Announcement concerning Abolition of the Directors Retirement Benefits System and Introduction of Performance-Linked Stock Compensation Plan

Transcription

1 To whom it may concern, May 24, 2017 Company name: Japan Lifeline Co., Ltd. Representative: Keisuke Suzuki, President and CEO (Code: 7575 TSE 1st Section) Contact person: Kenji Yamada, Vice President, Corporate Administration Department (TEL: ) Announcement concerning Abolition of the Directors Retirement Benefits System and Introduction of Performance-Linked Stock Compensation Plan At the Board Meeting held on May 24, 2017, the Company reviewed the Directors Retirement Benefits System, as a result of which the Board of Directors adopted a resolution to abolish this System and to newly introduce a performance-linked stock compensation plan (hereinafter referred to as the Plan ). Based on this Board Meeting action, the Company will submit a proposal at the 37 th Ordinary General Shareholders Meeting (hereinafter, the General Shareholders Meeting ) to be held on June 28, 2017 to approve the Plan. 1. Abolition of the Directors Retirement Benefits System As part of the Company s review of its directors remuneration system, the Company determined to abolish the existing Directors Retirement Benefits System, effective at the conclusion of the General Shareholders Meeting. In addition, with respect to directors and corporate auditors who will remain in office following conclusion of the General Shareholders Meeting, the Company will submit a proposal at the General Shareholders Meeting to pay them retirement benefits upon termination in proportion to the length of time such individuals served in their position following the conclusion of the General Shareholders Meeting. This payment of retirement benefits upon termination will be made when each director and each corporate auditor retires from their position at the Company. 2. Introduction of the Plan (1) The Company will introduce the Plan for directors (excluding outside directors and directors who reside overseas; the same shall apply hereinafter) with the goal of improving the Company s business performance over the medium to long term and enhancing management incentives to constantly contribute to an increase in corporate value, by aligning the directors compensation with that of Company performance. However, since Mr. Keisuke Suzuki, President and CEO, has a substantial investment in the Company, holding 12.6 percent (*) of the Company s shares, as a founding business manager, in the light of the main purpose of the Plan, it was accordingly determined that he would not participate in the Plan. Similarly, given that the office of chairman will be vacant following the conclusion of the General Shareholders Meeting, it also was determined that the Plan will not apply to the chairman as well. As a result of the Introduction of the Plan, directors remuneration will be composed of base remuneration, bonuses and stock compensation. Remuneration of outside directors who are independent of business execution will be composed of base remuneration and bonuses, and as noted earlier, outside directors

2 will not participate in the Plan. (*)Reflects the ownership ratio of Company shares held directly in his name and held by his asset management company as of the end of March (2) The Introduction of the Plan is subject to obtaining approval of the shareholders at the General Shareholders Meeting. (3) The Plan utilizes a structure known as a BIP (Board Incentive Plan) trust (hereinafter, the BIP trust ). The purpose of the BIP trust is, as is the case for performance shares and restricted stock issued in the U.S. and Europe to management, to deliver or provide (hereinafter, deliver, etc. ) to eligible directors the monetary equivalent of shares of the Company upon the attainment, among other things, of pre-set performance goals, which thereafter may be converted and settled in cash (hereinafter, the Company s shares, etc. ) and distributed to such directors. (4) Upon the expiration of the trust period of the BIP trust (hereinafter, the Trust ), which was set up for carrying out the Plan, the Company will set up new Trust or make a change to the existing Trust that expired and make an additional trust, and will continue the Plan. 3. Overview of the Plan (ix) Distribution of residual assets (viii) Gratuitous transfer/retirement of remaining shares Stock market (i) Resolution at the General Shareholders Meeting [Settlor] The Company (iii) Establishment of trust (iv) Shares of the Company (iv) Payment of purchase money (v) Dividends [Trustee (Co-trustee)](Scheduled) (iv) Shares of the Company Mitsubishi UFJ Trust and Banking Corporation The Master Trust Bank of Japan, Ltd. (vii) Delivery of shares of the Company and provision of money (vii) Granting of points [Beneficiary] Director (ii) Establishment of the Stock Issuance Rules (iv) Payment of purchase money The Trust Shares of the Company, Money (vi) Instruction of non-exercise of voting rights Trust administrator (i) The Company will obtain an approval for Introduction of the Plan at the General Shareholders Meeting. (ii) The Company will establish the Stock Issuance Rules with respect to the Plan at the Board Meeting. (iii) The Company will establish the Trust in which funds for the remuneration of the Company s directors, within the scope of approval pursuant to the resolution adopted at the General Shareholders Meeting, is entrusted and

