Extraordinary General Meeting of Shareholders

Notice of Convocation
Date and time
Location

February 17, 2023 (Friday) at 10:00 a.m.
Tamura Building 1F, 1-5-24 Sogawa, Toyama City, Toyama Prefecture

Deadline for Exercise of Voting Rights

February 16, 2023 (Thu) at 5:40 p.m.

In order to prevent the spread of COVID-19,
we ask that you kindly consider refraining
from attending the meeting and exercising
your voting rights in advance, in writing or
online, etc.
Please note that gifts will not be provided toshareholders attending the General Meeting of
Shareholders.

Nichi-Iko Pharmaceutical Co., Ltd.
Securities Code: 4541

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Important NoticeRegarding Measures to Prevent the Spread of COVID-19
at the Extraordinary General Meeting of Shareholders
We would like to inform you of the following regarding measures we will take at the General
Meeting of Shareholders to prevent the spread of COVID-19, and ask for the understanding andcooperation of our shareholders.
(1) Request to our shareholders
・In consideration of the health and safety of all of our shareholders, we would like to ask you
to refrain from attending the General Meeting of Shareholders on this occasion, regardless of
your health condition.
・In particular, we recommend that elderly people, those with underlying conditions, and those
who are pregnant refrain from attending.
・Voting rights may be exercised in writing or online, so please consider exercising yourvoting rights in this manner.
* Please refer to “Guidance on Exercise of Voting Rights” on page 2 regarding how to
exercise your voting rights.
(2) Request to those shareholders attending the meeting
・At the entrance of the venue, attendees’ body temperature will be checked by thermography.
Please note that those who appear to be unwell may be asked to refrain from entering thevenue.
・Shareholders in attendance are kindly requested to cooperate with measures to prevent
infection, such as wearing masks and using hand sanitizer.
・There is no parking available at the venue, so please refrain from coming by car.
(3) Measures taken by the Company
・The Company’s officers and meeting staff will in principle be wearing masks.
・Hand sanitizer will be provided at reception and various places in the venue.
・The proceedings of the General Meeting of Shareholders will be shortened as a measureagainst the spread of COVID-19.
・Seating in the venue will be spaced out to avoid crowding, so there are fewer seats available.
Please note that admission may be restricted as a result.
・In consideration of preventing infection and being fair to all shareholders, gifts will not be
distributed to shareholders who attend the meeting.
Please note that in the event of change in the operation method of the General Meeting of
Shareholders due to future circumstances, guidance will be provided on our website(https://www.nichiiko.co.jp/).

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Securities code 4541
February 2, 2023
To our shareholders:
1-6-21 Sogawa, Toyama City, Toyama Prefecture

Nichi-Iko Pharmaceutical Co., Ltd.
Yuichi Tamura, President & CEO
Notice of Extraordinary General Meeting of Shareholders
Please accept our sincere gratitude for your continued support.
We would like to inform you that an Extraordinary General Meeting of Shareholders of theCompany will be held as follows.
Please note that in lieu of attending the meeting, you may exercise your voting rights by either ofthe methods described in “4. Guidance on Exercise of Voting Rights.” We therefore kindly ask you to
exercise your voting rights by 5:40 p.m. on Thursday, February 16, 2023, after reviewing the attached
Reference Documents for the General Meeting of Shareholders.
1.
2.
3.

4.

Date and Time
February 17, 2023 (Fri), 10:00 a.m.
Location
Tamura Building 1F, 1-5-24 Sogawa, Toyama City, Toyama Prefecture
Agenda Proposals
Items for resolution
Agenda Item 1
Issuance of Offered Shares Through Third-Party Allotment (1)Agenda Item 2
Partial Amendments to the Articles of Incorporation in Order to Increase
the Total Number of Authorized Shares to be Issued
Agenda Item 3
Issuance of Offered Shares Through Third-Party Allotment (2)Agenda Item 4
Reduction of Amount of Capital
Agenda Item 5
Reduction of Amount of Capital Reserves
Agenda Item 6
Appropriation of Surplus
Agenda Item 7
Election of Five Persons as Directors (Excluding Directors Who Are
Audit Committee Members)
Agenda Item 8
Election of Three Persons as Directors Who Are Audit Committee
members
Agenda Item 9
Share Consolidation
Agenda Item 10 Partial Amendments to the Articles of Incorporation relating to the
Abolition of Share Units Provisions, etc.
Guidance on Exercise of Voting Rights

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(1)

(2)

If exercising voting right in writing
Please indicate your approval or disapproval of the proposals on the enclosed
Voting Rights Exercise Form and return it so that it arrives before 5:40 p.m. on
Thursday, February 16, 2023.
If exercising voting rights online, etc.
If you wish to exercise your voting rights online, etc., please refer to “Instructions
for Exercise of Voting Rights Online, etc.” from pages 32 to 33 and then enter
your approval or disapproval of the proposal before 5:40 p.m., Thursday, February
16, 2023.

○ If attending the meeting, please present the enclosed Voting Rights Exercise Form at the reception desk.
○ If there are any revisions to the Reference Documents for the General Meeting of Shareholders, they will be posted online on our
website.
Company website: https://www.nichiiko.co.jp/-4-Reference Documents for the General Meeting of Shareholders
Background of the Proposal of Agenda Item 1 to Agenda Item 10
The Company was the subject of a disposition for suspension of business operations pursuant to
the Act on Securing Quality, Efficacy and Safety of Products including Pharmaceuticals andMedical Devices issued by Toyama Prefecture in March 2021. Although production and shipmentof the products have gradually recommenced at Toyama Plant 1 that was subject of a disposition
for suspension of business operations, under strict quality evaluation, shipment have not yet
recommenced for certain products scheduled for manufacturing. Furthermore, due to thesuspension of production and shipment by Kobayashi Kako Co., Ltd. (“Kobayashi Kako”) in
December 2020, our consolidated subsidiary Elmed Co., Ltd. (“Elmed”) suspended the sale ofproducts that it had subcontracted to manufacture. As a result, our sales have been reduced due tothe quality issues at Toyama Plant 1 and Kobayashi Kako. Annually implemented drug pricereductions have also adversely impacted the structure of our revenue.
Moreover, due to an overall revision in the fiscal year ending March 2022 of the development
plans for biosimilars (follow-up products to biopharmaceuticals) and orphan drugs (drugs forrare diseases), in which we have been making ongoing investments in our North American business,
we accrued impairment losses of JPY 84.13 billion in the fiscal year ending March 2022, mainly
in relation to goodwill accrued from investments in our North American business and intangible
assets concerning the development of biosimilars and orphan drugs. Due to the accrual of losses of
JPY 104.984 million attributable to owners of parent in the fiscal year ending March 2022, the ratioof owners’ equity to gross assets was reduced from 30.6% at the fiscal year ending March 2021 to5.1% at the fiscal year ending March 2022. Therefore, our consolidated and non-consolidated
financial statements for the fiscal year ending March 2022 contained a “Note Regarding Going
Concern Assumptions” on the basis that there were events or conditions that raised material doubt
as to the assumption that we would be a going concern. Furthermore, as announced in our “NoticeRegarding Accrual of Impairment Losses” dated November 8, 2022, our “Notice Regarding
Accrual of Impairment Losses (Progress of Disclosed Matters)” dated November 14, 2022, andour “Report for the First Half of the 59th Fiscal Year” dated November 14, 2022, in light of Sagent
Group having accrued operating losses in the fiscal year ending March 2022 and the first quarterof the fiscal year ending March 2023 (operating losses of JPY 38.998 billion in the fiscal year
ending March 2022 and JPY 1.805 billion in the first quarter of the fiscal year ending March 2023)
and the development of the business in the U.S. market, we conducted impairment testing underInternational Financial Reporting Standards (IFRS) and accrued impairment losses in the second
quarter of the fiscal year ending March 2023 on the fixed assets of Sagent group, including
goodwill, and had negative equity of JPY 35,626 million as a result of losses of JPY 54,817 million-5-attributable to owners of parent.
Considering the challenging business climate and financial condition, and aiming to drastically
improve our financial condition and establish a firm earnings structure for future re-growth, we
resolved at our Board of Directors meeting on May 13, 2022 to apply to use the specified certified
dispute resolution procedure (“the Business Turnaround ADR”) under the Act on Strengthening
Industrial Competitiveness, and made a formal application to the Japanese Association of
Turnaround Professionals (an association that has been certified by the Minister of Justice and has
been accredited as a specified certified dispute business operator by the Minister of Economy,
Trade and Industry) to use the Business Turnaround ADR, which was accepted on the same day.
Thereafter, we held a creditors meeting with the creditors subject to the Business Turnaround
ADR (the “Covered Creditors”) on May 26, 2022 (first creditors meeting) to explain the businessturnaround plan proposal pursuant to the Business Turnaround ADR, and subsequently formulated
a draft business turnaround plan (the “Business Turnaround Plan Proposal”) including anagreement on debt relief and so forth by the Covered Creditors. At the creditors meeting on
November 16, 2022 (second creditors meeting) to discuss the proposed business turnaround plan,we explained the specifics of the Business Turnaround Plan Proposal to the Covered Creditors, andat the creditors meeting (third creditors meeting) held on December 28, 2022 for the resolution of
the proposed business turnaround plan, the Business Turnaround Plan Proposal was establishedwith the consent of the Covered Creditors.
The formulation of the Business Turnaround Plan Proposal required us to realize a fundamental
improvement to our financial condition in the form of a capital strengthening for the purposes of
escaping from a challenging business environment, establishing a stronger earnings structure,
drastically improving our financial strength, and continuing our growth. After appointing Mori
Hamada & Matsumoto as legal advisor and Deloitte Tohmatsu Financial Advisory LLC (“Deloitte
Tohmatsu Financial Advisory”) as financial advisor, Thereafter, we made requests to around 40
sponsor candidates, including business corporations and financial investors, to consider investingas sponsor candidates, seeking out the possibilities for financing on terms and conditions beneficial
to the Company.
As a result of this sponsor search, we came to receive final expressions of intent from several
sponsor candidates, including Godo Kaisha JSD (the “Allottee”), which is managed and operated
by J-Will Partners Co., Ltd (“JWP”). Thereafter, we determined that the Allottee was the optimalsponsor candidate after a general analysis from the standpoint of the terms of financial support tobe requested from the Covered Creditors, amount of capital financing that could be provided to theCompany, provision of capital financing at the time desired by the Company and probability ofrealization of the same, approach to our management and business after participating as a sponsor
in order to turn around the Company, content and viability of policies for medium and long-term-6-business continuation and improvement of future company growth through business structuralreforms, and the like. We have been told that JWP considers it important for our restructuring toresolve our issues and realize our intrinsic value through formulation of steady business strategies,
strengthening of management systems, support of financial reorganization, etc. based upon the
broad network and rich track record of JWP.
In making its proposal to provide sponsor support to the Company, the Allottee has told us thatit has come to believe in the importance of (i) strengthening quality assurance and quality
management systems and (ii) realizing improvements to sales and productivity throughstrengthened relations with specific wholesalers by proactively involving knowledge, networks,etc. from other industries, not just relying upon what is within the generic drug industry, to produce
a rehabilitation of the Company. Specifically, (i) in relation to strengthening quality assurance andquality management systems, the Allottee believes it is important to swiftly recommence
manufacturing of all products that we plan to manufacture and build systems for the stable supplyof assured-quality drugs through third-party personnel exchange in the production and quality
assurance areas and other proactive utilization of third-party knowledge, in addition tostrengthening the Company itself through improvements to recruitment and management processes,
etc. Furthermore, (ii) in relation to realizing improvements to sales and productivity throughstrengthened relations with specific wholesalers, through the alliance with Medipal Holdings
Corporation (“Medipal”) with whom we executed a capital and business alliance agreement inAugust 2021, the Allottee has come to believe that it is important to realize improvements to sales
and productivity by specifying the alliance model of “Plan Orders, Plan Production” and building
production systems based upon demand. In addition, the Allottee believes that working capital andcapital investment funding are necessary in realizing these fundamental structural reforms, and thata capital infusion of around JPY 20 billion is necessary for the same.
Moreover, Allottee has told us that an assumption considered by them in making such a largescale capital injection in comparison to the market capitalization of the Company is that in lightof the severe business environment and lack of certainty surrounding the Company, it is necessary
to build a system to execute swift and fundamental rehabilitation measures by taking the Company
private.
Specifically, the Allottee believes that a large-scale capital injection while the Company remains
listed would only dramatically dilute the holdings of the minority shareholders of the Company,
and while the subsequent business structural reforms would contribute to improvements to ourbusiness in the medium to long term, it is inappropriate to carry out the business structural reforms
while the Company remains listed and expose the minority shareholders of the Company to further
risks because profitability in the short term would be reduced and there would be risks if thebusiness structural reforms were unsuccessful; therefore, the Allottee believes that taking the-7-Company private after paying reasonable compensation to the minority shareholders of theCompany would contribute to the interests of the minority shareholders of the Company. In
particular, Allottee believes that the payment of an amount to minority shareholders that includes
a premium over the amount paid in for third-party allotment to the Allottee would be a relief
measure for the minority shareholders of the Company at this stage due to the circumstances,namely that we would otherwise be forced to request a considerable amount of debt relief, etc.
from Covered Creditors in the Business Turnaround ADR considering the large amount of future
losses, etc., our actual stock value being significantly lower than the market price, and the extreme
difficulty of financing cash flow from operations if a large-scale capital injection is not
implemented soon, taking into consideration our future cash flows, and our current situation inwhich, due to the accrual of losses of JPY 104.984 million attributable to owners of parent in thefiscal year ending March 2022, the ratio of owners’ equity to gross assets was reduced from 30.6%
at the end of March 2021 to 5.1% at the end of March 2022, and as announced in our “NoticeRegarding Accrual of Impairment Losses” dated November 8, 2022, our “Notice Regarding
Accrual of Impairment Losses (Progress of Disclosed Matters)” dated November 14, 2022, andour “Report for the First Half of the 59th Fiscal Year” dated November 14, 2022, in light of Sagent
Group having accrued operating losses in the fiscal year ending March 2022 and the first quarterof the fiscal year ending March 2023 (operating losses of JPY 38.998 billion in the fiscal year
ending March 2022 and JPY 1.805 billion in the first quarter of the fiscal year ending March 2023)
and the development of the business in the U.S. market, we conducted impairment testing underInternational Financial Reporting Standards (IFRS) and accrued impairment losses in the second
quarter of the fiscal year ending March 2023 on the fixed assets of Sagent group, including
goodwill, and had negative equity of JPY 35,626 million as a result of losses of JPY 54,817 million
attributable to owners of parent.
We gave careful consideration to the sponsorship proposal by the Allottee dated September 26,
2022, as it not only entailed a major dilution of our current shareholders, but also included a delisting of the Company and would have a material effect on all of the minority shareholders of theCompany.
First, we contacted multiple sponsor candidates prior to the proposal from the Allottee, discussed
support for the Company, and determined in the sponsor selection that the Allottee was the optimalsponsor candidate after a general analysis from the perspective of the situation surrounding theCompany as described above, including the terms of financial support to be requested from the
Covered Creditors, amount of capital financing that could be provided to the Company, provisionof capital financing at the time desired by the Company and probability of realization of the same,
approach to our management and business after participating as a sponsor in order to turn aroundthe Company, content and viability of policies for medium and long-term business continuation-8-

