V. Points to note concerning the counterplan against the acquisition of substantial holdings
1.Basic policy regarding persons or entities to determine our financial and business strategy
Nippon Express, as a listed company on a financial exchange, respects the free trade of our outstanding shares on the market and is not necessarily against the acquisition of substantial shareholdings by a particular party as long as it can contribute to the corporate value of Nittsu Group and by extension can improve and secure our shareholders' profit. In the end though, it will be left to the shareholders to decide whether or not to accept any proposals for the acquisition of substantial shareholdings.
However some proposals for the acquisition of substantial shareholdings, for instance if it was deemed to potentially damage the relationship with our stakeholders, could undermine the corporate value of Nittsu Group and by extension our shareholders' profit. Such proposals could insufficiently reflect Nittsu Group's value, or could lack the necessary information needed by shareholders to make any final decisions.
When faced with such a proposal, our Board of Directors considers it necessary to ensure the availability of appropriate time and information for shareholders. In addition the board reserves the right to act in negotiations with the proponent of the substantial shareholdings acquisition, in order to fulfill its duties as assignees.
2.Overview of the counterplan against the acquisition of substantial shareholdings.
Nippon Express announced on April 14, 2008 that its Board of Directors has adopted the "Counterplan against acquisition of substantial shareholdings. The overview of the plan is as follows.
A.Reasons for the adoption of the Plan
The Nippon Express' Board of Directors has adopted the Plan to clarify the rules which a bidder for a substantial shareholdings acquisition must observe, to ensure sufficient time and information to allow shareholders to make good decisions, and to provide opportunities for negotiations with the bidder.
The Plan establishes rules as detailed below for a bidder to observe, and states possible damage may occur to any bidder in situations whereby Nippon Express initiates countermeasures, and by disclosing these facts provides a warning to any bidder who is against our corporate values and by extension our shareholders' profit.
Meanwhile, to prevent our Board of Directors from making any arbitrary judgments concerning the application of the counterplan, the Plan respects the recommendations and policy advice made by an independent committee. This committee ensures transparency through the timely disclosure of information to shareholders and consists of advisors who are independent from our operational management such as our External Directors and External Auditors or external experts including business executives, retired government bureaucrats, lawyers, certified public accountants and academics with a proven track record or those who are pursuant to these persons. The independent committee has three members present since the adoption of the Plan; Masahiro Sugiyama, a professor at the Faculty of Commerce at Waseda University, Takao Seki, one of our Corporate Auditors, and Naoto Nakamura, a partner in the Law firm of Nakamura, Tsunoda and Matsumoto.
B.The aim of the Plan (to prevent anyone who is defined as unqualified by this basic policy from controlling our financial and business policies)
1.Procedures for this Plan
(1)Target substantial shareholders
The Plan is applicable to the acquisition of outstanding shares falling into(i)or(ii)as follows (Except for when our Board of Directors has granted approval. Hereinafter, the relevant action is called substantial holdings.) The person who acquires substantial holdings, or who wishes to acquire (an acquirer) must comply with the procedures stated beforehand in the Plan.
(i) Acquisition of over 20% of Nippon Express's outstanding shares.
(ii) Acquisition of over 20% of Nippon Express's outstanding shares by a bidder or related parties through take over bids
(2)After submission of "Intention statement", acquirer is required to submit sufficient information, "Required Information" to be judged by shareholders on substantial holdings.
Prior to the commencement of the substantial acquisition, the acquirer will be required to submit a pledge ,"Intention Statement" which has a pre-set format and follows the procedures of this Plan
(3)Submission of "Required Information"
After submitting the "Intention statement", the acquirer is required to submit the appropriate information, "Required Information" as judged by the substantial holdings shareholders
Firstly, Nippon Express will send the "Information List" which details the information that is to be submitted by the acquirer to an address in Japan within 10 days after the submission of the "Intention Statement". Upon receipt of the information list it is expected that the acquirer be able to submit the required information.
Additional information will be required to be submitted should the Board of Directors or the shareholders consider that the information received after the submission of the "Information List" is not sufficient enough to be judged or discussed.
The Board of Directors will disclose the facts and an overview of the proposal made by the acquirer, or any other information that the Board of Directors believes important to share with shareholders.
The Board of Directors will inform the acquirer (Completion of Submitting Information) and disclose the facts to the public when the information submitted for the plan is deemed sufficient.
(4)A review period by the Board of Directors
Two types of review periods (the first day is not included) are determined, depending on the particular type of proposal, for Board members to judge, discuss, negotiate, form opinions and pursue alternatives after the "Completion of Submitting Information"
(i) The review period is 60 days from when the acquirer first proposes the Take Over Bid to acquire all outstanding shares by cash
(ii) The review period is 90 days for all other proposals.
The review period may be extended up to 30 more days if the Board of Directors deems it necessary. In this case, Nippon Express will inform the acquirer and disclose to shareholders the extended period and the reason for the extension.