3 of which the directors who meet the beneficiary requirements will be designated as beneficiaries. (iv) The Trust will, in accordance with instructions of the trust administrator, use the funds so entrusted in accordance with (iii) to acquire shares of the Company, either directly from the Company (disposal of treasury shares) or in the stock market. The number of shares to be acquired by the Trust shall be within the scope of approval pursuant to the resolution adopted at the General Shareholders Meeting referred to in (i). (v) Dividends will be paid in respect shares of the Company held by the Trust like other shares of the Company. (vi) No voting rights shall be exercised with respect to shares of the Company held by the Trust during a trust period. (vii) During a trust period, a certain number of points will be granted to directors each year according to (a) the degree of attainment of performance goals for the business year, and (b) the individual director s position rank. A director who meets certain beneficiary requirements will receive delivery, etc. of the Company shares, etc. according to the accumulated points (which are further described in (5) below; the same shall apply hereinafter) when the director resigns from directorship. (viii) In the event shares of the Company remain upon expiration of a trust period, whether because performance goals were not achieved or for other reasons, the Company either will seek to continue to use the Trust as a new stock compensation plan by making a change(s) to the trust agreement or establishing an additional trust, or will cause the Trust to gratuitously transfer such shares to the Company, and thereafter such shares will be retired by resolution adopted at the Board Meeting. (ix) Residual assets after distributions are made to beneficiaries at the termination of the Trust will revert to the Company as a holder of vested right within the scope of reserve for trust expenses after deduction of share acquisition costs from trust money. (Note) In the case where all Company shares, etc. held by the Trust have been received by the eligible directors as a result of their receipt of delivery, etc. of such Company shares, etc. prior to the expiration of the trust period, the Trust will terminate early. In addition, the Company may entrust additional money to the Trust to acquire additional shares of the Company within the scope of approval given by the resolution adopted at the General Shareholders Meeting. (1) Overview of the Plan For the three (3) business years from the business year ending March 31, 2018 through the business year ending March 1, 2020 (hereinafter, the applicable period ) (*), the Plan is to make delivery, etc. of Company shares, etc. as director s remuneration according to the degree of attainment of performance goals in each such business year and the individual director s position rank. (*)In the event where a trust period is extended by making a change(s) to the trust agreement and setting up an additional trust (which is provided for in the 2 nd paragraph of (4) below, the same shall apply hereinafter), each of the three (3) business years after the extension shall be the applicable period. (2) Procedures for Introduction of the Plan At the General Shareholders Meeting, the Company will propose that the shareholders adopt a resolution setting forth an upper limit of the amount to be contributed by the Company to the Trust, the annual upper limit of points which directors can be granted (which is provided for in (5) below), and other necessary matters.

