Nearmap Ltd, in the matter of Nearmap Ltd [2022] FCA 1291

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 The plaintiff, Nearmap Ltd (ACN 083 902 907), seeks to propose a scheme of arrangement (Scheme) that requires Court approval under Part 5.1 of the Corporations Act 2001 (Cth). This application concerns the first stage, being an application to the Court for an order to convene the Scheme Meeting. 2 On 20 October 2022, at the first court hearing, I made orders for the convening and holding of a meeting of Nearmap shareholders for the purpose of considering, and if thought fit, agreeing, with or without modification, to the Scheme. These are my reasons for doing so.

OVERVIEW OF THE SCHEME 3 The commercial purpose of the Scheme is to effect the acquisition by Atlas AU BidCo Pty Ltd (Thoma Bravo BidCo) of all of the shares in Nearmap (Scheme Shares). The Scheme Consideration is a cash payment calculated at $2.10 per Scheme Share. 4 If the Scheme is to proceed, all conditions precedent, other than Court approval, must be either satisfied or waived by the applicable time, which for most conditions is 8.00am on 5 December 2022, being the date of the second court hearing, when the application for approval of the Scheme comes before the Court. 5 If the Scheme is agreed to by the requisite majorities at the Scheme Meeting and approved by the Court, it becomes effective on the lodging of an office copy of the Court's order with ASIC, which is anticipated to occur on 6 December 2022. 6 If the Scheme becomes effective on 6 December 2022 as anticipated, the Scheme Consideration will be issued to each holder of Scheme Shares (Scheme Shareholder) on the Implementation Date, which is anticipated to be on 15 December 2022, and the Scheme Shares will subsequently be transferred to Thoma Bravo BidCo on that date. A Deed Poll has been executed and delivered whereby Thoma Bravo BidCo covenants in favour of each Scheme Shareholder that Thoma Bravo BidCo will observe and perform all actions contemplated of Thoma Bravo BidCo under the Scheme, including the relevant obligations relating to the provision of the Scheme Consideration, subject to the proposed Scheme becoming effective under section 411(10) of the Act. The Deed Poll may be relied upon and enforced by any Scheme Shareholder. 7 Following implementation of the Scheme, Thoma Bravo BidCo will own 100% of the issued shares in Nearmap, and Nearmap will be delisted from the Australian Securities Exchange (ASX). If the Scheme is implemented, all of the Scheme Shares will be transferred to Thoma Bravo BidCo and, as noted, in consideration for that transfer, Scheme Shareholders will receive a cash payment of $2.10 per Scheme Share. 8 On the basis of the summary review undertaken at the first court hearing, the terms of the Scheme appear to be in conventional form for an acquisition scheme of this nature. 9 An independent expert report (IER) has been prepared by Grant Thornton Corporate Finance Pty Ltd (Grant Thornton). In the IER, Grant Thornton concludes that the Scheme is fair and reasonable and in the best interests of Nearmap shareholders, in the absence of a superior alternative proposal emerging. The value of the Scheme Consideration of $2.10 is within Grant Thornton's assessed value range of the Scheme Shares (on a control basis) of between $1.94 and $2.45 per share. 10 Nearmap has prepared a draft Scheme Booklet which sets out a detailed description of the proposed Scheme and its advantages and disadvantages, and serves as the explanatory statement on which Nearmap relies for the purpose of ss 411(2)(b)(i) and 412(1) of the Act. 11 The conclusions of Grant Thornton are summarised in the Scheme Booklet, and a copy of the IER will be annexed to it, along with a number of other annexures, including the Notice of Scheme Meeting. 12 ASIC has provided a letter to Nearmap dated 20 October 2022 in the usual form stating that, based upon ASIC's examination of the terms of the Scheme and the Scheme Booklet, ASIC did not propose to appear to make submissions or intervene to oppose the Scheme at the first court hearing.

