##### 



Exhibit 2.3



---

PAYING AGENT, CONVERSION AGENT
AND REGISTRAR AGREEMENT

Dated April 11, 2000

Among



INTERNET INITIATIVE JAPAN INC.





THE BANK OF NEW YORK



and



BANQUE INTERNATIONALE À LUXEMBOURG





relating to

¥15,000,000,000
1.75% Convertible Notes
due 2005







---





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##### 



TABLE OF CONTENTS



|                                                   |  |                                          |  |  |   |      |  | 
|-------------------------------------------------- |  | ---------------------------------------- |  |  | - | ---- |  | 
|                                                   |  |                                          |  |  |   | PAGE
|                                                   |  |                                          |  |  |   |     
|ARTICLE 1
DEFINITIONS                             
|                                                  
|SECTION 1.01.                                      |  | Definitions                              |  |  | 2 |     
|                                                  
|ARTICLE 2
APPOINTMENTS                            
|                                                  
|SECTION 2.01.                                      |  | Appointments                             |  |  | 2 |     
|                                                  
|ARTICLE 3
THE NOTES                               
|                                                  
|SECTION 3.01.                                      |  | Form of the Notes                        |  |  | 3 |     
|SECTION 3.02.                                      |  | Execution and Authentication             |  |  | 4 |     
|                                                  
|ARTICLE 4
PAYMENT                                 
|                                                  
|SECTION 4.01.                                      |  | Payment to the Principal Paying Agent    |  |  | 4 |     
|SECTION 4.02.                                      |  | Notification of Payment                  |  |  | 5 |     
|SECTION 4.03.                                      |  | Payment by Paying Agents                 |  |  | 5 |     
|                                                  
|ARTICLE 5
NOTIFICATION IN THE EVENT OF NON-PAYMENT
|                                                  
|SECTION 5.01.                                      |  | Notification in the Event of Non-payment |  |  | 6 |     
|                                                  
|ARTICLE 6
ADVANCES                                
|                                                  
|SECTION 6.01.                                      |  | Advances                                 |  |  | 6 |     
|                                                  
|ARTICLE 7
CONVERSION                              
|                                                  
|SECTION 7.01.                                      |  | Duties of the Conversion Agent           |  |  | 6 |     
|SECTION 7.02.                                      |  | Notes Held by Conversion Agent           |  |  | 6 |     





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##### 



|                                |  |                                                                           |  |  |    |      |  | 
|------------------------------- |  | ------------------------------------------------------------------------- |  |  | -- | ---- |  | 
|                                |  |                                                                           |  |  |    | PAGE
|                                |  |                                                                           |  |  |    |     
|SECTION 7.03.                   |  | Notification                                                              |  |  | 6  |     
|SECTION 7.04.                   |  | Notification to the Conversion Agent                                      |  |  | 7  |     
|SECTION 7.05.                   |  | Company to Provide Conversion Notice                                      |  |  | 8  |     
|SECTION 7.06.                   |  | Conditions                                                                |  |  | 8  |     
|SECTION 7.07.                   |  | Duties of Luxembourg Paying and Conversion Agent in Respect of Conversion |  |  | 8  |     
|                               
|ARTICLE 8
EARLY REDEMPTION     
|                               
|SECTION 8.01.                   |  | Notice of Redemption                                                      |  |  | 8  |     
|SECTION 8.02.                   |  | Redemption Notice                                                         |  |  | 8  |     
|SECTION 8.03.                   |  | Partial Redemption                                                        |  |  | 9  |     
|                               
|ARTICLE 9
CANCELLATION OF NOTES
|                               
|SECTION 9.01.                   |  | Cancellation by Registrar                                                 |  |  | 9  |     
|SECTION 9.02.                   |  | Cancellation by Issuer                                                    |  |  | 9  |     
|SECTION 9.03.                   |  | Cancelled Notes                                                           |  |  | 9  |     
|SECTION 9.04.                   |  | Certification of Payment Details                                          |  |  | 9  |     
|SECTION 9.05.                   |  | Records                                                                   |  |  | 9  |     
|                               
|ARTICLE 10
DUTIES OF REGISTRAR 
|                               
|SECTION 10.01.                  |  | The Register                                                              |  |  | 10 |     
|SECTION 10.02.                  |  | Transfers                                                                 |  |  | 10 |     
|SECTION 10.03.                  |  | Miscellaneous                                                             |  |  | 11 |     
|                               
|ARTICLE 11
REMUNERATION        
|                               
|SECTION 11.01.                  |  | Fees                                                                      |  |  | 11 |     
|SECTION 11.02.                  |  | Costs                                                                     |  |  | 11 |     
|SECTION 11.03.                  |  | Stamp Duties                                                              |  |  | 11 |     

ii



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##### 



|                                            |  |                                             |  |  |    |      |  | 
|------------------------------------------- |  | ------------------------------------------- |  |  | -- | ---- |  | 
|                                            |  |                                             |  |  |    | PAGE
|                                            |  |                                             |  |  |    |     
|ARTICLE 12
USE OF MONEY BY PAYING AGENTS   
|                                           
|SECTION 12.01.                              |  | Use of Money by Paying Agents               |  |  | 11 |     
|ARTICLE 13
MISCELLANEOUS                   
|                                           
|SECTION 13.01.                              |  | Publication of Notices                      |  |  | 12 |     
|SECTION 13.02.                              |  | No Implicit Duties                          |  |  | 12 |     
|SECTION 13.03.                              |  | No Agency Or Trust                          |  |  | 12 |     
|SECTION 13.04.                              |  | Liability                                   |  |  | 12 |     
|SECTION 13.05.                              |  | Indemnity by the Company                    |  |  | 12 |     
|SECTION 13.06.                              |  | Liability of the Agent                      |  |  | 12 |     
|SECTION 13.07.                              |  | Advice of Counsel                           |  |  | 13 |     
|SECTION 13.08.                              |  | Copies of Documents                         |  |  | 13 |     
|SECTION 13.09.                              |  | Acquisition of Notes                        |  |  | 13 |     
|SECTION 13.10.                              |  | Merger                                      |  |  | 13 |     
|SECTION 13.11.                              |  | Severability                                |  |  | 13 |     
|                                           
|ARTICLE 14
REPLACEMENT OF AGENTS           
|                                           
|SECTION 14.01.                              |  | Agents Required                             |  |  | 14 |     
|SECTION 14.02.                              |  | Appointment                                 |  |  | 14 |     
|SECTION 14.03.                              |  | Resignation                                 |  |  | 14 |     
|SECTION 14.04.                              |  | Delivery of Records by Agent on Termination |  |  | 15 |     
|SECTION 14.05.                              |  | Change of Office                            |  |  | 15 |     
|                                           
|ARTICLE 15
NOTICES                         
|                                           
|SECTION 15.01.                              |  | Notices                                     |  |  | 15 |     
|                                           
|ARTICLE 16
AMENDMENTS, SUPPLEMENTS, WAIVERS
|                                           
|SECTION 16.01.                              |  | Without Consent of Holders                  |  |  | 16 |     
|SECTION 16.02.                              |  | With Consent of Holders                     |  |  | 17 |     

iii



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|                                          |  |                              |  |  |    |      |  | 
|----------------------------------------- |  | ---------------------------- |  |  | -- | ---- |  | 
|                                          |  |                              |  |  |    | PAGE
|                                          |  |                              |  |  |    |     
|ARTICLE 17
GOVERNING LAW AND JURISDICTION
|                                         
|SECTION 17.01.                            |  | Governing Law                |  |  | 17 |     
|SECTION 17.02.                            |  | Jurisdiction                 |  |  | 18 |     
|SECTION 17.03.                            |  | Agent for Service of Process |  |  | 18 |     
|SECTION 17.04.                            |  | Waiver of Jury Trial         |  |  | 18 |     
|                                         
|ARTICLE 18
COUNTERPARTS                  
|                                         
|SECTION 18.01.                            |  | Counterparts                 |  |  | 18 |     

iv



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##### 



EXHIBITS

|          |  |                                                                                                              |  | 
|--------- |  | ------------------------------------------------------------------------------------------------------------ |  | 
|Annex 1   |  | Terms and Conditions of the Notes                                                                           
|Annex 2   |  | Form of Notes                                                                                               
|Annex 3   |  | Form of Restricted Note                                                                                     
|Annex 4   |  | Form of Unrestricted Note                                                                                   
|          |  |                                                                                                             
|Exhibit A |  | Conversion Notice                                                                                           
|Exhibit B |  | Form of notification to be sent by the Conversion Agent to the Company, the Transfer Agent and the Registrar
|Exhibit C |  | Form of notification to be sent by the Share Custodians Agent to the Conversion Agent                      





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##### 



This Agreement is made on April 11, 2000 among:



| | (1) |  | INTERNET INITIATIVE JAPAN INC., as issuer of the Notes referred to
below (the Company),                                                   
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | THE BANK OF NEW YORK (the Bank), at its specified offices in
London, England as principal paying agent, conversion agent and registrar and
|
| | (3) |  | BANQUE INTERNATIONALE À LUXEMBOURG (BIL) at its specified offices in
Luxembourg as Luxembourg paying and conversion agent.                
|

| | Whereas:
| | --------

|
|
|
|
|
|

| | Now it is hereby agreed as follows:
| | -----------------------------------





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ARTICLE 1
DEFINITIONS

SECTION 1.01.
Definitions.  Capitalized terms used herein and not
otherwise defined shall, unless the context otherwise provides, have the
meanings specified in the Terms and Conditions which are attached hereto as
Annex 1. For purposes of this Agreement:

Business Day means a day on which banks in London, Tokyo and Luxembourg
are not authorized or obligated to close for business and on which foreign
exchange dealings may be transacted in London, Tokyo and Luxembourg.

Unless otherwise specified, all references herein to Articles, Sections,
Exhibits and Annexes are to articles, sections, exhibits, annexes of or to this
Agreement. References to specific Conditions are to Conditions contained in the
Terms and Conditions. The words hereof, herein and hereunder and words

of similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement.

ARTICLE 2
APPOINTMENTS

SECTION 2.01.
Appointments.  The Company hereby appoints the Bank to act
as Registrar (the Registrar), principal paying agent (the Principal Paying
Agent), and conversion agent (the Conversion Agent) in respect of the Notes
and in accordance with the provisions of this Agreement and the Terms and
Conditions. The Bank hereby accepts such appointment. The Company hereby
appoints BIL to act as Luxembourg paying and conversion agent (the Luxembourg
Paying and Conversion Agent) in respect of the Notes in accordance with the
provisions of this Agreement and the Terms and Conditions and BIL hereby
accepts such appointment. The Registrar, the Principal Paying Agent, the
Conversion Agent and the Luxembourg Paying and Conversion Agent are
collectively referred to herein as the Agents and each as an Agent. The
Company reserves the right to vary or terminate the appointment of any Agent,
to appoint additional or other registrars, paying agents or conversion agents,
or to approve any change in the office through which any such Agent acts,
provided that there will at all times be a registrar, a paying agent and a
conversion agent for the Notes.

2



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ARTICLE 3
THE NOTES

SECTION 3.01. Form of the Notes.  Notes issued in definitive, fully
registered and certificated form will be substantially in the form attached
hereto as Annex 2. The Notes may have notations, legends or endorsements as
required by law, securities exchange rules or usage. Each Note shall be dated
the date of its authentication, as provided in Section 3.02. Except as
set forth in Condition 1(5) of the Terms and Conditions, individual definitive
Note certificates shall not be issued.

The Notes shall on issue be represented by two permanent global
certificates in registered form, without interest coupons. Notes initially
sold in reliance on Rule 144A (Rule 144A) under the United States Securities
Act of 1933, as amended (the Securities Act), shall be referred to as
Restricted Notes. Restricted Notes will initially be represented by a single
global Note in fully registered form without interest coupons (the Restricted
Global Note). Notes initially sold in reliance on Regulation S under the
Securities Act will be known as Unrestricted Notes. The Unrestricted Notes
will initially be represented by a single global Note in fully registered form
without interest coupons (the Unrestricted Global Note and together with the
Restricted Global Note, the Global Notes). The Restricted Global Note and
the Unrestricted Global Note will be registered in the name of The Bank of New
York Depositary (Nominees) Limited, as nominee of The Bank of New York, the
common depositary (the Common Depositary) for the Euroclear System
(Euroclear) and Clearstream Banking, société anonyme (Clearstream
Luxembourg), and deposited with a the Common Depositary. The Restricted
Global Note and the Unrestricted Global Note shall be substantially in the
forms attached as Annex 3 and Annex 4 hereto, respectively. The Terms and
Conditions will be attached to each of the Notes and to each Global Note.

Each Global Note shall represent the outstanding Notes as shall be
specified therein, and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be increased or reduced to reflect transfers or exchanges. Any endorsement of
a Global Note to reflect the amount of any increase or decrease in the amount
of the outstanding Notes represented thereby shall be made by the Registrar or
at the direction of the Registrar.

The Notes shall be issuable in minimum denominations of ¥24,000,000 and
any amount in excess thereof that is a whole multiple of ¥24,000,000.

3



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##### 



SECTION 3.02. Execution and Authentication.  Each Global Note will bear
the manual or facsimile signature of a duly authorized signatory of the Company
and be dated the date of payment of the purchase price for the Notes to the
Company. Each Global Note shall be authenticated manually by or on behalf of
the Registrar as is required under the applicable regulations and conventions
of Euroclear and Clearstream Luxembourg, respectively, pursuant to an order
delivered by the Company to the Registrar, and signed by one of the Companys
authorized signatories.

ARTICLE 4
PAYMENT

SECTION 4.01. Payment to the Principal Paying Agent.  The Bank shall act
as Principal Paying Agent with respect to the Notes until such time as the
Company varies such appointment. On the Record Date with respect to any
payment due in respect of the Notes, the Principal Paying Agent shall obtain
from the Registrar the principal amount of Notes represented by the Restricted
Global Note and the principal amount of Notes represented by the Unrestricted
Global Note and shall, on the Record Date, notify the Company as to the amount
of such payment to be made to the Principal Paying Agent.

In order to provide for the payments due in respect of the Notes
outstanding on the Record Date, the Company shall unconditionally pay, or cause
to be paid, to the Principal Paying Agent, for value on the second Business Day
prior to the date such amounts in respect of the Notes are due, an amount in
Japanese Yen sufficient (together with any funds then held by or on behalf of
the Principal Paying Agent which are available for such purpose) to pay the
amount due in respect of the Restricted Global Note and the Unrestricted Global
Note in accordance with this Agreement and as provided in the preceding paragraph.
Funds received by the Principal Paying Agent shall not be invested.

The Company may make payment of any cash amounts due on conversion of
Notes through the Principal Paying Agent. In such event, the Principal Paying
Agent shall effect such payment promptly following receipt from the Company.

In the event the Notes are issued as definitive certificates and not in
the form of Global Notes, payments may be effected through the Luxembourg
Paying and Conversion Agent.

4



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##### 



The Company hereby authorizes and directs the Principal Paying Agent, from
the amounts paid to it, to transfer any or all such amounts to the Luxembourg
Paying and Conversion Agent and authorizes and directs the Luxembourg Paying
and Conversion Agent, from the amounts so transferred to it, to make payment on
the Notes, as specified in Clause 4.03 below, on the relevant payment
date as set forth in the Terms and Conditions, and the Luxembourg Paying and
Conversion Agent shall ensure that such payments are credited to the respective
recipients in a timely manner.

SECTION 4.02. Notification of Payment.  The Company shall on or before
10:00 a.m. (London time) on the second Business Day prior to each due date for
payment in respect of the Notes procure that the bank through which such
payment is to be made will send the Principal Paying Agent confirmation that it
has received from the Company an irrevocable instruction to make the relevant
payment (by tested telex or authenticated SWIFT).

SECTION 4.03. Payment by Paying Agents.  Out of the sums paid to the
Principal Paying Agent in respect of interest and principal on the Notes, the
Principal Paying Agent will make payments to Euroclear and Clearstream
Luxembourg in Japanese Yen.

Notwithstanding the forgoing, payments pursuant to Condition 5(6) or
Condition 7 of the Terms and Conditions or payments made by the Company to the
Noteholders according to section 2(e) of the Registration Rights Agreement, if
any, will be payable through Euroclear and Clearstream Luxembourg to the
registered account maintained by the payee. A Noteholders registered account
means the yen account (in the case of a non-resident of Japan, the non-resident
yen account) maintained by or on behalf of it with a bank in Japan, details of
which appear on the Register at the close of business on the relevant Record
Date and a Noteholders registered address means its address appearing on the
Register at that time. Where payment is to be made by transfer to a registered
account, payment instructions will be made for value on the due date.

The Principal Paying Agent, and the Luxembourg Paying and Conversion Agent
(collectively, the Paying Agents) shall obtain from the Registrar, and the
Registrar shall supply, such details as are required for the Paying Agents to
make payment as stated above.

The Company shall provide for prompt notice to the Principal Paying Agent
in case the Company has to undertake payments to the Noteholders according to
section 2(e) of the Registration Rights Agreement.

5



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##### 



The Principal Paying Agent agrees to forward on to the Company any and all
payments made by converting Noteholders in accordance with Condition 5 of
the Terms and Conditions within five business days after the interest
Payment Date.

ARTICLE 5
NOTIFICATION IN THE EVENT OF NON-PAYMENT

SECTION 5.01.
Notification in the Event of Non-payment.  The Principal
Paying Agent shall forthwith notify the Company if it has not received payment
unconditionally in the manner provided in Section 4.01 or if it has not
received the confirmation required to be delivered in accordance with Section 4.02.

ARTICLE 6
ADVANCES

SECTION 6.01.
Advances.  If the amounts required for the payment of
principal, interest or otherwise are not, or not fully, received by the
Principal Paying Agent at the time and in the manner provided for in
Section 4.01
and if the Principal Paying Agent has received the confirmation
delivered in accordance with Section 4.02, the Paying Agents shall be
entitled, but not in any event be obliged, to advance the necessary funds and
to charge the Company interest on the amount of such advance at the rates
applied by them from time to time on overdraft facilities extended to prime
borrowers.

