Note: This document has been translated from a part of the Japanese original for reference purposes only. In
the event of any discrepancy between this translated document and the Japanese original, the original shallprevail. The Company assumes no responsibility for this translation or for direct, indirect or any other formsof damages arising from the translation.
(Stock Exchange Code 6461)
June 9, 2017
To Shareholders with Voting Rights:
Akira Yamamoto
President
NIPPON PISTON RING CO., LTD.
Head Office: 5-12-10,
Honmachi-Higashi, Chuo-ku,
Saitama City, Saitama
NOTICE OF CONVOCATION OF
THE 123RD ANNUAL GENERAL MEETING OF SHAREHOLDERS
Dear Shareholders:
We would like to express our appreciation for your continued support and patronage.
You are cordially invited to attend the 123rd Annual General Meeting of Shareholders of NIPPON PISTON
RING CO., LTD. (the “Company”). The meeting will be held for the purposes as described below.
If you are unable to attend the meeting, you can exercise your voting rights in writing. Please review
the attached Reference Documents for the General Meeting of Shareholders, indicate your vote for oragainst the proposal on the enclosed Voting Rights Exercise Form and return it so that it is received by
5:30 p.m. on Wednesday, June 28, 2017, Japan time.

1. Date and Time:Thursday, June 29, 2017 at 10:00 a.m. Japan time

2. Place:

2F Hall, NPR Yono Building (the Company’s Head Office Building) located at
5-12-10, Honmachi-Higashi, Chuo-ku, Saitama City, Saitama, Japan

3. Meeting Agenda:
Matters to be reported: 1. The Business Report, Consolidated Financial Statements for the Company’s
121st Fiscal Year (April 1, 2016 - March 31, 2017) and results of audits by
the Accounting Auditor and the Audit & Supervisory Board of theConsolidated Financial Statements
2. Non-consolidated Financial Statements for the Company’s 121st Fiscal Year
(April 1, 2016 - March 31, 2017)
Proposals to be resolved:
Appropriation of Surplus
Proposal 1:
Election of 4 Directors
Proposal 2:
Election of 1 Audit & Supervisory Board Member
Proposal 3:
Continuation of Countermeasures against the Action of Large-scale Purchase of
Proposal 4:
Shares in NIPPON PISTON RING CO., LTD. (Anti-takeover Measures)

-1-






When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception
desk. In order to save resources, please bring this Notice and the Business Report for the Company’s
121st Fiscal Year with you to the meeting.
Notes to Consolidated Financial Statements and Notes to Non-consolidated Financial Statements areposted on the Company’s website (http://www.npr.co.jp/) in accordance with provisions of laws andregulations as well as Article 15 of the Company’s Articles of Incorporation and therefore are notprovided in the Business Report for the Company’s 121st Fiscal Year. The Notes to Consolidated
Financial Statements and Notes to Non-consolidated Financial Statements, as well as the Appendix to
the Reported Matters, are subject to audit by the Accounting Auditor and the Audit & Supervisory
Board.
Should the Reference Documents for the General Meeting of Shareholders, the Business Report, theNon-consolidated Financial Statements and Consolidated Financial Statements require revisions, therevised versions will be posted on the Company’s website (http://www.npr.co.jp/).

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Reference Documents for the General Meeting of Shareholders

Proposal 1:
Appropriation of Surplus
It is proposed that the surplus be appropriated as indicated below.
1.

Matters Concerning Year-End Dividend
It is proposed that the year-end dividend for the 121st fiscal year be as follows, taking into
consideration matters such as business results for the fiscal year under review and future businessdevelopment.
(1) Type of dividend
Cash(2) Matters concerning allotment of property to be distributed and total amount
65 yen per share of the Company’s common stock
In this case, the total amount of dividend shall be 534,630,395 yen.
(3) Effective date of dividend of surplus
June 30, 20172.

Matters Concerning Other Appropriation of Surplus
Not applicable.

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Proposal 2:

Election of 4 Directors

The terms of office of Messrs. Teruo Takahashi, Masaaki Fujita, Masaaki Kawahashi, and Ryosuke
Nagumo will expire at the conclusion of this General Meeting of Shareholders. Accordingly, the election of
4 Directors is proposed.
The candidates are as follows.
No.

Name
(Date of birth)

Past experience, positions, responsibilities,
and significant concurrent positions
April 1981
April 2005
June 2006

1

2

Joined the Company
General Manager, Product Engineering Department II
Executive Officer with Development Division,
General Manager, Product Engineering Department II,
Development Division
April 2009
Executive Officer and General Manager, Product Engineering
Department II, in charge of Technical Planning Department,
Product Engineering Department I, Product Engineering
Department II, and Research and Development Department
Director and General Manager, Product Engineering
June 2009
Department II, in charge of Technical Planning Department,
Product Engineering Department I, Product Engineering
Department II, and Research and Development Department
Teruo Takahashi
February 2014
Director, in charge of Technical Planning Department, Product(February 10, 1959)
Engineering Department I, Product Engineering Department II,
and New Product Business Promotion Department[Reappointment]
April 2015
Director, in charge of Tochigi Plant, Technical Planning
Department, Product Engineering Department I, ProductEngineering Department II, Research and Development
Department, and New Product Business Promotion Department
June 2016
Managing Director, in charge of Technical Planning
Department, Product Engineering Department I, ProductEngineering Department II, Research and Development
Department, and New Product Business Promotion Department(to present)[Significant concurrent positions]
・President, NPR FUKUSHIMA WORKS CO., LTD.
・Director, NPR of America, Inc.
・Director, NPR AUTO PARTS MANUFACTURING INDIA PRIVATE LIMITED
Joined the Company
April 1984
General Manager, Corporate Planning Department
April 2005
President, NPR of America, Inc.
June 2006
Operating Officer, the Company
July 2012
President, NPR of America, Inc.
Masaaki Fujita
June 2013
Director, General Manager, Corporate Planning Department,(May 30, 1961)
in charge of Corporate Planning Department and Overseas
Operation Control Department
Director, General Manager, Corporate Planning Department,[Reappointment]
April 2015
in charge of Corporate Planning Department, Accounting and
Finance Department and Overseas Operation Control
Department (to present)[Significant concurrent positions]・Director, NPR IWATE CO., Ltd.

Number ofshares of theCompany held

-4-

4,200

3,784

No.

Name
(Date of birth)

Past experience, positions, responsibilities,
and significant concurrent positions
April 1975
April 1997

3

4

Joined RHYTHM WATCH CO., LTD.
General Manager, FV Sales, Domestic Sales Division,
RHYTHM WATCH CO., LTD.
January 2003
General Manager, Tokyo Branch, Domestic Sales Division,
RHYTHM WATCH CO., LTD.
Ryosuke Nagumo
June 2005
Director, General Manager, Tokyo Branch, Domestic Sales(November 13, 1953)
Division, RHYTHM WATCH CO., LTD.
January 2006
Director, General Manager, Sales Headquarters, Domestic Sales[Reappointment]
Division, RHYTHM WATCH CO., LTD.
June 2007
President and Representative Director, RHYTHM KAIHATSU
CO., LTD.
June 2014
Part-time Advisor, RHYTHM WATCH CO., LTD.
June 2015
Director, the Company (to present)
April 1977
Joined Japan Development Bank (present Development Bank ofJapan, Inc.)
March 2001
Head of Treasury Department, Development Bank of Japan, Inc.
June 2003
Head of Project Finance Department, Development Bank ofJapan, Inc.
June 2005
Head of Credit Analysis Department, Development Bank of
Kan Ishii
Japan, Inc.
(February 11, 1954)
June 2006
Branch Manager, Kyushu Branch, Development Bank of Japan,
Inc.
[New appointment]
June 2008
Executive Director, Development Bank of Japan, Inc.
October 2008
Managing Executive Officer, Development Bank of Japan, Inc.
January 2010
Deputy Trustee, Japan Airlines Co., Ltd.
August 2011
President and C.E.O., Fukuoka Jisho Co., Ltd.
August 2015
Vice Chairman/Director, Fukuoka Jisho Co., Ltd. (to present)[Significant concurrent positions]・Vice Chairman/Director, Fukuoka Jisho Co., Ltd.

