Teletoon Application - Corus Entertainment

Via GCKey
April 17th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
Applications for authority to effect a transfer of ownership and control
of the Category A specialty service programming undertaking known
an “TELETOON”
This is an application filed by 8324441 Canada Inc., a wholly owned subsidiary of Corus
Entertainment Inc. (Corus) on behalf of Bell Media Inc. (Bell) for the authority to
implement a change in the ownership and effective control of the Category A specialty
service programming undertaking known as “TELETOON” (TELETOON Canada Inc.)
through the acquisition of all outstanding shares of TELETOON held by Astral Media
Inc.
Corus has filed via GCKey the following documents:
1. Application for authority to effect a change in ownership or control of a licensed
broadcasting undertaking (Shares) - Form 139;
2. Appendix 1 – Supplementary Brief;
3. Appendix 2B – Control Statement;
4. Appendix 2C – Corporate Documents;
5. Appendix 2D – Purchase and Sale Agreement – Confidential and Abridged
versions; and
6. Appendix 5 – Financial Statements – Confidential and Abridged versions.
The present application flows from a series of agreements between Corus and BCE Inc.
(Bell) and Astral Media Inc. (Astral) to acquire either through shares or assets a variety
of licensed programming undertakings. These binding agreements between the parties
and each company as publicly traded companies (Corus, Bell and Astral) were made
known to the public on March 4th, 2013, the date upon which these agreements were
signed.
TELETOON Canada Inc. is the licensee of the following services: TELETOON (English
and French-language Category A specialty programming undertaking), The Cartoon
Network (Canada), TELETOON Retro English and TELETOON Retro French (Category
B specialty programming services). Corus through its wholly owned subsidiaries (YTV
Canada Inc. and Nelvana Limited) already holds 50% of the voting shares in
TELETOON Canada Inc. Astral, through its wholly owned subsidiary The Family
Channel Inc. holds the other 50% of the voting shares in TELETOON Canada Inc.
All of the licensed specialty programming undertakings held by TELETOON Canada
Inc. are controlled by its board of directors and are operated on a stand-alone basis.
Accordingly, neither Corus nor Astral Media Inc. exercise control over the subject
broadcasting undertakings.
As the owner of 50% of the voting shares of TELETOON Canada Inc., Corus has a preemptive right to the 50% of voting shares owned by Astral.
The agreements that are the subject of this application are subject to two important
conditions (among others):
1. The transaction between Bell and Astral that are the subject of this application
are conditional upon the approval of the transfer applications that will be heard
at an upcoming Commission public hearing on May 6th, 2013 (see Broadcasting
Notice of Consultation CRTC 2013 106, Items 1-3) are approved; and
2. Once the above applications are approved, that Bell and Astral move to close the
transaction.
In addition, Corus has requested in its Supplementary Brief filed in support of this
application that the timing of the Commission’s review and processing of this matter be
completed in order to allow Corus to effect either a simultaneous closing or a closing
very shortly after the larger transaction between Bell and Astral. The reasons for this
concurrent and expedited treatment have been laid out in Corus’ Supplementary Brief.
Pursuant to sections 31 and 32 of the Canadian Radio-television and Telecommunications
Commission Rules of Practice and Procedure (the “Rules”), we are hereby designating the
financial information in Appendix 5 as well as Schedule 3.3(a) and Schedule 4.8(a) of the
Agreement in Appendix 2D as confidential. The sections that have been redacted
contain competitively sensitive information whether for the current year or future years
that could detrimentally impact Corus if released. This information has been
disaggregated for the purposes of this report in a manner that it would not be for other
filings, whether to the Commission or for securities purposes.
Corus would be pleased to respond to any questions and would ask that they be
directed to the undersigned.
Thank you for your attention to this matter.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachments
***End of document***
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Application for authority to effect a change in
ownership or control of a licensed broadcasting
undertaking (Shares) - Form 139
General instructions
Filing
File electronically via My CRTC Account by attaching the application to the Cover page. My
CRTC Account allows you to securely submit documents to the Commission with a user ID and
password. Therefore, a signature is not required when using My CRTC Account. Applicants who
file their application in this manner are not required to submit a hard copy of the application and
its related documents.
Applicants who cannot send their application electronically with My CRTC Account can contact
the Commission at 1-877-249-CRTC (2782).
Instructions
The following questionnaire is in HTML format and may be downloaded to the word processing
software of your choice. This enables you to complete the downloaded questionnaire by inserting
your response in bold letters immediately following the question. You may add lines to the tables
if necessary but do not alter or delete any text from the questionnaire.
The application must be divided into sections as set out in the questionnaire, and include the
numbered questions followed by the corresponding response. Responses must be provided, at a
minimum, in a size 10 font.
Naming conventions for the electronic documents
The following documents should be submitted as separate electronic documents using the
naming convention specified below. The document number (Doc#) indicates the ascending order
in which the documents should appear on the public file.
Table 1 - Naming convention for the electronic documents
Document
Electronic file name
The Covering Letter (if any)
APP - Doc1 - Cover Letter
The Application Form
APP - Doc2 - Application form
Appendix 1
APP - Doc3 - Appendix 1 - Supplementary brief
Appendix 2A
APP - Doc4 - Appendix 2A - Ownership Information
Appendix 2B
APP - Doc5 - Appendix 2B - Control Statement and
Agreements (or draft)
Appendix 2C
APP - Doc6 - Appendix 2C - Corporate Documents (or draft)
Appendix 2D
APP - Doc7 - Appendix 2D - Purchase and Sale Agreement
(or draft)
Appendix 3
APP - Doc8 - Appendix 3 - Consolidation & Cross-Media
Appendix 5
APP - Doc9 - Appendix 5 - Financial Statements
Each confidential document
NOT WEB - APP - Doc xx - Confdoc - "brief description of the
document"
Each abridged version of each
confidential document
APP - Doc - ABRIDGED VERSION - "same description of
document for which confidentiality is requested"
The Commission may return the application if it has not been duly completed or if the required
technical documentation has not been filed with the Departement of Industry. The onus will be
on the applicant to submit a clear application that provides all of the relevant information,
identifies all regulatory issues raised in the application and provides supporting documentation.
Canadian Radio-television and Telecommunications
Commission
Application for authority to effect a change in ownership or
control of a licensed broadcasting undertaking (Shares)
1. General information
Location of undertaking: Toronto, Ontario
(for various locations, elaborate under section 4)
Type of transaction: Shares ( X ) Shares and control ( )
Type of undertaking (such as AM, FM, TV, Distribution, VOD, etc.): Category A specialty
programming undertaking providing both English-language and French-language feeds.
1.1
Provide a brief description of your application:
Application by 8324441 Canada Inc., a wholly owned subsidiary of Corus Entertainment Inc. (Corus) on
behalf of Bell Media Inc. (Bell) and its trustee, for the authority to implement a change in the ownership
and effective control of the Category A specialty service programming undertaking known an
“TELETOON” (TELETOON Canada Inc.) through the acquisition of all outstanding shares of TELETOON
held by Astral Media Inc.
Currently, 50% of all issued and outstanding shares of TELETOON ultimately held by Astral Broadcasting
Inc. through its wholly owned subsidiary The Family Channel Inc.
The existing structure of the ownership is depicted in CRTC Ownership Chart #159. This structure has
evolved to its current state as minority shareholders sold their shares. The current structure has Corus and
Astral each owning 50% of the equity in the TELETOON Company but through five entities.
The process of transferring their shares is described in detail in the Supplementary Brief (Appendix 1). The
result will be such that Corus moves from a 50% to a 100% position.
TELETOON Canada Inc. is also the licensee of three Category B specialty-programming undertakings
known as TELETOON Retro English, TELETOON Retro French and Cartoon Network.
1.2
List all the documents you request be treated as confidential:
Appendix 2D – Purchase and Sale Agreement Schedule 3.3(a) and Schedule 4.8(a)
Appendix 5 – Financial Statements
1.3 Identification of the licensee subject to the transaction (herein after the
applicant)
Name: Bell Media Inc.
Address: 299 Queen Street West, Toronto, Ontario M5V 2Z5
Fax: (416) 384-4580
E-mail: [email protected]
Contact person representing the applicant
(if there is no appointed agent under question 1.4)
Name: Kevin Goldstein
Title: Vice President, Regulatory Affairs
Telephone: (416) 384-5155
Please indicate the E-Mail address and FAX number that should be specified in a Notice
of Consultation.
Fax: (416) 479-7015
E-mail: [email protected]
1.4 Appointment of agent
I, Kevin Goldstein, the applicant, hereby appoint Sylvie Courtemanche as my agent for and on
my behalf and in my name to sign, file and complete (if necessary) an application with the
Canadian Radio-television and Telecommunications Commission and to sign and file a reply with
respect thereto and I do hereby ratify, confirm, and adopt as my own act, such application and
all replies made thereto.
Date: April 17, 2013
At: Toronto, Ontario
Signature:
Address of agent: Corus Quay, 25 Dockside Drive, Toronto, Ontario M5A 0B5
Title: Vice President, Government Relations
Telephone: (613) 692-3177
Fax: (416) 479-7015
E-mail: [email protected]
1.5 Identification of the purchaser of shares
Individual ( ) Company to be incorporated ( )
Company ( X) Other ( ) Specify: ____________________
Name: 8324441 Canada Inc.
Address: Corus Quay, 25 Dockside Drive, Toronto, Ontario M5A 0B5
Fax: (416) 479-7015
E-mail: [email protected]
1.6 Declaration of the applicant or its appointed agent
I, Sylvie Courtemanche solemnly declare that:
a. I am the appointed agent of the applicant named in this Application Brief and as such
have knowledge of all matters declared therein.
b. The statements made in this application, or any document filed pursuant to any request
for further information by the Commission, are (will be) to the best of my knowledge and
belief true in all respects.
c. The opinions and estimates given in this application, or any document filed pursuant to
any request for further information by the Commission, are (will be) based on facts as
known to me.
d. I have examined the provisions of the Broadcasting Act and the broadcasting regulations
relevant to this application.
And I have signed
Signature:
Date: April 17, 2013
Witnessed by
Signature:
Name (Printed): Gary Maavara
Date: April 17, 2013
At: Toronto, Ontario
1.7 Location(s) where the application may be examined
Set out the applicant’s website address or, if the application is not posted on their website, the
email address where an electronic copy of the application may be requested:
Website:
www.corusent.com
Email:
1.8 Same terms and conditions
The applicant confirms that the undertaking (s) involved in the proposed transaction will continue
to be operated by the licensee under the same terms and conditions as those in effect under the
current licence(s)
Yes ( ) No ( X )
On September 13th, 2012, TELETOON, TELETOON Retro English and TELETOON Retro French applied to
have these three (3) broadcasting licences renewed for a full licence term of seven (7) years. YTV Canada
Inc. seeks to have these licences renewed under the terms and conditions proposed in the licence renewal
applications filed in September 2012 (see Application No. 2012-1162-2; 2012-1163-0; and, 2012-1164-8).
The Applicant requests that the Commission rely on the documents filed by TELETOON in relation to the
requested changes to the terms and conditions of the subject licences.
(if an amendment is proposed, the applicant must complete a separate application brief.)
Date: April 17, 2013
At: Toronto, Ontario
Signature of Applicant/Licensee or its appointed agent:
1.9
It is mandatory that you file a Supplementary Brief identified as Appendix 1, ensuring that you
provide the following:
See Appendix 1 - Supplementary Brief.

The rationale for the transaction, from the perspective of both, the vendor(s) and the
purchaser(s);

The value of the transaction, including the method(s) used to assess this value;

The proposed tangible benefits pursuant to the Commercial Radio Policy 2006 (Broadcasting
Public Notice CRTC 2006-158) , and/or the Campus and community radio policy (Broadcasting
Regulatory Policy CRTC 2010-499) , and/or the television policy, A policy framework for
Canadian Television (Public Notice CRTC 1999-97);

The proposed intangible benefits;

The ownership issues (for example, concentration of ownership, cross-media ownership, sale of
broadcasting undertaking(s) within the first licence term, common ownership policy).
1.10 Procedural request
The Canadian Radio-television and Telecommunications Commission Rules of Practice and
Procedure allow an interested person to request that the Commission exercise a power under the
Rules of Procedure or change the Rules of Procedure for a specific proceeding (sections 5 and 7).
This is generally called a procedural request. You may consult the Implementation of new Rules
of Practice and Procedure, Broadcasting and Telecom Regulatory Policy CRTC 2010-958, 23
December 2010, and the Guidelines on the CRTC Rules of Practice and Procedure, Broadcasting
and Telecom Information Bulletin CRTC 2010-959, 23 December 2010, for more information.
Is the applicant requesting that the Commission make an exception to its Rules of Procedure in
the treatment of this application?
Yes ( ) No ( X )
If yes, please indicate which section of the Rules of Procedure you wish to vary, and provide a
detailed rationale as to why this request should be granted :
2. Ownership
Ownership information
Appendix 2A :
All applicants must complete section a) of the appendix but MAY BE exempt from
completing section b).
a. The Applicant
The licensee seeking authority to effect a change in ownership or control of its licensed
broadcasting undertaking(s).
YTV Canada Inc. and Nelvana Limited (which are wholly owned subsidiaries of Corus
Entertainment Inc.) currently hold 50% of the voting shares of TELETOON Canada Inc. which is
the licensee of TELETOON, the Cartoon Network, TELETOON Retro English and TELETOON
Retro French.
YTV Canada Inc. is also the licensee of two other English-language Category A specialty
programming undertakings (YTV and TreeHouse TV).
Corus Entertainment Inc. owns and operates 10 English-language specialty services, 2 Englishlanguage pay services, 3 over-the-air television stations and 37 commercial radio stations.
All of the corporate information regarding the Applicant and Corus Entertainment Inc. is already
on file at the Commission.
Corus Entertainment Inc. filed its annual ownership updates on February 15th, 2015 (see Rapids #
562859).
b. The Shareholder Corporations (after the transaction)
The parent corporation, the corporations which form part of the control chain, and all
corporations or legal entities listed in a table 2.2, holding directly or indirectly 10% or
more of the voting interest of the corporation to which the table 2.2 pertains.
You may be exempt from completing section b) if all ownership information for each
of the entities that form part of the ownership chain after the transaction has been
supplied within the last 12 months from the date of this application and accepted as
satisfactory by the Commission. You must also ensure that :
o
no changes have occurred since the last filing that would be subject to a notification
requirement or prior approval by the Commission pursuant to the Regulations;
o
no amalgamation has occurred; and
o
the exemption statement in section a) of Appendix 2A has been completed.
Corus Entertainment Inc. filed its annual ownership updates on February 15th, 2015 (see Rapids #
562859).
Control statement and agreements
Append as Appendix 2B:
A statement regarding who controls/will control the licensee and by what means. If the control
is held by a shareholder corporation, also advise who controls/will control it and by what means.
If applicable, attach all related documents, such as Shareholders Agreement, Voting Trust
Agreement, Local Management Agreement, Management Agreement, etc. Provide a draft
document if an executed copy is not yet available.
Corporate documents
Append as Appendix 2C, a copy of all constituting documents (for example, Certificate and
articles of Incorporation, Amendment or Amalgamation, By-Laws, Partnership Agreement, etc.),
that are not already on file with the Commission:
For the applicant; if not yet incorporated, provide draft documents
For the parent corporation and for each corporation or other legal entity listed in a table 2.2 of
an Appendix 2A, holding directly or indirectly 20% or more of the voting interest of the
corporation to which the table 2.2 pertains. If not yet incorporated, provide draft documents.
Appendix 2D
Append as Appendix 2D, a copy of the Purchase and Sale Agreement. Provide a draft
document if the executed copy is not yet available.
3. Industry consolidation and cross-media ownership
3.1
Has the information in 3.2 been submitted to the Commission within the last 12 months:
Yes ( ) No ( X )
If yes, provide reference to the application containing this information:
Application No.: __________________ Date filed:_____________________
If yes, proceed to section 4.
If no, complete question 3.2.
3.2
Complete the following table, providing a list of all entities involved in any of the areas listed
below, for which any investment (equity and/or debt securities) is held after the transaction
by the applicant , its directors, a corporation which directly or indirectly controls the applicant
and any shareholder holding 20% or more of the voting interest of the applicant. The table may
be appended as Appendix 3.
Business Classification Code
a. Other CRTC licence holder and exempted undertakings
Radio:
Corus Premium Television Ltd.: CHED-AM, CKNG-FM, CJKR-FM, CJGV-FM, CJOB-AM, CFMIFM, CKNW-AM, CFMJ-AM, CHML-AM, CILQ-FM, CING-FM, CKBT-FM
Corus Radio Company: CFOX-FM, CHMJ-AM, CHQT-AM, CISN-FM, CKRY-FM CFHK-FM, CFLGFM, CFNY-FM, CFPL-AM, CFPL-FM, CHAY-FM, CJSS-FM, CJXY-FM, CKDK-FM
591989 B.C. Ltd.: CFFX-FM, CFMK-FM CIMJ-FM, CIQB-FM CJDV-FM, CJOY-FM CKCB-FM,
CKRU-AM, CKWF-FM
CKIK-FM Limited: CFGQ-FM, CHQR-FM
Television:
591987 B.C. Ltd.: CHEX-TV, CHEX-TV-2, CKWS-TV, CKWS-TV-1, CKWS-TV-2
Specialty and Pay Services:
YTV Canada Inc.: YTV and TreeHouseTV
Teletoon Canada Inc.: Teletoon, Teletoon Kapow, Teletoon Retro, Teletoon Rétro
Movie Central Ltd.: Movie Central
Encore Avenue Ltd.: Encore Avenue
W Network Inc.: W Network
3924181 Canada Inc.: ABC Spark
7202342 Canada Inc.: Sundance Channel
7202377 Canada Inc.: W Movies
Telelatino Network Inc.: Telelatino, Sky TG24 Canada, EuroWorld Sport, Soccer Television,
Mediaset Italia, TLN en Espanol, TeleNinos
Food Network Canada Inc.: Food Network Canada
Country Music Television Ltd.: CMT
Cosmpolitan Television Canada Company: Cosmopolitan TV
OWN Inc.: OWN
4537549 Canada Inc.: Nickelodeon
b. Daily newspaper
Not applicable
c. Non-daily newspaper or other media publisher
Kids Can Press
d. Production or distribution of programming material
Nelvana Enterprises
e. Lessor of property, plant or equipment of applicant
Not applicable
f.
Telecommunications company regulated under the Telecommunications Act
Not applicable
g. Company owning securities in any of categories (a) to (f)
Not applicable
Name of
Security
Holder
Name of
Corporation in
which Securities
are Held
Business
Classification
Code
Type of
Securities
Held
Vote
(y/n)
% Held
Compared to
Number Issued
3.3
Respond to the following questions, taking into consideration the various ownership interests
identified in question 3.2, the increased consolidation in the broadcasting industry, and the trend
towards cross-media ownership:
a. Provide details on the synergies expected from the multiple holdings following the
transaction.
Corus Entertainment Inc. through its wholly owned subsidiaries YTV Canada Inc. and Nelvana
Limited currently owns 50% of the voting shares of TELETOON, the Cartoon Network,
TELETOON Retro English and TELETOON Retro French.
The service is currently operated by TELETOON and its board of directors. Following the approval
of the transfer of ownership and control, the Applicant intends to move the balance of the
operations of TELETOON to Corus Quay. Corus already provides a variety of services to the
operation at that location. A full description of the proposed operational changes is provided in the
Supplementary Brief.
b. How will the applicant's ability to fulfill the objectives of the Broadcasting Act be affected
by increased consolidation and/or cross-media ownership?
See Appendix 1 - Supplementary Brief.
c. How will the applicant's provision of local programming be affected by increased
consolidation and/or cross-media ownership?
Not applicable – this transaction involves a national specialty programming undertaking.
d. What steps are being taken to ensure editorial independence between the various media
interests?
TELETOON, the Cartoon Network, TELETOON Retro English and TELETOON Retro French do
not provide news programming therefore no issues relating to editorial independence arise.
4. Transmitters / service area
4.1
If applicable, provide a list of transmitters with their corresponding location or a list of the
service area location(s).
5. Funding, benefits and financial statements
5.1
Specify the funds available to finance the proposed transaction:
Equity: $0
Debt: $249M
Total: $249M
5.2
a. Specify the individual sources of financing for the funds identified in question 5.1 (for
example, Bank loans, share capital, other loans). If any of these persons hold public
office, by election or appointment, indicate the office held under the name of the
person(s).
Source
Existing cash balances and credit facilities
$
$249M
b. Where financing is to be provided, in whole or in part, through debt securities, provide
the list of proposed debt holders, including names, citizenship or jurisdiction of
incorporation (or other form of constitution), designation and description of debt
securities held, and the principal amount of each one.
Questions 5.3 and 5.4 do not apply to distribution undertakings
5.3
Provide the proposed benefits resulting from this transaction. Information relating to the
application of the benefits test and the existing exemptions is available in Public Notices 2006158, 1999-97 and 1993-68.
See Appendix 1 – Supplementary Brief.
5.4
Append as Appendix 5, the audited financial statements for the most recently completed fiscal
year of the undertaking being acquired and, where available, any subsequent interim financial
statements. If audited financial statements are not available, append non-audited financial
statements for the period in question accompanied by the management attestation in the format
set out in the Appendix of Circular No. 404, dated August 23, 1994.
See Appendix 5 – Financial Statements.
6. Inclusion of designated groups
Employment equity
Information relating to employment equity is available in Public Notices CRTC 1992-59 and 199734.
The Commission requires responses to questions regarding Employment Equity on behalf of the
licensee following the transaction as a whole, with reference to all of its employees in aggregate,
that is, employees at all undertakings for which the licensee, following the transaction, holds
licences.
6.1
If the application is approved, will the licensee following the transaction maintain the
undertaking's existing Employment Equity Policy, or implement its own?
Following approval of the transfer, closing and integration of the TELETOON services, the Applicant
intends to implement Corus’ Employment Equity Policy.
6.2
Is the licensee following the transaction subject to the 1996 Employment Equity Act (applicable
to federally-regulated employers with 100 or more employees)?
Yes ( X ) No ( )
If yes, proceed to question 6.7, "On-air Presence".
If no, proceed to question 6.3.
6.3
Outline examples of any measures (including hiring and training, apprenticeship programs, work
arrangements, etc.) that you have or will put in place for the designated groups (women,
Aboriginal peoples, persons with disabilities and visible minorities).
Questions 6.4 to 6.6 -- applicable if between 25 and 99 employees only:
6.4
How do you or will you communicate details of your employment equity policies to managers and
staff?
6.5
Have you assigned, or will you assign, a senior level person to be responsible for tracking
progress and monitoring results?
Yes ( ) No ( )
If yes, what authority does or will that person have to ensure goals are achieved?
6.6
What financial resources do you have or will you put in place to promote employment equity in
the workplace (for example, funds for daycare, access for persons with disabilities, etc.)?
On-air presence
Information relating to on-air presence and voice-overs is available in Public Notices CRTC 199469 and 1995-98.
25 or more employees only:
6.7
Outline policies and procedures in place, or plans in this regard, to ensure the representation of
members of the four designated groups in on-air positions, including voice-overs, where
applicable. These policies, procedures and plans should include references to programs produced
by the licensee following the transaction, as well as to acquired programming and advertising.
Please refer to the Corus’ Corporate Cultural Diversity Report filed on February 15th, 2013.
100 or more employees only:
6.8
Provide the total number and percentage of on-air employees, including voice-overs, (full-time,
part-time and temporary) from each designated group, as well as the total number of ALL on-air
employees who were employed in the last year, in which reports were submitted to Human
Resources Development Canada.
Licensees are not required to provide data for each of the four job categories identified
individually in the above-mentioned public notices, but rather for the four categories identified in
aggregate.
On-Air Employees
Number
%
178
40
Aboriginal Peoples
4
0.90
Persons with Disabilities
4
0.90
Visible Minorities
14
3.14
TOTAL number of ALL on-air employees
446
Women
7. Request for documents to be designated as confidential
Sections 30 to 34 of the Canadian Radio-television and Telecommunications Commission Rules of
Practice and Procedure set out a process by which parties to Commission proceedings may file
information on the record of a public proceeding in confidence.
A party filing information can “designate” it as confidential at the time it is filed with the
Commission (section 31) if it falls into one of the following categories:
a. Information that is a trade secret
b. Financial, commercial, scientific or technical information that is confidential and that is
treated consistently in a confidential manner by the person who submitted it; or
c. Information the disclosure of which could reasonably be expected :
i.
To result in material financial loss or gain to any person;
ii.
To prejudice the competitive position of any person; or
iii.
To affect contractual or other negotiations of any person.
At the time that the party files the information it designates as confidential, it must provide an
abridged version of the document along with an explanation of how the information falls into a
category of information listed in section 31. The party must provide a detailed rationale to
explain why the disclosure of the information is not in the public interest (section 32(1)).
The confidential version of the document must be filed separately and must be marked
“CONFIDENTIAL” on each page. If the document is filed electronically, each file containing
confidential information must include “CONFIDENTIAL” in the file name.
The abridged version of the document and the reasons for the designation of information as
confidential will be placed on the public record of the proceeding.
Please consult the Implementation of new Rules of Practice and Procedure, Broadcasting and
Telecom Regulatory Policy CRTC 2010-958, 23 December 2010, and the Procedures for filing
confidential information and requesting its disclosure in Commission proceedings, Broadcasting
and Telecom Information Bulletin CRTC 2010-961, 23 December 2010, for complete process for
filing confidential information.
7.1 Request for documents to be designated as confidential
Are you requesting for some information to be designated as confidential?
Yes ( X ) No ( )
If yes, you must provide a detailed rationale to explain why the disclosure of the information is
not in the public interest :
Pursuant to sections 31 and 32 of the Canadian Radio-television and Telecommunications Commission
Rules of Practice and Procedure (the “Rules”), we are hereby designating the financial information in
Appendix 5 as well as Schedule 3.3(a) and Schedule 4.8(a) of the Agreement in Appendix 2D as
confidential. The sections that have been redacted contain competitively sensitive information
whether for the current year or future years that could detrimentally impact Corus if released. This
information has been disaggregated for the purposes of this report in a manner that it would not be
for other filings, whether to the Commission or for securities purposes.
Book of supporting documents
Appended
(Yes or No)
Appendix Number and Name
E-Filed
(Yes or No)
Section 1: General Information
Yes
Yes
2A - Ownership Information
Yes
Yes
2B - Control Statement and Agreements (or draft)
Yes
Yes
2C - Corporate Documents (or draft)
Yes
Yes
2D - Purchase and Sale Agreement (or draft)
Yes
Yes
1 - Supplementary Brief (mandatory)
Section 2: Ownership
Section 3: Industry Consolidation and Cross-Media Ownership
Yes
3 - Consolidation & Cross-Media
Yes
Section 5: Funding, Benefits and Financial Statements
Yes
5 - Financial Statements
Yes
CRTC 139 (2012-09-20) - Ownership Shares
***End of Document***
Application by 8324441 Canada Inc., a wholly owned
subsidiary of Corus Entertainment Inc.
for authority to implement a change in the ownership and
effective control of TELETOON Canada Inc. licensee of
TELETOON (an English and French-language Category A
specialty programming undertaking) and the Category B
specialty programming undertakings the Cartoon Network
(Canada), TELETOON Retro English and TELETOON
Retro French
April 17, 2013
Introduction
1.
8324441 Canada Inc., a wholly owned subsidiary of Corus
Entertainment Inc. (Corus or the Company) is pleased to submit this
application on behalf of Bell Media Inc. (Bell) and its trustee for the
authority to implement a change in the ownership and effective control of the
Category A specialty programming undertaking known as TELETOON
(TELETOON Canada Inc.) and the Category B specialty programming
undertakings known as the Cartoon Network (Canada), TELETOON Retro
English and TELETOON Retro French through the acquisition of all
outstanding shares held by subsidiaries of Astral Media Inc. (Astral) in
TELETOON Canada Inc. (TELETOON). The existing corporate structure and
the history of how it evolved are described more fully below.
2.
The present transfer application is part of a broader series of transfers
between BCE Inc. and Astral Media Inc. Corus Entertainment Inc. (Corus),
through its wholly-owned subsidiaries (YTV Canada Inc. and Nelvana
Limited) already holds 50% of the voting shares in TELETOON. Currently,
Astral Media Inc., through its wholly-owned subsidiary The Family Channel
Inc., holds the other 50% of the voting shares in TELETOON through whollyowned subsidiaries.
3.
TELETOON and its Category B services are controlled by its board of
directors. Accordingly, neither Astral Media Inc. nor Corus currently control
the subject programming undertakings. Corus and Astral also provide a
range of series to TELETOON.
4.
On March 4th, 2013, Bell Media Inc. entered into a sale purchase agreement
(SPA) with Corus in relation to the 50% voting interest currently held by
Astral Media Inc. The acquisition of 50% of TELETOON Canada Inc.’s voting
shares is subject to the Commission approving the transfer of Astral Media
Inc. to Bell Media Inc.
5.
Under the SPA attached as Appendix 2D, the total consideration payable by
Corus for the 50% voting interest in TELETOON Canada Inc. is $249 million.
6.
The purchase price was arrived at by two publicly-traded companies
negotiating at arm’s length.
7.
As the present transaction involves the transfer of shares, Corus has taken
into consideration the Commission’s valuation policy (Broadcasting Public
Notice CRTC 2008-57).
8.
TELETOON has 20,000 voting shares which are held as follows:
YTV Canada Inc.
Nelvana Limited
Family Channel
4113756 Canada Inc.
4,000 shares
4,000 shares
8,000 shares
4,000 shares
1
9.
The company 4113756 Canada Inc. is 100% owned by 4116381 Canada Inc.
which in turn is owned 50% by YTV Canada Inc. and 50% by The Family
Channel Inc. (a corporation controlled by Astral Media Inc.). Given the
holding company structure, Corus is effectively acquiring 10,000 TELETOON
Shares at a price per share of $24,900.
10.
The shares held by The Family Channel Inc. (40% of the voting equity) will
be acquired by a newly incorporated CBCA company (Newco). Newco will also
acquire the shares in TELETOON Canada Inc. (20%) by 4116381 Canada Inc.
Newco will then be amalgamated with TELETOON Canada Inc., 4116381
Canada Inc. and 4113756 Canada Inc. (which currently holds 20% of the
TELETOON shares) to form TELETOON Amalco. The voting shares of
TELETOON Amalco will be 100% owned by Corus Entertainment Inc.
TELETOON Amalco (ultimately 8324441 Canada Inc.) will hold the licences
for the TELETOON group of channels.
11.
This structure will be established through two alternative processes which
would each result in the same outcome. This process is illustrated below:
2
12.
Upon closing there will be a final purchase price adjustment for a variance to
working capital compared to the target working capital range. If the closing
working capital is within the range, no adjustment is required. No leases
have been assumed.
13.
The Enterprise Value of TELETOON, TELETOON Retro, and TELETOON
Retro French was calculated based on a 10.5 multiple of the average EBITDA
for 2011, 2012 and the budget for 2013 ($43.7 million) after adjusting for
margin earned by the shareholders on services provided to TELETOON ($2.8
million). To this, a value of $10 million was attributed to Cartoon Network
based on its nascent performance to date to arrive at the total Enterprise
Value of TELETOON. TELETOON has no long-term debt and all cash will be
distributed to shareholders prior to closing. Therefore the Enterprise Value
as calculated is equal to the Equity value which when divided by the number
of shares equals the per share price for the 50% interest currently owned by
Bell.
14.
The 10.5x EBITDA multiple is directly comparable with recent transaction
multiples in the sector for like assets. The multiple reflects TELETOON’s
position as a highly profitable Category A service with good distribution,
exclusive programming contracts with valued suppliers, and a highly
recognizable brand.
15.
The Category B licences provide strong opportunities for growth as they
continue to build audiences.
16.
Following the Commission’s approval of the transfers outlined above, Corus
will exercise effective control of all four (4) programming services that are the
subject of this application namely; TELETOON (the English and Frenchlanguage services), the Cartoon Network and TELETOON Retro English as
well as TELETOON Retro French.
3
The Purchaser
17.
Corus Entertainment Inc. is one of Canada’s leading integrated media and
entertainment companies. The company was founded in 1999 as a separate
publicly-traded company1 built upon the television and radio broadcast assets
held by Shaw Communications Inc. at that time. Corus has a board of
directors and management who operate independently and who adhere to the
governance and fiduciary obligations to serve the corporation and all of its
shareholders at the standard set by the TSX and the corporate and securities
laws of Canada.
18.
The Corus Television division is comprised of specialty television networks,
pay television services, three conventional over-the-air television stations and
the Corus content business, which consists of the production and distribution
of films and television programs, merchandise licensing, publishing and
animation software. The Company’s other multimedia entertainment brands
include YTV; Treehouse; Nickelodeon (Canada); W Network; OWN: Oprah
Winfrey Network (Canada); W Movies; Sundance Channel (Canada); Movie
Central (including HBO Canada and Encore Avenue); Nelvana; Kids Can
Press; and Toon Boom. The Company also has a majority interest in CMT
(Canada); Telelatino (TLN, Euro World Sport, Mediaset Italia, SkyTG 24,
Teleniños and TLN En Español); ABC Spark; and Cosmopolitan TV.
19.
Corus also owns 37 radio stations, situated primarily in high growth urban
centres. The Corus radio portfolio includes a network of leading news-talk
radio stations that provide Canadians with the best in news and talk radio.
We also operate stations in classic rock, modern/mainstream rock, country,
greatest hits and hot adult contemporary/classic hit radio music formats.
20.
Corus assets include Nelvana, one of the world’s leading creators, producers
and distributors of children’s and animated programming, and related
consumer products. Nelvana is the cornerstone of Corus’ international
distribution, production and merchandising strategy and is renowned for
such globally recognized brands as Babar, Franklin and Beyblade. Kids Can
Press, Canada’s leader in children’s publishing and Toon Boom, a leader in
digital content and animation creation software, are also part of the Corus
family. The Toon Boom headquarters are located in Montreal.
21.
With Nelvana, Corus has made a very significant investment in the
Canadian production industry. Our Canadian Content is available in more
than 150 countries and in more than 40 different languages.
22.
To ensure continued growth for Corus Television we have developed a global
business strategy for our Canadian Content and we have been successful in
growing our television business in foreign language markets around the
world. We focus not just on content but also on related products such as toys
1
Corus trades on the Toronto Stock Exchange (TSX) under the stock listing CJR.B.
4
and other merchandise. Corus has also invested in international channels,
and new media applications related to our content brands.
23.
The Corus vision is to be globally recognized as Canada’s most influential
entertainment company. We’re achieving that vision with the hard work and
commitment of our talented employees, many of whom are award winners in
their fields. We also have a strong set of corporate values and we believe that
honouring them drives our success. These values help provide clarity and
focus – we are proud to live them each day.
ACCOUNTABILITY – We do what we say we’ll do – no excuses.
INITIATIVE – We empower employees to make great things happen.
INNOVATION – We are committed to creative thinking that leads to
breakthrough ideas and superior results.
KNOWLEDGE – We believe in continuous learning and the sharing of our
insights and ideas.
TEAMWORK – We believe that the greatest value is realized when we work
together.
24.
Corus is one of Canada’s largest producers of high quality Canadian radio
and television programming. We recognize that in an environment where
Canadians have the ability to access a wide variety of information and
entertainment means that we need to provide high-quality content each day.
Our ratings, financial performance, and industry awards suggest that we are
on the right track.
25.
To illustrate this, please find attached as Appendix “A” a short review of our
achievements and milestones over the past 12 months.
26.
Our entertainment and informational assets are achieving results that make
Corus an industry leader in Canada, and a small, but significant player in
the international marketplace. We believe that our success contributes to a
stronger Canadian broadcasting and production industry, a stronger
economy, and to stronger communities across Canada.
27.
We believe we can achieve our objectives through international growth of our
Nelvana content; by continuing to grow domestically and by developing new
Canadian brands for the Canadian and world market.
28.
Corus also believes that investing in our people is fundamental to our
success. So we have established Corus U, a unique in-house learning and
development program with a dedicated team to develop training. In Fiscal
2012, Corus U delivered over 7,000 hours of training to employees and
directors. We have structured performance management systems and
mentoring so everyone understands what to do and how they are doing.
5
29.
Corus is also dedicated to leadership in the area of new technology
utilization. We recognize the importance of making content available to our
audiences on both traditional and new platforms such as mobile television
and video-on-demand. For example, Corus was also an early adopter of
HDTV and the so-called OTT platforms for our pay movie channels.
Competitive Conditions
30.
Corus’ Category A broadcast networks such as YTV, W Network, CMT
(Canada), OWN: Oprah Winfrey Network (Canada), its conventional
television stations and its Category B networks such as Nickelodeon
(Canada) and Cosmopolitan TV, compete for audience, advertising revenues,
and programming with other conventional networks such as CBC, CTV,
Global, Citytv, other Category A and B channels, independent television
stations and basic cable program services as well as other media, including
DTH television services, DVDs, Blu-Ray, game platforms, print media,
outdoor billboards and the Internet.
31.
Television services compete for programming, audiences and advertising
revenues with other stations and cable networks in their respective coverage
areas and, in some cases, with respect to programming, with other station
groups, and in the case of advertising revenues, with other local and national
media. International media are also increasingly a presence in the Canadian
market.
32.
OTT services such as Netflix are expected to make further inroads in the
Canadian media landscape in the coming years. Whether OTT becomes a
substitute for traditional broadcasters will depend on their ability to secure
programming rights and to increase subscriber penetration. In order to
satisfy their subscribers, OTT services will need to acquire a wide range of
content. Some of this will be exclusive to them. Most OTT activity occurs
outside of the Canadian regulated system and has represented an economic
loss to this structure. This is well documented in a CRTC commissioned
paper. 2
33.
There is increasing evidence that OTT combined with U.S. linear viewing and
Internet TV viewing are taking a sizeable chunk out of the Canadian viewing
shares. The statistical analysis remains complex but our internal analysis of
the combined impact of U.S. linear television viewing and just Netflix OTT
viewing in Canada pulls the total Canadian service share down from a factor
of 100 to 79. We may be some time away from being able to determine the
exact share erosion, but it is clear that many Canadians are not watching
Canadian services at least part of the time. We need to pay attention to a
21% share loss. When Canadians are using foreign OTT, it represents a loss
“Market Impact and Indicators of Over the Top Television in Canada”: 2012, Peter Miller
and Randal Rudniski, March 30, 2012.
2
6
of revenue to Canadian operators such as Corus but also to all Canadian
producers and distributors of content.
34.
Coupled with competing for viewers and subscribers is the competition for
content. This may increase programming costs for traditional broadcasters
like Corus. Pay television has come under the most pressure initially. Our
subscriber growth has slowed and our programming costs have increased. We
now have greater competition for both linear and new platform rights. The
Commission is well aware that digital technology is fragmenting our markets
and influencing the economics of the regulated system.
35.
The business of producing and distributing children’s television programs is
also highly competitive. Corus competes with a variety of international
companies, including HIT Entertainment (a division of Fisher-Price) and
several U.S. studios. U.S. studios are substantially larger and have greater
financial resources. Many have their own television networks on which their
in-house productions are aired.
36.
All of which is to say that over the past few years, the television market has
fundamentally changed.
37.
Despite the current environment, Corus is confident that the long-term
outlook for the worldwide animation business and the children’s
entertainment sector is favourable. Future growth in the sector is being
fueled by:







