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ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: DINKY TOYS INC. Applicant – and – TEDDY PLAY INCOME FUND, CRAYOLA CREATIVE GAMES CORP. AND STEIFF STUFFED PRODUCTS LIMITED Respondents Fisher-Price, J.: REASONS FOR JUDGMENT: Overview  The applicant, Dinky Toys Inc. ("Dinky"), was a successful, indeed the only, bidder in an auction process conducted by the respondent Teddy Play Income Fund ("Teddy") in order to sell itself to the highest bidder. An acquisition and support agreement dated July 31, 2007 (the "Support Agreement") was entered into between Dinky and Teddy. The respondent Crayola Creative Games Corp. ("Crayola") made a subsequent higher offer for the units of Teddy, which the trustees of Teddy wish to recommend acceptance of to Teddy's unitholders. The Applicant asserts that the trustees of Teddy are not free to recommend acceptance of the Crayola offer, under the terms of the Support Agreement. The Applicant seeks an order requiring Teddy to enforce the standstill provisions of the confidentiality agreements between Teddy and Crayola and between Teddy and the respondent Steiff Stuffed Products Limited ("Steiff"), which Dinky asserts have been breached by Crayola and Steiff, and otherwise to perform its obligations under the Support Agreement to recommend Dinky's offer to the unitholders of Teddy.  The respondents oppose Dinky's application, denying that there have been any such breaches by Crayola or Steiff and asserting that even if there were, Teddy has waived them and was entitled to give such waiver under the Support Agreement. Teddy takes the position that it is entitled to terminate the Support Agreement, because Crayola's offer is a "Superior Proposal" within the meaning of the Support Agreement.  I have concluded that Dinky's application should be dismissed. Summary of Relevant Facts  All of the parties to this proceeding are toy manufacturers, although they occupy different niches in the toy market. Teddy specializes in more expensive toys, all of which it manufactures in its own domestic factory facilities, to its own original designs. Its initial focus, as its name suggests, was on teddy bears and other stuffed animal toys, all made using natural materials and with a high level of craftsmanship. In recent years, it has diversified into toys and games that are intended to foster creative play and are marketed to fond parents on the premise that such products will help awaken the natural genius of their offspring. It is an income trust, the units of which are listed on The Toronto Stock Exchange.  In contrast, Dinky produces a wider range of toys at a lower price point, for the mass market. All of its manufacturing is carried out under contract by suppliers in low-wage countries, primarily in the Far East. It is a reporting issuer in Ontario and elsewhere. The respondents Crayola and Steiff are smaller manufacturers catering to a mid-price market, specializing in the areas that their names suggest, games in the case of Crayola and dolls and stuffed animals in the case of Steiff. Both are closely-held corporations and neither is a reporting issuer.  Teddy received a number of approaches from potential buyers interested in its business, or parts of it, during 2006, including Dinky and Steiff. None of these expressions of interest resulted in anything more than preliminary discussions that did not proceed further at that time. However, the trustees of Teddy, concerned by the long-term risks that Teddy's business model made it vulnerable to lower-priced competition, began in September, 2006 to consider strategic alternatives that might maximize value for its unitholders, including a possible sale of the business. In October, 2006 the trustees decided that it would be in the best interests of unitholders to commence an auction process that would result, if possible, in a sale transaction providing an advantageous outcome for unitholders.  In order to implement an appropriate process to plan and carry out a sale of Teddy, the trustees of Teddy appointed in February, 2007 a special committee of five nonmanagement trustees.  In the auction process devised and conducted by the special committee of Teddy from March to June, 2007, 15 parties expressed interest, including Dinky, Crayola and Steiff. All of them were required by the special committee to sign a confidentiality agreement as a condition of obtaining access to Teddy's confidential information. The confidentiality agreements signed by the prospective bidders were all substantially the same. Most of the provisions of such confidentiality agreements are not relevant for purposes of these proceedings, but the "standstill" provisions agreed to by each of Dinky, Crayola and Steiff (which is defined as the "Recipient" of confidential information of Teddy, which is defined as the "Fund", in the agreement) should