Number ofshares of theCompany held

2000(Notes)1. There are no special interests between the candidates for Directors and the Company.
2. Messrs. Ryosuke Nagumo and Kan Ishii are candidates for Outside Directors. The Company reported Mr. Nagumo as
an independent director as stipulated by Tokyo Stock Exchange, Inc. If the reappointment of Mr. Nagumo is approved
as proposed, he will continue to be reported as an independent director. If the election of Mr. Ishii is approved as
proposed, he is scheduled to be reported to Tokyo Stock Exchange, Inc. as an independent director.
3. Number of years since appointment in the case where a candidate for Director is an incumbent Outside Director
Mr. Ryosuke Nagumo is currently a part-time Director of the Company and his term of office as an Outside Director
will be two years at the conclusion of this Annual General Meeting of Shareholders.
4. Limited liability agreement with the candidates for Directors
The Company has entered into an agreement with Mr. Ryosuke Nagumo in accordance with Article 427, Paragraph 1of the Companies Act to limit his liability pursuant to Article 423, Paragraph 1 of the Companies Act. If Mr. Nagumo
is elected, the Company intends to continue the limited liability agreement with him. The maximum amount of liability
pursuant to the agreement is the amount stipulated by laws and regulations.
If Mr. Kan Ishii is elected, the Company intends to enter into a similar agreement with him.

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Proposal 3:

Election of 1 Audit & Supervisory Board Member

The term of office of Audit & Supervisory Board Member Mr. Yasuo Suzuki will expire at theconclusion of this Annual General Meeting of Shareholders. Accordingly, the election of 1 Audit &Supervisory Board Member is proposed.
The Audit& Supervisory Board has previously given its approval to this proposal.
The candidate is as follows.
Name(Date of birth)Iwao Hiraishi(December 26, 1958)[New appointment]

Past experience, positions
and significant concurrent positions
April 1982
April 2003
June 2006
January 2010
April 2013

July 2013

July 2015

Joined the Company
General Manager, International Business Promotion Department
General Manager, Product Engineering Department I
General Manager, Technical Planning Department
General Manager, Technical Planning Department,
General Manager, Modular Design Promotion Office, Technical
Planning Department
Operating Officer, General Manager, Technical Planning
Department,
General Manager, Modular Design Promotion Office, Technical
Planning Department
Operating Officer, the Company (to present)
President, NPR of Europe GmbH. (to present)(Note)
1. There are no special interests between Mr. Iwao Hiraishi and the Company.

-6-

Number ofshares of theCompany held

1,877

Proposal 4:

Continuation of Countermeasures against the Action of Large-scale Purchase of
Shares in NIPPON PISTON RING CO., LTD.
(Anti-takeover Measures)

NIPPON PISTON RING CO., LTD. (the “Company”) first introduced “the Countermeasures against the
Action of Large-scale Purchase of the Company’s Shares (Anti-takeover Measures)” with the approval of thestockholders at the 114th Annual General Meeting of Stockholders held on June 27, 2008, and received
approval for the continuation following a partial revision pursuant to a resolution of the 120th Annual
General Meeting of Stockholders held on June 27, 2014, (hereinafter the updated countermeasures shall bereferred to as the “Current Plan”). However, the effective term of the Current Plan will expire at the close ofthis Annual General Meeting of Stockholders.
Since the update in 2011, we have continued to investigate matters including whether to continue theCurrent Plan based on changes in social and economic circumstances and the various trends and discussions
about the Anti-takeover Measures as one of our initiatives to ensure and enhance the corporate value of theCompany and the common interests of our stockholders. As a result of such investigations, a resolution was
passed at the Board of Director’s meeting held on May 29, 2017, to continue the Current Plan following apartial revision (hereinafter the revised countermeasures shall be referred to as “the Plan”) provided that it
receive the approval of stockholders at this Annual General Meeting of Stockholders. Consequently, werequest your approval for the continuation of the Plan. The main changes from the Current Plan to the Planare limited to formal amendments that do not include substantial changes in content.
1. Basic Policy Regarding Persons Who Control the Company’s Decisions on Financial and Business
Policies
The Company believes that it is desirable that persons who control the Company’s decisions on financial
and business matters have full understanding of the Company’s financial and business matters and of thesource of its corporate value, and are capable of ensuring and enhancing the corporate value of the Company
and the common interests of our stockholders in a continuous and sustainable manner.
Nevertheless, as a corporate entity listed on a financial instruments exchange, the Company respects thefree trading of the Company’s shares in the market and will not absolutely deny any action of large-scalepurchase by a specific party as long as it contributes to the corporate value of the Company and the common
interests of our stockholders. Additionally, we believe that a decision over whether to respond to a proposal
for the large-scale purchase of shares should ultimately be made based on the will of our stockholders.
However, recently in Japan’s capital market, there are some cases in which an action of large-scalepurchase of shares is undertaken “hostilely” without going through a sufficient discussion and agreement
process with the management team of the target company, and many such actions of large-scale purchases do
not contribute to the corporate value of the target company or the common interests of its stockholders.
These include: 1) those that may clearly harm the corporate value and common interests of stockholders inlight of the objectives of the takeover and/or management policies after the takeover; 2) those that may
effectively force stockholders to sell their shares; 3) those that do not provide sufficient time or information
for the Board of Directors or stockholders to consider the terms, etc. of the takeover or for the Board of
Directors to present an alternative proposal; and 4) those that require the target company to negotiate withthe purchaser in order to procure conditions more favorable than those originally proposed by the purchaser.
Furthermore, as outlined below in 2. (1) The Company’s Corporate Philosophy and Source of Corporate
Value, the Company’s business is based on the collaboration of various stakeholders, including our customer
companies, employees, and local communities. Creating a sound system that enables these stakeholders to
involve themselves in our business with confidence, and providing the stable supply of cutting-edge andhigh-quality services required globally are essential factors in raising the Company’s corporate value. Unlessthe person(s) undertaking the action of large-scale purchase of the Company’s shares can ensure and enhancethese corporate values in the medium- and long-term based on an understanding of the source of theCompany’s corporate value, it is possible that the corporate value of the Company and the common interestsof our stockholders will be damaged.
The Company believes that those who conduct such inappropriate large-scale purchases are notappropriate as persons who control the Company’s decisions on financial and business policies, and further
believes that it is necessary to ensure the corporate value of the Company and the common interests of ourstockholders by taking necessary and appropriate measures against large-scale purchases of shares by such
person(s)-7-2. Initiatives to Contribute to the Source of the Corporate Value of the Company and the Realizationof our Basic Policy(1) The Company’s Corporate Philosophy and Source of Corporate Value
The Company was founded in 1934 and, as a manufacturer of functional engine parts. We havepromoted technological development in materials, processing, and surface treatment technology. As theresult of product development in cylinder liners, camshafts and valve seat inserts, with a focus onpiston rings, and by establishing a global supply system, we have responded to the needs of ourdomestic and overseas customers, including automakers, in our aim to expand our business.
In our efforts to respond promptly and accurately to our customers’ needs, we have formulated our
corporate philosophy and specified our action guidelines as follows: “Let us build the prosperity of theCompany and of our lives by combining the ingenuity and efforts of each individual by strengthening
the collaboration between manufacturing, sales and technology.”<Corporate Philosophy>
1. Always act under the principle of “customer first.”
2. Respond flexibly to changes in the environment, secure appropriate profits, and give back tostockholders and other stakeholders.
3. Seek harmony with the society and maintain the position as a global comprehensive manufacturerof parts, to contribute to the human development.
4. Always strive for innovation and the better business performance, to build the prosperity of theCompany and improve the lives of the employees.
Fully recognizing our role as a global comprehensive manufacturer of parts while valuing
relationships with our customers, employees, and local communities, we attribute the growth of theCompany thus far to our stockholders’ support as well as the results of our efforts to establish a supply
system, improve quality, and make technological innovations, etc. based on the corporate philosophy
stated above. We believe this is the major source of the Company’s corporate value.
In addition, in order to enable many investors to invest in the Company on a long-term and ongoingbasis based on a good understanding of such source of the corporate value, we are working to enhance
the corporate value of the Company and the common interests of our stockholders from theperspectives of both promoting our mid-term management plan as outlined in (2) below andstrengthening our corporate governance as outlined in (3) below.
(2) Initiatives to Enhance Corporate Value
The Company is promoting sales activities striving for differentiation of its products to capture new
demands in response to the demands to lower fuel consumption and comply with emission regulations
backed by the rising global trend on environmental measures. In addition, we will promote cost cutting
activities on an ongoing basis by conducting revolutionary manufacturing (“monozukuri”) in our
mainstay products, upholding the basic policy of “establishing the foundation for Nippon Piston Ring
to prosper for 100 years — improve corporate value through marketing and innovation —,” we areworking to promote the following: 1) acquiring strategic models through differentiation of products; 2)
promotion of revolutionary manufacturing; 3) commercialization of new products (non-automobile
engine parts); 4) strengthening of human resources development to “achieve the world’s highest
quality; and 5) strengthening corporate social responsibility activities as priority issues to build atrusted corporation. As part of our priority issues, we are working to upgrade and improve theefficiency of production bases in North America, China, ASEAN, India, etc. for piston rings and valve
seat inserts, as well as strengthen and expand our sales capabilities. With regard to technologicaldevelopment, we are working on new product development in response to enhancement of thermal
efficiency and the next-generation automobiles with the environmental protection as a top priority issue,
as well as new product development with a focus on our proprietary technology toward expanding the
non-automobile engine business. Additionally, we have established CSR Promotion Committee and are
striving to strengthen our CSR activities.
(3) Strengthening Corporate Governance
The Company’s basic approach to corporate governance is to “improve management transparency,”“achieve accountability to stakeholders,” and “accelerate management,” and we are actively working
on strengthening them as one of our important management issues. Based on the aforementioned
corporate philosophy, we must respect the position of the various stakeholders surrounding the-8-Company, including our stockholders, customers, the local community and our employees, and fulfill
our obligations as a member of society with this in mind. We believe that these will be the driving
forces behind the Company’s lasting growth and will ultimately bring long-term benefits to ourstockholders. Specific initiatives are as follows:
1) Formulate the Compliance Action Guidelines and strive for their thorough implementation as well
as work toward compliance-centric management by establishing a Compliance Subcommittee.
2) In addition to having the Audit & Supervisory Board, consisting of five members including three
Outside Audit & Supervisory Board Members, monitor the execution of duties by Directors, in2013 the Company appointed an Outside Director in order to strengthen management oversightfunctions. Furthermore, in order to strengthen the mutual checking function of Directors, we aremaking efforts to appropriately manage the Board of Directors, Management Strategy Meetingsand Management Meetings, and are aiming to accelerate business execution and clarify
responsibilities.
In addition, we have established a Risk Management Subcommittee to create a system that will
respond accurately and promptly to the risks surrounding the Company.
3. Initiatives to Prevent Decisions on the Company’s Financial and Business Policies being Controlled
by Inappropriate Persons in Light of our Basic Policy(1) Objectives of the Introduction of the Plan
The Plan will be introduced in accordance with the basic policy outlined in the aforementioned 1.
Basic Policy Regarding Persons Who Control the Company’s Decisions on Financial and Business
Policies, with the objectives of ensuring and enhancing the corporate value of the Company and thecommon interests of our stockholders.
The Board of Directors believes that persons who conduct large-scale purchases that do notcontribute to the corporate value of the Company and the common interests of our stockholders areinappropriate as persons who control the Company’s decisions on financial and business policies, as
stipulated in the Basic Policy. In order to prevent decisions on the Company’s financial and business
policies being controlled by inappropriate persons, and to deter large-scale purchases that are contrary
to the corporate value of the Company and the common interests of our stockholders, the Company has
deemed it necessary to have a framework in place that enables the Board of Directors to present analternative proposal to our stockholders when a large-scale purchase of the Company’s shares is carriedout; secure the necessary information and time so that our stockholders can determine whether to
respond to a large-scale purchase; and conduct negotiations on behalf of our stockholders.
The overall flow, from the emergence of a large-scale purchaser to the invoking or non-invoking ofcountermeasures, is outlined in the flow chart in Appendix 1. However, as stated in the
below-mentioned 3. (2) 1) Details of Large-scale Purchase Rules, the Company may request a party(hereinafter, “Large-scale Purchaser”) who intends to execute the action of large-scale purchase, etc. of
the Company’s shares (defined in the below-mentioned 3. (2) 1) (a) Action of Large-scale Purchase, etc.
Subject to the Plan”) to comply with prescribed procedures (hereinafter, “Large-scale Purchase Rules),and may invoke certain countermeasures in order to prevent damage in the event that the action oflarge-scale purchase, etc. is not in accordance with said procedures or in the event that the details, terms
and methods of the Action of Large-scale Purchase, etc. are deemed to damage the corporate value of
the Company and the common interests of our stockholders. Additionally, in order to eliminate
arbitrary judgments by the Board of Directors, the invoking of countermeasures, etc. shall be based on
the objective judgment of an independent committee comprising only the Company’s Outside Directors,
Outside Audit & Supervisory Board Members or external experts who are independent from the
management team that executes the Company’s business operations (hereinafter, “Independent
Committee”).
(2) Details of the Plan
1) Details of Large-scale Purchase Rules
The Large-scale Purchase Rules set out by the Board of Directors refer to the following: i) The
Large-scale Purchaser presents the necessary and sufficient information concerning the Action of
Large-scale Purchase to the Board of Directors in advance; ii) The Board of Directors sets a
certain evaluation period then consults the Independent Committee, to carefully formulate and-9-announce their opinion as the Board of Directors, including the invoking of countermeasures; andiii) The Large-scale Purchaser commences said action of purchase after the procedures of i) andii).
Details are as described in (a) to (f) below.
(a) Action of Large-scale Purchase, etc. Subject to the Plan
The Plan shall be applied in the event of actions that fall under (i) or (ii) below or similaractions or when these proposals1 are made. (However, this excludes the actions separately
approved by the Board of Directors. The relevant action is hereinafter referred to as “Action of
Large-scale Purchase, etc.).
The Large-scale Purchaser who intends to conduct Action of Large-scale Purchase, etc. mustcomply with the Large-scale Purchase Rules stipulated in the Plan in advance.
(i) A purchase of with the share certificates, etc. issued by the Company2 resulting the holder3
or joint holders4 to have a holding ratio of share certificates, etc.5 of 20% or more. (Theholders and joint holders are hereinafter collectively referred to as “Specific Large-volume
Holders, etc.”)
1.
2.

