Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.

Securities code: 6104
March 5, 2020
To our shareholders:
Shigetomo Sakamoto,President
TOSHIBA MACHINE CO., LTD.
2-2 Uchisaiwaicho 2-Chome, Chiyoda-ku, TokyoNOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the Extraordinary General Meeting of Shareholders of TOSHIBA MACHINE CO.,LTD. (the “Company”), which will be held as described below.
If you are unable to attend the meeting in person, you may exercise your voting rights by postal mail or via theInternet. Please exercise your voting rights after reviewing the attached Reference Documents for the General
Meeting of Shareholders no later than 5:30 p.m., Thursday, March 26, 2020 (Japan Standard Time).
1. Date and Time: Friday, March 27, 2020 at 10:00 a.m. (Reception desk opens at 9:00 a.m.) (Japan StandardTime)
2. Venue:
Shangri-La, RIVER SIDE HOTEL NUMAZU, 4F
100-1 Agetsuchi-cho, Numazu City, Shizuoka
The meeting place has changed from the venue of the 96th Ordinary General Meeting of
Shareholders last year. Please refer to the venue map at the end of this notice when coming to
the venue (This only applies to those who received the Japanese version of this notice).
3. Purposes:
Items to be resolved:
Proposal 1:
Approval Regarding Introduction of Response Policies for the Tender Offer, etc. for
Company Shares by Office Support K.K. and Its Subsidiaries
Proposal 2:
Allotment of Share Options without Contribution-1-

[Translation]
Reference Documents for the General Meeting of Shareholders
Proposal 1:
Approval Regarding Introduction of Response Policies for the Tender Offer, etc. for Company
Shares by Office Support K.K. and Its Subsidiaries
1.

Reason for the proposal
As announced in “Notice Concerning the Company’s Response Policies for the Advance Notice of theTender Offer for the Shares of the Company from Office Support K.K.” dated January 17, 2020 (the“Response Policies Press Release”), the Company’s board of directors resolved, at its meeting held on thesame date, to introduce response policies for the tender offer for the shares of the Company by Office Support
K.K. (“Office Support”) and/or its subsidiaries, and other large-scale purchase actions, etc. which may beintended under the circumstances where the tender offer is announced in advance (the “Response Policies”).
This is an effort to prevent the determination of financial and business policies of the Company from being
controlled by an inappropriate person in light of the Company’s basic policies regarding how a person is tocontrol the decisions of the Company’s financial and business policies (Article 118, item (iii), (b).2 of theRegulation for Enforcement of the Companies Act (Ordinance of the Ministry of Justice No. 12 of 2006, as
amended)). (For details about the background to the introduction of the Response Policies, please see
Appendix 1 (Background Leading to the Introduction of the Response Policies).)
The Company believes that the decision on whether to accept the conduct of large-scale purchase actions forthe shares of the Company must ultimately be made by the shareholders, from the viewpoint of maximizing
the Company’s corporate value and the shareholders’ common interests. The Response Policies aim tosecure adequate information and a deliberation period for the shareholders to make proper decisions on thepotential impact of the tender offer for the shares of the Company by Office Support and/or its subsidiaries,
and other large-scale purchase actions, etc. which may be intended under circumstances where the tender
offer is announced in advance on the Company’s corporate value and the sources thereof, and ultimately, tosecure an opportunity to confirm the shareholders’ collective will at a shareholders meeting.
Meanwhile, Office Support only mentioned that it was considering conducting the tender offer against theCompany, in a letter dated January 10, 2020, and e-mails dated January 12 and 16, etc., and commenced thetender offer for the shares of the Company (the “Tender Offer”) on January 21, 2020 through City Index
Eleventh Co., Ltd., its subsidiary, without any prior notice to or contact with the Company regarding the
purpose of the Tender Offer and the specific management policies intended after the Tender Offer, neglecting
all the procedures provided in the Response Policies that set forth the procedures to confirm the will at ashareholders meeting.
In connection with the Tender Offer, as announced in the Company’s press release dated February 12, 2020,
titled “Notice of Expression of Opinion (Opposition) Regarding the Tender Offer for the Company Sharesby City Index Eleventh Co., Ltd. and Holding of Shareholders’ Will Confirmation Meeting” (the “Expressionof Opinion Press Release”), the Company concluded that the Tender Offer could damage the Company’s
corporate value and the shareholders’ common interests and expressed its opinion opposing the Tender Offer.
On that basis, the Company decided to submit Proposal 1 and Proposal 2 to this Extraordinary Shareholders
Meeting, in order to obtain approval by ordinary resolution of the shareholders at this Extraordinary
Shareholders Meeting regarding the introduction of the Response Policies, and also, on the premise of suchapproval being obtained, to implement an allotment of share options (the “Share Options”) without
contribution (the “Allotment of Share Options without Contribution”; for its details, please see Proposal 2)
to the shareholders, as stated in Proposal 2, based on the approval by ordinary resolution of the shareholders
at this Extraordinary Shareholders Meeting, as a countermeasure under the Response Policies if the Tender
Offer is consummated. (For details about the opinion opposing the Tender Offer, and the basis and reasons
therefor, as well as the background and reasons that led to the decision to hold this Extraordinary-2-

Shareholders Meeting, please see Appendix 2 (Opinion Regarding the Tender Offer, and Basis andReasons Thereof and Background and Reasons Leading to the Decision to Hold the Extraordinary
Shareholders Meeting).)2.

Details of the proposal
The specific details about the Response Policies are as stated in Appendix 3 (Basic Policies Regarding
How a Person Is to Control the Decisions of the Company’s Financial and Business Policies, and the
Response Policies).

Proposal 2:
1.

Allotment of Share Options without Contribution

Reason for the proposal
This proposal is to implement the Allotment of Share Options without Contribution as stated in 2. below andto request that the shareholders approve it by an ordinary resolution, subject to Proposal 1 being approved
and adopted.

2.

Details of the proposal
The specific details about the Allotment of Share Options without Contribution are as stated in Appendix 4(Terms and Conditions for Issuance of First Share Options-A).
The major schedule of the Allotment of Share Options without Contribution and the exercise period therefor,
etc. are as below. However, the Share Options are expected to be acquired before the commencement of
the exercise period, pursuant to Section 12 of Appendix 4 (Terms and Conditions for Issuance of First Share
Options-A).
March 27, 2020
April 24, 2020
April 27, 2020
September 1, 2020
December 31, 2020

(Reference 1)

This Extraordinary Shareholders Meeting
Record date
Effective date of the Allotment of Share Options without Contribution
First day of the exercise period of the Share Options
Last day of the exercise period of the Share Options

Resolution requirements

The resolution requirements for both Proposal 1 and Proposal 2 is an ordinary resolution. As announced in the
Expression of Opinion Press Release, and other press releases, the reasons why the resolution requirements are an
ordinary resolution are as below:
(i)

(ii)
(iii)

in cases such as the issuance of shares for subscription causing changes in the controlling shareholders thatwill require a resolution at a shareholders meeting, the resolution to be required pursuant to the prescribed
resolution requirements is an ordinary resolution (Article 206-2, paragraph (5) of the Companies Act);
therefore, as with the above case, it is reasonable to ask, by an ordinary resolution at a shareholders meeting,the shareholder’s will regarding the proposed acquisition of the controlling right by collecting shares;in the case where a proposal is approved by a majority vote at a shareholders meeting, there are no substantial
grounds for not considering the majority’s will; andthe Supreme Court Decision in the Bulldog Sauce Case (Supreme Court Decision, August 7, 2007, Minshu[Supreme Court Report in Civil Cases], vol. 61, No. 5, p. 2215) also holds as follows: “Shareholders’ own
decisions at a shareholders meeting should be respected regarding whether the acquisition of the
management controlling right by a specific shareholder will result in damaging the stock company’s
corporate value and harming the shareholders’ common interests, unless material defects exist in the-3-

decisions that would cause loss of its validity”; furthermore, the Supreme Court Decision does notparticularly refer to the resolution requirements for “the shareholders’ own decisions at a shareholders
meeting” (such as necessity of a special resolution). Therefore, it is reasonable to understand that theSupreme Court Decision in the Bulldog Sauce Case is based on the premise of an ordinary resolution at ashareholders meeting being the resolution requirements.
In addition, the Company obtained opinions from various company law scholars to the effect that there are no legal
issues in applying, as the resolution requirement, an ordinary resolution for both Proposal 1 and Proposal 2.

(Reference 2)

Recommendations of the Independent Committee

In convening this Extraordinary Shareholders Meeting, the Company’s board of directors obtained therecommendations dated February 21, 2020, from the Independent Committee, which was established on January 17,
2020, to the effect that the date and time, venue and purposes, and other matters related to the convocation of ashareholders meeting, as well as matters to be discussed at the Shareholders’ Will Confirmation Meeting, as statedin the convocation notice and reference documents of this Extraordinary Shareholders Meeting, are appropriate.
(Reference 3)

Special dividends

In the “Management Reform Plan toward the new ‘Shibaura Machine’” formulated and announced on February 4,
2020, the Company announced that it plans to pay 3 billion yen of special dividends during a period up to the payment
of interim dividends that eliminate the impact on the TOB, in the next fiscal year. The Company then resolved, atits board of directors meeting held on February 21, 2020, to pay the special dividends with the record date of the endof June 2020. Given the total amount of dividends being 3 billion yen, the amount of dividends per share isestimated as 124.30 yen (calculated to the third decimal place, and the third decimal place is rounded off), based on
24,135,169 shares, the number of issued shares (excluding treasury shares) as of December 31, 2019. For details
about the special dividends, please see “Notice Concerning Dividend of Surplus (Special Dividend)” dated
February 21, 2020.
(Note) Disclosure of voting results
Taking into account that the general public, including the Company’s shareholders and other market participants, arevery concerned about the Extraordinary Shareholders Meeting, please note that the voting results of the Company’s
shareholders (excluding the individual shareholders and the shareholders holding less than 10,000 shares) at theExtraordinary Shareholders Meeting may be disclosed within the extent permitted by laws and regulations.

-4-[Translation]

Appendix 1
Notice Concerning the Background Leading to the Introduction of the Response Policies
The Company prescribed basic policies regarding how a person is to control the decisions of its financial and business
policies (as provided in the main sentence of Article 118, item (iii) of the Regulation for Enforcement of theCompanies Act; the “Former Basic Policies”) at the May 22, 2007 board of directors meeting. It also introduced
the “Policy for Responding to Large-scale Share Acquisitions (Takeover Defense Measures)” with the approval at
the 84th Ordinary General Meeting of Shareholders on June 26, 2007, as efforts to prevent the determination of its
financial and business policies from being controlled by an inappropriate person in light of the Former Basic Policies(Article 118, item (iii), (b)2. of the Regulation for Enforcement of the Companies Act). The Company then obtained
its shareholders’ approval to renew the policy at the ordinary shareholders meetings on June 25, 2010, June 26, 2013,
and June 24, 2016 (the response policy approved at the 2016 ordinary shareholders meeting is hereinafter referred toas the “Former Plan”). However, the Company decided at its May 16, 2019 board of directors meeting not tocontinue but to abolish the Former Plan as at the conclusion of the 96th Ordinary General Meeting of Shareholders
on June 21, 2019, when the effective term of the Former Plan was to expire. The decision was made after carefully
considering the need to continue the Former Plan, taking into account the opinions of its shareholders, including
domestic and overseas institutional investors, and by monitoring changes in the Company’s environment, such as therecent trends of takeover defense measures and the penetration of the corporate governance code. As a result, theCompany saw the need to continue, after the Former Plan’s effective term expires, to secure information and time
for its shareholders to appropriately assess the propriety of any potential large-scale purchase of the Company sharesand made the decision, subject to the Company requiring any potential large-scale purchasers of its shares to provide
the necessary and sufficient information and taking appropriate measures under the relevant laws and regulations,such as disclosing its board of directors’ opinions.
However, the Company shares were incrementally purchased by Office Support K.K. (“Office Support”), and
Ms. Aya Nomura, its joint holder, in the market (the holding ratio of share certificates, etc. of Office Support and
Ms. Aya Nomura was 6.66% as of June 21, 2019, when the Former Plan was abolished). On November 21, 2019,
S-Grant. Co., Ltd. joined as another of its joint holders. With the three parties purchasing additional Company
shares on the market, their holding ratio of share certificates, etc. reached 9.19% on November 29, 2019. As ofJanuary 17, 2020, these three parties hold, in total, shares of the Company equivalent to approximately 11.49% of
the total number of voting rights of all shareholders of the Company. Furthermore, the Company received on
January 10, 2020, a written notice of even date from Office Support regarding the feasibility of a tender offer for theshares of the Company by Office Support. On January 13, 2020, the Company was notified that Office Support
would publicize the tender offer on January 21, 2020, and commence the tender offer on the following day,January 22, 2020. The Company was further informed on January 16, 2020, that Office Support would publicize
the tender offer, in which its subsidiary would be the tender offeror, on January 20, 2020, and that it would commence
the tender offer on the following day, January 21, 2020.
The Company believes that it is undeniable that the purpose or results of the tender offer could prevent maximizationof the Company’s corporate value and the shareholders’ common interests, given factors including the following:(1) Office Support is preparing for the tender offer without any substantive discussions with the Company, it has
almost never provided the Company with the conditions thereof, or it has not explained the Company’s management
policies after the tender offer is effected; and (2) the process and results of the previous investment activities ofinvestors including Office Support, Mr. Yoshiaki Murakami who has a powerful influence thereon (“Mr. Murakami”),
and the funds over which he exercises influence as stated in the Exhibit 1 of “Notice Concerning the Company’s
Response Policies for the Advance Notice of the Tender Offer of the Shares of the Company from Office Support
K.K.” dated January 17, 2020 (for example, the Yokohama District Court rendered its decision on May 20, 2019,
finding that Mr. Murakami and the funds over which he exercises influence purchased a large number of shares in
multiple listed companies, placed their management under pressure, and earned a resale gain by causing those listed-5-companies or their related companies to purchase at high prices all or a substantial part of the shares purchased(page 118 of the Siryoban Shojihomu No. 424 (July 2019 issue))).
In light of the above, the Company’s board of directors has concluded that any Large-scale Purchase Actions, etc.
must be conducted in accordance with certain procedures that it determines if: (i) Office Support attempts, forexample, a large-scale acquisition of the Company shares that constitutes a Large-scale Purchase Action, etc. throughthe tender offer above or by other similar means; or (ii) the advance notice of the tender offer by Office Support
results in any other party contemplating a Large-scale Purchase Action, etc. This is to secure the information andtime required for the Company shareholders to make appropriate decisions on the potential impact of any such Largescale Purchase Actions, etc. on the Company’s corporate value or the sources thereof, so that no events will occurthat prevent maximization of the Company’s corporate value and the shareholders’ common interests.
As a result, the Company’s board of directors has passed the following resolution to introduce response policies forthe tender offer by Office Support and its subsidiaries, and other large-scale purchase actions, etc. which may beintended under the circumstances where the tender offer is announced in advance (the “Response Policies”). Thisis an effort to prevent the determination of financial and business policies of the Company from being controlled byan inappropriate person in light of the basic policies (Article 118, item (iii), (b)2. of the Regulation for Enforcementof the Companies Act) that were resolved again at the Company’s board of directors meeting on May 16, 2019. The
Response Policies will be introduced primarily to respond to large-scale purchases that have already emerged,
including the tender offer, and differ from so-called takeover defense measures that are introduced at normal times,
such as the Former Plan that was abolished on June 21, 2019.
In addition to passing the above resolution, the Company’s board of directors has established an Independent
Committee comprised of three of its independent outside directors in order to prevent its arbitrary decisions and tofurther enhance the fairness and objectiveness of the operation of the Response Policies. The introduction of the
Response Policies has been unanimously approved by all directors, including the Company’s six independent outside
directors, regardless of whether they are audit and supervisory committee members.

-6-

[Translation]
Appendix 2
Opinion Regarding the Tender Offer, and Basis and Reasons Thereof and Background and Reasons Leading
to the Decision to Hold the Extraordinary Shareholders Meeting
1.

Opinion regarding the Tender Offer, and basis and reasons thereof(1)

Opinion regarding the Tender Offer
The Company’s board of directors resolved to oppose the tender offer for the Company Shares (the “Tender
Offer”) commenced on January 21, 2020 by City Index Eleventh Co., Ltd. (the “Tender Offeror”), a
subsidiary of Office Support K.K. (“Office Support”), at its meeting held on February 12, 2020. Therefore,shareholders are requested not to tender in the Tender Offer, and those shareholders who have alreadytendered in the Tender Offer, are requested to promptly cancel the agreements regarding the Tender Offer.

(2)

Basis and reasons for opinion regarding the Tender Offer(i)

Basis for opinion regarding the Tender Offer

The Tender Offeror announced to commence the Tender Offer as of January 21, 2020. As stated in the
Appendix 1, the Tender offer was commenced without any notice to or contact with the Company regarding
the purpose of the Tender Offer and the specific management policies intended after the Tender Offer,
although Office Support, a parent company of the Tender Offeror, sent to the Company a letter dated January
10, 2020, and e-mails dated January 12 and 16, 2020, each of which referred to the fact that it was considering
conducting the Tender Offer.
Based solely on information that the Company has gathered until January 28, 2020, including the content
described in the tender offer statement submitted by the Tender Offeror on January 21, 2020 regarding theTender Offer (the “Tender Offer Statement”), no substantial explanation was made, and the details were
unclear for many matters that are deemed important when evaluating and considering the propriety of theTender Offer and its conditions, such as: the purpose of the Tender Offer; details of the specific management
policies of the Company contemplated by the Tender Offeror to be pursued after the Tender Offer; details of
maximization of the Company’s corporate value and the shareholders’ common interests; and details of
improvement of the corporate governance; and the basis for the tender offer price in the Tender Offer (the“Tender Offer Price”).
Accordingly, regarding matters such as the propriety of the Tender Offer and its conditions, the Company’sboard of directors believed that it should continue making efforts to gather information on the Tender Offer
and the Tender Offeror in order for the Company to form an opinion regarding the Tender Offer after
carefully evaluating and considering it from the perspective of maximization of the Company’s corporate
value and the shareholders’ common interests.
Therefore, the Company has decided that it should timely gather accurate information regarding the Tender
Offer and the Tender Offeror by means of posing questions to the Tender Offeror in a target company’s
position statement based on a system set forth in the Financial Instruments and Exchange Act (Law No. 25
of 1948; as amended; the “Act”). Accordingly, at its board of directors meeting held today, the Company
resolved to submit a target company’s position statement containing questions directed at the Tender Offeror.
Meanwhile, the Company resolved that it would withhold expressing its opinion regarding whether to accept
the Tender Offer presently. One reasons for this is that it will be necessary to continue carefully evaluating
and considering the propriety of the Tender Offer. And another reason is that even though, as stated in the“Notice Concerning Establishment of Independent Committee and Appointment of Independent Committee
Members” dated January 17, 2020, the Company established, when introducing response policies for the-7-tender offer by Office Support and its subsidiaries, and other large-scale purchase actions, etc. which may
be intended under the circumstances where the tender offer is announced in advance (the Response Policies),
an Independent Committee comprising entirely of outside directors independent from the Company and theTender Offeror to prevent arbitrary decision-making by the Company’s board of directors and ensure fairness
and transparency of the Response Policies, and consulted the Consulted Matters (as defined in “(ii)Establishment and recommendations of the Independent Committee” of “(5) Measures to ensure fairness
and measures to avoid conflicts of interest” below; hereinafter the same). The Independent Committee had
not indicated a final decision regarding the Tender Offer at that time.
Thereafter, in response to the Company’s questions above, the Tender Offeror submitted the tender offeror’sanswer (the “Tender Offeror’s Answer”) to the Director-General of Kanto Local Finance Bureau on February
4, 2020. The Company evaluated and considered the Tender Offeror’s proposals in detail based on theTender Offeror’s Answer, and information on the Tender Offer and the Tender Offeror collected by theCompany.
The Company appointed several external experts (IR Japan, Inc., PwC Advisory LLC, and Nishimura &Asahi) as external advisors and receives their advice, etc. in expressing the Company’s opinions regarding
the Tender Offer.
The Independent Committee has independently appointed external experts (GCA Corporation and TMI
Associates) as external advisors separately from the Company’s respective external advisors. The
Independent Committee was held on January 24, 2020, January 27, 2020, February 6, 2020, February 11,2020, and February 12, 2020. The Independent Committee (i) commenced deliberation on the Consulted
Matters and appointed the external experts above as external advisors on January 24, 2020, (ii) deliberated
on and recommended that the Company withhold expressing its opinion on the Tender Offer, and submit
questions to the Tender Offeror, on January 27, 2020, and (iii) deliberated on the Consulted Matters after
consideration of the Tender Offeror’s Answer submitted by the Tender Offeror, on February 6, 2020 and
February 11, 2020.
Then, on February 12, 2020, the Independent Committee unanimously recommended to the Company’sboard of directors that it is appropriate for the Company to express its opposition to the Tender Offer. In
response to this recommendation, at the Company’s board of directors meeting held on February 12, 2020,
it was unanimously resolved by attending directors to express its opposition to the Tender Offer.
(ii)

Reasons for opinion regarding the Tender Offer

The Company opposes the Tender Offer for the following reasons. First, implementation of the substanceof the new mid-term management plan (between FY2019 and FY2023) proposed by the Company to theshareholders enhances the Company’s corporate value and shareholders’ common interests. Second, theTender Offeror Group has not shared any management policies for the Company for after the Tender Offer,and instead, it is likely that the Company’s corporate value and shareholders’ common interests will be
impaired by the Tender Offer and the shareholder value enhancement plan proposed by the Tender Offeror
Group. Third, the Tender Offer neglects to follow any of the procedures stipulated in the Response Policies,
and will be implemented using coercive methods, and slights the shareholders’ will. Specific details of thedecision are as follows:(i)

Execution of new mid-term management plan (between FY2019 and FY2023) formulated by theCompany contributes to the Company’s medium to long-term corporate value and the shareholders’common interests
The Company formulated a three-year mid-term management plan, the “Revolution E-10 Plan”(“RE-10”), for the period between FY2019 and FY2021, which was announced on May 15, 2019,and implemented it with the basic policy of enhancing corporate value through enhanced
profitability, strengthened product appeal, and growth investments.
-8-However, due to intensified US-China trade friction, the entire machine industry is faced with a fallin receiving orders since the Lehman Shock, and there is an unprecedented decrease in orders
received by the Company, and enhancement of profitability is a pressing need, and a rebirth fromlow profit structure to a profitable company became necessary. The Company determined thatwhile enhancement of profitability of the core business became a pressing need, one-step further
structural reform and securing of the revenue source was necessary, and sold all shares of NuFlareTechnology Inc. (“NFT”), the Company’s affiliate, on January 16, 2020. However, due to the saleof the NFT shares, because equity interests were lost and profitability declined further, in addition
to the structural reform, rebirth as a profitable company through drastic revision of investment
strategies and financial strategies was considered essential.
Under such circumstances, the Company’s board of directors proceeded with discussion ofsignificant revisions to “RE-10,” with core members being independent outside directors who
occupy six out of eleven seats of the board of directors, and in order to proceed further toward thenext era, and to be reborn as a new company, the Company’s board of directors formulated andannounced a new mid-term management plan (between FY2019 and FY2023) (the “Management
Reform Plan”) on February 4, 2020.
The Company set, as a quantitative target, the realization of sales of 135 billion yen, an operating
profit ratio of 8.0%, a payout ratio prospect of 40% (during the period of the Management ReformPlan), and ROE of 8.5% in fiscal year 2023 as new “Shibaura Machine” based on the Management
Reform Plan.
In addition, to realize the quantitative target, the Company will enhance profitability and capitalefficiency through the specific measures (a) through (d) and the investment plan/financial strategy
in (e) below.
<Management reform centered on reorganization>
(a)
(b)

(c)

Abolishment of the “division system” which produced specific optimization issues, and adoption ofa “company system”
Establishment of an “R&D Center” and a “Production Division” which bear enhancement of
production efficiency and QCD (Quality, Cost, Delivery) as common functions.
Implementation of personnel relocation and voluntary retirement toward optimal resource allocation
and reduction of fixed costs.

