Mitsubishi Motors : Announcement regarding Grant of Stock Options as Equity-linked Compensation(274KB)

November 26, 2020

Name of company:	MITSUBISHI MOTORS CORPORATION
Representative:	Takao Kato
	Representative Executive Officer, CEO
	(7211 TSE 1st section)
Contact:	Keiko Sasaki
	General Manager, IR Office
	(TEL．[phone])

Announcement regarding Grant of Stock Options as Equity-linked Compensation

On November 26, 2020, the Company resolved at the Board of Director's meeting that it will issue stock options to its directors etc. (excluding non-executive directors) as their equity-linked compensation in accordance with the terms and conditions of the stock options set forth below. The issue of the stock options was individually determined by the Company's Compensation Committee in its overall evaluation of director compensation.

1. Name of Stock Options
   Mitsubishi Motors Corporation Fourth Round of Stock Options (the "Stock Options")
2. Number of Participants and Total Number of Stock Options that could possibly be granted 1 director of the Company (excluding non-executive directors), 150 options
   1 inheritor of the former director of the Company (same as above), 150 options
   The total number of Stock Options is the maximum number of Stock Options that could possibly be granted to the grantees. The number of Stock Options actually granted may be smaller than the maximum number, depending on the number of applications and other factors.
3. Type of Shares that will be issued upon exercise of Stock Options Common stock of the Company
4. Formula to calculate number of shares to be issued upon exercise of one Stock Option
   Number of shares to be issued upon exercise of one Stock Option (the "Number of Issued Shares") shall be calculated by dividing JPY 40,000 (the "Issue Price") by the fair value of a Stock Option for one share. If a grantee simultaneously exercises his/her multiple options, the Number of Issued Shares shall be calculated by (i) multiplying the Issue Price by number of the Stock Options that are exercised and (ii) dividing the multiplied number by the fair value of a Stock Option for one share. However, if such calculation results in a fraction of a share (i.e. less than one (1) share), the Number of Issued Shares shall be rounded down to the nearest whole number.
   The fair value of a Stock Option for one share shall be calculated on the grant date (December 16th,
   2020) by using the following Black-Scholes formula:
   C = Se −λt N (d1 ) − e −rt XN (d 2 )

Where:

	⎛ S ⎞	⎛				σ 2	⎞
	ln ⎜		⎟	+ ⎜ r	− λ +		⎟t
	⎝ X ⎠	⎜				2	⎟
	⎝				⎠
d1 =				, d 2 = d1 − σ t
			σ
				t
(i)	Option price per share: ( C )
(ii)	Share price ( S ): Closing price of the regular trading of the shares of common stock (futsū
	kabushiki) of the Company on the Tokyo Stock Exchange on December 16th, 2020 (if there is no
	such closing price, the base price of the immediately following trading day)
(iii)	Exercise price: ( X ): one (1) yen
(iv)	Expected time to maturity: ( t ): eight (8) years
(v)	Volatility ( σ ): Share price volatility calculated using the closing price of the regular trading of the
	shares of common stock (futsū kabushiki) of the Company on each trading day during the period of
	eight (8) years (from December 17, 2012 to December 16, 2020)
(vi)	Risk-free interest rate ( r ): Interest rate of national government bonds whose remaining years to
	maturity corresponds to the expected time to maturity

(vii) Dividend yield ( λ ): Dividend amount per share (average of the actual dividends per share paid on an annual basis over each of the past 3 years) ÷ Share price set forth in (ii) above

(viii) Cumulative distribution function for the standard normal distribution ( N (⋅))

Notwithstanding the foregoing, if the Company conducts a stock split or a reverse stock split, the Number of Issued Shares shall be adjusted under the following formula:

Number of Issued Shares post-adjustment = Number of Issued Shares pre-adjustment x ratio of stock split or reverse stock split

If such adjustment results in a fraction of a share (i.e. less than one (1) share), the Number of Issued Shares shall be rounded down to the nearest whole number. If there are other circumstances where it is necessary to adjust the Number of Issued Shares, the Company can adjust such number to the extent reasonable.

The issuance would not fall under a "discounted issuance" (yuri hakko) since the Stock Options will be issued for a fair price.

1. Total Number of Stock Options that could be possibly granted 300 options
   The total number of Stock Options is the maximum number of Stock Options that could possibly be granted to the grantees. The number of Stock Options actually granted may be smaller than the maximum number, depending on the number of applications and other factors.
2. Amount of Contribution (issue price) per option JPY 40,000
   The Company will provide each of the grantees with monetary claim right in an amount equal to the contribution made by such grantee. The contribution of each grantee will be made by offsetting his or her monetary claim right against the claim of the Company for the contribution.
3. Amount of Contribution (exercise price)
4. 1. Contribution upon exercising a Stock Option shall be made in cash. The amount of each contribution shall be the Exercise Price (as defined below) multiplied by the Number of Issued Shares.

1. The amount for one share that a grantee shall contribute upon exercising a Stock Option (the "Exercise Price") is JPY 1.

8. Exercise Period

The exercise period will commence on the earliest of the following dates and end on April 30, 2053.

