Eagle I Capital Corporation
TSX VENTURE : EIC.P

July 23, 2009 14:57 ET

Eagle I Capital Corporation Enters Into Merger Agreement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 23, 2009) -

NOT FOR DISTRIBUTION TO THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Further to the news release of Eagle I Capital Corporation (TSX VENTURE:EIC.P) (the "Company") dated April 21, 2009, the Company is pleased to announce that it has entered into a merger agreement (the "Merger Agreement") with Eagle Acquisition, Inc. ("Eagle Subco") and Miguel's Products, LLC ("Miguel's). The Merger Agreement replaces and supersedes the letter agreement dated April 8, 2009 between the Company and Miguel's previously disclosed by the Company.

MERGER AGREEMENT & QUALIFYING TRANSACTION

Pursuant to the Merger Agreement, Eagle Subco will merge into Miguel's (the "Merger") and the Company will own all of the issued and outstanding voting limited liability company units of the company resulting from the Merger and continuing the business of Miguel's (which shall be referred to as the "Surviving Entity"), being 1,100 Class AA Units. The Company intends that upon the completion of the transactions contemplated by the Merger Agreement, the Merger will constitute the Company's qualifying transaction (the "Qualifying Transaction") pursuant to the policies of the TSX Venture Exchange (the "TSXV"). The Merger will be subject to the approval of the majority of the shareholders voting by person or by proxy at the Company's annual and special meeting of shareholders. A copy of the Merger Agreement is available at www.sedar.com. The key terms of the Merger Agreement are summarized below.

Conversion of Eagle Subco's Common Stock

Upon the closing of the Merger (the "Closing"), the 1,000 issued and outstanding common stock of Eagle Subco will be converted into 1,100 Class AA Units of the Surviving Entity.

Conversion of Miguel's Units

Upon the Closing, the issued and outstanding Class A Units of Miguel's will be converted into 3,985,250 common shares in the capital of the Company (the "Common Shares") and issued to Vanguard Food & Beverage Group, L.P. ("Vanguard"); the issued and outstanding Class B Units of Miguel's will be converted into 543 Class BB Units of the Surviving Entity (the "Class BB Units"); the issued and outstanding Class C Units of Miguel's will be converted into 7 Class BB Units; and the issued and outstanding Class D Units of Miguel's will be converted into 5,503,223 Common Shares and issued to Middlebury Equity Partners, LLC ("MEP") and an exchange convertible note (the "Convertible Note") in the original principal amount of US$500,000. The Convertible Note shall be convertible into Class CC Units of the Surviving Entity (the "Class CC Units").

The Convertible Note

MEP is the sole holder of the Class D Units of Miguel's. Following the Merger, Miguel's shall owe a principal amount of US$500,000 to MEP. As such, the Convertible Note shall be issued by the Surviving Entity to MEP or its assignee. The Convertible Note shall be convertible into Class CC Units at the option of the holder thereof.

Exchange of Class BB Units and Class CC Units

At the option of the holder thereof, the Class BB Units shall be exchangeable for an aggregate of 8,829,333 Common Shares, 8,500,000 of which shall be referred to as the "Set Aside Shares". The following conditions precedent apply with respect to the eligibility for exchange of the Class BB Units for the Set Aside Shares:

(a) for each US$100,000 in gross sales (without reduction for promotional or customer discounts, allowances or returns) recognized by the Surviving Entity for its fiscal year ended December 31, 2009, in excess of US$4,500,000, 250,000 of the Set Aside Shares shall be released and shall be eligible for exchange for the Class BB Units up to a maximum of 5,000,000 of the Set Aside Shares; and

(b) upon realization by the Resulting Issuer of gross revenue of US$10,000,000 (determined on a fully consolidated basis) during any fiscal year, as determined in accordance with Canadian generally accepted accounting principles consistently applied, 3,500,000 of the Set Aside Shares shall be eligible for exchange for the Class BB Units (the 3,985,250 Common Shares to be issued to Vanguard, the 5,503,223 Common Shares to be issued to MEP at Closing and the 8,829,333 Common Shares to be issued upon the exchange of the Class BB Units are collectively referred to herein as the "Consideration Shares").