Nearmap 13 Nearmap is an Australian public company limited by shares, and its shares are listed on the ASX. Nearmap provides access to high resolution aerial imagery, city-scale 3D content, Artificial Intelligence data sets, and geospatial tools. Using its own patented camera systems and processing software, Nearmap captures wide-scale urban areas in Australia, New Zealand, the United States of America and Canada several times each year, making current content instantly available. 14 Nearmap has the following securities and options currently on issue: (1) Nearmap Shares: 500,296,327 shares; (2) Nearmap Options: (a) ESOP Options: 10,179,171 options over Nearmap Shares under Nearmap's Employee Share Option Plan or ESOP; (b) Director Options: 2,248,746 options over Nearmap Shares held by Dr Robert Newman, Chief Executive Officer & Managing Director, Nearmap; and (c) LTIP Options: 1,374,299 options over Nearmap Shares under Nearmap's Long Term Incentive Plan or LTIP; (3) Nearmap RSUs: 1,485,677 restricted stock units convertible into Nearmap shares; and (4) Nearmap Matching Rights: 113,118 matching share rights. 15 The Nearmap Board is comprised of Dr Newman, Ross Stewart Norgard, who is a non-executive director, and five independent, non-executive directors, one of whom is the Chairman: Peter Richard James, Susan Marie Klose, Clifford Johann Rosenberg, David Baxby and Helen Jessica Souness. 16 The interests of the directors in Nearmap Shares are disclosed in the Scheme Booklet. Each director holds Nearmap Shares, which in aggregate amount to 40,235,418 Nearmap Shares, 8.04% of the total number of Nearmap Shares on issue. Apart from Dr Newman, the directors do not hold Nearmap Options. The directors do not hold any Nearmap RSUs or Nearmap Matching Rights. 17 The directors have formed the view that the Scheme is in the best interests of Nearmap shareholders, and the directors unanimously recommend that Nearmap shareholders vote in favour of the Scheme in the absence of a Superior Proposal (as defined in the Scheme Implementation Deed (SID)) and subject to the independent expert continuing to conclude that the Scheme is fair and reasonable and in the best interests of Nearmap Shareholders (Voting Recommendation). 18 In addition, subject to the same qualifications, each director intends to vote, or procure the voting of, any Nearmap Shares held or controlled by them, or held on their behalf, at the time of the Scheme Meeting in favour of the proposed Scheme (Voting Intention).

Thoma Bravo BidCo 19 Thoma Bravo BidCo was incorporated on 18 August 2022 as a special purpose vehicle to acquire the Scheme Shares under the Scheme. Thoma Bravo BidCo is an Australian proprietary company limited by shares, and is ultimately owned by Thoma Bravo Discover Fund IV L.P, that is managed and advised by Thoma Bravo L.P. (Thoma Bravo), a private equity firm based in the United States.

Scheme Implementation Deed 20 On 22 August 2022, Nearmap and Thoma Bravo BidCo entered into the SID pursuant to which they agreed to implement the proposed Scheme on the terms of the SID. Under the SID, Thoma Bravo BidCo agreed to acquire all of the Scheme Shares and pay the Scheme Consideration to each Scheme Shareholder. The parties' agreement to implement the proposed Scheme on the terms of the SID is subject to the satisfaction of certain conditions precedent, including that Nearmap shareholders agree to the Scheme, and the Court approves the Scheme. 21 Also on 22 August 2022, Nearmap announced to the ASX that it had entered into the SID, and that announcement attached a copy of the SID.

Deed Poll 22 The Scheme provides that Thoma Bravo BidCo must deposit an amount equal to the aggregate amount of the Scheme Consideration into the designated Trust Account before the Implementation Date. As Thoma Bravo BidCo will not be a party to the Scheme and will not be bound by its terms, it has executed and delivered a Deed Poll pursuant to which it covenants in favour of Nearmap (in Nearmap's own right and as trustee or nominee of each Scheme Shareholder) that Thoma Bravo BidCo will observe and perform all actions contemplated of Thoma Bravo BidCo under the Scheme, including the relevant obligations relating to the provision of the Scheme Consideration, subject to the proposed Scheme becoming effective under section 411(10) of the Act. The Deed Poll is directed to protecting against completion risk and may be relied upon and enforced by any Scheme Shareholder: cl 1.3 of the Deed Poll.

Conditions precedent 23 There are a number of conditions precedent to the SID and to the Scheme. The Scheme Booklet summarises the conditions precedent which remain outstanding. Mr James, the Chairman of Nearmap, has deposed to the fact that, as at the date of his affidavit, he is not aware of any fact, matter or circumstance that has resulted in, or is likely to result in, the failure of the Scheme due to any condition precedent not being satisfied or waived. Pursuant to clauses 3.10 of the SID and clause 3.2 of the Scheme, Nearmap and Thoma Bravo BidCo must provide to the Court at the second court hearing a signed certificate confirming whether or not all of the conditions precedent have been satisfied or waived (save for the conditions relating to Court approval of the Scheme).

