Notice of EGM

RNS Number:3417T
Creative Education Corp Plc
20 March 2007





                     The Creative Education Corporation Plc

                          ('Creative or the 'Company')



             Waiver of Rule 9 of City Code on Takeovers and Mergers



                                 Notice of EGM



Further to the announcement on 9 March 2007, Creative announces that it has
today posted to Shareholders a notice of EGM containing details of the proposed
waiver of Rule 9 of the City Code on Takeovers and Mergers in respect of the
exercise by Solent Nominees Limited ("SNL") of the remainder of its option to
subscribe for Loan Notes.



Definitions used are set out at the end of this announcement.



Introduction



In September 2006, the Company announced that, following an extended period of
underperformance and adverse trading conditions at several sites within the
portfolio of childcare nurseries, it had agreed to issue #1 million nominal
value convertible unsecured loan stock to provide additional working capital.



October Investments Limited, the original subscriber for the loan stock, did not
meet the subscription conditions and consequently the Company terminated its
agreement with October Investments Limited and entered into a new agreement with
SNL to subscribe for #1,000,000 2006 Loan Notes in replacement. Additionally,
the Company has granted SNL, or its nominees, an option to subscribe for up to a
further #1,500,000 2006 Loan Notes on or before 31 March 2007 pursuant to the
Loan Note Option.



On 22 January 2007 the Company held an extraordinary general meeting at which
all resolutions relating to the above were approved by Shareholders and resulted
in the conversion into Ordinary Shares of #605,469.84 nominal value 2006 Loan
Notes held by SNL at a conversion price of 0.33p per share, giving SNL an
interest of 183,475,708 Ordinary Shares.



Since 22 January 2007:



  * SNL has sold 43,000,000 Ordinary Shares and subsequently converted its
    outstanding #394,530.16 2006 Loan Notes into 119,554,593 Ordinary Shares to
    take its shareholding up to 260,030,301 Ordinary Shares, being 29.5 per cent
    of the current issued share capital of the Company;



  * SNL has subscribed for #495,000 2006 Loan Notes, pursuant to the Loan Note
    Option, which were issued, at SNL's request, to October Investments Limited
    and subsequently converted into 150,000,000 New Ordinary Shares.



SNL intends, subject to the passing of the Whitewash Resolution, to exercise in
full the remainder of the Loan Note Option by subscribing for #1,005,000 2006
Loan Notes and to convert such 2006 Loan Notes into New Ordinary Shares.



However, the 2006 Loan Note instrument contains a condition whereby SNL may not
convert its 2006 Loan Notes if to do so would require it to make an offer to buy
out the other shareholders of the Company pursuant to Rule 9 of the City Code.
Accordingly the circular being sent to Shareholders contains a notice of the EGM
at which a resolution will be put to Shareholders to consider, and if thought
suitable, permit SNL to convert its 2006 Loan Notes (after full exercise of the
Loan Note Option) and take a controlling interest in the company without having
to make an offer to buy out the Independent Shareholders under Rule 9 of the
City Code.



Conversion of other Shareholder debts



The Company has also entered into the following agreements with other
shareholders to convert, subject to Shareholder approval being obtained before
30 June 2007, outstanding debts owed by the Company into New Ordinary Shares:



Laurence Davis (a non-executive director of the Company): #766,702 2005 Loan
Stock will be convertible into 15,334,040 New Ordinary Shares at a conversion
price of 5p per share; and #533,266 loaned to the Company will be convertible
into 161,595,757 New Ordinary Shares at a conversion price of 0.33p per share.



John Baker: #745,980 2005 Loan Stock will be convertible into 14,919,600 New
Ordinary Shares at a conversion price of 5p per share; #257,579 2005 Loan Stock
issued to Iron Founders & Allied Trade Nominees Limited (a company of which John
Baker is a director and controlling shareholder) as consideration for the
acquisition of a leaseholder property at East Sheen known as Canniford Hall will
be convertible into 5,151,580 New Ordinary Shares at a conversion price of 5p
per New Ordinary Share; and #287,500 loaned to the Company will be convertible
into 87,121,212 New Ordinary Shares at a conversion price of 0.33p per share.



