EX-99 4 ex99-2.txt EXHIBIT 99.2 EXHIBIT 99.2 COOLBRANDS INTERNATIONAL INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS (Revised) NOTICE IS HEREBY GIVEN that the annual and special meeting of shareholders of CoolBrands International Inc. (the "Corporation") will be held at The Hilton Toronto (Toronto I Room), 145 Richmond Street West, Toronto, Ontario, on February 27, 2004, at 10:00 a.m. (Toronto time) (the "Meeting") for the following purposes: 1. to consider and receive the financial statements of the Corporation for the year ended August 31, 2003, together with the report of the auditor thereon; 2. to elect directors of the Corporation; 3. to recommend the re-appointment of BDO Dunwoody LLP as the auditor of the Corporation and to authorize the directors to fix the auditor's remuneration; 4. to consider, and if thought advisable, approve, a resolution providing for an amendment to the Corporation's 2002 Stock Option Plan; and 5. to transact such other business as properly may be brought before the meeting or any adjournments or postponements thereof. Holders of multiple voting shares and subordinate voting shares who are unable to attend the meeting in person are requested to sign and return the enclosed form of proxy in the envelope provided for that purpose. To be effective, proxies must be received before 5:00 p.m. (Toronto time) on February 24, 2004 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 adjourned or postponed meeting, or be presented prior to the commencement of the Meeting or any adjourned or postponed meeting. The Corporation's Annual Report for the year ended August 31, 2003, and management information circular are enclosed with this notice of meeting. Only shareholders of record at the close of business on January 12, 2004 are entitled to notice of the meeting and any adjournment or postponement thereof, while only shareholders of record as of the close of business on January 20, 2004 are entitled to vote at the meeting, except to the extent that a person has transferred any multiple voting shares or subordinate voting shares after that date and the new holder of such shares establishes proper ownership and demands not later than 10 days before the date of the meeting to be included in the list of shareholders eligible to vote at the meeting. DATED at Markham this 27th day of January, 2004 BY ORDER OF THE BOARD OF DIRECTORS /s/ Aaron Serruya -------------------------------------- Aaron Serruya Secretary COOLBRANDS INTERNATIONAL INCORPORATED MANAGEMENT INFORMATION CIRCULAR (Revised) 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 of shareholders of the Corporation (the "Meeting") to be held at the time and place and for the purposes set forth in the attached notice of annual and special meeting of shareholders (the "Notice of Meeting"). It is expected that the solicitation cost will be borne by the Corporation. All references in this management information circular to the "Meeting" include references to any adjournments or postponements thereof. 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 Meeting 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 must be received before 5:00 p.m. (Toronto time) on February 24, 2004 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 adjourned or postponed meeting, or be presented prior to the commencement of the Meeting or any adjourned or postponed meeting. 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 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 section 85B(4) of the Company Act (Nova Scotia) (the "Act"), 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 Meeting, or any adjournment thereof, at which the proxy is to be used or with the Chairman of the Meeting on the date of the Meeting, or any adjournment thereof, and upon either of such deposits the proxy is revoked. 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. In the absence of such direction, such shares will be voted in favour of the nominees proposed below for election as directors and in favour of the appointment of BDO Dunwoody LLP as the auditor of the Corporation. The enclosed form of proxy confers discretionary authority upon the persons named therein 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 Meeting. As at the date of this management information circular, management knows of no such amendments, variations or other matters to come before the Meeting other than the matters referred to in the Notice of Meeting. Voting Securities And Principal Holders Thereof On January 12, 2004, 6,033,282 multiple voting shares and 49,609,822 subordinate voting shares in the capital of the Corporation were issued and outstanding. 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. Subject to the following paragraph, all voting shareholders of record as of the record date are entitled either to attend and vote thereat in person the shares held by them or, provided a completed and executed proxy shall have been delivered to Equity Transfer Services Inc. within the time specified herein, to vote thereat by proxy the shares held by them. The Corporation has fixed January 12, 2004, as the record date for the purpose of determining shareholders entitled to receive notice of, and to vote at, the Meeting. In accordance with the provisions of the Act, the Corporation will prepare a list of holders of shares at the close of business on the record date. Each holder of voting shares named in the list will be entitled to vote at the Meeting the shares shown opposite his name on the list except to the extent that: (a) the shareholder has transferred any of his shares after the date on which the list was prepared; and (b) the transferee of those shares produces properly endorsed share certificates or otherwise establishes that he owns such shares and demands not later than 10 days before the Meeting that his name be included in the list of shareholders eligible to vote at the Meeting, in which case the transferee is entitled to vote his shares at the Meeting. To the knowledge of the directors and senior officers of the Corporation, the only persons, firms or corporations which beneficially own or exercise control or direction over securities of the Corporation carrying more than ten percent of the voting rights attached to any class of outstanding voting securities of the Corporation is The Serruya Family Trust which, directly and indirectly, owns 4,233,332 multiple voting shares of the Corporation or approximately 38.5% of the votes attaching to all outstanding shares. 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. In addition, Richard E. Smith, David M. Smith and David J. Stein hold 1,419,467, 288,106 and 45,138 multiple voting shares, representing 12.9%, 2.6% and 0.4% of the votes attaching to all outstanding shares of the Corporation, respectively. Michael Serruya and Aaron Serruya currently own 56,000 and 56,149 subordinate voting shares, respectively, representing 0.05% and 0.05% of the votes attaching to all outstanding shares of the Corporation. Richard E. Smith owns 8,300 subordinate voting shares, representing approximately 0.01%of the votes attaching to all outstanding shares of the Corporation, respectively. Pursuant to a Board Representation Agreement described below under "Election of Directors - Board Representation Agreement", The Serruya Family Trust, Michael Serruya, Aaron Serruya, Richard E. Smith, David M. Smith and David J. Stein have agreed with each other to vote all of their respective shares of the Corporation, representing in the aggregate 54.6% of the votes attaching to all outstanding shares of the Corporation, in favour of the nominees proposed below for election as directors. Voting Of Subordinate Voting Shares - Advice To Beneficial Shareholders The information set forth in this section is of significant importance to holders of subordinate voting shares who hold their subordinate voting shares in "book-entry" form, meaning that they are held through brokers and nominees and not in their own name. Holders of subordinate voting shares who do not hold their subordinate voting shares in their own name (referred to in this circular as beneficial shareholders) should note that only proxies deposited by holders of subordinate voting shares whose names appear on the records of the Corporation as the registered holders of subordinate voting shares can be recognized and acted upon at the Meeting. If subordinate voting shares are listed in an account statement provided to a holder of subordinate voting shares by a broker, then in almost all cases those subordinate voting shares will not be registered under the name of the holder on the records of the Corporation. Such subordinate voting shares will more likely be registered under the name of the beneficial shareholder's broker, or an agent or nominee of that broker. Subordinate voting 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. 