3.

4.

5.

“Proposal” includes acts of solicitation toward third parties.
Refers to share certificates, etc. stipulated in Article 27-23, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan.
Refers to holders stipulated in Article 27-23, Paragraph 1 of the Financial Instruments and Exchange
Act of Japan, including parties deemed to be holders pursuant to Article 27-23, Paragraph 3 of theAct.
Refers to joint holders stipulated in Article 27-23, Paragraph 5 of the Financial Instruments andExchange Act of Japan, including parties deemed to be joint holders pursuant to Article 27-23,
Paragraph 6 of the Act.
Refers to the holding ratio of share certificates, etc. stipulated in Article 27-23, Paragraph 4 of the
Financial Instruments and Exchange Act of Japan. In this event, the number of share certificates, etc.
held by the holder or joint holders (refers to the number of share certificates, etc. held as stipulated
in the same Paragraph) shall also be added.
(ii)

A tender offer of the share certificates, etc. issued by the Company6 resulting the party
conducting the takeover bid7 to have a holding ratio of share certificates, etc.8 of 20% ormore together with a number of percentages of share certificates, etc. held by those parties
with a special relationship9. (The party conducting the takeover bid and those parties with a
special relationship are hereinafter collectively referred to as “Specific Large-volume
Purchasers, etc.”)(b) Submission of Letter of Intent and Provision of Information
Prior to conducting the Action of Large-scale Purchase, etc., the Large-scale Purchaser subject
to the Plan shall submit an outline (including specific names, addresses, jurisdiction overincorporation, the names of representatives and contact information within Japan) of theLarge-scale Purchaser and their group (including joint holders, parties with a special relationship,
and partners and other constituent members in the case of a fund), the objectives, method andoutline of the Action of Large-scale Purchase, etc. (including the type and amount of thepurchase consideration, the timing, feasibility, and the structure and legality of the transaction
overall), a pledge expressing the intent to comply with the Large-scale Purchase Rules
prescribed in the Plan and compensation wording in the event of a violation, in a written form
prescribed by the Company (hereinafter, “Letter of Intent”) to the Board of Directors. All such
documents must be written in Japanese (the same shall apply to the documents and information
to be submitted by the Large-scale Purchaser).
Within 10 working days10 of receipt of the Letter of Intent, the Board of Directors shall provide
the Large-scale Purchaser with a list of necessary information required to enable ourstockholders to make judgment and the Board of Directors to evaluate and investigate the Actionof Large-scale Purchase, etc. (hereinafter, “Necessary Information”), and shall request theprovision of this Necessary Information (hereinafter, “Necessary Information Provision
Procedures”).

- 10 -

6.

7.

8.

9.

10.

