(abridged translation) june 1, 2012 notice of convocation ... · telecom limited (currently...

(Abridged Translation)

(Code Number: 9427) June 1, 2012

To our Shareholders,

eAccess Ltd. 10-1, Toranomon 2-chome Minato-ku, Tokyo, Japan Eric Gan Representative Director, President

NOTICE OF CONVOCATION OF THE 13TH ANNUAL SHAREHOLDERS MEETING

We hereby announce that the 13th Annual Shareholders Meeting of eAccess Ltd. (the “Company”) will be held as stated below, and your attendance is cordially requested. If you are unable to attend the meeting, you may exercise your voting rights by either using a voting slip or via an electronic method (Internet, etc.) subject to the following instructions. If you wish to exercise your voting rights using the voting slip, please review the enclosed Referential Material and indicate your approval or disapproval of each agenda item on the enclosed voting slip, and return the voting slip to the Company. Please note that the voting slip must arrive no later than 0:00 a.m. on Friday of June 22, 2012. When you exercise your voting rights by an electronic method (Internet, etc.), please also review the aforementioned Referential Material and exercise your voting rights no later than 0:00 a.m. on Friday of June 22, 2012.

1. Date and Time: June 22, 2012 (Friday), at 10:00 a.m.

2. Place of the Meeting: ANA InterContinental Tokyo, Prominence (B1 level) 1-12-33 Akasaka, Minato-ku, Tokyo, Japan

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3. Purpose of the Meeting:

Matters to be Reported Report on the business report and financial statement for the 13th business year (from April 1, 2011 through March 31, 2012)

Matters to be Resolved: First Item Election of Eight (8) Directors

Second Item Election of Two (2) Corporate Auditors

Third Item Election of One (1) Corporate Auditor Substitute

Fourth Item Issuing Stock Acquisition Rights in the Form of Stock Options

Fifth Item Determination of the Terms and the Amount of the Remuneration in the Form of Stock Options for the Directors

Sixth Item Determination of the Terms and the Amount of the Remuneration in the Form of Stock Options for the Corporate Auditors

4. Miscellaneous

The Board of Directors of the Company resolved in connection with shareholders meeting procedures, as follows: (i) The Company shall treat duplicative votes as follows: (a) If one shareholder exercises voting rights by a voting slip and through the Internet, the

vote made via the Internet shall prevail; and (b) If one shareholder sends two or more votes through the Internet, the last vote shall prevail;

and (ii) The Company shall physically deliver the convocation notice and other documents related to shareholders meetings (i.e., the convocation notice, referential material, voting slip, business report, financial statement, and audit reports thereof) to the shareholders who have agreed to receive convocation notices by electronic means, only upon request of those shareholders. Please be advised that the registered institutional investors may exercise their voting rights via an online voting platform, the “Electronic Voting Platform for Foreign and Institutional Investors”.

Please note that the Company may post any changes to the matters to be included in the referential material, the business report and the financial statement, on our website (http://www.eaccess.net/en/). (Reminder) When attending the meeting in person, you are kindly requested to submit the enclosed voting slip to the receptionist at the place of the meeting.

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Referential Material Proposals and References First Item Election of Eight (8) Directors

As the term of office of all of nine (9) directors will expire as of the end of this Shareholders Meeting, we propose to elect eight (8) directors. The following is information on the candidates:

No. Name (Date of Birth)

Personal History, Position and Responsibility in the Company and Important Positions Concurrently Held at Other Companies

Number of Shares of the

Company Held by the

Candidate

1 Sachio Semmoto (September 9, 1942)

June 1994 Senior Vice President of DDI CORPORATION (currently KDDI CORPORATION)

April 1996 Professor of Graduate School of Business Administration of Keio University

November 1999 Representative Director & President of eAccess Ltd.

June 2002 Representative Director, President & CEO of eAccess Ltd.

January 2005 Representative Director, Chairman & CEO of eAccess

Ltd. January 2005 Representative Director of

eMobile Ltd.(merged into the Company)

June 2005 Representative Director, Chairman & CEO of eMobile

Ltd. (merged into the Company) June 2007 Director & Chairman of

eAccess Ltd. June 2010 Representative Director, to present Chairman of eAccess Ltd.