and improvement of future company growth through business structural reforms, and the like.
Furthermore, in the process of advancing consideration of rehabilitation policies with the
Allottee since mid-October 2022, we came to believe that strengthening quality assurance andquality management systems, realizing improvements to sales and productivity throughstrengthened relations with specific wholesalers, and other swift and fundamental business reforms
are essential for the rehabilitation of the Company, and we determined that the terms of the proposalby the Allottee conformed to our views as providing for practical and specific terms for therealization of our growth in the medium to long term. As a large-scale capital injection is essential
to fundamentally improve our financial condition, and the failure to quickly achieve a large-scale
capital injection would risk difficulty in continuing our business due to the extreme difficulty infinancing cash flow from operations, leading to further risks to the minority shareholders of theCompany from reduced share prices and the like, we held sincere discussions with multiple sponsor
candidates, and based on multiple rounds of negotiations with Allottee, which indicated theconditions that we believe to be most optimal from the standpoint of the terms of financial support
to be requested from the Covered Creditors, amount of capital financing that could be provided to
the Company, provision of capital financing at the time desired by the Company and probability ofrealization of the same, approach to our management and business after participating as a sponsor
in order to turn around the Company, content and viability of policies for medium and long-termbusiness continuation and improvement of future company growth through business structuralreforms, and the like, we ultimately reached an agreement, and have determined that the conditions
are the best that the Company can offer to the minority shareholders of the Company. Moreover,
we came to decide that promoting the integration of the Company with the Allottee through the
Allottee making the Company a wholly-owned subsidiary and de-listing and a flexible and agile
management strategy ((i) strengthening quality assurance and quality management systems and (ii)realizing improvements to sales and productivity through strengthened relations with specificwholesalers as described above) was the best option, as it was believed to contribute the most to
the continuation of our group’s business and its medium and long-term growth and avoid causing
further risks for the minority shareholders of the Company. We have also received an expressionof strong intent from the Allottee to be involved in the aforementioned (i) strengthening quality
assurance and quality management systems and (ii) realizing improvements to sales andproductivity through strengthened relations with specific wholesalers in cooperation with theCompany group and JWP aiming for the realization of our growth from a medium and long-term
standpoint after the Company becoming a wholly-owned subsidiary, and have determined that the
Allottee is the optimal sponsor candidate.
From the standpoint described above, and from the standpoint of supporting both the financing
and the business of the Company, we believe that the proposal from the Allottee to provide sponsor-9-

support is the best option to improve the enterprise value of the Company, and is also the best
option for the minority shareholders of the Company considering the current state of the Company.
On November 14, 2022, we executed a Sponsor Agreement with the Allottee, and based on this,we will carry out an issuance of common shares of the Company (the “New Shares”) through athird-party allotment to the Allottee with a total paid-in amount of JPY 20 billion (the “Third-Party
Allotment;” such Third-Party Allotment will be carried out through the Third-Party Allotment 1
and Third-Party Allotment 2 as described in Agenda Item 1). In addition, we will implement shareconsolidation through which 70,384,700 common shares of the Company will be consolidated into
one share and cash totaling approximately JPY 2.5 billion (JPY 36 per share) will be paid tominority shareholders other than the Allottee (the “Share Consolidation”) after the implementationof the Third-Party Allotment, so that the Allottee will become the sole shareholder of the Company.
It is our understanding that the Allottee intends to make the Company a wholly-owned subsidiaryof the Allottee as a result of the Third-Party Allotment and the subsequent Share Consolidation (the“Transaction”), and that the common shares will be de-listed.
At this Extraordinary General Meeting of Shareholders, we are submitting proposals regarding
the Third-Party Allotment (Agenda Items 1 and 3), a partial amendment of the Articles ofIncorporation to increase the total number of authorized shares as necessary to carry out the ThirdParty Allotment (Agenda Item 2), the reduction of the amounts of capital and capital reserves (the“Capital Reduction”) and the application of the other capital reserves that would increase as a resultof the Capital Reduction against the negative retained earnings carried forward (the “Appropriationof Surplus”) subject to the payment for the New Shares (Agenda Items 4 through 6), and theelection of directors nominated by the Allottee subject to the payment for the New Shares (the“Third-Party Allotment Related Proposals”) (Agenda Items 7 and 8), as well as proposals regarding
the Share Consolidation (Agenda Item 9) and a partial amendment of the Articles of Incorporation
relating to the abolition of share units (Agenda Item 10) (together with the Third-Party Allotment
Related Proposals, the “Proposals”). The implementation of the Third-Party Allotment is subject
to the approval of the Proposals at the Extraordinary General Meeting of Shareholders, among
other conditions, and the effectiveness of the Share Consolidation is subject to the completion of
the Third-Party Allotment.
We would like to ask our shareholders to carefully read the content of each proposal on thefollowing pages, understand the purpose of each, and approve all proposals.