38.
great storytelling;
the growth of the 3D animation market;
the shift of audiences from traditional conventional networks to specialty
television networks;
the growth of digital television services, providing a platform for
additional cable, satellite, MDS and IPTV services and thereby new
programming opportunities;
the continued international expansion by all types of programming
services;
the growth in demand for content featuring recognizable characters on
multiple platforms; and
the emerging platforms for content distribution i.e. video-on-demand
(VOD), Subscription video-on-demand (SVOD), over-the-top (OTT)
services, smart phones, tablets and video games.
In Canada, the total production market is estimated at roughly $5.9 billion.3
It is unlikely that this market will grow significantly so as a producer, we
need to look abroad. As a Canadian broadcaster we also need to prepare for
domestic market competition. There’s no longer anywhere to hide from
competition.
Profile 2012 – An Economic Report on the Screen-based Production Industry in Canada.
Canadian Media Production Association.
3
7
39.
Meanwhile the real growth potential for Canadian broadcasters and
producers is in international markets. The Canadian market, even with
government funding and tax credits etc. is not large enough to sustain the
quality of production that the Canadian system requires, however, the world
market can do so. According to industry sources, total spending on filmed
entertainment – which includes feature films, video, television shows,
animation and other programming worldwide – is expected to grow from an
estimated US$85.4 billion in 2011 to US$99.7 billion in 2016. Emerging
electronic platforms will be the principal growth driver of filmed
entertainment globally and will offset any declines in physical home video
sales. Corus is confident that Canada can compete in this space.
40.
The development of Corus’ Kids and Family specialty networks and Corus’
Nelvana business has allowed the Company to build its position in the kids’
entertainment marketplace by expanding revenue sources through family coview opportunities, which attract advertisers looking for moms and dads, and
by consolidating the development streams to ensure that Corus continues to
create superior content, driving ratings in Canada and abroad. Additionally,
this integration enables us to maximize new digital platform opportunities,
which are increasingly important segments of the market.
41.
Our international competitors are goliaths in comparison to Corus. We need
content and scale to even get a seat at the content marketplace table. Corus
has already been investing as a broadcaster and as a producer to gain market
entry internationally.
42.
Corus Television is using its programming library to help launch new linear
broadcast channels internationally. One such channel initiative, KidsCo, was
launched in Fiscal 2007 to help increase the profile of the Nelvana brands.
Corus Television owns 49% of the channel in partnership with
NBCUniversal. KidsCo is an international children’s television channel for
preschoolers, children aged 6-10 and families. KidsCo is available in 100
countries in 17 languages and reaches 15 million subscribers worldwide.
KidsCo is distributed to satellite, cable and IPTV platforms across Europe,
Asia, Africa and Australia. KidsCo’s range of responsible, feel-good and
dependable content is also sourced from across the globe. This helps Corus to
understand the many intricacies of the world market.
43.
Nelvana’s library now has well over 4,000 half-hour animated episodes
including such well-known properties as Babar, Franklin, Max & Ruby, Mike
the Knight, Beyblade, Sidekick, Scaredy Squirrel, Mr. Young and Life with
Boys. A leader in rights management, Nelvana is on the vanguard of digital
opportunities. Beginning in Canada with Treehouse Direct, a digital
download storefront, Nelvana has opened up new avenues for delivery of its
content through strategic partnerships with pioneering companies in the
emerging digital landscape.
44.
Additionally, Nelvana is involved with two exciting children's channel
ventures: qubo and KidsCo. qubo, the U.S.-based children's channel, is now
8
seen in more than 42 million homes. KidsCo, a partnership between
NBCUniversal International and Corus Entertainment/Nelvana, offers the
rest of the world 4 a 24/7 multi-platform channel dedicated to delivering
family-friendly programming. In fact, as of January 2013, KidsCo began
broadcasting from Corus Quay via three feeds.
45.
Corus is renowned not only for its investments in content but also for its
major infrastructure investments. In September of 2010, Corus officially
opened its new Corus Quay broadcast facilities. The state-of-the-art media
production, broadcast and distribution facility features advanced technologies
and organizational design that sets a new standard for broadcast and content
operations throughout the world. We successfully brought together 11
independent Toronto-based operations, including 24 television services, 3
radio stations and over 1,100 employees. Built for growth, the configuration
of the operation allows for up to three times as many services to be delivered
from the facility.
46.
Corus has also recently invested in new premises and facilities for our radio
station clusters serving Kitchener-Waterloo, London, Winnipeg, Cornwall
and Calgary.
47.
Corus’ leadership in children’s programming assists all Canadian producers
in establishing credibility and hence success in world markets. This was
illustrated by the Corus presence at MIP this year and the focus there by the
world production community on kids programming.
48.
As both a producer and packager of content, Corus is well-positioned to meet
the challenges of these new markets.
49.
Corus not only has the ability but also the means to grow and contribute
meaningfully to the Canadian broadcasting system.
50.
These are the factors that are at the core of why Corus is seeking to acquire
the control of TELETOON and its suite of services. Our plans are set out
below.
The TELETOON Services – Ownership History and Structure
51.
TELETOON operates four (4) specialty programming services:
i.
TELETOON English and French – a Category A specialty programming
undertaking
ii. TELETOON Retro English – a Category B specialty programming
undertaking
iii. TELETOON Retro French – a Category B specialty programming
undertaking
4
KidsCo is not available in North America.
9
iv. Cartoon Network (Canada) – a Category B specialty programming
undertaking
52.
The TELETOON service was first licensed in 1996 (Broadcasting Decision
CRTC 96-598) as an analog specialty service providing animation
programming in both English and French via English and French-language
feeds. At that time it was owned by a consortium of various other Canadian
specialty services and producers made up of The Family Channel Inc. acting
as managing partner at 53.3% (owned by Astral Media & Western
International Communications (WIC)), YTV Canada Inc. at 26.7% (owned by
Shaw Communications), and Cinar and Nelvana with 10% each.
53.
In 2000, Corus, through its acquisition of WIC Premium Corporation, a
subsidiary of WIC, stepped up to a 40% ownership interest in TELETOON
(Broadcasting Decision CRTC 2000-222 and 2000-752). Corus did not control
or operate TELETOON; effective control was exercised by its board of
directors.
54.
In 2004, after an unfortunate series of events, Cinar was purchased by a
group led by Michael Hirsch and Toper Taylor who had sold the Nelvana
production company (but not the shares in TELETOON) to Corus in the same
year. Cinar was renamed Cookie Jar. As a result, Corus and Astral each held
40% of the equity and Cookie Jar held the remaining 20%. The company was
controlled by its board of directors.
55.
In 2006, Cookie Jar sold its interest in equal proportion to Corus and Astral
in the manner contemplated by the shareholder’s agreement. As a result,
each of Astral and Corus held 50% of the equity and control remained with its
board of directors.
56.
Throughout its operating history from 1997 to date, John Cassaday
(President and CEO of Corus) and Heather Shaw (Executive Chair of Corus)
have been members of the board of directors of TELETOON Canada Inc. and
have contributed to the strategic vision and oversight of TELETOON and its
suite of services. In this sense Corus is the only entity that has been involved
since TELETOON’s inception.
57.
The Category B services operated by TELETOON were licensed in 2005 and
2011 as follows:



TELETOON Retro English - Broadcasting Decision CRTC 2005- 511,
October 21, 2005
TELETOON Retro French - Broadcasting Decision CRTC 2005-510,
October 21, 2005
Cartoon Network – Broadcasting Decision CRTC 2011-687, November 4,
2011
10
58.
As a group and individually, the TELETOON services provide world-class
programming devoted to animation and animation-related content for all age
groups.
The Rationale, Structure and Process of the Transaction
59.
The operating structure and actual processes are a function of TELETOON’s
history. Corus and Astral have a “hands-on” operating role in the
TELETOON channels. Corus originates the service from its broadcast centre
at Corus Quay; sells the TELETOON channels’ advertising inventory
nationally (excluding Quebec), does on-air promotion, and contributes a small
proportion of the Canadian Content through Nelvana Limited. Astral Media
provides administrative support such as human resources management;
office services (reception, mailroom etc.); law, business affairs, and regulatory
advice and tasks; IT and operation of the websites and other interactive.
Cookie Jar had supplied programming and continues to have a programming
output deal with the channels.
60.
The Unanimous Shareholder’s Agreement (USA) dated September 1st, 2006
(which was filed with the CRTC and approved at that time) establishes the
respective rights of the signatories and the process by which a party can
dispose of its interest. Article V of the USA establishes the rights and
obligations concerning share transfers, charges on shares, and changes of
control of a shareholder. None of these rights are particularly novel in
corporate law or in policy terms. These rights include a right of first refusal5
(ROFR), sale provisions,6 and pre-emptive rights.7
61.
The present transfer application is part of a broader series of transfers
between Bell Media Inc. and Astral. On March 4th, 2013, Bell Media Inc.
entered into a purchase agreement with Corus in relation to the 50% voting
interest currently held by Astral. The acquisition of 50% of TELETOON
Canada Inc.’s voting shares is subject to the Commission approving the
transfer of Astral to Bell Media Inc. which involves a proposal to divest a
number of broadcasting assets, including Astral’s ownership interest in the
TELETOON services.
62.
With the Astral decision to sell, and Bell Media Inc.’s decision to divest the
Astral ownership interest in TELETOON, it is logical for Corus to acquire the
shares and now take control and complete responsibility for a broadcast
undertaking it has helped nurture since 1996.
See USA Section 5.7.
USA section 5.8.
7 USA Section 5.8.
5
6
11
The TELETOON Networks in a Nutshell
TELETOON – English and French
63.
TELETOON is a Canadian broadcast service predominantly focused on
animation and animation-related programming catering to kids, youth and
adult audiences that is delivered in both English and French. Themes focus
on action, adventure, superheroes and comedy. Fuelled by some of the best
animation in the world, TELETOON delivers Canadian audiences such hits
as Lego Ninjago, Amazing World of Gumball Dragons, Kaijudo and
Detentionaire. TELETOON is also well known for its blockbuster movie line
up.
64.
TELETOON spends it daytime schedule (from 6am to 5pm) focused towards
children aged 6-11. Shows in this block include classics such as Looney
Tunes and Scooby Doo! as well as domestic made hits such as Johnny
Test and Just Kidding.
65.
The 6pm to 8pm time period offers a co-view block that appeals to a broader
audience
that
includes
kids
6-11
with
their
parents. Mudpit, Skatoony and Star Wars: The Clone Wars are examples of
programs.
66.
Post 9pm TELETOON broadcasts under the 'Teletoon at Night' branding
and aims for a young adult audience with a taste for the smart and the
irreverent including titles such as Futurama, Family Guy and Robot Chicken.
67.
In the evening TELETOON is the top channel watched by men after the
sports services.
TELETOON RETRO – English and French
68.
As the name implies, TELETOON Retro is a Canadian specialty service that
assumes a retrospective look at the greatest animation titles of all time. The
whole family makes up the audience on this fun-for-all service that is
delivered in both English and French. TELETOON Retro promises discovery
for new audiences and nostalgia for existing fans with programs such as Bugs
Bunny and Tweety, Spiderman Classic, He-Man and The Jetsons.
69.
TELETOON Retro focuses its daytime schedule (from 6am to 5pm) on
children aged 6-11. Shows in this block include classics such as Alvin and the
Chipmunks, The Adventures of Tintin and The Smurfs.
70.
The 6pm to 11pm time period offers a co-view block that appeals to a broader
audience that includes children 6-11 and their parents. Looney Tunes
and The Flintstones are both audience favourites.
12
Cartoon Network Canada
71.
Cartoon Network provides unique and diverse entertainment experiences to
kids and families through hilarious animated and live-action content. The
Cartoon Network brand is seen in over 168 countries world-wide. Cartoon
Network Canada delivers Canadian audiences such hits as Adventure Time
with Finn and Jake, Destroy Build Destroy, 6Teen and Ben 10.
72.
The day time period (from 6am to 5pm) serves kids aged 6-11. Shows in this
block include classics such as Regular Show and The Marvelous
Misadventures of Flapjack.
73.
The prime time block appeals to kids and teens with shows such as Total
Drama, Dude What Would Happen and Level Up.
74.
Post 9pm, the network broadcasts under the 'Adult Swim' branding offering
original and acquired animated and live-action series for young
adults including titles King of the Hill, American Dad and Robot Chicken.
The Corus Vision for These Services
75.
To ensure Corus’ continued success domestically, we have over the last
several years grown organically through the launch of successful new
Category B services such as Cosmopolitan TV, Nickelodeon (Canada) and
ABC Spark. We have also made strategic acquisitions such as the acquisition
of Canadian Learning Television (now operating as the OWN: Oprah Winfrey
Network - Canada), the Drive-In Classics Channel (now operating as
Sundance Channel - Canada) and Sex TV (now known as W Movies).
76.
Having our programming channels associated with strong brands has been
fundamental to our success. Branding was also key in growing our pay
subscriber base through securing access to the highly acclaimed and valued
content known as HBO Canada.
77.
Having strong and growing Canadian media companies with compelling
brands will also serve many public interests goals. In the context of having
global media companies that have strong brands and numerous and
ubiquitous platforms with which to compete anywhere in the world, it is
essential that Canadian Content providers are able to leverage the content
not just domestically but on a worldwide basis.
78.
The best opportunities for a strong Canadian production sector will be by
creating windows not just in Canada but globally. Corus can play a key role
in achieving this critical public policy goal. We can assist the independent
production community to gain a foothold in international markets. We have a
plan to do this both through our tangible benefits proposals and through our
existing relationships with independent producers. Currently, Corus
purchases about 85% of the Canadian Content for its specialty and pay
13
services from independent producers and we will leverage these relationships
for the benefit of the Canadian broadcasting system as a whole. This starts
by having high quality services.
79.
The foundation for success abroad is success at home. Corus’ contribution to
TELETOON’s success has been significant. We have demonstrated our
commitment to TELETOON and are therefore the natural party to steward
the services and their important brands.
80.
The Corus goal is to develop content and the ability to serve Canadians
through these new platforms to keep audiences within the Canadian system
as it evolves. This, however, requires resolve and enormous investment.
81.
Specifically, by consolidating ownership, Corus will remove the meaningful
operating uncertainty that has clouded TELETOON’s operations over the last
several months. Further, as Corus has already established its leadership
among kids, we will seek to sharpen TELETOON’s focus on adults and young
adults, providing expanded program offerings to all Canadians within the
animation programming genre. Corus’ proven track record as growers of
networks and prudent operators will strengthen TELETOON. We will
expand the programming opportunities for Canadian producers through
increased CPE and benefits spending. As a leader in the international
distribution of animated programming, Corus will provide more international
sales opportunities for Canadian producers through the credibility that is
conferred on Canadian producers of series licensed by Corus-operated
networks.
82.
Corus will bring that expertise to TELETOON through its strong creative
vision for the network and deep relationships with international partners.
Corus will expand the appeal of TELETOON animation programming beyond
the kids audience, leveraging its experience as successful operators of young
adult (ABC Spark, Cosmopolitan TV), and adult services (W Network, Movie
Central, OWN Canada). This expanded programming vision will create
further opportunities around the world for a wider range of Canadian
producers, both as suppliers to TELETOON and in partnership with Corus.
Additionally, Corus’ proven record as a successful operator of channels and
investment in new platforms will ensure TELETOON also benefits from our
investment in new technologies and platforms necessary to succeed in the
rapidly changing media environment.
83.
Corus already provides network operations services for the TELETOON
networks, and, as noted, recently assumed network operations responsibility
for the KidsCo networks around the world out of its Corus Quay facility.
Corus’ proven leadership in international program sales with series like Mike
the Knight, Babar, Franklin and others, illustrates our world-class
capabilities, and these skills will accrue to program producers for
TELETOON in the event that the Corus’ application is approved.
14
84.
Corus is further committed to increasing its investment in English and
French language original programming to support the growth of the
TELETOON services.
85.
Acquiring the effective control of TELETOON Canada Inc. will allow Corus to
fully align these services with our specialty television group, which focuses on
providing superior program offerings to Canadian viewers on a variety of
platforms.
86.
Corus believes that TELETOON Canada Inc. will benefit from further
integration into the successful suite of Corus’ broadcast assets. Our success in
the specialty television segment is due to our expertise in brand stewardship,
world class on-air promotion and marketing and a deep commitment to cross
platform digital rights exploitation and distinctive programming visions. A
key element of this is our audience and consumer research capability.
87.
While there is some overlap of audiences targeted by YTV and TELETOON,
it is important to note that TELETOON is not a kids channel but rather an
animation service targeting audiences of all ages during the different day
parts. The TELETOON Retro and Cartoon networks also have a distinctive
programming mandate.
88.
Corus intends to use its leadership, passion and expertise for kids and youth
culture to further build TELETOON’s entertainment offering to deliver the
best in kids and family programming to all Canadians.
89.
Our continued growth and success in building networks with broad appeal
will benefit the Canadian broadcasting system through increased
investments in Canadian programming, further strengthening the Canadian
production community. Our goal is to keep Canadians inside the regulated
system, by their choice.
90.
By integrating the operations of the TELETOON services within the Corus
group of specialty and pay services we will be able to leverage not only our
superb digital broadcast platform that we have at Corus Quay, but we will be
able to leverage our significant consumer insights, marketing expertise and
the international distribution opportunity we have created around the world
through our distribution and marketing of the Nelvana content.
91.
Corus will use its strength and breadth in programming acquisition to secure
additional program rights to enhance the service and its cross promotional
platforms to increase the visibility of TELETOON and its suite of services.
92.
We also intend to build a strong team in Quebec to serve francophone viewers
there and across Canada.
93.
In sum, Corus intends to continuously improve our understanding about
what Canadian audiences, subscribers, and distributers want from
15
TELETOON. We will strive to execute our programming plans superbly well
and we will market and promote the services at the highest standard.
Proposed Regulatory Framework for the Operation of the TELETOON
Services
94.
TELETOON’s broadcasting licence as well as the licences for TELETOON
Retro French and English are currently under renewal. Corus, as a
shareholder of TELETOON, has had the opportunity to review the licence
renewal applications filed by TELETOON last fall. We support and request
that the Commission renew these licences in the manner requested by the
licensee in these applications.
95.
We would however request that should the Commission approve the transfer
of ownership and control of TELETOON and the TELETOON suite of
services to Corus that it be mindful that Corus intends to align these services
within its existing group of services.
96.
As the Commission is aware, Corus participated in the Group Based Licence
Renewal Hearing in 2011. Its suite of specialty and pay services now operates
under the Group Based Licensing model established in Broadcasting
Regulatory Policy CRTC 2010-167. Our Group Based Licensing decision
(Broadcasting Decision CRTC 2011-446) established certain parameters as
they relate to CPE and PNI spending.
97.
Corus intends to include TELETOON and TELETOON Retro English within
its existing group of English-language services from a group based licensing
perspective. This would mean that TELETOON and TELETOON Retro
would require additional amendments to their conditions of licence to
accommodate this integration.
98.
With regards to TELETOON Retro French, since this is a French-language
service, we would propose to operate this service under the proposed terms
contained in the licence renewal application filed by TELETOON
(Application No. 2012-1162-2). The Corus plans for the French-language
service are extremely important to its overall vision and strategy for the
larger Corus Group.
99.
Corus intends to become a significant contributor to the development of the
French-language Quebec broadcasting environment. All viewer and customer
interface will be overseen by capable Quebec-based francophone broadcast
executives.
100.
All programming, marketing, communication, advertising sales and matters
relating to pricing, packaging and cross platform content initiatives with
broadcasting distribution undertakings will be managed by our Quebec office.
16
101.
Since the Cartoon Network is operating under its first licence term and it is
not up for licence renewal (Broadcasting Decision CRTC 2011-687), we are
not proposing any changes to the conditions of licence following the transfer
of this service to Corus. Accordingly, Corus does not wish to include Cartoon
Network as part of its Group based licensing framework.
102.
Corus currently operates another newly licensed Category B service (ABC
Spark - Broadcasting Decision CRTC 2012-93) that is also operating under its
first licence term and which does not form part of our group of services
subject to group based licensing. We anticipate that the inclusion of these two
services would be reviewed at the time the Commission next considers our
group based licensing in 2016.
103.
This application is not conditional upon these changes. Corus understands
that the proposed changes to the conditions of licence of these services would
require a separate application pursuant to Part 1 of the Canadian Radiotelevision and Telecommunications Rules of Practice and Procedure following
completion of the transfer of control of these services; Corus would make the
subject applications to the Commission on an expedited basis.
Benefits of the Transaction
Intangible Benefits
104.
In addition to the tangible benefits initiatives Corus is proposing, approval of
this application will result in a number of intangible benefits as well.
TELETOON will be owned by an entertainment company focused on growing
the attractiveness of each of its specialty services. Such a focused approach is
necessary in an increasingly competitive environment with more and more
choices, regulated and unregulated, being available to Canadians. Given the
plethora of choices available to Canadians today, successful specialty services
need to maximize all available synergies and efficiencies. Under Corus’
ownership, TELETOON’s success will be assured by becoming part of a
company that is focused on operating specialty services and creating
outstanding Canadian Content.
105.
Corus has a proven record of strengthening the services it acquires by
building their brands and developing strong program offerings. Corus will
bring the same skills to TELETOON and will build upon its success to
develop each service into a strong branded specialty service responsive to its
target audience. This will ensure that these services provide a strong
Canadian programming offering which will enhance diversity in the
Canadian broadcasting system.
106.
In addition to on-screen enhancements, Corus plans to improve the
TELETOON digital interactive media presence. We will utilize our
interactive expertise to expand upon the current web offering to provide for a
17
fulsome and an interactive online community. All of these initiatives will
ultimately result in greater contributions to Canadian programming.
107.
Corus will be developing a Montreal-based team to operate the Frenchlanguage services it is acquiring in this transaction. The French-language
services in TELETOON will benefit with this direct in market management.
108.
Corus will establish a new, strong, well-operated, independent media
company in the Quebec and wider francophone market. Corus will bring its
significant capabilities to this market and will offer more choice, healthy
competition and diversity of voices to the market.
Tangible Benefits
109.
We believe that Corus’ acquisition of the effective control of the TELETOON
group of services will directly benefit the Canadian broadcasting system as a
result of our strategy to fund the development, production, exhibition and
distribution of high quality Canadian programming.
110.
The Corus benefits proposal is built upon the foundation principle of building
diversity of voice through research and development (R&D) for on-screen
programs; in training and in production; and in developing understanding of
the media environment. Our funds will also foster the development of how
the media can educate Canadians about a key issue facing all of us – obesity
and public health. Funds will be used by recipients across Canada and by
both official language groups.
111.
Our proposal also represents an additional incremental investment in
Canadian programming and other eligible benefit proposals totaling $24.9
million, consistent with the Commission’s policy on benefits contained in
Broadcasting Public Notice CRTC 1993-68 and Broadcasting Public Notice
CRTC 2007-53.
112.
85% of the proposed tangible benefits are directed towards on-screen
initiatives.
113.
The on-screen initiatives total $21,165,000 and will be paid out over seven
years. This represents new yearly investments of over three million dollars
per year. We anticipate that 75% of the funds for exhibition of Canadian
programming will be spent with independent Canadian producers. 90% of the
new programming funding will be directed towards animation programming.
114.
The confidential nature of the transaction involving publicly-traded
companies has meant that Corus has not been able to confirm all of the
details of all initiatives with the specified recipient prior to the filing of this
application. Our criteria are that the funds will be used for specific programs
and not become part of the general revenues of the recipient. We are
confident that each project complies with the Commission’s policies and that
18
each recipient does as well. In some cases we are extending commitments
that the Commission has approved in the past.
115.
Benefits targeted at schools will likely be in the form of student scholarships
or related stipends or funding special programs of study in the media field.
These would be administered by the school.
116.
Corus will provide additional details of each of these forthwith after filing.
Programming
117.
Corus will allocate $16,615,000 of incremental funds to the production of high
quality Canadian programming.
118.
As noted, 90% of this funding will be directed to animation programming.
119.
Each year $125,000 of this amount would be targeted to the Telefilm Canada
Canadian Talent Fund (for a total of $875,000) to support emerging and
established Canadian filmmakers in the animation genre.
120.
As is our current practice, Corus will work with producers from across the
country to identify, develop and fund the best proposals. We will ensure that
these incremental monies will stimulate the production of new, innovative
and relevant Canadian program offerings for broadcast on the TELETOON
networks.
Script and Concept Development
121.
Corus will establish a script and concept development fund of $2.8 million
payable over seven years. The Corus fund governance, management and
administration will be conducted by knowledgeable third parties. No Corus
administrative fees will be incurred in relation to this fund.
Export Initiative
122.
The Corus Export Initiative of $1,750,000 will assist Canadian independent
producers to gain access to international markets. Funds will be made
available for preparing and translating international sales packages and for
grants for travel and other expenses associated with attendance at world
markets. The Corus Export Initiative Fund governance, management and
administration will be conducted by knowledgeable third parties. No Corus
administrative fees will be incurred in relation to this fund.
Tangible Off-Screen Benefits
123.
The Corus tangible off-screen proposals total $3,735,000, which will be paid
out over seven years. Some of the items will represent extensions to funding
contributions that will run out over the anticipated seven year term to which
this plan applies.
19
124.
The proposals can be grouped into three categories: 1. Assistance for industry
festivals; 2. Training and Development and 3. Research.
Industry Festivals
125.
Industry Festivals have become an important method by which Canadian
producers can attract attention for their works and meet producers and the
programming buying community both in Canada and from abroad.
Toronto Animation Arts Festival International (TAAFI)
126.
The TAAFI festival was established to serve the 50 successful studios in the
Toronto region, the 10 schools of animation, and the community of
enthusiasts. It provides an opportunity for screening works, formal training
sessions and creates a marketplace.
Ottawa International Animation Festival (OAIF)
127.
$175,000
TIFF has become one of the pre-eminent festivals for showcasing major
motion pictures from around the world. Less well known is the role that TIFF
Kids plays in showcasing and establishing a market for the works of
Canadian children’s programming producers.
Banff World Media Festival
130.
$175,000
This Montreal-based animation festival provides another showcase for
animation producers to showcase and market their works.
TIFF Kids – Toronto International Film Festival
129.
$175,000
In similar fashion, the OAIF assembles animators, program buyers and fans
for four days of screenings, information exchange and business development.
Animaze Festival
128.
$175,000
$175,000
Banff is both one of Canada’s oldest but also most important festivals where
delegates from all over the world participate. In recent years Banff has
expanded to provide a place where producers of traditional forms of film and
television meet with the digital production community. It marked its 30th
anniversary of this annual forum of business and creative opportunities for
those in television and in new media. The Banff TV Foundation strives to
recognize, develop, celebrate and encourage excellence in television
programming within Canada and around the world. Independent producers
rely upon the Banff Festival to meet international commissioning editors and
potential co-production partners in an efficient manner. Corus, as one of
Canada’s strongest contributors to the creation of high quality Canadian
feature film, drama and animation content, will fund panel sessions with a
20
particular focus on kids and women’s programming or some form of new
producer mentor program, to be determined with the foundation.
DigiFest
131.
$105,000
DigiFest is a digital media festival in Toronto associated with 14 postsecondary academic institutions that brings together academics, business and
the general public for a festival about interactive and mobile media, gaming
and art & design.
Industry Training
The Canadian Film Centre (CFC)
132.
$500,000
This centre founded by Norman Jewison, a Governor-General Award and
Academy Award nominated filmmaker, opened its doors in 1988 as a film
training centre. The CFC has grown into Canada’s largest institution for
advanced training in film, television and new media. In 25 years, the CFC
has produced movies, short films, interactive films and games, TV pilots and
a host of new media applications that are revolutionizing the content
business. The CFC helps shape talent and innovation in Canada’s media
industries by launching new programs and initiatives that prepare, educate
and benefit emerging talent for the digital age and continue to bring
inspiring storytellers to the world. The benefit monies for the CFC will be
utilized to support the CFC’s training programs in film, television and new
media. As Canada’s leading institution for advanced training in film,
television and new media these training programs promise participants an
innovative education, creative industry partnerships and cutting edge
production experience.
Sheridan College, Faculty of Animation, Arts and Design $220,000
133.
Sheridan is one of the pre-eminent schools of animation in the world. Its
graduates make an enormous creative contribution each day to the animation
realm.
The National Screen Institute
134.
The National Screen Institute – Canada (NSI) is a charitable, not-for-profit
organization with headquarters in Winnipeg. NSI is a national film,
television and digital media training school for writers, directors and
producers.
Mount Royal University
135.
$175,000
$175,000
The benefits funds will be targeted to the Broadcasting and Communications
programs of this school located in Calgary.
21
Algonquin College
136.
$175,000
The Algonquin College animation program focuses on teaching students the
skills necessary to meet the high standards required to achieve success in the
animation production industry.
University of Waterloo – Stratford
$90,000 over six years
137.
Corus was one of the companies involved with the creation of the Stratford
campus of the University of Waterloo.
138.
The Waterloo-Stratford Campus is a satellite campus of the University of
Waterloo in the City of Stratford, Ontario, Canada. It is part of the Faculty of
Arts. The central areas of study include digital media and global enterprise –
a study of business on the international stage covering the disciplines of
political science, economics, history and culture.
139.
The Corus contribution will commence in the third year (Fiscal 2015) and
serves to extend an existing benefit which ends in Fiscal 2014.
YMCA
140.
$125,000 over five years
The YMCA was established over 160 years ago as a charity dedicated to the
health of both individuals and communities. The organization with its focus
on inclusiveness and accessibility means that they serve people of all ages,
backgrounds and abilities through all stages of life. There are 45 YMCAs and
6 YMCA-YWCAs in Canada that offer programs and services tailored to each
community’s needs. Together, they serve 2 million people in more than 1,000
communities across Canada.
141.
The Y established a program targeted to young people (16 to 21) where
young talented producers would teach basic media skills using professional
equipment. Most of the students are from the inner city and are from new
immigrant families. The program is intended to teach not only the skills but
to show these young people that they have a voice and that they can develop
the skills to make a positive contribution to their families and to the
community at large by using the communications skills taught. The program
operates throughout the year and involves between 12 and 20 young people
at a time as well as two instructors.
142.
The work that is produced is both creative and significant. For example, two
years ago one 17 year old produced a one minute video on the subject of
healthy eating habits. This video was selected by the City of Toronto Public
Health department as an effective tool to use in schools and elsewhere about
this important topic.
143.
The Corus contribution will commence in the fourth year (Fiscal 2016) and
serves to extend to an existing benefit contribution which ends in Fiscal 2015.
22
City Life Film Project
$25,000 over five years
144.
The City Life Project is similar to that of the YMCA but it is targeted at
emerging talents who have already received training. City Life takes a few
very promising film makers and links them with an accomplishing
professional for a few months. They work together to tell stories from their
communities in the form of short films.
145.
The Corus contribution will commence in the fourth year (Fiscal 2016) and
serves to extend an existing benefit which ends in Fiscal 2015.
Concerned Children’s Advertisers (CCA)
$200,000 over four years
146.
The CCA is a non-profit organization based in Toronto, founded in 1990. Its
mission is to be the credible, caring and authoritative voice of responsible
children’s advertising and communications in Canada, working in
partnership with government, educators, parents and experts to identify and
address issues of concern in children’s lives. Through a series of childdirected television public service messages (over 40 to date), and an education
program for teachers, parents, and community leaders, this organization has
produced and delivered over 40 public service announcements often in
partnership with Health Canada on issues of challenge in children’s lives,
including: substance abuse, child abuse, self-esteem, active living, bullying
and media literacy.
147.
One of its initiatives called “Long Live Kids! – What’s New Today?” includes
two exciting live-action 30 second television public service messages and a
new online education workshop called “Move Your Body” and “Use Your
Head”. These initiatives have been designed to motivate, inspire, and
empower children to take on a role for themselves and make smart choices
when it comes to their daily food and activity habits. With recent issues
related to childhood obesity, these initiatives are particularly relevant. This
serves to extend an existing benefit program.
Research
Canadian Communications Foundation
$170,000
148.
One of the best ways to help to plot the future of our industry is to
understand its past. The Canadian Communications Foundation (CCF) is
affiliated with Athabaska University and is compiling a history of Canadian
broadcasting and radio including television stations, including networks,
programs, broadcasters, policy development, milestone events and awards. It
has established an important research directory of materials about the
industry.
149.
The CCF was established in 1967. The funds will be directed at developing
more comprehensive content.
23
The Corus
(CICCORI)
Inner
City
Childhood
Obesity
Research Initiative
$900,000
150.
Corus has developed strong and well-known brands for children’s
programming and other related content including children’ books,
merchandising, games and other related products. As such, Corus believes
that it should endorse and promote initiatives that help educate and motivate
children to adopt healthy active living practices.
151.
In Public Notice CRTC 1993-68, Application of Benefits Test as the Time of
Transfers of Ownership or Control of Broadcasting Undertakings the
Commission stated as follows:
The Commission agrees with the comments regarding the importance of
research and development, particularly in this time of rapid technological
change. Accordingly, the Commission will generally consider research and
development initiatives as acceptable tangible benefits for radio, television and
cable undertakings provided that applicants demonstrate that the areas
covered by such initiatives will be of benefit to the public they serve and/or to
the industry or the broadcasting system as a whole.
152.
Increasingly children in Canada are developing life-crippling problems
because of childhood obesity. The statistics around these issues are cause for
alarm:

There are shocking statistics out there. Statistics Canada tells us that one
in four Canadian children is overweight or obese – Toronto Public Health
says that in this city that number is one in three.

