This document has been translated from the Japanese original for the convenience of non-Japanese shareholders. In the event of any discrepancy
between this translation and the Japanese original, the original shall prevail.

Securities identification code: 9842
Date of sending by postal mail: May 9, 2023
Start date of measures for providing information in electronic format: May 3, 2023

To our shareholders:Haruhiko Sakamoto
Representative Director and President

ARCLANDS CORPORATION
445 Kamisugoro, Sanjo, Niigata Prefecture
NOTICE OF THE 54TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially notified of the 54th Ordinary General Meeting of Shareholders of ARCLANDS CORPORATION(the “Company”), which will be held as described below.
You may exercise your voting rights in writing by postal mail or via the Internet, instead of attending themeeting in person. Please review the reference documents for the General Meeting of Shareholders and referto the Introduction on Voting Rights on page 3 (Japanese only) and return the voting form via postal mail or
exercise your voting rights via the Internet so that your voting form or electromagnetic vote will reach us by
no later than 6 p.m. on Wednesday, May 24, 2023 (Japan Standard Time).
When convening this General Meeting of Shareholders, the Company takes measures for providing information that
constitutes the content of reference documents in electronic format (items for which the measures for providing inelectronic format will be taken) and posts this information on the Company’s website. Please access the Company’s
website using the Internet address shown below to review the information.
The Company’s website: https://www.arclands.co.jp/ja/ir/news.html (in Japanese)
Items for which the measures for providing in electronic format will be taken are posted on Tokyo Stock Exchange’s(TSE’s) and the Company’s website as shown below.
TSE’s website (Listed Company Search):https://www2.jpx.co.jp/tseHpFront/JJK020010Action.do?Show=Show(Access the TSE website using the internet address shown above, enter “ARCLANDS” in “Issue name (company
name)” or the Company’s securities code “9842” in “Code,” and click “Search.” Then, click “Basic information”
and select “Documents for public inspection/PR information.” Under “Filed information available for public
inspection,” click “Click here for access” under “[Notice of General Shareholders Meeting /Informational Materials
for a General Shareholders Meeting].”)Meeting Details
1. Date and time:Thursday, May 25, 2023 at 10:00 a.m. (Japan Standard Time)(Registration will start at 9:00 a.m.)

2. Venue:

Fifth-floor Hall, the Company Headquarters
445 Kamisugoro, Sanjo, Niigata Prefecture

3. Purposes:
Items to be reported:
1. Business report and consolidated financial statements for the 54th Term (from March 1, 2022 toFebruary 28, 2023), as well as the results of audit of the consolidated financial statements by the
Accounting Auditor and the Audit and Supervisory Committee
2. Non-Consolidated Financial Statements for the 54th Term (from March 1, 2022 to February 28, 2023)
Items to be resolved:
Proposal 1 Appropriation of surplus
Proposal 2 Election of six (6) Directors (excluding Directors who are Audit and Supervisory
Committee Members)
Proposal 3 Approval for share exchange agreement with ARCLAND SERVICE HOLDINGS CO.,LTD.
1◎ If you attend the meeting in person, please carry the voting form and submit it at the reception desk at the venue.
◎ If revisions to the items for which the measures for providing in electronic format will be taken arise, a notice ofthe revisions and details of the items before and after the revisions will be posted on the Company’s
aforementioned website and the TSE website.
◎ Due to the revision to the Companies Act, the Company has changed the rule so that shareholders can refer to theitems for which the measures for providing in electronic format will be taken by accessing any aforementioned
website, in principle, and such items are delivered only to shareholders who requested the delivery of paper-based
documents by the record date. However, for this General Meeting of Shareholders, the Company will send paperbased documents, including the items for which the measures for providing in electronic format will be taken, toall shareholders, regardless of whether they requested the delivery of paper-based documents.
According to the provisions of laws and regulations and Article 16 of the Articles of Incorporation of the Company,
the following items are not provided in the paper-based documents delivered to shareholders.
1) Overview of the system to ensure the properness of operations and operational status of such system containedin the business report2) Consolidated statements of changes in equity and Notes to consolidated financial statements
3) Non-consolidated statements of changes in equity and Notes to non-consolidated financial statements
4) Contents of non-consolidated financial statements and other documents for the most recent fiscal year of
ARCLAND SERVICE HOLDINGS CO., LTD. of Proposal 3: Approval for share exchange agreement with
ARCLAND SERVICE HOLDINGS CO., LTD. contained in the reference documents for the General Meetingof Shareholders
Accordingly, the consolidated financial statements and non-consolidated financial statements contained herein
are part of the documents audited by the Accounting Auditor and the Audit and Supervisory Committee during
the preparation of the Accounting Auditor’s Report and the Audit Report, respectively.
◎ The results of resolutions at this General Meeting of Shareholders will be posted on the Company’s
aforementioned website, instead of postal mail as in the past.

2

Reference Documents for the General Meeting of Shareholders
Proposal 1

Appropriation of surplus

The Company will place emphasis on the stable provision of dividends over the long term, and it will return profits
to shareholders while considering the level of profits and dividend payout ratio guidelines and maintaining abalance with internal reserves for improving corporate value.
The Company proposes the year-end dividend for the 54th period and the appropriation of surplus as follows:1.
(i)Year-end dividends
Type of dividend property
Cash(ii) Allotment of dividend property and their aggregate amount¥20 per common share of the Company
Total payment: ¥811,151,340
As the Company has already paid an interim dividend of ¥20 per share, the annual dividend for the fiscal year
will be ¥40 per share.
(iii) Effective date of dividends of surplus
May 26, 2023
2.
(i)

Other appropriation of surplus
Item of surplus to be increased and amount of increase(ii)

Item of surplus to be decreased and amount of decrease

General reserve:
Retained earnings brought forward:¥10,000,000,000¥10,000,000,000

3Proposal 2

Election of six (6) Directors (excluding Directors who are Audit and Supervisory Committee
Members)

At the conclusion of this General Meeting of shareholders, the terms of office of all eight (8) Directors (excluding
Directors who are Audit and Supervisory Committee Members; applicable to the rest of this proposal) will expire.
Therefore, the Company proposes a decrease in the number of Directors by two (2) to enable strategic and flexible
decision-making and the election of six (6) Directors.
Regarding this proposal, there is no particular comment from the Audit and Supervisory Committee.
The candidates for Director are as follows:
Candidate
No.

Name(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
July 1970

1

Katsuji Sakamoto(January 7, 1945)
Reelection

Apr. 1978
Dec. 1987
Feb. 1993
Feb. 1997
Feb. 2003
Sept. 2003
Feb. 2006
Jan. 2007
May 2007
Feb. 2010
Feb. 2013
Feb. 2003
Feb. 2012

2

Haruhiko Sakamoto(May 4, 1976)
Reelection

Feb. 2014
June 2020
Apr. 2021
May 2021
Apr. 1994
Feb. 2007
Feb. 2011
May 2013

3

Hiroyuki Hoshino(November 1, 1970)
Reelection

Feb. 2018
Apr. 2021
Sept. 2022
Mar. 2023

Managing Director of Sakamoto Sangyo Co.,Ltd.
Established Musashi Co., Ltd., Director
Senior Managing Director of the Company
Representative Director and Vice President
Representative Director and President
Representative Director and Vice Chairman
Director and Vice Chairman
Representative Director and Vice Chairman
Representative Director, Vice Chairman,
Acting President, and COO
Representative Director, President, and COO
Representative Director and President
Representative Director, Chairman, and CEO(current position)
Joined the Company
General Manager of Product Department,
Home Center Headquarters
Executive Officer, General Manager of ProductDepartment 3, Home Center Headquarters
President, Executive Officer, and COO
Representative Director, President, and CEO of
VIVA HOME CORPORATION
Representative Director, President, and COO of
the Company (current position)
Joined the Company
Deputy General Manager of Development
Department
General Manager of Development Department
Director, General Manager of Development
Department
Managing Director, General Manager ofDevelopment Department
Managing Director of VIVA HOMECORPORATIONManaging Director, General Manager of Store
Development Headquarters of the Company
Senior Managing Director, General Manager ofStore Development Headquarters (current
position)

4

Number of theCompany’s shares
owned

1,508,354 shares

1,240,124 shares

8,200 shares

Candidate
No.

Name
(Date of birth)

Career summary, position and responsibility in the Company,
and significant concurrent positions outside the Company
Apr. 1995
Feb. 20134

5

6

Notes:

Joined the Company
Deputy General Manager of Store Operation
Department, Home Center Headquarters
Aug. 2013
Deputy General Manager of ProductDepartment 1, Home Center Headquarters
Aug. 2016
General Manager of Kansai Headquarters of
Arc Style Inc. (currently Arc Home
Corporation) (seconded)
Feb. 2017
Representative Director and President(employment transfer)
Dec. 2020
Executive Officer, General Manager of ProductDepartment, Home Center Headquarters of the
Toshiyuki Suto
Company (employment transfer)(April 16, 1971)
Reelection
May 2021
Director and General Manager of Home Center
Management Department
Mar. 2022
General Manager of Product Management
Department of VIVA HOME CORPORATION
Sept. 2022
Director, General Manager of ProductManagement Department of the Company
Dec. 2022
Director, General Manager of Sales
Headquarters and Product Management
Department
Mar. 2023
Managing Director, General Manager of Sales
Headquarters and Product Management
Department (current position)
Apr. 1995
Joined The Daiei, Inc
Sept. 2015
Joined ORENO Corporation
Jan. 2016
Director in charge of Management Department
July 2016
Managing Director in charge of Management
Department
July 2017
Joined LIXIL VIVA CORPORATION; General
Manager as Assistant to President
Kimitoshi Ino
Mar. 2018
General Manager of Corporate Strategy(May 13, 1972)
Planning Office
New election
June 2020
Executive Officer, General Manager ofCorporate Strategy Planning Office
Sept. 2022
Executive Officer, General Manager ofCorporate Planning Department of theCompany
Dec. 2022
Executive Officer, General Manager of
Administration Headquarters and Corporate
Planning Department (current position)
July 2001
Joined Smile Honda Co., Ltd. (currently
JOYFUL HONDA CO., LTD.)
Nov. 2018
Joined HONDA CO., LTD.
Sept. 2020
Joined Arc Style Inc. (currently Arc Home
Corporation)
Dec. 2020
Representative Director and President
Yoshifumi Sato
(October 14, 1973)
Apr. 2021
Executive Officer, General Manager of Reform
New election
Business Management Department of VIVAHOME CORPORATION
Sept. 2022
Executive Officer, President of Reform
Company of the Company
Dec. 2022
Executive Officer, General Manager of Home
Center Business Department (current position)
1. There is no special interest between any of the candidates for Director and the Company.