ARTICLE 7
CONVERSION

SECTION 7.01.
Duties of the Conversion Agent.  The Conversion Agent
shall accept deposit on behalf of the Company of a Conversion Notice in the
form of Exhibit A hereto (in duplicate), duly completed and signed, and any
amount payable by the relevant holder under Condition 5 of the Terms and
Conditions.

SECTION 7.02.
Notes Held by Conversion Agent.  On deposit of a
Conversion Notice (in duplicate) and transfer of the corresponding principal
amount of Notes and payment of any required amount in accordance with
Section 7.01,
the Conversion Notice so deposited, the Notes so transferred and
any relevant payments shall be deemed to be held by the Conversion Agent as the
agent of the Company.

6



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##### 



SECTION 7.03.
Notification.  (a) Promptly following deposit of a
Conversion Notice and transfer of the corresponding principal amount of Notes
and payment of any required amount in accordance with Section 7.01 hereof, the Conversion Agent shall (i) verify that the person presenting the
Conversion Notice is a holder of the Note referenced in the Conversion Notice;
(ii) verify that the Conversion Notice (in duplicate) has been duly completed
and signed in accordance with its terms; (iii) verify that the Conversion
Notice is accompanied by all amounts payable, if any, by the holder under
Condition 5; (iv) verify that a corresponding principal amount of Notes has
been transferred to the account of the Conversion Agent with Euroclear and/or
Clearstream Luxembourg; (v) endorse the Conversion Notice to that effect; (vi)
indicate on the Conversion Notice whether it relates to Notes represented by
the Unrestricted Global Note or Notes represented by the Restricted Global
Note; (vii) notify the Company, the Registrar and the Companys transfer agent
in respect of the Shares (currently The Sumitomo Trust and Banking Company,
Limited (the Transfer Agent)) and, where the converting holder has elected to
receive Conversion ADSs, the Depositary (in each case, in the manner specified
in Exhibit B hereto or such other form as shall for the time be the current form) by facsimile of the
information required by Exhibit B with respect to each such Conversion Notice;
and (viii) notify the Company of the amount of any cash received from the
converting Noteholder required to be paid to the Company, and remit such cash
as directed by the Company.

(b)  Each Conversion Notice will specify the method by which the Noteholder
will acquire the Conversion Shares or Conversion ADSs and cash, if any,
deliverable upon conversion of the Notes to which it relates.

SECTION 7.04.
Notification to the Conversion Agent.  (a) Forthwith upon
receipt of the notification referred to in Section 7.03(a), the Company shall
cause the Share Custodians Agent to notify the Conversion Agent by facsimile
(in the manner specified in Exhibit C hereto), in the case of a Note in respect
of which the Conversion Right has been exercised, confirming transfer free of
payment in accordance with such Conversion Notice of the relevant Conversion
Shares. Where the converting holder has elected to receive Conversion ADSs,
the Company shall (A) instruct the Transfer Agent to transfer the appropriate
number of Shares to the Depositary or its custodian
against issuance of ADSs representing such Shares and (B)
instruct the Depositary to confirm transfer free of payment in accordance with
such Conversion Notice.

(b)  Promptly upon receipt of the verification referred to in
Section 7.03(a) but not before, the Registrar shall remove the name of the
relevant Noteholder from the Register or reduce the number of Notes of which it
is holder, as appropriate, and decrease the aggregate principal amount of the
Global Note which represented the Note(s) to which the Conversion Notice
relates.

7



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##### 



SECTION 7.05.
Company to Provide Notice.  Promptly upon any adjustment to
the Conversion Price, the Company will provide the Principal Paying Agent with
a notice setting forth the adjusted Conversion Price.

SECTION 7.06.
Conditions.  The Company undertakes to comply with the
Terms and Conditions with respect to conversion of the Notes and (where so
required in accordance with the Terms and Conditions) to cause Conversion
Shares or Conversion ADSs to be transferred in satisfaction of the Conversion
Right in accordance with the provisions hereof and the Terms and Conditions.

SECTION 7.07. Duties of Luxembourg Paying and Conversion Agent in
Respect of Conversion.  Conversions of Notes may be effected through the
Luxembourg Paying and Conversion Agent. The Luxembourg Paying and Conversion
Agent has the same rights and responsibilities in respect of any Notes
submitted to it for conversion as are set forth in Sections 7.01 through 7.06 with respect to the Conversion Agent.

ARTICLE 8
EARLY REDEMPTION

SECTION 8.01.
Notice of Redemption.  If the Company intends to redeem
the Notes in accordance with Condition 5(2) of the Terms and Conditions, it
shall give notice to the Registrar of its intention in writing at least 5 days
before the giving of the notice of redemption required to be given to
Noteholders pursuant to such condition. Such notice shall state the date on
which such Notes are to be redeemed and the principal amount of Notes to be
redeemed.

SECTION 8.02.
Redemption Notice.  The Registrar shall publish the notice required in
connection with such redemption, at the Companys expense (upon receipt of such
form of notice from the Company), as provided in Condition 10 of the Terms and
Conditions. Such notice shall specify the date fixed for redemption, the
redemption price and the manner in which redemption will be effected.

SECTION 8.03.
Partial Redemption.  In the case of a partial redemption
of Notes pursuant to Condition 5(2) of the Terms and Conditions, the Notes to
be redeemed will be selected in such manner as the Principal Paying Agent
shall deem to be appropriate and fair.

8



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##### 



ARTICLE 9
CANCELLATION OF NOTES

SECTION 9.01.
Cancellation by Registrar.   All Notes which are redeemed
or converted shall be cancelled by the Registrar (if not already cancelled) and
the amount of the relevant Global Note reduced.

SECTION 9.02. Cancellation by Issuer.   The Company and any of its
subsidiaries or affiliates may at any time purchase Notes in the open market or
otherwise, subject to the provisions of Condition 5(28) of the Terms and
Conditions. All Notes which are so purchased will be cancelled by the Registrar
and the amount of the relevant Global Note reduced.

SECTION 9.03. Cancelled Notes.   Each of the Paying Agents and the
Conversion Agent shall provide to the Registrar all information required by the
Registrar in order to give all the relevant details for the purpose of Section 9.04
hereof to the Registrar.

SECTION 9.04. Certification of Payment Details.   Subject to receipt of
the relevant information, each of the Paying Agents and the Conversion Agent
shall as soon as practicable, and in any event within one month after the end
of the calendar quarter during which any such redemption, conversion or payment
(as the case may be) takes place, furnish the Company and the Registrar with a
certificate stating (as applicable): (i) the aggregate amounts paid in respect
of Notes redeemed or purchased by the Company and cancelled; and (ii) the
aggregate principal amount of Notes converted and cancelled.

SECTION 9.05. Records.   Subject to the receipt of the relevant
information, each of the Paying Agents and the Conversion Agent shall keep a
full and complete record of all Notes and of their redemption, repurchase,
conversion, payment, cancellation, dispatch and replacement (as appropriate) and shall
make such record available at all reasonable times to the Company and the
Registrar.

The Registrar shall notify each of the Paying Agents and the Conversion
Agent of the aggregate principal amount of the Notes that are issued and the
same shall form the basis of the records to be kept by each of the Agents.

9



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##### 



ARTICLE 10
DUTIES OF REGISTRAR

SECTION 10.01. The Register.   The Registrar shall maintain a register (the
Register) in London, England in accordance with the Terms and Conditions. The
Register shall show the aggregate amount of Notes represented by each Global
Note at the date of issue and all subsequent transfers and changes of ownership
in respect thereof and the names and addresses of the registered holders of the
Notes.

The Registrar shall at all reasonable times during office hours make the
Register available to the Company, the Agents or any person authorized by any
of them for inspection and for the taking of copies thereof or extracts
therefrom, and the Registrar shall deliver, at the expense of the Company, to
such persons all such lists of holders of Notes, their addresses, registered
accounts, holdings and other details as they may request.

SECTION 10.02. Transfers.   The Registrar will receive requests for the
transfer of Notes and effect the necessary entries. Transfers of Notes will be
made in accordance with the Terms and Conditions, the procedures established
for this purpose among Euroclear, Clearstream Luxembourg and the Registrar, and
the regulations of Euroclear and Clearstream Luxembourg applicable to such
transfers. Any such transfer which results in a change to the aggregate
principal amount of the Restricted Global Note and the Unrestricted Global Note
will be notified by the Common Depositary to the Registrar as a transfer from
one Global Note to the other. The Registrar shall promptly enter in the
Register details of any transfer that shall cause the aggregate principal
amounts represented by each Global Note to be amended accordingly and shall
notify the Conversion Agent.

Every Restricted Note shall be subject to the restrictions on transfer
provided in the legend to be set forth in such Restricted Note, substantially
in the form set forth in Annex 2 (the Securities Act Legend). Whenever a
Restricted Note is presented for registration of transfer or a replacement
certificate issued in respect of a Restricted Note, the Registrar shall only
deliver certificates with respect to Restricted Notes that bear the Securities
Act Legend, unless there is delivered to the Registrar satisfactory evidence,
which may include an opinion of counsel, that neither the Securities Act Legend
nor the restrictions on transfer therein are required to ensure compliance with
the provisions of the U.S. Securities Act of 1933, as amended.

SECTION 10.03. Miscellaneous.   The Registrar will carry out such other
acts as may be necessary to give effect to the Terms and Conditions and the
other provisions of this Agreement.

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ARTICLE 11
REMUNERATION

SECTION 11.01. Fees.   The Company shall, in respect of the services to be
performed by each of the Agents under this Agreement, pay to each of the Agents
the commissions, fees and expenses of each of the Agents as separately agreed
in writing with each of the Agents.

SECTION 11.02. Costs.   The Company shall pay to each of the Agents all reasonable
out-of-pocket expenses incurred by it in its agency capacities in connection
with the services performed under this Agreement, including reasonable
attorneys fees and expenses, or in connection with the investigation or defence
of any claims arising out of any action taken or omitted in connection with
this Agreement (except where such claims result from the misconduct,
negligence, wilful default, bad faith or breach of terms of this Agreement by
such Agent, its officers, agents or employees) promptly upon receipt from such
Agent of notification of the amount of such expenses together with the relevant
invoices and/or receipts.

SECTION 11.03. Stamp Duties.   The Company shall pay or reimburse all
stamp, transaction and other taxes, fees or duties, if any, to which this
Agreement may be subject.

ARTICLE 12
USE OF MONEY BY PAYING AGENTS

SECTION 12.01. Use of Money by Paying Agents.   Each of the Paying Agents
shall be entitled to deal with moneys paid to it by the Company for the
purposes of this Agreement in the same manner as other moneys paid to a banker
by its customers and shall not be liable to account to the Company for any
interest thereon. None of the Agents shall exercise any right of set-off or
lien or similar claim over moneys paid to it or by it under this Agreement.

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ARTICLE 13
MISCELLANEOUS

SECTION 13.01. Publication of Notices.   On behalf of and at the request
and expense of the Company, the Registrar will promptly cause to be published
any notices required to be given by the Company with respect to the Notes in
accordance with the Terms and Conditions, except as otherwise set out herein.

SECTION 13.02. No Implicit Duties.   Each Agent shall be obliged to
perform such duties, and only such duties, as are specifically set forth herein
and in the Terms and Conditions, and no implied duties or obligations shall be
read into this Agreement or the Terms and Conditions against any of them. Each
Agent, in any of its agency functions under this Agreement, shall be under no
obligation to take any action hereunder which may involve any expenditure of
funds or liability, the payment of which within a reasonable time is not, in
its reasonable opinion, assured to it.

SECTION 13.03. No Agency Or Trust.   In acting hereunder and in connection
with the Notes, each Agent shall act solely as agent of the Company and will
not thereby assume any obligations towards, or relationship of agency or trust
for, any of the Noteholders.

SECTION 13.04. Liability.   Each Agent shall be protected and shall incur no liability
for or in respect of any action properly taken, omitted or suffered in reliance
upon any instruction, request or order from the Company or any Noteholder,
Note, form of transfer, Conversion Notice, resolution, direction, consent,
certificate, affidavit, statement, telex, facsimile transmission or other paper
or document believed by it in good faith to be genuine and to have been
delivered, signed or sent by the proper party or parties.

SECTION 13.05. Indemnity by the Company.   The Company will indemnify each
Agent against any loss, liability, reasonable cost, claim, action or demand
which it may properly incur or which may be made against it arising out of or
in relation to or in connection with its appointment or the exercise of its
function under this Agreement, except such as may result from a material breach
by it of this Agreement or its own wilful misconduct, wilful default, gross
negligence or bad faith or that of its officers, employees, agents or any of
them. The provisions of this Section 13.05 and of Sections 11.01 and 11.02 shall
survive payment in full of all sums in respect of the
Notes, the resignation or removal of such Agent and the termination of this
Agreement.

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SECTION 13.06. Liability of the Agent.   No Agent shall be liable for any
loss, liability, cost, claim, action or demand arising under this Agreement
except to the extent due to its wilful misconduct, gross negligence, wilful
default, or bad faith or that of its officers, agents or employees. The
provisions of this Section 13.06 shall survive the payment in full of all
sums in respect of the Notes, the resignation or removal of such Agent and the
termination of this Agreement.

SECTION 13.07. Advice of Counsel.   Each of the Agents may consult with
counsel satisfactory to it and the advice or opinion of counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered by it hereunder in good faith and without negligence.

SECTION 13.08. Copies of Documents.   So long as any of the Notes remains
outstanding, the Company shall provide each of the Paying Agents with a
sufficient number of copies of each of the documents which are required to be
made available by stock exchange regulations or stated as being available in
the offering circular relating to the Notes and, subject to being provided with
such copies, each Paying Agent will procure that such copies shall be available
at its specified office for examination by Noteholders and that copies thereof
will be furnished to Noteholders upon request.

SECTION 13.09. Acquisition of Notes.   Each of the Agents and its
respective officers, directors and employees, in an individual capacity or any
other capacity, may become the owner of, or acquire any interest in, any Notes,
Shares or other obligations or securities of the Company, or any other person
with the same rights that it or they would have if it were not appointed
hereunder, and may engage or be interested in any financial or other transaction with the Company or
any other person and may act on, or as depositary, trustee or agent for, any
committee or body of holders of Notes or other obligations of the Company or
any other person as freely as if it were not appointed hereunder.

SECTION 13.10. Merger.   Any corporation into which any Agent may be merged or converted
or any corporation with which any Agent may be consolidated or any corporation
resulting from any merger, conversion or consolidation to which any Agent shall
be a party shall, to the extent permitted by applicable law, be a successor
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto. Notice of any such
merger, conversion or consolidation shall forthwith be given to the Company and
the Noteholders.

SECTION 13.11. Severability.   In the event that any one or more of the
provisions contained in this Agreement should be held invalid or unenforceable
in any respect, the validity and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby. The parties to this
Agreement shall endeavor in good faith negotiations to replace the invalid or
unenforceable provisions with valid provisions the effect of which comes as
close as possible to that of the invalid or unenforceable provisions.

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ARTICLE 14
REPLACEMENT OF AGENTS

SECTION 14.01. Agents Required.   The Company agrees that as long as any
of the Notes are outstanding or until moneys for the payment of principal of
and interest on, and any other amounts due with respect to, all Notes have been
made available at the offices of the respective Paying Agents and shall have
been transmitted to the Noteholders, to the extent required by the terms of
such Notes, there shall at all times be a registrar, a conversion agent, a
paying agent in the United Kingdom and (so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require) a paying and conversion agent in Luxembourg.

SECTION 14.02.
Appointment.   The Company may appoint further or other
agents. The Company may also terminate the appointment of any Agent at any
time. Such termination shall be effective by giving at least 90 days written
notice to that effect to such Agent.

However, no such notice relating to the termination of the appointment of
any Agent shall take effect until a new Agent has been appointed. The Company
shall procure that there is at all times an Agent performing the functions set
forth in this Agreement as required by the Terms and Conditions. The
termination of the appointment of any Agent shall not take effect (i) until
notice thereof shall have been given to the Noteholders in accordance with
Condition 10 or (ii) within the period commencing 45 days immediately preceding any due date for a
payment in respect of the Notes and ending 15 days after such date.

SECTION 14.03. Resignation.   An Agent may resign its appointment
hereunder at any time by giving to the Company at least 60 days written notice
to that effect unless shorter notice is agreed by the Company, provided that
(i) such resignation shall not take effect until a new Agent performing the
functions set forth in this Agreement has been appointed; (ii) no such
resignation shall take effect unless upon the expiry of the notice period there
is an Agent as required by Article 14 and the Terms and Conditions;
(iii) no such resignation shall take effect until notice thereof shall have
been given to the Noteholders in accordance with Condition 10; and (iv) no such
notice shall be given so as to expire within a period commencing 45 days
immediately preceding any due date for a payment in respect of the Notes and
ending 15 days after such date. If a successor agent has not been appointed
within the time specified by the provisions hereof, then the Agent may petition
a court of competent jurisdiction for such appointment.

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SECTION 14.04. Delivery of Records by Agent on Termination.   If the appointment of an
Agent hereunder is terminated or an Agent resigns its appointment hereunder,
such Agent shall, on the date on which such termination or resignation takes
effect, pay to the successor Agent the amounts held by it in respect of Notes
which have not been presented for payment and any other amounts held by it in
respect of the Notes and shall deliver to the successor Agent all records
concerning Notes maintained by the Agent pursuant to this Agreement, but shall
have no other duties or responsibilities hereunder.

SECTION 14.05. Change of Office.   If an Agent shall change its specified
office, it shall give to the Company and the Registrar not less than 30 days
prior written notice to that effect giving the address of the new specified
office. As soon as practicable thereafter, such Agent shall give to the
Noteholders, on behalf of and at the expense of the Company, notice of such
change and the address of the new specified office in accordance with Condition
10 of the Terms and Conditions.

ARTICLE 15
NOTICES

SECTION 15.01. Notices.   Any communication shall be in English, in
writing, and shall be addressed to the relevant party hereto as follows:



| | (a) | If to the Company:
| | --- | ------------------
|
| |     |                   



| | (b) | If to the Principal Paying Agent, Conversion Agent, and Registrar:
| | --- | ------------------------------------------------------------------
|
| |     |                                                                   

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| | (c) | If to the Luxembourg Paying and Conversion Agent:
| | --- | -------------------------------------------------
|
| |     |                                                  

Any communication shall be deemed to have been given when received by the
relevant party.

