to time the remuneration, if any, to
be paid to a director for his or her services as a director. The directors are
also entitled to be reimbursed for travelling and other out-of-pocket expenses
properly incurred by them in attending directors meetings, committee meetings
and shareholders meetings and in the performance of other duties of directors of
the Corporation. The directors may also award additional remuneration to any
director undertaking special services on the Corporation's behalf beyond the
services ordinarily required of a director by the Corporation.
A director may be employed by or provide services to the Corporation
otherwise than as a director. Such a director may receive remuneration for such
employment or services in addition to any remuneration paid to the director for
his or her services as a director.
ARTICLE 4
COMMITTEES
Section 4.1 Committees of Directors.
The directors may appoint from their number one or more committees and
delegate to such committees any of the powers of the directors except those
powers that, under the Act, a committee of directors has no authority to
exercise.
Section 4.2 Proceedings.
Meetings of committees of directors may be held at any place in or outside
Canada. At all meetings of committees, every question shall be decided by a
majority of
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the votes cast on the question. Unless otherwise determined by the directors,
each committee of directors may make, amend or repeal rules and procedures to
regulate its meetings including: (i) fixing its quorum, provided that quorum may
not be less than a majority of its members; (ii) procedures for calling
meetings; (iii) requirements for providing notice of meetings; (iv) selecting a
chair for a meeting; and (v) determining whether the chair will have a deciding
vote in the event there is an equality of votes cast on a question.
Subject to a committee of directors establishing rules and procedures to
regulate its meetings, Sections 3.3 to 3.12 inclusive apply to committees of
directors, with such changes as are necessary.
ARTICLE 5
OFFICERS
Section 5.1 Appointment of Officers.
The directors may appoint such officers of the Corporation as they deem
appropriate from time to time. The officers may include any of a chair of the
board, a president, a chief executive officer, a chief operating officer, one or
more vice-presidents, a chief financial officer, a corporate secretary and a
treasurer and one or more assistants to any of the appointed officers. No person
may be the chair of the board unless that person is a director.
Section 5.2 Powers and Duties.
Unless the directors determine otherwise, an officer has all powers and
authority that are incident to his or her office. An officer will have such
other powers, authority, functions and duties that are prescribed or delegated,
from time to time, by the directors, or by other officers if authorized to do so
by the directors. The directors or authorized officers may, from time to time,
vary, add to or limit the powers and duties of any officer.
Section 5.3 Chair of the Board.
If appointed, the chair of the board (or one of the co-chairs, if these
are co-chairs appointed) will preside at directors meetings and shareholders
meetings in accordance with Section 3.10 and Section 7.9, respectively. The
chair(s) of the board will have such other powers and duties as the directors
determine.
Section 5.4 Chief Executive Officer
If appointed, the chief executive officer of the Corporation will have
general supervision of the business and affairs of the Corporation. The chief
executive officer will have such other powers and duties as the directors
determine. Subject to Section 3.10 and Section 7.9, during the absence or
disability of the corporate secretary,
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treasurer or president, or if no corporate secretary, treasurer or president has
been appointed, the chief executive officer will also have the powers and duties
of the office of corporate secretary, treasurer or president, as the case may
be.
Section 5.5 President.
If appointed, the president of the Corporation will have supervision of
such business and affairs of the Corporation as the directors determine. The
president will have such other powers and duties as the directors determine.
Subject to Section 3.10 and Section 7.9, during the absence or disability of the
corporate secretary, treasurer or chief executive officer, or if no corporate
secretary, treasurer or chief executive officer has been appointed, the
president will also have the powers and duties of the office of corporate
secretary, treasurer and chief executive officer, as the case may be.
Section 5.6 Corporate Secretary.
If appointed, the corporate secretary will have the following powers and
duties: (i) the corporate secretary will give or cause to be given, as and when
instructed, notices required to be given to shareholders, directors, officers,
auditors and members of committees of directors; (ii) the corporate secretary
may attend at and be the secretary of meetings of directors, shareholders, and
committees of directors and will have the minutes of all proceedings at such
meetings entered in the books and records kept for that purpose; and (iii) the
corporate secretary will be the custodian of any corporate seal of the
Corporation and the books, papers, records, documents, and instruments belonging
to the Corporation, except when another officer or agent has been appointed for
that purpose. The corporate secretary will have such other powers and duties as
the directors or the president of the Corporation determine.