RELEVANT PRINCIPLES 24 Part 5.1 of the Act provides a procedure whereby an arrangement between a company and its members can be made binding on all members. Section 411(1) is the principal provision: Where a compromise or arrangement is proposed between a Part 5.1 body and its creditors or any class of them or between a Part 5.1 body and its members or any class of them, the Court may, on the application in a summary way of the body or of any creditor or member of the body, or, in the case of a body being wound up, of the liquidator, order a meeting or meetings of the creditors or class of creditors or of the members of the body or class of members to be convened in such manner, and to be held in such place or places (in this jurisdiction or elsewhere), as the Court directs and, where the Court makes such an order, the Court may approve the explanatory statement required by paragraph 412(1)(a) to accompany notices of the meeting or meetings. 25 The procedure involves three main steps: (1) an application to the Court for an order to convene a scheme meeting; (2) if such an order is made, the convening of the meeting at which a resolution to agree to the scheme is considered, and perhaps passed; and (3) if the resolution is passed by the necessary majorities, an application to the Court for approval of the scheme. 26 This application concerns the first step. 27 Section 411 of the Act does not state the criteria that must be satisfied before a scheme meeting is ordered, but it is clear that, if certain statutory pre-requisites are met, s 411(1) confers a discretion on the court in relation to whether the scheme meeting should be ordered: see, for example, Re Healthscope Limited [2019] FCA 542; 139 ACSR 608 at [43]; Re Amcor Limited [2019] FCA 346 at [45]; Re DuluxGroup Limited [2019] FCA 961; 136 ACSR 546 at [15]; Re Legend Corporation Limited [2019] FCA 1249 at [17]; Re Wellcom Group Limited [2019] FCA 1655 at [24]; Re Verdant Minerals Limited [2019] FCA 556 at [28], citing Re CSR Limited [2010] FCAFC 34; 183 FCR 358 at [8]; and Re Sienna Cancer Diagnostics Limited [2020] FCA 899 at [43]). 28 The principles which apply at this first stage are well-known and have been summarised by Beach J in a number of decisions including Re PM Capital Asian Opportunities Fund Limited [2021] FCA 1380 (at [39]-[40]): 39 …my function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, but with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further" (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J). 40 Clearly, my role is not to usurp the shareholders' decision whether to agree to a scheme by attempting to intrude my own commercial judgment. The question whether to accept particular consideration for shares is a commercial matter for the members to assess, and they ought not to be prevented from having the opportunity to do so provided that I am satisfied that they are acting on sufficient information and with time to consider what they are voting on. If the arrangement is one that seems fit for consideration by the meeting of members and is a commercial proposition likely to gain my approval if passed by the requisite majorities, then orders should be made to convene the meeting.

