[Translation]
Cover sheet
Documents for filing

Tender Offer Registration Statement

Government agent to receive filing

Director of the Kanto Local Finance Bureau

Date of filing

October 17, 2016

Name of filing party (Offeror)

Adherence Corporation

Address of filing party (Offeror)

1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo

Place to contact

1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo

Telephone number

03-6212-6098

Name of contact person

Kensaku Mizutani, Representative Director

Name of attorney-in-fact

N/A

Address of attorney-in-fact

N/A

Nearest place of contact

N/A

Telephone number

N/A

Name of contact person

N/A

Place where a copy of this tender offer
registration statement is available forpublic inspection

Adherence Corporation(1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

Note 1:
Note 2:
Note 3:Note 4:Note 5:Note 6:Note 7:Note 8:Note 9:Note 10:

The term “Offeror” means Adherence Corporation.
The term “Target Company” means Aderans Company Limited.
Where the figures have been rounded or truncated, the amount indicated as the total may not always
coincide with the sum of the relevant figures.
The term “Act” means the Financial Instruments and Exchange Act (Act No. 25 of 1948, as
amended).
The term “Enforcement Order” means the Financial Instruments and Exchange Act Enforcement
Order (Cabinet Order No. 321 of 1965, as amended).
The term “Cabinet Ordinance” means the Cabinet Ordinance with respect to Disclosure of a Tender
Offer for Share Certificates, Etc. by an Offeror other than the Issuing Company (Ministry of FinanceOrdinance No. 38 of 1990, as amended).
The term “Share Certificates, Etc.” means a right or interest in a share, etc.
Unless otherwise specified, any reference to the number of days or the date and time means thenumber of days or the date and time in Japan.
The term “Business Day(s)” means any day(s) other than those set forth in Article 1, Paragraph 1 of
the Act on Holidays of Administrative Organs (Act No. 91 of 1988, as amended).
Although the tender offer relating to the submission of this Statement (the “Tender Offer”) will be
conducted in accordance with the procedures and information disclosure standards prescribed in theAct, these procedures and information disclosure standards may differ from the procedures and1Note 11:

Note 12:Note 13:

information disclosure standards in the United States. In particular, Sections 13 (e) and 14 (d) of the
U.S. Securities Exchange Act of 1934 (as amended; the “U.S. Securities Exchange Act”), and therules prescribed thereunder do not apply to the Tender Offer, and the Tender Offer does not conformto those procedures and standards. All financial information contained in this Statement has been
prepared in accordance with Japanese accounting standards, and not in accordance with U.S.
accounting standards, and may not be comparable to the financial information of U.S. companies. It
may be difficult to enforce any right or claim arising under U.S. federal securities laws because theOfferor is incorporated outside the United States and its officers are non-U.S. residents. It may not
be possible to commence legal proceedings against the Offeror and its officers in a non-U.S. court forviolations of the U.S. securities laws. In addition, it may not be possible to compel any non-U.S
corporation and its subsidiaries and affiliates to subject themselves to a U.S. court’s jurisdiction.
Unless otherwise specified, all procedures relating to the Tender Offer are to be conducted entirely inJapanese. If all or any portion of the documentation relating to the Tender Offer is prepared in
English and there is any inconsistency between the English documentation and the Japanese
documentation, the Japanese documentation will prevail.
This Statement includes “forward-looking statements” as defined in Article 27A of the U.S. Securities
Act of 1933 (as amended) and Article 21(E) of the U.S. Securities Exchange Act. Actual results
might be materially different from the express or implied predictions including the “forward-looking
statements” contained herein due to known or unknown risks, uncertainties or any other factors.
Neither the Offeror nor any of its affiliates assures that such express or implied predictions including
the “forward-looking statements” contained herein will be achieved. The “forward-looking
statements” contained in this Statement have been prepared based on the information possessed by
the Offeror as of the date hereof, and, unless otherwise required under applicable laws andregulations, neither the Offeror nor any of its affiliates assumes any obligation to update or revise
such statements to reflect any future events or circumstances.
A financial advisor of the Offeror and Tender Offer Agent (including their respective affiliates) may,in their ordinary course of business, purchase shares or bonds with stock acquisition rights in theTarget Company for their own accounts or for the accounts of their clients prior to the Tender Offer or
during the period for the Tender Offer (the “Tender Offer Period”) outside the Tender Offer inaccordance with the requirements of Rule 14e-5(b)(12) of the U.S. Securities Exchange Act or takeactions for such purchase to the extent permitted by financial instruments and exchange related laws
and regulations of Japan. If any information concerning such purchase is disclosed in Japan, therelevant financial adviser or Tender Offer Agent who conducted such purchase will disclose suchinformation on their English website (or by any other means of public disclosure).

2

I.

Terms and conditions of tender offer

1.

Name of the Target Company
Aderans Company Limited

2.

Class of Share Certificates, Etc. for tender offer(1)

Common stock(2)

Stock acquisition rights

(3)

(i)

Stock acquisition rights issued pursuant to the resolution at the board of
directors meeting of the Target Company held on June 21, 2012 (the “Fourth
Series Stock Acquisition Rights”)(ii)

Stock acquisition rights issued pursuant to the resolution at the board of
directors meeting of the Target Company held on May 23, 2013 (the “Fifth
Series Stock Acquisition Rights”)(iii)

Stock acquisition rights issued pursuant to the resolution at the board of
directors meeting of the Target Company held on May 22, 2014 (the “Sixth
Series Stock Acquisition Rights”)(iv)

Stock acquisition rights issued pursuant to the resolution at the board of
directors meeting of the Target Company held on May 28, 2015 (the“Seventh Series Stock Acquisition Rights”)(v)

Stock acquisition rights issued pursuant to the resolution at the board of
directors meeting of the Target Company held on May 26, 2016 (the “Eighth
Series Stock Acquisition Rights,” and collectively with the Fourth, Fifth,
Sixth and Seventh Series Stock Acquisition Rights, the “Stock Acquisition
Rights”)

Bonds with stock acquisition rights
JPY denominated convertible bonds with stock acquisition rights due 2019 issued
pursuant to the resolution at the board of directors meeting of the Target Company held
on September 17, 2014 (the “Convertible Bonds”)

3.

Purposes of tender offer(1)

Outline of the Tender Offer
The Offeror is a joint stock corporation (kabushiki kaisha) incorporated on September
26, 2016 for the main purpose of acquiring and holding shares of common stock(“Target Company Shares”), Stock Acquisition Rights, and Convertible Bonds (seeNote 1) of the Target Company (collectively, “Target Company Share Certificates,
Etc.”), and all of its issued shares are owned by Integral Corporation (“Integral”) as ofthe date hereof.
Integral is an investment company, whose corporate mission is becoming the “Trusted
Investor,” that makes long-term equity investments based on a relationship of deep
trust with the management of invested companies and under the following three codes3

of conduct: “a relationship of deep trust is the foundation of all business activities,”“we will pursue single mindedly, the long-term enhancement of corporate value,” and“the ‘highest wisdom’ concentrated on creating ‘innovations.’” Integral has invested
in 13 companies including QB Net Co., Ltd. and Skymark Airlines Inc. and has sharedthe “same objectives and time horizon as the management of invested companies” andprovided support in both managerial and financial areas after investment.
With respect to operation of invested companies, Integral in principle respects their
existing management framework and provides as necessary management assistance forvarious management issues by dispatching members of Integral to those companies,
and, by truly sharing the “same objectives and time horizon as the management ofinvested companies,” Integral provides the most suitable support in both managerial
and financial areas in order to maximize corporate value. Integral’s motto is to aim
for permanent business growth and development by conducting long-term investments
and resource allotment rather than to pursue a short-term profit only by conducting cost
reduction and enhancing operational efficiency. As an independent domestic fundwith personnel who have engaged in M&A related businesses and corporate
management for a long time and have a high level of expertise regarding these areas,
Integral makes every effort to support invested companies in facilitating their growthstrategies by giving the highest priority to enhancing corporate value of invested
companies while fully understanding and respecting the characteristics of management
teams in Japanese companies.
The Offeror will conduct the Tender Offer as part of a series of transactions designed toacquire all of the Target Company Shares other than treasury shares held by the Target
Company and the Non-Tendered Shares (as defined below; the same applies
hereinafter), Stock Acquisition Rights, and Convertible Bonds and to make the Target
Company a private company (the “Transaction”). The Offeror (i) plans, through theTransaction, to make the Target Company a private company and cause the Offeror and
Mr. Nobuo Nemoto (“Mr. Nemoto”) (the number of shares held: 4,946,256 shares; andthe ownership ratio: 11.95% (see Note 2)), who is the founder and the Representative
Director, Chairman and President as well as the second largest shareholder of theTarget Company, to become the sole shareholders of the Target Company; and (ii)plans, through the contribution to the Offeror or the Target Company by Mr. Nemotoand Mr. Yoshihiro Tsumura (“Mr. Tsumura”) (the number of shares held: 8,002 shares;
and the ownership ratio: 0.02%) who is the Representative Director and Executive Vice
President of the Target Company, to make the total shareholding ratio in the Target
Company by Mr. Nemoto and Mr. Tsumura after the Merger (as defined below)
approximately 50.1%.
The Tender Offer is conducted as part of a so-called management buyout (MBO)(generally, meaning a transaction where any or all members of the management team ofa target company contribute funds to acquire its shares with a view to continue thebusiness of the target company) in order to make a friendly acquisition of the Target
Company Shares (other than treasury shares held by the Target Company and the
Non-Tendered Shares), Stock Acquisition Rights, and Convertible Bonds with thesupport of the board of directors of the Target Company.
Integral 2 Limited Partnership (“Integral 2 LP”) (see Note 3) and Integral Fund II (A)
L.P. (see Note 4) (collectively, the “Integral Group”) have entered into an MBO
memorandum dated October 14, 2016 (the “MBO Memorandum”) with Mr. Nemotoand Mr. Tsumura, whereby Mr. Nemoto has agreed (i) not to tender in the Tender Offer
any of the Target Company Shares held by Mr. Nemoto other than the Target Company
Share Certificates, Etc. held indirectly by. Mr. Nemoto through the management stock4

ownership plan (the number of shares held: 4,944,658 shares; and the ownership ratio:
11.94%; hereinafter referred to as the “Non-Tendered Shares”), (ii) to tender in theTender Offer 322 Fifth Series Stock Acquisition Rights (the number of Target
Company Shares underlying the stock acquisition rights: 32,200 shares; and theownership ratio: 0.08%), 419 Sixth Series Stock Acquisition Rights (the number ofTarget Company Shares underlying the stock acquisition rights: 41,900 shares; and theownership ratio: 0.10%), and 630 Seventh Series Stock Acquisition Rights (the numberof Target Company Shares underlying the stock acquisition rights: 63,000 shares; andthe ownership ratio: 0.15%) that are held by Mr. Nemoto (the total number ofunderlying shares: 137,100 shares; and the total ownership ratio: 0.33%; hereinafterreferred to as the “Expected Tendered Stock Acquisition Rights (Mr. Nemoto)”), and(iii) to waive without any consideration 700 Eighth Series Stock Acquisition Rights(the number of Target Company Shares underlying the stock acquisition rights: 70,000
shares; and the ownership ratio: 0.17%) that are held by Mr. Nemoto (hereinafterreferred to as the “Expected Waived Stock Acquisition Rights (Mr. Nemoto)”) in atimely manner upon the successful completion of the Tender Offer. Also, under the
MBO Memorandum, Mr. Tsumura has agreed to tender in the Tender Offer all Target
Company Shares other than the Target Company Share Certificates, Etc. held by Mr.
Tsumura indirectly through the management stock ownership plan (the number ofshares held: 6,600 shares; and the ownership ratio: 0.02%) as well as 100 Fourth Series
Stock Acquisition Rights (the number of Target Company Shares underlying the stockacquisition rights: 10,000 shares; and the ownership ratio: 0.02%), 138 Fifth Series
Stock Acquisition Rights (the number of Target Company Shares underlying the stockacquisition rights: 13,800 shares; and the ownership ratio: 0.03%), 180 Sixth Series
Stock Acquisition Rights (the number of Target Company Shares underlying the stockacquisition rights: 18,000 shares; and the ownership ratio: 0.04%), 270 Seventh Series
Stock Acquisition Rights (the number of Target Company Shares underlying the stockacquisition rights: 27,000 shares; and the ownership ratio: 0.07%), and 600 Eighth
Series Stock Acquisition Rights (the number of Target Company Shares underlying thestock acquisition rights: 60,000 shares; and the ownership ratio: 0.14%) that are held
by Mr. Tsumura (the total number of underlying shares: 135,400 shares; and the total
ownership ratio: 0.33%) (such Target Company Shares and Stock Acquisition Rights
are collectively referred to as the “Expected Tendered Share Certificates, Etc. (Mr.
Tsumura)”) (see Note 5).
In addition, Mr. Nemoto and Mr. Tsumura have entered into a tender offer acceptanceagreement dated October 13, 2016 (the “Tender Agreement (FT)”) with Franklin
Templeton Institutional LLC (“FT”), the substantive largest shareholder of the Target
Company, whereby FT has agreed to tender all of the Target Company Shares held by
FT (the number of shares held: 7,662,500 shares; and the ownership ratio: 18.51% (seeNote 6)) in the Tender Offer.
For details of the MBO Memorandum and the Tender Agreement (FT) above, pleasesee “(i) MBO Memorandum” and “(ii) Tender Agreement (FT)” of “6. Mattersregarding material agreement(s) related to the Tender Offer” below.
Note 1: According to the Target Company, the Convertible Bonds were issued
mainly in order for the Target Company to apply the funds raised by theissuance to the partial prepayment of long term borrowings made in order toacquire the shares of HC (USA) Inc. (“Hair Club”) and acquisition oftreasury shares in order to achieve greater return of profits to shareholders of
the Target Company and to improve capital efficiency. Because theConvertible Bonds are subject to a conversion restriction clause to the effectthat, in principle, they are not convertible unless the share price of the Target

5Note 2:Company continues to exceed 130% of the conversion price for a certain
period, and because the current conversion price as of the date hereof is2,133 yen per share, which is in excess of 620 yen, which is the price of thetender offer per Target Company Share in the Tender Offer (the “Tender
Offer Price”), it is not anticipated that the Convertible Bonds will be
converted into Target Company Shares. If the Tender Offer is successfullycompleted and the Transaction is conducted, it is planned that theConvertible Bonds that were unable to be acquired in the Tender Offer will
be redeemed for 5,000,000 yen per 5,000,000 yen in face value, in
accordance with their early redemption clause.
For details of theConvertible Bonds, please see “Notice Regarding Issuance of Yen
Denominated Convertible Bonds with Stock Acquisition Rights Due 2019”
and “Notice Regarding Determination of Terms and Conditions, Etc. ofIssuance of Yen Denominated Convertible Bonds with Stock Acquisition
Rights Due 2019” announced on September 17, 2014 by the Target
Company.
“Ownership ratio” means the ratio (rounded to two decimal points; the same
applies for ownership ratios hereinafter) of the number of shares held by therelevant shareholder to the number of shares (41,404,411 shares; the “Total
Number of Target Company Voting Shares”) resulting from the following
formula: the difference of (A) the sum total (43,787,520 shares) of (i) the
total number of issued shares (37,246,388 shares) as of August 31, 2016
stated in the quarterly report for the second quarter of the 48th term filed on
October 14, 2016 by the Target Company (the “Quarterly Report for theSecond Quarter of the 48th Term of the Target Company”) and (ii) the sum of(a) the number of Target Company Shares (1,852,900 shares) underlying the
Stock Acquisition Rights (1,275 Fourth Series Stock Acquisition Rights,
2,803 Fifth Series Stock Acquisition Rights, 3,552 Sixth Series Stock
Acquisition Rights, 4,859 Seventh Series Stock Acquisition Rights, and
6,040 Eighth Series Stock Acquisition Rights), the number of which is
obtained by deducting the number of the Stock Acquisition Rights that had
expired by August 31, 2016 (according to the Target Company, 30 Seventh
Series Stock Acquisition Rights had expired by August 31, 2016) from thenumber of the Fourth Series Stock Acquisition Rights (1,275 stockacquisition rights), the Fifth Series Stock Acquisition Rights (2,803 stockacquisition rights), the Sixth Series Stock Acquisition Rights (3,552 stockacquisition rights), and the Seventh Series Stock Acquisition Rights (4,889
stock acquisition rights) as of February 29, 2016 stated in the securities
report for the 47th term filed on May 26, 2016 by the Target Company (the“Securities Report for the 47th Term of the Target Company”) as well as theEighth Series Stock Acquisition Rights (6,040 stock acquisition rights) statedin “Notice Regarding Issuance of Stock Acquisition Rights as Stock Options(Aderans Co., Ltd. Eighth Series Stock Acquisition Rights)” published on
May 26, 2016 by the Target Company and “Notice Regarding Detail ofIssuance of Stock Acquisition Rights as Stock Options (Aderans Co., Ltd.
Eighth Series Stock Acquisition Rights as Stock Options)” published on July27, 2016 by the Target Company plus (b) the number of the Target Company
Shares (4,688,232 shares) underlying the stock acquisition rights attached to
the Convertible Bonds (2,000 stock acquisition rights) as of February 29,
2016 stated in the Securities Report for the 47th Term of the Target Company(according to the Target Company, no stock acquisition rights attached to theConvertible Bonds had expired by August 31, 2016) minus (B) the number oftreasury shares held by the Target Company (2,383,109 shares) as of August
31, 2016 stated in the “Summary of Accounts for the Second Quarter of the6Note 3:Note 4:Note 5:Note 6:

Term Ending February 2017 (Japanese GAAP) (Consolidated)” published on
October 14, 2016 by the Target Company.
Integral 2 LP is an investment limited partnership established under the Act
on Investment Limited Partnership Agreements (Act No. 90 of 1998, as
amended; hereinafter the same) and which is operated and managed by two
general partners—Integral Partners Corporation, a subsidiary of Integral, andIntegral II GP Investment Limited Partnership, which is operated andmanaged by Integral Partners Corporation as general partner.
Integral Fund II (A) L.P. is an exempted limited partnership establishedunder the laws of the Cayman Islands and operated and managed by Integral
Partners (Cayman) II (A) Limited as general partner, to which Integral
provides investment advice.
Mr. Nemoto and Mr. Tsumura are members of the management stock
ownership plan of the Target Company and Mr. Nemoto and Mr. Tsumura
hold, as equity held indirectly through the management stock ownership plan,a number of Target Company Shares equivalent to 1,598 shares (fractions
rounded down; an ownership ratio of 0.00%) and 1,402 shares (fractions
rounded down; an ownership ratio of 0.00%) respectively.
Figures are based on those stated in Amended Report No. 24 submitted by
FT to the Director-General of the Kanto Local Finance Bureau as of August
1, 2016.