<Promotion of investments in response to areas of growth>(d)Promotion of growth investments aimed for expansion of purposes to fields expected to grow in the
future(Specifically, constructing a business portfolio with energy fields and productivity enhancement
fields as an axis of growth, and promoting growth investments in technology fields such as“environmental SDGs,” “CASE,” “automation/labor-saving,” and “IoT/AI.” New business
opportunities will be pursued in fields such as (a) development of new materials for renewableenergy and large thin parts, in response to making automobiles into EVs at the Molding MachineCompany, (b) responses to mold demands in connection with the update of electronic devices
responding to 5G at the Machine Tools Company, and (c) development of vertical multi-articulated
robots and human-collaborative robots for the purpose of productivity enhancement and solving
personnel shortage at the Control Machine Company.)-9-

<Implementation of financial strategies aimed for enhancement of return on equity (ROE)>(e)

Enhancement of profitability and capital efficiency after allocation of cash-on-hand to investments
towards change into a profitable company
To achieve sales of 135 billion yen, and ROE of 8.5%, as uses of cash flow between FY2019 andFY2023, with operating cash flow, proceeds from sale of NFT shares, and cash-on-hand being theresources, the Company has a policy to spend 3 billion yen on structural reform expenses, 25 billion
yen on capital investment, 2 billion yen on R&D/personnel investment, and 15 billion yen on
shareholder returns through dividends (including special dividends) (In the next year, the Company
plans to pay 3 billion yen of special dividends during the period up to the payment of interim
dividends which eliminate the impact on the TOB, in addition to regular dividends at the same level
as this fiscal year), and to use the remaining cash flow to appropriate M&A (including borrowing
according to the scale of projects). Regarding M&As and external alliances, a “M&A Promotion
Division” will be newly established, and the Company will promote investments after ascertaining
themes to enhance the business value of each company, such as expansion of sales channels,
technology support, and creation of new businesses.
Through implementation of the specific measures stated above based on the Management Reform
Plan, the Company intends to make full efforts to realize sales of 135 billion yen, operating profit
ratio of 8.0%, payout ratio prospect of 40%, and ROE of 8.5% in fiscal year 2023, and to enhance
the Company’s corporate value and shareholders’ common interests.
As stated in the Response Policies, the Company’s corporate governance system was shifted to a
corporate governance system based on the so-called monitoring model by a company with an audit
and supervisory committee, as of June 21, 2019. Currently, the Company’s board of directors
comprises eight directors (including four outside directors and excluding directors who are audit
and supervisory committee members) and three directors (including two outside directors) who areaudit and supervisory committee members. Six directors, which is a majority of the total of elevenboard members, are independent outside directors. By shifting to a company with an audit andsupervisory committee, and the structuring of a corporate governance system with the majority ofthe board of directors comprised of independent outside directors, decision-making for businessexecution was further accelerated, and the audit and supervisory functions of the board of directors
were further strengthened. The Company shall securely realize the Management Reform Plan,
which is a promise to the shareholders, with prompt decision-making and appropriate audit andsupervision of the Company’s board of directors, under the corporate governance system describedabove, which was newly constructed in June 2019.
For details of the Management Reform Plan, please see “Notice Concerning Review of the MidTerm Management Plan and Establishment of a Management Reform Plan” announced by theCompany on February 4, 2020).

(ii)

The Tender Offeror group fails to provide the Company’s management policies to be pursued after
the Tender Offer, and the Tender Offer and the shareholder value enhancement plan proposed by theTender Offeror group will likely prejudice the Company’s corporate value and the shareholders’common interests(a)

The Tender Offeror group fails to provide the Company’s management policies to be pursued after
the Tender Offer, and the manner of the Tender Offeror group’s involvement in the Company’sbusiness management is entirely unclear
According to the Tender Offer Statement, as of the filing date of the Tender Offer Statement,
although the Tender Offeror does not own any Company shares, Office Support and S-Grant Co.,
Ltd. (“S-Grant”) (which are specially related parties of the Tender Offeror) (the Tender Offeror,- 10 -

Office Support, and S-Grant are collectively referred to as the “Tender Offeror Group”) own
1,576,200 Company shares (ownership ratio: 6.53%) and 1,500,000 Company shares (ownership
ratio: 6.21%) respectively, which means that the Tender Offeror Group owns 3,076,200 Company
shares (ownership ratio: 12.75%) in total. According to the Tender Offer Statement, the Tender
Offeror reached an oral agreement with Office Support and S-Grant (collectively, the “Nontendering Shareholders”) that the Company shares owned by the Non-tendering Shareholders(3,076,200 shares, ownership ratio: 12.75%) would not be tendered in the Tender Offer, and the total
number of Company shares to be owned by the Tender Offeror Group through the Tender Offer willbe 10,576,200 shares (ownership ratio: 43.82%) at the maximum.
If the Tender Offeror Group becomes the owner of 10,576,200 Company shares (ownership ratio:
43.82%) through the Tender Offer, its voting right exercise ratio at the Company’s shareholders
meetings will obviously entitle the Tender Offeror Group to determine the ordinary resolutions at
the Company’s shareholders meetings and grant it substantial control over the Company.
Therefore, the Company believes that the Company’s management policies envisaged by the Tender
Offeror must be presented in the Tender Offer. In this respect, the Tender Offeror commented in
its response to Question 5, Part 2 of the Tender Offeror’s Answer (page 24) that “we would like themanagement of the Target [quoter’s note: the Company] to think of raising the voting right exercise
ratio with due consideration for its shareholders.” However, if the Company may increase its
voting right exercise ratio to the maximum extent, the shareholder group owning 43.82% of voting
rights will still have the right to easily determine the ordinary resolutions at shareholders meetings,
whether alone or through coordination with other minority shareholders. As a note, the “Practical
Guidelines for Group Governance System” formulated on June 28, 2019 by the Ministry of
Economy, Trade and Industry states on page 117 that a party owning less than 40% of voting rights
may be considered to substantially control the relevant company if the actual voting right exercise
ratio and all other factors are taken into account.
Nevertheless, the Tender Offeror maintains insistence on shareholder returns, such as by stating in
the Tender Offer Statement, “shareholder value of the Target [quoter’s note: the Company] will be
increased through releasing its internal reserve that is considered unnecessary by such means asacquiring own shares.” The Tender Offeror admits that it has no specific management policies for
the Company to be pursued after the Tender Offer by stating that it “does not intend to be involvedin the business management of the Target [quoter’s note: the Company] and would like the current
management of the Target [quoter’s note: the Company] to continue to assume the business
management.” Office Support stated in its January 27, 2020, e-mail that “the purpose of our tender
offer targeting Toshiba Machine is not in acquiring its management right, as we have set to 43.83%
at the maximum.” In “Our Shareholder Value Enhancement Plan for Toshiba Machine Co., Ltd.”
sent by Office Support to the Company on the same date (the “Tender Offeror Group’s Shareholder
Value Enhancement Plan”) as well, Office Support asserts only shareholder returns and does notpresent any management policies for the Company.
To begin with, the Tender Offer is being conducted in an unnatural manner where the Tender Offeror
is a subsidiary of Office Support instead of Office Support and S-Grant that are currently
shareholders of the Company (according to the Tender Offer Statement, the capital relationshipamong Mr. Yoshiaki Murakami (“Mr. Murakami”), Ms. Aya Nomura (Mr. Murakami’s firstdaughter and a shareholder of the Company until January 14, 2020), and the Tender Offeror groupis as provided in the Exhibit hereto). The prospective corporation or individual who will be
involved in the Company’s business management, and the manner of involvement, are entirely
unclear; and the party responsible for such corporation or individual’s comments is ambiguous.
The Tender Offeror’s response to Question 8, Part 1 of the Tender Offeror’s Answer (page 16) also
shows that the Tender Offeror Group obviously avoids disclosing its purpose to intentionally have
the Company shares divided among three companies.
Considering, among other factors, that Ms. Aya Nomura transferred all Company shares to S-Grant- 11 -

immediately before the Tender Offer, Company shares may likely be transferred between
corporations over which Mr. Murakami exercises influence. There is an undeniable possibility thatsuch act may: cast uncertain influence over the Company’s corporate value; increase nontransparency in the prospective corporation or individual who will be involved in the Company’sbusiness management, and the manner of involvement; and prevent the maximization of theCompany’s medium- to long-term corporate value and the shareholders’ common interests.
The Tender Offeror Group further fails to provide any management policies in the Tender Offeror’s
responses to Question 21, Part 2 of the Tender Offeror’s Answer (page 33), and to Questions 1 and
4, Part 6 of the Tender Offeror’s Answer (pages 36 and 37). In response to the Company’s question
regarding management policies, the Tender Offeror only maintained that “it does not intend toacquire the management right,” and “the business management must be executed in the interest ofenhancing the shareholder value for all shareholders of the Target [quoter’s note: the Company].”
The Tender Offeror Group also does not refer to the Company business from a professional point ofview in its letters or other communications to the Company. According to the response to
Question 13, Part 1 of the Tender Offeror’s Answer (page 17), the Tender Offeror Group has notbeen involved in any business, or corporate management, related to the Company business. As theTender Offeror Group admits that “we have been making investments with the basic policy of
entrusting, as a general rule, the business operations of our investment targets to their management”
in its response to Question 14, Part 1 of the Tender Offeror’s Answer (page 18), the Tender Offeror
Group obviously does not understand the substance of the Company business or the industrial
machinery industry to which the Company belongs.
As discussed above, the Tender Offeror Group attempts to acquire substantial control over theCompany after the Tender Offer; but it has not presented the Company’s management policies topursue after the Tender Offer, the manner of the Tender Offeror Group intending to be involved in
the Company’s business management remains entirely unclear, and the Tender Offeror Group does
not even slightly understand the substance of the Company business or the industrial machineryindustry. Therefore, if the Tender Offeror Group ever acquires control over the Company, it iseasily envisaged that the Company’s daily business operations to date will be materially prejudiced;
and this will damage its business partners, customers, and employees. It is also easy to anticipate
that this will materially adversely affect the amicable relationship that the Company has developedwith its business partners, customers, and employees and damage the Company’s corporate value
and the shareholders’ common interests.
(b)

The background to the Tender Offer also suggests that the Tender Offeror Group does not intend to
pursue enhancing the Company’s corporate value but its interest lies solely in acquiring cash forpersonal gain
The Tender Offeror Group explains in the Tender Offer Statement that the purpose of the Tender
Offer is in “achieving enhancement of the Company’s corporate value and ROE.” However, theTender Offeror Group states, in relation to the Company’s management system after the Tender
Offer, that “as long as the management of the Target [quoter’s note: the Company] pursues business
management contemplating the maximization of its shareholder value, we do not intend to be
involved in the business management of the Target [quoter’s note: the Company] and would like thecurrent management of the Target [quoter’s note: the Company] to continue to assume the business
management,” and it fails to explain how it intends to use the control over the Company to be
substantially acquired through the Tender Offer for “achieving enhancement of the Company’s
corporate value and ROE.” Accordingly, not only is the purpose of the Tender Offer extremely
unclear, but it is also even doubtful that the Tender Offeror Group intends to pursue the enhancementof the Company’s corporate value.
The Company has had dialogues with the Tender Offeror Group until a subsidiary of Toshiba
Corporation (“Toshiba”), Toshiba Electronic Devices & Storage Corporation (together with Toshiba,- 12 -

“Toshiba et al.”) announced a tender offer on November 13, 2019 for shares in the Company’s
affiliate, NFT (the “Tender Offer for NFT”). This included the Tender Offeror Group sending a
total of five letters to the Company, and four meetings in total being held between the Company and
the Tender Offeror Group. During those dialogues, the Tender Offeror Group requested that theCompany: (i) clearly explain to its shareholders the level of funds that it needs to retain as a reserve
among its internal reserve (cash and deposits: 25.5 billion yen, strategically-held shares: 6.7 billion
yen, and NFT shares: 12.2 billion yen, respectively, as of the end of the fiscal year ended March2019); and then (ii) return to its shareholders the remainder thereof after deducting the required
portion, or specifically, enhance its shareholder value and ROE by acquiring its own shares or
making distributions worth approximately 30 billion yen (the Tender Offeror Group had requested
shareholder returns of approximately 40 to 50 billion yen until May 2019).
For example, the Tender Offeror Group wrote in its April 18, 2019 letter that “there are unlikely to
be investment targets in realistic terms that are less expensive and more attractive for the
management members of your company [quoter’s note: the Company] than the Company’s own
shares.” It particularly emphasized that the Company shares were traded at a PBR of 0.6 to
0.7 times, and stated that the Company had no measures (such as capital investments and M&As)
available to it other than acquiring its own shares or making distributions. The Tender Offeror
Group also questioned in its May 20, 2019 letter whether the investments referred to in the
Company’s medium-term management plan would “better contribute to enhancing the corporate
value of your company [quoter’s note: the Company] rather than acquiring its own shares.” It thenstated that “our company and other numerous institutional investors will object to the director
election proposal at the shareholders meeting of your company [quoter’s note: the Company] unlessit generates profits satisfying the criterion of an 8% IRR” and implicitly requested that the Company
acquire its own shares by suggesting exercising voting rights.
In this way, the Tender Offeror Group requested that the Company enhance its shareholder value
and ROE during its dialogues with the Company to date, while only claiming that the Company
acquire its own shares or make distributions, as the specific method. This inevitably suggests that
the Tender Offeror Group is adhered to gaining cash through shareholder returns by the Company.
After the Tender Offer for NFT by Toshiba et al. was released on November 13, 2019 and the Tender
Offeror Group learned that the Company was discussing selling NFT shares with Toshiba et al. who
were joint holders of NFT shares, the Tender Offeror Group requested on November 15, 2019,
through Mr. Murakami who had substantial control over the Tender Offeror Group, that theCompany hold discussions with Toshiba et al. so that the Company would not tender shares in theTender Offer for NFT by Toshiba et al. but would instead implement a scheme that involved NFT
making a tender offer for its own shares or a special dividend payout (the “Tender Offeror GroupProposed Scheme”). Mr. Murakami also personally informed NFT and Toshiba et al. of a proposal
over the phone that they change their scheme to the Tender Offeror Group-Proposed Scheme.
According to the Tender Offeror, the advantage of the Tender Offeror Group-Proposed Scheme wasthat the Company would benefit from tax advantages of approximately 3.2 billion yen as opposed
to tendering in the Tender Offer for NFT if it changed to, and tendered in, the Tender Offeror GroupProposed Scheme through discussions with Toshiba et al. and NFT, while the Company would be
subject to capital gains taxes of approximately 6.3 billion yen if it tendered in the Tender Offer for
NFT. Then, the Tender Offeror Group demanded that the Company discuss with Toshiba et al. tochange to the Tender Offeror Group-Proposed Scheme for the benefit of such tax advantages,
persistently until it sent its letter on January 10, 2020. That said, it would not be appropriate atleast for the Company to proactively request that Toshiba et al. or NFT change their plans to theTender Offeror Group-Proposed Scheme, in light of legal compliance or the Company reputation,
due to the following reasons: (i) the Tender Offeror Group-Proposed Scheme may be legallyquestionable in light of the uniformity of tender offer prices required by the restrictions on tender
offer, in that the Company will benefit from greater favorable treatment on an after-tax proceeds
basis compared to other general NFT shareholders; and (ii) in cases where some of the major- 13 -

shareholders benefit from tax advantages by adopting a share buyback or other similar scheme, amethod will be normally selected to return those advantages equally to other general shareholders.
Notwithstanding such issues, the Tender Offeror Group has been persistently requesting a change to
the Tender Offeror Group-Proposed Scheme. This and the Tender Offeror Group’s adherence toacquiring cash through the Company’s shareholder returns as stated above suggest that the Tender
Offeror Group has been keenly interested in the Company’s shareholder returns anticipated after theTender Offer for NFT, and in acquiring cash for personal gain as a result thereof.
The Tender Offeror Group also requested after HOYA Corporation (“HOYA”) released an advancenotice of tender offer for NFT shares on December 13, 2019 (the “HOYA Tender Offer”), that theCompany request that HOYA adopt the Tender Offeror Group-Proposed Scheme. It also repeated
its request that the Company discuss with Toshiba et al. conducting a tender offer by the Tender
Offeror Group-Proposed Scheme.
Although the Tender Offeror Group had been consistently requesting the enhancement ofshareholder returns and ROE as stated above since November 22, 2018 when it had its first meetingwith the Company, it was extremely rare that methods other than the Company acquiring its own
shares or making distributions were discussed; accordingly, specific measures to enhance corporate
value commensurate with the substance of the Company’s business or its management plans werehardly ever discussed. Given such background, the Tender Offeror Group apparently does not aim
to enhance the Company’s shareholder value through managing the Company together with its
management. Moreover, the Tender Offeror Group admits that it will not be involved in the
Company’s business management, as explained in “(a) The Tender Offeror Group fails to provide
the Company’s management policies to be pursued after the Tender Offer, and the manner of theTender Offeror Group’s involvement in the Company’s business management is entirely unclear”
above. The Tender Offeror Group’s attempt to acquire substantial control through the Tender Offeralso inevitably suggests that it aims to seek to acquire cash and profit for personal gain by having
the Company acquire its own shares or make distributions, under the pretext of shareholder returnor ROE enhancement.
Although the Tender Offeror Group claims to have continued dialogues with the Company for
approximately one and a half years, it does not sufficiently understand the substance of the Company
business, nor has it offered any response regarding specific measures to enhance shareholder value
or ROE other than by having the Company increase dividends or acquire its own shares, as shownin the response to Question 4, Part 2 of the Tender Offeror’s Answer (page 23). This proves that
the Tender Offeror Group’s interest does not extend to matters other than the Company acquiring
its own shares or making distributions.
Given the foregoing and the points discussed in “(a) The Tender Offeror Group fails to provide theCompany’s management policies to be pursued after the Tender Offer, and the manner of the Tender
Offeror Group’s involvement in the Company’s business management is entirely unclear” above,
the Company has concluded that the purpose of the Tender Offer lies in achieving objectives suchas changing the Company’s management policies as it desires (including implementing extremely
short-term and radical means of shareholder returns) through acquiring substantial control over theCompany with minimum funds by coercive tender offering limiting the number of shares to bepurchased (please see “(b) The Tender Offer is of a coercive nature” in “(iii) The Tender Offer
neglects the shareholders’ will” below). The Company is concerned that this will likely impede
the implementation of growth investments. Accordingly, the Company considers that its
shareholders will be (i) given an opportunity to sell a limited number of Company shares while
continuing to hold the remainder of the Company shares; and (ii) exposed to the risk of theCompany’s corporate value and the shareholders’ common interests being prejudiced byinvolvement in the Company’s business management by the Tender Offeror Group after acquiring
substantial control over the Company.

