Franchise Bancorp initiates succession planning

    
    Management of Franchise Bancorp Inc. purchase significant block of shares

    Stock Exchange: TSX Venture Symbol: FBI
    Outstanding Common Shares: 7,632,662
    

BRAMPTON, ON, Oct. 6 /CNW/ - (Franchise Bancorp Inc. - TSX Venture Exchange - FBI) - Edward K. Loyst ("Loyst"), the Chairman of Franchise Bancorp Inc. ("FBI"), announced the completion of a transaction in which he has acquired control of Teraj International Inc. ("Teraj") and in which Teraj has sold 50% of its shares in FBI to WTF Holdings Inc. ("WTF"). WTF is a company owned by Paul Thomson , the President and a director of FBI; James Walker , a director of FBI and the President of Global Pet Food Stores Inc., a subsidiary of FBI; and Dino Fragaglia, a Vice-President of Global Pet Food Stores Inc.

As a result of the acquisition of control of Teraj, Loyst is deemed to have acquired beneficial ownership of the shares owned by Teraj in FBI; being 4,322,550 (56.63%) common shares, 130,923 (100%) Class A preference shares and 403,001 (63.33%) Class B preference shares of FBI. The subsequent sale by Teraj to WTF resulted in the sale of 2,161,275 (28.32%) common shares, 65,461.5 (50%) Class A preference shares and 201,500.5 (31.67%) Class B preference shares.

Following completion of these transactions, the direct and indirect security holdings of Loyst in FBI consist of 2,541,736 (33.30%) common shares, 65,461.5 (50%) Class A preference shares and 201,500.5 (31.67%) Class B preference shares. The preference shares are redeemable for $0.85 each and convertible into common shares on the basis of three common shares for one preference share. If those preference shares were to be converted into common shares, Loyst's security holdings would consist of 3,342,622 common shares (being 39.63% of the common shares on a partially diluted basis).

Following completion of these transactions, the security holdings of WTF in FBI consist of 2,161,275 (28.32%) common shares, 65,461.5 (50%) Class A preference shares and 201,500.5 (31.67%) Class B preference shares. If those preference shares were to be converted into common shares, WTF's security holdings would consist of 2,962,161 common shares (being 38.48% of the common shares on a partially diluted basis).

In order to further facilitate succession planning at FBI, WTF and Teraj have entered into a put agreement under which Teraj will require WTF to purchase the remaining shares owned by Teraj for their fair market value at the time the put is exercised. The put may not be exercised by Teraj earlier than October 1, 2011 . Teraj is required to exercise the put no later than September 30, 2014 . WTF has the option to deem that the put be exercised if the board of FBI decides to sell a material subsidiary of FBI.

WTF and Teraj have agreed to vote their shares in FBI as a block. They have agreed that they will vote the shares in favour of nominees on the board of directors of FBI consisting of three nominees of WTF (being Paul Thomson , James Walker and Dino Fragaglia), three nominees of Teraj (including Loyst) and two independent nominees to be agreed to between WTF and Teraj.

The sale of shares to WTF was a private transaction completed under the resale exemption contained in section 2.8 of National Instrument 45-102 (Exemption for a Trade by a Control Person) and the exemption from the formal take-over bid requirements in Section 100.1 of the Ontario Securities Act (Private Agreement Exemption). The price paid by WTF for the securities was $0.2313 per common share, $0.8402 per Class A preference share and $0.8437 per Class B preference share.

FBI also announced that Raj Mahajan has resigned as a director of FBI.

Franchise Bancorp is a multi-concept franchise, retail and distribution company, with over 160 units across Canada . The retail and franchise brands include, Global Pet Foods, Ryan's Pet Foods, Living Lighting, and Rafters Home Store.

    
    NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS
    THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS
    RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
    

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For further information: Ted Loyst, Chairman or Paul Thomson, President, Franchise Bancorp Inc., Tel: [phone], Fax: [phone], Email: [email protected]