Notice Regarding the Introduction of a Performance-Linked Stock Compensation Plan
- TOKYO, Japan, March 16, 2016 -
Seiko Epson Corporation (TSE: 6724, "Epson") announces that it resolved at the meeting of its Board of Directors held on March 16, 2016, to introduce a new performance-linked stock compensation plan (hereinafter, the "Plan").
For details about the Plan, Epson intends to adopt another resolution at a meeting of the Board of Directors to be held at a later date. Subsequently, the Plan will be submitted for approval at the 74th Ordinary General Meeting of Shareholders (hereinafter, the "Shareholders Meeting") scheduled for late June of this year. Epson will announce the details of the Plan as soon as determined.
Epson also has resolved a policy of transitioning to a "company with an Audit & Supervisory Committee" on the condition that necessary amendments to the Articles of Incorporations and others are approved at the Shareholders Meeting. The Plan outlined below is subject to such transition.
1. Objective for introducing the Plan
(1) Epson will introduce the Plan for the Officers (Note 1) that is highly transparent and fair, for the purpose of showing its commitment to promoting sustainable growth and increasing its mid- to long-term corporate value in addition to strengthening the sense of sharing common interests with shareholders (Notes 2 and 3).
The Plan will be designed so that numbers of shares awarded to the respective Officers fluctuates depending on the levels of achievement of the mid- to long-term operating performance targets disclosed in the next mid-range business plan (FY2016-FY2018).
(2) The introduction of the Plan is subject to approval of the resolution at the Shareholders Meeting.
(3) The Plan will employ a framework referred to as the officer compensation BIP (Board Incentive Plan) trust (hereinafter, the "BIP Trust"). The BIP Trust is an incentive plan for officers modeled on the U.S. Performance Share and Restricted Stock systems, and the Plan provides the Officers with Epson's own shares, which will be acquired through the BIP Trust based on the levels of achievement of operating performance targets.
Note 1: "The Officers" means Epson's Directors and Executive Officers who have entered into delegation agreements with Epson, excluding those at positions independent from business execution such as Outside Directors and Directors who are Audit & Supervisory Committee Members, as well as overseas residents.
Note 2: Pursuant to the introduction of the Plan, the compensation for the Officers will consist of "basic remuneration," "bonuses" and "stock compensation." Meanwhile, the compensation for those at positions independent from business execution such as Outside Directors and Directors who are Audit & Supervisory Committee Members will consist of only the basic remuneration in light of their role of fulfilling the supervisory function on overall management.
Note 3: Epson has established the Director Compensation Committee in which Outside Directors make significant contributions, as an advisory body of the Board of Directors. The Director Compensation Committee has made deliberations on the introduction of the Plan to ensure the transparency and objectivity of the decision process and the results of discussions regarding such a compensation plan.
2. BIP Trust framework
1) Epson will obtain approval by resolution at the Shareholders Meeting related to the introduction of the Plan.
2) Epson will establish share delivery regulations related to the content of the Plan.
3) In accordance with the trust agreement, Epson contributes funds on the trustee's behalf within the scope of approval by resolution at the Shareholders Meeting in 1) above and establishes a trust having the Officers who satisfy the beneficiary conditions as beneficiaries (hereinafter, the "Trust").
4) According to the trust administrator's instructions, the Trust uses funds contributed as in 3) above as the source of funds to acquire Epson shares from Epson (disposal of treasury shares) or in the stock market.
5) The allocation of surplus funds in the Trust for the Epson shares is handled in the same manner as for other Epson shares, and is appropriated for necessary expenses for the Plan.
6) Throughout the trust period, voting rights are not to be exercised on Epson shares within the Trust.
7) During the trust period, the Officers are awarded a specific number of points each year based on their position and other factors, in accordance with the share delivery regulations established in 2) above. Such points fluctuate according to the levels of achievement of mid-range operating performance targets. Furthermore, Epson shares, which correspond to a certain proportion of such points, will be delivered to the Officers, in principle, after the lapse of three years following the awarding of points. As regards Epson shares corresponding to the remaining portion of points, the Officers will receive cash equivalent to the amounts obtained through the conversion of such shares into cash within the Trust as prescribed in the trust agreement.
8) If residual shares remain in the Trust at the expiry of the trust period in the event that operating performance targets are not met during the trust period, Epson may continue to use the Trust via additional contributions thereto or by modifying any provisions of the trust agreement. Otherwise, Epson will acquire such residual shares without charge, through gratis transfer of these residual shares from the Trust, and retire them by resolution of the Board of Directors.
9) Upon the termination of the Trust, residual assets remaining after allocation to beneficiaries are to be attributed to Epson within the scope of trust expense reserve after subtracting funds for acquiring shares from the trust money. The portion exceeding the trust expense reserve is planned to be donated to organization(s) having no interests with Epson and any of its officers.
Note: The Trustor may continue the Plan by contributing additional money as funds for acquiring its own shares for the Trust within the scope of the funds for acquiring shares, of which the amount is subject to approval by resolution at the Shareholders Meeting.
Epson is a global technology leader dedicated to driving innovations and exceeding customer expectations in printing, visual communications, quality of life and manufacturing. Epson's lineup ranges from inkjet printers, printing systems and 3LCD projectors to industrial robots, smart glasses and sensing systems and is based on original compact, energy-saving, and high-precision technologies.
Led by the Japan-based Seiko Epson Corporation, the Epson Group comprises nearly 72,000 employees in 93 companies around the world, and is proud of its contributions to the communities in which it operates and its ongoing efforts to reduce environmental burdens.