Canadian children are, on average, sedentary for almost two-thirds of
their waking hours. As a result, they are at risk for Type II diabetes and
cardiovascular disease.
153.
As a media company, our fundamental question is what we, and other
companies, can do to get the message out in an effective manner. The first
element is getting the experts to give us the story line that will be compelling
and effective. So we consulted the experts.
154.
St. Michael’s Hospital serves the most densely populated inner city in
Canada. It is the only hospital in Toronto – and the first in Canada – to have
created an Inner City Health Program. Every day, the health care teams
reach out to people who are most in need: women-at-risk, people who are
homeless, patients with severe and persistent mental illness and, sadly,
Toronto’s disadvantaged children.
155.
The St. Michael’s Hospital TARGet Kids! program is following over 5,000
children in the Toronto area to determine the common factors that hamper
healthy growth and development. If we can understand why health problems
24
develop in childhood, adolescence and into adulthood, we can prevent them.
This initiative is unique in Canada.
156.
The team of experts has made progress, garnering significant peer review
funding support and media attention. But they need help to expand the
program and develop the messaging for all Canadians utilizing traditional
and new media:


To enable the TARGet Kids! living laboratory to expand beyond Toronto’s
inner city core;
To help to grow the TARGet Kids! registry from 5,000 children to 10,000,
making it one of the largest urban cohorts of young children in the world,
of whom an estimated one third will become obese and have to cope with
the associated effects of chronic illness in adulthood, unless we intervene;

To broaden our understanding of the child, family and neighbourhood
environmental factors that underlies childhood obesity; and

To use this information to build awareness in the form of media tools to
develop and test new health interventions derived from the research
aimed at the root causes of childhood obesity to assist primary care
physicians, parents, and communities in working together to prevent
these problems from the outset. What we are proposing is a form of script
development over and above the funds set out above but on this particular
subject matter.
157.
In sum, the benefits funds will be used to build on this research and develop
the knowledge and understanding to help create effective messaging and
media tools to help Canadian children, their parents, and institutions to solve
this problem.
158.
All of the funds will be used by St. Michael’s Hospital to accomplish this
objective.
159.
All of the information will be shared with the community at large and we
hope to involve other media companies as well as independent producers.
160.
The program has recently expanded into two other provinces (Manitoba and
Quebec). The team is collaborating with site leads Dr. Carrie Daymont at the
Manitoba Institute of Child Health and Dr. Patricia Li at the Montreal
Children’s Hospital Research Institute, who are providing matching financial
support. Data collection at those sites is set to begin in 2013.
161.
The development of understanding and media tools will facilitate achieving
these goals.
25
Financial Impact
162.
The benefits monies will be disbursed as follows:
(millions)
Recipient
Year
Year
Year
Year
Year
Year
Year
Total
1 F14 2 F15 3 F16 4 F17 5 F18 6 F19 7 F20
Programming 2.374 2.374 2.374
2.374 2.374
2.374
2.371 $16.615
Script
0.4
0.4
0.4
0.4
0.4
0.4
0.4
$2.800
Export
0.25
0.25
0.25
0.25
0.25
0.25
0.25
$1.750
TAAFI
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
OAIF
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
Animaze
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
TIFF Kids
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
Banff
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
DigiFest
0.015 0.015 0.015
0.015 0.015
0.015
0.015
$0.105
CFC
0.075 0.075 0.075
0.075 0.075
0.075
0.05
$0.500
Sheridan
0.04
0.03
0.03
0.03
0.03
0.03
0.03
$0.220
NSI
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
Mount Royal
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
Algonquin
0.025 0.025 0.025
0.025 0.025
0.025
0.025
$0.175
UW-Stratford
0 0.015 0.015
0.015 0.015
0.015
0.015
$0.090
YMCA
0
0 0.025
0.025 0.025
0.025
0.025
$0.125
City Life
0
0 0.005
0.005 0.005
0.005
0.005
$0.025
CCA
0
0
0
0.05
0.05
0.05
0.05
$0.200
CICCORI
0.13
0.13
0.13
0.13
0.13
0.13
0.12
$0.900
CCF
0.05
0.05 0.014
0.014 0.014
0.014
0.014
$0.170
Total
3.534 3.539 3.533 3.583 3.583 3.583 3.545 $24.900
163.
Corus submits that the benefits package is in the public interest. The
proposed benefits package will result in the achievement of significant
contributions to the Canadian broadcasting system. The vast majority of the
funds will be used to finance the creation of new and innovative Canadian
programs. The remaining monies will be used to support key public policy
initiatives that advance certain objectives contained in section 3 of the
Broadcasting Act including:
3(1)(d)(i) serve to safeguard, enrich and strengthen the cultural, political,
social and economic fabric of Canada; and
(ii)
encourage the development of Canadian expression by providing a
wide-range of programming that reflects Canadian attitudes,
opinions, ideas, values and artistic creativity.
Diversity and Ownership Issues
164.
The Commission examines and regulates the subject of diversity in two
fundamental areas: program source and ownership.
26
165.
The Canadian broadcasting system is more diverse in each of these areas
than it has ever been since the first radio station launched in Montreal in the
last century. Canadians have a plethora of choice of both Canadian and
foreign services. Although today’s Canadian media industry is strong and
vibrant, the fundamental business premises of this industry are undergoing
major and fundamental changes because of the advent of new media, which
offers limitless unregulated media choices and opportunities. It is not only
new media that are changing the environment, but also the arrival of foreign
services in large numbers that are competing for content, viewers,
subscribers and advertisers without any of the obligations that Canadian
licensees carry.
166.
The number of services authorized to broadcast in Canada continues to
grow:8
Type
Analog Specialty
Category 1
Category 2
Pay
Pay per View
VOD
Total
2007
44
18
53
13
13
18
159
2011
49
18
110
16
11
33
237
167.
The advent of digital technology represents one of these opportunities by
bringing production and distribution tools to all Canadians. However, in
doing so digital technology also poses a threat to the existence of Canadian
media as we know it. The reality of the Canadian market – small and
surrounded by larger media entities – is exacerbated by digital technology
which increases fragmentation and removes borders as well as barriers to
entry.
168.
The Commission set out its policy on ownership diversity in Broadcasting
Public Notice CRTC 2008-4. In its policy notice, the Commission outlined how
it would deal with applications seeking a change in effective control based on
the total television audience share post acquisition. Essentially the
Commission undertakes, barring other policy concerns, to “process
expeditiously transactions that would result in the control by one person of
less than 35% of the total television audience share – including audiences to
both discretionary and OTA services.9”
169.
In the present case, the total of Corus’ English-speaking audience viewers 2+
shares for each of the periods 2011 are as follows:
8
9
CRTC Communications Monitoring Reports 2012 and 2008.
BPN 2008-4 at paragraph #87.
27
2011 Corus
Services
10.4%
2011 Joint Venture
Services10
3.02%
Total Corus Share
13.44%
170.
These Joint Venture figures include the TELETOON group of channels.
171.
Corus is a company that is ultimately controlled by the JR Family Trust,
which also owns and operates Shaw Communications Inc. and Shaw Media
Inc. Corus and Shaw Media are completely separate, however, for the
purposes of the Commission’s analysis, below are Shaw Media Inc.’s English
audience 2+ shares (English being all of Canada outside French Quebec) for
each of the 2011 periods as well as the combined Corus and Shaw audience
shares for each of these time periods:
2011 Shaw Services
22.40%
Total Corus/Shaw Share
35.83%
172.
It is important to note that Corus’ audience share position remains
unchanged in the event the Commission approves this transaction. Therefore,
there is no net increase in English-language share audience position as a
result of the proposed transfer. It has already been counted by the
Commission.
173.
This is the case because Corus already holds a 50% ownership and has
actively participated since 1999 through its role on the board of directors of
TELETOON Canada Inc. in the operation and stewardship of the
TELETOON services. Corus originates the service from its broadcast centre
at Corus Quay, sells its advertising inventory nationally (excluding Quebec)
and contributes Canadian Content through Nelvana Limited.
174.
The Commission also made an important statement in the Diversity Policy:
It is important to note that the Commission will not be concerned about
increases in viewing share that result from the normal competition for
audiences or the introduction of new services. Concerns are only triggered
when a proposed acquisition may result in a person gaining a dominant
position in the television sector.11
175.
Corus has been an industry leader in launching new television services or
rescuing failing brands by making the investment to bring them back to life
for Canadian audiences. Some examples of new launches are ABC Spark
(launched in 2012), Cartoon Network (2012), Nickelodeon (2009), and
TELETOON Retro English and French (2007). Re-branded and rescued
services include OWN: Oprah Winfrey Network (from Canadian Learning
Television), W Movies (from Sex TV) and Sundance Channel (from Drive In
10
11
Includes TELETOON.
IBID, paragraph #84.
28
Classics). These investments brought more and better
independently produced programming to Canadian homes.
Canadian
176.
So part of our share growth has been due to the introduction of new services
and also improving what we do to attract more audience.
177.
On the subject of program source, the Canadian regulatory regime already
imposes comprehensive obligations on licensees to create a structured market
for independent producers.
178.
We start with the understanding that a linear channel has a fixed volume of
time. Each year starts with a total of 8,760 hours. Each program occupies a
portion of that time. The number of individual program titles needed is a
function of the repeat factor.
179.
The current regulatory structure made up of the Commission rules and
funding agencies’ policies combined with tax credit and other rules greatly
influence the supply chain for programming.
180.
This matrix of regulations and policies has evolved a great deal since the
CRTC diversity policy was first announced in 2008. The combined impact of
existing conditions of licence (COL), the Group Based Licensing process, and
funding agency rules establish the framework for how the 8,760 hours are
filled. A Corus service is subject to the following rules which regulate our
decision making on programming acquisition and scheduling:
181.

Canadian Content must meet certain levels overall and in prime viewing
periods.

This Canadian Content volume must meet or exceed a Canadian Program
Expenditure (CPE) level.

Part of the CPE must be devoted to minimum levels of Programming of
National Interest (PNI) spending.

A portion of the PNI CPE must be spent on independent productions.
The Terms of Trade Agreement (ToT) also became a COL. The Canadian
Media Production Association (CMPA) describes its ambit: 12
The deal applies to the entire life cycle of a show - from first pitch, through to
development, production and broadcast on all platforms. Key areas covered by
the deal include:
Development and Evaluation
Licensing Conditions
Editorial Control
12
See: http://www.cmpa.ca/business-affairs-production-tools/terms-trade
29
Licence Term
Rights
Equity
Super Licence Fees
Producer Tax Credits
Timeframe and Administration
182.
The various funding agencies such as the Canada Media Fund (CMF) also
establish licence fee floors as a pre-condition to funding access.13
183.
The combined impact of these rules is to establish the volume of content, the
per unit price paid for it, the rights such as repeat factors and platforms that
can be associated with this price, and the nature of the party from which it
can be acquired. It is a market where the only substantive decision a
broadcaster really has is what project is selected and when it will be aired in
the calendar year. Even the development process is regulated. All other
elements have strict criteria associated with them.
184.
TELETOON already acquires more than 75% of the TELETOON Canadian
Content from independent producers because the Corus production system is
not geared to this level of programming volume. The actual total is about
85%. Most of the programs produced by Corus are also not suitable for the
mainly adult audiences of the TELETOON channels.
185.
So we won’t be supplying the service in any larger volumes that we do now.
As to program choice, show development rests completely with the
independent producer. They bring the program ideas to us. The volume, price
and rights are basically pro forma so the only substantive decision is the
subject matter. If we decide to pick a show, licence fees are governed by ToT
and CMF, etc. We can also decide if we want to invest additional equity but
again, that is governed by ToT. The audience for TELETOON is the ultimate
arbiter of success so renewal decisions are in their hands. If a program
gathers an audience, it is renewed.
186.
TELETOON has a programming team now and will have one after we
acquire the services. However Corus is building a dynamic new management
team in Montreal so producers will have the same number of stops to make
when they are pitching shows. So this market factor does not change either.
187.
Therefore, we will be picking the same volume of independent programs at
the same terms as is the case now. The big change will be the increase in
spending. Most of the benefits payments will also occur to the independent
production community in one way or another.
See the CMF Performance Envelope Program Guidelines 2012-2013 for an example at
http://www.cmf-fmc.ca/funding-programs/convergent-stream/performance-envelope/
13
30
The Channels are Different
188.
Another fundamental point is that each Corus channel has a unique
programming mandate. Each licence issued by the CRTC has a unique
Nature of Service (NOS) and programming conditions and/or expectations.
This does not change with the transaction. TELETOON and the related
channels are restricted to mainly animation services. YTV, Treehouse and
Nickelodeon have broader mandates but also varying audience targets as a
condition.
189.
The result is that the spectrum of programs and the volume needed does not
change.
Conclusion
190.
Corus is a respected and valued contributor to the Canadian broadcasting
system. We believe in the superb delivery of compelling programming on all
of our broadcasting assets and our role in Canadian animation programming
is recognized around the world.
191.
We have a demonstrated interest and capability as it relates to operating
specialty services and TELETOON specifically. Many of the business
activities are already performed by Corus.
192.
We have reached a definitive agreement with Bell Media Inc. and approval of
the proposed transfer of ownership would eliminate further ambiguity on
important assets, which contribute significant expenditures to the creation of
Canadian Content.
193.
TELETOON’s most recent performance has been uncharacteristically poor,
reflecting the uncertainty of its ownership and the challenging economic
times. Speedy resolution of the control of these broadcasting assets will
provide clarity of purpose and avoid unnecessary further erosion.
194.
But more importantly, at this crucial juncture in TELETOON’s history it
would no longer be appropriate to have the services continue with dual
ownership and with the control resting with the board of directors. With the
rapid changes being experienced within the Canadian broadcasting industry
as a result of digital migration, independent services such as TELETOON
will find it increasingly difficult to continue to grow and sustain current
levels of CPE without the aid and support of operating within a larger and
financially strong media group. Corus is ready, willing and able to invest in
the continued success of TELETOON.
31
Timing of the CRTC Review of this Application
195.
Corus and Bell-Astral request that this transaction be processed in a manner
so that we could effect a simultaneous closing with the Bell and Astral
closing. The Commission has a number of options in this regard. The
application could be heard at the same public hearing as the one for the
larger transaction between Bell and Astral. It could be a non-appearing item
on the same public hearing or the Commission could proceed by way of a
Public Notice of Consultation. We request this on the basis of a number of
compelling factors:
A. Delay of the closing of this transaction would create an
anomalous business and operational circumstance. This would
result in a manifestly unfair and confusing circumstance for all
concerned, including the CRTC.

In the event that Bell’s application is approved, it would move forward
with its plans to integrate Astral. We would face a situation where Bell
and Astral would need to adapt their plan to another event – the Corus
purchase approval or a denial – that would take place only months later.

This places unnecessary stress and risk upon the people and business
operations of these five channels. They not only would remain uncertain
but one side of the array of services would be making plans for a new
vision and structure while being required to continue its efforts for
TELETOON. It would certainly be a confusing situation.

This jeopardizes the efforts of TELETOON to serve its subscribers,
viewers and customers (BDU carriers and advertisers) in the manner in
which they expect.

Corus, as a 50% owner, would also face this long period of uncertainty in a
business environment that is evolving quickly. The delay would effectively
place any required investment decisions in programming and other needs
on hold for an entire fiscal year.

The delay would also push back the comprehensive plans we have for the
tangible and intangible benefits to the system. This removes over $3.5
million from the system for a year.

It would also require a full range of changes to the operation (operating
service contacts, etc.) and governance (e.g. board seats, signatories to
service agreements etc.) of the operation all of which would change again
months later. As noted above, Astral performs key operating tasks for the
company. The fact is that Astral, as a corporate entity, with whom are all
of the existing service agreements, would cease to exist.
32

A delay would hinder our efforts to build a strong Quebec-based team due
to the uncertainty. It would also be extremely difficult for the existing
employees who would face a long period of uncertainty.

As a practical matter, the distraction and demise of Astral would mean
that effective control would be passing to Corus in any case but without
the legal ability to move on it. In short, the five channels would sit in
limbo for months.
B. The Commission’s ability to do a comprehensive review would not
be constrained.

TELETOON filed its licence renewal application in September 2012 and
the Commission has completed its review.

The Commission has just recently reviewed and approved the Corus plan
for its other services as part of the Group Based Licensing process which
decision was published less than two broadcast years ago in July 2011.

TELETOON was part of the assets reviewed by CRTC in the original
application by Bell and Astral just months ago.

Corus is not requesting any fundamental changes from the TELETOON
obligations and framework of conditions of licence that it filed in its
renewal application.

TELETOON assets will be reviewed by the Commission as part of the
Bell-Astral review in every case.

The Commission already approved
TELETOON in 2000.
the
Corus
involvement
with
As a result the Commission has a comprehensive understanding of
TELETOON and Corus.
C. The Commission will be required to review and approve the
disposition of TELETOON as part of the Bell-Astral review
process.