100,609 common shares

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Company Held by the

Candidate

2 Eric Gan (September 6, 1963)

October 1993 Joined Goldman Sachs (Japan) Ltd. (currently Goldman Sachs Japan Co., Ltd.)

November 1999 Managing Director of Goldman Sachs (Japan) Ltd. (currently Goldman Sachs Japan Co., Ltd.)

January 2000 Representative Director of eAccess Ltd.

February 2003 Representative Director & CFO of eAccess Ltd.

January 2005 Representative Director, Senior Executive Vice President & CFO of eAccess Ltd.

January 2005 Representative Director of eMobile Ltd. (merged into the Company)

June 2005 Representative Director, Senior Executive Vice President & CFO of eMobile Ltd. (merged into the Company)

May 2007 Representative Director, President & COO of eMobile

Ltd. (merged into the Company) May 2007 Representative Director, Senior Executive Vice President of eAccess Ltd. June 2007 Director of eAccess Ltd. October 2008 Director of ACCA Networks Co.,

Ltd. (merged into the Company) June 2010 Representative Director,

President of eAccess Ltd. April 2012 Representative Director, to present President, Head of Finance &

Accounting Division of eAccess Ltd.

100,558 common shares

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Company Held by the

Candidate

3 Jiro Kokuryo (July 19, 1959)

April 1982 Joined Nippon Telegraph and Telephone Public Corporation (currently NIPPON TELEGRAPH AND TELEPHONE CORPORATION)

April 2000 Professor of Graduate School of Business Administration of Keio University

April 2003 Professor of Environment Information Department of Keio University

June 2004 Director of eAccess Ltd. to present April 2006 Professor of Faculty of Policy to present Management of Keio University July 2009 Trustee of Keio University to present July 2009 Dean of Faculty of Policy to present Management of Keio University

5 common shares

4 Junji Inoue (September 18,1949)

April 1974 Joined Mitsubishi Corporation June 1993 Vice President & General

Manager of Palo Alto Office of Mitsubishi International Corporation

March 2000 Senior Vice President of Mitsubishi International Corporation

April 2003 Senior Vice President & Executive Officer of Mitsubishi Corporation

June 2003 President of IT Frontier Corporation June 2007 Director of eAccess Ltd. to present April 2009 Chairman of the Board and CEO of IT Frontier Corporation April 2011 Advisor of IT Frontier Corporation

－

5




Company Held by the

Candidate

5 Ankur Sahu (October 18, 1969)

October 1998 Joined Goldman Sachs & Co. June 2000 Vice President of Principal

Investment Area of Goldman Sachs & Co.

January 2004 Vice President of Principal Investment Area of Goldman Sachs (Japan) Ltd. (currently Goldman Sachs Japan Co., Ltd.)

July 2005 Director of Fujita Corporation to present August 2005 Director of USJ Co., Ltd. to present November 2005 Managing Director of Principal Investment Area of Goldman Sachs Japan, Ltd. (currently

Goldman Sachs Japan Co., Ltd.) January 2006 Board Observer of eMobile Ltd. (merged into the Company) February 2006 Director of SANYO Electric

Co., Ltd. November 2006 Partner of The Goldman Sachs to present Group, Inc. December 2006 Managing Officer of GS TK Holdings I GK January 2007 Managing Officer of GS TK

Holdings III GK June 2007 Director of eMobile Ltd. (merged into the Company) November 2007 Director of USEN

CORPORATION March 2010 Managing Director of Merchant to present Banking Division of Goldman Sachs Japan Co., Ltd. June 2010 Director of eAccess Ltd. to present

－

6




Company Held by the

Candidate

6 Julian Horn-Smith (December 14, 1948)

1984 Founding member and Marketing Executive of Racal Telecom Limited (currently Vodafone Group Plc)

1986 Managing Director of Racal Telecom Limited (currently Vodafone Group Plc)

June1996 Board Member of Vodafone Group Plc

April 2001 Chief Operating Officer of Vodafone Group Plc

January 2005 Deputy Chief Executive Officer of Vodafone Group Plc

April 2007 Senior Advisor to UBS Limited to present June 2009 Director of eMobile Ltd.

