nzx regulation decision

NZX Regulation Decision Sky Network Television Limited (SKT) Application for a waiver from NZX Listing Rule 7.8.5(b) 16 September 2019

NZX REGULATION DECISION – 16 September 2019 2 of 6

Waiver from Listing Rule 7.8.5(b) Decision 1. Subject to the condition set out in paragraph 2 below, and on the basis that the information

provided by Sky Network Television Limited (SKT or the Company) is complete and accurate in all material respects, NZX Regulation (NZXR) grants SKT a waiver from NZX Listing Rule 7.8.5(b) (Rule), to the extent that this Rule requires SKT to prepare an appraisal report to accompany a notice of meeting provided to SKT shareholders to consider a resolution to approve the issue of the CEO Retention Shares.

2. The waiver in paragraph 1 above is provided on the condition that the current Independent Directors of SKT who were directors at the time of the negotiation and entry into Mr Stewart’s Employment Agreement will certify to NZX that the terms of Mr Stewart’s Employment Agreement including the CEO Share Scheme was set on an arm’s length and commercial basis.

3. The material 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 which have not been defined in this decision have the meanings given to them in the 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 behind Rule 7.8.5(b) is to ensure that security holders being asked to vote on resolutions to approve transactions to which Rule 7.8.5(b) applies receive the benefit of an independent evaluation that allows them to understand and scrutinise the merits of a transaction. This policy is not offended where the terms of an issue are simple and straightforward, have been negotiated on an arm's length basis, and are fairly and transparently disclosed;

b. The issue of CEO Retention Share rights (and the shares issued as they become exercisable) is based on information that has been disclosed to the market on 26 November 2018, and which is in direct satisfaction of SKT's contractual obligations to Mr Stewart under the Employment Agreement;

c. The number of CEO Retention Shares that may be issued is fixed at up to 800,000, giving shareholders absolute certainty as to what they are approving. At any point in time, shareholders can ascertain what SKT's outstanding obligations in respect of the CEO Retention Shares may be;

d. The need for an appraisal report only arises because Mr Stewart is a director of SKT as well as its Chief Executive Officer. The proposed issue of CEO Retention Shares to Mr Stewart is part of his remuneration package and reflects payment to him in his role as Chief Executive Officer, not as a director;

e. The current Independent Directors of SKT, who were directors at the time of the negotiation and entry into Mr Stewart’s Employment Agreement, are prepared to, in


accordance with the condition at paragraph 2 above, certify that the terms of the Employment Agreement were negotiated on an arm's length commercial basis;

f. The rights to be issued in respect of the CEO Retention Shares simply provide Mr Stewart with the right to be issued shares in the Company at certain points in time but no right to participate in any other corporate action such as bonus issues, rights issues or to be adjusted for dividends or reconstructions before such share issues. Given the simplicity of the relevant issue terms and the clear and transparent purpose, further clarification is not required for shareholders to make an assessment of its merits;

g. SKT has submitted, and NZXR has no reason not to accept, that the issue of CEO Retention Shares is advantageous to SKT on the basis that it further aligns Mr Stewart's interests with SKT's and its shareholders.

h. SKT's existing shareholders will be asked to consider the resolutions to approve the issue of CEO Retention Shares with the knowledge of the waiver sought having been granted;

i. NZXR has reviewed the relevant notice of meeting, and is satisfied that it contains sufficient information regarding the issue of the CEO Retention Shares to enable shareholders to understand the effects of this issue; and

j. There is precedent for this decision.

Confidentiality 7. SKT has requested this decision be kept confidential until SKT issues its 2019 notice of

annual meeting of shareholders.

8. In accordance with Rule 9.7.2, NZXR grants SKT’s request.


Appendix One 1. SKT is a Listed Issuer with Financial Products Quoted on the NZX Main Board and NZX

Debt Market.

2. In November 2018 SKT announced the appointment of Mr Stewart as its Chief Executive Officer. In connection with his appointment, SKT and Mr Stewart entered into an employment agreement (Employment Agreement) detailing the terms of Mr Stewart's employment including as to his remuneration.