- 14 -

(c)The Tender Offer for the Company and the Tender Offeror Group’s Shareholder Value Enhancement
Plan will likely prejudice the Company’s corporate value in light of previous investment cases ofcorporations over which Mr. Murakami exercises influence
In addition to the above, the Tender Offeror Group and the corporations over which Mr. Murakami
exercises influence previously made the investments listed in Exhibit 1 to the “Notice Concerning
the Company’s Response Policies for the Advance Notice of the Tender Offer of the Shares of theCompany from Office Support K.K.” dated January 17, 2020 (the “Response Policies Press
Release”). Specifically, the corporations over which Mr. Murakami exercises influence earned a
massive amount of profit by: (i) purchasing a large number of shares in Accordia Golf Co., Ltd.
(“Accordia”) in a short period and (ii) during the period of about one year and ten months since thecommencement of the acquisition of Accordia shares, applying pressure on Accordia in various
ways including the demand for convocation of an extraordinary shareholders meeting, andsuccessfully causing Accordia to purchase its own shares at a high price through a TOB, and also toagree to distribute large shareholder returns. The corporations over which Mr. Murakami exercises
influence also purchased a large number of shares in Kuroda Electric Co., Ltd. (“Kuroda Electric”)
in the market and applied pressure including by submitting a shareholder’s proposal to Kuroda
Electric “... in a manner to intimidate the management members present” and “overbearing behavior
that was beyond the level of normal dialogue” (see the press release titled “Sequence of Events
Leading to the Opinion of the Board of Directors of the Company on the Shareholder Proposal”
dated June 7, 2017, by Kuroda Electric). As a result, one of those corporations successfully
dispatched one outside director to Kuroda Electric. Although those corporations thereafter
purchased additional Kuroda Electric shares, they reached an agreement to sell all shares in Kuroda
Electric that they had, only four months after one of them dispatched the outside director to Kuroda
Electric, and actually sold all these shares only four months after that. As a result, they made asignificant amount of profit from these transactions.
Further, the Court found that the corporations over which Mr. Murakami exercised influence hadpurchased a large number of shares in Yorozu Corporation (“Yorozu”), with intentions to benefit
from a significant amount of profit by placing Yorozu’s management under pressure, and earning a
resale gain by causing Yorozu or its related companies to purchase at high prices the large numberof shares purchased in a short period, similar to what Reno Co., Ltd. (“Reno”) (or any othercorporate entity under the powerful influence of Mr. Murakami) had done in the past to corporations
it invested in, as stated in Exhibit 1 to the Response Policies Press Release. The Court found thelikelihood of attempts to abolish the takeover defense measure that stood in the way (the Yokohama
District Court decision on May 20, 2019 (page 118 of the Siryoban Shojihomu No. 424); the“Yokohama District Court Decision on Yorozu”).
The previous investment cases of corporations over which Mr. Murakami exercises influence listed
in Exhibit 1 to the Response Policies Press Release, and the facts found in the Yokohama District
Court Decision on Yorozu obviously demonstrate that those corporations are skilled in earning asignificant amount of profit by purchasing a large number of shares, placing the relevant companies’
management under pressure in various ways, and earning a resale gain by causing those companiesor their related companies to purchase at high prices the large number of shares purchased in a shortperiod.
In the case of the Tender Offer as well, it is highly likely that, as with the Yorozu case and otherexamples, the true intention of the Tender Offer for the Company and the shareholder returns
proposed by the Tender Offeror Group is to benefit from a large amount of profit by applying
pressure on the Company management in various ways, and to earn a resale gain by causing theCompany or its related companies to purchase at high prices the large number of shares purchasedin a short period or to receive a large amount of dividends, given factors including the following:(i) the background to the dialogues in which the Tender Offeror Group persistently demanded
shareholder returns from the Company; and (ii) the Tender Offer was unilaterally commenced- 15 -

without the Tender Offeror Group notifying or informing the Company management in advance ofthe purpose of the Tender Offer or the specific management policies to be pursued after the Tender
Offer, or without observing the Response Policies that prescribed the procedures to confirm theCompany shareholders’ will at shareholders meetings.
As discussed above, the previous investment cases of corporations over which Mr. Murakami
exercises influence suggest the undeniable possibility that the Tender Offer for the Company and
the Tender Offeror Group’s Shareholder Value Enhancement Plan may prejudice the Company’s
corporate value.
(d)

The Tender Offeror Group continually disregarded the Company’s request during the dialogue
process and when commencing the Tender Offer
The Company has had repeated positive dialogues with the Tender Offeror Group or Mr. Murakami
et al. to a reasonable extent in the interest of enhancing its medium- to long-term corporate value inaccordance with Principle 5-1 of the Corporate Governance Code (Policy for Constructive Dialogue
with Shareholders). Specifically, the Company has had dialogues on eight occasions either inmeetings or by teleconference since April 2018, including a meeting personally attended by
Mr. Murakami. Those occasions include five meetings attended by Takahiro Mikami, Former
President and Chief Operating Officer, and other directors or executive officers of the Company.
Shigetomo Sakamoto, Current President and Chief Operating Officer, attended in four out of five
above meeting. In addition to meetings and teleconferences, there were constant dialogues by email exchange or telephone.
When the Tender Offeror Group requested that the Company discuss with Toshiba to change its
scheme to the Tender Offeror Group-Proposed Scheme in connection with the Tender Offer for NFT,
the Company sincerely examined the Tender Offeror Group-Proposed Scheme, including by
obtaining advice and cooperation from external advisors, although the Company eventually decided
not to accept the Tender Offeror Group’s request by considering that it would not be appropriate, atleast for the Company to proactively request that Toshiba et al. or NFT change their scheme to theTender Offeror Group-Proposed Scheme, in light of legal compliance or the Company’s reputation,
due to the following reasons: (a) whether to change the scheme to the Tender Offeror GroupProposed Scheme should be basically negotiated with Toshiba et al. by NFT or its special committee
on behalf of NFT’s general shareholders, and the Company, being simply one of the NFT
shareholders, should not make any decision therefor proactively; (b) the Tender Offeror GroupProposed Scheme could be legally questionable in light of the uniformity of tender offer prices
required by the restrictions on tender offer, in that the Company will benefit from greater favorable
treatment on an after-tax proceeds basis compared to other general NFT shareholders; and (c) inother companies’ cases where some of the major shareholders benefit from tax advantages byadopting a share buyback or other similar scheme, a method will normally be selected to return thoseadvantages equally to other general shareholders.
However, the Tender Offeror Group commenced consideration of the Tender Offer for the Company
simultaneously with the Tender Offer for NFT being announced. After Toshiba et al. declared its
policy not to agree to increasing the tender offer price in the Tender Offer for NFT or not to respondto the tender offer for NFT shares by HOYA, the Tender Offeror Group unilaterally notified theCompany abruptly on January 10, 2020 of prospective implementation of a tender offer for theCompany shares, together with informing the Company that it should tender in the Tender Offer for
NFT if would not change the scheme to the Tender Offeror Group-Proposed Scheme. Then, theTender Offeror Group persistently requested that the Company discuss therewith the shareholder
value enhancement in a manner involving disclosure of insider information subject to executing a
confidentiality agreement.

- 16 -

The Company responded that it was unable to accept the request, explaining that: (i) allowing theTender Offeror Group’s involvement in revising the Company’s medium- to long-term management
plan by disclosing confidential information thereto under a confidentiality agreement would
contravene the purpose of the fair disclosure rules by listed companies introduced upon theamendment of the Financial Instruments and Exchange Act in 2017; and (ii) it might contravene theprinciple of equal treatment of shareholders to disclose only to the Tender Offeror Group,
confidential information not disclosed to other institutional investors or shareholders. The
Company added that it was prepared to sincerely receive the Tender Offeror Group’s opinions if
they were made for constructive purposes to enhance the Company’s medium- to long-term
corporate value, similar to dialogues with other institutional investors or shareholders. As for theCompany’s medium-term management plan, the Company informed the Tender Offeror Group that
it would like to hold discussions, as necessary, based on the details of revision after the Company’s
announcement thereof scheduled in February 2020.
However, the Tender Offeror Group refused the Company’s request without providing due reasonsand commenced the Tender Offer on January 21, 2020, without notifying or informing the Company
in advance of the purpose of the Tender Offer or the specific management policies to be pursued
after the Tender Offer and by disregarding all procedures under the Response Policies that prescribed
the procedures to confirm the shareholders’ will at shareholders meetings, as set forth in “(a) The
Tender Offer was commenced disregarding the Response Policies” in “(iii)The Tender Offer
neglects the shareholders’ will” below.
Although the Tender Offeror Group criticizes the Company’s stance on the alleged grounds ofshareholder dialogue in the Tender Offer Statement and its response to Question 16, Part 2 of theTender Offeror’s Answer (page 30), the Company has held sufficient dialogues to date with theTender Offeror Group and Mr. Murakami et al. in accordance with Principle 5-1 of the Corporate
Governance Code (Policy for Constructive Dialogue with Shareholders). It is the Tender Offeror
Group that refused the Company’s request without providing due reasons and forced the Tender
Offer to go ahead by disregarding the Response Policies aimed at the shareholders making
appropriate decisions according to their will. While the Tender Offeror stated that it “does notintend to be involved in the business management of the Target [quoter’s note: the Company] andwould like the current management of the Target [quoter’s note: the Company] to continue toassume the business management” in connection with the specific management policies to be
pursued after the Tender Offer, as quoted in “The Tender Offeror Group fails to provide theCompany’s management policies to be pursued after the Tender Offer, and the manner of the Tender
Offeror Group’s involvement in the Company’s business management is entirely unclear” above,
the Company believes that there is no trust relationship with the Tender Offeror Group that forced
the Tender Offer to go ahead by refusing the Company’s request without due reasons. If the Tender
Offeror Group in such a manner acquires substantial control over the Company, its corporate valueor the shareholders’ common interests will inevitably be prejudiced.
(e)

The Tender Offeror Group may be in violation of the Foreign Exchange and Foreign Trade Act andmay not qualify as a major shareholder of the Company
The Company manufactures and sells regulated goods and technologies that require advance
notifications regarding inward direct investments under the Foreign Exchange and Foreign Trade
Act (the “FEFTA”)
In this regard, Mr. Murakami, a foreign investor (Article 26, paragraph 1 of the FEFTA; hereinafter
the same) residing in Singapore (the Tender Offeror admits that Mr. Murakami is a foreign investor
in its response to Question 2(8), Part 1 of the Tender Offeror’s Answer (page 12)), attended meetings
between the Company and Office Support on two occasions. Participants of Office Support at theNovember 22, 2018 meeting said, “Office Support is a company for Mr. Murakami’s asset
management”. Mr. Murakami also personally commented as follows openly in his interview- 17 -

article “Exclusive: Yoshiaki Murakami Discloses His Aim for Hostile TOB Against Toshiba
Machine” published in the Nikkei Business Electronic Version dated January 21, 2020: (i) “I haveheld Toshiba Machine shares for a long time. I have been requesting dialogues with the Company,
but it has not agreed to do so. When I made an appointment for the first time, it was cancelled at
the last minute a few hours beforehand. I was able to meet the president only once, but thereafter
he would not agree to a meeting. So far, I have had a chance to have five meetings with theCompany in total, and have sent letters to its board of directors 13 times”; (ii) (when asked whether
he would seek an injunction if a takeover defense measure was triggered) “Of course, I will.
Corporate governance has been my lifework. I have devoted my life to it. Therefore, I will
exhaustively think how to prevent a takeover defense measure. As someone who has committed
his life to corporate governance, I will use all means available and do my best to ensure that suchbad practice will not be repeated.”; and (iii) “If there are questions for me, the Company can ask
those questions during the TOB period under the Financial Instruments and Exchange Act. If
necessary, I am ready to have an open discussion with the Toshiba Machine president on the Nikkei
Business. I will answer questions that he may have. I, too, have numerous questions that I would
like to ask. I will return to Japan from Singapore, if required for that purpose.” Mr. Murakami
also personally openly stated in his interview article “Hostile TOB Against Toshiba Machine:
Murakami’s New Proposal” published in the Nikkei Business Electronic Version dated January 22,
2020: (iv) “There is no problem with me if Toshiba Machine holds an extraordinary shareholders
meeting to ask whether its shareholders approve or disapprove the introduction of a takeover defense
measure. It should decide whether it is right or wrong at the meeting fair and square.”; and (v) “I
do not mind extending the TOB period so the Company can hold a shareholders meeting before the
TOB ends.” This shows that Mr. Murakami himself is substantively acting as a Company
shareholder and tender offeror and is the principal making investments in the Company andconducting the Tender Offer by using Office Support, S-Grant and the Tender Offeror as his hands
and feet. Office Support, S-Grant and the Tender Offeror are each likely deemed a foreign investor(Article 27, paragraph 13 of the FEFTA), no advance notification under the FEFTA has been, or will
likely be, filed for the acquisition and holding of at least 10% of the Company shares by Office
Support and S-Grant, nor for the Tender Offer by the Tender Offeror, on the grounds that the Tender
Offeror Group does not fall under a foreign investor (see the response to Question 3, Part 1 of theTender Offeror’s Answer (page 13)). This strongly suggests that the Tender Offeror Group is inviolation of the FEFTA.
The very fact that the Tender Offeror Group’s legal compliance awareness is questionable casts
doubt on its qualification to substantially control the Company, being a listed company having
numerous stakeholders and social responsibility for legal compliance. Further, the Company isconcerned that its corporate value and the shareholders’ common interests may be prejudiced by theCompany being forced to take action regarding the Tender Offeror group’s violation of the FEFTA
due to the Tender Offer.
(iii)

The Tender Offer neglects the shareholders’ will(a)

The Tender Offer was commenced disregarding the Response Policies
As stated in “2. Background and reasons leading to the decision to hold the extraordinary
shareholders meeting” below, the Company’s board of directors resolved to introduce the Response
Policies at its January 17, 2020 meeting, as efforts to prevent the determination of the Company’s
financial and business policies from being controlled by an inappropriate person in light of theCompany’s basic policies (Article 118, item (iii), (b).2 of the Regulation for Enforcement of theCompanies Act). In introducing the Response Policies, the board of directors also established an
Independent Committee comprising three of the Company’s independent outside directors in orderto prevent the board of directors’ arbitrary decisions and to further enhance the fairness andobjectivity of the operation of the Response Policies, as stated in “(ii) Establishment and- 18 -

recommendations of the Independent Committee” of “(5) Measures to ensure fairness and measures
to avoid conflicts of interest” below; hereinafter the same” below.
On the other hand, the Tender Offeror Group commenced the Tender Offer on January 21, 2020, by
only stating that it is considering conducting the Tender Offer against the Company in its
communications such as its January 10, 2020 letter, and e-mail on January 12 and 16, 2020. In
doing so, the Tender Offeror Group did not notify or inform the Company in advance of the purposeof the Tender Offer or the specific management policies to be pursued after the Tender Offer, anddisregarded all procedures under the Response Policies that prescribed the procedures to confirm
the shareholders’ will at shareholders meetings.
The Company considers that the Tender Offer having been commenced on January 21, 2020,
disregarding all procedures under the Response Policies is clear proof of the Tender Offeror Groupneglecting the Company shareholders’ will, as the purpose of the Response Policies is to securesufficient information and time for the shareholders to deliberate and make appropriate decisions
and to ultimately procure the opportunity to confirm the shareholders’ will overall at a shareholders
meeting, as stated in “2. Background and reasons leading to the decision to hold the extraordinary
shareholders meeting” below.
(b)

The Tender Offer is of a coercive nature
The Tender Offer Statement shows that the Tender Offer has a limit on the number of shares to bepurchased, restricting the maximum number of shares to be purchased to 7,500,000 shares(ownership ratio: 31.07%). Any number of shares exceeding the limit will not be subject to thepurchase and will be settled on a pro-rata basis. Therefore, the Tender Offer does not warrant an
opportunity for shareholders to sell at the Tender Offer Price all the shares that they tender, and acertain number of the Company shareholders will inevitably remain its shareholders after the Tender
Offer. According to the Tender Offer Statement, as of the filing date of the Tender Offer Statement,
although the Tender Offeror does not own any Company shares, Office Support and S-Grant (which
are specially related parties of the Tender Offeror) own 1,576,200 Company shares (ownership ratio:
6.53%) and 1,500,000 Company shares (ownership ratio: 6.21%) respectively, which means that theTender Offeror Group owns 3,076,200 Company shares (ownership ratio: 12.75%) in total.
According to the Tender Offer Statement, the Tender Offeror reached an oral agreement with the
Non-tendering Shareholders that the Company shares owned by the Non-tendering Shareholders(3,076,200 shares, ownership ratio: 12.75%) would not be tendered in the Tender Offer; and thetotal number of Company shares to be owned by the Tender Offeror Group through the Tender Offer
will be 10,576,200 shares (ownership ratio: 43.82%) at the maximum.
In this connection, the Tender Offeror Group stated in its January 27, 2020, e-mail that “the purposeof our tender offer targeting Toshiba Machine is not in acquiring its management right, as we have
set to 43.83% at the maximum.” It also repeated that it did not contemplate acquiring theCompany’s management right by the Tender Offer in its responses to Question 21, Part 2 of theTender Offeror’s Answer (page 33), and to Questions 1 and 4, Part 6 of the Tender Offeror’s Answer(pages 36 and 37). However, if the Tender Offeror Group becomes the owner of 10,576,200
Company shares (ownership ratio: 43.82%) through the Tender Offer, its voting right exercise ratioat the Company’s shareholders meetings will obviously entitle the Tender Offeror Group to
determine the ordinary resolutions at the Company’s shareholders meetings and grant it substantial
control over the Company, as stated in “(a) The Tender Offeror group fails to provide the Company’s
management policies to be pursued after the Tender Offer, and the manner of the Tender Offerorgroup’s involvement in the Company’s business management is entirely unclear” of “(ii) The Tender
Offeror group fails to provide the Company’s management policies to be pursued after the Tender
Offer, and the Tender Offer and the shareholder value enhancement plan proposed by the Tender
Offeror group will likely prejudice the Company’s corporate value and the shareholders’ common
interests” above.
- 19 -

If the Company shareholders believe that the Company’s corporate value will be prejudiced under
the control of the Tender Offeror Group, the aforementioned Tender Offer conditions will incentivize
those shareholders to elect to tender in the Tender Offer despite unsatisfactory tender offer
conditions, rather than remain minor shareholders of the Company with reduced corporate value.
This means that the Tender Offer will incentivize the shareholders objecting to a transfer of control
to nonetheless tender in the tender offer; accordingly, it may be considered to be a typical coercive
method. As stated in “(a) The Tender Offeror group fails to provide the Company’s management
policies to be pursued after the Tender Offer, and the manner of the Tender Offeror group’s
involvement in the Company’s business management is entirely unclear” of “(ii) The Tender Offerorgroup fails to provide the Company’s management policies to be pursued after the Tender Offer, andthe Tender Offer and the shareholder value enhancement plan proposed by the Tender Offeror groupwill likely prejudice the Company’s corporate value and the shareholders’ common interests” ofabove, the Tender Offeror Group fails to provide any specific management policies to be pursued
after the Tender Offer, and the Company views that the Tender Offer and the Tender Offeror Group’s
shareholder value enhancement plan will likely prejudice the Company’s corporate value and theshareholders’ common interests. The Tender Offer will force those shareholders who agree to theCompany’s view above to tender in the Tender Offer.
The Tender Offeror Group refutes the coercive nature of the Tender Offer in the Tender Offeror’s
responses to Question 6, Part 2 of the Tender Offeror’s Answer (page 24), solely on the grounds that“the purpose is not in acquiring a majority of voting rights in the Target [quoter’s note: theCompany].” However, conducting the Tender Offer by relying on such formality logic and without
any management policies is the very cause of increasing concerns for coerciveness.
As discussed above, the Tender Offer largely involves concerns for coerciveness. Even if there areshareholders who tender therein, it does not necessarily mean that shareholders agree to the Tender
Offer conditions or the transfer of control to the Tender Offeror Group through the Tender Offer.
The Company sees the need to set an opportunity, apart from the Tender Offer, to confirm its
shareholders’ will in a non-coercive environment and finds it appropriate to hold a shareholders’meeting (the “Shareholders’ Will Confirmation Meeting”) from that point of view.
(iv)

Conclusion

As discussed in the foregoing, the Company opposes the Tender Offer on the grounds that (i) the Tender
Offeror Group fails to provide any management policies to be pursued after the Tender Offer, and the Tender
Offer and the shareholder value enhancement plan proposed by the Tender Offeror Group will likely
prejudice the Company’s corporate value and the shareholders’ common interests; and (ii) the Tender Offer
neglects the shareholders’ will as it disregards all procedures under the Response Policies and will be
implemented using coercive methods.
(3)

Prospects of the Company being delisted and reasons thereof

As of today, the Company’s shares are listed on the First Section of Tokyo Stock Exchange, Inc. (the“TSE”).
According to the Tender Offer Statement, the Tender Offeror does not intend to cause the Company’s shares
to be delisted, and it is expected that the Company’s shares will remain listed on the TSE First Section,
considering the following: the Tender Offeror has set the maximum number of shares to be purchased at
7,500,000 shares (ownership ratio: 31.07%) in conducting the Tender Offer; and the total number of theCompany’s shares owned by the Tender Offeror group after the Tender Offer is supposed to remain
10,576,200 shares (ownership ratio: 43.82%) at most.

- 20 -

(4)Policies regarding reorganization, among others, after the Tender Offer (matters regarding the so-called twostep acquisition)
According to the Tender Offer Statement and its response to Question 11, Part 2 of the Tender Offeror’sAnswer (page 27), if the total number of the Company’s shares to be owned by the Tender Offeror groupthrough the Tender Offer is less than 10,576,200 shares (ownership ratio: 43.82%), the Tender Offeror groupintends to additionally acquire, after the termination of the tender offer period of the Tender Offer, shares of
the Company within the scope of difference between 10,576,200 shares and the number of the Company’s
shares purchased through the Tender Offer, but presently, no specific timing or method has been determined.

(5)

Measures to ensure fairness and measures to avoid conflicts of interest(i)Introduction of the Response Policies, etc.

As stated in “2. Background and reasons leading to the decision to hold the extraordinary
shareholders meeting,” the Company’s board of directors resolved, at its meeting held on January 17,
2020, to introduce the Response Policies to prevent the determination of financial and business policiesof the Company from being controlled by an inappropriate person in light of the Company’s basic
policies (Article 118, item (iii), (b).2 of the Regulation for Enforcement of the Companies Act).
Further, as stated in “(ii) Establishment and recommendations of the Independent Committee” below,
in adopting the Response Policies, the Company’s board of directors established the Independent
Committee consisting of three independent outside directors of the Company, in order to prevent
arbitrary decision-making by the Company’s board of directors and to further enhance the fairness andobjectiveness of the operation of the Response Policies.
For the background that the Company has decided to hold the Shareholders’ Will Confirmation Meetingon March 27, 2020, as a result of continuously seeking appropriate responses, based on the purposes of
the Response Policies, from the viewpoint of maximizing the Company’s corporate value and theshareholders’ common interests, under the circumstances where the Tender Offer group has actuallycommenced the Tender Offer, neglecting all the procedures provided in the Response Policies, pleasesee “2. Background and reasons leading to the decision to hold the extraordinary shareholders
meeting” below.
(ii)

Establishment and recommendations of the Independent Committee

As stated in the “Notice Concerning Establishment of an Independent Committee and Appointment of
Independent Committee Members” dated January 17, 2020, in adopting the Response Policies, theCompany’s board of directors established the Independent Committee consisting of three independent
outside directors of the Company (Mr. Seigo Iwasaki, the chair; Mr. Kiyoshi Sato, a committee member;
Mr. Kazumine Terawaki, a committee member), in order to prevent arbitrary decision-making by theCompany’s board of directors and to further enhance the fairness and objectiveness of the operation of the
Response Policies. In addition, as announced in “Consultation with the Company’s Independent
Committee based on the ‘Company’s Response Policies for the Advance Notice of the Tender Offer for
Shares of the Company from Office Support K.K.’” dated January 21, 2020, the Company’s board of
directors consulted on the matters below (the “Consulted Matters”) with the Independent Committee, onJanuary 22, 2020, immediately after the establishment of the Independent Committee:(a)Examination and evaluation of the sufficiency and properness, etc. of the information requested to
be provided from the Tender Offeror to the Company;(b)
Investigation, examination, and evaluation of the sufficiency, etc. of the information provided by
the Tender Offeror.;(c)
In addition to investigation, examination, and evaluation of the Tender Offeror’s compliance or noncompliance with the procedures provided in the Response Policies, and the status thereof,
examination and evaluation of the propriety of the request to the Tender Offeror for extension of thetender offer period (including the properness of the period of examination of the request forextension by the Company’s board of directors, if such a request should be made);- 21 -

(d)
(e)

(f)

Investigation, examination and evaluation of whether the Tender Offer prevents maximization of
the Company’s corporate value and the shareholders’ common interests;
In consideration of the investigations, examinations, and evaluations above, issuance ofrecommendations or opinions on the propriety of holding a Shareholders’ Will Confirmation
Meeting, the propriety of triggering countermeasures based on the Response Policies without
holding a Shareholders’ Will Confirmation Meeting if the Tender Offeror is evaluated as being
noncompliant with the procedures provided in the Response Policies; or on the terms and conditions
or procedures, etc., which will be preconditions for such a holding or triggering; andIn addition to the above, among the matters to be determined by the Company’s board of directors,
investigation, examination and evaluation, or issuance of recommendations or opinions on, thematters regarding which the Company’s board of directors will consult with the Independent
Committee from time to time, and the matters for which the Independent Committee considers thatits recommendations or opinions to the Company’s board of directors are required.

