Notice of Allotment of Stock Options (Subscription Warrants)

Transcription

1 To Whom It May Concern: June 27, 2017 Listed Company Name Representative Code No. Contact Person TOTO LTD. Madoka Kitamura President, Representative Director 5332 (First Section of Tokyo/Nagoya Stock Exchanges, Fukuoka Stock Exchange) Masayuki Yoshioka General Manager of Management planning Dept. (TEL: ) Notice of Allotment of Stock Options (Subscription Warrants) Fukuoka, Japan June 27, 2017 TOTO LTD. announced today that a meeting of the Board of Directors held today has resolved the allotment and the details of subscription warrants as stock options for a stock-linked compensation plan to the Company s directors (excluding outside directors). Details are as follows. I. Reasons for the allotment of subscription warrants The allotment is designed to ensure that the Company s directors (excluding outside directors) share with shareholders not only the benefits of high stock prices, but also the risks of low stock prices, bolstering their morale and motivation for improving the results of the Company. II. Summary of allotment of subscription warrants 1. Name of subscription warrants: 11th TOTO subscription warrants 2. Total number of subscription warrants: Type and number of shares that are object of subscription warrants The type of shares that are object of subscription warrants shall be common stocks of the Company. The number of shares for each subscription warrant (the Number of Granted Shares ) shall be 500 shares. However, if a share-split or a reverse share-split is conducted for common stocks of the Company after the date when subscription warrants are allotted (the Allotment Date ) as described in Condition 13 below, the Number of Granted Shares shall be adjusted by applying the following formula. Number of Granted Shares after adjustment = Number of Granted Shares before adjustment Ratio of share-split / reverse share-split In the case of a share-split, the number of Granted Shares after adjustment shall be applicable from the date following the base date of the relevant share-split, and in the case of a reverse 1

2 share-split, it shall be applicable from the effective date. However, if a share-split is carried out subject to the approval by the Company s ordinary general meeting of shareholders to the proposition of raising capital or reserves by reducing retained earnings, and if the base date of the share-split is determined to be a date before the day when the relevant ordinary general meeting of shareholders is closed, the number of Granted Shares after adjustment shall be retroactively applicable on the date following the relevant base date after the date following the closing date of the relevant ordinary general meeting of shareholders. In addition to the above, if a full share unit is amended after the allotment date, the Number of Granted Shares shall be adjusted to a reasonable extent. Any fractions of less than one share resulting from the above adjustments shall be rounded down to the nearest one share. When adjusting the Number of Granted Shares, the Company shall report or announce the necessary matters to holders of subscription warrants who are included in the register of the subscription warrants (the Subscription Warrants Holders ) by one day before the day when the Number of Granted Shares after adjustment is applicable. However, if the Company is not able to report or announce the necessary matters at least one day prior to the above application date, it shall report or announce them as soon as possible at a later date. 4. Amount of assets contributed upon the exercise of subscription warrants The amount of assets contributed upon the exercise of each subscription warrant shall be calculated by multiplying the paid-in value of 1 yen per share delivered upon the exercise of each subscription warrant by the Number of Granted Shares. 5. Exercise period of subscription warrants From July 21, 2017 to July 20, Matters concerning the increase in capital and capital reserve when shares are issued upon the exercise of subscription warrants (1) The amount of increase in capital when shares are issued upon the exercise of subscription warrants shall be one half of the maximum amount of increase in capital, etc., which is calculated in accordance with Paragraph 1 of Article 17 of the Corporate Calculation Regulation, and fractions of less than 1 yen resulting from the calculation shall be rounded up to the nearest 1 yen. (2) The amount of increase in capital reserve when shares are issued upon the exercise of subscription warrants shall be the amount calculated by deducting the amount of increase in capital as stated in the preceding paragraph (1) from the maximum amount of increase in capital, etc., as stated in the same paragraph (1) above. 7. Restriction on acquiring subscription warrants by assignment Acquisition of subscription warrants by assignment shall require approval of the Board of Directors. 8. Conditions for acquiring the subscription warrants The Company may acquire subscription warrants free of charge on the date separately specified by the Board of Directors, if any of agenda items (1) to (5) below is approved by the Company s 2

3 ordinary general meeting of shareholders (or if a resolution is made by the Company s Board of Directors or a decision is made by representative corporate officers in the case when a resolution made by the Company s ordinary general meeting of shareholders is not required). (1) Agenda for approval of a merger agreement under which the Company is to be dissolved. (2) Agenda for approval of a company split agreement or plan under which the Company is to be split (3) Agenda for approval of a share exchange agreement or share transfer plan under which the Company is to become a wholly owned subsidiary (4) Agenda for approval to change the Company s Articles of Incorporation to establish provisions concerning the requirement for the Company s approval with regard to the acquisition of all the Company s outstanding shares through transfer. (5) Agenda for approval to change the Company s Articles of Incorporation to establish provisions concerning the requirement for the Company s approval with respect to the acquisition through a transfer of shares issued upon the exercise of the subscription warrants, or concerning the acquisition by the Company of all shares issued with the exercise of subscription warrants by resolution of the Company s shareholder meeting 9. Policies to determine the cancellation of the subscription warrants or the grant of the subscription warrants by the successor company in relation to organizational restructure If the Company conducts a merger (limited to cases when the Company is the dissolving company), an absorption-type company split (kyushu-bunkatsu) or an incorporation-type company split (shinsetsu-bunkatsu) (limited to cases when the Company is the transferor), or share exchange (kabushiki kokan) or share transfer (kabushiki iten) (limited to cases when the Company is the wholly owned subsidiary) (collectively, the Organizational Restructure), each holder of subscription warrants that are outstanding (the Outstanding Subscription Warrants ) immediately prior to the date when the relevant Organizational Restructure becomes effective (the effective date of an absorption-type merger in the case of an absorption-type merger (kyushu-gappei); the date when a stock company through the consolidation-type merger (shinsetsu-gappei) is established in the case of the consolidation-type merger; the effective date of an absorption-type company split in the case of the absorption-type company split; the date when a stock company is established through an incorporation-type company split in the case of the incorporation-type company split; the effective date of a share exchange in the case of the share exchange; or the date when a parent company is established through a share transfer in the case of the share transfer) shall be granted the subscription warrants to acquire shares in the respective stock company as set forth in Item 8(a) to 8(e) of Paragraph 1 of Article 236 of the Companies Act (the Successor Company ). However, this shall be applicable subject to the issuing of the subscription warrants by the Successor Company in accordance with the following items set forth in the relevant absorption-type merger agreement, consolidation-type merger agreement, absorption-type company split agreement, incorporation-type company split plan, share exchange agreement or share transfer plan: 3