Refers to share certificates, etc. stipulated in Article 27-2, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan.
Refers to a takeover bid stipulated in Article 27-2, Paragraph 6 of the Financial Instruments andExchange Act of Japan.
Refers to the holding ratio of share certificates, etc. stipulated in Article 27-2, Paragraph 8 of the
Financial Instruments and Exchange Act of Japan.
Refers to parties with a special relationship stipulated in Article 27-2, Paragraph 7 of the Financial
Instruments and Exchange Act of Japan. However, regarding those listed in Article 27-2, Paragraph
7, Item 1, it excludes parties stipulated in Cabinet Office Ordinance Article 3, Paragraph 2
concerning the disclosure of a takeover bid for share certificates, etc. by parties other than theissuer.
Refers to days other than days specified in Article 1, Paragraph 1 of the Act on Holidays of
Administrative Organs.
The main points corresponding to the Necessary Information are as follows.
(i)

Details (including history, specific name, capital structure, financial condition, descriptionof business, and the existence, if any, and details of past transactions by the Large-scale
Purchaser similar to the Action of Large-scale Purchase, etc.) of the Large-scale Purchaser
and their group (including joint holders, parties with a special relationship, and partners
and other constituent members in the case of a fund)(ii) Objectives, method and outline of the Action of Large-scale Purchase, etc. (including thepresence of management participation intent, type and amount of the purchaseconsideration, the timing, feasibility, and the structure and legality of the transaction
overall)(iii) Basis for calculating the purchase consideration for the Company’s share certificates, etc.
(including the underlying facts and assumptions for the calculation, the calculation
method and the numerical data used in the calculation, the details and calculation basis ofany expected synergies created through a series of transactions relating to the Action of
Large-scale Purchase, etc., and information concerning the price of consideration in theevent that the Action of Large-scale Purchase, etc. is conducted with consideration otherthan cash)(iv) Procurement status of the funds required for the Action of Large-scale Purchase, etc.
(including the specific name of the provider of the funds (including substantial providers),
procurement method, and details of the transaction)(v) Timing of all past acquisitions of the Company’s share certificates, etc. by the Large-scale
Purchaser and the group, the number of acquisitions and the acquisition price for eachperiod, the timing of all past sales of the Company’s share certificates, etc. and thenumber of sales and sales price for each period(vi) Reasons for and details of any plan for further acquisition of the Company’s sharecertificates, etc. after the Action of Large-scale Purchase, etc.
(vii) In the event of any lease contracts, collateral contracts, resale contracts, purchasereservation contracts or any other important contracts or agreements (hereinafter,“collateral contracts, etc.”) concerning the Company’s share certificates, etc. that theLarge-scale Purchaser has already acquired or will acquire in the future, specific details of
the collateral contracts, etc., including the type of contract, the counterparty of thecontract, and the number of the Company’s share certificates, etc. that will be subject tothe contract(viii) The Company’s management policies, business plans, financial plans, capital policies,
dividend policies and asset utilization policies, etc. after the Action of Large-scale
Purchase, etc. (in the event that the Company’s share certificates, etc. are expected to bedelisted, the facts and reasons)(ix) Treatment and policies concerning the Company’s employees, business partners,
customers, local communities and other stakeholders after the purchase, etc.
(x) Other information the Board of Directors or the Independent Committee reasonably
deems necessary- 11 -

The Board of Directors may, as necessary, set a deadline for the Large-scale Purchaser toprovide this Necessary Information from the perspective of ensuring the prompt application of
the Large-scale Purchasing Rules. However, this deadline may be extended should theLarge-scale Purchaser request an extension based on reasonable reasons.
Additionally, in the event that, as the result of careful examination by the Board of Directors of
the information initially provided by the Large-scale Purchaser in accordance with theaforementioned list of Necessary Information, the Board of Directors reasonably deems that the
information is insufficient for the judgment of our stockholders and evaluation and investigationby the Board of Directors in light of the details and terms of the Action of Large-scale Purchase,etc., the Company may, upon setting a new deadline, request the Large-scale Purchaser toprovide additional information to receive the Necessary Information. With regard to the
judgment as to whether the Necessary Information provided by the Large-scale Purchaser issufficient, and whether the details and scope of the Necessary Information requested by the
Board of Directors are appropriate, the Board of Directors shall respect the advice andrecommendations of the Independent Committee to the maximum extent in order to eliminate
any arbitrary judgment.
In the event that the Company reasonably deems that the provision of information concerning
the Action of Large-scale Purchase, etc. by the Large-scale Purchaser is completed, theCompany shall provide the Large-scale Purchaser with a notification to this effect (hereinafter,“Notification of Completion of Information Provision”). Furthermore, notwithstanding a request
by the Board of Directors for the additional provision of Necessary Information, in the event that
the Large-scale Purchaser presents a reasonable explanation to the effect that the provision ofsaid information is difficult in part, the Board of Directors may recognize that the provision of
information by the Large-scale Purchaser has been completed even if the Necessary Information
requested by the Board of Directors has not been received, and may issue the Notification ofCompletion of Information Provision.
In the event that the Board of Directors receives a Letter of Intent from the Large-scale
Purchaser; in the event that the list of Necessary Information is sent to the Large-scale
Purchaser; or in the event that the provision of Necessary Information by the Large-scale
Purchaser is deemed to be complete, the Board of Directors shall make a prompt announcement
to this effect. Furthermore, the Board of Directors shall disclose to our stockholders theNecessary Information provided to the Board of Directors in a timely and appropriate manner inaccordance with applicable laws and regulations and the rules of the Financial Instruments
Exchange.
(c) Evaluation and Investigation by the Board of Directors
After issuing a Notification of Completion of Information Provision, the Board of Directors
shall set a period as in (i) and (ii) below, during which the Board of Directors evaluates,
investigates, negotiates, forms opinions, and formulates alternative proposals (hereinafter,“Board of Directors’ Investigation Period”) in accordance with the level of difficulty ofevaluating the Action of Large-scale Purchase, etc.
(i) A maximum period of 60 days (not including the first day) from the day the Company issues
the Notification of Completion of Information Provision if purchasing all of the Company’s
shares through a tender offer in exchange for cash (yen) only.
(ii) A maximum of 90 days (not including the first day) from the day the Company issues theNotification of Completion of Information Provision if the Action of Large-scale Purchase,
etc. is by other methods.
However, in the event that the Board of Directors fails to reach a judgment as to whether or not
to introduce countermeasures before the expiration of the Board of Directors’ Investigation
Period as noted in either of the aforementioned (i) or (ii) for such reasons that the Independent
Committee fails to make a recommendation within the Board of Directors’ Investigation Period
concerning the invoking or non-invoking of countermeasures as specified in the
below-mentioned 3. (2) 1) (d) Establishment of the Independent Committee andRecommendations to the Board of Directors, the Board of Directors may pass a resolution toextend the Board of Directors’ Investigation Period within a reasonable extent, upon consultation
with the Independent Committee. In this event, the Board of Directors shall notify theLarge-scale Purchaser of the specific period of extension and the reasons for deeming the- 12 -