be set out in full: "7. Standstill. During the period of 18 months from the date of this Agreement, the Recipient shall not, directly or indirectly, without the prior written authorization of the Fund: (a) acquire or agree to acquire or make any proposal or offer to acquire, directly or indirectly in any manner, any securities of the Fund or any material portion of the assets of any of them; (b) assist, advise or encourage any other persons to engage in any of the activities from which the Recipient is restricted by paragraph (a); (c) commence a take-over bid for any securities of the Fund or assist, advise or encourage others to do so; (d) effect, seek, offer or propose any amalgamation, merger, arrangement, business combination, reorganization, restructuring, liquidation or other extraordinary transaction with respect to the Fund (each of the foregoing being herein called an 'Extraordinary Transaction'); (e) assist, advise or encourage any other person to effect, seek, offer or propose any Extraordinary Transaction; (f) solicit proxies from the security holders of the Fund or form, join or in any way participate in a group to so solicit; (g) act alone or in concert with others, directly or indirectly, to seek to control or influence the management, board of trustees or policies of the Fund; or (h) make any public announcement with respect to the foregoing. Notwithstanding the foregoing, nothing in this Section 7 shall prevent the Recipient from: (i) acquiring and voting up to 2% of the outstanding securities of any class of the Fund; or (j) at any time after either (i) the Fund approves or enters into, or announces the approval or entering into, of an agreement, transaction or series of related transactions with a person other than the Recipient, a person under common control with the Recipient or a person acting jointly or in concert with the foregoing (a 'Third Party') having as its object the acquisition of, directly or indirectly, not less than 20% of the outstanding units of the Fund or assets of the Fund representing not less than 20% of the net asset value or contribution to earnings of the Fund, or (ii) any Third Party has commenced or announced a take-over bid or tender or exchange offer for not less than 20% of the outstanding units of the Fund or other business combination transaction with the Fund, and the Fund, in a communication approved by its board of trustees, recommends acceptance thereof ((i) or (ii), a "Third Party Transaction"), making any proposal to the board of trustees of the Fund to acquire 20% or more of the outstanding units of the Fund or 20% or more of its assets, whether by means of a take-over bid or otherwise, on terms and conditions that could reasonably be anticipated to be more advantageous to the unitholders of the Fund than the terms and conditions of the Third Party Transaction."  The special committee of Teddy devised and implemented a process, the details of which are not relevant for present purposes, whereby prospective bidders were required to submit their proposed offers for Teddy to the special committee on a confidential basis within a specified period. The results of the process were most disappointing to Teddy. By the expiry on June 30, 2007 of the specified time period, only one acquisition proposal had been received, an offer by Dinky to purchase all of the outstanding units of Teddy for $7.50 per unit, representing a premium of approximately 12% over the current average market price for Teddy's units.  Unknown to Teddy, two of the interested prospective bidders, Crayola and Steiff, had tentative discussions between themselves after reviewing and considering Teddy's confidential information, to which they had received access pursuant to the terms of the confidentiality agreements that they had signed. Neither of them wanted all of the assets of Teddy and each of them was reluctant to make the financial commitment necessary to acquire all of Teddy. However, if they could act together, their interests would be complementary, since Steiff wanted to acquire the stuffed animal lines produced by Teddy, whereas Crayola was interested in its creative toy product lines. Crayola and Steiff thought that they could not, under the terms of the standstill provisions in their confidentiality agreements, enter into an agreement to act jointly in attempting to acquire Teddy, but they discussed, and reached a consensus on, the value they attributed to the business segments of Teddy that they were interested in, the maximum price that it would make sense to pay for Teddy, and how to structure the splitting up of Teddy's assets if they were later in a position to acquire Teddy. Each of them indicated to the other that it would not submit an individual offer for Teddy at that time and would wait and see what happened once the first round of the auction process had been completed.  