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| April 26, 2005 |
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Notice Concerning Issuance of Stock Acquisition Rights (Shinkabu-Yoyaku-Ken)
as the Means of a Stock Option Scheme for a Stock-Linked Compensation Plan
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| Mitsubishi Chemical Corporation |
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Mitsubishi Chemical Corporation ("MCC") (Head office: Minato-ku, Tokyo; President: Ryuichi Tomizawa) passed a resolution at the meeting of its Board of Directors held on April 26, 2005 to propose to the MCC's General Meeting of Shareholders scheduled for June 28, 2005, subject to the provisions of Articles 280-20 and 280-21 of the Commercial Code, to issue stock acquisition rights in favor of directors and officers and retiring directors and officers of MCC as the means of a stock option scheme for a stock-linked compensation plan, and we hereby inform you as follows.
| 1. |
Reason for Issuance of the Stock Acquisition Rights |
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It is proposed that MCC should issue stock acquisition rights ("Stock Acquisition Rights") at no cost in favor of the directors and officers (the "Directors and Officers", which shall include the retiring directors and officers), which correspond to a stock option scheme for a stock-linked compensation plan, the exercise period of which will start after the retirement of the Directors and Officers and the amount to be paid when exercising a Stock Acquisition Right shall be  1 per share. The intention of MCC is to make the compensation scheme for the Directors and Officers which increases connectivity to the business performance of MCC and shareholder value.
| (1) |
Introduction of the compensation scheme for Directors and Officers according to their contribution to MCC's business performance:
MCC has discussed the reform of the existing compensation scheme for Directors and Officers with the view to making their compensation have a connection to business performance and shareholder value; and now MCC has decided (i) to reduce the compensation and allowance for retirement benefits for the Directors and Officers in part and (ii) using the surplus from such reduction as the fundamental resource, to institute a new scheme, in which Directors and Officers are compensated according to their contribution to MCC's business performance (based on their performance evaluation) for each fiscal year (from April 1 through March 31 of the following year) by being granted the Stock Acquisition Rights after the expiry of the relevant fiscal year. As a result, the contribution of the Directors and Officers shall be evaluated based on the progress of their mission in each fiscal year and MCC will thereby reward them amounting in total from zero up to twice of the fundamental resource at a maximum.
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| (2) |
Realizing the performance-related compensation scheme working with shareholder value:
Under the performance-related compensation scheme, MCC will reward the Directors and Officers not by cash, but by the grant of Stock Acquisition Rights, which has the same effect as rewarding them by granting the shares of MCC. As a result, the Directors and Officers will share both advantages and disadvantages relating to the stock prices with MCC's shareholders, which shall encourage the Directors and Officers to improve MCC's business performance and the middle- and long-term MCC's value.
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| 2. |
Terms and Conditions for Issuance of the Stock Acquisition Rights |
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| (1) |
Type and number of shares to be acquired upon exercise of the Stock Acquisition Rights:
No more than 1,170,000 common shares of MCC; provided, however, that, in the event of a stock split or consolidation of common shares of MCC after the issue date of the Stock Acquisition Rights (the "Issue Date"), the number of shares to be acquired upon exercise of the Stock Acquisition Rights shall be adjusted by the following formula (with any fraction less than one share being disregarded).
Number of shares
after adjustment |
= |
Number of shares
before adjustment |
x |
Ratio of stock split or
consolidation |
The number of shares to be acquired upon exercise of the Stock Acquisition Rights shall also be adjusted to the reasonable extent, in the event of a capital reduction, merger or corporate split of MCC after the Issue Date, or in any other event that would unavoidably require such adjustment, taking into consideration the terms and conditions of such capital reduction, merger, corporate split and other events.
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| (2) |
Aggregate Number of the Stock Acquisition Rights to be issued:
No more than 11,700 units. The number of shares to be acquired upon exercise of each Stock Acquisition Right (the "Number of Shares to be Granted") shall be 100 shares; provided, however, if the number of shares to be acquired upon exercise of the Stock Acquisition Rights is adjusted as set forth in (1) above, the said aggregate number and the Number of Shares to be Granted shall be likewise adjusted.
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| (3) |
Issue price of the Stock Acquisition Rights:
Zero
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| (4) |
Amount to be paid upon exercise of each Stock Acquisition Right:
The amount to be paid upon exercise of each Stock Acquisition Right (the "Exercise Price") shall be the amount obtained by multiplying 1 per share of the shares to be newly issued or transferred upon exercise of each Stock Acquisition Right by the Number of Shares to be Granted.
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| (5) |
Period during which the Stock Acquisition Rights may be exercised (the "Exercise Period"):
The Exercise Period of the Stock Acquisition Rights will be determined by the Board of Directors of MCC to fall within the period from June 28, 2006 to June 27, 2026.