Any of the parties named above may change its address for the purpose of
this Article 15 by giving notice of such change to the other parties
to this Agreement.

ARTICLE 16
AMENDMENTS, SUPPLEMENTS, WAIVERS

SECTION 16.01.
Without Consent of Holders.   The Company may amend,
supplement or modify this Agreement or the Terms and Conditions without the
consent of any Noteholder for the purpose of:



| | (a) |  | adding to the covenants of the Company for the benefit of the
Noteholders; or                                                                                                                                                                            
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | surrendering any right or power conferred upon the Company; or                                                                                                                                                                                           
|
| | (c) |  | securing the Notes; or                                                                                                                                                                                                                                   
|
| | (d) |  | evidencing the assumption by another legal entity of all of the
obligations of the Company with respect to the Notes as the result of a merger,
consolidation, or other form of consolidation permitted by Condition 8(d)
of the Terms and Conditions; or
|
| | (e) |  | curing any ambiguity, inconsistency, defect or omission in this
Agreement or the Notes or between the Terms and Conditions and the Notes; or                                                                                                             
|
| | (f) |  | complying with mandatory provisions of Japanese law.                                                                                                                                                                                                     

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SECTION 16.02.
With Consent of Holders.   The Company may amend, supplement or modify
this Agreement or the Terms and Conditions and past defaults under the Terms
and Conditions or this Agreement may be waived, with the written consent of the
Noteholders of not less than sixty-six and two thirds percent
(662/3%) in
aggregate principal amount of the Notes outstanding. Any such written consent
may be arranged by the Company or the Noteholders, and notified to the
Registrar. Without the written consent or affirmative vote of each Noteholder
affected, no amendment, supplement, modification or waiver under this Section may.



| | (a) |  | waive a default in the payment of the principal of or interest on any
Note, or change the stated maturity of the principal of or the time for payment
of any installment of interest on any Note, or change the currency of payment
of the principal of, or interest on, any Note or reduce the principal amount
of, or the rate of interest on, any Note, or impair the right to institute suit
for the enforcement of any such payment on or with respect to any Note;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | reduce the above-stated percentage in principal amount of the
outstanding Notes required for any modification of or amendment to the terms
and conditions of the Notes, or of any waiver of any past default;                                                                                                                                                                                                                                                           
|
| | (c) |  | modify any of the provisions of this paragraph except to provide that
certain other provisions of the Terms and Conditions of the Notes cannot be
modified, amended or waived without the consent of the holder of each
outstanding Note affected thereby.                                                                                                                                                                                                              

ARTICLE 17
GOVERNING LAW AND JURISDICTION

SECTION 17.01.
Governing Law.   This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to its conflict of law provisions.

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SECTION 17.02.
Jurisdiction.   The courts of the State of New
York are to have jurisdiction to settle any disputes which may arise out of or
in connection with this Agreement and accordingly any litigation or proceedings
arising out of or in connection with this Agreement shall be brought in such
courts. Each of the parties hereto agrees to submit to the jurisdiction of the
courts of the State of New York for proceedings or legal action arising out of
this Agreement.

SECTION 17.03.
Agent for Service of Process.   The Company
hereby appoints CT Corporation System, 111 Eighth Avenue,
13th Floor, New York,
New York 10011, as agent for service of process for all proceedings or
legal action arising out of this Agreement and brought in the courts of
the State of New York.

SECTION 17.04.
Waiver of Jury Trial.   The Company, each of the Agents and
the Register hereby irrevocably waive, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this agreement, the Notes or the transaction
contemplated hereby.

ARTICLE 18
COUNTERPARTS

SECTION 18.01.
Counterparts.   This Agreement may be executed in
counterparts which when taken together shall constitute one and the same
instrument.

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This Agreement has been entered into on the date first written above.



| |                                            
| | -------------------------------------------
| | INTERNET INITIATIVE JAPAN INC.             
|
| | Name:  Koichi Suzuki
Title: President & CEO
|
| | THE BANK OF NEW YORK                       
|
| | Name:
Title:                               
|
| | BANQUE INTERNATIONALE À LUXEMBOURG         
|
| | Name:
Title:                               

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Annex 1

TERMS AND CONDITIONS OF THE NOTES

The 1.75% Convertible Notes due 2005 (the Notes), in the aggregate
principal amount of ¥15,000,000,000, will be issued by Internet Initiative
Japan Inc. (the Company) in amounts of ¥24,000,000 and integral multiples
thereof without coupons. The Notes are unsecured and unsubordinated obligations
of the Company and will rank pari passu and without any preference among
themselves. The Notes will mature on March 31, 2005 and be payable at a price
of 100% of the principal amount thereof. The Notes will bear interest at 1.75%
per annum from their date of issuance, payable in arrears semi-annually on
March 31 and September 30 of each year, commencing on September 30, 2000.

On and after July 3, 2000 and on or before March 15, 2005 (the Conversion
Period), unless previously redeemed or repurchased, the Notes will be
convertible into shares of common stock of the Company, par value ¥50,000 per
share (the Shares). At the election of the holder of a Note, such Shares may
be delivered in the form of American Depositary Shares (ADSs) evidenced by
American Depositary Receipts (ADRs) issued by The Bank of New York, as
Depositary. Such conversion will initially be at a conversion price of
¥24,000,000 per Share (the Conversion Price), subject to adjustment upon the
occurrence of certain events described in Condition 5. Shares issued upon any
such conversion are referred to herein as Conversion Shares, and ADSs
delivered upon such conversion and representing Conversion Shares are referred
to herein as Conversion ADSs.

The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after April 1, 2003 and on or before March 15, 2005,
upon not more than 60 days nor less than 30 days prior notice, at par with
unpaid and accrued interest, subject to the limitation specified in Condition 5
relating to the Trading Price.

The Company has entered into a paying agent, conversion agent and
registrar agreement (the Agency Agreement) dated April 11, 2000 with The Bank
of New York and Banque Internationale à Luxembourg S.A. Copies of the Agency
Agreement are available for inspection by holders of the Notes at the specified
offices of The Bank of New York and Banque Internationale à Luxembourg S.A. The holders of the Notes are bound by, and are deemed to
have notice of, all of the provisions of the Agency Agreement.

1. Denomination and Form

(1)  The Notes will be issued in registered form in denominations of
¥24,000,000 and integral multiples thereof without interest coupons attached. A
certificate (each a Certificate) will be issued to each holder of Notes in
respect of its registered holding of Notes. Each Note and each Certificate will
have an identifying number which will be recorded on the relevant Certificate
and in the Register (as defined in Condition 1(2)). The Notes are not issuable
in bearer form.

(2)  The Notes will initially be in the form of permanent global notes
(the Global Notes) deposited with a common depositary (the Common
Depositary) for the Euroclear System (Euroclear) and Clearstream Banking,
société anonyme (Clearstream Luxembourg), which will initially be The Bank of
New York. Notes sold in reliance on Rule 144A (Rule 144A) under the United
States Securities Act of 1933, as amended (the Securities Act), are referred
to as Restricted Notes. Restricted Notes will initially be represented by one
of the Global Notes (the Restricted Global Note). Certificates with respect
to Notes sold in reliance on Regulation S under the Securities Act are referred
to as Unrestricted Notes. The Unrestricted Notes will initially be
represented by the other Global Note (the Unrestricted Global Note).
Interests in the Notes represented by the Global Notes may be held only through
Euroclear and Clearstream Luxembourg. Interests in the Notes of participants in
Euroclear and Clearstream Luxembourg will be represented by book entries on the
records of Euroclear and Clearstream Luxembourg, as the case may be. The amount
of Notes represented by each of the Restricted Global Note and the Unrestricted
Global Note will be evidenced by the register (the Register) maintained for
that purpose by a registrar (the Registrar), which initially will be The Bank
of New York.

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(3)  Each Certificate will bear the manual or facsimile signature of a
duly authorized signatory of the Company as well as the manual signature of an
authentication officer of the Registrar. Title to the Notes will pass in the
manner described below in Condition 2. The registered holder of any Note will
(except as otherwise required by law) be treated as its absolute owner for all
purposes whether or not it is overdue and regardless of any notice of
ownership, trust or any interest in it or any writing on, or the theft or loss
of, the Certificate issued in respect of it and no person will be liable for so
treating such holder. In these Terms and Conditions, Noteholder and (in
relation to a Note) holder means the person in whose name a Note is
registered in the Register.

(4)  Upon the issuance of the Global Notes, each of Euroclear and
Clearstream Luxembourg will credit, on its respective book-entry registration
and transfer system, the respective principal amounts of the Notes represented
by the Global Notes to the accounts of institutions that have accounts with it
(as the case may be, Euroclear Participants or Clearstream Participants).
The accounts to be credited will be designated by Goldman Sachs International.
Ownership of beneficial interests in the Global Notes will be limited to
Euroclear and Clearstream Participants or persons that may hold interests
through Euroclear or Clearstream Participants. Ownership of interests in the
Global Notes will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by Euroclear and Clearstream
Luxembourg (with respect to Euroclear and Clearstream Participants interests)
and by such Euroclear and Clearstream Participants (with respect to the owners
of beneficial interests in the Global Notes).

Rights of a person owning a beneficial interest in a Global Note are
governed by the procedures of Euroclear or Clearstream Luxembourg and, if such
person is not a Euroclear or Clearstream Participant, by the procedures of the
Euroclear or Clearstream Participant through which such person owns its
interest.

(5)  So long as the Notes are represented by the Global Notes,
registration in a name other than that of Euroclear or Clearstream Luxembourg
or their nominees will not be permitted unless either (i) Euroclear or
Clearstream Luxembourg notifies the Company that it is unwilling or unable to
continue as a clearing system in connection with a Global Note, and a successor
clearing system is not appointed by the Company within 90 days after its
receipt of such notice, or (ii) the Company shall have determined in its sole
discretion that the Notes shall no longer be represented by Global Notes. In
these circumstances, Notes in definitive form may be registered in the names of
the persons owning the beneficial interests therein as evidenced by the account
records of Euroclear or Clearstream Luxembourg, as the case may be; provided
that no Notes in definitive form will be issued until after the fortieth day
after the later of the commencement of the initial offering of the Notes and
the original issue date of the Notes. Such account records will, in the absence of manifest error, be conclusive
evidence of the identity of such persons owning beneficial interests in the
Global Notes.

2. Transfer of Notes

(1)  The Company will cause to be kept, at the office of the Registrar,
the Register on which the names and addresses of the holders of the Notes and
the particulars of the Notes held by them and of all transfers and exchanges of
Notes shall be kept.

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(2)  Subject to the Agency Agreement and clauses (3) and (4) below, a Note
may be transferred, in whole or in part, by surrender of the Certificate issued
in respect of that Note, with the form of transfer duly completed and signed by
the transferor at the specified office of the Registrar. No transfer of title
to any Note will be effective unless and until entered on the Register. If
Notes in definitive form are issued, transfers may also be effected through the
Luxembourg Paying Agent and Conversion Agent.

(3)  Transfers of interests in Notes between participants of Euroclear and
Clearstream Luxembourg shall be effected in accordance with procedures
established by Euroclear and Clearstream Luxembourg.

(4)  The conversion of a Note represented by a Global Note for a Note
represented by another Global Note shall be recorded on the Register and shall
be effected by an increase or a reduction in the aggregate amount of Notes
represented by each Global Note by the aggregate amount of converted Notes.

(5)  Conversions pursuant to Condition 2(4) may not be effected during the
period commencing on the Record Date (as defined in Condition 6(5)) and ending
on the related Payment Date (as defined in Condition 6(6)) (both dates
inclusive).

(6)  In case of a conversion of Notes into Shares, the conversion will be
recorded in the Register and a corresponding reduction of the aggregate amount
of the Notes represented by the relevant Global Note shall be made.

3. Negative Pledge

So long as any of the Notes remains outstanding the Company will not
create or permit to be outstanding any pledge, mortgage, lien, hypothecation,
encumbrance, charge or other security interest upon the whole or any part of
its undertaking, property or assets, present or future, to secure any Bonds
issued by the Company or issued by any subsidiary of the Company and guaranteed
by the Company for the benefit of the holders without in any such case at the
same time securing the Notes equally and ratably therewith or providing such
other security for the Notes as shall be approved by Noteholders representing
more than 50% of the aggregate outstanding principal amount of the Notes. For
purposes of this Condition 3, the term Bonds means any indebtedness in the
form of or represented by bonds, notes, debentures or other similar securities
which: (a)(i) are by their terms payable, or confer a right to receive payment,
in any currency other than yen or (ii) are denominated in yen and more than 50%
of the aggregate principal amount of which is initially distributed outside of
Japan by or with the authorization of the Company, (b) by their terms are
payable more than one year after issuance and (c) are listed, quoted or traded
on any stock exchange or any over-the-counter or other securities market
outside of Japan.

4. Interest

(1)  The Notes shall bear interest from their date of issuance (April 11,
2000), at the rate of 1.75% per annum (the Rate of Interest), payable
semi-annually in arrears on March 31 and September 30 in each year, commencing
on September 30, 2000, in the manner provided in Condition 6.

(2)  Each Note will cease to bear interest at the end of the day preceding
the Due Date (as defined in Condition 6(6)) for principal unless, upon due
presentation, payment of principal is improperly withheld or refused, in which
case such Note will continue to bear interest at the same rate until the end of
the day on which all amounts due in respect of such Note up to that day are
received at the office of the Principal Paying Agent named in Condition 9.

(3)  Interest shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of a period of less
than a complete month, the actual number of days elapsed.

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5. Redemption, Conversion and Purchase

(1)  Unless previously redeemed or converted as specified below, the
Company will redeem each Note at their principal amount on March 31, 2005, with
payment to be made in the manner provided in Condition 6. The Notes may not be
redeemed at the option of the Company other than in accordance with Condition
5(2).

(2)  The Notes are not entitled to any sinking fund. At any time on or
after April 1, 2003 and on or before March 15, 2005, the Notes will be
redeemable at the Companys option on at least 30 and not more than 60 days
notice, in whole or in part, at par with unpaid and accrued interest; provided
however,that for a redemption pursuant to this Condition 5(2) to occur, the
Closing Trading Price for the Companys Shares on the Principal Market, on each
Trading Day during a period of 30 consecutive Trading Days ending no more than
five Trading Days prior to the day on which the notice of redemption is given,
must be at least 140% of the Conversion Price then in effect. In the case of a
partial redemption of Notes pursuant to this Condition 5(2), the Notes to be
redeemed will be selected in such manner as the Principal Paying Agent shall
deem to be appropriate and fair, not more than 60 and at least 30 days prior to
the date fixed for redemption. With respect to any redemption pursuant to this
Condition 5(2), the Company will give notice to the Noteholders in accordance
with Condition 10 specifying the redemption date and, in the case of a partial
redemption, the identifying numbers of the Notes selected for redemption, not
less than 30 days prior to that date. All Notes which are redeemed by the
Company will be cancelled and, accordingly, may not be reissued or resold.

"Principal Market means the principal trading market for Shares or
depositary receipt representing Shares as determined from time to time by the
Board of Directors of the Company. At the date of initial issuance of the
Notes, the Principal Market is the Nasdaq National Market.

"Trading Day means a day on which normal trading is conducted on the
Principal Market.

"Closing Trading Price means, for any day, the last reported sales price
(regular way) of Shares on the Principal Market or, if such a last reported
sales price is not available, the average of the closing bid and asked prices
of Shares for such day as furnished by any member firm or market maker for the
Shares on the Principal Market selected from time to time by the Company for
the purpose and approved by the Principal Paying Agent, in each case converted
into Japanese yen if the Principal Market is outside of Japan at the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York;
providedthat if trading on the Principal Market is in depositary shares (or
similar instruments) representing Shares rather than in Shares themselves, then
the Closing Trading Price shall be the price of such depositary shares,
determined as set forth above, multiplied by the number of ADSs representing
one Share, and converted into yen as set forth above.

(3)  In the event of a Change of Control of the Company, each Noteholder
will have the right to require the Company to redeem all or a portion of such
Noteholders Notes on the date that is 30 days after the date on which such
Change of Control occurs at the principal amount thereof, together with accrued
and unpaid interest to, but excluding, the redemption date. The Company shall
give each Noteholder notice of such Change of Control in accordance with the
provisions of Condition 10 hereof not later than 10 days after the date on
which such Change of Control occurs.

"Change of Control means that beneficial ownership of 51% or more of the
outstanding Shares of the Company (or ADSs representing Shares) is acquired by
any person or persons acting in concert, including a holding company owned by
persons who were shareholders of the Company prior to the establishment of such
holding company.

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(4)  Subject to compliance with the provisions of this Condition 5, each
Noteholder has the right (A) to convert its Notes (the Conversion Right) into
Conversion Shares at any time during the Conversion Period referred to below
and (B) to elect to take delivery of such shares in the form of Conversion ADSs
but only if such holder is converting Unrestricted Notes or, if converting
Restricted Notes, is selling such ADSs pursuant to an effective Shelf
Registration Statement or after expiration of the holding period applicable to
sales of such Notes under Rule 144(k) under the Securities Act. Upon
conversion, the right of the converting Noteholder to payment of the Note to be
converted shall cease, and in consideration thereof the Company shall deliver
Shares as provided in this Condition 5. The right to convert Notes called for
redemption will terminate at the close of business on the date fixed for
redemption with respect thereto unless the Company defaults in making the
payment due upon redemption.

(5)  The price at which Conversion Shares will be issued by the Company to
Noteholders upon conversion will be ¥24,000,000 per Share (the Conversion
Price), subject to adjustments in the manner provided for in Conditions
5(13) through 5(27). The number of Conversion Shares to be issued on conversion
of a Note or Notes will be determined by dividing the principal amount of such
Note or Notes by the Conversion Price and subject to Condition 5(6) in case of
a fraction of a Share that is not an even hundredth. If a Noteholder requests
delivery of ADSs rather than Shares, then the number of Conversion ADSs will be
determined by multiplying the number of Conversion Shares determined in
accordance with the previous sentence by the number of ADSs representing one
Share at the time of conversion.