Having received only one offer, the proposal from Dinky, the special committee of Teddy considered whether it would be best to abandon the auction process and reconsider if other alternatives should be pursued. The majority of the special committee believed that time was not on Teddy's side and that the unitholders of Teddy should have the opportunity to accept an offer which, if not particularly generous, would at least provide some premium over the market price for the units.  The special committee endeavoured to negotiate a higher price from Dinky, but Dinky held firm. Although Dinky was not aware that it was the only bidder, it guessed that other likely bidders like Crayola and Steiff would be reluctant to bid for all of Teddy. Furthermore, it thought that it could always sweeten its offer later if a better offer materialized from another party.  The special committee recommended to the full board of trustees of Teddy that acceptance of the Dinky offer should be recommended to unitholders and that a support agreement on customary terms should be negotiated with Dinky. The board of trustees of Teddy accepted the recommendations of the special committee.  The special committee therefore proceeded to negotiate the Support Agreement with Dinky. The Support Agreement contained all of the customary provisions in such agreements. Teddy agreed to waive the standstill in Dinky's confidentiality agreement, in order to permit the Dinky offer to be made. Dinky agreed to make the offer at the agreed price of $7.50 per unit. Teddy agreed to send a trustees' circular to unitholders recommending acceptance of the Dinky offer. The Support Agreement contemplated a subsequent acquisition transaction for Dinky to acquire the remaining units if at least two-thirds of the outstanding units were tendered under the offer.  The critical provisions of the Support Agreement for the purposes of this proceeding are set out in Section 5.6 of the Support Agreement: "Covenants Regarding Non-Solicitation, Acquisition Proposals and Superior Proposals (a) On and after the date hereof until this Agreement is terminated, the Fund shall not, directly or indirectly, through any officer, trustee, employee, advisor, representative, agent or otherwise: (i) make, solicit, initiate, knowingly encourage inquiries with respect to, or submissions of proposals or offers that would constitute, or otherwise facilitate (including by way of furnishing information, or entering into any form of written or oral agreement, arrangement or understanding) an Acquisition Proposal; (ii) participate in any discussions or negotiations regarding any Acquisition Proposal; (iii) withdraw, modify, change or qualify the recommendation by the trustees of the Fund of the Dinky offer in a manner adverse to Dinky; or (iv) approve or recommend any Acquisition Proposal or enter into any agreement related to any Acquisition Proposal made by a third party after the date hereof. (b) The Fund shall immediately cease to provide any other party with access to information concerning the Fund and, to the extent it is entitled to do so under the applicable confidentiality agreements, request within 15 business days from the date hereof the return or destruction of all confidential information provided to any third party that has entered into a confidentiality agreement with the Fund relating to a potential Acquisition Proposal and shall use all reasonable efforts to ensure that such requests are honoured. (c) The Fund shall immediately cease, and will instruct its financial advisors and other representatives and agents to cease, and cause to be terminated any existing discussions or negotiations with any parties (other than Dinky) with respect to any potential Acquisition Proposal. The Fund agrees not to release or permit the release of any third party from or waive or forbear in the enforcement of any confidentiality or standstill agreement with such third party, except to allow such third party to propose to the trustees of the Fund an Unsolicited Acquisition Proposal that, in the view of such trustees, after receipt of advice from the Fund's financial advisors and legal counsel, would be reasonably likely, if consummated in accordance with its terms, to result in a Superior Proposal. (d) The Fund shall as promptly as practicable (and in any event within 24 hours following receipt of the same) at first orally and then in writing, notify Dinky of any Acquisition Proposal or any request for non-public information relating to the Fund in connection with such Acquisition Proposal or for access to the properties, books or records of the Fund by any person that informs the Fund that it is considering making, or has made, an Acquisition Proposal, and shall provide Dinky with a copy of (i) any written notice from any person informing it that such person is considering making, or has made, an Acquisition Proposal, and (ii) any Acquisition Proposal (or any amendment thereto), in each case forthwith after it is received by the Fund. (e) If the Fund receives a written request for non-public information relating to the Fund in connection with an Unsolicited Acquisition Proposal or for access to the properties, books and records of the Fund from a person who shall have made or indicates in writing that it has a serious intention of making an Acquisition Proposal and the trustees of the Fund determine in good faith, after consultation with financial advisors and legal counsel, that such proposal would be reasonably likely, if consummated in accordance with its terms, to result in a Superior Proposal, then the Fund: (i) may, notwithstanding Section 5.6(a)(i) or Section 5.6(a)(iv) but subject to compliance with Section 5.6(d) and entering into (and providing Dinky with a copy of) a confidentiality agreement with such person on substantially the same terms as Dinky's confidentiality agreement and containing a standstill provision substantially similar to that contained in Dinky's confidentiality agreement, provide such person with access to such information and engage in discussions or negotiations with such person; and (ii) will provide Dinky with a list of or copies of the information and access to similar information as that provided to such person, except to the extent such information was already provided or made available to Dinky. (f) Notwithstanding Section 5.6(a), if the Fund receives an Unsolicited Acquisition Proposal, the Fund may accept, approve, recommend or enter into any agreement in respect of such Acquisition Proposal and terminate this Agreement if: (i) such Acquisition Proposal constitutes a Superior Proposal; (ii) the Fund has given written notice to Dinky that there is a Superior Proposal together with all documentation related to and detailing the Superior Proposal and its intention to withdraw, withhold, qualify or modify in a manner adverse to Dinky its approval or recommendation of the Dinky offer; (iii) the Fund has complied with Section 5.6(g); (iv) five clear business days shall have elapsed from the later of (i) the date Dinky received the notice and documentation referred to in Section 5.6(f)(ii) and (ii) the date Dinky was provided with a copy of such Acquisition Proposal; and (v) the Fund has provided evidence satisfactory to Dinky, acting reasonably, that irrevocable and unconditional directions have been given by the Fund to a recognized financial institution to pay Dinky the termination fee provided for in Section 9.2 of this Agreement. (g) Dinky may, but is not required to, during the five business day period provided for in Section 5.6(f)(iv), offer in writing to amend the terms of its offer and, if it does so, then the trustees of the Fund shall review any such offer in good faith, in consultation with financial and outside legal advisors and, if the trustees determine that the Unsolicited Acquisition Proposal would thereby cease to be a Superior Proposal, it will cause the Fund to enter into an amendment to this Agreement reflecting the offer by Dinky to amend the terms of its offer. (h) If Dinky does not offer to amend the terms of its offer or if Dinky does so offer but the trustees continue to believe that the Unsolicited Acquisition Proposal would nonetheless remain a Superior Proposal and therefore rejects Dinky's offer to amend, the Fund may terminate this Agreement."  In considering Section 5.6 of the Support Agreement, it is necessary to refer to the following definitions in the Support Agreement: "'Acquisition Proposal' means any proposal or offer made by any person other than Dinky (or any affiliate of or person acting jointly or in concert with Dinky or any affiliate of Dinky) with respect to the acquisition, directly or indirectly, of assets, securities or ownership interests of or in the Fund representing 20% or more of the assets of the Fund, in a single transaction or a series of transactions or of equity interests representing a 20% or greater economic interest in the Fund, in a single transaction or a series of transactions pursuant to any merger, amalgamation, tender offer, share exchange, business combination, liquidation, dissolution, recapitalization, take-over or non-exempt issuer bid, amendment to the declaration of trust, redemption of units, extraordinary distribution, sale, lease, exchange, mortgage, pledge, transfer, purchase or issuance as consideration or similar transaction or series of transactions involving the Fund or any other transaction the consummation of which would reasonably be expected to impede, interfere with, prevent or materially delay the transactions contemplated hereby. 