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Agenda Item 1
Issuance of Offered Shares Through Third-Party Allotment (1)Pursuant to Article 199 of the Companies Act, we are requesting approval for the issuance ofoffered shares through a third-party allotment as outlined in 2. below (“Third-Party Allotment 1”;
the new shares issued by the Third-Party Allotment 1 hereinafter referred to as “New Shares 1”),for the reasons described in 1. below.
In addition, the 633,462,300 New Shares (6,334,623 voting rights) issued in the Third-Party
Allotment 1 and the Third-Party Allotment 2 described in Agenda Item 3 (collectively, the “ThirdParty Allotment”) are equal to 887.42% of the 71,382,652 shares issued and outstanding as of
September 30, 2022 (900.00% of the 703,847 total voting rights as of September 30, 2022).
Therefore, the dilution ratio from the Third-Party Allotment will be greater than 25%, and there
will be a change in the controlling shareholder, and therefore, pursuant to Rule 432 of the Tokyo
Stock Exchange, Inc. (“Tokyo Stock Exchange”) Securities Listing Regulations, we would also liketo ask shareholders to confirm their intentions regarding this proposal and the proposal in Agenda
Item 3 at the Extraordinary General Meeting of Shareholders. Moreover, the Third-Party Allotment
will not only involve a large-scale dilution and change in controlling shareholder, but it is also
expected that the Company will become a wholly-owned subsidiary of the Allottee and theCompany common shares will be delisted thereafter. Therefore, considering the size of the impact
on the minority shareholders of the Company, to ensure the fairness, transparency, and objectivityof our decision-making process, we created a special committee (“Special Committee”) consistingof three members with a certain degree of independence from the Allottee and the management of
the Company: Mr. Hajime Imamura (Attorney at Law), an outside director of the Company
registered as an independent officer with the Tokyo Stock Exchange; Mr. Hitoshi Hori (Certified
Public Accountant), an outside director and audit committee member; and Mr. Tetsutaro Wakatsuki(Attorney at Law, Murata & Wakatsuki Law Offices) as an external expert with extensive
experience in being involved as a special committee member in structural conflict of interest
transactions similar to this one. We requested their opinions as to the necessity and suitability of
the Third-Party Allotment and whether the Third-Party Allotment and Transaction would be
detrimental to the minority shareholders of the Company (the “Consultation Items”), and obtained
a report of their findings dated November 14, 2022, stating that the Third-Party Allotment isdeemed necessary and suitable, and that the Third-Party Allotment and Transaction are not deemed
to be detrimental to the minority shareholders of the Company..
1. Reason for Issuing Offered Shares at a Particularly Favorable Payment Amount(1) Purpose and Reason for Issuance of New Shares by Third-Party Allotment(i) Background of Third-Party Allotment
Please refer to “Background of the Proposal of Agenda Item 1 to Agenda Item 10” above.

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(ii) Reasons for Selecting Third-Party Allotment
Before deciding to carry out the Third-Party Allotment, we compared and considered various
financing methods. At the time, considering that a large-scale capital injection is essential tofundamentally improve our financial condition, and the failure to quickly achieve a large-scale
capital injection would cause extreme difficulty in financing cash flow from operations, as
described in “Background of the Proposal of Agenda Item 1 to Agenda Item 10” above, we believedthat the most important factor was having an assured expectation of raising the necessary funds on
our desired timeline.
In this regard, we determined that if, for example, we issued common stock through a public
offering, it would be difficult to carry out a public offering underwritten by a securities company
due to the fact that our consolidated financial statements for the second quarter of the fiscal year
ending March 2023 contained a “Note Regarding Going Concern Assumptions” and the Company
had negative equity of JPY 35,626 million, as announced in the “Report for the First Half of the59th Fiscal Year” dated November 14, 2022. Furthermore, we determined that a rights offering or
allocation to shareholders would not be an appropriate option at this time when the Company needs
to raise the necessary amount with a degree of certainty, as all of the share options may not be
exercised by the shareholders after considering the share price trends and the like, and it may bethat not all of the shareholders accept their allotments, so the final amount of funds raised would
be undetermined.
In contrast, we believed that a third-party allotment provided for the highest level of assurance
that the necessary amount would be raised, and if an appropriate sponsor could be selected, it would
be an appropriate option for the Company, and continued to analyze the possibility of support
including provision of funds through investment, etc. with multiple other sponsor candidates,
seeking out the possibilities for financing on terms and conditions beneficial to the Company. As
a result, we commenced discussions regarding the Third-Party Allotment with the Allottee, thesponsor candidate that indicated the most desirable terms and conditions for the Company.
Thereafter, while considering the terms proposed by the Allottee, we continued to discuss andnegotiate with the Allottee regarding the optimal scale and form of an investment, and came todetermine that receiving a total investment of JPY 20 billion by a third-party allotment through anissuance of New Shares to Allottee would be the best option for the Company at this time.
If the New Shares were allocated to the Allottee through the Third-Party Allotment, the Allottee
would come to hold 6,334,623 voting rights, which would be 90.00% of the total voting rights of
the Company (7,038,470 votes; representing the total of such voting rights and the total number ofvoting rights of the Company as of September 30, 2022 (703,847 votes)), and Allottee would be a
special subscriber as provided in Article 206-2(1) of the Companies Act. In this regard, at the Boardof Directors meeting held on November 14, 2022, three directors who are members of the Audit- 12 -

Committee (including two outside directors who are members of the Audit Committee) expressed
an opinion that considering the current financial conditions of the Company and its future outlook
including with regard to cash flows, raising funds from the Allottee through a Third-Party
Allotment and receiving sponsor support through the Transaction is believed to presently betransaction of existential importance for the Company, and the amounts paid in through the ThirdParty Allotment and paid to the minority shareholders of the Company through the disposition of
fractional shares following the Share Consolidation have been determined by the Board of
Directors of the Company and deemed appropriate in light of the need to obtain the agreement of
Covered Creditors to a considerable amount of debt relief, etc. in order to obtain sponsor support
through the Transaction and considering the valuation of the common shares in the Company as
described in the “Share Valuation Report” dated November 14, 2022 (“Share Valuation Report”)
and the opinions described in the Opinion dated November 14 that the amounts expected to be paid
for new shares and delivered to minority shareholders in the company through the handling of
fractional shares in the share combination are appropriate from a financial viewpoint for all
shareholders of the company other than the Allottee (Fairness Opinion) (“Fairness Opinion”), 2022
received from Akasaka International Accounting Co., Ltd. (“Akasaka International Accounting”)
through the Special Committee, from the standpoint of which the sponsor support through theTransaction is deemed to be a necessary and reasonable transaction for the Company, and it isreasonable to conduct the Third-Party Allotment with the Allottee which constitutes a special
subscriber as provided in Article 206-2(1) of the Companies Act. No outside director has expressed
an opinion contrary to the decision by the Board of Directors.

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(2) Reasonableness of Issuance Terms, Etc.
(i) Calculation Basis and Specific Terms of Payment Amount(a) Specific Terms of Payment AmountIn relation to the method and terms of investment, as described in “Background of the Proposal of
Agenda Item 1 to Agenda Item 10” above, we conducted sincere discussions with each sponsor
candidate considering the business environment, financial condition, demand for financing, shareprice, and the like of the Company. As a result, we decided that the amount paid for the New Shares
will be approximately JPY 31.57 as proposed by the Allottee as a sponsor candidate, the mostdesirable terms for the Company from the standpoint of the terms of financial support to berequested from the Covered Creditors, amount of capital financing that could be provided to theCompany, provision of capital financing at the time desired by the Company and probability ofrealization of the same, approach to our management and business after participating as a sponsor
in order to turn around the Company, content and viability of policies for medium and long-termbusiness continuation and improvement of future company growth through business structuralreforms, and the like, aiming to raise funds on the terms most beneficial to the Company.
The amount paid for the New Shares represents a discount of 91.28% (rounded to the nearest
hundredth; the same applies to discounts to share prices provided below) to the closing price(“Closing Price”) of the Company’s common stock on the Tokyo Stock Exchange of JPY 362 asof November 11, 2022, the business day before the date of the resolution of the Board of Directors
concerning the Third-Party Allotment (“Board Resolution Date”), a discount of 92.84% (rounded
to the nearest whole number; the same applies to discounts to simple average Closing Prices
provided below) to the simple average Closing Price of JPY 441 during the one-month period
immediately preceding the Board Resolution Date (October 12 through November 11, 2022), a
discount of 92.39% to the simple average Closing Price of JPY 415 during the three-month period
immediately preceding the same (August 12 through November 11, 2022), and a discount of
91.88% to the simple average Closing Price of JPY 389 during the six-month period immediately
preceding the same (May 12 through November 11, 2022).
As stated above, considering that the amount paid for the New Shares was ultimately decided as
the result of sincere discussions and negotiations with the Allottee, the sponsor candidate thatindicated the terms and conditions that we believed to be most desirable for us after sincere
discussions with multiple sponsor candidates, the conditions require us to request a considerable
amount of debt relief, etc. from Covered Creditors in the Business Turnaround ADR, including alarge amount of future losses, etc., and the circumstances in which the capital financing on thescale of JPY 20 billion is essential, we have determined that these are currently the best terms andconditions for the Company.

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(b) Acquisition of Share Valuation Report and Fairness Opinion from Third-Party Appraiser
As the amount to be paid differs from the market price, for the analysis of the Consultation Items,
the Special Committee requested that a third-party appraiser, Akasaka International Accounting,express an opinion as to the fairness to the minority shareholders of the Company from a financial
perspective of the calculation of the valuation of the common shares in the Company and the money
expected to be delivered to the shareholders through the payment for the New Shares and thehandling of fractional shares in the Share Consolidation (the “Expected Share Consolidation
Payment Amount”). The third-party appraiser, Akasaka International Accounting, is not a related
party of the Company or the Allottee and has no notable material conflict of interest in relation to
the Third-Party Allotment. The compensation of Akasaka International Accounting is a fixedamount that is paid regardless of the success or failure of the Third-Party Allotment and Transaction,and does not include any contingent compensation that is conditional upon the completion of theThird-Party Allotment and Transaction.
Having analyzed the valuation methods for the common shares of the Company, from amongthe (i) average market price method, (ii) comparable company method, and (iii) discounted cash
flow method (“DCF Method”), Akasaka International Accounting used the DCF Method to value
the common shares of the Company, and the Special Committee has obtained a Share Valuation
Report from Akasaka International Accounting dated November 14, 2022.
The Special Committee has also obtained the Fairness Opinion from Akasaka International
Accounting.
According to the Share Valuation Report, the valuation range for each common share of theCompany calculated based on each method is as follows:
DCF Method: JPY 0 to 41
Akasaka International Accounting used the (iii) DCF Method in the valuation of the commonshares of the Company for the following reasons.
First, regarding the (i) average market price method, it was explained that this method was not
used since the forecast earnings of the Company and the like were not announced as of the
preparation of the Share Valuation Report, and speculative trading based on optimistic scenarios
relating to the announced Business Turnaround ADR may have had a certain effect on priceformation, and therefore it was believed to be likely that the material effects on the continued
business of the Company that could be expected if the Business Turnaround ADR failed or theThird-Party Allotment and Transaction did not occur were not adequately reflected in the shareprice, and the effect on the share price due to the lack of appropriate information disclosure, a- 15 -

precondition to using the average market price method, could not be ignored.
Furthermore, regarding the (ii) comparable company method, it was explained that this method
was not used because the standard financial indicators generally used in this calculation method
such as income, net assets, and EBITDA were each negative in the Company’s most recent
financial statements, making this method impossible to use appropriately.