Section 5.7 Treasurer.
If appointed, the treasurer of the Corporation will have the following
powers and duties: (i) the treasurer will ensure that the Corporation prepares
and maintains adequate accounting records in compliance with the Act; (ii) the
treasurer will also be responsible for the deposit of money, the safekeeping of
securities and the disbursement of the funds of the Corporation; and (iii) at
the request of the directors, the treasurer will render an account of the
Corporation's financial transactions and of the financial position of the
Corporation. The treasurer will have such other powers and duties as the
directors or the president of the Corporation determine.
Section 5.8 Removal of Officers.
The directors may remove an officer from office at any time, with or
without cause. Such removal is without prejudice to the officer's rights under
any employment contract with the Corporation.
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ARTICLE 6
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
Section 6.1 Limitation of Liability.
Subject to the Act and other applicable law, no director or officer is
liable for: (i) the acts, omissions, receipts, failures, neglects or defaults of
any other director, officer or employee; (ii) joining in any receipt or other
act for conformity; (iii) any loss, damage or expense happening to the
Corporation through the insufficiency or deficiency of title to any property
acquired for or on behalf of the Corporation; (iv) the insufficiency or
deficiency of any security in or upon which any of the monies of the Corporation
shall be invested; (v) any loss or damage arising from the bankruptcy,
insolvency or tortious acts of any person with whom any of the monies,
securities or effects of the Corporation shall be deposited; or (vi) any loss
occasioned by any error of judgment or oversight on his part, or for any other
loss, damage or misfortune whatever which shall happen in the execution of the
duties of his office or in relation to his office.
Section 6.2 Indemnity.
The Corporation will indemnify to the fullest extent permitted by the Act
(i) any director or officer of the Corporation, (ii) any former director or
officer of the Corporation, (iii) any individual who acts or acted at the
Corporation's request as a director or officer, or in a similar capacity, of
another entity, and (iv) their respective heirs and legal representatives if
a) he acted honestly and in good faith with a view to the best
interest o the Corporation; and
b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had
reasonable grounds for believing that his conduct was lawful.
The Corporation is authorized to execute agreements in favour of any of
the foregoing persons evidencing the terms of the indemnity. Nothing in this
by-law limits the right of any person entitled to indemnity to claim indemnity
apart from the provisions of this by-law.
Section 6.3 Insurance.
The Corporation may purchase and maintain insurance for the benefit of any
person referred to in Section 6.2 against such liabilities and in such amounts
as the directors may determine and as are permitted by the Act.
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ARTICLE 7
SHAREHOLDERS
Section 7.1 Calling Annual and Special Meetings.
The Chair of the board, or, if there are co-chairs of the board, either
co-chair, or any two directors, the president and the chief executive officer
have the power to call annual meetings of shareholders and special meetings of
shareholders. Annual meetings of shareholders and special meetings of
shareholders will be held on the date and at the time and place in Canada as the
person(s) calling the meeting determine.
Section 7.2 Electronic Meetings.
Meetings of shareholders may be held entirely by means of telephonic,
electronic or other communications facility that permits all participants to
communicate adequately with each other during the meeting. The directors may
establish procedures regarding the holding of meetings of shareholders by such
means.
Section 7.3 Notice of Meetings.
No public notice or advertisement or any meeting of shareholders shall be
required, but notice of the time and place of each such meeting shall be given
not less than twenty-one (21) days nor more than sixty (60) days before the day
on which the meeting is to be held, to the auditor, if any, the directors and to
each shareholder of record entitled to vote at the meeting. Notice of a special
meeting of shareholders shall state the nature of the business to be transacted
in sufficient detail to permit the shareholder to form a reasoned judgment
thereon together with the text of any special resolution to be submitted to the
meeting. A special meeting and an annual meeting may be convened by one and the
same notice and it shall not be objectionable that the notice only convenes the
second meeting contingent on any special resolution being passed by the
requisite majority at the first meeting.