(6)  Fractions of Conversion Shares other than even one-hundredths of a
Share will not be issued on conversion but instead the Company will make a cash
payment in Japanese yen in an amount equal to the portion of the principal of
the Note or Notes not converted into Shares or hundredths of Shares to the
extent that such amount exceeds ¥10,000. The Company will use its best efforts
to amend its Articles of Incorporation prior to the end of June 2000
to permit the payment of dividends on its fractional shares that are even
hundredths of a share unless the Articles of Incorporation were so
amended prior to the original issuance of the Notes. Unless and until the
Companys Articles of Incorporation are amended to permit the Company
to pay dividends on fractional Shares, the Company will not take action that
would result in an adjustment of the Conversion Price of the Notes other than
to an amount by which ¥24,000,000 is evenly divisible.

No interest on Notes submitted for conversion will be payable by the
Company on any interest Payment Date subsequent to the Conversion Date, except
in the situation described in the next sentence. Notes surrendered for
conversion during the period from the close of business on any Record Date next
preceding any interest Payment Date to the opening of business on such interest
Payment Date must be accompanied by payment in Japanese Yen of an amount equal
to the interest thereon which the Noteholder will be entitled to receive on
such interest Payment Date. No other payment or adjustment for premium,
interest or dividends is to be made upon conversion.

Any dividend or interim dividend payable to shareholders of record on or
after the Conversion Date shall be paid in full to the converting Holder in
respect of the Conversion Shares issued to such converting Holder upon
conversion.

(7)  A Conversion Right may not be exercised by a Noteholder following the
giving of a Termination Notice pursuant to Condition 8 with respect to its
Notes.

(8)  To exercise the Conversion Right the Noteholder must (i) deliver at
its own expense during normal business hours to the office of the conversion
agent named in Condition 9 (the Conversion Agent) a notice of conversion (the
Conversion Notice) duly completed and in duplicate form obtainable from the
office of the Conversion Agent, and (ii) transfer a corresponding principal
amount of Notes to the account of the Conversion Agent with Euroclear or
Clearstream Luxembourg, and all amounts to be paid by the Noteholder pursuant
to Conditions 5(6) and 5(10). A Conversion Notice once received shall be
irrevocable and become effective on the day on which the conditions of the
first sentence of this Condition 5(8) have been fulfilled. To be effective, a
Conversion Notice must be received at least one Trading Day before the last day
of the Conversion Period.

24



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(9)  The Conversion Date will be deemed to be the day in Japan
immediately following the date on which the Conversion Notice shall have become
effective in accordance with Condition 5(8).

(10)  A Noteholder exercising its Conversion Right must pay any taxes and
other duties arising upon conversion of its Notes in the country in which the
related Note is deposited for conversion or payable in any jurisdiction upon
the issuance or delivery of Shares to or to the order of a person other than
the Converting Noteholder. The Company will pay the Japanese stamp duty tax
imposed upon the issuance of Shares registered in the name of the Share
Custodian and delivered to the Share Custodians Agent as set forth in
Condition 5(11).

(11)  Upon the exercise by the Noteholder of any Conversion Right, the
Company shall, as soon as practicable, and in any event not later than 14 days
(or 21 days in the case specified in clause (b) of the next sentence) in the
case of Conversion Shares or not later than seven days that are both New York
Business Days and Tokyo Business Days after the Conversion Date in the case of
Conversion ADSs, effect delivery of certificates for Conversion Shares or
Conversion ADSs, as the case may be, to the relevant Noteholder, in the manner
specified below in this Condition 5(11), and the Company shall make the cash
payment, if any, as provided in Condition 5(6). The Company agrees it will make
every effort to effect delivery of Conversion ADSs within a period of three
days that are both New York Business Days and Tokyo Business Days. Certificates
for Conversion Shares shall be delivered to the order of the person named in
the Conversion Notice (a) within 14 days after the Conversion Date, at the
designated office of the agent (the Share Custodians Agent) in Tokyo of the
custodian (the Share Custodian) appointed by the Principal Paying Agent or
(b) within 21 days after the Conversion Date, at another location specified by the
Noteholder, providedthat the delivery of Conversion Shares at a place other
than the designated office of the Share Custodians Agent shall be at the
request, risk and expense of the Noteholder. If a converting Noteholder
requests delivery of Shares in the form of ADSs, (a) the Company will instruct
its stock transfer agent (currently The Sumitomo Trust and Banking Company,
Limited) (i) to immediately notify the Depositary or its nominee that such
Shares have been registered in the name of the Depositary or its nominee and to
provide evidence thereof to the Depositary and (ii) as soon as practicable and
in any event within 14 days after the Conversion Date, to issue certificates
for the relevant Shares and deliver them to the Depositary or its nominee and
(b) the Company will instruct the Depositary to issue ADRs evidencing ADSs in
respect of such Shares and deliver such ADRs as specified above in this
Condition 5(11). The Share Custodian will initially be The Bank of New York and
the Share Custodians Agent will initially be The Bank of New York, Tokyo
branch. For purposes of this Condition 5(11), the term Share Custodian
includes, as appropriate, any nominee for the Share Custodian appointed to act
on its behalf. Conversion ADSs will be delivered to DTC for the account of the
relevant Noteholders Custodian (as defined in Condition 11(3)).

(12)  The Conversion Price shall be subject to adjustment as provided in
Condition 5(13) through 5(27).

25



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(13)  If the Company shall (a) make any kind of stock split in relation to
the Shares, including a free share distribution, a stock dividend or a
sub-division of Shares (any of the foregoing, a Stock Split), (b) consolidate
its outstanding Shares into a smaller number of shares or (c) re-classify any
of its Shares into other securities of the Company, then the Conversion Price
shall be appropriately adjusted so that the holder of any Note, the Conversion
Date in respect of which occurs after the coming into effect of the adjustment
described in this Condition 5(13), shall be entitled to receive the number of
Shares and/or other securities of the Company which it would have held or have
been entitled to receive after the happening of any of the events described
above had such Note been converted immediately prior to the happening of such
event (or, if the Company has fixed a prior record date for the determination
of shareholders entitled to receive any such Shares or other securities issued
upon any such Stock Split, consolidations or reclassification, immediately
prior to such record date), but without prejudice to the effect of any other
adjustment to the Conversion Price made with effect from the date of the
happening of such event (or such record date) or any time thereafter. An
adjustment made pursuant to this Condition 5(13) shall become effective
immediately on the relevant event becoming effective or, if a prior record date
is fixed therefor, immediately after the record date; provided that in the case
of a relevant transaction which must, under applicable Japanese law, be
submitted for approval to a general meeting of shareholders or to a meeting of
the Board of Directors of the Company before being legally effective, and which
is so approved after the record date fixed for the determination of
shareholders entitled to receive such Shares or other securities, such
adjustment shall, immediately upon such approval being given by such meeting,
become effective retroactively to immediately after such record date.

If the Company shall make a Stock Split and the record date therefor is
also:



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) the record date for the issue of any rights or warrants which
requires an adjustment of the Conversion Price pursuant to Condition 5(14) or
Condition 5(15) below, or



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) the date of issue of any securities convertible into or exchangeable
for Shares which requires an adjustment of the Conversion Price pursuant to
Condition 5(17) or Condition 5(20) below, or
|
| | (iii) the day immediately before the date of issue of any Shares which
requires an adjustment of the Conversion Price pursuant to Condition 5(18) or
Condition 5(20) below, or                    



| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iv) the date of issue of any rights or warrants to subscribe for or
purchase Shares or securities convertible into or exchangeable for Shares which
requires an adjustment of the Conversion Price pursuant to Condition 5(19) or
Condition 5(20) below,

then (except where such Stock Split gives rise to a retroactive adjustment
of the Conversion Price under this Condition 5(13)) no adjustment of the
Conversion Price in respect of such Stock Split shall be made under this
Condition 5(13), but in lieu thereof an adjustment shall be made under
Conditions 5(14), (15), (17), (18), (19) or (20), as the case may be, by
including in the denominator of the fraction described therein the aggregate
number of additional Shares to be delivered pursuant to such Stock Split.

(14)  If the Company shall grant, issue or offer to the holders of Shares
rights or warrants entitling them to subscribe for or purchase Shares:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) at a consideration per Share receivable by the Company (determined as
provided in Condition 5(22) below) which is fixed on or prior to the
record date mentioned below and is less than 95% of the current market price
per Share (as defined in Condition 5(21) below) on such record date, or



| |                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) at a consideration per Share receivable by the Company (determined as
aforesaid) which is fixed after the record date mentioned below and is less
than 95% of the current market price per Share (as defined as aforesaid) on the
date in Japan the Company fixes the said consideration,

26



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then the Conversion Price shall be adjusted by multiplying the Conversion
Price in effect (in a case within (a) above) on the record date in Japan for
the determination of shareholders entitled to receive such rights or warrants
or (in a case within (b) above) on the date the Company fixes the said
consideration by a fraction, of which the numerator shall be the number of
Shares outstanding (having regard to Condition 5(23) below) at the close of
business in Japan on such record date (in a case within (a) above) or on the
date the Company fixes the said consideration (in a case within (b) above) plus
the number of Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(22) below) for the issue of the
total number of Shares initially to be issued on exercise of such rights or
warrants would purchase at such current market price per Share specified in (a)
or, as the case may be, (b) above and of which the denominator shall be the
number of Shares outstanding (having regard to Condition 5(23) below) at the
close of business in Japan on such record date (in a case within (a) above) or
on the date the Company fixes the said consideration (in a case within (b)
above) plus the number of Shares initially to be issued upon exercise of such
rights or warrants at the initial subscription or purchase price. Such
adjustment shall become effective (in a case within (a) above) immediately
after the record date for the determination of shareholders entitled to receive
such rights or warrants or (in a case within (b) above) immediately after the
date upon which the Company fixes the said consideration but retroactively from
immediately after the record date for the said determination.

If, in connection with a grant, issue or offer of rights or warrants to
the holders of Shares entitling them to subscribe for or purchase Shares, any
rights or warrants and/or Shares which are not taken up and/or subscribed for
or purchased by the persons entitled thereto are offered to and/or subscribed
for or purchased by others (whether as placees or members of the public or
pursuant to underwriting arrangements or otherwise), no further adjustment
shall be required or made to the Conversion Price by reason of such offer
and/or subscription or purchase.

(15)  If the Company shall grant, issue or offer to the holders of Shares
rights or warrants entitling them to subscribe for or purchase any securities
convertible into or exchangeable for Shares:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) at a consideration per Share receivable by the Company (determined as
provided in Condition 5(22) below) which is fixed on or prior to the
record date mentioned below and is less than 95% of the current market price
per Share (as defined in Condition 5(21) below) on such record date, or
|
| | (b) at a consideration per Share receivable by the Company (determined as
aforesaid) which is fixed after the record date mentioned below and is less
than 95% of the current market price per Share (as defined as aforesaid) on the
date in Japan the Company fixes the said consideration,      

then the Conversion Price shall be adjusted by multiplying the Conversion
Price in effect (in a case within (a) above) on the record date in Japan for
the determination of shareholders entitled to receive such rights or warrants
or (in a case within (b) above) on the date the Company fixes the said
consideration by a fraction, of which the numerator shall be the number of
Shares outstanding (having regard to Condition 5(23) below) at the close of
business in Japan on such record date (in a case within (a) above) or on the
date the Company fixes the said consideration (in a case within (b) above) plus
the number of Shares which the aggregate consideration receivable by the
Company (determined as provided in Condition 5(22) below) would purchase at
such current market price per Share specified in (a) or, as the case may be,
(b) above, and of which the denominator shall be the number of Shares
outstanding (having regard to Condition 5(23) below) at the close of business
in Japan on such record date (in a case within (a) above) or on the date the
Company fixes the said consideration (in a case within (b) above) plus the
number of Shares initially to be issued upon conversion or exchange of such
convertible or exchangeable securities at the initial conversion or exchange
price or rate following exercise of such rights or warrants. Such adjustment
shall become effective (in a case within (a) above) immediately after the
record date for the determination of shareholders entitled to receive such
rights or (in a case within (b) above) immediately after the date upon which
the Company fixing the said consideration but retroactively from immediately
after the record date for the said determination.

27



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##### 



If, in connection with a grant, issue or offer of rights or warrants to
the holders of Shares entitling them to subscribe for or purchase securities
convertible into or exchangeable for Shares, any rights or warrants which are
not taken up and/or subscribed for or purchased by the persons entitled thereto
are offered to and/or subscribed for or purchased by others (whether as placees
or members of the public or pursuant to underwriting arrangements or
otherwise), no further adjustments shall be required or made to the Conversion
Price by reason of such offer and/or subscription or purchase.

(16)  If the Company distributes to the holders of Shares evidences of its
indebtedness, shares of capital stock of the Company (other than Shares) or
assets (excluding annual cash dividends or interim cash dividends (being cash
distributions pursuant to Article 293-5 of the Commercial Code of Japan))
or rights or warrants to subscribe for or purchase such shares or securities
(excluding those rights and warrants referred to in Conditions 5(14) and (15)
above), then the Conversion Price shall be adjusted by multiplying the
Conversion Price in effect on the record date of the determination of
shareholders entitled to receive such distribution by a fraction, of which the
numerator shall be the current market price per Share (as defined in Condition
5(21) below) on the record date for the determination of shareholders entitled
to receive such distribution less the fair market value (as determined by the
Company or, if pursuant to applicable Japanese law such determination is to be
made by application to a court of competent jurisdiction, as determined by such
court or by an appraiser appointed by such court) of the portion of the
evidences of indebtedness, shares, assets, rights or warrants so distributed
attributable to one Share, and of which the denominator shall be such current
market price per Share without any such reduction in respect of such fair
market value. In making a determination of fair market value of any such
evidences of indebtedness or shares or assets or rights or warrants, the Board
of Directors shall consult a leading securities company or bank in Tokyo
selected by it and approved by the Principal Paying Agent and shall take into
account fully the advice received from such company or bank. Such adjustment
shall become effective immediately after the record date for the determination
of shareholders entitled to receive such distribution; provided that (a) in the
case of such a distribution which must, under applicable Japanese law, be
submitted for approval to a general meeting of shareholders or be approved by a
meeting of the Board of Directors before such distribution may legally be made
and is so approved after the record date fixed for the determination of
shareholders entitled to receive such distribution, such adjustment shall,
immediately upon such approval being given by such meeting, become effective
retroactively immediately after such record date and (b) of the fair market
value of the evidences of indebtedness, shares, assets, rights or warrants so
distributed cannot be determined until after the record date fixed for the
determination of shareholders entitled to receive such distribution, such
adjustment shall, immediately upon such fair market value being determined,
become effective retroactively immediately after such record date.

(17)  If the Company shall issue any securities convertible into or
exchangeable for Shares (other than the Notes or in any of the circumstances
described in Condition 5(15) above and Condition 5(19) below) and the
consideration per Share receivable by the Company (determined as provided in
Condition 5(22) below) shall be less than 95% of the current market price per
Share (as defined in Condition 5(21) below) on the date in Japan on which the
Company fixes the said consideration (or, if the issue of such securities is
subject to approval by a general meeting of shareholders, on the date in Japan
on which the Board of Directors fixes the consideration to be recommended at
such meeting), then the Conversion Price, subject to Condition 5(20) below,
shall be adjusted by multiplying the Conversion Price in effect on the date of
the issue of such convertible or exchangeable securities by a fraction, of
which the numerator shall be the number of Shares outstanding (having regard to
Condition 5(23) below) at the close of business in Japan on the date of such
issue plus the number of Shares which the aggregate consideration receivable by
the Company (determined as provided in Condition 5(22) below) would purchase at
such current market price per Share and of which the denominator shall be the
number of Shares outstanding (having regard to Condition 5(23) below) at the
close of business in Japan on the date of such issue plus the number of Shares
initially to be issued upon conversion or exchange of such convertible or
exchangeable securities at the initial conversion or exchange price or rate.
Such adjustment shall be effective on the calendar day in Japan immediately
following the date of the issue of such convertible securities.

28



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##### 



(18)  If the Company shall issue any Shares (other than Shares issued upon
conversion or exchange of any convertible or exchangeable securities issued by
the Company (including the Notes) or upon exercise of any rights or warrants
granted, offered or issued by the Company or in any of the circumstances
described in Conditions 5(13) and 5(14) above or issued to shareholders of any
company which merges into the Company, in proportion to their shareholding in
such company immediately prior to such merger, upon such merger) for a
consideration per Share receivable by the Company (determined as provided in
Condition 5(22) below) less than 95% of the current market price per Share (as
defined in Condition 5(21) below) on the date in Japan the Company fixes the
said consideration (or, if the issue of such Shares is subject to approval by a
general meeting of shareholders, on the date in Japan on which the Board of
Directors fixes the said consideration to be recommended at such meeting), then
the conversion Price shall, subject to Condition 5(20) below, be adjusted by
multiplying the Conversion Price in effect immediately prior to the issue of
such additional Shares by a fraction, of which the numerator shall be the
number of Shares outstanding (having regard to Condition 5(23) below) at the
close of business in Japan on the day immediately prior to the date of issue of
such additional Shares plus the number of Shares which the aggregate
consideration receivable by the Company (determined as provided in Condition
5(22) below) would purchase at such current market price per Share and of which
the denominator shall be the number of Shares outstanding (having regard to
Condition 5(23) below) at the close of business in Japan on the day immediately
prior to the date of issue of such additional Shares plus the number of such
additional Shares. Such adjustment shall be effective on the calendar day in
Japan of the issue of such additional Shares.