- 16 -

On the other hand, the (iii) DCF Method used in calculating the value of the Company commonshares is a calculation method based upon future cash flow (profitability) from the business and isthought to be one appropriate method of valuation assuming the continuation of the business. The
Share Valuation Report explains that the business plan we provided to Akasaka International
Accounting has been considered, and a valuation of the shares has been calculated through the
DCF Method based upon the future cash flows under the business plan as of the calculationreference date.
The DCF Method evaluates enterprise value based upon the cash flow forecast to be generated
in and after the second quarter of the fiscal year ending March 2023, considering the revenue
forecast, investment plan, etc. under the business plan we prepared for the period from the fiscal
year ending March 2023 until the fiscal year ending March 2027 and other assumptions thought tobe reasonable, discounted to present value at a fixed discount rate based upon business risk. The
weighted average cost of capital (WACC) of 9.3% to 11.5% has been used as the discount rate, theperpetual growth rate method has been used for the going concern value calculation, and theperpetual growth rate has been calculated as -1.0% to 1.0%, resulting in a valuation range percommon share of JPY 0 to 41.
The specific financial forecasts of the Company that were used by Akasaka International
Accounting as assumptions in the DCF Method calculation are as follows.
These financial forecasts do not assume that the debt relief that we will request from the Covered
Creditors will be granted or that the Transaction including the Third-Party Allotment will be
executed.
The financial forecasts of the Company that were used by Akasaka International Accounting asassumptions in the DCF Method calculation include fiscal years in which large-scale changes inincome are expected. Specifically, in the fiscal year ending March 2023, we expect to have a largescale increase in income due to the implementation of resumed production at Toyama Plant 1,
advancement of “Plan Orders, Plan Production” (Note) with Medipal, other production and sales
improvements, as well as fixed cost reductions, expense reductions, product mix improvements,and other cost reduction measures. In the fiscal years ending March 2024 through March 2027, we
expect to have further large-scale year-on-year increases in income due to the advancement of“Plan Orders, Plan Production” with Medipal, other sales and production improvements, fixed cost
reductions, expense reductions, product mix improvements, and other cost reduction measures.

- 17 -

Synergy effects that are anticipated through the execution of this transaction were not consideredin those financial forecasts as the effects on the Company’s income are currently difficult toestimate.
(Unit: JPY 100 MM)
FY March
FY March
FY March
FY March
FY March
2023
2024
2025
2026
2027
(9 months)
Sales
141,878
135,379
118,998
119,140
119,431
Operating(7,481)(947)
6,877
10,384
12,971
ProfitEBITDA(3,224)
3,451
11,496
15,431
18,214
Free Cash(6,623)37,276
9,595
5,644
7,931
Flow
(Note) “Plan Orders, Plan Production” refers to a policy under which the medical drug
wholesaling companies in the Medipal group send planned orders to the Company, leading
to rationalized production schedules and efficient inventory management at the Company.
In relation to the DCF Method used in the Share Valuation Report, the Share Valuation Report
calculates the value of the shares assuming that the Company’s business will continue following
the end of the plan period and does not expect that it will be difficult to continue business during
or after the plan period due to causes such as being unable to obtain backup lines from financial
institutions. In this regard, the Share Valuation Report notes a view that if such difficulty incontinuing business were expected, there may be a lower share valuation than that which was
calculated through the DCF Method in the Share Valuation Report.
(c) Determination of Payment Amount by the Board of Directors Based on the Share Valuation
ReportAs stated above, we have determined that the amount to be paid in the Third-Party Allotment(approximately JPY 31.57) is reasonable even in light of the Share Valuation Report and Fairness
Opinion obtained from a third-party appraiser through the Special Committee. As this amountrepresents a major discount from the most recent market price of the shares of the Company, andis a particularly beneficial amount for the Allottee, we have made the issuance of the commonshares in the Third-Party Allotment conditional upon the approval of a special resolution at theExtraordinary General Meeting of Shareholders.

- 18 -

(ii)Basis for Determining that Issued Quantity and Scale of Share Dilution are Reasonable
633,462,300 New Shares (with 6,334,623 voting rights) will be issued in the Third-Party
Allotment, representing 887.42% of the 71,382,652 total shares in the Company issued andoutstanding as of September 30, 2022 and 900.00% of the 703,847 total voting rights in the
Company as of September 30, 2022.
Therefore, the Third-Party Allotment is expected to cause an extremely large-scale dilution. On
the other hand, we believe that the execution of the Third-Party Allotment can be deemed
reasonable even considering the large-scale dilution occurring from the Third-Party Allotment
considering the conditions, as stated above, that (i) there is a recognized need for the Company toraise a large amount of funds, and while the scale of the issuance in the Third-Party Allotment islarge, the scale has been set as necessary to obtain financing on the scale thought to be essential
for the Company, (ii) the Third-Party Allotment with the Allottee is the most appropriate methodof financing when compared to other financing methods, and (iii) the amount paid for the New
Shares also represents the best terms and conditions available to the Company in light of our severe
financial condition, and the results of our discussions with multiple sponsor candidates regarding
the possibility of support and our discussions and negotiations with the Allottee, and can be
determined to be fair and reasonable in light of the common share valuation calculations shown in
the Share Valuation Report.
Furthermore, as the Company has entered a state of negative equity, we believe that we haveprovided the best conditions possible to the minority shareholders of the Company with regard to
the proposals relating to the Third-Party Allotment, the partial amendments of the Articles ofIncorporation to increase the number of authorized shares, and the Share Consolidation, because
we will carry out lawful procedures with the approval of the shareholders of the Company byproposing them at the Extraordinary General Meeting of Shareholders, and moreover, the Share
Consolidation will ultimately result in the payment of cash to the minority shareholders of theCompany in an amount (JPY 36) that includes a 14.02% (rounded to the nearest hundredth; thesame applies to premium percentages below) premium in addition to the amount paid for the New
Shares in the Third-Party Allotment (approximately JPY 31.57), which amount was, as describedabove, ultimately agreed after multiple rounds of negotiations with the Allottee, the sponsor
candidate that indicated the terms and conditions thought to be most desirable by the Company
after sincere discussions with multiple sponsor candidates amid requests to Covered Creditors fora considerable amount of debt relief under conditions where the failure to realize a large-scale
capital infusion would worsen our financial performance and financial condition and make it
difficult to continue our business, causing further risks to the minority shareholders of theCompany through share price decreases and the like.

- 19 -

2.
(1)
(2)
(3)
(4)
(5)
(6)
(7)

Overview of Issuance of New Shares (1)Type and Number of Offered Shares
126,692,460 shares of common stock
Amount to be paid in
JPY 20,000,000,000 / 633,462,300 (approximately JPY 31.57) per share
Aggregate amount to be paid in
JPY 4,000,000,000
Amount of capital to be increased and capital reserves to be increased
Capital increase 2,000,000,000
Capital reserves 2,000,000,000
Payment period
Thursday, March 1, 2023 to Friday, March 31, 2023
Method of offering
Allocation of all shares (126,692,460 shares) to Godo Kaisha JSD by means of third-party
allotment.
Each of the foregoing items is subject to the effectiveness of the securities registration under
the Financial Instruments and Exchange Act of Japan and the approval of Agenda Items 1
through 10 at the Extraordinary General Meeting of Shareholders.

- 20 -

Agenda Item 2
Partial Amendments to the Articles of Incorporation in order to Increase the Total
Number of Authorized Shares to be Issued
1. Reason for Proposal
In order to enable the issuance of the New Shares through the Third-Party Allotment, with respect
to Article 7 (Total Number of Authorized Shares) of the current Articles of Incorporation to change
the total number of authorized shares to be issued shall be amended from the current 93,500,000
shares to 750,000,000 shares.
2.

Details of Amendments
The content of the amendments is as follows.
Under Article 113(3) of the Companies Act, if a public company such as the Company amends its
articles of incorporation to increase the total number of authorized shares, the total number ofauthorized shares after such amendment may not exceed four times the total number of issued shares
as of the time the amendment became effective. Based upon the total number of shares issued by theCompany as of September 30, 2022 (71,382,652 shares), it would be impossible to conduct a single
amendment of the Articles of Incorporation increasing the total number of authorized shares so that
all of the New Shares from the Third-Party Allotment could be issued. Therefore, as described below,
the amendments to the Articles of Incorporation to increase the total number of authorized shares will
be carried out in two stages. Specifically, we will first conduct Articles of Incorporation Amendment
1 to authorize the issuance of no more than four times the total number of shares issued by theCompany as of September 30, 2022 (71,382,652 shares), and then, conditional upon the issuance of
126,692,460 New Shares for Third-Party Allotment 1, we will conduct Articles of Incorporation
Amendment 2 to authorize the issuance of 750,000,000 shares. The issuance of 506,769,840 New
Shares for Third-Party Allotment 2 will be conditional upon the effectiveness of Articles ofIncorporation Amendment 2. The issuance of 126,692,460 New Shares for Third-Party Allotment 1,
the effectiveness of Articles of Incorporation Amendment 2, and the issuance of 506,769,840 New
Shares for Third-Party Allotment 2 will all take place on the same day.
(1)

Details of Articles of Incorporation Amendment 1

Current Articles of Incorporation(Total Number of Authorized Shares to be Issued)
Article 7. The total number of authorized shares by
the Company shall be 93,500,000 shares.

- 21 -(Underlines indicate amended portions.)
Amendment Proposal(Total Number of Authorized Shares to be
Issued)Article 7. The total number of authorizedshares by the Company shall be 200,000,000
shares.

(2)Details of Articles of Incorporation Amendment 2

Articles of Incorporation as amended by Articles
of Incorporation Amendment 1(Total Number of Authorized Shares to be Issued)
Article 7. The total number of authorized shares by
the Company shall be 200,000,000 shares.

- 22 -(Underlines indicate amended portions.)
Additional Amendment Proposal(Total Number of Authorized Shares to be
Issued)Article 7. The total number of authorizedshares by the Company shall be 750,000,000
shares.

