VMK - Verimark Holdings Limited - Specific issue of shares for cash
VERIMARK HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1998/006957/06)
(Share code: VMK ISIN: ZAE000068011)
("Verimark" or "the Company")
SPECIFIC ISSUE OF SHARES FOR CASH
1. INTRODUCTION
Shareholders are advised that the Company is proposing a disposal of
ordinary shares in Verimark, held in treasury by the subsidiary Verimark
(Proprietary) Limited ("Verimark Subsidiary"), to certain key members of
management ("the management shareholders"), in terms of the Verimark
Employee Share Purchase Agreement ("the Agreement"), subject to
restrictions, which is treated as a specific issue for cash in terms of
the JSE Limited ("JSE") Listing Requirements ("the Listing
Requirements").
2. THE TRANSACTION
2.1 Rationale and details relating to the transaction
Shareholders are well aware that the Company has just recently emerged
from a prolonged phase of depressed profitability and underperformance.
An integral part of the successful turnaround was due to the dedicated
performance of a completely new top management team. As Verimark does not
have a staff incentive scheme, the board deemed it prudent to adopt
interim measures to incentivise and retain key members of staff in order
to ensure the sustainability of the turnaround process.
As a result, the directors have undertaken to sell 3,050,000 ordinary
shares of 0.3333 cents each in the share capital of the Company, out of
treasury shares held by Verimark Subsidiary, for a consideration of 65
cents per ordinary share to the management shareholders. Verimark
Subsidiary will be giving financial assistance to the management
shareholders in terms of signed loan agreements to acquire the shares in
the share capital of the Company. The price of 65 cents per share was
determined with reference to the 30 day weighted average traded price up
to 25 February 2010, the date when the Board of Directors ("the board")
resolved to approve the transaction.
The ordinary shares to be sold will rank pari passu in all respects with
the existing issued ordinary shares in the Company and will be subject to
the terms of the Company`s Articles of Association, the Companies Act 61
of 1973, as amended and the Listings Requirements. The effective date of
the transaction will be 1 March 2010. Accordingly, the shares will rank
for payment of the final dividend in respect of the financial year ended
28 February 2010 of 6,0 cents per share, payable on 7 June 2010.
In terms of the Listing Requirements, a sale of treasury shares is
regarded as an issue of shares for cash. In addition, the restrictions on
trading imposed on management shareholders in terms of the Agreement,
categorise them as non-public shareholders and require that the
transaction be effected as a specific issue of shares for cash ("specific
issue").
Initially, no capital will be raised from the specific issue.
2.2 The Agreement
Management shareholders will purchase ordinary shares in Verimark, from
Verimark Subsidiary.
Verimark Subsidiary agreed to lend the transaction value and subsequent
interest to the management shareholders to facilitate the purchase of the
shares on the following terms:
* Interest will be charged at the same rate as Verimark Subsidiary
pays on its overdraft, currently being prime plus 1.5%;
* The loans and outstanding interest will be repaid by the management
shareholders -
- as and when dividends are declared by Verimark;
- ten percent of the yearly bonus paid to the management
shareholders, as and when paid, starting from the financial
year ending 28 February 2011;
- as and when shares are sold; and
- not later than five years from the date of the agreements, or
such later date as Verimark Subsidiary agrees to.
* The Verimark share certificates relating to the shares will be held
by Verimark Subsidiary as security for the outstanding amount due by
the management shareholders.
The management shareholders may pay for the shares in a shorter period
than the stipulated time. However, the lock-in provisions remain in place
until the five year period has elapsed.
The management shareholders will not be permitted to sell any of the
shares purchased for a period of five years from the date of the
agreement.
If a management shareholder`s employment is terminated during the five
year period, for whatever reason, all the shares will be sold back to
Verimark Subsidiary by the management shareholder for the total amount
outstanding on the management shareholder`s loan account, plus all
amounts paid off his loan account that were not from dividends declared
by the Company.
The management shareholders will have the voting rights/ power over the
shares. Prior to the sale of the shares the directors have full control
over the shares which are treated as treasury shares.
2.2.1 Management shareholders purchasing ordinary shares in Verimark from
Verimark Subsidiary
Name of Employee Number of shares
Renso du Plessis 2,000,000
Muhammad Adam 150,000
Zain Adam 150,000
Theuns 150,000
Bezuidenhout
Neil du Plessis 150,000
Clint Hoadley 150,000
Heinrich Lourens 150,000
Duane Rabie 150,000
Total 3,050,000
2.2.2 Repurchase of ordinary shares in Verimark by Verimark Subsidiary
In terms of the Agreement, fully set out in paragraph 2.2 above, all
the shares will be sold back to Verimark Subsidiary by the
management shareholder if such a management shareholder`s employment
is terminated during the five year period, for whatever reason.
Verimark Subsidiary may only repurchase the maximum number of
ordinary shares from the listed management shareholders, as
indicated in the table set out in paragraph 2.2.1 above.
To the extent that such repurchase is required, the repurchase of
shares by Verimark Subsidiary from the management shareholders is
regarded as a specific repurchase and requires authority from
shareholders by way of a special resolution ("the repurchase"). The
special resolution is subject to at least 75% of the votes cast by
the Company`s shareholders, present or represented by proxy at the
general meeting, being cast in favour thereof, excluding the shares
held by any shareholder and its associates participating in the
specific repurchase, as contemplated in section 85(2) of the
Companies Act, the JSE Limited ("JSE") Listings Requirements and in
accordance with the articles of association of Verimark.
In the event that such a repurchase be required, the overdraft
facilities will be utilised to fund the repurchase.
The effect of the repurchase will be that such repurchased shares
will be held as treasury shares.
3. CONDITIONS PRECEDENT TO THE SPECIFIC ISSUE
The specific issue is subject to the fulfillment of the following
conditions precedent:
3.1 JSE approval;
3.2 board approval; and
3.3 the approval by the 75% requisite majority of shareholders present
and voting at the general meeting is obtained. The management
shareholders are excluded from voting on the ordinary resolution to
approve the specific issue at the general meeting.
4 OPINIONS AND RECOMMENDATIONS
The board has considered the terms and conditions of the transaction and
is of the opinion that it is in the best interests of all of Verimark`s
key stakeholders.
5 FINANCIAL EFFECTS OF THE TRANSACTION AND THE REPURCHASE
The transaction and the repurchase will have no significant or material
effect on Verimark`s earnings, headline earnings, net asset value or
tangible net asset value.
6. GENERAL MEETING
A notice convening a general meeting and a form of proxy, for use by
certificated shareholders and own name dematerialised shareholders, will
be attached to and form part of the circular to be posted to shareholders
by Monday, 14 June 2010.
The general meeting will commence at 12h00 or immediately after the
conclusion of the annual general meeting to be held at 11h00 on Thursday,
8 July 2010 at the offices of the Company, 67 CR Swart Drive, Cnr Freda
Road, Bromhof Extension 48, Randburg, 2194 to consider and if deemed fit,
to pass, with or without modification, the ordinary and special
resolutions necessary to effect the specific issue.
By order of the Board
SJ Preller
Company Secretary
Johannesburg
8 June 2010
Sponsor
Grindrod Bank Limited
Date: 08/06/2010 16:23:01 Supplied by www.sharenet.co.za
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