In the event that MEP or its assignee elects to convert the Convertible Note for Class CC Units, the Class CC Units shall be exchangeable, subject to approval from the TSXV, into Common Shares. Each Class CC Unit shall be accorded a deemed value of US$1,000.00 (the "Deemed Value"). The Deemed Value will then be converted into Canadian Dollars, and the Class CC Units being exchanged shall be exchanged for the number of Common Shares with a value based on the price equal to the greater of (i) the share closing price of the Common Shares on the TSXV during the 20 business days immediately prior to the date on which MEP (or its assignee) exercises its right of exchange; or (ii) price per share of the Common Shares in connection with the issuance by Common Shares to an unaffiliated third party within the six month period prior to when MEP or its assignee exercises its right of exchange, in each case less discounts equal to the maximum applicable discounts permitted by the policies of the TSXV.

The terms of exchange of the Class BB Units and Class CC Units for the Common Shares are subject to the exchange agreement which will be entered into by the holders of the Class BB Units, and Class CC Units, Miguel's and the Company at Closing (the "Exchange Agreement"), the form of which is attached to the Merger Agreement.

Lock Up Agreements

Upon the Closing, all of the Consideration Shares will be subject to lock-up agreements (the "Lock-Up Agreements") and shall be held in escrow by an escrow agent pursuant to an escrow agreement with a total of 10% of the Consideration Shares to be released 120 days from the date of Closing and 30% to be released on each of the first, second and third anniversaries of the date of Closing.

Significant Conditions Required to Close

As a condition to Closing, the following, among other things, must occur: the approval of the Merger Agreement and the Merger by the majority of the shareholders of the Company; the approval of the TSXV of the Merger and the issuance of the securities of the Company in connection therewith; the completion of the Concurrent Financing (as defined below); and the execution and delivery of the Lock Up Agreements and the Exchange Agreement.

ARM'S LENGTH TRANSACTION

The proposed Qualifying Transaction constitutes an Arm's Length Qualifying Transaction pursuant to the policies of the TSXV.

EAGLE ACQUISITION, INC.

Eagle Subco is a company incorporated under the laws of the State of Delaware and is a wholly owned subsidiary of the Company. Eagle Subco does not have an operating business.

MIGUEL'S PRODUCTS, LLC

History and Business Overview

Miguel's is a Delaware limited liability company which is in the business of producing salty snack foods. Immediately prior to the Closing, the controlling unit holders of Miguel's are Vanguard and MEP.

MSA Enterprises, LLC ("MSA"), was founded in the late 1980s by a restaurateur who owned a restaurant in Stowe, Vermont. At the time, MSA's product line was limited to white corn tortilla chips, blue corn tortilla chips and several salsa varieties. Its distribution network was largely confined to New England. In 2005, Miguel's purchased the assets of MSA. Since then, Miguel's has broadened the products lines and distribution network formerly established by MSA, and expanded its private label business.

Currently, Miguel's products include white corn tortilla chips, blue corn tortilla chips, three types of flavored tortilla dippers, and five varieties of gourmet salsa. These products are made with all natural or organic ingredients. Miguel's also offers both salted and honey plantain strips. In addition to the foregoing, Miguel's is also developing two additional products, "inca chips", a flavored, ridged chip, and "clouds", a flavored corn and rice puff.

Manufacturing of Miguel's products is outsourced by contract to four facilities in the United States. Manufacturers in Connecticut and California produce Miguel's tortilla chips. Miguel's products are currently sold and distributed in retail markets in 35 states of the United States. Miguel's customers include specialty distributors, who deliver products to supermarket chains, and companies for which it makes private label products including Trader Joe's and Stew Leonard's As a result, Miguel's products are sold in such stores as Stop & Shop and similar supermarkets, Whole Foods and other natural food stores and fast-food chains, such as the New England-based burrito chain Boloco.

Below is a summary of the financial information of Miguel's (in US$).



Three
Months Year Year Year
Ended Ended Ended Ended
March December December December
31, 2009 31, 2008 31, 2007 31, 2006
(unaudited) (audited) (unaudited) (unaudited)
----------- ---------- ---------- ----------
Total Revenues,
Net of Discounts: $1,093,048 $3,963,386 $2,118,419 $1,577,702

Net Income (loss): $ (86,597) $ (625,107) $ (333,824) $ (215,696)

Total Assets: $1,007,802 $1,035,214 N/A N/A

Total Long Term
Liabilities: $1,438,487 $1,416,410 N/A N/A

Cash Dividends
Declared: $ 0 $ 0 $ 0 $ 0


THE SURVIVING ENTITY & RESULTING ISSUER

Business

Upon completion of the Merger, the Surviving Entity will be a wholly owned subsidiary of the Company. The Surviving Entity will be engaged in the business of manufacturing Miguel's products. As such, the Company, after the completion of the Merger (the "Resulting Issuer"), will be principally focused on the development of the existing business of Miguel's in the United States and will be considered as an industrial issuer.