Number of theCompany’s shares
owned

5

9,300 shares––2. “Number of the Company’s shares owned” is current as of February 28, 2023.
3. Reasons for the election of each candidate for Director are as follows:(1) In July 1970, Katsuji Sakamoto was appointed as Managing Director of the Company’s predecessor, Sakamoto Sangyo
Co., Ltd., at the time of its founding. During his tenure as the Company’s Senior Managing Director and as
Representative Director and Vice President, he pursued several structural reforms at the Company. In February 1997, he
was appointed as Representative Director and President. Since February 2013, he has been serving as Representative
Director, Chairman, and CEO of the Company. Katsuji Sakamoto possesses extensive knowledge of the Group’s overallbusiness management. Therefore, he has again been nominated as a candidate for Director.
(2) After joining the Company in 2003, Haruhiko Sakamoto served as the General Manager of the Product Department andthen General Manager of Product Department 3. He was appointed as President, Executive Officer, and COO of theCompany in June 2020, as Representative Director, President and CEO of VIVA HOME CORPORATION in April 2021,
and as Representative Director, President, and COO of the Company in May 2021. After the merger in September 2022,
he has continued to engage in various management issues steadily with strong leadership. For these reasons, he has again
been nominated as candidate for Director.
(3) Since joining the Company in 1994, Hiroyuki Hoshino worked in the home center business and the store development
business. He has been engaged in operations relating to store development since May 2013, when he was appointed as
Director. After the merger of the Company, he has fully demonstrated his operational experience in the home center
business and ample knowledge of development operations and business management. For these reasons, he has again
been nominated as candidate for Director.
(4) Toshiyuki Suto joined the Company in 1995. After serving as Deputy General Manager of Store Operation Department
and Deputy General Manager of Product Department 1, he was appointed as Representative Director and President of
Arc Style Inc. (currently Arc Home Corporation) in February 2017 and involved in the company’s management. He took
office as Executive Officer and General Manager of Product Department of the Company in December 2020 and has
served as Director of the Company since May 2021. Due to his abundant operational experience in the retail businessand knowledge of business management, he has again been nominated as candidate for Director.
(5) Kimitoshi Ino has abundant experience in the retail business as well as corporate management as a director. Since 2018,he has served as various positions including General Manager of Corporate Strategy Planning Office of LIXIL VIVACORPORATION and General Manager of Corporate Planning Department of the Company and has mainly promoted
companies’ management growth strategies. The Company judges that he is well suited for Director as he is expected tocontribute to the Company’s sustainable growth and further improvement of its corporate value. For these reasons, hehas been newly nominated as candidate for Director.
(6) Yoshifumi Sato, who has abundant experience in the sales division, took office as Representative Director and Presidentof Arc Style Inc. (currently Arc Home Corporation), a subsidiary of the Company, in 2020 and greatly contributed to its
business expansion. Since December 2022, as General Manager of Home Center Business Department of the Company,
he has promoted business improvement. The Company expects that he can demonstrate his capability of acting decisively
and exercising leadership. For these reasons he has been newly nominated as candidate for Director.
4. The Company has entered into a directors’ and officers’ liability insurance (“D&O insurance”) policy with an insurancecompany. Each of the candidates shall be named as an insured in said policy. Regarding the overview of the contents andother information of the D&O insurance policy, please refer to “3. Matters Related to Directors; (3) Directors’ and Officers’
Liability Insurance” (Japanese only) described in the Business Report. In addition, when the policy is renewed, theCompany plans to renew the policy with the same terms.

6

(Reference) Skill matrix of the Directors after the conclusion of the General Meeting of Shareholders
If Proposal 2 is approved at the General Meeting of Shareholders as originally proposed, the Directors (excluding
Directors who are Audit and Supervisory Committee Members) and the Directors who are Audit and Supervisory
Committee Members are expected to bring their professional expertise and provide contribution, particularly in thefollowing areas:
Areas of major professional experience/ Areas where major contributions are
expected
Corporate
Financial
Industry
Legalmanageaccounting
Marketing
IT/DX
ESG
experienceaffairsment/M&A

Position in the
Company

1

Katsuji
Sakamoto

Representative
Director, Chairman,
and CEO●●

2

Haruhiko
Sakamoto

Representative
Director, President, and
COO

●

●

3

Hiroyuki
HoshinoSenior Managing
Director
General Manager ofStore Development
Headquarters

●

●

4

Toshiyuki
SutoManaging Director
General Manager ofSales Headquarters●●

Director

Name

Director
General Manager of
Administration
Headquarters
Director
Yoshifumi General Manager of6
SatoHome Center Business
Department
Audit and Supervisory
Committee Member

5

Kimitoshi
Ino1

Outside Director
Hidetsugu
Audit and Supervisory
Onishi
Committee Member

2

Yasuyuki
Sasaki

Outside Director
Audit and Supervisory
Committee Member

3

Masayuki
Atsumi

Outside Director
Audit and Supervisory
Committee Member

●

●

●

●

●

●

●

●

●

●

●

●

●

●
●

7

●
●

Proposal 3:

Approval of the Share Exchange Agreement with Arcland Service Holdings Co., Ltd.

The Company and Arcland Service Holdings Co., Ltd. (hereinafter referred to as “Arcland SHD”) have agreed to
conduct a share exchange (hereinafter referred to as the “Share Exchange”) effective September 1, 2023, whereby
the Company will become the wholly owning parent company after the Share Exchange and Arcland SHD will
become a wholly owned subsidiary after the Share Exchange, and based on resolutions passed at Board of
Directors meetings on both companies held on April 14, 2023, a share exchange agreement (hereinafter referred toas the “Share Exchange Agreement”) was executed as of the same date.
Therefore, the Company seeks approval for the Share Exchange Agreement.
Reasons for conducting the Share Exchange and overview of the outline of the Share Exchange Agreement, etc. are
as follows.
1.

Reasons for Conducting the Share Exchange
The Company was established in July 1970 as a wholesaler of metal tools with a focus on cutting tools. After
opening its first home improvement store in 1978, the Company has continued to grow steadily with Musashi,a large home improvement store that boasts an overwhelming selection of products, at the core of its business.
In October 2020, the Company converted LIXIL VIVA CORPORATION (after becoming a wholly owned
subsidiary of the Company, the company name was changed to VIVA HOME CORPORATION; hereinafterreferred to as “VIVA HOME”) to a wholly owned subsidiary, and in September 2022, the Company mergedwith Viva Home for the purpose of speedy and even greater synergy creation, and changed its trade namefrom “Arcland Sakamoto Co., Ltd.” to “Arclands, Co. Ltd.” with the wish to get a new start as a single team.
As of April 14, 2023, the Company has 13 subsidiaries and 5 affiliates (of which 4 are equity method
affiliates), and the Group (meaning the company group that has the Company as its core company; the same
applies hereinafter) as a whole is engaged in the retail business selling housing-related products, household
goods, food products, etc. to ordinary consumers and professionals (businesses), the wholesale businessselling primarily DIY-related products nationwide and to the Group’s home improvement stores, and therestaurant business operating restaurants such as “Katsuya,” a tonkatsu specialty restaurant, and the real estatebusiness leasing and managing real estate as part of store development.
The Group’s management philosophy is “developing human resources is the essence of building a company –sharing dreams and happiness with everyone involved,” and it strive to be able to select products with quality
as the top priority and provide them to its customers at the lowest price possible. In particular, in the retail
division, the top priority is to create stores that win customers’ overwhelming support through a productlineup that makes the most of store size and regional characteristics, while working to create stores that
customers will be excited about based on the philosophy that the defining characteristic of a store is being fun.
On the other hand, as April 14, 2023, Arcland SHD consists of 10 subsidiaries and 4 affiliates (of which 3 areequity method affiliates) (together with Arcland SHD, hereinafter referred to as the “Arcland SHD Group”),
and its primary business is operating restaurants, particularly the tonkatsu specialty restaurant “Katsuya,” andmanaging the Franchise Chain Division. Arcland SHD’s origins lie in the Company’s restaurant businessdivision (hereinafter referred to as the “Restaurant Business Division,”) which the parent company, theCompany established in April 1986 as a result of its belief in the expansion of the restaurant market based on
its reading of the growth of the restaurant market since 1975 and the trends of the times. At the time, retailbusiness was rapidly expanding with the expansion of the sphere of daily activity resulting from the progressof motorization and the boom in roadside business. The home improvement store business, which was one
type of retail business that the Company operated, was entering an era in which opening a new store was allthat was needed to increase profits. While riding the wave of the times and steadily increasing sales in thehome improvement store business, the Company took notice of the availability of parking lots at the home
improvement stores and the restaurant business sharing the property of being a roadside business, and entered
the restaurant business by establishing the Restaurant Business Division. In particular, the family restaurant
business, which was the Company’s first foray into the restaurant business division, was a highly profitablebusiness format and representative of the restaurant business at the time. Subsequently, until the 2010s, theculture of eating out became considerably widespread in society, and the Food Service Division was able tosteadily build up its strength by accumulating experience in the restaurant business by continuing to open new
stores as a franchisee in the “CASA” family restaurant business and “Doutor Coffee Shop” cafe business. As
the sales in the restaurant division grew in size, so did the scale of the organization, so in March 1993, theCompany established Arcland SHD in Sanjo, Niigata, and transferred the operations of the Company’s
restaurant division to it, spinning off the restaurant division from the Company, and from that time, Arcland
SHD commenced its restaurant business as a wholly owned subsidiary of the Company.
8

