Hualan Biotechnology: Directors and senior management personnel’s salary and allowance management system
Hualan Bioengineering Co., Ltd.
Remuneration and allowance management system for directors and senior managers
Chapter 1 General Provisions
Article 1 In order to objectively reflect the efforts of the directors and senior managers of Hualan Bioengineering Co., Ltd. (hereinafter referred to as the "Company") as well as the risks and responsibilities assumed in the company's decision-making process, we will effectively encourage the company's directors and senior managers to actively participate in decision-making, management and supervision, and improve the company's business management. This system is formulated in accordance with the Company Law of the People's Republic of China, the Code of Governance of Listed Companies and other laws, administrative regulations and the Articles of Association, and in light of the actual situation of the company.
Article 2 The term “directors and senior managers” as mentioned in this system refers to all directors, general managers, deputy general managers, financial directors, board secretaries and other senior managers appointed with the approval of the shareholders’ meeting or the board of directors, hereafter collectively referred to as “directors and senior managers”.
Chapter 2 Total Salary Determination Mechanism and Salary Management Organization
Article 3 The company’s total wage determination mechanism is: based on the development strategy, annual business goals, economic benefits, comprehensive consideration of labor productivity, labor cost input-output rate, market benchmarking of employee wage levels, etc., the total wage is reasonably determined.
Article 4 The Remuneration and Assessment Committee of the Company's Board of Directors, under the authorization of the Board of Directors, is responsible for researching and formulating assessment standards for directors and senior managers, conducting assessments and making recommendations, studying and reviewing remuneration policies and plans for directors and senior managers, and organizing performance evaluations of directors and senior managers.
Article 5 The remuneration plan for directors and senior managers shall be formulated by the remuneration and assessment committee of the board of directors, and the basis and specific composition of the remuneration shall be clearly defined. The remuneration plan for directors shall be decided by the shareholders' meeting and shall be disclosed. When the board of directors or the remuneration and appraisal committee evaluates an individual director or discusses his remuneration, the director shall recuse himself. The remuneration plan for senior management personnel shall be reviewed by the Remuneration and Appraisal Committee of the Board of Directors, submitted to the Board of Directors for approval, explained to the shareholders’ meeting, and fully disclosed.
Article 6 The Remuneration and Assessment Committee of the Board of Directors shall supervise the implementation of the remuneration system. The company's human resources department and financial department assist the remuneration and assessment committee of the board of directors and are responsible for the specific implementation of the remuneration plan and the daily payment management of remuneration.
Chapter 3 Salary Structure and Performance Evaluation
Article 7 The remuneration standards for directors and senior managers are as follows:
Independent directors receive a fixed director allowance of RMB 100,000 per year; apart from this, they do not enjoy other remuneration, social security benefits, etc. from the company; the independent directors’ travel expenses for attending the company’s board of directors and shareholders’ meetings and other expenses required for exercising their powers in accordance with the Articles of Association shall be borne by the company. Independent directors do not participate in the company's internal performance appraisals linked to salary.
Non-independent directors who serve in the company receive corresponding remuneration based on the specific positions or positions they hold in the company, and do not receive additional director allowances; the remuneration of the company's non-independent directors and senior managers consists of basic salary, performance remuneration and medium- and long-term incentive income, among which the proportion of performance remuneration is in principle not less than 50% of the total basic remuneration and performance remuneration. Basic remuneration is determined based on industry remuneration levels, job responsibilities and performance of duties; performance remuneration is performance-oriented as the core and is linked to the company's profit completion rate and target responsibility system assessment results; the company can adopt equity incentive plans, employee stock ownership plans and other mid- and long-term incentive measures for senior managers, as well as other special incentives, bonuses or awards based on the company's actual situation. The specific plan will be formulated separately in accordance with relevant national laws and regulations. Non-independent directors and senior managers of the company who hold multiple positions in the company and subsidiaries shall receive remuneration based on the principle of higher salary rather than lower salary, without double counting.
