Companies Act

In cases where a stock company carries out any of the acts set forth below, pledge for share options is effective with respect to the monies, etc. which the holders of relevant share options are entitled to receive as a result of relevant act:

the acquisition of share options;

entity conversion;

merger (but only if relevant stock company disappears in the merger);

absorption-type company split;

incorporation-type company split;

share exchange; or

share transfer.

Registered pledgees of share options may receive the monies, etc. (limited to monies) under the preceding paragraph, and appropriate them as payment to satisfy their own claims in priority to other creditors.

If a stock company performs the acts set forth in the following items, if the claims under the preceding paragraph have not yet become due and payable, the registered pledgees of share options may have the person specified in each of those items deposit an amount equivalent to the value of the monies, etc. provided for in that paragraph. In these cases, the pledge is effective with respect to the monies so deposited:

acquisition of share options:the stock company;

entity conversion:a membership company after entity conversion prescribed in Article 744, paragraph (1), item (i); and

merger (but only if the stock company disappears in the merger):the company surviving the absorption-type merger as prescribed in Article 749, paragraph (1) or the company incorporated in the consolidation-type merger as prescribed in Article 753, paragraph (1).

The provisions of the preceding three paragraphs apply mutatis mutandis to cases where a special controlling shareholder acquires share options subject to the cash-out by the demand for share option cash-out. In this case, "the person specified in each of those items" in the preceding paragraph is deemed to be replaced with "the special controlling shareholder".

Pledges for share options attached to bonds with share option (limited to cases where the property provided for in Article 236, paragraph (1), item (iii) consists of the bonds with respect to relevant bonds with share option, and the redemption amount for relevant bonds is equal to or more than the value provided for in item (ii) of that paragraph with respect to relevant share options) are effective with respect to the shares that the holders of relevant share options receive by exercising relevant share options.

With regard to share options, the fact that the share options belong to the trust property may not be perfected against the stock company and other third parties unless the fact that the share options belong to the trust property is entered or recorded in the share option register.

When share options held by the share option holders set forth in Article 249, item (iii), (a) belong to the trust property, the share option holders may request the stock company to enter or record to that effect in the share option register.

When applying the provisions of Article 250, paragraph (1) and Article 259, paragraph (1) if the statement or record is made pursuant to the provisions of the preceding paragraph in the share option register, the phrase "showing the information required to be entered in the share option register which has been entered or recorded" in Article 250, paragraph (1) is deemed to be replaced with "showing the information required to be entered in the share option register (including the fact that the share options held by those share option holders belong to the trust property) which has been entered or recorded" and the phrase "information required to be entered in the share option register" in Article 259, paragraph (1) is deemed to be replaced with "information required to be entered in the share option register (including the fact that the share options held by those share option holders belong to the trust property)".

The provisions of the preceding three paragraphs do not apply to a share certificate-issuing company.

If there are provisions with respect to the matters set forth in Article 236, paragraph (1), item (vii), (b) as a feature of share options subject to call (meaning share options for which there are provisions with respect to the matters set forth in item (vii), (a) of that paragraph; hereinafter the same applies in this Chapter), the stock company must determine the day under the same item (vii), (b) by a resolution at a shareholders meeting (or at a board of directors meeting for a company with board of directors); provided, however, that this does not apply if it is otherwise provided as a feature of relevant share options subject to call.

If a stock company determines the day under Article 236, paragraph (1), item (vii), (b), the stock company must notify the holders of share options subject to call (or, if there are provisions with respect to the matters set forth in item (vii), (c) of that paragraph, the holders of share options subject to call determined under the provisions of paragraph (1) of the following Article) and the registered pledgees of share options thereof of that date, no later than two weeks prior to that day.

A public notice may be substituted for the notice under the provisions of the preceding paragraph.

If there are provisions with respect to the matters set forth in Article 236, paragraph (1), item (vii), (c), if a stock company intends to acquire share options subject to Call, it must determine the share options subject to call that it intends to acquire.

The share options subject to call under the preceding paragraph must be determined by a resolution at a shareholders meeting (or at a board of directors meeting for a company with board of directors); provided, however, that this does not apply if it is otherwise provided as a feature of relevant share options subject to call.

If a stock company makes the determination pursuant to the provisions of paragraph (1), the stock company must immediately notify the holders of share options subject to call who are determined under the provisions of that paragraph and the registered pledgees of share options thereof to the effect that the stock company will acquire relevant share options subject to call.

A public notice may be substituted for the notice under the provisions of the preceding paragraph.