Frank Mountain: #559,485 2005 Loan Stock will be convertible into 11,189,700 New
Ordinary Shares at a conversion price of 5p per New Ordinary Share.



The Independent Directors consider that these conversions are in the best
interests of the Company as they will reduce the Company's debts and thereby
help it to achieve a full financial recover and implement its new business plan.



The above shareholders will have the following holdings if the Resolutions are
approved and the Proposals are completed:


                               Current Holding1               Following Issue of New Ordinary
                                                               Shares pursuant to Proposals2
Shareholder             Ordinary Shares       Per cent.     Ordinary Shares          Per Cent

Laurence Davis3             31,741,468.00          3.60           206,671,265.00           14.10
John Baker4                 32,150,230.00          3.30           139,342,622.00            9.40
Frank Mountain               3,225,000.00          0.40            14,414,700.00            1.00

TOTAL                                              7.60                                    24.40



1.    Based on total voting capital of 882,828,049 Ordinary Shares

2.    Based on total voting capital of 1,482,685,392 Ordinary Shares

3.    includes 13,831,239 Ordinary Shares held by Shortlands Investments 
      Limited, a company of which Laurence Davis is a director and
      controlling shareholder.

4.    includes 691,881 Ordinary Shares issued to Iron Founders and Allied 
      Trade Nominees Limited, a company of which John Baker is a director
      and controlling shareholder and 3,305,505 Ordinary Shares held by 
      JB Consultancy Limited, a company of which John Baker is a director 
      and controlling shareholder.



Each of Laurence Davis, John Baker and Frank Mountain and Lightning Star
Limited, which owns 106,060,606 Ordinary Shares being 12.0 per cent. of the
current issued share capital of the Company, (none of whom are acting in concert
with SNL or any member of the Concert Party) has, except in the case of
accepting a general offer for the entire issued share capital of the Company, a
disposal pursuant to a court order, or agreeing to accept, or other law or
regulation or a disposal on or following his death, agreed not to sell his New
Ordinary Shares before 22 December 2007 without the prior written consent of
each of the Company, SNL and Corporate Synergy (such consent not to be
unreasonably withheld or delayed).



Each of Laurence Davis and John Baker has given an irrevocable undertaking to
vote in favour of the Whitewash Resolution (provided such resolution is proposed
before 30 June 2007).



Background to, and Reasons for, the Proposals



As set out in the Chairman's letter to Shareholders on 22 December 2006, the
Company had arranged a refinancing package with SNL in order to allow the new
management team, lead by Paul Ayres, to improve the Company's commercial
position through revenue growth and cost reductions.



Progress is being made in this regard, as the executive Directors have recently
undertaken a detailed review of the Company's business. The objectives of this
review were the reduction of overheads and initiatives that would improve
revenues. As a result of this initiative centralized head office costs have been
significantly reduced delivering an annual cost saving of #300,000.
Additionally, three of the Company's loss making facilities have been closed, as
analysis revealed that these business units would not be in a position to
deliver any positive impact on the Company's revenue performance.



In order to fulfill the Company's new business plan, the Directors require
further finance. SNL has indicated its willingness, subject to certain
conditions including passing of the Whitewash Resolution, to subscribe for the
remaining #1,005,000 2006 Loan Notes which are the subject of the Loan Note
Option.



Furthermore SNL has indicated its willingness to convert those 2006 Loan Notes
to equity at the pre-agreed rate of one New Ordinary Share per 0.33p nominal of
Loan Stock.



In addition, the Directors have also arranged for the holders of the 2005 Loan
Stock to convert their holdings to equity at the relevant pre-agreed rates.