3. Mr Stewart's remuneration arrangements, which were negotiated and agreed to by the board of SKT (Board), provide for (amongst other things) a base salary of NZ$1,500,000 per annum and incentive arrangements comprising:

a. the provision of 200,000 fully paid ordinary shares in the Company to be provided for no consideration on each of the first four anniversaries of employment subject to certain exceptions (a total of up to 800,000 ordinary shares) (the CEO Share Scheme); and

b. an annual cash based bonus payment linked to short term and long term incentive arrangements of up to 50% of base salary per annum, to be determined by the Board in its sole discretion.

4. Accordingly, in satisfaction of its obligations under the Employment Agreement in respect of the CEO Share Scheme, SKT proposes to seek shareholder approval at its 2019 annual meeting to approve the issue of 800,000 share rights to Mr Stewart in respect of the issue of up to 800,000 fully paid ordinary shares in SKT pursuant to the terms of his employment agreement (CEO Retention Shares).

5. Due to the way SKT proposes to issue the CEO Retention Shares, shareholder approval by way of ordinary resolution is required by Rule 4.2.1. SKT is intending to seek this shareholder approval at its upcoming 2019 annual meeting.

6. Rule 7.8.5(b) requires that a notice of meeting to consider a resolution in respect of an issue of Financial Products be accompanied by an appraisal report if that issue is intended, or is likely to result in, more than 50% of those Financial Products being issued to directors or associated persons of directors of the issuer.

7. On the basis that Mr Stewart is a director of SKT and the resolution to approve the issue of the CEO Retention Shares contemplates 100% of the Financial Products being issued to Mr Stewart, SKT's notice of meeting must be accompanied by an appraisal report which considers the issue.

8. Detailed information on the resolution considering the approval of the CEO Retention Shares can be found in SKT's 2019 notice of meeting.


Appendix Two

Shareholder approval for Issues by Ordinary Resolution

Rule 4.2.1 For the holders of Equity Securities to approve an issue of Equity Securities by the Issuer, the precise terms and conditions of the issue must have been approved by:

(a) separate Ordinary Resolutions of each Class of Quoted Equity Securities whose rights or entitlements could be affected, or

(b) if a Class of Quoted Equity Securities were issued on terms that the holders would vote together with the holders of another Class or Classes of Equity Securities on a resolution of the nature referred to in Rule 4.2.1(a), a single resolution of all such Classes of Equity Securities voting together.

Notices of Meeting Rule 7.8.4 As a minimum, the notice of meeting for a resolution to approve an issue, acquisition or redemption of Financial Products, or provision of financial assistance, must state or contain so much of the following information as is applicable and known to the Issuer:

(a) the number of any Financial Products to be issued, acquired, or redeemed or, if the number is not known, the formula to be applied to determine the number, and the maximum number which may be issued, acquired or redeemed,

(b) the purpose of the transaction,

(c) any issue, acquisition or redemption price or, if the price is not known, the formula to be applied to determine the price, and the time or times for payment with sufficient detail to enable Financial Product holders to ascertain the terms to or from any party,

(d) the party or parties to whom any Financial Products are to be issued, or from whom they

are to be acquired or redeemed, where that is known, and identifying by name any such parties who are Directors or Associated Persons of the Issuer or any Director,

(e) in the case on an issue, the consideration for the issue and, where that is cash, the

specific purpose for raising the cash,

(f) the period of time within which any issue, acquisition or redemption will be made,

(g) in the case of an issue, the ranking of the Financial Products to be issued for any future benefit, and

(h) in the case of a resolution under Rule 4.16.1, the amount and full terms of the financial

assistance to be given and the party or parties who will receive it, identifying by name any such parties who are Directors or Associated Persons of the Issuer or any Director.


Rule 7.8.5 A notice of meeting to consider a resolution of the nature referred to in Rule 7.8.4 (other than a resolution to permit an issue under Rule 4.7.1) must be accompanied by an Appraisal Report if:

(a) the resolution is required by Rule 4.13,

(b) more than 50% of the Financial Products to be issued are intended or likely to be acquired by Directors or Associated Persons of Directors, or

(c) more than 50% of the Financial Products to be acquired or redeemed or the financial

assistance to be given is intended or likely to go to Directors or Associated Persons of Directors.

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