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 subordinate voting shares are voted at the Meeting. 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 subordinate voting shares; however, its purpose is limited to instructing the registered holder of subordinate voting 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 subordinate voting shares directly at the Meeting, rather the proxy must be returned to the intermediary well in advance of the Meeting in order to have the subordinate voting shares voted. ELECTION OF DIRECTORS Six directors will be elected at the Meeting and unless authority to do so is withheld, the persons named in the enclosed form of proxy intend to vote for the election of the nominees whose names are set forth below. 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 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 election unless his office is earlier vacated in accordance with the Corporation's Memorandum and Articles of Association and the Act. The statement as to the shares of the Corporation beneficially owned or over which control or direction is exercised by the nominees for election as directors hereinafter named is in each instance based upon information furnished by the person concerned. The names of the nominees for election as directors, their municipality of residence, their positions with the Corporation, the year they become a director of the Corporation and the number of shares beneficially owned, directly or indirectly, or over which control or direction is exercised is as follows:
--------------------------------------------------------------------------------------------------- Number of Number of Multiple Voting Subordinate Year Shares Voting Shares Became Principal Beneficially Beneficially Name Director Occupation and Business Held Held --------------------------------------------------------------------------------------------------- Michael Serruya (2)(3) 1994 Co-Chairman of the Board 4,233,332(1) 56,000 Thornhill, Ontario --------------------------------------------------------------------------------------------------- Richard E. Smith (2)(3) 1998 Co-Chairman of the Board 1,419,467 8,300 Ronkonkoma, New York & Co-Chief Executive Officer ---------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- David J. Stein (4) 1998 President, Co-Chief 45,138 -- Ronkonkoma, New York Executive Officer --------------------------------------------------------------------------------------------------- Aaron Serruya 1994 Executive Vice President 4,233,332(1) 56,149 Thornhill, Ontario & Secretary --------------------------------------------------------------------------------------------------- Romeo DeGasperis (2)(3)(4) 2000 Director, Vice President -- -- Toronto, Ontario Con-Drain Company Ltd. --------------------------------------------------------------------------------------------------- David M. Smith (2)(3) 1998 Vice-Chairman and Chief 288,106 -- Ronkonkoma, New York Operating Officer ---------------------------------------------------------------------------------------------------
(1) 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 Serruya Family Trust. (2) Member of Audit Committee. (3) Member of Compensation Committee. (4) Member of Corporate Governance Committee. Michael Serruya - Co-Chairman of the Board and Director of the Corporation. Mr. Michael Serruya is a co-founder of the Corporation and has been actively involved in its development since its inception in 1986. Mr. Michael Serruya has been a Director of the Corporation since 1994 when the Corporation first went public. Mr. Serruya is primarily involved in the identification of potential acquisitions and review of the Corporation's business plan. Michael Serruya was the co-recipient in 1992 and 1993 of the Academy of Collegiate Entrepreneurs Award for North America. Michael Serruya is the brother of Aaron Serruya. Richard E. Smith - Co-Chairman, Co-Chief Executive Officer and Director of the Corporation. Mr. Richard E. Smith was Chairman of the Board, Chief Executive Officer and a Director of Integrated Brands Inc. from October 1985 until the acquisition of Integrated Brands Inc. by a wholly-owned subsidiary of the Corporation in March 1998. Mr. Richard E. Smith has been a Director of the Corporation since March 1998. Together with Mr. David Stein, he is responsible for development of the Corporation's business plan. Mr. Richard E. Smith has also been the Chairman of the Board, Secretary and a Director of Calip Dairies, Inc. for more than the past five years. Calip Dairies, Inc. owns the trademark and trade names of Dolly Madison Ice Cream. Mr. Smith was the founder of Frusen Gladje Ltd. in 1980 and was its Chairman of the Board and Chief Executive Officer until the sale of Frusen Gladje to Kraft, Inc. in 1985. David J. Stein - President, Co-Chief Executive Officer and Director of the Corporation. Mr. David J. Stein was a Vice President of Integrated Brands Inc. since December 1989 until the acquisition of Integrated Brands Inc. by a wholly owned subsidiary of the Corporation in March 1998. Mr. David J. Stein has been a Director of the Corporation since March 1998. Together with Mr. Richard E. Smith, he is responsible for development and execution of the Corporation's business plan. Aaron Serruya - Executive Vice President and Director of the Corporation. Mr. Aaron Serruya is a co-founder of the Corporation and has been actively involved in its development since its inception in 1986. Mr. Aaron Serruya has been a Director of the Corporation since 1994 when the Corporation first went public. His day-to-day responsibilities include selling all new franchises and resales, finding new locations, and research and development. Aaron Serruya was the co-recipient in 1992 and 1993 of the Academy of Collegiate Entrepreneurs Award for North America. Aaron Serruya is the brother of Michael Serruya. Romeo DeGasperis - is Vice President of Con-Drain Company Ltd., a family business in which he has worked for over 18 years. Mr. Romeo DeGasperis manages the operations and personnel of the company and is responsible for tendering new projects as well as all the networking and communications for the company. Mr. Romeo DeGasperis has been a Director of the Corporation since 2000. David M. Smith - Vice Chairman, Chief Operating Officer and Director of the Corporation. Mr. David M. Smith was a Vice President of Integrated Brands Inc. from December 1989, and a Director of Integrated Brands Inc. from September 1993 until the acquisition of Integrated Brands Inc. by a wholly owned subsidiary of the Corporation in March 1998. Mr. David M. Smith has been a Director of the Corporation since March 1998. Mr. David M. Smith manages the overall operations of the Corporation and directly oversees the information systems for the Corporation and the marketing, and new product development functions of the Corporation. Mr. David M. Smith is Mr. Richard E. Smith's son. The Corporation does not have an executive committee of its Board of Directors. Board Representation Agreement In connection with the acquisition on March 18, 1998 of Integrated Brands Inc. 