The Independent Committee held meetings on January 24, 2020, January 27, 2020, February 6, 2020,
February 11, 2020, and February 12, 2020; (i) on January 24, it started deliberating over the Consulted
Matters; (ii) on January 27, separately from each outside advisor of the Company, it independently appointed
outside experts (GCA Corporation and TMI Associates) as outside advisors, and conducted deliberations andissued recommendations regarding the Company’s withholding expressing its opinion on the Tender Offerand submitting questions to the Tender Offeror; and (iii) on February 6 and 11, it conducted deliberations
over the Consulted Matters, based on the Tender Offeror’s Answer submitted by the Tender Offeror.
Then, the Independent Committee issued recommendations to the Company’s board of directors as aunanimous opinion of the Independent Committee on February 12, 2020, to the effect that it is appropriate
for the Company to express its opinion objecting to the Tender Offer.
The outline of the recommendations is as below.
(i)

The Management Reform Plan promotes structural reforms and growth investments, etc. to achieve
regeneration, from an unprofitable company into a profitable company, in light of recent changes inthe business environment, as well as maintains and ensures the necessary financial soundness while
intending maximum shareholder returns, in connection with the capital policy. Therefore, it isconsidered that the Management Reform Plan contributes to the enhancement of the Company’s
corporate value and the shareholders’ common interests. In addition, the Management Reform
Plan specifies that the resources from the Company’s operating cash flow, cash-in from sale of
NFT’s shares, and cash-on-hand will be allocated for the growth investments, etc. and shareholder
returns.
Furthermore, the Management Reform Plan presents the sincere intention and strong sense of
responsibility of the Company’s management to realize the Management Reform Plan, based fullyon the reflection that the target value in the previous Mid-term Management Plan could not be
achieved. Additionally, the Management Reform Plan is clearly distinctive from the previous Midterm Management Plan, in terms of the contents thereof, because, among other reasons, it aims atradical management reforms, based on observations that are highly specialized and in-depth in the
Company’s business, as well as clearly stating the purpose of use of the funds that were previously
retained.

(ii)

Meanwhile, the Tender Offeror group explains that the purpose of the Tender Offer is to “achieve
an increase in shareholder value, and improvement of ROE.” However, even though the Tender
Offeror group will thereby have significant authority and power of influence over the Company, theTender Offeror group has not reasonably explained how it will use such authority for the above
purpose.

- 22 -

In addition, the Tender Offeror group still claims the necessity of the Tender Offer even after
considering the Management Reform Plan, by answering the questions from the Independent
Committee that: (a) the Management Reform Plan lacks reliability concerning the feasibility thereof,
because the Company has never achieved the Mid-term Management Plans; and (b) the Tender
Offeror group requests “a clear explanation to the shareholders regarding the level of funds that arenecessary to be retained […] out of the retained earnings that are held by the Target and deemed
unnecessary to be retained, and an improvement of ROE and increase in shareholder value throughreturning the remaining portions to the shareholders.”
With respect to (a), it is definitely true that the Company has not achieved the target values in the
Mid-term Management Plans that the Company has ever announced, and it is undeniable that theCompany must be asked by the shareholders to reflect thereon. However, the Tender Offeror group
may not immediately claim the necessity to acquire the above authority.
Even if the intention of (a) is interpreted to mean that the Tender Offeror group as a major
shareholder will supervise the process of realizing the Management Reform Plan on the premise of
the promotion of the Management Reform Plan, it would be difficult to say that the supervision by
the Tender Offeror group contributes to the Company’s corporate value and the shareholders’common interest. This is because: the Tender Offeror group has no experience in engaging inbusinesses related to the Company’s business and the management of a company; the Tender Offerorgroup is not recognized as having sophisticated expertise, which is the base of the Management
Reform Plan; and the Company’s internal information and other important information may not betransmitted exclusively to the Tender Offeror group in terms of the equal treatment of theshareholders; and no in-depth observation is expected to be conducted by the Tender Offeror group.
Instead, it must be said that such supervision by a specific shareholder with substantial control will
create the risk of conflicts of interest with the other general shareholders. Based on the above
reasons and a majority of the board members of the Company being independent outside directors,
it is appropriate to leave the supervision to realize the Management Reform Plan to the independent
outside directors of the Company, but inappropriate to leave it to the Tender Offeror group.
To begin with, if the Tender Offeror group does not rely on the Company’s management as statedin (a), it must be concluded that the Tender Offeror group initially plans to be involved in the
management of the Company after all, despite the explanation of the Tender Offeror group that “itwill not involve itself in the management of the Target and would like the Target’s management tocontinuously be committed to the management of the Target as long as the management of the Target
conducts the management with an intention to maximize the shareholder value.”
Meanwhile, with respect to (b), the Management Reform Plan specifies an allocation of 30 billion
yen for growth investments, etc. and 15 billion yen for shareholder returns, using the resources
comprised of the Company’s operating cash flow, cash-in from sale of NFT’s shares, and cash-onhand, whereby it aims to improve ROE and shareholder value. The Tender Offeror groupnevertheless has an attitude of maintaining the claims as above, which must lead to the conclusionthat the Tender Offeror group eventually disagrees with the growth investments, etc., and requests
unbalanced shareholder returns.
In addition to the above, taking comprehensively into account: that the Tender Offeror group is
considered to have implicitly taken advantage of its voting rights and requested that the Company
purchase its own shares, during the process until the Tender Offer commences; that in the materials
disclosed by the Tender Offeror, the Tender Offeror group did not eventually deny selling the sharesthat it owns to the Company, at least by making a proposal of measures to improve shareholder
value; and further, given the past investment cases made by the Tender Offeror group and companies
that are considered to have a special relationship with the Tender Offer group, it is strongly suspectedthat the true purpose of the Tender Offer is for the Tender Offeror group to earn profits by, among
other things, selling the shares that it owns to the Company and related parties thereof at a high price.
- 23 -

(iii)As stated in (i) above, the Management Reform Plan is recognized as contributing to enhancementof the Company’s corporate value and the shareholders common interests. However, if the true
purpose of the Tender Offer is as stated in (ii) above, it must be concluded that the Tender Offer willcause an outflow of funds necessary to execute the Management Reform Plan and prevent
achievement of the Management Reform Plan.
Moreover, even if the true purpose of the Tender Offer differs from the above, the Tender Offeror
Group has no experience in engaging in businesses related to the Company’s business or
management of a company; from the fact stated in (ii) above, it is easily assumed that the Tender
Offeror group will disapprove the Company’s making growth investments, etc. and also request that
the Company implement excessive shareholder returns, etc., by taking advantage of its voting rights;
and although the implementation of excessive shareholder returns, etc. may benefit the shareholders
at the time of the implementation from a short-term perspective, it will make it difficult for theCompany to make the medium- to long-term growth investments, etc. intended in the Management
Reform Plan. Therefore, from the medium- to long-term perspective, it must be said that theTender Offer is contrary to the Company’s corporate value and the shareholders’ common interests.
Based on the above, because the Tender Offer is deemed to prevent maximization of the Company’s
corporate value and the shareholders’ common interests, it is considered to be appropriate for theCompany’s board of directors to express its opinion objecting to the Tender Offer.

(iv)

As stated in (iii) above, because the Tender Offer is deemed to prevent maximization of theCompany’s corporate value and the shareholders’ common interests, it is appropriate for theCompany to trigger the countermeasures under the Response Policies, from the viewpoint ofprotecting the Company’s corporate value and the shareholders’ common interests, and as aprocedure therefor, to hold the Shareholders’ Will Confirmation Meeting, from the viewpoint ofleaving the decision on whether to accept the Tender Offer to the discretion of the shareholders.
The period required for holding the Shareholders’ Will Confirmation Meeting must be decided,
taking into account the statutory period and practical preparatory period, as well as the shareholders’deliberation period, etc. from the viewpoint of requesting that the shareholders carefully makedecisions. The Independent Committee received the explanation by the Company that the
Shareholders’ Will Confirmation Meeting will be held on March 27, 2020 at the earliest, which has
no unreasonable points, as a result of consideration from the above viewpoint.
Therefore, it is considered to be appropriate for the Company to hold the Shareholders’ Will
Confirmation Meeting on March 27, 2020.
In addition, from the viewpoint of the Tender Offeror’s interests, in order to provide the Tender
Offeror with an opportunity to decide on whether to withdraw the Tender Offer based on theoutcome of the Shareholders’ Will Confirmation Meeting and subsequent judicial decisions, it isdesirable that the Tender Offer period be extended, taking into account the Shareholders’ Will
Confirmation Meeting and the proceeding period for the subsequent judicial decisions. However,
it is appropriate that the Shareholders’ Will Confirmation Meeting be held after the Tender Offer
period ends, if the Tender Offeror waives the above interests and does not extend the Tender Offer
period to the date of the Shareholders’ Will Confirmation Meeting.
With regard to the above, the Tender Offeror group claims the unreasonableness of the Response
Policies on the grounds mainly that: (a) the Company resolved at its board of directors meeting heldon May 16, 2019 to discontinue and abolish “the response policies (takeover defense measures) forlarge-scale purchase actions for the Company’s shares”; (b) the Company did not confirm theshareholders’ will regarding introduction of the Response Policies; and (c) as the Company
shareholders will not tender their shares in the Tender Offer if they rely on the Company’s- 24 -

management, the Tender Offer will not be consummated, and therefore the Response Policies nolonger need to be maintained.
However, with respect to (a), the board of directors merely resolved to abolish the so-called takeover
defense measures that are introduced at normal times. Accordingly, it is impossible to consider
that the Company waived all the countermeasures to be implemented when such large-scalepurchase actions as prevent maximization of the Company’s corporate value and the shareholders’common interest commence, and further, that the Company’s shareholders wanted such waiver.
Meanwhile, with respect to (b), it is impossible to consider that the Response Policies are
unreasonable and neglect the shareholders’ will, taking into consideration that no opportunity toconfirm the shareholders’ will was provided, and the Response Policies are triggered only if the
Shareholders’ Will Confirmation Meeting approves to do so, in principle, in connection with theTender Offer.
Finally, with respect to (c), in consideration of the coercion of the Tender Offer (meaning that if theCompany shareholders rely on the opinion of the Company’s board of directors that the Tender Offer
will prevent maximization of the Company’s corporate value and the shareholders’ common
interests, together with no foreseeability of acts by the other shareholders, the Company’s
shareholders will be motivated to tender their shares in the Tender Offer in order to avoid the Tender
Offer succeeding without them tendering their shares in the Tender Offer, and suffering losses
arising from the damage to the corporate value and the shareholders’ common interests caused by
the Tender Offer), it is impossible to say that the Response Policies do not need to be maintained,taking into account that: it is inappropriate to determine whether the Tender Offer contributes to theenhancement of the Company’s corporate value and the shareholders’ common interests based on
the success or failure of the Tender Offer and the number of shares tendered in the Tender Offer;and that the Tender Offeror will additionally acquire the Company shares for the difference if theTender Offeror group’s ownership ratio is less than 43.82% as a result of the Tender Offer.
(v)

In light of the above, because the Tender Offer prevents maximization of the Company’s corporate
value and the shareholders’ common interests, it is deemed to be appropriate for the Company’sboard of directors to expresses its opinion objecting to the Tender Offer and to hold the Shareholders’Will Confirmation Meeting to confirm the shareholder’s will regarding whether to implement the
Response Policies and the countermeasures based on them.

(iii)

Appointment of external advisors

As stated in “(i) Basis for opinion regarding the Tender Offer” of “(2) Basis and reasons for opinion regarding
the Tender Offer” above, with the aim of ensuring the fairness and appropriateness of a decision-making
process in evaluating and considering the Tender Offer, the Company appointed several external experts
independent from the Company and the Tender Offeror (IR Japan, Inc., PwC Advisory LLC, and Nishimura& Asahi) as external advisors. The Company has proceeded to carefully evaluate and consider the Tender
Offer in light of advice from these external advisors. None of the external advisors is a related party of theTender Offeror or the Company, nor do they have any material interests in the Tender Offer that need to be
noted.

(iv)

Extension of the tender offer period

As stated in the “Notice Concerning the Company’s Response for the Shareholders’ Will Confirmation
Meeting” dated January 24, 2020, and the “Notice Concerning the Company’s Response for the Shareholders’Will Confirmation Meeting (Follow-up)” dated January 28, 2020, it has been decided that the Company’sboard of directors will hold a Shareholders’ Will Confirmation Meeting in late March or early April toconfirm the shareholders’ will regarding (a) and (b) below if the Company’s board of directors, as a resultof its future evaluation and consideration of the Tender Offer, takes an opposing position against the Tender- 25 -

Offer and deems it necessary to trigger countermeasures against the Tender Offer: (a) whether theshareholders agree to introduce the Response Policies; and (b) whether the shareholders agree to a proposal
concerning triggering countermeasures based on the Response Policies.
In connection with the
Shareholders’ Will Confirmation Meeting, the Company needs time to evaluate and consider the Tender
Offer to consider whether to trigger the countermeasures, and time to prepare and take procedures for the
Shareholders’ Will Confirmation Meeting. In addition, the Company thinks that it is necessary to secureadequate information and a deliberation period so that the shareholders can make appropriate decisions about(a) and (b) above. Accordingly, in letters dated January 24, 2020 and February 12, 2020, the Company
requested that the Tender Offeror extend the tender offer period to 60 business days. Then, the Tender
Offeror submitted the amended statement to the Tender Offer Statement on February 18, 2020, in responseto the Company’s request. Accordingly, the tender offer period is extended to Thursday, April 16, 2020
(60 business days).
2.

Background and reasons leading to the decision to hold the extraordinary shareholders meeting
As stated in Appendix 1, the Company had received advance notice about the tender offer for the Company’s
shares by Office Support and/or its subsidiaries and its board of directors resolved, at its meeting held on
January 17, 2020, to the Response Policies. This is an effort to prevent the determination of financial andbusiness policies of the Company from being controlled by an inappropriate person in light of the Company’s
basic policies (Article 118, item (iii), (b).2 of the Regulation for Enforcement of the Companies Act).
Company believes that the decision on whether to accept the conduct of large-scale purchase actions for theshares of the Company must ultimately be made by the shareholders, from the viewpoint of maximizing theCompany’s corporate value and the shareholders’ common interests. The Response Policies aim to securesufficient information and a deliberation period for the shareholders to make proper decisions on thepotential impact of the tender offer for the Company’s shares by Office Support and/or its subsidiaries andother large-scale purchase actions, etc. that may be intended under the circumstances where the tender offer
is announced in advance on the Company’s corporate value or the sources thereof, and ultimately, to secure
an opportunity to confirm the shareholders’ collective will at a shareholders meeting. As stated in “(ii)Establishment and recommendations of the Independent Committee” of “(5) Measures to ensure fairness
and measures to avoid conflicts of interest” of “1. Opinion regarding the Tender Offer, and basis and reasons
thereof” above, in adopting the Response Policies, the Company’s board of directors established theIndependent Committee consisting of three independent outside directors of the Company, in order toprevent arbitrary decision-making by the Company’s board of directors and to further enhance the fairness
and objectiveness of the operation of the Response Policies.
Meanwhile, the Tender Offeror group only mentioned that it was considering conducting the Tender Offeragainst the Company in a letter dated January 10, 2020, and e-mails dated January 12 and 16, etc., andcommenced the Tender Offer on January 21, 2020 without any notice to or contact with the Company
regarding the purpose of the Tender Offer and the specific management policies intended after the Tender
Offer, neglecting all the procedures provided in the Response Policies that set forth the procedures to confirm
the will at a shareholders meeting.
The Company believes that essentially, the Tender Offer must have been conducted after completing theprocedures provided in the Response Policies, from the viewpoint of maximizing the Company’s corporate
value and the shareholders’ common interests, in order to secure sufficient information and a deliberation
period for the shareholders to make proper decisions. Thus, the Company extremely regrets that the Tender
Offeror group commenced the Tender Offer by neglecting all the procedures provided in the Response
Policies. As such, under the situation where the Tender Offer has actually commenced, the Company has
continued seeking appropriate responses, from the viewpoint of maximizing the Company’s corporate value
and the shareholders’ common interests, based on the purposes of the Response Policies.
Consequently, as stated in the “Notice Concerning the Company’s Response for the Shareholders’ Will
Confirmation Meeting” dated January 24, 2020 and “Notice Concerning the Company’s Response for the- 26 -

Shareholders’ Will Confirmation Meeting (Follow-up)” dated January 28, 2020, as a result of the futureevaluation and consideration by the Company’s board of directors regarding the Tender Offer, if theCompany’s board of directors takes an opposing position against the Tender Offer and deems it necessary to
trigger countermeasures against the Tender Offer, the Company concluded that holding the Shareholders’Will Confirmation Meeting to confirm the shareholders’ will regarding (a) whether the shareholders agree
to introduce the Response Policies, and (b) whether the shareholders agree to a proposal concerning
triggering countermeasures based on the Response Policies, conforms to the purposes of the Response
Policies. Thus, the Company decided that it would hold the Shareholders’ Will Confirmation Meeting toconfirm the shareholders’ will regarding (a) and (b) above, depending on the results of the future evaluationand consideration regarding the Tender Offer.
Therefore, in order to prepare to hold the Shareholders’ Will Confirmation Meeting and to determine theshareholders who are entitled to exercise their voting rights at the Shareholders’ Will Confirmation Meeting,
the Company decided to conduct procedures to set the record date as promptly as possible, in practice. As
announced in the “Notice of Setting the Record Date for Convening the Extraordinary Shareholders Meeting”
dated January 28, 2020, the Company resolved, at its board of directors meeting on the same day, to set
Saturday, February 15, 2020, as the record date and to regard the shareholders entered or recorded in thelatest shareholder registry as of the record date as those shareholders entitled to exercise their voting rights
at the Shareholders’ Will Confirmation Meeting.
Before convocation of the Shareholders’ Will Confirmation Meeting, on and after January 21, 2020 when
the Tender Offer was announced, in order to express its opinion regarding the Tender Offer, the Company’sboard of directors immediately received advice and cooperation from the external advisors, etc. while
striving to collect information regarding the Tender Offer and the Tender Offeror, and proceeded withevaluations and consideration regarding the Tender Offer, in consideration of information, including
information that is not stated in the Tender Offer Statement. As such, the Company’s board of directors
decided to take an opposing position against the Tender Offer, and to hold the Shareholders’ Will
Confirmation Meeting to confirm the shareholders’ will regarding the implementation of the Response
Policies and the countermeasures based on them on March 27, 2020.
In addition, the scheduled date of the Shareholders’ Will Confirmation Meeting was determined for March
27, 2020, taking into account that: the Company needs time to evaluate and consider the Tender Offer toconsider whether to trigger the countermeasures, and time to prepare and take procedures for the
Shareholders’ Will Confirmation Meeting; and it is necessary to secure adequate information and adeliberation period so that the shareholders can make appropriate decisions about (i) whether theshareholders agree to introduce the Response Policies, and (ii) whether the shareholders agree to a proposal
concerning triggering countermeasures based on the Response Policies. Also, the scheduled date wasdetermined as a result of the adjustment of the schedule, to ensure three weeks from dispatch of the
convocation notice up to the Shareholders’ Will Confirmation Meeting, considering the Company’s attitude
toward the guidelines for its institutional shareholders’ exercise of voting rights with respect to a proposal
on takeover defense measures (the period for examination by the board of directors and the period secured
until a shareholders meeting after sending a convocation notice). As stated above, while the Company
introduced the Response Policies on January 17, 2020, the Tender Offer was announced on January 21, 2020.
Therefore, March 27, 2020, which is the scheduled date of the Shareholders’ Will Confirmation Meeting, isthe 46th business day calculated from the commencement date of the Tender Offer. In many cases ofcommon prior warning-type takeover defense measures in which the Independent Committee and the boardof directors decided whether to trigger the countermeasures, 150 or more days in total were secured, i.e., 60
days as a period to collect information necessary to decide whether to trigger the countermeasures and 90
days (excluding cases of 100% acquisition by cash consideration) as a period to consider whether to trigger
the countermeasures. Thus, holding the Shareholders’ Will Confirmation Meeting concerning the Tender
Offer on March 27, 2020, which is the 46th business day calculated from the commencement date of theTender Offer, does not unreasonably secure a long period. Moreover, the 46 business days includes theperiod required to ask the Tender Offeror questions and to have them answered. Taking into account that
the Company’s board of directors will express its opinion by evaluating and considering the purchase action- 27 -

in consideration of the answers after receiving the answers from the Tender Offeror, the Company believes
that this is the minimum period required for a shareholders deliberation period.
In this respect, in the event where the date of the Shareholders’ Will Confirmation Meeting is set on March 27,
2020, if the tender offer period is extended so as to hold the Shareholders’ Will Confirmation Meeting during
the tender offer period, the settlement of the Tender Offer will be conducted after the end of the current fiscal
year. However, the Company obtained opinions from various company law scholars, to the effect that there
are no legal issues in conducting the settlement of the Tender Offer after the end of the current fiscal year.
As stated in “(ii) Establishment and recommendations of the Independent Committee” of “(5) Measures toensure fairness and measures to avoid conflicts of interest” of “1. Opinion regarding the Tender Offer, andbasis and reasons thereof” above, the Company’s board of directors has received recommendations from the
Independent Committee on February 12, 2020, as a unanimous opinion of the Independent Committee, tothe effect that it is appropriate for the Company’s board of directors to express its opinion objecting to theTender Offer, because the Tender Offer prevents the maximization of the Company’s corporate value andthe shareholders’ common interests, and also to hold the Shareholders’ Will Confirmation Meeting to confirm
the shareholders’ will regarding the implementation of the Response Policies and countermeasures based onthem.

- 28 -

(Exhibit) Capital relationship among Mr. Murakami, Ms. Aya Nomura, and the Tender Offeror group

Parent-childrelationship

Mr. Yoshiaki Murakami

Ms. Aya Nomura (owned theCompany’s shared until
January 14 2020)

Major shareholder (ratio of voting rights is unknown)

ATRA Co., Ltd.

Parent-subsidiary relationship

Office Support K.K.
(owns the Company’s shares equivalent to 6.53% ratio of voting rights)
100％

100％

S-Grant. Co., Ltd.
(owns the Company’s sharesequivalent to 6.21% ratio of voting
rights)Kabushiki Kaisha MinamiAoyama Fudosan

66.50%

33.50%

City Index Eleventh Co., Ltd. (Tender Offeror)- 29 -

[Translation]
Appendix 3
Basic Policies Regarding How a Person Is to Control the Decisions of the Company’s Financial and Business
Policies, and the Response Policies

I.