In the Tender Offer, the Offeror has set 19,532,800 shares (ownership ratio: 47.18%) as
the minimum number of Share Certificates, Etc. to be purchased in the Tender Offer,and if the total number of Share Certificates, Etc. tendered in the Tender Offer (the“Tendered Share Certificates, Etc.”) falls below the minimum number of shares to bepurchased (19,532,800 shares), the Offeror will not purchase any of the Tendered Share
Certificates, Etc. Meanwhile, the Offeror has not set a maximum number of Share
Certificates, Etc. to be purchased, so if the number of Tendered Share Certificates, Etc.
is equal to or exceeds the minimum number of Share Certificates, Etc. to be purchased(19,532,800 shares), the Offeror will purchase all the Tendered Share Certificates, Etc.
If the Offeror is unable to acquire all of the Target Company Shares (other thantreasury shares held by the Target Company and the Non-Tendered Shares), the Stock
Acquisition Rights, and the Convertible Bonds through the Tender Offer, the Offeror
plans, after the successful completion of the Tender Offer, to request the Target
Company to implement the series of procedures stated in “(4) Policy for organizational
restructuring, etc. after the Tender Offer (matters relating to so-called “Two-Step
Acquisitions”)” below. The Offeror also plans, after such procedures have been
implemented, to carry out a merger in which the Offeror will be the disappearing
corporation and the Target Company will be the surviving corporation (the “Merger”),
but matters such as the specific schedule have not been determined yet.
According to the October 14, 2016 announcement by the Target Company titled“Notice of Implementation of MBO and Recommendation of Tender Acceptance” (the“Target Company Press Release”), the Target Company determined that the delistingof the Target Company Shares by means of a management buyout (MBO) is the best
measure to take for not only the general shareholders of the Target Company but also
its various other stakeholders and that the Tender Offer Price and other terms of theTender Offer are reasonable for the shareholders of the Target Company and that theTender Offer will provide the shareholders of the Target Company with an opportunity
to sell the Target Company Shares at a reasonable price, and the Target Company
resolved at its board of directors meeting held on October 14, 2016 to express an
opinion in support of the Tender Offer and to recommend to the Target Company’s

7

shareholders to tender their Shares in response to the Tender Offer. It also states thatsuch board of directors meeting also resolved to leave the decision to the holders ofStock Acquisition Rights and Convertible Bonds as to whether or not to tender their
Stock Acquisition Rights and Convertible Bonds in response to the Tender Offer.
For the details of the above resolutions of the board of directors of the Target Company,
please see “(v) Approvals from all directors without conflicts of interest and opinionsfrom all statutory auditors without conflicts of interest in the Target Company to theeffect that they have no objections” of “Measures to ensure fairness of the Tender Offer
Price and to avoid conflicts of interest and other measures to ensure fairness of theTender Offer” of “Process of calculation” of “(2) Price of tender offer” of “4. Term,
price and number of Share Certificates, Etc. for tender offer” below.
(2)

Background, purpose and decision-making process leading to decision to conduct theTender Offer, and management policy after the Tender Offer
The background, purpose, and decision-making process leading to the Offeror’s
decision to conduct the Tender Offer, and the management policy after the Tender
Offer, are as follows. Please note that those of the following statements that relate to
the Target Company are based on explanations received from, or publicly announced
by, the Target Company.
Under its management philosophy of “utilizing the hair-related business to help asmany people as possible acquire the physical and emotional qualities that underpin therealization of dreams and promote a good impression, and in doing so, bring smiles tofaces and support happy lives,” the Target Company is engaged in a full-service
hair-related business that features various domestic Japanese brands such as “Aderans”(which provides order-made wigs, hair volumizing products, and hair growth services
for men in Japan), “Ladies Aderans” (which provides order-made wigs, hair care, andscalp care (see Note 1) for women), and “Fontaine” (which provides ready-made wigs
for women), as well as North American subsidiary businesses Hair Club (which
provides order-made wigs and hair growth services for men and women) and Bosley,Inc. (which provides hair transplant surgery).
Following its establishment in March 1969, the Target Company began selling wigs.
Focusing on the fact that while it was the heyday for women’s wigs there were alsomen, though not many, who were concerned about baldness or hair loss, Representative
Director, Chairman and President Mr. Nemoto and the other founders of the Target
Company set the goal of being a company that strove to create the best products tosatisfy its customers and to become number one in the world. Fontaine Co., Ltd., apioneer in fashion wigs made of synthetic materials and who was engaged in the sale ofready-made wigs for women, became a subsidiary of the Target Company in August
1985 by way of a share purchase, subsequent to which the Target Company establishedlocal subsidiaries in Thailand in October 1986, Taiwan in January 1990, theNetherlands in January 1992, and the U.S. in November 1994, and the Target Company
went on to actively pursue further corporate acquisitions and overseas business such as
by acquiring Bosley, Inc. (which has an approximately 10% share of the U.S. hair
implant market) in August 2001 and acquiring (as a wholly-owned subsidiary) Hair
Club (which is a major seller of order-made wigs in the U.S.) in April 2013. The
Target Company received over-the-counter registration with the Japan Securities
Dealers Association in September 1985 and was listed on the Second Section of theTokyo Stock Exchange in January 1987 and the Second Section of the Osaka Securities
Exchange in December 1988, subsequent to which the Target Company’s listings werere-designated in August 1997 to the First Section of the Tokyo Stock Exchange and the8First Section of the Osaka Securities Exchange.
The Target Company group comprises the Target Company itself, together with 53
subsidiaries (51 consolidated subsidiaries and two non-consolidated subsidiaries) andtwo equity method affiliates, for a total of 56 companies, and is mainly engaged inhair-related business such as the production and sale of wigs and hair transplant
services. The business activities in which the Target Company is engaged in Japan
are its Aderans business (order-made) and Fontaine business (ready-made), both ofwhich provide hair-related products and services to general customers, while the main
business activity in which it is engaged overseas is the Bosley business, which provides
hair transplant services to general customers under the “Bosley” brand. For its
overseas wig business, the Target Company sells wigs globally through distribution
bases in the U.S., Europe and Asia, and wig production is handled by the Target
Company group’s production bases in Asia (Thailand, the Philippines, and Laos).
In its Aderans business, the Target Company is pursuing an increase in the number ofinquiries from potential customers by actively deploying promotional advertising withthe theme of “Vital Ex,” which is a patented hair volumizing method for men, andenhanced utilization of online marketing. For women’s wigs, the Target Company ispursuing replacement demand by offering improved after-sales services aimed atacquiring customers who use wigs made by other companies, and is also engaged inpromotional activities for its “Hair Up Program” that uses patented hair volumizing
technology, while the Fontaine business is additionally engaged in endeavors such asincreasing revenues of directly owned stores and opening new stores in generalmerchandise stores. In its Bosley business in the U.S., the Target Company isengaged in activities such as hiring physicians and physician assistants toaccommodate the full-scale introduction of a hair transplant method that does not use
mesh (follicular unit extraction, or FUE) and conducting test marketing for Cool
Sculpting (a localized slimming procedure that uses cryolipolysis (fat freezing)) withan aim of business expansion to the area of beauty-related business, and in its overseas
wig business the Target Company is actively opening new stores and expanding salesof items such as products for women and hair volumizing products. Activities in theother businesses of the Target Company include mail order business such as by meansof e-commerce websites and opening new salons within hospital complexes.
Note 1:“Scalp care” means caring for the scalp by methods such as conducting
condition checks of the hair and scalp, or washing the scalp.

However, in the domestic men’s market, which has matured to an almost flat level ofgrowth, the wig business is experiencing intensified competition from contiguous
markets such as drugs for AGA (Androgenetic Alopecia) treatment and hair growth
stimulants. While there has also been a revitalization of the domestic women’smarket due to the increase in the major target population of women in their 50s through70s and an increase in the number of active seniors, leading to an outlook of market
growth, new customer acquisition has been slow for the Target Company due tocompetitors and the impact of non-industry players entering the market for low-priced
wigs. In the overseas businesses, also, factors such as the gradual progress of a shift
towards the abovementioned FUE and a heightened demand for women’s wigs has
generated a need for new products that meet the needs of new customers and for
securing human resource. Under these environments, in its consolidated businessresults for the fiscal year ending February 2016, the Target Company posted
consolidated net sales of 79,153 million yen (up 3.2% from the preceding fiscal year)
but also recorded adverse results such as an operating loss of 125 million yen (whereas
it posted 2,880 million yen in operating income in the preceding fiscal year), an

9

ordinary loss of 548 million yen (whereas it posted 5,997 million yen in ordinary profit
in the preceding fiscal year), and a net loss of 1,860 million yen (whereas it posted net
income of 5,075 million yen in the preceding fiscal year). Furthermore, the corporate
strength of the Target Company is currently weakening as a result of decisions madefrom 2009 under the direction of management members invited from outside the Target
Company, namely a loss of talent to competitors due to the introduction of a voluntary
retirement scheme and closing of the research and development facility (in Tainai-shi,
Niigata), confusion and a loss of customers due to a change in the name of the Target
Company, and confusion due to management policies such as the short-term pursuit ofrevenues and profits despite the decrease in the number of customers.
With this awareness of its environment, the Target Company set a management visionof “realizing the ‘good company’ standard” and adopted a basic policy of sanpo yoshi(three-way benefit) management comprising “customer satisfaction,” “employee
satisfaction,” and “corporate responsibility and trust earned from society,” based on
which it is endeavoring to enhance corporate value and aiming to expand global market
share and secure stable profits. In Japan, the Target Company is aiming to enhanceloyalty from wig users through after-sales services and expand its business domains,and in order to achieve these aims it is expanding its business mainly into hair solutions(see Note 2), along with total beauty (see Note 3) and organic care (see Note 4), as wellas into the medical market domain for hair implants and drug treatments for AGA. In
the U.S., the Target Company is aiming for Hair Club to open more locations andreinforce its presence in the market for women, and for Bosley to pursue globalizationand expand its medical business, while Aderans Hair Goods (AHG, the Target
Company’s distributor in the U.S.) is to widen sales channels, and in order to achievethese aims, the Target Company, in addition to developing new services using thestrength of physician-facilitated medical businesses and expanding into other countries
and enhancing its position in hair growth services, is working at responding todiversified demand in the wig and hair volumizing market and at enhancing its
after-sales services. In Europe, the Target Company is aiming to enter regions wherea presence has not yet been established, boost repeat sales for order-made products andstrengthen after-sales services, and in order to achieve these aims it is seeking to attaina number one share in each market by enhancing and firmly establishing orderingsalons, accelerating expansion into unpenetrated countries, and establishing a positionof overwhelming advantage. In Asia, the Target Company is aiming to firm its
foothold in the hair solutions business, and in order to achieve this aim it isendeavoring to firmly establish its hair solutions business, accelerate the speed ofbusiness growth in China, and set up bases in the ASEAN region.
Note 2:

Note 3:Note 4:“Hair solutions” means providing services such as scalp care, hair growthand hair volumizing, in response each customer’s different hair-related
concerns and needs.
“Total beauty” means an anti-aging regime centered on promoting healthy
hair and scalp.
“Organic care” means hair care products such as shampoos that are madeusing organic raw materials.

It is the belief of Mr. Nemoto (Representative Director, Chairman and President of theTarget Company) and Mr. Tsumura (Representative Director and Executive Vice
President of the Target Company) that, although the above measures being adopted by
the Target Company can be expected to offer sizeable growth and stabilized profits if
viewed from a medium-term perspective, the measures will not be able to immediately
contribute to the interests of the Target Company, and will require a considerable
amount of time and acquisition of talent, as well as various prior investments including10

the opening of new locations. In particular, it is the view of Mr. Nemoto and Mr.
Tsumura that various risks exist that could adversely affect aspects of the Target
Company such as its profit level and cash flow in the short term, and that these risks
mean that the business of the Target Company will continue to be in a position inwhich its future is uncertain and is unable to be viewed optimistically. With acompetitive environment that is undergoing changes in market dynamics such as the
new entry of non-industry players and the appearance of low-priced wigs, the risks forthe domestic business include a decrease in profitability in the immediate future due to
new expansion of after-sales service locations in order to achieve differentiation, as
well as cannibalization (see Note 5) due to the sale of low-priced wigs, along with theneed for investment in order to enter new business domains such as the medical market
for hair transplants or AGA treatment drugs, while the risks for the overseas businessinclude a need for investment in order to accelerate expansion into countries in which
there is not yet a presence. In light of their view as to the foregoing risks, Mr.
Nemoto and Mr. Tsumura, by early August 2016, came to believe that if the Target
Company were to attempt to implement these measures while remaining listed, itwould not be able to receive sufficient support from the capital markets, and that doing
so would thus possibly be disadvantageous to the interests of the shareholders of theTarget Company such as by adversely affecting the Target Company Share Price.
Note 5:“Cannibalization” means that the sale of low-priced wigs by the Target
Company would adversely affect the sale of the existing wigs of the Target
Company.

Further, Mr. Nemoto and Mr. Tsumura believed that, in order to speedily carry out thevarious abovementioned measures, it would be necessary to have networks, credit
strength, management knowhow, and fundraising capabilities of a level beyond that of
the Target Company at present, and that it would thus also be necessary to work
together with a third party who would be able to enhance these aspects of the Target
Company. Under those circumstances, Integral, which had already been making
investigations and studies into potential investment targets within Japan, gained an
opportunity to have discussions with Mr. Nemoto and Mr. Tsumura regarding thefuture of the business of the Target Company, and from that point forward the threeparties engaged in discussions and examinations regarding matters such as the businessstrategy of the Target Company and its capital policy, from the perspective of seeking
to grow the Target Company in the medium to long term.
Integral possesses an abundant network of talent such as in management, financial
strategy, marketing, overseas expansion operations, and international operational
alliances, and by utilizing such network of talent it would be possible for Integral tosupply the Target Company, through the Offeror, with the talent necessary to pursue
business reforms. Further, Mr. Nemoto and Mr. Tsumura believe that, by introducing
into the Target Company, through the Offeror, the various types of knowhow
possessed by Integral such as that pertaining to management, governance andcompliance, making reliable headway with the business reforms of the Target
Company will also become possible. With the view that maximally utilizing the
networks, knowhow and other attributes possessed by Integral would in this way leadto improvement in the corporate value of the Target Company, Mr. Nemoto and Mr.
Tsumura came to believe that Integral would be suitable as a partner who is able tosupplement the Target Company with the functions it requires.
With a view that in order for the Target Company to aim for future growth it isimportant that a management structure be developed that enables agile and flexible
decision-making from a medium- to long-term perspective without being overly

11

swayed by factors such as short-term fluctuations in business results and that the
management team and employees of the Target Company work as one, with thecooperation of Integral, to pursue business expansion and a strengthened managementfoundation, Mr. Nemoto and Mr. Tsumura, in mid-August 2016, began examining
making the Target Company a private company by way of an MBO jointly conductedwith Integral.
Mr. Nemoto and Mr. Tsumura believe that simply continuing to manage the Target
Company as it is without taking radical measures may result in the Target Company
being unable to realize its abovementioned corporate philosophy of protecting
customers, protecting employees, and fulfilling its responsibilities to society. Mr.
Nemoto and Mr. Tsumura also believe that maintaining the listing of the Target
Company in its current state may lead to extensive losses for ordinary shareholders.
For these reasons, Mr. Nemoto and Mr. Tsumura came to believe that it is essential to
make the Target Company a private company and pursue reforms of its businessstructure and measures to strengthen its management foundation from a medium- tolong-term viewpoint.
As a result of the foregoing considerations, Mr. Nemoto and Mr. Tsumura reached thedecision that the Transaction will contribute to the improvement of the corporate valueof the Target Company and is the optimal policy for its general shareholders as well as
its various other stakeholders. Therefore, in late August 2016, Mr. Nemoto and Mr.
Tsumura, after consulting with Integral, made a request with Integral to the Target
Company for discussions and negotiations aimed at conducting the Transaction.
According to the Target Company Press Release, upon receiving such request for theTransaction, the Target Company established a project team regarding this Transaction(the “Project Team”) in late August 2016, comprising Mr. Masayoshi Sato, a directorof the Target Company, and Mr. Masaaki Izumoto, an executive officer of the Target
Company, both of whom have no special interests in the Transaction, and the Target
Company reviewed and discussed through the Project Team matters such as the pros
and cons of the Transaction including the Tender Offer, and had discussions andnegotiations with Mr. Nemoto, Mr. Tsumura and Integral multiple times as described
below. It is also stated that, in order to be careful in the decision-making on theTransaction including the Tender Offer, to exclude any risk of arbitrariness and conflictof interest in the decision-making process of the board of directors of the Target
Company and to ensure fairness in such decision-making process, the Target Company
established an independent committee on August 20, 2016, composed of members
including outside experts who are highly independent from the Target Company, theOfferor, and Integral.
Mr. Nemoto, Mr. Tsumura, and Integral proceeded to conduct due diligence from lateAugust 2016 to early October 2016 in order to closely study the feasibility of theTransaction, and also commenced initial negotiations from late August 2016 regarding
the terms and conditions of the Transaction including the Tender Offer.
Further, Mr. Nemoto, Mr. Tsumura, and Integral, at the same time as proceeding withdetailed examination of the terms and conditions of the Transaction including theTender Offer, established the Offeror on September 26, 2016 as a special purpose
acquisition company for conducting the Transaction, and, based on considerations suchas the preliminary results of the due diligence, officially proposed to the Target
Company on September 27, 2016 to conduct the Transaction and to set the Tender
Offer Price as 590 yen.