(merged into the Company) June 2010 Director of eAccess Ltd. to present

－

7 Glenn Gumpel (August 19, 1947)

1973 Manager of Affiliate Relations of American Broadcast Company

1983 Vice President of Legal and Business Affairs of Universal Studios Hollywood

1987 National Executive Director of Directors Guild of America

1995 Executive Vice President of Business and Legal Affairs, MCA (currently Universal Parks & Resorts)

March 1999 President of International and Global Business Affairs of Universal Studios Recreation Group (currently Universal Parks & Resorts)

June 1999 Director of USJ Co., Ltd. June 2004 President and Chief Executive to present Officer of USJ Co., Ltd. June 2010 Director of eAccess Ltd. to present

－

* 8

Alan Miyasaki (April 19, 1976)

August 1998 Joined Starwood Capital Group March 2000 Joined Cohen & Steers Capital

Partners February 2001 Joined The Blackstone Group July 2007 Managing Director of The

Blackstone Group Japan K.K. January 2012 Senior Managing Director of The to present Blackstone Group Japan K.K.

－

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(Notes) 1. “*” indicates a new candidate for director. 2. Each of the candidates for director has no special interest in the Company. 3. Mr. Jiro Kokuryo, Mr. Junji Inoue, Mr. Ankur Sahu, Sir Julian Horn-Smith, Mr. Glenn Gumpel and Mr.

Alan Miyasaki are the candidates for outside director as set forth in Article 2, Paragraph 3, Item 7 of the Companies Act Enforcement Ordinance.

4. GS TK Holdings III GK and GS TK Holdings I GK of which Mr. Ankur Sahu served as Managing Officer until July 31, 2011 are major shareholders of the Company. GS TK Holdings III GK and the Company have entered into an agreement in which the both parties agree on the matters related to the governance of the Company which stipulates among other things that GS TK Holdings III GK shall have a right to nominate two (2) candidates for director at each of the Company’s annual shareholders meetings provided that GS TK Holdings III GK and its affiliates, taken as a whole, maintain a certain shareholding ratio in the Company.

5. The investment funds (“Blackstone Investors”) managed by Blackstone Group L.P., an affiliate of The Blackstone Group Japan K.K. of which Mr. Alan Miyasaki serves as Senior Managing Director, have entered into an agreement with the Company in which the both parties agree that Blackstone Investors shall have a right to nominate one (1) candidate for director at each of the Company’s annual shareholders meetings provided that Blackstone Investors, taken as a whole, maintain a certain number of shares in the Company. Blackstone Investors are recorded in the name of MLPFS CUSTODY ACCOUNT on the shareholders registry.

6. Special affairs with respect to the candidates for outside directors are as follows: (i) Reasons for Appointment of and Qualification as Outside Directors

(A) Mr. Jiro Kokuryo has experience of working in a major telecommunication company and has been teaching at Keio University in the fields of IT and business administration for many years. Although he has not been involved in business management other than as an outside director or outside corporate auditor, we expect that his considerable knowledge will enable him to properly perform his duty as an outside director of the Company.

(B) Mr. Junji Inoue has considerable experience and extensive knowledge as a management executive for many years and we expect that these will be reflected in the management of the Company.

(C) Mr. Ankur Sahu served as Managing Officer of GS TK Holdings III GK and GS TK Holdings I GK, major shareholders of the Company, and we expect that his considerable experience in private equity and broad knowledge in the fields of Japanese corporate finance and business management will be reflected in the management of the Company to enhance the Board of Directors’ supervisory function on the Company’s business operations.

(D) Sir Julian Horn-Smith has many years of experience, as senior management of Vodafone Group Plc, UK, in the management of telecommunication company, and we expect that his advices and proposals from a global standpoint will be reflected in the management of the Company.

(E) Mr. Glenn Gumpel has considerable experience as a management executive with expertise in consumer marketing and overall business strategy and we expect that this will be reflected in the management of the Company.

(F) Mr. Alan Miyasaki is associated with Blackstone Investors, a major shareholder of the Company, and we expect that his considerable experience in finance and corporate analysis will be reflected in the management of the Company to enhance the Board of Directors’ supervisory function on the Company’s business operations.