A stock company acquires, on the day when the grounds under Article 236, paragraph (1), item (vii), (a) have arisen (or, if there are provisions with respect to the matters set forth in item (vii), (c) thereof, the day set forth in item (i) or the day set forth in item (ii) below, whichever comes later; the same applies in the following paragraph and paragraph (3)), share options subject to call (or, if there are provisions with respect to the matters set forth in paragraph (1), item (vii), (c) of that Article, the share options subject to call determined pursuant to the provisions of paragraph (1) of the preceding Article; the same applies in the following paragraph and paragraph (3)):

the day when the grounds under Article 236, paragraph (1), item (vii), (a) have arisen; or

the day of notice under the provisions of paragraph (3) of the preceding Article, or the day when two weeks have lapsed from the day of the public notice under paragraph (4) of that Article.

If the share options subject to call that a stock company acquires under the provisions of the preceding paragraph are attached to bonds with share option, the stock company acquires the bonds with respect to relevant bonds with share option on the day when the grounds under Article 236, paragraph (1), item (vii), (a) have arisen.

In the cases set forth in the following items, the holders of share options subject to call (excluding the relevant stock company) become the persons specified in each of those items in accordance with the provisions with respect to the matters provided for in Article 236, paragraph (1), item (vii), (a), on the day when the grounds under the same item arise:

if there are provisions on the matters set forth in Article 236, paragraph (1), item (vii), (d):the holders of shares referred to in the same item (vii), (d);

if there are provisions on the matters set forth in Article 236, paragraph (1), item (vii), (e):the holders of bonds referred to in the same item (vii), (e);

if there are provisions on the matters set forth in Article 236, paragraph (1), item (vii), (f):the holders of the relevant other share options under that item (vii), (f);

if there are provisions on the matters set forth in Article 236, paragraph (1), item (vii), (g):the holders of bonds constituting bonds with share option referred to in that item (vii), (g), and holders of share options attached to those bonds.

Without delay after the grounds under Article 236, paragraph (1), item (vii), (a) have arisen, a stock company must notify the holders of share options subject to call and registered pledgees of share options thereof (if there are provisions with respect to the matters set forth in the same item (vii), (c) thereof, the holders of share options subject to call determined pursuant to the provisions of paragraph (1) of the preceding Article, and registered pledgees of share options thereof) to the effect that relevant grounds has occurred; provided, however, that this does not apply if the stock company has given notice under the provisions of Article 273, paragraph (2) or has given public notice under the provisions of paragraph (3) of the same Article.

A public notice may be substituted for the notice under the provisions of the preceding paragraph.

A stock company may cancel its own share options. In these cases, the stock company must determine the features and number of the own share options it intends to cancel.

For a company with board of directors, the determination under the provisions of the second sentence of the preceding paragraph must be made by a resolution at a board of directors meeting.

A stock company may allot the share options of relevant stock company to shareholders (or, for a company with class shares, shareholders of a certain class) without requiring them to make additional contribution (hereinafter in this Section referred to as "allotment of share options without contribution").

Whenever a stock company intends to effect the allotment of share options without contribution, it must prescribe the following matters:

the features and number of the share options the stock company will allot to shareholders or the method for calculating that number;

if the share options provided for in the preceding item are attached to bonds with share option, the classes of bonds with respect to relevant bonds with share option, and the total of the amounts for each bond or the method for calculating that amount;

the day when relevant allotment of share options without contribution becomes effective; and

if the stock company is a company with class shares, the classes of shares held by shareholders who are entitled to relevant allotment of share options without contribution.

The provisions regarding the matters set forth in item (i) and item (ii) of the preceding paragraph must be that the share options under item (i) of that paragraph and the bonds under item (ii) of that paragraph will be allotted in proportion to the number of shares (or, for a company with class shares, the shares of the classes under item (iv) of that paragraph) held by shareholders (or, for a company with class shares, class shareholders of the classes under item (iv) of that paragraph) other than relevant stock company.

The determination of the matters set forth in each item of paragraph (1) must be made by a resolution at a shareholders meeting (or at a board of directors meeting for a company with board of directors); provided, however, that this does not apply if it is otherwise provided for in the articles of incorporation.

Shareholders to whom the share options under paragraph (1), item (i) of the preceding Article have been allotted become the share option holders provided for in item (i) of that paragraph on the day provided for in item (iii) of that paragraph (or, in the case provided for in item (ii) of that paragraph, the holders of share option provided for in item (i) of that paragraph and the holders of the bonds provided for in item (ii) of that paragraph).

A stock company must notify shareholders (or, for a company with class shares, class shareholders of the classes under item (iv) of the same paragraph) and the registered pledgees of shares thereof, of the features and number of the share options (in the cases provided for in item (ii) of the same paragraph, including the classes of bonds that have been allotted to relevant shareholders and the total of the amounts for each bond) that have been allotted to relevant shareholders, after the day stated in paragraph (1), item (iii) of the preceding Article without day.

If notice is made pursuant to the provisions of the preceding paragraph, when the end of the period stated in Article 236, paragraph (1), item (iv) with respect to the share options set forth in paragraph (1), item (i) of the preceding Article arrives before the day when two weeks elapse from the day of the notice, the period stated in the same item is deemed to be extended to the day when two weeks elapse from the day of the notice.