JSE LIMITED PROPOSED INCENTIVE SCHEME FOR THE RETENTION OF BLACK SHAREHOLDERS

Transcription

1 JSE LIMITED PROPOSED INCENTIVE SCHEME FOR THE RETENTION OF BLACK SHAREHOLDERS The introduction of this Scheme for the retention of black shareholders is subject to the approval of Shareholders of the JSE Limited at a general meeting on or about 9 May Introduction 1.1 JSE currently has a relatively high percentage of direct Black shareholding of approximately 9%. However, many of these Black shareholders hold their shares by virtue of the conversion of their JSE rights into JSE Shares and have thus not actively sought to become JSE shareholders as outside investors. In addition, such shareholders have no specific incentive to remain JSE shareholders (beyond the normal commercial incentives that all shareholders have) and thus there is no certainty as to the level of Black shareholding in future. 1.2 The JSE is a signatory to the Financial Sector Charter and the Board therefore believes it is appropriate to implement a broad-based black economic empowerment initiative in the short term that would incentivise current black shareholders to keep their JSE Shares at least until 1 June 2011, by granting them Options (to be issued in three (not necessarily equal) annual tranches) to acquire shares in the JSE at a discount to the market value of the JSE Shares prior to the grant of each tranche of Options. 2. Definitions In this Deed, unless inconsistent with the context 2.1 The following words shall have the following meanings Auditors BDA Black Board Business Day "Deed Dispose the Auditors for the time being of the JSE; the JSE s broker deal accounting system on which client records are maintained; when used in respect of an Entity, means a Entity which falls within the definitions of black people or black companies in the Financial Sector Charter; the board of directors of the JSE from time to time; any day other than a Saturday, Sunday or gazetted Public Holiday in South Africa; this document setting out the terms and conditions of the Scheme; sell, alienate, donate, exchange, distribute, transfer or in any manner whatsoever dispose of, or enter into any arrangement or transaction whatsoever which may have the same or a similar effect as any of the aforementioned sale, alienation, donation, exchange, distribution, transfer or disposal (including but not limited to any transaction, or series of arrangements or transactions, or the cession of any rights or the granting of any option or any similar transaction/s which would have the same economic effect), or realise any value in respect of, and "Disposal" and "Disposed" shall be construed accordingly; Effective Date 17h45 on 28 March 2006;

2 2. "Entity" JEF includes any natural person, partnership, association, company, or trust, which has a legal persona; the JSE Empowerment Fund, a trust to be created by the JSE to provide financial assistance to black people studying for qualifications relevant to the financial services industry; "JSE" JSE Limited, registration number 2005/022939/06; JSE Share Lapsed Option "Letter of Offer" Offer Date "Option" "Option Holder" "Option Price" an ordinary share of the JSE of R1 each (prior to the Subdivision) and of 10 cents each (after the Subdivision); an Option which has lapsed in terms of 6.4 below; a letter substantially in the form of the draft set out in Annexure "A" in terms of which the Board offers an Option to a Qualifying Black Shareholder; the date with effect from which an offer of an Option is made, being 5 June 2006 and 1 June of the calendar years 2007 and 2008 and in respect of Replacement Options, the date on which the Replacement Option is offered in terms of 6.5; an option granted to a Qualifying Black Shareholder to subscribe for JSE Shares in terms of the Scheme; a Qualifying Black Shareholder who has accepted an offer of an Option; an amount equal to 20% of the 30 calendar day VWAP for the JSE Share immediately prior to and including the Offer Date Qualifying Black Shareholders" (i) any Entity which has by 28 April 2006 provided the Board with the information requested by the Board in its sole and absolute discretion before that date and which is sufficient to satisfy the Board in its sole and absolute discretion that such Entity is Black and which (a) (b) is registered as a shareholder of the JSE or reflected as a holder of JSE Shares in the BDA records of JSE broking members on the Effective Date; or can prove to the satisfaction of the Board that the Entity purchased the JSE Shares on or before the Effective Date and had reported that purchase to the Secretary and was awaiting that purchase to be transferred into its name in the relevant BDA record; or (ii) JEF and Option Holders, in respect of Lapsed Options; "Qualifying Black Shareholding" the JSE Shares held by the relevant Qualifying Black Shareholder as at (i) (ii) the Effective Date; or where appropriate, the date on which an Option is granted to JEF in terms of clause 6.5 after the Effective Date, which respective shareholding shall be reduced by the number