(ii) Where a candidate for outside director has served as director, operating officer or corporate auditor of other stock companies for past 5 years, an outline of a) unlawful business operation in any of those companies during his office, b) any precautionary measure against such business operation taken by the candidate and c) any countermeasure against such unlawful situation, if any, is disclosed below. Mr. Ankur Sahu, a candidate for outside director, previously served as an outside director at Ardepro Co., Ltd. (“Ardepro”). On June 16, 2009, Ardepro established an investigation committee comprised of qualified external individuals to review the accounting procedures for certain prior business transactions, because Ardepro had discovered that it might have to correct such procedures. The investigation committee identified one or more accounting irregularities in the preparation and

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review of Ardepro’s business plan and inventory valuation, and as a result, Ardepro made partial amendment to its eight (8) reports (Annual Securities Reports, Semi-annual Securities Reports and Quarterly Securities Reports) filed with the Director General of Kanto Local Finance Bureau during the period from April 2006 to June 2009. Since his designation as an outside director of Ardepro on October 25, 2007, Mr. Ankur Sahu had attended a number of the board meetings of Ardepro and had worked towards the establishment of appropriate internal corporate control processes. After Ardepro identified the potential need to correct its accounting procedures as stated above, Mr. Ankur Sahu, as an outside director, requested that Ardepro confirm the circumstances of these prior occurrences, investigate the cause of such occurrences and establish preventive measures to avoid future reoccurrences. Mr. Ankur Sahu resigned as an outside director of Ardepro on May 19, 2009.

(iii) Years of Service as Outside Director of Each Candidate for Outside Director As of the end of this Shareholders Meeting, the career of Mr. Jiro Kokuryo as an outside director of the Company will have spanned 8 years and that of Mr. Junji Inoue will have spanned 5 years at the same point of time. The career of Mr. Ankur Sahu, Sir Julian Horn-Smith and Mr. Glenn Gumpel will have spanned 2 years at the end of this Shareholders Meeting.

(iv) Agreement on Liability Limitation of Outside Directors The Articles of Incorporation of the Company provide that the Company may enter into an agreement with each of its outside directors which may limit his/her liabilities for damages to the Company (“Liability Limitation Agreement”) for the purpose of attracting competent talents to the Company and enabling its outside directors to fully exercise their abilities. The Company has entered into the Liability Limitation Agreement with each of the current outside directors and plans to enter into the Liability Limitation Agreement with the incoming outside director. The outline of the Liability Limitation Agreement is as follows:

If an outside director performed his duty in good faith without malicious intention or gross negligence, the amount of his liabilities to the Company as set forth in Article 423, Paragraph 1 of the Companies Act shall be limited to the higher of JPY 3,000,000 or the minimum liability amount determined by applicable laws and regulations.

There are no further matters to be pointed out with respect to the election of directors pursuant to Article 74 of the Companies Act Enforcement Ordinance.

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Second Item Election of Two (2) Corporate Auditors

As the term of office of Corporate Auditors Mr. Yoshinobu Tanaka and Mr. Noritsugu Yamaoka will expire as of the end of this Shareholders Meeting, we propose to elect two (2) corporate auditors. This proposal has been approved by the Board of Corporate Auditors. The following is information on the candidates:


Personal History, Position in the Company and Important Positions Concurrently Held at

Other Companies


Company Held by the

Candidate

* 1

Koji Fukata (January 27, 1961)

April 1985 Joined Kokusai Denshin Denwa Co., Ltd. (currently KDDI CORPORATION)

October 2000 Joined eAccess Ltd. August 2002 Senior Vice President of eAccess Ltd. May 2007 Executive Vice President of

eAccess Ltd. October 2007 Representative Director,

President & COO of Open Wireless Network Corporation

June 2008 Representative Director, President of eAccess Ltd. October 2008 Director of ACCA Networks

Co., Ltd. (merged into the Company)

June 2010 Representative Director, Vice to present Chairman of eAccess Ltd.

500 common shares

* 2

Toshiki Sada (June 16, 1950)

April 1974 Joined Nomura Securities Co., Ltd.

June 1989 President of Nomura France S.A. June 1998 Head of Financial Research

Center, Nomura Securities Co., Ltd.

June 2000 Operating Officer of Nomura Asset Management Co., Ltd.

June 2003 Executive Officer of Nomura Asset Management Co., Ltd.

June 2005 Full-time Corporate Auditor of JAFCO Co., Ltd. March 2011 Full-time Corporate Auditor of to present KAYAC Inc.