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 a Board Representation Agreement (the "Board Representation Agreement") pursuant to which the Corporation agreed to nominate for the election of directors qualified individuals, 50% of whom are recommended by the Integrated Brands Principal Shareholders and 50% of whom are recommended by the CoolBrands Principal Shareholders. Each of the CoolBrands Principal Shareholders and the Integrated Brands Principal Shareholders agreed to vote their multiple voting shares and subordinate voting shares in the capital of the Corporation in favour of each other's nominees to the Board of Directors of the Corporation. Pursuant to the terms of the Board Representation Agreement, Messrs. Michael Serruya, Aaron Serruya and Romeo DeGasperis were nominated by the CoolBrands Principal Shareholders and Messrs. Richard E. Smith, David M. Smith and David J. Stein were nominated by the Integrated Brands Principal Shareholders. Pursuant to the terms of the Board Representation Agreement, the Corporation agreed to solicit proxies from its shareholders for above-mentioned nominees to the Corporation's Board of Directors and to cause management proxies to be voted in favour of such nominees. The Corporation's obligations under the Board Representation Agreement to solicit proxies terminates: (i) with respect to the nominees of the Integrated Brands Principal Shareholders, if the Integrated Brands Principal Shareholders own, in the aggregate, less than 500,000 voting securities (including voting securities issuable upon exercise or conversion of convertible securities); or (ii) with respect to the nominees of the CoolBrands Principal Shareholders, if the CoolBrands Principal Shareholders own, in the aggregate, less than 1,000,000 voting securities (including voting securities issuable upon exercise or conversion of convertible securities). In the event any director of the Corporation nominated by either the CoolBrands Principal Shareholders or the Integrated Brands Principal Shareholders ceases to be a director of the Corporation for any reason, each of the CoolBrands Principal Shareholders and the Integrated Brands Principal Shareholders has agreed to use its best efforts, promptly upon the request of the CoolBrands Principal Shareholders or the Integrated Brands Principal Shareholders, as the case may be, to cause to be elected or appointed a legally qualified individual nominated by either the CoolBrands Principal Shareholders or the Integrated Brands Principal Shareholders, as the case may be, to replace such director. In the event that the laws of the jurisdiction of incorporation of the Corporation are changed in a manner which prevents the Integrated Brands Principal Shareholders from nominating and electing non-residents of Canada as their respective nominees to the Corporation's Board of Directors, the CoolBrands Principal Shareholders have agreed to co-operate with the Integrated Brands Principal Shareholders in causing the Corporation to take all necessary action to ensure that the Integrated Brands Principal Shareholders are entitled to nominate and elect non-residents of Canada as their director nominees (including, without limitation, continuing the Corporation from its current jurisdiction of incorporation to another jurisdiction within Canada which permits at least 50% of the directors to be non-Canadian). Each of the CoolBrands Principal Shareholders and the Integrated Brands Principal Shareholders have agreed to use its best efforts, and to take all actions to ensure that (i) Michael Serruya and Richard E. Smith are elected as the Co-Chairman of CoolBrands and each subsidiary; (ii) that Richard E. Smith and David J. Stein are elected as Co-Chief Executive Officers of CoolBrands and each subsidiary; and (iii) that the Board of Directors of CoolBrands and the Board of Directors of each direct and indirect subsidiary of CoolBrands, and each Committee of the Board of Directors of CoolBrands and each Committee of the Board of Directors of each direct and indirect subsidiary of CoolBrands shall be comprised of members, 50% of whom are designated jointly by the Integrated Brands Principal Shareholders and 50% of whom shall be designated jointly by the CoolBrands Principal Shareholders. Each of the CoolBrands Principal Shareholders and the Integrated Brands Principal Shareholders have also 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 than 1,500,000 voting securities (including voting securities issuable upon the conversion or exercise of convertible securities). EXECUTIVE COMPENSATION Compensation of Officers The following sets forth all compensation earned for the years ended August 31, 2003, August 31, 2002 and August 31, 2001 by the Corporation's Co-Chief Executive Officers and the Corporation's other executive officers who received aggregate compensation during the fiscal year ended August 31, 2003, equal to or greater than $100,000 (collectively, the "Named Executive Officers") Summary Compensation Table
------------------------------------------------------------------------------------------------------------------- Fiscal Year Ended Annual Compensation Long-Term Compensation ----------------------------------------------------------------- Other Annual Securities Under All Other Name and Salary Bonus Compensation (1) Options Granted (2) Compensation (3) Principal Position ($) ($) ($) (#) ($) ------------------------------------------------------------------------------------------------------------------- Michael Serruya 2003 320,000 -- 25,864 191,666 -- Co-Chairman 2002 320,000 -- 25,864 -- -- 2001 320,000 -- 32,193 277,500 -- ------------------------------------------------------------------------------------------------------------------- Richard E. Smith 2003 (4) -- -- 225,000 -- Co-Chairman & Co- 2002 (4) -- -- -- -- Chief Executive 2001 (4) -- -- 675,000 -- Officer ------------------------------------------------------------------------------------------------------------------- David J. Stein 2003 US 326,442 US 60,000 US 7,571 225,000 US 1,820 President, Co-Chief 2002 US 261,923 US 60,000 US 7,571 -- US 1,630 Executive Officer 2001 US 249,519 -- US 7,854 375,000 US 1,575 ------------------------------------------------------------------------------------------------------------------- Aaron Serruya 2003 320,000 -- 36,717 191,666 -- Executive Vice- 2002 320,000 -- 44,461 -- -- President 2001 320,000 -- 53,226 277,500 -- ------------------------------------------------------------------------------------------------------------------- David M. Smith 2003 US 99,808(5) -- -- 191,666 -- Chief Operating 2002 (5) -- -- -- -- Officer 2001 (5) -- -- 420,000 -- ------------------------------------------------------------------------------------------------------------------- William J. Weiskopf 2003 US 140,000 US 42,000 -- -- US 1,604 President, Value 2002 US 140,000 US 30,000 -- -- US 1,516 America Flavors And 2001 US 140,000 -- -- 25,000 US 485 Ingredients -------------------------------------------------------------------------------------------------------------------
(1) These amounts represent the imputed value of interest-free loans made by the Corporation to Michael Serruya and Aaron Serruya, certain health benefits made available to Michael Serruya and Aaron Serruya and the value of a car benefit. (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) Richard E. Smith is paid by Calip Dairies, Inc. (an ice cream distributor owned by Mr. Richard E. Smith and members of his family). Pursuant to the terms of a Management Agreement between Calip Dairies, Inc. and Integrated Brands, Calip Dairies receives a fixed fee of US$1,300,000 per year effective July 1, 2003, prior to which the fee was US$1,000,000 per year, for providing a variety of management services. Pursuant to the Agreement, Calip Dairies, Inc. has agreed to make available its Chairman and/or Chief Executive Officer (currently Richard E. Smith) to Integrated Brands, to provide the assistance of other officers and personnel from Calip Dairies, Inc. and to make available a portion of Calip Dairies' office space and utilities and office furniture and equipment. The management fee paid by Integrated Brands to Calip Dairies, Inc. does not represent a material portion of Calip Dairies' revenues. (5) David M. Smith is paid by Calip Dairies, Inc. Effective January 1, 2003 when he became Chief Operating Officer of the Corporation, Mr. David Smith is paid a salary of US $150,000 per year by the Corporation. Options Granted During the fiscal year ended August 31, 2003, options were granted to the Named Executive Officers.
