July 10, 2023
SMS Co., Ltd.
(Company Code: 2175, TSE Prime Market)
https://www.bm-sms.co.jp/en/<PRESS RELEASE>
Notice regarding Issuance of Paid-in Stock Options(The 19th Stock Acquisition Rights) with Performance Conditions
SMS Co., Ltd. (the “Company”) hereby announces that, on July 10, 2023, its Board of Directors
has resolved to issue the 19th Stock Acquisition Rights (the “Stock Acquisition Rights”) to directors
and employees of the Company as outlined below, pursuant to the provisions of Articles 236, 238,
and 240 of the Companies Act.
The Stock Acquisition Rights will be issued to the subscribers with charge at a fair price and,as such, will not be allotted on the conditions particularly favorable to them. Therefore, theissuance will be conducted without approval of the General Meeting of Shareholders. The Stock
Acquisition Rights shall not be issued as compensation to subscribers. Each of the subscribers
shall undertake the rights on his/her investment decision.
I.

Purpose and Reasons for Issuance of Stock Acquisition Rights
With the Group mission of “We aim to improve the quality of life by providing information
infrastructure for an aging society,” the Company provides more than 40 services in Medical
Care, Elderly Care, Healthcare, and Senior Life in Japan and abroad, including career businesslike recruiting agent, management support platform for elderly care operators (Kaipoke) andmedical information service in Asia-Oceania.
Since its establishment, the Company marked rises in sales and profits for 19 consecutiveyears. To achieve the Group mission, however, we need to continue to grow the existing
businesses and promote the development and nurturing of new businesses for further businessexpansion. Accordingly, the Company has decided to issue the Stock Acquisition Rights withthe aim of enhancing directors’ and employees’ morale and motivation toward businessexpansion and an increase in corporate value.
As described in “II. Guidelines on Issuance of Stock Acquisition Rights, 3. Details of Stock
Acquisition Rights, (6) Conditions for exercising Stock Acquisition Rights,” these Stock
Acquisition Rights will become exercisable only when the adjusted operating income (*) in thefiscal year ending March 2026 achieves a predetermined level. The Company has chosen theadjusted operating income as the benchmark because it aims for continued profit growth as animportant management objective and the adjusted operating income will be the mostappropriate measure of the contribution of directors and employees to the expansion ofbusiness and the increase in corporate value. Specifically, the exercisable rate is set based on
the growth rate of the adjusted operating income. The exercisable rate shall be: 10% when theadjusted operating income for the fiscal year ending March 2026, exceeds the amount with anaverage annual growth rate of 10% compared to the adjusted operating income for the fiscalyear ended March, 2023; 70% when the adjusted operating income exceeds the amount withan average annual growth rate of 15%; and 100% when the adjusted operating income exceeds
the amount with an average annual growth rate of 20%. By clarifying the differences of
economic advantages enjoyable depending on the achievement levels of performance targets,
this plan is to bolster incentives for directors and employees who are allottees of these Stock
Acquisition Rights to achieve the Group’s long-term growth.
In the event that all the Stock Acquisition Rights are exercised, the maximum number ofshares to be issued will be 213,000 shares, which is approximately 0.24% of the total numberof issued shares as of the date of resolution of issuance. However, the Stock Acquisition Rights
are exercisable on the condition of the Company’s achieving the predetermined performancetarget and the Company believes that the achievement of the target will help improve thecorporate value and shareholder value and contribute to the interests of the existing
shareholders. Accordingly, the Company regards that the size of share dilution by issuing theStock Acquisition Rights comes within a reasonable range.
(*) The amount obtained by adding stock-based compensation expenses in the notes to theconsolidated financial statements in the Company’s annual securities report for therelevant fiscal year, to operating income of the consolidated statement of income in thesaid report.
II.

Guidelines on Issuance of Stock Acquisition Rights

1.

Number of Stock Acquisition Rights
2,130 units
The total number of shares that may be delivered upon exercise of Stock Acquisition Rights
shall be 213,000 shares of the Company’s common stock. If the number of shares underlying
one Stock Acquisition Right is adjusted in accordance with 3. (1) below, the said total numberof Stock Acquisition Rights shall be obtained by multiplying the adjusted number of shares
underlying one Stock Acquisition Right by the number of Stock Acquisition Rights above.