Statutory Prerequisites 29 On the evidence before me I am satisfied that the relevant statutory prerequisites have been met. 30 First, as required by s 411(1), Nearmap has made an application in relation to an arrangement that is proposed between it, as a Part 5.1 body and its members. It is well established that a scheme to effect an acquisition of shares may be an 'arrangement' within the meaning of s 411(1) of the Act: Re Foundation Healthcare Limited [2002] FCA 742; 42 ACSR 252 at 264 at [39]. 31 Secondly, as required by r 2.4(2) of Federal Court (Corporations) Rules 2000 (Cth), the evidence relied upon by Nearmap includes an ASIC company extract recording the results of a search of the records of ASIC in relation to Nearmap carried out no earlier than 7 days before the originating process was filed. 32 Thirdly, Nearmap has complied with the requirement in s 411(2)(a) of the Act to give ASIC at least 14 days' notice of the first court hearing and as required by s 411(2)(b), ASIC has had a reasonable opportunity to examine the terms of the proposed Scheme and the draft explanatory statement, and to make submissions to the Court. As noted, ASIC has provided a letter to Nearmap dated 20 October 2022 stating that it did not propose to appear to make submissions or intervene to oppose the Scheme at the first court hearing. 33 Fourthly, as required by r 3.2 of the Rules, the necessary evidence about the proposed chairperson and alternate chairperson of the Scheme Meeting has been provided. 34 Fifthly, as required by r 3.3(1) of the Rules, the proposed orders sufficiently identify a copy of the proposed arrangement in that a copy of the Scheme is annexed. 35 Finally, in relation to substantive requirement dealing with disclosure I am satisfied to the summary standard applicable at this first hearing that the information to be provided to shareholders for the purposes of their consideration of the Scheme is adequate. The information to be provided to shareholders is regulated by s 412 and reg. 5.1.01 and Schedule 8 of the Corporations Regulations 2001 (Cth). In particular, s 412(1) of the Act and Schedule 8 (Part 3) of the Regulations set out the disclosure requirements of the explanatory statement (which is included within the Scheme Booklet). Nearmap submits, and I accept, that the Scheme Booklet meets the requirements of s 412(1) in that the explanatory statement: (1) explains the effect of the compromise or arrangement, and in particular state any material interest of the directors, and the effect on those interests of the compromise or arrangement so far as it is different from the effect on the like interests of other persons; (2) sets out the prescribed information, being the information set out in reg 5.1.01 and Schedule 8 of the Regulations, and the verification of that information is demonstrated by the evidence on this application; and (3) sets out any other information that is material to the making of a decision whether or not to agree to the Scheme, and it includes a clear and comprehensive, detailed evaluation of the Scheme (including by reference to the IER), presented in a way that enables an Nearmap shareholder to form his or her own view of the merits of the Scheme. 36 In relation to the adequacy of the disclosure in the Scheme Booklet, I note that Nearmap does not seek an order than the Scheme Booklet be approved. That approach is consistent with the approach taken by this Court in Re Duluxgroup (at [63]), Re Amcor (at [114]-[115]), Re Verdant Minerals (at [84]), Re Healthscope Limited (at [189]) and Re Sienna Cancer Diagnostics (at [98]). A draft of the Scheme Booklet was lodged with ASIC on 30 September 2022. Amendments to that version were subsequently made, including in response to comments made by ASIC, and ASIC was provided with a revised draft on 12 October 2022 and 18 October 2022. ASIC then indicated to Nearmap that it had no further comments on the Scheme Booklet, and provided its preliminary no-objection letter on 20 October 2022. The Scheme Booklet must be registered by ASIC before being sent to Nearmap shareholders: s 412(6) of the Act. Before registering the Scheme Booklet, ASIC must conclude that it appears to comply with the requirements of the Act, and must form the opinion that the Scheme Booklet does not contain any matter that is false in a material particular or materially misleading in the form and context where it appears: s 412(8) of the Act. Nearmap submits that if, following orders being made for the convening of the Scheme Meeting, the Scheme Booklet is registered by ASIC, then this will provide further assurance as to the satisfaction of the relevant disclosure requirements. I accept that submission. 37 The procedural requirements having been satisfied, I now turn to the whether it is appropriate for the Court to exercise its discretion in favour of making the orders sought by Nearmap.

Discretion 38 The relevant discretionary considerations involve two main questions: first, whether the Scheme is fit for consideration by the shareholders; and second, whether the shareholders are to be properly informed as to the nature of the Scheme.

Whether the Scheme is fit for consideration 39 I am satisfied that on the materials before me there is no issue arising from the Scheme which would unquestionably lead to a refusal by the Court to approve the Scheme at the second court hearing. The Scheme on its face is not so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further: Re Foundation Healthcare at [44]. 40 First, the Scheme Booklet contains the directors' Voting Recommendation and Voting Intention, and annexes the IER stating that the Scheme is fair and reasonable and in the best interests of shareholders. 41 Secondly, consistently with the duty of disclosure on an application such as this, and recognising that the Court will in a summary way scrutinise the terms of a scheme to satisfy itself that there is no unfairness that would be likely to preclude approval of the scheme, Nearmap raised a number of particular features of the Scheme for the attention of the Court, including the following: (1) Performance risk; (2) Exclusivity arrangements; (3) Break fee; (4) Treatment of Nearmap Options, RSUs and Matching Rights; (5) Shareholder warranties; and (6) the purpose of the Scheme. 42 Nearmap submits that none of these matters gives rise to a concern that the Scheme is not fit for consideration by its members in the requisite sense. I accept Nearmap's submissions for the following reasons.