A key aspect of this public hearing process is that the public will have the
opportunity to understand and comment upon the disposition of the
assets that are going to Corus as part of the Bell-Astral hearing.
D. The only issues for review on the Corus application are our vision
for the assets, valuation, and benefits. The Commission will
already have approved the disposition by Bell.
33
196.
In sum, the Commission will be reviewing the assets in any case as part of
the broader transaction; it knows the purchaser Corus and the delay will
have significant impacts which could greatly damage the assets in question.
197.
We respectfully submit that review and approval of this application as part of
the Bell-Astral process would be significantly in the public interest.
34
Appendix A
Review of Corus Awards and Milestones
February 19, 2013: Corus Named One of Canada’s Best Diversity Employers
for 2012
The Company announced that, for the fifth year in a row, Corus Entertainment was
named one of Canada’s Best Diversity Employers for 2013 by Mediacorp Canada Inc.
February 6, 2013: Corus Recognized at the IR Magazine Canada 2012
Awards
The Company was recognized for the second year in a row with the prestigious IR
Magazine Canada 2013 award for Best Investor Relations by Sector - Leisure and
Media.
November 20, 2012: Corus Entertainment Named One of Greater Toronto's
Top Employers for 2013
Corus Entertainment was named one of Greater Toronto's Top Employers for 2013.
This special designation recognizes Greater Toronto employers that lead their
industries in offering exceptional places to work.
November 13, 2012: Kids Can Press Wins 2012 Governor General’s Literary
Award for Virginia Wolf
The Company’s Kids Can Press won the 2012 Governor General’s Literary Award for
Children's Literature – Illustration for Isabelle Arsenault’s Virginia Wolf. This is the
fifth Governor General’s Literary Award that Kids Can Press has received.
October 9, 2012: Toon Boom Storyboard Pro Wins a Primetime Engineering
Emmy®
The Company's subsidiary, Toon Boom, announced that the Academy of Television
Arts and Sciences had awarded a 2012 Primetime Engineering Emmy® Award to
Storyboard Pro, Toon Boom's flagship storyboarding software. These awards honour
significantly improved or innovative engineering developments that materially affect
the television medium.
September 23, 2012: Corus’ Programming Recognized at the 64th Primetime
Emmy® Awards
The Company announced that its programming received 24 awards at the 64th
Primetime Emmy® Awards. The award-winning series included HBO’s Game of
Thrones, Game Change, Boardwalk Empire, Curb Your Enthusiasm, Girls and Veep
as well as Nickelodeon’s The Penguins of Madagascar: The Return of the Revenge of
Dr. Blowhole.
April 20, 2012: Corus Named one of Canada’s Greenest Employers for 2012
The Company was named one of Canada’s Greenest Employers for 2012 by
Mediacorp Canada Inc. Selected alongside 54 other companies, this award
recognizes employers that create a culture of environmental awareness in their
organizations.
35
March 22, 2012: Corus Wins Three 2012 Canadian Music & Broadcast
Industry Awards
The Company won three 2012 Canadian Music & Broadcast Industry Awards
including: Station of the Year (Country), Country 105, Calgary; Station of the Year
(Rock), 102.1 the Edge, Toronto; and Program Director of the Year (Medium
Market), Brad Gibb, FM 96, London.
March 22, 2012: John Derringer Inducted into the Canadian Industry Hall
of Fame
The Company’s morning show host on Q107 Toronto, John Derringer, received the
Allan Waters Broadcast Lifetime Achievement Award and was inducted into the
Canadian Broadcast Industry Hall of Fame.
March 7, 2012: CKNW AM 980 Receives Three 2012 RTNDA Awards
The Company’s CKNW AM 980 was honoured with three 2012 RTNDA Canada
Awards including the Sam Ross Award for Editorial/Commentary, the Dave Rogers
Award for Long Feature and the Ron Laidlaw Award for Continuing Coverage.
February 21, 2012: Corus Named One of Canada’s Best Diversity Employers
for 2012
The Company announced that, for the fourth year in a row, Corus Entertainment
was named one of Canada’s Best Diversity Employers for 2012 by Mediacorp Canada
Inc.
February 2, 2012: Corus Recognized with two IR Magazine Canada 2012
Awards
The Company was recognized with two prestigious IR Magazine Canada 2012
awards including Best Investor Relations by Sector - Leisure and Media and Best
Investor Relations by a CFO (Tom Peddie) for a mid-cap company.
December 6, 2011: Corus Honoured with Canada’s Outstanding Employer
Award for 2011
The Company was honoured with The Learning Partnership’s 2011 Canada’s
Outstanding Employer Award for its Take Our Kids to Work™ program.
November 15, 2011: Kids Can Press Wins Governor General’s Literary Award
for Cybèle Young’s Ten Birds
The Company’s Kids Can Press won the 2011 Governor General’s Literary Award for
Children's Literature – Illustration for Cybèle Young’s Ten Birds. This is the fourth
Governor General’s Literary Award that Kids Can Press has received in the last five
years.
September 19, 2011: Corus Named One of Canada’s Top Employers for
Young People for 2011
Corus Entertainment was named one of Canada’s Top Employers for Young People
for 2011, which marks the second year in a row that Corus received special
recognition in attracting and training younger employees through Corus U’s inhouse and online training opportunities.
36
September 8, 2011: Corus Receives 23 Gemini Awards
The Company announced that its programming received a total of 23 awards from
the Academy of Canadian Cinema and Television’s 26th Annual Gemini Awards.
Movie Central’s series received a total of 17 awards, with Call Me Fitz picking up an
impressive seven Geminis. Corus’ YTV and TELETOON received six awards,
including two Geminis for Nelvana Studio’s Babar and the Adventures of Badou.
37
APPENDIX 2B
Control Statement
Appendix 2B
Statement of Control
The proposed licensee 8324441 Canada Inc. is 100% controlled by Corus Entertainment Inc.
APPENDIX 2C
Corporate Documents
Corporations Canada
9th floor, Jean Edmonds Towers South
365 Laurier Avenue West
Ottawa, Ontario K1A 0C8
2013-03-01
Corporations Canada
9e étage, Tour Jean-Edmonds sud
365, avenue Laurier ouest
Ottawa (Ontario) K1A 0C8
Corporation Information Sheet
Fiche de renseignements
concernant la société
Canada Business Corporations Act (CBCA)
Loi canadienne sur les sociétés par actions (LCSA)
8324441 Canada Inc.
832444-1
Corporation Number
Corporation Key
87705178
Required for changes of
address or directors online
Numéro de société
Clé de société
Requise pour mettre à jour en ligne l'adresse du siège
social ou l'information concernant les administrateurs
03-01
Anniversary Date
Required to file annual return
(mm-dd/mm-jj)
Annual Return Filing Period
Starting in 2014
03-01 to/au 04-30
Date anniversaire
Requise pour le dépôt du rapport annuel
Période pour déposer le rapport annuel
Débutant en 2014
(mm-dd/mm-jj)
Reporting Obligations
Obligations de déclaration
A corporation can be dissolved if it defaults in filing a document
required by the CBCA. To understand the corporation's reporting
obligations, consult Keeping Your Corporation in Good Standing
(enclosed or available on our website).
Une société peut être dissoute si elle omet de déposer un
document requis par la LCSA. Pour connaître les obligations de
déclaration de la société veuillez consulter la brochure Maintenir
votre société en conformité, ci-jointe ou disponible dans notre
site Web.
Corporate Name
Dénomination sociale
Where a name has been approved, be aware that the corporation
assumes full responsibility for any risk of confusion with existing
business names and trademarks (including those set out in the
NUANS® search report). The corporation may be required to change
its name in the event that representations are made to Corporations
Canada and it is established that confusion is likely to occur. Also
note that any name granted is subject to the laws of the jurisdiction
where the corporation carries on business. For additional
information, consult Protecting Your Corporate Name (enclosed
or available on our website).
En dépit du fait que Corporations Canada ait approuvé la
dénomination sociale, il faut savoir que la société assume toute
responsabilité de risque de confusion avec toutes dénominations
commerciales, marques de commerce existantes (y compris celles
qui sont citées dans le rapport de recherche NUANSMD). La société
devra peut-être changer sa dénomination advenant le cas où des
représentations soient faites auprès de Corporations Canada
établissant qu'il existe une probabilité de confusion. Il faut aussi
noter que toute dénomination octroyée est assujettie aux lois de
l'autorité législative où la société mène ses activités. Pour obtenir
de l'information supplémentaire, veuillez consulter le document
Protection de la dénomination sociale ci-joint ou disponible dans
notre site Web.
Telephone / Téléphone
1-866-333-5556
Email / Courriel
[email protected]
Website / Site Web
www.corporationscanada.ic.gc.ca
Certificate of Incorporation
Certificat de constitution
Canada Business Corporations Act
Loi canadienne sur les sociétés par actions
8324441 Canada Inc.
Corporate name / Dénomination sociale
832444-1
Corporation number / Numéro de société
I HEREBY CERTIFY that the above-named
corporation, the articles of incorporation of which
are attached, is incorporated under the Canada
Business Corporations Act.
JE CERTIFIE que la société susmentionnée, dont
les statuts constitutifs sont joints, est constituée
en vertu de la Loi canadienne sur les sociétés par
actions.
Marcie Girouard
Director / Directeur
2013-03-01
Date of Incorporation (YYYY-MM-DD)
Date de constitution (AAAA-MM-JJ)
Form 1
Articles of Incorporation
Canada Business Corporations
Act (s. 6)
1
Formulaire 1
Statuts constitutifs
Loi canadienne sur les sociétés
par actions (art. 6)
Corporate name
Dénomination sociale
8324441 Canada Inc.
2
The province or territory in Canada where the registered office is situated
La province ou le territoire au Canada où est situé le siège social
ON
3
The classes and any maximum number of shares that the corporation is authorized to issue
Catégories et le nombre maximal d’actions que la société est autorisée à émettre
an unlimited number of common shares.
4
Restrictions on share transfers
Restrictions sur le transfert des actions
See attached schedule / Voir l’annexe ci-jointe
5
Minimum and maximum number of directors
Nombre minimal et maximal d’administrateurs
Min. 1
6
Max. 10
Restrictions on the business the corporation may carry on
Limites imposées à l’activité commerciale de la société
None
7
Other Provisions
Autres dispositions
See attached schedule / Voir l’annexe ci-jointe
8
Incorporator’s Declaration: I hereby certify that I am authorized to sign and submit this form.
Déclaration des fondateurs : J’atteste que je suis autorisé à signer et à soumettre le présent formulaire.
Name(s) - Nom(s)
Original Signed by - Original signé par
Thomas C. Peddie
Thomas C. Peddie
Thomas C. Peddie
Misrepresentation constitutes an offence and, on summary conviction, a person is liable to a fine not exceeding $5000 or to imprisonment for a term not exceeding six months or both (subsection
250(1) of the CBCA).
Faire une fausse déclaration constitue une infraction et son auteur, sur déclaration de culpabilité par procédure sommaire, est passible d’une amende maximale de 5 000 $ et d’un
emprisonnement maximal de six mois, ou l’une de ces peines (paragraphe 250(1) de la LCSA).
You are providing information required by the CBCA. Note that both the CBCA and the Privacy Act allow this information to be disclosed to the public. It will be stored in personal information
bank number IC/PPU-049.
Vous fournissez des renseignements exigés par la LCSA. Il est à noter que la LCSA et la Loi sur les renseignements personnels permettent que de tels renseignements soient divulgués au public.
Ils seront stockés dans la banque de renseignements personnels numéro IC/PPU-049.
IC 3419 (2008/04)
Schedule / Annexe
Restrictions on Share Transfers / Restriction sur le transfert d'actions
The shares of the Corporation shall be subject to the restriction on the transfer of securities set
out under Other provisions, if any.
Schedule / Annexe
Other Provisions / Autres dispositions
(a)
The securities of the Corporation, other than non-convertible debt securities, shall not
be transferred without the approval of the board of directors or of the holder or holders of more
than 50% of the voting shares of the Corporation, to be evidenced in either case by a resolution
of such directors or shareholders.
(b)
The directors may appoint from time to time one or more additional directors within the
limits provided in the Canada Business Corporations Act.
(c)
The directors may from time to time determine the number of directors of the
Corporation.
Form 2
Initial Registered Office Address
and First Board of Directors
Formulaire 2
Siège social initial et premier
conseil d’administration
Canada Business Corporations Act
(CBCA) (s. 19 and 106)
Loi canadienne sur les sociétés par
actions (LCSA) (art. 19 et 106)
1 Corporate name
Dénomination sociale
8324441 Canada Inc.
2 Address of registered office
Adresse du siège social
25 Dockside Drive
Toronto ON M5A 0B5
3 Additional address
Autre adresse
4 Members of the board of directors
Membres du conseil d’administration
Resident Canadian
Résident Canadien
Thomas C. Peddie
25 Dockside Drive, Toronto ON
M5A 0B5, Canada
Yes / Oui
5 Declaration: I certify that I have relevant knowledge and that I am authorized to sign this form.
Déclaration : J’atteste que je possède une connaissance suffisante et que je suis autorisé(e) à signer le présent
formulaire.
Original signed by / Original signé par
Thomas C. Peddie
Thomas C. Peddie
416-479-7000
Misrepresentation constitutes an offence and, on summary conviction, a person is liable to a fine not exceeding $5000 or to imprisonment for a term not exceeding six months or both (subsection
250(1) of the CBCA).
Faire une fausse déclaration constitue une infraction et son auteur, sur déclaration de culpabilité par procédure sommaire, est passible d’une amende maximale de 5 000 $ et d’un
emprisonnement maximal de six mois, ou l’une de ces peines (paragraphe 250(1) de la LCSA).
You are providing information required by the CBCA. Note that both the CBCA and the Privacy Act allow this information to be disclosed to the public. It will be stored in personal information
bank number IC/PPU-049.
Vous fournissez des renseignements exigés par la LCSA. Il est à noter que la LCSA et la Loi sur les renseignements personnels permettent que de tels renseignements soient divulgués au public.
Ils seront stockés dans la banque de renseignements personnels numéro IC/PPU-049.
IC 2904 (2008/04)
Corporations Canada
9th floor
Jean Edmonds Towers South
365 Laurier Avenue West
Ottawa, Ontario K1A 0C8
Corporations Canada
9e étage
Tour Jean Edmonds sud
365, avenue Laurier ouest
Ottawa (Ontario) K1A 0C8
2013-03-01
Ontario Extra-provincial Registration /
L’enregistrement d’une entreprise extraprovinciale en Ontario
8324441 Canada Inc.
Corporate name / Dénomination sociale
832444-1
Corporation Number / Numéro de la société
Attached is your completed registration form for
Ontario. The form does not contain your Ontario
Corporation Number.
Ci-joint est votre formulaire d’enregistrement
rempli pour l’Ontario. Le formulaire ne contient
pas votre numéro d’entreprise de l’Ontario.
The Ontario registration application has been
forwarded to the Ontario Central Production and
Verification Services Branch. If your application is
approved, you will receive a "Notice to Clients"
advising you of the corporation's new Ontario
Corporation Number.
La demande d’enregistrement de l’Ontario a été
envoyée à la Direction des services centraux de
production et de vérification. Si votre demande est
approuvée, vous recevrez un « préavis des clients
» vous informant du nouveau numéro d’entreprise
de l’Ontario pour la société.
If you have any questions about your Ontario
registration, contact Central Production and
Verification Services Branch at:
1-800-361-3223 or 416-314-8880 or
www.ontario.ca/en/business/STEL02_163367.
Si vous avez des questions au sujet de
l’enregistrement en Ontario, contactez la
Direction des services centraux de production et
de vérification :
1-800-361-3223 ou 416-314-8880 ou
www.ontario.ca/fr/business/STEL02_164570.
INITIAL RETURN/
RAPPORT INITIAL
FORM 2 - EXTRA PROVINCIAL CORPORATIONS/
Corporations Information Act/
FORMULE 2 - PERSONNES MORALES EXTRA-PROVINCIALES
For Ministry Use Only
À l'usage du ministère
seulement
2.
Loi sur les renseignements exigés des personnes morales
3.
Ontario Corporation Number
Numéro matricule de la personne
morale en Ontario
Date of Incorporation
Date de constitution
1.
Initial Return
Rapport initial
Business Corporations/
Société par actions
2013-03-01
X
For Ministry Use Only
À l'usage du ministère seulement
4. Corporation Name Including Punctuation/Raison sociale de la personne morale, y compris la ponctuation
8324441 Canada Inc.
For Ministry Use Only
À l'usage du ministère seulement
5. Address of Registered or Head Office/Adresse du siège social
25 Dockside Drive
Toronto, Ontario
Canada M5A 0B5
6. Address of Principal Office in Ontario/Adresse du bureau principal en Ontario
Not Applicable/Ne s'applique pas
25 Dockside Drive
Toronto, Ontario
Canada M5A 0B5
7. Language of Preference/Langue préférée
X
French/Français
English/Anglais
8. Former Corporation Name/Raison sociale antérieure de la personne morale
9. Date commenced business activity in Ontario/Date de début des activités en Ontario
X
Not Applicable/Ne s'applique pas
2013-03-01
10. Date ceased carrying on business activity in Ontario/Date de cessation des activités en Ontario
X
Not Applicable/Ne s'applique pas
11. Jurisdiction of Incorporation/Amalgamation or Continuation/Ressort de constitution/de fusion ou prorogation
X
Canada/Canada
12. Name and Office Address of the Chief Officer/Manager in Ontario/Nom et adresse du bureau du directeur général/gérant en Ontario
X
Not Applicable/Ne s'applique pas
Date Effective/Date d'entrée en vigueur
13. Name and Office Address of Agent for Service in Ontario/Nom et adresse du bureau du mandataire aux fins de signification en Ontario
X
14. Name/Nom
Thomas C. Peddie
Not Applicable/Ne s'applique pas
Person authorizing filing/Personne qui autorise l'enregistrement
Director
NOTE/
Sections 13 and 14 of the Corporations Information Act provide penalties for making false or misleading statements or omissions.
REMARQUE: Les articles 13 et 14 de la Loi sur les renseignements exigés des personnes morales prévoient des peines en cas de déclaration fausse ou trompeuse, ou d'omission.
This information is being collected under the authority of The Corporations Information Act for the purpose of maintaining a public data base of corporate information.
La Loi sur les renseignements exigés des personnes morales autorise la collecte de ces renseignements pour constituer une banque de données accessible au public.
APPENDIX 2D
Share Purchase Agreement
ABRIDGED
ABRIDGED
EXECUTION VERSION
BELL MEDIA INC.
- and 8324441 CANADA INC.
- and CORUS ENTERTAINMENT INC.
______________________________________________________________________________
SHARE PURCHASE AGREEMENT
March 4, 2013
______________________________________________________________________________
ABRIDGED
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION ................................2
1.1
1.2
1.3
1.4
Definitions ..............................................................................................................2
Certain Rules of Interpretation .............................................................................10
Knowledge............................................................................................................12
Entire Agreement..................................................................................................12
ARTICLE 2 PURCHASE AND SALE........................................................................................12
2.1
2.2
2.3
Action by Bell and Purchaser ...............................................................................12
Place of Closing....................................................................................................13
Allocation of Purchase Price ................................................................................13
ARTICLE 3 PURCHASE PRICE ................................................................................................14
3.1
3.2
3.3
3.4
Purchase Price ......................................................................................................14
Satisfaction of Purchase Price ..............................................................................14
Delivery of Closing Date Balance Sheet ..............................................................14
Post-Closing Adjustment......................................................................................16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BELL ......................................16
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Residence of Bell..................................................................................................17
Status of Bell and Right to Sell ............................................................................17
Capitalization........................................................................................................17
Due Authorization and Enforceability of Obligations..........................................18
Absence of Conflicts ............................................................................................18
Regulatory Approvals...........................................................................................18
Litigation ..............................................................................................................19
Benefit Plans.........................................................................................................19
Business of HoldCo ..............................................................................................20
Business of HoldCo 2 ...........................................................................................20
Third Party Consents ............................................................................................20
Independence of Parties........................................................................................20
No Broker .............................................................................................................20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................20
5.1
5.2
5.3
Status of the Purchaser .........................................................................................21
Due Authorization and Enforceability of Obligations..........................................21
Absence of Conflicts ............................................................................................21
-i-
ABRIDGED
TABLE OF CONTENTS
(continued)
Page
5.4
5.5
5.6
5.7
5.8
5.9
5.10
Litigation ..............................................................................................................21
No Broker .............................................................................................................22
Share Ownership ..................................................................................................22
No Partner.............................................................................................................23
Qualified Corporation...........................................................................................23
Independence of Parties........................................................................................23
Continued Operation of the Business of the Company ........................................23
ARTICLE 6 SURVIVAL .............................................................................................................24
6.1
Nature and Survival ..............................................................................................24
ARTICLE 7 PURCHASER’S CONDITIONS PRECEDENT.....................................................24
7.1
7.2
7.3
7.4
7.5
7.6
7.7
Truth and Accuracy of Representations of Bell at the Closing Time...................24
Performance of Obligations..................................................................................24
Receipt of Closing Documentation ......................................................................25
No Proceedings.....................................................................................................25
CRTC Approval and Competition Act Approval .................................................25
Astral Arrangement ..............................................................................................25
Termination of Pension Plan Participation...........................................................25
ARTICLE 8 BELL’S CONDITIONS PRECEDENT ..................................................................26
8.1
8.2
8.3
8.4
8.5
8.6
Truth and Accuracy of Representations of the Purchaser at Closing Time..........26
Performance of Obligations..................................................................................26
Receipt of Closing Documentation ......................................................................26
No Proceedings.....................................................................................................27
CRTC Approval and Competition Act Approval .................................................27
Astral Arrangement ..............................................................................................27
ARTICLE 9 OTHER COVENANTS OF THE PARTIES...........................................................27
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
9.9
9.10
9.11
Conduct of Business Prior to Astral Closing........................................................27
Conduct of Business After the Astral Closing......................................................28
Actions to Satisfy Closing Conditions .................................................................28
Preservation of Records........................................................................................29
Regulatory Approvals...........................................................................................29
Benefit Plans.........................................................................................................33
Pension Plans........................................................................................................34
Restriction on Sale................................................................................................35
Waiver of Rights of First Refusal.........................................................................35
Confidentiality......................................................................................................36
[Redacted].............................................................................................................36
-ii-
ABRIDGED
TABLE OF CONTENTS
(continued)
Page
9.12
9.13
9.14
9.15
9.16
9.17
Cash Distribution..................................................................................................37
Books and Records ...............................................................................................37
Notice of Untrue Representation or Warranty......................................................37
Cooperation regarding reorganization ..................................................................38
Termination and Mutual Release Agreement.......................................................39
Section 256(9) Election ........................................................................................39
ARTICLE 10 INDEMNIFICATION ...........................................................................................40
10.1
10.2
10.3
10.4
10.5
10.6
Indemnification by Bell ........................................................................................40
Indemnification by the Purchaser .........................................................................42
Indemnification Procedures for Third Party Claims.............................................44
Tax Status of Indemnification Payments..............................................................45
Additional Limitations..........................................................................................45
Exclusive Remedy ................................................................................................45
ARTICLE 11 TERMINATION ...................................................................................................46
11.1
11.2
11.3
11.4
Termination ..........................................................................................................46
Effect of Termination ...........................................................................................47
[Redacted].............................................................................................................48
Indemnity Payment...............................................................................................48
ARTICLE 12 GENERAL.............................................................................................................50
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
Public Notices.......................................................................................................50
Expenses ...............................................................................................................50
Notices ..................................................................................................................50
Assignment ...........................................................................................................52
Enurement.............................................................................................................52
Amendment ..........................................................................................................52
Further Assurances ...............................................................................................52
Submission to Jurisdiction....................................................................................52
Execution and Delivery ........................................................................................53
Guarantee by Purchaser Parent.............................................................................53
-iii-
ABRIDGED
TABLE OF CONTENTS
(continued)
Page
EXHIBITS AND SCHEDULES
Exhibit A – Company Shares and HoldCo Shares
Schedule 3.3(a) – Sample Calculation of Closing Working Capital
Schedule 4.8(a) – Benefit Plans
Schedule 5.6 – Share Ownership
-iv-
ABRIDGED
THIS SHARE PURCHASE AGREEMENT is made as of March 4, 2013
BY AND AMONG:
BELL MEDIA INC., a corporation governed by the laws of
Canada,
(“Bell”)
- and 8324441 CANADA INC., a corporation governed by the laws of
Canada,
(the “Purchaser”)
- and CORUS ENTERTAINMENT INC., a corporation governed by
the laws of Canada;
(“Purchaser Parent”)
RECITALS:
A.
BCE Inc. (“BCE”) and Astral Media Inc. (“Astral”) entered into an arrangement
agreement dated March 16, 2012, as amended on November 19, 2012 (the “BCE-Astral
Agreement”), pursuant to which BCE agreed to acquire all of the issued and outstanding
shares of Astral by way of plan of arrangement;
B.
Upon the consummation of the transactions contemplated by the BCE-Astral Agreement
and certain reorganizations to be completed in the context of the Astral Arrangement,
Bell will (i) beneficially own and control certain of the issued and outstanding shares of
TELETOON Canada Inc., a corporation governed by the laws of Canada (the
“Company”) as set forth on Exhibit A (the “Company Shares”), and (ii) beneficially
own and control certain of the issued and outstanding shares of 4116381 Canada Inc., a
ABRIDGED
-2corporation governed by the laws of Canada (“HoldCo”) as set forth on Exhibit A (the
“HoldCo Shares”);
C.
HoldCo beneficially owns and controls all of the outstanding shares of 4113756 Canada
Inc. (“HoldCo 2”), which in turn beneficially owns and controls certain of the issued and
outstanding shares of the Company, each as set forth on Exhibit A;
D.
It is anticipated that as a condition to the closing of the Astral Arrangement, the interests
that Bell will have in HoldCo and the Company following the Astral Arrangement are to
be divested in order to comply with CRTC regulations and policies and/or obtain
approval under the Competition Act; and
F.
Bell has agreed to sell to the Purchaser and the Purchaser has agreed to purchase from
Bell the Company Shares and the HoldCo Shares on the terms and conditions of this
Agreement.
THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1
Definitions
Whenever used in this Agreement, the following words and terms have the meanings set out
below:
“Affiliate” of any Person means, at the time such determination is being made, any other
Person controlling, controlled by or under common control with such first Person, in each
case, whether directly or indirectly, and “control” and any derivation thereof means the
possession, directly or indirectly, of the power to direct the management and
policies/business or affairs of a Person whether through the ownership of voting
securities or otherwise; provided, that with respect to the Purchaser and Purchaser Parent,
the term Affiliates shall not include any Person other than Purchaser Parent and any
Person controlled, directly or indirectly, by Purchaser Parent;
ABRIDGED
-3“Agreement” means this Share Purchase Agreement, including all amendments or
restatements, as permitted, and references to “Article” or “Section” mean the specified
Article or Section of this Agreement;
“Astral” has the meaning given in the Recitals;
“Astral Arrangement” means the plan of arrangement transaction contemplated by the
BCE-Astral Agreement;
“Astral Benefit Plan” means the Benefit Plans sponsored or maintained by Astral and/or
its Affiliates;
“Astral Pension Plan” means the Pension Plan(s) sponsored or maintained by Astral
and/or its Affiliates and in which the Company and its employees participate;
“BCE” has the meaning given in the Recitals;
“BCE-Astral Agreement” has the meaning given in the Recitals;
“BCE Trust Arrangements” means the arrangements whereby the Company Shares
and/or the HoldCo Shares (directly or indirectly) to be acquired by BCE under the Astral
Arrangement may be deposited with the BCE Trustee, following the closing of the Astral
Arrangement pursuant to a voting trust agreement pending the sale of the Company
Shares and HoldCo Shares pursuant to the terms of this Agreement, if the Astral
Arrangement is completed and such voting trust arrangements are required to be entered
into pursuant to and approved in connection with any regulatory approval for the Astral
Arrangement;
“BCE Trustee” means the person who has the power to exercise the voting rights
attaching to the Company Shares and HoldCo Shares following the closing of the Astral
Arrangement pursuant to the BCE Trust Arrangements;
“Bell” has the meaning given in the Preamble;
“Bell Indemnified Parties” has the meaning given in Section 10.2(a);
ABRIDGED
-4“Benefit Plans” means plans, arrangements, agreements, programs, policies, practices or
undertakings, whether oral or written, formal or informal, funded or unfunded, insured or
uninsured, registered or unregistered to which the Company is a party or bound or in
which the employees of the Company participate or under which the Company has, or
will have, any liability or contingent liability, or pursuant to which payments are made, or
benefits are provided to, or an entitlement to payments or benefits may arise with respect
to any of the employees or former employees of the Company, directors or officers,
individuals working on contract with the Company or other individuals providing
services to the Company of a kind normally provided by employees (or any spouses,
dependants, survivors or beneficiaries of any such persons), excluding any Statutory
Plans;
“Books and Records” means books and records of a Person, including financial,
corporate, operations and sales books, records, books of account, sales and purchase
records, lists of suppliers and customers, formulae, business reports, plans and
projections and all other documents, surveys, plans, files, records, assessments,
correspondence, and other data and information, financial or otherwise, including all
data, information and databases stored on computer-related or other electronic media;
“Business Day” means any day, other than a Saturday or Sunday, on which banks in
Toronto, Ontario and in Montreal, Québec are open for commercial banking business
during normal banking hours;
“Channels” means Teletoon English and French, Teletoon Retro and Teletoon Rétro, and
Cartoon Network;
“Claims” includes claims, demands, complaints, grievances, actions, applications, suits,
causes of action, Orders, charges, indictments, prosecutions, informations or other similar
processes, assessments or reassessments, judgments, debts, liabilities, penalties, fines,
expenses, costs, damages or losses, contingent or otherwise, whether liquidated or
unliquidated, matured or unmatured, disputed or undisputed, contractual, legal or
equitable, including loss of value, professional fees, including fees and disbursements of
legal counsel on a full indemnity basis, and all costs incurred in investigating or pursuing
any of the foregoing or any proceeding relating to any of the foregoing;
ABRIDGED
-5“Closing” means the completion of the sale to and purchase by the Purchaser of the
Purchased Shares under this Agreement;
“Closing Date” means the fifth Business Day after the last of the conditions to the
obligations of the Parties as set forth in ARTICLE 7 and ARTICLE 8 is satisfied or
waived (other than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions);
“Closing Date Balance Sheet” has the meaning given in Section 3.3(a);
“Closing Time” means 10:00 a.m. (Toronto time), on the Closing Date or such other
time on the Closing Date as the Parties may agree in writing as the time at which the
Closing shall take place;
“Closing Working Capital” means the amount of Working Capital for the Company as
of the time that is immediately prior to the Closing Time;
“Commissioner of Competition” means the Commissioner of Competition appointed
pursuant to the Competition Act or any Person duly authorized to exercise the powers of
the Commissioner of Competition;
“Company” has the meaning given in the Recitals;
“Company Shares” has the meaning given in the Recitals;
“Competition Act” means the Competition Act (Canada) and the regulations
promulgated thereunder;
“Competition Act Approval” means (a) in the event that the sale of the Company Shares
or the HoldCo Shares is notifiable pursuant to Part IX of the Competition Act (i) the
issuance of an Advance Ruling Certificate with respect to the purchase and sale of the
Company Shares and the HoldCo Shares; (ii) notice under section 114 of the Competition
Act with respect to the purchase and sale of the Company Shares and the Holdco Shares
has been given and the applicable waiting period under section 123 of the Competition
Act has expired or has been terminated early in accordance with the Competition Act; or
(iii) the obligation to give the requisite notice with respect to the purchase and sale of the
ABRIDGED
-6Company Shares and the HoldCo Shares has been waived pursuant to subsection 113(c)
of the Competition Act; and (b) the purchase and sale of the Company Shares and the
Holdco Shares in accordance with this Agreement has been approved by the
Commissioner of Competition pursuant to the terms of any Consent Agreement;
“Competition Tribunal” means the Competition Tribunal established under the
Competition Tribunal Act (Canada);
“Consent Agreement” means any agreement between Bell and the Commissioner of
Competition in relation to the Astral Arrangement that is registered with the Competition
Tribunal;
“Contemplated
Reorganization
Transaction”
has
the
meaning
given
in
Section 9.15(a);
“Contracts” means contracts, licences, leases, agreements, obligations, promises,
undertakings, understandings, arrangements, documents, commitments, entitlements or
engagements to which a Person is a party or by which it is bound or under which a Person
has, or will have, any liability or contingent liability (in each case, whether written or
oral, express or implied), and includes any quotations, orders, proposals or tenders which
remain open for acceptance and warranties and guarantees;
“CRTC” means the Canadian Radio-television and Telecommunications Commission or
any successor body thereto;
“CRTC Approval” means the approval by the CRTC of the transfer of the Company
Shares and the HoldCo Shares to the Purchaser;
“Encumbrances” means pledges, liens, charges, security interests, leases, title retention
agreements, mortgages, restrictions, easements, rights-of-way, title defects, options or
adverse claims or encumbrances of any kind or character whatsoever;
“Family” means The Family Channel Inc.;
“Final Closing Statement” means the final statement of Closing Working Capital as
determined pursuant to Section 3.3(e);
ABRIDGED
-7“Final Closing Working Capital” means the Closing Working Capital as set forth on
the Final Closing Statement;
“GAAP” means generally accepted accounting principles from time to time approved by
the Canadian Institute of Chartered Accountants, or any successor institute, applicable as
at the date on which any calculation or determination is required to be made;
“Governmental Authority” means any federal, provincial, state, territorial, regional,
municipal or local government or authority, other political subdivision thereof or stock
exchange and any entity or Person having jurisdiction exercising executive, judicial,
legislative, regulatory or administrative functions of, or pertaining to, government;
“Governmental Authorizations” means authorizations, approvals, franchises, Orders,
certificates, consents, directives, notices, licences, permits, agreements, instructions,
registrations or other rights issued to or required by a Person by or from any
Governmental Authority;
“HoldCo” has the meaning given in the Recitals;
“HoldCo 2” has the meaning given in the Recitals;
“HoldCo Shares” has the meaning given in the Recitals;
“Indemnified Party” has the meaning given in Section 10.3(a);
“Indemnifying Party” has the meaning given in Section 10.3(a);
“Laws” means applicable laws (including common law and civil law), statutes, by-laws,
rules, regulations, Orders, ordinances, protocols, codes, guidelines, treaties, policies,
notices, or requirements, in each case of any Governmental Authority;
“Multi-Employer Plans” means Benefit Plans to which the Company is required to
contribute pursuant to a collective agreement and which are not maintained or
administered by the Company or its Affiliates;
ABRIDGED
-8“Neutral Auditor” means PricewaterhouseCoopers, or such other nationally recognized
auditing firm as the Parties may agree in writing, or if the Parties cannot agree, such other
nationally recognized auditing firm as appointed by a court of competent jurisdiction;
“NewHoldCo” has the meaning given in Section 9.15(a);
“Notice” has the meaning given in Section 12.3;
“Notice of Acceptance” has the meaning given in Section 3.3(b);
“Objection Deadline Date” has the meaning given in Section 3.3(b);
“Objection Notice” has the meaning given in Section 3.3(b);
“Orders” means orders, injunctions, judgments, administrative complaints, decrees,
rulings, awards, assessments, directions, instructions, penalties or sanctions issued, filed
or imposed by any Governmental Authority or arbitrator;
“Outside Date” has the meaning given in Section 11.1(b);
“Parties” means Bell and the Purchaser collectively, and “Party” means any one of
them;
“Pension Plans” means Benefit Plans providing pensions, superannuation benefits or
retirement savings including pension plans, top up pensions or supplemental pensions,
“registered retirement savings plans” (as defined in the Income Tax Act (Canada)),
“registered pension plans” (as defined in the Income Tax Act (Canada)) and “retirement
compensation arrangements” (as defined in the Income Tax Act (Canada));
“Pension Plan Unfunded Liability” means an unfunded liability in respect of any
Pension Plan, including a going concern unfunded liability, a solvency deficiency or
wind-up deficiency;
“Person” means any individual, sole proprietorship, partnership, firm, entity,
unincorporated association, unincorporated syndicate, unincorporated organization, trust,
body corporate, Governmental Authority, and where the context requires any of the
ABRIDGED
-9foregoing when they are acting as trustee, executor, administrator or other legal
representative;
“Purchase Price” has the meaning given in Section 3.1;
“Purchaser” has the meaning given in the Preamble;
“Purchaser Benefit Plans” has the meaning given in Section 9.6(a);
“Purchaser Indemnified Parties” has the meaning given in Section 10.1(a);
“Purchaser Parent” has the meaning given in the Preamble;
“Regulatory Approvals” means CRTC Approval and Competition Act Approval;
“Restricted Assets” has the meaning given in Section 9.8(a);
“Shareholders Agreement” means the Unanimous Shareholders Agreement among
Family, Nelvana Limited, YTV Canada, Inc. and the Company dated as of September 1,
2006, as amended to date;
“Statutory Plans” means statutory benefit plans which the Company is required to
participate in or comply with, including the Canada and Quebec Pension Plans and plans
administered pursuant to applicable health tax, workplace safety insurance and
employment insurance legislation;
“Subsequent Transaction” has the meaning given in Section 11.4(a);
“Target Working Capital” means $90,750,000;
“Tax Returns” means all returns, reports, declarations, elections, notices, filings, forms,
statements and other documents (whether in tangible, electronic or other form) and
including any amendments, schedules, attachments, supplements, appendices and exhibits
thereto, made, prepared, filed or required to be made, prepared or filed by Law in respect
of Taxes;
“Taxes” means any taxes, duties, fees, premiums, assessments, imposts, levies and other
charges of any kind whatsoever imposed by any Governmental Authority, including all
ABRIDGED
- 10 interest, penalties, fines, additions to tax or other additional amounts imposed by any
Governmental Authority in respect thereof, and including those levied on, or measured
by, or referred to as, income, gross receipts, profits, capital, transfer, land transfer, sales,
goods and services, harmonized sales, use, value-added, excise, stamp, withholding,
business, franchising, property, development, occupancy, employer health, payroll,
employment, health, social services, education and social security taxes, all surtaxes, all
customs duties and import and export taxes, countervail and anti-dumping, all licence,
franchise and registration fees and all employment insurance, health insurance and
Canada, Québec and other government pension plan premiums or contributions;
“Unresolved Objections” has the meaning given in Section 3.3(c);
“Vendor’s Core Representations” has the meaning given in Section 7.1; and
“Working Capital” means, with respect to the Company, the current assets (and any
other assets listed in Schedule 3.3(a) including long term program and rights assets) of
the Company minus the current liabilities (and any other liabilities listed in
Schedule 3.3(a)) of the Company, in each case, as set forth in Schedule 3.3(a) and
calculated in accordance with the sample calculation set forth in Schedule 3.3(a).
1.2
Certain Rules of Interpretation
In this Agreement:
(a)
Consent – Whenever a provision of this Agreement requires an approval or
consent and such approval or consent is not delivered within the applicable time
limit, then, unless otherwise specified, the Party whose consent or approval is
required shall be conclusively deemed to have withheld its approval or consent.
(b)
Currency – Unless otherwise specified, all references to money amounts are to
lawful currency of Canada.
(c)
Governing Law – This Agreement is a contract made under and shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable in the Province of Ontario.
ABRIDGED
- 11 (d)
Headings – Headings of Articles and Sections are inserted for convenience of
reference only and do not affect the construction or interpretation of this
Agreement.
(e)
Including – Where the word “including” or “includes” is used in this Agreement,
it means “including (or includes) without limitation”.
(f)
No Strict Construction – The language used in this Agreement is the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any Party.
(g)
Number and Gender – Unless the context otherwise requires, words importing
the singular include the plural and vice versa and words importing gender include
all genders.
(h)
Severability – If, in any jurisdiction, any provision of this Agreement or its
application to any Party or circumstance is restricted, prohibited or unenforceable,
such provision shall, as to such jurisdiction, be ineffective only to the extent of
such restriction, prohibition or unenforceability without invalidating the
remaining provisions of this Agreement and without affecting the validity or
enforceability of such provision in any other jurisdiction or without affecting its
application to other Parties or circumstances.
(i)
Statutory references – A reference to a statute includes all regulations and rules
made pursuant to such statute and, unless otherwise specified, the provisions of
any statute, regulation or rule which amends, supplements or supersedes any such
statute, regulation or rule.
(j)
Time – Time is of the essence in the performance of the Parties’ respective
obligations.
(k)
Time Periods – Unless otherwise specified, time periods within or following
which any payment is to be made or act is to be done shall be calculated by
excluding the day on which the period commences and including the day on
ABRIDGED
- 12 which the period ends and by extending the period to the next Business Day
following if the last day of the period is not a Business Day.
1.3
Knowledge
Any reference to the knowledge of any Party means to the actual knowledge, information and
belief of such Party.
1.4
Entire Agreement
This Agreement and the agreements and other documents making reference hereto and/or thereto
and entered into pursuant to or in connection with this Agreement, constitute the entire
agreement between the Parties and set out all the covenants, promises, warranties,
representations, conditions and agreements between the Parties in connection with the subject
matter of this Agreement and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, pre-contractual or otherwise. There are no covenants,
promises, warranties, representations, conditions, understandings or other agreements, whether
oral or written, pre-contractual or otherwise, express, implied or collateral between the Parties in
connection with the subject matter of this Agreement except as specifically set forth in this
Agreement and any document making reference hereto and/or thereto and entered into pursuant
to or in connection with this Agreement.
ARTICLE 2
PURCHASE AND SALE
2.1
Action by Bell and Purchaser
Subject to the provisions of this Agreement, at the Closing Time:
(a)
Purchase and Sale of Shares – Bell shall sell and the Purchaser shall purchase
the Company Shares and the HoldCo Shares;
(b)
Payment of Purchase Price – the Purchaser shall pay the Purchase Price to Bell
as provided in Section 3.2;
ABRIDGED
- 13 (c)
Transfer and Delivery of the Purchased Shares – Bell shall transfer and deliver
to the Purchaser share certificates representing the Company Shares and the
HoldCo Shares, each duly endorsed in blank for transfer, or accompanied by
irrevocable security transfer powers of attorney duly executed in blank, in either
case by the holders of record, and shall take such steps as shall be necessary to
cause the Company and HoldCo to enter the Purchaser or its nominee(s) upon the
books of the Company and HoldCo, respectively, as the holder of the Company
Shares or the HoldCo Shares, as applicable, and to issue one or more share
certificates to the Purchaser or its nominee(s) representing the Company Shares or
the HoldCo Shares, as applicable; and
(d)
Other Documents – Bell and Purchaser shall deliver such other documents as
may be necessary to complete the transactions provided for in this Agreement.
2.2
Place of Closing
The Closing shall take place at the Closing Time at the offices of Osler, Hoskin & Harcourt LLP
located at 1 First Canadian Place, Suite 6100, Toronto, Ontario, or at such other place as may be
agreed upon by Bell and the Purchaser.
2.3
Allocation of Purchase Price
80% of the Purchase Price shall be allocated to the purchase of the Company Shares and 20% of
the Purchase Price shall be allocated to the purchase of the HoldCo Shares. In the event of an
adjustment to the Purchase Price pursuant to Section 3.4, the increase or decrease to the Purchase
Price will be allocated between the Company Shares and the HoldCo Shares in the same
proportion as set forth in the preceding sentence. The Parties agree to report the purchase and
sale of the Company Shares and the HoldCo Shares in any Tax Returns in accordance with the
allocation of Purchase Price as determined pursuant to this Section 2.3.
ABRIDGED
- 14 ARTICLE 3
PURCHASE PRICE
3.1
Purchase Price
The aggregate amount payable by the Purchaser for the Company Shares and the HoldCo Shares
(the “Purchase Price”) shall be the amount of $249,000,000.
3.2
Satisfaction of Purchase Price
At the Closing Time, the Purchaser shall satisfy the Purchase Price by payment to Bell, or such
Affiliate of Bell as Bell may designate, of $249,000,000, by wire transfer of immediately
available funds, to an account designated by Bell or such designee no less than two Business
Days prior to the Closing Date.
3.3
Delivery of Closing Date Balance Sheet
(a)
Within 60 days after the Closing Date, the Purchaser shall prepare and deliver to
Bell balance sheets setting forth the assets and liabilities of the Company and
HoldCo as of the time immediately prior to the Closing Time (the “Closing Date
Balance Sheet”). The Closing Date Balance Sheet shall be prepared in good faith
by the Purchaser in accordance with GAAP and applied on the same basis as and
using the same accounting principles and practices used in the preparation of the
Company’s most recent annual financial statements. The Closing Date Balance
Sheet shall set forth the final amount of Closing Working Capital of the Company
based on such Closing Date Balance Sheet in accordance with the sample
calculation set forth in Schedule 3.3(a). If requested by Bell in writing, the
Purchaser shall allow Bell and its auditors or other representatives reasonable
access to (i) review the working papers and other documentation used or prepared
in connection with the preparation of, or which otherwise form the basis of the
Closing Date Balance Sheet and (ii) senior management and accounting personnel
of the Company and the Purchaser during normal business hours.
(b)
No later than 30 days after delivery by the Purchaser to Bell of the Closing Date
Balance Sheet (the “Objection Deadline Date”), Bell shall deliver either a notice
ABRIDGED
- 15 indicating that Bell accepts the Closing Date Balance Sheet (the “Notice of
Acceptance”) or a reasonably detailed statement describing Bell’s objections to
the Closing Date Balance Sheet (the “Objection Notice”). If Bell delivers to the
Purchaser the Objection Notice prior to the Objection Deadline Date, only those
matters specified in the Objection Notice shall be deemed to be in dispute, and all
other matters set forth in the Closing Date Balance Sheet shall be final and
binding on the Parties. If Bell delivers to the Purchaser a Notice of Acceptance or
fails to deliver to the Purchaser an Objection Notice prior to the Objection
Deadline Date, the Closing Date Balance Sheet shall be the Final Closing
Statement and shall be final and binding on the Parties for all purposes under this
Agreement.
(c)
Bell and the Purchaser shall attempt to resolve all of the items in dispute set out in
the Objection Notice within 15 days of receipt of the Objection Notice by Bell.
Any items set forth in the Objection Notice that are not resolved within such 15
day period (the “Unresolved Objections”) may be referred thereafter by either
Party to the Neutral Auditor.
(d)
The Neutral Auditor shall not make any determination for an amount outside the
range of the amounts disputed by the Parties. The Parties shall each provide or
make available all documents and information as are reasonably required by the
Neutral Auditor to make its determination promptly following any request
received from the Neutral Auditor. The Neutral Auditor shall make its final
determination with respect to the Unresolved Objections as promptly as
practicable, and in any event, within 30 days from the date the Unresolved
Objections were submitted to the Neutral Auditor, and upon making its final
determination, shall deliver to Bell and the Purchaser a statement setting forth
such final determination of the Unresolved Objections. The determination of the
Neutral Auditor with respect to the Unresolved Objections shall be final and
binding on the Parties. Upon receipt of the final determination of the Unresolved
Objections, the Purchaser shall adjust the Closing Date Balance Sheet, including
the final amount of Closing Working Capital, as required, in accordance with the
Neutral Auditor’s determination of the Unresolved Objections and deliver such
ABRIDGED
- 16 revised statement to Bell within five Business Days of receipt by the Purchaser
from the Neutral Auditor of the Neutral Auditor’s determination of the
Unresolved Objections.
(e)
The Final Closing Statement shall be (i) the Closing Date Balance Sheet upon
delivery by Bell to the Purchaser of the Notice of Acceptance or the failure of
Bell to deliver to the Purchaser prior to the Objection Deadline Date the Objection
Notice pursuant to Section 3.3(b) or (ii) the Closing Date Balance Sheet as
modified to the satisfaction of both Parties as a result of (A) the resolution of all
of the disputes pursuant to Section 3.3(c) or (B) the resolution of all of the
Unresolved Objections by the Neutral Auditor pursuant to Section 3.3(d).
(f)
The fees and expenses of the Neutral Auditor in acting in accordance with this
ARTICLE 3 shall be shared equally by the Purchaser and Bell.
3.4
Post-Closing Adjustment
(a)
[Redacted]
[The redacted information relates to the determination of any post-closing
adjustment payable by Bell or the Purchaser.]
(b)
Any payments made pursuant to Section 3.4Error! Reference source not found.
shall be made by the applicable Party (i) within five Business Days of the Final
Closing Statement becoming or being deemed to become final and binding on the
Parties or, if the Final Closing Statement is the Closing Date Balance Sheet as
modified in accordance with 3.3(e)(ii), within five Business Days of receipt by
Bell of the revised Closing Date Balance Sheet, and (ii) by wire transfer of
immediately available funds to the accounts specified in writing by the receiving
Party. Notwithstanding (i) above, a Party shall have at least two Business Days
from receipt of wire transfer instructions to make any payment pursuant to
Section 3.4Error! Reference source not found..
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BELL
ABRIDGED
- 17 Bell represents and warrants to the Purchaser the matters set out below.
4.1
Residence of Bell
Bell is not a non-resident of Canada for the purposes of the Income Tax Act (Canada).
4.2
Status of Bell and Right to Sell
Bell is a corporation existing under the laws of Canada. At the Closing Time, Bell will have the
right to dispose of the Company Shares and the HoldCo Shares as provided in this Agreement
and such disposition will not violate, contravene, breach or offend against or result in any default
under any (a) Contract to which Bell or any of its Affiliates is a party, or otherwise bound or
affected, (b) charter or by-law provision of Bell or any of its Affiliates, or (c) Order, judgment,
decree, licence, permit or Law to which Bell or any of its Affiliates is subject, or otherwise
bound or affected, except in the case of (a) and (c) where such violation, contravention, breach,
offence or default would not reasonably be expected to materially and adversely affect the ability
of Bell to carry out its obligations under, and to consummate the transactions contemplated by,
this Agreement. At the Closing Time, Bell or any of its Affiliates will be the sole registered and
beneficial owner of the Company Shares and the HoldCo Shares, in each case, free and clear of
all Encumbrances.
For the purposes of this Section 4.2, the term “Affiliates” shall not include the Company,
HoldCo or HoldCo 2.
4.3
Capitalization
At the Closing Time, the Company Shares will constitute all of the securities in the capital of the
Company beneficially owned by Bell, directly or indirectly. At the Closing Time, the HoldCo
Shares will constitute all of the shares in the capital of HoldCo beneficially owned by Bell,
directly or indirectly. All of the Company Shares and all of the HoldCo Shares have been duly
and validly issued and are outstanding as fully paid and non-assessable shares.
To the
knowledge of Bell, after having made due inquiries of Astral, no options, warrants or other rights
to purchase the Company Shares or the HoldCo Shares and no securities or obligations
convertible into or exchangeable for the Company Shares or the HoldCo Shares have been
authorized or agreed to be issued or are outstanding. There is no indebtedness or other amounts
ABRIDGED
- 18 owing by the Company, HoldCo or HoldCo 2 to Bell or any of its Affiliates other than
indebtedness incurred by any of the Company, HoldCo or HoldCo 2 accounted for in the
calculation of Working Capital.
4.4
Due Authorization and Enforceability of Obligations
Bell has all necessary corporate power, authority and capacity to enter into this Agreement and to
carry out its obligations under this Agreement. The execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Bell. This Agreement constitutes, and
each other agreement to be executed by Bell in connection with the Closing will constitute, a
valid and binding obligation of Bell enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws affecting the enforcement of creditors’ rights generally or by general principles
of equity, regardless of whether asserted in a proceeding in equity or Law.
4.5
Absence of Conflicts
Other than with respect to the Regulatory Approvals, Bell is not a party to, bound or affected by
or subject to any:
(a)
indenture, mortgage, lease, agreement, obligation or instrument;
(b)
charter or by-law provision; or
(c)
Laws or Governmental Authorizations;
that would be violated, breached by, or under which default would occur or an Encumbrance
would, or with notice or the passage of time would, be created as a result of the execution and
delivery of, or the performance of obligations under, this Agreement or any other agreement to
be entered into under the terms of this Agreement.
4.6
Regulatory Approvals
Other than the Regulatory Approvals and approvals under the Competition Act and by the CRTC
in connection with the Astral Arrangement, no approval, Order, consent of or filing with any
ABRIDGED
- 19 Governmental Authority is required on the part of Bell, Family, the Company, HoldCo or
HoldCo 2, in connection with the execution, delivery and performance of this Agreement or any
other documents and agreements to be delivered under this Agreement or the performance of
Bell’s obligations under this Agreement or any other documents and agreements to be delivered
under this Agreement.
4.7
Litigation
There are no Claims, investigations or other proceedings (other than proceedings to obtain the
Regulatory Approvals and approvals under the Competition Act and by the CRTC in connection
with the Astral Arrangement), including appeals and applications for review, in progress or, to
the knowledge of Bell, pending or threatened against or relating to Bell, before any
Governmental Authority, which, if determined adversely to Bell, would,
(a)
enjoin, restrict or prohibit the transfer of all or any part of the Company Shares or
the HoldCo Shares as contemplated by this Agreement; or
(b)
materially delay, or restrict or prevent Bell from fulfilling any of its obligations
set out in this Agreement or arising from this Agreement,
and Bell has no knowledge of any existing ground on which any such action, suit, litigation or
proceeding might be commenced with any reasonable likelihood of success.
4.8
Benefit Plans
(a)
Schedule 4.8(a) sets forth a complete list of the Benefit Plans. None of the
Benefit Plans is a Multi-Employer Plan. Other than the Astral Pension Plans
disclosed on Schedule 4.8(a), none of the Benefits Plans is a Pension Plan.
(b)
Current and complete copies of all written Benefit Plans as amended to date or,
where oral, written summaries of the terms thereof, and all booklets and
communications concerning the Benefit Plans which have been provided to
persons entitled to benefits under the Benefit Plans have been delivered or made
available to the Purchaser together with copies of all material documents relating
to the Benefit Plans.
ABRIDGED
- 20 4.9
Business of HoldCo
HoldCo does not conduct and has not conducted any business other than the ownership and
control of the shares of HoldCo 2 set forth on Exhibit A and has no assets or liabilities other than
those arising from its ownership of such shares.
4.10
Business of HoldCo 2
HoldCo 2 does not conduct and has not conducted any business other than the ownership and
control of the shares of the Company set forth on Exhibit A and has no assets or liabilities other
than those arising from its ownership of such shares.
4.11
Third Party Consents
No notifications, approvals or consents are required to be obtained by Bell or any of its Affiliates
in connection with the execution, delivery and performance of this Agreement or any other
documents and agreements to be delivered under this Agreement.
For the purposes of this Section 4.11, the term “Affiliates” shall not include the Company,
HoldCo or HoldCo 2.
4.12
Independence of Parties
The Parties are not Affiliates, and this Agreement and all other related commercial dealings
amongst the Parties have been entered into at arm’s length.
4.13
No Broker
Bell has carried on all negotiations relating to this Agreement and the transactions contemplated
in this Agreement directly and without intervention on its behalf of any other party in such
manner as to give rise to any valid claim for a brokerage commission, finder’s fee or other like
payment against the Purchaser or the Company, HoldCo or HoldCo 2.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to Bell the matters set out below:
ABRIDGED
- 21 5.1
Status of the Purchaser
The Purchaser is a corporation existing under the laws of Canada.
5.2
Due Authorization and Enforceability of Obligations
The Purchaser has all necessary corporate power, authority and capacity to enter into this
Agreement and to carry out its obligations under this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action of the Purchaser. This Agreement
constitutes, and each other agreement to be executed by Purchaser in connection with the
Closing will constitute, a valid and binding obligation of the Purchaser enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’
rights generally or by general principles of equity, regardless of whether asserted in a proceeding
in equity or Law.
5.3
Absence of Conflicts
Other than with respect to Regulatory Approvals, the Purchaser is not a party to, bound or
affected by or subject to any:
(a)
indenture, mortgage, lease, agreement, obligation or instrument;
(b)
charter or by-law provision; or
(c)
Laws or Governmental Authorizations;
that would be violated, breached by, or under which default would occur or an Encumbrance
would, or with notice or the passage of time would, be created as a result of the execution and
delivery of, or the performance of obligations under, this Agreement or any other agreement to
be entered into under the terms of this Agreement.
5.4
Litigation
There are no Claims, investigations or other proceedings, including appeals and applications for
review, in progress or, to the knowledge of the Purchaser, pending or threatened against or
ABRIDGED
- 22 relating to the Purchaser, before any Governmental Authority, which, if determined adversely to
the Purchaser, would,
(a)
prevent the Purchaser from paying the Purchase Price to Bell;
(b)
enjoin, restrict or prohibit the transfer of all or any part of the Company Shares or
the HoldCo Shares as contemplated by this Agreement; or
(c)
materially delay, or restrict or prevent the Purchaser from fulfilling any of its
obligations set out in this Agreement or arising from this Agreement,
and the Purchaser has no knowledge of any existing ground on which any such action, suit,
litigation or proceeding might be commenced with any reasonable likelihood of success.
5.5
No Broker
The Purchaser has carried on all negotiations relating to this Agreement and the transactions
contemplated in this Agreement directly and without the intervention on its behalf of any other
party in such manner as to give rise to any valid claim for a brokerage commission, finder’s fee
or other like payment against Bell.
5.6
Share Ownership
(a)
During the period commencing on January 1, 2012 and ending at the Closing
Time, the Purchaser, together with Purchaser Parent and with persons controlled
by Purchaser Parent (for purposes of the Income Tax Act (Canada)), did not own
any shares of any class in the capital of Astral, directly or indirectly, through a
trust or a partnership.
(b)
To the knowledge of the Purchaser, after reasonable enquiry, no person listed in
Schedule 5.6 owned, either alone or together, 10% or more of the shares of any
class in the capital of the Purchaser or of a corporation related to the Purchaser
and that has a significant direct or indirect interest in any shares of the Purchaser
at the Closing Time.
ABRIDGED
- 23 (c)
During the period commencing on January 1, 2012 and ending at the Closing
Time, the Purchaser, Purchaser Parent and their respective Affiliates together, to
the knowledge of Purchaser, after reasonable enquiry, with persons that are
related to the Purchaser or Purchaser Parent (for purposes of the Income Tax Act
(Canada)), did not own, directly or indirectly, through a trust or a partnership,
10% or more of the shares of any class in the capital of Astral.
5.7
No Partner
The Purchaser has not entered into any agreement with nor does it have any partners not
disclosed to Bell pursuant to which Purchaser would not be considered the sole purchaser in
respect of the transactions contemplated herein.
5.8
Qualified Corporation
The Purchaser is a “Canadian” within the meaning of the Direction to the CRTC (Ineligibility of
Non-Canadians), SOR/97-192, as amended from time to time, and is “Canadian” as defined in
the Investment Canada Act (Canada), and, without limiting the generality of the foregoing,
Purchaser is not controlled in fact either directly or indirectly by Persons who are nonCanadians.
5.9
Independence of Parties
The Parties are not Affiliates, and this Agreement and all other related commercial dealings
amongst the Parties have been entered into at arm’s length.
5.10
Continued Operation of the Business of the Company
It is the intent of the Purchaser that the business of operating the Channels will be continued by
the Company (or another Affiliate of the Purchaser) following the acquisition of the Company
Shares and the HoldCo Shares by the Purchaser.
ABRIDGED
- 24 ARTICLE 6
SURVIVAL
6.1
Nature and Survival
All representations, warranties and covenants contained in this Agreement on the part of each of
the Parties shall survive the Closing for the same period of time during which an obligation to
indemnify exists pursuant to Section 10.1 or 10.2.
ARTICLE 7
PURCHASER’S CONDITIONS PRECEDENT
The obligation of the Purchaser to complete the purchase of the Company Shares and the
HoldCo Shares under this Agreement shall be subject to the satisfaction of, or compliance with,
at or before the Closing Time, each of the following conditions precedent (each of which is
acknowledged to be inserted for the exclusive benefit of the Purchaser and may be waived by it
in whole or in part).
7.1
Truth and Accuracy of Representations of Bell at the Closing Time
The representations and warranties made by Bell pursuant to Sections 4.1 (Residency), 4.2
(Status and Right to Sell), 4.3 (Capitalization) and 4.4 (Due Authorization and Enforceability of
Obligations) (the “Vendor’s Core Representations”) shall be true and correct as at the Closing
Time and with the same effect as if made at and as of the Closing Time and the Purchaser shall
have received a certificate from an officer of Bell confirming the truth and correctness of such
representations and warranties. The remaining representations and warranties made by Bell
pursuant to this Agreement shall be true and correct in all material respects as at the Closing
Time and with the same effect as if made at and as of the Closing Time and the Purchaser shall
have received a certificate from an officer of Bell confirming the truth and correctness of such
representations and warranties.
7.2
Performance of Obligations
Bell shall have performed or complied with, in all material respects, all its obligations and
covenants under this Agreement and the Purchaser shall have received a certificate from an
officer of Bell confirming such performance or compliance, as the case may be.
ABRIDGED
- 25 7.3
Receipt of Closing Documentation
On or prior to the Closing, Bell shall have delivered or caused to be delivered to the Purchaser:
(a)
the certificate or certificates representing the Company Shares and the HoldCo
Shares duly endorsed for transfer to the Purchaser;
(b)
a receipt for the payment of the Purchase Price;
(c)
evidence that all applicable corporate proceedings in connection with the
