IQE
23/03/2016 09:39
WAV/RULE
NOT PRICE SENSITIVE
REL: 0939 HRS Intueri Education Group Limited
WAV/RULE: IQE: Waiver from NZX Main Board Listing Rule 9.2.1
NZX Regulation Decision
Intueri Education Group Limited (IQE)
Application for a waiver from NZX Main Board Listing Rule 9.2.1
21 March 2016
Decision
1. Subject to the conditions set out in paragraph 2 below and on the basis
that the information provided by Intueri Education Group Limited (IQE) is
complete and accurate in all material respects, NZX Regulation (NZXR) grants
IQE a waiver from NZX Main Board Rule 9.2.1 (Rule) to the extent that IQE
would be required by that Rule to seek shareholder approval to enter into the
Earn-Out Deferment.
2. The waiver in paragraph 1, above, is provided subject to the following
conditions:
(a) the Directors of IQE certify to NZX that:
i. the terms of the Earn-Out Deferment have been and will be negotiated on an
arm's length and commercial basis;
ii. entry into and the terms of the Earn-Out Deferment will be in the best
interests of IQE, and it will be fair and reasonable to IQE's
shareholders;and
iii. IQE has not been and will not be influenced in its decision to enter
into the Earn-Out Deferment by the interests of the Vendors; and
(b) the waiver, its conditions and the implications of this waiver are
disclosed in IQE's annual report for the period that it seeks to rely on the
waiver.
3. The material information on which this decision is based is set out in
Appendix One to this decision. This waiver will not apply if that
information is not, or ceases to be, full and accurate in all material
aspects.
4. The Rules to which this decision relates are set out in Appendix Two.
5. Capitalised terms that are not defined in this decision have the meanings
given to them in the Rules.
Reasons
6. In coming to the decision to provide the waiver set out in paragraph 1
above, NZXR has considered that:
(a) the policy behind Rule 9.2.1 is to regulate transactions where a Related
Party to a Material Transaction may gain favourable consideration due to its
relationship with the Issuer. NZXR may waive the requirement to obtain the
approval of a resolution for the purposes of Rule 9.2.1 if it is satisfied
that the personal connections with, or personal interests of a Related Party
are immaterial or plainly
unlikely to have influenced the promotion, or the decision to enter into, the
transaction. The granting of this waiver will not offend the policy behind
Rule 9.2.1;
(b) IQE has submitted, and NZXR agrees, it is unlikely the Vendors could have
influenced IQE's decision to enter into the Earn-Out Deferment for the
following reasons:
i. neither Ms Brookes nor Ms Walsh has ever been a Director of IQE.
Therefore, neither of the Vendors have never been in a position to directly
influence the decision of the IQE board;
ii. Ms Brookes retired as a Director of OCA and entered into a period of
maternity leave for her position as CEO for OCA on 1 January 2016. The
negotiations for the Earn-Out Deferment began after Ms Brookes' retirement.
Therefore, it is unlikely Ms Brookes' involvement was material or influential
to the management of IQE, or its board, in determining to enter into the
Earn-Out Deferment;
iii. Ms Walsh is considered to be a Related Party, only because of her role
as an executive officer of OCA, a subsidiary of IQE. The nature and function
of that role means it is unlikely Ms Walsh's involvement was material or
influential to the management of IQE, or its board, in determining to enter
into the Earn-Out Deferment;
iv. the Earn-Out Deferment has been proposed by IQE and IQE submits is the
most appropriate method of accommodating the higher than expected earn-out
payment required; and
v. IQE has submitted, and NZXR has no reason not to accept, that the only
transfer of value to the Vendors is through the payment of interest.
Implementation of the Earn-Out Deferment is important for IQE's management of
working capital in the near term. As such IQE receives a reciprocal benefit
and was unlikely influenced into entering the Earn-Out Deferment by the
Vendors;
(c) the conditions of the waiver provide comfort that the terms of the
Earn-Out Deferment will be negotiated, agreed and entered into on an arm's
length commercial basis and will be in the best interests of IQE and its
shareholders; and
(d) there is precedent for the decision.
Confidentiality
7. IQE has requested that NZX keep this waiver confidential until the
Earn-Out Deferment negotiations are complete, and is announced to the market.