Since its establishment, the Arcland SHD Group has been striving to deliver new value to as many customers
as possible through food, from daily meals to special occasions, based on its corporate philosophies of“perpetual prosperity,” “emphasizing results,” “the cream of the crop,” and “attempting to make what we
think is impossible possible.” Arcland SHD built a solid business foundation by opening its first store for its
current core business, the “Katsuya” pork cutlet restaurant, in Sagamihara, Kanagawa in August 1998, andthen commencing expansion into the “Katsuya” franchise business in July 1999. Arcland SHD continued tosteadily expanding its business after that, but there were some issues, such as the fact that directly managed
stores remained limited to Niigata, Hokuriku, and the greater Tokyo area. In August 2007, common shares ofArcland SHD (“Arcland SHD Shares”) were listed on the JASDAQ stock exchange in order to further expand
its scale, differentiate itself from competitors, create self-sustaining growth, and improve its name recognition.
Arcland SHD has continued to achieve steady growth since then, and in conjunction with its increase in scale,it changed its listed market to the First Section of the Tokyo Stock Exchange, Inc. (“Tokyo Stock Exchange”)
in June 2014, and it is currently listed on the Prime Market of the Tokyo Stock Exchange.
The Arcland SHD Group currently operates 15 restaurants brands, and as of the end of December 2022, it has
expanded its business to 676 domestic restaurants and 89 restaurants overseas, for a total of 765 restaurants,
and it has achieved expansion of its scale through its goals from when it became publicly traded ofdifferentiating itself from competitors, creating self-sustaining growth, and improving its name recognition In
particular, in order to further expand its core “Katsuya” business, the Arcland SHD Group will focus on
maintaining and improving QSCA (Quality, Service, Cleanliness, and Atmosphere) at its restaurants,
improving existing products, and expanding its business categories, while also actively developing new
business categories. In addition, the Arcland SHD Group is aggressively developing new business categories
to expand the scale of its business beyond “Katsuya.”With regard to the business environment for both companies in recent years, the home improvement store
market in which the Company operates entered a mature phase starting in 2000, and market growth has
remained flat, while the number of home improvement stores continues to increase, competition among storeshas further intensified, and growth in sales through new store openings has been difficult. In addition, theindustry as a whole is experiencing a trend of declining in sales per floor area and faces a situation where it isdifficult for to grow sales through existing stores. Furthermore, home improvement stores are prone to pricecompetition because it is not easy to differentiate products, and in recent years, other types of retailers such as
big box stores (superstores), drugstores, discount stores, 100-yen stores, and discount interior and furniturespecialty stores have been gaining strength. The competitive environment surrounding the industry has
continued to intensify: in particular, in recent years, these types of businesses have converted to malls andstarted providing food, clothing, and housing services, including food service business, and the emergence of
e-commerce sites such as Amazon is also a threat to the home improvement store industry. It has become
more difficult for both companies to continue to achieve continued growth, and in the home improvement
store industry, consolidation and reorganization are underway. In relation thereof, the Company also madeVIVA HOME a wholly owned subsidiary in October 2020, as stated above, in order to create speedy and evengreater synergies. While the Company’s home improvement store business has now reached a certain level of“expansion of scale” through the merger and integration with VIVA HOME, it is at a stage where it should
improve profitability through “qualitative improvement” by increasing efficiency and productivity through thecreation of synergies with VIVA HOME going forward.
On the other hand, in the restaurant industry to which Arcland SHD belongs, there are signs of a recovery
from the spread of COVID and a transition to the so-called “with COVID” and “post-COVID” environment,
but the business environment remains extremely difficult with rising labor costs resulting from factors such asa shortage of workers, soaring procurement prices caused by global price increases, and prolonged tension in
Ukraine. Furthermore, major changes are occurring in food consumption behavior, such as increasing demandfor delivery and take-out, and there is a strong need to quickly implement effective measures in response tothese changes. In particular, the speed of change in food consumption behavior is notable, and theenvironment is rapidly changing as a result of trends in fashion, impressions toward food ingredients, andeconomic and cultural backgrounds. Amid these circumstances, Arcland SHD’s foods business has adroitly
responded to changes in the business environment, with takeout sales, including delivery, now accounting for
approximately half of total sales at both “Katsuya” and “Karayama.” Although Arcland SHD’s foods businessmaintains stable profitability under these conditions, the increased labor costs attributable to labor shortages,
global inflation and increasing costs due to the conflict in Ukraine contribute to an extremely difficult businessenvironment where, in order to increase enterprise value, internal growth through new store openings willneed to be accelerated and “expansion of scale” will need to be achieved through mergers and acquisitions andnon-recurring growth (Arcland SHD’s core category, “Katsuya” (domestic), accounted for 59.3% of the
Arcland SHD Group’s net sales in the previous fiscal year, and the dependence of its performance on the“Katsuya” (domestic) business has increased) and discover and build a portfolio of new business categories.
9However, although Arcland SHD recognizes that the retention rate of workers is its greatest challenge, finding
an effective solution continues to be difficult, and it has been difficult for Arcland SHD alone to achieve an“expansion of scale” and discover and build a portfolio of new business categories.
As stated above, as both companies have achieved the growth envisioned at the time of the spin-off, thebusiness environment surrounding both companies and consumer’s lifestyles and values are fundamentallychanging. In order for both companies to always be the companies that customers choose, regardless of theera, and in order to achieve further medium/long-term growth, we believe that both companies have reached aturning point where both companies must build a solution that enables them to accurately ascertain each of
their challenges and be able to respond flexibly and swiftly. Amid these circumstances, in order for bothcompanies to further enhance their corporate value, they should not pursue growth independently as separate
and independent listed companies, but rather position the home improvement store business, which is the corebusiness of the Company, and the restaurant business, which is the core business of Arcland SHD, as the twopillars of the Group’s overall corporate value enhancement, and we believe that it is important for bothcompanies to work together to strategically manage the group from the perspective of increasing the corporate
value of the Group as a whole by positioning the home improvement store business as the core business of theCompany and the restaurant business as the core business of Arcland SHD, which can be achieved by
combining and engaging in strategic group management and utilizing management resources of bothcompanies.
Therefore, we believe that forming a complete parent-subsidiary relationship, not limited to transactions andcooperation between the parent company and consolidated subsidiary based on the assumption that bothcompanies are single and independent listed companies and further cultivating and developing the “housing
and food” related business and building a relationship between the two companies that will allow us to provide
comprehensive services that are closer to the lives of consumers by operating the two companies in a fully
integrated manner are necessary to further grow the corporate value of the entire Group. The Company has
been considering making Arcland SHD a wholly owned subsidiary from around September 2021, and has also
held discussions with Arcland SHD. However, at that time, the two companies did not come to a common
understanding of the future vision of organically strengthening and growing the home center business and therestaurant business through the management of the two companies as a complete unit. Therefore, thediscussion and consideration were terminated around February 2022. However, as the business environment
continues as described above, with the movement toward normalization from the spread of the novel
coronavirus infection, in the home center business in the Company, the demand for preventing the spread of
infection and the demand for stay-at-home products due to people refraining from going out have diminished,
and we felt that maximizing the corporate value of the entire Group through the Company’s growth alone wasneither efficient nor the best method. As a result, the Company came to have a clearer future vision of
maximizing the corporate value of the entire Group by organically linking the home center business in the
Company and the restaurant business in Arcland SHD while growing both businesses. The Company has been
aiming for strategic group management by uniting both companies from the perspective of improving thecorporate value of the entire group. However, both companies are listed companies independent of each other,and each of them has a responsibility to manage their businesses with the highest priority on improving theirown corporate value. Therefore, we felt that it was structurally difficult for the group to give top priority torealizing the future vision of maximizing the corporate value of the entire group if we maintain the status ofparent-subsidiary listing, which has inherent risks of structural conflicts of interest, and we became even moreacutely aware of the need for the two companies to operate in a completely unified manner. In addition to this,in light of the fact that public opinion on parent-subsidiary listings described below is becoming more criticalas the years pass, the Company has decided to start considering making Arcland SHD a wholly owned
subsidiary again from around September 2022.
The Company has positioned the period until FY 2024 as a period for pursuing group synergies in its“Medium-Term Management Plan – LIFE (FY 2021 – FY 2024)” released in March 2021 and is endeavoringto create synergies within the entire Group with “sales growth,” “improvement of gross profit margin,” and“reduction of SG&A expenses” as its three basic strategies. Making Arcland SHD a wholly owned subsidiaryis expected to produce effects including “sales growth” by expanding the customer base and energizing M&A,
and “reduction of SG&A expenses” by joint procurement of packaging materials.
At the same time, in recent years, there have been increasing negative comments about the risk of structural
conflicts of interest with respect to the governance of publicly traded subsidiaries and moves to strengthen
measures to respond to these conflicts, including the “Practical Guidelines for Group Governance Systems”
dated June 28, 2019 formulated by the Ministry of Economy, Trade and Industry, and the June 11, 2021 rerevision of the Corporate Governance Code, etc. also require various measures for transparency and fairness ingovernance of publicly traded subsidiaries. In this way, we recognize that there has been a trend in the capital
10

markets for group companies to be strongly required to improve the capital efficiency of the group as a whole
in recent years. Moreover, in addition to this environment surrounding parent company/subsidiary listings, thereorganization of the Tokyo Stock Exchange’s markets has led to requirements for further strengthening ofgovernance in the Prime Market, and there are also increased financial and administrative burdens to respondto these requirements. In response to these trends, the Company has also carefully reviewed the design ofgroup governance and the handling of Arcland SHD Shares from the standpoint of the group’s overall medium
and long-term business portfolio strategy, enhancement of corporate value and governance structure, andimprovement of capital efficiency.
As a result of this review, the Company believes that in order to maximize the strengths of the Group,
including the Arcland SHD Group, and to maximize the improvement in the corporate value of the Group as awhole, it would be best for the Company and Arcland SHD to execute the Share Exchange and thereby join
together as a group to strengthen and expand their customer bases, develop new business categories, andimplement flexible and agile management strategies rather than maintaining their independence as listedcompanies, and that the execution of the Share Exchange is the best option for both the Company and Arcland
SHD, and on December 13, 2022, the Company made a proposal for the Share Exchange to Arcland SHD.
In response to the proposal from its parent company and controlling shareholder, the Company, Arcland SHD
decided to initiate a detailed review of a transaction to make Arcland SHD a wholly owned subsidiary of theCompany, including the Share Exchange (hereinafter referred to as the “Transaction”). Upon commencing adetailed review of the Transaction, and prior to deliberating and passing a resolution on the merits of theTransaction at Arcland SHD’s Board of Directors, Arcland SHD ensured that Arcland SHD’s decisions
regarding the Transaction are made with due care, and in addition, eliminated the possibility of arbitrarinessand conflicts of interest in the decision-making process of the Board of Directors of Arcland SHD and ensured
the fairness of the process, and additionally, in order to obtain an opinion as to whether the decision by the
Board of Directors of Arcland SHD to enter into the Transaction (if a tender offer is made as part of thecontent of the Transaction, including Arcland SHD expressing a specific opinion on such tender offer) is
disadvantageous to the minority shareholders of Arcland SHD, Arcland SHD established a Special Committee
on January 10, 2023 consisting of committee members who have no interest in the Company, the controllingshareholder (hereinafter referred to as the “Special Committee”; the details are as stated in 3.(1) (iii)“Measures to ensure fairness (including measures to avoid conflicts of interest)” below), and in combination
with this, the Company and Arcland SHD established a system for a detailed review, including theengagement of outside experts.
As a result of the review and discussion by the Companies, both companies recognize that the structural
conflicts of interest between the minority shareholders of the Company and Arcland SHD will be resolved
when Arcland SHD becomes a wholly owned subsidiary of the Company through this Share Exchange, it will
become possible to solve the challenges discussed above and to more quickly benefit from advantages such as
the establishment of a system that enables flexible and prompt implementation of management measuresnecessary to strengthen the competitiveness of the Group, including Arcland SHD, over the medium to longterm, the business benefits of mutual utilization of management resources, and the increased management
efficiency that will result from eliminating the parent company/subsidiary listing, and the Share Exchange willcontribute to the long-term enhancement of the corporate value of both companies. Additionally, throughrepeated discussions between the two companies regarding the future vision of organically strengthening andgrowing the home improvement store and restaurant businesses through integrated management of the twocompanies, the two companies have reached a common understanding that they should not only pursue
individual growth on the premise that they are separate and independent listed companies, but also that theyshould pursue “group optimization” that will maximize the corporate value of the Group, including Arcland
SHD, as a whole. We also performed a review of the disadvantages expected to result from delisting, but wehave come to the conclusion that shareholders of Arcland SHD will enjoy more advantages from becoming awholly owned subsidiary of the Company than the resulting disadvantages, since after the Share Exchange,
Arcland SHD will continue to benefit from being associated with the Group’s reputation and creditworthiness,
including the expected ability to raise funds by the Company as a wholly owned subsidiary of the Company, it
will be possible to provide the shareholders of Arcland SHD with the value and benefits that could result fromthe Share Exchange by delivering them with the Company shares, which are the consideration for the Share
Exchange, and it is believed that the Share Exchange will be beneficial not only to the Company but also to
the shareholders of Arcland SHD.
As a result of the above, the two companies have decided to execute the Share Exchange by resolutions of
their respective Boards of Directors on April 14, 2023.
After the implementation of the Share Exchange, instead of pursuing only individual growth on theassumption that the Company and Arcland SHD are independent listed companies, as in the past, the two11companies will join together and seek to work in concert to achieve further growth and dramatically increasevalue. We will shift to a “group perspective” that also seeks to enhance the corporate value of the entire
Group, manage the Group with a growth strategy that is “group-optimal” by increasing the corporate value of
the Group as a whole to the greatest extent possible, and resolve the various problems that arise in therespective business environments, while working to reduce business costs and secure and conserve humanresources. Specifically, we are considering implementing the following measures to enhance our value as agroup.
(i)

Promote opening of new stores by Arcland SHD by strengthening cooperation within the GroupAs of April 2023, the Company operates Musashi home improvement stores in 11 prefectures, mainly in the
Tohoku, Koshinetsu and Hokuriku regions, and VIVA HOME stores in 22 prefectures in the Hokkaido,
Kanto, Koshin, Chubu, Kansai and Kyushu regions, for a total of 144 stores. Since becoming publicly traded,
Arcland SHD has independently expanded its business scale by increasing the number of stores based on astrong orientation toward independence, but after “Katsuya” had expanded into major metropolitan areas,
Arclands SHD is now shifting its strategy to target smaller markets for new store openings from 2023 thathave a population of approximately 60,000 people rather than 100,000. By making Arcland SHD a wholly
owned subsidiary of the Company through the Share Exchange, it will become easier to utilize the Group’s
extensive network of locations, and it will also be possible to more flexibly and proactively develop storesoperated by Arcland SHD within the Group’s stores, primarily the Group’s home improvement stores, andtheir premises. Through this, we believe that it will be possible to improve the name recognition andprofitability of “Katsuya” and other Arcland SHD restaurants and strengthen their ability to attract customers,
as well as to provide customers with one-stop “living and eating.” In addition, we will further promote newstore openings by providing not only stores, primarily the Group’s home improvement stores, and theirpremises, but also the Group’s various resources to secure store properties and information.