(19)  If the Company shall issue rights or warrants to subscribe for or
purchase Shares or securities convertible into or exchangeable for Shares
(other than in any of the circumstances described in Conditions 5(14) and (15)
above) and the consideration per Share receivable by the Company (determined as
provided in Condition 5(22) below) shall be less than 95% of the current market
price per Share (as defined in Condition 5(21) below) on the date in Japan the
Company fixes the said consideration (or, if the issue of such rights or
warrants is subject to approval by a general meeting of shareholders, on the
date in Japan the Board of Directors fixes the consideration to be recommended
at such meeting), then the Conversion Price shall, subject to Condition 5(20),
be adjusted by multiplying the Conversion Price in effect on the date of the
issue of such rights or warrants by a fraction, of which the numerator shall be
the number of Shares outstanding (having regard to Condition 5(23) below) at
the close of business in Japan on the date of such issue plus the number of
Shares which the aggregate consideration receivable by the Company (determined
as provided in Condition 5(22) below) for the issue of the total number of
Shares initially to be issued upon exercise of such rights or warrants or
conversion or exchange of such securities would purchase at such current market
price per Share and of which the denominator shall be the number of Shares outstanding (having regard to
Condition 5(23) below) at the close of business in Japan on the date of such
issue plus the number of Shares initially to be issued upon exercise of such
rights or warrants at the initial subscription or purchase price or conversion
or exchange of such securities at the initial conversion or exchange price or
rate following exercise of such rights or warrants. Such adjustment shall be
effective on the calendar day in Japan immediately following the date of the
issue of such rights or warrants.

29



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##### 



(20)  If the Company shall make two or more of (and in any combination of)
(a) the issue of any securities convertible into or exchangeable for Shares
which requires an adjustment of the Conversion Price pursuant to Condition
5(17) above and/or (b) the issue of any Shares which requires an adjustment of
the Conversion Price pursuant to Condition 5(18) above and /or (c) the issue of
any rights or warrants which requires an adjustment of the Conversion Price
pursuant to Condition 5(19) above and the date of issue of any such convertible
or exchangeable securities and/or any such rights or warrants and/or the day
immediately before the date of issue of any such Shares falls on the same day
(the relevant date), then no adjustment of the Conversion Price in respect of
each such issue shall be made separately under the provisions of the relevant
sub-paragraph but in lieu thereof the Conversion Price shall be adjusted by
multiplying the Conversion Price in effect on the relevant date by a fraction,
of which the numerator shall be the number of Shares outstanding (having regard
to Condition 5(23) below) at the close of business in Japan on the relevant
date plus the aggregate of the numbers of Shares which the aggregate
consideration receivable by the Company in respect of each of such issues
(determined as provided under the relevant sub-paragraph) would purchase at the
current market price per Share (determined as provided under the relevant
sub-paragraph), and of which the denominator shall be the number of Shares
outstanding (having regard to Condition 5(23) below) at the close of business
in Japan on the relevant date plus the aggregate of (in the case of (a) above)
the number(s) of Shares initially to be issued upon conversion or exchange
(determined as provided in Condition 5(17) above), (in the case of (b) above)
the number(s) of such additional Shares and (in the case of (c) above) the
number(s) of Shares initially to be issued upon exercise of the relevant rights
or warrants or conversion or exchange of the relevant convertible or
exchangeable securities (determined as provided in Condition 5(19) above). Such
adjustment shall be effective as of the calendar day in Japan immediately after
the relevant date.

(21)  For the purpose of this Condition 5, the current market price per
Share on any date shall be deemed to be the average of the daily closing
prices of the Shares for the 30 consecutive trading days commencing 45 trading
days before such date. The closing price of the Shares for each trading day
shall be the last reported sales price (regular way) of Shares on the Principal
Market or, if such a last reported sales price is not available, the average of
the closing bid and asked prices of Shares for such day as furnished by any
member firm of or market maker for the Shares on the Principal Market selected
from time to time by the Company for the purpose and approved by the Principal
Paying Agent. If Shares (or depositary shares representing the same) are quoted
on the Principal Market in a currency other than U.S. Dollars or consideration
is receivable by the Company in a currency other than U.S. Dollars then the
current market price or consideration (as applicable) in U.S. Dollars shall be
determined based upon the most recently published noon buying rate in New York
City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York (the Noon Buying Rate) available at the time the Company
shall take any action that may result in an adjustment of the Conversion Price.
If the Shares are traded on the Principal Market in the form of depositary
shares and not in the form of Shares then the daily closing price of the shares
for any day shall be the closing price of such depositary shares on such day
multiplied by the number of depositary shares representing one Share, converted
into U.S. Dollars as provided above if applicable. For the purpose of this
Condition 5(21), the term trading day means a day when the Principal Market
is open for business, but does not include a day when no such last sales price
is reported and no such closing bid and offered prices are furnished as
aforesaid. If during the said 45-trading day period or any period thereafter up
to but excluding the date as of which the adjustment of the Conversion Price in
question shall be effected, any event (other than the event which requires the
adjustment in question) shall occur which gives rise to a separate adjustment
(excluding a retroactive adjustment to take effect on or after such date) to
the Conversion Price under the provisions of Condition 5, the current market
price as determined above shall be adjusted in such manner and to such extent
as the Principal Paying Agent shall in its absolute discretion deem appropriate
and fair in order to compensate for the effect of such event.

(22)  For the purposes of any calculation of the consideration receivable
pursuant to Conditions 5(14), (15), (17), (18), (19), (20) above, the following
provisions shall be applicable:



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) in the case of the issue of Shares for cash, the consideration shall
be the amount of such cash; provided that in no case shall any deduction be made
for any commissions or any expenses paid or incurred by or on behalf of the
Company for any underwriting of the issue or otherwise in connection therewith;

30



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) in the case of the issue of Shares for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to
be the fair value thereof as determined by the Board of Directors (and making
such determination of the Board of Directors of the Company shall consult a
leading securities company or bank in Tokyo selected by the Board of Directors
of the Company and approved by the Principal Paying Agent and shall take fully
into account the advice received from such company or bank) or, if pursuant to
applicable Japanese law such determination is to be made by application to a
court of competent jurisdiction, as determined by such court or an appraiser
appointed by such court, irrespective of the accounting treatment thereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (iii) (x) in the case of the issue of securities convertible into or
exchangeable for Shares, the aggregate consideration receivable by the Company
shall be deemed to be the consideration for any such securities plus the
additional consideration (if any) to be received by the Company upon (and
assuming) the conversion or exchange of such securities at the initial
conversion or exchange price or rate and (y) in the case of the issue of rights
or warrants to subscribe for securities convertible into or exchangeable for
Shares, the aggregate consideration receivable by the Company shall be the
consideration (if any) received by the Company for any such rights or warrants
plus the additional consideration to be received by the Company upon (and
assuming) the exercise thereof at the initial subscription or purchase price
and (if applicable) upon the following conversion or exchange of such
securities at the initial conversion or exchange price or rate. The
consideration per Share receivable by the Company shall be such aggregate
consideration divided by the number of Shares to be issued upon (and assuming)
such conversion or exchange at the initial conversion or exchange price or rate
(if applicable) following the exercise of such rights or warrants; and



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (iv) in the case of this issue of rights or warrants to subscribe for or
purchase Shares, the aggregate consideration receivable by the Company shall be
deemed to be the consideration (if any) received by the Company for any such
rights or warrants plus the additional consideration to be received by the
Company upon (and assuming) the exercise of such rights or warrants at the
initial subscription or purchase price (the consideration in each case to be
determined in the same manner as provided in sub-paragraphs (i) and (ii)
above), and the consideration per Share receivable by the Company shall be such
aggregate consideration divided by the number of Shares to be issued upon (and
assuming) such exercise at the initial subscription or purchase price.

(23)  If, at the time of computing an adjustment (the later adjustment)
of the Conversion Price pursuant to any of the Condition 5(14) to Condition
5(20) above (inclusive), the Conversion Price already incorporates an
adjustment made (or taken into account pursuant to the proviso to Condition
5(24) below) to reflect the issue of such Shares, rights, or warrants to
subscribe for or purchase such Shares or other securities convertible into or
exchangeable for such Shares, but such Shares are not outstanding at the time
relevant for ascertaining the number of outstanding Shares for the purposes of
computing the later adjustment, such Shares shall be deemed to be outstanding
for the purposes of making such computation to the extent that the number of
the Shares so deemed to be outstanding exceeds the actual number of Shares in
issue as a result thereof at the time of making such computation.

(24)  No adjustment of the Conversion Price shall be required unless such
adjustment would result in an increase or decrease in such price of at least
one percent; provided that any adjustment which by reason of this Condition
5(24) is not required to be made shall be carried forward and taken into
account (as if such adjustment were made at the time when it would be made but
for the provisions of this Condition 5(24)) in any subsequent adjustment. All
calculations (including, without limitation, calculations of the Conversion Price and the current
market price per Share) under this Condition 5 shall be made to the nearest one
yen.

31



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(25)  Notwithstanding the provisions of this Condition 5, the Conversion
Price shall not be changed as a result of any adjustment made hereunder to such
an extent that, under applicable law then in effect, Notes may not be converted
at such changed Conversion Price into legally issued, fully-paid and
non-assessable Shares.

(26)  Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly notify the Principal Paying Agent, the Conversion
Agents, the Share Custodian and the Share Custodians Agent setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment and the effective date thereof, and shall
promptly give notice to the Noteholders stating that the Conversion Price has
been adjusted and setting forth the Conversion Price in effect prior to such
adjustment, the adjusted Conversion Price and the effective date of such
adjustment provided that where a notice has been given of such adjustment
pursuant to this Condition 5 and such notice shall have correctly stated any
information required to be given pursuant to this Condition 5(26), then such
notice shall, as to such information, satisfy the requirements of this
Condition 5(26).

(27)  Any reference in this Condition 5 to the date on which the
consideration is fixed shall be construed as a reference to the first day on
which such consideration in a cash amount can be ascertained, where the
consideration is originally expressed by reference to a formula and not then
ascertainable in a cash amount.

(28)  The Company and any of its subsidiaries or affiliates may at any
time purchase Notes at any price in the open market or otherwise, providedthat
such purchases are in compliance with all relevant Japanese, U.S. or foreign
laws, regulations, administrative orders, administrative acts and other acts
and rules of any relevant agency, authority, central bank, department,
government, legislature, minister, official, public or statutory corporation,
self-regulatory organization or stock exchange.

(29)  All Notes which are paid or converted into Shares will forthwith be
cancelled by reduction in the principal amount of the relevant Global Note. All
Notes so cancelled and any Notes purchased pursuant to Condition 5(28) and
cancelled pursuant to this Condition 5(29) may not be reissued or resold.

(30)  The Company shall procure that the authorized share capital of the
Company shall always be sufficient for the issuance of Shares to a Noteholder
exercising its Conversion Right.

(31)  The Noteholders will be informed if any adjustment of the Conversion
Price described in this Condition 5 will occur in accordance with the
provisions of Condition 10 of the Terms and Conditions. The Company will inform
the Luxembourg Stock Exchange if any adjustment of the Conversion Price
described in Condition 5 will occur and state the amount of Notes that remain
outstanding.

(32)  All services in connection with the conversion of Notes may be
performed through the Luxembourg Paying Agent and Conversion Agent.

6. Payments

(1)  The Company irrevocably undertakes to pay in Japanese yen, when due,
principal, interest and other amounts payable pursuant to Conditions 4 and 5.
The amounts due in respect of the Notes shall be paid to the Noteholder with
due observance of any tax, foreign exchange or other laws and regulations of
the country of the relevant Paying Agent without it being permissible to
require the execution of an affidavit or compliance with any other formality
whatsoever, unless such affidavit or formality is prescribed by the laws of the
country of the relevant Paying Agent.

32



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(2)  Payments of principal of, and interest on, the Global Notes shall be
made on the relevant Payment Date (as defined in Condition 6(6)) to Euroclear
and Clearstream Luxembourg in Japanese yen. Payment of principal shall be
made upon surrender of the relevant Global Note to the Principal Paying Agent.

(3)  Principal of, and interest on, the Notes and amounts payable pursuant
to Condition 5(6) or Condition 7 will be payable in yen at such Paying Agents
as the Company may appoint from time to time at which, at the option of the
Noteholder, such payments will be made by mailing to such Noteholders
registered address a yen check drawn on a bank in Japan or by transfer to the
registered account maintained by the payee. A Noteholders registered account
means the yen account (in the case of a non-resident of Japan, the non-resident
yen account) maintained by or on behalf of it with a bank in Japan, details of
which appear on the Register at the close of business on the relevant Record
Date and a Noteholders registered address means its address appearing on the
Register at that time. Where payment is to be made by transfer to a registered
account, payment instructions will be made for value on the due date. Payment
of principal will only be made against presentation or surrender of the
relevant Note at the specified office of any Paying Agent.

(4)  Payments made by the Company in accordance with Condition 6(1) and
(2) to Euroclear and Clearstream Luxembourg shall discharge the liability of
the Company under the Notes to the extent of the sums so paid.

(5)  The record date for purposes of payments of principal and interest
and other amounts payable pursuant to Condition 6 (the Record Date) shall be
the tenth Tokyo Business Day preceding the relevant due date. Euroclear and
Clearstream Participants will be bound with respect to record dates by the
rules of Euroclear and Clearstream Luxembourg in effect from time to time and
applicable to such Participants .

(6)  For the purposes of these Terms and Conditions, Payment Date means
the day on which the payment is actually to be made, where applicable, as
adjusted in accordance with Condition 6(7), and Due Date means the date for
making such payments as provided herein, without taking account of any such
adjustment.

(7)  If any Due Date for payment of principal or interest in Japanese yen
in respect of any Note is not a Tokyo Business Day and a London Business Day,
such payment will not be made until the next day which is both a Tokyo Business
Day and a London Business Day, and no further interest shall be paid. A Tokyo
Business Day and London Business Day shall be any day on which banks are
open for business in Tokyo and London, respectively.

7. Taxation

All payments of principal and interest by the Company in respect of the
Notes held by a Japanese non-resident or a designated financial institution
will be made without withholding of, or deduction for or on account of, any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of Japan, or any authority
therein or thereof having power to tax, if the Noteholder establishes that the
Note is held by or for the account of a Japanese non-resident or a designated
financial institution in compliance with the requirements under Japanese tax
laws. If such withholding or deduction in respect of Notes held by such
Japanese non-resident or designated financial institution is required by law,
the Company will pay such additional amounts as may be necessary in order that
the net amounts received by the Noteholders after such withholding or deduction
shall equal the amounts of principal and interest which would have been
receivable in respect of the Notes in the absence of such withholding or
deduction; except that no such additional amounts shall be payable with respect
to any Note:

33



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) to a holder (i) who is for Japanese tax purposes treated as a resident
of Japan or a Japanese corporation or (ii) who fails to comply with the
Japanese tax law requirements in respect of the exemption from such withholding
or deduction or (iii) who is otherwise subject to such taxes, duties,
assessments or governmental charges by reason of his being connected with Japan
otherwise than by reason only of the holding of any Note or the receipt of
principal or interest in respect of any Note; or



| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) presented for payment (where presentation is required) more than 30
days after the Relevant Date except to the extent that the holder thereof would
have been entitled to such additional amounts on presenting the same for
payment as at the expiry of such 30-day period.

As used herein, the Relevant Date means the date on which such payment
first becomes due, except that, if the full amount of the moneys payable has
not been duly received by the Principal Paying Agent on or prior to such due
date, it means the date on which, the full amount of such moneys having been so
received, notice to that effect shall have been duly published in accordance
with Condition 10.

Any reference in this Note to principal or interest shall be deemed also
to refer to any additional amounts which may be payable under this Condition or
any undertakings or covenants given in addition thereto or in substitution
therefor.

As used herein, a Japanese non-resident means a person that is not an
individual resident of Japan or a Japanese corporation for Japanese tax
purposes and designated financial institution means a Japanese financial
institution or a Japanese securities company designated by the Special Taxation
Measures Law Enforcement Order pursuant to Article 6, paragraph 8 of
the Special Taxation Measures Law of Japan (Law No. 26 of 1957, as amended).

8. Events of Default

If any of the following events occurs:



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Non-payment:the Company fails to pay any amount of principal of,
premium, if any, or interest on the Notes when payment thereof becomes due and the
default continues for a period of 30 days; or



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) Breach of other obligations:the Company defaults in the performance
or observance of any of its other obligations under or in connection with the
Notes or the Agency Agreement and such default remains unremedied for 60 days
after written notice thereof, addressed to the Company by any Noteholder, has
been delivered to the Company or to the specified office of a Paying Agent; or                                                                                                                         
|
| | (c) Cross-default:the Company fails to pay when due any indebtedness
for borrowed money of or guaranteed by the Company with an aggregate
outstanding principal amount of at least ¥ 300,000,000 (or the equivalent in
any other currency or currencies) at its stated maturity or within any
applicable grace period, or any indebtedness for borrowed money of the Company
with such aggregate principal amount becomes due and payable prior to its
stated maturity other than by reason of a permitted prepayment; or
|
| | (d) Winding up, etc:a final and non-appealable order of a court of
competent jurisdiction is entered or an effective resolution of the Company is
passed for the winding-up or dissolution of the Company, except for purposes of
a consolidation, amalgamation, merger or reconstruction under which the
continuing corporation or the corporation formed as a result thereof
effectively assumes all the obligations of the Company under the Notes and the
Agency Agreement; or                                       

34



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) Receivership, etc.:any secured party takes possession, or a trustee
or receiver is appointed, in bankruptcy or insolvency proceedings involving the
Company, of all or substantially all of the Companys assets and undertakings
and such possession or appointment continues undischarged and unstayed for a
period of 90 days; or                                                                                                                                                                                                                                                                                                                         
|
| | (f) Payment stoppage, etc.:the Company stops payment (within the
meaning of the bankruptcy law of Japan) or (otherwise than for purposes of a
consolidation, amalgamation, merger or reconstruction as is referred to in (d)
above) ceases to carry on business or becomes unable to pay its debts generally
as they become due; or                                                                                                                                                                                                                                                                                                                              
|
| | (g) Bankruptcy, etc.:a decree or order by any court having jurisdiction
is issued adjudging the Company bankrupt or insolvent, or approving a petition
seeking for the Company reorganization under bankruptcy, composition,
reorganization or insolvency law of Japan and such decree or order continues
undischarged and unstayed for a period of 90 days, or the Company has
instituted, or the Company initiates or consents to proceedings relating to
itself under bankruptcy, composition, reorganization or insolvency law of Japan
or makes a conveyance or assignment for the benefit of, or enters into any
composition with, its creditors generally;

any Note may, by written notice addressed by the holder (a Termination
Notice) thereof to the Company and delivered to the Company or to the
specified office of the Paying Agent, be declared immediately due and payable,
whereupon it shall become immediately due and payable at its principal amount
together with accrued interest without further action or formality (unless it
is proven that the event that has led to the Note being declared immediately
due and payable has been cured at the time the notice of such declaration is
received by the Company or a Paying Agent). Notice of any such declaration
shall promptly be given to the Noteholders in accordance with Condition 10.

