Canada Pacific Capital Corp.
TSX VENTURE : CPR.P

May 16, 2011 17:20 ET

Canada Pacific Capital Corp. Enters Into Share Exchange Agreement and Files Preliminary Prospectus for Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - May 16, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Canada Pacific Capital Corp. (the "Corporation" or "CPCC") (TSX VENTURE:CPR.P) announces today that, further to a press release of January 31, 2011 announcing that it had entered into a letter of intent dated January 20, 2011 (the "LOI") and a press release of May 2, 2011 announcing an amendment to the LOI dated April 29, 2011 with respect to the proposed qualifying transaction (the "QT") with China Freeze-Dry Inc., a corporation governed under the laws of the British Virgin Islands (the "BVICo"), and Linyi Shenhe Foodstuff Co., Ltd., a corporation governed under the laws of the People's Republic of China ("Shenhe"), CPCC has entered into a share purchase agreement with BVICo, Shenhe, BVICo's Hong Kong subsidiary, Supertown Trading Company Limited, and current shareholders of BVICo dated May 13, 2011 (the "Share Purchase Agreement"). The Share Purchase Agreement replaces and supersedes the LOI, as amended.

The Corporation is a capital pool company and intends for its acquisition of Shenhe through BVICo to constitute its "Qualifying Transaction" as such term is defined in the policies of the TSX Venture Exchange (the "Exchange").

While the LOI, as amended, contemplated a concurrent public offering of CPCC Shares pursuant to an offering prospectus, parties have agreed in the Share Purchase Agreement to proceed by way of a concurrent private placement financing by BVICo (the "BVICo Financing") of common shares of BVICo ("BVICo Shares"). BVICo will use best efforts to complete the BVICo Financing immediately prior to completion of the QT for a minimum of 554 BVICo Shares for gross proceeds of $2,000,000 (the "Minimum Offering") and a maximum of 8,310 BVICo Shares for gross proceeds of $30,000,000 (the "Maximum Offering") at a price of $3,610.06 per BVICo Share. On completion of the QT, the BVICo Shares will be exchanged for a minimum of 1,000,000 CPCC common shares after a 10:1 share consolidation of the CPCC common shares (the "Post-Consolidation Shares") in the case of the Minimum Offering, and a maximum of 15,000,000 Post-Consolidation Shares in the case of the Maximum Offering, at an effective price of $2.00 per Post-Consolidation Share.

BVICo has engaged PI Financial Corp. as lead agent for the BVICo Financing and BVICo has agreed to pay a cash commission equal to 7% (or 3.5% with respect to purchasers on the president's list) of the gross proceeds of the BVICo Financing and to issue broker warrants (the "BVICo Broker Warrants") to purchase that number of BVICo Shares equal to 7% (or 3.5% with respect to purchasers on the president's list) of the BVICo Shares sold in the BVICo Financing for a period of two years at a price of $3,610.06 per BVICo Share (38.78 BVICo Broker Warrants in the case of the Minimum Offering or 581.71 BVI Broker Warrants in the case of the Maximum Offering, assuming there is no president's list). On completion of the QT, the BVICo Broker Warrants will be exchanged into broker warrants of the resulting issuer (each a "Replacement Broker Warrant") (70,000 Replacement Broker Warrants in the case of Minimum Offering or 1,050,000 Replacement Broker Warrants in the case of Maximum Offering, assuming there is no president's list) with each Replacement Broker Warrant entitling the holder to purchase one Post-Consolidation Share at $2.00 per share for a period of two years following the completion of the QT. Purchasers of the BVICo Shares and the holders of the BVICo Broker Warrants issued in the BVICo Financing will sign an acknowledgement to become a party to the Share Purchase Agreement. The BVICo Financing will occur concurrently with the QT and it will be a condition to the completion of the QT to complete the Minimum Offering.

On completion of the QT, (i) assuming the Minimum Offering is completed, the Corporation will have 92,411,562 Post-Consolidation Shares outstanding on a non-diluted basis, and current CPCC shareholders will own 1,160,000 (1.26%), current BVICo shareholders will own 90,251,562 (97.66%) and purchasers in the BVICo Financing will own 1,000,000 (1.08%), of the Post-Consolidation Shares outstanding; (ii) assuming the Maximum Offering is completed, the Corporation will have 106,411,562 Post-Consolidation Shares outstanding on a non-diluted basis, and current CPCC shareholders will own 1,160,000 (1.09%), current BVICo shareholders will own 90,251,562 (84.81%) and purchasers in the BVICo Financing will own 15,000,000 (14.10%), of the Post-Consolidation Shares outstanding. The Corporation will also have issued and outstanding options to purchase 116,000 Post-Consolidation Shares at $1.00 per share until December 31, 2012, agent's options to purchase 80,000 Post-Consolidation Shares at $1.00 per share until January 6, 2013, and Replacement Broker Warrants to purchase (assuming there is no president's list) 70,000 Post-Consolidation Shares in the case of Minimum Offering or 1,050,000 Post-Consolidation Shares in the case of Maximum Offering at $2.00 per share for two years.

Based on unaudited consolidated financial statements of BVICo prepared in accordance with Canadian generally accepted accounting principles, for the nine-month periods ended March 31, 2011 and 2010, BVICo's gross sales were C$78.1 million and C$59.9 million, respectively, and BVICo's net income was C$22.1 million and C$17.9 million, respectively. As at March 31, 2011, BVICo had assets of C$141.0 million, liabilities of C$4.2 million and shareholders' equity of C$136.9 million.

For more details on the concurrent BVICo Financing and other terms of the QT, please refer to the preliminary prospectus of CPCC dated May 13, 2011 available at www.sedar.com.

Completion of the QT will be subject to the satisfaction or waiver of terms and conditions under the Share Purchase Agreement, customary or otherwise, including but not limited to completion of the consolidation of the shares of CPCC, satisfactory completion of due diligence, completion of the Minimum Offering and the receipt of all required approvals and consents, including the approval of the securities commissions of Ontario, British Columbia, Alberta, Nova Scotia and the Exchange.

While the QT is not subject to approval of CPCC shareholders, CPCC has called an annual and special meeting of shareholders to be held on June 20, 2011 to approve, among other things, the consolidation of its common shares on a 10:1 basis, and proposed change of its name to "China Freeze-Dry Products Corporation" or such other name as approved by the board of directors of the resulting issuer and applicable regulatory authorities.

If completed, the proposed transaction is expected to constitute the Corporation's Qualifying Transaction under Policy 2.4 of the Exchange.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION.

Completion of the QT is subject to a number of conditions including but not limited to, due diligence, Exchange acceptance and if required by Exchange policies, majority of the minority shareholder approval. Where applicable, the QT cannot close until the required shareholder approval is obtained. There can be no assurance that the QT will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular or prospectus to be prepared in connection with the QT, any information released or received with respect to the QT may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative. The Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Cautionary Statements Regarding Forward Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws relating to the proposal to complete the QT and associated transactions, including statements regarding the terms and conditions of the QT and associated transactions. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the QT and associated transactions, that the ultimate terms of the QT and associated transactions will differ from those that currently are contemplated, and that the QT and associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, BVICo, Shenhe, Supertown Trading Company Limited or their respective financial or operating results or (as applicable), their securities.

NEITHER THE 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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