(ii) Development of new business categories and expansion of business scale through information sharing andcooperation on M&A
The Company has been pursuing M&A as part of its growth strategy until now, as exemplified by theacquisition of VIVA HOME in October 2020 and the subsequent merger. Meanwhile, Arcland SHD has been
actively developing new business categories following its core business category “Katsuya,” which it has
increasingly depended on, and as part of this, it has acquired shares in Cosmic Dining Corporation, as
described in (iii) “Expansion of the scale of the frozen foods business” below, as well as in Meal Works Co.,
Ltd. (Head office: 14F, Shinochanomizu Building, 4-3 Kanda-Surugadai, Chiyoda-ku, Tokyo), which
manages restaurants including the “Mango Tree” Thai restaurant and the “Dancing Club” seafood restaurant,
and performs consulting.
As the two companies continue to pursue M&A going forward, we believe that the combination of Arcland
SHD’s knowledge from M&A so far with Company’s knowledge from the VIVA HOME acquisition andsubsequent PMI (Post Merger Integration) will make it possible to more efficiently perform the series ofprocesses from the initial review stage at the time of M&A execution to the pursuit of post-integration growthstrategies, enabling both companies to build up a track record and results from M&A as a growth strategies.
Going forward, we plan to proactively consider and implement the optimal M&A for the group at each time,taking into account the “group perspective” as the Group, rather than the individual strategies of eachcompany as in the past.
(iii) Expansion of the scale of the frozen foods business
Arcland SHD has acquired Cosmic Dining Corporation (currently Cosmic SY Corporation due to a trade namechange; head office: 653 Kamiizumi-cho, Maebashi, Gunma), which manufactures and sells frozen foods suchas tonkatsu, menchikatsu, and Salisbury steaks for supermarkets and restaurants through M&A and converted
it to a wholly owned subsidiary, and its business has been growing steadily due to the increase in demand forhome-cooked meals in recent years in response to macroeconomic trends relating to lifestyle changes, such asa decrease in time spent on housework resulting from the increase in dual-income households, and we believe
this trend will continue in this future.
In this kind of situation, since the Company is also engaged in food product, etc. retail business, we believethat further expansion of sales channels for Arcland SHD can be expected by displaying frozen food products
handled by Arcland SHD at stores operated by the Company, which can potentially expand Arcland SHD’ssales routes. In addition, while there are restrictions related to related-company transactions when bothcompanies are listed, the Share Exchange will create a group company relationship whereby the Company will12

be able to engage in selling frozen food products handled by Arcland SHD through Arclands Online, an ecommerce site operated by the Company. In light of these factors, we believe that expanding the scale of thefrozen foods business at Arcland SHD, including capital investment in Arcland SHD’s frozen foods businessand acquisition of companies related to this business through M&A, will contribute to enhancing the corporate
value of the Group as a whole.
(iv) Reduction of business costs through use of PBs and joint procurement of packaging materials and construction
materials for Arcland SHD
Amid the sharp rise in raw material prices in recent years, with store renovation and repair costs been
increasing at Arcland SHD, it is believed that by utilizing the Group’s wholesale functions, it will be possible
to reduce the procurement costs of materials for store renovation and repair. In addition to the above, we
believe it is possible to reduce packaging costs, which have been increasing in recent years due to increased
demand for takeout, including delivery, to a certain degree by developing packaging material PBs for Arcland
SHD by utilizing the Company’s product development know-how and joint procurement with the Company.
In the future, we would also like to jointly study and explore the feasibility of renovating Arcland SHD’sstores interiors and handling store improvements and repair internally through the renovation businessaffiliated with the Arclands Group.
(v) Personnel exchange between Arcland SHD and the GroupIn order to provide work opportunities that suit each employee’s stage of life, Arcland SHD is striving tocreate an environment where employees can work actively for a longer time. One of the Group’s principles is
to “Create an ideal environment by considering the life of our customers, the life of society, and the life of ourstaff” as one of its principles, and the Group also strives to provide an optimal working environment for its
employees.
We believe that as a result of Arcland SHD becoming a wholly owned subsidiary of the Company in the Share
Exchange, it will be possible for both companies, which are seeking to improve the working environment for
their employees, to provide their employees with a wider range of career choices, without being limited torestaurant and home improvement store businesses.
In addition, as noted in (ii) “Development of new business categories and expansion of business scale throughinformation sharing and cooperation on M&A” above, we believe that continuing to perform M&A in the
future will allow employees to choose how they work from a variety of business types and operations.
We believe that, through their interactions with the personnel at the Group who specialize in operations andorganizational improvement, Arcland SHD will be able to implement organizational improvements to address
the retention of workers. We also believe that a two-way exchange of personnel will enable both companies toshare their proprietary knowledge and management know-how, thereby accelerating the growth of the groupas a whole and enhancing the value of the Group.
(vi) Share customer information between the two companies
We believe that Arcland SHD and the Group can appropriately share their extensive customer-related datawith each other in accordance with laws and regulations, and that by analyzing this customer-related data andutilizing it in the formulation of management strategies, sales promotion activities, etc., both companies’
groups can work together to expand their customer bases. In particular, Arcland SHD has limited opportunities
to acquire customer information because it currently does not have a membership app. We expect Arcland
SHD will be able to expand its customer base and improve customer sales by incorporating the Group’s
knowhow in respect of attracting new customers, retaining existing customers, proposing new products toexisting customers, acquiring customer data and analyzing such data. In addition, we believe it will bepossible to provide common services that only a wholly owned parent/subsidiary group can provide, such as
introducing a membership system and loyalty point service common to all of the stores and brands affiliatedwith the Company and Arcland SHD, and will continue to explore the feasibility of these services.
(vii) Strengthen group management functions and reduce management costs by improving the efficiency of indirect
departments
We believe that it will be possible to strengthen group management administration functions and reducemanagement costs by reviewing the indirect divisions of both companies and optimizing them, including
consolidation if necessary. Specifically, we believe that it is possible to strengthen group business
management functions and reduce management costs through integrated management of administrative
13

departments such as legal affairs, IR, and recruitment. In addition, we believe that it is possible to utilize theresources and know-how of the Group to promote DX support such as digitization of various normal
operations, which is not currently considered to be sufficiently implemented by Arcland SHD alone.
At present, Arcland SHD is still a subsidiary of the Company, so even if the Company and Arcland SHD do
not execute the Share Exchange, we believe that it will still be possible to produce the above effects to acertain extent, but given that Arcland SHD is publicly traded and has minority shareholders, the capital
structure of the Company, the parent company, and the minority shareholders of Arcland SHD could have aconflict of interest, there is a capital structure where there could be conflicts of interest between the parent
company, the Company, and the minority shareholders of Arcland SHD, so careful consideration is requiredof each measure to ensure that there is no risk of harming the interests of Arcland SHD’s minority
shareholders, and in some cases, we believe it would be expected that as a result of it being impossible to deny
the possibility of harming the interests of Arcland SHD’s minority shareholders, it will be impossible topromptly implement measures that would originally have been meaningful for improving the corporate valueof both companies. Furthermore, due to the presence of minority shareholders in Arcland SHD, if theCompany provides any information or resources to Arcland SHD, this would create a situation for theCompany in which a portion of the profits from the utilization of these information and resources would bemade available to the minority shareholders of Arcland SHD, so as a result, the Company, as a listedcompany, may hesitate to provide information and resources to Arcland SHD, and this may therefore not bedone adequately. Given the above, in order for the two companies to fully realize the effects of reviewing andimplementing the group’s growth strategy in a unified manner while maintaining the “group perspective”
described above, we believe it is necessary to form a wholly owned parent company/subsidiary relationshipbetween the two companies and to prevent any conflict of interest between the parent company, the Company,
and the minority shareholders of Arcland SHD.
Although a scheme to make Arcland SHD a wholly owned subsidiary using a tender offer with cash as
consideration would also be possible, the Company and Arcland SHD determined that choosing a shareexchange scheme is desirable because they expected that delivering common shares of the Company(hereinafter referred to as the “Company’s Shares”) to Arcland SHD’s shareholders as consideration for the
Share Exchange will provide these shareholders with opportunities to enjoy, through holding of theCompany’s Shares, the effects expected to be produced by the various measures planned to be implemented
after the Share Exchange after the interests of the Company and Arcland SHD are aligned and businessdevelopment and revenue increases to the Group as a whole, including the Arcland SHD Group, that will
result from achievement of these effects, and resulting increases in the share price and dividends for theCompany’s Shares, as well as that the high liquidity of the Company’s Shares will allow Arcland SHD
shareholders to cash in these shares at any time by trading on the market.
Based on these points, after a comprehensive review, the Company and Arcland SHD shared theunderstanding that Arcland SHD becoming a wholly owned subsidiary of the Company through the Share
Exchange would contribute to improving the corporate value of both the Company and Arcland SHD, andmoreover, the corporate value of the Group as a whole, including the Arcland SHD Group, and would be
beneficial to the shareholders of both the Company and Arcland SHD. After reviewing and discussing thevarious terms and conditions, including the Share Exchange Ratio, both companies reached an agreement, andon April 14, 2023, the Boards of Directors of both companies resolved to implement the Share Exchange forthe purpose of making Arcland SHD a wholly owned subsidiary of the Company, and executed the Share
Exchange Agreement.
2.

Outline of the Share Exchange Agreement
The details of the Share Exchange Agreement executed on April 14, 2023 between the Company and Arcland
SHD are as follows.

14

Share Exchange Agreement
Arclands Co., Ltd. (hereinafter referred to as “Party A”) and Arcland Service Holdings Co., Ltd. (hereinafterreferred to as “Party B”) shall execute a share exchange agreement (the “Agreement”) on April 14, 2023 (the“Execution Date of the Agreement”), as follows.
Article 1(Method of Share Exchange)

Party A and Party B shall conduct a share exchange (the “Share Exchange”) in which Party A will become thewholly owning parent company and Party B will become the wholly owned subsidiary in accordance with theprovisions of the Agreement.
Article 2(Trade Name and Address)

The trade names and addresses of Party A and Party B are as follows.
(1) Party A: wholly owning parent company after the share exchange(Trade name)

Arclands Co., Ltd.

(Address)

445 Kamisugoro, Sanjo, Niigata Prefecture(2) Party B: wholly owned subsidiary after the share exchange(Trade name)

Arcland Service Holdings Co., Ltd.

(Address)

14F Shinochanomizu Building, 4-3 Kanda-Surugadai, Chiyoda-ku, Tokyo

Article 3(Matters Concerning Money, Etc. to be Delivered upon the Share Exchange and the Allotment
thereof)

1. Upon the Share Exchange, Party A shall deliver to the shareholders of Party B (excluding Party A;
hereinafter referred to as the “Shareholders Subject to the Allotment”), as of the point in time immediately
preceding the time when the Share Exchange comes into effect (the “Time of Record”), the number ofshares of Party A’s stock obtained by multiplying the total number of shares of Party B’s stock held byParty A by 1.87.
2. Upon the Share Exchange, Party A shall allot shares of Party A to the Shareholders Subject to the
Allotment at a ratio of 1.87 shares of Party A for each share of Party B held by the said shareholders.
3. If the number of shares of Party to be delivered by Party A to the Shareholders Subject to the Allotment
pursuant to the provisions of the preceding two paragraphs includes a fraction of less than one share, Party
A shall handle such fractions in accordance with the provisions of Article 234 of the Companies Act andother relevant laws and regulations.
Article 4(Matters Concerning Share Capital and Capital Reserves of Party A)

The amount of Party A’s share capital and capital reserves to be increased by the Share Exchange shall be
determined by Party A in an appropriate manner in accordance with Article 39 of the Regulations on
Corporate Accounting.
Article 5(Effective Date)

The effective date of the Share Exchange (the “Effective Date”) shall be September 1, 2023. However, if
necessary for the progress of the procedures for the Share Exchange or for any other reason, the Effective Date
may be changed upon consultation and agreement between Party A and Party B.
Article 6(Resolution at the General Meeting of Shareholders)15Party A and Party B shall each seek approval of this Agreement by a resolution of their respective general
meetings of shareholders by the day prior to the Effective Date.
Article 7(Cancellation of Treasury Shares)

Party B shall, in accordance with a resolution at a meeting of the Board of Directors to be held by the dayprior to the Effective Date, cancel all of its treasury shares held as of the point in time immediately preceding
the Time of Record (including those acquired through the purchase of shares pertaining to the dissenting
shareholders’ share purchase demands exercised upon the Share Exchange as set forth in Article 785,
Paragraph 1 of the Companies Act) held as of the point in time immediately preceding the Time of Record.
Article 8(Management of Company Property, Etc.)