Basic policies regarding how a person is to control the decisions of the Company’s financial andbusiness policies
As a listed company, the Company recognizes that if a share purchase proposal is made by specific persons
that may materially impact the Company’s basic management policies, whether to accept it should ultimately
be left to its shareholders’ decision.
However, where a Large-scale Purchase Action, etc. is conducted, it is difficult for the Company shareholders
to appropriately assess the impact of the Large-scale Purchase Action, etc. on the Company’s corporate value
and the shareholders’ common interests, without the necessary and sufficient information being provided by
the Large-scale Purchaser. Further, some Large-scale Purchase Actions, etc., would damage theCompany’s corporate value and the shareholders’ common interests that the Company has maintained andenhanced, such as those that attempt to: (i) temporarily control the management and transfer the Company’s
tangible/intangible important management assets to the Large-scale Purchaser or its group companies;(ii) appropriate the Company’s assets for repayment of the Large-scale Purchaser’s debts; (iii) have theCompany and/or its related parties acquire the Company’s shares merely at a high price without intending
to actually participate in the management (so-called greenmailer); and (iv) obtain temporary high dividends
by having the Company sell and dispose of its expensive assets.
In light of the above, the Company believes that the Company’s board of directors has a duty: (i) to have theLarge-scale Purchaser provide the necessary and sufficient information for the Company shareholders tomake decisions; (ii) to provide the results of evaluation and consideration by the Company’s board of
directors regarding the impact of the proposal by the Large-scale Purchaser on the Company’s corporate
value and the shareholders’ common interests, as a reference for the Company shareholders to consider the
proposal; and (iii) (as the case may be) to negotiate or discuss the Large-scale Purchase Action, etc. or theCompany’s management policies with the Large-scale Purchaser, or to present the board of directors’
alternative proposals for the management policies to the Company shareholders.
In terms of the basic policies above, the Company’s board of directors will require that the Large-scale
Purchaser provide the necessary and sufficient information for the Company shareholders to appropriately
determine whether to accept the Large-scale Purchase Action, etc., in order to ensure maximization of theCompany’s corporate value and the shareholders’ common interests. The board of directors will also timely
and properly disclose such information as provided to the Company or otherwise take measures to be deemed
appropriate within the extent permissible under the Financial Instruments and Exchange Act, the Companies
Act, and other laws and regulations, as well as the Articles of Incorporation.
While the basic policies regarding how a person is to control the decisions of the Company’s financial andbusiness policies are as stated above, the Company’s board of directors believes that any Large-scale
Purchase Action, etc. for the Company’s shares by a Large-scale Purchaser ultimately requires the Company
shareholders agreeing to the Large-scale Purchase Action, etc. by considering details of the purposes andconditions thereof and being provided in advance with sufficient time and information necessary to
determine whether it is acceptable. As such, before triggering the countermeasures based on the response
policies for a tender offer for the shares of the Company by Office Support K.K. (“Office Support”) (thetender offer for the shares of the Company by Office Support or its subsidiaries about which Office Support
has provided advance notice is hereinafter referred to as the “Tender Offer”), and other large-scale purchaseactions, etc. which may be intended under the circumstances where the Tender Offer is announced in advance(the “Response Policies”), the Company’s board of directors will hold a shareholders meeting (the- 30 -

“Shareholders’ Will Confirmation Meeting”) as a venue for such consideration and determination by theCompany shareholders. Further, if the Company shareholders express their will to support the Large-scale
Purchase Action, etc. at the Shareholders’ Will Confirmation Meeting (such will is to be expressed throughwhether a proposal requesting approval for the Company taking the prescribed countermeasures if a Largescale Purchase Action, etc. is made, is approved by an ordinary resolution at the Shareholders’ Will
Confirmation Meeting), the Company’s board of directors will support the implementation of the Largescale Purchase Action, etc. and will not take any action to substantially prevent it, as long as it is implemented
pursuant to the terms and conditions disclosed at the Shareholders’ Will Confirmation Meeting.

II.

Special efforts contributing to realizing basic policies

1.

Efforts to enhance the Company’s corporate value and the shareholders’ common
interests(1)

The Company’s corporate principles and management policies
As the group’s corporate principles, the Company group, based on respect for human values,
contributes toward building a foundation for industry by creating an abundance of value and helping
to improve people’s lives and cultural development across the world.
Further, as the management policies, the Company group: (i) makes efforts to enhance its brandpower in the global market to further expand profits by improving the efficiency of production atdomestic and overseas plants; by implementing various measures to reduce the group-wide grosscost, such as achieving more optimum procurement, including resolving procurement difficulties;
by cultivating new regional and customer markets; and by developing and selling new products thatmeet market and customers’ needs; (ii) utilizes its “strength as a general machinery manufacturer”
to evolve into a “manufacturer which co-creates value” to create customer value together with thecustomers; (iii) in doing so, makes investments for growth in a bid for continued enhancement of
the corporate value and reforms the corporate nature to cope with changes with the times; and(iv) focuses on vigorously performing quality and environmental management on the bases ofISO9001 and 14001, and actively works on the development of human resources that will lead thefuture of the Company, and on ESG activities such as compliance with laws and contribution tosociety.

(2)

Medium-term management plan to embody the management policies
The Company group started a new medium-term management plan called the “Revolution E10 Plan”
in fiscal year 2019. Within the Revolution E10 Plan, based on the basic guideline to “Maximize
the use of our strength as a general machinery manufacturer to continue to grow,” the Company
group strives to survive against competition in this age in which things are rapidly and drasticallychanging and aims to achieve reforms to increase the profitability by boldly changing conventional
way of thinking and updating working practices to promote further growth.
Taking into consideration the progress of various measures and the immediate market environment,
the Company group has recently reviewed the Revolution E10 Plan and decided to position the threefactors below as the most important measures to realize the basic policies; therefore, the Company
group will advance efforts to carry out these measures swiftly. Details of the review of themedium-term management plan will be announced in early February 2020.
(i)
(ii)
(iii)

To establish a “Production Division” and an “R&D Center” that have the common functionof improving productivity and strengthening QCD;
To realize a reduction in fixed expenses and optimum distribution of resources; andTo promote investments for growth to globally develop the general-purpose machinery
business and to achieve drastic expansion of the specialized machinery business- 31 -

Furthermore, the Company group will strive to promote the improvement of profitability (operating
profit ratio) and capital efficiency (ROE) by appropriating cash on hand for investments related tothe measures above, and to actively make investments to increase profitability while also delivering
greater shareholder returns from profits except as required for the business activities.

2.

Strengthening of corporate governance
The Company has specifically implemented the following efforts to further strengthen corporate governance.
(Corporate governance system)
The Company’s corporate governance system was shifted to a corporate governance system based on the socalled monitoring model by a company with an audit and supervisory committee, as of June 21, 2019. In
doing so, the Company established the shareholders meeting, board of directors, audit and supervisorycommittee, and accounting auditors to enhance the system of supervising and auditing the execution of duties
by the directors. Meanwhile, the Company built an appropriate system of internal controls based on the“Fundamental Policy of Internal Control,” and voluntarily set up a “Nomination Advisory Committee” anda “Remuneration Advisory Committee” to enhance transparency and fairness in the nomination of directors
and the remuneration of directors who are not audit and supervisory committee members. Further, it hasdeveloped a corporate governance system that is highly transparent by realizing the separation ofmanagement and execution of business by using an executive officer system, clarifying management
responsibilities, and enhancing the efficiency and alacrity of management decision-making and businessexecution.
The Company’s board of directors comprises eight directors (including four outside directors and excluding
directors who are audit and supervisory committee members) and three directors (including two outside
directors) who are audit and supervisory committee members. Six directors, which is a majority of all of
the eleven board members, are independent outside directors. The board of directors holds regular monthly
meetings, as well as special meetings from time to time when necessary to flexibly make operational
decisions and effectively supervise the business executions.
(Internal audit and audit by audit and supervisory committee)
The Company has an internal auditing department controlled directly by the representative directors, which
regularly verifies the legality and appropriateness of the business activities, reports the auditing results to
the representative directors, and provides instructions for matters to be improved, if any.
Further, the internal auditing department exchanges information with the audit and supervisory committee
and accounting auditors from time to time, and it is required to attend meetings of the audit and supervisorycommittee as necessary, whereby mutual coordination is ensured.
(Other matters)
In addition, the Company has been earnestly working on strengthening corporate governance, based onJapan’s latest Corporate Governance Code. For details of the Company’s corporate governance system,
please refer to the Company’s corporate governance report (dated June 21, 2019).

- 32 -

III.

Efforts to prevent the determination of financial and business policies of the Company
from being controlled by an inappropriate person in light of the Basic Policies

1.

The purposes of the Response Policies
The Response Policies will be introduced in accordance with I. “Basic policies regarding how a person is tocontrol the decisions of the Company’s financial and business policies” above, with the aim of maximizing
the Company’s corporate value and the shareholders’ common interests.
The Company’s board of directors believes that the decision whether to accept the conduct of the Largescale Purchase Actions, etc. must ultimately be made by the shareholders, from the viewpoint of maximizing
the Company’s corporate value and the shareholders’ common interests. The Company’s board of directors
also believes that, in order for the shareholders to properly decide whether to accept the conduct of the Largescale Purchase Actions, etc., it is necessary to secure an opportunity to confirm their general will by holding
a Shareholders’ Will Confirmation Meeting in advance of the commencement of the Large-scale Purchase
Actions, etc.; and that, in order to allow confirmation of the will to be substantive based on deliberation, it
is necessary, as a precondition therefor, to secure sufficient information from the Large-scale Purchaser andtime to consider will be provided to the shareholders.
In light of the above, the Company’s board of directors sets the Response Policies as procedures to be taken
if the Large-scale Purchase Actions, etc. are to be conducted, as described below. These Response Policies
are the framework for requesting that the Large-scale Purchaser provide the necessary information and for
securing the time required for the Company’s shareholders to deliberate over the propriety of the conduct of
the relevant Large-scale Purchase Action, etc. based on the provided information, as a precondition to enable
the shareholders to determine based on sufficient information, in advance of the conduct of the Large-scale
Purchase Action, etc., whether the Large-scale Purchase Action, etc. will prevent the maximization of theCompany’s corporate value and the shareholders’ common interests. The above-mentioned procedures
purport to provide the shareholders with the necessary and sufficient information and time to make a proper
decision regarding whether to accept the conduct of the Large-scale Purchase Actions, etc., which the boardof directors believes will contribute to the maximization of the Company’s corporate value and theshareholders’ common interests.
Therefore, the Company’s board of directors plans to request that the Large-scale Purchaser comply with the
Response Policies; and if the Large-scale Purchaser fails to do so, to take certain countermeasures by fully
respecting the Independent Committee’s opinions, from the viewpoint of maximizing the Company’s
corporate value and the shareholders’ common interests.
As stated above, the decision to introduce the Response Policies has been made by the Company’s board of
directors, based on the determination that it is necessary to establish certain procedures to respond to theTender Offer by Office Support or its subsidiaries and other large-scale acquisitions that may be intended
under the circumstances where the Tender Offer is announced in advance, from the viewpoint of maximizing
the Company’s corporate value and the shareholders’ common interests. Nevertheless, the Response
Policies entail a structure under which the decision regarding whether the Company should take prescribedcountermeasures in response to the Large-scale Purchase Actions, etc. conducted will be ultimately left to
the will of the shareholders through a Shareholders’ Will Confirmation Meeting. Accordingly, on condition
that the time and information required to evaluate and examine details of the Large-scale Purchase Actions,etc. are sufficiently secured, the Company believes that it is fair to deem the following process as reasonable:
if an ordinary resolution to trigger the countermeasures is passed at a Shareholders’ Will Confirmation
Meeting after the Company’s board of directors fulfills its accountability to them, then the relevant
countermeasures may be deemed to be based on the reasonable will of the shareholders (for details of thestructure to enhance reasonableness of the Response Policies, please refer to 5. below.).

- 33 -

2.

Substance of the Response Policies(1)

Outlines(i)

Procedures for the Response Policies
As stated above, the Company believes that the decision regarding whether to accept the
conduct of a Large-scale Purchase Action, etc. must ultimately be made by the shareholders.
Accordingly, if the Company obtains approval at a Shareholders’ Will Confirmation
Meeting and the relevant Large-scale Purchase Action, etc. is not withdrawn, the Company
will trigger prescribed countermeasures by fully respecting the Independent Committee’s
opinions, in order to maximize the Company’s corporate value and the shareholders’common interests.
In addition, the Response Policies aim to request that the Large-scale Purchaser provide thenecessary information to serve as the basis for the shareholders to make decisions, to secure
the time required for the shareholders to deliberate over the propriety of the conduct of theLarge-scale Purchase Action, etc. based on the provided information, and then to confirm
the shareholders’ will concerning whether to accept the conduct of the Large-scale Purchase
Action, etc. through a Shareholders’ Will Confirmation Meeting. Therefore, should those
aims not be achieved, namely, if the Large-scale Purchaser does not comply with theprocedures specified in (3) below and seeks to conduct the Large-scale Purchase Action,etc. before a Shareholders’ Will Confirmation Meeting described in (3)(iv) below is held,
the Company’s board of directors will trigger prescribed countermeasures by fully
respecting the Independent Committee’s opinions.

(ii)

Establishment of Independent Committee
In relation to the operation of the Response Policies, the Company has established theIndependent Committee consisting of three independent outside directors of the Company.
The Independent Committee will give the board of directors recommendations on the
propriety of triggering countermeasures and other matters necessary to respond inaccordance with the Response Policies. The Company’s board of directors will determine
the propriety of triggering countermeasures and other relevant matters by fully respecting
the Independent Committee’s recommendations.
In addition, the Independent Committee may, among other things, obtain advice fromexternal experts (such as financial advisers, lawyers, certified public accountants, and tax
accountants) independent from the Company’s board of directors and the Independent
Committee, as necessary. All the expenses incurred to obtain the advice will be borne by
the Company to a reasonable extent.
In principle, resolutions of the Independent Committee will be passed by a majority vote of
the committee members present at a meeting of the committee where all the incumbent
committee members are present. However, if any member of the Independent Committee
is unable to attend the committee meeting or there are any unavoidable circumstances,resolutions will be passed by a majority vote of the committee members present at themeeting where the majority of the committee members are present.

(iii)

Use of allotment of share options without contribution as a countermeasure
If the countermeasures stated in (i) above are triggered, the Company will allot all of its
shareholders share options with a discriminative exercise condition to the effect that
Ineligible Persons (as defined in 3(1)(v)(a) below) are not entitled to exercise rights and- 34 -

other conditions, and a discriminative acquisition clause to the effect that the Company will
acquire share options in exchange for shares of the Company from persons other than
Ineligible Persons, and other clauses (the “Share Options”) by way of allotment of shareoptions without contribution (Article 277 et seq. of the Companies Act) (for details, pleaserefer to 3. below).

(iv)

The Company’s acquisition of the Share Options
If the Share Options are allotted without contribution in accordance with the Response
Policies, and shares of the Company are delivered to the shareholders other than Ineligible
Persons in exchange for the Company’s acquisition of the Share Options, the ratio of sharesof the Company held by Ineligible Persons will be diluted to a certain extent.

(2)

Large-scale Purchase Actions, etc. subject to the Response Policies
In the Response Policies, the term “Large-scale Purchase Actions, etc.” refers to the following
actions (except for those conducted with prior consent of the Company’s board of directors):
(i)

(ii)

(iii)

a purchase (including but not limited to the commencement of a tender offer) of theCompany’s share certificates, etc. (Note 3) with the aim of making the holding ratio ofvoting rights (Note 2) of the specific shareholders’ group (Note 1) 20% or greater;a purchase (including but not limited to the commencement of a tender offer) of theCompany’s share certificates, etc. after which the holding ratio of voting rights of thespecific shareholders’ group would be 20% or greater; or
irrespective of whether each action provided in (i) or (ii) above is conducted, any action
conducted by the Company’s specific shareholders’ group with another shareholder of theCompany (including cases where the relevant action is conducted with multiple othershareholders of the Company; hereinafter the same applies in this (iii)) that falls under eitherof the following items: (a) agreements or other actions after which the relevant shareholder
would fall into the category of a joint holder of the specific shareholders’ group; or (b) any
actions to establish a relationship between the specific shareholders’ group and the relevant
shareholder where either one substantially controls the other or where they act jointly orcooperatively (Note 4) (Note 5) (limited to cases where the total holding ratio of sharecertificates, etc. of the specific shareholders and the relevant shareholder would be 20% or
greater with respect to the share certificates, etc. issued by the Company).

As stated above, the term “Large-scale Purchaser” refers to a person who conducts or seeks to
conduct the Large-scale Purchase Actions, etc. alone or jointly or cooperatively with another person.
(Note 1)

The term “specific shareholders’ group” refers to (i) a “holder” (as provided in
Article 27-23, paragraph (1) of the Financial Instruments and Exchange Act,
including a person who is included in the definition of a holder pursuant toparagraph (3) of the same Article) and a “joint holder” (as provided in Article 2723, paragraph (5) of the same Act, including a person who is deemed to be a joint
holder pursuant to paragraph (6) of the same Article) of “share certificates, etc.”(as provided in Article 27-23, paragraph (1) of the same Act) of the Company, (ii)a person who conducts a “purchase, etc.” (as provided in Article 27-2, paragraph(1) of the same Act, including a purchase, etc. conducted on a financial instruments
exchange market) of “share certificates, etc.” (as provided in Article 27-2,
paragraph (1) of the same Act) of the Company and its “specially related party” (asprovided in Article 27-2, paragraph (7) of the same Act), and (iii) a related party of
any of the persons set forth in (i) or (ii) above (meaning a group of investmentbanks, securities corporations, and other financial institutions that have concluded
a financial advisory agreement with those persons, other persons who share- 35 -

(Note 2)(Note 3)(Note 4)(Note 5)(3)common substantial interests with those persons, tender offer agents, lawyers,
accountants, other advisors, or persons reasonably considered by the Company’sboard of directors as persons who are substantially controlled by those persons or
who act jointly or cooperatively with those persons).
The term “holding ratio of voting rights” refers to, depending on the specificpurchase method of the specific shareholders’ group, (i) a “holding ratio of sharecertificates, etc.” (as provided in Article 27-23, paragraph (4) of the Financial
Instruments and Exchange Act) of the specific shareholders’ group if such group isa holder and its joint holder of the “share certificates, etc.” (as provided in Article
27-23, paragraph (1) of the same Act) of the Company (in this case, the “numberof share certificates, etc. held” (as provided in the same paragraph) by joint holdersof the holder will be considered for the purpose of this calculation); or (ii) the totalof the “ownership ratio of share certificates, etc.” (as provided in Article 27-2,
paragraph (8) of the same Act) of the specific shareholders’ group if such group isa person conducting a purchase, etc. of share certificates, etc. (as provided in
Article 27-2, paragraph (1) of the same Act) of the Company and the speciallyrelated party of such person. For the purpose of calculating a holding ratio ofshare certificates, etc. or a ownership ratio of share certificates, etc., the latest
annual securities report, quarterly securities report, and report on repurchase may
be referred to with respect to the “total number of issued shares” (as provided in
Article 27-23, paragraph (4) of the same Act) and the “total number of voting rights”(as provided in Article 27-2, paragraph (8) of the same Act).
The term “certificates, etc.” refers to certificates, etc. provided in Article 27-23,
paragraph (1) of the Financial Instruments and Exchange Act.
Decision on whether “a relationship between the specific shareholders’ group andthe relevant shareholder where either one substantially controls the other or where
they act jointly or cooperatively” has been established will be made based on (a)formation of any relationship such as a new investment relationship, businessalliance relationship, business or contractual relationship, interlocking directorate
relationship, funding relationship, credit granting relationship, relationship ofsubstantial interests concerning share certificates, etc. of the Company throughderivatives, stock lending, etc.; and (b) effects that the specific shareholders’ groupand the relevant shareholder directly or indirectly have on the Company, among
other things.
Decision on whether the action specified in (iii) in the main text above has takenplace will be reasonably made by the Company’s board of directors (in making thedecision, the Independent Committee’s recommendations will be fully respected).
The Company’s board of directors may request information from its shareholders
to the extent necessary to make the decision on whether the relevant action falls
under the requirements specified in (iii) of the main text above.

Procedures leading to triggering of countermeasures
The Response Policies aim to secure an opportunity for the shareholders to express their will
regarding whether to accept the conduct of the Large-scale Purchase Actions, etc. Due toprocedural reasons, the Company requires a reasonable preparation period to hold a Shareholders’Will Confirmation Meeting. The Response Policies also aim, as the premise for the shareholders
to deliberate over the propriety of the relevant Large-scale Purchase Action, etc., to request
information from the Large-scale Purchaser and to secure the time required for the shareholders todeliberate based on that information.
Accordingly, in order to obtain information concerning the Large-scale Purchase Action, etc. fromthe Large-scale Purchaser, to secure a deliberation period for the shareholders, and then to ensure- 36 -

that a Shareholders’ Will Confirmation Meeting will be held, the Large-scale Purchaser will be
required to comply with the following procedures provided in the Response Policies.

(i)

Submission of an explanation of the purpose of the Large-scale Purchase
Action, etc.
The Large-scale Purchaser will be required to submit an explanation of the purpose of theLarge-scale Purchase Action, etc. to the Company’s board of directors in writing no later
than 60 business days before the commencement of the Large-scale Purchase Action, etc.
The explanation of the purpose of the Large-scale Purchase Action, etc. will be required tocontain substance equivalent to that to be contained in a tender offer statement provided in
Article 27-3, paragraph (2) of the Financial Instruments and Exchange Act, in Japanese,
according to the details, manner, and other factors of the Large-scale Purchase Action, etc.
intended to be conducted, to which the representative of the Large-scale Purchaser will be
required to affix his/her signature or his/her name and seal, and the representative’s
certificate of qualification will be required to be attached.

(ii)

Provision of information
The Company will request that the Large-scale Purchaser provide the information specified
in Exhibit that is considered necessary for the shareholders to decide whether to accept the
conduct of the Large-scale Purchase Action, etc., at a Shareholders’ Will Confirmation
Meeting (whose substance is subject to change to a reasonable extent according to thedetails, manner, and other factors of the Large-scale Purchase Action, etc.; hereinafter, theinformation is referred to as the “Necessary Information”) within five business days fromthe day on which the Company’s board of directors receives an explanation of the purposeof the Large-scale Purchase Action, etc. (the first day is not included).
If the Necessary Information is submitted, the Company will disclose the fact that it has
been submitted and its substance in a timely and appropriate manner to the necessary or
beneficial extent for the shareholders to decide whether to accept the conduct of the Largescale Purchase Action, etc. If the Company’s board of directors reasonably decides thatthe information received from the Large-scale Purchaser is insufficient for the shareholders
to decide whether to accept the conduct of the Large-scale Purchase Action, etc. in light ofthe details, manner, and other factors of the Large-scale Purchase Action, etc., then it may
request that the Large-scale Purchaser provide additional information by setting a due dateas necessary (in making that decision, the Independent Committee’s opinions will be fully
respected). In this case, the Large-scale Purchaser will be required to provide the relevant
additional information to the Company’s board of directors by the due date. If theadditional information is provided, the Company will also disclose the fact that it has been
provided and its substance in a timely and appropriate manner, to the necessary or beneficial
extent for the shareholders to decide whether to accept the conduct of the Large-scale
Purchase Action, etc.