The Directors believe that, by arranging the additional finance referred to
above and the conversion of an aggregate of #4,155,512 of debt to equity, the
Company will be in a far stronger financial position, which will enable the
Directors to see through the revised business plan drawn up by the new
management team.



The Directors may issue an additional #500,000 2006 Loan Notes to raise
additional working capital to assist in the turnaround of the Group.



Once the Company's performance has improved sufficiently, the Directors intend
to grow the business through the acquisition of other nursery businesses and
educational initiatives.





The City Code and the Code Waiver



The Concert Party comprises SNL and the beneficial holders of the Ordinary
Shares held by SNL. Currently, the aggregate beneficial holding of the Concert
Party is 260,030,301 Ordinary Shares, representing 29.5 per cent. of the issued
share capital of the Company.



Following completion of the Proposals (assuming exercise in full of the Loan
Note Option and subsequent conversion of #1,005,000 2006 Loan Notes), the
Concert Party will own in aggregate 564,575,755 Ordinary Shares representing
approximately 38.1 per cent. of the enlarged issued share capital of the
Company. Accordingly, a waiver of Rule 9 of the City Code is required.



The Panel has been consulted and has agreed that it will not require the Concert
Party, individually or collectively, to make a general offer for shares in the
Company which would otherwise arise as a result of the Conversion, subject to
Resolution 1 (as set out in the notice convening the Extraordinary General
Meeting) being passed on a poll by the Independent Shareholders. To be passed,
Resolution 1 will require a simple majority of the votes cast by the Independent
Shareholders.



Information on the Concert Party



SNL is registered in the British Virgin Islands with registered number 567181.
Its registered office is at Palm Grove House, PO Box 438, Road Town, Tortola,
British Virgin Islands.



SNL acts as a nominee company for clients of Regent, a Swiss based financial
services group which is licensed by the Association Romande des Intermediaires
Financiers.





Extraordinary General Meeting



The Company has convened an EGM at 10am on Thursday 12 April 2007 at the offices
of Fladgate Fielder, 25 North Row, London W1K 6DJ.



The Resolutions will be put to the EGM that will permit, inter alia:



  * SNL to convert the entirety of the balance of its 2006 Loan Notes (after
    full exercise of the Loan Note Option) amounting to #1,005,000 nominal value
    to be converted at 0.33p per share into 304,545,454 New Ordinary Shares
    representing 20.5 per cent. of the Enlarged Share Capital of the Company.
    This would take SNL's total holding to 564,575,755 Ordinary Shares
    representing 38.1 per cent. of the Enlarged Share Capital of the Company;
    and



  * Conversion of certain other Shareholder debts into New Ordinary Shares.





Recommendation:



SNL, as a substantial shareholder of the Company, and Laurence Davis, as a
non-executive director of the Company, are "related parties" for the purposes of
the AIM rules.



The Independent Directors, having consulted with Corporate Synergy (the
company's nominated adviser), consider the Related Party Transactions to be fair
and reasonable in so far as the shareholders are concerned and in the best
interests of the Company and the shareholders as a whole.



The Independent Directors, having been so advised by Rawlinson & Hunter (the
Company's adviser for the purposes of Rule 3 of the City Code), consider the
Proposals to be fair and reasonable in so far as the shareholders are concerned
and in the best interests of the Company and the shareholders as a whole.



In providing advice to the Independent Directors, Corporate Synergy and
Rawlinson & Hunter have relied upon the commercial assessments of the
Independent Directors.





Copies of this document



Copies of this document will be available to the public free of charge at the
offices of Fladgate Fielder at 25 North Row, London W1K 6DJ during normal
business on any weekday (other than Saturdays, Sundays and public holidays), for
a period of one month from the date of the EGM.