During the period from the Execution Date of the Agreement to the day before the Effective Date, Party A andParty B shall each perform their respective duties and manage and operate their respective properties with thecare of a prudent manager, and any matters that materially affect their properties or rights and obligations or
the ratio pertaining to the Share Exchange set forth in Article 3 shall be subject to consultation and agreement
between them.
Article 9(Dividends of Surplus, Etc.)

1. Party A may distribute the following dividends from surplus(1) Dividend of surplus up to 20 yen per share with record date of February 28, 2023
(2) Dividend of surplus up to 20 yen per share with a record date of August 31, 2023
2. Party B may distribute a dividend of surplus up to 15 yen per share with a record date of June 30, 2023
3. Except as provided in the preceding two paragraphs, neither Party A nor Party B shall, after the Execution
Date of the Agreement, pass a resolution for the distribution of dividends from surplus whose record dateis a date prior to the Effective Date, nor shall Party A or Party B pass a resolution to acquire treasury
shares whose acquisition date is a date prior to the Effective Date (excluding cases when Party A must
acquire treasury shares in response to the exercise of shareholders’ rights pursuant to applicable laws andregulations).
Article 10 (Modification of Terms and Conditions of the Share Exchange and Termination of theAgreement)
1. If there is a material change in the assets or business condition of either Part A or Party B during the period
from the Execution Date of the Agreement to the day before the Effective Date, or if a situation arises or
becomes apparent that would materially impede the execution of the Share Exchange, or if it becomesdifficult to achieve the objectives of the Share Exchange, Party A and Part B shall consult in good faith on
the measures to be taken, and if the parties cannot agree on a solution through such consultations, thisAgreement may be terminated by written notice to the other party at least one day prior to the Effective
Date. In addition, if the parties reach agreement through such consultation, the terms and conditions of the
Share Exchange and other details of the Agreement may be modified, or the Agreement may beterminated.
2. If neither Party A nor Party B can reasonably confirm by 30 days prior to the Effective Date that the Share
Exchange does not require filing a Form F-4 registration statement under the Securities Act of 1933 (U.S.),
either party may terminate this Agreement by giving written notice to the other party at least one day prior
to the Effective Date.
Article 11 (Effectiveness of the Agreement)This Agreement shall cease to be effective if, by one day prior to the Effective Date, approval by a resolutionof a general meeting of shareholders of either Party A or Party B as set forth in Article 6 has not beenobtained, or if the approval or authorization of the relevant authorities as required by laws and regulations

16

(including foreign laws) for the execution of the Share Exchange has not been obtained, or if this Agreement
is terminated pursuant to the preceding Article.
Article 12 (Governing Law and Court of Jurisdiction)
1. This Agreement shall be governed by and interpreted in accordance with Japanese law.
2. In the event of any dispute arising out of this Agreement, the Tokyo District Court shall have exclusive
jurisdiction as the court of first instance.
Article 13 (Matters to be resolved)
In addition to the matters set forth in this Agreement, other matters necessary for the Share Exchange shall be
determined upon consultation and agreement between Party A and Party B in accordance with the purpose ofthis Agreement.
Two copies of this document shall be prepared as proof of the execution of the Agreement, and Party A andParty B shall each keep one copy after placing their signatures and seals hereon.
April 14, 2023
Haruhiko Sakamoto
Representative Director and President
Arclands Co., Ltd.
445 Kamisugoro, Sanjo, Niigata
Moritaka Sakamoto
Representative Director and President
Arcland Service Holdings Co., Ltd.
14F Shinochanomizu Building, 4-3 Kanda-Surugadai, Chiyoda-ku, Tokyo

3.

Outline of the Details Stipulated in Article 193 of Article 193 (Excluding Items 5 and 6) of Regulations for
Enforcement of the Companies Act(1) Matters Concerning Appropriateness of the Consideration(i)

Details of allocation for the Share Exchange

Allocation ratio for the Share Exchange
Number of shares delivered as a result of the
Share Exchange

The Company(Wholly owning parent
company after the shareexchange)1

Arcland SHD(Wholly owned subsidiary after
the share exchange)
1.87

The Company’s Shares: 26,768,217 shares (planned)(Note 1) Share allocation ratio
1.87 shares of the Company are assigned and allocated per share of Arcland SHD. However, no allocation of shares will be performed for
Arcland SHD Shares that the Company holds as of the Record Time (defined below) in the Share Exchange. Note that the allocation ratio forthe above Share Exchange (hereinafter referred to as the “Share Exchange Ratio”) may change after mutual discussion and agreement between
the two companies if there is a material change in the terms and conditions that the calculation is based upon.
(Note 2) Number of the Company’s Shares delivered as a result of the Share Exchange

17In the Share Exchange, the Company will deliver to the shareholders of Arcland SHD (however, meaning the shareholders after the treasury
shares below are cancelled, and excluding the Company) as of the point in time immediately before the Company acquires all of theoutstanding shares of Arcland SHD (excluding Arcland SHD shares held by the Company) through the Share Exchange (hereinafter referred
to as the “Record Time”), in exchange for the shares of Arcland SHD they hold, the total number of Arcland SHD Shares they hold multipliedby 1.87.
The shares to be delivered by the Company are planned to be allocated from newly issued shares.
Additionally, Arcland SHD plans to cancel all of its treasury shares held as of the time immediately prior to the Record Time (including
treasury shares acquired by Arcland SHD through the purchase of shares in connection with the Share Exchange by dissenting shareholders
who have requested the purchase of their shares as set forth in Article 785(1) of the Companies Act) by a resolution of a meeting of its Boardof Directors to be held by the day before the effective date of the Share Exchange.
In addition, Arcland SHD has issued first convertible unsecured bond-type bonds with stock acquisition rights (hereinafter referred to as the“Bonds with New Share Reservation Rights”). (The repayment terms for the Bonds with New Share Reservation Rights is August 14, 2023,
and the number of shares of Arcland SHD subject to the new share reservation rights granted to the Bonds with New Share Reservation Rights(as of April 14, 2023) is calculated by dividing the total amount of the Bonds with New Share Reservation Rights, 2,009,000,000 yen by thevalid conversion price as of April 14, 2023, 2,179 yen. (921,900 shares, rounding down the shares less than one unit).)Accordingly, the number of shares to be delivered by the Company can be revised going forward depending on the number of treasury shares
to be acquired and retired by Arcland SHD and the execution of the new share reservation rights by the holder of the Bonds with New ShareReservation Rights.
(Note 3) Treatment of shares less than one unit
Shareholders of Arcland SHD who will be holding less than one unit (less than 100 shares) of the Company shares as the results of the Share
Exchange, maybe able to utilize the following schemes in relate to the Company’s Shares pursuant to the Company’s articles of association
and Rules on handling of shares. Please note that shares less than one unit cannot be sold in financial instruments exchange markets.
(i)

Scheme for purchasing shares less than one unit (for holding 100 shares)
Pursuant to Article 194, paragraph 1 of the Companies Act and the provision of articles of association of the Company, this scheme
allows the holders of less than one unit share of Arclands stock to purchase the number of shares from the Company so that the sum of
their shares will be one unit.

(ii)

Scheme for selling shares less than one unit (sales of less than one unit share)
Pursuant to Article 192, paragraph 1 of the Companies Act, this scheme allows the holders of less than one unit share of the Company
stock to request the Company to purchase the less than one unit share from the shareholder number of shares from Arclands so that thesum of their shares will be one unit.

(Note 4) Treatment of fraction less than one share
Pursuant to the provisions of Article 234 of the Companies Act and other relevant laws and regulations, if there are shareholders of theCompany who receive a fraction of less than one share of the Company stock as a result of the Share Exchange, the Company will sell thenumber of shares equivalent to the sum of all of the fractions less than one share (discarding the fraction if the sum includes a fraction lessthan one share) and deliver the proceeds to those shareholders in proportion to the fractions attributed to them.

(ii) Basis, etc. for the details of the allocation for the Share Exchange(a) Basis and reasons for the details of the allocation
In order to ensure fairness and appropriateness in determining the Share Exchange Ratio, the Company and
Arcland SHD each separately selected a third-party valuation agency and legal advisor independent of bothcompanies: the Company selected J-TAP Advisory K.K. (hereinafter referred to as “J-TAP”) and Arcland
SHD selected Daiwa Securities Co. Ltd. (hereinafter referred to as “Daiwa Securities”) as their respective
third-party valuation agencies, and the Company selected Mori Hamada & Matsumoto and Arcland SHD
selected TMI Associates as their respective legal advisors, and they commenced a full-scale review.
As described in (iii) “Measures to ensure fairness (including measures to avoid conflicts of interest)” below,
the Company performed a careful review based on the content of the share exchange ratio calculation reportobtained on April 13, 2023 from J-TAP, the Company’s third-party valuation agency, advice from its legal
advisor, Mori Hamada & Matsumoto, and the results of due diligence conducted by the Company on Arcland
SHD, and as a result, the Company determined that the Share Exchange is appropriate and will benefit theinterests of its shareholders, so it decided it will be appropriate to perform the Share Exchange at the Share
Exchange Ratio.
At the same time, as described in (iii) “Measures to ensure fairness (including measures to avoid conflicts ofinterest)” below, Arcland SHD performed a careful review based on the content of the share exchange ratio
calculation report obtained on April 13, 2023 from Daiwa Securities, Arcland SHD’s third-party valuation
agency, advice from its legal advisor, TMI Associates, the results of due diligence conducted by Arcland SHD
on the Company, and the instructions, advice, report received on April 14, 2023 (for details, please see (iii)“Measures to ensure fairness (including measures to avoid conflicts of interest)”) from the Special Committee
consisting solely of independent members who have no interest in the Company, the controlling shareholder.
As a result, Arcland SHD has determined that the Share Exchange Ratio is appropriate, and that it will benefit
the interests of all of its shareholders, so it has decided it will be appropriate to perform the Share Exchange at
the Share Exchange Ratio.
18

As described above, the Company and Arcland SHD have carefully considered the results of the shareexchange ratio calculations submitted by their respective third-party valuation agencies, taking into accountthe results of due diligence conducted by each company on their counterpart, and they held negotiations anddiscussions and after comprehensively taking into account factors such as both companies’ financial
conditions, asset conditions and future prospects. As a result, the Company and Arcland SHD have determinedthat the Share Exchange is appropriate and will benefit the interests of their respective shareholders, so wehave decided that it will be appropriate to perform the Share Exchange at the Share Exchange Ratio.
Note that the Share Exchange Ratio may change in accordance with the Share Exchange Agreement after
mutual discussion and agreement between the two companies if there is a material change in the terms andconditions that are the basis for the calculation.
(b) Matters regarding the valuation①

Name of the valuation agencies and relationship with the both companies

J-TAP, the Company’s third-party valuation agency, and Daiwa Securities, Arcland SHD’s valuation agency,
are both independent of the Company and Arcland SHD, are not related parties of either the Company or
Arcland SHD, and have no material interest to be noted in relation to the Share Exchange.
②

Overview of calculation

J-TAP performed its calculation using market share price analysis (with April 13, 2023 as the reference date
for calculation, the analysis is based on the average closing price on the Tokyo Stock Exchange Prime Market
for the most recent one month from March 14, 2023 to the reference date for calculation, the average closing
price for the most recent three months from January 16, 2023 to the reference date for calculation, and theaverage closing price for the most recent six months from October 14, 2022 to the reference date forcalculation) because the Company and Arcland SHD are listed on the Tokyo Stock Exchange Prime Market
and market prices exist for both companies, together with the discount cash flow method (hereafter referred toas the “DCF Method”) to reflect evaluations of the conditions for both companies’ future business activities.
The future financial forecasts for the Company and Arcland SHD used as the basis for J-TAP’s calculations
using the DCF method did not include any financial years for which major increases or decreases to profits
were expected. These financial projections do not assume that the Share Exchange will be implemented.
The calculated range for Arcland SHD Shares per the Company’s Share based on each valuation method is asfollows.
Used methods
Market share price method
DCF method(Note)

Calculated share exchange ratio range
1.41~1.49
0.62~2.27

In calculating the Share Exchange Ratio, J-TAP has, in principle, used information received from the Company and Arcland SHD andinformation that is publicly available, etc. as-is, and has assumed that all such materials and information, etc. are accurate and complete, andhas not independently verified the accuracy and completeness of such information. In addition, J-TAP has not conducted an independent
evaluation or assessment of the assets or liabilities of the Company and Arcland SHD or their affiliates (including off-balance-sheet assets andliabilities, as well as other contingent liabilities), nor has it requested any third-party institution to appraise or assess such assets or liabilities.
J-TAP has relied on this information without independently verification the accuracy, appropriateness, or feasibility of the business plans ofboth companies. J-TAP’s calculations reflect the above information through April 13, 2023.