The accidental omission to give notice of any meeting of shareholders to,
or the non-receipt of any notice by, any person, or any error in any notice not
affecting the substance of the notice, does not invalidate any resolution passed
or any action taken at the meeting.
Section 7.4 Waiver of Notice.
A shareholder, a proxyholder, a director or the auditor and any other
person entitled to attend a meeting of shareholders may waive notice of a
meeting of shareholders, any irregularity in a notice of meeting of shareholders
or any irregularity in a meeting of shareholders. Such waiver may be waived in
any manner and may be given at any time either before or after the meeting to
which the waiver relates. Waiver of any notice of a meeting of shareholders
cures any irregularity in the notice, any default in the giving of the notice
and any default in the timeliness of the notice.
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Section 7.5 Representatives.
A representative of a shareholder that is a body corporate or an
association will be recognized if (i) a certified copy of the resolution of the
directors or governing body of the body corporate or association, or a certified
copy of an extract from the by-laws of the body corporate or association,
authorizing the representative to represent the body corporate or association is
deposited with the Corporation, or (ii) the authorization of the representative
is established in another manner that is satisfactory to the corporate secretary
or the chair of the meeting.
Section 7.6 Persons Entitled to be Present.
The only persons entitled to be present at a meeting of shareholders are
those persons entitled to vote at the meeting, the directors, the officers, the
auditor of the Corporation and others who, although not entitled to vote, are
entitled or required under any provision of the Act or the articles or by-laws
to be present at the meeting. Any other person may be admitted with the consent
of the chair of the meeting or the persons present who are entitled to vote at
the meeting.
Section 7.7 Quorum.
A quorum of shareholders is present at a meeting of shareholders if the
holders of not less than 10% of the shares entitled to vote at the meeting are
present in person or represented by proxy, irrespective of the number of persons
actually present at the meeting.
Section 7.8 Proxies.
A proxy shall comply with the applicable requirements of the Act and other
applicable law and will be in such form as the directors may approve from time
to time or such other form as may be acceptable to the chair of the meeting at
which the instrument of proxy is to be used. A proxy will be acted on only if it
is deposited with the Corporation or its agent prior to the time specified in
the notice calling the meeting at which the proxy is to be used or it is
deposited with the corporate secretary or the chair of the meeting or any
adjournment of the meeting prior to the time of voting, or at such earlier time
and in such manner as the board of directors may prescribe in accordance with
the Act.
Section 7.9 Chair, Secretary and Scrutineers.
The chair of any meeting of shareholders is the first mentioned of the
following officers that is present at the meeting:
a) the chair of the board, or, if there are co-chairs, either
co-chair of the board;
b) the chief executive officer; or
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c) a vice-president (in order of corporate seniority).
If no such person is present at the meeting, the persons present who are
entitled to vote shall choose a director who is present, or a shareholder who is
present, to chair the meeting.
The corporate secretary, if any, will act as secretary at meetings of
shareholders. If a corporate secretary has not been appointed or the corporate
secretary is absent, the chair of the meeting will appoint a person, who need
not be a shareholder, to act as secretary of the meeting.
If desired, the chair of the meeting may appoint one or more persons, who
need not be shareholders, to act as scrutineers at any meeting of shareholders.
Section 7.10 Procedure.
The chair of a meeting of shareholders will conduct the meeting and
determine the procedure to be followed at the meeting. The chair's decision on
all matters or things, including any questions regarding the validity or
invalidity of a form of proxy or other instrument appointing a proxy, shall be
conclusive and binding upon the meeting of shareholders.
Section 7.11 Manner of Voting.
Subject to the Act and other applicable law, any question at a meeting of
shareholders shall be decided by a show of hands, unless a ballot on the
question is required or demanded. Subject to the Act and other applicable law,
the chair of the meeting may require a ballot or any person who is present and
entitled to vote may demand a ballot on any question at a meeting of
shareholders. The requirement or demand for a ballot may be made either before
or after any vote on the question by a show of hands. A ballot will be taken in
the manner the chair of the meeting directs. A requirement or demand for a
ballot may be withdrawn at any time prior to the taking of the ballot. The
result of such ballot shall be the decision of the shareholders upon the
question.
