＜Translation＞
August 27, 2008
For Immediate Release:
Company name: Digital Garage, Inc.
Representative: Kaoru Hayashi, President/CEO(JASDAQ code: 4819)(URL http://www.garage.co.jp/)
Direct inquiries to:Board Director Kota Sakurai,
TEL:+81-3-5465-7747

Announcement of Group Realignment Merger andDivestiture of Subsidiaries
Digital Garage, Inc. (“the Company”) is pleased to announce that the Company’s Board of Directors
passed a resolution in its meeting held on August 27, 2008 to authorize the surviving company of
Digital Garage, Inc. to absorb and merge with the dissolving companies of DG Solutions Co., Ltd., awholly-owned subsidiary of the Company, and DG & Ibex, Inc. (“DG & Ibex), Creative Garage, Inc.
(“Creative Garage”), and DG Media Marketing, Inc. (“DG Media Marketing”), all of which are
wholly-owned subsidiaries of DG Solutions, and entered into a merger agreement with thesedissolving companies. The merger is subject to the demerger of Sogei Inc. (“Sogei”), a whollyowned subsidiary of DG Solutions, in which Sogei inherits the rights and obligations of DG Media
Marketing concerning its e-marketing business. The demerger is scheduled for October 27, 2008,
the same day as the effective date of the merger. DG Marketing and Sogei entered into a demerger
agreement on August 27, 2008.
In addition, the Company’s Board of Directors resolved in its meeting held on August 27, 2008 to
authorize the surviving company of Digital Garage, Inc. to absorb and merge with the dissolving
company of ECONTEXT, Inc. (“ECONTEXT”), and entered into an absorption merger agreementwith ECONTEXT. For details of this merger, please refer to the separate press release dated August27, 2008.
Notes
Purpose of the Merger and Demerger Concerning the Subsidiaries
Digital Garage, Inc. was founded in 1995 to conduct advertising, planning, production, and otherbusinesses via the Internet. It operates according to a management vision to create new contexts(foundations in diversifying values) and contribute to society by organically connecting a variety ofcomplex data and further enhancing the value of existence for corporations, customers, and data.
It aims to do this by utilizing the Company’s solution expertise based on its achievements since theearly days of the Internet industry, and effective utilization of the state-of-the-art Internet
technologies. The Company adopted a pure holding company system through a company split inJanuary 2006 in order to strengthen its group management function, clarify the profitability and-1-management responsibilities of each of its businesses, and enhance the speed and flexibility ofdecision-making in each of its businesses. The Company operates in four core business areas: thesolution business for IT construction, marketing promotion support, and Internet advertisingrelated business; the portal/blog business for Internet media businesses, such as Kakaku.com; theincubation business for investment in and development of venture and other companies; and thefinancing business for settlement and logistics, such as ECONTEXT’s e-commerce, as well as
foreign exchange margin transactions.
The corporate solution business is increasingly required to hybridize by comprehensively
connecting “real” business and cyber (Internet) business. In the Digital Garage Group, we have DG& Ibex that promotes “real” and cyberspace businesses; DG Media Marketing that has established
web advertising as its business domain; and Creative Garage that runs a creative production
business. In addition, ECONTEXT, which conducts settlement business, can be defined in a broader
sense as a corporate solution business. Digital Garage, a pure holding company, believes that theCompany has succeeded in offering unique solutions that its competitors are unable to provide, byencouraging close working relationships between its solution companies.
In this environment, disharmony began to arise between Digital Garage and its solution companies
and ECONTEXT, because business collaboration was strengthened largely due to the pure holding
company structure. Specifically, issues such as the following have become evident between thegroup business companies, including ECONTEXT: slower decision-making, conflicts in the
distribution of human resources, and time-consuming adjustment processes for transaction prices
and profit sharing. These issues, in turn, led to conflicting interests that hindered the maximizationof group value through maximizing business synergy. In addition, awareness has arisen of
problems in the areas of internal control system introduction and appropriate distribution ofmanagement resources, as the cost of managing stock exchange listings increased. In addition, theneed to offer total solutions to maximize customer profits has grown rapidly, including settlement.
Digital Garage has determined that an integrated organizational system needs to be constructed
and the diffused management resources need to be optimally redistributed to solve these issues,
implement strategies for further growth, and conduct business in a flexible manner. The Company
has therefore decided to transform itself from a pure holding company to an operating holding
company. On August 27, 2008 it entered into an absorption merger agreement with the following
four companies: DG Solutions, DG & Ibex, Creative Garage, and DG Media Marketing.
In addition, the business line of DG Media Marketing is scheduled to be divided into two areas: theInternet advertising agency business (e-marketing business) where corporate messages arecommunicated to Internet users via the Internet, and the solution business that seeks to shareprofits by helping to increase corporate sales through customer retention programs such as point
systems. The former is expected to engender synergy with Sogei, a comprehensive advertising
agency, due to the requirement to implement cross-media measures (in order to express
messages in a variety of media) other than the web, and for that reason it will be split andabsorbed by Sogei. The latter is expected to generate synergy with ECONTEXT (which conducts
settlement business) and the Company’s solution business, because accumulated points are
considered semi-currencies and are likely to be supervised by the Financial Services Agency. For
this reason, Digital Garage has decided to merge DGMM’s solution business with the Company.
By amalgamating with its solution companies, Digital Garage will optimize its sales channels andconduct cross-marketing. This, in turn, will enable the Company to offer a more comprehensive
consultation, marketing, and settlement unit that can solve customers’ issues. From the-2-perspective of “Customer First,” the Company will therefore be able to further enhance thecorporate value of the DG Group.
The Company has chosen merger, which is the simplest and most effective management form fordissolving conflicts between maximizing the interests of each subsidiary and the group as a whole,
reducing costs in indirect divisions, and constructing a system that can obtain large-scale orders
and promptly implement unified growth strategies.
The upcoming group realignment is intended to further improve the group’s competitiveness byoffering an integrated solutions menu such as IT construction, advertising, marketing, andsettlement infrastructure by merging the Company with the group solution companies as well as
ECONTEXT, which provides settlement infrastructure as a solution business in a broader sense.
Going forward, Digital Garage plans to continue to develop its strategy from a group-wide
perspective, so that the Company can operate its businesses more strategically and functionally as
an operation holding company, while enhancing professionalization and creativity in the unified
solution business incorporating Digital Garage, its solution companies, and ECONTEXT. In the
incubation business, the Company has decided that it is most appropriate to continue to operate
DG Incubation as a subsidiary, considering the special nature of investment business. Using DG
Incubation as the core, the group plans to invest in state-of-the-art Internet ventures overseas, aswell as conducting business incubation in Japan.
In addition, the media neutrality and independence of the Company’s consolidated subsidiaries that
conduct portal/blog business will be respected, as they will remain subsidiaries of the Company.
The Company plans to continue to reward its shareholders after the merger with its goal ofenhancing the corporate and shareholder value of the overall Digital Garage group.
I. Outline of the Merger
1. Merger schedule
Meeting of the Board of Directors that resolved toundertake the merger (each company involved)
Conclusion of merger agreement