transactions contemplated by this Agreement have been taken by Bell, such
evidence to be in form and substance satisfactory to the Purchaser, acting
reasonably; and
(d)
a certificate of status of Bell, dated no more than five days prior to the Closing
Date.
7.4
No Proceedings
There shall be no Order issued materially delaying, or restricting or preventing, and no pending
or threatened Claim of a Governmental Authority, or judicial or administrative proceeding
commenced, for the purpose of enjoining, materially delaying, restricting or preventing, the
consummation of the transactions contemplated by this Agreement.
7.5
CRTC Approval and Competition Act Approval
CRTC Approval and Competition Act Approval shall have been received.
7.6
Astral Arrangement
The Astral Arrangement shall have been completed.
7.7
Termination of Pension Plan Participation
Bell shall have delivered or caused to be delivered to the Purchaser documents (satisfactory to
Purchaser acting reasonably) evidencing the Company’s cessation of participation in the Astral
Pension Plan effective on a date at or before the Closing Time, and without any further liability
or obligation on the Company for making contributions to the Astral Pension Plan and without
ABRIDGED
- 26 any liability or obligation on the Company for any Pension Plan Unfunded Liabilities under the
Astral Pension Plan.
ARTICLE 8
BELL’S CONDITIONS PRECEDENT
The obligations of Bell to complete the sale of the Company Shares and the HoldCo Shares
under this Agreement shall be subject to the satisfaction of or compliance with, at or before the
Closing Time, each of the following conditions precedent (each of which is acknowledged to be
inserted for the exclusive benefit of Bell and may be waived by it in whole or in part).
8.1
Truth and Accuracy of Representations of the Purchaser at Closing Time
The representations and warranties made by Purchaser pursuant to Sections 5.1 (Status) and 5.2
(Due Authorization and Enforceability of Obligations) shall be true and correct as at the Closing
Time and with the same effect as if made at and as of the Closing Time and Bell shall have
received a certificate from an officer of the Purchaser confirming the truth and correctness of
such representations and warranties. The remaining representations and warranties made by the
Purchaser pursuant to this Agreement shall be true and correct in all material respects as at the
Closing Time and with the same effect as if made at and as of the Closing Time and Bell shall
have received a certificate from an officer of the Purchaser confirming the truth and correctness
of such representations and warranties.
8.2
Performance of Obligations
The Purchaser shall have performed or complied with, in all material respects, all its obligations
and covenants under this Agreement and Bell shall have received a certificate from an officer of
the Purchaser confirming such performance or compliance, as the case may be.
8.3
Receipt of Closing Documentation
On or prior to the Closing, the Purchaser shall have delivered or caused to be delivered to Bell:
(a)
evidence that all applicable corporate proceedings in connection with the
transactions contemplated by this Agreement have been taken by the Purchaser,
such evidence to be in form and substance satisfactory to Bell, acting reasonably;
ABRIDGED
- 27 (b)
a certificate of status of the Purchaser, dated no more than five days prior to the
Closing Date; and
(c)
a signed acknowledgement of the termination of the Shareholders Agreement to
be effective as at the Closing Time.
8.4
No Proceedings
There shall be no Order issued materially delaying, or restricting or preventing, and no pending
or threatened Claim of a Governmental Authority, or judicial or administrative proceeding
commenced, for the purpose of enjoining, materially delaying, restricting or preventing, the
consummation of the transactions contemplated by this Agreement.
8.5
CRTC Approval and Competition Act Approval
CRTC Approval and Competition Act Approval shall have been received.
8.6
Astral Arrangement
The Astral Arrangement shall have been completed.
ARTICLE 9
OTHER COVENANTS OF THE PARTIES
9.1
Conduct of Business Prior to Astral Closing
During the period from the date of this Agreement to the date on which the transactions
contemplated by the BCE-Astral Agreement have been consummated, the Parties shall each use
their commercially reasonable efforts to cause the Company, HoldCo and HoldCo 2 to conduct
each of their respective businesses in the ordinary course, which, in respect of Bell, shall be
limited to, (a) using its commercially reasonable efforts to enforce each of the covenants set forth
in Section 4.1 of the BCE-Astral Agreement to the extent that a failure to enforce such covenants
would have an adverse effect on the Company, HoldCo or HoldCo 2 and (b) not granting any
waivers of any covenants or agreements made by Astral pursuant to the BCE-Astral Agreement
to the extent any such waiver would have an adverse effect on the Company, HoldCo or
HoldCo 2.
ABRIDGED
- 28 9.2
Conduct of Business After the Astral Closing
(a)
The Purchaser acknowledges that, if the Closing does not occur forthwith
following the closing of the Astral Arrangement, such that the BCE Trust
Arrangements are entered into pending Closing, the BCE Trustee shall have full
power and authority to direct the voting of the Company Shares and HoldCo
Shares as is usual for trust arrangements of the type of the BCE Trust
Arrangements, and agrees that any action or omission by the BCE Trustee in the
conduct of the voting of the Company Shares and HoldCo Shares shall,
notwithstanding any provision to the contrary, be permitted for the duration of the
BCE Trust Arrangements, it being understood that any such action omission by
the BCE Trustee shall not limit the Purchaser’s right to indemnification pursuant
to ARTICLE 10 if the result of such act or omission is that Bell has breached a
covenant herein set forth or a representation or warranty of Bell made herein.
Bell agrees that if the BCE Trust Arrangements are entered into prior to Closing,
it shall, subject to the terms of the BCE Trust Arrangements, make commercially
reasonable efforts to cause the BCE Trustee to act in a manner consistent with the
covenants set forth in this ARTICLE 9.
(b)
If the BCE Trust Arrangements are entered into prior to Closing, the Purchaser
shall cause YTV Canada, Inc. and Nelvana Limited (in each case, solely in their
capacity as shareholders of the Company, HoldCo and HoldCo 2, as applicable),
to use their commercially reasonable efforts to cause the Company, HoldCo and
HoldCo 2 to conduct their respective businesses in the ordinary course for the
duration of the BCE Trust Arrangements in a manner consistent with past
practice.
9.3
Actions to Satisfy Closing Conditions
Each of the Parties shall take all such actions as are within its power to control, and use
reasonable commercial efforts to cause other actions to be taken which are not within its power
to control, so as to ensure compliance with each of the conditions and covenants set forth in
ARTICLE 7 (other than the condition set forth in 7.5 (in respect of which all obligations under
this Agreement are set forth in Section 9.5) and Section 7.6), ARTICLE 8 (other than the
ABRIDGED
- 29 condition set forth in Section 8.5 (in respect of which all obligations under this Agreement are
set forth in Section 9.5) and Section 8.6) and ARTICLE 9 which are for the benefit of any other
Party; provided, however, to the extent that the conditions set forth in either Section 8.1 or 8.2 or
the covenants of the Purchaser set forth in ARTICLE 9 are not satisfied or complied with as a
result of, or in connection with, a misrepresentation, inaccuracy or breach of the representations
and warranties set forth in either Section 5.6(b) or 5.6(c), or as a result of a breach of a covenant
related to any representations or warranties set forth in Section 5.6(b) or 5.6(c), the Purchaser
shall have no liability (except to the extent of any intentional misrepresentation with respect to
Section 5.6(b) and 5.6(c) by the Purchaser or fraud of the Purchaser with respect to
Section 5.6(b) and 5.6(c)).
9.4
Preservation of Records
The Purchaser shall take all reasonable steps to preserve and keep the Book and Records of the
Company delivered to it in connection with the completion of the transactions contemplated by
this Agreement for a period of six years from the Closing Date, or for any longer period as may
be required by any Laws or Governmental Authority, and shall make such Book and Records
available to Bell as may be reasonably required by it in connection with a Claim by the
Purchaser against Bell under this Agreement or relating to any inquiries or requirements of any
Governmental Authority with jurisdiction over Bell.
9.5
Regulatory Approvals
(a)
Purchaser shall use its best efforts and take any and all actions and steps required
or advisable to obtain the Regulatory Approvals, including proposing, negotiating,
agreeing to and implementing, in any fashion, any remedy; provided, however,
nothing in this Agreement shall require Purchaser to agree to or implement a
material remedy.
(b)
The Purchaser and the Vendor shall cooperate with one another in connection
with obtaining the Regulatory Approvals in respect of the purchase and sale of the
Company Shares and the HoldCo Shares as contemplated by this Agreement,
including providing or submitting on a timely basis all filings, written
submissions, documentation and information that is required, or in the reasonable
ABRIDGED
- 30 opinion of either Party, advisable, in connection with obtaining such Regulatory
Approvals, provided that competitively sensitive information may be provided
only to the external counsel of the other Party.
(c)
For greater certainty, with respect to the CRTC Approval, the Purchaser, on
behalf of the Company, shall, as promptly as practicable, prepare a draft of all
required documents, registrations, statements, petitions, filings and applications
for the CRTC Approval in respect of the purchase and sale of the Company
Shares and the HoldCo Shares as contemplated by this Agreement and deliver
such draft application to Bell no later than 7 days following the date of this
Agreement (or such later date as Bell may agree in writing). The application for
the CRTC Approval will include the commitment by the Purchaser to honour the
conditions of licence imposed by the CRTC that are existing as of the date hereof
with respect to the Channels, subject to any amendments to such conditions of
license imposed by the CRTC in connection with the license renewal applications
to the CRTC, dated September 13, 2012, in each case, on the licenses to be held
by the Company and a proposed “tangible benefits package” equivalent to recent
industry standards for transactions of this nature which shall include a proposed
tangible benefits package of 10% of the value of the transaction contemplated
herein as determined by the CRTC. Bell shall be entitled to comment upon such
application for the CRTC Approval, it being understood that the Purchaser shall
amend such application to reflect such comments inasmuch as it considers such
comments to be appropriate, in its reasonable discretion.
Bell shall (or the
Purchaser on behalf of Bell shall) file such application for the CRTC Approval no
later than 15 days following the date of this Agreement. The Purchaser shall use
reasonable commercial efforts to obtain the CRTC Approval in respect of the
purchase and sale of the Company Shares and the HoldCo Shares as contemplated
by this Agreement, including requesting that the CRTC process the application in
the most expedited manner available and requesting the earliest possible hearing
date for the consideration of the application by the CRTC, should such a hearing
be deemed necessary, so as to allow the Closing Date to occur as soon as possible
and in any event on or prior to the Outside Date. If the CRTC rejects the
transactions contemplated in this Agreement, the Purchaser shall appeal the
ABRIDGED
- 31 decision and reapply to CRTC within 30 days of the CRTC decision with an
application that addresses the matters raised by the CRTC and the provisions of
this Section 9.5 shall apply to such new application, mutatis mutandis.
(d)
For greater certainty, with respect to the Competition Act Approval, the Parties
shall: (i) as promptly as practicable and in any event within 5 days following the
date of this Agreement, prepare and file a joint submission to the Commissioner
of Competition seeking an Advance Ruling Certificate pursuant to section 102 of
the Competition Act, a no-action letter, waiver of the obligation to provide notice
under the Competition Act, and approval by the Commissioner of Competition
under any Consent Agreement, in respect of the purchase and sale of the
Company Shares and the HoldCo shares as contemplated by this Agreement; and
(ii) unless waived by the mutual agreement of the Parties, or Competition Act
Approval has been received, provide notice under section 114 of the Competition
Act with respect to the purchase and sale of the Company Shares and the HoldCo
Shares by no later than March 25, 2013.
(e)
Subject to Laws, the Purchaser and Bell shall keep each other fully informed as to
the status of and the processes and proceedings relating to obtaining the
Regulatory Approvals, and shall promptly notify each other of any material notice
or other material communication (including providing copies of any
correspondence, deficiency responses, and responses to information requests)
from any Governmental Authority in connection with obtaining the Regulatory
Approvals. Prior to the completion of the Astral Arrangements, Purchaser shall
not make any submissions or filings or respond to any information requests, or
participate in any meetings or any material conversations with any Governmental
Authority in respect of any filings, investigations or other inquiries related to the
obtaining of the relevant Regulatory Approval without the prior approval of Bell,
not to be unreasonably withheld.
Following completion of the Astral
Arrangements, neither Party shall make any submissions or filings or respond to
any information requests, participate in any meetings or any material
conversations with any Governmental Authority in respect of any filings,
investigations or other inquiries related to the obtaining of the relevant Regulatory
ABRIDGED
- 32 Approval unless it consults with the other Party in advance and gives the other
Party the opportunity to review drafts of any such submissions, filings, or
responses and considers its comments in good faith, or to attend and participate in
any meetings or material communications. Despite the foregoing, submissions,
filings, documentation or other written communications with any Governmental
Authority may be redacted as necessary before sharing with the other Party to
address reasonable attorney-client or other privilege or confidentiality concerns,
provided that a Party shall provide external legal counsel to the other Party nonredacted versions of drafts or final submissions, filings or other written
communications with such Governmental Authority on the basis that the redacted
information will not be shared with its clients.
(f)
For greater certainty, any changes or amendments proposed to be made by the
Purchaser to the application for the CRTC Approval as filed, or any response to
be filed in respect of a deficiency question, or any filings, submissions or
responses to information requests made in connection with the Competition Act
Approval shall be submitted to Bell for comments, prior to being filed, it being
understood that the Purchaser shall amend the relevant materials to reflect such
comments inasmuch as the Purchaser considers such comments to be appropriate,
in Purchaser’s reasonable discretion.
(g)
Time is of the essence and neither Party shall take any action that could
reasonably be expected to negatively affect, hinder or delay the receipt of
regulatory approvals for and completion of the Astral Arrangement, the
Regulatory Approvals, or the completion of the purchase and sale of any of the
Company Shares or the HoldCo Shares as contemplated by this Agreement.
(h)
All costs and expenses incurred in connection with obtaining the Regulatory
Approvals (including all filing fees, the costs and expenses of any tangible
benefits package or any other regulatory levies, charges or payments) shall be
borne by the Purchaser, other than costs and expenses of any advisors retained by,
or for the benefit of, Bell, including legal counsel, which costs and expenses shall
be for the account of Bell.
ABRIDGED
- 33 9.6
Benefit Plans
(a)
Effective as of the Closing Time, the Purchaser shall establish or otherwise
designate non-pension benefit plans (the “Purchaser Benefit Plans”) to provide
non-pension benefits to the Company employees in respect of the period after the
Closing Time. For greater certainty, nothing in this Agreement shall limit the
right of the Purchaser to, after the Closing Date, amend or terminate in whole or
in part any Purchaser Benefit Plans, nor shall anything in this Agreement require
any Purchaser Benefit Plans to replicate any particular benefit provided under a
Astral Benefit Plan; provided that any Company employee who is employed in
the Province of Québec and is terminated by the Company within 12 months
following the Closing Time shall be provided with the same notice period as such
Company employee would have received had his or her employment been
terminated immediately prior to the Closing Time.
(b)
Effective as of the Closing Time, each Company employee shall cease to
participate in and accrue benefits under the Bell and/or Astral Benefit Plans, and
shall commence participation in the Purchaser Benefit Plans; provided that if any
Company employee suffers a disability after the Closing Date and such disability
is considered under the terms of the relevant Astral Benefit Plan in which such
Company employee participated to be a recurrence of a disability that occurred on
or prior to the Closing Date that is eligible for coverage, then the relevant Astral
Benefit Plan shall, to the extent permitted under such Astral Benefit Plan, make
disability payments to such Company employee in relation to such recurring
disability.
(c)
The Purchaser Benefit Plans shall, to the extent permitted by Laws, recognize all
service with the Company and/or membership in the Benefit Plans for the
purposes of determining eligibility for membership in, and entitlement to benefits
under, the Purchaser Benefit Plans.
(d)
Bell shall be responsible, in accordance with the terms of the applicable Astral
Benefit Plan, for any and all claims incurred by the Company employees (and
their eligible spouses, beneficiaries and dependants) prior to the Closing Time.
ABRIDGED
- 34 The Purchaser shall be responsible, in accordance with the terms of the applicable
Purchaser Benefit Plan, for any and all claims incurred by the Company
employees (and their eligible spouses, beneficiaries and dependants) on and after
the Closing Time.
(e)
Subject to applicable Laws, Bell shall provide to the Purchaser, as soon as
practicable after the Closing Date, such data, records, documentation and
information relating to Company employees and their participation in any Astral
Benefit Plan as the Purchaser may reasonably require for the administration of
claims under the Purchaser Benefit Plans.
(f)
Notwithstanding any other provisions in this Agreement, Bell shall, if requested
by the Purchaser, permit the Company employees (and their eligible spouses,
beneficiaries and dependents) to continue to participate in and receive benefits
under certain Astral Benefit Plans for a transitional period following the Closing
Date on the terms and subject to the conditions to be agreed upon by Bell and the
Purchaser.
(g)
For the purposes of this Section 9.6, the term “incurred” means, in relation to
claims under Astral Benefit Plans or Purchaser Benefit Plans, the date on which
the event giving rise to such claim occurred and, in particular: (i) with respect to a
death or dismemberment claim, shall be the date of the death or dismemberment;
(ii) with respect to a short-term or long-term disability claim, shall be the date of
occurrence of the initial inquiry or accident or the date of diagnosis of the initial
illness giving rise to the claim; (iii) with respect to an extended health care claim,
including, without limitation, dental and medical treatments, shall be the date of
the treatment; and (iv) with respect to a prescription drug or vision care claim, the
date that the prescription was filled.
9.7
Pension Plans
(a)
Effective as of the Closing Time, each Company employee who is a member of
the Astral Pension Plan shall cease to participate in and accrue benefits under the
Astral Pension Plan, and shall commence participation in the Purchaser Benefit
ABRIDGED
- 35 Plans for service with the Company as of the day immediately following the
Closing Date.
(b)
The Parties shall cause the Company to cease participation in the Astral Pension
Plan effective as of a date prior to the Closing Time, without any further liabilities
or obligations on the Company under, to, or in respect of the Astral Pension Plan
as of the date of such termination of participation.
(c)
Bell shall assume and remain responsible for any liabilities and obligations of the
Company as a participating employer in the Astral Pension Plan, including any
liability or responsibility for any Pension Plan Unfunded Liability, from and after
the date of the Company’s participation in the Astral Pension Plan.
9.8
Restriction on Sale
(a)
The Purchaser and Purchaser Parent shall not, and shall cause their Affiliates to
not, at any time prior to the [Redacted] anniversary of the Closing Date, sell,
directly or indirectly, or grant any right or option to any Person to acquire, or take
any action (including the issuance of shares) that would cause any Person to
control (i) any of the Company Shares, the HoldCo Shares, or the shares of
HoldCo 2 or (ii) any of the Channels (the “Restricted Assets”), other than with
the consent of Bell.
(b)
[Redacted]
[The redacted information relates to circumstances in which the covenants in
Section 9.8(a) may be modified.]
9.9
Waiver of Rights of First Refusal
If prior to the Closing, this Agreement is terminated by either Party in accordance with
Sections 11.1(b), 11.1(c) or 11.1(f), the Purchaser agrees that it shall (a) waive its rights under
Section 5.7 of the Shareholders Agreement, and any other rights of first refusal or any similar
rights, including any rights of first offer, it may have with respect to the sale by Bell or any of its
Affiliates of the Company Shares or the HoldCo Shares pursuant to a binding written agreement
executed by Bell or any of its Affiliates and another Person not later than 18 months after the
ABRIDGED
- 36 date of termination of this Agreement, and (b) consent to Bell’s disclosure of confidential
information relating to the Company, HoldCo and HoldCo 2 to potential purchasers of the
Company Shares or the HoldCo Shares, subject to such potential purchasers entering into
confidentiality agreements with Bell restricting their disclosure of such confidential information
on terms substantially similar to those set forth in Sections 9.10(b) and 9.10(c).
9.10
Confidentiality
(a)
Subject to Section 12.1, the Parties agree that each of them shall maintain the
confidentiality of all matters relating to the subject matter of this Agreement and
the process relating to this Agreement except with the consent of the other Party.
(b)
Subject to Section 9.10(c), after the Closing, Bell shall, and shall cause its
Affiliates to, keep confidential all information relating to the Company, HoldCo
and HoldCo 2, except information which:
(i)
is generally available to the public other than as a result of a breach of this
Agreement by Bell;
(ii)
was received in good faith by Bell after the Closing from a non-Affiliated
Person who was lawfully in possession of such information and free of
any obligation of confidentiality; or
(iii)
is released from the provisions of this Agreement by the written
authorization of the Purchaser.
(c)
If Bell or any of its Affiliates is requested pursuant to, or required by, applicable
law or legal process to disclose any confidential information, Bell may make such
disclosure, but must first provide the Purchaser with prompt notice of such
request or requirement, unless notice is prohibited by law, in order to enable the
Purchaser to seek an appropriate protective order or other remedy.
9.11
[Redacted]
[The redacted information relates to the treatment of Company employees after the
Closing.]
ABRIDGED
- 37 9.12
Cash Distribution
The Parties agree that Bell and the Purchaser shall (a) cause the Company, HoldCo and
HoldCo 2 to declare and pay dividends or otherwise make payments or distributions of cash in
respect of its shares in accordance with past practice, and (b) notwithstanding the foregoing,
cause the Company, to declare and pay a dividend or otherwise make a payment or distribution
of cash in respect of its shares immediately prior to the Closing Time, and for the avoidance of
doubt, immediately prior to any calculation of Closing Working Capital, in an amount equal to
substantially all of the cash on hand at the time of such dividend, payment or distribution, in each
case subject to applicable corporate law.
9.13
Books and Records
All Books and Records of the Company, HoldCo and HoldCo 2 in the possession or control of
Bell shall be delivered to the Purchaser on or prior to the Closing Date.
9.14
Notice of Untrue Representation or Warranty
Bell shall notify the Purchaser promptly upon any representation or warranty made by it pursuant
to ARTICLE 4 becoming incorrect prior to Closing. The Purchaser shall notify Bell promptly
upon any representation or warranty made by it pursuant to ARTICLE 5 (other than the
representations and warranties made pursuant to Section 5.6(b) or Section 5.6(c)) becoming
incorrect prior to Closing. With respect to the representations and warranties made by the
Purchaser pursuant to Section 5.6(b) or Section 5.6(c), the Purchaser shall notify Bell promptly
upon such representation and warranty becoming incorrect in any material respect prior to
Closing; provided that the Purchaser shall have no liability for any failure to notify Bell of any
representation or warranty made pursuant to Section 5.6(b) or Section 5.6(c) becoming incorrect.
For the purposes of this Section 9.14, unless otherwise specified, each representation and
warranty shall be deemed to be given at and as of all times from the date of this Agreement to the
Closing Date. Any such notice shall set out particulars of the untrue or incorrect representation or
warranty and details of any actions being taken by Bell or the Purchaser, as the case may be, to
rectify the incorrectness. No such notice will relieve either Party of any right or remedy provided
for in this Agreement.
ABRIDGED
- 38 9.15
Cooperation regarding reorganization
(a)
Not later than thirty days after the date of this Agreement, Bell shall deliver to the
Purchaser a reasonably detailed summary plan with respect to any contemplated
reorganization with respect to the transfer of the Company Shares and the HoldCo
Shares including to an Affiliate of Bell which could be a newly formed
corporation (“NewHoldco”) or partnership (the “Contemplated Reorganization
Transaction”), and as part of such summary plan, Bell may elect, in its
reasonable discretion, to sell to Purchaser all of the issued and outstanding shares
of NewHoldco. The Purchaser shall, and shall cause each of the Company,
HoldCo and HoldCo 2 to, reasonably cooperate with Bell in connection with the
Contemplated Reorganization Transaction, including with respect to structuring
and preparing any reorganization (including for Tax purposes) of their respective
capital, assets and corporate structure, any transfer or redemption of shares of
their respective capital or the payment of such dividends, as Bell may reasonably
require, and to use its commercially reasonable efforts to implement any such
Contemplated Reorganization Transaction prior to the closing of the Astral
Arrangement or prior to the Closing, as Bell may reasonably require; provided,
however, such requested cooperation does not unreasonably interfere with the
ongoing operations of the Company, HoldCo or HoldCo 2. In addition, if Bell
elects, in accordance with this Section 9.15, to sell to Purchaser the shares of
NewHoldco, the Parties agree to cooperate and take all necessary actions to
implement such transaction, including making all necessary amendments to this
Agreement.
(b)
If Bell elects, in accordance with this Section 9.15, to sell to Purchaser the shares
of NewHoldco, Bell shall be responsible for and shall indemnify the Purchaser for
100% of the Taxes payable by NewHoldco for periods or portions of periods
ending on or prior to the Closing Date.
(c)
No aspects of the Contemplated Reorganization Transactions will be effected
until such time as the Parties agree, acting reasonably, that the Astral
Arrangement is likely to be completed. Bell shall pay the implementation costs
ABRIDGED
- 39 and any direct or indirect costs and liabilities, fees, damages, penalties, Taxes,
Claims and other amounts that may be incurred as a consequence of the
implementation of or to unwind, any such Contemplated Reorganization
Transaction, including actual out-of-pocket costs and expenses for filing fees and
external counsel and auditors which may be incurred.
(d)
The Purchaser shall have the right to review and comment on all agreements,
contracts, certificates, resolutions and other documents in connection with the
Contemplated Reorganization Transaction, and in any event, the Contemplated
Reorganization Transaction shall be satisfactory to the Purchaser, acting
reasonably and shall have no adverse effects on the Purchaser, the Company,
HoldCo or HoldCo 2, or any of their respective Affiliates.
9.16
Termination and Mutual Release Agreement
During the period between the date of this Agreement and the Closing Date, Bell shall, and the
Purchaser Parent shall cause its Affiliates that are parties to the Shareholders’ Agreement to,
negotiate in good faith with a view to, concurrently with the Closing, entering into an agreement
terminating the Shareholders Agreement and providing a mutual release with respect to any
surviving obligations thereunder.
9.17
Section 256(9) Election
Bell and the Purchaser covenant and agree to make the election under subsection 256(9) of the
Income Tax Act (Canada) such that the acquisition of control of HoldCo, HoldCo 2, the
Company and NewHoldco shall be deemed to have occurred at the Closing Time, and not at the
beginning of the Closing Date. Bell and the Purchaser covenant and agree that this election shall
be made in the tax return of HoldCo, HoldCo 2, the Company and NewHoldco for the taxation
year ending immediately before the Closing Time.
ABRIDGED
- 40 ARTICLE 10
INDEMNIFICATION
10.1
Indemnification by Bell
(a)
Bell shall indemnify and save harmless the Purchaser, its directors, officers,
agents, employees and shareholders (collectively referred to as the “Purchaser
Indemnified Parties”), from and against all Claims, whether or not arising due to
third party Claims, which may be made or brought against the Purchaser
Indemnified Parties, or which they may suffer or incur, directly or indirectly, as a
result of or in connection with or relating to:
(i)
any non-fulfilment or breach of any covenant or agreement on the part of
Bell contained in this Agreement or in any certificate or other document
furnished by or on behalf of Bell pursuant to this Agreement, including the
Contemplated Reorganization Transaction; or
(ii)
any misrepresentation or any incorrectness in or breach of any
representation or warranty of Bell contained in this Agreement or in any
certificate or other document furnished by or on behalf of Bell pursuant to
this Agreement, except for any misrepresentation or any incorrectness in
or breach of any representation or warranty of Bell to the extent disclosed
by Bell in the officer’s certificates provided in accordance with
Section 7.1 in sufficient detail and context to allow the Purchaser to assess
the impact of such Claim prior to the Closing Date, and for the avoidance
of doubt, any such disclosure in such officer’s certificate shall cause the
condition set forth in Section 7.1 not to be satisfied.
(b)
Bell’s obligations under Section 10.1(a) shall be subject to the following
limitations:
(i)
subject to Section 10.1(c), the obligations of Bell under Section 10.1(a)(ii)
shall terminate on the date that is 18 months from the Closing Date except
with respect to bona fide Claims by Purchaser Indemnified Parties set
ABRIDGED
- 41 forth in written notices given by a Purchaser Indemnified Party to Bell
prior to such date;
(ii)
for Claims made under Section 10.1(a)(ii), Bell shall not be required to
pay any amount until the aggregate of all Claims exceeds $1,000,000 and
upon the aggregate of all Claims exceeding $1,000,000 Bell shall be
required to pay the amount owing in respect of all such Claims including
the $1,000,000; provided, however, in no event shall Bell be required to
pay any amount for Claims made under Section 10.1(a)(ii) (other than
Claims made with respect to the Vendor’s Core Representations) in excess
of $93,375,000 or in excess of $249,000,000 with respect to Claims
against Bell for the misrepresentation, incorrectness or breach of any of
the Vendor’s Core Representations, except that the foregoing limitations
shall not apply to wilful breaches of this Agreement by Bell or fraud of
Bell.
(c)
the obligations of Bell under Section 10.1(a) with respect to:
(i)
any Claims under Section 10.1(a)(i);
(ii)
any Claims based on any breach of the Vendor’s Core Representations; or
(iii)
any Claims based on intentional misrepresentation or fraud by Bell or any
Person acting for or on behalf of Bell;
shall survive indefinitely.
(d)
notwithstanding anything to the contrary in this Agreement, the Claims incurred
by the Purchaser Indemnified Parties arising out of or relating to any
misrepresentation, incorrectness or breach of any representation or warranty of
Bell contained in Sections 4.9 and 4.10 shall be limited to, and shall not, exceed,
50% of the Claims incurred by the Purchaser Indemnified Parties arising out of or
relating to such inaccuracy or breach of any such representation or warranty.
ABRIDGED
- 42 10.2
Indemnification by the Purchaser
(a)
The Purchaser shall indemnify and save harmless Bell, its directors, officers,
agents, employees and shareholders (collectively referred to as the “Bell
Indemnified Parties”), from and against all Claims, whether or not arising due to
third party Claims, which may be made or brought against Bell Indemnified
Parties, or which they may suffer or incur, directly or indirectly as a result of or in
connection with or relating to:
(i)
any non-fulfilment or breach of any covenant or agreement on the part of
the Purchaser contained in this Agreement or in any certificate or other
document furnished by or on behalf of the Purchaser pursuant to this
Agreement, other than any covenant contained in Section 9.14 to the
extent related to, or in connection with, either of Sections 5.6(b) or 5.6(c);
or
(ii)
any misrepresentation or any incorrectness in or breach of any
representation or warranty of the Purchaser contained in this Agreement or
in any certificate or other document furnished by or on behalf of the
Purchaser pursuant to this Agreement, other than the representations and
warranties contained in Sections 5.6(b) and 5.6(c) (except to the extent of
any intentional misrepresentation with respect to Section 5.6(b) and 5.6(c)
by the Purchaser or fraud of the Purchaser with respect to Section 5.6(b)
and 5.6(c)).
(b)
The Purchaser’s obligations under Section 10.2(a) shall be subject to the
following limitations:
(i)
subject to Section 10.2(c), the obligations of the Purchaser under Section
10.2(a)(ii) shall terminate on the date that is 18 months from the Closing
Date except with respect to bona fide Claims by Bell Indemnified Parties
set forth in written notices given by a Bell Indemnified Party to the
Purchaser prior to such date;
ABRIDGED
- 43 (ii)
for Claims made under Section 10.2(a)(ii), the Purchaser shall not be
required to pay any amount until the aggregate of all Claims exceeds
$1,000,000 and upon the aggregate of all Claims exceeding $1,000,000 the
Purchaser shall be required to pay the amount owing in respect of all such
Claims including the $1,000,000; provided, however, in no event shall the
Purchaser be required to pay any amount for Claims made under
Section 10.2(a)(ii) (other than Claims made with respect to Section 5.1
(Status of the Purchaser) and 5.2 (Due Authorization and Enforceability))
in excess of $93,375,000 or in excess of $249,000,000 with respect to
Claims against the Purchaser for the misrepresentation, incorrectness or
breach of any of the representations set out in Sections 5.1 (Status of the
Purchaser) and 5.2 (Due Authorization and Enforceability), except that the
foregoing limitations shall not apply to wilful breaches of this Agreement
by the Purchaser or fraud of the Purchaser.
(c)
the obligations of the Purchaser under Section 10.2(a) with respect to:
(i)
any Claims under Section 10.2(a)(i);
(ii)
any Claims based on any incorrectness in or breach of the representations
and warranties set out in Sections 5.1 (Status of the Purchaser) and 5.2
(Due Authorization and Enforceability); or
(iii)
any Claims based on intentional misrepresentation or fraud by the
Purchaser or any Person acting on behalf of the Purchaser;
shall survive indefinitely , and any Claims based on any incorrectness in or breach of the
representations and warranties set out in Section 5.6(a) shall survive for a period of 30
Business Days after the expiration of the last of the limitation periods contained in the
Income Tax Act and any other applicable legislation imposing Tax subsequent to the
expiration of which an assessment, reassessment or other form of recognized document
assessing liability for Tax cannot be issued, except with respect to any bona fide Claims
by Bell Indemnified Parties set forth in written notices given by a Bell Indemnified Party
to the Purchaser prior to such date.
ABRIDGED
- 44 10.3
Indemnification Procedures for Third Party Claims
(a)
In the case of Claims made by a third party with respect to which indemnification
is sought, the Party seeking indemnification (the “Indemnified Party”) shall give
prompt notice, and in any event within 20 days, to the other Party (the
“Indemnifying Party”) of any such Claims made upon it. If the Indemnified
Party fails to give such notice, such failure shall not preclude the Indemnified
Party from obtaining such indemnification but its right to indemnification may be
reduced to the extent that such delay materially prejudiced the defence of the
Claim or materially increased the amount of liability or cost of defense.
(b)
The Indemnifying Party shall have the right, by notice to the Indemnified Party
given not later than 30 days after receipt of the notice described in
Section 10.3(a), to assume the control of the defence, compromise or settlement
of the Claim, provided that such assumption shall, by its terms, be without cost to
the Indemnified Party and provided the Indemnifying Party acknowledges in
writing its obligation to indemnify the Indemnified Party in accordance with the
terms contained in this Section in respect of that Claim.
(c)
Upon the assumption of control of any Claim by the Indemnifying Party as set out
in Section 10.3(b), the Indemnifying Party shall diligently proceed with the
defence, compromise or settlement of the Claim at its sole expense, including if
necessary, employment of counsel and experts reasonably satisfactory to the
Indemnified Party and, in connection therewith, the Indemnified Party shall
cooperate fully, but at the expense of the Indemnifying Party with respect to any
out-of-pocket expenses incurred, to make available to the Indemnifying Party all
pertinent information and witnesses under the Indemnified Party’s control, make
such assignments and take such other steps as in the opinion of counsel for the
Indemnifying Party are reasonably necessary to enable the Indemnifying Party to
conduct such defence.
The Indemnified Party shall also have the right to
participate in the negotiation, settlement or defence of any Claim at its own
expense.
ABRIDGED
- 45 (d)
The final determination of any Claim pursuant to this Section 10.3, including all
related costs and expenses, shall be binding and conclusive upon the Parties as to
the validity or invalidity, as the case may be, of such Claim against the
Indemnifying Party.
(e)
If the Indemnifying Party does not assume control of a Claim as permitted in
Section 10.3(b), the Indemnified Party shall be entitled to make such settlement of
the Claim as in its sole discretion may appear advisable, and such settlement or
any other final determination of the Claim shall be binding upon the Indemnifying
Party.
10.4
Tax Status of Indemnification Payments
Any payment made by Bell pursuant to this ARTICLE 10 shall constitute a reduction of the
Purchase Price and any payment made by the Purchaser pursuant to this ARTICLE 10 shall
constitute an increase in the Purchase Price. In either case, each of Bell and the Purchaser shall,
within a reasonable time of payment and receipt of such payment, as applicable, and in any event
within two months of such payment, request all amendments to its current or past Tax Returns as
may be necessary to reflect the foregoing.
10.5
Additional Limitations
Notwithstanding any other Section in this ARTICLE 10, neither Party shall be liable for any
exemplary or punitive damages (except for any such damages actually paid by the Indemnified
Parties to any third party in respect of any third party Claim).
10.6
Exclusive Remedy
Following the Closing, the rights of indemnity set forth in this ARTICLE 10 are the sole and
exclusive remedy of each Party in respect of any misrepresentation, incorrectness in or breach of
any representation or warranty by the other Party under this Agreement, other than such
misrepresentation, incorrectness or breach arising as a result of, in connection with, or with
respect to, any fraud or wilful misconduct.
ABRIDGED
- 46 ARTICLE 11
TERMINATION
11.1
Termination
This Agreement may be terminated at any time prior to the Closing:
(a)
by the mutual written consent of Bell and the Purchaser;
(b)
by either Bell or the Purchaser if the Closing shall not have occurred by the date
that is the one year anniversary of the date hereof (as such date may be postponed
as set forth below, the “Outside Date”), provided that if on the day that is at least
five days before the Outside Date, the application for CRTC Approval remains
pending, but either Party reasonably believes that CRTC Approval is reasonably
capable of being obtained on or prior to the date that is three months after the
Outside Date and all other conditions set forth in ARTICLE 7 and ARTICLE 8
(other than those capable of being satisfied at the Time of Closing only) have
been satisfied, then either Party shall have the right to postpone the Outside Date
to the date that is three months after the Outside Date, upon written notice to the
other Party prior to 5:00 pm ET on the day that is at least one day before the
Outside Date; provided that the Outside Date shall not be extended beyond the
date that is 15 months from the date hereof and the right to terminate this
Agreement pursuant to this Section 11.1(b) shall not be available to any Party
whose failure to fulfill any obligations under this Agreement shall have been the
primary cause of, or shall have resulted in the failure of the Closing to occur on or
prior to the Outside Date;
(c)
by Bell if (i) the CRTC Approval is denied, (ii) the Competition Act Approval has
not been obtained on or before the closing of the Astral Arrangement, or (iii) the
Commissioner of Competition indicates in writing that he objects to the
transaction provided for in this Agreement; provided that the right to terminate
this Agreement pursuant to this Section 11.1(c) shall not be available to Bell if its
failure to fulfill any obligations under this Agreement shall have been the primary
ABRIDGED
- 47 cause of, or shall have resulted in the either the CRTC Approval being denied or
the failure to obtain Competition Act Approval;
(d)
by Bell if it is not required to divest the Channels by the CRTC and pursuant to
the Competition Act in connection with the Astral Arrangement;
(e)
by the Purchaser if (i) Bell is in breach of any representation, warranty, covenant,
obligation or other provision of this Agreement; (ii) the Purchaser has provided
written notice to Bell of such breach; (iii) such breach has not been waived or
cured (or is not capable of being cured) by the earlier of the day prior to the
Outside Date and 15 Business Days following the date on which the Purchaser
notifies Bell of such breach; (iv) such breach, if not waived or cured in
accordance with clause (iii) above (or is not capable of being cured), would render
any condition set forth in ARTICLE 7 incapable of being satisfied; and (v) the
Purchaser is not then in breach of this Agreement so as to directly or indirectly
cause any of the conditions set forth in ARTICLE 8 not to be satisfied;
(f)
by Bell if (i) the Purchaser is in breach of any representation, warranty, covenant,
obligation or other provision of this Agreement; (ii) Bell has provided written
notice to the Purchaser of such breach; (iii) such breach has not been waived or
cured (or is not capable of being cured) by the earlier of the day prior to the
Outside Date and 15 Business Days following the date on which Bell notifies the
Purchaser of such breach; (iv) such breach, if not waived or cured in accordance
with clause (iii) above (or is not capable of being cured), would render any
condition set forth in ARTICLE 8 incapable of being satisfied; and (v) Bell is not
then in breach of this Agreement so as to directly or indirectly cause any of the
conditions set forth in ARTICLE 7 not to be satisfied; or
(g)
by either Party if the BCE-Astral Agreement is terminated for any reason prior to
the completion of the Astral Arrangement.
11.2
Effect of Termination
Each Party’s right of termination under Section 11.1 is in addition to any other rights it may have
under this Agreement or otherwise, and the exercise of a right of termination will not be an
ABRIDGED
- 48 election of remedies.
If this Agreement is terminated pursuant to Section 11.1, all further
obligation of the Parties under this Agreement will terminate, except that the provisions of
ARTICLE 1, Section 9.9, Section 9.10, Section 11.2, Section 11.3, Section 11.4 and ARTICLE
12 shall survive; provided, however, that if this Agreement is terminated by the Purchaser
pursuant to Section 11.1(e) or by Bell pursuant to Section 11.1(f), the terminating party’s right to
pursue all legal remedies with respect to such breach that gave rise to the right of termination
pursuant to Section 11.1(e) or 11.1(f) will survive such termination unimpaired.
11.3
[Redacted]
[The redacted information relates to the payment of fees related to regulatory outcomes.]
11.4
Indemnity Payment
(a)
In the event that this Agreement is terminated pursuant to Section 11.1(b), at a
time when the condition set forth in Section 8.5 is not satisfied, or pursuant to
Section 11.1(c), and Bell has delivered to the Purchaser a written notice signed by
an executive officer of Bell stating that Bell is ready, willing and able in good
faith to close the transactions contemplated by this Agreement and would do so
but for the unfulfilled condition in Sections 8.5 or 8.6, and the Purchaser is not
otherwise entitled to terminate this agreement under Section 11.1(e) (without
regard to the cure periods), the Purchaser shall indemnify Bell and be required to
pay to Bell, promptly upon completion of a direct or indirect sale of the Company
Shares and the HoldCo Shares by Bell to a subsequent third party purchaser in
order to satisfy a condition attached to the regulatory approvals obtained in
connection with the Astral Arrangement, (such sale, a “Subsequent
Transaction”), an amount equal to (i) the net aggregate proceeds that would have
been received had the transactions contemplated by this Agreement been
completed, less (ii) the net aggregate proceeds that Bell later receives in the
applicable Subsequent Transaction (taking into account adjustments related to the
Working Capital and the actual working capital delivered to the purchaser in the
Subsequent Transaction, or similar adjustments, but not any indemnity payments
made by Bell to a potential acquiring entity). For greater certainty and without
limiting the foregoing, the Purchaser’s indemnity hereunder shall apply regardless
ABRIDGED
- 49 of the process leading to a Subsequent Transaction being conducted by Bell or a
Divestiture Trustee (as such term is defined in the Consent Agreement), or any
other person appointed by the Commissioner of Competition pursuant to the
Consent Agreement.
(b)
Until expiry of the Initial Sale Period (as such term is defined in the Consent
Agreement) and the appointment of a Divestiture Trustee pursuant to the Consent
Agreement, the terms described in this Section 11.4(b) shall apply with respect to
any requirement for any Subsequent Transaction. After consultation with the
Purchaser and taking into account the Purchaser’s views, Bell shall retain, at the
Purchaser’s costs, reputable investment bankers, on customary terms for a
transaction of this type, including customary fees and disbursements, to conduct a
full auction process with respect to any Subsequent Transaction. Bell shall keep
the Purchaser fully informed as to any sale process in respect of any Subsequent
Transaction, including by providing it with all material written correspondence
between Bell and any potential acquiring entity.
The Purchaser shall have
reasonable access to such investment bankers throughout the auction process and
Bell shall consider in good faith any of the Purchaser’s requests and comments
with respect to the auction process and the ensuing negotiations with the bidders,
including with respect to the selection of the proposed acquiror. Bell shall use its
reasonable best efforts to obtain the most favourable terms as a result of such
auction process and ensuing negotiations, and in determining such favourable
terms shall take into account the ability of a potential acquiror to consummate any
Subsequent Transaction and the total consideration payable by the potential
acquiror. For greater certainty, Bell shall have complete discretion in selecting
the potential acquiror; provided that if the Purchaser does not agree with Bell’s
proposed selection (which disagreement the Purchaser shall have expressed to
Bell in writing within five Business Days of Bell’s request in that regard), and
Bell does not select the potential acquiror offering the highest price, the indemnity
provided for in the previous paragraph shall be reduced by an amount equal to the
difference between (i) the net aggregate proceeds that Bell would have received if
it had selected the potential acquiror offering the highest price, and (ii) the net
aggregate proceeds that Bell receives in the Subsequent Transaction.
ABRIDGED
- 50 ARTICLE 12
GENERAL
12.1
Public Notices
The Parties shall jointly plan and co-ordinate any public notices, press releases, and any other
publicity concerning the transactions contemplated by this Agreement and no Party shall act in
this regard without the prior approval of the other, such approval not to be unreasonably
withheld; provided, however, each Party shall have the right to issue a press release (or such
other public announcement) announcing the execution of this Agreement and its principal
commercial terms shortly following execution of this Agreement, such press release (or other
public announcement) to be provided in draft form to the other Party in advance in order to
provide a reasonable opportunity to comment. A copy of this Agreement may be filed with a
Governmental Authority to the extent that a Party concludes, acting reasonably, that it is
obligated to do so under Law.
12.2
Expenses
Except as otherwise provided in this Agreement each Party shall pay all costs and expenses
(including the fees and disbursements of legal counsel and other advisers) it incurs in connection
with the negotiation, preparation and execution of this Agreement and the transactions
contemplated by this Agreement.
12.3
Notices
Any notice, consent or approval required or permitted to be given in connection with this
Agreement (in this Section 12.3 referred to as a “Notice”) shall be in writing and shall be
sufficiently given if delivered (whether in person, by courier service or other personal method of
delivery):
ABRIDGED
- 51 (a)
in the case of a Notice to the Purchaser at:
c/o Corus Entertainment Inc.
Corus Quay
25 Dockside Drive
Toronto, ON M5A 0B5
Attention:
Gary A. Maavara
With a copy to:
Osler, Hoskin & Harcourt LLP
1 First Canadian Place, Suite 6100
Toronto, Ontario M5X 1B8
Attention:
(b)
Douglas A. Bryce and Terry Burgoyne
in the case of a Notice to Bell at:
Bell Media Inc.
299, rue Queen Ouest
Toronto, ON M5V 2Z5
Attention:
Corporate Secretary
With a copy to:
Bell Canada
1, Carrefour Alexander-Graham-Bell, Building A7
Verdun, QC H3E EB3
Attention:
Corporate Secretary
Any Notice delivered or transmitted to a Party as provided above shall be deemed to have been
given and received on the day it is delivered or transmitted, provided that it is delivered or
transmitted on a Business Day prior to 5:00 p.m. local time in the place of delivery or receipt.
However, if the Notice is delivered or transmitted after 5:00 p.m. local time or if such day is not
a Business Day then the Notice shall be deemed to have been given and received on the next
Business Day.
Any Party may, from time to time, change its address by giving Notice to the other Parties in
accordance with the provisions of this Section.
ABRIDGED
- 52 12.4
Assignment
Neither party may assign this Agreement or any of the benefits, rights or obligations under this
Agreement without the prior written consent of the other Party; provided that Bell may, as part of
its Contemplated Reorganization Transaction, assign all of its rights, interests and obligations
under this Agreement to any Affiliate of Bell without the Purchaser’s prior written consent, but
Bell shall not be relieved of its obligations under this Agreement, and any reference in this
Agreement to “Bell” shall be deemed to include the assignee.
12.5
Enurement
This Agreement enures to the benefit of and is binding upon the Parties and their respective
successors (including any successor by reason of amalgamation of any Party) and permitted
assigns.
12.6
Amendment
No amendment, supplement, modification or waiver or termination of this Agreement and,
unless otherwise specified, no consent or approval by any Party, is binding unless executed in
writing by the Party to be bound thereby.
12.7
Further Assurances
The Parties shall, with reasonable diligence, do all such things and provide all such reasonable
assurances as may be required to consummate the transactions contemplated by this Agreement,
and each Party shall provide such further documents or instruments required by any other Party
as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry
out its provisions, whether before or after the Closing.
12.8
Submission to Jurisdiction
(a)
Each Party submits to the exclusive jurisdiction of any Ontario courts sitting in
Toronto in any action, application, reference or other proceeding arising out of or
relating to this Agreement and consents to all claims in respect of any such action,
application, reference or other proceeding being heard and determined in such
Ontario courts. Each of the Parties irrevocably waives, to the fullest extent it may
ABRIDGED
- 53 effectively do so, the defence of an inconvenient forum to the maintenance of
such action, application or proceeding.
Each Party consents to any action,
application, reference or other proceeding arising out of or relating to this
Agreement being tried in Toronto and, in particular, being placed on the
Commercial List of the Ontario Superior Court of Justice.
(b)
The Parties shall not raise any objection to the venue of any action, application,
reference or other proceeding arising out of or relating to this Agreement in the
Ontario Courts sitting in Toronto, including the objection that the proceedings
have been brought in an inconvenient forum.
(c)
A final judgment in any such action, application or proceeding is conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner specified by law.
12.9
Execution and Delivery
This Agreement may be executed by the Parties in counterparts and may be executed and
delivered by facsimile or electronic transmission and all such counterparts and facsimiles or
electronic copies together constitute one and the same agreement.
12.10 Guarantee by Purchaser Parent
Purchaser Parent hereby unconditionally guarantees to Bell the timely payment and performance
by the Purchaser of the Purchaser’s obligations under this Agreement, and agrees to cause the
Purchaser to perform all of its obligations under this Agreement.
[Remainder of Page Intentionally Blank]
ABRIDGED
IN WITNESS OF WHICH the Parties have executed this Agreement.
8324441 CANADA INC.
By: “John Cassaday”
Name: John Cassaday
Title: Director
By: “Tom Peddie”
Name: Tom Peddie
Title: Director
CORUS ENTERTAINMENT INC.
By: “John Cassaday”
Name: John Cassaday
Title: President and Chief Executive
Officer
By: “Tom Peddie”
Name: Tom Peddie
Title: Executive Vice President and Chief
Financial Officer
BELL MEDIA INC.
By: “Kevin Crull”
Name: Kevin Crull
Title: President
[Signature Page to Purchase Agreement – Teletoon]
ABRIDGED
ABRIDGED
ABRIDGED
ABRIDGED
APPENDIX 5
Financial Statements
ABRIDGED
ABRIDGED
Appendix 5 Copy of Teletoon F2012 Financials Abridged.xls Income Statement
CONSOLIDATED
STATEMENTS OF EARNINGS
FOR THE PERIOD ENDED 31-08-12
(in thousands)
YEAR TO DATE
Actual
Last year
Revenues from Operations
External
101 Revenue - Cable
102 Revenue - Advertising
103 Revenue - Miscellaneous
104 Revenue 4
105 Revenue 5
106 Revenue 6
$44,152
55,416
47
$45,563
58,510
217
-------------------- -------------------99,615
104,290
107 Total External Revenues
-------------------- -------------------110 TOTAL REVENUES
99,615
Operating expenses
111 Cost of Sales - Canadian
112 Cost of Sales - Foreign
113 Programming & Technical
114 Selling & Marketing
115 Administrative
104,290
21,659
19,647
15,730
15,086
5,865
5,988
10,321
11,058
5,089
5,464
-------------------- -------------------58,664
57,243
120 Total Operating Expenses
130 EBITDA
EBITDA margin
Depreciation & amortization
131 Depreciation of fixed assets
132 Amortization
40,951
47,047
41.1%
45.1%
140
119
68
75
-------------------- -------------------208
194
140 Total depreciation & amortization
150 Mgmt earnings bef. int.& taxes (MEBIT)
Interest
151 External
152 Internal
40,743
46,853
(49)
(297)
-------------------- -------------------155 Total Interest
160 Mgmt earnings bef. taxes (MEBT)
(49)
(297)
40,694
46,556
Statutory income and expenses
161 Dividend income
162 Statutory interest, net
163 Share of equity earnings
164 Non-controlling interest
165 Tax on Capital / CRTC
166 Management Fees - ATN
(11)
----------------- ----------------(11)
170 Total
180 Statutory earnings bef. taxes (SEBT)
181 Provision for income taxes
40,694
46,545
(10,994)
(13,442)
-------------------- --------------------
190 Net earnings, statutory
29,700
Page 1 of 3
33,103
========= =========
ABRIDGED
Appendix 5 Copy of Teletoon F2012 Financials Abridged.xls Balance Sheet
CONSOLIDATED
STATEMENTS OF EARNINGS
FOR THE PERIOD ENDED 31-08-12
(in thousands)
2012
August
2011
August
ASSETS
Current
201
202
203
205
206
Cash and short-term investments
Accounts receivables-trade
Accounts receivables-intercompany
Program and film rights
Prepaids and other receivables
$10,779,738
19,117,221
170,804
28,706,903
23,717,389
$5,704,454
19,982,890
124,451
27,540,780
22,432,378
------------------- ------------------210 Total Current Assets
211 Program and rights
212 Loans receivables-affiliates
213 Advances to (from)-affiliates
214 Investments
216 Fixed assets
217 Broadcast licences
219 Future Income Tax - Asset
220 Total assets
82,492,055
75,784,953
32,402,692
32,772,121
274,906
566,090
584,131
221,090
221,090
------------------- ------------------115,956,833
109,362,295
=========== ===========
LIABILITIES
Current
252
253
254
255
256
257
Accounts payable
Accrued liabilities
Provisions
Accounts payable-affiliates
Program exhibition rights payable
Long-term debt due within one year
628,180
560,809
1,214,369
5,028,225
10,644,665
12,587,610
4,381,266
15,899,434
-------------------- -------------------260 Total Current Liabilities
262 Program exibition rights payable
263 Loans payable-affiliates
264 Long-term debt
265 Non-controlling interest
266 Other liabilities
24,421,264
26,523,294
529,887
87,859
-------------------- -------------------270 Total Liabilities
24,951,151
26,611,153
-------------------- -------------------SHAREHOLDERS' EQUITY
281
282
190
284
Capital stock
Retained earnings, opening
Net earnings for the period
Dividends
2,000,000
80,752,320
29,699,542
(21,446,180)
2,000,000
69,703,887
33,102,687
(22,055,432)
------------------- ------------------290 Total Shareholders Equity
91,005,682
82,751,142
------------------- ------------------295 Total liabilities & shareholders equity
Page 2 of 3
115,956,833
109,362,295
=========== ===========
ABRIDGED
Appendix 5 Copy of Teletoon F2012 Financials Abridged.xls Cash Flow
CONSOLIDATED
STATEMENTS OF EARNINGS
FOR THE PERIOD ENDED 31-08-12
(in thousands)
YTD
Actual
CASH PROVIDED BY (USED FOR):
OPERATING OPERATIONS
190 Net earnings, statutory
131 Depreciation of fixed assets
163 Share of equity earnings
302 (Gain) loss on sale of fixed assets
164 Non-controlling interest
310 Cash flow from operations
320 Change in non-cash operating items
Account receivable - trade
Accounts receivable - affiliates
Program and film rights
Prepaids
Accounts payable
Accounts payable - affiliates
Accrued liabilities
Provisions
Program exhibition rights payable
Long term debt less than a year
330 Cash flow from operating activities
INVESTING
331 Addition to fixed assets
332 Proceeds from sale of fixed assets
335 (Inc.) dec. in investments
336 (Inc.) dec. in other assets
337 (Inc.) dec. in broadcast licences
338 (Inc.) dec. in goodwill
339 R/E adjustments
----------------29,909
----------------1,371
(47)
(797)
(1,788)
(586)
6,264
(4,467)
(2,870)
----------------26,989
----------------(148)
----------------(148)
-----------------
340 Investing
FINANCING ACTIVITIES
341 Inc. (dec.) in bank indebtedness
342 Inc. (dec.) in loans - affiliates
343 Inc. (dec.) in advances to (from) - affiliates
344 Change in long-term debt
345 Change in other liabilities
346 Increase in capital stock
347 Dividends paid
350 Financing activities
360 Increase (decrease) in cash
Check
$29,700
209
Page 3 of 3
(21,446)
----------------(21,446)
----------------5,395
----------------5,077
Via GCKey
June 12th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various undertakings – Transfer of Shares
and Acquisition of assets - Change in effective control – Application
No: 2013-0596-2 – Response to deficiency letter dated May 28th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated May 28th, 2013.
Corus has filed via GCKey the following documents:
1. Response to deficiency letter dated May 28th, 2013;
2. Appendix A – Revised Appendix 2A – Confidential and Abridged version;
3. Appendix B – Financial Statements as of August 31st, 2012 and interim financial
statements as of February 28th, 2013 – Confidential and Abridged versions;
4. Appendix C – Lease details – Confidential and Abridged versions.
Pursuant to sections 31 and 32 of the Canadian Radio-television and Telecommunications
Commission Rules of Practice and Procedure (the “Rules”), Corus is designating the
financial information in Appendix B and the amounts in Appendix C as confidential.
The sections that have been redacted contain competitively sensitive information
whether for the current year or future years that could be detrimental to the licensees
involved if released. This information is not otherwise publicly accessible, whether to
the Commission or for securities purposes and could if released impact our ability to
negotiate similar commercial arrangements.
We are also hereby designating as confidential the home addresses of the individual
directors and officers of the corporations listed in Appendix A. This request is made to
address privacy concerns related to the disclosure of the home addresses, other than the
city of residence, of these directors and officers. Abridged versions of both appendices
have been provided for the public record.
Corus would be pleased to respond to any questions and would ask that they be
directed to the undersigned.
Thank you for your attention to this matter.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachments
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
***End of document***
Via GCKey
June 12th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various undertakings – Transfer of Shares and
Acquisition of assets - Change in effective control – Application
No: 2013-0596-2 – Response to deficiency letter dated May 28th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated May 28th, 2013.
The Commission’s questions are reproduced below with the Applicant’s response
provided in bold.
Ownership Analysis
1. Rationale of the transaction - Paragraph 82 of the supplementary brief indicates
how this transaction would benefit TELETOON Canada should the transaction be
approved by the Commission. Please indicate why the Commission should view this
as a benefit to Canadians and to the Canadian broadcasting system when Corus is
already in a position to provide such benefits to TELETOON.
Corus response
In June of 2006 Astral Media Inc. and Corus applied to the Commission for
approval to take up 10% each of the voting interest in Teletoon Inc.As a result the
voting interest of Astral Media Inc. and Corus would be equal at 50%.
2
The Commission approved the application (Broadcasting Public Notice CRTC
2006-129, 29 September 2006, Appendix 1, item #6) and stated the following:
This transaction does not affect the effective control of Teletoon Inc., which
is exercised by its board of directors.
As part of that process, the applicants had filed a Unanimous Shareholder
Agreement (USA) dated September 1st, 2006 that was binding upon the signatories
which were wholly-owned subsidiaries of either Corus or Astral Media Inc. This
agreement formed part of the record of that proceeding. This agreement set out the
obligations as between the parties which included pre-emptive rights for each
party to have first rights in the event that one party was leaving. In the context of
the structure, which requires close cooperation and trust between the equal share
owners, this made a great deal of sense. Otherwise one party could be left in a
close relationship with a co-owner that it does not know.
The Commission endorsed this with the approval as noted above. In a sense the
Commission has already approved the fact that either Corus or Astral could
become the whole owner of the company in 2006.
Teletoon Inc. has been operating since 2006 in this cooperative manner with the
actual operations of the company being shared between Astral Media Inc. and
Corus as service providers while the corporation and its core staff, including the
CEO and the board, directed its course. This process is now ending with the sale
of Astral Media Inc. As such the services performed by Astral Media Inc. must be
replaced. The voting ownership is also changing. It is in the public interest that
this be done in the method contemplated by the parties in the USA and which was
approved by the Commission at that time.
The public benefit arises from the structural fact that an equal partner should
have the right to pick its opposite number. An approval would be in the public
benefit as it would clarify the ownership. The inverse of this is that a denial
would mean that Corus could face the prospect of a co-owner that it did not pick
and which could effectively exercise negative control over the company by
refusing to be cooperative in the superlative manner that Corus and Astral Media
Inc. have been. BCE Inc. would also be required to find a new purchaser which
would take time. We respectfully submit that a further delay would be
detrimental to the Teletoon licences, to Corus, and to the public interest. Public
markets tend to punish uncertainty.
At this time of great change in our industry, it is not in the public interest to leave
such an important group of services which Canadian viewers like, and which
contribute greatly to the system in the form of CPE spending and otherwise, with
a period of uncertainty that could be months.
It is also in the public interest that Corus and its shareholders be treated fairly and
pursuant to an agreement that was reviewed and approved by the Commission
seven years ago.
3
2. Current shareholders of TELETOON Canada
a) Please confirm staff’s understanding that, "YTV Canada, Inc." (with a comma)
should have been referred to as a shareholder of TELETOON Canada instead of
"YTV Canada Inc." (no comma). Please note that this entity will be referred to as
YTV for the remainder of this letter. In the negative, please file a certificate of
amendment.
Corus response
YTV Canada, Inc. is the correct name.
b) In paragraph 2 of the supplementary brief, it is stated that The Family Channel
Inc. (Family) holds 50% of the voting shares in TELETOON Canada through
wholly owned subsidiaries. The Commission’s records currently show that
Family directly and indirectly holds a total of 50% of the voting shares in
TELETOON Canada through partly owned subsidiaries. Please clarify and file
documentation in support if necessary. The Commission’s ownership charts are
available on the Commission’s website.
Corus response
The Commission’s ownership charts are correct.
c) In the cover letter of the TELETOON application, it is stated that "neither Corus
nor Astral Media Inc. exercise control over the subject broadcasting
undertakings", yet, on paragraph 59, the supplementary brief states that Corus
originates the service (and this is further restated in paragraph 173) and that
Astral Media provides administrative support. Please clarify.
Corus response
This question involves the separate concepts of ownership control in law and
services required to operate the service.
In June of 2006 Astral Media Inc. and Corus applied to the Commission for
approval to take up 10% each of the voting interest in Teletoon Inc. As a result the
voting interest of Astral Media Inc. and Corus would be equal at 50%.
The Commission approved the application (Broadcasting Public Notice CRTC
2006-129, 29 September 2006, Appendix 1, item #6) and stated the following:
This transaction does not affect the effective control of Teletoon Inc., which
is exercised by its board of directors.
The Teletoon Inc. board and its management exercised this control.
It is not unusual for a broadcasting operation to enter into service contracts to
accomplish a variety of goals. An obvious example is carriage agreements with
4
Telesat Canada for satellite space to deliver the signal to BDU’s. This of course is
done by virtually everyone. A second obvious example is the acquisition of
programming from independent producers. Of course the Commission sanctions
and mandates this through conditions of licence. There are many other services
performed by third parties such as audience measurement, advertising sales, etc.
In the case of Teletoon Inc. the owners agreed that it also made sense to have the
company contract out other services to Corus and to Astral Media Inc. Agreements
were vetted by the board and by auditors and have operated for years to benefit
the service. It is these services that are referred to in the Supplementary Brief at,
inter alia, paragraphs 59 and 173. These agreements do not effect legal control but
simply relate to operational elements.
So Teletoon uses the Corus Quay physical infrastructure to hold, assemble and
deliver the programming in the linear channel form. This is not unusual in the
Canadian system. For example, Superchannel is originated by and at Bell facilities
in Toronto while the corporate, programming and other functions reside in offices
that are in Edmonton.
3. Transaction steps - Staff notes that the various steps of the transaction involving the
shareholders of TELETOON Canada have been summarized in paragraph 10 of the
supplementary brief. Yet, this summary does not correspond to the charts presented
in paragraph 11. Therefore, please refer to the charts contained in the Appendix to
this letter: they correspond to staff’s understanding.
a) Please review staff’s understanding as presented in the Appendix to this letter
and comment.
Corus response
We will follow Alternative “A” illustrated in the diagrams following paragraph 11
of the supplementary brief.
b) Please clarify the purpose of the differentiation between TELETOON Amalco
and 8324441 Canada Inc. (4441 Inc.) in the supplementary brief.
Corus response
4441 Inc., Teletoon Canada, 6381 Inc. and 4113756 Canada Inc., will amalgamate
and continue as Teletoon Amalco. Essentially, Teletoon Amalco will be the
successor to 4441 Inc.
b) Please explain why two alternatives have been proposed for this transaction
and why a definitive course of action has yet to be decided.
5
Corus response
BCE Inc. initially proposed the two alternatives because it had not yet decided on
its disposition strategy at the time of signature of the SPA. As outlined above in
reply to question 3(a), BCE Inc. has now indicated that it will follow Alternative
“A” illustrated in the diagrams following paragraph 11 of the supplementary
brief.
d) Please explain what will happen to Family after its participation in 4116381
Canada Inc. (6381 Inc.) and TELETOON Canada are purchased by 4441 Inc.
Corus response
BCE Inc. has advised Corus that it proposes the following reorganization in
respect of Family:





