CNU
02/10/2015 09:12
WAV/RULE
NOT PRICE SENSITIVE
REL: 0912 HRS Chorus Limited (NS)
WAV/RULE: CNU: Chorus Limited (CNU) waiver from Rule 7.6.4(b)(iii)
Chorus Limited (CNU)
NZX Regulation Decision
Chorus Limited (CNU)
Application for waiver from NZX Main Board Listing Rule
7.6.4(b)(iii)
16 September 2015
NZX REGULATION DECISION - 16 September 2015 2 of 6
Background
Decision
1. Subject to the conditions set out in paragraph 2 below, and on the basis
that the information provided by CNU is complete and accurate in all material
respects, NZX Regulation ("NZXR") grants CNU a waiver from Rule 7.6.4(b)(iii)
to allow CNU to provide financial assistance to Mr Ratcliffe pursuant to the
terms of the Plan.
2. The waiver in paragraph 1 is granted on the conditions that:
a. CNU's Chairman certify on behalf of CNU's board that:
i. Mr Ratcliffe had no influence over the terms of the Plan and did not vote
on any resolutions relating to the Plan;
ii. Mr Ratcliffe will not participate in any CNU Board discussions regarding
whether performance hurdles have been met, or whether Plan Shares should be
awarded where the required performance hurdles have not been met; and
iii. Mr Ratcliffe's participation and entitlements under the Plan are
determined by the same criteria applying to all Participants; and
b. Mr Ratcliffe will not be a member of CNU's Human Resources and
Compensation Committee or vote on Board resolutions determining who will the
employees to whom the offers will be made, and the quantum of the offers.
3. The information on which this decision is based is set out in Appendix One
to this decision. This waiver will not apply if that information is not or
ceases to be full and accurate in all material respects.
4. The Rules to which this decision relates are set out in Appendix Two to
this decision.
5. Capitalised terms that are not defined in this decision have the meanings
given to them in the NZX Main Board Listing Rules.
Reasons
6. In coming to the decision to provide the waiver set out in paragraph 1
above, NZXR has considered that:
a. the policy objective of Rule 7.6.4(b)(iii) is to ensure Directors do not
exercise their discretion or use their position to obtain financial
assistance which unfairly advantages Directors to the detriment of
shareholders, and/or is not consistent with the financial assistance given to
other employees who are not Directors;
b. CNU have submitted, and it is a condition to the waiver, that Mr Ratcliffe
will participate in the Scheme on the same terms as the other Participants.
Mr Ratcliffe's participation appears to be consistent with the assistance
given to employees who are not Directors;
c. the participation of Mr Ratcliffe in designing the scheme and determining
eligibility is limited, so that he cannot use his position to obtain
financial assistance which is unfairly advantageous. The certification
provided by CNU's chairman gives NZXR comfort that Mr Ratcliffe has had no
influence over the terms of the Plan, will not vote on any resolutions
relating to the Scheme or participate in any board discussions in respect of
the Plan in the manner set out in that certification;
d. the situation falls within the circumstances stated in the footnote to
Rule 7.6.4, which states that NZXR may waive the restriction on Directors and
Associated Persons of Directors participating in financial assistance given
to Employees in certain circumstances; and
e. there is precedent for this waiver.
Confidentiality
7. CNU has requested that its application and any decision be kept
confidential until either details of the Plan are released to the market or a
Directors and Senior Managers Relevant Interest Notice in respect of the Plan
are released to the market.
8. In accordance with footnote 1 to Rule 1.11.2, NZXR grants CNU's request.
Appendix One
1. Chorus Limited ("CNU") is a Listed Issuer with ordinary shares quoted on
the NZX Main
Board.
2. CNU proposes to establish an executive long term incentive restricted
share plan (the "Plan") for selected employees ("Participants"), under which
Participants would be granted
the right to receive a loan for the purpose of acquiring shares ("Plan
Shares") in CNU.
3. CNU wishes for its CEO, Mark Ratcliffe, who is also a Director of CNU, to
have the right to participate in the Plan.
