Chapter 5. Directors, Board of Directors and Audit Committee

• Article 26. (Number of Directors)
  • ① The board of directors of the Company shall consist of 6 or more directors.
  • ② The board of directors of the Company shall have 3 or more outside directors who shall compose a majority of the total number of directors: Provided that when the number of outside directors fails to represent a majority of the total number of directors due to vacancies, the Company shall appoint outside directors at the first general meeting of shareholders convened after such cause has occurred, to satisfy the requirements.
• Article 27 (Appointment of Directors)
  • ① Directors shall be appointed at a general meeting of shareholders. The Company shall appoint outside directors under Article 26 from among candidates recommended by the committee for recommending candidates for outside directors, and directors to be appointed to the member of audit committee, not outside director under Article 42-3, shall be separated and appointed.
  • ② Directors shall be appointed by affirmative votes of a majority of the voting rights of shareholders present thereat and representing at least a quarter of the total issued and outstanding shares.
  • ③ When appointing 2 or more directors, shareholders may exercise only one voting right to one share owned, and Article 1382-2 of the Commercial Act shall not apply.
• Article 28 (Term of Office of Directors)
  • ① The term of office of directors shall be 1 year or longer and 3 years, and the term of individual director shall be determined at the time of appointment; however, when the term expires prior to the regular general meeting of shareholders concerning the final period for settlement of accounts, the term concerned shall be extended until the closure of the general meeting concerned.
  • ② Directors may be reelected.
• Article 29 (Vacancies)
  • ① When vacancies arise at the office of directors, appointment of directors shall be executed at a general meeting of shareholders; however, the above shall not apply if the vacancy above does not violate statutory number of directors or hinder business performances.
  • ② The director appointed due to vacancies shall serve the remaining term of the predecessor.
• Article 30 (Responsibilities of Directors)

  The Company shall compensate all legal costs as well as other losses, damages and debts either paid or assumed by directors in the pursuit of given duties: Provided that when the losses, damages and debts concerned occurred due to breach of duty by his/her act in bad faith or gross negligence, the above shall not apply.

• Article 31 (Dismissal and Vacancies of Directors)
  • ① Dismissal of directors shall be in compliance with Article 385 of the Commercial Act.
  • ② Directors shall be removed from office when falling under any of the followings:
    1. 1. When submitting a letter of resignation;
    2. 2. When adjudicated bankrupt;
    3. 3. When adjudicated quasi-incompetent or incompetent;
    4. 4. When deceased.
• Article 32 (Appointment of Representative Director)

  The Company shall appoint 1 or more representative directors at the board of directors.

• Article 33 (Duty of Representative Director)
  • ① The representative director shall represent the Company and oversee entire operation of the Company.
  • ② Directors shall assist the representative director and share and perform their duties. Upon absence of the representative director, a director designated by the representative director shall assume the duty of the representative director; however, when designation above is not made, the duty concerned shall be assumed by in the order of president, vice president, executive director and managing director.
  • ③ Directors shall perform their duties in good faith for the interest of the Company in accordance with statutes, and the articles of association.
• Article 34 (Duty of Report by Directors)
  • ① Directors shall report the progress of business to the board of directors at least once in 3 months.
  • ② Directors shall immediately report to the audit committee when discovering matters likely to cause noticeable harms to the Company.
• Article 35 (Duty of Auditor)

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• Article 36 (Audit Records of Auditor)

