Lanfan Medical: Remuneration Management System for Directors and Senior Management
Remuneration Management System for Directors and Senior Management
Chapter 1 General Provisions
Article 1 In order to further improve the salary management of directors and senior managers of Lanfan Medical Co., Ltd. (hereinafter referred to as the "Company"), establish a scientific and effective incentive and restraint mechanism, effectively stimulate the enthusiasm and creativity of the company's directors and senior managers, improve the company's operating and management efficiency, and promote the company's health, sustainability and stability. This system is formulated in accordance with the provisions of the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Code of Governance of Listed Companies and other relevant laws, administrative regulations, departmental rules, and the Articles of Association of Lansail Medical Co., Ltd. (hereinafter referred to as the "Articles of Association") and based on the actual situation of the company.
Article 2 This system applies to company directors and senior managers specified in the Articles of Association.
Article 3 The company’s remuneration management system for directors and senior managers shall adhere to the following principles:
(1) Fairness principle: reflect the principle that the income level is consistent with the company's size and performance, while taking into account the external salary level;
(2) The principle of unity of responsibilities, rights and interests: reflects the consistency of remuneration with position value, responsibilities and obligations;
(3) Long-term development principle: reflect that remuneration is consistent with the company's sustainable and healthy development goals;
(4) The principle of equal emphasis on incentives and constraints: embodying the linkage between salary payment and assessment, rewards and punishments, and the company’s incentive mechanism.
Chapter 2 Management Organization
Article 4 The Remuneration and Assessment Committee of the Company’s Board of Directors is the functional agency responsible for the remuneration management of directors and senior managers and performs the following responsibilities:
(1) Responsible for formulating remuneration standards, distribution mechanisms, payment and stop-payment recourse arrangements for directors and senior managers, and clarifying the basis and specific composition of remuneration;
(2) Responsible for reviewing the performance of directors and senior managers and conducting performance appraisals;
(3) Responsible for supervising the implementation of the company’s compensation system;
(4) Responsible for evaluating existing problems in the company’s compensation system and making suggestions for improvement;
(5) Other salary management matters stipulated or authorized by the board of directors.
Article 5 The remuneration plan for directors shall be determined by the shareholders’ meeting and shall be disclosed. When the board of directors or the remuneration and appraisal committee of the board of directors evaluates an individual director or discusses his or her remuneration, the director shall recuse himself or herself.
The senior management remuneration plan is approved by the board of directors, explained to the shareholders' meeting, and fully disclosed.
If a company suffers a loss, it shall specifically explain whether changes in the remuneration of directors and senior managers meet performance linkage requirements at each stage of the review of the remuneration of directors and senior managers.
Article 6 The company’s human resources, finance and other relevant departments shall cooperate with the remuneration and assessment committee of the board of directors in the specific implementation of the remuneration plan for the company’s directors and senior managers.
Article 7 The total salary of directors and senior managers refers to the total labor remuneration paid directly to directors and senior managers by the company within a certain period (including basic salary, performance pay, medium and long-term incentive income and various allowances, subsidies, etc.)
Article 8 Total salary determination mechanism: The total salary of directors and senior managers shall be determined based on the total salary of the previous year and combined with the company’s operating performance of the year, personal performance of duties, and the company’s future development plan and other factors.
Chapter 3 Salary Standards
Article 9 In principle, the remuneration of the company's directors and senior managers consists of basic salary, performance remuneration and medium- and long-term incentive income. In principle, the proportion of performance remuneration shall not be less than 50% of the total basic remuneration and performance remuneration.
Article 10 Based on the nature of work of directors and senior managers, as well as the responsibilities, risks, pressures, etc. they bear, the following remuneration standards are determined:
(1) Independent directors: A fixed allowance system is implemented, and the allowance standards are reviewed by the shareholders’ meeting. The reasonable expenses required by the company's independent directors to perform their duties shall be borne by the company;
(2) Non-independent directors (including employee directors): receive remuneration based on the management positions they hold and no longer receive director remuneration separately. The remuneration of non-independent directors who do not serve in the company shall be reviewed by the shareholders' meeting.
