Hi JJ,This may be a little easier to read:OPTIONSAND OTHER...

Hi JJ,
This may be a little easier to read:

OPTIONSAND OTHER CONVERTIBLE SECURITIES

Many ASX-listed Australian companies have employee incentiveplans which involve the granting of share options or rights to executives. Aperson seeking to acquire ownership of all of a company’s shares should makearrangements to acquire, or have cancelled, any options, rights and othersecurities convertible into shares. This is to avoid the highly undesirablesituation where a bidder has acquired 100% of the company’s shares but thereremain options or rights on issue which, if exercised, would result in theissue of shares to the options or rights holders and the bidder ceasing to own 100%of the company. This is an issue because in that situation the company’sdirectors would need to take into the account the interests of the minorityshareholders, and the company would be subject to the related partytransactions restrictions in the Corporations Act. Furthermore, the exercise ofthe options or rights may, depending on the circumstances, cause the target toexit the bidder’s Australian tax consolidated group.

The common methods for acquiring or cancelling options andrights (and other convertible securities) are as follows:

• if the control transaction proceeds via a takeover bid:

• the bidder making a simultaneous takeover bid for eachclass of convertible securities; or

• the bidder entering into contractual arrangements witheach convertible security holder and the target under which the convertiblesecurities are to be transferred to the bidder or cancelled if the bidderobtains a relevant interest in more than 50% of the target’s shares and the bidis unconditional; and if the control transaction proceeds via a scheme of arrangement:

• the bidder proposing a simultaneous scheme of arrangementfor each class of convertible securities; or

• the bidder entering into contractual arrangements witheach convertible securityholder and the target under which the convertiblesecurities are to be transferred to the bidder or cancelled if the scheme becomeseffective. To avoid any collateral benefit or unequal treatment issues, theconsideration provided for the acquisition or cancellation of convertiblesecurities should be no greater than market value. For this purpose it is usualto undertake a Black-Scholes or other valuation of the convertible securities. Analternative method of eliminating convertible securities is to compulsorilyacquire them. In general terms, a person can compulsorily acquire a company’s convertiblesecurities if the person’s voting power in the company is at least 90% and theperson beneficially owns at least 90% by value of all the shares and convertiblesecurities in the company. The consideration payable is normally the fairmarket value of the convertible securities.

CHEERS

RAN58