Performance risk 43 As noted above at paragraph [22], mechanisms have been put in place to address the issue of performance risk. Those mechanisms are in conventional form and appropriately protect against the risk identified.

Exclusivity arrangements 44 The SID contains a number of exclusivity provisions, including 'no shop', 'no talk', 'no due diligence', 'notification of approaches' and 'matching right' obligations on the part of Nearmap (Exclusivity Provisions). The Exclusivity Provisions apply during the 'Exclusivity Period', which commences on the date of the SID (22 August 2022) and ends on the earliest of the termination of the SID, the End Date (22 February 2023 unless automatically extended or other date as agreed), or the Effective Date (which is the date on which Court orders approving the Scheme are lodged with ASIC, which is currently anticipated to be on 6 December 2022). Accordingly, the longest period during which the exclusivity provisions could reasonably be anticipated to apply is nine months. 45 The Exclusivity Provisions are disclosed in the Scheme Booklet and it is not necessary to describe them in detail other than to note that the "No talk" and "No due diligence" obligations are subject to a "fiduciary carve-out". In particular, clause 11.7 of the SID provides that these obligations do not prohibit Nearmap from taking or refusing to take any action with respect to a bona fide written competing proposal, provided that the Nearmap Board has determined in good faith after consultation with Nearmap's financial and external legal advisers, that the competing proposal could reasonably expect to lead to a superior proposal; or after receiving written notice from Nearmap's advisers specialising in the area of corporate law, that the failure to take or not take such action would constitute, or would be likely to constitute, a breach of the fiduciary or statutory duties of the Nearmap Board member. 46 The Exclusivity Provisions were the outcome of normal commercial negotiations that took place between Nearmap and Thoma Bravo BidCo, who were each assisted in those negotiations by separate, independent legal and financial advisers in relation to the terms and operation of those provisions. The directors of Nearmap considered that without the Exclusivity Provisions, Thoma Bravo BidCo would not have entered into the SID or otherwise agreed to implement the Scheme and accordingly that the Exclusivity Provisions were in the interests of Nearmap Shareholders, being reasonable and appropriate measures to secure Thoma Bravo BidCo's entry into the SID and its commitment to implement the Scheme on the terms and conditions of the SID. 47 Exclusivity provisions such as those in the SID have been accepted in many company schemes of arrangement (Re Arthur Yates & Co Limited (2001) 36 ACSR 758 at 759-760 at [9]), and "it is desirable that the scheme proponents tender evidence directed to showing that the exclusivity provisions are the result of a normal commercial negotiation": Re Verdant Minerals at [50(d)]. 48 I am satisfied that in the present case the exclusivity provisions are not such as to render the Scheme to be not fit for consideration by the shareholders of Nearmap - the exclusivity period is up to nine months; the exclusivity provisions are subject to an appropriate fiduciary carve-out other than the "no-shop" provision which I accept is consistent with authority: Palladium Holdings Pty Ltd [2022] FCA 526 at [29]-[30]; there is clear disclosure of the provisions in the Scheme Booklet; and there is evidence that the exclusivity provisions were inserted in the SID as the result of normal commercial negotiations between Nearmap and Thoma Bravo BidCo. I further note that pursuant to the SID, material non-public information relating to Nearmap that is made available to a third party for the purposes of a competing proposal must also be provided to Thoma Bravo BidCo, and there is a time limit of four weeks imposed on a third party's due diligence. These provisions viewed in the context of the genesis of the Scheme do not cause me to change my view as to the fitness of the Scheme for consideration by shareholders.