In the case of a vote by a show of hands, each person present who is
entitled to vote has one vote. If a ballot is taken, each person present who is
entitled to vote is entitled to the number of votes that are attached to the
shares which such person is entitled to vote at the meeting.
Section 7.12 Votes to Govern.
Any question at a meeting of shareholders shall be decided by a majority
of the votes cast on the question unless the articles, the by-laws, the Act or
other applicable law requires otherwise. In case of an equality of votes either
when the vote is by a show
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of hands or when the vote is by a ballot, the chair of the meeting is not
entitled to a second or casting vote.
Section 7.13 Adjournment.
The chair of any meeting of shareholders may, with the consent of the
persons present who are entitled to vote at the meeting, adjourn the meeting
from time to time and place to place, subject to such conditions as such persons
may decide. Any adjourned meeting is duly constituted if held in accordance with
the terms of the adjournment and a quorum is present at the adjourned meeting.
Any business may be considered and transacted at any adjourned meeting which
might have been considered and transacted at the original meeting of
shareholders.
ARTICLE 8
SECURITIES
Section 8.1 Form of Security Certificates.
Subject to the Act, security certificates, if required, will be in the
form that the directors approve from time to time or that the Corporation
adopts.
Section 8.2 Transfer of Shares.
Transfers of securities of the Corporation shall be registerable on the
register of transfers or on one of the branch registers of transfers (if any)
kept by or for the Corporation in respect thereof upon surrender of the security
properly endorsed together with such additional assurance as the Corporation
shall require and subject to the provisions of the Act and the restrictions on
transfer set forth in the articles of the Corporation. If no security
certificate has been issued by the Corporation in respect of a security issued
by the Corporation, clause (i) above may be satisfied by presentation of a duly
executed security transfer power, together with such reasonable assurance that
the security transfer power is genuine and effective as the directors may
require.
Section 8.3 Transfer Agents and Registrars.
The Corporation may from time to time appoint one or more agents to
maintain, for each class or series of securities issued by it in registered or
other form, a central securities register and one or more branch securities
registers. Such an agent may be designated as transfer agent or registrar
according to their functions and one person may be designated both registrar and
transfer agent. The Corporation may at any time terminate such appointment.
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ARTICLE 9
PAYMENTS
Section 9.1 Payments of Dividends and Other Distributions.
Any dividend or other distribution payable in cash to shareholders will be
paid by cheque or by electronic means or by such other method as the directors
may determine. The payment will be made to or to the order of each registered
holder of shares in respect of which the payment is to be made. Cheques will be
sent to the registered holder's recorded address, unless the holder otherwise
directs. In the case of joint holders, the payment will be made to the order of
all such joint holders and, if applicable, sent to them at their recorded
address, unless such joint holders otherwise direct. The sending of the cheque
or the sending of the payment by electronic means or the sending of the payment
by a method determined by the directors in an amount equal to the dividend or
other distribution to be paid less any tax that the Corporation is required to
withhold will satisfy and discharge the liability for the payment, unless
payment is not made upon presentation, if applicable.
Section 9.2 Non-Receipt of Payment.
In the event of non-receipt of any payment made as contemplated by Section
9.1 by the person to whom it is sent, the Corporation may issue re-payment to
such person for a like amount. The directors may determine, whether generally or
in any particular case, the terms on which any re-payment may be made, including
terms as to indemnity, reimbursement of expenses, and evidence of non-receipt
and of title.
Section 9.3 Unclaimed Dividends.
To the extent permitted by law, any dividend or other distribution that
remains unclaimed after a period of 2 years from the date on which the dividend
has been declared to be payable is forfeited and will revert to the Corporation.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Notices.