On the other hand, since the Company and Arcland SHD are listed on the financial instruments exchange andmarket share prices exist, Daiwa Securities calculated the value of both companies using the market shareprice, and it performed a calculation using the DCF method to reflect the status of future business activities.
The calculation results for each method are as follows. The calculated ranges for the Share Exchange Ratio
below state the ranges calculated by each calculation method when the share value per the Company’s Share is
1.
Used methods
Market share price method
DCF method

Calculated share exchange ratio range
1.41~1.49
1.27~1.95

For the market price method, April 13, 2023 was used as the reference date for calculation, and the closing
price on the reference date and the average closing prices for the one-month (March 14, 2023 to April 13,2023), three-month (January 16, 2023 to April 13, 2023), and six-month (October 14, 2022 to April 13, 2023)
periods prior to the reference date were used.
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The DCF method utilized the expected future cash flow based on the financial forecasts prepared by theCompany for the period between February 2023 and February 2026 discounted using a fixed discount rate. A
discount rate of 4.98%~5.29% was utilized. To calculate the going concern value, the constant-growth rate
model was used and a terminal value of 0.25%~0.25% was utilized. The DCF method utilized the expected
future cash flow based on the financial forecasts prepared by Arcland SHD for the period between December
2023 and December 2025, discounted using a fixed discount rate. A discount rate of 5.50%~5.81% was
utilized. To calculate the going concern value, the constant-growth rate model was used and a terminal valueof 0.50%~1.00% was utilized. With respect to the financial projections that Daiwa Securities utilized inconnection with the DCF method, there were no fiscal years in which significant increases or decreases in
profits were projected.
(Note) In calculating the Share Exchange Ratio, Daiwa Securities has used materials and information received
from the Company and Arcland SHD and information that is publicly available and has assumed that allmaterials and information subject to analysis and review are accurate and complete, and has not independently
verified the accuracy and completeness of these materials information or borne any duty to do so. In addition,
Daiwa Securities has not conducted an independent evaluation, appraisal, or assessment of the assets or
liabilities of the Company and Arcland SHD or their affiliates (including contingent liabilities), nor has it
requested any third-party agency to evaluate, appraise, or assess such assets or liabilities. Daiwa Securities
assumed that the respective business plans, financial forecasts and other future information provided by theCompany and Arcland SHD were prepared reasonably by the respective managements of both companies
based on the best forecasts and judgments currently available. Daiwa Securities has relied on this information
without independently verification the accuracy, appropriateness, or feasibility of the business plans of bothcompanies. Daiwa Securities’ calculation of the Share Exchange Ratio is based on financial, economic,
market, and other conditions as of April 13, 2023 These financial projections do not assume that the Share
Exchange will be implemented.
(iii) Measures to ensure fairness (including measures to avoid conflicts of interest)
The Company and Arcland SHD hold 17,520,000 shares (including 160,000 shares of Arcland SHD that theCompany has loaned to a third party as of April 14, 2023; the same shall apply hereinafter) of Arcland SHD
Shares (55.03% (rounded to the third decimal place; the same applies hereinafter in calculations of theshareholding ratio) of the total number of outstanding shares as of March 31, 2023 (33,096,000 shares) lessthe number of shares of Arcland SHD treasury stock (1,261,445 shares) (31,834,555 shares)) and Arcland
SHD constitutes the Company’s consolidated subsidiary, so in the event of the Share Exchange, we havedetermined that it is necessary to avoid conflicts of interest and ensure fairness, and we have taken thefollowing measures to ensure fairness (including measures to avoid conflicts of interest).
(a) Acquisition of a stock valuation report from an independent third-party valuation agency
In order to ensure fairness in the calculation of the Share Exchange Ratio used in the Share Exchange, theCompany selected J-TAP, a third-party valuation agency independent of the Company and Arcland SHD, andobtained a valuation report on the Share Exchange Ratio as of April 13, 2023, and Arcland SHD selectedDaiwa Securities, a third-party valuation agency independent of the Company and Arcland SHD, and obtained
a valuation report on the share exchange ratio as of April 13, 2023. For an outline of the valuation report, see“(b) Summary of Valuation” in “(ii) Matters Relating to Valuation” above. The two companies have notobtained written opinions (fairness opinion) from the third-party appraisers to the effect that the shareexchange ratio for the Share Exchange is fair to the shareholders of the Company or Arcland SHD from afinancial perspective.
(b)

Advice from an independent law firm

The Company has appointed Mori Hamada & Matsumoto as its legal advisor for the Share Exchange and has
obtained advice on the procedures for the Share Exchange and the methods and processes, etc. for decisionmaking by the Board of Directors from a legal perspective. Mori Hamada & Matsumoto has no materialinterest in the Company or Arcland SHD.
On the other hand, Arcland SHD has appointed TMI Associates as its legal advisor for the Share Exchange
and has obtained advice on the procedures for the Share Exchange and the methods and processes, etc. fordecision-making by the Board of Directors from a legal perspective. TMI Associates has no material interestin the Company or Arcland SHD.
(c)

Acquisition of a report from a special committee that has no interest in Arcland SHD

In response to Arcland SHD receiving the proposal from the Company, its parent company and controllingshareholder, and upon commencing a detailed review of the Transaction, prior to deliberating and resolving on
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the merits of the Transaction at Arcland SHD’s Board of Directors, Arcland SHD has ensured that Arcland
SHD’s decisions regarding the Transaction are made with due care, eliminated the possibility of arbitrarinessand conflicts of interest in the decision-making process of the Board of Directors of Arcland SHD, andensured the fairness of the process, and additionally, in order to obtain an opinion as to whether the decisionby the Board of Directors of Arcland SHD to enter into the Transaction (if a tender offer is made as part of thecontent of the Transaction, including Arcland SHD expressing a specific opinion on such tender offer) is
disadvantageous to the minority shareholders of Arcland SHD, Arcland SHD established a Special Committee
on January 10, 2023 consisting of three members: Yasuyuki Yagi and Koichi Hanafusa, outside directors(members of the Audit Committee) of Arcland SHD who have no interest in the Company, the controllingshareholder, and who have been reported to the Tokyo Stock Exchange as independent directors, and Fumiaki
Iwasaki, an independent outside expert with no interest in the Company or Arcland SHD (an attorney andpartner at Torikai Sogo Law Office). Arcland SHD consulted with the Special Committee on: (i) mattersrelating to the reasonableness of the purpose of the Transaction (including whether the Transaction willcontribute to the enhancement of Arcland SHD’s corporate value), (ii) Matters concerning the appropriatenessof the terms and conditions of the Transaction (including the appropriateness of the method of conducting theTransaction and the type of consideration), (iii) matters relating to the fairness of the procedures for theTransaction (including consideration of what measures to ensure fairness should be taken and to what extent),and (iv) the Transaction (if a tender offer is implemented in the Transaction, the details of the opinion
expressed with respect to such tender offer) not being disadvantageous to minority shareholders based on theabove (hereinafter referred to as the “Matters for Consultation”). In addition, in consulting on the Matters for
Consultation, Arcland SHD has granted authority including: (a) authority to conduct an investigation of theTransaction (including asking questions and obtaining explanations from Arcland SHD’s officers or
employees involved in the Transaction or Arcland SHD’s advisors for the Transaction on matters necessary
for the consideration of the Matters for Consultation), (b) authority to request Arcland SHD to communicate tothe other party the Special Committee’s proposals or other opinions or questions or to set up an opportunity
for the Special Committee itself to consult with the other party (including its officers and employees involvedin the Transaction and its advisors for the Transaction), (c) authority to refuse to approve the advisors
appointed by Arcland SHD if it determines that there is a problem with the independence of the advisors
appointed by Arcland SHD, in which case Arcland SHD shall respect the wishes of the Special Committee tothe maximum extent possible, and (d) authority to appoint the Special Committee’s own advisors at Arcland
SHD’s expense, if deemed particularly necessary.
The Special Committee carefully reviewed the Matters for Consultation by meeting a total of 13 times fromFebruary 2, 2023 to April 13, 2023, and additionally exchanged opinions and gathered information via emails
and held discussions from time to time.
Specifically, the Special Committee reviewed and confirmed the independency and expertise of Daiwa
Securities Co. Ltd. and TMI Associates which been respectively appointed by Arcland SHD as financial
advisor / third-party valuation agency and as legal advisor and approved their appointments. Then, the Special
Committee sent a questionnaire regarding the purpose of the Transaction, and etc., to the Company and theCompany explained to the Special Committee regarding the purpose of the Transaction, the background andhistorical negotiation leading to the Transaction, the reason for selecting the method of Share Exchange, future
management policy and treatment of employees after the Transaction, and the treatment of Shareholders
benefit plan and a question-and-answer session was held. Additionally, TMI Associates, the legal advisor for
Arcland SHD advised the Special Committee about the measures to ensure the fairness of the operations of
this Special Committee and other procedures for this Transaction as well as the measures to avoid conflicts ofinterests and explained the results of legal due diligence on the Company, and a question-and-answer session
was held. Further, STREAM Co., Ltd. / STREAM Tax Co. who had conducted the financial and tax due
diligence on the Company based on the request from Arcland SHD explained to the Special Committee about
the results of such due diligence and a question-and-answer session was held. In addition, Daiwa Securities,
which is the financial advisor and third-party valuation agency for Arcland SHD explained to the Special
Committee regarding the method and results of calculation for the consideration at Transaction (the Share
Exchange Ratio, etc.) and a question-and-answer session was held and validated the appropriateness. Further,following the receipt of advice from Daiwa Securities and TMI Associates, the Special Committee wassubstantially involved in the negotiation with the Company by setting the negotiation policy for theconsideration of the Transaction (the Share Exchange Ratio, etc.), and by receiving reporting and directions
regarding the developments of the negotiation as appropriate.
Under such circumstances, the Special Committee has carefully discussed and reviewed the Matters for
Consultation and submitted a report that the Share Exchange is not disadvantageous to the minority
shareholders of Arcland SHD to the Board of Directors of Arcland SHD on April 14, 2023. The following isan overview of the Special Committee’s opinion.
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(i)