Family incorporates a new subsidiary (New Family).
Family transfers its assets – other than its shares in Teletoon Canada and 6381
Inc. – to New Family.
The BCE-Astral arrangement closes.
Family is amalgamated with various entities including Bell, to form New Bell
Media, and the shares in Teletoon Canada and 6381 Inc. are put in trust with
the Astral trustee.
New Bell Media sells the shares in Teletoon Canada and 6381 Inc. to 4441 Inc.
e) Please confirm whether the reorganisation process (shown in step 3 of the
appendix to this letter) corresponds to an amalgamation or to a wind-up.
Corus response
The reorganization process corresponds to an amalgamation.
f) Please clarify the process whereby Nelvana Ltd. and YTV will become nonvoting shareholders instead of voting shareholders of TELETOON Amalco, e.g.
that the voting shares will be sold to Corus or bought back by TELETOON
Amalco.
Corus response
On its formation, Teletoon Amalco issues non-voting shares to each of Nelvana
Ltd. and YTV, and voting shares to Corus, in place of the shares held by them in
the various predecessor corporations before the amalgamation.
4. Involvement of the trustee - Staff notes that a trust will be created in the event the
Commission approves the BCE/Astral Arrangement. Yet the role of the trustee is not
explained in the BCE/Astral Supplementary brief. Please clarify the trustee’s
involvement in:
6
a) the current transactions and
b) contracts / sales agreement or any other proof filed in support of this
transaction.
Corus response
At the time of perfecting the agreement between BCE Inc. and Corus, the
proposed BCE Inc. trustee had not yet been appointed. At the time of writing of
this letter, the Commission has not yet published an approval of the trustee. As
such the trustee has not been involved in the process and there is no reason in law
for this to occur to date.
Meanwhile the Share Purchase Agreement (SPA) dated March 4th, 2013 expressly
contemplates divestiture of this property and the role of a trustee in the preamble
D; in the Definitions in Article I (such as “BCE Trust Agreements” and “BCE
Trustee”); and in Article 9.2. The SPA expressly provides that the trustee shall
have full power and authority in voting the shares.
The trustee would operate according to the terms of the Voting Trust Agreement
filed by BCE Inc. on January 31st, 2013 to which is appended the affidavit of Pierre
Boivin, dated December 3rd, 2012.
5. Possible future reorganisation – Paragraph 95 of the supplementary brief indicates
that should the Commission approve the TELETOON application, "that it be mindful
that Corus intends to align these services within its existing group of services".
Please comment in detail with specific reference to:
a) a possible future reorganisation, or
b) a redefinition of the group for grouped based licensing.
Corus response
The licences would be held by the corporations as described in the application. As
such there is no corporate reorganization contemplated beyond what is already
described in the application.
From an operational standpoint, we will move the people and operations
conducted at Brookfield Place to Corus Quay so these become part of the overall
team and plant at our premises. The Brookfield space was operated by Astral
Media Inc. and Teletoon occupied space pursuant to a verbal agreement as
explained in our response to question 12.
From a regulatory perspective we set out our expectations in paragraphs 94 to 103
of the Supplementary Brief. Since we filed, the Teletoon licence renewal process
has been delayed. In any case our expectation would be to treat the licences in the
same manner that we described in March.
7
6. Appendix 2A
- We understand some of the ownership information usually contained in
Appendix 2A has been deposited through the BOIAF for the past ownership
structure of Corus, Bell and Astral Media Inc.
-
Nonetheless, the information is still needed for the new corporation that has been
created by Corus, namely 4441 Inc.
-
Further, the Commission has not received the composition of the board of
directors for 4441 Inc. following the transaction.
a) Therefore, please file an Appendix 2A presenting the final control chain of
4441 following this transaction should the Commission approve it.
Corus response
Please find as Appendix A the revised Appendix 2A, filed with this response.
7. Termination fees – Concurrently with the TELETOON application, the Commission
received two other groups of applications for a change in control, i.e. change in
control of the undertakings CKQB-FM and CJOT-FM (Radio applications) and
change in control of the undertakings Historia and Séries+ (H&S applications).
In the Radio applications, it is stated that Corus will pay $195,000 to BCE Inc. (BCE)
if the Commission does not approve the BCE/Astral transaction, whereas the
TELETOON application and the H&S applications state that BCE will pay $3,735M
and $2,079M respectively to Corus if the Commission does require the divestiture of
assets.
a) Please explain the rationale behind BCE paying Corus a termination fee in one
instance and Corus paying BCE a termination fee in the other.
Corus response
There is a typographical error in Section 6.3 of the CJOT/CKQB share purchase
agreement. It should read, “If this Agreement is terminated pursuant to Section
6.1(1)(d) then Vendor shall pay to Purchaser within three Business Days of such
termination a cash amount of $195,000 (the “Termination Fee”) by way of
liquidated damages” [emphasis added]. The second sentence of s. 6.3 reinforces
the fact that there is a typographical error in the first sentence, by virtue of
precluding “other amounts… due and payable…by Vendor” [emphasis added];
that is, the second sentence implies that the termination fee in the first sentence is
payable by Vendor.
8. City of operation – The published address for TELETOON Canada is currently
Brookfield Place, 181 Bay Street, Toronto, ON M5J 2T3. In paragraph 107 of the
supplementary brief, it is stated that Corus will be developing a Montreal-based
8
team to operate the French-language services. On the other hand, section 3.3 of the
application form indicates that the intention is to move the balance of the operations
of TELETOON Canada to Corus Quay in Toronto.
a) Please clarify and:
• indicate where and how the English-languages services will be operated; and
• detail the process of the transfer of one out of 4 undertakings to a different
city.
Corus response
The English language services will be operated at, and the licences for all, will be
held at Corus Quay, 25 Dockside Drive, Toronto, ON M5A 0B5.
The services that serve French-language audiences will be managed by a Quebecbased team resident in Montreal. We are currently looking for space but we can
confirm that it will be located in that city.
This team will be responsible for programming, promotion and marketing,
advertising and affiliate sales, and other “customer-facing” operations as they
arise. It is in this manner that we can ensure that our programming reflects the
needs of our core audience and customers.
9. Intangible benefits – In paragraph 104 of the supplementary brief it states that one
of the intangible benefits of the current transaction is the creation of synergies and
efficiencies, whereas paragraph 184 mentions that most of the programs produced
by Corus are not suitable for the mainly adult audiences of the TELETOON Canada
channels and that the Corus production system is not geared to this level of
programming volume. In such a context, please explain how synergies can be
created.
Corus response
The reference in paragraph 109 was to assure the Commission and the
independent programming community that our demand for and needs for
independently-produced programming will not change.
The synergies we contemplate relate to matters such as space costs.
Value of the transaction
10. Cash distribution – Please refer to subsection 9.12 of the SPA, it provides for
dividends in an amount equal to substantially all of the cash on hand to be paid
immediately before the calculation of the value of the working capital at closing. Our
understanding is that the purchase price has been determined as if the amount of
cash at hand as of the date of the transaction was close to $0. Please confirm or
clarify.
9
Corus response
We confirm that, immediately before closing, cash is distributed, so there is no
cash in the business at the time of closing, and therefore the working capital
calculation is based solely on non-cash working capital. Please note that the
working capital adjustment is based on 50% of the variance between the “Final
Closing Working Capital” and the “Target Working Capital”, if the variance is
greater than $1,950,000.
11. Financial statements – Please file a complete set of financial statements as of 31
August 2012 for TELETOON Canada, including the notes to financial statements. If
available, also provide its interim financial statements prepared as of the date of the
transaction, i.e., 4 March 2013, or as close to that date as possible.
Corus response
As requested, please find enclosed as Appendix B financial statements as of
August 31st, 2012 (previously filed with our application) and interim financial
statements as of February 28th, 2013. Please note that audited financial statements
including notes are not available.
12. Leases – Please refer to Paragraph 12 of the Supplementary Information dated 17
April 2013. This paragraph states that no leases are to be assumed with this
transaction.
a) Please clarify how assets currently under lease by TELETOON Canada will be
replaced at date of closure of the transaction.
Corus response
Please see response to question 12 b) below.
b) Please provide details for any and all lease arrangements that TELETOON
Canada as of 4 March 2013, and the planned disposition for each. The following
table is provided to assist you in preparing this information. Example of leases
include but are not limited to premises, transmission towers or tower space,
software licences, vehicles, equipment, etc.
Corus response
There are no formal real estate lease arrangements for TELETOON Canada as
of March 4th, 2013. Currently, TELETOON Canada occupies space in three
different locations: Brookfield Place (Toronto), Corus Quay (Toronto) and at
1800 McGill College “Suite 1600” (Montreal).
The arrangement for space between Corus and TELETOON Canada at Corus
Quay and TELETOON Canada and Astral Media Inc. for Brookfield Place and
McGill College are simply verbal arrangements, which give TELETOON
10
Canada space at a set monthly price in the three locations identified above.
The arrangements exist on a month-to-month basis and will terminate upon
closing of the proposed transaction with Corus following the termination of a
transition period, which effectively would occur within 30 days of the closing
date.
There currently exits a licence for Broadview software used for programming
and trafficking that expires at the end of 2013 and this licence will not be
renewed. Other than this software licence, which will expire by year end, there
are no other lease arrangements that will be assumed by Corus in this
transaction.
Appendix C attached is a table that provides the particulars of these verbal
arrangements.
Corus appreciates the opportunity to address these questions. We remain available to
respond to any further information requests if required.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachment
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
***End of document***
Appendix
1)
2)
3)
4)
-7-
5)
APPENDIX A
ABRIDGED
APPENDIX 2A
Section A
Name of the APPLICANT
8324441 CANADA INC.
Definitions
2.1
Authorized Securities
Describe all categories of shares authorized to be issued.
Security Type
Number of Votes Per
Share
Convertible
(y/n)
Participating (6)
(y/n)
Number of Shares
Authorized
Number Issued
and Outstanding
1
n
y
unlimited
one
Common
Shares
2.2
Shareholding
Supply the details for each shareholder holding 10% or more of the voting shares(5), of the voting
rights (if different from the voting shares), and of any other category of shares identified in the
common shares(6) definition. For the remaining shareholders, (those holding less than 10%) supply
the total shares under "Others Canadian" and "Others Non-Canadian".
Security Type
Shareholder Name
(1)
Complete Home Address or Legal Entity
Jurisdiction
Corus
Common Shares Entertainment Federal Corporation
Inc.
2.3
Canadian(2)
(x)
Number of
Shares Held
%
Votes
X
1
100
Directors and Officers
Supply a list of the current/proposed directors and officers of the corporation (3) (4)
Name of
Directors/Officers (1)
Heather A. Shaw
John M. Cassaday
Thomas C. Peddie
Doug Murphy
Judy Adam
Complete Home Address
Calgary, Alberta
North York, Ontario
Toronto, Ontario
Etobicoke, Ontario
Oakville, Ontario
Canadian(2)
(x)
Directors Date of Appointment
Officer Position
X
March 1, 2013
Chair
X
March 1, 2013
CEO
X
March 1, 2013
CFO &
Treasurer
President
Vice-President
Finance
APPENDIX A
Gary Maavara
Randy Witten
ABRIDGED
Toronto, Ontario
Corporate
Secretary
Assistant
Corporate
Secretary
Toronto, Ontario
Exemption:
The applicant hereby confirms that :
 All ownership information for each of the entities that form part of the control chain has been supplied
within the last 12 months from the date of this application, and accepted as satisfactory by the
Commission; and
 No changes have occurred since the last filing that would be subject to a notification requirement or
prior approval by the Commission pursuant to the Regulations; and
 No amalgamation has occurred.
date of filing of last complete update: 13/03/11
BOIAF Rapids # 562859
YY/MM/DD
APPENDIX 2A
Section B
Name of the Shareholder Corporation
Definitions
2.1
Authorized Securities
Describe all categories of shares authorized to be issued.
Security Type
Number of Votes Per
Share
Convertible
(y/n)
Participating (6)
(y/n)
Number of Shares
Authorized
Number Issued
and Outstanding
APPENDIX A
2.2
ABRIDGED
Shareholding
Supply the details for each shareholder holding 10% or more of the voting shares(5), of the voting
rights (if different from the voting shares), and of any other category of shares identified in the
common shares(6) definition. For the remaining shareholders (those holding less than 10%), supply
the total shares under "Others Canadian" and "Others Non-Canadian".
Security Type
2.3
Shareholder Name (1)
Complete Home Address or Legal Entity
Jurisdiction
Canadian(2) Number of
(x)
Shares
Held
%
Votes
Directors and Officers
Supply a list of the present/proposed directors and officers of the corporation (3) (4)
Name of
Directors/Officers (1)
Complete Home Address
Canadian(2)
(x)
Directors Date of
Appointment
Officer Position
For an additional APPENDIX 2A, copy tables 2.1, 2.2 and 2.3 on a new page
DEFINITIONS
(1)
director/shareholder: If any of these persons hold public office, by election or appointment,
indicate the office held under the name of the person(s).
(2)
Canadian:
Specify if Canadian or Non-Canadian. If a person, CANADIAN means a
Canadian citizen, ordinarily resident in Canada, and as defined in the
Direction to the CRTC (Ineligibility of Non-Canadians) P.C. 1997-486 as
amended by P.C. 1998-1268. If a corporation, CANADIAN means a
"qualified corporation" as defined in the Direction to the CRTC (Ineligibility
APPENDIX A
ABRIDGED
of Non-Canadians) P.C. 1997-486 as amended by P.C. 1998-1268.
(3)
directors
Means a person who is a member of the board of directors of a corporation
or, where the corporation has no directors, a person performing functions
that are similar to the functions performed by directors, as defined in the
Direction to the CRTC (Ineligibility of Non-Canadians) P.C. 1997-486 as
amended by P.C. 1998-1268.
(4)
officers:
Those persons designated as Chairman, President, Chief Executive
Officer, Vice-President, General Manager, Secretary, Assistant-Secretary,
Comptroller, Treasurer, Assistant-Treasurer or any others under similar
titles.
(5)
voting shares:
The shares to which are attached one or more votes, and includes
securities that are convertible into such shares at all times at the option of
the holder.
(6)
common shares:
The shares that represent the residual equity in the earnings of the
corporation, and includes securities that are convertible into such shares at
all times at the option of the holder and the preferred shares to which are
attached rights to participate in the earnings of the corporation with no
upper limit.
(7)
applicant/shareholder: If a person, refers to a person who has reached the age of majority.
APPENDIX B
ABRIDGED
APPENDIX B
ABRIDGED
APPENDIX B
ABRIDGED
APPENDIX B
ABRIDGED
APPENDIX B
ABRIDGED
APPENDIX B
ABRIDGED
APPENDIX C
ABRIDGED
Via GCKey
July 26th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various Undertakings – Transfer of Shares and
Acquisition of Assets - Change in Effective Control – Application
No: 2013-0596-2 – Response to Deficiency Letter Dated July 12th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated July 12th, 2013.
Corus has filed via GCKey the following documents:
1. Response to deficiency letter dated July 26th, 2013;
2. Appendix A – Revised TELETOON Canada Balance Sheet as at 28-02-13 –
Confidential and Abridged version.
Pursuant to sections 31 and 32 of the Canadian Radio-television and Telecommunications
Commission Rules of Practice and Procedure (the “Rules”), Corus is designating the
financial information in Appendix A as confidential.
The sections that have been redacted contain competitively sensitive information whether
for the current year or future years that could be detrimental to the licensees involved if
released. This information is not otherwise publicly accessible, whether to the Commission
or for securities purposes and could if released impact our ability to negotiate similar
commercial arrangements. An abridged version has been provided for the public record.
Corus would be pleased to respond to any questions and would ask that they be directed to
the undersigned.
Thank you for your attention to this matter.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachments
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
Pierre Boivin, Trustee
***End of document***
Via GCK
Key
July 26thh, 2013
Mr. John
n Traversy
Secretarry General
Canadia
an Radio-tele
evision and
Telecom
mmunication
ns Commisssion
Ottawa, Ontario
K1A 0N2
2
Dear Mrr. Traversy:
Re:
TELETOON
T
N Canada Inc.
I
– Variious Unde rtakings – Transfer of Shares and
Acquisition
A
n of Assets - Change in
i Effectiv e Control – Application
No:
N 2013-0596-2 – Resp
ponse to Deficiency
D
L
Letter Datted July 12
2th, 2013
E
ent Inc. (Co
orus), on be
ehalf of TE
ELETOON C
Canada Incc. (TELETO
OON)
Corus Entertainme
hereby provides
p
its response to the Commiission’s defiiciency letteer dated July
y 12th, 2013
3.
mmission’s questions
q
are reproducced below w
with the Applicant’s response prov
vided
The Com
in bold.
Value off the transacction
1. Leas
ses – Please
e refer to question
q
12 of your ressponse letter dated 12 June 2013.. You
state
e that the liicence for Broadview
B
software
s
willl end on 31 Decemberr 2013. Furrther,
you indicate
i
in the
t table acccompanying
g your letteer that you do not inten
nd to renew
w this
lease
e. Please exp
plain how yo
ou will replace this softtware.
r
Corus response
urchaser will
w
integr
rate TELE
ETOON intto the pu
urchaser’s existing P
Pilat
The pu
program
mming so
oftware (IBMS)
(
and
a
Wide
eOrbit tra
affic softtware licence
agreements. This transfer is
i essentia
al as the A
Astral Med
dia Inc. inffrastructur
re is
absorbe
ed into th
he Bell Me
edia Inc. systems.
s
A
As the Com
mmission is aware,, the
absorpttion of Astral Media Inc. comm
menced alm
most imme
ediately aft
fter the clo
osing
date of the Bell-A
Astral tran
nsaction on
n July 5th, 2013. We
e expect to
o complete
e the
integrattion to Cor
rus system
ms shortly after the c
closing onc
ce Commisssion appr
roval
is secur
red.
2
2. Financial Statements - Please refer to the financial statement ‘TELETOON Canada
Inc., Balance Sheet as at 28-02-13’ found in Appendix B – Financial Statements
submitted with your last response.
a) While the title indicates the financial statement is reporting information as at
28 February 2013, the columnar headings indicate that the information provided is
as at 28 February 2012 and 31 August 2012 respectively. Please clearly identify the
reporting date for the information provided.
Corus response
The first columnar heading should have read “Feb 28, 2013”. A revised balance
sheet is enclosed as Appendix A.
b) This financial statement does not report any long term debt held by TELETOON
Canada Inc. other than Program exhibition rights payable. Please confirm that no
long term debt is being assumed by the purchaser related to this transaction.
Corus response
We confirm that there is no long-term debt being assumed by the purchaser
related to the transaction.
1. Programming - In paragraph 87 of the supplementary brief, Corus states that “while
there is some overlap of audiences targeted by YTV and TELETOON, it is important to
note that TELETOON is not a kids channel but rather an animation service targeting
audiences of all ages during the different day parts. The TELETOON Retro and Cartoon
networks also have a distinctive programming mandate.” Staff notes that, as set out by
condition of licence in Appendix 5 to Broadcasting Decision 2011-446, no more than 10%
of the programs broadcast by Treehouse may be broadcast by the specialty service YTV.
a) Please elaborate on the possible overlap between Treehouse TV and TELETOON,
TELETOON Retro and Cartoon Network.
Corus response
Corus has been involved with TELETOON for over a decade and the overlap
between the services has been minimal. So the measures are in place and this will
not change. Our programming strategy is driven by the imperative to provide our
subscribers and audiences with a varied, diverse and interesting range of
program content as well as to meet the requirements of existing conditions of
licence.
TELETOON, TELETOON Retro and Cartoon Network are mainly targeted at
people older than adolescents. Treehouse is a pre-school channel that also has coviewing by parents but its programming is primarily young children content.
3
The Commission has already established a framework of conditions through the
licensing process to maintain diversity between the services. This is clear on a
plain reading of the content-related terms of each licence.
TELETOON Retro is by nature of service a channel that uses content that is at
least 10 years old and with 90% of all programming (with the exception of
categories 12 and 15) being animated content. So it is already restricted. It also
already has conditions of licence restricting the access to non-animated
programming.
TELETOON Retro Nature of Service is as follows:
a) The licensee shall provide a national Category 2 specialty television
service with English- and French-language feeds. The service shall present
classic cartoons from Canada and around the world, including animated
movies, specials, series and shorts which commenced production at least
ten (10) years prior to their exhibition by the licensee.
b) The programming must be drawn exclusively from the following
categories, as set out in Schedule I to the Specialty Services Regulations,
1990: 1, 2a, 2b,3, 4, 5a, 5b, 6a, 6b, 7a, 7b, 7c, 7d, 7e, 7f, 7g, 8a, 8b, 8c, 9, 10, 11,
12, 13, 14 and 15.
c) With the exception of material drawn from categories 12 and 15, no less
than 90% of all programming broadcast during the broadcast week shall be
animated programs drawn from categories 7d, 7e and 7g.
d) No more than 10% of all programming broadcast during the broadcast
week shall be non-animated programs drawn from categories other than
7d, 7e, 7g, 12 or 15.
The Cartoon Network Nature of Service is as follows:
a) The licensee shall provide a national, English-language specialty
Category B service devoted to programming from international markets,
featuring the latest trends in non-violent action, adventure, superheroes,
comedy and interactivity. The service’s interactivity will be achieved via
programs on games associated with action series as well as magazine
shows that cover current comic book trends and classics in comic books.
b) The programming shall be drawn exclusively from the following program
categories set out in Item 6 of Schedule I to the Specialty Services
Regulations, 1990, as amended from time to time:
5(b) Informal education/Recreation and leisure
6(b) Amateur sports
7 Drama and comedy
(a) Ongoing dramatic series
(b) Ongoing comedy series (sitcoms)
4
(c) Specials, mini-series or made-for-TV feature films
(d) Theatrical feature films aired on TV
(e) Animated television programs and films
(f) Programs of comedy sketches, improvisation, unscripted
works, stand-up comedy
(g) Other drama
10 Game shows
11 (a) General entertainment and human interest
(b) Reality television
12 Interstitials
13 Public service announcements
c) No more than 15% of all programming broadcast during the broadcast
week shall be drawn from program category 7(d).
The Treehouse Nature of Service is as follows:
a) The licensee shall provide a national English-language specialty Category A
service.
b) All programs broadcast between 6 a.m. and 9 p.m. shall have as their target
audience children up to six years of age.
c) The licensee may draw programming from all the categories set out in item
6 of Schedule I to the Specialty Services Regulations, 1990, as amended
from time to time.
d) The licensee shall not devote more than 10% of the broadcast month to
programs drawn from each of categories 2(b) Long-form documentary and
6(a) Professional sports.
e) A minimum of 80% of the programs broadcast between 9 p.m. and 6 a.m.
that are drawn from category 7 Drama and comedy and that have parents,
families and caregivers as their target audience shall be copyrighted at
least 10 years prior to the broadcast year in which they are broadcast by
the licensee.
f) No more than 10% of the programs broadcast between 9 p.m. and 6 a.m.
shall be drawn from category 8 (Music) programming that targets an
audience other than preschoolers.
g) In each broadcast year, the licensee shall devote no less than 70% of the
broadcast day and no less than 60% of the evening broadcast period to the
exhibition of Canadian programs.
b) Please elaborate on the measures you will put in place to ensure that there is no or
limited programming overlap between the TELETOON services, Cartoon Network,
YTV and Treehouse, and to ensure that those services remain distinct at all times.
5
Corus response
The first measure is compliance with the various natures of service and
conditions of licence as set out in the response above. Each set of conditions of
licence are clearly distinctive.
Another constraint on these specialty services is the program licence agreements
which tell us on which of the services a program title can be used.
A third constraint are our customers in the form of subscribers and the BDUs
who watch carefully what we program to ensure that they are getting value from
each of their subscriptions. This is the new reality of the à la carte world.
b) Would you accept a condition of licence similar to Treehouse’s for TELETOON,
TELETOON Retro and Cartoon Network?
Corus response
As noted above, these services already have a wide and deep range of conditions
of licence that constrain what they can schedule.
In addition, Treehouse and TELETOON are Category A services which are the
types of services where the investments are made for first window broadcast
content. Category B specialty services by their very nature typically serve as a
second, third or more window for broadcast content. So it is highly unlikely
given this that there would be any kind of significant overlap between the
Category A and Category B services.
More importantly, as the broadcast system evolves it is increasingly the market
that is determining success. As a result, we would oppose another condition that
would serve to inhibit our ability to meet the needs of customers especially given
the fact that all of these services currently exist is there is minimal programming
overlap at this time. We would also need to see the exact language of a condition
of licence before making a comment about it.
2. Benefits to the system - At paragraphs 98 to 100 of the supplementary brief, Corus
announces its intention to operate TÉLÉTOON Rétro French independently from its
group. Corus adds that it intends to become a significant contributor to the development
of the French-language Quebec broadcasting environment. Please elaborate on the
reasons for Corus’ proposal, especially given that in application 2013-0597-0, it requests
authority to acquire two more French-language specialty services, Historia and Séries+.
More specifically, how would this strategy provide benefits to the Canadian
broadcasting system, to the production of Canadian content and to Canadian audiences?
Corus response
Before addressing why Corus believes that operating TÉLÉTOON Rétro French
independently from its English-language group of services will benefit the
Canadian broadcasting system, the production of Canadian content and will also
6
be beneficial to Canadian audiences, it is important to first understand that our
proposal is built upon the Commission’s existing policy on Group-based Licensing
(Broadcasting Regulatory Policy CRTC 2010-167 “BRP 2010-167” – A group-based
approach to the licensing of private television services). It also takes into
consideration the manner in which the Commission applied the Group-based
Licensing Policy for Astral Media Inc.’s group of television services in 2012
(Broadcasting Decision CRTC 2012-241 “Decision 2012-241”).
In BRP 2010-167 the Commission stated the following:
41. The Commission must supervise and regulate the broadcasting system in
order to fulfill the policy objectives of the Act. These include encouraging the
development of Canadian expression; being readily adaptable to scientific and
technological change; and ensuring that each element of the Canadian
broadcasting system contributes in an appropriate manner to the creation and
presentation of Canadian programming.
42. The Commission considers that these objectives, particularly the
adaptability of the broadcasting system to change, are best met through a
regulatory approach that recognizes the significant challenges to conventional
television broadcasting and the stronger role that both regulated and
unregulated, on-demand platforms are playing in providing Canadians with
the television programming they need and want.
43. The Commission notes that there has been a significant shift in Canadians'
viewing habits since the publication of the 1999 Television Policy. The
subsequent widespread introduction of digital cable has rapidly brought
Canadians a wide variety of programming choices, from both Canadian and
non-Canadian sources. The availability of new services on conventional and
specialty television platforms has been significantly augmented by content
available from alternative, unregulated platforms.
44. The exclusivity of broadcasters' programming has eroded as a result of
increased choice and increasing cost of foreign programming. This has
resulted in a diminishing of the profits realized from the exhibition of popular
foreign programming. The profitability of this programming has, in the past,
provided conventional television broadcasters with the resources to spend on
less profitable Canadian programming, such as programs of local reflection,
local news, and especially high-quality scripted Canadian entertainment.
Accordingly, the Commission’s Group-based Licensing Policy was formulated
with a full view of achieving the objectives of the Broadcasting Act while
recognizing the market and technological changes that are impacting the
Canadian television industry.
The Commission established which media groups would be subject to Groupbased licensing as follows:
7
115. … It is the Commission's determination that a group-based approach, at
least initially, will be applied to private, English-language ownership groups
that generate more than $100 million in annual revenues from conventional
television stations, and own at least one specialty or pay programming service
(designated groups). Accordingly, as noted above, the groups meeting the
criteria at this time are CTVgm, Canwest and Rogers.
118. In principle, the Commission considers that a modified group-based
approach with the associated flexibility could apply to ownership groups other
than designated groups. The Commission will consider applications for licence
amendments from other ownership groups, including those controlling
multiple specialty and pay services, to allow flexibility in the allocation of their
services' CPE obligations.
In 2010, Corus requested that its English-language specialty, pay and over-the-air
television services be considered at the Group-based licensing hearing held in the
spring of 2011. Corus’ group of English-language television services included
over-the-air, specialty and pay services and collectively generated more than a
$100 million in annual revenues. The Commission agreed to do so and Corus’
television services are now licensed on a group basis (Broadcasting Decision
CRTC 2011-446).
Accordingly, given that TÉLÉTOON Rétro French and Historia and Séries+
combined would not generate more than $100 million in annual revenues and
that they are French-language services we considered that the Commission’s
Group-based Licensing Policy would not apply to this group of services.
More importantly however, we considered carefully the Commission’s
determinations in Decision 2012-241. In that decision the Commission decided
that Astral Media’s English- and French-language specialty and pay services
would be regulated as one group of services in the following manner:
13. After examining the applications, the interventions and Astral’s replies, the
Commission considers it appropriate to designate Astral as a group in
recognition of its unique operating reality, namely the fact that that its services
must meet comparable requirements in both linguistic markets in Canada and
that the revenues it derives from the two markets are almost equal. To ensure
that this flexibility does not unduly disrupt the existing balance between the
two linguistic markets, the Commission will monitor the allocation of CPE
between the French- and English-language services over the licence term and
will assess the extent of these allocations at Astral’s next licence renewal
[emphasis added].
At the hearing, the English-language and French-language production
associations and other intervenors had advocated that the application of the
group-based licensing approach should be done separately for the Englishlanguage services and the French-language services. The concern was that each
linguistic market would not continue to see the same level of production and
expenditures on Canadian programming and that one or the other linguistic
8
market would be short-changed as a result of having English- and Frenchlanguage services within one licensing group. The Commission was sensitive to
this concern and that is why it noted that it would continue to monitor the
allocation of CPE between English- and French-language services over the
licence term even though it accepted the Astral proposal.
Corus believes that its proposal best serves the Canadian broadcasting system as
well as the production of Canadian content and will also be beneficial to
Canadian audiences for the following reasons:
•
It would avoid any undue disruption to the existing balance between the
two linguistic markets and would ensure a continued level of spending and
separate window of opportunity for acquisitions for both the English- and
French-language markets, thereby providing stability in the creation of
Canadian content and benefiting the production community and the
audiences in the separate markets ;
•
Corus’ proposal ensures that for these French-language services all
programming, marketing, communication, advertising sales and matters
relating to pricing, packaging and cross platform content initiatives with
broadcasting distribution undertakings would be managed by the Quebec
office, thereby providing the best possible and most relevant content
opportunities for French-language audiences;
•
It would allow Corus to focus and create a separate French-language
programming group in Montreal thereby better enabling us to contribute
to the Quebec broadcasting environment and allowing for a direct viewer
and customer interface through our Quebec-based francophone broadcast
employees;
•
Quebec-based producers would have an opportunity to pitch programming
ideas in Montreal;
•
The proposal is fully compliant with the Commission’s existing policy on
group-based licensing; and
•
There is no unique operating reality that would apply in the Corus context
since the revenues for the combined English-language services would
greatly surpass those of the combined French-language services, therefore
there is no sound policy justification for deviating from the Commission’s
determination in Decision 2012-241.
3. Canadian programming - At paragraph 117 of the supplementary brief, Corus
specifies that it will allocate $16,615,000 of incremental funds to the production of high
quality Canadian programming. Corus further states that those funds will stimulate the
production of new, innovative and relevant Canadian program offerings for broadcast on
the TELETOON networks.
9
a) Please demonstrate how the proposal is incremental to Corus’ current and planned
expenditures in respect of the production of Canadian content.
Corus response
These funds will be incremental to the CPE that is due in each broadcast year.
The total on screen spending will be $21,165,000 with $16,615,000 dedicated to
production. The table at paragraph 162 breaks this out by category and by year.
b) Please specify the proportion of this amount that would go to third parties.
Corus response
As we stated in the application supplementary brief at paragraph 113, a minimum
of 75% would be spent with independent producers.
c)
Please specify the proportion of this amount that would go to French-language and
English-language projects.
Corus response
As we stated in the supplementary brief at paragraph 113, a minimum of 90% will
be directed towards animation programming. This type of programming lends
itself well to multiple languages. The Corus studio Nelvana produces in English
and Quebec French as well as a range from 16 to 44 other languages depending
on demand.
In this context it will be up to the independent producers to determine in what
languages they will produce. This will no doubt be driven by the markets they
uncover for their programs.
d) Please justify how this proposal will benefit the Canadian broadcasting system in
general and not exclusively TELETOON Canada.
Corus response
TELETOON Canada already spends a great deal on programming and this would
be incremental to that amount. As a result, most of the content produced with
these benefits funds will likely find a first broadcast home on other services that
need animation programming. As such, other Canadian services will effectively
have more seed money to build their schedules.
This demand from other Canadian services will also impact the amount of
programming that is done in English or French as a first window. This also
means that the smaller French-language market producer will have more seed
money to create new programming.
e) Confirm that no more than 10% of this amount will be allocated to on-line services or
productions.
10
Corus response
Yes, we confirm that not more than 10% of this amount will be allocated to on-line
services or productions.
4. Tangible benefit initiatives
As part of the proposed on-screen tangible benefit initiatives, the Corus Export
Initiative will assist Canadian independent producers to gain access to international
markets. As set out in Public Notice 1993-98, the Commission accepts as tangible
benefits initiatives programming expenditures for radio, television and cable as long as
the programming is new or enhances that offered by the existing licensee. Examples of
such initiatives include:
•
•
•
•
•
•
•
the production and development of new programming for television, particularly in
"under-represented" categories; and productions involving the independent
production sector;
co-operative television productions;
new or improved news and public affairs radio and television programming;
the production of specific, new, locally-produced radio and television programs;
the development of pilots for television;
the production of community programming, where the expenditure is clearly
identifiable as incremental to the 5% spending benchmark for cable as set out in
Public Notice CRTC 1991-59, entitled "Community Channel Policy"; and
contributions to program development funds and program production funds for
television.
a) As such, please justify why the Corus Export Initiative meets the Commission’s
eligibility criteria for an on-screen tangible benefit initiative.
Corus response
It is well known that the Canadian market alone is not large enough to support a
significant independent production sector. The market is also changing as noted
by the Commission’s Chairman in his speech to the Association des producteurs
de films et de television du Québec in May:
To succeed in the digital environment, the production and creative industries
must move beyond individual projects. We have to produce content for the
global audience and create international brands to rival the best in the world.
The combination of Canadian licence fees, tax credits, and funding pools are just
enough to finance production but producers still require capital investments to
develop new content, survive failures and to market their works in international
markets. This incremental investment is only forthcoming if producers can
demonstrate tangible progress in international programming markets.
11
In Canada we talk about the “$600 cup of coffee” required by producers in
smaller centres to pitch projects in Toronto or Montreal. On a global scale this
“cup of coffee” amount gets much higher.
The matter of marketing and promoting Canadian works was discussed
extensively at the Commission’s Telefilm symposium last October on the day
before the International Institute of Communications (IIC) conference which was
co-chaired by the Commission’s Chairman. The timing of the symposium with the
IIC was by design. Fostering the export market was one key topic of the
discussion, as noted by the Chairman of the Commission:
This symposium is a starting point. I’m confident that it will lead to a joint
strategy that will allow us to promote Canadian content more effectively at
home and invigorate our brand in the global marketplace. As you go through
the day’s sessions, I would encourage you to be unconventional in your
thinking, bold in your ideas and courageous in your vision.
In our discussions with officials from agencies such as Telefilm and the Canadian
Media Fund as well as with production companies across Canada, the notion of
funding for export development was met with enthusiasm. Our plan would be to
have existing agencies administer the funds and oversee how the producers
would use it. None of the funding would be accessed by Corus.
Providing independent producers with the capital to develop international
markets is as important as script development and training programs. It is a key
piece of the structure needed to build the Canadian production system. As a
result, the success of the Canadian programming system rests with our ability to
sell content not just domestically but internationally. Measures such as this fund
will ensure that on-screen Canadian content continues to get produced not only
for Canadian audiences but also for a global audience.
−
At paragraphs 121 and 122 of the supplementary brief, Corus indicates that the Script
and Concept Development initiative and the Export Initiative will be administered by
knowledgeable third parties.
b) Please demonstrate how this project would not normally be undertaken or realized
in the absence of the transaction.
Corus response
In the normal course any export initiative undertaken by Corus would be done
solely for our benefit. The Script and Concept Development and the Export
Initiative will be incremental to what we do and it won’t be for our benefit. It is
the independent producers that will use this money. In the normal course we
would not fund their efforts in these areas.
12
c) Please elaborate on the structure and operations of these funds, including
participation on the board of directors, participation on the selection committee,
selection criteria and measurement of the success of the funds’ initiatives.
Corus response
The funds would be administered by groups such as Telefilm Canada, Canada
Media Fund or the National Screen Institute. We have discussed this generally
with them but have not come to definitive agreements. However the terms for
these agreements will state that they will administer the funds without direct
Corus involvement. They may ask us for advice from time to time due to our
position as a leading producer and broadcaster.
The Corus mission of the Export Initiative is encapsulated in Telefilm Canada’s
description of their program:
The Canada Feature Film Fund’s International Marketing and Festival
Participation Program is available to Canadian companies specializing in
film production, distribution and sales, and aims to support the marketing and
promotion of Canadian content and talent abroad. This Program was
previously known as the International Festival Participation Pilot Program.
The Program’s objectives are in line with Telefilm Canada’s strategic priorities
of promoting talent and increasing access to Canadian content. It supports the
international marketing and promotional strategies of Canadian productions
officially selected at recognized international festivals.
Of course this relates to film production so we would also apportion funds to
television programming. This would be administered by a body such as the
Canada Media Fund or the National Screen Institute.
The manner in which they decide to allocate funds and measure success will no
doubt be done in the manner that they do it now with the requisite governance
and transparency structures applied as they do to existing funding mechanisms
which they operate. Corus has no operating involvement in these organizations
and no board seats.
−
Staff notes that Corus proposes to allocate tangible benefits to industry festivals. Please
demonstrate how the proposed allocation to industry festivals is incremental to Corus’
current practices of sponsoring such festivals and would not normally be undertaken or
realized in the absence of the transaction. Staff notes, for instance, that Corus is already
a lead sponsor for Digifest.
Corus response
Corus provided the fledgling Digifest festival with space for the event at Corus
Quay. This was a substantial cost saving for them, which in fact made the festival
possible.
13
The benefits will be cash payments to the festivals. In the ordinary course we
would not fund these festivals with cash. Our normal contribution would simply
be in the form of purchasing tickets to the events or advertising and other
promotion for the event.
−
Staff notes that various initiatives related to industry training are set out at paragraphs
132 to 147 of the supplementary brief. As set out in Public Notice 1993-68, the
Commission generally accepts as a tangible benefit, contributions to organizations
involved in the production of Canadian programming or the promotion and development
of Canadian talent. Scholarships in broadcasting or broadcast-related fields also
constitute tangible benefits. Examples of grants that are acceptable as tangible benefits
would include grants to local artistic organizations whose works are related to the
broadcasting system, as well as contributions, over and above annual membership fees.
In order to assess the eligibility of the proposed initiatives, please:
c) specify how the funds allocated to the various initiatives will be used, and
d) justify how this use is consistent with what the Commission generally accepts as
tangible benefits.
Corus response
The schools will use the funds for scholarships as contemplated by the
Commission’s benefits policy.
The Concerned Children’s Advertisers, the Canadian Communications
Foundation, and the Corus Inner City Childhood Obesity Research Initiative will
be used to create content.
The YMCA and City Life Project use the funds to pay for the basics of operating
the program for inner city youth who would otherwise not have the access to the
media tools and training.
The mission of the City Life Film Project is as follows:
To provide talented youth from priority neighbourhoods with the unique
opportunity to tell stories from their communities and to achieve artistic
excellence through filmmaking.
These programs are offered to the participants free of charge so in a sense our
funding acts like a form of scholarship. By establishing these programs they also
become a form of local artistic association that provides that community another
cultural voice.
It is perhaps trite to say that our communications environment is changing and
that no one really can predict how it will evolve. Festivals and these schools
establish a process and a place where people can learn the skills that Canadians
will need to thrive in the digital media economy. These are the places where
14
analysis of trends takes place and where innovation is fostered. The schools that
are listed in the application are amongst the best on Earth. The funding of these
is indeed a significant benefit that impacts the entire communications system.
−
Staff notes that a number of initiatives proposed would be extensions of existing
benefits and that payments to those initiatives would be deferred for a number of years
until the existing benefits expire. More specifically, the following contributions were
identified as benefits in Broadcasting Decision 2009-706:
•
•
•
•
University of Waterloo at Stratford
YMCA
City Life Film Project
Concerned Children’s Advertisers
Generally, the Commission requires that tangible benefits be paid over seven
consecutive broadcast years starting in the year of the transaction.
e) Please explain why the Commission should accept this alternative proposal.
Corus response
The table at paragraph 162 sets out the nature of all the payments. At the bottom
of the table is a line entitled “Total” which is the total of the payments for each
year. The Commission will recognize that the totals for each year are roughly
equal. So our significant benefits proposal meets the policy that benefits are paid
out over seven years.
The groups noted operate on existing commitments. Our payments will extend
their revenue streams for the balance of the seven year period which is efficient
and makes their fiscal planning more predictable. We are providing them with
the funds when they need it. This will benefit other groups who will be receiving
higher grants earlier in the term in order to establish equal cash flow overall.
Our experience is that some groups like the cash up front which they use as a
form of investment capital that they can draw from later.
5. Intangible benefits - As part of its benefits proposal, Corus identifies the following
intangible benefits:
•
•
•
Corus’ experience will strengthen the service’s Canadian programming offering;
Corus’ plans to improve TELETOON Canada’s digital interactive media presence;
Corus’ plans to establish a Montréal-based team.
Please elaborate on each intangible benefits initiative and demonstrate how this project
would not normally be undertaking or realized in the absence of the transaction.
15
Corus response
Corus’ experience will strengthen the service’s Canadian programming offering
The Commission has set out its policy regarding intangible benefits in Public
Notice CRTC 1993-68. The policy states that intangible benefits may be as
significant as tangible benefits and, in some cases, of primary importance in the
approval of transactions. In addition, only proposed initiatives that would not be
realized without approval of the proposed transaction will be viewed as benefits.
Expenditures that would normally be considered ongoing normal expenses of the
current licensee do not qualify as benefits unless that licensee, because of
financial circumstances, is unable to implement the initiative within the
timeframe proposed by purchaser.
It is important to note that currently Corus already holds 50% of the voting