(iii)

Board of Directors’ Evaluation Period
The Company’s board of directors will set 60 business days from the date when the
Company receives an explanation of the purpose of the Large-scale Purchase Action, etc.
from the Large Purchaser, as the period for the Company’s board of directors to evaluate
and consider the propriety of the conduct of the Large-scale Purchase Action, etc. (the“Board of Directors’ Evaluation Period”). The Board of Directors’ Evaluation Period is
calculated not on a calendar day basis but on a business day basis, considering that theperiod starts not from the completion of the information provision stated in (ii) above but- 37 -

from the date of receiving an explanation of the purpose of the Large-scale Purchase Action,
etc.
The Large-scale Purchase Action, etc. is to be commenced only after the Board of Directors’
Evaluation Period has passed (alternatively, if a Shareholders’ Will Confirmation Meetingis held, then after the proposal on triggering the countermeasures is disapproved and theShareholders’ Will Confirmation Meeting is concluded).

(iv)

Holding of a Shareholders’ Will Confirmation Meeting
If the Company’s board of directors opposes the conduct of the Large-scale Purchase Action,etc. and considers it appropriate to trigger the countermeasures against it, the Company will
decide to hold a Shareholders’ Will Confirmation Meeting within 60 business days after
receiving an explanation of the purpose of the Large-scale Purchase Action, etc. andthereafter promptly hold a Shareholders’ Will Confirmation Meeting. At the Shareholders’Will Confirmation Meeting, the shareholders’ will is to be confirmed regarding whether toaccept the conduct of the Large-scale Purchase Action, etc., by asking for a vote for oragainst the proposal on triggering the countermeasures. Meanwhile, the Company’s boardof directors may make a proposal to maximize the Company’s corporate value and theshareholders’ common interests that will serve as an alternative to the conduct of the Largescale Purchase Action, etc. When making such proposal, the Company’s board of
directors will fully respect the Independent Committee’s opinions.
The Company shareholders will be requested to express their decision on whether to accept
the conduct of the Large-scale Purchase Action, etc. after deliberating over the information
regarding the Large-scale Purchase Action, etc., by voting for or against the proposal on
triggering the countermeasures submitted by the Company’s board of directors. If the
proposal is passed by the consent of a majority of the voting rights of the shareholders
present at the Shareholders’ Will Confirmation Meeting who are entitled to exercise voting
rights, the proposal on triggering the countermeasures will be approved. In addition, if a
Shareholders’ Will Confirmation Meeting is held, details such as the record date for exerciseof the voting rights and the date and time to hold the Shareholders’ Will Confirmation
Meeting will be timely and properly announced.

(v)

Countermeasures
If the Company shareholders approve the proposal on triggering the countermeasuressubmitted by the Company’s board of directors, at the Shareholders’ Will Confirmation
Meeting, the Company’s board of directors will trigger the countermeasures stated in 3.
below (allotment of the Share Options subject to discriminatory exercise conditions andacquisition clause without contribution), in accordance with the shareholders’ will, by fully
respecting the Independent Committee’s opinions.
Meanwhile, if the Company
shareholders do not approve the proposal on triggering the countermeasures, at the
Shareholders’ Will Confirmation Meeting, then the Company’s board of directors will not
trigger the countermeasures, in accordance with the shareholders’ will.
However, if the Large-scale Purchaser does not comply with the procedures stated in (i) to(iii) above and attempts to conduct the Large-scale Purchase Action, etc. before theShareholders’ Will Confirmation Meeting stated in (iv) above is held, this will preclude
ensuring the time necessary for the Company shareholders to deliberate, using theinformation to be disclosed by the Large-scale Purchaser, or the opportunity for theCompany to confirm their will, regarding whether to accept the Large-scale Purchase
Action, etc. Therefore, in such a case, the Company’s board of directors will trigger thecountermeasures without holding the Shareholders’ Will Confirmation Meeting, unless- 38 -

exceptions apply. In determining whether triggering the countermeasures is appropriate,
the Company’s board of directors will fully respect the Independent Committee’s opinions.
In addition, the report of the Corporate Value Study Group of the Ministry of Economy,
Trade and Industry, dated June 30, 2008, titled “Takeover Defense Measures in Light ofRecent Environmental Changes” also sets forth that “the board of directors would bepermitted to adopt takeover defense measures and implement them against the acquirers
who do not temporarily halt, violating procedures within a scope recognized as reasonable,
in case of ensuring adequate time and information necessary for shareholders toappropriately judge the propriety of the takeovers or opportunities for negotiation to extract
better takeover terms for shareholders through negotiation with the acquirers.”

3.

Outline of the Countermeasures (allotment of Share Options without contribution)
The following provides an outline of the allotment of Share Options without contribution to be conductedby the Company as countermeasures under the Response Policies (details of the Share Options not provided
below will be separately determined by the Company’s board of directors by its resolution regarding theallotment of Share Options without contribution).

(1)

Substance of Share Options to be allotted(i)Type of shares underlying Share Options
Common shares of the Company(ii)

Number of shares underlying Share Options
The number of shares underlying one Share Option shall be separately determined by theboard of directors.

(iii)

Value of assets required for exercise of Share Options
The form of assets required for the exercise of the Share Options shall be cash, and thevalue thereof shall be one yen multiplied by the number of shares underlying each Share
Option.

(iv)

Exercise period for Share Options
The period in which the Share Options may be exercised shall be a certain period separately
determined by the board of directors.

(v)

Conditions for exercise of Share Options(a)

No Share Options held (or substantially held) by Ineligible Persons may be
exercised.
“Ineligible Persons” means any of the following persons:
(i)
(ii)
(iii)

Large-scale Purchaser;
Joint holder (Article 27-23, paragraphs (5) and (6) of the Financial
Instruments and Exchange Act) of a Large-scale Purchaser;
Specially related party (Article 27-2, paragraph (7) of the Financial
Instruments and Exchange Act) of a Large-scale Purchaser; or- 39 -

(iv)

(vi)

A person who the Company’s board of directors reasonably determines
falls under either of the following, taking into account the Independent
Committee’s recommendations:(x)
A person who acquires or succeeds to a Share Option from any ofthe persons set forth in (i) above through to and including (iv)without the Company’s approval; or(y)A “related party” of any of the persons set forth in (i) above
through to and including (iv).
A “related party” means
investment banks, securities corporations, and other financial
institutions that have concluded a financial advisory agreementwith those persons, other persons who share common substantial
interests with those persons, tender offer agents, lawyers,
accountants, other advisors, or persons who are substantiallycontrolled by those persons or who act jointly or cooperatively
with those persons. In deciding whether a partnership or otherfund falls under a “related party,” the fund manager’s substantive
identity and other factors are taken into account.

(b)

A holder of Share Options may exercise its Share Options only if it provides theCompany with: a document containing its representations, warranties regarding theholder not being an Ineligible Person as listed in (v)(a) above (if the Share Options
are exercised on behalf of a third party, including the third party not being an
Ineligible Person in (v)(a) above), indemnifications and other matters designatedby the Company; materials that demonstrate the satisfaction of conditions
reasonably required by the Company; and a document required by any Laws.

(c)If, pursuant to applicable securities laws and other Laws of foreign countries, it isnecessary to implement prescribed procedures or satisfy prescribed conditions withrespect to exercise of the Share Options by any person residing in the jurisdictionof these Laws, the person residing in that jurisdiction may exercise the Share
Options only if the Company deems that all of these procedures and conditions
have been implemented or satisfied. Meanwhile, even if implementation orsatisfaction of the above procedures and conditions by the Company would enable
a person residing in that jurisdiction to exercise the Share Options, the Company
will not be obligated to implement or satisfy them.

(d)

The confirmation regarding the satisfaction of the conditions specified in (v)(c)above shall be pursuant to the procedures to be prescribed by the board of directors,
which will be similar to those set forth in (v)(b) above .

Acquisition clause(a)

On a date that comes on or after the effective date of allotment of the Share Options
without contribution and that is designated by the board of directors, the Company
may acquire the Share Options that can be exercised in accordance with (v)(a) and(b) above (i.e., which are held by persons who do not fall under Ineligible Persons)but that have not been exercised yet (including the Share Options that are held bypersons who fall under (v)(c) above; hereinafter referred to as “Exercisable Share
Options” in (vi)(b) below), by providing, as consideration therefor, such persons
with common shares of the Company in the number equivalent to the integer
portion of the product of: (a) the number of the Share Options to be acquired; and(b) the number of shares underlying one Share Option.

- 40 -

(b)On a date that comes on or after the effective date of allotment of the Share Options
without contribution and that is designated by the board of directors, the Company
may acquire the Share Options, other than the Exercisable Share Options, that havenot been exercised yet. It may do this by providing, as consideration therefor,such shareholders with share options, the exercise of which by Ineligible Persons
is subject to certain restrictions (i.e., subject to the exercise conditions andacquisition clause described below and other features set forth by the board of
directors; these share options shall hereinafter be referred to as the “Second Share
Options”), in the same number as the number of the Share Options to be acquired.
(i)

Exercise conditions
Ineligible Persons shall not exercise the Second Share Options except for
the following case and other cases provided by the Company’s board of
directors:(x)
If the Large-scale Purchaser ceases or withdraws the Large-scale
Purchase Action, etc. after a resolution of a Shareholders’ Will
Confirmation Meeting, and pledges not to conduct any Largescale Purchase Action, etc. thereafter, and the Large-scale
Purchaser and other Ineligible Persons have disposed of shares of
the Company by delegating it to the securities corporation
approved by the Company; and(y)
If the ratio recognized by the Company’s board of directors as theholding ratio of share certificates, etc. of the Large-scale
Purchaser after the disposal (in this (i), when calculating theholding ratio of share certificates, etc., Ineligible Persons otherthan the Large-scale Purchaser or its joint holder will also bedeemed to be joint holders of the Large-scale Purchaser; and theSecond Share Options held by Ineligible Persons for which theexercise conditions have not been satisfied will be excluded) falls
below 20%, then the Large-scale Purchaser and other Ineligible
Persons that have disposed of shares of the Company may
exercise the Second Share Options, the number of underlying
shares of which is equivalent to that of shares having been
disposed, only to the extent that the ratio after the exercise falls
below 20%.

(ii)

Acquisition clause
If any of the Second Share Options remains unexercised as of the 10th
anniversary of their delivery date, the Company may acquire the Second
Share Options (limited to those for which the exercise conditions have notbeen satisfied) by providing, as consideration therefor, money equivalent
to the market value of the Second Share Options at that time.

(c)

The confirmation regarding the satisfaction of the conditions concerning
compulsory acquisition of the Share Options shall be pursuant to the procedures tobe prescribed by the board of directors, which will be similar to those set forth in(v)(b) above. At any time not later than the day immediately before thecommencement date of the period in which the Share Options may be exercised, if
the Company’s board of directors considers it appropriate for the Company toacquire the Share Options, the Company may acquire all the Share Options without
consideration on a date separately designated by the Company’s board of directors.

- 41 -

(vii)

Approval for transfer
Any acquisition of the Share Options through transfer will require the approval of the boardof directors.

(viii)

Matters concerning the stated capital and reserves
Matters concerning the stated capital and capital reserves to be increased in conjunction
with events such as the exercise, and acquisition pursuant to the acquisition clause, of the
Share Options shall be provided in accordance with the Laws.

(ix)

Fractions
If the number of shares to be delivered to a person who has exercised the Share Option(s)includes a fraction less than one share, such fraction will be rounded down. When theholder of the Share Options exercises multiple Share Options at one time, the fraction of
the number of shares to be delivered to the holder of the Share Options may be determined
after adding all of the number of shares (containing fractions) to be delivered by thatexercise of the Share Options.

(x)Issuance of share option certificates
No share option certificates will be issued for the Share Options.

(2)

Number of Share Options allotted to shareholders
One Share Option will be allotted per common share of the Company (excluding the Company’scommon shares held by the Company).

(3)

Shareholders eligible for allotment of Share Options without contribution
Share Options will be allotted to all shareholders (excluding the Company) holding common sharesof the Company who are listed or recorded in the latest shareholder registry on the record dateseparately designated by the board of directors.

(4)

Total number of Share Options
The total number of Share Options to be allotted will be equal to the latest total number of issued
shares of the Company as of the record date separately designated by the board of directors(excluding the number of the Company’s common shares held by the Company).

(5)

Effective date of allotment of Share Options without contribution
The effective date will be a date that falls on the record date or a date thereafter separately designatedby the board of directors.

(6)

Other matters
Allotment of Share Options without contribution will take effect, subject to either of the following
conditions being satisfied: (i) approval by a Shareholders’ Will Confirmation Meeting is obtained
and the Large-scale Purchase Action, etc. is not withdrawn; or (ii) the Large-scale Purchaser does
not observe the procedures set forth in III.2(3) below and attempts to conduct its Large-scale
Purchase Action, etc. before the Shareholders’ Will Confirmation Meeting set forth in 2(3)(iv) aboveis held.

- 42 -

4.

Impact on shareholders and investors(1)

Impact of the Response Policies on shareholders and investors upon the introduction
thereof
Upon introducing the Response Policies, the Company will not conduct an allotment of the Share
Options without contribution. Accordingly, the Response Policies will not have a direct andconcrete impact on the rights and economic interests of shareholders and investors upon the
introduction of the Response Policies.

(2)

Impact on shareholders and investors upon allotment of the Share Options without
contribution
The Share Options will be allotted to all shareholders automatically; accordingly, no shareholders
will forfeit their rights in relation to the allotment of the Share Options. If the Company conducts
an allotment of the Share Options without contribution, the per-share value of the shares of theCompany held by shareholders will be diluted. However, the value of all the shares of theCompany held by shareholders will not be diluted; thus, it is not anticipated that this will have any
direct and concrete impact on the legal rights and economic interests of shareholders and investors.
Further, before the exercise period of the Stock Options commences, the Company intends to acquire,through compulsory acquisition, all of the Share Options pursuant to the acquisition clause attachedthereto; and the Company will deliver the shares of the Company to the Share Options that satisfy
the exercise conditions.
However, if countermeasures are triggered, they may consequently cause disadvantages to the legal
rights or economic interests of the Ineligible Persons prescribed in 3(1)(v)(a) above.
Further, if the Company conducts an allotment of the Share Options without contribution, theCompany shall set the record date to determine the shareholders to be entitled to receive them.
Because the per-share value of the shares of the Company will be diluted due to the allotment of the
Share Options without contribution, the share price of the shares of the Company may decline after
the shareholders entitled to receive allotment of the Share Options without contribution are finallydetermined. The Company’s board of directors will set the record date for allotment of the Share
Options without contribution by considering the manner of the Large-scale Purchase Actions, etc.
and various other circumstances. If the Company intends to set such a record date, the Company
will disclose the same in a timely and appropriate manner.
If the Large-scale Purchaser observes the Large-Scale Purchase Rules described in 2(3) above, andif the shareholders do not approve the proposal to trigger the countermeasures in the Shareholders’Will Confirmation Meeting, the Company will not conduct an allotment of the Share Options
without contribution. Further, even after commencing procedures to trigger the countermeasures,
the Company’s board of directors may discontinue taking countermeasures if it decides that they nolonger need to be triggered (in that case, the Company will disclose the same in a timely andappropriate manner in accordance with the Laws). Shareholders and investors who buy and sell,etc. shares of the Company on the assumption that the dilution of the per-share value of the sharesof the Company occurs, may incur significant damage due to fluctuations in the share price if eitherof the above circumstances arises.

- 43 -

(3)Procedures required for shareholders upon allotment of the Share Options without
contribution(a)Procedures for allotment of the Share Options without contribution
If the Company’s board of directors resolved to conduct an allotment of the Share Options
without contribution, the Company will set the record date for allotment of the Share
Options without contribution; and it will disclose the same in a timely and appropriatemanner. In this case, the Share Options shall be allotted without contribution to theshareholders of the Company entered or recorded in the latest shareholder registry on therecord date, in proportion to the number of common shares owned by them. Accordingly,
the shareholders of the Company entered or recorded in the latest shareholder registry on
the record date will be allotted the Share Options as a matter of course, without the need totake any specific procedures.

(b)

Procedures for acquisition of the Share Options
Although conditions and procedures for exercise are set forth as described in 3. above
regarding the Share Options allotted to shareholders, the Company in principle intends toacquire the Share Options pursuant to the acquisition clause on a date, before the arrival of
the exercise period, separately designated by the Company’s board of directors. In thiscase, the Company will conduct the acquisition by issuing a public notice not later than two
weeks before the intended acquisition date, in accordance with the Laws.
If the Company acquires the Share Options pursuant to the acquisition clause in accordancewith 3(1)(vi)(b) above, the shareholders will receive allotment of the shares of the Company
as compensation for acquisition of the Share Options by the Company, without the need to
pay money equivalent to the exercise price.
However, the handling of matters such as acquisition or exercise of the Share Options
regarding Ineligible Persons will differ from that of other shareholders.

(c)Other procedures
Regarding the details of each of the above procedures, the Company will make disclosurein a timely and appropriate manner in accordance with the Laws when these procedures
actually become necessary. Accordingly, please check the specific content of suchdisclosure.

5.

Structure to enhance reasonableness of the Response Policies(1)

The Response Policies take into account the purposes of the guidelines regarding
takeover defense measures at normal times
The Response Policies differ from so-called takeover defense measures that are introduced at normal
times, but have been formulated in light of: (i) the content of the “Guidelines Regarding Takeover
Defense for the Purposes of Protection and Enhancement of Corporate Value and Shareholders’Common Interests” published by the Ministry of Economy, Trade and Industry and the Ministry ofJustice, on May 27, 2005; (ii) the proposal in the report of the Corporate Value Study Group of the
Ministry of Economy, Trade and Industry, dated June 30, 2008, titled “Takeover Defense Measuresin Light of Recent Environmental Changes”; and (iii) the purposes of the rules for introduction of
takeover defense measures, in relation to takeover defense measures at normal times prescribed by
the Tokyo Stock Exchange, and of “Principle 1.5 Anti-Takeover Measures” of the “Japan’s
Corporate Governance Code” (as revised on June 1, 2018) that the Tokyo Stock Exchange- 44 -

introduced and started applying from June 1, 2015, due to revision of the Securities Listing
Regulations. Therefore, the requirements specified in those guidelines that also apply to theemergency countermeasures are satisfied in the Response Policies.

(2)

Respect of the shareholders’ will (structure where the shareholders’ will is directlyreflected)
When triggering the countermeasures based on the Response Policies, the Company will reflect its
shareholders’ will by holding a Shareholders’ Will Confirmation Meeting. As long as the Largescale Purchaser complies with the procedures stated in 2(3) above, whether to trigger thecountermeasures will be decided based only on the shareholders’ will expressed at the Shareholders’Will Confirmation Meeting.
Meanwhile, if the Large-scale Purchaser does not comply with the procedures stated in 2(3) above
and attempts to conduct its Large-scale Purchase Action, etc. before the Shareholders’ Will
Confirmation Meeting stated in 2(3)(iv) above is held, the countermeasures will be triggered only
by a decision of the board of directors by fully respecting the Independent Committee’s opinions.
This is attributable to the Large-scale Purchaser’s decision not to provide an opportunity for theCompany shareholders to determine the propriety of the Large-scale Purchase Action, etc. after
deliberating over the necessary and sufficient information. Therefore, the Company believes thattriggering the countermeasures against such Large-scale Purchase Action, etc. disregarding its
shareholders’ will is unavoidable to protect opportunities to confirm its shareholders’ will.
In addition, as stated in 6. below, the effective term of the Response Policies is until the conclusionof the first meeting of the board of directors held after the ordinary shareholders meeting of theCompany held in 2020, in principle.
As such, the Response Policies fully respect the shareholders’ will.

(3)

Elimination of the board of directors’ arbitrary decisions
As stated in (2) above, the Company will hold a Shareholders’ Will Confirmation Meeting anddecide whether to trigger the countermeasures against the Large-scale Purchase Action, etc. inaccordance with its shareholders’ will. As long as the Large-scale Purchaser complies with theprocedures stated in 2(3) above, whether to trigger the countermeasures will be decided based on
the Shareholders’ Will Confirmation Meeting; and the countermeasures will not be triggered at thearbitrary discretion of the Company’s board of directors.
Further, as stated in 2(1)(ii) above, the Company will obtain recommendations from the Independent
Committee comprising three of its independent outside directors, regarding the matters necessary toconsider the propriety of triggering the countermeasures or otherwise take action in line with thecountermeasures, in order to ensure the necessity and appropriateness of the Response Policies andto prevent them from being abused to protect management interests. The Company’s board of
directors fully respects the Independent Committee’s opinions, in order to ensure the fairness of theboard of directors’ decisions and eliminate its arbitrary decisions. In addition, the Independent
Committee may, among other things, obtain advice from external experts (such as financial advisors,
attorneys-at-law, certified public accountants, and tax accountants) independent from theCompany’s board of directors and the Independent Committee, as necessary. As such, theobjectiveness and reasonableness of the Independent Committee’s decisions are ensured.
Therefore, the Response Policies eliminate the board of directors’ arbitrary decisions.

- 45 -

(4)The Response Policies are not a dead-hand takeover defense measure or a slow-handtakeover defense measure
As stated in 6. below, the Response Policies are abolishable at any time by resolution of the boardof directors comprising the directors appointed at a shareholders meeting; therefore, the Response
Policies are not a so-called dead-hand takeover defense measure (meaning a takeover defense
measure that cannot be prevented from being triggered even by replacing a majority of the membersof the board of directors) or a slow-hand takeover defense measure (meaning a takeover defense
measure that requires time to be prevented from being triggered because the members of the boardof directors cannot be replaced all at once).

6.

