Issuance of Stock Options to Employees of the Company’s Subsidiaries

 Rakuten, Inc. (the “Company”) announces that at the meeting of the Board of Directors held today, it resolved to issue the following Share Options as stock options to employees of the Company’s subsidiaries, pursuant to “Issuance of Share Options as Stock Options to Directors, Executive Officers and Employees of the Company and its subsidiaries”, approved at the 22nd Annual General Shareholders’ Meeting held on March 28, 2019.

1. Reason for Issuing Share Options on Especially Favorable Conditions
    Since the value of the Share Options is linked with the Company’s stock price, delivering the Share Options as part of a performance-linked compensation package to the executives and employees of the Group will allow executives and employees of the Group to share the gains of shareholders when stock prices rise and feel shareholders’ losses when stock prices fall, thus enhancing their motivation to achieve higher performance and higher stock prices.
    In addition, the exercise period of a portion of the Share Options will commence on the date on which one year has passed from the issuance of the Share Options, while the proportion of the Share Options, which may be exercised, will increase gradually in stages until the date prior to the date on which four years have passed from the issuance, with the rest of the Share Options becoming exercisable thereafter. By making the Share Options exercisable in stages in this way, it will be possible to exercise the Share Options on the date on which one year has passed from the issuance of the Share Options. This will offer an attractive compensation package to prospective recruits to the Group, especially in countries and regions where the competition for talented human resources is intense. On the other hand, by making a portion of the Share Options exercisable gradually in stages until the date prior to the date on which four years have passed from the issuance, it will be possible to further raise the incentive of the Group towards higher performance and higher stock prices in the long-term, and retain existing talented staff.
    The Company intends to implement stock option plans for executives and employees of the Group in order to continuously enhance the Group’s corporate and shareholder value, by recruiting and retaining talented staff and by raising the motivation of executives and employees of the Group towards higher performance.
   
   [Determination Methods and Main Features of the Group’s Compensation System]      
    In determination of the total amount of compensation, including the granting of Share Options, several factors are taken into account, such as the degree to which the Group’s operating profit targets were achieved; the business performance of each Group company, business segment or division; and the personnel evaluation of each individual.
    As a general rule, the Group has designed its compensation system so that as an individual’s rank and responsibility increases, the portion of their total compensation comprised of performance-based bonuses (based on individual, Group Company, business unit or department performance) and Share Options (that are linked to stock prices) also increases. Nevertheless, a major feature of the Group’s compensation system is that it delivers Share Options to a wide range of personnel starting with first-year employees with relatively low ranks and small roles up to Directors. This reflects the Group’s belief that making the majority of the executives and employees of the Group potential shareholders will further raise the awareness of each of the executives and employees of the Group towards enhancing corporate and shareholder values. Additionally, this is expected to reinforce the sense of unity among all executives and employees of the Group, which is thought to be an indispensable element in expanding and fostering the Rakuten Ecosystem both in Japan and abroad.
   
   

2. Outline of the Issuance of the Share Options

(1) Total number of units and persons to whom Share Options will be allotted

Employees of the Company’s subsidiaries:
 1,029 in total         39,881 units in total

(2) Class and number of shares to be issued upon exercise of Share Options
 Common stock of the Company:   3,988,100 shares

 However, if the Company splits its common stock (including allotment of its common stock without compensation; hereinafter the same shall apply) or consolidates its common stock, the number of shares to be issued upon exercise of each unit of such Share Options will be adjusted according to the following formula; provided that such adjustment will be made only to those that  remain unexercised or uncanceled at the time of such adjustment and; provided, further, that if any fraction less than one share arises as a result of such adjustment, such fraction shall be discarded.

Number of shares after adjustment = Number of shares before adjustment x Ratio of split or consolidation

 In addition, if the Company carries out a merger, a company split, share exchange, share transfer, or other action that makes it necessary to adjust the number of shares, the number of shares will be adjusted within a reasonable range, taking into account the conditions of the merger, company split, share exchange, share transfer, or other similar action.