extension necessary, and shall disclose the information to stockholders. Any such extension shall,in principle, be limited to a single extension for a maximum of 30 days.
During the Board of Directors’ Investigation Period, the Board of Directors shall adequately
evaluate and investigate Necessary Information provided while receiving advice andrecommendations from the Independent Committee as well as advice, as necessary, fromindependent external experts (financial advisors, certified public accountants, attorneys-at-law,and other experts), and shall carefully compile and publish their opinions as the Board of
Directors with regard to the Action of Large-scale Purchase, etc. Furthermore, the Board of
Directors may, as necessary, negotiate improvement of conditions related to the Action of
Large-scale Purchase, etc. with the Large-scale Purchaser and present alternative proposals to
the Company’s stockholders.
(d)Establishment of the Independent Committee and Recommendations to the Board of Directors
The Company will establish an Independent Committee as an independent organization toappropriately implement the Plan and prevent arbitrary decisions by the Board of Directors. The
Independent Committee shall consist of three or more members who shall be appointed fromamong the Company’s Outside Directors, Outside Audit & Supervisory Board Members, andexternal experts (including attorneys-at-law, certified public accountants, corporate managers
with a wealth of management experience, and academic experts) to ensure fair and neutral
judgments. An outline of the Independent Committee is as stated in Appendix 2, and the names
and past experience and positions of members of the Independent Committee are as stated inAppendix 3.
The Board of Directors shall promptly provide the Independent Committee with the Letter ofIntent and the Necessary Information submitted by the Large-scale Purchaser upon their receipt,
and shall promptly provide the Independent Committee with the results of the Board of
Directors’ evaluation and analysis of the Necessary Information and alternative proposals, etc.
upon their compilation. In addition, the Board of Directors shall consult with the Independent
Committee with regard to: (i) the adequacy of the Necessary Information provided by theLarge-scale Purchaser; (ii) the need, if any, for an extension of the Board of Directors’
Investigation Period; and (iii) the appropriateness, etc. of invoking countermeasures to the
Action of Large-scale Purchase, etc.
The Independent Committee shall, during the Board of Directors’ Investigation Period,
investigate the details of the Action of Large-scale Purchase, etc. from the perspective ofensuring and enhancing the corporate value of the Company and the common interests of ourstockholders, and shall make recommendations to the Board of Directors, including theappropriateness of invoking countermeasures (including recommendations with a reservationthat the intentions of stockholders should be confirmed), based on the below-mentioned 3. (2) 2)Countermeasures in the Event of Action of Large-scale Purchase, etc. In order to ensure that the
judgments of the Independent Committee contribute to the corporate value of the Company andthe common interests of our stockholders, the Independent Committee may, at the Company’s
expense, obtain advice from independent external experts (financial advisors, certified public
accountants, attorneys-at-law, and other experts) and request the attendance of the Company’s
Directors, Audit & Supervisory Board Members, and employees, etc. at meetings of the
Independence Committee to seek explanations in regard to necessary information. Additionally,in the event that the Independent Committee seeks the provision of investigative materials andany other information or consultation and negotiations through the Board of Directors, theLarge-scale Purchaser must respond promptly to such requests.
The Company shall promptly disclose information regarding the outline of therecommendations by the Independence Committee and any other matters deemed appropriate, in
accordance with the applicable laws and regulations and the rules of the Financial Instruments
Exchange.

(e) Resolutions by the Board of Directors, and General Meeting of Stockholders for Confirmation of
Stockholders’ Intentions
The Board of Directors shall give maximum respect to the aforementioned recommendationsof the Independence Committee and, as an entity under the Companies Act, pass a resolution
concerning the invoking or non-invoking of countermeasures against the Action of Large-scale
Purchase, etc.

- 13 -

However, when invoking countermeasures, in addition to carrying out the consultation
procedures with the Independence Committee, in the event that (i) the Board of Directors
determines, after considering whether or not it is necessary to carry out a substantive judgment
based on the details of the Act of Large-scale Purchase from the perspective of ensuring andenhancing the corporate value of the Company and the common interests of our stockholders, aswell as considering details of that Action of Large-scale Purchase, etc. and general matters suchas time extension, that it is practically feasible to confirm the intention of the Company’s
stockholders, and is appropriate in light of laws and ordinances and the duty of care of Directors,
or in the event that (ii) the Independent Committee makes a recommendation that the intentionsof stockholders should be confirmed with respect to invoking countermeasures against the
Action of Large-scale Purchase, etc., the Board of Directors shall convene a General Meeting ofStockholders (hereinafter, “General Meeting of Stockholders for Confirmation of Stockholders’Intentions”) upon deciding specific details of the countermeasures, and may confirm theintentions of stockholders with regard to the invoking of countermeasures.
In the event that the decision is made to hold a General Meeting of Stockholders for
Confirmation of Stockholders’ Intentions, the Board of Directors shall set a period of a
maximum of 60 days during which stockholders may adequately consider whether or not to
invoke countermeasures against the Plan (hereinafter, “Stockholders’ Investigation Period”), andshall hold a General Meeting of Stockholders for Confirmation of Stockholders’ Intentions
during the Stockholders’ Investigation Period. (It should be noted that the Board of Directors’
Investigation Period shall terminate at the same time as the commencement of the Stockholders’
Investigation Period. The Stockholders’ Investigation Period shall terminate at the conclusion of
the General Meeting of Stockholders for Confirmation of Stockholders’ Intentions.) In the eventthat a General Meeting of Stockholders for Confirmation of Stockholders’ Intentions is held, theBoard of Directors shall abide by the judgment of stockholders at the General Meeting ofStockholders for Confirmation of Stockholders’ Intentions. In the event that the Board of
Directors passes a resolution concerning the invoking or non-invoking of countermeasuresagainst the Action of Large-scale Purchase, etc., or in the event that the Board of Directors
passes a resolution to convene a General Meeting of Stockholders for Confirmation of
Stockholders’ Intentions, the Board of Directors shall promptly disclose information on theoutline of the resolution and other matters deemed appropriate by the Board of Directors.
(f) Action of Large-scale Purchase, etc. Waiting Period
The Large-scale Purchaser shall not execute the Action for Large-scale Purchase, etc. during
the period from the commencement of procedures relating to the Large-scale Purchase Rules
until the expiration of the Board of Directors’ Investigation Period (however, in the event thatthe aforementioned Stockholders’ Investigation Period is established, the period shall be until thetermination of the period combining the Board of Directors’ Investigation Period and theStockholders’ Investigation Period).
2) Countermeasures if the Action of Large-scale Purchase, etc. Takes Place(a) Conditions for invoking countermeasures(i)

When a Large-scale Purchaser does not comply with the Large-scale Purchase Rules
In the event that the Large-scale Purchaser does not comply with the Large-scale Purchase
Rules stipulated in the Plan, and it is not corrected within five working days after the Boardof Directors requests such correction in writing, in cases other than where it is obvious that
there is a necessity not to invoke countermeasures for the sake of ensuring and enhancing thecorporate value of the Company and the common interests of our stockholders and otherspecial circumstances, the Independent Committee shall, in principle, recommend that theBoard of Directors invoke countermeasures. (However, there may be cases when the
Independent Committee makes a recommendation with a reservation that the intentions ofstockholders should be confirmed.)
The Board of Directors shall decide to invoke the countermeasures with the utmost respect
for the recommendations of the Independent Committee. However, in the event that, in
addition to the recommendation procedures by the Independent Committee with regard to
invoking the countermeasures, a General Meeting of Stockholders for Confirmation of- 14 -

Stockholders’ Intentions is held as stipulated in the aforementioned 3. (2) 1) (e), the Board of
Directors shall decide to invoke countermeasures pursuant to the judgment of stockholders at
the General Meeting of Stockholders for Confirmation of Stockholders’ Intentions.
When determining whether or not the Large-scale Purchase Rules have been complied with,
it is necessary to adequately consider the circumstances of the Large-scale Purchaser within areasonable extent and not to certify that the Large-scale Purchase Rules have not been
complied with simply for the reason that the Necessary Information has not been provided in
part.
(ii) When a Large-scale Purchaser complies with the Large-scale Purchase Rules
In the event that the Large-scale Purchaser complies with the Large-scale Purchasing Rules,
the Independent Committee shall, in principle, recommend that the Board of Directors does
not invoke countermeasures against the Action for Large-scale Purchase, etc. In such cases,
whether or not to respond to the Action for Large-scale Purchase, etc. by the Large-scale
Purchaser should be decided by our stockholders upon consideration of the details of the
Action for Large-scale Purchase, etc. and the opinions and alternative proposals, etc.
regarding the Action for Large-scale Purchase, etc. presented by the Company.
However, even if the Large-scale Purchasing Rules are complied with, in the event that the
Independent Committee deems that the party demonstrates any of the following
circumstances from (a) to (i) and as a result would bring about a significant loss of thecorporate value of the Company and the common interests of our stockholders for reasons
such as causing damage from which it would be difficult to recover, the Independent
Committee shall recommend that the Board of Directors invoke countermeasures against the
Action for Large-scale Purchase, etc. (However, there may be cases when the Independent
Committee makes a recommendation with a reservation that the intentions of stockholders
should be confirmed.) In this event, the Board of Directors shall decide to invokecountermeasures in accordance with the same procedures as the abovementioned (i) in the
Event the Large-scale Purchaser does not comply with Large-scale Purchase Rules.
(a) When it is judged that the purchaser, despite having no intention of participating in the
management of the Company, is acquiring or is attempting to acquire the Company’s
share certificates, etc. for the purpose of raising the share price and forcing the Company
or a party affiliated to the Company to purchase the shares at a high price (so-called“greenmailer”)(b) When it is judged that the purchaser is acquiring the share certificates, etc. of theCompany for the purpose of temporarily controlling the management of the Company
and transferring intellectual property rights, expertise, confidential business informationand main business partners and customers that are necessary for the business
management of the Company to the Large-scale Purchaser or their group companies, etc.
(c) When it is judged that the purchaser is acquiring the Company’s share certificates, etc.
for the purpose of diverting the Company’s assets as security or funds for repayment ofdebts of the Large-scale Purchaser or their group companies, etc. after taking control ofthe management of the Company(d) When it is judged that the purchaser is acquiring the Company’s share certificates, etc.
for the purpose of temporarily controlling the Company to sell or otherwise dispose ofhigh value assets, including real estate and securities that are not related to our businessfor the time being, and using the profits from such disposal to pay a temporarily highdividend or for the purpose of using the opportunity of the rapid rise in share value
resulting from the temporarily high dividend to sell the Company’s share certificates, etc.
at a high price(e) When it is judged that the purchase conditions of the Company’s share certificates, etc.
proposed by the Large-scale Purchaser (including but not limited to the type and amountof purchase consideration, the basis for calculating said amount, specific details of otherconditions (including the timing and method of acquisition), any illegality, and thefeasibility) are significantly inadequate or inappropriate in light of the corporate value of
the Company(f) When it is judged that the purchase method of the Company’s share certificates, etc.
proposed by the Large-scale Purchaser may restrict the opportunity or the freedom for- 15 -