Abolition procedures and effective term of the Response Policies
The effective term of the Response Policies is until the conclusion of the first meeting of the board of
directors held after the ordinary shareholders meeting of the Company held in 2020. However, at theconclusion of the first meeting of the board of directors after the ordinary shareholders meeting of theCompany held in 2020, if there are persons who are actually engaged in, or contemplating, a Large-scale
Purchase Action, etc. and are designated by the Company’s board of directors, the effective term will be
extended, to the extent necessary to respond to such actions engaged in or contemplated. As stated above,
the Response Policies will be primarily introduced to respond to large-scale purchases that have alreadyemerged, including the Tender Offer; therefore, the Response Policies are not planned to be maintained after
specific large-scale purchases are no longer contemplated.
In addition, if the board of directors comprising the directors appointed at the Company’s shareholders
meeting resolves to abolish the Response Policies before expiration of the effective term, they will beabolished upon such resolution.
End- 46 -

(Exhibit) Information requested to provide by Large-scale Purchaser
Part 1

Details of Large-scale Purchaser, etc. and group thereof

1. In the event that the Large-scale Purchaser is a corporate entity, we request provision of the following
information: location of its head office, contact details in Japan, governing laws of incorporation, businessdescription, number of employees, a summary of offices, name and career history (including a record of positions
held and rewards and punishments received in the past, hereinafter “Career”) of each officer for the past ten
years, a summary of the major investors (the top ten as determined by shares held or investment ratio, including
specific name, address, governing laws of incorporation, capital structure, investments made in other entities andthe ratios thereof, name and Career of representative for the past ten years), in the event that there is any personthat substantially controls the Large-scale Purchaser, a profile of the person (including the specific nature of thecontrol over the Large-scale Purchaser, specific name, address, governing laws of incorporation, capital structure,investments made in other entities and the ratios thereof, name and Career of representative for the past ten
years), main bank, investments made in other entities and the ratios thereof, a summary of the substantiallycontrolling or managing fund (regardless of whether it was established based on Japanese law or foreign law, or
what legal statute the fund is based on, hereinafter “the Fund”) and its partner or investor (regardless of whether
the investment is made directly or indirectly), managing partners, and individuals who provide investment advice
on an ongoing basis (hereinafter “Partners,” including specific name, address, governing laws of incorporation,
capital structure, investments made in other entities and ratios thereof, name and Career of representative for the
past ten years, hereinafter “the Profile of the Partners”), detailed investment policies, detailed information on
investment and loan activities for the past ten years, and whether the entity falls under a “Foreign Investor”(hereinafter “Foreign Investor”) as stipulated in Article 26, paragraph 1 of the Foreign Exchange and Foreign
Trade Act (hereinafter “Foreign Exchange Law”) and information which serves as the basis for designation as a
Foreign Investor (including status of holders of direct and indirect voting rights, and whether officers have any
addresses or residences in Japan).
2. In the event that the Large-scale Purchaser is a corporate entity, we request provision of the following
information: address of the representative, contact details in Japan, place of tax payment, main bank, Career forthe past ten years, investments made in other entities, the ratios thereof and titles held at those entities, a summaryof the substantially controlling or managing Fund and its Partners, detailed investment policies, and detailed
information on investment and loan activities for the past ten years.
3. In the event that the Large-scale Purchaser is an individual, we request provision of the following information:
address, contact details in Japan, place of tax payment, main bank, Career for the past ten years, investments
made in other entities, the ratios thereof and titles held at those entities, a summary of the substantiallycontrolling or managing Fund and its Partners, detailed investment policies, detailed information on investment
and loan activities for the past ten years, and whether the individual falls under a Foreign Investor and theinformation which serves as the basis for designation as a Foreign Investor (including whether he/she has any
addresses or residences in Japan).
4. In the event that there exists a joint holder or specially related party of the Large-scale Purchaser regarding theshare certificates, etc. of the Company under the Financial Instruments and Exchange Act, a parent company,
subsidiary, and/or affiliated companies of the Large-scale Purchaser, an individual or group of relatives that isable to exert substantial influence over the Large-scale Purchaser (hereinafter, these persons and the Large-scale
Purchaser are collectively “Large-scale Purchaser Group”), and in the event that the person is a corporate entity,
we request provision of the information stated in 1 above, as well as information concerning its representativeequivalent to that stated in 2 above, and in the event that the person is an individual, we request provision of
information equivalent to that stated in 3 above, respectively.

- 47 -

5. We request provision of the following information: a summary of the decision-making bodies (the names of therespective decision-making bodies, specific matters under their respective authority, and their decision-making
procedures) of the Funds, corporate entities, partnerships, and other associations that are included in the Largescale Purchaser Group (including any person who gives the decision-making bodies directions and advice, if any,
and this shall apply hereinafter). If these decision-making bodies are made up of individuals, we request
provision of the following information: their specific job titles, names and Careers, and if these decision-making
bodies are committees, we request provision of the following information: the scope of the relevant persons andthe number qualified to participate in them. We also request provision of the following information: whether
there are any persons who are involved in decision-making for the purchases of the Company’s shares(hereinafter “Share Purchase”) other than the Large-scale Purchaser Group, and if there are such persons, their
specific names or trade names, a summary of the persons, their roles, and a summary of the decision-making
bodies (the names of the respective decision-making bodies, specific matters under their respective authority, andtheir decision-making procedures).
6. We request provision of the following specific information: the number of the Company’s share certificates, etc.
held by each member of the Large-scale Purchaser Group (including the Company’s share certificates, etc.
substantially held through equity swaps and other derivatives, etc., hereinafter “Held Share Certificates, etc.”);the number of share certificates, etc. if the Held Share Certificates, etc. include the Company’s share certificates,etc. substantially held through equity swaps and other derivatives, etc., details of the derivatives, etc., and asummary of the counterparty and other persons involved in the contracts regarding the derivatives, etc. (including
their specific names, addresses, governing laws of incorporation, capital structure, and the names of therepresentatives); the number of share certificates, etc. among the Held Share Certificates, etc. pledged ascollateral, and a summary of persons who have the security interests, etc. (including their specific names,
addresses, governing laws of incorporation, capital structure, and the names of the representatives), and the
trading for the Company’s share certificates, etc. including the Held Share Certificates, etc. by the Large-scale
Purchaser Group within the last sixty (60) days.
7. We request provision of the following specific information: the names of shareholders in the shareholder registerof the Held Share Certificates, etc. of the Large-scale Purchaser Group, the number of shares in the shareholder
register for each such person, which contract or other agreements make such person a shareholder in theshareholder register, and if it is planned to change the names of shareholders in the shareholder register, the newnames of any such shareholders.
8. We request provision of the following information: the ratio of the price of the Held Share Certificates, etc. tothe total assets of the Large-scale Purchaser.
9. We request provision of the following information: the ratio of the price of the Held Share Certificates, etc. tothe total assets of the Large-scale Purchaser Group.
10. We request provision of the following specific information: details regarding the knowledge and experience of
the Large-scale Purchaser Group and its members (including major shareholders or investors and significant
subsidiaries and affiliated companies, and including main Partners in the event that the Large-scale Purchaser isthe Fund, and this shall apply hereinafter) concerning our group’s manufacturing and sales of injection molding
machines, die cast machines, extrusion machines, machine tools, precision processing machines, industrial
robots, electronically controlled equipment, and others, as well as the business of supplying parts and providing
services, etc. related to the respective businesses (hereinafter “Company Business”).
11. We request provision of the following information: whether the Large-scale Purchaser Group and its members
have substantial experience in running companies and actually being involved in the work of such companies inJapan, and if so, the details of their experience in doing so (including the percentage of the voting rights held by
the Large-scale Purchaser Group and the form of involvement in actual business duties or management). If- 48 -

they have any particular experience in running companies or engaging in work related to businesses similar to
the Company Business (excluding the case where they are merely holding shares of the companies), we request
provision of the specific details.
12. We request provision of the following information: whether the Large-scale Purchaser Group and its members
have substantial experience in running companies that run similar business to the Company Business, in countries
other than Japan, through acquiring shares or dispatching officers. If they have such experience, we request
provision of the following information with respect to the companies that the Large-scale Purchaser Group andits members have run: the names, governing laws of incorporation, the names of countries or regions in which
their offices are located (please indicate the main offices if there are multiple offices), business description,
history, capital structure and financial conditions, the percentage of the voting rights held by the Large-scale
Purchaser Group and its members in the companies, and how the Large-scale Purchaser Group and its members
ran the companies (such as whether they dispatched managers, what kind of support for realizing growth theLarge-scale Purchaser Group and its members provided for the companies, among others).
13. We request provision of the following information with respect to the Large-scale Purchaser Group and its
members: whether they have ever violated any laws and regulations (including laws, cabinet orders, rules,
directives, ordinances, guidelines, notifications, administrative dispositions, rules for financial instrument
exchanges, and/or other rules regardless of whether they are made in Japan or in foreign countries, and this shallapply hereinafter), in the present or in the past ten years (and if that is the case, the specific facts thereof), whether
they have been convicted (including any pending cases, and if they have been convicted, the name of the crimes
and the sentences), whether they have received any rulings, decisions, orders, or dispositions (including
imposition of taxes), instructions or indications (including omissions in collection of taxes at the source, as
identified by tax authorities) by judicial bodies, administrative bodies, and/or others (regardless of whether thebodies are located in Japan or in foreign countries, hereinafter “Rulings, etc.”) which determined any violationsof laws and regulations, etc., or whether they have been subject to any judicial procedures or administrative
procedures related to the Rulings, etc. (regardless of whether they are the procedures of Japan or of foreigncountries, and if they have been subject to any rulings or procedures , provide details of the Rulings, etc. andprocedures).
14. We request provision of the following information with respect to the Large-scale Purchaser Group and its
members: details of any ongoing lawsuits and/or other judicial procedures in Japan and in foreign countries(including the names of courts involved, the filing dates of the cases, involved parties, main issues, and amounts
in controversy).
15. We request provision of the following information with respect to the Large-scale Purchaser Group and its
members: if they have or have ever had any relationship(s) with anti-social groups or terrorist-relatedorganizations, a summary of the anti-social groups or terrorist-related organizations, the names of the person(s)having relationships with anti-social groups or terrorist-related organizations, and their relationships with antisocial groups or terrorist-related organizations.
16. We request provision of the following information with respect to any Funds which the Large-scale PurchaserGroup and its members have ever controlled or operated, corporate entities, partnerships, or other associations
the Large-scale Purchaser Group and its members have ever belonged to, or their group companies or theirmembers (including those who executed duties): whether they have ever violated any laws and regulations (ifthat is the case, the specific facts thereof), whether they have been convicted (including pending cases, and ifthey have been convicted, the name of the crimes and the sentences), whether they have received any Rulings,
etc. by judicial bodies, administrative bodies and/or others which determined violations of laws and regulations,or whether they have been subject to any judicial procedures or administrative procedures related to the Rulings,
etc. (if they have been subject to any rulings or procedures, provide details of the Rulings, etc. and procedures).

- 49 -

17. We request provision of the following specific information with respect to any case where the Large-scale
Purchaser Group has ever acquired or held share certificates, etc. of companies in Japan, respectively: if theLarge-scale Purchaser Group has ever made specific proposals, such as redirecting assets to the core business,disposing excessive assets, increasing dividends, exercising share buybacks, or appointing those who the Largescale Purchaser Group recommended as directors, or through actions, such as meetings with the managers, withthe aim of increasing the share price or returning profits to shareholders or others, specific details of the proposals,
the response of the companies that received the proposals, whether or not the share prices rose as a result of thecompanies implementing the proposals, and the contents of profits that the Large-scale Purchaser Group
subsequently received.
18. We request provision of the following specific information with respect to any case where the Large-scale
Purchaser Group has ever acquired or held share certificates, etc. of companies in Japan: whether proxy fights
have ever been carried out in order to realize the proposals of the Large-scale Purchaser Group, and, if so, what
the specific outcomes were.
19. We request provision of the following information: details on and the effectiveness of the internal control system(including company group collective internal control systems) and compliance system in order to comply withlaws and regulations of the Large-scale Purchaser Group.
20. We request provision of the balance sheets and the income statements of the respective companies from the past
three years that are included in the Large-scale Purchaser Group.
21. We request provision of the following information: if the investment activities of the Large-scale PurchaserGroup and its members include any cases in which they collected or attempted to collect the investment bydirecting the invested companies or large shareholders of the invested companies or the management or others
concerned with the companies to purchase the acquired shares after they had acquired the shares in the invested
companies, as well as a timeline of any such actions and their details. We also request provision of the following
information: whether they are considering directing the Company, large shareholders of the Company, or the
management or others to acquire the share certificates, etc. after they have acquired the shares of the Company,
and any other methods for collecting investments and their contents if the Company, large shareholders of theCompany, or the management or others decline the acquisition, as well as their thoughts on the economic
reasonableness, feasibility, timing, etc. thereof.
22. We request provision of the following specific information with respect to any investment activities the corporate
entities or the Funds that the Large-scale Purchaser Group and its members have ever conducted, controlled, or
operated, or the corporate entities or the Funds that the Large-scale Purchaser Group and its members have ever
belonged to, respectively: the names of the investment destinations, the reasons for choosing each of them as
investment destinations (including the specific contents of the investment criteria of the Large-scale PurchaserGroup), the timing of the beginning of the acquisition of the share certificates, etc., the purpose of acquiring theshare certificates, etc., investment policies, the method and period for collection of investments, proposals madeto investment destinations, and if any activity was conducted to enhance the corporate value of investment
destinations, the specific contents of the activity, the contents of involvement in business management after
making investments, whether the important assets were sold or disposed of after making investments, the method
for acquiring the share certificates, etc. of each investment destination, the method and the period for collectionof investment, the performance trend after making investments, and whether they established amicable
relationships with the management or employees of the respective investment destinations.
23. We request provision of the following information: the purpose of the holding of Held Share Certificates, etc. by
the Large-scale Purchaser Group and the future policy for the holding (if they are considering to dispose of theHeld Share Certificates, etc., the currently-presumable purpose, timing, trading conditions, the number of shares,
the counterparty, the method, and whether they intend to demand that the Company buy the Held Share- 50 -

Certificates, etc. through share buybacks (if there is such an intention, including its specific contents, such as thepresumed selling price, the total number of share certificates, etc.).

Part 2.

Purpose, Methods, and Contents, etc. of the Share Purchase

1. We request provision of a specific explanation for the reason, basis, etc. for selecting the Large-scale Purchaserfrom the Large-Scale Purchaser Group as the subject of the Share Purchase.
2. If the Large-scale Purchaser conducts the Share Purchase, the number of shareholders of the Company, thenumber of tradable shares, the ratio of tradable shares, and the current total market value of tradable shares will
decline, along with a decline in the liquidity of the Company’s shares. Taking the potential effects of thissituation on the Company’s shares into account, we request provision of your specific thoughts on (1) the impact
on the function to form the proper share price of the Company in the market, (2) the possibility of changing thelisted market of the Company’s shares and the impact on maintaining the listing, (3) the impact on the investment
appetite of potential investors in the Company (institutional investors), and (4) other impacts on the corporate
value and shareholders’ interests of the Company if the Share Purchase is carried out by the Large-scale
Purchaser. Additionally, we request provision of your specific reason and true intent for continuing to purchaseshare certificates, etc. of the Company even though shares of the Company will lose their liquidity, as mentioned
above.
3. Under the circumstances described above (that if the Share Purchase is carried out by the Large-scale Purchaser,
the liquidity of the Company’s shares will decrease), we request provision of your specific thoughts on how
much the share price is expected to rise and how shareholders’ interests will be influenced, by indicating the
grounds, basis, etc. for each case.
4. We request provision of the following specific information: the policy for acquiring share certificates, etc. of theCompany by the Large-scale Purchaser Group, the assumed investment returns, the period for collection of
investments, the investment amount to collect, and other basic approaches for investment policies.
5. We request provision of the following information: management or financial indicators on which importance isplaced when the Large-scale Purchaser Group invests in the Company, and the level of such indicators that theLarge-scale Purchaser Group finds desirable.
6. We request provision of the following specific information: whether the corporate value and the share value ofeach company of the Company group are appropriately evaluated in the current share price of the Company, andwhich criteria are employed for that evaluation. If you do not find them to have been evaluated appropriately,
we request provision of your specific thoughts on the reason why the Company’s shares have not been reasonably
evaluated in the market.
7. We request provision of the following information: the average cost per share when the Large-Scale PurchaserGroup has acquired the Held Share Certificates, etc. up to the present.
8. We request provision of the following specific information: whether you are considering to make some proposals
or offer the Company advice about the business management of the Company after the Share Purchase, whatkind of proposals or advice you plan to submit, and for what kind of event or under what kind of conditions.
9. We request provision of the following facts: the timing of when you initiated specific consideration of the Share
Purchase, the reason, history, and timing of your decision that to conduct the Share Purchase as a result of suchconsideration, and the facts and the premises that led you to make this decision.
10. We request provision of the specific reason for choosing the Company as an investment destination.
11. We request provision of the reason why you chose the present as the time to implement the Share Purchase.

- 51 -

12. We request provision of the reason why you chose the purchase in the market as the purchase method (i.e., thereason that you chose the purchase in the market rather than other methods, such as a tender offer).
13. If the Company conducts the process to confirm our existing shareholders’ will, we request your answer as towhether the Large-scale Purchaser will cooperate in the process. For instance, if the Company proposes anagenda item on the propriety of the Share Purchase to a general meeting of shareholders to confirm theshareholders’ will, whether the Large-scale Purchaser (1) will hold the Share Purchase temporarily and cooperate
in holding the general meeting of shareholders, and (2) will follow the resolution at the general meeting ofshareholders in the event that it is resolved to oppose the Share Purchase and demand that the Large-scale
Purchaser hold the Share Purchase (on the condition that the resolution needs the majority of the voting rights ofshareholders with voting rights who attend the general meeting of shareholders).
14. We request provision of the following information: details of the transactions involving the Company’s sharecertificates, etc. (such as the timing, counterparties, methods, prices, etc.) that the Large-scale Purchaser Grouphas made so far (including transactions made within the Large-scale Purchaser Group).
15. We request provision of the following specific information: if you have any experience in matters described in
Items 11 or 12, or in Part 1 above, detail which experience(s) of yours (along with which company such
experience(s) occurred with) will be useful in which part of the business management of the Company.
16. We request provision of the following specific information: the restrictions pursuant to the Foreign Exchange
Law and other laws that may be applicable to the implementation of the Share Purchase, the contents of any suchapproval or permission, etc. pursuant to the Antimonopoly Act and/or other laws that should be obtained fromgovernments or third parties within and outside Japan, and the current situation of obtaining, implementing, orcomplying with the above.
17. We request provision of the following specific information: the possibility of maintaining permissions andapprovals within and outside Japan necessary for managing the Company group and for complying with thevarious laws and regulations within and outside Japan after the completion of the Share Purchase.
18. We request provision of the following information, respectively: a summary of the investment banks, securities
corporations, and other financial institutions that have concluded a financial advisory agreement with those
persons, lawyers, accountants, and/or other advisors engaged by the Large-scale Purchaser Group for the Share
Purchase (including specified names, addresses, governing laws of incorporation, and names of representatives).

Part 3.

Basis for calculating the consideration for the Share Purchase and financial support thereof

1. We request provision of the following specific information: in order to execute the Share Purchase, the basis forcalculating the consideration for the Share Purchase as well as the details of the calculation(s) (including facts
and assumptions for the calculation(s), calculation methods, calculating institutions and information thereof,
numerical information used for the calculation(s), and the amounts of synergy and dis-synergy expected to result
from a series of transactions relating to the Share Purchase and the calculation basis thereof).
2. We request provision of the following specific information: if all or part of the funds used for the Share Purchase(including a purchase action relating to our shares acquired to date by the Large-scale Purchaser Group) consistof ready cash owned by individuals, Funds, corporations, unions, and other members of the Large-scale PurchaserGroup, the details of the ready cash (including names of the owners of the ready cash and ownership forms
thereof, amounts thereof, and proportion of the ready cash and funds procured from external sources).
Furthermore, we request the provision of any documents evidencing the ownership of the ready cash.
3. We request provision of the following specific information: if all or part of the funds used for the Share Purchase(including a purchase action relating to our shares acquired to date by the Large-Scale Purchaser Group) consistof funds procured from external sources, provide details of the funds procured from external sources (including- 52 -

specified names and capital structure of the providers of the procured funds, and including substantial providers,irrespective of whether provided directly or indirectly), and if there are entities substantially controlling theproviders of the procured funds, a summary of any such entities (including the specified forms of the control
over the providers of the procured funds, specified names, addresses, governing laws of incorporation, capital
structure, invested companies, the ratios thereof, and names and Careers during the past ten years ofrepresentatives), procurement methods, procured amounts, conditions for providing funds, presence/absence anddetails of mortgages and pledges after providing funds, and details of specified related transactions.
Furthermore, we request provision of any documents evidencing the receipt of the provided funds.

Part 4.

Communication with third parties

1. We request provision of the following information: if there is, in respect to the Share Purchase, prior discussion
and/or other communication (including communication such as an act of making an important suggestion as set
forth in Article 27-26, paragraph (1) of the Financial Instruments and Exchange Act) with third parties (including
our competitors) other than the Company and the Large-scale Purchaser Group, the specific forms, contents, anda summary of the third parties (including specified names, addresses, governing laws of incorporation, capital
structure, and names of representatives).

Part 5.

Contracts on our shares, etc. held or scheduled to be acquired by Large-scale Purchaser

1. We request provision of the following information with respect to lease contracts, mortgage contracts, repurchase
contracts, commitments to trade, and other important contracts or agreements regarding the share certificates,etc. of the Company (including those made orally, hereinafter “Mortgage Contracts, etc.”) that the Large-scale
Purchaser Group is executing at present or has executed in the past, a summary of the other parties to theMortgage Contracts, etc. (including specified names, addresses, governing laws of incorporation, capital
structure, and names of representatives), the number of share certificates, etc. of the Company covered by the
Mortgage Contracts, etc., and details of the Mortgage Contracts, etc.
2. We request provision of the following information: if the Large-scale Purchaser Group plans to execute theMortgage Contracts, etc. relating to the share certificates, etc. of the Company to be acquired in the Share
Purchase, a summary of the other parties to the Mortgage Contracts, etc. (including specified names, addresses,
governing laws of incorporation, capital structure, and names of representatives), the number of share certificates,etc. of the Company covered by the Mortgage Contracts, etc., and details of the Mortgage Contracts, etc.

Part 6.

Management policies, business plans, capital policies, and dividend policies of the Company andthe Company group after the Share Purchase

1. We request provision of the following information: whether the Large-scale Purchaser Group intends toparticipate in our company’s management, and if so, the details thereof.
2. We request provision of the following specific information: whether you may propose to dispatch directors andother officers to the Company, and under which situation(s) you will propose to dispatch officers.
3. We request provision of the following specific information: management policies, business plans, fiscal plans,
funding plans, investment plans, capital policies, and dividend policies of the Company and the Company group(including plans for sales, provision of mortgage, and disposal of the Company Business and assets after thecompletion of the Share Purchase) that the Large-scale Purchaser Group will design, as well as policies fortreatment of customers, suppliers, officers, and employees of the Company and the Company group, and otherstakeholders, including the local governments of areas in which the real estate and manufacturing facilities
managed by the Company are located, after the completion of the Share Purchase.
4. We request provision of the following information: details of the shareholding policies of the Held Share
Certificates, etc. by the Large-scale Purchaser Group after the completion of the Share Purchase (if the group- 53 -

purchases our share certificates, etc. additionally, or sells the Held Share Certificates, etc. in the market, items
assumed at present such as purposes, timing, transaction conditions, the number of shares, the other party,
methods, and presence/absence of the intention to request that the Company purchase the Held Share Certificates,etc. for share buybacks (and if having this intention, the assumed purchase amounts and the total number of sharecertificates, etc.)).
5. We request provision of the following specific information: what the Large-scale Purchaser Group thinks thesources of our corporate value are and what kind of medium and long-term measures should be implemented toenhance our corporate value.
6. We request provision of the following specific information: what the Large-scale Purchaser Group thinks of theprospects in the industry related to the Company Business and our position in the industry.
7. We request provision of the following specific information: what the Large-scale Purchaser Group, based on yourunderstanding of Item 6 above, thinks of the future demand and trends in the industry related to our business, ourposition in the industry (e.g., comparison with competitors), and the direction the management of the Company
should aim for in the future.
8. We request provision of the following specific information: your understanding and evaluation of our capital
policies, our capital policies deemed to be appropriate, and their effect(s) on our corporate value if those capital
policies were to be adopted.
9. We request provision of the following specific information: your understanding and evaluation of our dividend
policies, our dividend policies deemed to be appropriate, and their effect(s) on our corporate value if those
dividend policies were to be adopted.
10. We request provision of the following specific information: your understanding and evaluation of our asset
utilization policies, our asset utilization policies deemed to be appropriate, and their effect(s) on our corporate
value if those asset utilization policies were to be adopted.
11. We request provision of the following specific information: the policies of the Large-scale Purchaser Group forexercising its voting rights at the shareholders’ meeting of the Company (including details of the standards forexercising its voting rights) and its policies for exercising other rights as a shareholder.
12. We request provision of the following specific information: whether the Large-scale Purchaser Group expects tochange investment ratios, management systems (e.g., role sharing between the Large-scale Purchaser Group andthe Company), decision making methods, and/or business management policies, etc. after the Share Purchase,and if so, details regarding how those will be changed and for what kind of event or under what kinds ofconditions.
13. We request provision of the following specific information: whether the Large-scale Purchaser Group will, withrespect to the Company, implement acts such as capital increase/decrease, mergers, business assignment to/fromothers, stock exchange/transfer, and/or company split, as well as proposals, advice, and effects regardingtransactions such as disposal/acquisition of important properties (including exercise of shareholders’ appraisal
rights), and if so, the details thereof.