In accordance with Footnote 1 to Rule 1.11.2 NZXR grants IQE's request.
Appendix One
1. Intueri Education Group Limited (IQE) is a Listed Issuer with ordinary
shares Quoted on the NZX Main Board.
2. IQE entered into a sale and purchase agreement with Ms Cheryl Brookes and
Ms Catherine Walsh (both acting in their individual capacities and as
trustees for the C Walsh Investment Trust and the Brookes Investment Trust
respectively) (the Vendors) on the 12 December 2014 (the SPA). The SPA was
for the acquisition of the remaining ordinary shares in Online Courses
Australia Group Pty Limited (OCA) that IQE did not already own. The SPA was
amended on 6 January 2015 (prior to completion of the share purchase).
3. On completion of the SPA, OCA became a wholly-owned subsidiary of IQE.
4. The SPA provides for an "earn-out" mechanism. The earn-out amount payable
by IQE to the Vendors to be determined based on the performance of OCA's
business for the financial year ended 31 December 2015.
5. Following the completion of the year ended 31 December 2015, the earn-out
payment required to be made by IQE is AU$19,908,998, approximately
AU$5,000,000 higher than IQE contemplated when entering into the SPA.
6. To assist IQE with the prudent management of its working capital
requirements, the Vendors and IQE have agreed that a portion of the earn-out
amount will be deferred from the date that is 5 business days after the 31
December 2015 audit of OCA is completed, which is expected to be in late
March or early April 2016 until 30 June 2017 (the EarnOut Deferment). The
proposed Earn-Out Deferment has a value of AU$4,908,998, which exceeds more
than 10% of IQE's Average Market Capitalisation.
7. The key terms of the Earn-Out Deferment are:
(a) interest is to be payable on the amount deferred under the Earn-Out
Deferment at a rate of 6.95% per annum;
(b) the repayment date is to be 30 June 2017, or earlier if elected by IQE,
or certain events of default occur; and
(c) security is to be granted over the assets of some of IQE's Australian
subsidiaries and the giving of guarantees by some of IQE's Australian
subsidiaries, in favour of the Vendors.
8. The Vendors are related parties to the transaction pursuant to Rule 9.2.3.
9. Ms Brookes was a Director and the Chief Executive (CEO) of OCA until 1
January 2016. Effective from that date Ms Brookes resigned from her position
as a Director of OCA, and began a period of maternity leave from her position
as CEO. As six months has not lapsed since Ms Brookes left her positions as
a Director or executive officer of OCA, she is a Related Party of IQE under
Rule 9.2.3(a).
10. Ms Walsh is an executive officer of OCA, responsible for quality and
compliance oversight. Pursuant to Rule 9.2.3(a), Ms Walsh is a Related Party
of IQE.
11. Neither of the Vendor's are, nor have ever been, a Director of IQE.
12. The only value received by the Vendor's under the Earn-Out Deferment is
the payment of interest on the amount of the earn-out that is deferred, and
payment of the deferred principal amount.
13. The Earn-Out Deferment is a Material Transaction under Rule 9.2.2 and
therefore requires shareholder approval under Rule 9.2.1 because:
(a) pursuant to Rule 9.2.2(c) the Earn-Out Deferment constitutes borrowings
by IQE in excess of 10% of IQE's Average Market Capitalisation as at 11 March
2016;
(b) pursuant to Rule 9.2.2(d) the security to be granted over the assets of
some of IQE's Australian subsidiaries to secure the borrowing constitutes the
granting of security for obligations which could expose IQE to liability in
excess of 10% of IQE's Average Market Capitalisation as at 11 March 2016; and
(c) pursuant to Rule 9.2.2(d) the giving of guarantees by some of IQE's
Australian subsidiaries constitutes the entry into of guarantees which could
expose IQE to liability in excess of 10% of IQE's Average Market
Capitalisation as at 11 March
2016.
14. IQE has applied to NZX Regulation (NZXR) for a waiver from Rule 9.2.1 to
the extent that this Rule would otherwise require IQE to obtain shareholder
approval to enter into the Earn-Out Deferment.