--------------------------------------------------------------------------------------------- Market Value Securities % of Total of Securities Under Options Underlying Options Granted to Exercise or Options on Granted Employees In Base Price Date of Grant Expiration Name (#) Fiscal Year ($/Security) ($/Security) Date --------------------------------------------------------------------------------------------- Michael Serruya 191,666 14.7 5.00 5.00 January 23, 2008 --------------------------------------------------------------------------------------------- Aaron Serruya 191,666 14.7 5.00 5.00 January 23, 2008 --------------------------------------------------------------------------------------------- David M. Smith 191,666 14.7 5.00 5.00 January 23, 2008 --------------------------------------------------------------------------------------------- David J. Stein 225,000 17.3 5.00 5.00 January 23, 2008 --------------------------------------------------------------------------------------------- Richard E. Smith 225,000 17.3 5.00 5.00 January 23, 2008 ---------------------------------------------------------------------------------------------
Option Exercise and Year-End Values Table The following table summarizes the number and value of options held, or exercised during the fiscal year ending August 31, 2003 by the Named Executive Officers.
------------------------------------------------------------------------------------------- Value of Unexercised in- Shares Unexercised the-Money Acquired on Options Options Exercise Aggregate Value Exercisable/Un- Exercisable/Un- Name (#) Realized ($) Exercisable (#) exercisable ($) (1) ------------------------------------------------------------------------------------------- Michael Serruya NIL NIL 395,156/NIL 5,341,045/NIL ------------------------------------------------------------------------------------------- Richard E. Smith NIL NIL 672,240/NIL 9,493,486/NIL ------------------------------------------------------------------------------------------- Aaron Serruya NIL NIL 395,156/NIL 5,341,045/NIL ------------------------------------------------------------------------------------------- David M. Smith NIL NIL 1,390,972/NIL 17,738,740/NIL ------------------------------------------------------------------------------------------- David J. Stein NIL NIL 846,106/NIL 12,032,778/NIL ------------------------------------------------------------------------------------------- William J. Weiskopf 17,500 82,250 NIL/7,500 NIL/122,250 -------------------------------------------------------------------------------------------
(1) Market value of underlying subordinate and multiple voting shares as at August 29, 2003, being $17.55 minus the exercise price of the options. Compensation of Directors Non-independent Directors of the Corporation did not receive any fees and/or any other type of compensation in fiscal 2003 for acting as such. Romeo DeGasperis, an independent Director, received 15,000 options in fiscal 2003. 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 $150,000 per claim. The premium paid for renewal of the coverage during the fiscal year ended August 31, 2003 was $65,880, all of which was paid by the Corporation. Management Agreement Integrated Brands Inc., a wholly-owned subsidiary of the Corporation, has entered into a management agreement with Calip Dairies, Inc., a New Jersey corporation controlled by Mr. Richard E. Smith, which was amended in fiscal 2003. The amended agreement provides for an annual management fee of US$1,300,000, effective July 1, 2003, prior to which the fee was US $1,000,000 per year. Pursuant to the agreement, Calip Dairies, Inc. has agreed to make its Chairman and/or Chief Executive Officer, (currently Mr. Richard E. Smith) available to Integrated Brands Inc., to provide the assistance of other officers and personnel from Calip Dairies and to make available a portion of Calip Dairies' office space and utilities and office furniture and equipment. The amended agreement continues until December 31, 2013 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 Dairies, Inc. are beneficially owned by Richard Smith, Susan Smith, David Smith and/or David Stein, unless Calip Dairies, Inc. gives Integrated Brands Inc. written notice on or before September 30th of that same year that Calip Dairies, Inc. will not renew the agreement, in which event the agreement terminates effective on December 31 following such notice. The obligations of Integrated Brands Inc. under the agreement are guaranteed by the Corporation. Employment Agreements Integrated Brands Inc., 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 US$265,000 in calendar 2002, US$280,000 from January 1, 2003 until May 31, 2003, US$490,000 from June 1, 2003 until December 31, 2003, US$500,000 in calendar 2004, US$520,000 in calendar 2005, US$540,000 in calendar 2006, US$560,000 in calendar 2007, US$580,000 in calendar 2008, US$600,000 in calendar 2009, US$620,000 in calendar 2010, US$640,000 in calendar 2011, US$660,000 in calendar 2012, US$680,000 in calendar 2013 and US$700,000 in any subsequent calendar year. 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 Inc. without cause, Integrated Brands Inc. must pay Mr. Stein a severance amount equal to 36 months salary at the annual rate in effect as of the date of termination. The obligations of Integrated Brands Inc. under the agreement are guaranteed by the Corporation. The Corporation has entered into five-year employment agreements with Michael Serruya and Aaron Serruya, each dated April 9, 1999, which were amended in fiscal 2004. The amended agreements provide for base salaries of $320,000 & $320,000 until October 4, 2003 and thereafter $420,000 & $420,000, respectively, per annum, increasing by the rate of inflation annually on the anniversary of the employment agreement, and a bonus of up to $100,000 per year, respectively, 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 CoolBrands. Each employment agreement provides for a severance payment in the amount of $500,000 to be made to the officer 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 2003, base salaries for Michael Serruya and Aaron Serruya were $320,000 and $320,000, respectively. No bonuses were paid for fiscal 2003 under the employment agreements. 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, 2003, or any associate or affiliate thereof is indebted to the Corporation. As of the date of this Notice, no officers, directors or employees of the Corporation or their associates were indebted to the Corporation. REPORT ON EXECUTIVE COMPENSATION At August 31, 2003, the Compensation Committee was comprised of the following four directors: Michael Serruya, Romeo DeGasperis, Richard E. Smith and David M. Smith. The mandate of the Compensation Committee includes the responsibility of reviewing and recommending to the Board of Directors for its approval the compensation programs for the Corporation's executive officers. The executive compensation policies of the Corporation are designed to recognize and reward individual performance as well as provide a competitive level of compensation. 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 the Chief Executive Officers) 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. Executive Compensation for the Co-Chief Executive Officers The cash compensation paid by the Corporation to Mr. David J. Stein, one of the Co-Chief Executive Officers, is set through an employment agreement, which is described above. The Compensation Committee assesses the performance of Mr. David J. Stein on an annual basis when awarding bonuses pursuant to his employment agreement. The other Co-Chief Executive Officer, Mr. Richard E. Smith, is paid by Calip Dairies, Inc. (an ice cream distributor owned by Mr. Richard E. Smith and members of his family) pursuant to the terms of a Management Agreement under which Calip Dairies, Inc. receives a fixed fee of US$1,300,000 per year effective July 1, 2003, prior to which the fee was US$1,000,000 for providing a variety of management services. One of these services provided by Calip Dairies, Inc. is to make its Chairman and/or Chief Executive Officer (currently Mr. Richard E. Smith) available to Integrated Brands. There is no pension plan of the Corporation in which executive officers or other employees may participate. Submitted on behalf of the Compensation Committee: Michael Serruya (Co-Chairman of the Board) Richard E. Smith (Co-Chairman of the Board) David M. Smith Romeo DeGasperis RELATIVE PERFORMANCE GRAPH On August 29, 2003, the closing price of a subordinate voting share of the Corporation on The Toronto Stock Exchange was $17.55 per subordinate voting share. The following graph compares the Corporation's cumulative total shareholder return from September 1, 1998 to August 31, 2003 with cumulative returns of the S&P/TSX Composite and the TSX Consumer Products Index for the same period. Relative Performance Graph [THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.] 