Wednesday, August 27, 2008
Wednesday, August 27, 2008

(each company involved)
General meeting of shareholders to approve the merger

Friday,September 26, 2008

(Digital Garage)(planned)

Effective date of merger

Monday,(the day on which the merger takes effect)(planned)

October 27, 2008

(Note) The merger falls under the category of a short form merger as stipulated in Article 784,
Paragraph 1 of the Companies Act of Japan. As a result, DG Solutions, DG & Ibex, Creative
Garage, and DG Media Marketing will conduct the merger without being required to obtainapproval at general meetings of shareholders.
Since the Company will sustain a so-called merger loss as a result of the merger, however,
the Company has decided that the merger does not fulfill the requirements for a short form
merger as stipulated in Article 796, Paragraph 3 of the Companies Act of Japan. For thisreason, the Company plans to obtain approval for the absorption merger agreements at a
general meeting of shareholders of the Company.

-3-2. Merger method
The merger will be conducted by way of an absorption merger, with Digital Garage being thesurviving company, and DG Solutions, DG & Ibex, Creative Garage, and DG Media Marketing
being the dissolving companies.
3. Allocation of new shares in association with the merger
There will be no issuance of new shares and no increase of paid-in capital and reserves
accompanying the merger, since DG Solutions is a wholly-owned subsidiary of the Company, and
DG & Ibex, Creative Garage, and DG Media Marketing are wholly-owned subsidiaries of DG
Solutions.
4. Treatment of stock acquisition rights and convertible bonds
DG Solutions, DG & Ibex, Creative Garage, and DG Media Marketing have not issued stockacquisition rights or convertible bonds.
5. Overview of parties to the merger (as of June 30, 2008)
(1)

(2)

(3)

(4)

(5)

(6)
(7)

Company nameNature of business

Digital Garage, Inc.