Any notice, communication or document required to be given, delivered or
sent by the Corporation to any director, officer, shareholder or auditor is
sufficiently given, delivered or sent if delivered personally, or if delivered
to the person's recorded address, or if mailed to the person at the person's
recorded address by prepaid mail, or if otherwise communicated by electronic
means permitted by the Act. The directors may establish procedures to give,
deliver or send a notice, communication or document to any director, officer,
shareholder or auditor by any means of communication permitted by the Act or
other applicable law. In addition, any notice, communication or document may be
delivered by the Corporation in the form of an electronic document.
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Section 10.2 Notice to Joint Holders.
If two or more persons are registered as joint holders of any security,
any notice may be addressed to all such joint holders but notice addressed to
one of them constitutes sufficient notice to all of them.
Section 10.3 Computation of Time.
In computing the date when notice must be given when a specified number of
days' notice of any meeting or other event is required, the date of giving the
notice is excluded and the date of the meeting or other event is included.
Section 10.4 Persons Entitled by Death or Operation of Law.
Every person who, by operation of law, transfer, death of a securityholder
or any other means whatsoever, becomes entitled to any security, is bound by
every notice in respect of such security which has been given to the
securityholder from whom the person derives title to such security. Such notices
may have been given before or after the happening of the event upon which they
became entitled to the security.
ARTICLE 11
EFFECTIVE DATE
Section 11.1 Effective Date.
This by-law comes into force on the date of issuance of a certificate of
continuance continuing the Corporation under the Canada Business Corporations
Act.
Section 11.2 Repeal.
All previous by-laws of the Corporation are repealed as of the coming into
force of this by-law. Such repeal does not affect the previous operation of any
by-law so repealed or affect the validity of any act done or right, privilege,
obligation or liability acquired or incurred under any such by-law prior to its
repeal.
This by-law was made by resolution of the directors on January 11, 2006.
_____________________________________
Secretary
This by-law was confirmed by resolution of the shareholders on March 20,
2006.
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Secretary
APPENDIX "1"
Items Relating to Change of Auditor
NOTICE OF CHANGE OF AUDITOR
TO: BDO Dunwoody LLP, Chartered Accountants
AND TO: BDO Seidman, LLP, Certified Public Accountants
It is proposed that CoolBrands International Inc. (the "Corporation") will
change its auditor from BDO Dunwoody LLP, Chartered Accountants, Toronto,
Ontario, Canada (the "former auditor") to BDO Seidman, LLP, Certified Public
Accountants, Melville, New York, U.S.A. (the "successor auditor"), effective as
of the close of the Annual and Special Meeting of Shareholders of the
Corporation scheduled to be held on February 27, 2006 (the "Annual and Special
Meeting").
The Audit Committee's recommendation for the change of auditor to the Board of
Directors was made as a result of several factors, including that in addition to
a majority of the Corporation's business being located in the United States,
during the past year the Corporation has changed its financial reporting from
Canadian generally accepted accounting principles to United States generally
accepted accounting principles and has divested itself of the franchise
division, the only significant Canadian-based operation of the Corporation. The
Corporation believes that BDO Seidman, LLP is therefore able to serve the
Corporation more efficiently from its office in Melville, New York, U.S.A. than
BDO Dunwoody LLP in Toronto, Canada.
In accordance with National Instrument 51-102 - Continuous Disclosure
Obligations ("NI 51-102"), the Corporation reports that:
1. the former auditor has therefore been terminated as auditor of the
Corporation effective the close of the Meeting;
2. the former auditor will not be proposed to shareholders at the
Meeting for reappointment;
3. there were no reservations in the former auditor's reports in
connection with the audits of the two most recently completed fiscal
years and any period subsequent to the most recently completed
fiscal year for which an audit report was issued and preceding the
date of expiry of the former auditor's term of office; and
4. there are no "reportable events" as such term is defined in NI
51-102.
The change of auditor and the recommendation to appoint the successor auditor
was approved by the audit committee and the board of directors of the
Corporation.
DATED this 11th day of January, 2006.
ON BEHALF OF THE BOARD OF DIRECTORS
/s/ David Stein
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David Stein
President and Chief Executive Officer