300 Consumer YF Sep-94 75 65 8 Oct-94 74 65 8 Nov-94 70 63 8 Dec-94 73 65 8 Jan-95 69 65 8 Feb-95 71 67 8 Mar-95 74 70 22 Apr-95 74 65 20 May-95 77 71 29 Jun-95 78 78 25 Jul-95 79 81 30 Aug-95 78 82 38 Sep-95 78 81 34 Oct-95 77 82 33 Nov-95 80 83 37 Dec-95 81 82 37 Jan-96 86 87 53 Feb-96 85 84 49 Mar-96 86 80 63 Apr-96 89 85 56 May-96 90 88 53 Jun-96 87 84 53 Jul-96 85 79 46 Aug-96 89 81 49 Sep-96 91 89 49 Oct-96 96 90 47 Nov-96 104 96 48 Dec-96 102 97 48 Jan-97 105 101 55 Feb-97 106 101 63 Mar-97 101 95 67 Apr-97 103 96 75 May-97 110 102 82 Jun-97 111 103 92 Jul-97 118 105 103 Aug-97 114 100 102 Sep-97 121 106 125 Oct-97 118 104 122 Nov-97 112 104 104 Dec-97 115 103 108 Jan-98 115 108 106 Feb-98 122 112 141 Mar-98 130 114 154 Apr-98 132 119 205 May-98 131 122 195 Jun-98 127 119 200 Jul-98 119 115 177 Aug-98 95 97 137 S&P/TSX Composite Consumer Products COB.A Sep-98 100 100 100 Oct-98 99 99 98 Nov-98 110 110 72 Dec-98 110 117 80 Jan-99 115 129 57 Feb-99 112 132 47 Mar-99 112 131 36 Apr-99 120 130 53 May-99 119 130 56 Jun-99 119 140 46 Jul-99 123 148 45 Aug-99 121 147 40 Sep-99 120 143 36 Oct-99 125 142 29 Nov-99 130 147 24 Dec-99 145 156 28 Jan-00 146 168 21 Feb-00 157 186 25 Mar-00 163 147 26 Apr-00 161 150 23 May-00 159 151 23 Jun-00 176 174 21 Jul-00 179 164 21 Aug-00 194 180 22 Sep-00 177 180 20 Oct-00 179 173 18 Nov-00 173 172 14 Dec-00 168 160 14 Jan-01 161 159 23 Feb-01 154 172 24 Mar-01 147 158 20 Apr-01 144 154 21 May-01 141 164 28 Jun-01 136 163 32 Jul-01 134 165 34 Aug-01 133 169 34 Sep-01 118 161 28 Oct-01 119 167 26 Nov-01 128 182 48 Dec-01 132 191 53 Jan-02 132 177 62 Feb-02 132 178 70 Mar-02 135 185 85 Apr-02 132 167 86 May-02 132 160 96 Jun-02 123 151 109 Jul-02 114 138 103 Aug-02 114 140 113 Sep-02 106 130 109 Oct-02 108 139 90 Nov-02 113 144 82 Dec-02 114 137 82 Jan-03 113 136 79 Feb-03 113 141 76 Mar-03 109 143 110 Apr-03 113 144 120 May-03 118 161 144 Jun-03 120 163 205 Jul-03 125 165 252 Aug-03 129 167 268
STATEMENT OF CORPORATE GOVERNANCE PRACTICES The Toronto Stock Exchange Company Manual sets out a series of guidelines for effective corporate governance. These guidelines deal with matters such as the constitution and independence of corporate boards, their functions, the effectiveness and education of board members and other items dealing with sound corporate governance. The TSX requires that each listed company disclose on an annual basis its approach to corporate governance. The Corporation's disclosure with respect to the guidelines is set out in Schedule "A" to this management information circular. The disclosure statement has been prepared by the Corporate Governance Committee of the Board of Directors and has been approved by the Board of Directors. INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS The only material transactions within the last three years in which any director, senior officer, principal shareholder or any associate or affiliate of the foregoing has or had an interest in are as follows: (a) Yogen Fruz International, Ltd., a corporation whose sole shareholder is The Serruya Family Trust, a significant shareholder of the Corporation, routinely enters into leases with commercial landlords for the premises used by the Corporation's Canadian franchisees and sublets such premises to such franchisees. Yogen Fruz International, Ltd. does not earn any fees or premium on such leases. The Corporation holds a 50 year option to acquire all of the issued and outstanding shares of Yogen Fruz International Ltd. ; and (b) Integrated Brands Inc., a wholly owned subsidiary of the Corporation, has entered into a distribution agreement with Calip Dairies, Inc. ("Calip"), a company controlled by Richard E. Smith, dated October 13, 1997. Pursuant to the agreement, Integrated Brands Inc. 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 Inc., 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 Richard Smith, Susan Smith, David Smith and/or David Stein, unless Calip gives Integrated Brands Inc. 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. Integrated Brands Inc. has also entered into a Management Agreement with Calip as described above under "Executive Compensation - Management Agreement". APPOINTMENT OF AUDITOR Unless authority to do so is withheld, the persons named in the enclosed proxy intend to vote for the re-appointment of BDO Dunwoody LLP, Chartered Accountants, Toronto, Ontario, 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 has been the corporation's auditor since February 28, 2001. THE 2002 STOCK OPTION PLAN AMENDMENT In 2002, the Corporation established a stock option plan (the "2002 Plan") as a means of attracting, retaining and motivating directors, officers, consultants and key employees. The Corporation has grown significantly since the 2002 Plan was initially put into effect on November 1, 2002. For example, the number of employees has grown more than five-fold from approximately 253 employees in November, 2002 to approximately 1,305. The Board of Directors of the Corporation believes that the 2002 Plan has been instrumental to that growth, but that in a certain respect the terms of the 2002 Plan do not continue to meet the needs of the Corporation for its continued growth by not allowing the Board of Directors sufficient discretion with respect to the number of options available to grant in any one fiscal year. In order to continue to be able to attract additional qualified directors, officers, consultants and key employees, and to provide appropriate incentives to the Corporation's existing directors, officers, consultants and key employees, the Board of Directors believes that it is in the best interest of the Corporation to amend the 2002 Plan to remove the restriction in the 2002 Plan which limits the Board of Directors from granting options in any one fiscal year that represent more than 2.5% of the total number of outstanding equity shares of the Corporation at the start of that fiscal year. The Board of Directors is proposing this change because it believes that increasing the number of stock options the Board of Directors may grant in any one fiscal year will better enable the Corporation to realize the maximum incentive value of the total number of stock options reserved under the 2002 Plan. As of January 20, 2004, there were 1,592,579 outstanding and unexercised stock options under the 2002 Plan. An additional 2,552,423 options are still available for granting under the 2002 Plan out of a maximum number of issuable options of 5,170,000. There are also 343,250 outstanding and unexercised stock options and 186,079 options available for granting under the Corporation's 1998 Stock Option Plan. The key features of the 2002 Plan, after this amendment is in effect, will be as follows: 1. The maximum number of subordinate voting shares (the "Shares") reserved for issuance under the 2002 Plan will continue to be 5,170,000 of which 2,552,423 Shares remain reserved for issuance after taking into account the stock options previously granted under the 2002 Plan. 2. Options to purchase Shares ("Options") may be granted from time to time to eligible service providers by the Board of Directors. An eligible service provider is a director, officer, employee or consultant of the Corporation or any of its subsidiaries. 3. An exercise price for the Options shall be fixed by the Board of Directors at the time of the grant in compliance with the 2002 Plan, applicable law and the rules of the Toronto Stock Exchange ("TSX"), which price will be no less than the closing price of the Shares on the TSX on the day immediately prior to the grant of Options. 4. Options cannot be granted for a term exceeding ten (10) years. 5. Subject to the Board of Director's discretion to determine otherwise, Options will generally vest as to 1/3 of the grant on each of the first, second and third anniversaries of the date of grant. 6. The maximum number of Shares available for issuance to any one person is 5% of the aggregate number of Shares issued and outstanding on a non-diluted basis at the time of the grant. 