Matters concerning reasonableness of the purpose of the Transaction (including whether the Transaction
will contribute to the enhancement of the corporate value of Arcland SHD)
The following is a summary of the understanding of Arcland SHD and the Company, as confirmed by theSpecial Committee from Arcland SHD and the Company, regarding the purpose of the Transaction, thebackground leading up to the Transaction, and the specific details of Arcland SHD’s corporate value
expected to increase as a result of the Transaction.
• The home improvement store market in which the Company operates entered a mature phase starting in
2000, and market growth has remained flat, while the number of home improvement stores continues toincrease, competition among stores has further intensified, and growth in sales through new store
openings has been difficult. In addition, the industry as a whole is experiencing a trend of decline insales per floor area and faces a situation where it is difficult to grow sales through existing stores.
Furthermore, home improvement stores are prone to price competition because it is not easy todifferentiate products, and in recent years, other types of retailers such as GMS (general merchandise
stores), drugstores, discount stores, 100-yen stores, and discount interior and furniture specialty stores
have been gaining strength. The competitive environment surrounding the industry has continued tointensify: in particular, in recent years, these types of businesses have converted to malls and started
providing food, clothing, and housing services, including food service business, and the emergence ofEC (e-commerce) sites such as Amazon is also a threat to the home improvement store industry. It has
become more difficult for both companies to continue to achieve continued growth, and in the home
improvement store industry, consolidation and reorganization are underway. In relation thereof, theCompany also made VIVA HOME a wholly owned subsidiary in October 2020, as stated above, and inorder to create speedy and even greater synergies, merged with VIVA HOME in September 2022. While
the Company’s home improvement store business has now reached a certain level of “expansion ofscale” through the merger and integration with VIVA HOME, it is at a stage where it should improve
profitability through “qualitative improvement” by increasing efficiency and productivity through thecreation of synergies with VIVA HOME going forward.
• On the other hand, Arcland SHD’s foods business has stable profitability, in addition to the increasedlabor costs attributable to labor shortages, global inflation and increasing costs due to the conflict in
Ukraine contribute to an extremely difficult business environment where, in order to increase enterprisevalue, we think internal growth through new store openings will need to be accelerated and “expansionof scale” will need to be achieved through mergers and acquisitions and non-recurring organic growth(Arcland SHD’s core category, “Katsuya” (domestic), accounted for 59.3% of the Arcland SHD Group’s
net sales in the previous fiscal year, and the dependence of its performance on the “Katsuya” (domestic)business has increased) and discover and build a portfolio of new business categories. However,
although Arcland SHD recognizes that the retention rate of workers is its greatest challenge, finding aneffective solution continues to be difficult, and it has been difficult for Arcland SHD alone to achieve an“expansion of scale” and discover and build a portfolio of new business categories.
• As stated above, as of now, both companies have achieved the growth envisioned at the time of the spinoff, and the business environment surrounding both companies and consumer’s lifestyles and values arefundamentally changing. In order for both companies to always be the companies that customers choose,regardless of the era, and in order to achieve further medium/long-term growth, we believe that bothcompanies have reached a turning point where both companies must build a solution that enables themto accurately ascertain each of their challenges and be able to respond flexibly and swiftly. Amid thesecircumstances, in order for both companies to further enhance their corporate value, they should not
pursue growth independently as separate and independent listed companies, but rather position the home
improvement store business, which is the core business of the Company, and the restaurant business,
which is the core business of Arcland SHD, as the two pillars of the Group’s overall corporate valueenhancement, and by combining and engaging in strategic group management, utilize management
resources of both companies, and work together to resolve the issues above will not only increase thecorporate value of the Arcland SHD but also contribute to improve the corporate value of the Group as awhole.
• As described above, we believe that forming a complete parent-subsidiary relationship, not limited togeneral and formulaic transactions and cooperation between the parent company and listed subsidiary
based on the assumption that both companies are single and independent listed companies and further
cultivating and developing the “housing and food” related business and building a relationship between
the two companies that will allow us to provide comprehensive services that are closer to the lives ofconsumers by operating the two companies in a fully integrated manner are necessary to further growthe corporate value of the entire Group, the Company has been considering making Arcland SHD awholly owned subsidiary from around September 2021, and has also had discussion with Arcland SHD.
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After that, the discussion and consideration were terminated around February 2022; however, theCompany started considering making Arcland SHD a wholly owned subsidiary again from around
September 2022.
• The Company has positioned the period until FY 2024 as a period for pursuing group synergies in its“Medium-Term Management Plan – LIFE (FY 2021 – FY 2024)” released in March 2021 and is
endeavoring to create synergies within the entire Group with “sales growth,” “improvement of grossprofit margin,” and “reduction of SG&A expenses” as its three basic strategies. Making Arcland SHD awholly owned subsidiary is expected to produce effects including “sales growth” by expanding thecustomer base and energizing M&A, and “reduction of SG&A expenses” by joint procurement of
packaging materials.
• At the same time, in recent years, there have been increasing negative comments about the risk ofstructural conflicts of interest with respect to the governance of publicly traded subsidiaries and moves
to strengthen measures to respond to these conflicts, including the “Practical Guidelines for Group
Governance Systems” dated June 28, 2019 formulated by the Ministry of Economy, Trade and Industry,
and the June 11, 2021 re-revision of the Corporate Governance Code, etc., also require various measures
for transparency and fairness in governance of publicly traded subsidiaries; in this way, the Company
recognizes that there has been a trend in the capital markets for group companies to be strongly required
to improve the capital efficiency of the group as a whole in recent years. Moreover, in addition to thisenvironment surrounding parent company/subsidiary listings, the reorganization of the Tokyo Stock
Exchange’s markets has led to requirements for further strengthening of governance in the Prime
Market, and there are also increased financial and administrative burdens to respond to theserequirements. In response to these trends, the Company has also carefully reviewed the design of group
governance and the handling of Arcland SHD Shares from the standpoint of the group’s overall medium
and long-term business portfolio strategy, enhancement of corporate value and governance structure, andimprovement of capital efficiency.
• As a result of this review, the Company believes that in order to maximize the strengths of the Group,
including the Arcland SHD Group, and to maximize the improvement in the corporate value of theGroup as a whole, it would be best for the Company and Arcland SHD to execute the Transaction andthereby join together as a group to strengthen and expand their customer bases, develop new businesscategories, and implement flexible and agile management strategies rather than maintaining their
independence as listed companies, and that the execution of the Transaction is the best option for both
the Company and Arcland SHD, on December 13, 2022, the Company made a proposal for theTransaction to Arcland SHD.
• Arcland SHD has, in response to the proposal to execute the Transaction on December 13, 2022 from its
parent company and controlling shareholder the Company, conducted a detailed review of theTransaction, and continued to have discussions with the Company. As a result, both companies
recognize that the structural conflicts of interest between the minority shareholders of the Company and
Arcland SHD will be resolved when Arcland SHD becomes a wholly owned subsidiary of the Company
through the Transaction, it will become possible to solve the challenges discussed above and to more
quickly benefit from advantages such as the establishment of a system that enables flexible and prompt
implementation of management measures necessary to strengthen the competitiveness of the Group,
including Arcland SHD, over the medium to long term, the business benefits of mutual utilization ofmanagement resources, and the increased management efficiency that will result from eliminating theparent company/subsidiary listing, and the Transaction will contribute to the long-term enhancement of
the corporate value of both companies; additionally, through repeated discussions between the twocompanies regarding the future vision of organically strengthening and growing the home improvement
store and restaurant businesses through integrated management of the two companies, the twocompanies have reached a common understanding that they should not only pursue individual growth on
the premise that they are separate and independent listed companies, but also that they should pursue“group optimization” that will maximize the corporate value of the Group, including Arcland SHD, as awhole. We also performed a review of the expected disadvantages to company creditworthiness andcurrent shareholders as a result of delisting, and after execution of the Transaction, as a major groupcompany of the Group, it is considered possible to maintain the increased creditworthiness, and it will bepossible to provide the minority shareholders of Arcland SHD with the value and benefits that could
result from the Transaction by delivering them with the Company’s common shares, which are theconsideration for the Share Exchange, and it is believed that execution of the Transaction will bebeneficial not only to the Company but also to the minority shareholders of Arcland SHD, and we havecome to the conclusion that there will be more advantages from becoming a wholly owned subsidiary of
the Company than the resulting disadvantages.
23• After the implementation of the Transaction, instead of pursuing only individual growth on theassumption that the Company and Arcland SHD are independent listed companies, as in the past, thetwo companies intend to join together and seek to work in concert to achieve further growth anddramatically increase value, we will shift to a “group perspective” that also seeks to enhance thecorporate value of not only Arcland SHD but the entire Group, manage the Group with a growth strategy
that is “group-optimal” by increasing the corporate value of the Group as a whole to the greatest extent
possible, and resolve the various problems that arise in the respective business environments, whileworking to reduce business costs and secure and conserve human resources. Specifically, the twocompanies are considering implementing the following measures to enhance the value as a group.
(A) Promote opening of new stores by Arcland SHD by strengthening cooperation within the Group(B) Development of new business categories and expansion of business scale through information
sharing and cooperation on M&A(C) Expansion of the scale of the frozen foods business(D) Reduction of business costs through use of PBs and joint procurement of packaging materials andconstruction materials for Arcland SHD(E)

Personnel exchange between Arcland SHD and the Group(F)

Share customer information between the two companies(G) Strengthen group management functions and reduce management costs by improving theefficiency of indirect departments• At present, Arcland SHD is still a subsidiary of the Company, so even if the Company and Arcland SHD
do not execute the Transaction, it still considered possible to produce the above effects to a certain
extent, but given that Arcland SHD is publicly traded and has minority shareholders, the capital structureof the Company, the parent company, and the minority shareholders of Arcland SHD could have aconflict of interest, there is a capital structure where there could be conflicts of interest between theparent company, the Company, and the minority shareholders of Arcland SHD, so careful considerationis required of each measure to ensure that there is no risk of harming the interests of Arcland SHD’s
minority shareholders, and in some cases, it would be expected that as a result of it being impossible todeny the possibility of harming the interests of Arcland SHD’s minority shareholders, it will be
impossible to promptly implement measures that would originally have been meaningful for improving
the corporate value of both companies. Furthermore, due to the presence of minority shareholders in
Arcland SHD, if the Company provides any management information or management resources to
Arcland SHD, this would create a situation for the Company in which a portion of the profits from theutilization of these information and resources would be made available to the minority shareholders of
Arcland SHD, so as a result, the Company, as a listed company, may hesitate to provide information andresources to Arcland SHD, and this may therefore not be done adequately. Given the above, in order forthe two parties to fully realize the effects of reviewing and implementing the group’s growth strategy ina unified manner while maintaining the “group perspective” described above, we believe it is necessary
to form a wholly owned parent company/subsidiary relationship between the two companies and toprevent any conflict of interest between the parent company, the Company, and the minority
shareholders of Arcland SHD.
• Since the Company expects to maintain the management structure, governance structure, and decisionmaking structure and methods of Arcland SHD after making Arcland SHD its wholly owned subsidiary,
if the structural conflict of interest between the Company and minority shareholders of Arcland SHD is
resolved through the execution of the Transaction, while Arcland SHD maintains the current
management structure, through mutual sharing and provision of management information and resources
and prompt decision making by the two companies, it is considered possible to establish a structure thatenables flexible and prompt implementation of management measures necessary to strengthen themedium to long term competitiveness of the Group including Arcland SHD.
• Although a scheme to make Arcland SHD a wholly owned subsidiary using a tender offer with cash as
consideration would also be possible, it was determined that executing a share exchange scheme by theTransactions is reasonable because they expected that delivering common shares of the Company toArcland SHD’s minority shareholders as consideration for the share exchange will provide theseshareholders with opportunities to enjoy, through holding the Company’s Shares, the effects expected to
be produced by the various measures planned to be implemented after the Share Exchange after theinterests of the Company and Arcland SHD are aligned and business development and revenue increases
to the Group as a whole, including the Arcland SHD Group, that will result from achievement of these24effects, and resulting increases in the share price and dividends for the Company’s Shares, as well as thatthe high liquidity of the Company’s Shares will allow Arcland SHD shareholders to cash in these sharesat any time by trading on the market.
With regard to the above, it is considered that Arcland SHD becoming a wholly owned subsidiary of theCompany through the Transaction will build a relationship that enables both companies to work together
to provide flexible and immediate multiple solutions, and will fully demonstrate the effects ofconsidering and implementing the group’s growth strategy in a unified manner while maintaining a“group perspective,” and will benefit to improve Arcland SHD’s medium to long term company value,and furthermore, it is evaluated that implementing the Transaction by means of a share exchange is notunreasonable compared to a tender offer with cash consideration or a squeeze-out, therefore, it isevaluated that the purpose of the Transaction is reasonable. The Special Committee considers that the
proposal for the Transaction, which is the subject of the Matters for Consultation, is a separate andindependent proposal from the above discussed proposal made in 2021 by the Company to make
Arcland SHD a wholly owned subsidiary, and that the purpose of the Transaction itself and the terms of
the Transaction are the most important factors in relation to the Matters for Consultation, therefore, did
not consider it necessary to focus on the history of past discussions and reviews.
(ii) Matters relating to the appropriateness of the terms and conditions of the transaction (including theappropriateness of the transaction execution method and the type of compensation)(a) Share Exchange Ratio
The Share Exchange Ratio is recognized to be above the upper limit of the range of calculation results
based on the market price method and within the range and above the median of the range of
calculation results based on the DCF (Discounted Cash Flow) method in the Share Exchange Ratio
Calculation Report obtained from Daiwa Securities. In addition, there is nothing unreasonable about
the calculation method and selection of valuation method in the said Share Exchange Ratio
Calculation Report.
The Share Exchange Ratio can be evaluated as being above average compared to the average premium
level in recent cases in which listed subsidiaries have been made wholly-owned subsidiaries throughshare exchanges similar to the Transaction.
In addition to the above, we have found no matters that have materially adversely affected the terms of
the Transaction as a result of our due diligence on the Company.
Furthermore, as described in (iii)(c) below, the Share Exchange Ratio was determined as a result of
substantial discussions and negotiations between the Company and Arcland SHD, and there is nothing
unreasonable about the negotiation process.
In light of the above, this share exchange ratio is appropriate.
(b) Appropriateness of the Transaction execution method and the type of compensation
The Transaction is an allotment of the Company’s Shares to the company’s shareholders, and theshareholders of the Company, as such, can continue to enjoy the benefits from the realization ofsynergies expected to arise from the growth of the Group (including the enhancement of the corporate
value of Arcland SHD, which will become a wholly owned subsidiary of the Company) even after theTransaction is executed. On the other hand, given that the Company’s Shares can be traded on theprime market of the Tokyo Stock Exchange, and that opportunities to cash out can be secured at any
time after the Transaction, the Transaction execution method and the type of compensation areappropriate.
(c) Brief summary
In addition to the above, and in light of the fact that there is nothing unreasonable about the terms andconditions of the Transaction, we have concluded that the terms and conditions of the Transaction,
including the Share Exchange Ratio, are reasonable and appropriate.
The shareholder special benefit plan of Arcland SHD will be abolished as a result of the Transaction,
and after the Transaction is executed, such plan previously granted will be replaced by a new plan thatis substantially the same as the current special benefit plan of Arcland SHD. Also, in terms ofshareholder benefits, it is acknowledged that the company is showing consideration for theshareholders of Arcland SHD by planning to establish a new shareholder benefit program that can beused in common with the Group.

