Nippon Paint : Notice of Disposal of Treasury Shares as Restricted Stock Compensation

Investor Relations (IR)2022.08.31 Notice of Disposal of Treasury Shares as Restricted Stock Compensation

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August 31, 2022
Company:Nippon Paint Holdings Co., Ltd.Representative:Yuichiro Wakatsuki
Director, Representative Executive Officer & Co-President
Wee Siew Kim
Director, Representative Executive Officer & Co-President
(Code No.: 4612; TSE Prime)Contact:Ryosuke Tanaka
General Manager, Investor Relations and Sustainability
(TEL [phone])

Notice of Disposal of Treasury Shares as Restricted Stock Compensation

Nippon Paint Holdings Co., Ltd. (the "Company") has decided to conduct a disposal of treasury shares (the "Disposal of Treasury Shares" or the "Disposal"). The details are as follows.

1. Overview of the Disposal

(1) Disposal date	September 16, 2022
(2) Class and number of shares to be disposed	Common shares of the Company: 20,000 shares
(3) Disposal price	1,067 yen per share
(4) Total value of shares to be disposed	21,340,000 yen
(5) Recipients and the number thereof; and the number of shares to be disposed	Directors of the Board of the Company: 1 person / 20,000 shares
(6) Other	The Securities Notice in relation to the Disposal has been submitted in accordance with the Financial Instruments and Exchange Act.

2. Purpose and Reason for the Disposal

The Board of Directors of the Company approved a resolution on February 27, 2019 to establish a restricted stock compensation plan as a new compensation plan for the Directors of the Board and Corporate Officers of the Company. The plan serves as a medium to long-term incentive for the Directors of the Board of the Company and enables these individuals to more greatly share the benefit from the growth of corporate value along with shareholders. The Company also decided to introduce a restricted stock compensation plan for the Executive Officers of the Company and the Directors of the Board of its subsidiaries on March 26, 2020. For more information about this plan, please refer to the press release titled "Notice regarding Introduction of a Restricted Stock Compensation Plan" dated February 27, 2019 and "Notice regarding the Introduction of a Restricted Stock Compensation Plan for Subsidiaries" dated March 26, 2020.

The Compensation Committee has reviewed the restricted stock compensation plan in order to adjust the compensation provided to the Directors of the Board and the Executive Officers of the Company (the "Qualified Persons") to correspond with their roles, responsibilities, and risk exposure, and decided the number of the Company's common stock to be delivered to individual Qualified Persons. In accordance with this decision and based on the decision made at the Compensation Committee meeting held today and the decision by the Representative Executive Officers & Co-Presidents, the Company has decided to provide monetary compensation claims of 21,340,000 yen (the "Monetary Compensation Claims") and 20,000 shares of common stock of the Company to the Qualified Persons.

For the Disposal of Treasury Shares, one Qualified Person, who is the planned recipient, will make in-kind contributions of all the Monetary Compensation Claims to the Company according to the restricted stock compensation plan. In return, the Qualified Person will receive shares of the Company's common stock (the "Allocated Shares") that will be disposed of by the Company. For the Disposal of Treasury Shares, the Company and the Qualified Person will enter into a restricted stock allocation agreement. For a summary of the stock allocation agreement, please see 3 as described below.

3. Summary of the Stock Allocation Agreement

(1) Transfer restriction period: September 16, 2022 - September 16, 2052

(2) Conditions for the cancellation of transfer restrictions
The Company will cancel the transfer restriction all Allocated Shared held by the Qualified Person upon the expiration of the transfer restriction period, provided that he or she has continuously retained his or her position as a Director, Executive Officer, Corporate Officer not concurrently serving as a Director, Audit & Supervisory Board Member, employee, or any equivalent position at the Company or the Company's subsidiaries during the transfer restriction period.

(3) Treatment in the event of retirement or resignation of the Qualified Person due to death or other legitimate reason
(i) Timing of the cancellation of transfer restrictions
In the event that the Qualified Person retires or resigns from his or her position as a Director, Executive Officer, Corporate Officer not concurrently serving as a Director, Audit & Supervisory Board Member, employee, or any equivalent position at the Company or the Company's subsidiaries due to a legitimate reason (including expiration of his or her term of office and mandatory retirement), the transfer restriction will be cancelled immediately after the retirement or resignation of the Qualified Person. In the event of death, the transfer restriction will be cancelled at a time decided separately by the Compensation Committee of the Company or by the Representative Executive Officers & Co-Presidents after the death of the Qualified Person.
(ii) Number of shares subject to the cancellation of transfer restriction
The number of shares obtained by dividing the number of months from the month in which the decision regarding the Disposal was made to the month in which the Qualified Person retired or resigned from his or her position (the "tenure of service") by eight (if that number exceeds one, it will be rounded down to one) and multiplying it by the number of the Allocated Shares held at the time of retirement or resignation as defined in (i). (However, any fractional shares of less than one unit of stock resulting from the calculation are omitted.)

(4) Acquisition of Allocated Shared by the Company without consideration
When the transfer restriction period expires or is cancelled in the case defined in (3) above, the Company will rightfully acquire without consideration the Allocated Shares whose transfer restrictions are not cancelled.

(5) Management of shares
During the transfer restriction period, the Allocated Shares are held in dedicated accounts at Nomura Securities Co., Ltd. that are opened by the Qualified Person so that no transfer, establishment of security rights, or other methods of disposal can be performed. In order to ensure the effectiveness of transfer restrictions, etc. with respect to the Allocated Shares, the Company has signed an agreement with Nomura Securities Co., Ltd. in relation to the management of accounts for the Allocated Shared held by each Qualified Person. The Qualified Person shall consent to the terms regarding the management of these accounts.

(6) Treatment in the event of organizational restructuring, etc.
If, during the transfer restriction period, a merger agreement in which the Company will be the dissolved company, a share exchange agreement or share transfer plan in which the Company will become a wholly owned subsidiary, or any other matter related to organizational restructuring, etc. is approved at a General Meeting of Shareholders of the Company (or the Board of Directors in cases where the approval of the General Meeting of Shareholders is not required for the organizational restructuring, etc.), the Company will, by resolution of the Board of Directors, cancel the transfer restriction, with respect to the number of shares determined by multiplying the number of the Allocated Shared held at that time by the number obtained by dividing the tenure of service by eight (if that number exceeds one, it will be rounded down to one; however, any fractional shares of less than one unit of stock resulting from the calculation are omitted), on the business day preceding the effective date of the organizational restructuring, etc. Additionally, the Company will rightfully acquire without consideration the Allocated Shares whose transfer restrictions have not been cancelled immediately after the transfer restrictions are cancelled.

4. Basis for calculating the payment amount and other information

The Disposal of Treasury Shares for the planned recipients of allocations will be performed by using the monetary compensation claims granted as the restricted stock compensation to these recipients as assets contributed in kind in accordance with the restricted stock compensation plan. To eliminate arbitrary decisions concerning the disposal price, this price will be 1,067 yen, which is the closing price of the Company's common stock on the Prime Market of the Tokyo Stock Exchange on August 30, 2022 (the business day preceding the decision by the Compensation Committee meeting and the decision by the Representative Executive Officers & Co-Presidents). The Company believes that this price is reasonable and not particularly advantageous because it is the market share price on the day preceding the decision by the Compensation Committee meeting and the decision by the Representative Executive Officers & Co-Presidents.