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as defined in Rule 405 of the Securities Act of 1933 (§230.405
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Item
8.01.
Other
Events.
On
August 6, 2021, the Court of Chancery of the State of Delaware (the
“Delaware Court”) approved a settlement agreement dated
August 3, 2021 (the “Settlement Agreement”), between
Swisher Hygiene Inc., a Delaware corporation in dissolution
(“Swisher” or the “Company”), and
Honeycrest Holdings, Ltd. and its affiliates (collectively,
“Honeycrest”). The Settlement Agreement settles all
claims, demands and causes of action of any kind or nature
whatsoever, whether known or unknown, that Honeycrest has made or
could have made previously, now, or hereafter against the Company,
its stockholders, or its affiliates, arising from a 1990 license
agreement entered into between Honeycrest and two frozen desert
licensors that were subsequently acquired as a subsidiary by
Coolbrands International Inc., Swisher’s
predecessor.
The
Settlement Agreement resolves over 23 years of litigation
represented by three New York cases, Honeycrest Holdings, Ltd. v. Integrated
Brands, Inc., New York Supreme Court, Queens County (Index
No. 5204/1998) (”Honeycrest I”); Honeycrest Holdings, Ltd. v. Swisher Hygiene
Inc., et al., New York Supreme Court, Queens County
(Index No. 29666/01, renumbered as an e-filed case under Index No.
705039/2020) (“Honeycrest II”); and Honeycrest Holdings, Ltd. v. Swisher Hygiene
Inc., Integrated Brands, Inc., 7624026 Canada Inc., and John and
Jane Does #1 through #99, New York Supreme Court, Queens
County (Index No. 706482/2017) (“Honeycrest III”). The
Settlement Agreement also terminates all appeals, including
Honeycrest’s 2018 appeal of the dismissal of the Honeycrest
III complaint, and Honeycrest’s 2021 appeal of the denial of
Honeycrest’s motion to strike Swisher’s Answer and
Counterclaim in Honeycrest II, both of which were pending at the
time of the Settlement Agreement.
The
Settlement Agreement includes a payment by Swisher to Honeycrest of
$5.3 million, and removes the final obstacle to the Company’s
dissolution and final liquidation.
As
previously reported, in June 2020 the Delaware Court permitted the
Company to make a $10 million interim distribution to the
Company’s stockholders. At that time, however, the Delaware
Court ordered the Company to establish a reserve (the
“Reserve”) of $6.9 million for the Honeycrest claim. In
March 2021, the Delaware Court denied the Company’s request
for a second interim distribution to stockholders of $5 million. In
May 2021, the Delaware Court denied the Company’s request to
utilize a portion of the Reserve for defense costs associated with
the Honeycrest claim. With this background, and given the 23-year
history of the Honeycrest litigation extensively discussed in prior
Company filings, we believe a resolution of this dispute by any
means other than a settlement agreement was highly unlikely in the
foreseeable future. Moreover, the cost of prolonged litigation and
unrelated administrative, legal and accounting costs would have
continued to deplete the Company’s remaining assets,
threatening any further distribution to the Company’
stockholders. Accordingly, the Company, seeking to bring this
matter to a close on the best available terms for its stockholders,
entered into the Settlement Agreement.
The
Company intends to make its final payment to vendors and creditors
on or before August 31, 2021, after which the Company, with the
approval of the Delaware Court, will make a final distribution to
the Company’s stockholders. The amount and timing of this
final distribution has not yet been finalized, but once approved by
the Delaware Court, the Company will announce the timing and terms
of the final distribution to stockholders through a public release,
and the filing of a Form 8-k with the Securities and Exchange
Commission.
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