Directors, Officers and Insiders of the Resulting Issuer

The board of directors of the Resulting Issuer will consist of five persons: Barry Atkins, David Horton, Mark Hellendrung, Dean Lynch and Todd M. Enright.

The executive officers of the Resulting Issuer will be: Barry Atkins (President and Chief Executive Officer) and Robert Rosko (Chief Financial Officer and Corporate Secretary).

Upon Closing, Vanguard will hold 3,985,250 Common Shares, representing 22.2% of the Common Shares and will thus become an Insider of the Resulting Issuer pursuant to the TSXV policies. Vanguard is a Delaware limited partnership under the direction and control of Todd Enright. The general partner of Vanguard is Vanguard Food and Beverage Group LLC, a Delaware limited liability company. The managing member of Vanguard Food and Beverage Group LLC is Todd Enright.

Upon Closing, MEP will hold 5,503,223 Common Shares, representing 30.8% of the Common Shares and will thus become an Insider of the Resulting Issuer pursuant to the TSXV policies. MEP is a Delaware limited liability company. The manager and controlling partner of MEP is Todd Enright.

The background of the directors and officers of the Resulting Issuer is as follows.

Barry Atkins - currently President, Chief Executive Officer and Director of the Company, proposed President, Chief Executive Officer and Director of the Resulting Issuer

Carefree, Arizona, Age 57

Mr. Atkins was the founder and president of several start-up companies over the past 25 years that were involved in the telecommunications industry. He has also worked with companies to automate operations, restructure management and obtain additional financing for expansion.

Mark Hellendrung - proposed Director of the Resulting Issuer

Middletown, Rhode Island, Age 41

Mr. Hellendrung received a B.A. in Business Economics from Brown University and an M.S. in Accountancy from Bentley College. He currently serves as a director of Blount Seafood, The Steel Yard, and the Aquidneck Island Land Trust and is the Chief Executive Officer of Narragansett Brewing Co. He has nearly 15 years of experience working with beverage companies. His past experience includes acting as interim President of Magic Hat Brewing Co. and as President of Nantucket Nectars from 1994 through its sale to Cadbury Schweppes/Snapple in 2001.

David J. Horton - currently Director of the Company, proposed Director of the Resulting Issuer

West Vancouver, British Columbia, Age 72

Mr. Horton joined Canaccord Capital Corporation in 1990 and is currently a Senior Vice-President and Director of Canaccord Capital Corporation. He holds a Bachelor of Commerce degree from the University of British Columbia and an MBA from the University of Western Ontario.

Dean J. Lynch - proposed Director of the Resulting Issuer

Milton, Massachusetts, Age 61

Mr. Lynch has been an entrepreneur for over 30 years and has owned several businesses, including distributorships for Wise and Cape Cod Potato Chips, a restaurant and several Blockbuster Video stores. He is presently part owner of Nantucket LLC, a kettle potato chip company. Mr. Lynch was educated at the Culinary Institute of America and the University of Miami. He is currently retired.

Todd M. Enright - proposed Director of the Resulting Issuer

Hinsdale, New Hampshire, Age 40

Mr. Enright is the co-founder and managing member of MEP and Vanguard. Since 1994, Mr. Enright has been a partner in four investment funds focusing on expansion and later stage private equity transactions. Mr. Enright holds a Bachelor of Arts with Honors from Marlboro College.

Robert Rosko - currently Chief Operating Officer of Miguel's, proposed Chief Financial Officer and Corporate Secretary of the Resulting Issuer

Edison, New Jersey, Age 50

In addition to acting as the Chief Operating Officer of Miguel's, Mr. Rosko has also acted as the President of Edison Technologies, LLC. Mr. Rosko earned his AAS from Raritan Valley College in 1981.

Managers and Officers of the Surviving Entity

At Closing, the managers and officers of the Surviving Entity will be Anthony Cusano (President), Bruce Duley (Senior Vice President, Sales and Marketing) and Robert Rosko (Chief Operating Officer).

The background Anthony Cusano (President), Bruce Duley (Senior Vice President, Sales and Marketing) is as follows.

Anthony Cusano - currently President of Miguel's

North Haven, Connecticut, Age 55

Mr. Cusano is the owner of ShelfSpace Marketing and was the past Chief Executive Officer of Cape Cod Potato Chips. Mr. Cusano earned his degree in journalism from the University of New Haven in 1973.