3 "Replacement Option" is any Option as defined in 6.5; of JSE Shares Disposed of by that shareholder after the Effective Date or the date the Option is granted in terms of (ii) as the case may be; 3. "Scheme" Scheme Shares "Secretary" "Subdivision" VWAP 2.2 In this Deed: the Scheme set out in this Deed, as it may be amended from time to time in terms of clause 8; the JSE Shares which are the subject of the Scheme comprising JSE Shares in the event that JSE shareholders have approved the Subdivision and such Subdivision has been implemented, or failing that JSE Shares; the Company Secretary of the JSE from time to time; the subdivision of each ordinary JSE Share of R1 into ten ordinary shares of 10 cents each as proposed to JSE shareholders in the Circular issued to JSE shareholders during April 2006; the volume weighted average price for the JSE Share for the relevant period determined by dividing the total value of all trades in JSE Shares through (i) (ii) the central electronic equities order book operated by the JSE (currently JSE SETS) after the Listing; and/or the over the counter market facilitated by, and reported to, the JSE prior to its Listing, by the total volume of JSE Shares traded in such respective trades during the relevant period. references to a statutory provision include any subordinate legislation made from time to time under that provision and include that provision as modified or re-enacted from time to time; words importing any particular gender include the other genders (ie the masculine, feminine and neuter genders, as the case may be); the singular includes the plural and vice versa; and natural persons include artificial persons and vice versa; if a definition imposes substantive rights and obligations on a party, such rights and obligations shall be given effect to and shall be enforceable, notwithstanding that they are contained in a definition; any definition, wherever it appears in this Deed, shall bear the same meaning and apply throughout this Deed unless otherwise stated or inconsistent with the context in which it appears; if there is any conflict between any definitions in this Deed then, for purposes of interpreting any clause of the Deed or paragraph of any Annexe, the definition appearing in that clause or paragraph shall prevail over any other conflicting definition appearing elsewhere in the Deed; where any number of days is prescribed, those days shall be reckoned exclusively of the first and inclusively of the last day unless the last day falls on a day which is not a Business Day, in which event the last day shall be the next succeeding Business Day; where the day upon or by which any act is required to be performed is not a Business Day, the parties shall be deemed to have intended such act to be performed upon or by the next succeeding Business Day; any provision in this Deed which is or may become illegal, invalid or unenforceable in any jurisdiction affected by this Deed shall, as to such jurisdiction, be ineffective to the extent of such