－

(Notes) 1. “*” indicates new candidates for corporate auditor. 2. Each of the candidate for corporate auditor has no special interest in the Company. 3. Mr. Toshiki Sada is the candidate for outside corporate auditor as set forth in Article 2, Paragraph 3, Item 8

of the Companies Act Enforcement Ordinance. 4. Special affairs with respect to the candidate for outside corporate auditor are as follows:

(i) Reasons for Appointment of and Qualification as Outside Corporate Auditor Mr. Toshiki Sada has broad knowledge and considerable experience in corporate analysis and financial markets and we expect that these will be reflected in the auditing system of the Company. Mr. Toshiki Sada has extensive experience in financial institutions and has a considerable level of

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knowledge with regard to corporate finance and accounting. If the Candidate is elected as proposed, he will be qualified as an independent corporate auditor under the Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange.

(ii) Agreement on Liability Limitation of Outside Corporate Auditor The Articles of Incorporation of the Company provide that the Company may enter into an agreement with each of its outside corporate auditors which may limit his/her liabilities for damages to the Company (“Liability Limitation Agreement”) for the purpose of attracting competent talents to the Company and enabling its outside corporate auditors to fully exercise their abilities. The Company has entered into the Liability Limitation Agreement with each of the current outside corporate auditor and plans to enter into the Liability Agreement with the incoming outside corporate auditor. The outline of the Liability Limitation Agreement is as follows:

If an outside corporate auditor performed his duty in good faith without malicious intention or gross negligence, the amount of his liabilities to the Company as set forth in Article 423, Paragraph 1 of the Companies Act shall be limited to the higher of JPY 3,000,000 or the minimum liability amount determined by applicable laws and regulations.

There are no further matters to be pointed out with respect to the election of corporate auditors pursuant to Article 76 of the Companies Act Enforcement Ordinance.

Third Item Election of One (1) Corporate Auditor Substitute

As the term of office of Mr. Yuji Shibata, elected as a corporate auditor substitute at the 12th Annual Shareholders Meeting, will expire as of the beginning of this Shareholders Meeting, we propose to elect one (1) corporate auditor substitute as a precaution against the cases where there is a shortfall in the number of corporate auditors prescribed in applicable laws. This proposal has been approved by the Board of Corporate Auditors. The following is information on the candidate:

Name (Date of Birth)

Personal History, Position in the Company and Important Positions Concurrently Held at

Other Companies


Company Heldby the

Candidate

Yuji Shibata (July 31, 1950)

April 1973 July 1995 July 2000 February 2002 August 2007 June 2008 June 2011 to present

Joined the Long-Term Credit Bank of Japan (currently Shinsei Bank, Limited) Chief of Multimedia Division, Corporate Finance Department of the Long-Term Credit Bank of Japan (currently Shinsei Bank, Limited) IT Team Leader of Corporate Advisory Division of Shinsei Bank, Limited Chief of Internal Audit of eAccess Ltd. Vice President & Chief of Internal Audit of eAccess Ltd. Senior Vice President & Chief of Internal Audit of eAccess Ltd. Vice President & Chief of Internal Audit of eAccess Ltd.

－

(Note) The candidate has no special interest in the Company.

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Fourth Item Issuing Stock Acquisition Rights in the Form of Stock Options

The Company would like our shareholders to approve the issuance of stock acquisition rights under the particularly advantageous terms and condition, to the directors, corporate auditors and employees of the Company pursuant to the Companies Act for the purpose of encouraging the sound and stable management and the social confidence of the Company by (i) improving the motivation and morale of the directors and employees of the Company to raise the business performance and (ii) raising the awareness of proper audit of the corporate auditors of the Company. The terms of the stock options are shown in the Attachment 1 (Group A11) and Attachment 2 (Group O4). We would like our shareholders to delegate the determination of other detailed terms and conditions to the Board of Directors.

