Idemitsu Kosan : Notice Regarding Execution of Share Exchange Agreement for Idemitsu Kosan Co., Ltd. to Make SDS Biotech K.K. its Wholly-Owned Subsidiary

May 11, 2021

Press Release

Company Name: Idemitsu Kosan Co.,Ltd.

Representative Director & Chief Executive Officer: Shunichi Kito

(Company Code: 5019, TSE, First Sect.) Contact person:

Munehiro Sekine, General Manager,

Investor Relations Office, Treasury Department

(TEL: [phone])

Company Name: SDS Biotech K.K. President and Representative Director： Mitsuhiro Sagae

(Company Code: 4952, TSE, Second Sect.) Contact person:

Toshio Otsuka, Corporate Officer, General Manager, Corporate Service Division (TEL: [phone])

Notice Regarding Execution of Share Exchange Agreement for Idemitsu Kosan Co., Ltd. to Make SDS Biotech K.K. its Wholly-Owned Subsidiary (Simplified Share Exchange)

Idemitsu Kosan Co., Ltd. ("Idemitsu Kosan") and SDS Biotech K.K., a consolidated subsidiary of Idemitsu Kosan ("SDS Biotech"; together with Idemitsu Kosan, the "Companies"), hereby announce that the Companies adopted a resolution at their respective board of directors meetings held today to execute a share exchange for cash consideration through which Idemitsu Kosan will become the wholly-owning parent company in the share exchange and SDS Biotech will become a wholly-owned subsidiary in the share exchange (the "Share Exchange") and that the Companies entered into a share exchange agreement (the "Share Exchange Agreement") today, as stated below.

The Share Exchange is planned to take effect on August 2, 2021; pursuant to the procedures for a simplified share exchange set forth in the main text of Article 796, paragraph (2) of the Companies Act (Act No. 86 of 2005, as amended; the same applies hereinafter), Idemitsu Kosan will not obtain approval via a resolution of its shareholders meeting, whereas SDS Biotech will obtain the approval of its annual shareholders meeting to be held on June 23, 2021. Furthermore, the Share Exchange is subject to approval via a resolution of the annual shareholders meeting of SDS Biotech above.

If the above condition is satisfied and the Share Exchange is conducted, then, prior to the effective date of the Share Exchange, the common stock of SDS Biotech (the "SDS Biotech Stock") will be delisted from the Second Section of Tokyo Stock Exchange, Inc. (the "Tokyo Stock Exchange") as of July 29, 2021 (the last trading day being July 28, 2021).

1. Purpose of Making SDS Biotech a Wholly-Owned Subsidiary through the Share Exchange

1. Background and Purpose behind Deciding to Conduct the Share Exchange

Idemitsu Kosan was founded by Mr. Sazo Idemitsu as "Idemitsu Shokai" in Moji City, Fukuoka Prefecture (currently, Moji Ward, Kitakyushu City) in June 1911 and started selling petroleum mainly in the Kanmon area. In March 1940, Mr. Sazo Idemitsu established Idemitsu Kosan Co., Ltd. in Tokyo, and Idemitsu Shokai merged with Idemitsu Kosan Co., Ltd. in November 1947. Idemitsu Kosan was listed on the First Section of the Tokyo Stock Exchange in October 2006 and still remains listed thereon. As of March 31, 2021, Idemitsu Kosan, its 155 subsidiaries, including SDS Biotech, and 61 affiliates (collectively, the "Idemitsu Kosan Group") engage in (i) fuel oil business, (ii) basic chemicals business, (iii) functional materials business,

(iv) power and renewable energy business, (v) resources business, and (iv) other businesses.

Furthermore, in the review of its mid-term management plan (FY 2020 to FY 2022) published today, Idemitsu Kosan again disclosed its "Vision for 2030" and its basic policy and management goals eying 2030. Aiming to become a resilient company that can flexibly adapt no matter what environmental changes occur amid the circumstances in which the mid-tolong-term management environment is extremely unpredictable, Idemitsu Kosan, in order to promote converting its business portfolio into a forward-looking one, intends to shift its fossil fuels and basic chemicals business to a next-generation fuels and material circular business, while continuing to aim to enhance the corporate value of the Idemitsu Kosan Group by further expanding its functional materials business, including the agri-bio business, among other efforts.