Appendix Two
Rule 9.2 Transactions with Related Parties
Rule 9.2.1 An Issuer shall not enter into a Material Transaction if a Related
Party is, or is likely to become:
(a) a direct or indirect party to the Material Transaction, or at least one
of a related series of transactions of which the Material Transaction forms
part; or
(b) in the case of a guarantee or other transaction of the nature referred to
in paragraph (d) of the definition of Material Transaction, a direct or
indirect beneficiary of such guarantee or other transaction, unless that
Material Transaction is approved by an Ordinary Resolution of the
Issuer.
Rule 9.2.2 For the purposes of Rule 9.2.1, "Material Transaction" means a
transaction or a related series of transactions whereby an Issuer:
(a) purchases or otherwise acquires, gains, leases (as lessor or lessee) or
sells or otherwise disposes of, assets having an Aggregate Net Value in
excess of 10% of the Average Market Capitalisation of the Issuer; or
(b) issues its own Securities or acquires its own Equity Securities having a
market value in excess of 10% of the Average Market Capitalisation of that
Issuer, save in the case of an issue pursuant to Rule 7.3.5 where only the
market value of those Securities being issued to the Related Party or to any
Employees of the Issuer are to be taken into account; or
(c) borrows, lends, pays, or receives, money, or incurs an obligation, of an
amount in excess of 10% of the Average Market Capitalisation of the Issuer;
or
(d) enters into any guarantee, indemnity, underwriting, or similar
obligation, or gives any security, for or of obligations which could expose
the Issuer to liability
in excess of 10% of the Average Market Capitalisation of the Issuer; or
(e) provides or obtains any services (including without limitation obtaining
underwriting of Securities or services as an Employee) in respect of which
the actual gross cost to the Issuer in any financial year (ignoring any
returns or
(f) benefits in connection with such services) is likely to exceed an amount
equal to 1% of the Average Market Capitalisation of the Issuer; or
(g) amalgamates, except for amalgamations of a wholly owned Subsidiary with
another wholly owned Subsidiary or with the Issuer;
(h) For the purposes of Rule 9.2.2(a), "Aggregate Net Value" means the net
value of those assets calculated as the greater of the net tangible asset
backing
value (from the most recently published financial statements) or market value
Rule 9.2.3 For the purposes of Rule 9.2.1, "Related Party" means a person who
is at the time of a Material Transaction, or was at any time within six
months before a Material
Transaction:
(a) a Director or executive officer of the Issuer or any of its Subsidiaries;
or
(b) the holder of a Relevant Interest in 10% or more of a Class of Equity
Securities of the Issuer carrying Votes; or
(c) an Associated Person of the Issuer or any of the persons referred to in
(a) or (b), other than a person who becomes an Associated Person as a
consequence of the Material Transaction itself (or an intention or proposal
to enter into the Material Transaction itself); or
(d) a person in respect of whom there are arrangements other than the
Material Transaction itself, intended to result in that person becoming a
person described in (a), (b), or (c), or of whom the attainment of such a
status may reasonably be expected, other than as a consequence of the
Material
Transaction itself;
but a person is not a Related Party of an Issuer if:
(e) the only reason why that person would otherwise be a Related Party of the
Issuer is that a Director or executive officer of the Issuer is also a
Director of that person, so long as:
i. not more than one third of the Directors of the Issuer are also Directors
of that person; and
ii. no Director or executive officer of the Issuer has a material direct or
indirect economic interest in that person, other than by reason of receipt of
reasonable Directors' fees or executive remuneration; or
(f) that person is a Subsidiary of, incorporated joint venture of, or
unincorporated joint venture participant with, the Issuer and:
i. no Related Party of the Issuer has or intends to obtain a material direct
or indirect economic interest in that Subsidiary, incorporated joint venture,
or unincorporated joint venture participant, other than by reason of receipt
of
reasonable Director's fees or executive remuneration; and
ii. the Issuer is entitled to participate, directly or indirectly, in at
least one half of the income or profits, and the assets, of that Subsidiary,
incorporated joint venture, or unincorporated joint venture participant.
End CA:00279742 For:IQE Type:WAV/RULE Time:2016-03-23 09:39:30