12

Subsequently, Mr. Nemoto, Mr. Tsumura, and Integral examined the joint management
structure that would comprise Mr. Nemoto, Mr. Tsumura, and Integral, and engaged in
multiple discussions and negotiations with the Target Company regarding the terms
and conditions of the Tender Offer, including the future management policy of theTarget Company and the Tender Offer Price. The Project Team requested the Offeror
to re-deliberate the Tender Offer Price, in consideration of the opinion received fromthe independent committee on October 5, 2016 to the effect that the interests of theminority shareholders should be further taken into account in future discussions andnegotiations regarding prices.
After receiving the request form the Project Team, Mr. Nemoto, Mr. Tsumura, andIntegral re-deliberated the Tender Offer Price and further considered the meaning of
the Transaction as follows. Generally, the benefits of being a listed company can
include improved name recognition and credit strength, an enhanced ability to acquiretalent in recruitment activities, and the possibility for raising funds from the market.
However, Mr. Nemoto, Mr. Tsumura, and Integral believe that the Target Company, asa leading company in the full-service hair-related business, already possesses a highlevel of name recognition, credit strength and ability to acquire talent, and that thesequalities would not automatically be affected by the Target Company being delisted.
Also, Mr. Nemoto, Mr. Tsumura, and Integral believe that any need for the Target
Company to raise funds from the market would, at least in the short term, only besmall.
On the other hand, being a listed company entails disadvantages, including the cost ofremaining listed, a decrease in speediness of decision-making, and a difficulty inmaking investment from the abovementioned kind of long-term perspective due tofocusing on short-term profit improvement measures out of concern for the impact on
the share price. In light of the need for speedy decision-making and action-taking on
various measures formulated from a medium- to long-term perspective as set out above,
Mr. Nemoto, Mr. Tsumura, and Integral decided that, in the case of the Target
Company, the disadvantages of being listed outweigh the benefits.
As a result of taking into account considerations such as the benefits and disadvantages
entailed by the Transaction and the consequences of maintaining the listing of theTarget Company Shares as described above as well as the process of the above
discussions and negotiations with the Project Team, Mr. Nemoto, Mr. Tsumura, andIntegral came to believe that it is reasonable to set the Tender Offer Price as 620 yen
and made a revised offer to that effect to the Target Company on October 11, 2016.
Based on this revised offer, the Project Team and Mr. Nemoto, Mr. Tsumura, andIntegral further discussed and negotiated upon the pros and cons of the Transaction
including the Tender Offer and the terms and conditions therefor.
Based on the result of such discussions and negotiations, Mr. Nemoto, Mr. Tsumura,and Integral decided on October 14, 2016 to conduct the Tender Offer through theOfferor as part of the Transaction, setting the Tender Offer Price as 620 yen.
The Transaction constitutes a so-called management buyout (MBO), and Mr. Nemotoand Mr. Tsumura have agreed in the MBO Memorandum to continue to manage theTarget Company as the representative director of the Target Company after thecompletion of the Tender Offer. Meanwhile, with regard to the management structure
after the Merger, the Shareholders Agreement (as defined in “(iii) Shareholders
Agreement” of “6. Matters regarding material agreement(s) related to the Tender Offer”
below) provides that the side of Mr. Nemoto and Mr. Tsumura and the side of IntegralGroup may each appoint directors of the Target Company in a number prorated based13

on each side’s respective voting ratio in the Target Company. The Offeror isconsidering that one or multiple persons nominated by Integral will serve as directors
or statutory auditors of the Target Company, but details such as the number of any suchnominees, the timing of their nomination, and who the candidates would be, arecurrently undetermined. In addition, no agreement has been reached between the sideof the Offeror and the side of the directors and statutory auditors of the Target
Company other than Mr. Nemoto and Mr. Tsumura regarding any appointment of
directors or statutory auditors after the Tender Offer. It is planned that the details of
the management structure of the Target Company for after the Tender Offer iscompleted, including the composition of the directors and statutory auditors, will be
determined through discussions with the Target Company following the successful
completion of the Tender Offer. It is also planned that the employees of the Target
Company after the successful completion of the Tender Offer will in principle continue
to enjoy their current level of employment conditions.
(3)

Measures to ensure fairness of the Tender Offer Price and to avoid conflicts of interest
and other measures to ensure fairness of the Tender Offer
Taking into consideration the fact that the Tender Offer is a part of the Transaction fora management buyout (MBO) and the problem of structural conflicts of interest could
exist, the Offeror and the Target Company have primarily taken the following
measures to ensure the fairness of the Transaction including the Tender Offer in orderto ensure fairness of the Tender Offer Price, the purchase price of Stock Acquisition
Rights and the purchase price of the Convertible Bonds and to avoid arbitrariness andconflicts of interest in the decision-making process leading to the decision to conductof the Tender Offer.
(i)
(ii)
(iii)
(iv)
(v)

(vi)

Deliberation, discussion, negotiation, etc., by the Project Team;
Obtaining a share valuation report, etc. from an independent third party financial
advisor by the Target Company;
Obtaining advice from an independent law firm by the Target Company;
Establishment of an independent committee by the Target Company;
Approvals from all directors without conflicts of interest and opinions from all
statutory auditors without conflicts of interest in the Target Company to theeffect that they have no objections;
Securing objective circumstances that ensure fairness of the Tender Offer; andFor details of the measures listed above, please refer to “Measures to ensure fairness of
the Tender Offer Price and to avoid conflicts of interest and other measures to ensure
fairness of the Tender Offer” of “Process of calculation” of “(2) Price of tender offer”
of “4. Term, price and number of Share Certificates, Etc. for tender offer” below.
(4)

Policy for organizational restructuring, etc. after the Tender Offer (matters relating toso-called “Two-Step Acquisitions”)
If the Offeror fails to acquire all Target Company Shares (other than treasury shares
held by the Target Company and the Non-Tendered Shares) through the Tender Offer
as described in “(1) Outline of the Tender Offer” above, the Offeror plans to take aseries of procedures in the following manner so that the Offeror and Mr. Nemoto willhold all Target Company Shares (other than treasury shares held by the Target
Company) (the “Squeeze-out Procedures”).
Specifically, the Offeror intends to request the Target Company to hold anextraordinary general shareholders’ meeting at which the following proposals will be

14submitted (the “Extraordinary General Shareholders’ Meeting”) promptly after the
successful completion of the Tender Offer: (i) to conduct a consolidation of the Target
Company Shares (the “Share Consolidation”); and (ii) to make amendment to the
Articles of Incorporation of the Target Company to abolish the share unit number
provisions subject to the Share Consolidation taking effect. The Offeror and Mr.
Nemoto will vote in favor of each such proposal at the Extraordinary General
Shareholders’ Meeting. If the proposal of the Share Consolidation is approved at theExtraordinary General Shareholders’ Meeting, the shareholders of the Target Company
will, on the effective date of the Share Consolidation, hold the number of Target
Company Shares proportionate to the ratio of the Share Consolidation that is approvedat the Extraordinary General Shareholders’ Meeting. If there is a fraction of one shareof the Target Company Shares as a result of the Share Consolidation, each shareholderof the Target Company will receive an amount of money obtained by selling the Target
Company Shares equivalent to the total number of such fractions (any fraction of one
share in the total will be rounded down) to the Target Company or the Offeror orotherwise, in accordance with the procedures under Article 235 of the Companies Act(Act No. 86 of 2005, as amended; hereinafter the same) and other relevant laws andregulations. The sale price of such Target Company Shares equivalent to the total
number of the fractions will be valued so that the amount of money to be delivered toeach shareholder of the Target Company who did not tender its shares in the Tender
Offer (other than Mr. Nemoto and the Target Company) as a result of the sale will beequal to the price obtained by multiplying the Tender Offer Price by the number of theTarget Company Shares held by each such shareholder, and then a petition for
permission of voluntary sale will be filed on that basis. The ratio of the Share
Consolidation of the Target Company Shares has not been determined as of the datehereof. However, the ratio of the Share Consolidation will be determined so that the
number of the Target Company Shares held by each shareholder of the Target
Company (other than the Offeror and Mr. Nemoto) who did not tender its shares in theTender Offer will be a fraction of one share in order for only both or any of the Offeror
and Mr. Nemoto to hold all Target Company Shares (other than treasury shares held by
the Target Company). If the Extraordinary General Shareholders’ Meeting is held, it
will be held around January 2017 and the specific procedures and the schedule of
implementation thereof will be announced promptly by the Target Company once it
has decided them.
In relation to the implementation of the Share Consolidation, where as a result of theTender Offer, there is, or it is expected that there will be, a shareholder who holds a
number of Target Company Shares equivalent to or more than the Non-Tendered
Shares (4,944,658 shares) held by Mr. Nemoto, even if the Share Consolidation isconducted under such circumstances, it may not be possible for only the Offeror and
Mr. Nemoto to become the shareholders of the Target Company. In such case, theOfferor will, at its sole decision, request the Target Company to implement any
procedures necessary for only the Offeror and Mr. Nemoto to become the shareholdersof the Target Company.
The Companies Act provides that if the Share Consolidation has been conducted andthere is a fraction of one share of the Target Company Shares as a result of the Share
Consolidation, each shareholder of the Target Company may request the Target
Company to purchase all of the shares held by it that are fractions of one share at a fair
price and may file a petition to a court to determine the price of the Target Company
Shares in accordance with Articles 182-4 and 182-5 of the Companies Act and otherprovisions of relevant laws and regulations. In this case, the purchase price per sharewill ultimately be determined by a court.

15

The procedures above may be replaced with a method of using class shares with theoption to call all shares or other methods that have substantially comparable effect,
depending on, among other factors, the circumstances of interpretation of any relevant
law or regulation by the relevant authorities, the ownership ratio of Share Certificates,
Etc. by the Offeror and Mr. Nemoto after the Tender Offer and the ownership of Share
Certificates, Etc. of the Target Company by the Target Company’s shareholders andholders of stock acquisition rights or bonds with stock acquisition rights other than theOfferor and Mr. Nemoto. However, even in such case, the Offeror intends to adopt
the method of ultimately delivering money to the Target Company’s shareholders(other than the Mr. Nemoto and the Target Company) who did not tender their sharesin the Tender Offer. The amount of money to be delivered to such shareholders insuch case is expected to be valued so that it will be equal to the price obtained bymultiplying the Tender Offer Price by the number of Target Company Shares held bysuch shareholders.
If the Offeror fails to acquire all Stock Acquisition Rights in the Tender Offer despite asuccessful completion of the Tender Offer, the Offeror plans to promptly request theTarget Company to acquire the Stock Acquisition Rights, encourage the holders of theStock Acquisition Rights to waive their Stock Acquisition Rights or take any otherprocedures reasonably required to conduct the Transaction. If the Offeror fails toacquire all Convertible Bonds in the Tender Offer despite a successful completion of
the Tender Offer, the Convertible Bonds which failed to be acquired in the Tender
Offer will be redeemed at 5,000,000 yen per 5,000,000 yen in face value in accordancewith the provisions of early redemption after the completion of settlement of theTender Offer.
The Offeror plans to carry out the Merger, whereby the Offeror will be thedisappearing corporation and the Target Company will be the surviving corporation,
after implementing each of the procedures above, but the specific schedule has notbeen determined yet.
The Tender Offer is not intended to solicit the shareholders of the Target Company toapprove the proposals at the Extraordinary General Shareholders’ Meeting.
(5)

Possibility of and reasons for delisting
The Target Company Shares are listed on First Section of the Tokyo Stock Exchange
as of the date hereof. However, since the Offeror has not set a maximum limit on thenumber of Share Certificates, Etc. to be purchased in the Tender Offer, the Target
Company Shares may be delisted through prescribed procedures in accordance with thestock delisting criteria of the Tokyo Stock Exchange, depending on the results of theTender Offer. Also, even in the case where the shares of common stock of the Target
Company do not fall under that criteria at the time of the successful completion of theTender Offer, the Offeror plans to conduct the Squeeze-Out Procedures set out in “(4)Policy for organizational restructuring, etc. after the Tender Offer (matters relating toso-called “Two-Step Acquisitions”)” above after the successful completion of theTender Offer, in which case the Target Company Shares will be delisted through theprescribed procedures in accordance with the stock delisting criteria of the Tokyo
Stock Exchange. After delisting, the Target Company Shares will be unable to be
traded on the First Section of the Tokyo Stock Exchange.

(6)

Matters regarding material agreement(s) related to the Tender Offer(i)

MBO Memorandum16

As described in “(1) Outline of the Tender Offer” above, the Integral Group hasentered into the MBO Memorandum dated October 14, 2016 with Mr. Nemoto and Mr.
Tsumura, whereby Mr. Nemoto has agreed (i) not to tender in the Tender Offer the
Non-Tendered Shares (the number of shares held: 4,944,658 shares; and the ownership
ratio: 11.94%), (ii) to tender in the Tender Offer the Expected Tendered Stock
Acquisition Rights (Mr. Nemoto) (the total number of underlying shares: 137,100
shares; and the total ownership ratio: 0.33%), and (iii) to waive without any
consideration all of the Expected Waived Stock Acquisition Rights (Mr. Nemoto) (thetotal number of underlying shares: 70,000 shares; and the total ownership ratio: 0.17%)
in a timely manner upon the successful completion of the Tender Offer. Also, under
the MBO Memorandum, Mr. Tsumura has agreed to tender in the Tender Offer the
Expected Tendered Share Certificates, Etc. (Mr. Tsumura) (the total number ofunderlying shares: 135,400 shares; and the total ownership ratio: 0.33%). No
conditions precedent for the tendering or non-tendering of such shares and stockacquisition rights are stipulated.
In addition, Mr. Nemoto has agreed under the MBO Memorandum to contribute atleast 1,200,000,000 yen to the Offeror at least two (2) Business Days prior to thesettlement commencement date of the Tender Offer and subject to the successful
completion of the Tender Offer. Mr. Nemoto has also agreed in the MBO
Memorandum with respect to the Non-Tendered Shares (4,944,658 shares) as follows:(a) he will exercise the voting rights represented by the Non-Tendered Shares to theextent necessary for the Squeeze-out Procedures; and (b) if as a result of the Tender
Offer, there is, or it is expected that there will be, a shareholder who holds a number ofTarget Company Shares equivalent to or more than the Non-Tendered Shares, Mr.
Nemoto will implement any procedures necessary for only the Offeror and Mr. Nemoto
to become the shareholders of the Target Company.
In addition to the above, Mr. Nemoto and Mr. Tsumura intend to make contribution to
the Offeror or the Target Company respectively under the MBO Memorandum so thatthe total ratio of contribution to the Target Company by Mr. Nemoto and Mr. Tsumura
after the Merger will be approximately 50.1%.
(ii)

Tender Agreement (FT)As described in “(1) Outline of the Tender Offer” above, Mr. Nemoto and Mr.
Tsumura have entered into the Tender Agreement (FT) dated October 13, 2016 with
FT, whereby FT has agreed to tender all of the Target Company Shares held by FT (thenumber of shares held: 7,662,500 shares; and the ownership ratio: 18.51%) in theTender Offer. Given that the negotiation with FT was mainly conducted by Mr.
Nemoto and Mr. Tsumura, the Tender Agreement (FT) was entered into by Mr.
Nemoto and Mr. Tsumura.
The Tender Agreement (FT) provides that the tendering by FT is subject to theconditions precedent that FT is not aware of any Material Fact (having the meaning as
defined in Paragraph 2 of Article 166 of the Financial Instruments and Exchange Act)with respect to the Target Company which is not published as of the date of the tender.
In certain situations where a third party commences a counter tender offer during theTender Offer Period, FT may be able to tender its shares in such counter tender offer at
its decision. In addition, it is not restricted for FT to sell its Target Company Shareson the stock market.

17

(iii)

Shareholders Agreement
The Integral Group has entered into the shareholders agreement dated October 14,
2016 with Mr. Nemoto and Mr. Tsumura regarding, among others, the board membersof the Target Company after the Transaction, matters that require prior approvals
related to the operation of the Target Company, and share transfer restrictions of theTarget Company (the “Shareholders Agreement”). The Shareholders Agreement
provides that it will take effect on the effective date of the Merger.
In addition to the above, the Integral Group, Mr. Nemoto and Mr. Tsumura intend toenter into an executive service agreement regarding, among others, the management of
the Target Company upon the successful completion of the Tender Offer. In suchcase, the Integral Group and the Target Company will enter into a capital and businessalliance agreement that provides for matters necessary for the Target Company torealize the contents and purposes of the Shareholders Agreement.

4.

Term, price and number of Share Certificates, Etc. for tender offer(1)

Tender offer period(i)

Initial term as of registration

From Monday, October 17, 2016 throughTuesday, November 29, 2016 (30 business days)
Date of public notice
Monday, October 17, 2016
Public notice will be made electronically via theInternet, and a notice to that effect will be
Name of newspaper in which public notice ispublished in the Nikkei.
to appear
(URL
of
the
electronic
notice:http://disclosure.edinet-fsa.go.jp/)
Tender offer period

(ii)
(iii)

(2)

The possibility of extension of tender offer period upon request of the Target Company
N/A
Person to contact for information about extension of tender offer period
N/A

Price of tender offer

Share certificate
620 yen per share of common stock
Certificate of stock 1 yen per Fourth Series Stock Acquisition Right
acquisition rights
1 yen per Fifth Series Stock Acquisition Right
1 yen per Sixth Series Stock Acquisition Right
1 yen per Seventh Series Stock Acquisition Right
10,100 yen per Eighth Series Stock Acquisition Right
Certificate of bond with 1,453,280 yen per 5,000,000 yen in face value of Convertible Bonds
stock acquisition rights
Trustbeneficiary
certificate for Share
Certificates,
Etc.
()
Depositary receipt for
Share Certificates, Etc.
()
Basis of calculation(i) Common stock18

In determining the Tender Offer Price, the Offeror made a broad-ranging andcomprehensive analysis on the business and financial status of the Target
Company based on the financial information and other materials disclosed by
the Target Company, the results of due diligence conducted with respect to theTarget Company, and other matters. In light of the fact that the Target
Company Shares are traded on a financial instruments exchange, the Offeror
also referred to the trends of the closing price (483 yen) of the Target Company
Shares on the Tokyo Stock Exchange as of October 13, 2016, which is theBusiness Day immediately preceding the date of announcement to conduct theTender Offer and the simple average closing prices of the one-month,three-month and six-month periods prior to October 13, 2016 (461 yen, 455 yen
and 495 yen; all rounded to the nearest whole number; the same applies forcalculations of simple averages hereinafter). By also comprehensively taking
into consideration the possibility of endorsement of the Tender Offer by theTarget Company and the prospect of successful completion of the Tender Offer,and upon discussion and negotiation with the Target Company, the Offeror
determined the Tender Offer Price to be 620 yen on October 14, 2016. As
described above, the Offeror has determined the Tender Offer Price bycomprehensively taking into consideration the factors related to the share valueof the Target Company (e.g. being based on objective materials such as
financial information while referring to premium rates adopted in past MBO
cases) and upon discussion and negotiation with the Target Company, and has
not obtained any share valuation report from any third-party appraiser.
The Tender Offer Price represents (i) a premium of 28.36% (rounded to two
decimal points; the same applies for calculations of premium rates hereinafter)
on 483 yen, the closing price of the Target Company Shares on the Tokyo Stock
Exchange as of October 13, 2016, which is the Business Day immediately
preceding the date of announcement to conduct the Tender Offer, (ii) a premiumof 34.49% on 461 yen, the simple average closing price for the one-month
period prior to October 13, 2016, (iii) a premium of 36.26% on 455 yen, thesimple average closing price for the three-month period prior to October 13,
2016, and (iv) a premium of 25.25% on 495 yen, the simple average closing
price for the six-month period prior to October 13, 2016. The Tender Offer
Price also represents a premium of 29.17% on 480 yen, the closing price of theTarget Company Shares on the Tokyo Stock Exchange as of October 14, 2016,
which is the Business Day immediately preceding the filing date of thisStatement.
(ii) Stock Acquisition Rights
With regard to the Fourth, Fifth, Sixth, and Seventh Series Stock Acquisition
Rights out of the Stock Acquisition Rights, the exercise price of each Stock
Acquisition Right per Target Company Share (Fourth Series Stock Acquisition
Rights: 972 yen, Fifth Series Stock Acquisition Rights: 1,381 yen, Sixth Series
Stock Acquisition Rights: 1,571 yen, Seventh Series Stock Acquisition Rights:
1,088 yen) exceeds the Tender Offer Price (620 yen) as of the date hereof.
Therefore, the Offeror has determined that the purchase price per Fourth, Fifth,
Sixth, and Seventh Series Stock Acquisition Right is to be 1 yen.
On the other hand, with respect to the Eighth Series Stock Acquisition Rights,
the exercise price of each Eighth Stock Acquisition Right per Target Company
Share (519 yen) falls below the Tender Offer Price (620 yen) as of the datehereof. Therefore, the Offeror has determined that the purchase price per
Eighth Series Stock Acquisition Right is to be 10,100 yen, which is obtained bymultiplying the difference (101 yen) of the Tender Offer Price (620 yen) and19

the exercise price of each Eighth Series Stock Acquisition Right per Target
Company Share by the number of the Target Company Shares underlying each
Eighth Series Stock Acquisition Right (100 shares).
Although approval by the board of directors of the Target Company is required
for acquisition of any Stock Acquisition Rights by transfer, according to theTarget Company, the Target Company has resolved at its board of directors
meeting held on October 14, 2016 to comprehensively approve that the holdersof the Stock Acquisition Rights transfer their Stock Acquisition Rights to theOfferor by tendering their Stock Acquisition Rights in the Tender Offer, subject
to the successful completion of the Tender Offer.
In determining the tender offer price of Stock Acquisition Rights, the Offeror
has not obtained any valuation report from a third-party appraiser because it has
calculated such tender offer price based on the Tender Offer Price.
(iii) Convertible Bonds
The Offeror has determined the purchase price per 5,000,000 yen in face valueof the Convertible Bonds to be 1,453,280 yen, which is obtained by multiplying
the face value of the Convertible Bonds (5,000,000 yen) divided by theeffective conversion price (2,133 yen) as of the date hereof (2,344 shares) (anyfraction will be rounded down) by the Tender Offer Price (620 yen). Such
purchase price of 1,453,280 yen represents a discount of 70.93% (rounded totwo decimal points) on the face value of 5,000,000 yen.
If the Tender Offer is successful and the Transaction is conducted, theConvertible Bonds which failed to be acquired in the Tender Offer will be
redeemed at 5,000,000 yen per 5,000,000 yen in face value in accordance withthe provisions of early redemption. The purchase price per 5,000,000 yen inface value of the Convertible Bonds in the Tender Offer (1,453,280 yen) falls
below such redemption amount per 5,000,000 yen in face value of theConvertible Bonds (5,000,000 yen) by 3,546,720 yen.