As for the business environment surrounding Idemitsu Kosan, with substantial changes occurring due to, inter alia, the shift toward decarbonization accelerated by the Japanese government's declaration of carbon- neutrality by 2050, in addition to the expansion of the COVID-19 pandemic, Idemitsu Kosan is promoting initiatives for sustainable growth based on the recognition that responding to these changes in demand will be an issue for Idemitsu Kosan, whose main business is energy. Furthermore, in the functional materials business encompassing the Agricultural Biotechnology Products Business Division, which strives to develop and market biological agrochemicals/stock-raising materials derived from natural products, Idemitsu Kosan has been promoting new agent development for biological agrochemicals, demand for which is expected to increase further in the future, and various other undertakings in cooperation with SDS Biotech in an attempt to further expand its business areas, in order to respond to the global increase in awareness of the safety of agricultural chemicals and to changes in the business environment due to the reorganization of the entire industry, as stated below. Under those changes in the business environment, Idemitsu Kosan believes that it is necessary for Idemitsu Kosan to look at its group as a whole from a larger perspective and rethink what the group as a whole should be to continue to achieve sustainable growth over a medium to long term in the future and that examination and implementation of specific measures to address these issues have become pressing tasks.

SDS Biotech is a company whose predecessor is Showa Diamond Chemical K.K., which was established in October 1968 as a joint venture between Showa Denko K.K. and Diamond Shamrock (in the U.S.). It changed its trade name to its current name SDS Biotech K.K. in June 1983. In August 1984, it registered its stock on the over-the-counter market of the Japan Securities Dealers Association as an over-the- counter issue. Thereafter, after going through a transition in the form of a capital and business alliance, in March 2005, it separated and became independent from Showa Denko K.K., which was its parent company at that time, by way of a management buyout, with the assistance of MH Capital Partners II, L.P.. Thereafter, SDS Biotech was listed on the JASDAQ Securities Exchange in December 2008, and then it was listed on the Second Section of the Tokyo Stock Exchange in December 2009. In June 2011, it became a consolidated subsidiary of Idemitsu Kosan through a tender offer by Idemitsu Kosan.

SDS Biotech conducts business activities based on its management philosophy of contributing to society by providing products that are based on research and development and that take food safety and environmental protection into consideration. Specifically, SDS Biotech has been committing itself to enhancing its corporate value in its belief that its mission is to maintain good relationships with all of its stakeholders (shareholders, trading partners, employees, etc.) as well as to contribute to society, as a core company in the pesticides business of the Idemitsu Kosan Group, by defining "food safety and security" and "growing food demand" as its keywords.

Under the global business environment surrounding SDS Biotech, the need for pesticides, as one of the technologies for productivity improvement and stable production, has been expanding over the medium to long term due to an increasing demand for food in emerging countries against a backdrop of population increases and economic growth. However, emergence of pesticide-resistant diseases, pests, and weeds and reducing environmental impacts have recently been pointed out as issues. SDS Biotech believes that, particularly in developing countries as well, agricultural efficiency and labor savings will increase and awareness of agricultural chemical safety will rise; accordingly, the market's needs for agricultural chemicals will change markedly. On the other hand, in Japan, due to the aging of farmers, the lack of successors, and the decrease in cultivated land, major changes are taking place in the nature of agriculture such as the number of large-scale farmers and corporations increasing in line with the promotion of various measures and progress