4 In the event where a trust period is extended by making a change(s) to the trust agreement and establishing an additional trust, the Company will act in accordance with a resolution adopted at the Board Meeting within the scope of approval given at the General Shareholders Meeting. (3) Directors subject to the Plan (Beneficiary requirements) On condition that a director meets the following beneficiary requirements, he/she will receive delivery of the number of shares of the Company (shares less than one share unit shall be rounded down) equivalent to 70 percent of the accumulated points after his/her resignation from the directorship through the prescribed procedures for finalizing beneficiaries as well as the provision to such director of the monetary equivalent of the proceeds from converting the remaining shares into cash within the Trust. The beneficiary requirements are as follows: (i) The person shall be a director during the applicable period (including a person who newly became a director in the applicable period, provided, however, that the chairman and the current president shall be excluded). (ii) A person who resigned from a directorship of the Company. (Resignation includes the circumstances where the individual is assigned, and resides, overseas. The same shall apply hereinafter.) (*) (iii) A person who did not commit certain illegal activities during his/her tenure. (iv) The accumulated points have been finalized. (v) Other requirements deemed necessary to attain the purposes of the stock compensation plan. * In the case where the trust period (stated in the 4 th paragraph of (4) below) has been extended and the person subject to the Plan is in office as director at the expiration of the extended period, the Trust shall terminate at that point in time, and Company shares, etc. will be delivered/provided to such person while in office as director. * In the event a director dies during a trust period, such person s accumulated points at the date of death shall be converted in the Trust into the cash value of the commensurate number of shares of the Company, with the monetary equivalent of such cash value being promptly distributed by the Trust to such person s heir(s). In addition, in the event a director is assigned, and resides, overseas, during a trust period, after converting all the shares of the Company commensurate with the accumulated points at that time into cash within the Trust, the director shall receive the monetary equivalent of the cash value of the conversion proceeds as a distribution from the Trust. (4) Trust period The trust period shall be approximately three (3) years from August 14, 2017 (scheduled) through August 31, 2020 (scheduled). The trust period may be extended only for the same period as the initial trust period (that is, for three (3) years) by making a change(s) to the trust agreement and establishing an additional trust at the expiration of the initial trust period. Provided, however, that when making additional contribution to the Trust, in the event that remaining shares of the Company (excluding shares of the Company that are equivalent to points granted to directors and whose delivery, etc. have not yet been completed) and money (hereinafter, remaining shares, etc. ) remain within the trust assets at the end of the trust period before extension, the aggregate amount of the

5 remaining shares, etc. and trust money that is additionally contributed shall not exceed the upper limit of the trust money approved at the General Shareholders Meeting. In addition, in the event that a change(s) to the trust agreement is/are not made and an additional trust is not established at the expiration of the trust period, no points will be thereafter granted to directors. Provided, however, that in the event one or more directors who are likely to meet the beneficiary requirements at such point in time are in office, the trust period of the Trust may be intentionally extended up to a maximum of 10 years until such directors resign and the delivery, etc. of Company shares, etc. to such directors is completed. (5) Calculation method of shares of the Company, etc. delivered/provided to directors On June 1 of each year during a trust period, points will be granted according to the degree of attainment of performance goals set for the business year ended March 31 of the same year (the first opportunity will be with respect to the business year ending March 31, 2018) and each individual director s position rank. When directors resign from their position, Company shares, etc. will be delivered/provided to them according to the cumulative number of points (hereinafter, the accumulated points ). One point corresponds to one share of the Company. Provided, however, that if an event has occurred that is deemed to require a fair adjustment to the number of points, such as a stock split, stock consolidation, etc. of the Company, during a trust period, the number of shares of the Company per point will be adjusted in accordance with the split ratio, consolidation ratio, etc. (6) The amount of the upper limit of trust money contributed to the Trust and the upper limit of the number of points granted per year The amount of the upper limit of trust money contributed by the Company to the Trust within a trust period will be 300,000,000 yen. *1 *1 The amount of the upper limit of contributed trust money is calculated by taking into consideration the level of remuneration of current directors and adding trust fees and trust expenses to the share acquisition fund. At the General Shareholders Meeting, the Company is scheduled to propose to the shareholders that they adopt a resolution to approve 66,100 points as the upper limit of the total number of points granted to directors of the Company per year. If so approved, the upper limit of the number of shares to be acquired by the Trust (hereinafter, the upper limit of the number of shares to be acquired ) in the applicable period is the number of shares (198,300 shares *2 ) equivalent to the numerical number arrived at by multiplying the upper limit of the total number of points granted to directors of the Company per year by the number of years in a trust period. *2 In the event an adjustment stated in the 2nd paragraph of (5) above is made, the upper limit of the number of shares to be acquired also will be adjusted in accordance with such adjustment. (7) Acquisition method of shares of the Company by the Trust The initial acquisition of shares of the Company by the Trust either will be made directly from the Company (disposal of treasury shares) or in the stock market within the scope of the amount of the upper limit of the trust money stated in (6) above and the upper limit of the number of shares to be acquired.