Fifth Item Determination of the Terms and the Amount of the Remuneration in the Form of Stock Options for the Directors 1. Amount of Remuneration

The amount of remuneration of directors is up to two-hundred million (200,000,000) yen per year as approved at the 5th Annual Shareholders Meeting held on June 29, 2004. Aside from the limit of this amount, the Company would like our shareholders to approve the setting of limit to the amount of remuneration of directors in the form of stock options at an amount equivalent to the fair value of 300 units (300 units for outside directors) of stock acquisition rights, to be issued within one (1) year from the date of this Shareholders Meeting, for the purpose of improving the directors' motivation and morale in order to raise the Company’s business performance. The amount of stock options issued as remuneration of the directors shall be calculated by multiplying the fair value of one (1) unit of stock option, calculated in accordance with a calculation model of stock options such as Black-Scholes model, taking into account the share price on the grant date, exercise price and any other conditions, by the total number of stock options to be granted to the directors. We would like our shareholders to delegate the determination of the allocation of stock options (including the number of directors who receive stock options), as stated in Fourth Item. If the First Item is approved as originally proposed by the Board of Directors, the Company will have eight (8) directors (including six (6) outside directors).

2. Terms of Stock Option to be Allotted as Remuneration The details of stock options to be allotted to the directors are shown in the Attachment 1 (Group A11). No more than 300 units of Group A11 stock options shall be allotted to the outside directors of the Company.

Sixth Item Determination of the Terms and the Amount of the Remuneration in the Form of Stock Options for the Corporate Auditors 1. Amount of Remuneration

The amount of remuneration of corporate auditors is up to thirty million (30,000,000) yen per year as approved at the 1st Annual Shareholders Meeting held on June 28, 2000. Aside from the limit of this amount, the Company would like our shareholders to approve the setting of limit to the amount of remuneration of corporate auditors in the form of stock options at an amount equivalent to the fair value of 200 units of stock acquisition rights, to be issued within one (1) year from the date of this Shareholders Meeting, for the purpose of raising the corporate auditors' awareness of proper audit. The amount of stock options issued as remuneration of the corporate auditors shall be calculated by multiplying the fair value of one (1) unit of stock option, calculated in accordance with a calculation model of stock options such as Black-Scholes model, taking into account the share price on the grant date, exercise price and any other conditions, by the total number of stock options to be granted to the corporate auditors. At the end of this Shareholders Meeting, the Company has four (4) corporate auditors (including three

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(3) outside corporate auditors).

2. Terms of Stock Option to be Allotted as Remuneration The details of stock options to be allotted to corporate auditors are shown in the Attachment 2 (Group O4).

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Attachment 1 (A11Group)

Offering Conditions of Stock Options

1. Number of Stock Options:

The Board of Directors shall determine the total number of Stock Options to be granted, with a maximum number of 60,300.

2. Issue Price of Stock Options: To be issued for free

3. The Date of Allotment: The Board of Directors shall determine the date of allotment of Stock Options within one (1) year from the date of the resolution to issue Stock Options at the shareholders' meeting.

4. Terms of Stock Options:

(1) Shares to be Issued upon Exercise of Stock Options:

The number and type of shares to be issued upon exercise of one (1) Stock Option ("Entitled Shares") is 1 share of common stock of the Company. Upon a split or consolidation of shares, the number of Entitled Shares for unexercised Stock Options shall be adjusted by the following formula, with any fraction less than 1 share resulting from such adjustment being rounded down:

Adjusted number Pre-adjusted number of Entitled Shares = of Entitled Shares X Rate of split/consolidation

(2) Amount to be Paid upon Exercise of Stock Option:

Amount to be paid upon exercise of Stock Options shall be the amount to be paid upon exercise of a Stock Option per share ("Exercise Price") multiplied by the number of Entitled Shares as described below. The Exercise Price shall be the average price of the closing prices of a share of common stock of the Company on the Tokyo Stock Exchange of every day of the preceding month to the month in which the Stock Option is issued (except for those days where no deal was made) multiplied by 1.05, with a fraction less than 100 yen resulting from such adjustment rounded down. Provided however, in the event that such price is below the closing price of the execution date of the Stock Option Agreement (in the event that no deal was made on such day, the most recent preceding day), such closing price shall be the Exercise Price. Upon a split or consolidation of shares of common stock of the Company after the issuance of the Stock Options, the Exercise Price shall be adjusted by the following formula, with a

fraction less than one (1) yen resulting from such adjustment being rounded down: Adjusted Pre-adjusted 1 Exercise Price = Exercise Price X Rate of stock split/consolidation In the event that the Company issues common stocks for consideration less than the Market Price (as defined in Section (E) below), other than by way of exercise of stock options, or the Company issues securities entitling the holders thereof to exercise conversion or stock options for the common stock of the Company at a conversion price or Exercise Price (being the per share issue price of the Company's common stock subject to conversion or exercise of such securities, hereinafter the same) less than the Market Price of the Company's common stock, then the Exercise Price of the Stock Option will be adjusted by the following formula. Provided, however, that the adjustment will not be made when new shares are issued upon the exercise of stock options granted to employees, directors, corporate auditors, or outside consultants of the Company.

