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Issuance of Stock Acquisition Rights as Stock Option Scheme for Stock-Linked Compensation Plan

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Issuance of Stock Acquisition Rights as Stock Option Scheme for Stock-Linked Compensation Plan


May 10, 2006

TDK Corporation's (the "Company") Board of Directors today passed a resolution regarding to authorized it to issue to individuals other than stockholders of stock acquisition rights with specially favorable terms and conditions. The purpose of the issue is to offer a stock option scheme for a stock-linked compensation plan to corporate officers of the Company, pursuant to the regulations of Articles 236, 238 and 239 of the Company Law of Japan. This resolution is subject to approval at the 110th Ordinary Annual General Meeting of Stockholders scheduled for June 29, 2006.

1. Reason for issuance of stock acquisition rights with specially favorable terms and conditions to individuals other than stockholders

The company will issue stock acquisition rights free of charge in accordance with the matters pertaining to issuance beginning with item 2. below to the Company's corporate officers as a stock option scheme for a stock-linked compensation plan. The stock acquisition rights are structured so that these officers also share the risk of a decrease in the Company's share price with stockholders and not just the benefits of a price increase. The issuance of these rights is thus intended to provide the Company's corporate officers with further incentive for improving the Company's operating results and share price. The amount to be paid per share issued upon the exercise of stock acquisition rights is ¥1 per share.

2. Matters pertaining to the issuance of stock acquisition rights
(1) Maximum number of stock acquisition rights
Up to 158 stock acquisition rights as detailed in (3) below.

Furthermore, up to 15,800 shares of the Company's common stock can be distributed due to the exercise of stock acquisition rights. In the event that the "number of shares granted" is adjusted in accordance with (3) 1. below, the number of shares shall be calculated by multiplying the "number of shares granted" after adjustment by the maximum number of stock acquisition rights as detailed above.
(2) Amount to be paid for stock acquisition rights
No payment shall be required for the stock acquisition rights.
(3) Details of stock acquisition rights
1. Class and number of shares to be issued upon the exercise of the stock acquisition rights
The class of share to be issued upon the exercise of stock acquisition rights shall be the Company's common stock, and the number of shares for each stock acquisition right (hereinafter the "number of shares granted") shall be 100.

However, in the event that the Company conducts a stock split, distributes shares free of charge, or consolidates its common stock after the determination date of this proposal (hereinafter "determination date"), the "number of shares granted" shall be adjusted according to the following method of calculation. This adjustment will apply to the "number of shares granted" for those stock acquisition rights that have not already been exercised prior to the relevant date. Moreover, fractions of less than one share arising out of the above adjustments shall be discarded.

Post-adjustment "Number of shares granted" = Pre-adjustment "number of shares granted" × stock split or stock consolidation ratio

Moreover, in other cases where circumstances arise requiring the "number of shares granted" to be adjusted after the determination date, the "number of shares granted" shall be adjusted appropriately.
 
2. Method for calculating the amount to be invested when exercising each stock acquisition right
The amount to be invested when exercising each stock acquisition right shall be the amount to be paid for each share that can be granted due to the exercise of stock acquisition rights, which shall be ¥1, multiplied by the "number of shares granted."
 
3. Exercise period for stock acquisition rights
The exercise period shall be from August 6, 2006 to August 5, 2026.
 
4. Other conditions for exercising stock acquisition rights
(a) Stock acquisition rights holders, excluding b. below, shall not be able to exercise stock acquisition rights in the period from August 6, 2006 to August 5, 2009, but are able to exercise stock acquisition rights after August 6, 2009.

(b) Stock acquisition rights holders shall be permitted to exercise stock acquisition rights until August 5, 2009 in cases specified in (i) and (ii) below, as long as it is within the time frame stipulated.
   (i) In the event that a stock acquisition rights holder loses his or her position as either director or employee of the Company (including full-time consultants and contract employees, but excluding part-time consultants and part-time contract employees. *This definition of employee is applicable throughout this resolution.)
     Three years from the day after losing the position
(ii) In the event that a proposal for approval of a merger agreement, under which the Company is to be dissolved, or a proposal for approval of a stock exchange agreement or a proposal for share transfer that makes the Company a wholly owned subsidiary, is approved at a meeting of stockholders of the Company.
     A period of 15 days from the day following the approval date.
(c) After August 6, 2009, in the event that a stock acquisition rights holder loses his or her position as either a director or employee of the Company, the individual may exercise his or her rights up to three years from the day after losing the position as long as it is within the exercise period for stock acquisition rights.
 
5. Item concerning increases in common stock and additional paid-in capital if shares are issued due to the exercise of stock acquisition rights
(a) In the event that shares are issued due to the exercise of stock acquisition rights, common stock shall increase by half the limit for increase in common stock calculated in accordance with Article 40-1 of the Japanese generally accepted accounting principles. Any amount less than one yen arising from this calculation shall be rounded up to the nearest yen.

(b) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in capital shall increase by the amount remaining after deducting the increase in common stock prescribed in a. above.
 
6. Restrictions on the acquisition of stock acquisition rights due to transfers
Regarding the acquisition of stock acquisition rights due to transfers, approval is required by resolution of the Company's Board of Directors.
 
7. Provisions for the acquisition of stock acquisition rights
No provisions for the acquisition of stock acquisition rights are specified.
 
(4) Authority to determine other matters concerning stock acquisition rights
Matters concerning the distribution and details of stock acquisition rights, other than the items prescribed above, shall be determined at the meeting of the Board of Directors to be held after this Ordinary General Meeting of Stockholders.

For further information, contact the Corporate Communications Dept.
Tel.: 81-3-6778-1055
E-mail: pr@jp.tdk.com

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