WAV/RULE: NZXR: NZX Regulation- SAT - Waiver from NZAX Listing Rule 9.1.1

12 Mar 2010 5:30 pm

NZXR 12/03/2010 WAV/RULE

REL: 1730 HRS NZX Regulation

WAV/RULE: NZXR: NZX Regulation- SAT - Waiver from NZAX Listing Rule 9.1.1

2 February 2010 NZX Regulation Decision Satara Co-operative Group Limited Application for Waiver from Listing Rules 9.1.1

Background 1 Satara Co-Operative Group Limited ("SAT") listed on the NZAX in 2004. Each year since its listing, SAT has been granted a waiver from NZAX Listing Rule ("Rule") 9.1.1 to enable it to enter into a contract with Zespri Group Limited ("Zespri") for the supply of kiwifruit to Zespri ("ZGL Contract"), without the prior approval of SAT's ordinary shareholders.

2. Zespri has a statutory monopoly on the sale of New Zealand kiwifruit for export (except to Australia). As a result, SAT, other supply entities and growers must sell all their export fruit (excluding that exported to Australia) through Zespri.

3. SAT, through its wholly owned subsidiary Satara Kiwifruit Supply Limited, enters into the ZGL Contract on an annual basis. The ZGL Contract is the result of group negotiations between Zespri, fifteen kiwifruit supply entities, one of which is SAT, and representatives of growers who sell directly to Zespri.

4. The terms of the ZGL Contract in turn fix a substantial part of the terms on which SAT (and other supply entities) obtain kiwifruit from their growers.

5. For the 2009 season, the value of the kiwifruit supplied by SAT to Zespri under the ZGL Contract was approximately NZ$79 million, which represented approximately 11% of all kiwifruit supplied to Zespri in that season. Approximately NZ$68 million was supplied by SAT as agent on behalf of kiwifruit growers (that is, it was not an asset of SAT) and the balance of approximately NZ$11 million relates to fruit owned by SAT from orchards leased or owned by SAT itself. These values are expected to be similar for the 2010 kiwifruit season.

6.The Average Market Capitalisation of SAT, at the date of this waiver, is $11,438,253. The value of the kiwifruit to be supplied by SAT under the ZGL Contract for the 2010 kiwifruit season will therefore exceed 50% of the Average Market Capitalisation of SAT, requiring SAT to seek shareholder approval to enter into the ZGL Contract under Rule 9.1.1.

Application 7. SAT has applied to NZXR for a waiver from Rule 9.1.1 to enable it to enter into the ZGL Contract for 2010 without the prior approval of SAT's shareholders.

8. In support of its application SAT makes the following submissions: (a)Zespri has a statutory monopoly on the sale of New Zealand kiwifruit for export, excluding that to Australia. As a result SAT, and other supply entities and growers, must sell all their export fruit (excluding for export to Australia) through Zespri; (b)Zespri annually negotiates a single form of supply contract for all the kiwifruit suppliers (including SAT) and representatives of growers who sell directly to Zespri. The ZGL Contract is in the same form as the contract entered into by Zespri with the other suppliers and growers who elect to supply kiwifruit to Zespri in any year; (c)While SAT participates in the joint negotiation of the contract each year, as one of the twelve suppliers expected this year, it has limited influence on the final terms and form of the ZGL Contract in any given year; (d)The supply of export kiwifruit to Zespri, through the ZGL Contract, together with the associated post-harvest services such as packing, coolstorage and logistics, constitutes SAT's principal activity for the purpose of its co-operative status; (e)It is not practicable to obtain shareholder approval for the ZGL Contract because SAT will be one of twelve kiwifruit suppliers and a number of growers which will negotiate and enter into the same form of contract and the ZGL Contract is typically negotiated under time pressure at the commencement of each kiwifruit season. There is no opportunity to refer the ZGL Contract to shareholders for their consideration and even if the ZGL Contract could be placed before shareholders, SAT is only one of a number of parties required to sign the same form of supply contract and has limited influence on the final form of the ZGL Contract;

(f)The current kiwifruit supply arrangements have been in place for several years and were disclosed in the disclosure document prepared when SAT listed, so that shareholders would be aware of the arrangements and could take them into account when deciding to purchase SAT's shares. The previous waiver granted from the requirement of Rule 9.1.1 in respect of SAT's entry into the ZGL Contract for the 2009 season was also disclosed in SAT's annual report for the financial year ended 31 December 2008. SAT disclosed the the terms of the 2009 waiver, and its intention to seek a similar waiver for 2010, in its annual report for 2009, which is shortly to be sent to shareholders; and

(g)While the detail of the ZGL Contract changes each season as negotiated by Zespri, the ZGL Contract is an existing arrangement which has been in place for a number of years and is fundamental to the industry in which SAT operates and the nature of SAT's business. SAT, through its Board of Directors and management, must be able to deal with the ZGL Contract negotiations for each season as required by the circumstances.

Rule 9.1.1 9. Rule 9.1.1 provides that: "An NZAX Issuer shall not (subject to NZAX Listing Rule 9.1.3) enter into any transaction or series of linked or related transactions to acquire, sell, lease, exchange, or otherwise dispose of (otherwise than by way of charge) assets of the NZAX Issuer or assets to be held by the NZAX Issuer: (a) which would change the essential nature of the business of the NZAX Issuer; or (b) in respect of which the gross value is in excess of 50% of the Average Market Capitalisation of the NZAX Issuer; except: (c) with the prior approval of an Ordinary Resolution of the NZAX Issuer or a special resolution if that NZAX Issuer must obtain approval of the transaction or transactions by a special resolution under section 129 of the Companies Act 1993; or (d) following a Pre Break Announcement, and satisfaction of the other requirements of NZAX Listing Rule 10.2."

Decision

10. On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants SAT a waiver from Rule 9.1.1 for the purposes of entering into the ZGL Contract for the 2010 kiwifruit season on the following conditions: (a) that the ZGL Contract for 2010 is materially the same as that entered into by the other fourteen suppliers of kiwifruit to Zespri; (b) that the material terms of the ZGL Contract for 2010 be disclosed to the market via NZX's Market Announcement Platform; and (c) that the Directors of SAT certify to NZX that the terms of the ZGL Contract for 2010 are in the best interests of SAT and its shareholders.

Reasons 11. In coming to this decision, NZXR has considered the following matters: ?

(a) Zespri has a statutory monopoly on the sale of New Zealand kiwifruit for export, except to Australia and SAT's principal activity is the provision of post harvest services to the kiwifruit industry. Accordingly, SAT has no choice but to enter into these arrangements in order to undertake its principal business.

(b) These are existing supply and contract negotiation arrangements which have been in place for some years.

(c) The arrangements were disclosed in the Disclosure Document prepared when SAT initially listed and SAT's subsequent annual reports so that both existing and potential shareholders are fully aware of the arrangements and can take these arrangements into account when considering whether to purchase SAT's securities.

(d) There is precedent for the granting of this waiver as SAT has been granted a waiver for the past seven seasons.

ENDS. End CA:00192433 For:NZXR Type:WAV/RULE Time:2010-03-12:17:30:14

More announcements for NZXR