Discretionary Option Arrangement

The Employer (the Employer) makes an extra cash contribution to a Trustee of a Trust (the Trustee), in respect of acquisition of several discretionary options for employees, and claims this amount as a tax deduction. 2. The Trustee pays the cash contribution back to the Employer as consideration for acquiring several such options ('the options') from the Employer. The acquisition price of the option is determined in accordance with a valuation methodology adopted by the Employer. 3. The options may be exercised or cancelled. • An option that is exercised enables its owner to acquire a share in the Employer on the exercise of the option. • An option that is cancelled gives its owner a cash amount referable to the market value of a share in the Employer at the time the option is cancelled. 4. The legal and beneficial ownership of the options is initially held by the Trust for the benefit of employees of the Employer generally. 5. In a later financial year and at the direction of the Employer, the Trustee allocates each such option to a specific employee. At this time, the legal and beneficial ownership of the option passes from the Trustee to that employee (the employee). 6. The employee holds the option and can exercise or cancel the option in accordance with the option vesting conditions. The conditions may include performance hurdles, a minimum holding period, or the exercise of a discretion by the Employer to allow the option to be exercised or cancelled. 7. Once the vesting conditions have been satisfied, the employee may exercise or cancel the option. However, the Employer may at its discretion, do one of two things in respect of the option: (a) allow the option to be exercised and issue a share to the employee; or (b) cancel the option. 8. Where the option is exercised and a share is issued to the employee, the cost of the share to the employee is the option exercise price. The option exercise price is the market value of the share at the time the option is acquired by the Trustee. 9. Where the option is cancelled, the employer will pay to the employee a cash amount equal to the difference between the option exercise price and the value of a share in the Employer at the time the option is cancelled.