Process of calculation

In determining the tender offer price of Convertible Bonds, the Offeror has not
obtained any valuation report from a third-party appraiser because it calculates
such tender offer price based on the Tender Offer Price.
Process for determination of Tender Offer Price and purchase prices for
Stock Acquisition Rights and Convertible Bonds
With a view that in order for the Target Company to aim for future growth it isimportant that a management structure be developed that enables agile andflexible decision-making from a medium- to long-term perspective without
being overly swayed by factors such as short-term fluctuations in businessresults and that the management team and employees of the Target Company
work as one, with the cooperation of Integral, to pursue business expansion anda strengthened management foundation, Mr. Nemoto and Mr. Tsumura, in
mid-August 2016, began examining making the Target Company a privatecompany by way of an MBO jointly conducted with Integral. As a result of
the foregoing considerations, Mr. Nemoto and Mr. Tsumura reached thedecision that the Transaction will contribute to the improvement of thecorporate value of the Target Company and is the optimal policy for its generalshareholders as well as its various other stakeholders. Therefore, in lateAugust 2016, Mr. Nemoto and Mr. Tsumura, after consulting with Integral,made a request to the Target Company with Integral for discussions andnegotiations aimed at conducting the Transaction, and then proceeded to
conduct due diligence from late August 2016 to early October 2016 in order to20

closely study the feasibility of the Transaction, and also commenced initialnegotiations from late August 2016 regarding the terms and conditions of theTransaction including the Tender Offer.
Further, Mr. Nemoto, Mr. Tsumura, and Integral, at the same time asproceeding with detailed examination of the terms and conditions of theTransaction including the Tender Offer, established the Offeror on September
26, 2016 as a special purpose acquisition company for conducting theTransaction, and, based on considerations such as the preliminary results of thedue diligence, officially proposed to the Target Company on September 27,
2016 to conduct the Transaction and to set the Tender Offer Price as 590 yen.
Subsequently, Mr. Nemoto, Mr. Tsumura, and Integral examined the joint
management structure that would comprise Mr. Nemoto, Mr. Tsumura, andIntegral, and engaged in multiple discussions and negotiations with the Target
Company regarding the terms and conditions of the Tender Offer, including thefuture management policy of the Target Company and the Tender Offer Price.
The Project Team requested the Offeror to re-deliberate the Tender Offer Price,in consideration of the opinion received from the independent committee on
October 5, 2016 to the effect that the interests of the minority shareholders
should be further taken into account in future discussions and negotiations
regarding prices.
After receiving the request from the Project Team, Mr. Nemoto, Mr. Tsumura,and Integral re-deliberated the Tender Offer Price and further considered themeaning of the Transaction.
As a result of taking into account considerations such as the benefits anddisadvantages entailed by the Transaction and the consequences of maintaining
the listing of the Target Company Shares, as described above as well as theprocess of the above discussions and negotiations with the Project Team, Mr.
Nemoto, Mr. Tsumura, and Integral came to believe that it is reasonable to set
the Tender Offer Price as 620 yen and made a revised offer to that effect to theTarget Company on October 11, 2016. Based on this revised offer, the Project
Team and Mr. Nemoto, Mr. Tsumura, and Integral further discussed andnegotiated upon the pros and cons of the Transaction including the Tender
Offer and the terms and conditions therefor.
As described in “Basis of calculation” above, by comprehensively taking into
consideration the factors related to the share value of the Target Company (e.g.
being based on objective materials such as financial information while referring
to premium rates adopted in past MBO cases), and upon discussion andnegotiation with the Target Company, Mr. Nemoto, Mr. Tsumura, and Integral
determined on October 14, 2016 to conduct the Tender Offer through theOfferor as part of the Transaction, setting the Tender Offer Price to be 620 yen.
Measures to ensure fairness of the Tender Offer Price and to avoid
conflicts of interest and other measures to ensure fairness of the Tender
Offer
Taking into consideration the fact that the Tender Offer is a part of theTransaction for a management buyout (MBO) and the problem of structural
conflicts of interest could exist, the Offeror and the Target Company haveprimarily taken the following measures to ensure the fairness of the Transaction21

including the Tender Offer in order to ensure fairness of the Tender Offer Price,and the purchase price of the Stock Acquisition Rights and the Convertible
Bonds and to avoid arbitrariness and conflicts of interest in the decision-making
process leading to the decision to conduct of the Tender Offer.
(i) Deliberation, discussion, negotiation, etc., by the Project Team
According to the Target Company Press Release, upon receiving the proposal
for the Transaction from Mr. Nemoto and Mr. Tsumura in late August 2016
upon their discussion with Integral, the Target Company established the Project
Team in late August 2016, comprising Mr. Masayoshi Sato, a director of theTarget Company, and Mr. Masaaki Izumoto, an executive officer of the Target
Company, both of whom have no special interests in the Transaction, and theTarget Company reviewed and discussed through the Project Team matters suchas the pros and cons of the Transaction including the Tender Offer from theperspective mentioned above, and had discussions and negotiations with Mr.
Nemoto, Mr. Tsumura and Integral multiple times, in order to be careful in thedecision-making on the Transaction including the Tender Offer, to exclude any
risk of arbitrariness and conflict of interest in the decision-making process ofboard of directors of the Target Company and to ensure fairness in suchdecision-making process, by taking into account the fact that the Transaction
constitutes a so-called management buyout (MBO) and the possibility ofexistence of structural conflicts of interest.
It is also stated that specifically, the Project Team (i) conducted reviews anddiscussions on the Transaction from late August 2016, (ii) carefully reviewed
and discussed the reasonableness of terms of purchase under the Tender Offer
such as the Tender Offer Price and the fairness of series of procedures ofTransaction from the perspective of enhancement of corporate value of theTarget Company and common interests of shareholders of the Target Company
by receiving advices, opinions and other assistances from financial advisor andlegal advisor who are independent from the Offeror and Integral, as provided in“(ii) Obtaining a share valuation report, etc. from an independent third party
financial advisor by the Target Company” and “(iii) Obtaining advice from an
independent law firm by the Target Company”, and (iii) had discussions andnegotiations with Mr. Nemoto, Mr. Tsumura and Integral multiple times. (Fordetails of the process of negotiation, please see “(2) Background, purpose anddecision-making process leading to decision to conduct the Tender Offer, andmanagement policy after the Tender Offer” of “3. Purposes of tender offer.”)
It is also stated that Mr. Nemoto, who is Representative Director, Chairman andPresident of the Target Company, and Mr. Tsumura, who is Representative
Director and Executive Vice President of the Target Company have not been
appointed as a member of the Project Team and have not been involved in any
reviews or discussion by the Project Team mentioned above, in order to avoid
any conflict of interest based on the fact that, they plan to enter into amanagement agreement with Integral Group concerning the continuingmanagement of the Target Company by Mr. Nemoto and Mr. Tsumura as theRepresentative Directors of the Target Company after the completion of theTender Offer. The Target Company Press Release states that it is also
considered that Mr. Nemoto plans to make a capital contribution to the Offeror
no later than two business days prior to the commencement date of settlementof the Tender Offer, the total capital contribution ratio of Mr. Nemoto and Mr.
Tsumura in the Target Company after the Merger under the Transaction isplanned to be approximately 50.1%, and the side of Mr. Nemoto and Mr.

22

Tsumura and the side of Integral Group may each appoint directors of theTarget Company in a number prorated based on each side’s respective voting
ratio in the Target Company.
(ii) Obtaining a share valuation report, etc. from an independent third party
financial advisor by the Target Company
According to the Target Company Press Release, to express an opinion on theTender Offer Price, the Target Company requested Plutus Consulting Co., Ltd.
(“Plutus Consulting”), which is a financial advisor and third party valuation
institution independent from the Target Company, the Offeror and Integral, tocalculate the value of the Target Company Shares and received the sharevaluation report from Plutus Consulting on October 13, 2016. It is also statedthat Plutus Consulting, which is a financial advisor and third party valuation
institution, is not a party related to the Target Company, the Offeror andIntegral and does not have any notable material interest in the Tender Offer. It
is also stated that the Target Company has not received a fairness opinion on
Tender Offer Price from Plutus Consulting.
It is also stated that upon considering the calculation methods to be used for theTender Offer, Plutus Consulting conducted the calculation by using the market
share price method due to the fact that the Target Company Shares are listed on
the First Section of the Tokyo Stock Exchange and by using the discounted
cash flow method (the “DCF method”) to reflect the future business activitiesof the Target Company in the calculation. It is also stated that the value
ranges per Target Company Share as calculated by Plutus Consulting by using
the methods mentioned above are as provided below.
Market share price method: 455 yen to 495 yen
DCF Method: 536 yen to 685 yen
It is also stated that under the market share price method, by making October
13, 2016 as the reference date, the calculation resulted in a range of share value
per Target Company Share of 455 yen to 495 yen based on the closing price ofTarget Company Shares of 483 yen on the Tokyo Stock Exchange as of thereference date, the simple average closing price of Target Company Shares ofpast 1-month period of 461 yen (all rounded to the nearest whole number; thesame applies for calculations of simple averages hereinafter), the simple
average closing price of Target Company Shares of past 3-month period of 455
yen and the simple average closing price of Target Company Shares of past
6-month period of 495 yen.
It is also stated that under the DCF method, the corporate value of the Target
Company has been evaluated by taking the future cash flows which will be
generated in and after the third quarter of fiscal year ending February 2017
based on the future earnings forecast of the Target Company by considering thefactors such as the business plan prepared by the Target Company for theperiod from the fiscal year ending February 2017 to the fiscal year ending
February 2021, interviews with the Target Company and information publicly
available, and then determining the present value of such future cash flows by
discounting them by a certain discount rate corresponding to the business risk.
It is also stated that the discount rate (shareholder’s equity cost) used was
5.404% to 6.240% and the contentious value was calculated by using theperpetuity growth method with the perpetuity growth rate at 0%.

23

It is also stated that the financial forecasts based on the business plan of theTarget Company, which were used as the basis of calculation using the DCF
method, are as provided below. It is also stated that such plan incorporates theimpact of downward adjustment of earnings forecast disclosed by the Target
Company in the announcement of “Notice regarding Differences between First
Two-Quarter Performance Forecast and Actual Results and Revision of
Full-Year Performance Forecast” on October 14, 2016 and “(Correction) Partial
Correction to ‘Notice regarding Differences between First Two-Quarter
Performance Forecast and Actual Results and Revision of Full-Year
Performance Forecast’” on October 17, 2016 (please see (2) Announcement of“Notice regarding Differences between First Two-Quarter Performance
Forecast and Actual Results and Revision of Full-Year Performance Forecast”
of “6. Other matters” of “V. Conditions of the Target Company” below). It isalso stated that the financial forecasts provided below also include the businessyears in which significant increase or decrease in earnings is expected. It isalso stated that specifically, in the fiscal year ending February 2017 and thefiscal year ending February 2018, a significant decrease in earnings is expectedcompared to the fiscal year immediately preceding each of such fiscal years
mainly due to reasons such as slowdown in acquiring new customers in
Fontaine business (Ready-Made) due to the entry of competitors and companies
in different business into the low-end wig market and increase in shop-related
costs and labor costs relating to the opening of new shops. It is also stated thatbetween the fiscal year ending February 2019 and the fiscal year ending
February 2021, a significant increase in earnings compared to the fiscal year
immediately preceding each of such fiscal years is expected by taking measures
such as attraction and retention of wig users through the after-services andexpansion of business areas in Japan, opening of new Hair Club locations andstrengthening of business towards female customers in the U.S., global
expansion of Bosley, expansion of healthcare business and strengthening hair
restoration business, and meeting the diversified demands and strengthening ofafter-services in wig and hair growth markets. It is also stated that the synergy
effects expected to occur upon implementation of Transaction are not added tothe said financial forecasts because it was difficult to make specific estimation
at the present time.

Net Sales
Operating
Income(Operating
Loss)
EBITDAFree CashFlow(million yen)
FiscalFiscalYear
Year
EndingEndingFebruary February
2020
2021

SecondHalf ofFiscalYear
EndingFebruary2017 (6months)39,602(539)

FiscalYear
EndingFebruary
2018

FiscalYear
EndingFebruary
2019

79,156(527)

82,331(104)

85,965744

89,8801,999

1,720(1,523)

3,961
(526)

4,230
465

5,008
958

6,308
2,018

It is also stated that the financial forecasts as provided above differ from the24

figures provided in the consolidated sales, consolidated operating income andconsolidated EBITDA provided in the “Aderans Group New Medium-term
Business Plan ESCR 2016”, which was published by the Target Company on
April 14, 2016, for the reasons provided below.
It is also stated that acquisition of new customers is slowing down due to theintensification in the competition of wig business with the adjacent markets
such as the markets for AGA (androgenetic alopecia) treatment products, hair
restoration products and hair growth products with respect to the men’s market
in Japan and the entry of competitors and companies in different business into
the low end wig market with respect to the women’s market in Japan. It isalso stated that as for the overseas business, the shift to new hair transplant
method (FUE) is slower than expected and the development and advertisingcosts for new products and shop-related costs and labor costs relating to theactive opening of new shops are increasing in order for the Target Company tomeet the new customers’ needs based on the increase in demands for women’swigs. It is also stated that for this reason, the Target Company concluded thatinstead of using the figures provided in the “Aderans Group New Medium-term
Business Plan ESCR 2016”, which were the target figures of the Target
Company, it was more appropriate to consider the reasonableness of Tender
Offer Price by making objective and reasonable calculation of corporate valueof the Target Company based on the forecasts which are more in line with thecurrent condition by taking into account, among others, the up-to-date businessenvironment and business performance of the Target Company.
It is also stated that the Target Company has not obtained any valuation reportor fairness opinion from any third party valuation institution with respect to thepurchase price per stock acquisition right of Stock Acquisition Rights andpurchase price per face value of 5,000,000 yen of Convertible Bond. It is also
stated that since acquisition of any Stock Acquisition Rights by assignment
requires the approval of board of directors of the Target Company, the Target
Company resolved at its board of directors meeting held on October 14, 2016 tocomprehensively approve the stock acquisition right holders’ assignment ofStock Acquisition Rights held by them to the Offeror by tendering the Tender
Offer on condition of the successful completion of the Tender Offer.
(iii) Obtaining advice from an independent law firm by the Target Company
According to the Target Company Press Release, in order to ensure thetransparency and reasonableness of decision-making process of board of
directors of the Target Company with respect to the Transaction including theTender Offer, the Target Company appointed Nomura & Partners as a legal
advisor who is independent from the Target Company, the Offeror and Integral
and has been receiving necessary legal advice from such law firm concerning
the method and process of decision-making of board of directors of the Target
Company and other matters to keep in mind in relation to the Transaction
including the Tender Offer. It is also stated that Nomura & Partners is also
not a party related to the Target Company, the Offeror and Integral and does
not have any notable material interest in the Tender Offer.
(iv) Establishment of an independent committee by the Target Company
According to the Target Company Press Release, on August 20, 2016, theTarget Company resolved to establish an independent committee, which
comprises of members including outside experts who are highly independent25

from the Target Company, the Offeror and Integral (as members of independent
committee, Mr. Seiji Yamashita (attorney of Yamashita Sogo Law Offices) andMr. Masaaki Suda (Certified Public Accountant of Suda Certified Public
Accountant Office, both of whom are outside experts who are highly
independent from the Target Company, the Offeror and Integral, and Mr.
Kazuhiro Miyakawa (Certified Public Accountant and Certified Public Tax
Accountant) who is outside statutory auditor of the Target Company andindependent executive as prescribed in Article 436-2 of Securities Listing
Regulations of Tokyo Stock Exchange), to have such independent committee(i) review and make the opinion to the board of directors of Company, among
others, (1) whether or not the purpose of Tender Offer (including any
transaction relating to delisting of the Target Company would be deemed
reasonable (including the issue of whether or not the Tender Offer (including
any transaction relating to delisting of the Target Company) would contributeto the enhancement of corporate value of the Target Company), (2) whether or
not the fairness of tender offer price of Tender Offer has been ensured, and (3)whether or not the interests of shareholders of the Target Company have beentaken into consideration through fair procedures, in connection with the policy
on expression of opinion to be made by the board of directors of the Target
Company in relation to the Tender Offer (“Response Policy”), and issue a
notice on the contents of Response Policy and (ii) review whether or not thedecision of board of directors of the Target Company on the Response Policy(including the decision on any transaction relating to delisting of the Target
Company) based on (i) above would go against the interests of minority
shareholders of the Target Company (collectively, “Matters of Inquiry”), in
order to be careful in the decision-making on the Transaction including theTender Offer, to exclude any risk of arbitrariness and conflict of interest in thedecision-making process of board of directors of the Target Company and toensure fairness in such decision-making process, by taking into account the factthat the Transaction falls under so-called management buyout (MBO) and thepossibility of existence of structural conflict of interest. It is also stated thatthe independent committee was held seven times in total from September 8,2016 to October 13, 2016 and carefully reviewed and discussed the Matters ofInquiry. It is also stated that specifically, the independent committee (a)received explanation from the Project Team such as current status of the Target
Company, significance of Transaction, enhancement of corporate value,
business plan, contents of proposals made by Integral, Mr. Nemoto and Mr.
Tsumura, and progress of negotiation, (b) was informed by Integral and Mr.
Tsumura through hearing the details on, among others, purpose andsignificance of Transaction, management policy after the implementation ofTransaction, and handling of employees, and conducted Q&As relating to thesematters, and (c) further received explanation from Plutus Consulting on thecalculation of value of Target Company Shares and conducted Q&As.
It is also stated that upon carefully reviewing and discussing the Matters ofInquiry under the circumstances mentioned above, the independent committee,
by unanimous vote of members, provided the board of directors of the Target
Company with the response letter on October 13, 2016 of which the summary is
as provided below.
(i) (1) The Transaction will achieve the further strengthening of earnings
base and enhancement of corporate value of the Target Company and its
purpose is reasonable due to the fact that by delisting of the Target Company
through the Transaction, (a) the management system, under which flexible
and adjustable decision-making will be made from a medium- and long-term