'Superior Proposal' means any bona fide written Unsolicited Acquisition Proposal made by any person, in the good faith determination of the trustees of the Fund, after consultation with its financial advisors and with legal counsel: (a) that is reasonably capable of being completed without undue delay having regard to financial, legal, regulatory and other matters; (b) in respect of which adequate arrangements have been made to ensure that the required funds will be available to effect payment in full of the consideration; and (c) that would, if consummated in accordance with its terms (but not assuming away the risks addressed in clauses (a) and (b) above), result in a transaction more favorable to the unitholders of the Fund from a financial point of view than the Dinky offer; provided, however, that for purposes of this definition, the references in the definition of Acquisition Proposal to '20% or more' or '20% or greater' shall be deemed to be references to '100%'. 'Unsolicitated Acquisition Proposal' means any Acquisition Proposal proposed to the trustees of the Fund which was not procured in contravention of the Fund's obligations under Section 5.6(a)(i) or the first sentence of Section 5.6(c)."  As is usual, the Support Agreement provided for a "break fee" payable to Dinky if the trustees of Teddy decided to accept a Superior Proposal (it is referred to in Section 5.6(f)(v), quoted above). No party to this proceeding has suggested that the amount of the break fee provided for in the Support Agreement was excessive or unusual in the relation to the size of the transaction.  The Dinky offer for Teddy and Teddy's agreement to support the offer were publicly announced on July 31, 2007 by both Teddy and Dinky.  When Dinky's offer was publicly announced, Crayola and Steiff were thereby released from certain of the standstill provisions of their confidentiality agreements with Teddy, pursuant to paragraph (j) of those provisions. Crayola and Steiff renewed their discussions, believing that Dinky's offer price was sufficiently low that there was scope to make a higher offer, if they could agree on an approach to splitting Teddy's business if the offer was successful. Since they had laid all of the groundwork for such an agreement in their prior discussions, Crayola and Steiff quickly reached a formal agreement on August 7, 2007 that Crayola would make a competing bid for Teddy at a price of $9.75 per unit. If the offer was successful, Crayola would sell Steiff the stuffed toy assets of Teddy that Steiff was interested in, at a price and on terms set out in detail in their agreement.  Crayola lost no time in presenting its proposed offer for all of the units of Teddy at a price of $9.75 per unit to the trustees of Teddy on August 8, 2007. It requested, as a condition of making the offer, that Teddy waive in writing any past, present or future breaches of Crayola's confidentiality agreement with Teddy, whether such breaches might be committed by Crayola alone or jointly or in concert with any other parties, and, to the extent that any such breach was committed jointly or in concert with other parties who had also entered into confidentiality agreements with Teddy, that such waiver would also extend for the benefit of such other parties if their conduct had similarly breached their confidentiality agreements. Because the Crayola offer was significantly better for unitholders of Teddy than the Dinky offer, the trustees of Teddy agreed to provide the requested waiver to Crayola.  The trustees of Teddy notified Dinky of Crayola's competing bid in accordance with the Support Agreement. They quickly concluded, after consolidation with Tonka World Markets Inc. ("Tonka") and Teddy's legal advisors, that the proposed Crayola offer constituted a "Superior Proposal" within the meaning of the Support Agreement and advised Dinky accordingly on August 20, 2007, in accordance with the provisions of the Support Agreement previously quoted in these reasons.  Dinky was immediately suspicious that the Crayola offer was being made on the basis of an undisclosed agreement between Crayola and some other interested party, Steiff being one of the most likely suspects in Dinky's mind. Dinky did not believe that Crayola, acting alone, would have the financial capability or desire to acquire all of Teddy. Dinky also reasoned that, if its suspicions were correct, Crayola, and probably at least one other party as well, probably breached their obligations under their confidentiality agreements with Teddy and that Teddy must have acquiesced in those breaches. Accordingly, rather than improving its offer to compete with the Crayola bid, Dinky launched this application. Analysis  Dinky argues that the discussions between Crayola and Steiff, prior to the announcement of Dinky's offer, contravened one or more of paragraphs (a), (b), (c), (d) and (e) of the standstill provisions of their confidentiality agreements with Teddy. Dinky suggests that the speed with which Crayola and Steiff subsequently reached a formal agreement that Crayola would make a competing bid at an agreed price and that, if it were successful, Crayola and Steiff would subsequently split up the assets of Teddy on agreed terms, indicates that their earlier discussions must have represented at least a tacit agreement as to the basis upon which they would proceed if the opportunity arose.  