Break Fee 49 If the Scheme does not become effective, a break fee of $10,540,000 may be payable by Nearmap to Thoma Bravo BidCo pursuant to clause 12 of the SID (Nearmap Break Fee). The circumstances in which Nearmap may be required to pay the Break Fee are not unusual for schemes of this nature. They are set out in clause 12.4 of the SID and summarised in the Scheme Booklet. The Nearmap Break Free is triggered by a change of recommendation or voting intention by any director; where Nearmap terminates the SID as a consequence of a superior proposal, or Nearmap enters into a binding agreement to undertake a superior proposal; where a competing proposal is announced prior to the earlier of the end date or date of termination of the SID (subject to certain conditions); or Thoma Bravo BidCo validly terminates the SID due to a material breach (including a sufficiently material breach of warranty) by Nearmap. 50 Importantly, the Nearmap Break Fee is not payable if the Scheme does not proceed solely because Nearmap Shareholders do not vote in favour of the Scheme in the requisite majorities at the Scheme Meeting and is not payable if the Scheme becomes effective. 51 I am satisfied that the Nearmap Break Fee is neither excessive nor coercive in nature, and that the terms requiring payment and the circumstances in which those terms were agreed are consistent with the approach taken in the authorities: see, for example, Re Amcor at [58] - [70] and in Re Healthscope at [146] - [153]. Critically, the terms and the amount of the Nearmap Break Fee is not such that it would likely influence voting at the meeting. The Nearmap Break Fee is not payable if the Scheme does not proceed merely because Nearmap shareholders do not vote in favour of the Scheme in sufficient numbers to pass the resolution at the Scheme Meeting. Further, the parties acknowledge that the Nearmap Break Fee is a genuine and reasonable pre-estimate of the likely costs that Thoma Bravo BidCo will likely incur if the Scheme is not implemented, as best as can be accurately ascertained. Both parties received advice from their respective legal advisors on the Nearmap Break Fee before it was agreed. There is a reasoned basis for Nearmap concluding, having taken advice, that the implementation of the Scheme will provide benefits to it and Nearmap shareholders, and that it is appropriate for Nearmap to agree to the Nearmap Break Fee in order to secure Thoma Bravo BidCo's participation in the Scheme. 52 Finally, the triggers for the payment of the Nearmap Break Fee are consistent with those identified in the Takeovers Panel's Guidance Note 7 on its approach to lock-up devices. The Nearmap Break Fee does not exceed the relevant guideline that such fees should not exceed 1% of the equity value of the target as specified in Guidance Note 7: Re QMS Media Limited [2019] FCA 2172 at [60]; Re 5G Networks Limited [2021] FCA 1189 at [30]. The amount of the Nearmap Break Fee represents approximately 1% of the equity value of Nearmap having regard to the aggregate value of the Scheme Consideration.