(3) Total number of Share Options:            39,881 units
 One hundred shares will be issued for each Share Options; provided, however, that in the event of any adjustment in the number of shares stipulated in (2) above, the number of shares to be issued for the Share Options will be adjusted accordingly.

(4) Cash payment for Share Options
 No cash payment is required for Share Options.

(5) Value of the assets to be contributed upon exercise of Share Options
 The Price for one Share Option will be one yen.

(6) Exercise period of Share Options
  The exercise period will be from the date on which one year has passed from the issuance of the Share Options (hereinafter “date of issuance”) to the date on which ten years have passed from the date of issuance. If the final day of the exercise period falls on a holiday of the Company, the final day will be the working day immediately preceding the final day.

(7)    Conditions etc. for exercise of Share Options

(i) Those who received an allotment of the issue of Share Options (hereinafter “Holders of Share Options”) will remain Directors (excluding Outside Directors), Executive Officers, Company Auditors or employees of the Company, or its subsidiaries or affiliates at the time of exercising such rights; provided, however, that exceptional treatment may be allowed in this regard by the Board of Directors in consideration of circumstances and in the event where the Holders of Share Options have made applications for the exercise of Share Options in accordance with the procedures prescribed by the Company by the date of retirement (or by the application date immediately following the date of retirement if it is recognized that there are justifiable grounds for not being able to make the application by the date of retirement).

(ii) Share Options may not be inherited; provided, however, that exceptional treatment may be allowed in this regard by the Board of Directors in consideration of circumstances.

(iii) Share Options may not be offered for pledge or disposed of in any other way.

(iv) Share Options may be exercised by the Holder of Share Options, in whole or in part, according to the following categories.

i) The entire allotment of Share Options may not be exercised prior to the date on which one year has passed from the date of issuance.

ii) 15% of the allotment of Share Options may be exercised from the date on which one year has passed from the date of issuance to the date prior to the date on which two years have passed from the date of issuance (if a fraction less than one unit arises in the number of exercisable Share Options, such fraction will be discarded).

iii) 35% of the allotment of Share Options (if a portion of the allotment of Share Options had been exercised prior to the date on which two years have passed from the date of issuance, the total amount exercisable including the previously exercised portion shall be 35%) may be exercised from the date on which two years have passed from the date of issuance to the date prior to the date on which three years have passed from the date of issuance (if a fraction less than one unit arises in the number of exercisable Share Options, such fraction will be discarded).

iv) 65% of the allotment of Share Options (if a portion of the allotment of Share Options had been exercised prior to the date on which three years have passed from the date of issuance, the total amount exercisable including the previously exercised portion will be 65%) may be exercised from the date on which three years have passed from the date of issuance to the date prior to the date on which four years have passed from the date of issuance (if a fraction less than one unit arises in the number of exercisable Share Options, such fraction will be discarded).

v) The entire allotment of Share Options may be exercised from the date on which four years have passed from the date of issuance to the date on which ten years have passed from the date of issuance.

(v) The Holders of Share Options have duties to pay all taxes (including but not limited to income tax, social security contributions, pensions, and employment insurance premium) specified by laws and regulations in relation to stock options and shares. In cases where the Company and its subsidiaries and affiliates is obliged to levy income tax, etc., the relevant company obliged to levy income tax, etc. will be able to levy tax from Holders of Share Options by the methods listed below.

i) Receipt by cash

ii) Appropriation of shares owned by the Holders of Share Options

iii) Deduction from salaries, bonuses, etc. of the Holders of Share Options

iv) Other methods specified by the Company

(8) Matters concerning increase in capital stock and capital reserve by issuing of shares upon exercise of Share Options

(i)  Amount of increase in capital stock by issuing shares upon exercise of Share Options will be half of the upper limit of capital increase as calculated pursuant to the provisions of Article 17, Paragraph 1 of the Ordinance on Accounting of Companies, where any resultant fraction less than one yen will be rounded up.