stockholders to make a judgment and effectively force our stockholders to sell the
Company’s share certificates, etc., such as the so-called coercive two-step acquisition(refers to the purchase of shares such as a tender offer, in which the purchase of all theshare certificates, etc. of the Company is not induced in the first stage of purchase, andthe purchasing conditions in the second stage of purchase are set unfavorably, or notstated clearly)(g) When it is judged that the acquisition of control by the Large-scale Purchaser could
significantly damage the corporate value of the Company, and consequently hinder theensuring and enhancement of the common interests of our stakeholders, such as cases
where the corporate value of the Company including the interests of our stockholders,customers, employees and other stakeholders and/or the common interests of ourstockholders would significantly be damaged(h) When it is judged that, in a comparison of future corporate value in the medium to longterm, the corporate value of the Company in the event that the Large-scale Purchaser
acquires control of the Company is significantly inferior compared with the corporate
value of the Company in the event that the Large-scale Purchaser does not acquire
control of the Company(i) When it is judged that the Large-scale Purchaser is significantly inappropriate as thecontrolling stockholder of the Company from the perspective of public order andmorality(b) Details of countermeasures
Countermeasures against the Action of Large-scale Purchase, etc. by the Company inaccordance with the Plan shall, in principle, be based on the gratis allotment of share optionsprescribed in Article 277 of the Companies Act. However, in the event that it is deemed
appropriate to invoke other countermeasures approved by the Companies Act, other laws andregulations, and the Articles of Incorporation of the Company, other countermeasures may betaken.
The outline of share options issued in the event that the gratis allotment of share options iscarried out as a countermeasure (hereinafter, the “Share Options”) is stated in Appendix 4. The
Share Options shall be allotted without contribution to stockholders recorded in the final
stockholder registry (excluding the Company) on a certain date (hereinafter, “record date ofallotment”) determined separately by resolution of the Board of Directors with regard to gratis
allotment of the Share Options (however, in the event that the General Meeting of Stockholders
is made the decision-making body for the gratis allotment of share options as the result of
amendments to the Articles of Incorporation, this decision shall be made by the General Meetingof Stockholders; hereinafter, “Gratis Allotment Resolution for the Share Options”) in the
proportions stipulated separately in the Gratis Allotment Resolution for the Share Options at therate of one or more share option for every one share of the Company.
The value of assets to be contributed upon exercise of one Share Option shall be one yen or
more and shall be determined separately by means of the Gratis Allotment Resolution for the
Share Options, and the exercise of one Share Option shall result in the issuance of one share of
the Company’s common stock to the holder of said Share Option. However, the Share Options
are subject to a discriminatory condition to exercise and share options held by the following
persons may not be exercised: (i) Specific Large-volume Holders, etc., (ii) Specific
Large-volume Purchasers, etc., (iii) persons who have acquired or inherited the Share Options
from persons who fall under (i) or (ii) without obtaining approval from the Board of Directors, or(iv) a related person11 with those who fall under any of (i) to (iii). (These persons shallhereinafter be collectively referred to as “nonqualified persons.”)3) Countermeasure Suspension Procedures
Even after a resolution for the gratis allotment of the Share Options is passed or the gratis
allotment of the Share Options is undertaken as a means of invoking countermeasures, in the eventthat it is judged that the invoking of countermeasures is not appropriate, for reasons such as theLarge-scale Purchaser rescinding or amending the Action of Large-scale Purchase, etc., the Boardof Directors may, after respecting the recommendations of the Independent Committee to the
maximum extent possible, halt the invoking of countermeasures by way of suspending the gratis
allotment of the Share Options during the period up until the effective day of the gratis allotmentof the Share Options, or by way of the Company acquiring the Share Options without contribution- 16 -

during the period from the effective day of the gratis allotment of the Share Options until the dayprior to the commencement day of the exercise period of the Share Options. This will enable theCompany to suspend countermeasures in the event that it is no longer appropriate to invokecountermeasures for reasons such as the Large-scale Purchaser rescinding or amending thepurchase proposal or action of purchase.
In this event, the Board of Directors will promptly disclose the information.
4) Effective Term, Abolition and Amendments of the Plan
The effective term of the Plan shall be up to the time of the conclusion of the Annual General
Meeting of Stockholders regarding the last business year ending within the three years (at theconclusion of the Annual General Meeting of Stockholders to be held in June 2020).
However, even prior to the expiration of the effective term of the Plan, the Company shallreview the Plan from time to time from the perspective of ensuring and enhancing the corporate
value of the Company and the common interest of our stockholders and, (i) in the event that theGeneral Meeting of Stockholders passes a resolution to abolish or amend the Plan or (ii) in theevent that the Board of Directors passes a resolution to abolish or amend the Plan, the Plan shallbe abolished or amended at that time. In the event of making important changes to the details of
the Plan, the Board of Directors shall submit a proposal to the General Meeting of Stockholders
for the introduction of the Plan after amendments in order to obtain the opportunity toappropriately reflect the intentions of stockholders. The Plan after amendments shall take effect on
the condition that the approval of stockholders is obtained for the proposal.
11.

“A related person” refers to a person who substantially controls that person; a person who is
controlled by or under the joint control of that person (including any person the Board of Directors
recognizes as falling under this definition), or a person who the Board of Directors recognizes as
acting in collaboration with that person. “Control” means “when controlling decisions over thefinancial and business policies” of another company, etc.” (as prescribed in Article 3, Paragraph 3 of
Enforcement Regulations of the Companies Act).
In the event that the Plan is abolished or amended, etc. the Company shall promptly disclose
information, as necessary, about the facts of the abolition or amendment and (in the event of
amendment, etc.) the details and other matters regarding the amendment.
The provisions of laws and ordinances cites in the Plan are based on the provisions enacted as of
May 28, 2017 and, in the event that it becomes necessary in accordance with the establishment,
revision or abolition of laws and ordinances on or after that date, the Board of Directors may, upon
consideration of the intent of said establishment, revision or abolition, change the meaning ofclauses or terms in the Plan to a reasonable extent and within an extent that does not disadvantage
the stockholders.
Additionally, with regard to the Plan after the Annual General Meeting of Stockholders
scheduled to be held in June 2020, we intend to obtain the approval of stockholders for thecontinuation of the Plan or the introduction of a plan with new content at the Annual General
Meeting of Stockholders scheduled to be held in June 2020 following the necessary review of thePlan by the Board of Directors.