DG Solutions Co., Ltd.

DG & Ibex, Inc.

(surviving company)(dissolving company)(dissolving company)

Holding shares of group

Intermediate holding

Marketing promotion

companies to manage

company in the solution

support service, IT system

their business activities

divisiondesign and development

January 5, 2006

September 18, 1983

Date of establishment August 17, 1995
Location of head
office43-15, Tomigaya 2-

43-15, Tomigaya 2-chome, Shibuya-ku,

chome, Shibuya-ku,

Tokyo

Tokyo

Representative Director

and CEO

and President

Masaharu Nishimoto

Kazunari Higuchi

1,831,833 thousand yen

100,000 thousand yen

100,000 thousand yen

159,358 shares

2,100 shares

9,360 shares

2,750,045 thousand yen

1,560,904 thousand yen

1,045,123 thousand yen(non-consolidated)(non-consolidated)(non-consolidated)

11,776,438 thousand yen

3,805,219 thousand yen

4,920,644 thousand yen(non-consolidated)(non-consolidated)(non-consolidated)

June 30

June 30

June 30

Kaoru Hayashi: 27.9%

Digital Garage: 100.0%

DG Solutions: 100.0%

President and CEO

representative

Kaoru Hayashi

Paid-in capitalissued(8)

Net assets(9)

Total assets(10) Fiscal year closing

State Street Bank & Trust
Company: 7.0%
Major shareholders(11) and shareholding
ratiosChiyoda-ku, Tokyo

Representative Director

Title and name of

Number of shares

8-1, Sanban-cho,

TIS Inc.: 5.5%
The Master Trust Bank ofJapan, Ltd. (trust
account): 5.2%
BBH (LUX) Fidelity Funds
Pacific Fund: 5.0%

-4-

(1)

Company nameCreative Garage, Inc.

DG Media Marketing, Inc.

(dissolving company)(dissolving company)

Design and production ofadvertising graphics, video,(2)

Nature of business

web pages, etc., and generalcreative production such as

Planning, development and sales of Internet
ads, and marketing of group media

publishing(3)

Date of establishment(4)

Location of head office(5)

Title and name ofrepresentative

February 5, 2003

March 27, 2006

43-15, Tomigaya 2-chome,

30-2, Uehara 1-chome, Shibuya-ku, Tokyo

Shibuya-ku, Tokyo
Representative Director andPresident

Representative Director and President
Kinya Atsukawa

Hitoshi Kiku

(6)Paid-in capital

30,000 thousand yen

75,000 thousand yen(7)

Number of shares issued

600 shares

34,000 shares(8)

Net assets-13,164 thousand yen

210 thousand yen(non-consolidated)(non-consolidated)

134,741 thousand yen

266,997 thousand yen(non-consolidated)(non-consolidated)(9)

Total assets(10)

Fiscal year closing

March 31

June 30

Major shareholders and

DG Solutions: 88.8%

DG Solutions: 88.8%(11)

shareholding ratios(Note 1)

The figures for net assets and total assets of Creative Garage are correct as of March 31, 2008, thefinal day of the most recent fiscal year.
(Note 2)The shareholding ratio of DG Media Marketing was 88.8% as of June 30, 2008, but has sinceincreased to 100% as of August 27, 2008.

6. Post-merger situation(1) Company name

Digital Garage, Inc.
Solution business(2)

Nature of businessSettlement and logistics platform business in EC business, etc.
Holding shares of group companies to manage their business activities(3)

Location of head office(4) Title and name of representative(5) Paid-in capital

43-15, Tomigaya 2-chome, Shibuya-ku, Tokyo
President and CEO

Kaoru Hayashi

1,831,833 thousand yen (There will be no change to the amount ofpaid-in capital as a result of the merger.)(6) Net assets

The amount has not yet been determined.

(7) Total assets

The amount has not yet been determined.

(8) Fiscal year closing

June 30(9) Overview of accounting treatment
Account treatment for the merger will be implemented by applying III. 4. Transactions underCommon Control in the Accounting Standards for Business Associations (published on October
31, 2003 by the Business Accounting Council of the Financial Services Agency). No goodwill is
expected to arise as a result of the merger.