During the review period the Board of Directors judges and discusses the Required Information submitted by the acquirer, consults with the relevant external experts and considers from the perspective of improving and securing our corporate value as well as our shareholders' profit. Through these discussions, the Board of Directors will inform the acquirer and will make timely and adequate disclosures to the shareholders. The Board of Directors may negotiate requirements and methods of substantial holdings with the acquirer and may offer shareholders an alternative option.
(5) Recommendations in applying the counterplan made by an independent committee
The independent committee makes recommendations to the Board of Directors on the pros and cons of applying the counterplan within the review period in accordance with the procedures stated below, while the Board will judge, discuss, negotiate, form opinions and pursue alternatives as mentioned above in(4). On such occasions, in order to guarantee the judgment of the independent committee improves and secures our corporate value and our shareholders' profits, the independent committee is allowed to consult with third parties independent from our operating management, including investment banks, brokerage firms, financial advisors, certified public accountants, lawyers, consultants and other experts, at our cost. In the event that the independent committee makes a recommendation to the Board of Directors concerning what is stated in(i)or(ii)below, the Board of Directors will promptly disclose the relevant facts and a summary of their decision along with any other item which the Board of Directors deems appropriate.
(i) In the case of recommendations to apply the counterplan made by the independent committee
In cases where the acquirer does not comply with the procedures described above in (2)to(4), or in cases where the substantial holdings by the acquirer are intended for a short-term benefit entirely for the acquirer and seriously damages our corporate value and our shareholders' profit, the independent committee will recommend the Board of Directors to apply the counterplan.
(ii) In cases where a recommendation to not apply the counterplan is made by the independent committee
The independent committee recommends to not apply the counterplan to the Board of Directors without cases of (i)
(6) Resolution of the Board of Directors
Our Board of Directors pays the utmost respect to the recommendations made by the independent committee as described in(5) and will quickly decide whether to apply the counterplan in order to improve and secure our corporate value and our shareholders' profit based on their recommendations.
The Board of Directors will promptly disclose a summary of the relevant decisions and other facts as judged as appropriate by the Board of Directors on occasions where the above decisions have been made, whether the aim concerns applying or not applying the counterplan.
(7) Termination of the counterplan or application of the counterplan
Even after deciding on the application of the counterplan or after its application following the procedures stated above in (6), our Board of Directors may terminate the counterplan or discontinue its application based on the recommendations made by the independent committee, or regardless of such recommendations on occasions where(i)the acquirer terminates the substantial holdings or(ii)the relevant facts, that is the premise for the judgment on whether to apply the counterplan or not, has changed, and where the counterplan will not improve and secure our corporate value and the shareholders' profit.
Our Board of Directors, in cases where the above decisions are made, will promptly disclose a summary of the decision and other facts judged as relevant by the Board of Directors.
(8) Inception of substantial acquisition
The acquirer is required to comply with the procedures stated above in (1) to (6) and may not commence any substantial holdings until the Board of Directors decides not to apply the counterplan.
2.The aim of the counterplan on this Plan
The counterplan, as applied by the Board of Directors is based on decisions described above in 1．（6）, is principally concerned with the allotment of warrants, hereinafter called the allotment. In appropriate cases, we reserve the right to employ another counterplan, as approved by relevant laws and regulations including the Corporate Law, and the articles of incorporation.
3.Review period, termination, and amendments of the Plan
The term of the Plan is from April 11, 2008 until the end of next general shareholders' meeting. At this meeting, approval will be sought to authorize an extension of the plan until the general shareholders' meeting in June 2011.
This Plan can be reviewed or terminated before the end of the period should the shareholders decide to enact such a termination or amendment.
Meanwhile, the Board of Directors may revise or amend the Plan to such an extent as recognized as reasonably necessary, after the approval of the independent committee, following amendments of, or revisions in the interpretations and operations of the Corporate Law, the Financial Instruments and Exchange Act, other relevant laws and regulations or stock exchange regulations, or following revisions of the taxation systems and judicial precedents.
Nippon Express, if terminating or amending the Plan, will disclose information concerning this termination or amendments and (in the case of amendments) the aim of the amendments, and other facts that the Board of Directors deem appropriate.
C.Rationality of the Plan
1.Fulfilling all of the guidelines regarding the counterplan against acquisition
The Plan fulfills all three principles as described in the Guidelines for Hostile Takeover Defensive Measures (Corporate Value Protection Measures) released by the Ministry of Economy, Trade and Industry and the Ministry of Justice in May 27th, 2005. That is the principle for improving and securing the corporate value and the shareholders’ profit, the principle of preliminary disclosure and shareholders’ will, and the principle of guaranteeing necessity and equality.