Bruce Duley- currently Senior Vice President, Sales and Marketing of Miguel's

Hamden, Connecticut, Age 69

In addition to working as the Senior Vice President, Sales and Marketing of Miguel's, Mr. Duley's past experience in sales and marketing include acting as the Regional Director of Sales of Richelieu Foods, Inc. and as the Executive Director of Sales of Cape Cod Potato Chip.

CONCURRENT FINANCING

In order to raise operating capital for the Resulting Issuer and to satisfy a condition of the Merger Agreement, the Company intends to complete a brokered private placement (the "Concurrent Financing") involving the issuance of up to 3,400,000 units of the Company (a "Unit") at a price of $0.25 per Unit for aggregate gross proceeds of up to $850,000. Each Unit will be comprised of one Common Share and one half of one Common Share purchase warrant (a "Warrant"). Each whole Warrant is exercisable to acquire one share of the Resulting Issuer for a period of 12 months from the date of the issuance at an exercise price of $0.50 per share. The Concurrent Financing will be completed concurrently with the completion of the Merger.

Pursuant to the engagement letter between Canaccord Capital Corporation ("Canaccord") and the Company dated June 30, 2009, Canaccord has agreed to act as the lead agent for the Concurrent Financing and will use its best efforts to sell the Units offered under the Concurrent Financing. A commission equal to 8% of the gross proceeds of the Concurrent Financing will be paid to Canaccord in cash, along with Common Share purchase warrants equal in number to 5% of the number of Units sold under the Concurrent Financing (the "Broker Warrants"). Each Broker Warrant will have a term of 12 months and entitle the holder to acquire a share of the Resulting Issuer for a price of $0.25 per share. In addition, Canaccord shall receive a non-fundable administrative work fee of $3,000.

The net proceeds of the Concurrent Financing will be used for the Surviving Entity's business operations, expansion of its business and general working capital.

The securities issued by the Company pursuant to the Concurrent Financing are subject to a hold period of four months and one day from the date of issuance, as required by the TSXV policies and securities laws.

The securities contemplated to be issued pursuant to the Concurrent Financing have not been and will not be registered under the Securities Act of 1933, as amended, or any state securities laws, and the securities may not be offered or sold in the United States absent registration or an applicable exemption from such registration. This news release does not constitute an offer of securities.

DEPOSITS

The Company loaned US$185,000 to Miguel's (the "Deposit") as permitted by Policy 2.4 of the TSXV. The Company obtained TSXV approval for the Deposit. Should the Merger Agreement be terminated, Miguel's shall repay the Deposit plus interest at 8% per annum to the Company on or before December 31, 2009.

Completion of the Merger is subject to a number of conditions, including but not limited to, TSXV acceptance, approval of the majority of the shareholders of the Company and the closing of the Concurrent Financing. There can be no assurance that the Merger will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in securities of a capital pool company should be considered highly speculative.

This news release contains forward-looking statements about the Company, Miguel's, the Surviving Entity, and the Resulting Issuer, their respective businesses and future plans, including the Merger, the Concurrent Financing and proposed business. Forward-looking statements are statements that are not historical facts and include the nature of the Qualifying Transaction, deemed value of securities anticipated to be issued to Miguel's shareholders, and the amount of the proposed Concurrent Financing. The forward-looking statements in this news release are subject to various risks, uncertainties and other factors that could cause the Resulting Issuer's actual results or achievements to differ materially from those expressed in or implied by forward-looking statements. These risks, uncertainties and other factors include, without limitation, uncertainty as to the Resulting Issuer's ability to achieve the goals and satisfy the assumptions of management; uncertainties as to the availability and cost of financing; the risk that development projects will not be completed successfully or in a timely manner; uncertainty as to the demand for the Resulting Issuer's products and the Resulting Issuer's ability to meet such demand; the effect of fluctuating energy prices on Miguel's business; general economic factors and other factors that may be beyond the control of the parties. Forward-looking statements are based on the beliefs, opinions and expectations of the management of the Company and Miguel's, at the time they are made, and the Company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those reflected in the forward-looking statements unless and until required by securities laws applicable to the Company. Additional information about the Company is available at www.sedar.com.

Trading of the Common Shares has been halted since April 21, 2009, and will recommence at such time as the TSXV may determine, having regard to the completion of certain requirements pursuant to TSXV Policy 2.4.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Qualifying Transaction and has neither approved nor disapproved the contents of this news release. 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.

Contact Information

  • Eagle I Capital Corporation
    Barry Atkins
    President & CEO
    604 689 1515
    604 687 8678 (FAX)