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in the consolidation of operating cultivated land under the government-led "Program for Strengthening Agricultural Competitiveness (Note)". SDS Biotech presumes that the importance of safer pesticides will gradually increase in Japan as well against the backdrop of, among others, (i) concerns about the low food self-sufficiency rate and (ii) domestic agricultural products being favored again due to increasing awareness of consumers regarding food safety and security; however, cultivated acreage is assumed to remain on approximately the same level as the current level over the medium term, and it is difficult to expect that the domestic pesticides market will expand. Although SDS Biotech has engaged in diverse research and development aimed at establishing sustainable weed- and pest-control technologies, including development of effective products and new active ingredients, spread of the fungicide Daconil and the paddy herbicide Benzobicyclon, as effective ways to counter fungicide-resistant pathogen and herbicide-resistant weeds, and development of biological pesticides with an even lower environmental impact, it believes that it is necessary to endeavor to reform its business portfolio and strengthen its corporate structure under the recognition that given these changes in the business environment, it has been becoming even more important than ever before not only to expand its chemical pesticides business, including its current mainstay products, but also to strengthen and deepen its whole business of plant protection products, including biological pesticides, over the medium to long term.

(Note) The "Program for Strengthening Agricultural Competitiveness" is intended to realize reinforcement of competiveness of domestic agriculture, through such efforts as lowering the price of production materials and reforming the distribution/processing structure of agricultural products, in order to create an environment in which farmers can freely develop their businesses and to resolve structural problems that cannot be solved by farmers' efforts.

Since SDS Biotech became a consolidated subsidiary of Idemitsu Kosan in June 2011 through a tender offer conducted by Idemitsu Kosan, Idemitsu Kosan and SDS Biotech have cooperated to expand their respective businesses and have jointly undertaken numerous efforts to strengthen the cooperative relationship between the Companies in the pesticides business, such as by cooperatively conducting, among others, execution of measures, research and development, participation in overseas capital, as well as sales and personnel exchanges.

In proceeding with formulating its group strategy since the middle of November 2019, Idemitsu Kosan came to the realization that it is necessary to review what the group as a whole should be in order to continue to achieve sustainable growth over the medium to long term, and thereby respond to the global increase in awareness of the safety of agricultural chemicals and to changes in the business environment due to the reorganization of the entire industry, as stated above. Based on that realization, Idemitsu Kosan, by looking back upon the efforts made by Idemitsu Kosan and SDS Biotech to date and the results thereof, came to the following realization: through these efforts with SDS Biotech, Idemitsu Kosan was able to make certain achievements, such as the Companies' joint development of a new active substance for a biological pesticide and the expansion of product sales of SDS Biotech through sales subsidiaries of Idemitsu Kosan; however, it cannot be denied that there has been a limit to the cooperation promoted by the Companies, each being an independent listed company. Specifically, Idemitsu Kosan reached the conclusion that there have been significant reasons for the limit to the cooperation between the Companies, such as the fact that in the current situation, there are limitations on the formulation of business strategies whose top priority is the enhancement of the corporate value of the Idemitsu Kosan Group as a whole, through the agile mutual utilization of know- how, personnel, development strategies, and financial power with SDS Biotech, and to prompt decision making for the implementation of cooperative measures between the Companies, as well as the fact that it is necessary to consider the interests of minority shareholders when implementing development investment, in SDS Biotech from the mid- to long-term perspective. Based on this understanding, Idemitsu Kosan reached the decision that it will be beneficial, not only for the enhancement of SDS Biotech's corporate value but also for the enhancement of the corporate value of the Idemitsu Kosan Group as a whole, to make SDS Biotech a wholly-owned subsidiary of Idemitsu Kosan and to thereby strengthen the cooperation between the Companies, through the agile mutual utilization of the Companies' know-how, personnel, development strategies, and financial power, while also fully utilizing the solid business foundation of SDS Biotech, being an agricultural chemical company in operation for 50 years, whose business range from development, manufacture, sales, and

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cooperation with other companies, as well as the positive features of SDS Biotech's management and structure. Therefore, in the middle of February 2021, Idemitsu Kosan made an initial request to SDS Biotech for the commencement of consultations toward making SDS Biotech its wholly-owned subsidiary.