9. Paying Agents, Conversion Agents and Registrar

(1)  The Paying Agents, the Registrar and the Conversion Agents (together,
the Agents) and their respective specified offices are as follows:



| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | Registrar, Principal Paying Agent, and Conversion Agent:
The Bank of New York
One Canada Square
London E14 5AL
England
Fax: 44-171-893-6399

with a copy to:



| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                     
| | The Bank of New York, Singapore Branch
1 Temasek Avenue
#02-01 Milennia Tower
Singapore 039192
Attn: Global Trust Services
Fax: 65-883-0338
Luxembourg Paying Agent and Conversion Agent:
Banque Internationale à Luxembourg S.A.
69, route dEsch
L-2953 Luxembourg
Attn: Fiscal and Listing Agencies Department
Fax: 352-4590-4227

35



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(2)  In acting as Agents in connection with the Notes, the Agents act
solely as agents of the Company and do not assume any obligations towards or
relationship of agency or trust for or with any of the Noteholders.

(3)  The Company reserves the right at any time to vary or terminate the
appointment of any of the Agents, and to appoint successor or additional paying
agents, successor or additional conversion agents or successor or additional
Registrars, providedthat so long as the Notes are listed on the Luxembourg
Stock Exchange, the Company shall maintain a Paying Agent and Conversion Agent
in Luxembourg if the rules and regulations of the Luxembourg Stock Exchange so
require. Notice of any change in the Paying Agent, the Conversion Agent or the
Registrar, or in the specified office of any Paying Agent, the Conversion Agent
or the Registrar shall promptly be given to the Noteholders in accordance with
Condition 10.

10. Notices

Notices to the Noteholders will be valid if published in an English
language newspaper of general circulation in the United States and Europe. Any
such notice shall be deemed to have been given on the date of such publication
(or, if published more than once or on different dates, on the first date on
which publication is made), providedthat notices to the Noteholders may be
given by delivery of the relevant notice to Euroclear and Clearstream
Luxembourg, for communication by them to their respective participants in
substitution for publication as required by this Condition, and provided
furtherthat, so long as the Notes are listed on the Luxembourg Stock Exchange,
the requirements of that exchange have been complied with and, where such
requirements specify publication in a leading newspaper having general
circulation in Luxembourg, by such publication in such newspaper have been
complied with.

11. Governing Law and Jurisdiction

(1)  The Notes and these Terms and Conditions shall be governed by, and
construed in accordance with, the internal laws of the State of New York.

(2)  The courts of the State of New York and the federal courts of the
United States of America, in each case located in the Borough of Manhattan, The
City of New York, shall have non-exclusive jurisdiction to settle any disputes
which may arise out of or in connection with the Notes and these Terms and
Conditions. Any legal actions arising out of or in connection with the Notes
and these Terms and Conditions may be brought in the courts of the State of New
York or the federal courts of the United States of America, in each case
located in the Borough of Manhattan, The City of New York. The Company
irrevocably submits to the exclusive jurisdiction of any such court in any such
action and waives to the fullest extent permitted by law any objection which it
may have to the determination of the venue of any such action brought in such
court and any claim that any such action brought in such court has been brought
in an inconvenient forum.

(3)  Any person owning a beneficial interest in a Note may in any
proceedings against the Company or to which such Noteholder and the Company are
parties protect and enforce in its own name its rights arising under its Notes
only on the basis of (i) a statement issued by its Custodian (a) stating the
full name and address of such person, (b) specifying an aggregate principal
amount of Notes credited on the date of such statement to such persons
securities account maintained with such Custodian and (c) confirming that the
Custodian has given a written notice to Euroclear or Clearstream Luxembourg, as
appropriate, the Common Depositary and the Registrar containing the information
pursuant to (a) and (b) and (ii) a copy of the relevant Global Note certified
as being a true copy by a duly authorized officer of the Registrar. For
purposes of the foregoing, Custodian means any bank or other financial
institution of recognized standing authorized to engage in the securities
custody business with which the owner of a beneficial interest in a Note
maintains a securities account in respect of any Notes and includes Euroclear
and Clearstream Luxembourg.

36



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12. Amendment

(1)  The Terms and Conditions of the Notes may be modified or amended by
the Company, without the consent of the Noteholders, for the purpose of (a)
adding to the covenants of the Company for the benefit of the Noteholders; (b)
surrendering any right or power conferred upon the Company; (c) securing the
Notes; (d) evidencing the assumption by another legal entity of all of the
obligations of the Company with respect to the Notes as the result of a merger,
consolidation, or other form of consolidation permitted by Condition 8(d); (e)
curing any ambiguity, inconsistency, defect or omission in the Notes or between
the Terms and Conditions and the Notes; or (f) complying with mandatory
provisions of Japanese law, to all of which each Noteholder, by acceptance
hereof, consents.

(2)  The Terms and Conditions of the Notes may also be modified or amended
by the Company, and past defaults thereunder or under the Agency Agreement by
the Company may be waived, with the written consent of the Noteholders of not
less than sixty-six and two-thirds percent (66 2/3%) in aggregate principal
amount of the Notes outstanding. Any such written consent of holders may be
arranged by Company or such holders. Notwithstanding the foregoing, no such
modification, amendment or waiver, without the consent of the holder of each
Note, may: (a) waive a default in the payment of the principal of or interest
on any Note, or change the stated maturity of the principal of or the time for
payment of any installment of interest on any Note, or change the currency of
payment of the principal of, or interest on, any Note or reduce the principal
amount of, or the rate of interest on, any Note, or impair the right to
institute suit for the enforcement of any such payment on or with respect to
any Note; (b) reduce the above-stated percentage in principal amount of the
outstanding Notes required for any modification of or amendment to the terms
and conditions of the Notes, or of any waiver of any past default; or (c) modify any of the
provisions of this paragraph except to provide that certain other provisions of
the Terms and Conditions of the Notes cannot be modified, amended or waived
without the consent of the holder of each outstanding Note affected thereby.

37



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13. Miscellaneous

(1)  No service charge shall be made for any such registration of transfer
or exchange of the Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.

(2)  In case any Certificate shall at any time become mutilated or
destroyed or stolen or lost and such Certificate or evidence of the loss, theft
or destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Company, a new Note of like tenor will be issued by the
Company in exchange for the Certificate so mutilated, or in lieu of the Note so
destroyed or stolen or lost, but, in the case of any destroyed or stolen or
lost Security, only upon receipt of evidence satisfactory to the Company that
such Certificate was destroyed or stolen or lost, and, if required by the
Company, upon receipt also of indemnity satisfactory to the Company. All
expenses and reasonable charges associated with procuring such indemnity and
with the preparation, authentication and delivery of a new Note shall be borne
by the Holder of the Certificate that was mutilated, destroyed, stolen or lost.
Every new Certificate issued in lieu of any mutilated, destroyed, lost or
stolen Certificate shall constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone. Any new Certificate
delivered pursuant to this paragraph shall be so dated that neither gain nor
loss in interest shall result from such exchange.

38



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Annex 2

|         |  |                 |  |                                                             
|-------- |  | --------------- |  | ------------------------------------------------------------
|Amount
¥ |  | Certificate No. |  | ISIN
010958369(Restricted Note)
010958342(Unrestricted Note)

INTERNET INITIATIVE JAPAN INC.

¥15,000,000,000
1.75% Convertible Notes
due 2005

The Notes in respect of which this Certificate is issued are in registered
form and form the series designated as specified in the title (the
Notes) of
Internet Initiative Japan Inc. (the Company).

The Company hereby certifies that ___________ is, at the date hereof, entered
in the register of Noteholders as the holder of Notes in the principal amount
of ¥ ________ ( _______ Japanese Yen) or such other amount as is shown from
time to time on the register of Noteholders as being represented by this
Certificate and is duly endorsed (for information purposes only). For value
received, the Company promises to pay the person who appears at the relevant
time on the register of Noteholders as holder of the Notes in respect of which
this Certificate is issued such amount or amounts as shall become due in
respect of such Notes and otherwise to comply with the Terms and Conditions, as
referred to below.

The Notes are constituted by, and have the benefit of the terms and
conditions (the Terms and Conditions) set out in Annex 1 hereto.

Terms defined in the Terms and Conditions shall have the same meaning in
this Certificate.

The Notes are convertible into shares of common stock, par value ¥50,000
per share, of the Company (the Conversion Shares). The converting holders
shall have the right to take delivery of the Conversion Shares in the form of
ADSs, subject to certain limited exceptions. See Section 5 of the
Terms and Conditions.

This Certificate is evidence of entitlement only. Title to the Notes
passes only by surrender hereof, with the form of transfer duly completed and
signed by the transferor in the form attached to this Certificate, followed by
due registration in the register of Noteholders and only the duly registered
holder is entitled to payments on Notes in respect of which this Certificate is
issued.

The Terms and Conditions are modified as follows in so far as they apply
to the Notes in respect of which this Certificate is issued.





---



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Transfer

Transfers of interests in the Notes with respect to which this Certificate
is issued shall be made in accordance with the Terms and Conditions and the
Agency Agreement.

A person transferring the Notes in respect of which this Certificate is
issued must provide the Registrar with a written order containing instructions
and such other information as the Company and the Registrar may require to
complete, execute and deliver Certificates.

The provisions of Condition 2 will otherwise apply, except that new
Certificates to be issued upon transfer of Notes will, within 21 days of
receipt by the Registrar or an Agent of the form of transfer attached to this
Certificate, be mailed by uninsured mail at the risk of the holders entitled to
the relevant Notes to the addresses specified in the form of transfer.

The Notes have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. Accordingly,
the Notes are being offered and sold only (a) to qualified institutional
buyers (as defined in Rule 144A under the Securities Act) (QIBs) in
compliance with Rule 144A under the Securities Act and (b) in offers and sales
that occur outside the United States to persons other than U.S. persons
(foreign purchasers, which term shall include dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) in offshore transactions
meeting the requirements of Rule 903 of Regulation S under the Securities Act
(Regulation S). As used herein, the terms offshore transaction, United
States and U.S. person have the respective meanings given to them in
Regulation S. Each purchaser of Notes, by its acceptance thereof, will be
deemed to have acknowledged, represented to and agreed with the Company and
Goldman Sachs International (the Initial Purchaser) as follows:

(1)  It understands and acknowledges that the Notes and the Conversion
Shares have not been registered under the Securities Act or any other
applicable securities laws, the Notes are being offered for resale in
transactions not requiring registration under the Securities Act or any other
securities laws, including sales pursuant to Rule 144A under the Securities
Act, and the Notes and the Shares issuable on conversion of the Notes may not
be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, pursuant to an exemption therefrom or in a transaction not
subject thereto, and in each case in compliance with the conditions for
transfer set forth below.

(2)  It is not an affiliate (as defined in Rule 144 under the Securities
Act) of the Company or acting on behalf of the Company and it is either: (a) a
Qualified Institutional Buyer within the meaning of Rule 144A under the
Securities Act and is aware that any sale of the notes to it will be made in
reliance on Rule 144A. Such acquisition will be for its own account or for the
account of another Qualified Institutional Buyer; or (b) an institution that,
at the time the buy order for the notes was originated, was outside the United
States and was not a U.S. person (and was not purchasing for the account or
benefit of a U.S. person) within the meaning of Regulation S under the
Securities Act.

2



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##### 



(3)  It acknowledges that neither the Company nor the Initial Purchaser
nor any person representing the Company or the Initial Purchaser has made any
representation to it with respect to the Company or this offering or sale of
any Notes, other than the information contained in this Offering Circular,
which Offering Circular has been delivered to it and upon which it is relying
in making its investment decision with respect to the Notes. Accordingly, it
acknowledges that no representation or warranty is made by the Initial
Purchaser as to the accuracy or completeness of such material. It has had access to such
financial and other information concerning the Company and the Notes as it has
deemed necessary in connection with its decision to purchase any of the Notes,
including an opportunity to ask questions of and request information from the
Company and the Initial Purchaser.

(4)  It is purchasing the Notes for its own account, or for one or more
investor accounts for which it is acting as a fiduciary or agent, in each case
for investment, and not with a view to, or for offer or sale in connection
with, any distribution thereof in violation of the Securities Act, subject to
any requirement of law that the disposition of its property or the property of
such investor account or accounts be at all times within its or their control
and subject to its or their ability to resell such Notes pursuant to Rule 144A,
Regulation S or any exemption from registration available under the Securities
Act. It agrees on its own behalf and on behalf of any investor account for
which it is purchasing or holding the Notes or the Conversion Shares, and each
subsequent holder of the Notes or such Shares by its acceptance thereof will
agree, to offer, sell or otherwise transfer such Notes or Shares prior to the
date which is two years after the later of the date of the original issue and
the last date on which the Company or any affiliate of the Company was the
owner of such Notes or Shares (or any predecessor thereto)(the Resale
Restriction Termination Date) only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) for so long as the Notes are eligible for resale pursuant to Rule
144A, to a person it reasonably believes is a Qualified Institutional Buyer
that purchases for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales to non-U.S. persons
that occur outside the United States within the meaning of Regulation S under
the Securities Act or (e) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. Each purchaser acknowledges that the Company and
The Bank of New York, as Registrar, reserve the right prior to any offer, sale
or other transfer of the Notes pursuant to clauses (d) or (e) above prior to
the Resale Restriction Termination Date to require the delivery of an opinion
of counsel, certifications and/or other information satisfactory to the Company
or the Registrar as applicable.

(5)  In connection with any transfer of a Restricted Note prior to the
Resale Restriction Termination Date, the holder must provide to the Registrar a
certification as to the manner of such transfer.

(6)  It agrees that it will give to each person to whom it transfers the
Notes or the Conversion Shares notice of any restrictions on transfer of such
Notes or Shares.

(7)  If it is a purchaser in a sale that occurs outside the United States
within the meaning of Regulation S under the Securities Act, it acknowledges
that until the expiration of the 40-day restricted period within the meaning
of Rule 903 of Regulation S under the Securities Act, any offer or sale of the
Notes shall not be made by it to a U.S. person or for the account or benefit of
a U.S. person within the meaning of Regulation S under the Securities Act.

3



---



##### 



(8)  It acknowledges that the Registrar will not be required to accept for
registration of transfer any Notes, except upon presentation of evidence
satisfactory to the Company and the Registrar that the restrictions set forth
therein have been complied with.

(9)  It acknowledges that the Company, the Registrar, the Initial
Purchaser and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations, warranties and agreements, and agrees that if
any of the acknowledgments, representations, warranties and agreements deemed
to have been made by it by its purchase of the Notes are no longer accurate, it
shall promptly notify the Company, the Registrar and the Initial Purchaser. If
it is acquiring any Notes as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect to
each such investor account and that it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such investor
account.

(10)  It agrees that it will not deposit any Shares it receives on
conversion of Restricted Notes into any unrestricted depositary receipt
facility established or maintained by a depositary bank relating to such Shares
until the Shares are no longer deemed to be restricted securities within the
meaning of Rule 144(a)(3) under the Securities Act.

(11)  It understands that, unless the Company determine otherwise in
accordance with applicable law, until the Resale Restriction Termination Date
certificates in respect of the Restricted Notes will bear a legend reflecting
the restrictions set forth above.

The Notes have not been and will not be registered under the Securities
and Exchange Law of Japan (Law No. 26 of 1948) (as amended) (the Securities
and Exchange Law) and will be subject to the Special Taxation Measures Law
(Law No. 26 of 1957) (as amended) (the Law). The Initial Purchaser has
represented and agreed that (i) it has not, directly or indirectly, offered or
sold and will not, directly or indirectly, offer or sell any Notes in Japan or
to, or for the benefit of, any person resident in Japan (which term as used in
this item (i) means any person resident in Japan, including any corporation or
other entity organised under the laws of Japan) or to others for re-offering
or re-sale, directly or indirectly, in Japan or to a resident of Japan, except
pursuant to an exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any other applicable
laws, regulations and ministerial guidelines of Japan; and (ii) it has not,
directly or indirectly, offered or sold and will not, (a) as part of its
distribution at any time and (b) otherwise until 40 days after the issue date of the Notes directly or indirectly offer or
sell Notes in Japan or to, or for the benefit of, any resident of Japan, (which
term as used in this item (ii) means any person resident in Japan, including
any corporation or other entity organised under the laws of Japan but excluding
certain financial institutions and securities companies defined in
Article 6, paragraph 8 of the Law) or to others for re-offering or re-sale,
directly or indirectly, in Japan or to a resident of Japan, so as to satisfy
the requirements for the tax exemption as provided for in
Article 6
of the Law and any other applicable laws, regulations and ministerial
guidelines of Japan.

The statements set out in the legend above are an integral part of the
Notes in respect of which this Certificate is issued and by acceptance hereof
the holder of the Notes evidenced by this Certificate or any owner of an
interest in such Notes agrees to be subject to and bound by the terms of such
legend.

Conversion

Subject to the requirements of Euroclear and Clearstream Luxembourg, the
Conversion Right attaching to Notes in respect of which this Certificate is
issued may be exercised by the presentation to or to the order of any
Conversion Agent of one or more Conversion Notices in the form attached as
Exhibit A duly completed by or on behalf of a holder of a book-entry interest
in such Note. The exercise of the Conversion Right shall be notified by the
Conversion Agent in the form attached as Exhibit B to the Company and the
holder of this Certificate. The provisions of Condition 5 shall otherwise
apply.

4



---



##### 



Payments

Payments of principal in respect of Notes represented by this Certificate
will be made against presentation and, if no further payment falls to be made
in respect of the Notes, surrender of this Certificate to or to the order of
the Principal Paying Agent or such other Paying Agent as shall have been
notified to the Noteholders for such purpose.

