WAV/RULE: NZXR: Waiver - RYM - NZSX Listing Rule 7.6.4(b)(iii)

28 Jun 2010 8:30 am

NZXR 28/06/2010 WAV/RULE

REL: 0830 HRS NZX Regulation

WAV/RULE: NZXR: Waiver - RYM - NZSX Listing Rule 7.6.4(b)(iii)

15 June 2010 NZX Regulation Decision Ryman Healthcare Limited Application for Waiver from NZSX Listing Rule 7.6.4(b)(iii)

Background Ryman Healthcare Limited ("RYM") is an NZSX listed Issuer with ordinary shares ("Shares") quoted on the NZSX market. RYM has an established employee share purchase scheme ("Scheme") for key selected employees of RYM ("Participants").

Under the Scheme, RYM provides financial assistance to Participants by way of an interest free loan, which must be applied to the purchase of Shares. Among those Participants in the Scheme is Simon Challies, formerly the chief executive officer of RYM, who has participated in the Scheme since 2006. On 18 May 2010, Mr Challies was appointed as managing director of RYM.

The RYM board of directors ("Board") wishes to continue to provide financial assistance to Mr Challies pursuant to the terms of the Scheme.

NZSX Listing Rule ("Rule") 7.6.4 provides that an Issuer may, subject to certain monetary thresholds being complied with, provide financial assistance for the purpose of, or in connection with, the acquisition of Equity Securities, provided that the financial assistance is not given to any Director of the Issuer, or Associated Person of a Director.

Application RYM has approached NZX Regulation ("NZXR") seeking a waiver from Rule 7.6.4(b)(iii), so as to permit the provision of further financial assistance to Mr Challies pursuant with the terms of the Scheme. In support of the application, RYM submits that: The footnote to Rule 7.6.4 states that:

"NZX may waive the restriction in Rule 7.6.4(b)(iii) on Directors and Associated Persons participating in financial assistance given to Employees:

so far as it affects assistance given to bona fide full time employees who are Directors, or Associated Persons, 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 financial assistance,and would not, if all relevant factors were publicly disclosed, be reasonably seen as being materially influenced by the relationship; and/ or where NZX is satisfied that the assistance is not likely to disproportionately benefit the persons controlling the Issuer and those associated with them." Mr Challies has not had, and will not have, any material influence over the terms or amount of the financial assistance to be provided to him under the Scheme. His entitlement under the Scheme is determined according to the criteria contained in the share scheme policy approved by the Board ("Policy"), which was adopted by the Board prior to Mr Challies becoming a director. Moreover, the Scheme, including its terms, has been in existence since 2006.

RYM has a separate remuneration and nominations committee of the Board, comprised solely of independent directors. This committee determines the eligibility for participation in the Scheme.

The Policy applies to all RYM employees who are determined to be eligible to participate in the Scheme, irrespective of their position within RYM. Mr Challies' level of assistance under the Scheme is intended to be at a higher proportion of his base salary compared to other Participants:

This differentiation reflects the importance of the managing director's role, the additional risks inherent in the role of managing director of a company of the size and complexity of RYM, and the importance to RYM of retaining Mr Challies and incentivising him to remain with RYM, particularly in light of RYM's strong performance during the period in which Mr Challies has been chief executive; and The actual level of Mr Challies' financial assistance will still be determined in accordance with the Policy.

RYM has a policy of paying relatively modest base salaries to its senior executives in comparison to the market (including entities of similar size), instead preferring to provide a proportionately higher level of financial assistance (relative to base salary) in order for senior executives to participate in the ownership of RYM through the Scheme. The advantages of this approach include aligning the interests of shareholders and senior executives, and incentivising senior executives to remain with RYM through the medium to long term, providing welcomed continuity and experience to RYM.

Because the Scheme and the Policy were adopted by the RYM board prior to Mr Challies' appointment as a director, and the level of participation in the Scheme is the responsibility of the remuneration committee, the provision of financial assistance under the Scheme to Mr Challies cannot reasonably be seen as being materially influenced by his appointment as managing director. Mr Challies has previously received financial assistance under the Scheme, prior to being appointed managing director. The board's intention to provide further financial assistance to Mr Challies is therefore not influenced by the change in Mr Challies' role from that of chief executive to managing director. Mr Challies will not receive preferential treatment arising from his position as a director of RYM. The financial assistance provided to Mr Challies will not disproportionately benefit the major shareholders of RYM, or any other person with an effective controlling stake in RYM (or Associated Persons of any of them).

There are currently 500,000,000 ordinary shares on issue in RYM. Based on an approximate market price per share of $2.13, the level of financial assistance currently intended to be provided to Mr Challies in 2010 would enable Mr Challies to acquire approximately 352,113 shares, or approximately 0.07% of the total number of shares on issue. Therefore there are no implications from a control perspective arising from the provision of the financial assistance in 2010. If similar levels of financial assistance were provided to Mr Challies in future years in accordance with the Policy, there would also be no implications from a control perspective.

RYM shareholders and prospective investors will be aware of the value of the financial assistance being provided to Mr Challies under the Scheme, because RYM is required by section 79 of the Companies Act 1993 to send to each RYM shareholder a disclosure document setting out details of financial assistance given in connection with the acquisition of RYM equity securities, before that financial assistance is given.

There is precedent for the granting of the waiver sought in the decisions in respect of STU dated 23 October 2009, NPX dated 15 September 2009 and CEN dated 23 July 2009.

Rule 7.6.4 Rule 7.6.4(b) provides: "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 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;..." The footnote to Rule 7.6.4 states that:

"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."

Decision

On the basis that the information provided to NZXR is full and accurate in all material respects, NZXR grants RYM a waiver from Rule 7.6.4(b)(iii) to allow Mr Challies to continue to receive Financial Assistance, pursuant to the terms of the Scheme and the Policy.

Reasons

In granting a waiver from Rule 7.6.4(b)(iii), NZXR has considered that:

The policy objective of Rule 7.6.4(b)(iii) is to ensure that Directors are not able to exercise their discretion to provide financial assistance on terms that are unfairly advantageous to them, or are otherwise inconsistent with that provided to other employees. In this instance, the participation of all Participants in the Scheme is on the same terms and conditions; As the Scheme, including its terms, have been in existence since 2006 and Mr Challies was appointed managing director in May 2010, the terms of the Scheme cannot reasonably be said to be influenced by Mr Challies participation in the Scheme, and more specifically, influenced by his role as managing director; As RYM will be required to disclose annually the level of Financial Assistance given to its executives, together with remuneration levels generally, Shareholders will be aware of the terms of the Scheme, together with Mr Challies participation, and will be able to make appropriately informed investment decisions as a result of that information; and There is precedent for this decision in the waiver decisions in respect of of STU dated 23 October 2009, NPX dated 15 September 2009 and CEN date 23 July 2009.

Confidentiality

RYN has requested that this application, and the decision resulting from it, be kept confidential until RYM releases details of the Scheme and Mr Challies participation to the market. NZXR grants RYM's request in accordance with Rules 1.6.2 and 1.11.2 and the footnotes to those Rules.

ENDS. End CA:00196581 For:NZXR Type:WAV/RULE Time:2010-06-28:08:30:18

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