(3) Reasonableness of the Plan
1) Consistency with Guidelines and Timely Disclosure Rules for Anti-takeover Measures
The Plan satisfies the three principles set out in the “Guidelines Regarding Takeover Defenses
for the Purposes of Protection and Enhancement of Corporate Value and Shareholders’ Common
Interests” (hereinafter, “Anti-takeover Guidelines”) jointly released by the Ministry of Economy,
Trade and Industry and the Ministry of Justice on May 27, 2005: (i) the principle of the protectionand enhancement of corporate value and shareholders’ common interests; (ii) the principle of priordisclosure and the intentions of shareholders; and (iii) the principle of necessity and suitability,
and is in complete accordance with the Anti-takeover Guidelines.
The Plan also takes into full consideration the “Takeover Defense Measures in Light of Recent
Environmental Changes” released on June 30, 2008 by the Corporate Value Study Group of the
Ministry of Economy, Trade and Industry.
In addition, the Plan also fulfils the intent of the various regulations pertaining to the- 17 -

introduction of anti-takeover measures prescribed by Tokyo Stock Exchange, Inc.
2) Introduction for the Purpose of Ensuring and Enhancement of the Common Interests ofStockholders
As stated above, the Plan will be introduced for the purpose of ensuring and enhancement of thecorporate value and common interests of our stockholders by securing the necessary informationand time required for stockholders to judge whether the Action of Large-scale Purchase, etc. isappropriate, and enabling negotiations to be conducted for the benefit of stockholders when such
Action of Large-scale Purchase, etc. is carried out against the Company.
3) Sufficient Respect for Stockholders’ Intentions (Sunset Provision)
The Plan will be introduced subject to the approval of stockholders at this Annual General
Meeting of Stockholders in order to ensure the opportunity to appropriately reflect the intentionsof stockholders on its introduction. The Plan will not be introduced unless the approval of the
majority of stockholders present at this Annual General Meeting of Stockholders is obtained.
As stated in the abovementioned 3. (2) 1) (e) General Meeting of Stockholders for Confirmationof Stockholders’ Intentions, in the event that the Board of Directors deems that the Plan isappropriate in light of laws and regulations and the duty of care of the Directors, or in the eventthat the Independent Committee makes a recommendation that the intentions of stockholders
should be confirmed with respect to invoking countermeasures, it shall be possible to confirm theintentions of stockholders with regard to the invoking or non-invoking of countermeasures at theGeneral Meeting of Stockholders.
In addition, if a resolution to abolish the Plan is passed at a General Meeting of Stockholders, orif a resolution to abolish the Plan is passed at a meeting of the Board of Directors, which
comprises Directors appointed at the General Meeting of Stockholders, the Plan shall be abolishedat that point even if it’s prior to the expiration of the effective term. In that sense the introduction
and abolition of the Plan will be based on the will of the Company’s stockholders.
4) Eliminating Arbitrariness of the Board of Directors
The Company has established the Independent Committee as a unit independent from theBoard of Directors so as to appropriately carry out this countermeasure, prevent arbitrary
judgments by the Board of Directors, and ensure the rationality and fairness of the judgments.
The Independent Committee is comprised of three or more members who shall be selected fromamong the Company’s Outside Directors, Outside Audit & Supervisory Board Members, andexternal experts (including attorneys-at-law, certified public accountants, corporate managers
with a wealth of management experience, and academic experts), all of whom are independent
from the management team that executes the Company’s business operations. (An outline of the
Independent Committee is as stated in Appendix 2, and the names, past experience and positionsof the members of the Independent Committee are as stated in Appendix 3.)
In the event that Action of Large-scale Purchase, etc. is taken against the Company, as stated in
the aforementioned 3. (2) 2) Countermeasures if the Action of Large-scale Purchase, etc. Takes
Place, the Independent Committee shall make a substantive judgment as to whether the Action of
Large-scale Purchase, etc. will damage the corporate value of the Company and the common
interests of our stockholders, and the Board of Directors shall make a decision respecting the
judgment to the maximum extent as a body under the Companies Act. In this way, theIndependent Committee conducts strict oversight to ensure that the Board of Directors does notconduct arbitrary operations of the Plan, including its invoking, and shall disclose an outline ofits decisions to stockholders to ensure a mechanism for the transparent operation of the Plan inorder to maintain the corporate value of the Company and the common interests of ourstockholders.
5) Setting Objective and Reasonable Requirements
As stated above, the Plan is designed in such a way that countermeasures will not be invoked
unless the Independent Committee deems that reasonable and detailed objective requirements
have been satisfied, and can be said to ensure a mechanism that prevents any arbitrary invoking
by the Board of Directors.
6) No Dead-hand or Slow-hand Anti-takeover Measure- 18 -

The Plan is designed in such a way that it may be abolished even prior to the expiration of its
effective term by a decision of the Board of Directors, which comprises Directors appointed at
the General Meeting of Stockholders, or by the Board of Directors which comprises Directors
appointed by the General Meeting of Stockholders and nominated by a person who haspurchased a large number of the Company’s shares. Therefore, the Company believes that thePlan is of a completely different nature to the rights plans known as the dead-hand anti-takeovermeasure (an anti-takeover measure in which the invoking of the measure cannot be prevented
even if a majority of the members of the Board of Directors are replaced) and the slow-handanti-takeover measure (an anti-takeover measure in which the invoking of the measure takes
more time to prevent due to the inability to replace all of the directors at once) that make it
impossible or difficult for the management team to abolish a plan.
7) Acquiring the Opinions of Third-party Experts
The Plan enables the Independent Committee to receive advice from external experts (financial
advisors, certified public accountants, attorneys-at-law, consultants and other experts) at theCompany’s expense should a Large-scale Purchaser emerge. This mechanism more securely
guarantees the fairness and objectivity of judgments by the Independent Committee.
(4) Impact on our Stockholders
1) Impact on Stockholders on Introduction of the PlanAt the time of the introduction of the Plan, it will have no impact on the rights of stockholders
since no actual allocation of the Share Options will then be made.
2) Impact on Stockholders when Countermeasures are Invoked
In the event that a decision is made to invoke countermeasures based on the Plan and a
resolution is passed concerning the implementation of gratis allotment of share options pursuant
to the principles, stockholders who are recorded in the final stockholder registry on the record
date of allotment shall naturally become the holders of share options on the day when gratis
allotment of share options becomes effective, without making an application or following anyother procedures. As a result of this mechanism, even if the dilution of share value per share of
the Company held by stockholders and investors arises at the time of gratis allotment of the
Share Options, dilution of the overall economic value of shares held in the Company will notarise. Additionally, since dilution of voting rights per share of the Company will not arise, nodirect or specific impact on the legal rights and economic interests with regard to shares of theCompany held by stockholders and investors is assumed.
In the event that the Board of Directors recognizes that the invoking of countermeasures is not
appropriate for reasons such as the rescindment or amendment of the purchase action by theLarge-scale Purchaser, the Company may, until the day prior to the commencement date of theexercise period of the Share Options, halt the allotment of the Share Options or acquire the Share
Options without consideration and without delivering the Company’s shares in exchange for the
Share Options even after the gratis allotment resolution for the Share Options and effective dateof the gratis allotment of the Share Options. In such cases, since dilution of the value per sharewill not arise, any stockholders and investors who purchased the Company’s share certificates,etc. assuming that the value of shares would be diluted may suffer significant damages due to thefluctuation in share price.
Furthermore, in the event that discriminatory terms are attached to the exercise or acquisitionof the Share Options, it is assumed that the legal rights and economic interests of the Large-scale
Purchaser will be affected upon such exercise or acquisition. However, even in this case, there is
no assumption of any direct and specific impact on the legal rights and economic interests of theCompany’s shares held by stockholders and investors other than the Large-scale Purchaser.
3) Necessary Procedures for Stockholders upon the Gratis Allotment of the Share Options(a) Procedures for recording in the stockholder registry
In the event of a resolution to conduct the gratis allotment of the Share Options, the Company
shall announce the record date of allotment for the Share Options, pursuant to laws andregulations. As the Share Options will be allocated to the stockholders recorded in the final- 19 -

stockholder registry on the record date of allotment, it is necessary for stockholders to berecorded in the final stockholder registry on the relevant record date of allotment.
(b) Necessary procedures on exercising or acquiring the Share Options
The Company shall send claim forms and other documents required for exercising the rights of
the Share Options to stockholders recorded in the final stockholder registry on the record date ofallotment. When stockholders who have been allotted the Share Options exercise their rights
during the period for exercising rights, in principle by paying the amount separately stipulated by
the gratis allotment resolution for the Share Options of one yen or more to the payment-handlinginstitution after submitting the claim form for exercising the Share Options, one share of theCompany’s common stock shall in principle be issued for each share option. If stockholders fail
to complete the procedures for exercising the Share Options, including cash payment, the Share
Option will be terminated (Article 287 of the Companies Act) and the Company’s shares held
will be diluted as a result of the exercise of the Share Options by other stockholders. However, inthe event that the Board of Directors decides to acquire the Share Options pursuant to theprovision that allows the Share Options to be acquired in exchange for the Company’s shares, inaccordance with statutory procedures, stockholders, other than nonqualified persons, who havebeen deemed to have satisfied the requirements for the invoking of countermeasures, shall in
principle receive one share of the Company’s common stock for each Share Option as
consideration for the Company acquiring the Share Options, without making the cash payment
equivalent to the payment amount, on a day separately stipulated by the Board of Directors.
In addition to the above, the Company will announce or advise details of the payment method, etc.
to stockholders after the resolution concerning the gratis allotment of the Share Options is passed, so
we would like to ask our stockholders to check the details at that time.