-5-

I. Summary of corporate divestiture concerning subsidiaries
1. Corporate divestiture schedule
Board of Directors meeting approving corporate divestiture agreement (both companies):
August 27, 2008
Conclusion of corporate divestiture agreement:

August 27, 2008

General meeting of shareholders to approve the corporate divestiture agreement(both companies):

September 25, 2008

Date of corporate divestiture (effective date):

October 27, 2008

2. Method of corporate divestiture
Absorption split with DG Media Marketing as the split company and Sogei as the succeedingcompany.
3. Allocation in association with the corporate divestiture
All of the 500 shares issued by Sogei at the time of the company split will be allocated to DG
Media Marketing.
4. Increase in the amount of paid-in capital due to the corporate divestuture
There will be no change in the amount of paid-in capital.
5. Treatment of stock acquisition rights and convertible bonds
Not applicable.
6. Rights and obligations to be inherited by the succeeding company
Sogei will inherit any and all rights and obligations concerning DG Media Marketing’s e-marketingbusiness.
7. Prospect for fulfillment of debt obligations
The Company believes that the split company and succeeding company will not have any
difficulties fulfilling their respective debt obligations to be performed on and after the effective
date of the corporate divestiture.
8. Overview of parties to the corporate divestiture (as of June 30, 2008)(1) Company name

DG Media Marketing, Inc.

Sogei Inc.

(split company)(succeeding company)
Any and all advertising business

Planning, development and sales of(2) Nature of business

Internet ads, and marketing of groupmedia

including, but not limited to, planning,proposal-making, producing andimplementation of advertising,marketing research, sales promotion,
public relations.

(3) Date of establishment(4) Location of head office

March 27, 2006

November 27, 1962

30-2, Uehara 1-chome, Shibuya-ku,

15-7, Tsukishima 1-chome, Chuo-ku,

Tokyo

Tokyo

-6-

Representative Director and CEO(5) Title and name ofrepresentative

Representative Director and President

Masaharu Nishimoto

Kinya Atsukawa

Representative Director and President
Kimitoshi Ikeda(6) Paid-in capital(7) Number of sharesissued(8) Net assets

Fiscal year

closing(11)

100,000 thousand yen

34,000 shares

275,000 shares

210 thousand yen (non-consolidated)(9) Total assets(10)

75,000 thousand yen

10,717 thousand yen (nonconsolidated)

266,997 thousand yen (non-7,520,780 thousand yen (non-consolidated)consolidated)

June 30

March 31

DG Solutions: 100.0%

DG Solutions: 100.0%

Major

shareholders andshareholding ratios(Note 1)

The figures for net assets and total assets of Sogei are correct as of March 31, 2008, the final day ofthe most recent fiscal year.

9. Overview of the split business division(1) Nature of the business of the split division
e-marketing business(2) Business performance of the split division(Unit: million yen)
Fiscal year ended June 30, 2007

Fiscal year ended June 30, 2008

Sales

181

369

Gross operating profit

37

33

Operating income

6-21

Ordinary income

6-21(3) Items and amount of assets and liabilities (as of June 30, 2008)(Unit: million yen)
AssetsItem

Liabilities
Book value

Item

Book value

Current assets

69

Current assets

66

Fixed assets

0

Fixed assets

―

Total

69

Total

66

(Note) Final amounts will be determined by adding or subtracting any increases and decreases in the above amounts up to
the effective date.

10. Post-company split situation(1) Split company(i) Company name
DG Media Marketing, Inc.

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(ii) Nature of business
Planning, development and sales of Internet ads, and marketing of group media(iii) Location of head office30-2, Uehara 1-chome, Shibuya-ku, Tokyo(iv) Representative
Representative Director and President: Kinya Atsukawa(v) Amount of paid-in capital
There will be no change in the amount of paid-in capital as a result of the split.
(vi) Fiscal year closing
June 30(2) Succeeding company(i) Company name
Sogei Inc.
(ii) Nature of business
Any and all advertising business including, but not limited to, planning, development andsales of Internet advertising; sales of Group media; planning, proposal-making, producing
and implementation of advertising; marketing research; sales promotion; public relations.
(iii) Location of head office15-7, Tsukishima 1-chome, Chuo-ku, Tokyo(iv) Representative
Representative Director and CEO: Masaharu Nishimoto
Representative Director and President: Kimitoshi Ikeda(v) Amount of paid-in capital
There will be no change in the amount of paid-in capital as a result of the split.
(vi) Fiscal year closing
March 31

End of Document-8-