SDS Biotech believes that although it is necessary to make investments to proactively engage in research and development as well as to strengthen its whole line of plant protection products in order to reform its business portfolio and strengthen its corporate structure, there will be a limit to the implementation of these measures by SDS Biotech alone. This is because if SDS Biotech attempts to implement these measures alone, there will be cases, depending on the required size of investment, where their realization will be difficult due to SDS Biotech's company size. In addition, even if investments are made, expected results may not always be achievable, whereas there is a possibility of, among others, financial conditions deteriorating on a short- term basis, which may result in SDS Biotech failing to obtain a positive evaluation from the capital market and accordingly may result in a lower stock price for SDS Biotech. This means that the possibility cannot be denied that the above attempt may result in disadvantages for the minority shareholders of SDS Biotech. Given such situation, SDS Biotech has been thinking that in order to consistently enhance its corporate value within the business environment surrounding SDS Biotech as described above, it is useful to further mutually utilize networks, know-how, and resources with Idemitsu Kosan, towards the creation of new products for plant protection products and the expansion of business fields. However, SDS Biotech believed that although the Companies, under a certain cooperative relationship, have jointly undertaken numerous efforts, such as by cooperatively conducting, among others, execution of measures, research and development, participation in overseas capital, as well as sales and personnel exchanges, ever since SDS Biotech became a consolidated subsidiary of Idemitsu Kosan through a tender offer by Idemitsu Kosan in June 2011, there has been a limit to mutual utilization of the Companies' management resources from the perspective of the need for SDS Biotech to independently operate as a listed company (even if the Companies comprise a parent company and its subsidiary) and also from the perspective of the necessity of considering the interests of minority shareholders. In particular, SDS Biotech has also acknowledged that if SDS Biotech intends to further mutually utilize management resources with Idemitsu Kosan, then partly due to the said limit arising from their capital relationship, there will be a certain limitation on proceeding with measures to proactively reform its business portfolio and strengthen its corporate structure. This is because while it is necessary for this kind of mutual utilization with Idemitsu Kosan to allocate, between the parent company and its subsidiary, the profits and expenses from the mutual utilization from a mid- to long-term perspective, it will also be necessary to allocate profits and expenses between the parent company and its subsidiary giving consideration to the return of profit to the minority shareholders of SDS Biotech. Under those circumstances, in the middle of February 2021, SDS Biotech received a request for consultation from Idemitsu Kosan towards making SDS Biotech its wholly- owned subsidiary. SDS Biotech considered this request in good faith, and as a result, reached the decision that by SDS Biotech becoming a wholly-owned subsidiary of Idemitsu Kosan, it will be possible, on its own initiative, to proceed with reforming its business portfolio and strengthening its corporate structure, without being subject to the limitation above, and that it may be possible to consistently enhance its corporate value within the business environment surrounding SDS Biotech as described above. From the above, SDS Biotech reached the decision that it will be worth specifically considering itself becoming a wholly-owned subsidiary of Idemitsu Kosan in light of the possibility that it will be beneficial for the enhancement of SDS Biotech's corporate value, and moreover, the enhancement of the corporate value of the Idemitsu Kosan Group as a whole, and decided to continue with the consultation to specifically consider becoming a wholly-owned subsidiary of Idemitsu Kosan.

After that, as stated in "3 (1) Grounds and Reasons for Particulars of the Allotment," Idemitsu Kosan appointed an external professional and proceeded with further consideration, and in late February 2021, it formally proposed making SDS Biotech its wholly-owned subsidiary through the Share Exchange to SDS Biotech. Thereafter, as stated in "3 (1) Grounds and Reasons for Particulars of the Allotment," SDS Biotech also prepared a structure for the consideration, such as by appointing an external professional, and Idemitsu Kosan and SDS Biotech both conducted further consideration regarding the Share Exchange, and simultaneously, they conducted repeated consultations and negotiations.