The determination and payment of performance-based remuneration to the company’s non-independent directors and senior managers should be based on performance evaluation. A certain proportion of performance-based remuneration for directors and senior managers is paid after the disclosure of the annual report and performance evaluation. The performance evaluation should be based on audited financial data and the completion of annual goals.
The performance evaluation of non-independent directors and senior managers is organized by the Remuneration and Appraisal Committee, and the company can entrust a third party to conduct performance evaluation.
The performance evaluation of independent directors is carried out through self-evaluation, mutual evaluation and other methods.
Chapter 4 Salary Payment and Stop Payment Recourse
Article 8 The salary and allowances paid by the company are pre-tax amounts, and the company will withhold and pay personal income tax uniformly.
Article 9 The remuneration or allowances of directors and senior managers shall be calculated and paid based on the actual time of their approved appointment. If a company director or senior managers leave office due to reasons such as change of term, re-election, resignation during the term, etc., the remuneration or allowances shall be calculated and paid based on their actual term of office.
Article 10 The travel expenses incurred by the company’s directors to attend the company’s board of directors and shareholders’ meetings, as well as the reasonable expenses required to exercise their powers in accordance with the Articles of Association, shall be reimbursed by the company according to the facts.
Article 11 If any of the following circumstances occurs to the company’s directors and senior managers during their term of office, the unpaid performance remuneration for the current year will not be paid from the date of the relevant circumstances:
(1) Being publicly censured or deemed unsuitable by the stock exchange;
(2) Being administratively punished or taking market entry ban measures by the China Securities Regulatory Commission and its dispatched agencies due to serious violations of laws and regulations;
(3) Those who are prohibited from serving as directors or senior managers of a company as stipulated in the Company Law of the People's Republic of China;
(4) The company's board of directors determines that the company's relevant regulations have been seriously violated.
Article 12 When a company retrospectively restates its financial report due to financial fraud or other misstatements, it shall promptly re-evaluate the performance-based remuneration of directors and senior managers and accordingly recover the excess payment and make up for the underpayment.
If a company's directors or senior managers violate their obligations and cause losses to the company, or are at fault for financial fraud, misappropriation of funds, illegal guarantees and other illegal activities, the company shall reduce or stop paying unpaid performance remuneration and medium- and long-term incentive income according to the severity of the case, and recover all or part of the performance remuneration and medium- and long-term incentive income that have been paid during the period when the relevant behavior occurred.
Chapter 5 Salary Adjustment
Article 13 The remuneration system should serve the company's business development strategy and be adjusted accordingly as the company's business development changes to meet the needs of the company's further development. The remuneration and assessment committee of the company's board of directors can adjust the remuneration of directors and senior managers based on factors such as industry level and company operating performance.
Article 14 The basis for adjusting the remuneration of directors and senior managers is:
(1) Changes in salary levels in the region and industry. Every year, through market salary reports or public salary data, we collect salary data in the same industry and region as a reference for the company's salary adjustments;
(2) Social price growth level. Companies should adjust wages with reference to social price growth levels to ensure that their actual purchasing power levels remain at a reasonable level;
(3) The company’s revenue scale, profit and growth;
(4) Adjustment of the company’s development strategy or organizational structure;
(5) Adjustment of personal performance, rank and responsibilities, etc.
Chapter 6 Supplementary Provisions
Article 15 In order to promote directors and senior managers to fully exercise their rights and perform their duties, the company may purchase insurance related to performance protection for them upon review and approval by the board of directors.
Article 16 Matters not covered in this management system shall be implemented in accordance with relevant national laws, administrative regulations, normative documents and the relevant provisions of the "Articles of Association"; if this management system is inconsistent with the relevant provisions of the latest relevant national laws, administrative regulations and normative documents, the relevant provisions shall prevail.
Article 17 This management system will take effect after being reviewed and approved by the company's shareholders' meeting, and the same applies to modifications.
Hualan Bioengineering Co., Ltd.
March 2026