Notices

So long as the Notes are represented by this Certificate, notices to
Noteholders shall be given by delivery as required by the Terms and Conditions
except that so long as the Notes are listed on the Luxembourg Stock Exchange,
and the rules of that exchange so require, notices shall also be published in a
leading newspaper having general circulation in Luxembourg.

This Certificate shall not be valid for any purpose until authenticated by
or on behalf of the Registrar.

This Certificate is governed by, and shall be construed in accordance
with, the laws of the State of New York.

Taxation

Interest Payments on this security will be subject to Japanese withholding
tax unless the holder establishes that this Note is held by or for the account
of a holder that is not an individual resident of Japan or a Japanese
corporation for Japanese tax purposes or is a designated Japanese financial
institution described in Article 6 of Paragraph 8 of the special
taxation measures law of Japan.

Interest payments on this security to an individual resident of Japan or a
Japanese corporation not described in the preceding paragraph will be subject
to Japanese income tax on the amount specified in subparagraphs (a) or (b)
below, as applicable:



| |                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) If interests is paid to an individual resident of Japan or to a
Japanese corporation (except as provided in subparagraph (b) below), the amount
of such interest;                                                                                                                                                                 
|
| | (b) If interest is paid to a public entity, a financial institution, or a
securities company through a Japanese payment handling agent as provided in
Article 3-3, Paragraph 6 of the special taxation measures law of Japan,
the amount of such interest minus the amount provided in the cabinet order
relating to said Paragraph 6.

5



---



##### 



IN WITNESS whereof the Company has caused this Certificate to be signed on
its behalf.

INTERNET INITIATIVE JAPAN INC.



| |                                                             
| | ------------------------------------------------------------
| | By: _______________________
          Name:
          Title:

Certificate of Authentication

Certified that the above-named holder is at the date hereof entered in the
register of Noteholders as holder of the above-mentioned principal amount of
Notes.

THE BANK OF NEW YORK, as Registrar

By: _______________________
               Authorized Signatory

Dated:

6



---



##### 



FORM OF TRANSFER

FOR VALUE RECEIVED the undersigned hereby transfers the following
principal amounts of Notes in respect of which the Global Certificate is
issued, and all rights in respect thereof, to the transferee(s) listed below:

|                             |  |                                                        
|---------------------------- |  | -------------------------------------------------------
|Principal Amount transferred |  | Name, address and yen account for paymentsof transferee



| |                                           |                                          
| | ----------------------------------------- | -----------------------------------------
| | Dated: ___________Name: _________________ | Certifying Signature: ___________________

OR*



| |                                
| | -------------------------------
| | _______________________________
| | Duly authorized officer        
|
|
|
| | _______________________________
| | Duly authorized officer        
|
|
| | Accepted by:                   
|
|
|
| | _______________________________
| | Duly authorized officer        

*  Where the transferor is a corporation, this form of transfer must be
endorsed under its common seal or under the hand of two of its officers duly
authorized in writing.

Note:



| | (i)   |  | A representative of the Noteholder should state the capacity in which
he signs e.g. executor.                                                                                                                                                                
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | The signature of the person effecting a transfer shall conform to any
list of duly authorized specimen signatures supplied by the registered holder
or be certified by a recognized bank, notary public or in such other manner as
the Registrar may require.
|
| | (iii) |  | This form of transfer should be dated as of the date it is deposited
with the Registrar.                                                                                                                                                                     
|
| | (iv)  |  | The Noteholder should inform the Registrar of any changes to the
information provided in this form of transfer, including changes with respect
of the yen account for payments of the Noteholder.                                                            

7



---



##### 



Annex 3

|                  |  |                 |  | 
|----------------- |  | --------------- |  | 
|ISIN
XS0109583699 |  | Certificate No.

INTERNET INITIATIVE JAPAN INC.

¥15,000,000,000
1.75% Convertible Notes
due 2005

The Notes in respect of which this Global Certificate is issued are in
registered form and form the series designated as specified in the title (the
Notes) of Internet Initiative Japan Inc. (the
Company).

The Company hereby certifies that The Bank of New York Depositary
(Nominees) Limited, is, at the date hereof, entered in the register of
Noteholders as the holder of Notes in the principal amount of up to
¥15,000,000,000 (fifteen billion Japanese Yen) or such lesser amount as is
shown from time to time on the register of Noteholders as being represented by
this Global Certificate and is duly endorsed (for information purposes only) in
the third column of Schedule A to this Global Certificate. The aggregate
amount of Notes outstanding represented hereby may from time to time be
increased up to the foregoing amount or decreased to reflect transfers or
exchanges; providedthat the aggregate principal amount of Notes outstanding
and represented by this and any other Global Certificate shall not exceed such
amount. For value received, the Company promises to pay the person who appears
at the relevant time on the register of Noteholders as holder of the Notes in
respect of which this Certificate is issued such amount or amounts as shall
become due in respect of such Notes and otherwise to comply with the Terms and
Conditions, as referred to below.

The Notes are constituted by and have the benefit of the terms and
conditions (the Terms and Conditions) set out in Annex 1 hereto, as modified
by the provisions of this Global Certificate.

Terms defined in the Terms and Conditions shall have the same meaning in
this Global Certificate.

The Notes are convertible into shares of common stock, par value ¥50,000
per share, of the Company (the Conversion Shares). The converting holders
shall have the right to take delivery of the Conversion Shares in the form of
ADSs, subject to certain limited, exceptions. See Section 5 of the
Terms and Conditions.

This Global Certificate is evidence of entitlement only. Title to the
Notes passes only by surrender hereof, with the form of transfer duly completed
and signed by the transferor in the form attached this Global Certificate
followed by due registration in the register of Noteholders and only the duly
registered holder is entitled to payments on Notes in respect of which this
Global Certificate is issued.

The Terms and Conditions are modified as follows in so far as they apply
to the Notes in respect of which this Global Certificate is issued.





---



##### 



Transfer

Transfers of interests in the Notes with respect to which this Global
Certificate is issued shall be made in accordance with the Terms and Conditions
and the Agency Agreement.

The Agents will not accept the deposit of this Global Certificate for
transfer of any Notes save in the case of transfer into the name of a holder on
behalf of Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System (Euroclear), Clearstream Banking, societe
anonyme, (Clearstream Luxembourg) or an alternative clearing system (as
defined under Notices below) unless, (1) Euroclear or Clearstream Luxembourg
(or any alternative clearing system on behalf of which the Notes represented by
this Global Certificate may be held) is closed for business for a continuous
period of 14 days (other than by reason of holidays, statutory or otherwise) or
announces an intention permanently to cease business or does in fact do so or
(2) there shall have occurred and be continuing an Event of Default.

In such circumstances, the Company will (in the case of (2), on the
request of a Noteholder) cause sufficient definitive Certificates to be
executed and delivered to the Registrar for completion, authentication and
dispatch to the relevant Noteholders (who, in the case of (2), have so
requested the delivery of definitive Certificates). A person with an interest
in the Notes in respect of which this Global Certificate is issued must provide
the Registrar with a written order containing instructions and such other
information as the Company and the Registrar may require to complete, execute
and deliver such definitive Certificates.

Until and including the fortieth day after the later of the commencement
of the initial offering of the Notes and the original issue date of the Notes
(the Restriction Date), an interest in Notes represented by the Unrestricted
Global Note may be transferred to a person who takes delivery in the form of an
interest in a Note represented by the Restricted Global Note only if the
Registrar receives a written certificate of the transferee to the effect that
it is purchasing such interest for its own account or for an account or
accounts with respect to which it exercises sole investment discretion and that
it and, if applicable, each such account is a qualified institutional buyer
within the meaning of Rule 144A, in each case in a transaction complying in all
respects with the requirements of Rule 144A and in accordance with any
applicable securities laws of any State of the United States or any other
jurisdiction. After the Restriction Date, such restrictions and certification
requirements will no longer apply to such transfers of Unrestricted Notes.
Interests in Notes represented by the Restricted Global Note may be transferred
to a person who takes delivery in the form of an interest in the Unrestricted
Global Note, whether before, on or after the Restriction Date, only if the
Registrar receives a written certificate from the transferor to the effect that
such transfer is being made in accordance with Rule 903 of Regulation S.

The provisions of Condition 2 will otherwise apply, except that new
Certificates to be issued upon transfer of Notes will, within 21 days of
receipt by the Registrar or an Agent of the form of transfer attached to this
Global Certificate, be mailed by uninsured mail at the risk of the holders
entitled to the relevant Notes to the addresses specified in the form of
transfer.

[Insert securities Act Legend from Annex 2]

Definitive Certificates issued in respect of Notes sold in reliance on
Rule 144A under the Securities Act shall bear the legend set forth above.

The statements set out in the legend above are an integral part of the
Notes in respect of which this Global Certificate is issued and by acceptance
hereof the holder of the Notes evidenced by this Global Certificate or any
owner of an interest in such Notes agrees to be subject to and bound by the
terms of such legend.

2



---



##### 



Conversion

Subject to the requirements of Euroclear and Clearstream Luxembourg, the
Conversion Right attaching to Notes in respect of which this Global Certificate
is issued may be exercised by the presentation to or to the order of any
Conversion Agent of one or more Conversion Notices in the form attached as
Exhibit A duly completed by or on behalf of a holder of a book-entry interest
in such Note. Deposit of this Global Certificate with the Conversion Agent
together with the relevant Conversion Notice shall not be required. The
exercise of the Conversion Right shall be notified by the Conversion Agent in the form
attached as Exhibit B to the Company and the holder of this Global Certificate.
The provisions of Condition 5 shall otherwise apply.

Where the Notes represented by this Global Certificate are to be
converted, the Conversion Notice need not be signed. In such a case, delivery
of the Conversion Notice will constitute confirmation by the holder of a
book-entry interest in the Notes to be converted that the information and the
representations in the Conversion Notice are true and accurate on the date of
delivery.

Payments of principal

Payments of principal in respect of Notes represented by this Global
Certificate will be made against presentation and, if no further payment falls
to be made in respect of the Notes, surrender of this Global Certificate to or
to the order of the Principal Paying Agent or such other Paying Agent as shall
have been notified to the Noteholders for such purpose.

Cancellation

Cancellation of any Note following its purchase or conversion in
accordance with the Terms and Conditions will be effected by a reduction in the
principal amount of the Notes in the Register.

Notices

So long as the Notes are represented by this Global Certificate and this
Global Certificate is held on behalf of Euroclear or Clearstream Luxembourg,
notices to Noteholders may be given by delivery of the relevant notice to the
relevant clearing system(s) for communication by it to entitled accountholders
in substitution for notification as required by the Terms and Conditions except
that (i) so long as the Notes are listed on the Luxembourg Stock Exchange, and
the rules of that exchange so require, notices shall also be published in a
leading newspaper having general circulation in Luxembourg.

Enforcement

This Global Certificate shall not be valid for any purpose until
authenticated by or on behalf of the Registrar.

This Global Certificate is governed by, and shall be construed in
accordance with, the laws of the State of New York.

Taxation

Interest Payments on this security will be subject to Japanese withholding
tax unless the holder establishes that this Note is held by or for the account
of a holder that is not an individual resident of Japan or a Japanese
corporation for Japanese tax purposes or is a designated Japanese financial
institution described in Article 6 of Paragraph 8 of the special taxation
measures law of Japan.

3



---



##### 



Interest payments on this security to an individual resident of Japan or a
Japanese corporation not described in the preceding paragraph will be subject
to Japanese income tax on the amount specified in subparagraphs (A) or (B)
below, as applicable:



| | (A) |  | If interests is paid to an individual resident of Japan or to a
Japanese corporation (except as provided in subparagraph (B) below), the amount
of such interest;                                                                                                                                                                 
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) |  | If interest is paid to a public entity, a financial institution, or a
securities company through a Japanese payment handling agent as provided in
Article 3-3, Paragraph 6 of the special taxation measures law of Japan,
the amount of such interest minus the amount provided in the cabinet order
relating to said Paragraph 6.

4



---



##### 



IN WITNESS whereof the Company has caused this Global Certificate to be
signed on its behalf.

__________________ ____, 2000


INTERNET INITIATIVE JAPAN INC.

By: ____________________________

Name:


Title:


Certificate of Authentication

Certified that the above-named holder is at the date hereof entered in the
register of Noteholders as holder of the above-mentioned principal amount of
Notes.

THE BANK OF NEW YORK, as Registrar

By: ___________________________
               Authorized Signatory



|      
|------
|Dated:

5



---



##### 



SCHEDULE A

Schedule of Reductions or Increases in Principal Amount of Notes in
respect of which this Global Certificate is issued

The following reductions/increases in the principal amount of Notes in
respect of which this Global Certificate is issued have been made as a result
of (i) exercise of the Conversion Right attaching to Notes, or (ii) repayment
or cancellation of Notes, or (iii) transfers of Notes (including transfers of
interests between Global Certificates), or (iv) exchanges of interests in the
Notes represented by this Global Certificate for definitive Certificates as set
out in the Agency Agreement.

|                                                                                  |  |                                                                                                             |  |                                                                                                               |  |  |  |                                                                                 |  |  |  | 
|--------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  |  |  | ------------------------------------------------------------------------------- |  |  |  | 
|Date of Conversion/Redemptions or Cancellations/Transfer/Exchange
(stating which) |  | Amount of decrease/increase in principal amount of and number of
Notes evidenced by this Global Certificate |  | Principal amount of and number of Notes evidenced by this
Global Certificate following such decrease/increase |  |  |  | Notation made by or on behalf of the Registrar following
such decrease/increase

6



---



##### 



FORM OF TRANSFER

FOR VALUE RECEIVED the undersigned hereby transfers the following
principal amounts of Notes in respect of which the Global Certificate is
issued, and all rights in respect thereof, to the transferee(s) listed below:

|                             |  |                                                        
|---------------------------- |  | -------------------------------------------------------
|Principal Amount transferred |  | Name, address and yen account for paymentsof transferee



| | Dated: ___________Name: ______________ | Certifying Signature: _____________
| | -------------------------------------- | -----------------------------------

OR*

_________________________________

Duly authorized officer


_________________________________

Duly authorized officer


Accepted by:

_________________________________

Duly authorized officer


*  Where the transferor is a corporation, this form of transfer must be
endorsed under its common seal or under the hand of two of its officers duly
authorized in writing.

Note:



| | (i)   |  | A representative of the Noteholder should state the capacity in which
he signs e.g. executor.                                                                                                                                                                
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | The signature of the person effecting a transfer shall conform to any
list of duly authorized specimen signatures supplied by the registered holder
or be certified by a recognized bank, notary public or in such other manner as
the Registrar may require.
|
| | (iii) |  | This form of transfer should be dated as of the date it is deposited
with the Registrar.                                                                                                                                                                     
|
| | (iv)  |  | The Noteholder should inform the Registrar of any changes to the
information provided in this form of transfer, including changes with respect
of the yen account for payments of the Noteholder.                                                            

7



---



##### 



Annex 4

|             |  |                 |  | 
|------------ |  | --------------- |  | 
|ISIN         |  | Certificate No.
|XS0109583426 |  |                 |  | 

INTERNET INITIATIVE JAPAN INC.

¥15,000,000,000
1.75% Convertible Notes
due 2005

The Notes in respect of which this Global Certificate is issued are in
registered form and form the series designated as specified in the title (the
Notes) of Internet Initiative Japan Inc. (the Company).

The Company hereby certifies that The Bank of New York Depositary
(Nominees) Limited, is, at the date hereof, entered in the register of
Noteholders as the holder of Notes in the principal amount of up to
¥15,000,000,000 (fifteen billion Japanese Yen) or such lesser amount as is
shown from time to time on the register of Noteholders as being represented by
this Global Certificate and is duly endorsed (for information purposes only) in
the third column of Schedule A to this Global Certificate. The aggregate
amount of Notes outstanding represented hereby may from time to time be
increased up to the foregoing amount or decreased to reflect transfers or
exchanges; provided that the aggregate principal amount of Notes outstanding
and represented by this and any other Global Certificate shall not exceed such
amount. For value received, the Company promises to pay the person who appears
at the relevant time on the register of Noteholders as holder of the Notes in
respect of which this Certificate is issued such amount or amounts as shall
become due in respect of such Notes and otherwise to comply with the Terms and
Conditions, as referred to below.

The Notes are constituted by and have the benefit of the terms and
conditions (the Terms and Conditions) set out in Annex 1 hereto, as modified
by the provisions of this Global Certificate.

Terms defined in the Terms and Conditions shall have the same meaning in
this Global Certificate.

The Notes are convertible into shares of common stock, par value ¥50,000
per share, of the Company (the Conversion Shares). The converting holders
shall have the right to take delivery of the Conversion Shares in the form of
ADSs, subject to certain limited, exceptions. See Section 5 of the
Terms and Conditions.

This Global Certificate is evidence of entitlement only. Title to the
Notes passes only by surrender hereof, with the form of transfer duly completed
and signed by the transferor in the form attached to this Global Certificate
followed by due registration in the register of Noteholders and only the duly
registered holder is entitled to payments on Notes in respect of which this
Global Certificate is issued.

The Terms and Conditions are modified as follows in so far as they apply
to the Notes in respect of which this Global Certificate is issued.





---



##### 



Transfer

Transfers of interests in the Notes with respect to which this Global
Certificate is issued shall be made in accordance with the Terms and Conditions
and the Agency Agreement.

The Agents will not accept the deposit of this Global Certificate for
transfer of any Notes save in the case of transfer into the name of a holder on
behalf of Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System (Euroclear), Clearstream Banking, société
anonyme (Clearstream Luxembourg) or an alternative clearing system (as
defined under Notices below) unless, (1) Euroclear or Clearstream Luxembourg
(or any alternative clearing system on behalf of which the Notes represented by
this Global Certificate may be held) is closed for business for a continuous
period of 14 days (other than by reason of holidays, statutory or otherwise) or
announces an intention permanently to cease business or does in fact do so or
(2) there shall have occurred and be continuing an Event of Default.

In such circumstances, the Company will (in the case of (2), on the
request of a Noteholder) cause sufficient definitive Certificates to be
executed and delivered to the Registrar for completion, authentication and
dispatch to the relevant Noteholders (who, in the case of (2), have so
requested the delivery of definitive Certificates). A person with an interest
in the Notes in respect of which this Global Certificate is issued must provide
the Registrar with a written order containing instructions and such other
information as the Company and the Registrar may require to complete, execute
and deliver such definitive Certificates.