4 prohibition or unenforceability and shall be treated as having not been written (ie pro non scripto) and severed from the balance of this Deed, without invalidating the remaining provisions of this Deed or affecting the validity or enforceability of such provision in any other jurisdiction; the use of any expression covering a process available under South African law (including, for example, a winding-up or sequestration) shall, if any of the parties is subject to the law of any other jurisdiction, be interpreted in relation to that party as including any equivalent or analogous proceeding under the law of such other jurisdiction; references to any amount shall mean that amount exclusive of VAT, unless the amount expressly includes VAT; the rule of construction that if general words or terms are used in association with specific words or terms which are a species of a particular genus or class, the meaning of the general words or terms shall be restricted to that same class (ie the eiusdem generis rule) shall not apply, and whenever the word "including" is used followed by specific examples, such examples shall not be interpreted so as to limit the meaning of any word or term to the same genus or class as the examples given. 3. Purpose This Scheme is intended to encourage Qualifying Black Shareholders to retain their Qualifying Black Shareholding, until at least 08:30 on 1 June 2011 by offering Qualifying Black Shareholders an Option to subscribe for, collectively, the Scheme Shares. 4. Eligibility 4.1 A Qualifying Black Shareholder shall be eligible to and shall participate in the Scheme only if and to the extent that an Option is offered to and is accepted by that Qualifying Black Shareholder in terms of this Deed. 4.2 The Board shall offer Options to Qualifying Black Shareholders; shall offer the Options in three tranches with each tranche comprising such number of JSE Shares (which may or may not be equal) as may be decided by the Board in its sole and absolute discretion but which shall in total not exceed the maximum set out in 6.1 below. The offers shall be made with effect from the Offer Date in of each of 2006, 2007 and 2008; may, in its sole and absolute discretion, offer Options in respect of JSE Shares which were the subject of Lapsed Options to JEF and to Option Holders subsequent to the Effective Date in terms of 6.5, 5. Options provided that the total number of JSE Shares which are subject to such Options may not be greater than as provided for in 5.2. Subject to an Option Holder fulfilling the conditions set out in 6 below, an Option will grant an Option Holder the right to subscribe for JSE Shares as follows 5.1 the Option will only be exercisable during June 2011 in the manner contemplated in this Deed; 5.2 the total number of JSE Shares for which the Option Holders together may subscribe under the Scheme shall be the number of Scheme Shares; 5.3 the JSE Shares in each of the tranches of Options, will be apportioned between all Qualifying Black Shareholders in proportion to their Qualifying Black Shareholdings and rounded down to the nearest whole JSE Share; and 4.

5 5.4 the subscription price for each JSE Share issued pursuant to the exercise of the Option shall be the Option Price. 6. Conditions 6.1 The maximum number of JSE Shares in respect of which Options may be offered under this Scheme is the number of Scheme Shares. 6.2 The total number of JSE Shares subject to Options shall be adjusted (if at all) in such manner as the Auditors shall certify to be appropriate as a result of any corporate action affecting the JSE Shares. 6.3 An Option shall be subject to the provisions of this Deed; shall be offered by the Board substantially in the form of the Letter of Offer attached as Annexure "A", to each Qualifying Black Shareholder who holds a Qualifying Black Shareholding and must be accepted by that Qualifying Black Shareholder within 15 Business Days of the date of the Letter of Offer as required by that Letter, failing which the Option will lapse and shall be dealt with under 6.5; shall be personal to the Qualifying Black Shareholder to whom it is addressed, and, therefore, may only be accepted, and if accepted, exercised, by that Qualifying Black Shareholder and may not be ceded by that Qualifying Black Shareholder to any person; may only be exercised by the Option Holder if it has not Lapsed and if the Option Holder is a Qualifying Black Shareholder who, from the Effective Date until the date of exercise of the Option, held the Qualifying Black Shareholding in respect of which the Option Holder seeks to exercise the Option and was Black without interruption and satisfied the JSE of these facts during June of each year during that period and on the date of exercise; or is a Qualifying Black Shareholder who acquired the Option from the JSE on a date after 5 June 2006 (such later date being the Acquisition Date ) and who, from the Acquisition Date until the date of exercise of the Option, held the Qualifying Black Shareholding and was Black without interruption and satisfied the JSE of these facts during December of each year during that period and on the date of exercise; shall be exercised by notice in writing delivered, together with payment of the Option Price, to the Secretary on any Business Day during the calendar month of June 2011; and may be exercised in part or in full. 6.4 An Option shall lapse immediately in the event that the Letter of Offer is not accepted by the Qualifying Black Shareholder in terms of 6.3.2; in respect of such part of the Qualifying Black Shareholding as is Disposed of by the Option Holder to any person prior to the exercise of the Option, with any fraction of any adjusted JSE Share which is subject to such an adjusted Option being rounded down to the nearest whole JSE Share; or in respect of the entire Qualifying Black Shareholding, in the event that the Option Holder ceases to be Black or fails to meet the definition of Black, for any period prior to the exercise of the Option; or in respect of the entire Qualifying Black Shareholding, in the event that the Option Holder notifies the JSE in writing that it does not wish to exercise the Option; or 5.

