Ann: WAV/RULE: NZX: AIR - Waiver from NZSX Listin

• Release Date: 04/09/12 11:31
• Summary: WAV/RULE: NZX: AIR - Waiver from NZSX Listing Rule 8.1.7
• Price Sensitive: No
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NZX
04/09/2012 09:31
WAV/RULE

REL: 0931 HRS NZX Limited

WAV/RULE: NZX: AIR - Waiver from NZSX Listing Rule 8.1.7

NZX Market Supervision Decision
Air New Zealand Limited
Application for Waiver from NZSX Listing Rule 8.1.7

Background

1. Air New Zealand Limited ("AIR") is a Listed Issuer with ordinary shares
Quoted on the NZX Main Board.

2. AIR currently has a Long Term Incentive Plan and a Chief Executive Officer
Option Incentive Plan (the "Option Plans"), under which employees and the
Chief Executive Officer ("Participants") are respectively granted options to
acquire new AIR shares ("Shares"). The options are not Quoted on the NZX Main
Board. On exercise of the options, the Participant is required to pay the
exercise price, and will receive one Share for each option exercised.

3. AIR is proposing to amend the terms of the Option Plans to provide that
instead of purchasing/issuing a Share for each option exercised, AIR would
only purchase/issue a number of Shares with a value (based on current market
prices) equal to the delta between the aggregate of the market share price
and the exercise price of the options exercised.  The market share price is
the closing sell price of the Shares on the NZX Main Board on the trading day
the Participant elects to exercise the options (or in the event that this
date is not a trading day or the election is received by AIR later than one
hour before the close of trading, the closing sell price on the next trading
day immediately following this date). Accordingly, AIR proposes that the
Option Plans are amended to include the following formula to determine the
number of Shares to be issued to an option holder:

DVNS = (A - B) x C
 A

where:

DVNS is the Delta Value Number of Shares to be issued or transferred, in each
case, rounded to the nearest whole Share.

A is the closing sell price of the Shares on the NZX Main Board on the
trading day the Participant elects to exercise the options (or in the event
that this date is not a trading day or the election is received by AIR later
than one hour before the close of trading, the closing sell price on the next
trading day immediately following this date).

B is the Exercise Price.

C is the number of options being exercised.

4. As a result of the reduction in the number of Shares to be received upon
the exercise of options under the Option Plans, the Participant will receive
a lesser number of Shares upon the exercise of the options than currently
provided under the Option Plans. However, the option holders will not be
required to pay the exercise price in cash to AIR.

5. AIR intends to obtain the consent of all existing option holders to the
proposed amendments to the Option Plans and will rely on the Securities Act
(Renewals and Variations) Exemption Notice 2002. AIR also intends to include
the same mechanism in a new option plan for the Chief Financial Officer of
AIR (the "CFO Plan").

6. NZSX Listing Rule ("Rule") 8.1.7 provides that an option must not confer
the right to a change in the exercise price or number of underlying
Securities, unless such change is made in accordance with the exceptions in
that Rule, which contains certain provisions allowing an amendment to the
number of underlying securities in relation to a Rights issue.

Application

7. AIR has applied to NZX Market Supervision ("NZXMS") for a waiver from Rule
8.1.7 so that it may incorporate the proposed amendments detailed above, in
the Option Plans and the proposed CFO Plan.

8. In support of its application AIR makes the following submissions:

(a) The use of the proposed formula to determine the number of Shares an
option holder receives upon the exercise of options does not materially
change the economic outcome for both option holders and AIR (and its
shareholders). The cost of the Option Plans to AIR will not materially change
as a result of the amendment (and is, in fact, expected to reduce as a result
of lower transaction costs for AIR). Under the current terms of the Option
Plans, option holders receive a "gain" based on the delta between the market
share price and the exercise price.  This will remain the same under the
proposed formula;

(b) The proposed amendments do not alter the exercise price. Although the
exercise price will be used for the purposes of determining the number of
Shares to be issued under the formula, option holders will not be required to
pay the exercise price in cash;

(c) The proposed amendments will reduce the dilutionary impact on AIR
shareholders of any Shares issued by AIR upon the exercise of any options
because a reduced number of Shares would be required to be issued.  This
includes a reduction in the dilution of the Government's shareholding which
will be particularly relevant if the Government does decrease its
shareholding in AIR (as publicly announced);