shares of TELETOON through its wholly-owned subsidiaries (YTV Canada Inc.
and Nelvana Limited). Accordingly, Corus is very well acquainted with this
Canadian animation service. As one of Canada’s most significant producers of
Canadian programming, which is exclusively in the animation genre and the
many investments (over 1 billion dollars) we have made in the production of
Canadian programming over the last decade, Corus is uniquely positioned
through a 100% ownership and control of the TELETOON to strengthen the
service’s Canadian programming offering.
Corus has already made significant investments in ensuring it has the best digital
platform to secure the success of Canadian programming through its investments
in its state of the art broadcast centre Corus Quay. Bringing TELETOON under
the control of Corus will mean that the many investments made will now be used
to the benefit of TELETOON and this will help facilitate the delivery of Canadian
programming on all available platforms to the benefit of Canadian consumers.
Our incremental spending is detailed in our tangible benefits proposals.
Nevertheless we believe that TELETOON will uniquely benefit from Corus’
experience, since we are a producer of Canadian programming making Canadian
animation content available in more than 150 countries and in more than 40
languages.
We believe Corus’ bench strength will help reinforce the service’s Canadian
programming
because
we
fundamentally
understand
that
Canadian
programming cannot continue to succeed and grow through domestic
distribution alone. It must also succeed on the international stage.
The Chairman of the Commission recently expressed his view on what lies ahead
for Canadian creative industries.1 He stated that all of the new changes in the
television environment offered extraordinary possibilities for the creative sector.
With more than $3 billion of investments by Canadian broadcasters in 2012-2013
1
(Banff Film and TV Festival – 2013 http://www.crtc.gc.ca/eng/com200/2013/s130612.htm)
16
“the Canadian broadcasting system has access to the type of funding to create
high-quality films, TV programs and other screen-based content for distribution
on multiple platforms.” More importantly, “audiences are now globally connected
and on the lookout for new and exciting content…Canadian-made productions
also appeal to viewers in the US, Europe and hundreds of other countries.” The
Chairman believes that:
It all adds up to outstanding opportunities to put Canada on the world map as
a producer of quality content. The time has come to define ourselves in terms of
who we are—in all our diversity—with self-confidence and audacity.
We agree. Canadian programming must succeed beyond the confines of our
domestic market. Corus’ Canadian programming sales offices in strategic
locations around the world and its strategic alliances with international
broadcasters such as NBCUniversal (KidsCo), have enabled us to reach 15 million
subscribers worldwide in 100 countries and in 17 languages. This type of bench
strength, although not an incremental spend per se, represents what we believe is
a unique opportunity for Canadian content to succeed on the world stage. Corus
has the relationships and the wherewithal to promote and champion Canadian
programming throughout the world. Corus will provide leadership, knowledge,
expertise and support such as promoting Canadian content at MIP.
Ability, strength and capability both through our employees and infrastructure
are what Canadian programming needs and we bring all of these elements to the
TELETOON service. Therefore we believe that this represents a significant
intangible benefit that will help strengthen the Canadian programming offered
on TELETOON.
Corus’ plans to improve TELETOON Canada’s digital interactive media presence
Through our investments in Corus Quay, Corus is uniquely positioned to foster
TELETOON’s digital interactive media presence. We operate a world-class digital
broadcast facility that has all the elements necessary to grow and further
TELETOON’s digital media presence.
But this digital media presence requires not only state of the art digital
infrastructure, it also requires the support of a major media group such as Corus
to facilitate a better and more robust digital media presence. We will facilitate
this through our strong relationships with broadcast distributors.
In a new digital broadcast environment, leveraging content on the digital
platform requires bench strength and Corus will bring this to TELETOON.
We see Corus bringing TELETOON the support and guidance it needs for a
greater digital media interactive experience through the following means:
•
Exploring development opportunities through growth of the 3D animation
markets;
17
•
By driving growth for content that features recognizable characters on
multiple platforms; and
•
Securing the delivery of TELETOON content on emerging platforms for
content distribution such as video-on-demand, subscription video-ondemand, over-the-top services, smart services, tablets and video games.
This is not an exhaustive list but rather simply represents the many
opportunities ahead to improve TELETOON’s digital interactive media presence.
Corus’ plans to establish a Montreal-based team
Currently, TÉLÉTOON does not have a Montreal-based team. Corus intends to
establish such a team with the acquisition of TÉLÉTOON, Historia and Séries+.
The investments made will be significant and include securing office space and
the necessary infrastructure needed to support this team. In addition, Corus will
be hiring new executives and employees to support the following functions for
the French-language services we are seeking to acquire:
•
programming, marketing, communication, advertising sales and matters
relating to pricing, packaging and cross platform content initiatives with
broadcasting distribution undertakings;
•
to contribute to the Quebec broadcasting environment and allow for a
direct viewer and customer interface through our Quebec-based
francophone broadcast employees; and
•
an opportunity for Quebec-based producers to pitch programming ideas.
Corus has already announced that Mario Cecchini will be leading the Quebecbased team. Mr. Cecchini is a seasoned media executive with extensive
experience in Quebec as well as in the Canadian broadcast sector in general.
Accordingly, the Canadian broadcasting system would now have a significant
intangible benefit through the establishment of having a new Quebec-based, fully
staffed office that would ensure the best possible and most relevant content
opportunities for French-language producers and audiences. Corus Média will
replace Astral as the third major player in the Quebec market.
Without the acquisitions proposed, it is clear that such an investment in the
Quebec market would not be made.
Corus appreciates the opportunity to address these questions. We remain available to
respond to any further information requests if required.
18
Sincerely
y,
Sylvie Courtemanch
he
Vice President, Gov
vernment Re
elations
Corus En
ntertainmen
nt Inc.
Attachm
ment
Cc:
Marie-Claire
M
e Bouthillierr, CRTC
Kevin
K
Goldsttein, Bell Media
M
Inc.
Pierre
P
Boivin
n, Trustee
o documen
nt***
***End of
ABRIDGED
Via GCKey
August 15th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various Undertakings – Transfer of Shares and
Acquisition of Assets - Change in Effective Control – Application
No: 2013-0596-2 – Response to Deficiency Letter Dated August 8th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated August 8th, 2013.
Corus has filed via GCKey the following documents:
1.
2.
3.
4.
5.
6.
7.
8.
Response to deficiency letter dated August 8th, 2013;
Appendix A – Draft Articles of Amalgamation – Confidential and Abridged versions;
Appendix B – Appendix 2A – Confidential and Abridged versions;
Appendix C – Cross-Media Ownership;
Appendix 1 – TELETOON Historical CPE;
Appendix 2 – TELETOON Retro English Historical CPE;
Appendix 3 – Corus Group CPE and PNI;
Appendix 4 – TELETOON and TELETOON Retro English PNI.
Pursuant to sections 31 and 32 of the Canadian Radio-television and Telecommunications
Commission Rules of Practice and Procedure (the “Rules”), Corus is designating the home
addresses of the individual directors and officers of the corporations listed in Appendix A
and B as confidential. This request is made to address privacy concerns related to the
disclosure of the home addresses, other than the city of residence, of these directors and
officers. Abridged versions of all appendices have been provided for the public record.
Corus would be pleased to respond to any questions and would ask that they be directed to
the undersigned.
Thank you for your attention to this matter.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachments
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
Pierre Boivin, Trustee
***End of document***
Via GCKey
August 15th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various Undertakings – Transfer of Shares and
Acquisition of Assets – Change in Effective Control – Application
No: 2013-0596-2 – Response to Deficiency Letter Dated August 8th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated August 8th, 2013.
The Commission’s questions are reproduced below with the Applicant’s response provided
in bold.
Ownership Analysis
1. Involvement of the trustee – In Broadcasting Decision CRTC 2013-310
(Decision 2013-310), the Commission required as a condition of approval the divestiture
of certain assets to be put in trust.
a) In view of this, please clarify the role of the trustee in the current transaction
(i.e. involvement in transaction and in contracts/agreements).
Corus response
The position of the Trustee is defined by the Voting Trust Agreement (VTA)
between BCE Inc. (Bell) and Pierre Boivin (the Trustee) which was approved by
the Commission in a letter dated June 27, 2013. The VTA sets out the context in
the recitals and the obligations of the Trustee to Bell.
In the case of TELETOON Canada Inc. assets that are the subject of this
application, the Trustee holds exactly half (50%) of the ownership shares of the
2
company on behalf of Bell. The Trustee does not control and does not manage the
assets. Corus holds the other half of the equity. Control is exercised by the
Board of Directors and a separate management team operates the company.
This management team and Corus have conferred with the Trustee about the
status of these operations. The Trustee has appointed directors to the
TELETOON board and has participated in a Board of Directors meeting as an
observer. The company is operating on a stand-alone basis in the normal course.
b) In the event that the Trustee’s approval is required in order to proceed with the
current transaction, please file an executed copy of the document signed by the
Trustee giving the right to Bell to act on its behalf and giving its approval to
proceed with the transactions.
Corus response
The VTA exists in the context of a number of other agreements referred to in the
recitals, all of which were in existence well in advance of the approval of the VTA
by the Commission on June 27, 2013.
The first agreement was that between Bell and Astral Media Inc. (Astral) dated
March 16, 2012 and as amended on November 16, 2012 as noted in the recitals of
the VTA. That agreement provided that Astral would sell its shares of the
publicly-traded company to Bell.
The second agreement was that between Corus, Bell and Astral dated March 4,
2013 for the acquisition of certain assets including TELETOON.
So by the time that the Commission approved the VTA, it was clear that some
assets would be passing to Corus (subject to Commission approval) and that the
Trustee’s role was simply to be a custodian of the assets pending a decision of the
Commission. The Trustee had no role in the sale process.
The Trustee is not required to approve the transaction between Bell, Astral and
Corus but rather simply to deliver up the shares when so instructed by Bell.
Accordingly, under s. 4(f) of the VTA, once Commission approval is secured, the
Trustee is then required to take such actions required to facilitate a change in
effective control of the subject programming undertakings.
2. Transaction steps – Please refer to paragraph 10 of the supplementary brief and to
your reply to question 3b) of your letter dated 12 June 2013. We note that since the
filing of your application, you stated that alternative “A” will be followed.
a) Please confirm that you will not proceed with alternative “B” and that therefore
you will not proceed with the steps explained at paragraph 10 (i.e. creation of
Newco, acquisition of shares of the Family Channel Inc., and amalgamation
steps).
3
Corus response
Corus confirms that we will not proceed with alternative “B”. The Newco
identified in paragraph 10 of Corus’ Supplementary Brief is 8324441 Canada Inc.,
and not the Newco referenced in Step 1 of alternative “B”.
8324441 Canada Inc. will acquire the TELETOON shares held by Bell Media Inc.
and 4116381 Canada Inc.; 8324441 Canada Inc. will not be acquiring shares in
Family Channel Inc.
Subsequently, the amalgamation step set out in Step 2 of alternative “A” will
proceed. As a result, the amalgamation step set out in Step 2 of alternative “B”
will obviously not proceed.
b) As a follow-up to Decisions 2013-308, 2013-309, 2013-310, and of the
administrative letter dated 27 June 2013, we understand that Bell Media Inc.
currently holds 50% of the voting shares in 4116381 Canada Inc. and 40% of the
voting shares in TELETOON Canada Inc. (TELETOON Canada) and that the
Trustee controls the undertaking and the licensee.
i) Please confirm staff’s understanding.
Corus response
Pursuant to the Decisions noted above, we believe your understanding to be
correct.
With regards to the matter of the Trustee’s role, please see response to question
1a); the Trustee does not control the undertaking and the licensee.
ii) Please indicate which sections of the Share Purchase Agreement will no
longer be valid or accurate;
Corus response
We do not believe that any sections of the Share Purchase Agreement (SPA) are
invalid or inaccurate. Section 9.15 of theSPA contemplates the reorganization
outlined in Step 3 of Decision 2013-308 (the “NewHoldco” mentioned in the SPA is
referred to as “Halftoon Newco” in Decision 2013-308). The role of the Trustee is
also addressed in the SPA.
iii) explain why? (for example, section 9.15); and
Corus response
See response to question 2b)ii).
iv) indicate if they will be replaced or modified.
4
Corus response
There is no need to replace or modify any provisions of the SPA, since the SPA as
a whole continues to be valid, accurate and binding.
Generally, contracts require an amendment to reflect changes agreed to by the
parties after execution (e.g. change in the terms of the deal), omissions or errors.
A contract does not require an amendment to reflect anything else, such as the
satisfaction of conditions or the failure of certain scenarios to unfold if the
contract contemplates those only as potential scenarios (e.g. “if [x] happens, then
the parties shall do [y]”). In this example, if [x] does not happen, then there is no
need to amend the contract to reflect that. If they wish, the parties may confirm
to each other in writing outside of the contract that [x] did not happen, so that
there is a record of that fact. But that confirmation is not legally required.
c) In light of the above-mentioned Decisions/Letter, please:
i) provide a step-by-step description of alternative “A”; and
Corus response
Please see alternative “A” included at paragraph 11 of the Supplementary Brief
filed on April 17, 2013. The restructuring process set out as alternative “A” is still
accurate.
ii) review staff’s understanding as presented in the Appendix to this letter
and confirm. If not, detail.
Corus response
Corus has reviewed the Appendix to the Commission’s letter and has summarized
below the corrections to be made:
Step 1 – Correct except New Family should be Family
Step 2 – Correct
Step 3 – Correct
Step 4 – Correct percentages but Corus Entertainment Inc. will hold all voting
shares and Nelvana Ltd. and YTV Canada Inc. will hold non-voting shares
Step 5 – Steps 4 and 5 should be combined into one
d) You confirmed that the reorganisation process (shown in step 3 of the appendix
to this letter) corresponds to an amalgamation. An amalgamation usually occurs
between wholly owned entities. As it was explained, Nelvana Ltd. and YTV still
ultimately hold voting share in TELETOON Canada, and would therefore be
considered as sister companies. Please precisely detail how the amalgamation
process will unfold as it involves sister companies, which is usually not possible
in an amalgamation.
5
Corus response
Nelvana Ltd. and YTV Canada Inc. will hold non-voting shares. Amalgamations
may occur between “sister companies” (horizontal amalgamation) or parent and
subsidiary companies (vertical amalgamation).
TELETOON Canada Inc., 8324441 Canada Inc., 4116381 Canada Inc. and 4113756
Canada Inc. will amalgamate under ss. 181-183 of the Canada Business
Corporations Act (CBCA).
In the case at hand, the “sister relationship” between Nelvana Ltd. and YTV
Canada Inc. is irrelevant since they are not being amalgamated.
e) In your 12 June 2013 reply, you have indicated that the amalgamation process
will result in the creation of TELETOON Amalco, which would therefore become
the proposed licensee. Yet, in most the original documentation filed, 8324441
Canada Inc. (4441 Inc.) is the proposed licensee. Please clarify and resubmit
Appendix 2A and Appendix 2B, if necessary.
Corus response
In paragraph 11 of the Supplementary Brief and as indicated in our response to
question 2d) above and in our response to question 2d) dated June 12, 2013,
TELETOON Canada Inc., 8324441 Canada Inc., 4116381 Canada Inc. and 4113756
Canada Inc. will amalgamate under ss. 181-183 of the CBCA.
The licensee will then be TELETOON Amalco.
A revised Appendix 2A is provided in response to question 2i) below.
f) Please explain whether TELETOON Amalco will be created through a simplified
amalgamation and confirm that, at no time, will you proceed with a wind-up or
any other form of amalgamation requiring the issuance of new licences.
Corus response
TELETOON Amalco will be created through a long-form process and we confirm
that at no time will Corus proceed with a wind-up or other form of amalgamation
that would require the issuance of new licences.
g) Please clarify the process whereby Nelvana Ltd. and YTV will become non-voting
shareholders instead of voting shareholders of TELETOON Amalco, i.e. other
than the issuance of shares to Nelvana Ltd. and YTV, what is the process by
which original shares are withdrawn. Further, please file supporting
documentation.
6
Corus response
Nelvana Ltd. and YTV Canada Inc.’s original voting shares in TELETOON Canada
Inc. will be converted into non-voting shares as part of the amalgamation (see s.
182(c) of the CBCA).
Please see response to question 2h) for supporting documentation.
h) Please file a draft version of the articles of amalgamation.
Corus response
Appendix A attached is a draft version of the articles of amalgamation.
i) To complement your answer to question f) above, please file detailed information
on TELETOON Amalco using Appendix 2A of the application form as a template.
Corus response
Appendix B attached is an Appendix 2A for TELETOON Amalco.
3. Share Purchase Agreement (SPA) – We note that throughout the SPA, you are
indicating that further to the consummation of the transactions contemplated by the
BCE/Astral Agreement, and by the corporate reorganisations, Bell will beneficially own
and control the shares of TELETOON Canada or will have effective ownership of the
licensee. Please file an attestation confirming that as contemplated in letter decision
dated 27 June 2013:
a) the Trustee, Pierre Boivin, currently has and will continue to have (at all times)
effective control of the licensee (TELETOON Canada) and its undertakings; and
Corus response
As explained earlier in our letter, the Trustee does not have effective control of
the licensee TELETOON Canada Inc. and its undertakings (please see response to
question 1a)).
b) the SPA will be amended accordingly.
Corus response
Section 9.2(a) of the SPA expressly contemplates the role of the Trustee, in a
manner that corresponds to our explanation of the Trustee’s role in reply to
question 3a) above. As a result there is no need to amend the SPA.
4. Cross-media ownership – As Shaw and Corus are under the effective control of JR
Shaw, please refer to section 3 of the application form and resubmit it, considering that
Shaw and Corus are part of the same ownership group.
7
Corus response
Shaw Media Inc. has prepared Appendix C attached, which contains the
requested information regarding cross media ownership for this company.
Broadcasting programming analysis
5. Tangible benefits and funding - Please refer to the second to last paragraph of
response 4a) and to 4c) of your 26 July 2013 response and indicate whether any entity in
the Shaw/Corus group would have access to, or be directly involved with, such funding.
Corus response
Corus confirms that no entity in the Shaw/Corus group will have access to, or be
directly involved, with such funding.
6. Competitive safeguards - In appendix 2 to Decision 2013-310, the Commission set out
conditions of licence applicable to television programming undertakings and
broadcasting distribution undertakings relating to the Code of conduct for commercial
arrangements and interactions, tied selling, negotiation of non-linear rights, provision of
a notice, access to advertising availabilities by competitors, requirement to file
affiliation agreements and dispute resolution prior to the expiry of an affiliation
agreement.
These remedies against anti-competitive behaviours were, as a condition of approval, to
be added to the broadcasting licences for all undertakings that will be operated by a
BCE-related entity following the close of the transaction between BCE and Astral.
Given that Shaw and Corus are part of the same ownership group, the size of the
combined Shaw/Corus entity, and the resulting opportunity for anti-competitive
behaviour, please provide the Commission with the following information:
a) Please comment on the applicability and relevance of remedies against anticompetitive behaviours such as those set out in Decision 2013-310 in the context
the current transaction.
b) Please comment on the possible imposition, as a condition of approval of the
transaction, of remedies against anti-competitive behaviours to be added as
conditions of licence for all Corus-related services following the transaction.
c) Please comment on the individual conditions of licence set out in Appendix 2 of
Decision 2013-310 and their applicability to Corus-related services.
Corus response to a), b) and c)
These questions raise important issues relating to the jurisdiction of the
Commission and the nature of existing policies and regulations in existence
outside of the Vertical Integration (VI) Policy.
8
Corus submits that the Commission does not have the jurisdiction to amend
conditions of licence for services that are not part of a proceeding. We submit
that this would set a dangerous substantive and procedural precedent for the
industry.
As a programming undertaking, the Corus networks are governed by the
Commission’s undue preference rules. We are also not able to withhold our
signals in the event of a disagreement. The existing rules on programming
undertakings are substantial and clearly circumscribe behaviour.
That said, Corus is prepared to accept the conditions outlined in Appendix 2 of
Broadcasting Decision CRTC 2013-310, as applicable to a programming
undertaking (conditions of licence 1, 5-9, 11-13). We would accept these conditions
on all of the television licences that are subject to this proceeding.
7. Calculation of CPE - TELETOON Canada is currently required to calculate its CPE
on a cash basis. As of Broadcasting Decision CRTC 2011-446, services included in the
Corus group are required to calculate their CPE on an accrual basis.
a) Please comment on the impact on your operations should TELETOON Canada’s
CPE requirements, which are currently calculated on a cash basis, be calculated
on an accrual basis for the next licence term.
b) Would you accept a condition of licence requiring you to fulfill TELETOON
Canada’s CPE requirements on an accrual basis (with an exception for equity
investments in Canadian feature films), with a 3-year adjustment period?
Corus response to a) and b)
In the context of the Group based licensing proceeding conducted in 2011, Corus
indicated to the Commission that switching from calculating CPE on a cash basis
to calculating CPE on an accrual basis would have a negative impact on the
short-term profitability of any television service where such a change is
mandated.
Corus accepts that the Commission has determined that Canadian television
services must all calculate their CPE on an accrual basis (with the exception of
equity investments in Canadian feature films) and therefore Corus is prepared to
accept a condition of licence requiring TELETOON Canada to fulfil its CPE
requirements on an accrual basis (with an exception for equity investments in
Canadian feature films) with a 3-year adjustment period.
8. Group-based licensing - At paragraph 97 of the Supplementary brief, Corus indicates
that it intends to include TELETOON and TELETOON Retro English within its
existing group of English-language services from a group-based licensing perspective.
Corus adds that it reviewed and supports the licence renewal applications by
TELETOON Canada. As set out in Broadcasting Decision 2011-446, the Commission
has established a minimum group CPE level of 30% for the Corus group and a minimum
group expenditure requirement of 9% on PNI. Staff notes that the Commission could
9
impose requirements related to CPE and PNI as part of the services’ licence renewals.
As such:
a) Please submit your proposed CPE and PNI requirements, along with the
respective conditions of licence, for all the services that you wish to include in the
Corus group as well as your justification (with detailed calculations).
Corus response
In its most recent licence renewal application, TELETOON Canada submitted a
proposed CPE rate of 29%, which was based on its historical CPE (adjusted for
CMF usage) using the 3-year broadcasting period of 2009–2011.
In Appendix 1 attached, Corus has updated the 3-year analysis for the 2010–2012
CRTC reporting periods resulting in a historical CPE rate of 28% (adjusted for
CMF usage) for TELETOON Canada.
In Appendix 2 attached, Corus has calculated the historical CPE for TELETOON
Retro English to be 4%. Under normal circumstances, Corus would have
requested a 28% CPE rate for TELETOON and a 4% CPE rate for TELETOON
Retro English.
However, given that all major media groups that operate under a group basis
have an aggregate CPE rate of 30% and that this is the group CPE rate
established by the Commission for Corus in Broadcasting Decision CRTC 2011446, we are proposing CPE rates of 31% for TELETOON and 16% for TELETOON
Retro English, consistent with the current CPE rates established for Corus’
Category A and Category B specialty channels respectively.
Based on the analysis shown in Appendix 3 attached, this would not change the
current Corus group rate when TELETOON and TELETOON Retro English are
added to the Corus group of English-language television services.
Based on the 2010–2012 TELETOON and TELETOON Retro English CRTC Annual
Returns, we have calculated TELETOON and TELETOON Retro English’s
historical PNI to be 26% and 4% respectively (see Appendix 4 attached).
We are confident that the CRTC’s Annual Returns capture all of TELETOON and
TELETOON Retro English’s PNI programming due to their natures of service as
they would not air award shows or documentaries. Based on this information, we
propose a PNI rate for TELETOON of 26% of prior year’s revenue and a PNI rate
for TELETOON Retro English of 4% of prior year’s revenue.
As shown in Appendix 3 attached the inclusion of TELETOON and TELETOON
Retro English into the Corus group of English-language television services at
these proposed rates would increase the Corus group’s overall PNI rate to 12%.
10
TELETOON – Proposed conditions of licence for CPE and PNI
1. Except as otherwise provided for in conditions 4 and 6 and in accordance
with A group-based approach to the licensing of private television services,
Broadcasting Regulatory Policy CRTC 2010-167, 22 March 2010, the licensee
shall in each broadcast year devote to the acquisition of or investment in
Canadian programming 31% of the previous year’s gross revenues of the
undertaking.
2. The licensee may count expenditures made for the acquisition of or
investment in Canadian programming by one or more pay television
services, specialty services or conventional television stations from the
“Corus group” in the same broadcast year towards fulfilling the
requirement in condition 1 as long as these expenditures are not used by
those pay television services, specialty services or conventional television
undertakings towards fulfilling their own Canadian programming
expenditure requirement.
3. Except as provided for in conditions 4, 5 and 6 and in accordance with A
group-based approach to the licensing of private television services,
Broadcasting Regulatory Policy CRTC 2010-167, 22 March 2010
(Broadcasting Regulatory Policy 2010-167), the licensee shall in each
broadcast year devote to the acquisition of or investment in programs of
national interest, as defined in paragraphs 71 to 73 of Broadcasting
Regulatory Policy 2010-167, 26% of the previous year’s gross revenues of the
licensee.
4. The licensee may count expenditures made for the acquisition of or
investment in programs of national interest by one or more pay television
services, specialty services or conventional television stations from the
“Corus group” in the same broadcast year towards fulfilling the
requirement in condition 3 as long as these expenditures are not used by
those pay television services, specialty services or conventional television
stations towards fulfilling their own Canadian programming expenditure
requirement.
5. At least 75% of the expenditures in condition 3 must be made to an
independent production company.
6. In each broadcast year of the licence term, excluding the final year, where
the licensee expends an amount for that year on Canadian programming or
programs of national interest that is greater than the minimum required
expenditure, the licensee may deduct that amount from the minimum
required expenditure in one of more of the remaining years of the licence
term.
11
TELETOON Retro English – Proposed conditions of licence for CPE and PNI
1. Except as otherwise provided for in conditions 4 and 6 and in accordance
with A group-based approach to the licensing of private television services,
Broadcasting Regulatory Policy CRTC 2010-167, 22 March 2010, the licensee
shall in each broadcast year devote to the acquisition of or investment in
Canadian programming 16% of the previous year’s gross revenues of the
undertaking.
2. The licensee may count expenditures made for the acquisition of or
investment in Canadian programming by one or more pay television
services, specialty services or conventional television stations from the
“Corus group” in the same broadcast year towards fulfilling the
requirement in condition 1 as long as these expenditures are not used by
those pay television services, specialty services or conventional television
undertakings towards fulfilling their own Canadian programming
expenditure requirement.
3. Except as provided for in conditions 4, 5 and 6 and in accordance with A
group-based approach to the licensing of private television services,
Broadcasting Regulatory Policy CRTC 2010-167, 22 March 2010
(Broadcasting Regulatory Policy 2010-167), the licensee shall in each
broadcast year devote to the acquisition of or investment in programs of
national interest, as defined in paragraphs 71 to 73 of Broadcasting
Regulatory Policy 2010-167, 4% of the previous year’s gross revenues of the
licensee.
4. The licensee may count expenditures made for the acquisition of or
investment in programs of national interest by one or more pay television
services, specialty services or conventional television stations from the
“Corus group” in the same broadcast year towards fulfilling the
requirement in condition 3 as long as these expenditures are not used by
those pay television services, specialty services or conventional television
stations towards fulfilling their own Canadian programming expenditure
requirement.
5. At least 75% of the expenditures in condition 3 must be made to an
independent production company.
6. In each broadcast year of the licence term, excluding the final year, where
the licensee expends an amount for that year on Canadian programming or
programs of national interest that is greater than the minimum required
expenditure, the licensee may deduct that amount from the minimum
required expenditure in one of more of the remaining years of the licence
term.
9. Group-based licensing - Please comment whether the inclusion of some of these
services into the Corus group could impact the overall group CPE and PNI requirements
12
set out in Broadcasting Decision CRTC 2011-446 and comment on whether the group
requirements would remain appropriate. If not, please specify an appropriate adjusted
group requirement for the Corus Group, taking into account the additional services that
you propose to include. Additionally, please provide detailed calculations to justify this
scenario.
Corus response
Please see response to question 8.
10. Canadian programming expense - In light of the elimination of the CMF licence-fee
top-up as an eligible Canadian programming expense, please submit your proposed
individual CPE requirements for each of the services, in addition to your justification.
Corus response
Please see response to question 8.
Corus appreciates the opportunity to address these questions. We remain available to
respond to any further information requests if required.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Attachment
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
Pierre Boivin, Trustee
***End of document***
Appendix
1)
2)
Astral  Bell
Corus
Astral  Bell
Corus
New Family
 New Bell
Media
YTV
Canada, Inc.
50%
Nelvana Limited
20%
YTV
Canada, Inc.
New Family
(Trustee)
50%
50%
4116381
Canada Inc.
NelvanaLimited
4113756
Canada Inc.
20%
20%
8324441
Canada Inc.
20%
40%
50%
4116381
Canada Inc.
4113756
Canada Inc.
20%
20%
40%
TELETOON
Canada Inc.
TELETOON
Canada Inc.
3)
4)
Corus
Astral  Bell
Corus
New Family
 New Bell
Media
YTV
Canada, Inc.
Amalgamation
8324441
Canada Inc.
Control
Control
Nelvana Limited
20%
50%
4116381
Canada Inc.
YTV
Canada, Inc.
20%
60%
50%
TELETOON
Amalco
(not 8324441
Canada Inc.)
Nelvana Limited
4113756
Canada Inc.
- Cartoon Network (Cat. B)
- TELETOON
20%
20%
- TÉLÉTOON Rétro (Cat. 2)
20%
40%
TELETOON
Canada Inc.
Corus Entertainment
Inc.
- TELETOON Retro (Cat. 2)
5)
Corus
Corus Entertainment Inc.
100%
TELETOON
Amalco
- Cartoon Network
- TELETOON
- TÉLÉTOON Rétro
- TELETOON Retro
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
APPENDIX A
ABRIDGED
TELETOON CANADA INC.
Form 2, Initial Registered Office Address and First Board of Directors
Schedule I
4
Members of the board of directors
Name
Address
Heather A. Shaw
Calgary, AB
Yes
John Cassaday
North York, ON
Yes
Thomas C. Peddie
Toronto, ON
Yes
LEGAL_1:27797174.1
Resident Canadian
(Yes/No)
APPENDIX B
ABRIDGED
APPENDIX 2A
Section A
Name of the APPLICANT
Teletoon Amalco, OBCI
Definitions
2.1
Authorized Securities
Describe all categories of shares authorized to be issued.
Security Type
Number of Votes Per
Share
Convertible
(y/n)
Participating (6)
(y/n)
Number of Shares
Authorized
1
n
y
unlimited
0
n
n
unlimited
0
n
n
unlimited
Common
Shares
Class A special
shares
Class B
special shares
2.2
Number Issued
and Outstanding
Shareholding
Supply the details for each shareholder holding 10% or more of the voting shares(5), of the voting
rights (if different from the voting shares), and of any other category of shares identified in the
common shares(6) definition. For the remaining shareholders, (those holding less than 10%) supply
the total shares under "Others Canadian" and "Others Non-Canadian".
Security Type
Shareholder Name
(1)
Corus
Common Shares Entertainment
Inc.
2.3
Complete Home Address or Legal Entity
Jurisdiction
Canadian(2)
(x)
Federal Corporation
X
Number of
Shares Held
%
Votes
100
Directors and Officers
Supply a list of the current/proposed directors and officers of the corporation (3) (4)
Name of
Directors/Officers (1)
Heather A. Shaw
John Cassaday
Thomas C. Peddie
Complete Home Address
Alberta
Ontario
Ontario
Canadian(2)
(x)
Directors Date of Appointment
Officer Position
X
TBD
Chair
X
TBD
X
TBD
Chief Executive
Officer
Chief Financial
Officer &
Treasurer
APPENDIX B
ABRIDGED
Ontario
Doug Murphy
President
Ontario
Judy Adam
Vice-President
Finance
Corporate
Secretary
Assistant
Corporate
Secretary
Ontario
Gary Maavara
Ontario
Randy Witten
Exemption:
The applicant hereby confirms that :
: All ownership information for each of the entities that form part of the control chain has been supplied
within the last 12 months from the date of this application, and accepted as satisfactory by the
Commission; and
: No changes have occurred since the last filing that would be subject to a notification requirement or
prior approval by the Commission pursuant to the Regulations; and
: No amalgamation has occurred.
date of filing of last complete update:
YY/MM/DD
APPENDIX 2A
Section B
Name of the Shareholder Corporation
Definitions
2.1
Authorized Securities
Describe all categories of shares authorized to be issued.
Security Type
Number of Votes Per
Convertible
Participating (6)
Number of Shares
Number Issued
APPENDIX B
ABRIDGED
Share
2.2
(y/n)
(y/n)
Authorized
and Outstanding
Shareholding
Supply the details for each shareholder holding 10% or more of the voting shares(5), of the voting
rights (if different from the voting shares), and of any other category of shares identified in the
common shares(6) definition. For the remaining shareholders (those holding less than 10%), supply
the total shares under "Others Canadian" and "Others Non-Canadian".
Security Type
2.3
Shareholder Name (1)
Complete Home Address or Legal Entity
Jurisdiction
Canadian(2) Number of
(x)
Shares
Held
%
Votes
Directors and Officers
Supply a list of the present/proposed directors and officers of the corporation (3) (4)
Name of
Directors/Officers (1)
Complete Home Address
Canadian(2)
(x)
Directors Date of
Appointment
Officer Position
For an additional APPENDIX 2A, copy tables 2.1, 2.2 and 2.3 on a new page
DEFINITIONS
(1)
director/shareholder: If any of these persons hold public office, by election or appointment,
indicate the office held under the name of the person(s).
APPENDIX B
ABRIDGED
(2)
Canadian:
Specify if Canadian or Non-Canadian. If a person, CANADIAN means a
Canadian citizen, ordinarily resident in Canada, and as defined in the
Direction to the CRTC (Ineligibility of Non-Canadians) P.C. 1997-486 as
amended by P.C. 1998-1268. If a corporation, CANADIAN means a
"qualified corporation" as defined in the Direction to the CRTC (Ineligibility
of Non-Canadians) P.C. 1997-486 as amended by P.C. 1998-1268.
(3)
directors
Means a person who is a member of the board of directors of a corporation
or, where the corporation has no directors, a person performing functions
that are similar to the functions performed by directors, as defined in the
Direction to the CRTC (Ineligibility of Non-Canadians) P.C. 1997-486 as
amended by P.C. 1998-1268.
(4)
officers:
Those persons designated as Chairman, President, Chief Executive
Officer, Vice-President, General Manager, Secretary, Assistant-Secretary,
Comptroller, Treasurer, Assistant-Treasurer or any others under similar
titles.
(5)
voting shares:
The shares to which are attached one or more votes, and includes
securities that are convertible into such shares at all times at the option of
the holder.
(6)
common shares:
The shares that represent the residual equity in the earnings of the
corporation, and includes securities that are convertible into such shares at
all times at the option of the holder and the preferred shares to which are
attached rights to participate in the earnings of the corporation with no
upper limit.
(7)
applicant/shareholder: If a person, refers to a person who has reached the age of majority.
APPENDIX C
3. Industry consolidation and cross-media ownership
3.1
Has the information in 3.2 been submitted to the Commission within the last 12 months:
Yes ( ) No ( x)
If yes, provide reference to the application containing this information:
Application No.: __________________ Date filed:_____________________
If yes, proceed to section 4.
If no, complete question 3.2.
3.2
Complete the following table, providing a list of all entities involved in any of the areas listed
below, for which any investment (equity and/or debt securities) is held by the applicant, its
directors, a corporation which directly or indirectly controls the applicant and any shareholder
holding 20% or more of the voting interest of the applicant. The table may be appended as
Appendix 3.
Business classification code
Note: For all entities referenced by a * below, please see Shaw’s Broadcasting
Ownership Information Annual Filing, filed March 5, 2013 (RAPIDS # 562860,
Confirmation # 65808) for relevant information.
a. Other CRTC licence holder and exempted undertakings
Distribution Licensees:
Shaw Pay-Per-View Ltd.* – Regional Shaw Pay-Per-View (television), and
National Shaw Pay-Per-View (DTH)
Star Choice Television Network Incorporated* – Shaw Direct (DTH)
Shaw Cablesystems Limited* – Terrestrial BDUs serving the following areas:
British Columbia (Chilliwack, Coquitlam, Courtenay, Duncan, Kamloops,
Kelowna, Langford, Nanaimo, New Westminster, Vancouver (2 licenses),
Victoria, White Rock); Alberta (Calgary, Edmonton, Fort McMurray, Lethbridge,
Red Deer); Saskatchewan (Saskatoon); Manitoba (Winnipeg); Ontario (Sault
Ste-Marie, Thunder Bay)
•
Note that each of these licensees also operates a cable community
channel.
Videon Cablesystems Inc.* – Terrestrial BDUs serving Edmonton and Winnipeg;
and national VOD service, Shaw on Demand
•
Note that the licensees serving Edmonton and Winnipeg also operate a
cable community channel.
Shaw Fiberlink Ltd.* and Shaw Satellite Services Inc.* – Shaw Broadcast
Services
Television Licensees:
Shaw Cablesystems Limited* – CJBN-TV
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
APPENDIX C
2
Partnership* – CIHF-DT Halifax and its transmitters; CIHF-DT-2 Saint John and
its transmitters; CKMI-DT-1 Montreal and its transmitters; CIII-DT-41 Toronto
and its transmitters; CKND-DT Winnipeg and its transmitter; CFRE-DT Regina
and its transmitter; CFSK-DT Saskatoon; CISA-DT Lethbridge and its
transmitters; CICT-DT Calgary and its transmitters; CITV-DT Edmonton and its
transmitter; CHBC-TV Kelowna and its transmitters; CHAN-DT Vancouver and its
transmitters
Shaw Cablesystems Limited and Videon Cablesystems Limited are shareholders
in Cable Public Affairs Channel Inc., which operates CPAC.
Specialty and Digital Specialty Services Licensees:
Food Network Canada Inc.* – Food Network Canada
HGTV Canada Inc.* – HGTV Canada, DIY Network, Quest
History Television Inc.* – History Television
Showcase Television Inc.* – Showcase, Showcase Action, The Independent Film
Channel Canada, Lifetime
Discovery Health Channel Canada ULC* – Twist TV
Life Network Inc.* – Slice
Shaw Media Inc.* – Historia and Series+
NGC Channel Inc.* – National Geographic Channel, NatGeo Wild
Jasper Broadcasting Inc.* – BBC Canada
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
Partnership* – MovieTime, DejaView, Reality TV, Shaw Media Sports, Specialty
A, Global News Plus BC
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
Partnership*, and Shaw Media Global Inc.*, partners in a general partnership
carrying on business as Mystery Partnership* – Mystery
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
Partnership*, and Fox Sports World Canada Holdco Inc.*, partners in a general
partnership carrying on business as Fox Sports World Canada Partnership* –
Fox Sports World Canada
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
Partnership*, and Shaw Media Global Inc.*, partners in a general partnership
carrying on business as TVtropolis General Partnership* – TVtropolis
Shaw Television G.P. Inc.* (the general partner) and Shaw Media Global Inc.*
(the limited partner), carrying on business as Shaw Television Limited
Partnership*, and Shaw Media Global Inc.*, partners in a general partnership
carrying on business as Men TV General Partnership* – H2
b. Daily newspaper
N/A
APPENDIX C
c.
3
Non-daily newspaper or other media publisher
Shaw Media creates, and engages freelance talent to create, certain news and
other written and other digital content for use and exploitation on its various
web properties and, in particular, its news and lifestyle-brand websites. The
relevant Shaw Media entities involved in this are as follows:
Shaw Media Inc.*
Shaw Television G.P. Inc.* and Shaw Media Global Inc.*, carrying on business
as Shaw Television Limited Partnership*
d. Production or distribution of programming material
Shaw Media does not currently carry-on a standing content production business
other than with respect to its production of news content (Global National and
Global Local News (“News”)) and Entertainment Tonight Canada (“ETC”). In
addition, from time to time, Shaw Media may produce a very limited number of
one-off television productions from time to time (e.g. certain award shows) or
audio-visual and other content intended for exploitation on its digital
properties. The balance of content currently telecast on Shaw Media
broadcasting undertakings is either commissioned as original production from
independent producers or licensed from third-party distributors. The relevant
Shaw Media entities involved in production are as follows:
Shaw Media Inc.*; and
Shaw Television G.P. Inc.* and Shaw Media Global Inc.*, carrying on business
as Shaw Television Limited Partnership*;
Please note that: (i) production activities do not represent the bulk of business
of the entities named above; (ii) Shaw Media undertakes production of certain
advertising content for its advertising clients; (iii) in certain circumstances, and
from time to time, Shaw Media may also incorporate wholly-owned special
purpose production entities to produce individual one-off programs; and (iv)
there are certain inactive wholly-owned special purpose production entities that
continue to subsist solely for the purpose of holding copyright in and to
programs produced by it for predecessors to Shaw Media (e.g. Alliance Atlantis
(broadcast business) production entities).
Shaw Media does not currently carry-on a content distribution business.
e. Lessor of property, plant or equipment of applicant
N/A
f.
Telecommunications company regulated under the Telecommunications Act
Shaw Telecom Inc. and Shaw Business Inc., carrying on business as Shaw
Telecom G.P. – Provides Shaw Home Phone services
Shaw Communications Inc.* and Shaw Cablesystems Limited*, carrying on
business as Shaw Cablesystems G.P. – Provides internet service
APPENDIX C
4
g. Company owning securities in any of categories (a) to (f)
Securities holders in Shaw Telecom Inc.:
Name of Security Holder
Business
Classification
Code
Securities Held
Class or
description of
securities held
VOTE
Y
Shaw Communications Inc.*
F, G
Class A Common
N
X
% held
compared to
number
issued
100%
The directors of Shaw Telecom Inc. are JR Shaw, Brad Shaw, Peter Bissonnette and Steve
Wilson.
Securities holders in Shaw Business Inc.:
Name of Security Holder
Business
Classification
Code
Securities Held
Class or
description of
securities held
VOTE
Y
Shaw Communications Inc.*
F, G
Class A Common
X
N
% held
compared to
number
issued
100%
The directors of Shaw Business Inc. are JR Shaw, Brad Shaw, Peter Bissonnette and
Steve Wilson.
APPENDIX 1
TELETOON HISTORICAL CPE (Using 2010 - 2012 CRTC Return Information)
Prior Year's Revenue
CPE
CMF top up
CPE without CMF top up
CPE %
2010
76,268
29,093
7,113
21,980
29%
2011
83,823
38,432
15,165
23,267
28%
2012
89,301
35,433
10,663
24,770
28%
Avg
83,131
34,319
10,980
23,339
28%
TELETOON HISTORICAL CPE (Using 2009 - 2011 CRTC Return Information)
Prior Year's Revenue
CPE
CMF top up
CPE without CMF top up
CPE %
2009
81,630
33,758
8,859
24,899
31%
2010
76,268
29,093
7,113
21,980
29%
2011
83,823
38,432
15,165
23,267
28%
Avg
80,574
33,761
10,379
23,382
29%
APPENDIX 2
TELETOON RETRO ENGLISH HISTORICAL CPE (Using 2010 - 2012 CRTC Return Information)
Prior Year's Revenue
CPE
CMF top up
CPE without CMF top up
CPE %
2010
3,856
217
217
6%
2011
5,467
202
202
4%
2012
6,454
241
241
4%
Avg
5,259
220
220
4%
APPENDIX 3
Corus Entertainment Inc.
Calculation of Corus Group CPE & PNI Percentages Including Teletoon & Teletoon Retro English
Information taken from 2010 -2012 CRTC Annual Returns (except Teletoon & Teletoon Retro CPE)
Corus New CPE Calculation:
Corus
Specialty/Pay
Corus
Conventional
Corus Total
Excl-Teletoon
Teletoon
Teletoon
Retro E
Corus Total
Incl. Teletoon
& Retro E
Prior Year's Revenue - 3 Year Average
395,803,883
15,848,668
411,652,551
83,130,501
5,259,007
500,042,059
CPE $ Expenditure
117,326,935
4,437,627
121,764,562
25,770,455
841,441
148,376,459
CPE % Requirement
30%
31%
16%
30%
Teletoon
Retro E
Corus Total
Incl. Teletoon
& Retro E
Corus New PNI Calculation:
Corus
Specialty/Pay
Prior Year's Revenue - 3 Year Average
PNI $ Expenditure
PNI % Requirement
Corus
Conventional
Corus Total
Excl-Teletoon
Teletoon
395,803,883
15,848,668
411,652,551
83,130,501
5,259,007
500,042,059
35,622,349
1,426,380
37,048,730
21,613,930
210,360
58,873,020
9%
26%
4%
12%
APPENDIX 4
Corus Entertaiment Inc.
Calculation of Teletoon & Teletoon Retro English Program of National Interest (PNI) Percentage
Information taken from 2010 -2012 CRTC Annual Returns
Teletoon PNI Calculation:
2010
2011
2012
Average
Prior years revenue
76,267,679
83,822,937
89,300,886
83,130,501
PNI Programming Expenditures
Category 7
Category 2b
Award Shows
Total PNI Programming Expenditures
19,967,730
19,967,730
21,234,331
21,234,331
23,008,065
23,008,065
21,403,375
21,403,375
26%
25%
26%
26%
2010
2011
2012
Average
PNI Percentage
Teletoon Retro English PNI Calculation:
Prior years revenue
3,856,276
5,467,072
6,453,674
5,259,007
PNI Programming Expenditures
Category 7
Category 2b
Award Shows
Total PNI Programming Expenditures
174,555
174,555
202,430
202,430
241,259
241,259
206,081
206,081
PNI Percentage
5%
4%
4%
4%
Via GCKey
August 15th, 2013
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2
Dear Mr. Traversy:
Re:
TELETOON Canada Inc. – Various Undertakings – Transfer of Shares and
Acquisition of Assets - Change in Effective Control – Application
No: 2013-0596-2 – Response to Deficiency Letter Dated August 14th, 2013
Corus Entertainment Inc. (Corus), on behalf of TELETOON Canada Inc. (TELETOON)
hereby provides its response to the Commission’s deficiency letter dated August 14th, 2013.
The Commission’s questions are reproduced below with the Applicant’s response provided
in bold.
11. Shaw and Corus as a group – The supplementary brief filed with this application
states the following:
"Corus Entertainment Inc. (Corus) is a company that is ultimately controlled by
the JR Family Trust, which also owns and operates Shaw Communications Inc.
and Shaw Media Inc. (Shaw). Corus and Shaw Media are completely separate,
however, for the purposes of the Commission’s analysis, below are Shaw Media
Inc.’s English audience 2+ shares, 22.40% share in 2011 for Shaw services and
35.83% share in 2011 for Corus/Shaw services”.
a) Please provide the audience 2+ shares for the broadcast year 2011-2012
for both Shaw and Corus/Shaw.
2
Corus response
The share of audience 2+ for the broadcast year 2011-2012 for Shaw is 23.3% and
for Corus / Shaw is 36.1%. For additional detail, please see the response to
question 11b).
b) In the event that the Trustee’s approval is required in order to proceed
with the current transaction, please file an executed copy of the document
signed by the Trustee giving the right to Bell to act on its behalf and
giving its approval to proceed with the transactions.
Corus response
The following table shows the share of audience 2+ for the broadcast year 2012
and the broadcast year 2013 year to date (YTD) as of August 4, 2013.
2012
2013 YTD
Shaw Media
23.3%
23.8%
Corus Entertainment
12.8%
13.4%
Total
36.1%
37.1%
Please note the following with regard to the methodology:

Total viewing is based on viewing to all Canadian conventional stations
(including ethnic stations) and Canadian discretionary services (specialty,
pay, and the on demand versions of same, excluding PPV services) for all
persons 2+, Monday- Sunday 2a-2a in keeping with the calculation used in
table 4.3.9 of the 2012 Communication Monitoring Report published by the
Commission.

2012 figures represent the 2011-2012 broadcast year, specifically 29 August
2011 to 26 August 2012.

2013 YTD figures represent the 2012-2013 broadcast year to date,
specifically 27 August 2012 to 4 August 2013.
Rather than provide an
estimate for the year, we have provided the actual confirmed data for the
broadcast year to date. We do not expect these share percentages to
materially change between now and the end of the broadcast year.

Shaw and Corus figures are shown pro-forma for the transactions
contemplated in the applications currently being reviewed by the
Commission as well as those applications approved since the publication of
the 2012 Communications Monitoring Report, specifically:
o
Shaw Media includes the audience share related to Mystery but
excludes Historia and Séries+.
3
o
Corus Entertainment includes Historia, Séries+, TELETOON,
TELETOON French, TELETOON Retro English, TELETOON Retro
French, and Cartoon Network.
o
In addition, it should be noted that in 2012 total viewing for HBO has
been included in the calculation of the Corus share. In 2013, only the
viewing attributable to HBO-West is included in the Corus share, as
Corus does not own HBO-East. Prior to the 2013 broadcast year, it was
not possible to split out the East and West audience statistics of HBO.

Perhaps most importantly, it should be noted that these transactions have
no impact on the combined market share of Shaw and Corus because
previous calculations of combined market share included joint ventures at
100%. In other words, this transaction does not change the market share.

Our growth in market share since broadcast year 2011 has been due to
organic growth from existing channels due to Corus’ investment in
programming as well as new channel launches such as ABC Spark and
Cartoon Network which have delivered powerful brands and new
programming to Canadian audiences. We are pleased to report that our
Canadian Content is attracting larger audiences.
Corus appreciates the opportunity to address these questions. We remain available to
respond to any further information requests if required.
Sincerely,
Sylvie Courtemanche
Vice President, Government Relations
Corus Entertainment Inc.
Cc:
Marie-Claire Bouthillier, CRTC
Kevin Goldstein, Bell Media Inc.
Pierre Boivin, Trustee
***End of document***