4 (1) Number of subscription warrants to be issued by the Successor Company The same number as the Outstanding Subscription Warrants held by the relevant holder (2) Type of shares underlying the subscription warrants Common stocks in the Successor Company (3) Number of shares underlying the subscription warrants To be determined in accordance with Condition 3 above, upon taking into account the terms and conditions of the relevant Organizational Restructure (4) Amount of assets contributed upon the exercise of subscription warrants The amount of assets contributed upon the exercise of each subscription warrant shall be calculated by multiplying the post-reorganization exercise price as set forth below by the number of shares of the Successor Company underlying each subscription warrant as set forth in (3) above. The post-reorganization exercise price shall be one yen per share of the Successor Company, to be granted upon the exercise of each issued subscription warrant. (5) Exercise period of subscription warrants The period commences on the later of the first day of the period during which the subscription warrants may be exercised as set forth in Condition 5 above or the date when the relevant Organizational Restructure becomes effective. The period ends with the expiration of the period during which the subscription warrants may be exercised as set forth in Condition 5 above. (6) Matters concerning the increase in capital and capital reserve when shares are issued upon the exercise of subscription warrants To be determined in accordance with the conditions set forth in Condition 6 above (7) Restriction on acquiring subscription warrants by assignment Acquisition of subscription warrants by assignment shall require the approval of the Board of Directors of the Successor Company. (8) Conditions for acquiring the subscription warrants To be determined in accordance with Condition 8 above (9) Other conditions for the exercise of subscription warrants To be determined in accordance with Condition 11 below 10. Fractions of less than 1 share occurring on exercise of subscription warrants If a fraction of less than 1 share to be delivered to the holder of the subscription warrants occurs upon exercise of subscription warrants, it shall be rounded down to the nearest 1 share. 11. Other conditions for the exercise of subscription warrants (1) Holders of subscription warrants may exercise the subscription warrants, only when the holders no longer hold a position as the Company s director (including a corporate officer in a company with a committee), statutory auditor, and/or corporate officer. In this case, the holders may only exercise the subscription warrants within ten years from the day following the day on which they relinquish the above titles (the Commencement Date of Exercising Rights ). 4

5 (2) Irrespective of (1) above, holders of subscription warrants may exercise their subscription warrants in the cases specified in (a) and (b) below, so long as this is done within the period prescribed in each case. (However, (b) shall exclude cases when subscription warrants of the Successor Company are granted to the holders of the subscription warrants in accordance with Condition 9 above.) (a) When holders of the subscription warrants do not make the commencement date of exercising the rights before July 20, 2046 From July 21, 2046 to July 20, 2047 (b) In the event that an ordinary general meeting of shareholders approves an agenda for approval of a merger agreement under which the Company is to be dissolved, or an agenda for approval of a share exchange agreement or share transfer plan under which the Company is to become a wholly owned subsidiary (or if a resolution is made by the Company s Board of Directors or a decision is made by representative corporate officers in the case when a resolution made by the Company s ordinary general meeting of shareholders is not required) A period of 30 days beginning on the day following the relevant approval date (3) If the holders of subscription warrants abandon their subscription warrants, the relevant subscription warrants may not be exercised. 12. Calculation method of the paid-in value of the subscription warrants The paid-in value of each subscription warrant shall be calculated by multiplying an option price per share that is computed based on the Black-Scholes model, the formula below, and basic figures described in (2) through (7) below by the Number of Granted Shares. C Se and d ln qt S X N rt d Xe N d T 2 r q T 2 T (1) Option price per share (C ) (2) Share price ( S ): Closing prices in ordinary trading of shares of the Company s common stock quoted on the Tokyo Stock Exchange on July 20, 2017 (or a base price quoted on the next trading day, if there is no closing price for that day) (3) Exercise price ( X ): One yen (4) Estimated remaining period (T ): 15 years (5) Volatility ( ): Volatility of share prices calculated based on the closing prices of ordinary trading of the Company s common stock quoted on each trading day for fifteen years (from July 20, 2002 to July 20, 2017) (6) Risk-free rate ( r ): Interest rates on government bonds with a period to maturity corresponding to the estimated remaining period 5

6 (7) Dividend yield ( q ): Dividends per share (Dividends payments for the fiscal year ended March 2017) / Share price stated in (2) above (8) Cumulative distribution function of the standard normal distribution ( N ) 13. Allotment date of subscription warrants July 20, Period of payments for subscription warrants The payment date shall be July 20, Members to whom the subscription warrants are to be allocated, and the number of members and subscription warrants to be allocated Forty units of subscription warrants shall be allocated to 10 of the Company s directors ( excluding outside directors). ### This notice has been translated from the original notice in Japanese. In the event of any discrepancy, the original in Japanese shall prevail. 6