Agenda Item 3
Issuance of Offered Shares Through Third-Party Allotment 2
Pursuant to Article 199 of the Companies Act, we are requesting approval for the issuance of offeredshares through a third-party allotment as outlined in 2. below (“Third-Party Allotment 2”; the newshares issued by the Third-Party Allotment 2 hereinafter referred to as “New Shares 2”), for the reasonsdescribed in 1. below. In addition, due to the reasons described in Agenda Item 1, pursuant to Rule 432of the Tokyo Stock Exchange Securities Listing Regulations, we would also like to ask shareholders to
confirm their intentions regarding the proposal in Agenda Item 1 and this proposal at the Extraordinary
General Meeting of Shareholders.
1. Reason for Issuing Offered Shares at a Particularly Favorable Payment AmountAs described in “(1) Purpose and Reason for Issuance of New Shares by Third-Party Allotment” and“(2) Reasonableness of Issuance Terms, Etc.” under “1. Reason for Issuing Offered Shares at a
Particularly Favorable Payment Amount” in “Agenda Item 1 Issuance of Offered Shares Through
Third-Party Allotment.”
2. Overview of Issuance of New Shares (2)(1)
Type and Number of Offered Shares
506,769,840 shares of common stock(2)
Amount to be paid in
JPY 20,000,000,000 / 633,462,300 (approximately JPY 31.57) per share(3)
Aggregate amount to be paid in
JPY 16,000,000,000(4)Amount of capital to be increased and capital reserves to be increased
Capital increase 8,000,000,000
Capital reserves 8,000,000,000(5)
Payment period
Wednesday, March 1, 2023 to Friday, March 31, 2023
(6)
Method of offering
Allocation of all shares (506,769,840 shares) to Godo Kaisha JSD by the method of thirdparty allotment.
(7)
Each of the foregoing items is subject to the effectiveness of the securities registration under
the Financial Instruments and Exchange Act of Japan and the approval of Agenda Items 1
through 10 at the Extraordinary General Meeting of Shareholders.

- 23 -

Agenda Item 4
Reduction of Amount of CapitalWith the aim of improving the flexibility and agility of capital policy moving forward and ensuring
financial soundness, pursuant to the provisions of Article 447(1) of the Companies Act, we will reduce
the amount of capital and make a transfer to other capital surplus.
Reduction in the amount of capital under this proposal will be subject to the payment for the New
Shares.
(1)
Amount of capital reduction
The amount of capital of JPY 35,975,865,942 yen will be reduced by JPY 35,875,865,942 yen
to become JPY 100,000,000 yen, and the reduced amount of capital of JPY 35,875,865,942
will be transferred to other capital surplus.
(2)
Effective date of capital reduction
March 31, 2023 (planned)
Agenda Item 5
Reduction of Amount of Capital Reserves
With the aim of improving the flexibility and agility of capital policy moving forward and ensuring
financial soundness, pursuant to the provisions of Article 448(1) of the Companies Act, we will reduce
the amount of capital reserves and make a transfer to other capital surplus. The reduction in the amountof capital reserves under this proposal is subject to payment for the New Shares.
(1)
Amount of capital reserves reduction
The amount of capital reserves of JPY 34,511,608,492 yen will be reduced by JPY
34,411,608,492 yen to become JPY 100,000,000 yen, and the reduced amount of capitalreserves of JPY 34,411,608,492 will be transferred to other capital surplus.
(2)
Effective date of capital reserves reduction
March 31, 2023 (planned)
Agenda Item 6
Appropriation of Surplus
If the proposals in Agenda Item 4 and Agenda 5 are approved, other capital surplus will be increasedby JPY 70,287,474,434, but for the purpose of compensating for losses carried forward and correcting
the capital structure, in accordance with the provisions of Article 452 of the Companies Act, we arerequesting approval to apply JPY 40,844,719,767 of the other capital surplus after the increase against
retained earnings carried forward to compensate for the deficit. This proposal coming into effect issubject to the approval of Agenda Item 4 and Agenda Item 5.
(1)
Surplus item to be increased and amount thereof
Retained earnings carried forward; JPY 40,844,719,767(2)
Surplus item to be decreased and amount thereof
Other capital surplus; JPY 40,844,719,767- 24 -

Agenda Item 7
Election of Five Persons as Directors (Excluding Directors Who Are Audit
Committee Members)
We are requesting approval for the appointment of five directors (excluding directors who are Audit
Committee members; the same hereinafter in this Agenda Item 7), subject to the payment for the New
Shares.
The Audit Committee has determined that all candidates for director are qualified for this proposal.
The candidates for director are as follows.
Candidate
No.

1

2

Name
(Date of Birth)

Biography, Position in the Company
No. of Company(Significant Concurrent Positions)Shares Owned
Apr. 1983
Joined Yamanouchi Pharmaceutical (now Astellas Pharma)
Shingo Iwamoto
Oct. 2004
President and Representative Director, Astellas Pharma Philippines(Born Jul. 20, 1960))
Oct. 2011
Group leader of Sales Strategy Dept, Astellas Pharma－ shares
Apr. 2012
Group leader of Medical Affairs Dept, Astellas Pharma
New
Apr. 2014
Head of Sales and Marketing Department, Teva Seiyaku
appointment
May 2016
President and Representative Director, Aspen Japan
Apr. 2020
President and Representative Director, Sandoz Japan(Reasons, etc. for nomination as candidate for Board Member)
Mr. Iwamoto has held important positions in the pharmaceutical industry over the course of many years since joining Yamanouchi
Pharmaceutical in 1983, and has gained a wide range of industry knowledge and an extensive network as well as long experience aspresident of a pharmaceutical company. His extensive management experience, high level of insight, and strong leadership have been
judged to be necessary for the future management of the Company in order for the Company’s results of operations to recover.
Therefore, the Company has nominated him as a candidate for Board Member.
Apr. 1977
Joined Sanseido (now MEDIPAL HOLDINGS)
Jul. 2004
Executive Officer, KURAYA SANSEIDO (now MEDIPALHOLDINGS)
Jun. 2007
Director, Medicio Paltac Holdings (now MEDIPAL HOLDINGS)
Oct. 2009
Director, MEDICEO
Yasuhiro Chofuku
Jun. 2010
Managing Director, MEDICEO(Born Dec. 8, 1954)
Apr. 2012
Representative Director, President and CEO, MEDICEO
Jun. 2012
Head of Pharmaceutical Business, MEDIPAL HOLDINGS (current－ sharesNew
post)
appointme Outside
Jun. 2016
Senior Managing Director, MEDIPAL HOLDINGS
nt
Jun. 2019
Director, Vice President, MEDIPAL HOLDINGS (current post)
Apr. 2022
Representative Director, Chairperson, MEDICEO(Significant concurrent positions）
Executive Vice President, Medipal Holdings Corporation (current post)
Chairperson and Representative Director, Mediceo Corporation (current post)- 25 -

(Reasons, etc. for nomination as candidate for Outside Board Member and expected role)
Mr. Chofuku possesses deep knowledge of the pharmaceutical business, which is the core business of Medipal Holdings
Corporation, and is involved in business execution as the industry's top pharmaceutical business manager, working to improve theperformance of the Medipal Group. He has also taken the lead in managing compliance within the Medipal Group, and has a highlevel of expertise and deep insight into management. The Company has nominated him as a candidate for Outside Board Member,
expecting that he will provide guidance and supervision for management of the Company based on this perspective in order to build
a solid structure for our Group to become a company that is trusted by society.

- 26 -

Candidate
No.

3

Name
(Date of Birth)

Biography, Position in the Company(Significant Concurrent Positions)Apr. 1990
Feb. 2000
May 2003
Nov. 2006
Takashi Shinmei
Jul. 2012(Born Feb. 27 1965)
Feb. 2014
New
Independe Nov. 2020
appoint Outside
Oct. 2022
nt
ment

Joined the Industrial Bank of Japan
Joined Goldman Sachs Japan
Joined J Will Partners
Executive Director, Shinwa Bank
Director, J Will Partners
Director, J Will Corporation (current post)
Senior Advisor, J Will Asset Management (current post)
President and Representative Director, J X Wind (current post)

No. of Company
Shares Owned－ shares(Significant concurrent positions）
Director, J-Will Corporation
President and Representative Director, K.K. J X Wind
(Reasons, etc. for nomination as candidate for Outside Board Member and expected role)
As director of J-Will Group companies, Mr. Shinmei has demonstrated outstanding management skills and has achieved group
growth. In addition, he has accomplished a number of business revitalizations and corporate value enhancements as an officer ofinvestee companies, and has a wealth of experience and insight. The Company has nominated him as a candidate for Outside Board
Member expecting that he will provide supervision and guidance for the management of the Company based on this perspective.
Apr. 1997
Eiji Hasegawa(Born Jun. 11, 1974)
New
Indepenappoint Outside
dent
ment
4

Apr. 1999
Mar. 2004
Apr. 2011
Oct. 2022

Joined Chuo Audit Corporation (ChuoAoyama Audit
Corporation)
Registered as certified public accountant
Joined J Will Partners
Partner, J Will Partners
Director, J Will Partners (current post)－ shares(Significant concurrent positions）
Director, K.K. J-Will Partners(Reasons, etc. for nomination as candidate for Outside Board Member and expected role)
Through his expertise in finance and management as a certified public accountant, Mr. Hasegawa has gained a wide range ofexperience and insight regarding business restructuring and corporate revitalization structures. In addition, he has achieved corporate
revitalization and increased corporate value at many investee companies in the healthcare field. The Company has nominated him asa candidate for Outside Board Member expecting that he will provide supervision and guidance for the management of the Company
based on this perspective.

- 27 -

Candidate
No.

Name
(Date of Birth)
Shigetoshi Ebihara(Born Nov. 21, 1979)

５

New
Indepenappoint Outside
dent
ment

Biography, Position in the Company(Significant Concurrent Positions)Apr. 2002
Nov. 2013
Jan. 2021
Jun. 2021

Joined Keyence
Joined Frontier Management
J Will Asset Management (current post)
Outside Director, ND Software (current post)

No. of Company
Shares Owned－ shares(Significant concurrent positions）
Director, K.K. J-Will Asset Management
Outside Director, ND Software Co., Ltd.

(Reasons, etc. for nomination as candidate for Outside Board Member and expected role)
Mr. Ebihara has a wide range of experience and insight regarding business revitalization support and marketing strategy building
for listed companies, as well as a track record of business revitalization and corporate value improvement at investee companies in
the healthcare field. The Company has nominated him as a candidate for Outside Board Member expecting that he will provide
supervision and guidance for the management of the Company based on this perspective.
(Notes)1.
2.
3.
4.