Treatment of Nearmap Options, RSUs and Matching Share Rights 53 It is proposed that if the Scheme becomes effective then, in respect of the following securities and options Nearmap currently has on issue the following steps will be taken, each of which is described in the Scheme Booklet. 54 First, in relation to ESOP Options, Nearmap has in place option cancellation deeds which provide that if the Scheme becomes effective, all ESOP Options will be cancelled on the Effective Date. Any vested and "in the money " ESOP Options (being those ESOP Options with an exercise price less than the Scheme Consideration) will be cancelled for cash consideration (calculated as the Scheme Consideration less any exercise price, multiplied by the number of such options). Of the 10,179,171 ESOP Options on issue, 4,260,000 ESOP Options are "in the money", will vest upon the Scheme becoming effective, and will be cancelled for an aggregate cash consideration of $1,666,500.00. The cash consideration represents the "in the money" value of the ESOP Options, taking into account the Scheme Consideration less the exercise price of the applicable ESOP Option. The remaining 5,919,171 ESOP Options are "out of the money" (having an exercise price equal to or exceeding the Scheme Consideration) and will be cancelled for no consideration. 55 Secondly, in relation to the 2,248,746 Director Options held by Dr Newman, an option cancellation deed is in place which provides that if the Scheme becomes effective, any "out of the money" Director Options (being those options with an exercise price equal to or exceeding the Scheme Consideration) will be cancelled for no consideration. All of the Director Options are "out of the money", and accordingly will be cancelled for no consideration. 56 Thirdly, in relation to the 1,374,299 LTIP Options on issue, under the Long Term Incentive Plan rules, Nearmap has discretion to cancel LTIP Options on the occurrence of the Scheme. Nearmap has determined pursuant to the Long Term Incentive Plan rules to, if the Scheme becomes effective, any "out of the money" LTIP Options (being those Options with an exercise price equal to or exceeding the Scheme Consideration) will be cancelled for no consideration. All of the LTIP Options are "out of the money" and will be cancelled for no consideration. 57 Fourthly, in respect of the 1,485,677 RSUs on issue, Nearmap similarly has discretion to cancel LTIP Options on the occurrence of the Scheme under the Long Term Incentive Plan rules. Nearmap has determined pursuant to the Long Term Incentive Plan rules, if the Scheme becomes effective, to cancel any unvested RSUs for contingent cash consideration (calculated as the Scheme Consideration less any exercise price, multiplied by the number of such RSUs). The cash consideration will be contingent upon and payable on the date the unvested RSUs would have vested in accordance with their original terms. All of the 1,485,677 RSUs are unvested (and will not vest prior to the Effective Date), and will be cancelled for an aggregate contingent cash consideration of $3,119,921.70 (calculated by multiplying the number of RSUs by $2.10). 58 Finally, accommodation is made in respect of the Matching Share Rights. A total of 113,118 Matching Share Rights will vest on 30 September 2022 (at which time they will be matched with the equivalent number of Matching Shares). A further amount of about 119,998 Matching Share Rights are not due to vest until 31 March 2023. The matching of Nearmap Shares to Matching Share Rights will be accelerated. Under the Matching Share Rights Plan rules, the Nearmap Board has discretion to accelerate the vesting of some or all of the Matching Share Rights. The Nearmap Board has determined to exercise its discretion to accelerate the vesting of all outstanding Matching Share Rights, conditional on the Scheme becoming effective. In this way the holders of all holders of the 119,998 Matching Share Rights will be allocated Matching Shares on the Effective Date, which will be acquired by Thoma Bravo BidCo under the Scheme. 59 Nearmap has submitted that the proposed treatment of the Nearmap Options and RSUs gives rise to two potential issues. The first issue concerns classes. The second issue concerns the appropriateness of Dr Rob Newman making the Voting Recommendation. 60 The first issue is in relation to whether separate class meetings are necessary or desirable as a result of the proposed treatment of the Nearmap Options and RSUs. On this issue, the authorities have consistently held that members (including directors) with existing performance rights or options which are to be cancelled in return for a cash payment or converted into shares which will participate in the Scheme do not constitute a separate class for the purposes of voting on the Scheme: see Re Healthscope at [105] - [120]. 61 The relevant question is whether the rights of the relevant shareholders under consideration are so dissimilar from the rights of the other shareholders as to make it impossible for them to consult together with a view to their common interest: Re Healthscope at [107]. 62 In Re Amcor, Beach J considered the proposed treatment of employee incentive arrangements under the relevant transactions and held that no separate class meetings were necessary or desirable in circumstances where: 86 [t]he holders of incentives who are also Amcor shareholders will participate in the Scheme on the same basis and receive the same consideration as Amcor shareholders who are not holders of incentives. That is, all shareholders are being treated equally under the Scheme. There is no additional benefit being offered by New Amcor to these shareholders under or in connection with the Scheme. 63 These principles have been applied in in relation to performance rights: Re Citadel Group Limited [2020] FCA 1580, in relation to a potential benefit to a director in the form of a consultancy agreement; Re DWS Limited [2020] FCA 1590; 148 ACSR 616; and in relation to performance rights and proposed cash payment incentives, including to a director of RXP: Re RXP Services Limited [2021] FCA 38. In each case separate scheme meetings were not required. See further, Re Spicers Limited [2019] FCA 731; Re QMS; Re Villa World Limited [2019] NSWSC 1207; 139 ACSR 550; Re ERM Power Limited [2019] NSWSC 1502. 64 I accept that on the basis of these authorities, separate class meetings are not necessary or desirable as a result of the proposed treatment of the Nearmap Options, the RSUs and the Matching Share Rights. 65 The second issue is whether a director who is to receive an additional benefit if a Scheme is approved should make a recommendation to members about voting in favour of the Scheme. On this question, in a number of recent decisions, courts have expressed divergent views. In some cases, the court has taken the view that, as a general rule, a director who will receive such a benefit should decline to make a recommendation to shareholders as to how they should vote, but that the making of such a recommendation may not preclude the Court making orders convening a meeting if the benefits are adequately disclosed in the scheme booklet. 66 In other cases, the court has taken a different approach, holding that, ordinarily, the interests of directors ought not prevent them from making a voting recommendation to shareholders where that interest is sufficiently disclosed in the scheme booklet and shareholders may take it into account in determining the weight to give to that recommendation. 67 I accept Nearmap's submission that the latter approach is to be preferred in the circumstances of the current scheme. In Re DWS, Beach J reviewed the authorities and agreed with the approach taken in Re SMS Management and Technology Limited [2017] VSC 257, Re Kidman Resources Limited [2019] FCA 1226; 139 ACSR 122 and Re Villa World Limited, namely, that the interests of directors ought not ordinarily prevent them from making a voting recommendation to shareholders, provided that the interest is sufficiently disclosed in the scheme booklet. 68 In the present case, the interests of Dr Newman in relation to the proposed treatment under the Scheme of the Nearmap Options he holds are not of such a nature that they ought to preclude him from making the Voting Recommendation. In any event, the proposed treatment under the Scheme of his Nearmap Options is sufficiently disclosed in the Scheme Booklet.

