This English translation is provided for the information purpose only.

If any discrepancy arises

between this translation and the Japanese original, the Japanese original shall prevail

Convocation Notice for Bondholders Meeting ofCovalent Materials Corporation 1st Series Unsecured Bond(with Inter-Bond Pari Passu Clause)
To Bondholders:
September 14, 2012
Covalent Materials Corporation

The bondholders are hereby invited to attend the bondholders meeting (the “Bondholders Meeting”)
in person or by proxy, to be held in relation to the 1st Series Unsecured Bond (with the inter-bondpari passu clause) (ISIN code: JP330135A829) (the “Bond”) of Covalent Materials Corporation (the“Company”) under the provisions of Article 717 of the Companies Act as follows.

If thebondholders are unable to attend the Bondholders Meeting, the bondholders may exercise theirvoting rights in written form submitted in advance.

1.

Date and time of the Bondholders Meeting
October 5, 2012 (Friday) at 2:00 PM (Tokyo time)2.

Venue for the Bondholders Meeting”Basho” room, U-Port 6th floor
4-13, Nishi-Gotanda 8-chome, Shinagawa-ku, Tokyo

3.

Purpose of the Bondholders Meeting
Partial amendment to the Terms and Conditions of the Bond

(1) Substance of the Proposal
The Terms and Conditions of the Bond shall be amended as follows:(The underlined parts indicate the portions to be amended)
Current

Amended

4. Interest Rate

4. Interest Rate

2.87% per annum

2.87% per annum on or before February 18,
2013, and 4.25% per annum on or afterFebruary 19, 2013

6. Redemption Price

6. Redemption Price

JPY 100 per face value of JPY 100 of EachThe redemption price shall be as provided inBondCondition 8.

8. Methods and Date of Redemption

8. Methods and Date of Redemption

The Company shall redeem all(1) The Company shall redeem part of theprincipal amount of the Bonds on February

principal amount of the Bonds, in the18, 2013 (the “Maturity Date”).

aggregate amount to the nearest but not

(1)

(2)

If the date on which the Bonds shallexceeding the amount whichever isbe redeemed falls on a bank holiday, thehigher

Bonds shall be redeemed on the businessdeducting (x) the aggregate amount paid

day preceding such Redemption Date.

or to be paid for the Bonds agreed to be(3)The Bonds may be purchased andpurchased by the Company during thecancelled at any time on or after the dateperiod from October 15, 2012 tofollowing

unless

December 31, 2012 in accordance withotherwise provided by the Book-Entry

the purchase offer for all holders of theInstitution set forth in Condition 20.

Bonds (the “Bondholders”) at thethePaymentDate,obtained

byeitherof(i)purchase price of JPY 76 per face valueof JPY 100 of Each Bond with themaximum purchase amount of JPY
28,000,000,000 in the face value
(y)

JPY

21,300,000,000,orfrom(ii)deducting (x) JPY 3,000,000,000 andthe aggregate purchase price of theBonds through the purchase offer as set
forth above (excluding the amountalready paid) from (y) the aggregate
amount of the cash and deposit andliquidity securities as shown on theconsolidated balance sheet of theCompany as of December 31, 2012, at
JPY 100 per face value of JPY 100 ofEach Bond.

The redemption amountper Each Bond shall be the maximum

JPY 1,000,000 or an integral multiple
thereof as calculated by the aboveformula.

The Company shall make apublic notice of the redemption amountper Each Bond by January 31, 2013.
(2) With regard to the remaining principal
amount of the Bonds, the total amountshall be redeemed at JPY 110 per
remaining principal amount of JPY 100of Each Bond on February 18, 2017.
However, with regard to the early
redemption and the redemption at theoption of the Bondholders, the amountto be redeemed shall be as provided inthis Condition, Item (3) and Item (4).
(3) The Company may redeem, before
maturity, all or part of the principal
amount of the then outstanding Bonds,
along with the payment of accrued
interest up to the relevant redemption
date at the price per face value of JPY
100 of Each Bond set forth in Item (5)below on any interest payment datecommencing on February 18, 2013 bymaking a three weeks prior publicnotice.
(4) Redemption at the option of theBondholders(a)

If (i) the aggregate number of votingrights

registeredon

theCompany’s

shareholders’ register of Carlyle Japan
Partners

II,L.P.,International

Partners

Co-Investment

II

Carlyle
II,
A,

Japan

L.P.,

CJP

L.P.,

CJP

Co-Investment II B, L.P., Unison CapitalPartners II, (F), L.P., Unison CapitalPartners II, L.P., UC Mask Investors 2 (F)L.P., UC Mask Investors L.P. and UC
Mask Investors (F), L.P. falls below
two-thirds of the aggregate number ofvoting rights of all shareholders of theCompany, or (ii) the Company sells ortransfers all or substantially all of assets orbusiness or suspends all or substantially allof its business (except in connection withor in pursuance of a merger, consolidation,
amalgamation or other corporate or group
reorganization

andthesurviving

corporation, the continuing corporation or
the corporation formed thereby effectively
assumes the entire obligations of theCompany under the Bonds) (collectively,the “Change of Control Event”), thebondholders may, at any time thereafter,
request the Company to repay the Bonds atany time thereafter.