7. The maximum number of Shares, which may be reserved for issuance to insiders, cannot exceed 10% of the total number of issued and outstanding Shares on a non-diluted basis. The maximum number of Shares which may be issued to any one insider within a one-year period cannot exceed 5% of the number of Shares issued and outstanding on a non-diluted basis. The maximum number of Shares which may be issued to all insiders within any one-year period cannot exceed 10% of number of Shares issued and outstanding on a non-diluted basis. 8. Options granted pursuant to the 2002 Plan are non-transferable and non-assignable, other than to an eligible service provider's registered retirement savings plan or registered retirement income fund in certain circumstances. 9. Options are subject to early termination in the event that an optionee ceases to be an officer, director, consultant or employee of the Corporation. 10. In the event of the death of an eligible service provider, Options may continue to be exercised up to one year following the death, but not beyond the normal expiry of the term of the Option. To approve the amendments to the 2002 Plan (which are also subject to the approval of the TSX), shareholders will be asked at the Meeting to approve the resolution attached as Schedule "B" hereto (the "2002 Stock Option Plan Amendment Resolution"), which must be passed with or without amendment by the affirmative vote of a majority of the votes cast by shareholders of the Corporation attending or represented by proxy at the Meeting. In the absence of a contrary instruction, the persons named in the enclosed form of proxy intend to vote in favour of the passing of the 2002 Stock Option Plan Amendment Resolution. GENERAL At the date hereof, management knows of no matters to come before the Meeting other than the matters referred to in the Notice of the Meeting. However, if any other matters which are not now known to management should properly come before the Meeting, the proxy solicited hereby will be voted on such matters in accordance with the best judgment of the persons voting the proxy. 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 27th, 2004 /s/ Michael Serruya ----------------------------- Michael Serruya Co-Chairman of the Board SCHEDULE "A" STATEMENT OF CORPORATE GOVERNANCE PRACTICES The Company Manual of The Toronto Stock Exchange (the "TSX") (on which the Corporation's subordinate voting shares are listed) requires disclosure on an annual basis of the approach to corporate governance by listed companies as compared to guidelines established by the exchange. These guidelines focus on the importance of each corporation addressing the governance matters in its own context and the receipt by the investment community of an explanation for the corporation's approach to governance. The Board of Directors of the Corporation has constituted a Corporate Governance Committee in order to review and, if deemed necessary, to recommend changes to the corporate governance practices of the Corporation. The Board itself, however, has considered the TSX guidelines and believes that its approach to corporate governance is working effectively for the Corporation and its shareholders. In particular, the Board considers that many of the guidelines are better suited to corporations larger than the Corporation (such as financial institutions and large industrial corporations) and corporations the shares of which are more widely held than those of the Corporation. The Board of Directors The Corporation's Board of Directors is responsible for the supervision of the management of the Corporation's business and affairs. Under its governing statute (the Company Act (Nova Scotia) (the "Act")), the Board is required to carry out its duties with a view to the best interests of the Corporation. To assist it in fulfilling this responsibility, the Board has specifically recognized its responsibility for the following areas: (a) adoption of a strategic planning process; (b) identification of the principal risks of the Corporation's business and monitoring the implementation of appropriate systems to manage these risks; (c) succession planning, including appointing, training and monitoring senior management; (d) implementation of a communication policy to facilitate communications with shareholders and others involved with the Corporation; and (e) integrity of the Corporation's internal control and management information systems. Mandate of the Board of Directors The Board discharges its responsibilities directly and through its committees. As well, from time to time ad hoc committees of the Board may be appointed. On a quarterly basis, members of the Board receive and discuss reports on the subsidiary companies as well as on the Corporation's overall financial position and its investments. In addition, Board members are consulted informally by senior management of the Corporation to remain informed of corporate developments, which may not require formal meetings and to provide advice as needed. Strategic, financial and succession plans are approved. In addition, developments and issues of current relevance are reviewed. It is the responsibility of the Board to supervise the management of the affairs and business of the Corporation, acting with a view to the best interests of the Corporation, pursuant to the powers granted by, and the obligations imposed under, the Act, the Corporation's memorandum of association and articles of association and common law. The Board, either directly or through its committees, includes in its responsibilities: o approval of all matters which by law must be approved by the Board, including but not limited to, declaration of dividends, offerings of securities and transactions out of the ordinary course of business; o approval of entering into any ventures which are outside of the Corporation's existing business; o approval of any changes in senior management including changes in senior management of the Corporation's subsidiaries; o annual review and consent to substantial strategic planning matters; o considering and deliberating the principal risks of the Corporation's business and receiving and reviewing reports of the Corporation's assessment and management of those risks; o considering succession issues and appointing and monitoring senior management; o discussing and considering how the Corporation communicates with its various shareholders; o assessing the integrity of the Corporation's internal control and management information systems, both directly and through its Audit Committee; and o since the Board has plenary power, any responsibility which is not delegated to senior management or a Board committee remains with the full Board. It is the responsibility of the Co-Chairmen of the Board to ensure the effective operation of the Board. The Co-Chairmen of the Board periodically informally meet, on an individual basis, with every member of the Board to discuss each director's contribution to the Board and committee meetings and any other matters, which the individual directors wish to raise with the Co-Chairmen of the Board. The frequency of the meetings of the Board of Directors as well as the nature of agenda items change depending upon the state of the Corporation's affairs and in light of opportunities or risks which the Corporation faces. At least 12 meetings of the Board are scheduled for the fiscal year ending August 31, 2004. The Board met on at least 10 occasions during the fiscal year ended August 31, 2003. Board Composition Much of the TSX Guidelines focus on the composition of the Board of Directors of the Corporation and, in particular, on the number of "unrelated directors" who make up such Board. In the TSX Guidelines, an "unrelated director" is a director who is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act with a view to the best interest of the Corporation, other than an interest arising from shareholding. The TSX Guidelines also focus on the importance of having an appropriate portion of Board members who are free from any interest or relationships with a significant shareholder of the Corporation, i.e. a shareholder controlling more than 50% of the voting securities. The Corporation's significant shareholders are The Serruya Family Trust and the Smith Group (Richard E. Smith, David M. Smith and David J. Stein). The Board has concluded that five of the Board's six members are "related" within the meaning of the TSX Guidelines. The Corporation presently has one "unrelated" director, Mr. Romeo DeGasperis. The Board believes that the current composition of the Board is appropriate in the