6 in respect of the entire Qualifying Black Shareholding, in the event that the Option Holder fails to provide to the JSE, on a Business Day during each calendar month of June during which that Option Holder holds an Option and if any Option is being exercised, prior to the date of such exercise, a certificate satisfactory to the JSE confirming and warranting to the JSE (i) the Black status of that Option Holder and (ii) that that Option Holder held that Option Holder s Qualifying Black Shareholding continuously since the date of the award of the first tranche of Options or, in the event of clause being applicable, from the Acquisition Date, up to 1 June of the relevant month prior to 2011 or up to the date of exercise in 2011; or in respect of the entire Qualifying Black Shareholding, in the event that the Option Holder fails to exercise the Option in terms of the Scheme by the last Business Day of June 2011; or in respect of the entire Qualifying Black Shareholding, in the event that the Option Holders Disposes or attempts to Dispose of the Option itself; or in respect of the entire Qualifying Black Shareholding in the event of any certificate, warranty or representation given to the Board in terms of 0 being found to be incorrect in any material way; or in the event of a lapse in terms of the provisions of 6.8, and upon any such lapsing, the holder of a Lapsed Option shall not in any circumstances have any claim of whatsoever nature against the JSE arising from the lapsing. 6.5 The Board may in its sole discretion from time to time offer Options to JEF or, failing acceptance by JEF of such Options, to existing Option Holders, in order to re-allocate Lapsed Options (such new Options being referred to as Replacement Options ). In this latter event, the Replacement Options shall be offered to all then Option Holders holding Options which have not lapsed, pro rata to the Qualifying Black Shareholding they then hold and subject to the terms set out in this Deed applied mutatis mutandis. In such event, any such offer of a Replacement Option shall be in addition to that Option Holder's then existing Options. 6.6 This Deed and a duly accepted Letter of Offer shall constitute the whole contract between the JSE and an Option Holder. 6.7 Within 10 Business Days after the exercise of an Option whether in part or in full, and after the payment of the Option Price, in terms of the Scheme, the Board shall allot and issue JSE Shares represented by the exercised Options. 6.8 The JSE shall be entitled from to time and at any time to require from any Option Holder such confirmation as the JSE may reasonably require to confirm the Black status of that Option Holder and/or the period that that Option Holder has held the required Qualifying Black Shareholding. Failure on the part of the Option Holder to so provide such confirmation within 15 Business Days of written request shall cause the relevant Options to lapse. In addition, the JSE shall be entitled to make such enquiries as it may consider reasonably necessary to establish such Black status or such holding period and each Option Holder shall be deemed to have authorised the JSE to make such enquiries. 7. Mediation and arbitration 7.1 separate, divisible agreement This clause is a separate, divisible agreement from the rest of this Deed and shall: not be or become void, voidable or unenforceable by reason only of any alleged misrepresentation, mistake, duress, undue influence, impossibility (initial or supervening), illegality, immorality, absence of consensus, lack of authority or other cause relating in substance to the rest of the Deed and not to this clause. The parties intend that any such issue shall at all times be and remain subject to arbitration in terms of this clause; remain in effect even if the Deed terminates or is cancelled. 6.