(d) The proposed amendments do not contain any right to change the number of
underlying securities as determined by the formula. Under the formula it is
the closing sell price of the Shares on the NZX Main Board on the trading day
the Participant elects to exercise the options (or in the event that this
date is not a trading day or the election is received by AIR later than one
hour before the close of trading, the closing sell price on the next trading
day immediately following this date) that will drive the number of Shares
received by an option holder. The provisions in the Option Plans regarding
share splits, consolidations, rights issues, bonus issues and other capital
restructurings will remain; and

(e) Whilst the use of a formula for determining the number of Shares an
option plan entitles an option holder to receive is unusual in the context of
listed New Zealand companies there is evidence in the market of other listed
companies using a similar mechanism in relation to their option plans. For
example, the Fisher & Paykel Healthcare 2003 Share Option Plan and Fisher &
Paykel Healthcare Share Option Plan Cancellation Facility.

Rule 8.1.7

9. Rule 8.1.7 provides that:

"An Option must not confer the right to a change in the exercise price or
number of underlying Securities, except if that Option:

(a)  was issued with the approval of holders of Quoted Equity Securities,
then the exercise price or number of underlying Securities may change in
accordance with the formula or provision contained in the terms of the Option
if there is a Rights issue to the holders of the underlying Securities; or

(b)  was not issued with the approval of holders of Quoted Securities and
there is a Rights issue to the holders of the underlying Securities, then the
exercise price of that Option may be reduced according to the formula set out
as follows:

O1 = O - E[P-(S+D)] / N + 1

O1 = the new exercise price of the Option.

O = the Old exercise price of the Option.

E = the number of underlying Securities into which one Option is exercisable.

[Note: E is generally one unless the number has changed because of a bonus
issue or capital change.]

P = the average market price per share (weighted by reference to volume) of
underlying Securities during the 5 Business Days ending on the day before the
Rights date.

S = the subscription price for a Security under the Rights issue.

D = the dividend (in the case of a trust, distribution) due but not yet paid
on the existing underlying Securities (except those to be issued under the
Rights Issue).

N = the number of Securities with Rights or entitlements that must be held to
receive a Right to one new Security.

Provided that nothing in this Rule shall apply to any Option which was issued
prior to the coming into force of this Rule or Listing of an Issuer."

Decision

10. On the basis that the information provided to NZXMS is full and accurate
in all material respects, NZXMS grants AIR a waiver from Rule 8.1.7, so that
it may incorporate the proposed amendments in the Option Plans and CFO Plan.

11. The waiver in paragraph 10 is granted on the condition that prior to
implementation of the proposed amendments, the directors of AIR certify to
NZXMS that:

(a) The benefits conferred on Participants remain, as far as practicable, the
same after the proposed amendment have been implemented and do not confer any
additional value on participants;

(b) The proposed amendment of the options is fair and reasonable to AIR and
its shareholders;

(c) AIR will seek and obtain the approval of all existing option holders to
the proposed amendments to the Option Plans; and

(d) There are no other material changes to the terms of the Option Plans.

Reasons

12. In coming to this decision, NZXMS has considered the following matters: ?

(a) The purpose of Rule 8.1.7 is to ensure that options may not be
subsequently varied by the Issuer in a manner that is detrimental to the
interests of the holders of other Equity Securities. In this instance, the
inclusion of an objective formula to determine the number of Shares issued
upon the exercise of the options does not offend the policy behind the Rule;

(b) The proposed amendment does not affect the economic position of either
the participant or AIR. Option holders will not be required to pay the
exercise price in cash, but will be in the same economic position.
Furthermore, as fewer new Shares will be issued, the dilutionary effect on
AIR's shareholders on the exercise of the options will be reduced; and

(c) AIR will seek and obtain the approval of option holders to the proposed
amendment, and the certification in paragraph 11 will give NZXMS comfort that
the AIR Board consider the proposed amendments to be in the best interests of
AIR and its shareholders.

Confidentiality

13. AIR has requested that NZX keep this waiver application and any decision
confidential until the existing option holders have been approached in
relation to giving their consent to the proposed amendments.

14. In accordance with footnote 1 to Rule 1.11.2, NZXMS grants AIR's request.

ENDS.
End CA:00226870 For:NZX    Type:WAV/RULE   Time:2012-09-04 09:31:22