- 20 -

Appendix 1

Flow Chart until the Invoking or Non-invoking of Countermeasures under the Plan

- 21 -

Appendix 2

Outline of Independent Committee Rules

1. Establishment and Composition, etc.
 The Independent Committee shall be established by a resolution of the Board of Directors of theCompany.
 Members of the Independent Committee (hereinafter, “Independent Committee Members”) shallnumber three or more; shall satisfy all of the requirements below; and shall be appointed by aresolution of the Board of Directors from among Outside Directors, Outside Audit & Supervisory
Board Members, and external experts (including attorneys-at-law, certified public accountants,
corporate managers with a wealth of management experience, and academic experts), all of whom
are independent from the Company.
(1) Persons who are not, or who have never been, Directors, executive officers, employees or
Audit & Supervisory Board Members (excluding Outside Directors and Outside Audit &Supervisory Board Members) of the Company or its subsidiaries, or close relatives of those
persons (a “close relative” refers to a spouse or any family within the second degree, or a
relative living in the same household; hereinafter, the same)(2) Persons who are not a Director, executive officer or employee of the Company’s major
business partners (“major business partner” refers to a business partner to whom the annual
amount paid by the Company to said company as consideration for goods or services, or towhom the annual amount paid by said company as consideration for goods and services to
the Company exceeds 3% of the Company’s average consolidated net sales for the past five
years; hereinafter, the same)(3) Persons who are not an external advisor (“external advisor” includes, but is not limited to,external legal advisors, certified public accountants, tax accountants, judicial scriveners, andfinancial advisors) to the Company or its major business partners(4) Persons who have no special interest with the Company
2. Term of Office of Independent Committee Members
 The term of office shall be until the conclusion of the Annual General Meeting of Stockholders
regarding the last business year ending within the three years after the appointment.
3. Management and Resolutions, etc. of the Independent Committee
 The Independent Committee shall be convened by the Board of Directors or by an Independent
Committee Member.
 Resolutions of the Independent Committee shall, in principle, be passed with all Independent
Committee Members in attendance and by a majority of those in attendance. However, for reasonsof an accident or other special circumstances, resolutions may be passed with a majority of
Independent Committee Members in attendance and by a majority of their voting rights.
4. Activities, etc. of the Independent Committee
 The Independent Committee shall review and resolve the following matters, and makerecommendations to the Board of Directors with the reasons for those resolutions.
(1) Examine and consider the details of the purchase proposal submitted by the Large-scale
Purchaser(2) Determine the adequacy of the Necessary Information submitted by the Large-scale Purchaser(3) Determine the necessity, if any, for an extension of the Board of Directors’ Investigation
Period(4) Determine the invoking or non-invoking of countermeasures(5) Determine whether or not to consult the Board of Directors with regard to the appropriatenessof invoking the countermeasures(6) Determine whether or not to halt countermeasures that have been invoked(7) Other matters that the Independent Committee may undertake as stipulated in the Plan, andmatters over which the Board of Directors has sought consultation
 The Independent Committee shall review and resolve the above matters from the perspective ofwhether or not they will contribute to the corporate value of the Company and the common interestsof our stockholders.
 The Independent Committee may, at the Company’s expense, seek advice from attorneys-at-law,certified public accountants, tax accountants, financial advisors, and other experts.

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Appendix 3

Introduction of the Independent Committee Members

The following five individuals are expected to be the members of the Independent Committee upon the
introduction of the Plan.

Ryosuke Nagumo
Born in 1953
April
June

1975
2005

January

2006

June

2007

June

2015

Joined RHYTHM WATCH CO., LTD.
Director, General Manager, Tokyo Branch, Domestic Sales
Division, RHYTHM WATCH CO., LTD.
Director, General Manager, Sales Headquarters, Domestic
Sales Division, RHYTHM WATCH CO., LTD.
President and Representative Director, RHYTHM
KAIHATSU CO., LTD.
Outside Director, the Company (to present)

Kan Ishii
Born in 1954
April

1977

October

2008

January
AugustAugust

2010
2011
2015

June

2017

Joined Japan Development Bank (presently Development
Bank of Japan Inc.)
Managing Executive Officer, Development Bank of JapanInc.
Deputy Trustee of Japan Airlines Co., Ltd.
President and C.E.O., Fukuoka Jisho Co., Ltd.
Vice Chairman / Director, Fukuoka Jisho Co., Ltd. (topresent)
Scheduled to be appointed as Outside Director, the Company

Hiroshi Ishibashi
Born in 1948
April

1974

April
June

1984
2004

January

2014

Registered as Attorney-at-Law
Joined Marunouchi Sogo Law OfficePartner, Marunouchi Sogo Law OfficeOutside Audit & Supervisory Board Member, the Company(to present)
Advisor, Marunouchi Sogo Law Office (to present)

Osamu Takai
Born in 1947
April
April

1992
2012

June

2014

Professor, School of Engineering, Nagoya University
Professor Emeritus, Nagoya University (to present)
Professor, College of Engineering, Kanto Gakuin University,
Vice Director, Materials & Surface Engineering ResearchInstitute, Kanto Gakuin University (to present)
Outside Audit & Supervisory Board Member, the Company (topresent)- 23 -

Hiroki Kimura
Born in 1962
April
July

1984
2013

April

2015

June

2016

April

2017

Joined Asahi Mutual Life Insurance Company
Director, Executive Officer and Head of Asset Management
Administration Division, Asahi Mutual Life Insurance
Company
Managing Director, Executive Officer in charge of AssetManagement Planning Department and Securities Management
Department, Asahi Mutual Life Insurance Company
Outside Audit & Supervisory Board Member, the Company (topresent)
President and Representative Director, Asahi Mutual Life
Insurance Company (to present)* The Company is planning to conclude agreements with Messrs. Ryosuke Nagumo and Kan Ishii as
Independent Committee members provided that they will be elected as Outside Directors at thisAnnual General Meeting of Shareholders.

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Appendix 4

Outline of Share Options

1. Total number of allotted Share Options
The total number of allotted Share Options shall be not less than the total number of the Company’s
issued common stock on the record date of allotment stipulated in the Gratis Allotment Resolution for
the Share Options (excluding the number of the Company’s common stock held by the Company atthe same time), and shall be stipulated separately in the Gratis Allotment Resolution for the Share
Options.
2. Stockholders eligible for allotment
The Share Options shall be allocated at a ratio stipulated separately in the Gratis Allotment
Resolution for the Share Options at one option or more per share owned in the Company (excluding
the Company’s common stock held by the Company) to stockholders recorded in the stockholder
registry on the record date of allotment.
3. Effective date of the gratis allotment of the Share Options
The date shall be stipulated separately in the Gratis Allotment Resolution for the Share Options.
4. Class and number of shares subject to the Share Options
The class of shares subject to the Share Options shall be the Company’s common stock, and thenumber of shares subject to one Share Option shall be one share (hereinafter, “number of subject
shares”). However, the necessary adjustments shall be made if the Company splits shares orconsolidates shares.
5. Details and price of property to be contributed upon exercise of the Share Options
The object of contribution upon the exercise of the Share Options shall be cash, and the amount per
share of the Company’s common stock as property to be contributed upon exercise of the Share
Options shall be one yen or more, and shall be stipulated separately in the Gratis Allotment Resolution
for the Share Options.
6. Restrictions on transfer of the Share Options
Acquisition of the Share Options by transfer shall require the approval of the Board of Directors.
7. Requirements for exercising the Share Options
Nonqualified persons cannot exercise the Share Options they hold. Details of exercise conditions for
the Share Options are stipulated separately in the Gratis Allotment Resolution for the Share Options.
8. Acquisition of the Share Options by the Company
The Company may acquire the Share Options held by persons other than nonqualified persons on
the date stipulated separately by the Board of Directors, and may grant the number of subject shares of
the Company’s common stock per one Share Option in exchange for the Share Option as
consideration.
Details of the acquisition clause for the Share Options are stipulated separately in the Gratis
Allotment Resolution for the Share Options.
9. Gratis acquisition when halting the invoking of countermeasures, etc.
In the event that the Board of Directors halts the invoking of countermeasures or in any other event
stipulated separately by the Board of Directors in the Gratis Allotment Resolution for the Share
Options, the Company may acquire all of the Share Options without consideration.
10. Period for exercising the Share Options
The period for exercising the Share Options and other necessary matters shall be stipulated
separately in the Gratis Allotment Resolution for the Share Options.

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