Introduction of Countermeasures to Large-Scale Acquisitions of Teijin Shares
The Company established the Countermeasures to Large-Scale Acquisitions of the Company’s Shares (Takeover Defense Measures) (hereinafter, “the Plan”), which were approved by shareholders at the 146th Annual General Meeting of Shareholders held on June 24, 2015.
The summary of the Plan is as follows:
Applicable acquisitions are those that lead to holdings of 20% or more of the Company’s shares
2.Procedures for Negotiations with Acquirer
Acquirers are required to submit in advance an acquisition statement and provide a period that allows the Company to collect information and examine the acquisition proposal, present the Company management’s plans and alternative proposals to shareholders and negotiate with the acquirer.
3.Allotment of Stock Option with call in the Event That an Acquirer Does Not Comply with Procedures
If an acquirer does not comply with the aforementioned procedures, in accordance with the recommendation of the Independent Committee, the Board of Directors will decide to allot all shareholders registered at that time Stock Option with call, without contribution, at the rate of one Stock Option per one share of stock held.
4.Calling the Stock Option with a Call and Distribution of the Company’s Stock
According to the Call Option attached to the stock option, the Company will call the stock option in exchange for the Company’s shares from all shareholders other than the acquirer and other non-qualified parties at a rate of one (1) share of the Company’s stock per one (1) stock option.
5.Impact on Shareholders Other than the Acquirer and Other Non-qualified Parties
As the Company’s shares are evenly delivered to all the shareholders other than the acquirer and other non-qualified parties, the shares held by the shareholders would not be diluted. As the Company’s shares are not granted to the acquirer and other non-qualified parties, this would result in dilution of the acquirer’s voting rights to a maximum of 50%.
6.Requirements for the Allotment of the Stock Option Without Contribution
The allotment of the stock option without contribution will be implemented in case any acquisition falls under the following cases and it is deemed reasonable to implement an allotment of the stock option without contribution:
(1)In case the acquisition does not comply with the procedure set forth in the Plan;
(2)In case the Acquisition may cause obvious harm to the corporate value of the Company and, in turn, the common interests of the shareholders, in view of the purpose of the Acquisition and the post-acquisition management policy, etc. and that falls under any of the below-mentioned actions:
Buy out of the Company’s shares to demand that the Company purchase said shares at an inflated price;
Management that achieves an interest for the Acquirer to the detriment of the Company, such as temporary control of the Company’s management for the low-cost acquisition of the Company’s material assets, etc.;
Diversion of the Company’s assets to secure or use as a source of funds to repay debts of the Acquirer or its group company; and
Temporary control of the Company’s management to bring about a disposal of high-value assets, etc. that have no current relevance to the Company’s business and declaring temporarily high dividends from the profits of the disposal, or selling the shares at a high price taking advantage of the opportunity afforded by the sudden rise in share prices created by the temporarily high dividends.
(3)In case the acquisition threatens to have the effect of compelling the shareholders to sell their shares;
(4) In case the compensation of the Acquisition is insufficient in view of the corporate value of the Company.
7.Overview of Process Prior to Triggering The Plan
When the acquirer submits the Acquisition Statement, the Independent Committee consisting of five members appointed from among the outside directors and outside corporate auditors may require the Company’s Board of Directors to present its opinion regarding the details of the acquisition by the acquirer within a specified period of time ( a maximum 30 days ). Following this, the Independent Committee will collect and examine information for a maximum period of 60 days. The Independent Committee may extend this assessment period for up to 30 days.
Based on its collection and examination of this information, the Independent Committee will make a recommendation to the Board of Directors for either the implementation or non-implementation of an allotment of the stock option without contribution. The Company’s Board of Directors shall respect and adhere to the aforementioned recommendation from the Independent Committee and finally resolve whether implement or non-implement an allotment of the stock option without contribution. However, the Board of Directors shall convene a shareholders’ meeting as soon as practicable and raise a proposal on the implementation of the allotment of stock option without contribution as a matter to be resolved thereat, in case the Independent Committee has placed a reserve that prior approval of a shareholders’ meeting should be obtained for the recommendation that an allotment of the stock option without contribution should be implemented.
Explanation as to How the Above Measures Comply with the Basic Policy, Do Not Harm the Common Interests of the Shareholders of the Company and Do Not Pursue the Personal Interests of the Company’s Directors and Statutory Auditors
The Plan was designed to incorporate the following perspectives and therefore the Company believes that it should comply with the Basic Policy, be consistent with the corporate value of the Company and the common interests of the shareholders and not pursue the personal interests of the Company’s Directors and Corporate Auditors.
1.Respect of Shareholders’ Intent
The Plan became effective upon its approval at the 146th Ordinary General Meeting of Shareholders, held on June 22, 2012, and will remain in effect for three years, until the conclusion of the Ordinary General Meeting of Shareholders pertaining to the business year ending March 2015. Moreover, as the term of office of the Company’s directors is one (1) year, the shareholders’ intent may be well reflected by way of the election of directors. Furthermore, even before the expiry of the effective period after The Plan is introduced, The Plan shall be abolished immediately in case a proposal that The Plan be abolished is approved at a shareholders’ meeting of the Company.
2.Emphasis on the Judgment by Highly Independent Outside Directors and Independent Outside Statutory Auditors
Upon the introduction of the Plan, the Company established the Independent Committee, an organ with the role of substantial and objective decision making for the benefit of shareholders while eliminating the possibility of arbitrary decisions by the Company’s Board of Directors with regard to the actual operation of the Plan. The Independent Committee consists of members elected and appointed by the Company’s Board of Directors from among those persons of outside director or outside corporate auditor.
3.Reinforcement and Continuity of Corporate Governance
The Company intends to separate and reinforce three managerial functions (decision making, execution of business and monitoring/auditing) by electing four independent outside directors on its Board of Directors, which comprises a maximum of 10 directors, and having three independent outside statutory auditors comprising a majority of the number of statutory auditors. The Company has also established an Advisory Board- comprising five to seven outside advisers, the Chairman of the Company*, and the President & CEO – as a consultative body to the Board of Directors that is charged with deliberating the alternation of President & CEO and nomination of successors, as well as compensation systems for directors and statutory auditors of the Teijin Group. Guidelines on corporate governance of the Company including these measures above are disclosed in the form of the Corporate Governance Guide.
The above measures are viewed as groundbreaking initiatives for corporate governance among Japanese listed companies. This mechanism should have the effect of strongly breaking the self-protective conduct of the Company’s directors and corporate auditors and are expected to prevent the arbitrary application of The Plan. The Company intends to maintain its corporate governance above during the effective period of This Plan.
*The case of absence of the Chairman of the Company, Senior Advisor will perform the office of the Chairman.
4.Setting of Rational and Objective Requirements for Triggering The Plan
The Plan is structured not to be easily triggered unless rational, detailed and objective requirements are satisfied, and moreover, these objective requirements are consistent with the cases set out for determining a person who is deemed inappropriate to control the decisions of the Company’s financial and business policies. This idea serves to prevent the Board of Directors from arbitrarily triggering the Plan.
The outline of flow chart with regard to the measures against Large-Scale acquisitions is as follows
For example, if after a gratis allotment a potential acquirer withdraws the proposed acquisition of the Company´s shares, the Company may choose not to deliver the Company´s shares after acquiring the stock acquisition rights for no consideration.