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Release: April 27, 2005

Notice of Issuance of Stock Acquisition Rights as Stock Compensation-Type Stock Options

The board of directors of NGK INSULATORS, LTD. (President & COO: Shun Matsushita; Head Office: Nagoya, Aichi, Japan) today resolved to make a proposal at its annual general meeting of shareholders scheduled for June 2005 to issue Stock Acquisition Rights at no cost for the purpose of granting stock compensation-type stock options to NGK's directors, corporate auditors and corporate officers pursuant to provisions of Articles 280-20 and 280-21 of Japan's Commercial Code. Particulars are provided in the following:

1. Reasons for issuing Stock Acquisition Rights with specially favorable conditions

With this free issuance of Stock Acquisition Rights as stock compensation-type stock options, NGK intends to link its compensation system for directors, corporate auditors and corporate officers more to the company's stock price and consolidated business performance. Thereby, they will share with stockholders both advantages and risks generated by ups and downs of the stock price, leading them to enhance their motivation and morale to raise the value of the stock and consolidated business performance through appropriate management of the company.
NGK will drastically review its compensation system for directors and corporate auditors abolishing the existing retirement benefits system; and instead granting directors, corporate auditors and corporate officers Stock Acquisition Rights free of charge as stock compensation-type stock options subject to an approval at each general shareholders meeting held every fiscal year during their service.

2. Outline

(1) Grantees of Stock Acquisition Rights
NGK's directors, corporate auditors and corporate officers.

(2) Type and the number of shares to be issued upon exercise of Stock Acquisition Rights
Up to 200,000 shares of NGK's common stock
In the event, however, that NGK carries out stock splits or reverse stock splits, the number of common stocks to be issued upon exercise of Stock Acquisition Rights shall be adjusted in accordance with the following calculation formula, with any resulting fractional figure less that 1 share being rounded down.

Post-adjusted number of shares = Pre-adjusted number of shares X Ratio of stock split or reverse stock split

Furthermore, in the event of merger or consolidation with other company where Stock Acquisition Rights are succeeded to such company, or in the event of any corporate division, NGK may adjust the number of common stocks to be issued upon exercise of Stock Acquisition Rights.

(3) The aggregate number of Stock Acquisition Rights
The aggregate number of Stock Acquisition Rights shall be up to 200.
1,000 shares will be allotted to each Stock Acquisition Right. If, however, an adjustment of the number of common stocks is carried out in a manner stipulated in "(2)", this aggregate number shall be adjusted as well.

(4) Issuing price of Stock Acquisition Rights
Free of charge

(5) Amount to be paid in upon exercise of each Stock Acquisition Right
The amount to be paid in upon exercise of each Stock Acquisition Right shall be the amount obtained by multiplying the amount to be paid in per share to be issued or transferred upon exercise of each Stock Acquisition Right, which is one (1) yen, by the number of shares allotted to each Stock Acquisition Right.

(6) Exercise period of Stock Acquisition Rights
The period in which Stock Acquisition Rights are exercisable is determined by NGK's board of directors within the period of July 1, 2005 to June 30, 2035.

(7) Other conditions regarding exercise of Stock Acquisition Rights

  • A person holding Stock Acquisition Rights is entitled to exercise such rights from one year after the following day of termination of his or her service as a director, corporate auditor or corporate officer (hereinafter referred to as "the first day of an exercise period") until six years after the following day of such termination of service but not later than June 30, 2035.
  • Regardless of the above statement in the previous item in the case that "the first day of an exercise period" does not fall on any date until June 30, 2034, such person is entitled to exercise the rights on and after July 1, 2034.
  • No partial exercise of a single Stock Acquisition Right shall be permissible.
  • In the event of the death of a holder of Stock Acquisition Rights, such rights shall be succeeded to the bereaved family provided in the "agreement with respect to allotment of Stock Acquisition Rights" signed between the holder and NGK.
  • Other conditions which are not mentioned above are subject to a resolution of the company's board of directors and the "agreement with respect to allotment of Stock Acquisition Rights."

(8) Causes and conditions of cancellation of Stock Acquisition Rights

  • Should any merger contract that defines NGK as the merged and extinct company, or should any share exchange or transfer agreement that transforms NGK into a wholly-owned subsidiary of other company be approved at NGK's general meeting of shareholders, the company may cancel all outstanding Stock Acquisition Rights without compensation.
  • NGK may cancel at any time Stock Acquisition Rights acquired and owned by the company without compensation.
  • In the case that a holder of Stock Acquisition Rights becomes unable to exercise such rights, NGK may cancel the said rights without compensation.

(9) Restriction on transfer of Stock Acquisition Rights
Any transfer, pledge or other means of disposal of Stock Acquisition Rights shall require an approval of NGK's board of directors.

(10) Succession of Stock Acquisition Rights in the case of a share exchange or share transfer
In the case of a share exchange or transfer where NGK becomes a wholly-owned subsidiary of other company, any obligations with regard to Stock Acquisition Rights shall be succeeded by such company that becomes the 100%-parent company as a result of the share exchange or transfer. This, however, shall be applied provided that a share exchange agreement and a resolution of a general shareholders meeting held for a share transfer includes stipulations concerning the succession of Stock Acquisition Rights in the line with the following principles.
(The principles of deciding the conditions of Stock Acquisition Rights to be succeeded.)

  • Type of shares of 100%-parent company to be issued upon exercise of Stock Acquisition Rights
    The 100%-parent company's common stock
  • Number of shares of 100%-parent company to be issued upon exercise of Stock Acquisition Rights
    The number of shares of 100%-parent company to be issued upon exercise of Stock Acquisition Rights shall be adjusted in accordance with the ratio of a share exchange or transfer, with any resulting fractional figure less that 1 share being rounded down.
  • Amount to be paid in upon exercise of Stock Acquisition Rights
    The amount to be paid in upon exercise of Stock Acquisition Rights shall remain the same as the amount before succession of such rights.
  • Exercise period of Stock Acquisition Rights
    The period in which Stock Acquisition Rights are exercisable shall remain the same as the period before succession of such rights.
  • Other conditions regarding exercise of Stock Acquisition Rights, and causes and conditions of their cancellation
    As a rule, the conditions remain the same as before the succession of Stock Acquisition Rights. The details shall be determined at a meeting of NGK's board of directors held at the time of a share exchange or transfer.
  • Restriction on transfer of Stock Acquisition Rights
    Transferring Stock Acquisition Rights shall require an approval of the board of directors of the 100%-parent company.

(Note)
Specifics of the issuance and allotment of Stock Acquisition Rights will be determined by a resolution of a meeting of NGK's board of directors to be held after the annual general meeting of shareholders scheduled for June 2005, provided that the bill described above is approved at the said shareholders meeting.


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