7 disputes subject to mediation and arbitration Save as may be expressly provided for elsewhere in this Deed for the resolution of particular disputes, any other dispute arising out of or in connection with this Deed or the subject matter of this Deed, including without limitation, any dispute concerning: the existence of the Deed apart from this clause; the interpretation and effect of the Deed; the parties' respective rights or obligations under the Deed; the rectification of the Deed; the breach, termination or cancellation of the Deed or any matter arising out of the breach, termination or cancellation; damages arising in delict, compensation for unjust enrichment or any other claim, whether or not the rest of the Deed apart from this clause is valid and enforceable, shall be referred to mediation as set out in mediation If the parties to any dispute are unable to agree on a mediator or to resolve any dispute by way of mediation within 14 days of any party to any dispute in writing requesting that the dispute be resolved by mediation, then the dispute shall be submitted to and decided by arbitration as set out in this clause. 7.4 appointment of arbitrator The parties to any dispute shall agree on the arbitrator who shall be an attorney or advocate on the panel of arbitrators of the Arbitration Foundation of Southern Africa ("AFSA"). If agreement is not reached within 10 Business Days after any party calls in writing for such agreement, the arbitrator shall be an attorney or advocate nominated by the Registrar of AFSA for the time being. The request to nominate an arbitrator shall be in writing outlining the claim and any counterclaim of which the party concerned is aware and, if desired, suggesting suitable nominees for appointment as arbitrator, and a copy shall be furnished to the other parties to the dispute who may, within 7 days, submit written comments on the request to the addressee of the request with a copy to the first party. 7.5 venue and period for completion of arbitration The arbitration shall be held in Sandton and the parties to the dispute shall endeavour to ensure that it is completed within 90 days after notice requiring the claim to be referred to arbitration is given. 7.6 Arbitration Act - rules The arbitration shall be governed by the Arbitration Act, 1965, or any replacement Act and shall take place in accordance with the Commercial Arbitration Rules of AFSA. 7.7 arbitrator may apply equity The arbitrator need not strictly observe the principles of law and may decide the matters submitted to him according to what he considers equitable in the circumstances.

8 application to court for urgent interim relief Nothing contained in this 7 (Mediation and arbitration) shall prohibit a party to the dispute from approaching any court of competent jurisdiction for urgent interim relief pending determination of the dispute by arbitration. In this event, the court will determine who will bear the costs of suit and in what proportions. 8. Amendment of Scheme The Board may, from time to time, by resolution, amend all or any of the provisions of the Scheme (whether retrospectively or otherwise), provided that no such amendment shall adversely affect the vested rights of any Option Holder, and no such amendment affecting 8.1 the category of persons entitled to participate in the Scheme; 8.2 the total number of Scheme Shares; 8.3 the proportion in which JSE Shares may be allocated to any Qualifying Black Shareholder; 8.4 the provisions relating to the payment of the Option Price; 8.5 the voting, dividend, transfer and other rights attaching to the JSE Shares and the Options, shall be made, unless approved by members of the JSE in general meeting. 9. Administration The JSE will bear all costs of and incidental to the implementation and administration of the Scheme including any stamp duty payable in respect of the issue of any JSE Shares and will, from time to time, as and when necessary, provide all requisite funds and facilities including all secretarial, accounting, administrative, legal and financial advice and services, office accommodation, stationery and so forth, necessary in terms of the Scheme. 10. Duration of the Scheme The Scheme shall continue until 30 June 2011, by when the last outstanding Option is required to have been exercised, when it shall automatically terminate.