For Further Information:



Paul Ayres, CEC                                            020 8864 5147



Olly Cairns, Corporate Synergy                             020 7448 4400



Derek Rawlings, Rawlinson & Hunter                         020 7451 9003



Toby Hall / Jade Mamarbachi, gth media relations           020 7153 8035





Definitions



"2005 Loan Stock"      #3,200,000 nominal loan stock created
                       pursuant to an instrument dated 10 October 2005



"2006 Loan Notes"      #3,000,000 nominal convertible loan stock
                       created pursuant to an instrument dated 15 December 2006



"Act"                  the Companies Act 1985, as amended



"AIM"                  the market of that name operated by
                       the London Stock Exchange



"AIM Rules"            the Rules governing the admission to,
                       and operation of, AIM published by the London Stock 
                       Exchange



"City Code"            The City Code on Takeovers and Mergers



"Code Waiver"          the waiver by the Panel, conditional upon the approval 
                       of the Whitewash Resolution, of the obligation on the 
                       Concert Party that would otherwise arise under Rule 9 
                       of the City Code to make a mandatory cash offer for 
                       the issued Ordinary Shares not already owned by the
                       Concert Party as a result of the issue of the New 
                       Ordinary Shares to the Vendors.



"Concert Party"        SNL and the beneficial owners of the
                       Ordinary Shares held by SNL



"Conversion"           the proposed conversion of the #1,005,000 2006 Loan 
                       Notes, which are the subject of the Loan Note Option, 
                       into New Ordinary Shares



"Corporate Synergy"    Corporate Synergy Plc, nominated adviser
                       and broker to the Company



"Directors" or "Board"  the directors of the Company



"Enlarged Share Capital" the Existing Ordinary Shares and the New Ordinary
                         Shares



"Existing Ordinary Shares"   the Ordinary Shares in issue on the date of
                             this release



"Extraordinary General Meeting" the extraordinary general meeting of the Company
                                convened for 10 a.m. on

Thursday 12 April 2007



"Form of Proxy"           the form of proxy enclosed with this document for 
                          use by Shareholders in connection with the EGM



"Group"                   the Company and its subsidiaries



"Independent Directors"   the Directors other than Laurence Davis



"Independent Shareholders"  the Shareholders other than the Concert Party



"Loan Note Option"          the option to subscribe for #1,500,000
                            2006 Loan Notes granted by the Company to SNL



"New Ordinary Shares"       the new Ordinary Shares to be issued following 
                            conversion of the 2005 Loan Stock and the 2006 
                            Loan Note into Ordinary Shares



"Options"                   options to subscribe for Ordinary Shares



"Option Schemes"            the EMI Option Scheme and the Unapproved
                            Share Option scheme of the Company



"Ordinary Shares"           ordinary shares of 0.1p each in the
                            capital of the Company



"Proposals"                 the passing of the Resolutions, the Code Waiver, 
                            the Conversion and the proposed conversion of other 
                            Shareholder debts



"Regent"                    Regent Trust Company SA



"Related Party Transactions"  1. the conversion of #394,530.16 2006 Loan Notes 
                              by SNL into 118,350,948 New Ordinary Shares; 
                              2. the agreement between the Company, SNL and 
                              October Investments Limited dated 9 February 2007;
                              3. the proposed subscription by SNL of #1,005,000 
                              2006 Loan Notes pursuant to the Loan Note Option 
                              and conversion of such 2006 Loan Notes into New 
                              Ordinary Shares; and 4. the proposed conversion 
                              by the Company of #766,702 2005 Loan Stock 
                              (issued by the Company to Laurence Davis as 
                              consideration for the acquisition of his shares
                              in Conduit Square Limited) and #533,266 loan from 
                              Laurence Davis to the Company into New Ordinary 
                              Shares.



"Resolutions"               the resolutions of the Company set out
                            in the notice of EGM



"Shareholders"              holders of Ordinary Shares



"SNL"                       Solent Nominees Limited



"Takeover Panel"            the Panel on Takeovers and Mergers



"Unapproved Option Scheme"  the unapproved share option scheme operated by
                            the Company



"Whitewash Resolution"      Resolution number 1 in the notice of EGM, in
                            relation to approval by Independent Shareholders of 
                            the Code Waiver




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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