Number of new

common stocks to

be issued ×

Amount to be

paid per share Number of issued and

outstanding common

stocks ＋

Market price Adjusted

Exercise Price ＝ Pre-adjusted

Exercise Price ×

Number of issued and

outstanding common stocks＋ Number of new common

stocks to be issued

For the above formula,

(A) “Pre-adjusted Exercise Price” means the exercise price on the date immediately preceding the date on which the Adjusted Exercise Price becomes effective.

(B) “Number of issued and outstanding common stocks” means (a) in the case of issuance of new shares or securities where the date of allotment of such shares or securities is determined, the number of issued and outstanding common stocks as of the previous day of the allotment date, (b) in other cases, the number of issued and outstanding common stocks as of the date one (1) month prior to the date on which the Adjusted Exercise Price becomes effective. In addition, if there are outstanding securities entitling the holders thereof to convert into or exercise stock acquisition rights (“SARs”) with respect to common stocks in the Company, the “Number of issued and outstanding common stocks” shall include the number of common stocks to be acquired or issued if such securities were to be converted or exercised at the effective price at the relevant time.

(C) "Amount to be paid per share" means (a) in the case of issuance of new shares at a price less than Market Price, an amount to be paid on such new shares (in case of the payment other than by cash, a fairly valued amount), (b) in the case of issuance of securities entitling the

holders thereof to convert into or exercise SARs with respect to common stocks in the Company at a price less than Market Price, such price.

(D) "Number of new common stocks to be issued" means (a) in the case of issuance of new shares at a price less than Market Price, number of common stocks to be issued, (b) in the case of issuance of securities entitling the holders thereof to convert into or exercise SARs with respect to common stocks at a price less than Market Price, the number of common stocks to be acquired or issued upon the conversion or exercise thereof at the initial Exercise Price.

(E) “Market Price” means the average closing price of the common stock of the Company for thirty (30) successive trading days immediately following the day forty-five (45) days prior to the date on which the Adjusted Exercise Price as determined below becomes effective. Any fraction less than one (1) yen counted among the average price shall be rounded up.

The effective date of the adjustment above shall be as follows:

(F) In the case of issuance of new shares at a price less than Market Price, the Adjusted Exercise Price shall be effective on the payment date for such new shares; provided, however, that in the case of allotment to the existing shareholders, it shall be effective on the date immediately following the allocation date of such new shares.

(G) In the case of issuance of new shares pursuant to a share split of common stocks, the Adjusted Exercise Price shall be effective as of the date immediately following the record date for such share split. Provided, however, that in the case of the issuance of new shares by way of share split at the time of capitalization of distributable surplus, and the record date for such share split falls prior to the date of the close of the relevant shareholders meeting at which the capitalization of distributable surplus is approved, it shall be effective as of the date immediately following the date on which such shareholders meeting approving the capitalization is concluded.

(H) In the case of issuance of securities entitling the holders thereof to convert into or exercise SARs with respect to common stocks at a price less than Market Price, the Adjusted Exercise Price shall be effective as of the date immediately following the date of issuance of such securities. Provided, however, that in the case of allotment to existing shareholders, it shall be effective as of the date immediately following the allotment date.

In the event of inheritance of the Stock Options as a result of the Company being subject to a merger or amalgamation or in the event that the Company conducts an amalgamation or merger or any similar event which requires the adjustment of the Exercise Price, the Company shall adjust the Exercise Price as it deems necessary.