In this case, theCompany shall redeem all of the Bonds
requested for redemption at the price perface value of JPY 100 of Each Bond set
forth in Item (5) below within 30 days
after the effective date of such request.
(b)

The Company shall make a public

notice of the occurrence of the Change ofControl Event and other matters theCompany deems necessary in accordancewith Condition 15 and notify the same tothe Paying Agent set forth in Condition 13
promptly after the occurrence of the
Change of Control Event.
(c)

A Bondholder

whointends

torequest redemption shall notify its request
for redemption to the Company inaccordance with the reasonable procedure
set forth by the Company.
(d)

The request for redemption of theBonds shall become effective when thenotice of matters required therefor reaches
the Company.
(5) The redemption amount when theCompany redeems the Bonds pursuant
to Items (3) and (4) shall be thefollowing amount per face value of JPY100 of Each Bond:(i) JPY 101.25 during the period fromFebruary 19, 2013 to August 18, 2013(ii) JPY 102.50 during the period from
August 19, 2013 to February 18, 2014(iii) JPY 103.75 during the period fromFebruary 19, 2014 to August 18, 2014(iv) JPY 105 during the period from August19, 2014 to February 18, 2015(v) JPY 106.25 during the period fromFebruary 19, 2015 to August 18, 2015(vi) JPY 107.50 during the period from
August 19, 2015 to February 18, 2016(vii) JPY 108.75 during the period fromFebruary 19, 2016 to August 18, 2016(ix) JPY 110 during the period from August19, 2016 to February 18, 2017
(6) When the Bonds are redeemed partiallypursuant to Item (1) or (3), Each Bondshall be redeemed partially on pro-ratabasis.
(7) If the date on which the Bonds shall beredeemed (including the date on which
the Bonds are redeemed before maturityin accordance with Item (3) above, the“Redemption Date”) falls on a bankholiday, the Bonds shall be redeemed onthebusinessday

precedingsuch

Redemption Date.
(8) The Bonds may be purchased andcancelled at any time on or after thedate following the Payment Date, unlessotherwise provided by the Book-Entry
Institution set forth in Condition 20.

11. Financial Covenants

11. Financial Covenants(1) Negative Pledge Provisions(2)(1) Negative Pledge Provisions

In case the Company create any

So long as any of the Bonds remains

security interest on the unsecured

outstanding, the Company shall not, andbonds issued or to be issued by theshall procure that no subsidiary of theCompany in Japan other than theCompany will, create any security

Bonds, the Company must accord orinterest other than the Permitted Liensprocure to accord the Bonds the sameuponsecurity as is granted

in respect ofsubsidiary’s assets, present or future, tosuch bonds in accordance with thesecure any debt or debts (as defined

Act on Trust for Secured Bonds,below) without in any such case at theunless such bonds carries a provisionsame time according or procuring to be

as to alteration into secured bonds

accorded to the Bonds the same security

as defined in item (2) below.

as is granted to in respect of such debt

Other provisions

or debts, provided however that theThe Bonds do not have any provision

Company may create security interest

as to alteration into secured bonds

for the borrowing for the purpose ofand other financial covenants.

The

procurement of funds for the fullprovision as to alteration into secured

redemption of the Bonds. In addition,

bonds means a provision setting forth

the Company or its subsidiaries may

thatcreatecreate security interest upon any of thesecurity interest on the bonds or may

properties or assets of the Company orcreate security interest on the bonds

its subsidiaries to secure any debt orat any time for the purpose to waive

debts in an aggregate amount at any

thetime outstanding not greater than JPY

theCompany

acceleration

triggering

event

shallduetocertain

regardingthefinancial indices of the Company,

theCompany’s

3,000,000,000.
Permitted liens are;

or

such

including the covenants to maintaina.

security interest for the purpose

certain level of net assets or that theof borrowing from Japan Bank

Company.