Shareholder warranties 69 Clause 8.3 of the Scheme sets out a warranty that each Scheme Shareholder is taken to have given to Nearmap and Thoma Bravo BidCo at the date of the transfer of their Scheme Shares. The warranty is in the usual form (no encumbrances, capacity to transfer, and no existing rights to Nearmap Shares or securities that are not the subject of the Scheme) and is disclosed in the Scheme Booklet. The warranties are given by Nearmap as agent and attorney for each Scheme Shareholder.

Purpose of the Scheme 70 The Court's jurisdiction to approve a scheme is restricted by section 411(17) of the Act. This is a matter which affects the discretion ultimately to approve the Scheme, rather than the discretion to order a meeting. At the approval stage, the Court must be satisfied there is no proscribed purpose as described in s 411(17)(a) or there must be provided to the Court a statement in writing by ASIC that it has no objection to the arrangement under s 411(17)(b). ASIC will not provide a statement under s 411(17)(b) until the second court hearing. Here, as noted above, ASIC has provided a no-objection letter to Nearmap in which it indicated that it did not propose to appear to make submissions or intervene to oppose the Scheme at the first court hearing. 71 I am satisfied that s 411(17) does not present a bar to a meeting being convened in circumstances where it seems likely that ASIC will produce the relevant statement at the second court hearing and there is presently nothing to suggest a proscribed purpose.

Members are to be properly informed 72 The second principal aspect relevant to the exercise of the court's discretion at the first hearing is the adequacy of the information to be provided to shareholders. 73 As noted above, s 412(1) of the Act and Schedule 8 (Part 3) of the Regulations set out the disclosure requirements of the explanatory statement (which is included within the Scheme Booklet). Having regard to the prescription of the contents of the explanatory statement in these provisions, I am satisfied that the statutory disclosure requirements are met, and that the information to be provided to shareholders is adequate for the purpose of the Court exercising its discretion to convene the Scheme Meeting. Nearmap shareholders are to be presented with an appropriately detailed and clear explanation of the Scheme in the Scheme Booklet, as well as a careful analysis of the Scheme in the IER. The Scheme Booklet meets all of the statutory requirements, has been verified by Nearmap and Thoma Bravo BidCo, and has been examined by ASIC and is required to be registered by ASIC prior to distribution to shareholders.

Conclusion on the exercise of discretion 74 For the reasons given, I am satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the Scheme Meeting, the Court would be likely to approve it, and that it is therefore appropriate to make the orders sought convening the Scheme Meeting.

Ancillary orders 75 Nearmap proposes to conduct the Scheme Meeting as a hybrid meeting, that is, providing shareholders with the opportunity to attend either in-person or electronically via an online platform. In accordance with the broad power of the Court to make orders for the conduct of scheme meetings pursuant to ss 411 and 1319, and s 249R(b) of the Act with respect to the holding of a meeting of members at one or more physical venues and using virtual meeting technology, I made orders for the convening and holding of a hybrid meeting of shareholders along the lines sought by Nearmap. 76 I also made an order dispensing with compliance with rule 2.15 of the Rules. As is usual in applications of this type, that order was sought and made out of an abundance of caution to protect against a need to comply with rules directed to insolvent schemes, of which this is not one. 77 I also made orders that voting on the resolution to agree to the Scheme is to be conducted by way of a poll: see s 250JA(1)(a) of the Act and further orders providing for a cut-off time for the receipt of proxies, identifying the chairperson and alternate chairperson of the Scheme Meeting, and providing that the chairperson of the Scheme Meeting has the power to adjourn the meeting. The second court hearing is listed for hearing on 5 December 2022.

CONCLUSION 78 For these reasons, at the first court hearing, I made orders in the terms sought by Nearmap and adjourned the proceedings until 5 December 2022, being the date of the second court hearing. I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.