(3) Senior managers: receive remuneration based on the specific management positions they hold in the company. The remuneration of senior managers consists of three parts: basic salary, performance compensation and medium- and long-term incentive income. Basic remuneration is determined based on industry salary levels, job responsibilities and performance of duties, and is paid on a monthly basis; performance remuneration is linked to the company's annual operating performance, and comprehensively determined based on the annual performance evaluation of senior managers; mid- and long-term incentive income is linked to mid- and long-term assessment and evaluation results, and the company formulates incentive plans based on actual conditions as a reward for mid- and long-term operating performance and contributions.
The company should determine a certain proportion of performance-based remuneration for directors and senior managers to be paid after annual report disclosure and performance evaluation. Performance evaluation should be based on audited financial data.
Article 11 The company may implement equity incentive plans, employee stock ownership plans, etc. to motivate directors and senior managers. The main principles of incentives are based on the fulfillment of corresponding job responsibilities, the completion of annual business goals, personal performance indicators, and other related indicators. Relevant matters shall be implemented in accordance with relevant laws, regulations, Articles of Association and other company systems.
Article 12 The company will reasonably determine the salary distribution ratio of directors, senior managers and ordinary employees based on factors such as industry level, development strategy, job value, etc., promote the salary distribution to tilt towards key positions, production front lines and urgently needed high-level and highly skilled talents, and promote the improvement of the salary level of ordinary employees.
Article 13 If a company turns from profit to loss or its losses expand compared with the previous fiscal year, the average performance-based remuneration of the company's directors and senior managers shall decrease accordingly. If it does not decrease, the reasons shall be disclosed.
Chapter 4 Salary Payment and Stop Payment Recourse
Article 14 The remuneration of directors and senior management personnel shall be paid in accordance with the company's internal remuneration-related systems. The allowances of independent directors shall be paid every six months.
Article 15 The remuneration and allowances of the company's directors and senior managers are all pre-tax amounts. After the company withholds and pays personal income tax in accordance with relevant national regulations, the remaining portion is paid to the individual. The company's withholding and payment items include but are not limited to the following:
(1) Withholding and payment of personal income tax;
(2) Various social insurance fees and other portions borne by individuals;
(3) Other amounts stipulated by the state or the company should be borne by the individual.
Article 16 If a company's directors or senior managers leave office due to reasons such as change of term, re-election, resignation during the term, etc., their remuneration will be calculated and paid based on their actual term of office and actual performance.
Article 17 The company may establish a deferred payment mechanism for performance remuneration of directors and senior managers based on industry characteristics, business models and other factors, and clarify the specific circumstances, relevant personnel, deferral ratios and implementation arrangements applicable to the deferred payment.
Article 18 When any of the following circumstances occurs to a company's directors or senior managers during their term of office, the remuneration and assessment committee of the board of directors shall consider and decide whether to deduct or not pay the current year's salary to the specific company's directors or senior managers, or to recover part or all of the salary paid:
(1) Being publicly condemned or declared unsuitable by the stock exchange;
(2) Being administratively punished by the securities regulatory authority of the State Council due to major violations of laws and regulations;
(3) Other circumstances in which the company's board of directors or the remuneration and assessment committee determine that there has been a serious violation of relevant government or company regulations, or that has caused significant losses to the company.
Article 19 When a company retrospectively restates its financial report due to financial fraud or other misstatements, it shall promptly reassess the performance compensation and medium- and long-term incentive income of directors and senior managers and recover the excess payment accordingly.
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 20 The remuneration (allowances) of the company's directors and senior managers shall be consistent with market development, match the company's operating performance and personal performance, and coordinate with the company's sustainable development.
Article 21 The basis for adjusting the remuneration (allowance) of the company’s directors and senior managers is:
(1) Salary increase level in the same industry;
(2) Inflation level;
(3) The company’s operating performance;
(4) Adjustment of the company’s development strategy or organizational structure;
(5) Personal position adjustment or job change.
Chapter 6 Supplementary Provisions
Article 22 Matters not covered in this system shall be implemented in accordance with the relevant national laws, regulations, normative documents and the "Articles of Association"; if this system conflicts with laws, regulations, normative documents promulgated by the country in the future or the "Articles of Association" modified through legal procedures, the provisions of the relevant national laws, regulations, normative documents and the "Articles of Association" shall be implemented.
Article 23 The company’s board of directors is responsible for formulating, interpreting and revising this system.
Article 24 This system shall be implemented from the date of review and approval by the company's shareholders' meeting, and the same shall apply when it is revised.
Blue Sail Medical Co., Ltd.
board of directors
April 27, 2026