Corporation's circumstances. The Corporation's business was founded in 1986 by members of the Serruya family. The Serruya Family Trust, which was created and settled for the benefit of certain members of the Serruya family, continues to own approximately 70.2% of the issued and outstanding multiple voting shares of the Corporation. The early role of Messrs. Michael and Aaron Serruya in the Corporation and their guidance of its successful development since that time, make them uniquely suited to fulfil their respective roles as Co-Chairman and Executive Vice-President of the Corporation and to serve as members of the Board. These members of the Board of Directors reflect the origins of the Corporation, and the dedication of the Serruya family to the Corporation's business. The Smith Group owns approximately 29.1% of the issued and outstanding multiple voting shares of the Corporation. Richard E. Smith was the founder of Integrated Brands and has been its Chief Executive Officer and Chairman of the Board since its inception. In addition, Mr. Richard E. Smith has been involved in the frozen dessert industry for more than thirty years. The Board believes that its relationship with management in supervising the management of the business and affairs of the Corporation is appropriate, and that the TSX Guidelines' focus on the independence of the Board from management is neither necessary nor desirable in the Corporation's circumstances. The current management's significant contributions to the formation and continued growth of the Corporation and the confidence which the Board understands shareholders have in that management, are factors supporting the Board's opinion that additional independence is not in the Corporation's best interests. However, in order to assist the Board in ensuring that the Corporation's system of corporate governance continues to suit its needs, as indicated above, the Board has constituted a Corporate Governance Committee which will monitor the performance of the Board in light of the corporate governance guidelines suggested by the TSX Guidelines and recommend modifications where appropriate. Committees The Board and its committees (consisting of an Audit Committee, a Compensation Committee and Corporate Governance Committee) are available to consider the views of management and investors concerning their needs and decisions affecting the Corporation. (a) Audit Committee The Audit Committee follows recommendations of the Corporation's outside auditors to enhance the effectiveness of those published guidelines. In addition to carrying out its statutory legal responsibilities, the Committee's roles and responsibilities include, but are not necessarily limited to, the following: o review quarterly and annual financial statements, before they are approved by the Board; o monitor audit functions and the preparation of financial statements; o approve press releases on financial results; o review all prospectuses, material change reports and the annual information form; o examine the presentation and impact of significant risks and key management estimates and judgments that may be material to the Corporation's financial reporting; o review the adequacy of internal accounting control procedures and systems, financial plans for the ensuing year, budget, organization, activities and performance; o meet with the Corporation's external auditors and with members of management at least once a year (and more frequently as necessary) to assist it in the effective discharge of its duties; o meet with the outside auditors; and o review and approve foreign currency risk strategies. The Audit Committee is not composed solely of "outside directors" as recommended by the TSX Guidelines. The only "outside director" on the Audit Committee is Romeo DeGasperis. (b) Compensation Committee The Compensation Committee reviews the Corporation's overall compensation philosophy and corporate succession and development plans at the executive officer level. The Committee's roles and responsibilities include, but are not necessarily limited to, the following: o review and approve the grant of options to directors, officers and those employees judged to be key employees and consultants of the Corporation.; o establish the Corporation's compensation policy and its implementation through an effective compensation program, including compensation of senior executives; o set personnel policies; o approve executive salaries; and o review training programs and succession plans. (c) Corporate Governance Committee The Corporation's Corporate Governance Committee has the general responsibility for developing the Corporation's approach to governance issues. At present, Board approval is required for any transaction which is out of the ordinary course of business or could be considered to be "material" to the business of the Corporation. As a matter of practice, all significant decisions affecting the Corporation and its subsidiaries are approved by the Board of Directors prior to their implementation. The Committee's roles and responsibilities include, but are not necessarily limited to, the following: o facilitate the independent functioning and maintain an effective relationship between the Board of Directors and management of the Corporation; o analyze Board composition and dynamics and make recommendations with respect to new nominees to the Board; o establish procedures and approve an appropriate orientation and education program for new recruits to the Board; o consider the adequacy and form of compensation paid to the directors; o provide recommendations for other procedures which contribute to the Board's ability to exercise informed judgment; o develop programs and procedures which will enable the Board to act effectively and on an informed basis; o annually review the mandates of the Board of Directors and its committees and recommend to the Board such amendments to those mandates as the Committee believes are necessary or desirable; o consider and, if thought fit, approve requests from directors or committees of directors for an engagement of special advisors from time to time; o prepare and recommend to the Board annually, a "Statement of Corporate Governance Guidelines" to be included in the Corporation's annual report or information circular; o recommend to the Board's internal guidelines on corporate governance issues in the context of the Corporation's particular circumstances and recommend the making of appropriate adjustments as necessary to accommodate the changing needs of investors and the Corporation; o review, on a periodic basis, the composition of the Board and the appropriate number of independent directors to sit on the Board of Directors; and o assess, at least annually, the effectiveness of the Board as a whole, the committees of the Board and the contribution of individual directors, including considering the appropriate size of the Board. Process of Appointing New Directors The Corporate Governance Committee has the mandate to recommend candidates for filling vacancies on the Board and ensure that qualifications are maintained. In connection with the acquisition of Integrated Brands Inc., Messrs. Richard E. Smith, David M. Smith, David J. Stein ("the 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 ("the CoolBrands Principal Shareholders"), on the other hand, entered into a Board Representation Agreement pursuant to which the Corporation agreed to nominate for the election of directors qualified individuals, 50% of whom are recommended by the Integrated Brands Principal Shareholders and 50% of whom are recommended by the CoolBrands Principal Shareholders. Each of the CoolBrands Principal Shareholders and the Integrated Brands Principal Shareholders agreed to vote their multiple voting shares and subordinate voting shares in the capital of the Corporation, representing in the aggregate 54.6% of the votes attaching to all outstanding shares of the Corporation, in favour of each other's nominees to the Board of Directors of the Corporation. Board Expectations of Management The Board works closely with members of management. The Board's access to information relating to the operations of the Corporation, through the membership on the Board of Directors of several key members of management and, as necessary, the attendance of other members of management at the request of the Board, are key elements to the effective and informed functioning of the Board of the Corporation. The Board looks to management to formulate and carry out strategic planning