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• Article 37 (Constitution and Authority of Board of Directors)
  • ① The board of directors shall be composed of directors, and shall adopt resolution of matters significant to the business of the Company.
  • ② The board of directors may establish separate provisions in order to determine matters required for delegation of authorities and other operations of the board of directors.
• Article 38 (Convocation of Board of Directors' Meetings and Methods of Adopting Resolutions)
  • ① The board of directors shall be convened by the chairperson of the board or a director separately assigned. When the board of directors is convened, notification in writing or verbal shall be served to each director one day prior to the date of the board of directors' meeting: Provided that with unanimous consent from all directors, the meeting may be convened without undergoing a convocation procedure.
  • ② A resolution of the board of directors shall be adopted in the presence of a majority of directors in office by the affirmative votes of a majority of directors present at the meeting: Provided that a resolution of the board of directors upon matters falling under Article 397-1 (Prohibition of Appropriation of Company's Opportunities) and Article 1398 (Prohibition of Self-transaction) of the Commercial Act shall be adopted by the affirmative votes of two-third of directors.
  • ③ No person who has special interests in a resolution by the board of directors shall exercise his/her voting rights.
  • ④ The board of directors may allow all or some of the directors to take part in the adoption of a resolution without presence in person at the meeting by means of a remote communications system that enables all directors' simultaneous transmission and receipt of sounds. In such cases, the relevant directors shall be deemed present at the meeting.
• Article 39 (Chairperson)
  • ① The board of directors shall appoint a chairperson of the board of directors with one-year term of office at the first board of directors' meeting following annual regular general meeting of shareholders.
  • ② In preparation for an occasion where a chairperson is absent without designating an acting chairperson, the chairperson shall determine the order of directors who shall act as an acting chairperson on behalf of the chairperson.
  • ③ When a chairperson is unable to attend the board of directors' meeting, the chairperson shall designate a director from all directors to act as an acting chairperson; and when the designation above is not made by the chairperson, an acting chairperson shall be appointed according to the order determined by Paragraph 2 of this article above.
• Article 40 (Minutes of Board of Directors' Meeting)

  Minutes shall be prepared with regard to the proceedings of a board of directors’ meeting. The agenda items, summary of the proceedings and the outcomes thereof, and the objectors and grounds for their objection shall be entered in the minutes, and the directors and auditors present at the meeting shall write their names and affix seals, or affix their signatures, thereon.

• Article 41 (Remuneration and Retirement Allowance for Directors)
  • ① The amount of remuneration to be received by directors shall be determined by a resolution of a general meeting of shareholders.
  • ② Retirement allowance for directors shall be prescribed by the regulation on executive's retirement allowance under the resolution adopted by a general meeting of shareholders.
• Article 42 (Committees within Board of Directors)
  • ① The board of directors shall establish the committee for recommending candidates for outside directors and audit committee for committees within the board. In addition, the board of directors may establish a committee which deliberates and determines corporate strategies and other matters delegated by the board.
  • ② The committee within the board shall be composed of two or more directors, and its organization and operation shall be determined by the resolution of the board.
  • ③ The board of directors shall not delegate to the committees its power of the following matters:
    1. 1. Proposal of matters subject to approval by a general meeting of shareholders;
    2. 2. Appointment or dismissal of the representative director;
    3. 3. Establishment of committees and appointment or dismissal of their members;
    4. 4. Other matters as determined by the board of directors.
  • ④ The committee shall notify each director of the resolutions it has adopted. In such cases, any of the directors may, upon receipt of the notification, request the convocation of a meeting of the board of directors, and the board of directors may resolve, once again, on the resolutions of the committee.
• Article 42-2 (Committee for Recommending Candidates for Outside Directors)

  A majority of all members of the committee for recommending candidates for outside directors shall be composed of outside directors, and the committee shall perform a function of recommending candidates for outside directors appointed by a general meeting of shareholders.

• Article 42-3 (Constitution of Audit Committees)
  • ① The Company shall establish an audit committee as prescribed by Paragraph 1 of Article 42 in lieu of auditor.
  • ② The audit committee shall be composed of 3 or more directors.
  • ③ Two-third or more of members of the committee shall be outside directors, and members who are not outside directors shall meet the requirements under Paragraph 2 of Article 542-10 of the Commercial Act.
  • ④ Where the total amount of voting stocks of the Company held by the largest shareholder and his/her specially related persons, persons owning stocks in the computation of the largest shareholder or his/her specially related persons, and other persons delegating voting rights to the largest share holder or his/her specially related persons exceeds three percent of the total number of shares issued and outstanding, excluding nonvoting stocks, such shareholder may not exercise his/her voting rights on the stocks in excess when appointing members of the audit committee who are not outside directors.
  • ⑤ Any shareholder who has stocks in excess of three percent of the total number of issued stocks other than nonvoting rights of the Company, may not exercise his/her voting rights on the stocks in excess when appointing members of the audit committee as outside directors.
  • ⑥ The audit committee shall appoint a person to represent the committee by its own resolution. In such case, the chairperson shall be an outside director.
• Article 42-4 (Duty of Audit Committee)
  • ① The audit committee shall audit the accounting and businesses of the Company.
  • ② The audit committee may request to convene the board of directors' meeting by submitting the objective and grounds for convocation of the meeting in writing to a director (referring to a director with the power to convene a board of directors' meeting, hereinafter the same shall apply).
  • ③ When the director fails to immediately convene a board of directors' meeting despite the request at Paragraph 2 above, the audit committee so requested my convene a board of directors' meeting.
  • ④ The audit committee may request to convene an extraordinary general meeting of shareholders by submitting the objective and grounds for convocation of the meeting in writing to the board of directors.
  • ⑤ The audit committee may request subsidiary companies for their business reports when deemed necessary to fulfill its duty. In such case, when the subsidiary company concerned fails to immediately report or when necessary to verify the contents of the report, the committee may investigate the businesses and the status of the property of the subsidiary company concerned.
  • ⑥ The audit committee shall approve the appointment of an external auditor.
  • ⑦ The audit committee shall deal with matters delegated by the board of directors other than as prescribed by Paragraph 1 through Paragraph 5.
  • ⑧ Resolutions adopted by the audit committee shall not be re-determined by the board of directors.
• Article 42-5 (Audit Records)