Crayola and Steiff, of course, deny this. They say that their discussions at that time amounted to nothing more than mutual sharing of information based on a acknowledgment that each of them was interested in some of the assets of Teddy, but not all of them, a fact which was already known to each of them, and communicating their intentions that neither would make a bid as part of the formal auction process initiated by Teddy.  Dinky also puts forward the novel argument that the tacit agreement by Crayola and Steiff that neither of them would make a bid as part of the formal auction process by Teddy violated the standstill provisions. Dinky argues that the standstill provisions should be interpreted in a purposive manner, in accordance with the intention of Teddy to encourage bidders to come forward, so as to prevent them from acting in concert to hold back from making a bid, as Crayola and Steiff did. However creative this argument by Dinky may be, I have great difficulty in interpreting the language of the standstill provisions, which seems to prohibit only positive acts on the part of recipients of confidential information, as precluding a passive or negative act such as deciding not to make a bid and letting another potential bidder know of this decision.  Dinky is on much stronger ground, in my opinion, when it relies upon the conduct by Crayola and Steiff after the announcement of Dinky's bid as a breach of their confidentiality agreements with Teddy (ignoring, for the moment, the effect of the waiver given by Teddy to Crayola). As Dinky points out, the release of the standstill in paragraph (j) merely allows another prospective bidder, such as Crayola, to make a superior offer of its own. It is not a complete release from the standstill provisions. Dinky argues that Crayola and Steiff clearly breached certain of their standstill obligations that remained in effect, by agreeing that, if Crayola's competing offer were successful, Crayola and Steiff would subsequently split up the assets of Teddy. Dinky suggests that this constituted Steiff agreeing to acquire assets of Crayola, contrary to paragraph (a), and assisting and encouraging a bid by Crayola, contrary to paragraph (b). Dinky argues that it also constituted Crayola and Steiff together seeking or proposing an Extraordinary Transaction, contrary to paragraph (d), namely the division of Teddy's assets subsequent to a successful bid by Crayola. Dinky again urges that the standstill provisions should be read in a purposive manner, having regard to Teddy's presumed intention to create and encourage a bidding war between prospective acquirors, by precluding them from entering into side deals that would limit the number of bids and therefore make it less likely that the best possible price for Teddy would be achieved.  Crayola and Steiff respond that the terms of the standstill provisions should be given their natural and ordinary meanings. They argue that Steiff did nothing to "assist, advise or encourage" Crayola to make a bid for Teddy; it merely agreed that if Crayola decided to do so at a certain price, Steiff would be prepared to purchase certain of Teddy's assets after the transaction was completed. Steiff provided no financial assistance, expertise or other help to Crayola in formulating or making its offer. Likewise, Crayola and Steiff argue that for purposes of the standstill provisions, an acquisition referred to in paragraph (a) or an Extraordinary Transaction referred to in paragraph (d) can only be intended to refer to a transaction that is part of, or an alternative to, a change of control transaction in respect of Teddy. They should not apply to an asset sale that would occur only after a change of control transaction had been completed, when all of the outstanding units of Teddy had been acquired and the confidentiality agreements would have ceased to have any purpose or effect.  Dinky also points to the broad waiver requested by Crayola from Teddy as a condition of making its offer as evidencing a "consciousness of guilt" that Crayola and Steiff had violated the terms of their confidentiality agreements. Crayola responds that the waiver was merely requested out of an abundance of caution, based upon advice from Crayola's legal counsel, and nothing should be read into it.  