4. The key terms of the Plan are as follows:
a. CNUs' Human Resources and Compensation Committee and/or Board will
determine the employees to whom offers will be made and the quantum of the
offers;
b. CNUs' subsidiary, Chorus New Zealand Limited ("CNZL") will provide the
loan to Participants for the purposes of acquiring Plan Shares;
c. Plan Shares will be held by Chorus LTI Trustee Limited ("CLT"), a wholly
owned subsidiary of CNU. CLT will hold Plan Shares for each Participant in
trust;
d. Plan Shares will generally be acquired on-market and will be allocated to
each employee at the average market price at which they are acquired;
e. if a Participant continues to be an employee of CNZL or a related company
before the expiry of the specified restricted period and certain performance
hurdles are achieved, then CLT will transfer to that Participant legal title
to the Participant's Plan Shares at the end of the restricted period;
f. if a Participant ceases to be employed by CNZL or a related company before
the expiry of the restricted period, then legal title will not be transferred
to the Participant except in the limited circumstances allowed under the
Plan;
g. if a Participant continues to be employed by CNZL or a related company for
the restricted period but the performance hurdles for a tranche of Plan
Shares are not achieved, legal title will not be transferred to the
Participant unless the Board in it sole discretion determines otherwise. If
the performance hurdles are only partially achieved, legal title in a
proportionate number of the Plan Shares will
be transferred;
h. the loan advanced by CNZL will be repayable on the date on which legal
title to the
Plan Shares is transferred. To the extent that legal title in Plan Shares is
to be Transferred to a Participant, the Participant will be paid a bonus
which, after tax (and subject to any applicable KiwiSaver obligations),
equals the amount of the Participants loan balance in respect of the relevant
Plan Shares. Participants authorise and direct CNZL to apply the bonus
towards repayment of their outstanding loan balance; and
i. to the extent that legal title in the Plan Shares is not transferred to a
Participant, there are put and call options in respect of the Participant's
beneficial interest in the relevant Plan Shares. The consideration payable by
the Trustee on exercise of the call or put option will be an amount equal to
the Participant's loan balance in respect of the relevant Plan Shares.
Participants authorise and direct CNZL to apply the consideration towards
repayment of their outstanding loan balance.
5. The purpose of the Plan is to align the interests of employee participants
with CNU's shareholders;
6. Based on the closing price of CNU's Shares on 11 September 2015, the
expected number of Plan Shares that will initially be issued under the Plan
in 2015 represents approximately 0.1125% of CNU's Shares. The amount of the
loan expected to be granted to Mr Ratcliffe will be for approximately 0.0350%
of CNU's Shares in 2015 (based on the closing price of CNU's Shares on 11
September 2015). Grants under the Plan are expected to be for lesser amounts
in future years. In particular, based on the market capitalisation of CNU as
at 11 September 2015, grants are expected to be of an amount which, in
aggregate represents approximately 0.0641% of CNU's shares. The amount of the
loan expected to be granted to Mr Ratcliffe will be for approximately 0.0175%
of CNU's Shares. As such, the assistance will not disproportionately affect
the current shareholders of CNU;
7. While NZX Main Board Listing Rule ("Rule") 7.6.4(b) allows financial
assistance to be given to Employees in certain circumstances, the financial
assistance may not be given to a Director of the Issuer or an Associated
Person of the Director without obtaining shareholder approval or a waiver
from NZX Regulation ("NZXR"). To facilitate the provision of financial
assistance to Mr Ratcliffe under the Scheme, CNU has sought a waiver from
NZXR in respect of Rule 7.6.4(b)(iii).
Appendix Two
Rule 7.4.4(b)(iii) Buybacks of Equity Securities, Redemption of Equity
Securities and Financial Assistance
7.6.4 An Issuer may give financial assistance of the nature referred to in
Rule 7.6.3 if:
....
(b) the financial assistance is given to Employees (as defined in Rule 7.3.6)
of the Issuer and:
(i) the amount of the financial assistance, together with the amount of all
other financial assistance given under this paragraph (b) by the Issuer
during the shorter of the period of 12 months preceding the date of giving of
the financial assistance and the period from the date on which the Issuer was
Listed to the date of giving of the financial assistance, does not exceed 5%
of the Average Market Capitalisation
of the Issuer; and
(ii) the amount of the financial assistance, together with the amount of all
other
financial assistance given under Rule 7.6.4(b)(i) during the shorter of the
period of five years preceding the date of the giving of financial assistance
and the period from the date on which the Issuer was Listed to the date of
the giving of the financial assistance, does not exceed 10% of the Average
Market Capitalisation of
the Issuer; and
(iii) the financial assistance is not given to any Director of the Issuer or
Associated
Person of a Director; or
...
The footnote to Rule 7.6.4 provides:
NZX may waive the restriction in Rule 7.6.4(b)(iii) on Directors and
Associated Persons
participating in financial assistance given to Employees:
(a) so far as it affects assistance given to bona fide full time employees
who are Directors, or Associated Persons of Directors, where NZX is satisfied
that the amounts and terms of the assistance will be determined according to
criteria applying generally to all employees eligible to receive the
assistance, and would not, if all relevant factors were publicly disclosed,
be reasonably seen as being materially influenced by the
relationship; and/or
(b) where NZX is satisfied that the assistance is not likely
disproportionately to benefit the persons controlling the Issuer and those
associated with them.
End CA:00271196 For:CNU Type:WAV/RULE Time:2015-10-02 09:12:21
