The Company has introduced the compensation system for the Board of Directors, excluding Outside Directors (hereinafter referred to as the “Eligible Board of Directors”) and Corporate Officers (hereinafter together with the Eligible Board of Directors referred to as the “Eligible Board of Directors, etc.”) since the fiscal year ended March 31, 2023, in order to motivate them to achieve higher corporate value over the medium to long term, on the road to a “Global Specialty Pharma,” as well as to further share value with shareholders. The compensation system consists of a stock compensation system to grant tenure-based restricted stock to the Eligible Board of Directors (hereinafter referred to as the “System I”) and a system to grant performance-linked restricted stock to the Eligible Board of Directors, etc. (hereinafter referred to as the “System II”) (hereinafter the System I and the System II are collectively referred to as the “System”).
The Board of Directors of the Company today resolved the following resolutions with respect to the System: as tenure-based restricted stock compensation under the System I, to provide a total of 46,106,800 yen in monetary compensation claims to the three Eligible Board of Directors (hereinafter referred to as the “Allottees I”) and grant 29,200 shares of the common stock of the Company after the Allottees I pay all such monetary compensation claims as contribution in kind, and as performance-linked restricted stock compensation under the System II, to provide a total of 167,058,200 yen in monetary compensation claims to the three Eligible Board of Directors, and the twelve Corporate Officers (hereinafter referred to as the “Allottees II,” and together with the Allottees I, collectively referred to as the “Allottees”) and grant 105,800 shares of the common stock of the Company after the Allottees II pay all such monetary compensation claims as contribution in kind. The Company intends to enter into a Restricted Stock Allotment Agreement outlined below with each of the Allottees. Therefore, the Company’s common stock subject to the Disposal of Treasury Shares falls under the category of specified restricted stock stipulated in Article 54, paragraph (1) of the Corporation Tax Act and Article 84, paragraph (1) of the Order for Enforcement of the Income Tax Act.

Tenure-based restricted stock compensation (System I)

Performance-linked restricted stock compensation (System II)

(1) Details of System II

The Company shall grant shares of the Company to the Eligible Board of Directors, etc., in consideration of the performance of their duties during the period from the date of the Ordinary General Shareholders’ Meeting held in the previous fiscal year to the day before the date of the Ordinary General Shareholders’ Meeting to be held in the relevant fiscal year, in proportion to the degree of achievement of performance target figures, etc. determined by the Board of Directors of the Company during the performance evaluation period separately determined.
In cases where it is not appropriate to grant restricted stock, such as when any of the Eligible Board of Directors, etc., retire or resign from any of the Eligible Positions due to the expiration of their term of office, the Company will pay (settle) the amount in cash instead of delivering shares.

(2) Period Subject to Compensation and Performance Evaluation Period

Period subject to remuneration: From June 20, 2024 to June 18, 2025
Performance evaluation period: From April 1, 2024 to March 31, 2025

(3) Outline of Restricted Stock Allotment Agreement

1. (i) Transfer restriction period

   From July 18, 2025 to the date when the Allottees II retire from any of the Eligible Positions.During the transfer restriction period set forth above (hereinafter referred to as the “Transfer Restriction Period II”), the Allottees II may not transfer, create a pledge or mortgage by transfer to or for a third party, or otherwise dispose of, the allotted performance-linked restricted stock (hereinafter referred to as the “Allotted Shares II”).

2. (ii) Acquisition of Allotted Shares II by the Company without paying compensation

   The Company shall naturally acquire the Allotted Shares II without paying compensation if any of the Allottees II retire from any of the Eligible Positions on or after the commencement date of the Transfer Restriction Period II, unless such retirements are due to the expiration of their term of office, death, or other reasons deemed reasonable by the Board of Directors of the Company.
   In addition, the Company shall naturally acquire the Allotted Shares II for which the Transfer Restrictions have not been lifted, based on the terms provided in (iii) “Lifting of transfer restrictions” below, without paying compensation at the expiration of the Transfer Restriction Period II (hereinafter referred to as the “Time of Expiration II”), if any.

3. (iii) Lifting of transfer restrictions

   The Company shall lift the Transfer Restrictions of all of the Allotted Shares II held by the Allottees II at the Time of Expiration II, in principle, on the condition that the Allottees II have continuously held the Eligible Positions throughout the Transfer Restriction Period II, and that the retirements of the Allottees II from the Eligible Positions are due to the expiration of their term of office, death, or other reasons deemed reasonable by the Board of Directors of the Company.

4. (iv) Provisions for management of shares

   Each of the Allottees II shall, in a manner designated by the Company, open an account to book or record the Allotted Shares II with SMBC Nikko Securities Inc. The Allotted Shares II shall be deposited and maintained in that account until the Transfer Restrictions are lifted.

5. (v) Handling in cases of organizational restructuring, etc.

   In the event of a merger agreement in which the Company is the dissolving company or any other organizational restructuring, etc. of the Company during the Transfer Restriction Period II, the Company shall lift, based on a resolution of the Board of Directors’ meeting of the Company, the Transfer Restrictions of all of the Allotted Shares II at a date prior to the effective date of such organizational restructuring, etc.

6. (vi) Malus and clawback clauses

   The Company shall acquire all or part of the Allotted Shares II held by the Allottees II without paying compensation if, during the Transfer Restriction Period II or for a certain period of time after the lifting of the Transfer Restrictions, any of the Allottees II violate laws and regulations or internal rules, etc. in a material respect and the Board of Directors of the Company recognizes such violation as grounds for the gratis acquisition of the shares by the Company, or in the case of any other event specified by the Board of Directors of the Company as being grounds for the same. Additionally, if such shares have been disposed of, the Company may demand payment of an amount equivalent to the value of such shares at the time of the act of disposal to the relevant Allottees II.

To avoid arbitrary pricing, the disposal price for the Disposal of Treasury Shares shall be set at 1,579 yen, which is the closing price of the Company’s common stock on the Tokyo Stock Exchange on June 18, 2025, the business day immediately preceding the date of resolution of the Board of Directors’ meeting of the Company. This is the market price on the day before the date of resolution, and the Company believes that it is a reasonable and not particularly advantageous price.