2.

Amount of payment for Stock Acquisition Rights and method of calculation thereof

The issue price shall be 2,500 yen per Stock Acquisition Right. The amount has been
determined based on the calculation conducted by Plutus Consulting Co., Ltd. (“Plutus”), an
independent appraisal institution, which took information about the Company’s share priceand others into consideration. In the process of computation, Plutus used the Monte Carlosimulation, a widely used pricing model of an option.
3.

Details of Stock Acquisition Rights(1) Class and number of shares underlying Stock Acquisition Rights
The number of shares underlying one Stock Acquisition Right (the “Number of SharesGranted”) shall be 100 shares of the Company’s common stock.
If the Company has, subsequent to the allotment date of the Stock Acquisition Rights,
conducted a stock split (including, hereinafter, gratis allotment of the Company’s commonstock) or reverse stock split, the Number of Shares Granted shall be adjusted using the formula
shown below; provided that such adjustment shall be made only for the number of shares
underlying the unexercised Stock Acquisition Rights at that point in time, and any fraction lessthan one share resulting from the adjustment shall be rounded down to the nearest whole
number:Adjusted Number of Shares Granted =Number of Shares Granted before adjustment × Split (or reverse split) ratio

If the Company has, subsequent to the allotment date of the Stock Acquisition Rights, carriedout a merger or company split, reduced its stated capital, or otherwise needed to adjust theNumber of Shares Granted in a manner similar to these, the Number of Shares Granted shallbe appropriately adjusted to the extent deemed reasonable.
(2) Value of property to be contributed upon exercise of Stock Acquisition Rights andmethods of calculation thereof
The value of property to be contributed upon exercise of Stock Acquisition Rights shall be
determined by multiplying the amount to be paid in per share (the “Exercise Price”) by the
Number of Shares Granted.
The Exercise Price shall be 2,708 yen (The closing price of the Company’s share on theTokyo Stock Exchange on July 7, 2023, the day immediately prior to the date of the resolution
by the Board of Directors of the Company determining the issuance of Stock Acquisition Rights).
If the Company has, subsequent to the allotment date of the Stock Acquisition Rights,
effected a stock split or reverse stock split, the Exercise Price shall be adjusted using thefollowing formula, and any fraction less than one yen resulting from the adjustment shall berounded up to the nearest yen:

Adjusted Exercise Price = Exercise Price before adjustment ×1Split (or reverse split) ratio

If the Company has, subsequent to the allotment date of the Stock Acquisition Rights, issued
new shares or disposed treasury shares at a price below the market value (meaning a pricethat is particularly low compared to a fair issue price) of the common stock of the Company(excluding the cases of the issuance of new shares or the disposal of treasury shares due tothe exercise of the Stock Acquisition Rights, and the transfer of treasury shares through shareexchange), the Exercise Price shall be adjusted using the following formula. Any fraction lessthan one yen resulting from the adjustment shall be rounded up to the nearest yen:
Adjusted Exercise Price = Exercise Price before adjustment ×
Number of new shares issued × Amount to be paid in per share
Market price per share before issuance of new shares
Number of shares outstanding + Number of new shares issued