For International Cooperation(against exported goods) andsuch provision ofsecurity

interest is required by laws orregulationsb.

securityinterestfortheborrowing for the acquisitionof property and upon suchpropertyc.

security interest existing on
property at the time of its
acquisition (including throughmerger, share exchange, sharetransfer,corporate

splitorother corporate reorganization
proceedings)
d.

security interest on property of
any subsidiary of the Company
existing at the time when such
subsidiary became a subsidiaryof the Companye.

security interest existing as of
September 13, 2012 (the debt
securedbysuch

security

interest is hereinafter referred
to as the “Existing SecuredDebt”)
f.

security interest on borrowings
as renewal or refinancing ofthe Existing Secured Debt orPermitted

Liens,including

replacement of assets for lieng.

security interest for the sellersof raw materials and othersecurity interest necessary forthe ordinary course of businessIn this Item (1), Condition 11, the “debtor debts” means bonds, loan or otherindebtedness.
(2) Sinking Fund(i) 75% of Excess Cash Flow (as definedbelow) for 6 months ending on the end ofeach annual or semi-annual fiscal period
starting with the period ending September
30, 2013 (if the amount obtained bydeducting 75% of Excess Cash Flow fromCash and Deposit on consolidated basis on
theendofsuch

fiscalperiodorsemi-annual fiscal period is less than JPY
3,000,000,000, the amount obtained bydeducting JPY 3,000,000,000 from such
Cash and Deposit, and if Cash and Deposit
is not more than JPY 3,000,000,000, zero)and (ii) 90% of net proceeds (the amountthe amount
repaid for the debt secured by therelevant assets and reasonable fees andobtainedbydeducting

costs from sales price) from any asset sales(other than those assets subject to any
Permitted Liens, sale of assets during theordinary

courseofbusinessoftheCompany, or the sales the net proceeds ofwhich is less than ¥100,000,000) will
sweep into the Sinking Fund for the benefitof the holders or creditors of the Bonds
and Existing Secured Debt within 7
business days after the date of theannouncement of financial information forthe period ending such dates (in the case of(i)) or actual receipt of such proceeds (inthe case of (ii)), as the case may be.

Allmoney swept into the Sinking Fund will be
set aside and kept in a bank account of theCompany

separatelyopenedforthepurpose therefor, and shall be maintainedwith a financial institution with which theCompany does not have credit facilities,
except that, while the Existing SecuredDebt

remains

outstanding,thebankaccount for the Sinking Fund may be
maintained with the creditor of theExisting Secured Debt.

The Company

shall not use such money swept into theSinking Fund for any purpose other thanredemption or repayment of the Bonds orthe Existing Secured Debt. The deposit
may be pledged in favor of the creditor ofthe Existing Secured Debt, while theExisting Secured Debt remains outstanding
an only in the amount of the Existing
Secured Debt.
In this Item (2), Condition 11, “ExcessCashFlow”

means

theamountobtained by deducting Purchases ofTangible and Intangible Fixed Assets,
Cash Interest Expense, mandatory
principal

repayments

onsecuredindebtedness, Cash Taxes,

Changesin Trade Receivables, Changes inInventory Assets and Changes inAccountPayables(increaseordecrease in Trade Receivables andInventory Assets shall be deducted oradded, respectively, and decrease or
increase in Account Payables shall bededucted or added, respectively) fromthe total amount of Operating Income,Depreciation and Amortization basedon annual or semiannual consolidated
financial statements of the Company(if the obtained amount is less thanzero, the amount shall be zero).
(3) Restricted payments
So long as any of the Bonds remains
outstanding, the Company shall not
pay the principal nor interest of any
debt subordinated to the Bonds,acquireany(including

preferredacquisition

sharesbytheCompany of the shares pursuant to theexercise of the rights to request theCompanytodistributeacquireshares)

ordividends

toits

shareholders.
(4) Restriction on indebtedness

So long as any of the Bonds
remains outstanding, the Company
shall not incur any debt (bonds andany indebtedness for borrowedmoney) other than those related toPermitted Liens

14. Covenants in respect of Event of Default(2) TheCompany

defaults

inthe14. Covenants in respect of Event of Default(2) TheCompany

defaults

intheperformance or observance of theperformance or observance of theprovisions of Condition 11, item (1).

provisions of Condition 11, and suchdefault is not remedied within 30 days;（New）

22. Regular Reports to the Bondholders(1) Thecompany

shall

publishthesemi-annual financial statements byposting to the Company’s website nolater than 45 days after the close of eachhalf fiscal year.
(2) The Company shall announce theannual financial statements by posting
to the Company’s website no later than
60 days after the close of each fiscalyear.
(3) The Company shall hold annual andsemi-annual earnings conference assoon as practicable, but in no event nolater than 10 days after the posting offinancial statements on the Company’swebsite.