2.Adoption of the Plan to improve and secure the corporate value and the shareholders' profit
The Plan, as stated above in A, enables shareholders to make judgments on whether to adopt the substantial holdings and provides the necessary information and time for the Board of Directors to offer alternative proposals and allows the Board to negotiate with the acquirer on behalf of the shareholders, on the occasions where substantial holdings of our outstanding shares is being conducted. The Plan is adopted for the purpose of improving and securing the corporate value and the shareholders’ profit.
3.Respect the shareholders' will
Our Board of Directors has already accepted the Plan and has also agreed to discuss the Plan at the next general shareholders’ meeting as stated above in B．3. Even if the Plan is accepted at the next general shareholders’ meeting, the plan may be amended or terminated at a subsequent shareholders’ meeting. This reflects the shareholders’ will concerning when to adopt and terminate the Plan.
4.Information disclosure and judgment by independent professionals
Upon the adoption of the plan, Nippon Express will establish an independent committee to act as an advisory panel for the Board of Directors in order to eliminate any arbitrary judgments made by the Board of Directors and to make objective resolutions and recommendations concerning the operation of the Plan, including the application of the counterplan.
The independent committee consists of at least three members who are independent from our operational management such as our External Directors and External Auditors or external experts including business executives, retired government bureaucrats, lawyers, certified public accountants and academics with a proven track record.
In addition, Nippon Express will disclose the necessary information to shareholders concerning a summary of the judgments made by the independent committee. Nippon Express will also secure a system that enables the transparent operation of the Plan to improve our corporate value and our shareholders’ profit.
5.Establishing the rational and objective conditions to apply the Plan
The Plan as designed and described above in B．1．, is not to be applied until reasonable and objective application requirements are fulfilled. As such, the Plan ensures a system that prevents our Board of Directors from making arbitrary applications.
6.No dead-hand type or slow-hand type counterplan
As stated above in B．3．, the Plan can be terminated at any time by the Board of Directors which consists of directors appointed by the shareholders. Thus, the Plan is not a defensive dead-hand measure (a counterplan against acquisition that can not be terminated even if the majority of Board members are replaced).
Nor is a slow-hand defensive measure (a counterplan which requires more time to prevent its application because it does not allow the replacement of all Board members at once), since we have not adopted a classified board system.
D.Impact on shareholders
1,Impact on shareholders and investors upon the adoption of this Plan
Upon the adoption of this Plan, we will not grant rights. Hence the Plan does not directly or specifically affect the legal rights or economic benefits relevant to shareholders and the shares held by investors upon the adoption of it.
Meanwhile, as stated previously in B．1．, our countermeasure against substantial holdings may differ according to whether the acquirer complies with the Plan or not. Please be advised that shareholders and investors should carefully observe the actions of the acquirer.
2,Impact on shareholders upon the adoption of this Plan.
When the Board of Directors decides on the application of the counterplan and the allotment, rights will be granted to those shareholders written or recorded on the shareholders’ list as of the allotment date otherwise defined, at a ratio of up to 2 new rights shares for one existing share. Although this kind of allotment dilutes the economic value of a stock for shareholders and investors, it does not dilute the economic value of the entire shareholdings and the voting rights per share in cases of the allotment. We do not expect this to have any direct and concrete impact concerning the legal rights and economic value of shares held by shareholders and investors.
However, it could subsequently affect the legal rights and economic benefit of the acquirer following the application of counterplan.
Meanwhile, even after the Board of Directors resolves the allotment following the procedures stated above in B．1．（7）, the share price may change in cases where the Board of Directors decides to terminate the counterplan or discontinue its application. For instance, after determining which shareholders should be granted the allotment, in cases where the termination of the application for the countermeasure and the free acquisition of warrants by Nippon Express without distributing new shares, the economic value per share held by shareholders and investors would not be diluted. Please be advised that possible share price movements could cause a loss to investors who have traded on the premise of such an economic value dilution per share.
Moreover, in cases where discriminate terms are imposed upon the exercise of warrants or acquisition, the legal rights and economic benefits of the acquirer could suffer from such an exercise or acquisition. In this instance, we do not assume any direct and concrete influence on the legal rights and economic benefits of the shares held by shareholders and investors except those held by the acquirer.
3,Procedures to be followed by the shareholders
(1) Registration of transfer of the shares
Nippon Express will publicly announce the allotment date when the Board has resolved to issue the option. Nippon Express shareholders who are registered as at the allotment date will receive their allotment rights. Shareholders who deposit shares at JASDEC do not need to follow these procedures.
(2) Other procedures
No Application of the rights will be necessary for shareholders registered or recorded in the latest shareholders' list of the company or JASDEC as of the allotment date since those will automatically become a holder of allotment rights.
Shareholders may wish to exercise their rights during the exercisable period. (In that case, payment will be required.)
Additionally, in regard to the allotment and exercise methods and the method of acquisition by Nippon Express, we will make a disclosure and announcement in a timely and appropriate manner based on the applicable laws and regulations as well as Stock Exchange regulations, after the resolutions on the allotment have been made by the Board of Directors. Please be advised to check for such disclosures and announcements.