Number of shares outstanding +In the formula above, the “Number of shares outstanding” shall be the total number of issued
shares of the Company’s common stock, less the number of treasury shares of the Company’scommon stock; and in the event that treasury shares of the Company’s common stock aredisposed of, the “Number of new shares issued”, “Amount to be paid in per share” and “Marketprice per share before issuance of new shares” shall be read as the “Number of treasury sharesdisposed of”, “Disposal amount per share ” and “Market price per share before disposal,”
respectively.
Furthermore, if the Company has, subsequent to the allotment date of the Stock Acquisition
Rights, carried out a merger with another company, or a company split, or otherwise needs toadjust the Exercise Price in a manner similar to these, the Company may appropriately adjust
the Exercise Price to the extent deemed reasonable.
(3) Period during which Stock Acquisition Rights may be exercised
The period during which the Stock Acquisition Rights may be exercised (the “ExercisePeriod”) shall be from July 1, 2026 to June 30, 2031. However, if the final day of the Exercise
Period is a Company holiday, the preceding business day shall be the final day.
(4) Matters concerning increases in stated capital and legal capital surplus
1) In the event of shares being issued upon exercise of the Stock Acquisition Rights, anincrease in the amount of stated capital shall be one-half of the maximum amount of increasein capital, etc., calculated in accordance with Paragraph 1, Article 17 of the Ordinance on
Accounting of Companies. Any fraction less than one yen resulting from the calculation shallbe rounded up to the nearest yen.
2) In the event of shares being issued upon exercise of the Stock Acquisition Rights, anincrease in the amount of legal capital surplus shall be the amount obtained by subtracting

the increase in capital in the above 1) from the maximum amount of increase in capital, etc.
stated in the above 1).
(5) Restriction on acquisition of Stock Acquisition Rights through transfer
Acquiring the Stock Acquisition Rights through transfer shall require approval through a
resolution by the Company’s Board of Directors.
(6) Conditions for exercising Stock Acquisition Rights
1) If the amount of the adjusted operating income in the fiscal year ending March 2026 has
exceeded each of the levels stated in (a) to (c) below, a stock acquisition right holder may
exercise the number of the Stock Acquisition Rights equivalent to each predetermined rate ofthe Stock Acquisition Rights allotted to each holder (the “Exercisable Rate”).
(a) When the adjusted operating income has exceeded 9,858 million yen, the Exercisable Rateshall be 10%(b) When the adjusted operating income has exceeded 11,265 million yen, the Exercisable
Rate shall be 70%(c) When the adjusted operating income has exceeded 12,799 million yen, the Exercisable
Rate shall be 100%
In determining the values of the adjusted operating income above, the amount calculated
below shall be used as a reference value. It is the amount obtained by adding stock-based
compensation expenses in the notes to the consolidated financial statements in theCompany’s annual securities report for the relevant fiscal year, to operating income of theconsolidated statement of income in the said report. In case where any indicator used as areference value should be changed or modified due to the change in the accounting standards
and other reasons, the Company shall separately establish an applicable indicator as areference value through a resolution at a Board of Directors’ meeting. In case where there isa fractional number of less than one in the exercisable Stock Acquisition Rights, the number
shall be truncated.
2) A Stock Acquisition Rights holder does not need to be a director or an employee of theCompany at the time of exercise of the Stock Acquisition Rights. Except when the Board ofDirectors of the Company separately approves, a Stock Acquisition Rights holder may not
exercise the Stock Acquisition Rights in cases where the holder is removed from his/herposition or receives disciplinary dismissal, or when there is a case that falls upon any of theitems stipulated in the agreement on allotment of the Stock Acquisition Rights that the exerciseof the Stock Acquisition Rights shall not be appropriate.
3) Heirs of a stock acquisition right holder may not exercise the Stock Acquisition Rights.
4) In the event that the exercise of Stock Acquisition Rights causes the number of outstanding
shares of the Company to exceed its total number of authorized shares, said Stock Acquisition
Rights may not be exercised.

5) Stock Acquisition Rights constituting less than one unit may not be exercised.
4.

Date of the allotment of Stock Acquisition Rights
July 26, 2023

5.

Matters concerning acquisition of Stock Acquisition Rights(1) In the event that the Company’s General Meeting of Shareholders has approved (or, that theCompany’s Board of Directors has resolved to approve, due to no approval required form theGeneral Meeting of Shareholders) a merger agreement under which the Company will beextinguished, a split agreement or plan under which the Company will be split, or a shareexchange agreement or share transfer plan under which the Company will become a whollyowned subsidiary, the Company may acquire the entire amount of the Stock Acquisition
Rights gratis on or after the date specified separately by its Board of Directors.
(2) In the event that a holder of the Stock Acquisition Rights becomes unable to exercise his/her
Stock Acquisition Rights due to 3. (6) above, prior to his/her exercising the right for the StockAcquisition Rights, the Company may acquire such Stock Acquisition Rights gratis.
6.