Conference calls will include

an earnings presentation given byrelevant Company management andquestion

time

Bondholders.

thereafterfortheThe Company shallmake reasonable effort to make itpossiblefor

theBondholders

toparticipate in the conference throughtelephone conference system.

(2) Reason for the Proposal
The Company has completed a business transfer of its silicon wafer business to Sino-American
Silicon Products Inc., (Taiwan) on March 29, 2012, and is currently concentrating its corporate
resources on the highly competitive ceramics business, and focusing on establishing corporate
structures that ensure profitability and lead to continuous growth as a specialized ceramics
manufacturer.

However, as at the end of March 2012, the Company did not hold sufficient

funds to cover the redemption amount of 53.3 billion yen of the outstanding Bonds by theredemption date of February 18, 2013.

Therefore, there was a situation that could lead to

doubts in the Company’s status as a going concern at the end of the latest fiscal year.
situation has not changed to this day.

ThisIn order to overcome this situation, the Company has

implemented structural reforms, led by the radical review of unprofitable businesses, special
invitations for early retirement, a reduction of fixed charges, and seeking to enhance theCompany’s profitability and stabilize its cash management including funding.

However, theCompany is facing difficulty in funding the redemption amounts of all of the outstanding Bonds
by the redemption date in February 2013.

The financial condition of the Company must bepromptly stabilized and doubts in the Company’s status as a going concern need to be promptly
dispelled, in order for the Company to continue business.

For this purpose, the Company has

examined various options including partial extension of maturity date of the Bonds.

Based onthese examinations, the Company, with the intention to provide the bondholders who desire to
recover their investment at an early date with an opportunity to sell the Bonds, made a decision
to make an offer to purchase the Bonds at a discount price of 76 million yen per 100 million
yen principle amount of the Bond, up to approximately 21.3 billion yen, the excess cash flow
amount after deduction of the required working capital, on or before the end of December 2012,
on the condition, among other things, that the agendum is approved at the bondholder meetingand that the court’s approval is obtained.

In addition to the above, the Company determined topropose to make a partial redemption of the Bonds on February 18, 2013 in the amountobtained by deducting the aggregate amount of the purchase price for the Bond to be acquired
through the Purchase Offer from (i) 21.3 billion yen or (ii) the aggregate amount of cash deposit
and liquidity securities as at the end of December 2012 (excluding the amount already paid for
the Purchase Offer) minus 3 billion yen, whichever is higher, and extension of the maturity date
for the remaining amount to February 18, 2017.

Simultaneously, in order to obtain thebondholders understanding for the extension of the maturity date, the Company determined topropose amendments to the conditions of the Bonds, including increase in the annual interest
rate of the Bond effective on and after February 19, 2013 from 2.87% to 4.25% andsemi-annual increase of the redemption amount effective on and after February 19, 2013 at anannual rate of 2.5%.

(3) Supplementary Disclosurei.

Please send Certification under Article 86 (the document certifying matters set forth in eachof the Items of Article 68, Paragraph 3 of the Act on Book-Entry Transfer of Company
Bonds, Shares, etc. (the “Book-Entry Transfer Act”) delivered by an immediate accountmanagement institution or book-entry institution under Article 86, Paragraph 3 of theaforementioned Act) of the Bond to the Company, to the addressee below, as required by theprovisions of Article 86, Paragraph 2 of the Book-Entry Transfer Act, no later thanSeptember 27, 2012 (Thursday), one week prior to the date of the Bondholders Meeting, ifthe bondholders wish to vote at the Bondholders Meeting. In addition, Certification underArticle 86, submitted by the bondholders, shall be held temporarily by the Company until
the end of the Bondholders Meeting. Please present an original “receipt” delivered by theCompany to the bondholders in return for the receipt of Certification under Article 86, when

attending the Bondholders Meeting.
ii.

Please make sure to send the voting form to the addressee below no later than 5:00 PM(Tokyo time) on October 4, 2012 (Thursday), if the bondholders wish to exercise theirvoting rights in writing.

In the case where the bondholders exercise their voting rights

more than once to the same proposal and such voting differ from each other, then the last
exercise of the voting rights shall be treated as effective.
iii.

If no directions for “approval”, “rejection” or “diverse exercise” is given to the voting form,
such voting form will be treated as “approval”.

iv.

Please contact the addressee below for the reference materials and the voting form for theBondholders Meeting.

(Note)

Below is the presentation and delivery address for Certification of Article 86 and thevoting form, and contact regarding the Bondholders Meeting:

6-3, Osaki 1-chome, Shinagawa-ku, Tokyo 141-0032, Japan
Accounting & Finance, Finance Group,
Covalent Materials Corporation(TEL+81-3-5437-8405

E-mailIR-contact@covalent.co.jp)