5.

6.

7.

Mr. Yasuhiro Chofuku concurrently serves as representative director of Mediceo Corporation, with whom the Company has a business
relationship that includes sales of pharmaceuticals.
There is no other special interest between any of the candidates and the Company.
Mr. Yasuhiro Chofuku, Mr. Takashi Shinmei, Mr. Eiji Hasegawa, and Mr. Shigetoshi Ebihara are candidates for Outside Board Member.
Pursuant to the provisions of Article 427(1) of the Companies Act, the Company plans to enter into agreements with the candidates for
Outside Board Member to limit liability for damages under Article 423(1) of the Companies Act, and the cap on maximum amount ofliability for damages under the relevant agreement is the amount stipulated under laws and regulations.
As provided for in Article 430-3(1) of the Companies Act, the Company has entered into an officer indemnification insurance policy,
including Board Members of the Company, which covers damage that may arise from the insured’s assumption of liability incurred in thecourse of the performance of duties, or receipt of claims pertaining to the pursuit of such liability.
Each candidate who is elected and assumes office as a Board Member will be insured under the insurance policy. In addition, the insurance
policy is scheduled to be renewed with the same contents at the next renewal.
Mr. Yasuhiro Chofuku serves as representative director of Mediceo Corporation, which was subjected to an on-site inspection by the Japan
Fair Trade Commission and a search by the Tokyo District Public Prosecutors Office for suspicion of violating the provisions of Article 3of the Antimonopoly Act (prohibition of unreasonable restraint of trade) in the tender process for pharmaceuticals conducted by Japan
Community Healthcare Organization (JCHO) in 2016 and 2018, but the company applied to the Japan Fair Trade Commission for
exemption from surcharges, voluntarily reported its past violations, fully cooperated with the Commission's investigation, and took theelimination measures, and was subject to neither a cease and desist order nor a surcharge payment.。
The Company intends to submit notification to the Tokyo Stock Exchange that Mr. Takashi Shinmei, Mr. Eiji Hasegawa, and Mr. Shigetoshi
Ebihara have been designated as independent officers as provided for by the aforementioned exchange.

- 28 -

Agenda Item 8
Election of Three Persons as Directors Who Are Audit Committee members
We are requesting approval for the appointment of five directors who are Audit Committee members,
subject to the payment for the New Shares.
The candidates for directors who are Audit Committee members are as follows.
Candidate
No.

Name(Date of Birth)

Biography, Position in the Company(Significant Concurrent Positions)Apr. 1977
Apr. 1984
Apr. 1985
Jul. 1999
Mar. 2001
Apr. 2001
Apr. 2017

Makoto Shiragami(Born Oct. 16, 1951)
New
Indepenappoint Outside
dent
ment
1

Apr. 2020
Jul. 2021
Nov. 2022

Joined the Ministry of Health and Welfare
Seconded to World Health Organization (WHO) Western PacificRegion Office (Manilla, Philippines)
Seconded to WHO Headquarters (Geneva, Switzerland)
Head of Reliability Studies Dept., Organization for Adverse
Drug Reaction Relief and R&D Promotion
Resigned from the Ministry of Health, Labour and Welfare
Professor, School of Pharmacy, Nihon University
Professor, Faculty of Pharmaceutical Science, Teikyo Heisei
University
Joined Nobelpharma
Executive Officer, Head of Compliance Division, Nobelpharma(current post)
Professor Emeritus, Nihon University (current post)

No. of Company
Shares Owned－ shares(Significant concurrent positions)Executive Officer, Head of Compliance Division, Nobelpharma Co., Ltd.
Professor Emeritus, Nihon University
Representative for Support Members, Japan Pharmacoeconomics Association
Trustee, The Health Care Science InstituteManager Training Committee Chair, The Japan Home-Health Apparatus
Industrial Association
Councilor, OTC Self-Medication Promotion Foundation(Reasons, etc. for nomination as candidate for Board Member who is an Audit and Supervisory Committee Member and expected role)

Over the course of many years since joining the Ministry of Health and Welfare, Mr. Shiragami has held important posts such as
secondment to the World Health Organization and serving as pharmacist examiner for the Ministry of Health, Labor and Welfare,specialist on the Medical Ethics Council of the Ministry of Health, Labor and Welfare, member of the Tokyo Pharmaceutical Affairs
Council, chairperson of the Chiba Prefecture Council for the Promotion of Generic Drug Use, a member of the Japan Society ofSocial Pharmacy, and chairperson of the Pharmaceutical Society of Japan Division of Regulatory Sciences, and possessed highly
specialized knowledge and insight in the industry. The Company has nominated him as a candidate for Outside Board Member who
is an Audit Committee Member expecting that he will provide guidance and supervision for the management of the Company basedon this perspective.

- 29 -

Candidate
No.

Name
(Date of Birth)
Yoshihito Ofuji(Born Aug. 28, 1967)
New
appoint Outsidement

2

Biography, Position in the Company(Significant Concurrent Positions)Apr. 1990
Dec. 2019
Apr. 2021
Oct. 2022
Oct. 2022

Joined Takeda Pharmaceutical Company
Joined Nihon Pharmaceutical
Director and Head of Accounting Dept., Nihon Pharmaceutical
Joined MEDIPAL HOLDINGS
Deputy Head of Finance and Accounting Dept. MEDIPALHOLDINGS (current post)

No. of Company
Shares Owned－ shares(Reasons, etc. for nomination as candidate for Board Member who is an Audit and Supervisory Committee Member and expected role)

Mr. Ofuji has considerable knowledge of finance and accounting, having worked for many years in the finance and accounting
departments at Takeda Pharmaceutical Co., Ltd. and its subsidiary Nihon Pharmaceutical Co., Ltd. and engaged in accounting
procedures, preparation of financial statements, and performance management and budget management of the entire Takeda
Pharmaceutical Group and the research and development department and domestic sales department, as well as serving as Directorand Head of Accounting at Nihon Pharmaceutical Co., Ltd. The Company has nominated him as a candidate for Outside Board
Member who is an Audit Committee Member expecting that he will utilize such extensive knowledge in audits of the Company.

Keisuke Enomoto(Born December 16, 1987)
New
Indepenappoint Outside
dent
ment
3

Apr. 2011
Sep. 2015
Oct. 2015
Nov. 2022
Nov. 2022

Joined KPMG Azsa LLC
Registered as certified public accountant
Joined J Will Partners
Representative, Enomoto Certified Public Accountants (current
post)
Representative Director, suct Advisory (current post)－ shares(Significant concurrent positions)Representative, Enomoto Certified Public Accountants
Representative Director, SACT Advisory(Reasons, etc. for nomination as candidate for Board Member who is an Audit and Supervisory Committee Member and expected role)

As a certified public accountant, Mr. Enomoto has a wealth of experience in corporate accounting audits, and possesses high-levelknowledge and broad insight into finance and accounting. The Company has nominated him as a candidate for Outside Board
Member who is an Audit Committee Member expecting that as expert in corporate accounting, he will contribute to maintaining andimproving the transparency and soundness of management through audits and guidance on the legality and appropriateness of overallmanagement.
(Notes) 1. There is no special interest between any of the candidates and the Company.
2. Mr. Makoto Shiragami, Mr. Yoshihito Ofuji, and Mr. Keisuke Enomoto are candidates for Outside Board Member.
3. Pursuant to the provisions of Article 427, (1) of the Companies Act, the Company plans to enter into agreements with candidates for
Outside Board Member to limit liability for damages under Article 423(1)of the Companies Act, and the cap on maximum amount ofliability for damages under the relevant agreement is the amount stipulated under laws and regulations.
4. As provided for in Article 430-3(1) of the Companies Act, the Company has entered into an officer indemnification insurance policy withan insurance company for officers, etc., including Board Members of the Company, which covers damage that may arise from the insured’s
assumption of liability incurred in the course of the performance of duties, or receipt of claims pertaining to the pursuit of such liability.
Each candidate who is elected and assumes office as a Board Member will be insured under the insurance policy. In addition, the insurance
policy is scheduled to be renewed with the same contents at the next renewal.

- 30 -

5.

The Company intends to submit notification to the Tokyo Stock Exchange that Mr. Makoto Shiragami and Mr. Keisuke Enomoto havebeen designated as independent officers as provided for by the aforementioned exchange.

- 31 -

Agenda Item 9
Share Consolidation
We are requesting approval to combine 70,384,700 shares of the Company into one share (the Share
Consolidation) so that the Allottee becomes the sole shareholder of the Company, conditional upon theissuance of all of the New Shares in the Third-Party Allotment.
Furthermore, this proposal is subject to conditions that depend upon the timing of the issuance of all
New Shares for the Third-Party Allotment, and depending upon the timing of the issuance of all New
Shares for the Third-Party Allotment, the Share Consolidation will actually take effect on the effective
date (the “Share Consolidation Effective Date”) that immediately follows that date of issuance.
1. Reasons for Share Consolidation
As described in “(1) Purpose and Reason for Issuance of New Shares by Third-Party Allotment”
under “1. Reason for Issuing Offered Shares at a Particularly Favorable Payment Amount” in“Agenda Item 1 Issuance of Offered Shares Through Third-Party Allotment 1” above, we have cometo the conclusion that, from the standpoint of both financial and business support for the Company,
conducting the Third-Party Allotment and carrying out the Transaction are the best measures for ourshareholders as well.
Therefore, we have decided to carry out the Third-Party Allotment and the Share Consolidation to
make the Allottee the sole shareholder of the Company, conditional upon the issuance of all of the
New Shares in the Third-Party Allotment and assuming the approval of all of the shareholders of theCompany is obtained at the Extraordinary General Meeting of Shareholders.
2.

Matters Listed in Each Item of Article 180(2) of the Companies Act(1)
Consolidation Ratio
Consolidation of 70,384,700 shares of the Company into one share(2)

Effective Date of Share Consolidation
Depending on the timing of the issuance of all New Shares for the Third-Party Allotment, theShare Consolidation Effective Date shall be as follows.
(i) Conditional upon all New Shares for the Third-Party Allotment being issued no later thanMarch 9, 2023, the Share Consolidation Effective Date shall be March 31, 2023.
(ii) Conditional upon all New Shares for the Third-Party Allotment being issued on or after March
10, 2023 and no later than March 31, 2023, the Share Consolidation Effective Date shall be
April 22, 2023.