Treatment of Stock Acquisition Rights upon Corporate Reorganization
In the event that the Company has carried out a merger (limited to a case where theCompany will be extinguished as a result of the merger), absorption-type company split,
incorporation-type company split, share exchange, or share transfer (collectively, the“Corporate Reorganization”), Stock Acquisition Rights of the company that falls under any ofsub-items (a) to (e) in Item 8, Paragraph 1, Article 236 of the Companies Act (the “SurvivingCompany”) shall be delivered to a holder of the remaining Stock Acquisition Rights on the datewhen the Corporate Reorganization comes into effect (the “Remaining Stock AcquisitionRights”), in accordance with the terms and conditions set out below, provided, however, thatthe foregoing shall apply only to cases where the delivery of the Surviving Company’s Stock
Acquisition Rights, in accordance with the terms and conditions set out below, has been
stipulated in the absorption-type merger agreement, consolidation-type merger agreement,
absorption-type company split agreement, incorporation-type company split plan, shareexchange agreement, or share transfer plan, and in that case the Remaining Stock Acquisition
Rights shall be extinguished and the Surviving Company shall issue new Stock Acquisition
Rights.

(1) Number of Stock Acquisition Rights of the Surviving Company to be delivered
Said number shall be the same as the number of the Stock Acquisition Rights owned by eachholder of the Stock Acquisition Rights.
(2) Class of shares of the Surviving Company underlying Stock Acquisition Rights

Such shares shall be the Surviving Company’s common stock.
(3) Number of shares of the Surviving Company underlying Stock Acquisition Rights
The number shall be determined in accordance with 3. (1) above, taking into account theterms and conditions of the Corporate Reorganization, etc.
(4) Value of property to be contributed upon exercise of Stock Acquisition Rights
The value of property to be contributed upon exercise of each stock acquisition right to bedelivered shall be determined by multiplying the number of shares of the Surviving Companyunderlying the said Stock Acquisition Rights to be calculated according to 6. (3) above by thepost-corporate reorganization Exercise Price obtained through the adjustment of theExercise Price in accordance with 3. (2) above, taking into account the terms and conditionsof the Corporate Reorganization, etc.
(5) Period during which Stock Acquisition Rights may be exercised
The period shall commence either on the first day of the Exercise Period of the Remaining
Stock Acquisition Rights stipulated in 3. (3) above or on the day on which the CorporateReorganization comes into effect, whichever comes later, and shall end on the last day ofthe Exercise Period of the Remaining Stock Acquisition Rights stipulated in 3. (3) above.
(6) Matters concerning increases in stated capital and legal capital surplus in the event of shares
being issued upon exercise of Stock Acquisition Rights
These shall be determined in accordance with 3. (4) above.
(7) Restriction on acquisition of Stock Acquisition Rights through transfer
Restriction on acquisition through transfer shall require approval through a resolution of theBoard of Directors of the Surviving Company.
(8) Other conditions for exercising Stock Acquisition Rights
These shall be determined in accordance with 3. (6) above.
(9) Grounds and conditions for acquisition of Stock Acquisition Rights
These shall be determined in accordance with 5 above.
(10) Other terms and conditions shall be determined in accordance with the terms
and conditions applied in the Surviving Company.
7.

Matters concerning certificates of Stock Acquisition Rights
The Company shall not issue certificates of the Stock Acquisition Rights.

8.

Date of the payment of money in exchange for Stock Acquisition Rights
August 25, 2023

9.

Deadline for the application for Stock Acquisition Rights
July 21, 2023

10.

Allottees of Stock Acquisition Rights and number thereof, and number of Stock

Acquisition Rights to be allotted
Directors and employees of the Company, totaling 32 persons, and a total of 2,130 Stock
Acquisition Rights.
The number of the allottees above is a planned one and there may be an increase or adecrease therein. The number of the Stock Acquisition Rights above is a maximum number ofissuance and there may be a decrease depending on the number of subscriptions and otherfactors.