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Merger Agreement and Other Covenants Entered Into by and Between AFYA LIMITED and YDUQS PARTICIPAÇÕES S.A.

AFYA
  • Afya Limited (a Cayman Islands entity listed on Nasdaq) and YDUQS Participações S.A. (a Brazilian publicly held corporation listed on B3) entered into a Merger Agreement on September 23, 2026.
  • The transaction involves merging Afya into YDUQS, with YDUQS acting as the surviving entity listed on B3's Novo Mercado segment while Afya ceases to exist as a separate legal entity.
  • The combined company will operate as an integrated education group combining YDUQS's higher education sector with Afya's medical education sector.
  • Afya shareholders will receive newly issued YDUQS common shares based on an Exchange Ratio that results in Afya shareholders owning 69.0% and YDUQS shareholders owning 31.0% of the Combined Company on a Fully Diluted Basis.
  • The Exchange Ratio is set at 6.408347 YDUQS shares for each Afya share, with fractional entitlements settled in cash following a sale on the B3 trading market.
  • The transaction utilizes a Locked Box mechanism based on the financial position of both parties as of June 30, 2026, with no adjustments to the Exchange Ratio for variations in Net Debt or Working Capital occurring after that date.
  • Specific financial covenants include a YDUQS Net Debt Cap limiting increased consolidated Net Debt to R$ 750,000,000.00 above the Locked Box level.
  • Permitted distributions include a YDUQS Distribution of up to R$ 750,000,000.00 or its Adjusted Free Cash Flow to Equity, while Afya is entitled to its Adjusted Free Cash Flow to Equity plus a "Top-Up" payment if YDUQS distributes excess amounts.
  • The Parties agreed to strict conduct of business covenants restricting actions such as incurring new indebtedness, selling material assets, or entering into new M&A transactions without consent until the Closing Date.
  • Exclusivity obligations prevent both companies from soliciting or negotiating competing transactions, with specific procedures for handling unsolicited offers.
  • The Closing is subject to conditions precedent including CADE (Brazilian antitrust authority) approval, corporate approvals from both companies, and the absence of any Material Adverse Effect.
  • The Long Stop Date for satisfying all conditions is March 31, 2028, with automatic extensions available for CADE review delays or regulatory injunctions.
  • Break-Up Fees are established at R$ 325,000,000.00 for breaches prior to shareholder approval and R$ 650,000,000.00 for breaches following approval or failure to close.
  • The agreement includes provisions for handling dissenting shareholders under Cayman law, where such shareholders will receive fair value in cash rather than shares.
  • U.S. securities law compliance is addressed by limiting share issuance to qualified institutional buyers, institutional accredited investors, or non-U.S. persons to avoid registration under the Securities Act.
  • Disputes arising from the agreement will be resolved through arbitration administered by the Market Arbitration Chamber in São Paulo under Brazilian law.
  • The transaction is expected to expand academic offerings and strengthen operating capabilities through the integration of both education platforms.