The provisions of Condition 2 will otherwise apply, except that new
Certificates to be issued upon transfer of Notes will, within 21 days of
receipt by the Registrar or an Agent of the form of transfer attached to this
Global Certificate, be mailed by uninsured mail at the risk of the holders
entitled to the relevant Notes to the addresses specified in the form of
transfer.

Conversion

Subject to the requirements of Euroclear and Clearstream Luxembourg, the
Conversion Right attaching to Notes in respect of which this Global Certificate
is issued may be exercised by the presentation to or to the order of any
Conversion Agent of one or more Conversion Notices in the form attached as
Exhibit A duly completed by or on behalf of a holder of a book-entry interest
in such Note. Deposit of this Global Certificate with the Conversion Agent
together with the relevant Conversion Notice shall not be required. The
exercise of the Conversion Right shall be notified by the Conversion Agent in
the form attached as Exhibit B to the Company, the Registrar and the holder of
this Global Certificate. The provisions of Condition 5 shall otherwise apply.

Where the Notes represented by this Global Certificate are to be
converted, the Conversion Notice need not be signed. In such a case, delivery
of the Conversion Notice will constitute confirmation by the holder of a
book-entry interest in the Notes to be converted that the information and the
representations in the Conversion Notice are true and accurate on the date of
delivery.

Payments

Payments of principal in respect of Notes represented by this Global
Certificate will be made against presentation and, if no further payment falls
to be made in respect of the Notes, surrender of this Global Certificate to or
to the order of the Principal Paying Agent or such other Paying Agent as shall
have been notified to the Noteholders for such purpose.

2



---



##### 



Notices

So long as the Notes are represented by this Global Certificate and this
Global Certificate is held on behalf of Euroclear or Clearstream Luxembourg,
notices to Noteholders may be given by delivery of the relevant notice to the
relevant clearing system(s) for communication by it to entitled accountholders
in substitution for notification as required by the Terms and Conditions except
that (i) so long as the Notes are listed on the Luxembourg Stock Exchange, and
the rules of that exchange so require, notices shall also be published in a
leading newspaper having general circulation in Luxembourg.

Enforcement

This Global Certificate shall not be valid for any purpose until
authenticated by or on behalf of the Registrar.

This Global Certificate is governed by, and shall be construed in
accordance with, the laws of the State of New York.

Taxation

Interest Payments on this security will be subject to Japanese withholding
tax unless the holder establishes that this Note is held by or for the account
of a holder that is not an individual resident of Japan or a Japanese corporation for
Japanese tax purposes or is a designated Japanese financial institution
described in Article 6 of Paragraph 8 of the special taxation
measures law of Japan.

Interest payments on this security to an individual resident of Japan or a
Japanese corporation not described in the preceding paragraph will be subject
to Japanese income tax on the amount specified in subparagraphs (A) or (B)
below, as applicable:



| | (A) |  | If interests is paid to an individual resident of Japan or to a
Japanese corporation (except as provided in subparagraph (B) below), the amount
of such interest;                                                                                                                                                                 
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) |  | If interest is paid to a public entity, a financial institution, or a
securities company through a Japanese payment handling agent as provided in
Article 3-3, Paragraph 6 of the special taxation measures law of Japan,
the amount of such interest minus the amount provided in the cabinet order
relating to said Paragraph 6.

3



---



##### 



IN WITNESS whereof the Company has caused this Global Certificate to be
signed on its behalf.

__________________ _____, 2000

INTERNET INITIATIVE JAPAN INC.

By:_________________
          Name:
          Title:

Certificate of Authentication

Certified that the above-named holder is at the date hereof entered in the
register of Noteholders as holder of the above-mentioned principal amount of
Notes.

THE BANK OF NEW YORK, as Registrar

By:__________________________
                    Authorized Signatory

Dated:

4



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##### 



SCHEDULE A

Schedule of Reductions or Increases in Principal Amount of Notes in
respect of which this Global Certificate is issued

The following reductions/increases in the principal amount of Notes in
respect of which this Global Certificate is issued have been made as a result
of (i) exercise of the Conversion Right attaching to Notes, or (ii) repayment
or cancellation of Notes, or (iii) transfers of Notes (including transfers of
interests between Global Certificates), or (iv) exchanges of interests in the
Notes represented by this Global Certificate for definitive Certificates as set
out in the Agency Agreement.

|                                                                                  |  |                                                                                                             |  |                                                                                                               |  |                                                                                 |  |  |  |  |  | 
|--------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  |  |  |  |  | 
|Date of Conversion/Redemptions or Cancellations/Transfer/Exchange
(stating which) |  | Amount of decrease/increase in principal amount of and
number of Notes evidenced by this Global Certificate |  | Principal amount of and number of Notes
evidenced by this Global Certificate following such decrease/increase |  | Notation made by or on behalf of the Registrar
following such decrease/increase

5



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##### 



FORM OF TRANSFER

FOR VALUE RECEIVED the undersigned hereby transfers the following
principal amounts of Notes in respect of which the Global Certificate is
issued, and all rights in respect thereof, to the transferee(s) listed below:

|                             |  |                                                        
|---------------------------- |  | -------------------------------------------------------
|Principal Amount transferred |  | Name, address and yen account for paymentsof transferee

| |                                        |                                    
| | -------------------------------------- | -----------------------------------
| | Dated: ___________Name: ______________ | Certifying Signature: _____________

OR*

_________________________________

Duly authorized officer


_________________________________

Duly authorized officer


Accepted by:

_________________________________

Duly authorized officer


*  Where the transferor is a corporation, this form of transfer must be
endorsed under its common seal or under the hand of two of its officers duly
authorized in writing.

Note:



| | (i)   |  | A representative of the Noteholder should state the capacity in which
he signs e.g. executor.                                                                                                                                                                
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | The signature of the person effecting a transfer shall conform to any
list of duly authorized specimen signatures supplied by the registered holder
or be certified by a recognized bank, notary public or in such other manner as
the Registrar may require.
|
| | (iii) |  | This form of transfer should be dated as of the date it is deposited
with the Registrar.                                                                                                                                                                     
|
| | (iv)  |  | The Noteholder should inform the Registrar of any changes to the
information provided in this form of transfer, including changes with respect
of the yen account for payments of the Noteholder.                                                            

6



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##### 



Exhibit A

¥15,000,000,000

1.75% Convertible Notes due 2005

INTERNET INITIATIVE JAPAN INC.

CONVERSION NOTICE

(Please read the notes overleaf before completing this Notice)

Name:___________________

Date:___________________

Address:________________

Signature:________________

Delivery of the Conversion Notice will constitute confirmation by the
holder of a beneficial interest in the Notes to be converted of Internet
Initiative Japan Inc. (IIJ) that the information and the representations in
the Conversion Notice are true and accurate on the date of delivery.

As the Notes to be converted are represented by a Certificated Note and
the Notes are cleared through Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system (Euroclear) and/or
Clearstream Banking, société anonyme (Clearstream Luxembourg), the Conversion
Notice must be signed by or on behalf of the beneficial owner of the Notes and
sent to the Conversion Agent on behalf of the Company.

To:     Internet Initiative Japan Inc.

I/We, being the holder(s) of a beneficial interest in the Notes specified
below, hereby irrevocably elect to convert such Notes into shares of common
stock, par value ¥50,000 per share of IIJ in registered form (the Conversion
Shares) in accordance with Condition 5 of the Terms and Conditions of the
Notes (the Terms and Conditions) and apply for the Conversion Shares to be
delivered on conversion.

1.     Total principal amount of Notes to be converted: ____________________

These Notes represent a co-ownership/beneficial interest in the
Certificated Note





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##### 



2.     I/we hereby request to take delivery of Conversion Shares in the form
of Conversion ADSs.

[               ]*

*check the box if you request to take delivery of Conversion Shares in the
form of Conversion ADSs.

If fractional shares representing 1/100th of a Share or integral multiples
thereof arise and in the event that I/we request to take delivery of Conversion
Shares in the form of Conversion ADS, I/we hereby further request that a
certificate of such fractional shares be issued and delivered.

3.     I/we hereby request that the Conversion Shares or Conversion ADSs
(together with any other securities, property or cash) required to be delivered
upon conversion be delivered via Euroclear/Clearstream Luxembourg to ___________ (account no.) to the order of __________ (Euroclear/Clearstream Luxembourg
member).

4.     Any cash payments due under Condition 5 of the Terms and Conditions
should be paid to Euroclears yen account at the Industrial Bank of Japan,
Ltd., Tokyo.

5.     I/we hereby declare that all approvals, consents and authorizations
(if any) required by law to be obtained by me/us prior to the said conversion
have been obtained and are in full force and effect and that any applicable
condition thereto has been complied with by me/us.

6.     At the time of signing and delivery of this Conversion Notice, I/we
represent and agree that I/we, or the person who has an interest in the Notes
to be converted, is



| | (A) |  | not a U.S. person (within the meaning of Regulation S under the United
States Securities Act of 1933 (the Securities Act)) and I/we, or such person,
purchased such Notes, or an interest therein, in a transaction made in
accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act
and, prior to the expiration of 40 days after such conversion, I/we or it will
not offer, sell, pledge or otherwise transfer such Conversion Shares and/or
Conversion ADSs except (a) to a person who the purchaser and any person acting
on its behalf reasonably believe is a qualified institutional buyer (QIB)
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Securities Act, or (b) in an
offshore transaction complying with Rule 903 or Rule 904 of Regulation S; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) |  | a QIB and understands that the Conversion Shares and/or Conversion
ADSs to be delivered upon conversion of such Notes have not been and will not
be registered under the Securities Act and covenants: (i) not to deposit or
cause to be deposited such Conversion Shares and/or Conversion ADSs into a
depositary receipt facility (if any) established or maintained by a depositary
bank other than a Rule 144A restricted depositary receipt facility (if any), so
long as such Conversion Shares and/or Conversion ADSs are restricted
securities within the meaning of Rule 144A(a)(3) of the Securities Act and
(ii) that if I/we, or such person, should sell or transfer such shares, I/we,
or such person, will do so only in compliance with the Securities Act and other
applicable laws and only (a) to IIJ, (b) pursuant to Rule 144A to a person that
the holder reasonably believe in a QIB within the meaning of Rule 144A
purchasing for its own account or for the account of a QIB whom the holder has
informed, in each case, that the resale or other transfer is being made in
reliance on Rule 144A (c) in an offshore transaction in accordance with Rule
903 or Rule 904 of Regulation S (and not in a pre-arranged transaction resulting in the resale of such Conversion Shares
and/or Conversion ADSs into the United States) pursuant to a registration
statement which has been declared effective under the Securities Act or (e)
pursuant to an exemption from registration under the Securities Act provided by
Rule 144 thereunder (if available) subject, in the case of (b), to the delivery
by the transferee or other purchaser to the transferor of a covenant similar in
all material respects to those given in (i) and (ii) above, and in each case in
accordance with any applicable securities laws of any state of United States.
I/we further acknowledge that IIJ and its affiliates and other will rely upon
the truth and accuracy of the foregoing acknowledgments, representations and
agreement.

2



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|                 |                                                                                                           
|---------------- | ----------------------------------------------------------------------------------------------------------
|PLEASE NOTE: (i) | This Conversion Notice will be void unless the
introductory details, Sections 1, 2, 3 and 4 are completed.
|                

| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | Your attention is drawn to Condition 5 of the Terms and Conditions
with respect to the conditions precedent which must be fulfilled before the
Notes specified above will be treated as effectively eligible for conversion.                                                                                                                                                                                                                                                                                                                   
|
|
| | (iii) | Transfer of shares or other securities or property will be made at
the risk and expense of the converting Noteholder and the converting Noteholder
will be required to prepay the expenses of, and submit any necessary documents
required in order to effect, dispatch in the manner specified.                                                                                                                                                                                                                                               
|
| | (iv)  | If as contemplated by the Terms and Conditions the converting
Noteholder becomes entitled to additional Conversion Shares or Conversion ADSs
(together with any other securities, property or cash), they will be delivered
or dispatched in the same manner as the Conversion Shares or Conversion ADSs or
other securities, property and cash or, as the case may be, cash payments in
lieu of delivery of Conversion Shares or Conversion ADSs pursuant to Condition
5 previously issued or paid pursuant to the relevant Conversion Notice.
|
| | (v)   | Notes surrendered for conversion during the period from the close of
business on any Record Date next preceding any interest Payment Date to the
opening of business on such interest Payment Date must be accompanied by
payment in Japanese Yen of an amount equal to the interest thereon which the
Noteholder will be entitled to receive on such interest Payment Date.                                                                                                                                                                   

For Agents use only:

1.     Note conversion identification reference:

2.     Conversion Date: _____________________ .

3.     Aggregate principal amount of Notes in respect of which Notes have
been deposited for conversion: _______________.

4.     Conversion Price on Conversion Date: _________________.

5.     Number of Conversion Shares or Conversion ADSs deliverable: ___________________
[Shares and fractional shares representing 1/100th of a share
or integral multiples thereof ][ADSs].

3



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##### 



6.     (If applicable and an amount over ¥10,000) amount of cash payment due
to converting Noteholder under Condition 5 of the Terms and Conditions in
respect of fractions of Conversion Shares or Conversion ADSs representing less
than 1/100 of a Share: ________________.

7.     (If applicable) amount of any cash payment in lieu of delivery of
Conversion Shares due under Condition 5 of the Terms and Conditions: _________________.

Note: The Conversion Agent must complete items 1 to 5 and (if applicable)
6 and/or 7.

4



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##### 



Exhibit B

Form of notification to be sent by facsimile transmission by the
Conversion Agent to the Company, the Transfer Agent and the Registrar

¥15,000,000,000

1.75% Convertible Notes
INTERNET INITIATIVE JAPAN INC.

|    |  |                                                                |  |  |  |  |  | 
|--- |  | -------------------------------------------------------------- |  |  |  |  |  | 
|To: |  | The Bank of New York, as Registrar                            
|   
|To: |  | The Sumitomo Trust and Banking Co., Ltd., as Transfer Agent   
|   
|To: |  | Internet Initiative Japan Inc.                                
|   
|To: |  | The Bank of New York, Tokyo Branch, as Share Custodians Agent

Note conversion identification reference:

(A)

(B)

(C)

(D)

(E)

(F)

(G)

(H)

Regards

Conversion Agent

Explanation

Against the letters (A) to (H) inclusive will be inserted the following
information with respect to the relevant Conversion Notice.





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##### 



|     |  |   |  |                                                                                                                                                                                                                                                                                                                                      
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A)  |  | = |  | name and address of converting holder of a beneficial interest in the Notes                                                                                                                                                                                                                                                          
|    
|(B)  |  | = |  | total principal amount of Notes to be converted by the same holder
of a beneficial interest in the Notes                                                                                                                                                                                                                             
|    
|(C)  |  | = |  | number of Conversion Shares (including fractional shares
representing 1/100th of a Share or integral multiples thereof and excluding
fractional shares less than 1/100th) or Conversion ADSs issuable                                                                                                                                
|    
|*(D) |  | = |  | (if applicable) amount of cash payment due under Condition 5 of the
Terms and Conditions to converting Noteholder in respect of fractions of
Conversion Shares or Conversion ADSs representing less than 1/100th of a Share.                                                                                                         
|    
|(E)  |  | = |  | Payment from the Noteholder accompanying the request for conversion                                                                                                                                                                                                                                                                  
|    
|(F)  |  | = |  | The amount of any other cash payable upon conversion                                                                                                                                                                                                                                                                                 
|    
|(G)  |  | = |  | the Conversion Date and the Conversion Price in respect of the conversion                                                                                                                                                                                                                                                            
|    
|(H)  |  | = |  | name and address of person to whom, if applicable, Conversion Shares
or Conversion ADSs, a check in respect of cash payments in lieu of delivery of
Conversion Shares or Conversion ADSs pursuant to Condition 5 of the Terms and
Conditions etc. are to be transferred or dispatched, and manner of transfer,
dispatch or collection



---



| | * | According to Condition 5(6) of the Terms and Conditions, the Company has to
make such payment only if the amount due exceeds ¥10,000.
| | - | -------------------------------------------------------------------------------------------------------------------------------------

2



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##### 



Exhibit C

Form of notification to be sent by facsimile transmissions by the
Share Custodians Agent to the Conversion Agent which has sent the relevant
Conversion Notice

¥15,000,000,000

1.75% Convertible Notes
INTERNET INITIATIVE JAPAN INC.



|    |                                                       
|--- | ------------------------------------------------------
|To: | The Bank of New York
as Conversion Agent              
|   
|To: | Banque Internationale à Luxembourg
as Conversion Agent

Note conversion identification reference: __________________

|    |  |      
|--- |  | -----
|(A) |  |      
|   
|(B) |  | (i)  
|   
|    |  | (ii) 
|   
|    |  | (iii)
|   
|(C) |  |      
|   
|(D) |  |      

Regards,

THE BANK OF NEW YORK, TOKYO BRANCH

By:_______________
               Name:
               Title:

Explanation

Against the letters (A) to (D) inclusive must be inserted the following
information with respect to the delivery of Conversion Shares upon conversion:





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##### 



|    |  |   |  |                                                                                                                                                                                                                                                                                                                              
|--- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | = |  | the identification code and number of the Agent who forwarded the
copy of the Conversion Notice in respect of the Notes that have been converted.                                                                                                                                                                            
|   
|(B) |  | = |  | number of Conversion Shares (including fractions of 1/100th of a Share or integral multiples thereof) delivered upon conversion                                                                                                                                                                                              
|   
|(C) |  | = |  | the date of transfer or dispatch of the Conversion Shares and any
securities, property or cash or the date the same were made available at the
head office of the Principal Paying Agent or the Luxembourg Paying Agent                                                                                                      
|   
|(D) |  | = |  | (if applicable) the name and address of the person (which will be the Depositary in case of a conversion into ADSs) to whom or to whose order the conversion Shares and/or cash, if any, were transferred or dispatched and, if applicable, the address to which and the manner in which they were transferred or dispatched.

2