6 Additionally, in the event a possibility arises that either the number of shares within the Trust may fall short of that corresponding to the accumulated points held by the directors or that money in the trust assets may fall short of what is required to meet trust fees and trust expenses, the Company may make an additional contribution to the Trust and additionally acquire Company shares within the scope of the upper limit of the trust money stated in (6) above and the upper limit of the number of shares to be acquired. (8) Method and timing of delivery, etc. of shares, etc. to directors Directors who met beneficiary requirements stated in (3) above will receive from the Trust delivery of the number of shares of the Company (shares less than one share unit shall be rounded down) equivalent to 70 percent of the accumulated points at the time of resignation after their resignation through the prescribed procedures for finalizing beneficiaries as well as the provision to such director of the monetary equivalent of the proceeds from converting the shares of the Company into cash within the Trust. In the event a director dies during a trust period, such person s accumulated points at the date of death shall be converted in the Trust into the cash value of the commensurate number of shares of the Company, with the monetary equivalent of such cash value being promptly distributed by the Trust to such person s heir(s). In addition, in the event a director is assigned, and resides, overseas, during a trust period, after converting all the shares of the Company commensurate with the accumulated points held by such person, into cash within the Trust, the director shall receive the monetary equivalent of the cash value of the conversion proceeds. (9) Exercise of voting rights of shares of the Company within the Trust In order to ensure neutrality with respect to management of the Company, no voting rights with respect to shares of the Company held within the Trust shall be exercised during a trust period. (10) Handling of dividends on shares of the Company within the Trust Dividends on shares of the Company within the Trust will be received by the Trust and will be applied to trust fees and trust expenses. If, after such application, there remains cash attributable to dividends at the termination of the Trust, such remaining dividends will be distributed to those directors who became beneficiaries of the Trust under the trust agreement by meeting the prescribed beneficiary requirements at the termination of the Trust. (11) Handling of the Trust at its termination In the event that shares of the Company remain in the Trust at its termination, whether because performance goals were not achieved or for other reasons (and if the trust period stated in the 4 th paragraph of (4) above was extended, at the termination of the extended period), the Company will cause the Trust to gratuitously transfer such shares to the Company, and thereafter such shares may be retired by a resolution adopted at the Board Meeting.

7 (For your reference) Particulars of the trust agreement (i) Type of trust Pecuniary trust other than individually operated specified money trust (third-party-benefit trust) (ii) Purpose of trust Granting of incentives to directors (iii) Settlor The Company (iv) Trustee Mitsubishi UFJ Trust and Banking Corporation (scheduled) (Co-trustee: The Master Trust Bank of Japan, Ltd. (scheduled)) (v) Beneficiary Those who meet beneficiary requirements for directors who have resigned from directorship (vi) Trust administrator A third person/party that has no interest in the Company (vii) Date of trust agreement August 14, 2017 (scheduled) (viii) Trust period From August 14, 2017 (scheduled) through August 31, 2020 (scheduled) (ix) Commence date of the Plan August 14, 2017 (scheduled) (x) Exercise of voting rights Voting rights shall not be exercised (xi) Type of shares to be acquired Common shares of the Company (xii) Upper limit of trust money 300,000,000 yen (including trust fees and trust expenses) (scheduled) (xiii) Holder of vested right The Company (xiv) Residual assets Residual assets that the Company can receive as the holder of vested right shall be within the scope of reserve for trust expenses arrived at after deduction of share acquisition fund from the trust money [Content of trust/stock-related business] (i) Trust-related business (ii) Stock-related business Mitsubishi UFJ Trust and Banking Corporation and The Master Trust Bank of Japan, Ltd. will conduct trust-related business as trustees of the Trust Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. will conduct the business of delivery, etc. of shares of the Company to beneficiaries in accordance with a business consignment agreement