On this issue, I have concluded that the interpretation of the standstill provisions put forward by Crayola and Steiff is unduly narrow and technical. It appears to me that Crayola was "assisted" to make its offer for Teddy by knowing that it had a firm agreement with Steiff pursuant to which it could dispose of unwanted assets of Teddy subsequent to a successful completion of its bid, on a reasonable interpretation of "assist" in its context in the standstill provisions. Similarly, the agreement between Crayola and Steiff clearly gave Steiff the opportunity to acquire a material portion of the assets of Teddy and the fact that this would only occur subsequent to the completion of a successful offer by Crayola does not make it any the less an agreement to acquire the assets.  Therefore, if Dinky is correct that the agreement entered into between Crayola and Steiff breached the remaining standstill provisions of their confidentiality agreements with Teddy, the question becomes whether Teddy was entitled to waive those breaches, as it purported to do in order to receive Crayola's offer.  This issue turns on the proper construction of the second sentence of Section 5.6(c) of the Support Agreement. Teddy's position is that the waiver it provided to Crayola clearly falls within the exception set out in such sentence, since if it had not provided such waiver, Crayola would not have been prepared to propose its offer for Teddy, an offer which the trustees of Teddy ultimately determined was a Superior Proposal.  Dinky responds that if the exception is interpreted so as to permit a waiver as broad as that requested by Crayola and given by Teddy, it renders meaningless Teddy's agreement "not to release or permit the release of any third party from or waive or forbear in the enforcement of any confidentiality or standstill agreement with such third party". In particular, Teddy could purport to release parties from their standstill obligations even though they were not making an acquisition proposal, which is exactly what the waiver requested by Crayola purported to do, with the obvious purpose of attempting to shield Steiff as well as itself.  Teddy replies to this that the exception in Section 5.6(c) would not be necessary merely to enable another potential bidder to present an acquisition proposal, since the prospective bidder would already be free to do so as a result of the operation of paragraph (j) of the standstill provisions in Teddy's form of confidentiality agreement, once Dinky's offer had been made and the Support Agreement entered into. Therefore, Teddy submits, the exception must be interpreted in a manner which gives effect to the "fiduciary out" provisions of Section 5.6 of the Support Agreement and enables the trustees to waive subsisting confidentiality or standstill obligations, if that is the only way to satisfy their fiduciary duties by facilitating the making of an acquisition proposal which they reasonably believe will result in a Superior Proposal. Teddy submits that this case is exactly such a situation, where it was necessary for the trustees to accommodate Crayola's concerns that there might be technical breaches of confidentiality agreements in order to obtain a better offer for the benefit of the unitholders of Teddy.  Although this issue is not without difficulty, I hold that in the circumstances, Teddy was entitled pursuant to the exception in Section 5.6(c) of the Support Agreement to grant the waiver requested by Crayola, for the reasons given by Teddy in its submissions.  Dinky further argues that Crayola's offer did not qualify as a "Superior Proposal" within the meaning of the Support Agreement, because it was not "bona fide", being based upon an agreement between Crayola and Steiff that was in breach of their confidentiality agreements with Teddy. Dinky supports this argument by reference to Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254 (C.A.), affirming (2007), 29 B.L.R. (4th) 292 (Ont. S.C.J.), in particular the analysis of the application judge at p. 309 B.L.R., para. 37. However, both the facts and the contractual language at issue in that decision are sufficiently different from those before me that I do not find the decision to be of much assistance in resolving this point.  In my view, the requirement that a Superior Proposal be "bona fide" is intended to ensure that the party putting forward the proposal intends in good faith to complete it in accordance with its terms, if it is successful, and reasonably believes that it has the capability to do so. In other words, the proposal cannot be merely a tactical manoeuvre for some ulterior purpose, which the purported bidder does not intend to go through with. In this sense, the Crayola offer is clearly bona fide. There is no doubt that Crayola wants to buy the units of Teddy, if its offer is accepted by unitholders, and intends to complete such acquisition if it is successful.  In the result, Dinky's application is dismissed. I find that the trustees of Teddy are entitled to terminate the Support Agreement and to recommend to unitholders acceptance of the Crayola offer.
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