1. May 1, 2023
2. If a shareholders' meeting of the Company (or, where no shareholder approval is required, the Board of Directors or an Executive Officer of the Company) approves a merger agreement that provides that the Company shall cease to exist, or a share exchange agreement for a statutory share exchange (kabushiki koukan) agreement or a plan for a statutory share-transfer (kabushiki iten) that will result in the Company becoming a wholly-owned subsidiary, the date of such approval.
3. If a shareholders' meeting of the Company (or, where no shareholder approval is required, the Board of Directors or an Executive Officer of the Company) approves a transfer of all or substantially all of the Company's business, or a spin-off agreement or spin-off plan (kaisha bunkatsu) that results in all or substantially all of the Company's business being assumed by a successor company, the date of such approval.

9. Conditions to Exercise of Stock Options

1. 1. No fraction of a Stock Option may be exercised.
   2. Other conditions will be provided under the stock option grant agreement between the Company and the grantees.
2. Amount of Capital Stock and Capital Surplus Increased by Issuance of Shares upon Exercise of Stock Option
   The amount of capital stock increased by the issuance of shares upon the exercise of a Stock Option shall be the amount obtained by multiplying the maximum limit of capital increase (as calculated in accordance with the provisions of Article 17, paragraph 1 of the Company Accounting Regulation) by 0.5, and any fraction of less the one (1) yen arising as a result of such calculation shall be rounded up to the nearest one (1) yen. The amount of capital surplus increased by the issuance of shares upon the exercise of stock acquisition rights shall be the amount obtained by deducting the capital stock to be increased from the maximum limit of capital increase.
3. Events where the Company may redeem the stock options
4. 1. If the Grantee (or his/her Successor) becomes unable to exercise any granted Stock Options pursuant to this Agreement, the Company may redeem such unexercisable Stock Options without consideration on a date as is determined by the Board of Directors of the Company.
   2. If a shareholders' meeting of the Company (or, where no shareholder approval is required, the Board of Directors or an Executive Officer of the Company) approves any of the following, the Company may redeem all of the unexercisable Stock Options that exist as of the date of such approval without consideration on a date as is determined by the Board of Directors of the Company:
   3. 1. a merger agreement that provides that the Company shall cease to exist;
      2. a spin-off agreement or a spin-off plan for a spin-off (kaisha bunkatsu) that provides that the Company's business shall be assumed by a successor company;
      3. a share exchange agreement for a statutory share exchange (kabushiki koukan) agreement or a plan for a statutory share-transfer (kabushiki iten) that will result in the Company becoming a wholly-owned subsidiary;

1. 1. an amendment to the Articles of Incorporation of the Company to the effect that a transfer of any shares is required to be approved by the Company; or
   2. an amendment to the Articles of Incorporation of the Company to the effect that a transfer of any shares of a certain class that will be issued upon exercise of a Stock Option is required to be approved by the Company, or that the Company may repurchase all of such shares with a shareholders' resolution.
2. Prohibition on Transfer of Stock Options
   Any transfer of Stock Options must be approved by the Board of Directors of the Company.
3. Treatment of the Stock Options in case of a Corporate Reorganization
   If the Company conducts a merger (in which the Company will cease to exist), a statutory share exchange (kabushiki koukan) or a statutory share-transfer (kabushiki iten) (in which the Company will become a wholly-owned subsidiary) or a spin-off (kaisha bunkatsu) (in which the Company will transfer its business) (each, a "Corporate Reorganization"), replacement stock options of the other party to the Corporate Reorganization (the "Replacement Stock Options") as stipulated in Article 236, paragraphs (1), item (viii) (a) through (e) of the Companies Act (the "Successor Company") shall be granted to any grantee that holds Stock Options immediately before the effective date of the Corporate Reorganization in accordance with the below conditions. In such event, the Stock Options held by such grantee (the "Old Stock Options") shall be terminated in exchange for the Replacement Stock Options. However, such termination will not occur unless the relevant merger agreement, share exchange agreement, share transfer plan, spin-off agreement or spin-off plan provides that the Successor Company issues the Replacement Stock Options.
4. 1. Number of the Replacement Stock Options that will be granted to a holder of the Old Stock Options
      The same number as the number of the Old Stock Options held by the relevant grantee
   2. Type of shares that will be issued upon exercise of the Replacement Stock Options Common stock of the Successor Company
   3. Number of shares to be issued upon exercise of one Replacement Stock Option
      Such number shall be determined in accordance with item 4 above (Formula to calculate number of shares to be issued upon exercise of one Stock Option) taking into consideration the terms of the Corporate Reorganization.
   4. Amount of Contribution at exercise (exercise price)
      The amount payable to the Successor Company upon exercising a Replacement Stock Option shall be determined by multiplying (a) the exercise price for one share of the Successor Company by (b) the number of shares of the Successor Company to be issued or transferred upon the exercise of the Replacement Stock Options as determined in accordance with (3) above. The exercise price for one share is JPY 1.
   5. Exercise Period
      The exercise period will commence on the earlier of (a) the earliest of the following dates or (b) the effective date of the Corporate Reorganization, and will end on April 30, 2053.
   6. 1. May 1, 2023