SUMMARY OF THE PRINCIPAL TERMS OF THE MASSMART HOLDINGS LIMITED 2013 SHARE PLAN(SHARE PLAN OR PLAN)

1. Introduction and rationale

The purpose of a long-term share incentive plan is to attract, retain, motivate and reward executives and managers who are able to influence the performance of the Company and its subsidiaries on a basis which aligns their interests with those of the Company's shareholders. The Remuneration Committee commissioned reports by Deloitte, 21st Century Business & Pay Solutions and PricewaterhouseCoopers to review the appropriateness of the Company’s current long-term share
incentive plan.

The various reports recommended to the Remuneration Committee that the current long-term share incentive plan be changed to be more in line with current market trends. The terms of the Share Plan detailed below will allow Massmart to remain competitive in annual and share based incentives, reward long term sustainable Company performance, act as a retention tool, and ensure that those participating in the Share Plan share a significant level of personal risk with the Company’s shareholders. The Plan further provides for the inclusion of a number of performance conditions, designed to align the interests of participants with those of Massmart’s shareholders, and to reward Company and individual performance, more so than merely the performance of the economy or the retail sector in which the Company operates.

2. Summary of proposed principal terms of the Share Plan

The Plan

The Massmart Holdings Limited 2013 Share Plan, the terms of which are embodied in the Plan Rules, entails participation therein through either the restricted share method and/or the performance share method as determined by the Board of Directors in discussion with the Remuneration Committee.

Eligibility

Any person holding full-time salaried employment or office, namely any executive (including any executive director), senior manager and/or key employee of any Group company (Employer Company) but excluding any non-executive director, as selected by the Board of Directors from time to time in its sole and absolute discretion, shall be eligible for participation in the Plan (Eligible Employee).

Grants and Awards of shares

The Board, at the direction of the Remuneration Committee, will offer to Eligible Employees participation in the Plan through a weighted combination of:

  • conditional grants of shares, which will vest in the participant no earlier than the third anniversary of the grant (Grants);
  • conditional awards of shares, which will vest in the participant no earlier than the third anniversary of the award date to the extent that the relevant performance criteria imposed by the Board have been met (Awards).

Limitation

The maximum number of shares which may be acquired by: (i) participants under the Plan and any other Massmart share plan is not to exceed 39.5 million shares and (ii) any one participant in terms of the Plan and any other Massmart share plan is not to exceed 4 million shares. In the determination of the above limits, shares which have been acquired through the JSE and transferred to participants shall not be taken into account. 

Settlement

As soon as reasonably possible after an Award or Grant has vested, the Company shall be entitled to settle the Award or Grant by either procuring that the relevant number of shares are acquired on the JSE and delivered to the participant, or by allotting and issuing new shares to the participant. It is the stated intention of the Company to acquire shares through the JSE rather than to issue new shares. Alternatively, in order to provide for future flexibility, the Company or Employer Company is entitled to, in its sole and absolute discretion, make settlement through the payment of a cash bonus equal to fair market value of the relevant number of shares. The fair market value shall be determined by reference to the volume weighted average price of a share on the JSE over the 10 trading days immediately preceding the relevant vesting date.

Administration of the Plan

The Board is responsible for the operation and administration of the Plan through its Remuneration Committee, and has discretion to decide whether and on what basis the Plan shall be operated, which may include the delegation of the administration of the Plan to the compliance officer of the Plan or any third party appointed by the Board, but excluding any executive director of the Company. A trust will not be used to administer the Plan.

Annual accounts

The Board shall ensure that a summary appears in the annual financial statements of the Company of, inter alia, the number of shares Granted or Awarded or settled to participants and the number of shares which may be utilised for the Plan at the beginning of the financial year.

Shares

The Company shall at all times reserve and keep available, free from pre-emptive rights, out of its authorised but unissued share capital, such number of shares as may be required to enable the Company to fulfil its obligations to deliver shares to participants, and shall ensure that shares may only be issued or purchased for purposes of the Plan once a participant (or group of participants) to whom Grants or Awards will be offered, has been formally identified. This provision will however only be necessary in the unlikely event that the Company decides to settle shares from its authorised but unissued share capital.

Funding

Save for the tax liability arising pursuant to an Eligible Employee’s participation in the Plan, the costs associated with the implementation and administration of, and participation in, the Plan will be funded by the Company, and recovered from each Employer Company based on the number of participants who are employed by each Employer Company.

Termination of employment

Unless the Board determines otherwise, if a participant ceases to be employed by an Employer Company by reason of:

  • No Fault Termination prior to the vesting of a Grant, then the Grant shall vest on the date of termination of employment and shall be settled to the participant as soon as practically possible after the date of termination of employment; or
  • Fault Termination prior to the vesting of a Grant, then such Grant shall be cancelled on the date of termination of employment.

The manner in which a participant's Grant or Award is treated upon termination of employment is determined by reference to whether the participant’s employment was terminated by reason of No Fault Termination or Fault Termination.

No Fault Termination is the termination of employment of a participant by the Employer Company by reason of:

  • death;
  • injury, disability or ill-health;
  • dismissal based on operational requirements as contemplated in the Labour Relations Act, 1995;
  • retirement;
  • the Employer Company ceasing to be a member of the Group; or
  • mutual agreement.

Fault Termination is the termination of employment of a participant by the Employer Company by reason of misconduct, poor performance or a resignation by the participant.

In the event that participant’s employment is terminated by virtue of:

  • No Fault Termination prior to the vesting of his Grant or Award, then the vesting of his Grant or Award will be accelerated to the date on which his employment is terminated and:
    • all the shares in respect of which his Grant was made will be settled;
    • a pro rata portion of the shares in respect of which his Award was made will be settled, based on the extent to which he has complied with the performance criteria and the number of days which he remained employed following the Award date; and
  • Fault Termination prior to the vesting of his Grant or Award, the Grant or Award will be cancelled.

Voting and dividend rights

Prior to the settlement of a Grant or an Award, participants shall have no voting or dividend rights in respect of the shares in respect of which a Grant or an Award has been made.

Change of control

If an offer is made to shareholders or the Company or a scheme of arrangement is proposed between the Company and the shareholders which would result in a change of control of the Company, the Board of Directors will use its best endeavours to procure that the same or a similar offer is made or a scheme of arrangement is proposed, as the case may be, to all participants in respect of all existing Grants and Awards.

Alternatively, should control of the Company pass to a third party offeror (Offeror) as a result of an offer, an amalgamation or reconstruction or scheme of arrangement which makes provision for participants:

  • to receive shares in the Offeror or other company on terms which, in the opinion of the External Auditors, are not less favourable than the settlement terms under the Plan, the participants will be obliged to accept such shares and the Grant and Award shall lapse;
  • are granted similar rights based on an incentive scheme similar to the Plan in respect of shares in such Offeror or other company on terms which in the opinion of the External Auditors are not less favourable than the settlement terms under the Plan, they shall be deemed to have been granted such rights in terms of such new incentive scheme and the Grants or Awards shall lapse.