with a view to achieving continuing profitable growth and obtaining maximum return on the shareholders' equity and the Corporation's assets. Management is also expected to provide all necessary information in a timely manner to the Board and its committees, and to ensure that they properly discharge their responsibilities. Finally, the Board expects management to carry out its responsibilities to the Corporation and its shareholders in a prudent manner, adhering to the fundamental principles of risk management and maximum exploitation of its resources and the products that form the foundation of the Corporation. The Board is confident that the Corporation's management responds ably to this experience. Corporate Objectives which the Co-CEOs are Responsible for Meeting The Co-CEOs are responsible for leading the Corporation into the future and must ensure that there are long-term goals and a strategic planning process in place. The Co-CEOs' written objectives constitute a mandate on a year to year basis. The Co-CEOs' responsibilities include, but are not necessarily limited to the following: o maximize shareholder value. o ensure that disclosure requirements to shareholders are met in a timely fashion. o improve quality of interaction between management and the Board. o ensure that Corporation's achievement of financial and non-financial targets are met. o ensure that decisions with respect to human resource management are met. o ensure that decisions with respect to implementing corporate strategy and other Board decisions are met. o implement training, development and succession plans for other senior management members. Succession Planning (including appointing, training and monitoring senior management) The Board functions through delegation to management and therefore must ensure that management is of the highest calibre in appointing, training, assessing and providing for succession. The Board must ensure that the relationship between management performance and compensation is reasonable. Senior management is reviewed on an annual basis. Items under review include such things as future career paths and future objectives, qualifications, etc. Communication Policy for the Corporation Management is available to shareholders to respond to questions and concerns on a prompt basis, with regard to limitations imposed by law and by the sensitivity of the information in relation to the Corporation's competitors. The Board believes that its communications with shareholders and the avenues available for shareholders and others interested in the Corporation to have their inquiries about the Corporation answered are responsive and effective. At the Corporation's annual meeting, full opportunity is afforded for shareholder questioning of senior management about the Corporation's activities. SCHEDULE "B" RESOLUTION OF THE SHAREHOLDERS REGARDING AN AMENDMENT TO THE 2002 STOCK OPTION PLAN OF THE CORPORATION BE IT RESOLVED THAT: 1. The 2002 Stock Option Plan of the Corporation be amended to remove the restriction in the 2002 Stock Option Plan which limits the board of directors from granting options in any one fiscal year which represent more than 2.5% of the total number of outstanding equity shares in the Corporation at the start of that fiscal year, and such amendment to the 2002 Stock Option Plan is hereby authorized and approved, subject to the approval of the Toronto Stock Exchange, and the making of any necessary filings with all relevant regulatory authorities. 2. Any one officer or director of the Corporation is hereby authorized and directed, for and on behalf of the Corporation, to execute or cause to be executed, under the seal of the Corporation or otherwise, and to deliver or cause to be delivered, all such other documents and instruments, and to perform or cause to be performed all such other acts and things, as in such person's opinion may be necessary or desirable to give full effect to the foregoing 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. COOLBRANDS INTERNATIONAL INC. To Registered and Non-Registered Shareholders In accordance with National Instrument 54-102 of the Canadian Securities Administrators, registered and beneficial shareholders may elect annually to have their names added to an issuer's supplemental mailing list in order to receive interim financial statements. If you are interested in receiving such statements, please complete and return this form. NAME: __________________________________________________________________________ ADDRESS: _______________________________________________________________________ _______________________________________ POSTAL CODE: ___________________________ (I certify that I am a beneficial shareholder) SIGNATURE: ----------------------------------- DATE: ___________________________________ COOLBRANDS INTERNATIONAL INC. PROXY SOLICITED BY MANAGEMENT FOR USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FEBRUARY 27, 2004 The undersigned shareholder of COOLBRANDS INTERNATIONAL INC. (the "Corporation") hereby appoints Michael Serruya, Co-Chairman of the Corporation, or failing him, Aaron Serruya, a director of the Corporation, or in lieu of the foregoing ______ __________________ as nominee of the undersigned to attend, act and vote for the undersigned at the annual and special meeting of shareholders (the "Meeting") of the Corporation to be held on February 27, 2004 and at any adjournments or postponements thereof. The undersigned specifies that all of the voting shares owned by him and represented by this form of proxy shall be: (a) VOTED FOR [_] WITHHELD FROM VOTING [_] in respect of the election as directors of those persons listed below; Romeo DeGasperis, Aaron Serruya, Michael Serruya, David M. Smith, Richard E. Smith, David J. Stein (b) VOTED FOR [_] VOTED AGAINST [_] in respect of the resolution set forth in Schedule "B" to the management information circular dated January 27, 2004 proposing an amendment to the 2002 Stock Option Plan of the Corporation; (c) VOTED FOR [_] WITHHELD FROM VOTING [_] in respect of the appointment of BDO Dunwoody LLP as auditor and authorizing the directors to fix the auditor's remuneration; (d) VOTED at the discretion of the proxy nominee on any other matters as may be properly come before the Meeting or any adjournments or postponements thereof; If an amendment or variation to matters identified in the Notice of Meeting are proposed at the Meeting or any adjournments or postponements thereof or if any other matters properly come before the Meeting or any adjournment or postponements thereof, this proxy confers discretionary authority to vote on such amendments or variations or on such other matters according to the best judgment of the person voting the proxy at the Meeting or any adjournments or postponements thereof. This proxy is solicited on behalf of the management of the Corporation. A shareholder has the right to appoint a person to represent him and to attend and act for him on his behalf at the meeting other than the nominees designated above and may exercise such right by inserting the name of his nominee in the space provided above for that purpose. The undersigned hereby revokes any proxy previously given: DATED the _____________ day of ___________, 2004. ____________________________________ Name of Shareholder (Please Print) ------------------------------------ Signature of Shareholder NOTES: 1. The shares represented by this proxy will be voted or withheld from voting on any ballot that may be called in accordance with the foregoing directions and, if the shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. In the event that no specification has been made with respect to voting or withholding from voting in respect of the election of directors, or the appointment of the auditor and the authorization of the directors to fix the remuneration of the auditor, the proxy nominees are instructed to vote the shares represented by this proxy in favour of such matters. 2. This proxy form must be signed and dated by the shareholder or his attorney authorized in writing, or, if the shareholder is a corporation, by any officer or attorney thereof duly authorized. If the proxy form is not dated in the space provided it is deemed to bear the date on which it is mailed to the Corporation. 3. Properly executed forms of proxy must be received before 5:00p.m. (Toronto time) on February 24, 2004 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 day of the meeting or any adjourned or postponed meeting thereof (excluding Saturdays, Sundays and holidays).