As a result, Idemitsu Kosan became convinced that by making SDS Biotech its wholly-owned subsidiary through the Share Exchange, (i) the capital relationships between the Companies will be deepened and (ii) in the future, by shifting to a structure of integrated management with the Agricultural Biotechnology

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Products Business Division of Idemitsu Kosan that is based, as the nucleus, on SDS Biotech, SDS Biotech will be able to implement its management in a manner perfectly aligned with the Idemitsu Kosan Group's business strategies; (i) and (ii) above will make it possible to more actively inject management resources, and will largely contribute to the resolution of various issues in SDS Biotech; through this, the enhancement of SDS Biotech's corporate value will be realized, and simultaneously, the mutual relationship between the agri- bio business within Idemitsu Kosan's functional materials business and SDS Biotech will be strengthened, thereby forming a stable foundation that accelerates the development of the pesticides business of the Idemitsu Kosan Group as a whole, and will eventually enhance the corporate value of the Idemitsu Kosan Group as a whole in a form in line with "converting the business portfolio into a forward-looking one," Idemitsu Kosan's basic policy.

On the other hand, SDS Biotech reached the following decisions: (i) if it becomes a wholly-owned subsidiary of Idemitsu Kosan, a structure will be developed where it may receive more active support from Idemitsu Kosan because limitations arising from capital relationships will cease to exist, and then, SDS Biotech may expect the following: financial support from Idemitsu Kosan regarding SDS Biotech's investments for reinforcing its whole line of plant protection products; utilization, in SDS Biotech's research and development, of advance technologies which Idemitsu Kosan has been working on; the expansion of its business related to biological pesticides; and the utilization of Idemitsu Kosan's corporate functions, among other things, all of which have been recognized by SDS Biotech as future issues; (ii) furthermore, by resolving the problem regarding conflicts of interest, arising due to the existence of minority shareholders, the creation of short-term profit will not necessarily be required, and therefore it will be possible to actively execute a development strategy from a more mid- to long-term perspective (in other words, to execute specific measures towards proactively reforming its business portfolio and strengthening its corporate structure); (iii) in addition, it can be presumed that SDS Biotech's corporate value could be more consistently enhanced amid a harsh business environment through the combination of (a) the costs required for SDS Biotech to maintain its share listing being lowered, and (b) such capital becoming able to be allocated to development investment; and furthermore, (iv) although disadvantages of SDS Biotech becoming a wholly-owned subsidiary of Idemitsu Kosan and thus becoming privatized are generally expected, such as SDS Biotech ceasing to be able to procure funds in the capital market and certain adverse impact on SDS Biotech's recruitment activities and the like due to losing its prestige as a listed company, taking into account (a) that SDS Biotech's financial foundation can be reinforced because, among others, financial assistance from Idemitsu Kosan can be expected by SDS Biotech as its wholly-owned subsidiary and (b) that the adverse impact on SDS Biotech's recruitment activities and the like is not expected to be significant because there will be no change in the fact that SDS Biotech is an Idemitsu Kosan Group company whose parent company is Idemitsu Kosan, a listed company, it can be presumed that SDS Biotech will be able to enjoy more advantages than disadvantages therefrom by becoming a wholly-owned subsidiary of Idemitsu Kosan.

As a result, Idemitsu Kosan and SDS Biotech reached the conclusion that it would be the best option, from the perspective of enhancing the corporate value of the Companies, for SDS Biotech to become a wholly- owned subsidiary of Idemitsu Kosan through the Share Exchange.

1. Management Policy After Share Exchange

As a management policy after the implementation of the Share Exchange, Idemitsu Kosan and SDS Biotech will strive to enhance their corporate value by basically maintaining SDS Biotech's brand, trade name, and management execution structure at present, and by also mutually and flexibly utilizing the Companies' respective know-how, human resources, development strategies, and financial ability, among other things, thereby strengthening the business platform of the agri-bio business of the Idemitsu Kosan Group.

Although not yet decided, by completing the management integration of SDS Biotech, as a nucleus, and the Agricultural Biotechnology Products Business Division of Idemitsu Kosan within FY 2022, the Companies plan to strengthen prompt and accurate decision-making system of the Idemitsu Kosan Group.

Specifically, Idemitsu Kosan and SDS Biotech plan to expand the scale of research and development in the plant protection field towards creation of new active substances, as well as to put efforts into business fields, such as highly-functional fertilizers, that contribute to increasing food production, by implementing a group-wide integrated management of the following businesses and actively injecting management resources

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