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| (6) |
Other conditions for the exercise of the Stock Acquisition Rights:
| 1) |
No Stock Acquisition Right may be exercised in part only. |
| 2) |
The other conditions for the exercise of the Stock Acquisition Rights shall be determined by a resolution of the Board of Directors of MCC. |
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| (7) |
Limitation on transfer of the Stock Acquisition Rights:
Transfer of the Stock Acquisition Rights shall require an approval of the Board of Directors of MCC.
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| (8) |
Event of cancellation of the Stock Acquisition Rights and the conditions therefor:
MCC may at any time cancel, at no cost, any Stock Acquisition Rights remaining unexercised which acquired and held by MCC.
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| (9) |
Succession of the Stock Acquisition Rights upon an exchange of stock or a stock-for-stock exchange (kabushiki-kokan or kabushiki-iten, collectively a "Stock Exchange"):
In the event of a Stock Exchange upon which MCC becomes a wholly-owned subsidiary of any company, the obligations with respect to the Stock Acquisition Rights then remaining unexercised and not cancelled shall be succeeded by such company (the "100%-parent company"); provided, however, that, the foregoing shall be applied only if, at the General Meeting of Shareholders of MCC (or, if a 100%-parent company shall be incorporated by MCC jointly with any other company, the General Meeting of Shareholders of MCC and such other company, respectively), an agreement for exchange of stock to be entered into between MCC and the 100%-parent company or an agenda for stock-for -stock exchange, stating that the 100%-parent company shall succeed the obligations with respect to the Stock Acquisition Rights in accordance with the following principles, has been approved.
| 1) |
Type of shares of 100%-parent company to be acquired upon exercise of the Stock Acquisition Rights:
Common shares of the 100%-parent company. |
| 2) |
Number of shares of the 100%-parent company to be acquired upon exercise of each Stock Acquisition Right:
Taking into account the ratio of the Stock Exchange and the other conditions, the Number of Shares to be Granted (if already adjusted as set forth in (2) above, the Number of Shares to be Granted after such adjustment) shall be adjusted. |
| 3) |
Amount to be paid upon exercise of each Stock Acquisition Right:
The Exercise Price after succession shall be equal to the Exercise Price before succession. |
| 4) |
Exercise Period of the Stock Acquisition Rights:
From the later of either (i) the commencement date of the Exercise Period set forth in (5) above or (ii) the date of Stock Exchange, through the expiry date of the Exercise Period set forth in (5) above. |
| 5) |
Other conditions for the exercise of the Stock Acquisition Rights and the event of cancellation of the Stock Acquisition Rights and the conditions therefor:
To be determined pursuant to (6) and (8) above. |
| 6) |
Limitation on transfer of the Stock Acquisition Rights:
Transfer of the Stock Acquisition Rights shall require an approval of the Board of Directors of the 100%-parent company. |
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(Note) # The details of the terms and conditions for the issuance of the Stock Acquisition Rights and allotment thereof will be determined by a resolution at the meeting of the Board of Directors of MCC and subject to an approval adopted at the 11th General Meeting of Shareholders of MCC scheduled for June 28, 2005.
| For further information, please contact: |
Public Relations and Investor Relations Department
Mitsubishi Chemical Corporation |
| TEL: [+81] (0)3-6414-3730 |
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Outline of Stock Option Scheme
for a Stock-Linked Compensation Plan to be Introduced
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| 1. |
The Structure |
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| (1) |
The amounts of compensation and allowance for retirement benefits to be paid to directors and officers of MCC will be reduced and the reduced amount will be the resource of the performance-related compensation.
(The reduction has already been introduced in April (with respect to the retirement bonus) and July (with respect to the compensation) of fiscal year 2004 ending March 31, 2005.) |
| (2) |
The performance of each of the directors and officers of MCC in a fiscal year (from each April 1 to the following March 31) will be evaluated by the Board of Directors of MCC to be held in the following May. |
| (3) |
The directors and officers of MCC will receive the number of Stock Acquisition Rights calculated in accordance with the performance evaluation in (2) above after the General Meeting of Shareholders to be held in the following June (see the diagram below). |
| (4) |
Each director and officer of MCC holding Stock Acquisition Rights is entitled to exercise such rights for five years after the year following retirement (the Exercise Price is 1 per share). |
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| 2. |
Progress afterwards |
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MCC and Mitsubishi Pharma Corporation ("MPC") will jointly establish a holding company (HC) on October 3, 2005 by way of a stock-for-stock exchange (please refer to "Establishment of Holding Company" separately announced by both companies on April 26, 2005). Upon such establishment, all of the obligations with respect to Stock Acquisition Rights of MCC's directors and officers given as the performance-related compensation for fiscal year 2004 will be assumed by the HC (See "2. Terms and Conditions for Issuance of the Stock Acquisition Rights (9)).
The treatment of the Stock Acquisition Rights from fiscal year 2005 will be discussed by the HC. |
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