9 9. Annexure "A" (Draft of a letter to be prepared on JSE Letterhead LETTER OF OFFER Strictly personal and confidential Date: June Dear Sirs, The JSE Limited Incentive Scheme for the Retention of Black Shareholders 1. The Scheme As you may know, the JSE Limited (the JSE ) has established an Incentive Scheme for the Retention of Black Shareholders (the "Scheme") as part of its ongoing commitment to the transformation of our industry. A copy of the Scheme is enclosed and its definitions are used in this letter. The Scheme authorises the JSE to issue options in tranches over a period of three years (the Option ) to Black holders of JSE shares ( JSE Shares ). An Option entitles the Option Holder to acquire a certain number of JSE Shares, subject to the Option Holder meeting certain conditions, all in terms of the Scheme. 2. Grant of option for We have pleasure in advising you that in terms of a resolution of the Board of Directors of the JSE, it was agreed that you should be granted an Option to acquire [ ] JSE Shares, being the number of JSE Shares equal to [ ] JSE Shares for every 100 JSE Shares (post the Subdivision) held by you on [28 March 2006] ( the Effective Date ), such holding being the "Qualifying Black Shareholding" referred to in the Scheme Deed. (Your Qualifying Black Shareholding on the Effective Date was [xxxxx] JSE Shares.) You are accordingly hereby offered the Option subject to the terms and conditions of the Scheme with effect from [5 June 2006] (the Offer Date for the purposes of the Scheme). This is the [first] tranche of Options to be offered to you under the Scheme. Further tranches will be offered with effect from 1 June 2007 and 1 June 2008 and we will contact you in due course in this regard. 2.2 The Option hereby offered is personal to you and may only be accepted and/or exercised by you and may not be ceded by you. 2.3 You may exercise the Option in full or in part. 3. The Option Price 3.1 The Option Price shall be R[ ] per JSE Share, which price has been calculated as determined in the Deed. 3.2 The Option Price per JSE Share shall be payable upon the exercise of the Option as set out in 4 below. 4. Exercise of Option You may exercise your Option in whole or in part, by notice in writing delivered together with payment of the Option Price in respect of the JSE Shares to be subscribed for, to the Secretary of the JSE on any

10 Business Day during the calendar month of June 2011, provided that simultaneously with such exercise you satisfy the Board of the JSE that you comply with the conditions set out in the Scheme. 5. Terms and conditions of the Option 5.1 The Option is granted subject to the terms and conditions referred to in the Deed and by your acceptance of this offer of the Option, you accept as binding upon yourself the terms and conditions so set out. Your attention is specifically drawn to clause of the Deed which stipulates that an Option Holder must during June of each year from the Effective date until the exercise of the Option, satisfy the JSE that such Option Holder held the Qualifying Black Shareholding in respect of which the Option has been granted and was Black without interruption from the Effective Date. 5.2 In terms of the Scheme, the Board may make further offers of Replacement Options to Qualifying Black Shareholders subject to the overall limit set out in the Scheme. In the event that the Board exercises such discretion, you will be notified in writing of the terms of such further offer. 5.3 In the event of any conflict between the provisions of this letter and the provisions of the Scheme, the provisions of the Scheme shall prevail. 6. Acceptance of offer of Option In order to accept the offer of the Option set out in this letter please return within 10 Business Days of the date hereof, the attached copy of this letter to the Secretary of the JSE duly signed in acknowledgement of your acceptance and your having received a copy of this letter and the Scheme Deed annexed hereto. 7. Option Holders Forum In addition to granting the Options, the Board has formed an Option Holders Forum which the JSE hopes will become an active place for the discussion between the JSE and Option Holders about future strategic threats to and opportunities for our capital markets and in particular about how the JSE and Option Holders could work together to address these. We will be calling the first Forum meeting shortly and trust that you will accept our invitation to become an active member of the Forum. Yours sincerely, 10. Director

11 11. ACCEPTANCE AND ACKNOWLEDGEMENT OF AWARD OF OPTION ON [JSE TO INSERT DATE] Qualifying Black Shareholding: Number of shares which can be acquired on exercise of Option: Option Price per share: Total potential liability if Option is exercised in full: [JSE to insert number] [JSE to insert number] [JSE to insert number] [JSE to insert number] Exercise date for Option: June 2011 I hereby accept the offer of the Option granted in terms of the letter to which this acceptance and acknowledgement is attached. I acknowledge having received a copy of the Scheme. I also confirm that I shall be bound by the terms and conditions of the Option as set out in the Scheme. Authorised signature date