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(iii) Matters relating to the fairness of the proceedings for the Transaction (including consideration of theextent to which any fairness assurance measures should be taken).
It is acknowledged that Arcland SHD has taken the following measures to ensure the fairness of theproceedings in the negotiation process leading to the Transaction.
(a) Arcland SHD will ensure the fairness of the decision-making process of Arcland SHD withrespect to the Transaction by carefully considering the fact that the Company holds approximately
55% of Arcland SHD shares and that Arcland SHD is a consolidated subsidiary of the Company,
and by eliminating arbitrariness and the possibility of conflicts of interest in the decision-making
process of the Board of Directors of Arcland SHD. In addition, a Special Committee has been
established for the purpose of obtaining the opinions of the Board of Directors of Arcland SHD as
to whether the decision to execute the Transaction by the said Board of Directors is
disadvantageous to the minority shareholders of Arcland SHD. In making a decision regarding theTransaction, the Company shall respect the opinions of the Special Committee to the maximum
extent possible. If the Special Committee determines that the terms of the Transaction are notappropriate, the Company shall decide not to execute the Transaction, and in negotiating the termsof the Transaction with the Company, the Company shall report to the Special Committee in atimely manner on the status of such negotiations and receive opinions, instructions and requests atimportant stages.
(b) Arcland SHD and the Company have appointed Daiwa Securities, a financial advisor and thirdparty valuation institution that is recognized as independent from Arcland SHD and Arclands, and
TMI Associates, a legal advisor, as their respective external advisors, and have carefully
considered and discussed the appropriateness of the terms of the Transaction, including the Share
Exchange Ratio, while receiving advice, etc. from each of them(c) Arcland SHD received a proposal for a lower share exchange ratio than the share exchange ratio (1.87
shares of the Company’s stock for 1 share of Arcland SHD stock), but in response to this proposal,
Arcland SHD has repeatedly requested the Company to reconsider the exchange ratio from theperspective of protecting the interests of minority shareholders, and has held substantive discussions
and negotiations to raise this share exchange ratio on multiple occasions. In addition, after lengthy
discussions at the Special Committee, suggestions and advice were given to Arcland SHD regarding
how to proceed with the discussions and negotiations and the details to be communicated to theCompany, and Arcland SHD also decided its response policy based on such suggestions and advice.
The opinions of the Special Committee were appropriately reflected in the process of discussion andnegotiation with the Company(d) No officer or employee of Arcland SHD who concurrently serves or has served as an officer or
employee of the Company has been involved in the consideration of the Transaction or in thediscussions and negotiations with the Company. Although Katsuji Sakamoto, Chairman and
Representative Director of the Company, and Moritaka Sakamoto, President and Representative
Director of Arcland SHD, have a parent-child relationship, Moritaka Sakamoto does notconcurrently serve as an officer or employee of Arclands nor has he ever worked for theCompany, and as a Director of Arcland SHD, he has a duty of care and loyalty only to it. Given
that it is desirable for Moritaka Sakamoto, Representative Director of Arcland SHD, to participate
in the review of the Transaction in order for Arcland SHD to fully review and negotiate theTransaction, there should be no particular problem with his involvement in the review of theTransaction and in the discussions and negotiations with the Company(e) As stated in (a) above, if the Special Committee determines that the terms of the Transaction are
not appropriate, the Board of Directors of Arcland SHD will decide not to execute theTransaction. In discussing and negotiating with the Company regarding the Transaction, as
described in (b) above, the Special Committee has seriously considered for a long time how toproceed with the discussions and negotiations with the Company and the contents to becommunicated to the Company, and suggested and advised Arcland SHD of the results of suchdiscussions and negotiations. Arcland SHD has respected the opinions of the Special Committee
to the maximum extent, and in considering the Transaction, Arcland SHD proceeded in a mannerthat appropriately reflected the opinions of the Special Committee; therefore, it is considered thatthe proceedings were conducted in a manner that fully respected the opinions of the Special
Committee(f) Although Arclands SHD did not, at the time of the Transaction, ensure the opportunity for acompeting takeover bid by another potential acquirer in the M&A (“Market Check”), the26Company has been informed that it owns approximately 55% of Arcland SHD shares. Given that
Arcland SHD is a consolidated subsidiary of the Company, there is little likelihood that any otherserious competing proposal will be made, and according to the Company, it has no intention of
accepting the sale of Arcland SHD shares even if another competing takeover bidder were toappear. In light of the above, it is unlikely that the market check will function as a measure toensure fairness in this transaction, and therefore, it is not meaningful to implement it. In addition,
while there are few advantages to conducting market check as described above, there are
disadvantages, such as the possibility of information leakage of trade secrets, etc., to competitors,
and the adverse effects on business and stock prices due to leakage of transaction information, etc.
Therefore, the fact that Arcland SHD is not conducting market check does not raise questions
about the fairness of the proceedings for the Transaction
In light of the above, it can be said that Arcland SHD has taken reasonable measures necessary toensure the fairness of this transaction, and it has been concluded that the proceedings for thistransaction are fair.
(iv) Based on (i) through (iii) above, the Share Exchange (if a tender offer is implemented in the Transaction,
the content of the statement of opinion regarding such tender offer) is not disadvantageous to minority
shareholders
Based on (i) through (iii) above, the Special Committee has carefully examined the Transaction andconcluded that the Transaction is not disadvantageous to the minority shareholders of Arcland SHD.
(d)Approval of all directors of Arcland SHD

All directors of Arcland SHD attended the meeting of the Board of Directors of Arcland SHD held today, andthe resolution to approve the Share Exchange was unanimously approved by the attending directors. Although
Katsuji Sakamoto, the Representative Director and Chairman of the Company, and Moritaka Sakamoto, theRepresentative Director and President of Arcland SHD, are father and son, Moritaka Sakamoto is neither adirector nor employee of the Company and has not been employed at the Company, and as a director of
Arcland SHD, has a duty of care and loyalty only to Arcland SHD, and it is desirable that he engage andnegotiate in respect of this Transaction at Arcland SHD, we believe there are no issues with his involvement in
the Transaction and negotiations related thereto.

(2) Matters Concerning Appropriateness of the Amount of Share Capital and Capital Reserves of the Company
The amount of share capital and capital reserves of the Company to be increased upon the Share Exchange
will be determined by the Company in an appropriate manner in accordance with Article 39 of the Regulations
on Corporate Accounting. Such details are determined within the scope of laws and regulations upon
comprehensive consideration and examination of the Company’s capital policy and other circumstances, andthe Company has determined them to be appropriate.

(3) Matters Concerning Appropriateness of the Provisions for New Share Reservation Rights
Not applicable.

(4) Matters Concerning the Wholly Owned Subsidiary after the Share Exchange(i)

In accordance with laws and regulations and the provisions of Article 16 of the Articles of Incorporation of theCompany, the financial statements, etc. of Arcland SHD for its final fiscal year (fiscal year from January 1,
2022 to December 31, 2022) will be posted on the Company’s website (https://www.arclands.co.jp/ja/ir/news.
html) and the website of the Tokyo Stock Exchange(https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show). The information is omitted from the
Notice of Convocation and the document to be delivered to shareholders who have requested delivery of the
document (document stating the matters to be provided in electronic format).

(ii) Details of any material disposition of assets, incurrence of material liabilities, or other events occurring after
the end of the final fiscal year that may materially affect the status of the company’s assets.
Not applicable.

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(5) For the Company, details of any material disposition of assets, incurrence of material liabilities, or otherevents occurring after the end of the final fiscal year that may materially affect the status of the company’s
assetsAt a meeting of the Board of Directors held on February 14, 2023, the Company resolved to refinance the total
amount of the current syndicated loan by structuring a syndicated loan with Sumitomo Mitsui Banking
Corporation and Mizuho Bank, Ltd. as arrangers, and executed an agreement on March 10, 2023.
The main details are as follows.
Tranche A

Date of execution of the agreement
Structured amount
Disbursement date
Final repayment dateParticipating financial institutions
Collateral

Tranche B
March 10, 2023
48,250 million yen
10,000 million yen
March 15, 2023
September 29, 2023
June 16, 2031
Several financial institutions including Sumitomo Mitsui
Banking Corporation and Mizuho Bank, Ltd.
UnsecuredFinancial covenants
The Syndicated Loan Agreement after refinancing has financial covenants, and if any of the following
covenants are breached, the Company may forfeit the benefit of term for all obligations under the agreement.
(a) Maintain the total amount of net assets on the consolidated balance sheets as of the end of the fiscal year
ended February 28, 2023 and the end of each subsequent fiscal year, and as of the end of the second
quarter of the fiscal year ending August 31, 2023 and the end of each subsequent second quarter
thereafter, at or above an amount equal to the total net assets on the consolidated balance sheet as of theend of the fiscal year ended February 28, 2022, and at or above an amount equal to 80% of the total net
assets on the consolidated balance sheets as of the end of the most recent fiscal year or the end of thesecond quarter.
(b) Not report an operating loss in the borrower’s non-consolidated and consolidated statements of income
for the fiscal year ended February 28, 2023 and for each fiscal year thereafter, and for the second quarterof the fiscal year ending August 31, 2023 and each subsequent second quarter thereafter.
(c) The net leverage ratio (α)* at the end of the fiscal year ending February 29, 2024 and at the end of eachsubsequent fiscal year shall not exceed the following values:
2024 February fiscal year: α≦6.52025 February fiscal year: α≦6.22026 February fiscal year: α≦5.92027 February fiscal year: α≦5.62028 February fiscal year: α≦5.32029 February fiscal year: α≦5.02030 February fiscal year: α≦4.72031 February fiscal year: α≦4.4*Net Leverage Ratio= (total interest-bearing debt － total cash and deposits) / total EBITDA

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