(ii)  Amount of increase in capital reserve by issuing shares upon exercise of Share Options will be the upper limit of capital stock increase as described in (i) above minus the amount of increase in capital stock set out therein.

(9) Reasons and conditions for the acquisition of Share Options

(i)　In cases where the proposal of any merger agreement under which the Company is dissolved, or any absorption-type company split (kyushu-bunkatsu) agreement or incorporation-type company split (shinsetsu-bunkatsu) plan in which the Company will be a splitting company, or any share exchange agreement or share transfer plan in which the Company will be a wholly owned subsidiary of another company is approved at a General Shareholders’ Meeting of the Company, the Company may acquire Share Options at a date specifically determined by the Board of Directors of the Company without any compensation.

(ii)   In cases where Holders of Share Options cease to accommodate the conditions of (7) (i) above before exercising Share Options, the Company may acquire such Share Options at the date specifically determined by the Board of Directors of the Company without any compensation.

(10) Restriction on the acquisition of Share Options by transfer
 Any acquisition of Share Options by transfer will require approval via a resolution of the Board of Directors of the Company.

(11) Treatment of Share Options in case of organizational restructuring of the Company
 In the event the Company merges (limited to cases where the Company becomes a dissolving company), performs an absorption-type company split or an incorporation-type company split, or conducts a share exchange or a share transfer (hereinafter collectively “Organizational Restructuring”), Share Options of a corporation described in Article 236, Paragraph 1, Items 8.1 through 8.5 of the Companies Act (hereinafter “Restructured Company”) will be delivered under the following conditions to Holders of Share Options remaining unexercised (hereinafter “Remaining Share Options”) at the time when Organizational Restructuring takes effect. In this case, the Remaining Share Options will lapse and the Restructured Company will issue new Share Options. However, the foregoing will apply only to cases in which the delivery of Share Options of the Restructured Company according to the following conditions is stipulated in the merger agreement, the absorption-type company split agreement, the incorporation-type company split plan, the share exchange agreement, or the share transfer plan. 

(i) Number of Share Options of the Restructured Company to be delivered
 The Restructured Company shall deliver Share Options, the number of which will equal the number of Share Options held by the holder of the Remaining Share Options.

(ii) Class of shares of the Restructured Company to be issued upon the exercise of Share Options
 Shares of common stock of the Restructured Company

(iii) Number of shares of the Restructured Company to be issued upon the exercise of Share Options
 To be decided according to (2) and (3) above after taking into consideration the conditions, etc. of the Organizational Restructuring.

(iv) Value of the assets to be contributed upon the exercise of Share Options
 The value of the assets to be contributed upon the exercise of each Share Options will be decided according to (5) above after taking into consideration the conditions, etc. of the Organizational Restructuring.

(v) Exercise period of Share Options
 Starting from the later of either the first date of the exercise period of Share Options as stipulated in (6) above or the date on which the Organizational Restructuring becomes effective and ending on the expiration date for the exercise of Share Options as stipulated in (6) above.

(vi) Matters concerning increase in capital stock and capital reserve to be increased by the issuing of shares by the Restructured Company upon the exercise of Share Options
 To be determined in accordance with (8) above.

(vii) Restriction on acquisition of Share Options by transfer
 Acquisition of Share Options by transfer will be subject to the approval of the Board of Directors of the Restructured Company (or by the majority decision of Directors if such company is not a company with a Board of Directors).

(viii) Reasons and conditions for the acquisition of Share Options
 To be determined in accordance with (9) above.

(12) Rules pertaining to fractions of less than one share arising from the exercise of Share Options
 Fractions of less than one share in the number of shares to be delivered to Holders of Share Options who exercised Share Options will be discarded.

(13) Date of issuance of Share Options
 November 1, 2019

【Notes】
(1) Date of Board of Directors resolution for submitting the Proposal to the General Shareholders Meeting: February 22, 2019
(2) Date of General Shareholders Meeting resolution: March 28, 2019