Part 7.

Treatment policies of our employees, unions, suppliers, customers, and other stakeholders
including local communities after the Share Purchase

1. We request provision of the following information: whether the Large-scale Purchaser Group intends to respect
our employees’ interests and wishes, and if so, the details thereof.

- 54 -

2. We request provision of the following information: whether the Large-scale Purchaser Group will request any
change(s) in our employees’ working environment, and if so, the details and reasons thereof, and what kind ofchanges will be requested and for what kind of event or under what kinds of conditions.
3. We request provision of the following information: whether the Large-scale Purchaser Group intends to respect
the interests and will of the Company and its present and future suppliers and/or customers, and if so, the details
thereof.
4. We request provision of the following information: whether the Large-scale Purchaser Group will request any
change(s) in the relationship with any suppliers and/or customers of our company and its affiliated companies,
and if so, the details and reasons thereof, and what kind of changes will be requested and for what kind of eventor under what kinds of conditions.
5. We request provision of the following information: whether the Large-scale Purchaser Group will propose any
reduction in the number of our employees (including what relates to sales of business, the same shall apply
hereinafter), and if so, for what kind of event the Large-scale Purchaser Group may propose such a reduction.

Part 8.

Specific measures for avoiding conflicts of interest with other shareholders of the Company

1. We request provision of the following information: whether the Large-scale Purchaser Group intends to respect
the interests and wishes of our existing shareholders (other than those belonging to the Large-scale PurchaserGroup), and if so, the details thereof.
End- 55 -

Appendix 4
Terms and Conditions for IssuanceofFirst Share Options-A

1.

Name of share optionsFirst Share Options-A (the “Share Options”)

2.

Number of Share Options
The latest total number of issued shares of the Company as of the Record Date (as defined in Section 5;
hereinafter the same) (excluding the number of the Company shares held by the Company).

3.

Form of allotment
Allotment to shareholders. The Share Options shall be allotted to the shareholders who are listed orrecorded in the shareholder registry on the Record Date at the rate of one Share Option per share of theCompany held by them. However, Share Options will not be allotted for the Company shares held by theCompany.

4.

Amount to be paid in for Share Options
None

5.

Record Date
April 24, 2020

6.

Date on which the allotment of Share Options becomes effective
April 27, 2020

7.

Type and number of shares underlying Share Options
The type and number of shares underlying one Share Option shall be one common share of the Company.

8.

Exercise period for Share Options
From September 1, 2020 to December 31, 2020

9.

Value of assets required for exercise Share Options(1)

The form of assets required to exercise each Share Option shall be cash, and the value thereof shallbe an amount calculated by multiplying the Exercise Price (as defined in (2) below) by the numberof shares to be allotted.

(2)

The amount of money per common share of the Company required to exercise the Share Options(the “Exercise Price”) shall be one yen.

- 56 -

10.

Conditions for exercise of Share Options(1)

Persons who fall under any of the items (i) through (iii) below (the “Ineligible Persons”) may not
exercise the Share Options:
(i)
(ii)

(iii)

City Index Eleventh Co., Ltd. (the “Large-scale Purchaser”);
Joint holder (meaning a “joint holder” defined in Article 27-23, paragraphs (5) of the
Financial Instruments and Exchange Act and including a person deemed to be a joint holder
pursuant to Article 27-23, paragraphs (6) of the same Act) or a specially related party(meaning a “specially related party” defined in Article 27-2, paragraph (7) of the Financial
Instruments and Exchange Act) of a Large-scale Purchaser, including Mr. Yoshiaki
Murakami, Ms. Mitsue Murakami, Ms. Aya Nomura, Ms. Rei Murakami, Mr. Yukihiro
Nomura, Mr. Tatsuya Ikeda, Mr. Hironao Fukushima, Mr. Fuminori Nakashima,
Mr. Masahiro Ohmura, Mita Securities Co., Ltd., Reno Co., Ltd., Fortis Co., Ltd., C&I
Holdings Co., Ltd., Kabushiki Kaisha Minami-Aoyama Fudosan, Office Support K.K.,
ATRA Co., Ltd., S-Grant Co., Ltd., City Index Holdings Co., Ltd., and City Index
Hospitality Co., Ltd.; or
A person who the Company’s board of directors reasonably determines falls under either ofthe following, taking into account the Indipendent Committee’s recommendations:(a)A person who acquires or succeeds to a Share Option from any of the persons set
forth in (i) above through to and including (iii) without the Company’s approval;or(b)
A “related party” of any of the persons set forth in (i) above through to andincluding (iii). A “related party” means investment banks, securities corporations,and other financial institutions that have concluded a financial advisory agreementwith any of the persons set forth in (i) above through to and including (iii), otherpersons who share common substantial interests with those persons, tender offer
agents, lawyers, accountants, other advisors, or persons who are substantiallycontrolled by those persons or who act jointly or cooperatively with those persons.
In deciding whether a partnership or other fund falls under a “related party,” thefund manager’s substantive identity and other factors shall be taken into account.

(2)

A holder of Share Options may exercise its Share Options only if the Company determines that theholder is not an Ineligible Person, such as where the holder provides the Company with thefollowing: a document containing its representations and warranties regarding the holder not beingan Ineligible Person as listed in (1) above (if the Share Options are exercised on behalf of a third
party, including the third party not being an Ineligible Person in (1) above), indemnifications andother matters designated by the Company; materials that demonstrate the satisfaction of conditions
reasonably required by the Company; and a document required by any laws, regulations, or the like.

(3)

If, pursuant to applicable securities laws and other laws, regulations and the like of foreign countries,
it is necessary to implement prescribed procedures or satisfy prescribed conditions with respect toexercise of the Share Options by any person residing in the jurisdiction of these laws, regulations
and the like, the person residing in that jurisdiction may exercise the Share Options only if theCompany deems that all of these procedures and conditions have been implemented or satisfied.
Meanwhile, even if implementation or satisfaction of the above procedures and conditions by theCompany would enable a person residing in that jurisdiction to exercise the Share Options, theCompany will not be obligated to implement or satisfy them.

(4)

The confirmation regarding the satisfaction of the conditions specified in (3) above shall be pursuant
to the procedures to be prescribed by the Company’s board of directors, which will be similar to
those set forth in (2) above.

(5)

No Stock Option may be partially exercised.
- 57 -

11.

Limitation on transfer of Share Options
Any transfer of the Share Options will require the approval of the Company’s board of directors.

12.

13.

Acquisition of Share Options(1)

If there is a resolution of the Company’s board of directors on or after April 28, 2020, then on theacquisition date designated by the Company’s board of directors, the Company may acquire all of
the Share Options held by the holder of the Share Options (except the Company) that could be
exercised in accordance with Section 10 (1) and (2) above, but that have not been exercised as ofsuch acquisition date (hereinafter referred to as “Exercisable Share Options” in (2) below) by
providing, as consideration therefor, common shares of the Company in the number equivalent to
the integer portion of the product of: (a) the number of Share Options to be acquired; and (b) the
number of shares underlying one Share Option.

(2)

If there is a resolution of the Company’s board of directors on or after April 28, 2020, then on theacquisition date designated by the Company’s board of directors, the Company may acquire theShare Options other than the Exercisable Share Options, held by the holder of all of the Share
Options (except the Company) that have not been exercised as of such acquisition date. It may dothis by providing, as a consideration therefor, with share options of the Company, the exercise ofwhich by Ineligible Persons is subject to certain restrictions (i.e., subject to the contents describedin the Exhibit), in the same number as the number of the Share Options to be acquired.

(3)

At any time not later than August 31, 2020, if the Company’s board of directors considers it
appropriate for the Company to acquire the Share Options, the Company may acquire all the Share
Options without consideration on a date separately designated by the Company’s board of directors.

(4)

The satisfaction of the conditions regarding acquisition of the Share Options pursuant to (1) and (2)above shall be confirmed by procedures similar to those set forth in Section 10 (2).

Stated capital and capital reserves to be increased in conjunction with the issuance of shares by exercising
Share Options
The amount of stated capital to be increased in conjunction with the issuance of shares by exercising Share
Options shall be the product of the maximum amount of increase in stated capital calculated in accordancewith Article 17 of the Rules of Corporate Accounting and 0.5, and if such calculated amount includes afraction less than one yen, such fraction shall be rounded up. The amount of capital reserves to be increased
shall be the difference in the maximum amount of increase in stated capital by the amount of stated capital
to be increased.

14.

Method for requesting the exercise of the Share Options(1)

If the Share Options are to be exercised, the matters necessary for the request to exercise the Share
Options shall be notified to the place accepting the request, set forth in Section 16, during theexercise period of the Share Options set forth in Section 8.

(2)

If the Share Options are to be exercised, in addition to the notice for the request to exercise the Share
Options provided in the preceding item, the total amount of assets to be contributed at the exerciseof the Share Options shall be paid in cash to the account designated by the Company at the place
handling payments, set forth in Section 17.

(3)

The request for the exercise of Share Options shall become effective on the date when all the mattersnecessary for the request have been notified to the place accepting the request, set forth in Section- 58 -

16, and the total amount of assets to be contributed at the exercise of the Share Options have been
paid in to the account set forth in the preceding item.
15.

Non-issuance of share option certificates
The Company will not issue share option certificates for the Share Options.

16.

Place of accepting requests for exercise of Share Options
Management Strategy Department of the Company

17.

Place of handling payments
Sumitomo Mitsui Trust Bank, Limited

18.

OthersOther than as set forth above, the decision-making for necessary matters regarding the issuance of the Share
Options, and any other acts will be entrusted to the representative director president of the Company.

- 59 -

(Exhibit) Details of First Share Options-B
1.

Name of share optionsFirst Share Options-B (the “Share Options”)

2.

Type and number of shares underlying share options
The type and number of shares underlying one Share Option shall be one common share of the Company.

3.

4.

Value of assets required to exercise Share Options(1)

The form of assets required to exercise each Share Option shall be cash, and the value thereof shallbe an amount calculated by multiplying the Exercise Price (defined in (2) below) by the number ofshares to be allotted.

(2)

The amount of money per common share of the Company required to exercise the Share Options(the “Exercise Price”) shall be one yen.

Exercise period for Share Options
From September 1, 2020 to August 31, 2035.

5.

Stated capital and capital reserves to be increased in conjunction with the issuance of shares by exercising
Share Options
The amount of stated capital to be increased in conjunction with the issuance of shares by exercising Share
Options shall be the product of the maximum amount of increase in stated capital calculated in accordancewith Article 17 of the Rules of Corporate Accounting and 0.5, and if such calculated amount includes afraction less than one yen, such fraction shall be rounded up. The amount of capital reserves to be increased
shall be the difference in the maximum amount of increase in stated capital by the amount of stated capital
to be increased.

6.

Limitation on transfer of Share Options
Any transfer of the Share Options will require the approval of the Company’s board of directors.

7.

Acquisition of Share Options
If any of the Share Options remains unexercised on the date separately designated by the Company’s boardof directors during the term from the date on which the 10th anniversary of their delivery date has passed
until the date on which the 11th anniversary of their delivery date has passed (the “Share Options Acquisition
Date”), the Company may acquire all of such Share Options (limited to those for which the exercise
conditions have not been satisfied) by providing, as consideration therefor, money equivalent to the fairvalue of the Share Options as of the Share Options Acquisition Date.

8.

Conditions for exercise of Share Options(1)

A holder of Share Options may not exercise the Share Options if the holder does not satisfy eitherof the following conditions (if the holder exercises the Share Options on behalf of a third party,
including the case where the third party does not satisfy either of the following conditions):- 60 -

(i)(ii)

A holder of Share Options does not continue a Large-scale Purchase Action, etc. (as definedin (4) below) and pledges not to conduct any Large-scale Purchase Action, etc. thereafter;and(i) If the ratio recognized by the Company’s board of directors as the holding ratio of sharecertificates, etc. (as defined below) of a holder of Share Options (however, for the purposeof this Section, when calculating the holding ratio of share certificates, etc., Ineligible
Persons (as defined below) other than a holder of Share Options or its joint holder (asdefined below) will be deemed to be joint holders of the holder of the Share Options; andthe Share Options held by Ineligible Persons will be excluded) falls below 20%; or(ii) where the ratio recognized by the Company’s board of directors as the holding ratio ofshare certificates, etc. of a holder of Share Options is 20% or greater, if the holder of Share
Options or other Ineligible Persons dispose of the shares of the Company through asecurities company authorized by the Company to do so and the ratio recognized by theCompany’s board of directors as the holding ratio of share certificates, etc. of the holder of
Share Options after that disposal falls below 20%, then the holder of Share Options andother Ineligible Persons may exercise the Share Options only to the extent that the ratio
recognized by the Company’s board of directors as the holding ratio of share certificates,etc. of the holder of Share Options after exercise of the Share Options falls under 20%.

(2)

If, pursuant to applicable securities laws and other laws, regulations and the like of foreign countries,
it is necessary to implement prescribed procedures or satisfy prescribed conditions with respect toexercise of the Share Options by any person residing in the jurisdiction of these laws, regulations
and the like, the person residing in that jurisdiction may exercise the Share Options only if theCompany deems that all of these procedures and conditions have been implemented or satisfied.
Meanwhile, even if implementation or satisfaction of the above procedures and conditions by theCompany would enable a person residing in that jurisdiction to exercise the Share Options, theCompany will not be obligated to implement or satisfy them.

(3)“Ineligible Persons” means a person who falls under any of the following (i) through to andincluding (iv). If City Index Eleventh Co., Ltd., Office Support K.K., and S-Grant Co., Ltd.
become holders of Share Options, for example, on the premise that the relationship as of February 21,
2020 is maintained, then, Mr. Yoshiaki Murakami, Ms. Mitsue Murakami, Ms. Aya Nomura, Ms. Rei
Murakami, Mr. Yukihiro Murakami, Mr. Tatsuya Ikeda, Mr. Hironao Fukushima, Mr. Fuminori
Nakashima, Mr. Masahiro Ohmura, Mita Securities Co., Ltd., Reno Co., Ltd., Fortis Co., Ltd. C&I
Holdings Co., Ltd., Kabushiki Kaisha Minami-Aoyama Fudosan, Office Support K.K., ATRA Co.,
Ltd., S-Grant Co., Ltd., City Index Holdings Co., Ltd., and City Index Hospitality Co., Ltd. fallunder the Ineligible Persons:(i)A holder of Share Options;(ii)
Joint holder (meaning a “joint holder” defined in Article 27-23, paragraphs (5) of the
Financial Instruments and Exchange Act and including a person deemed to be a joint holder
pursuant to Article 27-23, paragraphs (6) of the same Act) of a holder of Share Options;(iii)
Specially related party (meaning a “specially related party” defined in Article 27-2,
paragraph (7) of the Financial Instruments and Exchange Act) of a holder of Share Options;or(iv)
A person who the Company’s board of directors reasonably determines falls under either ofthe following:(a)
A person who acquires or succeeds to a Share Option from any of the persons set
forth in (i) above through to and including (iv) without the Company’s approval;or(b)
A “related party” of any of the persons set forth in (i) above through to andincluding (iv). A “related party” means investment banks, securities corporations,and other financial institutions that have concluded a financial advisory agreementwith any of the persons set forth in (i) above through to and including (iv), otherpersons who share common substantial interests with those persons, tender offer- 61 -

agents, lawyers, accountants, other advisors, or persons who are substantiallycontrolled by those persons or who act jointly or cooperatively with those persons.
In deciding whether a partnership or other fund falls under a “related party,” thefund manager’s substantive identity and other factors shall be taken into account.
(4)“Large-scale Purchase Actions, etc.” refers to the following actions (except for those conducted withprior consent of the Company’s board of directors):(i)a purchase (including but not limited to the commencement of a tender offer) of theCompany’s share certificates, etc. (as provided in Article 27-23, paragraph (1) of the
Financial Instruments and Exchange Act) with the aim of making the holding ratio of voting
rights (as defined below) of the specific shareholders’ group (as defined below) 20% or
greater;(ii)

a purchase (including but not limited to the commencement of a tender offer) of theCompany’s share certificates, etc. (as provided in Article 27-23, paragraph (1) of the
Financial Instruments and Exchange Act) after which the holding ratio of voting rights ofthe specific shareholders’ group would be 20% or greater; or(iii)irrespective of whether each action provided in (i) or (ii) above is conducted, any action
conducted by the Company’s specific shareholders’ group with another shareholder of theCompany (including cases where the relevant action is conducted with multiple othershareholders of the Company; hereinafter the same applies in this (iii)) that falls under eitherof the following items: (a) agreements or other actions after which the relevant shareholder
would fall into the category of a joint holder of the specific shareholders’ group; or (b) any
actions to establish a relationship between the specific shareholders’ group and the relevant
shareholder where either one substantially controls the other or where they act jointly orcooperatively (limited to cases where the total holding ratio of share certificates, etc. of thespecific shareholders and the relevant shareholder would be 20% or greater with respect tothe share certificates, etc. issued by the Company).

“Specific shareholders’ group” refers to (i) a “holder” (as provided in Article 27-23, paragraph (1)of the Financial Instruments and Exchange Act, including a person who is included in the definitionof a holder pursuant to paragraph (3) of the same Article) and a “joint holder” (as provided in Article
27-23, paragraph (5) of the same Act, including a person who is deemed to be a joint holder pursuant
to paragraph (6) of the same Article) of “share certificates, etc.” (as provided in Article 27-23,
paragraph (1) of the same Act) of the Company, (ii) a person who conducts a “purchase, etc.” (asprovided in Article 27-2, paragraph (1) of the same Act, including a purchase, etc. conducted on afinancial instruments exchange market) of “share certificates, etc.” (as provided in Article 27-2,
paragraph (1) of the same Act) of the Company and its “specially related party” (as provided in
Article 27-2, paragraph (7) of the same Act), and (iii) a related party of any of the persons set forthin (i) or (ii) above (meaning a group of investment banks, securities corporations, and other financial
institutions that have concluded a financial advisory agreement with those persons, other persons
who share common substantial interests with those persons, tender offer agents, lawyers,
accountants, other advisors, or persons reasonably considered by the Company’s board of directors
as persons who are substantially controlled by those persons or who act jointly or cooperatively withthose persons).
“Holding ratio of voting rights” refers to, depending on the specific purchase method of the specificshareholders’ group, (i) a “holding ratio of share certificates, etc.” (as provided in Article 27-23,
paragraph (4) of the Financial Instruments and Exchange Act) of the specific shareholders’ group if
such group is a holder and its joint holder of the “share certificates, etc.” (as provided in Article 2723, paragraph (1) of the same Act) of the Company (in this case, the “number of share certificates,etc. held” (as provided in the same paragraph) by joint holders of the holder will be considered for- 62 -

the purpose of this calculation); or (ii) the total of the “ownership ratio of share certificates, etc.” (asprovided in Article 27-2, paragraph (8) of the same Act) of the specific shareholders’ group if suchgroup is a person conducting a purchase, etc. of share certificates, etc. (as provided in Article 27-2,
paragraph (1) of the same Act) of the Company and the specially related party of such person. For
the purpose of calculating a holding ratio of share certificates, etc. or a ownership ratio of sharecertificates, etc., the latest annual securities report, quarterly securities report, and report on
repurchase may be referred to with respect to the “total number of issued shares” (as provided in
Article 27-23, paragraph (4) of the same Act) and the “total number of voting rights” (as provided
in Article 27-2, paragraph (8) of the same Act).

9.

10.

(5)

Decision on whether “a relationship between the specific shareholders’ group and the relevant
shareholder where either one substantially controls the other or where they act jointly orcooperatively” has been established will be made based on (a) formation of any relationship such asa new investment relationship, business alliance relationship, business or contractual relationship,
interlocking directorate relationship, funding relationship, credit granting relationship, relationshipof substantial interests concerning share certificates, etc. (as provided in Article 27-23, paragraph(1) of the Financial Instruments and Exchange Act) of the Company through derivatives, stock
lending, etc.; and (b) effects that the specific shareholders’ group and the relevant shareholder
directly or indirectly have on the Company, among other things.

(6)

Decision on whether the action specified in (iii) above has taken place will be reasonably made by
the Company’s board of directors. The Company’s board of directors may request informationfrom its shareholders to the extent necessary to make the decision on whether the relevant action
falls under the requirements specified in (iii) above.

(7)

The confirmation regarding the satisfaction of the conditions specified in (2) above shall be pursuant
to the procedures to be prescribed by the Company’s board of directors.

(8)

No Stock Option may be partially exercised.

Method for requesting the exercise of the Share Options(1)

If the Share Options are to be exercised, the matters necessary for the request to exercise the Share
Options shall be notified to the place accepting the request, set forth in Section 11, during theexercise period of the Share Options set forth in Section 4.

(2)

If the Share Options are to be exercised, in addition to the notice for the request to exercise the Share
Options provided in the preceding item, the total amount of assets to be contributed at the exerciseof the Share Options shall be paid in cash to the account designated by the Company at the place
handling payments, set forth in Section 12.

(3)

The request for the exercise of Share Options shall become effective on the date when all the mattersnecessary for the request have been notified to the place accepting the request, set forth in Section
11, and the total amount of assets to be contributed at the exercise of the Share Options have been
paid in to the account set forth in the preceding item.

Non-issuance of share option certificates
The Company will not issue share option certificates for the Share Options.

11.

Place of accepting requests for exercise of Share Options
Management Strategy Department of the Company- 63 -

12.

Place of handling payments
Sumitomo Mitsui Trust Bank, Limited

13.

OthersOther than as set forth above, the decision-making for necessary matters regarding the issuance of the Share
Options, and any other acts will be entrusted to the representative director president of the Company.

End.

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