(3)

Type of Shares to be Combined
Common shares- 32 -

(4)Total Number of Authorized Shares on the Effective Date
10 shares

3. Matters Related to the Appropriateness of the Provisions Concerning the Matters Listed in Article
180(2)(i) of the Companies Act
Matters related to the appropriateness of the provisions concerning the matters listed in Article
180(2)(i) of the Companies Act as of the date of the decision to convene the Extraordinary General
Meeting of Shareholders pursuant to Article 298(1) of the Companies Act are as follows.
The consolidation ratio for the Share Consolidation is to combine 70,384,700 shares of the Company
into one share. Based on the fact that the Share Consolidation is carried out for the purpose of having
the Allottee become the only shareholder of the company, the fact of being subject to all the New Sharesfor the Third-Party Allotment being issued, and the following items, we have determined that theconsolidation ratio of the Share Consolidation is appropriate.
Other matters related to the appropriateness of the provisions regarding the consolidation ratio are
as follows.
(1)
Matters Taken into Consideration So as not to Harm the Interests of the Company's
Shareholders (Excluding the Parent Company, etc.)
In the Transaction, the Allottee is not a parent company, etc. of the Company prior to the payment
for the Third-Party Allotment. However, considering that the Allottee intends to become the sole
shareholder of the Company through the Transaction, which includes the Third-Party Allotment, andthe effects on the minority shareholders of the Company, we implemented the measures below toensure the fairness of the Transaction from the standpoint of ensuring fairness in the Transactionand eliminating arbitrariness and avoiding conflicts of interest in the decision making process
leading to the decision to carry out the Transaction.
(i) Special Committee Acquisition of Valuation and Fairness Opinion from Independent ThirdParty Appraiser
As described in “(1) Purpose and Reason for Issuance of New Shares by Third-Party Allotment”
and “(i) Calculation Basis and Specific Terms of Payment Amount” under “(2) Reasonablenessof Issuance Terms, Etc.” under “1. Reason for Issuing Offered Shares at a Particularly Favorable
Payment Amount” in “Agenda Item 1 Issuance of Offered Shares Through Third-Party Allotment(1)” above, in considering the Consultation Items, the Special Committee requested that Akasaka
International Accounting, a third-party appraiser, provide an opinion as to the fairness to theminority shareholders of the Company from a financial perspective of the calculation of thevaluation of the common shares in the Company, the amount paid for the New Shares, and the
Expected Share Consolidation Payment Amount, and obtained the Share Valuation Report from
Akasaka International Accounting. For an overview of the calculation, please see “(1) Purpose- 33 -

and Reason for Issuance of New Shares by Third-Party Allotment” and “(i) Calculation Basis andSpecific Terms of Payment Amount” under “(2) Reasonableness of Issuance Terms, Etc.” above.
The Special Committee also obtained the Fairness Opinion from Akasaka International
Accounting(ii) Obtaining Opinion from Persons with Certain Degree of Independence from Our
Management
We created a Special Committee consisting of three members with a certain degree of
independence from the Allottee and the management of the Company, namely Mr. Hajime
Imamura (Attorney at Law), an outside director of the Company registered as an independent
officer with the Tokyo Stock Exchange, Mr. Hitoshi Hori (Certified Public Accountant), an
outside director and audit committee member, and Mr. Tetsutaro Wakatsuki (Attorney at Law,
Murata & Wakatsuki Law Offices), an external expert with extensive experience in being
involved as a special committee member in structural conflict of interest transactions similar tothis one, requested their opinions as to the necessity and suitability of the Third-Party Allotment
and whether the Third-Party Allotment and the Transaction would be detrimental to the minority
shareholders of the Company, and obtained a report of their findings stating that the Third-Party
Allotment is deemed necessary and suitable, and that the Third-Party Allotment and theTransaction are not deemed to be detrimental to the minority shareholders of the Company.
(iii) Advice from Independent Law Firm to Our Company
We have selected Mori Hamada & Matsumoto as a legal advisor and are receiving legal advice
from this firm regarding the method, schedule, etc. of the Board of Directors decision making,including the procedures for the Third-Party Allotment and Transaction. Mori Hamada &Matsumoto is independent from the Company and the Allottee and has no material conflict ofinterest with the Company or the Allottee.
(iv) Approval by Directors who have No Conflict of Interest with the Company (Including
Directors who are Audit Committee Members)
At the Board of Directors meeting held on November 14, 2022, 9 directors were present who
have no special conflict of interest, and they passed the foregoing resolution unanimously. Yuichi
Tamura, the Representative Director and President of the Company, currently holds a total of
8,504,448 shares in the Company (with 85,044 voting rights, representing 12.08% of all voting
rights) either directly or through K.K. TAMURA, in which he serves as representative director,
or its wholly-owned subsidiary K.K. Taku, and was absent from this meeting of the Board of- 34 -

Directors due to the risk of constituting a director with a special conflict of interest.
(2)
Matters Concerning Cases Where Fractional Amounts of Less Than One Share Are Expected
to Be Handled Pursuant to the Provisions of Article 235 of the Companies Act(i) Method of Handling Fractional Amounts(a) Whether Handling Will Follow Any Provisions of Article 234(2) of the Companies Act,
applying Article 235(1) or Article 235(2) of the Act mutatis mutandis, and Reasons Therefor
Due to the Share Consolidation, it is expected that the number of the Company common shares
held by minority shareholders other than the Allottee will be a fraction of less than one share.
To handle fractional amounts of less than one share arising due to the Share Consolidation,
we will sell a number of shares equal to the total thereof (under Article 235(1) of the Companies
Act, any fractional amount of less than one share in the total will be rounded down) in accordancewith the provisions of Article 235 of the Act and other related laws and regulations, and deliver
the proceeds of that sale to the shareholders of the Company proportionally to their fractions.
We expect that for this sale, we will acquire a number of the Company common sharescorresponding to the total of the fractional amounts with the permission of a court pursuant to
the provisions of Article 234(2) and Article 234(4) of the Companies Act, applying Article 235(2)of the Act mutatis mutandis.
If the permission of the court is obtained as stated above, the sale price in this case will be set
so that the amount will be equal to the number of common shares held by the shareholders of theCompany multiplied by JPY 36.
(b) In the Case of Planned Handling Pursuant to the Provisions of Article 234(2) of theCompanies Act as Applied Mutatis Mutandis to Article 235(2) of the Act (Excluding Sale in theMarket), the Names of Persons Expected to Purchase the Shares in the Sale, the Method of
Ensuring Funds for Such Persons to Pay the Price of the Sale and the Adequacy of Such Method,
and the Expected Time of Sale and Time of Delivery of Sale Proceeds to Shareholdersa.

Names of Persons Expected to Purchase Shares in the Sale
Nichi-Iko Pharmaceutical Co., Ltd.

b.

Method of Ensuring Funds for Nichi-Iko Pharmaceutical Co., Ltd. to Pay the Pricefor Sale and Adequacy of Such Method
As of January 17, 2023, we currently have cash and deposits in an amount adequate
to pay the sale price for a number of the Company common shares equal to the totalof all fractional amounts arising due to the Share Consolidation. No event has occurredthat would have an effect on the payment of the sale price for the Company common- 35 -

shares in an amount equal to the total of all fractional amounts arising due to the Share
Consolidation, and we are not aware of a possibility of such an occurrence in the future.
Therefore, we have determined that the method for ensuring funds for the paymentof the sale price for the Company common shares in an amount equal to the total of
all fractional amounts arising due to the Share Consolidation by Allottee is adequate.
c.

Expected Time of Sale and Time of Delivery of Sale Proceeds to Shareholders
Between around April 2023 and May 2023, we expect to make a petition to a courtfor permission to sell the Company common shares in an amount equal to the total of
the fractional amounts of less than one share arising due to the Share Consolidation,
pursuant to the provisions of Article 234(2) of the Companies Act, applying Article
235(2) of the Act mutatis mutandis. The timing of obtaining this permission will varydepending upon the circumstances of the court and the like, but we expect to obtain
the permission of the court and sell the common shares between April 2023 and May
2023, and thereafter make the necessary preparations to deliver the proceeds of thesale to the shareholders of the Company, and deliver the proceeds of the sale to theshareholders of the Company between around May 2023 and June 2023.
Considering that time may be required for certain procedures between the effective
date of the Share Consolidation and the sale, we have determined that the sale of theCompany common shares corresponding to the total of the fractional amounts of lessthan one share arising as a result of the Share Consolidation and the delivery of thesale proceeds to the shareholders will take place at the times respectively stated above.
The proceeds of the sale are expected to be delivered to all shareholders of theCompany who are entered or recorded in the final shareholder register as of thebusiness day prior to the effective date of the Share Consolidation, in the same manner
as for deliveries of assets as in-kind distributions.

(ii) Amount of Money Expected to be Delivered to Shareholders in Handling of Fractional
Amounts and Adequacy of Such Amount
The Expected Share Consolidation Payment Amount is expected to be to an amount equal
to the number of common shares held by all of the shareholders of the Company multipliedby JPY 36, which is an amount equal to the paid-in amount for the New Shares in the ThirdParty Allotment (approximately JPY 31.57) plus a premium of 14.02%. This amountrepresents a discount of 90.06% to the closing price of JPY 362 as of November 11, 2022,
the business day prior to the Board Resolution Date. However, considering that, as describedin “Background of the Proposal of Agenda Item 1 to Agenda Item 10” above, the Expected- 36 -

Share Consolidation Payment Amount was ultimately agreed after multiple rounds ofnegotiations with the Allottee, the sponsor candidate that indicated the terms and conditions
thought to be most desirable by the Company after sincere discussions with multiple sponsor
candidates, under conditions where the failure to realize a large-scale capital infusion would
worsen our financial performance and financial condition and make it difficult to continue
our business, causing further risks to the minority shareholders of the Company throughshare price decreases and the like, and the circumstances have required us to make requests
to Covered Creditors for a considerable amount of debt relief considering the large amountof future losses, etc. in the Business Turnaround ADR, and we are in a position where it isessential to raise funds on a scale of JPY 20 billion, we have determined that these are thebest conditions that we can provide to all of the minority shareholders of the Company, andthat we are providing a reasonable sale opportunity to all of the minority shareholders of theCompany.
Therefore, we have determined that the Expected Share Consolidation Payment Amount(JPY 36) is adequate.
4.