  The audit committee shall prepare a record pertaining to the audit; and a summary of audit process and the outcomes thereof shall be recorded in the audit record and auditors who have carried out such audit shall write their names and affix their seals, or shall affix their signatures, thereon.

• Article 42-6 (Appointment of External Auditor)

  The Company shall appoint an external auditor subject to approval from the audit committee in accordance with the Act on External Audit of Stock Companies; and the appointment above shall be reported to the regular general meeting of shareholders convened during the fiscal year when the appointment concern is made, notified in writing or by an electronic document to shareholders as of date of closing the latest register of shareholders or posted at the official website of the Company.

• Article 43 (Managerial Executives)
  • ① The Company may have managerial executives in order to execute the resolution of the board of directors.
  • ② Matters concerning managerial executives shall be determined by separate provisions of the board of directors.
• Article 44 (Adviser, etc.)
  • ① The representative directory may appoint advisers and consultants due to necessity for businesses based on the recommendation made by the chief executive officer.
  • ② The chief executive officer may determine and pay advisers and consultants above remunerations and expenses required for given duties as if they are managerial executives.
• Article 45 (Qualification of Outside Directors)

  The Company shall appoint persons with qualifications under applicable laws such as the Commercial Act from those who have professional knowledge or experiences in business management, economics, laws or relevant technologies or who have good social reputations, to outside directors; and if the person loses the qualification above after being appointed to an outside director, the person concerned shall lose the office of outside director.

• Article 46 (Preparation and Availability of Financial Statements and Business Report)
  • ① The representative director of the Company shall prepare documents under following subparagraphs, accompanying statements and business report 6 weeks prior to the date of regular general meeting of shareholders, have the documents above audited by the audit committee, and submit the documents under following subparagraphs and business report to the regular general meeting of shareholders:
    1. 1. A balance sheet;
    2. 2. An income statement;
    3. 3. Other documents indicating financial standing and management performance as prescribed by the Enforcement Decree of Commercial Act.
  • ② When the Company falls under the company subject to prepare consolidated financial statements as prescribed by the Enforcement Decree of Commercial Act, each document under Paragraph 1 shall include consolidated financial statements.
  • ③ The audit committee shall submit an audit report to the representative director 1 week prior to the date of regular general meeting of shareholders.
  • ④ Notwithstanding the above, the Company may approve the above subject to resolution of the board of directors when the Company satisfies all requirements under the following subparagraphs:
    1. 1. That an external auditor presents an opinion that each of the documents listed in Paragraph 1 appropriately represents the company's financial conditions and performance of management in accordance with statutes and the articles of association;
    2. 2. That all member of the audit committee give consent thereto.
  • ⑤ In cases where a board of directors gives approval pursuant to Paragraph 4, directors shall report the details of each document listed in Paragraph 1 to a general meeting of shareholders.
  • ⑥ The representative director shall keep the documents listed in Paragraph 1 as well as an audit report at the principal office of the company for five years and shall keep copies thereof at the branch offices for three years, from one week prior to the date set for a regular general meeting of shareholders.
  • ⑦ When each document listed in Paragraph 1 is approved by a general meeting of shareholders or by the board of directors pursuant to Paragraph 4, the representative director shall immediately publicly notify the financial statements and external auditor's opinion.