26perspective without being swayed by short-term changes such as changes inbusiness performance and share price, will be developed, (b) the
reorganization of its business structure and the strengthening of managementbase will be facilitated, (c) prompt and appropriate response to the changes inbusiness environment surrounding the Target Company and risks
accompanying such changes will become possible, and (d) receipt from
Integral a valuable support on, among others, improvement on existing
business operations, active and planned undertaking of new businesses,
precise assessment of risk and management process and speedy
decision-making and access to Integral’s human resource network in terms
of, among others, management, financial strategy, marketing, overseas
expansion work and international business tie-up will likely become possible
due to the participation by Integral, (2) the terms of Transaction arereasonable due to reasons such as the fact that (a) it is planned that theamount of payment to be made during the two-step buyout will be calculated
in a way so that such amount will become identical to the price equal to theTender Offer Price multiplied by the number of common stocks of the Target
Company owned by the common shareholders of the Target Company, (b)the period of tender offer under the terms of Tender Offer is set for relatively
long time, (c) the Tender Offer Price can be considered as a price with aconsiderable amount of premium added because it is a price to which a
premium is added in the amount equal to 28.36% of closing price of Target
Company Shares of 483 yen on the First Section of the Tokyo Stock
Exchange as of October 13, 2016, in the amount equal to 34.49% of simple
average closing price of Target Company Shares of past 1-month period of
461 yen until October 13, 2016, in the amount equal to 36.26% of simple
average closing price of Target Company Shares of past 3-month period of
455 yen until October 13, 2016, and in the amount equal to 25.25% of simple
average closing price of Target Company Shares of past 6-month period of
495 yen until October 13, 2016, and (d) the price has been decided after
taking appropriate measures to resolve any conflict of interest, and (3) bytaking into account the facts such as the fact that no directors, who have any
conflict of interest with the Target Company, participated in thedecision-making process concerning the Transaction, independent financial
advisor and legal advisor have been appointed, and share valuation report has
been procured from independent third party valuation institution, it would beconsidered as reasonable for the board of directors of the Target Company toexpress an opinion in support of Tender Offer and to recommend toshareholders of the Target Company to tender their Target Company Sharesin response to the Tender Offer due to the fact that the procedures ofTransaction are transparent and fair and the interests of minority shareholdersof the Target Company have been taken into consideration. On the other
hand, it would be considered reasonable to leave the decision to the holdersof Stock Acquisition Rights and Convertible Bonds with respect to the issueof whether or not such holders should tender their Stock Acquisition Rights
and Convertible Bonds in response to the Tender Offer due the fact that (a)the decision has been made that the purchase price of Fourth Series Stock
Acquisition Rights, Fifth Series Stock Acquisition Rights, Sixth Series Stock
Acquisition Rights and Seventh Series Stock Acquisition Rights per stockacquisition right is 1 yen because the exercise price per Target Company
Share with respect to such Stock Acquisition Rights exceeded the Tender
Offer Price, (b) the decision has been made that the purchase price of Eighth
Series Stock Acquisition Rights per stock acquisition right is 10,100 yen
which is the difference (101 yen) between the Tender Offer Price and the27exercise price per Target Company Share with respect to the Eighth Series
Stock Acquisition Rights multiplied by 100 which is the number of Sharessubject to one Eighth Series Stock Acquisition Rights because the exercise
price per Target Company Share with respect to the Eighth Stock Acquisition
Rights (519 yen) is lower than the Tender Offer Price, but the exercise period
begins approximately 1 year and 8 months after the final day of Tender Offer
Period and (b) the purchase price of Convertible Bonds per convertible bondis 1,453,280 yen which is the face value of Convertible Bonds in the amountof 5,000,000 yen after dividing by the valid conversion price in the amountof 2,133 yen (2,344 shares) (rounding off anything less than 1 share) andmultiplying by Tender Offer Price.
(ii) Accordingly, the Transaction would be deemed as not going against theinterests of minority shareholders of the Target Company.
(v) Approvals from all directors without conflicts of interest and opinions fromall statutory auditors without conflicts of interest in the Target Company to theeffect that they have no objections
According to the Target Company Press Release, as provided in “(2)Background, purpose and decision-making process leading to decision to
conduct the Tender Offer, and management policy after the Tender Offer” of“3. Purposes of tender offer” above, the Target Company received a proposal inlate August 2016 from Mr. Nemoto and Mr. Tsumura, who had discussions
with Integral, and based on such proposal, set up a structure to review suchproposal concerning the Transaction by appointing Plutus Consulting as
financial advisor and third party valuation institution and Nomura & Partners as
legal advisor and by establishing an independent committee to review suchproposal concerning the Transaction, in order to ensure the fairness of Tender
Offer Price and to ensure the fairness of other matters on the Transaction
including Tender Offer. It is also stated that thereafter, upon receiving advices
from Plutus Consulting, Nomura & Partners as well as taking into considerationof an opinion from the independent committee, the Target Company ended up
receiving a final proposal to have the Tender Offer Price at 620 yen on October
11, 2016 after good faith negotiations with Mr. Nemoto and Mr. Tsumura andwith Integral.
It is also stated that the board of directors of the Target Company carefully
discussed and reviewed the terms of Transaction by taking into account theshare valuation report on the Target Company Shares received from Plutus
Consulting on October 13, 2016, legal advices received from Nomura &Partners, the response letter provided by the independent committee on October
13, 2016 and other relevant materials, etc.
It is also stated that thereupon, the Target Company came to a conclusion that
although it is necessary to make flexible and adjustable decisions based on a
medium- and long-term perspective in order for the Target Company topromptly and appropriately respond to the changes in business environment
surrounding the Target Company and risks accompanying such changes and forits business to continue to grow in Japan and overseas, the implementation of
measures based on such decisions will require costs for advance investment in ashort term and will require a reasonable period of time until such measures
actually contribute to the Target Company’s earnings. It is also stated thatfurthermore, due to the fact that taking measures based on a long-term
perspective, which are accompanied by the said risks, has the risk of causing28

decrease in the Target Company’s profit level and deterioration in its cash flow,
the Target Company may not be able to receive sufficient valuation from thecapital market in a short term and the shareholders of the Target Company may
suffer a loss due to reason such as adverse effect on the price of the Target
Company Shares if these measures are implemented while the Target Company
continues to be a listed company. It is also stated that therefore, the Target
Company came to a conclusion that the delisting of Target Company Sharesthrough management buyout (MBO) is the best measure to take for not only
general shareholders of the Target Company, but also various stakeholders dueto the fact that (i) it is absolutely necessary for the Target Company to promote
the restructuring of its business structure in a way which corresponds to the
future changes and strengthening of management base by management andemployees of the Target Company working as one after building a management
system which enables flexible and adjustable decision-making from a mediumand long-term perspective without being swayed by short-term change in its
business performance, etc., in order to maintain and enhance the corporate
value of the Target Company and (ii) it is also necessary to avoid the risk ofshareholders of the Target Company incurring any financial loss arising fromany short-term decrease in the Target Company’s profit level and deteriorationin its cash flow.
It is also stated that the Target Company also concluded that Integral is avaluable business partner in terms of maintaining and enhancing the corporate
value of the Target Company when promoting the restructuring of medium- andlong-term business structure of the Target Company and strengthening ofmanagement base due to the fact that by participation of Integral in addition to
Mr. Nemoto and Mr. Tsumura, who are current members of management of theTarget Company, the Target Company will likely be able to receive from
Integral a valuable support on, among others, improvement on existing business
operations, active and planned undertaking of new businesses, precise
assessment of risk and management process and speedy decision-making and tohave access to Integral’s human resource network in terms of management,
financial strategy, marketing, overseas expansion work and international
business tie-up, among other things.
It is also stated that moreover, the board of directors of the Target Company
concluded that the Tender Offer Price and other terms of Tender Offer arereasonable for the shareholders of the Target Company and that the Tender
Offer will provide the shareholders of the Target Company with an opportunity
to sell the Target Company Shares at a reasonable price, by taking into accountthe facts such as (i) the Tender Offer Price exceeded the price range (455 yen to
495 yen) calculated based on the market share price method as provided in theshare valuation report, which the Target Company received from Plutus
Consulting on October 13, 2016, and the Tender Offer Price was within theprice range (536 yen to 685 yen) calculated based on DCF Method and (ii) a
premium is added in the amount equal to 28.36% of closing price of Target
Company Shares of 483 yen on the First Section of the Tokyo Stock Exchange
as of October 13, 2016, which is business day immediately preceding the publicannouncement date of Tender Offer, in the amount equal to 34.49% of simple
average closing price of Target Company Shares of past 1-month period of 461
yen until October 13, 2016, in the amount equal to 36.26% of simple averageclosing price of Target Company Shares of past 3-month period of 455 yen
until October 13, 2016, and in the amount equal to 25.25% of simple averageclosing price of Target Company Shares of past 6-month period of 495 yen

29

until October 13, 2016.
The price book-value ratio (PBR) of the Target Company calculated based on
the book value of net assets of the Target Company as of February 29, 2016 isless than 1, but the book value of net assets of the Target Company will notnecessarily be converted into cash on “as is” basis considering the facts such asthat considerable additional costs will accrue for liquidation, and the Target
Company views that the valuation result based on DCF method, which assumes
the continuation of the Target Company’s business, is not underestimating its
value. Therefore, the Target Company placed the highest importance on the
result based on DCF method for the calculation of value of Target Company
Shares by taking into consideration the factors such as the fact that result of
DCF method reflects the future earning capacity and growth of the Target
Company.
It is also stated that based on the foregoing, the Target Company resolved at its
board of directors meeting held on October 14, 2016 to express an opinion in
support of the Tender Offer and to recommend to the Target Company’s
shareholders to tender their Target Company Shares in response to the Tender
Offer, by a unanimous vote of all directors (i.e., 5 directors excluding Mr.
Nemoto, who is Representative Director, Chairman and President of the Target
Company, and Mr. Tsumura, who is Representative Director and Executive
Vice President of the Target Company) who participated in the deliberation andresolution. It is also stated that by a unanimous vote of all directors (i.e., 5
directors excluding Mr. Nemoto, who is Representative Director, Chairman andPresident of the Target Company, and Mr. Tsumura, who is Representative
Director and Executive Vice President of the Target Company), whoparticipated in the deliberation and resolution, such board of directors meeting
also resolved to leave the decision to the holders of Stock Acquisition Rights
and Convertible Bonds as to whether or not to tender their Stock Acquisition
Rights and Convertible Bonds in response to the Tender Offer due to the factthat (a) the decision has been made that the purchase price of Fourth Series
Stock Acquisition Rights, Fifth Series Stock Acquisition Rights, Sixth Series
Stock Acquisition Rights and Seventh Series Stock Acquisition Rights perstock acquisition right is 1 yen because the exercise price per Target Company
Share with respect to such Stock Acquisition Rights (Fourth Series Stock
Acquisition Rights: 972 yen, Fifth Series Stock Acquisition Rights: 1,381 yen,
Sixth Series Stock Acquisition Rights: 1,571 yen and Seventh Series Stock
Acquisition Rights: 1,088 yen) exceeded the Tender Offer Price (620 yen) as ofthe public announcement date of Tender Offer (October 14, 2016), (b) thedecision has been made that the purchase price of Eighth Series Stock
Acquisition Rights per stock acquisition right is 10,100 yen which is thedifference (101 yen) between the Tender Offer Price and the exercise price per
Target Company Share with respect to the Eighth Series Stock Acquisition
Rights multiplied by 100 which is the number of Target Company Sharessubject to one Eighth Series Stock Acquisition Rights because the exercise
price per Target Company Share with respect to the Eighth Stock Acquisition
Rights (519 yen) is lower than the Tender Offer Price, but the exercise period
begins approximately 1 year and 8 months after the final day of Tender Offer
Period, and (c) the price to purchase the Convertible Bonds is 1,453,280 yen
which is the face value of Convertible Bonds in the amount of 5,000,000 yen
after dividing by the conversion price valid as of the public announcement dateof Tender Offer in the amount of 2,133 yen (2,344 shares) (rounding offanything less than 1 share) and multiplying by Tender Offer Price in the30amount of 620 yen.
It is also stated that all statutory auditors of the Target Company including 2
outside statutory auditors participated in the deliberation at such board of
directors meeting and expressed an opinion that they have no objection to theresolutions mentioned above.
It is also stated that Mr. Nemoto, who is Representative Director, Chairman andPresident of the Target Company, and Mr. Tsumura, who is Representative
Director and Executive Vice President of the Target Company have notparticipated in any deliberations and resolutions of such board of directors andin any discussions and negotiations with Integral and Offeror on behalf of theTarget Company in order to avoid any conflict of interest based on the fact that,they plan to enter into a management agreement with Integral Group
concerning the continuing management of the Target Company by Mr. Nemotoand Mr. Tsumura as the Representative Directors of the Target Company after
the end of Tender Offer. It is also stated that Mr. Nemoto plans to makecapital contribution to the Offeror no later than two business days prior to thecommencement of payment of Tender Offer and the total capital contribution
ratio of Mr. Nemoto and Mr. Tsumura in the Target Company after the Merger
under the Transaction is planned to be approximately 50.1%, and the side of
Mr. Nemoto and Mr. Tsumura and the side of Integral Group may each appoint
directors of the Target Company in a number prorated based on each side’s
respective voting ratio in the Target Company.
(vi) Securing objective circumstances that ensure fairness of the Tender Offer
While the minimum period for tender offers under laws and regulations is 20
Business Days, the Offeror has set the Tender Offer Period for the Tender Offer
as 30 Business Days. Setting a relatively long Tender Offer Period ensures anappropriate opportunity for the shareholders of the Target Company, the holdersof the Stock Acquisition Rights and the holders of the Convertible Bonds tomake a decision whether to tender their shares in the Tender Offer as well as
ensures an opportunity for any party other than the Offeror to conduct counter
offers for the Target Company Shares, the Stock Acquisition Rights, andConvertible Bonds, as a means to ensure the appropriateness of the Tender
Offer Price.
No agreement between the Offeror and the Target Company has been executedwhich includes deal protection provisions to prohibit the Target Company fromhaving contact with a counter offeror or which otherwise limit the opportunity
for a counter offeror to have contact with the Target Company. The Offeror
and its affiliates give consideration to ensure fairness of the Tender Offer by not
only setting the Tender Offer Period as above but also ensuring the opportunity
for a counter offer.

(Note)In addition to the above, while FT does not intend to make contribution to theOfferor or the Target Company after the Tender Offer and FT is a major
shareholder who has no special interest in the Tender Offer or the Transaction
different from minority shareholders, the Tender Offer Price has been approved
by FT. Such confirmation of intention of major shareholder who has no special
interest sufficiently gives consideration to interests of minority shareholders.
It is also stated that for the calculation of share value, Plutus Consulting generally used theinformation provided by the Target Company and publicly available information, etc. “as is”

31based on the assumption that all of such materials and information, etc. are accurate and complete
and has not verified on its own as to their accuracy and completeness. It is also stated that inaddition, it is assumed that the information on financial forecasts as provided by the Target
Company is reasonably prepared by the management of the Target Company based on the best
forecasts and decisions possible at the present time.
(3)

Number of Share Certificates, Etc. to be purchased in tender offer

Minimum number of Share Maximum number of Share
Number of Share Certificates,
Certificates,
Etc.
tobe Certificates, Etc. to be
Etc. to be purchased
purchasedpurchased
36,459,753 (shares)
Note 1:

Note 2:
Note 3:Note 4:Note 5:Note 6:

19,532,800 (shares)- (shares)

If the total number of Share Certificates, Etc. tendered is less than the minimum number of
Share Certificates, Etc. to be purchased (19,532,800 shares), the Offeror will not purchase anyof the Share Certificates, Etc. so tendered. If the total number of Share Certificates, Etc.
tendered is equal to or exceeds the minimum number of Share Certificates, Etc. to bepurchased (19,532,800 shares), the Offeror will purchase all the Share Certificates, Etc. sotendered.
The Offeror does not intend to acquire the treasury shares held by the Target Company
through the Tender Offer.
In the Tender Offer, the Offeror has not set a maximum number of Share Certificates, Etc. tobe purchased, so the number of shares to be purchased is stated as the maximum number of
Share Certificates, Etc. of the Target Company (36,459,753 shares) acquired by the Offeror
through the Tender Offer. The maximum number is the number of shares (36,459,753
shares), which is the difference between the Total Number of Target Company Voting Shares(41,404,411 shares) and the number of the Non-Tendered Shares (4,944,658 shares).
The “Minimum number of Share Certificates, Etc. to be purchased” is the number obtained bymultiplying (A) the difference (195,328) between (i) the number of voting rights (244,774)
equivalent to two-thirds of the number of voting rights (367,161) represented by the numberof shares (36,716,179 shares) obtained by deducting the number of Target Company Shares(4,688,232 shares) underlying the stock acquisition rights attached to Convertible Bonds(2,000 stock acquisition rights) from the Total Number of Target Company Voting Shares(41,404,411 shares) and (ii) the number of voting rights (49,446) represented by the
Non-Tendered Shares by (B) 100. We assume that no Convertible Bonds will be converted
into Target Company Shares (for details, please see Note 1 of “(1) Outline of the Tender Offer”
of “3. Purposes of tender offer” above), and therefore if the total number of the tendered
Share Certificates, Etc. meets the minimum number set out above (19,532,800 shares), thetotal number of the tendered Share Certificates, Etc. will, together with the number of voting
rights (49,446) represented by the Non-Tendered Shares, be deemed capable of ensuring thenumber of voting rights that is necessary to obtain approval for the Squeeze-out Procedures at
the Extraordinary General Shareholders’ Meeting.
Shares less than one unit are also subject to the Tender Offer. If a right to claim for purchaseof shares less than one unit is exercised by shareholders in accordance with the Companies
Act, the Target Company may purchase its own shares less than one unit during the Tender
Offer Period in accordance with procedures required by laws and regulations.
Stock Acquisition Rights and stock acquisition rights attached to Convertible Bonds may be
exercised by the last day of the Tender Offer Period, and in that case, the Target Company
Shares issued or transferred through such exercise are also subject to the Tender Offer.

32

5.