Disposition of Material Assets, Incurrence of Material Liabilities, and Other Events Having
Material Effect on the Property of the Company After the End of the Prior Fiscal Year(ⅰ) Going-Concern Assumption
As described in “Background of the Proposal of Agenda Item 1 to Agenda Item 10” above,
due to an overall revision in the fiscal year ending March 2022 of the development plans forbiosimilars (successors to original drugs) and orphan drug formulations (drugs for rare
medical conditions) in which we had continually invested in our North American business,
we accrued impairment losses of JPY 84.13 billion in the fiscal year ending March 2022,
mainly in relation to goodwill accrued from investments in our North American businessand intangible assets concerning the development of biosimilars and orphan drug
formulations. Due to the accrual of losses of JPY 104.984 million attributable to owners ofparent in the fiscal year ending March 2022, the ratio of owners’ equity to gross assets was
reduced from 30.6% at the end of March 2021 to 5.1% at the end of March 2022.
Furthermore, we continued to accrue impairment losses and quarterly losses attributable toowners of parent during the fiscal year ending March 2023. Therefore, there are events orconditions that raise material doubt as to the assumption that we will be a going concern.
(ⅱ) Formal Application for Business Turnaround ADR and Acceptance, and Formulation ofBusiness Turnaround Plan

- 37 -

As described in “Background of the Proposal of Agenda Item 1 to Agenda Item 10”
above, considering the harsh management conditions and financial condition, and aiming
to drastically improve our financial condition and establish a firm earnings structure for
future re-growth, we resolved at our Board of Directors meeting on May 13, 2022 to apply
for the Business Turnaround ADR, and made a formal application to the Japanese
Association of Turnaround Professionals (an organization certified by the Minister ofJustice as a certified dispute resolution provider and approved by the Minister of
Economy, Trade and Industry as a specified certified dispute resolution provider) for theBusiness Turnaround ADR.
Thereafter, we held a creditors meeting with the Covered Creditors on May 26, 2022
(first creditors meeting) to explain the business turnaround plan proposal pursuant to theBusiness Turnaround ADR, and subsequently formulated the Business Turnaround Plan
Proposal. At the creditors meeting on November 16, 2022 (second creditors meeting) to
discuss the proposed business turnaround plan, we explained the specifics of the Business
Turnaround Plan Proposal to the Covered Creditors, and at the creditors meeting (third
creditors meeting) held on December 28, 2022 for the resolution of the proposed businessturnaround plan, the Business Turnaround Plan Proposal was established with the consent
of the Covered Creditors.
The content of the Business Turnaround Plan includes receipt of debt relief of JPY
55,784,651,484 yen from all 15 financial institutions that are the Covered Creditors on thedate of payment for the New Shares. Furthermore, this amount is the amount for which
debt relief has been finalized as of December 28, 2022, and in addition to the above
amount, debt relief up to a maximum amount of JPY 42,715,348,516 (up to a maximum
amount of JPY 98,500,000,000 yen in total with the above amount) may be received.
(ⅲ) Third-Party Allotment
At the Board of Directors meeting held on November 14, 2022, we resolved to carry out
an issuance of the New Shares through a third-party allotment to the Allottee, with a total
paid-in amount of JPY 20 billion.
We also resolved, at the Board of Directors meeting held on the same day, to combine
every 70,384,700 of the Company common shares into one share and to deliver a total of
JPY 2.5 billion (JPY 36 per share) in cash to the minority shareholders of the Company
other than the Allottee (the Share Consolidation) after the execution of the Third-Party
Allotment, so that the Allottee becomes the sole shareholder of the Company.
The above resolutions of the Board of Directors were passed on the assumption that the
Allottee plans to make the Company a wholly-owned subsidiary through the Third-Party- 38 -

Allotment and Share Consolidation, and that the Company common shares are expected to
be delisted.
(ⅳ) Accrual of Impairment Losses Concerning North America BusinessAs described in “Background of the Proposal of Agenda Item 1 to Agenda Item 10”
above, in light of Sagent Group having accrued operating losses in the fiscal year ending
March 2022 and the first quarter of the fiscal year ending March 2023 (operating losses of
JPY 38.998 billion in the fiscal year ending March 2022 and JPY 1.805 billion in the firstquarter of the fiscal year ending March 2023) and the development of the business in the
U.S. market, we conducted impairment testing under International Financial ReportingStandards (IFRS) and accrued impairment losses of JPY 47,417 million in the second
quarter of the fiscal year ending March 2023 on fixed assets including goodwill
concerning Sagent group.

- 39 -

Agenda Item 10 Partial Amendments to the Articles of Incorporation relating to the Abolition of
Share Units Provisions, etc.
1. Reason for the Proposal
If Agenda Item 9 “Share Consolidation” is approved as proposed and the Share Consolidation takes
effect, the total number of common shares issued and outstanding of the Company will be reduced
to 10 shares in accordance with the provisions of Article 182(2) of the Companies Act. To clarify thispoint, we will amend Article 7 (Total Number of Authorized Shares) of the Articles of Incorporation,
conditional upon the effectiveness of the Share Consolidation.
When the Share Consolidation takes effect, the total number of shares issued and outstanding will
become 10 shares, there will no longer be a need to provide for share units, and there will be lessneed to set the record date for ordinary general meetings of shareholders. Therefore, conditional upon
the effectiveness of the Share Consolidation, we will delete the entirety of Article 9 (Unit of Shares)of the Articles of Incorporation in order to abolish the provisions regarding common share units,
which currently provide for 100 shares per unit, as well as Article 11 (Rights to Shares of Less Than
One Unit), Article 12 (Right to Demand Purchase of Shares of Less Than One Unit), and Article 15(Record Date for the Ordinary General Meeting of Shareholders), and re-number the other articles
accordingly.
2.

Content of Amendment
The content of the amendment is as follows. The amendment to the Articles of Incorporation under
this proposal will become effective on the Share Consolidation Effective Date, conditional upon theamendment to the Articles of Incorporation under Agenda Item 2 having become effective, theproposal for the Share Consolidation under Agenda Item 9 having been approved as proposed, andthe Share Consolidation having become effective.
(Underlines indicate amended portions.)
Articles of Incorporation as amended by Articles
Additional Amendment Proposalof Incorporation Amendment 2- 40 -

(Total Number of Authorized Shares)
Article 7. The total number of authorized shares by
the Company shall be 750,000,000 shares.

(Total Number of Authorized Shares)
Article 7. The total number of authorized shares by
the Company shall be 10 shares.

(Unit of Shares)
Article 9. A unit of shares in the Company shallconsist of 100 shares.

(Deleted)

Article 10 (Text omitted)

Article 9 (No change)(Rights to Shares of Less Than One Unit)
Article 11. A shareholder of the Company may not
exercise rights with regard to shares of lessthan one unit that he or she holds, otherthan the following:(1)
Rights listed in Article 189(2) of theCompanies Act(2)
Rights to make demands under theprovisions of Article 166(1) of theCompanies Act(3)
Rights to receive allotments of offeredshares and offered share options
proportionally to the number of shares heldby the shareholder(4)
Rights to make demands as provided in thefollowing Article(Deleted)(Right to Demand Purchase of Shares of Less Than
One Unit)
Article 12. A shareholder of the Company may
demand the purchase of shares of less than
one unit that he or she holds, as provided in
the Share Handling Regulations.

(Deleted)

Articles 13 to 14 (Text omitted)

Articles 10 to 11 (No change)- 41 -

(Record Date for Ordinary General Meeting of
Shareholders)
Article 15. The record date for voting rights at theordinary general meeting of shareholders of theCompany shall be March 31 of each year.

(Deleted)

Articles 16 to 36 (Text omitted)

Articles 12 to 32 (No change)

End of document- 42 -

Instructions for Exercise of Voting Rights Online, etc.
When exercising your voting rights online, etc., please be aware of the following matters in advance.
1. Website for exercise of voting rights
Voting rights may be exercised online only by using the following website for exercising voting rights
designated by the Company.
Website for exercise of voting rights: https://www.web54.net
2. Handling of voting rights(1) When exercising your voting rights by computer or mobile phone, please use the voting rights
exercise code and password stated in the enclosed Voting Rights Exercise Form, and follow the
instructions on the screen to enter your approval or disapproval.
(2) When exercising your voting rights using a smartphone, voting rights may be exercised throughthe smartphone website for exercising voting rights without having to enter the voting rights
exercise code and password by scanning the “login QR code for the smartphone website forexercising voting rights” shown in the enclosed Voting Rights Exercise Form.
Please note that if you wish to change the content of your vote after exercising your voting
rights, you will need to scan the QR code again and enter the voting right exercise code andpassword stated in the Voting Rights Exercise Form.
(3) The deadline for exercising your voting rights is 5:40 p.m. on Thursday, February 16, 2023, so
please exercise your voting rights as soon as possible.
(4) If you exercise your voting rights both in writing and online, etc., we will treat the exercise ofyour voting rights online, etc. as valid. In addition, if you exercise your voting rights multiple
times online, etc. or carry out duplicate voting using a computer, smartphone, or mobile phone,
the last vote will be treated as the valid exercise of your voting rights.
(5) Fees charged by providers and telecommunications carriers (such as connection fees, etc.)
incurred when using the website for exercising voting rights shall be borne by shareholders.
3. Handling of passwords and voting rights codes(1) The password is important information for confirming that the person voting is the actual
shareholder. Please handle it with the same care as you would for a personal seal or PIN.
(2) Entering an incorrect password more than a certain number of times will result in being unable
to use the website for voting. If you wish to have your password reissued, please follow the
instructions on the screen.
(3) The voting rights exercise code stated in the Voting Rights Exercise Form is valid only for thisgeneral meeting.

- 43 -

4. Inquiries about how to operate a computer, etc.
(1) If you are unclear on how to operate your computer, mobile phone, etc. for exercising yourvoting rights on the site, please contact us at the number below:
Sumitomo Mitsui Trust Bank, Limited Transfer Agent Web SupportDedicated line
[Phone] 0120 (652) 031 (available 9:00 a.m. to 9:00 p.m.)(2) For other inquiries, please contact us at the following:a. Shareholders with an account at a securities company
For shareholders with an account at a securities company, please contact your securities
company.
b. Shareholders who do not have an account at a securities company (shareholders with a
special account)
Sumitomo Mitsui Trust Bank, Limited
Transfer Agent Business Center[Phone] 0120 (782) 031 (available 9:00 a.m. to 5:00 p.m., except weekends and holidays)
5. Using the Electronic Voting Platform (for institutional investors)
For institutional investors, voting rights may be exercised electronically through the Electronic
Voting Platform operated by ICJ, Inc.

- 44 -