Proportion of ownership of Share Certificates, Etc. after tender offer
Number of
voting rights
364,597

Details

Number of voting rights represented by the Share Certificates, Etc. to be purchased: (a)Number of voting rights represented by the potential Share Certificates, Etc. included in
65,411(a): (b)Number of voting rights represented by trust beneficiary certificates and depositary
receipts for Share Certificates, Etc. included in (b): (c)Number of voting rights represented by the Share Certificates, Etc. held by the Offeror(as of October 17, 2016): (d)Number of voting rights represented by the potential Share Certificates, Etc. included in(d): (e)Number of voting rights represented by trust beneficiary certificates and depositary
receipts for Share Certificates, Etc. included in (e): (f)Number of voting rights represented by the Share Certificates, Etc. held by special
52,900related persons (as of October 17, 2016): (g)Number of voting rights represented by the potential Share Certificates, Etc. included in
3,359(g): (h)Number of voting rights represented by trust beneficiary certificates and depositary
receipts for Share Certificates, Etc. included in (h): (i)Total number of voting rights of all shareholders of the Target Company (as of August
348,11431, 2016): (j)Proportion of the number of voting rights represented by the Share Certificates, Etc. tobe purchased in the total number of voting rights of all shareholders of the Target
88.06
Company (a/j) (%)
Proportion of ownership of Share Certificates, Etc. after tender offer
100.00((a+d+g)/(j+(b-c)+(e-f)+(h-i))×100) (%)
Note 1: The “Number of voting rights represented by the Share Certificates, Etc. to be purchased: (a)” is
the number of voting rights represented by the number of shares to be purchased (36,459,753
shares) in the Tender Offer.
Note 2: The “Number of voting rights represented by the potential Share Certificates, Etc. included in (a):(b)” is, in voting rights represented by the Share Certificates, Etc. to be purchased, the maximum
number (65,411) of voting rights of the number of the Target Company Shares (6,541,132 shares)
which is the sum of (i) the number of the Target Company Shares (1,852,900 shares) underlying
the Stock Acquisition Rights (1,275 Fourth Series Stock Acquisition Rights, 2,803 Fifth Series
Stock Acquisition Rights, 3,552 Sixth Series Stock Acquisition Rights, 4,859 Seventh Series
Stock Acquisition Rights, and 6,040 Eighth Series Stock Acquisition Rights), the number ofwhich is obtained by deducting the Stock Acquisition Rights that had expired by August 31, 2016(according to the Target Company, 30 Seventh Series Stock Acquisition Rights had expired byAugust 31, 2016) from the number of the Fourth Series Stock Acquisition Rights (1,275 stockacquisition rights), the Fifth Series Stock Acquisition Rights (2,803 stock acquisition rights), theSixth Series Stock Acquisition Rights (3,552 stock acquisition rights), and the Seventh Series
Stock Acquisition Rights (4,889 stock acquisition rights) as of February 29, 2016 stated in the
Securities Report for the 47th Term of the Target Company as well as the Eighth Series Stock
Acquisition Rights (6,040 stock acquisition rights) stated in “Notice Regarding Issuance of Stock
Acquisition Rights as Stock Options (Aderans Co., Ltd. Eighth Series Stock Acquisition Rights)”
published on May 26, 2016 by the Target Company and “Notice Regarding Detail of Issuance ofStock Acquisition Rights as Stock Options (Aderans Co., Ltd. Eighth Series Stock Acquisition
Rights as Stock Options)” published on July 27, 2016 by the Target Company plus (ii) the
number of the Target Company Shares (4,688,232 shares) underlying the stock acquisition rights
attached to the Convertible Bonds (2,000 stock acquisition rights) as of February 29, 2016 statedin the Securities Report for the 47th Term of the Target Company (according to the Target

33

Note 3:Note 4:Note 5:Company, no stock acquisition rights attached to the Convertible Bonds had expired by August
31, 2016).
The “Number of voting rights represented by the Share Certificates, Etc. held by special related
persons (as of October 17, 2016): (g)” is the total number of voting rights represented by the
Share Certificates, Etc. held by the special related persons. Since the Share Certificates, Etc.
held by the special related persons (excluding the Non-Tendered Shares) are also subject to theTender Offer, when calculating the “Proportion of ownership of Share Certificates, Etc. after
tender offer,” the “Number of voting rights represented by the Share Certificates, Etc. held byspecial related persons (as of October 17, 2016): (g)” (excluding the number of voting rights(49,446) represented by the Non-Tendered Shares (4,944,658 shares)) is not added to thenumerator.
The “Total number of voting rights of all shareholders of the Target Company (as of August 31,
2016): (j)” is the number of voting rights of all shareholders as of August 31, 2016 as stated in
the Quarterly Report for the Second Quarter of the 48th Term of the Target Company (stated as
the share unit number is 100 shares). However, since all of the Target Company Shares
including shares less than one unit (excluding treasury shares), Stock Acquisition Rights andConvertible Bonds are subject to the Tender Offer, when calculating the “Proportion of thenumber of voting rights represented by the Share Certificates, Etc. to be purchased in the total
number of voting rights of all shareholders of the Target Company” and the “Proportion ofownership of Share Certificates, Etc. after tender offer,” 414,044 voting rights represented by the
Total Number of Target Company Voting Shares (41,404,411 shares) is used as a denominator.
The “Proportion of the number of voting rights represented by the Share Certificates, Etc. to bepurchased in the total number of voting rights of all shareholders of the Target Company” and the“Proportion of ownership of Share Certificates, Etc. after tender offer” have been rounded to two
decimal points.

6.

Licenses, Etc. concerning acquisition of Share Certificates, Etc.

(1)

Class of Share Certificates, Etc.
Common stock(2)

Relevant laws and regulations(i)

Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade
The Offeror shall, in accordance with Article 10, Paragraph 2 of the Act Concerning Prohibitionof Private Monopolization and Maintenance of Fair Trade (Act No. 54 of 1947, as amended; the“Antimonopoly Act”), give prior notification (the “Prior Notification”) to the Japan Fair Trade
Commission regarding the plan for acquisition of shares of the Target Company through theTender Offer (the “Share Acquisition”) and under Article 10, Paragraph 8 of the Antimonopoly
Act, in principle, the Offeror may not conduct the Share Acquisition until 30 days have passed
from the date on which the Prior Notification was accepted (the period might be shortened; theperiod during which the Share Acquisition is prohibited is referred to as the “Acquisition
Prohibition Period”).
In addition, Article 10, Paragraph 1 of the Antimonopoly Act prohibits any act of acquiring
shares of other companies that will cause a substantial restraint of competition in a particularfield of trade and the Japan Fair Trade Commission may order measures necessary to eliminate
any acts that breach that provision (Article 17-2, Paragraph 1 of the Antimonopoly Act;
hereinafter referred to as a “Cease and Desist Order”). If the Japan Fair Trade Commission
intends to issue a Cease and Desist Order, it shall conduct a hearing of opinions with thewould-be addressee of that Cease and Desist Order (Article 49 of the Antimonopoly Act), and insuch a hearing, it shall notify the addressee of the details of the planned Cease and Desist Order(Article 50, Paragraph 1 of the Antimonopoly Act; hereinafter referred to as “Prior Notice of34

Cease and Desist Order”), and Prior Notice of the Cease and Desist Order issued against a plan
regarding share acquisition for the Prior Notification is to be made within a certain period oftime (in principle, 30 days from the date on which the Prior Notification above was accepted;
however, the period might be extended or shortened; hereinafter referred to as the “Cease andDesist Period”) (Article 10, Paragraph 9 of the Antimonopoly Act). If the Japan Fair Trade
Commission has decided not to give Prior Notice of Cease and Desist Order, it will give noticeto that effect (“Notice to the Effect that Cease and Desist Order will not be Issued”) (Article 9 of
the Rules on Applications for Approval, Reporting, Notification, etc. Pursuant to the Provisionsof Articles 9 to 16 of the Act on Prohibition of Private Monopolization and Maintenance of Fair
Trade (Japan Fair Trade Commission Rule No. 1 of 1953, as amended)).
The Offeror has made Prior Notification to the Japan Fair Trade Commission on September 30,
2016 and it has been accepted as of that date. On October 11, 2016, the Offeror received fromthe Japan Fair Trade Commission a notice to the effect that the Acquisition Prohibition Period of
30 days would be shortened to 11 days, and therefore the Acquisition Prohibition Period ended
upon the passing of October 11, 2016. In addition, on October 11, 2016, the Offeror received
from the Japan Fair Trade Commission a Notice to the Effect that Cease and Desist Order will
not be Issued, and therefore the Cease and Desist Period ended on October 11, 2016.
(ii)

U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976
The Offeror shall, in accordance with the U.S. Hart-Scott-Rodino Antitrust Improvements Act of1976 (as amended; the “U.S. Antitrust Act”), give prior notification to the U.S. Department ofJustice Antitrust Division and the U. S. Federal Trade Commission (collectively, the “U.S.
Antitrust Authorities”) regarding the Share Acquisition in advance of the Share Acquisition.
The Offeror will be able to carry out the Share Acquisition after 15 days (or, if early terminationof the waiting period is permitted, a number of days less than 15) have passed since the priornotification above, unless any of the U.S. Antitrust Authorities issues a request for providing
additional information (a “Second Request”). If a Second Request is issued, unless any of the
U.S. Antitrust Authorities obtains an injunction against the Share Acquisition from a U.S. federal
court, the Offeror will be able to carry out the Share Acquisition upon the expiration of an
extended waiting period of ten days after it completes provision of additional information
pursuant to the Second Request.
The prior notification regarding the Share Acquisition made to the U.S. Antitrust Authorities was
accepted on October 14, 2016 (local time). If any such injunction is not issued and such a
waiting period or extended waiting period expires before the day immediately preceding the
expiration date of the Tender Offer Period or an extended Tender Offer Period, the Offeror shallimmediately submit an amendment statement hereto in accordance with Article 27-8, Paragraph
2 of the Act. If any such injunction is issued or such a waiting period does not expire before
the day immediately preceding the expiration date of the Tender Offer Period (or an extended
Tender Offer Period), the Tender Offer Period or the commencement date of settlement may be
extended. In such cases, the Offeror may withdraw the Tender Offer as it will be deemed thatan event set out in Article 14, Paragraph 1, Item (4) of the Enforcement Order has occurred as
described in “(2) Conditions of withdrawal, etc. of the tender offer, details thereof and method of
disclosure of withdrawal, etc.” of “11. Other conditions and methods of purchase” below.

(3)

Date and number of approval(i)

Antimonopoly Act
Date of approval:

Number of approval:

October 11, 2016 (upon receipt of a Notice to the Effect that Cease
and Desist Order will not be Issued and a notice of shortening of
the Acquisition Prohibition Period)
Ko/Kei/Ki No. 666 (the number of the Notice to the Effect that35

Cease and Desist Order will not be Issued)
Ko/Kei/Ki No. 667 (the number of a notice of shortening ofProhibition Period)(ii)

U.S. Antitrust Act
N/A

7.

Method of tendering shares under the tender offer and cancellation thereof(1)

Method of tendering shares under the tender offer(i)

Tender Offer Agent
Mizuho Securities Co., Ltd. 1-5-1, Otemachi, Chiyoda-ku, Tokyo(ii)

Any person who tenders shares in the Tender Offer (“Tendering Shareholders,” which refers toshareholders, holders of stock acquisition rights and holders of bonds with stock acquisitionrights) will be required to fill out the prescribed “Form for Tender” and submit it to the head
office or any branch in Japan of the Tender Offer Agent by 3 p.m. on the last day of the Tender
Offer Period. Any person who tenders bonds with stock acquisition rights must open a foreign
securities account. In addition, no tender will be accepted through “Mizuho Securities Net
Club,” which is an online trade service.

(iii)

When accepting shares to be tendered in the Tender Offer, it is required that Tendering
Shareholders open a securities account with the Tender Offer Agent and that shares to be tendered
are recorded in that account. In the Tender Offer, shares tendered through financial instruments
dealers other than the Tender Offer Agent will not be accepted. In addition, shares that arerecorded in a special account established by Sumitomo Mitsui Trust Bank, Limited, which is theaccount management institution for the special account (tokubetsu kouza) designated by theTarget Company, cannot be tendered in the Tender Offer. If shares to be tendered are entered orrecorded in a special account (tokubetsu kouza) established by an account management institution
for a securities account or a special account (tokubetsu kouza) opened by a financial instruments
dealer other than the Tender Offer Agent, the Tendering Shareholder must complete theprocedures to transfer such shares to a securities account opened with the Tender Offer Agent
before tendering such shares. (see Note 1 below)(iv)

When accepting Stock Acquisition Rights to be tendered in the Tender Offer, it is required that,together with the “Form for Tender,” “a document stating the items described in the stockacquisition right registry,” which is issued by the Target Company as certification of the positionof holders of stock acquisition rights upon their request, and a document necessary to request thechange of the holders’ name of the stock acquisition right in the registry subject to the completionof the Tender Offer be submitted. For specific procedures for issuing “a document stating theitems described in the stock acquisition right registry,” and a document necessary to request thechange of the holders’ name of the stock acquisition right in the registry, please contact the Target
Company.

(v)

When accepting Convertible Bonds to be tendered in the Tender Offer, if a global bond ofConvertible Bonds has been deposited in a common depositary of Euroclear Bank S.A./N.V. or
Clearstream Banking, societe anonyme, which is a securities clearing institution in Europe, thesubmission of certificates of Convertible Bonds is not required; however, during the Tender Offer
Period, it is required to deposit Convertible Bonds to be tendered in a customer clearing accountof the Tender Offer Agent in Euroclear Bank S.A./N.V. When tendering Convertible Bonds, arequest form for deposit of foreign securities in a customer clearing account of the Tender Offer
Agent must be submitted together with the “Form for Tender.” Holders of bonds with stockacquisition rights who have taken such procedures will own Convertible Bonds in that account36

for the period commenced after the account was opened with the Tender Offer Agent until when
the Tender Offer is successfully closed and Convertible Bonds are settled.
(vi)

Tendering Shareholders’ seal and the “Form for Tender” above will be required at the time of thetender.

(vii)

Tendering Shareholders who have not opened a securities account with the Tender Offer Agentare required to open a new securities account. To open a new securities account, each Tendering
Shareholder’s Individual Number (My Number) or Corporate Number and identification
documents will be required. (see Note 2 below)(viii)

Please note that the procedures to transfer tendered Share Certificates, Etc. described in (iii)
above and opening a new account described in (vii) might require a certain number of days.

(ix)

Any tender of Share Certificates, Etc. by shareholders, etc. residing outside of Japan (meaning
shareholders, holders of stock acquisition rights and holders of convertible bonds; also including
the case where these shareholders, etc. are corporations located outside of Japan, hereinafterreferred to as “Foreign Shareholders, Etc.”) shall be made through a standing proxy in Japan.

(x)

For individual shareholders who are residents in Japan, the difference between the sale price of
the Share Certificates, Etc. purchased by the Offeror and the acquisition costs, etc. will be
generally subject to separate self-assessment taxation concerning capital gains from the transferof shares, etc. (see Note 3 below)(xi)

Upon accepting Share Certificates, Etc. tendered by Tendering Shareholders, the Tender Offer
Agent shall deliver a Receipt of Acceptance of the Tender Offer to the Tendering Shareholders.

Note 1:

Procedures for transferring the Share Certificates, Etc. from a special account (tokubetsu kouza)
established by an account management institution for a special account (tokubetsu kouza)
designated by the Target Company to a securities account of the Tender Offer Agent:
If procedures for transferring the Share Certificates, Etc. from a special account (tokubetsu
kouza) established by an account management institution for a special account (tokubetsu kouza)
designated by the Target Company to a securities account of the Tender Offer Agent are
conducted through the Tender Offer Agent or conducted by an account management institution
for a special account (tokubetsu kouza), an “application form for account transfer” that states
information identical to the personal information submitted to the account management
institution for the special account (tokubetsu kouza) is required to be filed. For details, pleasecontact the Tender Offer Agent or the account management institution for your special account(tokubetsu kouza).

Note 2:

Submission of Individual Number (My Number) or Corporate Number and identification
documents:
The following identification documents, etc. will be required when a Tendering Shareholder
opens a new securities account with the Tender Offer Agent and when Foreign Shareholders, Etc.
make a tender through a standing proxy in Japan. For details about documents for number
confirmation and identification documents, please contact the Tender Offer Agent.
Individual shareholders:
Any of the following documents for confirmation of Individual Number and identification
documents set out in (i) through (iii) of the table below will be required. Any individual
shareholder who does not submit its Individual Number (My Number) cannot open an accountwith Mizuho Securities Co., Ltd. as the Tender Offer Agent. In addition, even those who have37

already opened a securities account with the Tender Offer Agent are also required to submit
documents for confirmation of Individual Number and identification documents when changing
their respective names, addresses, and Individual Numbers (My Numbers).
(i)

(ii)

(iii)

Notification Card

Copy of a residence certificate
stating an Individual Numberor
Certificate of items entered inresidence certificate(* Each of these documents isdeemed as one identification
document)+
Numberconfirmation
document

Individual
Number Card
(both sides)with a photoa. Any of the following
documents (confirmation
documents with a photo):- driver’s license;- certificate of driving
history;- passport;- residence card;- medical treatment andeducation handbook;- physical disability
certificate, etc.

+a.

Any of the following
documents(confirmation
documents with a photo):- driver’s license;- certificate of driving
history;- passport;- residence card;- medical treatment andeducation handbook;- physical disability
certificate, etc.

+

or

or
b. Any two of the following
documents (if submission of
the documents listed in a.
above is difficult):

Identification
documentb. Any two of the following
documents (if submissionof the documents listed ina. above is difficult):- copy of residence
certificate;- certificate of items
entered in residence
certificate;- health insurance cards
such as national healthinsurance card;- certificate of seal;- national pension
handbook, etc.

-

- health insurance cards suchas national healthinsurance card;- certificate of seal;- national pension
handbook, etc.

If you submit your Individual Number Card (both sides), you will not be required toseparately submit any identification document.
Please submit documents stating your name, address, and date of birth.
Please submit identification documents that have not expired or, if they do not state the expiry
date, please submit identification documents prepared within the past six (6) months.

Corporate shareholders:
It is required to submit (i) a copy of a “notice specifying Corporate Number” or (ii) a document
stating a Corporate Number which is printed out from the National Tax Agency’s Corporate

38

Number Publication Site (http://www.houjin-bangou.nta.go.jp/) and an identification document (acertificate of registration (prepared within the past six (6) months that identify the corporatename and the address of the head office or principal office and the corporation’s businessdetails)). In addition to the identification of the corporation, personal identification of each
person in charge of the transaction (or representative of the corporation if such representative
effects the transaction) will be required. Furthermore, even corporations that have alreadyopened a securities account with the Tender Offer Agent are also required to submit documents
for confirmation of Corporate Number and identification documents when changing theirrespective corporate names and location.
Foreign Shareholders, Etc.:
Documents issued by a foreign government or competent international organization approved by
the Japanese government or other similar documents equivalent to the identification documents
above for residents of Japan (if Foreign Shareholders, Etc. are individuals, identification
documents stating their name, address and date of birth (*1) are required, and if Foreign
Shareholders, Etc. are corporations, identification documents stating the corporation’s name andthe address of the head office or principal office and the corporation’s business details (*2) are
required. Identification documents for both individual and corporation are limited to those thatare prepared within the past six (6) months or limited to those that are effective with respect toany documents with an effective period or with a deadline) and a power of attorney for thedelegation agreement between Foreign Shareholders, Etc. and a standing proxy or a copy of thatagreement (*3) are required.

Note 3:(*1)

In principle, shareholders who have Japanese nationality and reside outside of Japanare required to submit their passports.

(*2)

If Foreign Shareholders, Etc. are corporations, a confirmation of the corporation’s
business details is required; therefore, if identification documents do not state thecorporation’s business details, other documents that identify business details(documents equivalent to the identification documents for residents of Japan or
documents stating the corporation’s business details that are to be prepared by the
corporation pursuant to the provisions of foreign laws and regulations) are required tobe submitted.

(*3)

Limited to a copy of the agreement (i) stating the name or address outside of Japan of
the Foreign Shareholders, Etc. and also stating (x) the date certified by a standing
proxy or (y) the name, address or representative of a standing proxy or name and titleof signatory, and (ii) certified as a copy of the original with the registered seal for the
securities account of the Tender Offer Agent.

Separate self-assessment taxation concerning capital gains from transfer of shares, etc. (forindividual shareholders residing in Japan):In principle, individual shareholders residing in Japan will be subject to separate self-assessment
taxation with respect to capital gains from the transfer of shares, etc. Sale of shares, etc.
through tendering in the Tender Offer will be treated as the sale made through ordinary financial
instruments dealers. Please consult with tax experts such as a certified tax accountant when
making any decision with respect to specific tax treatment.

(2)

Method of cancellation of tenders under the tender offer
Tendering Shareholders may, at any time during the Tender Offer Period, cancel their tenderunder the Tender Offer. Tendering Shareholders who wish to cancel their tender must deliver orsend a cancellation notice stating that such Tendering Shareholder cancels its tender under the39

Tender Offer (the “Cancellation Notice”), with a Receipt of Acceptance of the Tender Offer
attached, to the head office or any branch in Japan of the Tender Offer Agent who accepted
tender by 3 p.m. on the last day of the Tender Offer Period. The cancellation of the tender willtake effect at the time when the Cancellation Notice is delivered to, or reaches, the Tender Offer
Agent. Therefore, Tendering Shareholders should be aware that if the Cancellation Notice issent by mail, Tendering Shareholders may not cancel their tender unless the Cancellation Noticereaches the Tender Offer Agent by no later than 3 p.m. on the last day of the Tender Offer Period.
Party authorized to receive the Cancellation Notice:
Mizuho Securities Co., Ltd. 1-5-1, Otemachi, Chiyoda-ku, Tokyo(or any other domestic branch of Mizuho Securities Co., Ltd.)(3)

Method of return of Share Certificates, Etc.
If Tendering Shareholders submit a cancellation of their tender in the manner described in “(2)Method of cancellation of tenders under the tender offer,” the tendered Share Certificates, Etc.
will be returned promptly after the completion of the cancellation procedures in accordance withthe method indicated in “(4) Method of return of Share Certificates, Etc.” in the section titled “10.
Method of Settlement” below.

(4)

Name and address of the head office of financial instruments dealers/bank, etc. holding in trust
and returning Share Certificates, Etc.
Mizuho Securities Co., Ltd. 1-5-1, Otemachi, Chiyoda-ku, Tokyo

8.

Funds required for tender offer(1)

Funds, etc. required for tender offer

Purchase price (JPY): (a)22,605,046,860
Type of consideration other than cash:
Total amount of consideration other than cash:
Purchase commission: (b)190,000,000
Others: (c)10,000,000
Total (a)+(b)+(c):22,805,046,860
Note 1: “Purchase price (JPY): (a)” shows the amount obtained by multiplying the number ofshares to be purchased in the Tender Offer (36,459,753 shares) by the Tender Offer
Price (620 yen).
Note 2: “Purchase commission: (b)” consists of estimated commissions to be paid to the Tender
Offer Agent.
Note 3: “Others: (c)” consists of the estimated amount of fees and expenses for public notice of
the Tender Offer, printing of the Tender Offer Explanatory Statement and othernecessary documents, and any other fees and expenses.
Note 4: The above amounts are exclusive of consumption tax, etc.
Note 5: The actual amount of other expenses to be paid to the Tender Offer Agent andattorney’s fees, etc. will not be determined until after the completion of the Tender
Offer.
(2)

Deposits or borrowings allocable for funds required for tender offer(i)

Deposits as of one day or two days preceding the date hereof

40Type of deposit

Amount (thousand yen)

Total (a)(ii)-

Borrowings before the date hereof(a)Financial institutions
Category ofbusiness oflender-1
2

Name oflenderTerms ofcontract--

Amount (thousand
yen)
-

Total
(b)

OthersCategory ofbusiness oflender-(iii)

Name oflenderTerms ofcontract

Total-

Amount(thousand yen)-Funds to be borrowed on or after the date hereof(a)1Financial institutions

Category ofbusiness oflenderName oflenderTerms ofcontract---

Amount(thousandyen)-

Borrowing to be allocated to funds
required for tender offer (Note):

2

Note:

Bank

Mizuho Bank, Ltd.
(5-5, Otemachi
1-chome,
Chiyoda-ku,
Tokyo)

Due date: the earlier of the last dayof March, 2017 (lump-sum
repayment) or the effective date of
the Merger
Interest: JBA Japanese yen TIBOR+ 1.625%
Collaterals: Shares of the Offeror,
etc.

23,000,000

Total (b)23,000,000
On October 14, 2016, the Offeror obtained a loan certificate, as evidence of the above
borrowing, from Mizuho Bank, Ltd. stating that it is ready to make a loan up to
23,000,000 thousand yen. The terms set out in the loan certificate attached hereto are41

scheduled to be stipulated as conditions precedent for implementing the loans.
(b)Category ofbusiness oflender-OthersName oflenderTerms ofcontract-

Total (c)(iv)

Amount(thousandyen)-

Other methods of financing

Contents
Amount (thousand yen)Contribution through subscription ofcommon stock by Integral 2 Limited
5,200,000
Partnership
Contribution through subscription of
600,000
common stock by Integral Fund II (A) L.P.
Contribution through subscription of
1,200,000
common stock by Mr. Nobuo Nemoto
Total (d)7,000,000
Note 1: On October 13, 2016, the Offeror obtained a certificate with the following contents, asevidence of the above contribution, from Integral 2 LP stating that it is ready to make acontribution up to 5,200,000 thousand yen.
Integral 2 LP is an investment limited partnership established under the Act on
Investment Limited Partnership Agreements. Integral 2 LP consists of, in addition to
Integral Partners Corporation and Integral II GP Investment Limited Partnership as
general partners, institutional investors such as domestic financial institutions and life
insurance companies and business companies as limited partners.
The limited partners of Integral 2 LP have agreed to make a specified amount of
aggregate capital contribution by cash to Integral 2 LP and if, no later than seven
Business Days before the contribution, they receive a notice from the general partnersof Integral 2 LP requesting contribution, then the limited partners are obliged to, by thedate designated by the general partners, make a capital contribution by cash inproportion to their respective commitment amounts and within the amount calculated
by deducting from each such commitment amount any amounts already contributed byeach such limited partner. In addition, the failure of a limited partner to fulfill its
funding obligations does not excuse any other limited partner from fulfilling its own
funding obligations, and the general partners of Integral 2 LP may satisfy any shortfall
caused by such failure by requiring additional capital contributions from the remaining
limited partners proportionate to their respective commitment amounts up to certain
extent so that Integral 2 LP has the ability to contribute funds equivalent to the amountof the contribution for the Offeror.
Note 2: As evidence of the above contribution, on October 13, 2016, the Offeror obtained acertificate with the following contents from Integral Fund II (A) L.P. stating that it isready to make a contribution up to 600,000 thousand yen.
Integral Fund II (A) L.P. is an exempted limited partnership established under the lawsof the Cayman Islands. Capital commitments to Integral Fund II (A) L.P. are fromlimited partners of Integral Fund II (A) L.P. that are fund of funds of an investmentcompany owned by foreign government and other investors. Each limited partner ofIntegral Fund II (A) L.P. has agreed to make a specified amount of aggregate capital
contribution (the “Commitment Amount”) by cash to Integral Fund II (A) L.P. Once a42

Note 3:(v)

capital call notice has been issued by Integral Partners (Cayman) II (A) Limited, thegeneral partner of Integral Fund II (A) L.P., no later than ten Business Days before thecontribution, each of the limited partners is obligated to make a capital contribution bycash to Integral Fund II (A) L.P. in proportion to its Commitment Amount and within
its then remaining Commitment Amount, on or prior to the date designated by Integral
Partners (Cayman) II (A) Limited.
In addition, the failure of a limited partner to fulfill its funding obligations does not
excuse any other limited partner from funding its obligation, and Integral Partners(Cayman) II (A) Limited may satisfy any shortfall due to such a failure by requiring
additional capital contributions from the remaining limited partners proportionate totheir respective Commitment Amounts up to certain extent so that Integral Fund II (A)
L.P. will have the ability to contribute funds equivalent to the amount of thecontribution for the Offeror.
As evidence of the above contribution, on October 13, 2016, the Offeror obtained acertificate from Mr. Nemoto stating that he is ready to make a contribution up to
1,200,000 thousand yen. The Offeror has confirmed from a copy of bank deposit
passbook of Mr. Nemoto that he has cash and deposits in an amount greater than theamount that he is obliged to contribute.
Total of deposits or borrowings allocable for funds required for purchase
30,000,000 thousand yen = (a)+(b)+(c)+(d)(3)

Relationship between the Offeror and the issuer of securities to be used asconsideration for tender offer
N/A

9.

Conditions of the issuer of securities to be used as consideration for the tender offer
N/A

10.

Method of settlement(1)

Name and address of head office of financial instruments dealers/bank etc. in charge ofsettlement of tender offer
Mizuho Securities Co., Ltd.

(2)

1-5-1 Otemachi, Chiyoda-ku, Tokyo

Commencement date of settlement
December 6, 2016 (Tuesday)(3)

Method of settlement
A notice regarding the purchase under the Tender Offer will be mailed to the address ofTendering Shareholders (or the standing proxy in the case of Foreign Shareholders,Etc.) without delay after the expiration of the Tender Offer period. The purchase shallbe settled in cash. The Tender Offer Agent will, in accordance with the instructions
given by the Tendering Shareholders (or the standing proxy in the case of Foreign
Shareholders, Etc.) and without delay on or after the commencement date of settlement,
remit to the address designated by the Tendering Shareholders (or the standing proxy inthe case of Foreign Shareholders, Etc.), or pay to the Tendering Shareholders’ accountwhere the Tender Offer Agent accepted the tender in the Tender Offer, the sales price43

with regard to the Share Certificates, Etc. purchased.
(4)

Method of return of Share Certificates, Etc.
In the event that all of the tendered Share Certificates, Etc. will not be purchased under
the terms set forth in “(1) Conditions set forth in each item of Article 27-13, Paragraph
4 of the Act and the details thereof” or “(2) Conditions of withdrawal, etc. of the tender
offer, details thereof and method of disclosure of withdrawal, etc.” in the section titled“11. Other conditions and methods of purchase” below, the Tender Offer Agent will, on
or after the commencement date of settlement (or the date of withdrawal of the Tender
Offer if the Offeror withdraws the Tender Offer), promptly return the Share Certificates,
Etc. that must be returned. With respect to the shares, the Tender Offer Agent will
return shares by reverting those shares to the original condition at the time of the tender.
With respect to Stock Acquisition Rights, the documents submitted upon tender of theStock Acquisition Rights (set forth in (iv) of “(1) Method of tendering shares under thetender offer” in the section titled “7. Method of tendering shares under the tender offerand cancellation thereof” above) will be delivered to the Tendering Shareholders (or the
standing proxy in the case of Foreign Shareholders, Etc.) or mailed to the address of theTendering Shareholders (or the standing proxy in the case of Foreign Shareholders,Etc.), in accordance with the instructions given by each relevant Tendering Shareholder.
In addition, with respect to Convertible Bonds, the documents submitted upon tender of
the Convertible Bonds (set forth in (v) of “(1) Method of tendering shares under thetender offer” in the section titled “7. Method of tendering shares under the tender offerand cancellation thereof” above) will be delivered to the Tendering Shareholders (or the
standing proxy in the case of Foreign Shareholders, Etc.) or mailed to the address of theTendering Shareholders (or the standing proxy in the case of Foreign Shareholders,Etc.), in accordance with the instructions given by each relevant Tendering Shareholder,
and the Tender Offer Agent will revert the tendered Share Certificates, Etc. kept by
Euroclear Bank S.A./N.V. to the original condition at the time of the tender.

11.

Other conditions and methods of purchase(1)

Conditions set forth in each item of Article 27-13, Paragraph 4 of the Act and thedetails thereof
If the total number of the Share Certificates, Etc. tendered is less than the minimum
number of Share Certificates, Etc. to be purchased (19,532,800 shares), the Offeror will
not purchase any of the Share Certificates, Etc. so tendered. If the total number of the
Share Certificates, Etc. tendered is equal to or exceeds the minimum number of Share
Certificates, Etc. to be purchased (19,532,800 shares), the Offeror will purchase all the
Share Certificates, Etc. so tendered.

(2)

Conditions of withdrawal, etc. of the tender offer, details thereof and method of
disclosure of withdrawal, etc.
If any event listed in Article 14, Paragraph 1, Items (1)1 through (1)9 and Items (1)12
through (1)18, Items (3)1 through (3)8 and (3)10, Item (4), as well as Article 14,
Paragraph 2, Items (3) through (6) of the Enforcement Order occurs, the Tender Offeror
may withdraw the Tender Offer. The “events which are equivalent to those listed in
Items (3)1 through (3)9” set out in Article 14, Paragraph 1, Item (3)10 of the
Enforcement Order shall refer to (i) the case where any of the statutory disclosure
documents submitted by the Target Company in the past is found to contain a false
statement on a material fact, or omit a statement on a material fact that should havebeen stated, but the Offeror was not aware of the existence of such false statement, etc.

44

nor the Offeror could have been aware of such false statement, etc. even withreasonable care, and (ii) the case where any of the events listed in Article 14, Paragraph
1, Items (3)1 through (3)7 of the Enforcement Order occurs in respect of a significant
subsidiary of the Target Company.
In each of the following cases, the Offeror may, on or before the day preceding the dateof expiration of the Tender Offer Period (including in any case where this period is
extended), withdraw the Tender Offer on the basis that the Tender Offeror was not able
to obtain “license, etc.” set out in Article 14, Paragraph 1, Item (4) of the Enforcement
Order with respect to the notification that is provided by the Offeror to the U.S.
Antitrust Authorities pursuant to the U.S. Antitrust Act, an injunction prohibiting
consumption of the Share Acquisition is issued by a court at the request of the U.S.
Antitrust Authorities or the waiting period or an extended waiting period under the U.S.
Antitrust Act has not expired
If the Tender Offeror intends to withdraw the Tender Offer, the Tender Offeror will givean electronic public notice and publish a notice to that effect in the Nikkei. However,
if it is deemed difficult to give the public notice by the last day of the Tender Offer
Period, the Tender Offeror will make a public announcement by the method set out in
Article 20 of the Cabinet Ordinance and give a public notice immediately after theannouncement.
(3)

Conditions to reduce purchase price, details thereof and method of disclosure of
reduction
Under Article 27-6, Paragraph 1, Item (1) of the Act, if the Target Company conducts
any act set out in Article 13, Paragraph 1 of the Enforcement Order during the Tender
Offer Period, the Tender Offeror may reduce the purchase price in accordance with thestandards set out in Article 19, Paragraph 1 of the Cabinet Ordinance.
If the Tender Offeror intends to reduce the purchase price, the Tender Offeror will giveelectronic public notice and publish a notice to that effect in the Nikkei. However, if it
is deemed difficult to give the public notice by the last day of the Tender Offer Period,
the Tender Offeror will make a public announcement by the method set out in Article 20of the Cabinet Ordinance and give public notice immediately after the announcement.
If the purchase price is reduced, the Tender Offeror will also purchase the Share
Certificates, Etc. tendered on or before the date of the public notice at the reduced
purchase price.

(4)

Matters concerning Tendering Shareholders’ right to cancel tender
Tendering Shareholders may, at any time during the Tender Offer Period, cancel theiragreement for the Tender Offer. Tendering Shareholders must cancel their agreement
for the Tender Offer in accordance with the method set out in “(2) Method ofcancellation of tenders under the tender offer” of “7. Method of tendering shares under
the tender offer and cancellation thereof” above.
The Tender Offeror will not make any claim for damages or penalty payment against
Tendering Shareholders even if the Tendering Shareholders cancel their agreement.
Further, the cost of returning tendered Share Certificates, Etc. to the Tendering
Shareholders will be borne by the Tender Offeror. If cancellation is proposed, thetendered Share Certificates, Etc. will be returned promptly after the procedures for thatcancellation proposal are consummated in the manner set out in “(4) Method of returnof Share Certificates, Etc.” in “10. Method of settlement” above.

45

(5)

Method of disclosure if the conditions of the Tender Offer are changed
The Tender Offeror may change the conditions, etc. of the Tender Offer during theTender Offer Period unless such change is prohibited under Article 27-6, Paragraph 1 of
the Act or Article 13 of the Enforcement Order. If the Tender Offeror intends tochange any conditions, etc. of the Tender Offer, the Tender Offeror will give anelectronic public notice and publish a notice to that effect in the Nikkei. However, if it
is deemed difficult to give the notice by the last day of the Tender Offer Period, theTender Offeror will make a public announcement in the manner set out in Article 20 of
the Cabinet Ordinance and give a public notice immediately after the announcement.
If the conditions, etc. of the Tender Offer are changed, the Tender Offeror will alsopurchase the Share Certificates, Etc. tendered on or before the date of the public noticein accordance with the changed conditions, etc. of the Tender Offer.

(6)

Method of disclosure if amendment statement is filed
If the Tender Offeror submits an amendment statement to the Director-General of the
Kanto Local Finance Bureau (excluding the cases provided for in the proviso in Article
27-8, Paragraph 11 of the Act), the Tender Offeror will immediately make a publicannouncement of the content of that amendment statement that is relevant to the content
of the public notice of the commencement of the Tender Offer in the manner set out in
Article 20 of the Cabinet Ordinance. The Tender Offeror will also immediately amend
the explanatory statement of the Tender Offer and deliver the amended explanatory
statement to the Tendering Shareholders who have already received the previous
explanatory statement. However, if the amendments are limited in scope, the Tender
Offeror may instead prepare and deliver to Tendering Shareholders a document stating
the reason for the amendments, the matters amended, and the details thereof.

(7)

Method of disclosure of results of the Tender Offer
The results of the Tender Offer will be made public on the day following the last day of
the Tender Offer Period in the manner set out in Article 9-4 of the Enforcement Orderand Article 30-2 of the Cabinet Ordinance.

(8)

Other
(i)

The distribution of the Tender Offer Registration Statement, Tender Offer
Explanatory Statement and other documentation related to the Tender Offer (the“Offer Documents”) may be restricted by law in certain jurisdictions. Any person
who receives any Offer Documents is required to make himself, herself or itself
aware of and comply with the relevant restrictions.

(ii)

In the jurisdictions where an offer for purchase or a solicitation of offer for sale of
any Target Company Shares, the Stock Acquisition Rights or the Convertible Bonds
to which the Offer Documents relate is not lawful, the Offer Documents shall notconstitute an offer or solicitation. In any of the above jurisdictions, tendering by ashareholder of Target Company Shares, a holder of the Stock Acquisition Rights ora holder of the Convertible Bonds will not be accepted.

(iii)

Upon tendering in the Tender Offer, each Tendering Shareholder (or, in the case of
Foreign Shareholders, Etc., their standing proxies) shall be deemed to have given
the representation and warranty that solicitation relating to the Tender Offer to theTendering Shareholder is lawful under all applicable securities laws and regulations,46

and the Tendering Shareholder is in compliance with all applicable laws andregulations in connection with the tender.

47

II.

Conditions of the Offeror

1.

In the case of a corporation(1)

Outline of the Offeror(i)History of the Offeror

Month, Year
September, 2016

(ii)

Event
Incorporated as a joint stock corporation (kabushiki kaisha) whose tradename is Adherence Corporation, whose head office is at 1-1, Marunouchi
2-chome, Chiyoda-ku, Tokyo, and whose stated capital is 500,000 yen

Business purpose of the Offeror and the details of its business(Purpose of the Offeror)
1.
2.
3.

Investment business;
Lending of money; andAny business incidental or in relation to any of the foregoing.

(Details of business of the Offeror)
The purpose of the Offeror’s business is to acquire and own the Share Certificates, Etc.
of the Target Company.
(iii)

Amount of capital and total number of issued shares of the Offeror(as of October 17, 2016)
Amount of Stated Capital
Total number of issued shares
500,000 yen
100 shares

Note:

As stated in “I. Terms and conditions of tender offer,” “8. Funds required for tender
offer,” “(2) Deposits or borrowings allocable for funds required for tender offer,” “(iv)Other methods of financing,” the Offeror will receive a contribution up to 5,200,000
thousand yen from Integral 2 LP, a contribution up to 600,000 thousand yen from
Integral Fund II (A) L.P., and a contribution up to 1,200,000 thousand yen from Mr.
Nemoto no later than two Business Days before the commencement date of settlementof the Tender Offer, and the Offeror’s stated capital will be increased by 7,000,000
thousand yen at a maximum.

(iv)

Major shareholders

Name
IntegralCorporation
Total
(v)

(as of October 17, 2016)
Ratio to the total
Number of shares heldnumber of issued
shares (%)

Address
1-1, Marunouchi
2-chome,
Chiyoda-ku, Tokyo-100

100.00100

100.00

Employment histories of and number of shares held by officers

48

(as of October 17, 2016)
Title held

Position

Name

Date ofbirth

Employment history
April 1998
February
2005
January
2006
December
2007
January
2009
October
2011

Representative
Director-

Kensaku
Mizutani

March 8,1974

September
2013

December
2014

March
2016
June 2016

September
2016

Joined Mitsubishi
Corporation
Joined Morgan Stanley
Japan Securities Co.,
Ltd.
Joined GCA
Corporation
Appointed Director andPartner at Integral
Corporation (current
position)
Appointed Director at
B.P.S. Corporation(current position)
Appointed Director at
FiBest Limited
Appointed Director at
TBI Co., Ltd. (currently
TBI Holdings Co., Ltd.)(current position)
Appointed Director at
QB Net Co., Ltd.
(currently QB Net
Holdings Co., Ltd.)(current position)
Appointed Director at
Convano Inc. (current
position)
Appointed Director at
Shinwa Co., Ltd.
(current position)
Appointed
Representative Directorof the Offeror (current
position)

Total

(2)

Number ofshares held--

Financial condition

The Offeror is a company incorporated on September 26, 2016 and its initial fiscal year has not
ended yet as of the date hereof. Therefore, no financial statements of the Offeror have been
prepared so far.
(3)

Matters concerning the Offeror which is an ongoing disclosure company(i)Documents filed by the Offeror

(ii)

(a)

Annual Securities Report and Documents Attached Thereto(b)

Quarterly Securities Report or Semiannual Securities Report(c)Amendment Report

Place of public inspection of documents mentioned above

49

2.

In the case of an entity other than a corporation
N/A

3.

In the case of an individual
N/A

50

III.

Breakdown of Share Certificates, Etc. held and/or traded by the Offeror and special related
persons

1.

Breakdown of ownership of Share Certificates, Etc. as of the date hereof(1)

Total number of Share Certificates, Etc. held by the Offeror and the special related
persons(as of October 17, 2016)

Share certificates
Certificates of stock acquisitionrightsCertificates of corporate bonds
with stock acquisition rights
Beneficiary certificates of trust of
Share Certificates, Etc. ()
Deposit receipts for Share
Certificates, Etc. ()
Total
Total number of Share
Certificates, Etc. held
(Total number of potential Share
Certificates, Etc. held)(2)

Number of
Share
Certificates,
Etc. held

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (2)of Enforcement
Order

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (3)of Enforcement Order

49,541 (shares)– (shares)– (shares)

3,359

–

–

–

–

–

–

–

–

–

–

–

52,900––52,900––(3,359)––

Share Certificates, Etc. held by the Offeror(as of October 17, 2016)

Share certificates
Certificates of stock acquisitionrightsCertificates of corporate bonds
with stock acquisition rights
Beneficiary certificates of trust of
Share Certificates, Etc. ()
Deposit receipts for Share
Certificates, Etc. ()
Total
Total number of Share
Certificates, Etc. held
(Total number of potential Share
Certificates, Etc. held)

Number of
Share
Certificates,
Etc. held

Number of Share
Certificates, Etc.
provided in Article
7,
Paragraph 1, Item(2) of Enforcement
Order

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (3)of Enforcement Order– (shares)– (shares)– (shares)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(–)

–

–

51

(3)

Share Certificates, Etc. held by the special related persons (total shares held by special
related persons)(as of October 17, 2016)

Share certificates
Certificates of stock acquisitionrightsCertificates of corporate bonds
with stock acquisition rights
Beneficiary certificates of trust of
Share Certificates, Etc. ()
Deposit receipts for Share
Certificates, Etc. ()
Total
Total number of Share
Certificates, Etc. held
(Total number of potential Share
Certificates, Etc. held)(4)

Number of
Share
Certificates,
Etc. held

Number of Share
Certificates, Etc.
provided in Article
7,
Paragraph 1, Item(2) of Enforcement
Order

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (3)of Enforcement Order

49,541 (shares)– (shares)– (shares)

3,359

–

–

–

–

–

–

–

–

–

–

–

52,900––52,900––(3,359)––

Share Certificates, Etc. held by each special related person (breakdown by each special
related person)(i)

Special related person

Name or corporate name
Address or location
Occupation orcontents of business(as of October 17, 2016)
Nobuo Nemoto
13-4, Araki-cho, Shinjuku-ku, Tokyo (location of the Target
Company)
Representative Director, Chairman and President of AderansCompany Limited
Contact Person:

Contact information

Relationship with Offeror

Name or corporate name
Address or location
Occupation orcontents of business

MasaakiIzumoto,GeneralManager,
Global IR Department
Aderans Company Limited
Contact Place:
13-4, Araki-cho, Shinjuku-ku, Tokyo
Telephone Number: 03-3350-3268
A person who agreed to exercise the voting rights and other rights asa shareholder jointly with the Offeror.
A person who agreed to acquire the Share Certificates, Etc. of theTarget Company jointly with the Offeror(as of October 17, 2016)
Yoshihiro Tsumura
13-4, Araki-cho, Shinjuku-ku, Tokyo (location of the Target
Company)
Representative Director, Executive Vice President of AderansCompany Limited

52

Contact Person:

MasaakiIzumoto,GeneralManager,
Global IR Department
Contact information
Aderans Company Limited
Contact Place:
13-4, Araki-cho, Shinjuku-ku, Tokyo
Telephone Number: 03-3350-3268
A person who agreed to acquire the Share Certificates, Etc. of theRelationship with Offeror
Target Company jointly with the Offeror
Note:
Although Mr. Tsumura does not intend to directly acquire the Share Certificates, Etc. of the Target
Company, if the Tender Offer is constituted, Mr. Tsumura plans to make contributions to the Tender
Offeror. Therefore, Mr. Tsumura is listed as a special related person since he is considered to be a
person who agreed to acquire Share Certificates, Etc. of the Target Company jointly with the Tender
Offeror.

(ii)

Number of Share Certificates, Etc. held

Nobuo Nemoto(as of October 17, 2016)
Number of Share
Certificates, Etc.
held

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (2)of Enforcement Order

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (3)of Enforcement Order

Share certificates
49,461 (shares)– (shares)– (shares)
Certificates of stock acquisition
2,071
–
–
rightsCertificates of corporate bonds–––
with stock acquisition rights
Beneficiary certificates of trustof Share Certificates, Etc.
–
–
–
(
)
Deposit receipts for Share–––
Certificates, Etc. ()
Total
51,532––
Total number of Share
51,532––
Certificates, Etc. held
(Total number of potential Share(2,071)––
Certificates, Etc. held)
Note:“Number of Share Certificates, Etc. held” above includes 15 voting rights pertaining to 1,598 sharesof the Target Company indirectly held by Mr. Nemoto through the management stock ownership planof the Target Company.
Yoshihiro Tsumura

Share certificates
Certificatesofstock
acquisition rights
Certificates of corporate
bonds with stock acquisitionrightsBeneficiary certificates oftrust of Share Certificates,
Etc. ()

Number of Share
Certificates, Etc.
held

Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (2)of Enforcement Order(as of October 17, 2016)
Number of Share
Certificates, Etc.
provided in Article 7,
Paragraph 1, Item (3) of
Enforcement Order

80 (shares)– (shares)– (shares)

1,288

–

–

–

–

–

–

–

–

53

Deposit receipts for Share
Certificates,
Etc.
(
)
Total

–

–

–

1,368

–

–

Total number of Share
1,368
–
–
Certificates, Etc. held
(Total number of potential(1,288)––
Share Certificates, Etc. held)
Note :“Number of Share Certificates, Etc. held” above includes 14 voting rights pertaining to 1,402 sharesof the Target Company indirectly held by Mr. Tsumura through the management stock ownership planof the Target Company.

2.

Trading of Share Certificates, Etc.
(1)

Trading during the 60-day period prior to the date hereof
NameTypes of sharecertificates

Increase

Nobuo Nemoto(Note 1)

Common stock

455 shares–

455 shares

Yoshihiro Tsumura(Note 2)

Common stock

683 shares–

683 shares

Note 1:

Note 2:

3.

DecreaseNet

Mr. Nemoto acquired 222 shares (rounding down to the nearest whole number) on August25, 2016 and 233 shares (rounding down to the nearest whole number) on September 23,
2016 by purchasing through the management stock ownership plan of the Target
Company.
Mr. Tsumura acquired 333 shares (rounding down to the nearest whole number) on
August 25, 2016 and 349 shares (rounding down to the nearest whole number) on
September 23, 2016 by purchasing through the management stock ownership plan of theTarget Company.

Material contracts concerning these Share Certificates, Etc.
The Integral Group has entered into the MBO Memorandum dated October 14, 2016 with Mr.
Nemoto and Mr. Tsumura. In the MBO Memorandum, Mr. Nemoto agreed not to tender the
Non-Tendered Shares (the number of shares held: 4,944,658 shares; and the ownership ratio:
11.94%) in the Tender Offer, to tender the Expected Tendered Stock Acquisition Rights (Mr.
Nemoto) (the total number of underlying shares: 137,100 shares; and the total ownership ratio:
0.33%) in the Tender Offer, and to waive without any consideration all of the Expected Waived
Stock Acquisition Rights (Mr. Nemoto) (the total number of underlying shares: 70,000 shares;
and the total ownership ratio: 0.17%) promptly after the successful completion of the Tender
Offer. Also, in the MBO Memorandum, Mr. Tsumura agreed to tender the Expected Tendered
Share Certificates, Etc. (Mr. Tsumura) (the total number of underlying shares: 135,400 shares;
and the total ownership ratio: 0.33%) in the Tender Offer.
For details, please see “(i) MBO Memorandum” of “6. Matters regarding material agreement(s)related to the Tender Offer” of “3. Purposes of tender offer” of “I. Terms and conditions of tender
offer” above.
In addition, Mr. Nemoto has pledged in total 2,360,000 shares of the Target Company Shares that
he holds as collateral to Sumitomo Mitsui Banking Corporation, Resona Bank, Limited and the
Hokuriku Bank, Ltd.

4.

Contract of purchase, etc. of Share Certificates, Etc. on and after the date hereof
N/A

54

IV.

Transactions between the Offeror and the Target Company

1.

Transactions between the Offeror and the Target Company or its officers, and the contents
thereof
N/A

2.

Agreements between the Offeror and the Target Company or its officers, and the contents
thereof(1)

Agreements between the Offeror and the Target Company, and the contents thereof
According to the Target Company Press Release, the Target Company resolved at its
board of directors meeting held on October 14, 2016 to express an opinion in supportof the Tender Offer, to recommend to the Target Company’s shareholders to tendertheir Target Company Shares in response to the Tender Offer, and to leave the decision
to the holders of Stock Acquisition Rights and Convertible Bonds as to whether or not
to tender their Stock Acquisition Rights and Convertible Bonds in response to theTender Offer.
For the details of the above resolutions of the board of directors of the Target Company,
please see “(v) Approvals from all directors without conflicts of interest and opinionsfrom all statutory auditors without conflicts of interest in the Target Company to theeffect that they have no objections” of “Measures to ensure fairness of the Tender Offer
Price and to avoid conflicts of interest and other measures to ensure fairness of theTender Offer” of ”Process of calculation” of “(2) Price of tender offer” of “4. Term,
price and number of Share Certificates, Etc. for tender offer” above.

(2)

Details of agreements between the Offeror and officers of the Target Company(i)

MBO Memorandum

The Integral Group has entered into the MBO Memorandum dated October 14, 2016
with Mr. Nemoto and Mr. Tsumura. In the MBO Memorandum, Mr. Nemoto agreed
not to tender the Non-Tendered Shares (the number of shares held: 4,944,658 shares;
and the ownership ratio: 11.94%) in the Tender Offer, to tender the Expected Tendered
Stock Acquisition Rights (Mr. Nemoto) (the total number of underlying shares: 137,100
shares; and the total ownership ratio: 0.33%) in the Tender Offer, and to waive without
any consideration all of the Expected Waived Stock Acquisition Rights (Mr. Nemoto)(the total number of underlying shares: 70,000 shares; and the total ownership ratio:
0.17%) promptly after the successful completion of the Tender Offer. Also, in the
MBO Memorandum, Mr. Tsumura agreed to tender the Expected Tendered Share
Certificates, Etc. (Mr. Tsumura) (the total number of underlying shares: 135,400 shares;
and the total ownership ratio: 0.33%) in the Tender Offer.
(ii)

Shareholders Agreement

The Integral Group has entered into the Shareholders Agreement dated October 14,
2016 with Mr. Nemoto and Mr. Tsumura regarding the board composition of the Target
Company after the Transaction, matters that require prior approvals related to theoperation of the Target Company, and share transfer restrictions of the Target Company,etc.
For outline of contents of agreements including the MBO Memorandum and theShareholders Agreement, please see “(i) MBO Memorandum” and “(iii) Shareholders

55

Agreement” of “(6) Matters regarding material agreement(s) related to the Tender Offer”
of “3. Purposes of tender offer” of “I. Terms and conditions of tender offer” above.
(3)

Background, purpose and decision-making process leading to decision to conduct theTender Offer, and management policy after the Tender Offer
Please see “(2) Background, purpose and decision-making process leading to decision
to conduct the Tender Offer, and management policy after the Tender Offer” of “3.
Purposes of tender offer” of “I. Terms and conditions of tender offer” above.

(4)

Measures to ensure fairness of the Tender Offer Price and to avoid conflicts of interest
and other measures to ensure fairness of the Tender Offer
Please see “Measures to ensure fairness of the Tender Offer Price and to avoid conflictsof interest and other measures to ensure fairness of the Tender Offer” of ”Process of
calculation” of “(2) Price of tender offer” of “4. Term, price and number of Share
Certificates, Etc. for tender offer” of “I. Terms and conditions of tender offer” above.

56

V.

Conditions of the Target Company

1.

Profits and losses, etc. for the past three years(1)

Profits and losses
Fiscal year

Net sales
Sales cost
Selling, general and administrative expenses
Non-operating income
Non-operating expenses--

Net income (loss)

-

-

(2)

-

Profit and loss per share

Fiscal year
Net income or loss per share
Dividend per share
Net assets per share

2.

(Japanese yen)--

(Japanese yen)--

Share price information(Japanese yen)

Names of financial
instruments exchangeorapproved financial
instruments dealers
association

First Section of the Tokyo Stock Exchange

April
2016

Month

May
2016

June
2016

July
2016

August2016

September
2016

October
2016

Highest share price

699

571

560

524

472

453

540

Lowest share price

555

515

480

444

432

420

448

Note:

The highest and lowest share prices for October 2016 represent the highest and lowest shareprices up to and including October 14, 2016.

3.

Shareholder information(1)

Breakdown by holders
as ofStatus of Shares(shares constituting 1 unit:

Description

Number ofshareholders
Number ofsharesheld (units)
Proportion of
number ofsharesheld (%)

National andlocal
governments

shares)Foreign entities, etc.
Other than
Individuals
Individuals

Financial
institutions

Financial
instruments
dealers

Other
entities

-

-

-

-

-

-

-

-

-

-

-

-

-

Individuals
or others

Total

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(2)

Number of shares held by major shareholders and officers(i)Major shareholders

57

Status ofshares lessthan 1 unit
(shares)Name or corporate name

Address or location

Number ofshares held

Total

-

-

(ii)

4.

as of
Ratio to thetotal number
of issued
shares (%)-

Officers

Name

Title

Job title

Number ofshares held

Total

-

-

-

as of
Ratio to thetotal number
of issued
shares (%)-

Matters concerning the Target Company which is an ongoing disclosure company(1)

Documents filed by the Target Company(i)Annual securities report and documents attached thereto
Annual securities report and documents attached thereto for the 46th term (from March
1, 2014 to February 28, 2015) were filed to the Director-General of the Kanto Local
Finance Bureau on May 28, 2015
Annual securities report and documents attached thereto for the 47th term (from March
1, 2015 to February 29, 2016) were filed to the Director-General of the Kanto Local
Finance Bureau on May 26, 2016

(ii)

Quarterly securities report or semiannual securities report
Quarterly Securities Report for the Second Quarter of the 48th Term (from June 1,2016 to August 31, 2016) is filed to the Director-General of the Kanto Local Finance
Bureau on October 14, 2016

(iii)

Extraordinary report
N/A

(iv)

Amendment report
N/A

(2)

Place of public inspection of documents mentioned above
Aderans Company Limited(13-4, Araki-cho, Shinjuku-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

5.

Details, etc. of facts regarding implementation of tender offer that have been notified
N/A

58

6.

Other matters(1) Announcement of “Notice Regarding Revision to Dividend Forecast for Fiscal 2017”
It has been announced that the Target Company decided at the board of directors meeting held on
October 14, 2016 to revise its dividend forecast for the fiscal year ending February 2017 and not
to declare a year-end dividend for the fiscal year ending February 2017, on the condition that theTender Offer is completed. Please refer to the announced notice for further details.
(2) Announcement of “Notice regarding Differences between First Two-Quarter Performance
Forecast and Actual Results and Revision of Full-Year Performance Forecast”
On October 14, 2016, the Target Company announced “Notice regarding Differences between
First Two-Quarter Performance Forecast and Actual Results and Revision of Full-Year
Performance Forecast” and on October 17, 2016, the Target Company announced “(Correction)
Partial Correction to ‘Notice regarding Differences between First Two-Quarter Performance
Forecast and Actual Results and Revision of Full-Year Performance Forecast’”. Based on theannouncement, overview of the difference between earnings forecast and actual earnings figures
for consolidated cumulative second quarter for the fiscal year ending February 2017 and annual
consolidated performance forecast for the fiscal year ending February 2017 for the Target
Company are as follows. The overview of the announcement below is an excerpt of the noticeannounced by the Target Company. Please refer to the announced notice for further details.
Difference between performance forecast and actual earnings figures for consolidated cumulative
second quarter for the fiscal year ending February 2017 (March 1, 2016 to August 31, 2016)

Net Sales

Previous forecast (A)Actual earnings (B)Difference (B-A)
Change(Reference) Actual results forthe second quarter for the fiscal
year ended February 2016

Net quarterly
incomeattributable to
Net quarterly
Ordinary income
the shareholders income per shareof the parent
company

Operatingincome40,000 million
200 million yen 190 million yen
yen
37,860 million(1,245) million
169 million yen
yenyen(2,140) million(1,435) million(31) million yen
yenyen(1,319) million
yen(1,349) million
yen

―

―

―

39,842 million
459 million yen 821 million yen 349 million yen
yen

10.00 yen

(5.3)%(15.0)%

30 million yen

0.86 yen(37.85) yen―

Annual consolidated performance forecast for the fiscal year ending February 2017 (March 1, 2016 to
February 28, 2017)
Net Sales

Previous forecast (A)Revised forecast (B)Difference (B-A)
ChangeNet income
attributable toOrdinary income the shareholdersof the parent
company

Operatingincome81,300 million
650 million yen 640 million yen 100 million yen
yen
77,462 million(370) million (1,520) million (1,900) million
yen
yen
yen
yen
(3,838) million (1,020) million (2,160) million (2,000) million
yen
yen
yen
yen
―

(4.7)%

59――

Net income pershare

2.86 yen(54.49) yen――

(Reference) Actual results forthe fiscal year ended February
2016

79,153 million
yen(125) million
yen(548) million
yen(1,860) millionyen(53.27) yen(3) Announcement of “Notice regarding Booking of Non-Operating Expenses (Foreign Exchange
Losses)”On October 14, 2016, the Target Company announced “Notice regarding Booking of
Non-Operating Expenses (Foreign Exchange Losses)”. According to the notice, the Target
Company posted foreign exchange losses of 1,419 million yen as non-operating expenses for the
consolidated cumulative second quarter for the fiscal year ending February 2017 because of the
yen’s appreciation. Please refer to the announced notice for further details.

60