(3) Exercise Period of Stock Options:

From the Date of Allotment until the 10th anniversary of the day on which the resolution of

the Board of Directors (the "Date of Resolution"), subject to the restrictions set forth below: (i) During the period from the Date of Allotment to the 2nd anniversary of Date of Resolution , the Stock Options shall be exercisable only if exercisable pursuant to the Stock Option Agreement. (ii) During the period from the next day of the 2nd anniversary of Date of Resolution to the 3rd anniversary of Date of Resolution, the Stock Options shall be exercisable up to a quarter (1/4) of the number of granted Stock Options. (iii) During the period from the next day of the 3rd anniversary of Date of Resolution to the 4th anniversary of Date of Resolution, the Stock Options shall be exercisable up to a half (1/2) of the number of granted Stock Options. (iv) During the period from the next day of the 4th anniversary of Date of Resolution to the 10th anniversary of the Date of Resolution, the Stock Options shall be exercisable for all granted Stock Options.

(4) Conditions of Exercise of Stock Options:

(i) Any part of the Stock Options allotted may be exercised. The Stock Options may be exercised only for an integral number of Shares. (ii) The Stock Options shall be exercisable to the extent that the aggregated Exercise Price of the Stock Options exercised in any year does not exceed 12 million yen (or in the case where the maximum aggregate Exercise Price of the Stock Options exercised in a year as required to be complied with in order to maintain the tax qualified status is modified by a future change of laws or regulations, the maximum amount so modified, hereinafter referred to as the “Cap Amount”). Even if the product of the Exercise Price and the number of granted Stock Options set forth in the Stock Option Agreement exceeds the sum of the product of the Exercise Price and the number of exercisable Stock Options in each year during the Exercise Period set forth in the Stock Option Agreement, the Stock Options can be exercised in each year during such Exercise Period only up to the Cap Amount under the then applicable laws and regulations.

(iii) In order to exercise the Stock Options, the Allottee shall complete and sign and seal the "Request Form for New Share Issue" (“Request Form”) prescribed by the Company, and submit such Request Form together with the Stock Option certificate (“Certificate”) to the Company. Provided, however, in the event that the Certificates have not been issued or the same have been deposited to the Company, the Allottee shall not be required to submit the Certificate to the Company. (iv) The Allottee shall, along with the submission of the Request Form and by the time designated by the Company, remit in cash the full amount to be paid for the exercise of the Stock Options into the bank account designated by the Company. (v) The Allottee shall, upon the request of the Company, if any withholding tax is imposed on the economical benefit receivable by the exercise of the Stock Options, pay the amount of withholding tax into the bank account designated by the Company, by the time designated by the Company.

(5) Acquisition of Stock Options:

(i) By a resolution by the Board of Directors, the Company may acquire and cancel at no cost the Stock Options that become unable to exercise.

(ii) If the Company becomes the subject of a merger, corporate split, share-for-share exchange (kabushiki-kokan), share transfer (kabushiki-iten), or similar corporate structure changes, or if the Company's common stocks cease to be traded over Stock Exchanges or OTC Markets due to cancellation of registration, delisting or the like, the Company may, should its Board consider it necessary, acquire and cancel all outstanding Stock Options at no cost or for any price as determined by the Board of Directors at its discretion.

(6) Treatment of Stock Options upon Corporate Structure Changes:

If the Company is merged into another company, transfers its rights and obligations by way of corporate split, or becomes a wholly-owned subsidiary as a result of share-for-share exchange (kabushiki-kokan) or share transfer (kabushiki-iten) (collectively, the “Corporate Structure Changes”), the stock options of the companies listed in Article 236, Paragraph 1, Item 8 of the Companies Act of Japan (the “Restructured Company (ies)”) shall be respectively granted to the existing holders of the Stock Options at the time of the effective date of the Corporate Structure Changes. Stock Options shall cease to exist upon the Corporate Structure Changes. Provided, however, that the preceding sentences shall apply only when the plan on the grant of stock options of the Restructured Companies are set forth respectively in the agreement of amalgamation, the agreement or plan of corporate split, the agreement of share-for-share exchange (kabushiki-kokan) or the plan of share transfer (kabushiki-iten), in accordance with the following terms and conditions:

(i) Number of stock options of the Restructured Company to be granted: The same number of stock options as that of existing Stock Options held by the grantee

at the time of the effective date of the Corporate Structure Changes shall be granted. (ii) Type of shares of the Restructured Company for which the stock options shall be

exercised: The shares of common stock of the Restructured Company shall be issued.

(iii) Number of shares of the Restructured Company for which the stock options shall be exercised:

To be determined according to Section 4. (1) considering the terms and conditions of the Corporate Structure Changes.

(iv) Exercise Price: To be reasonably adjusted considering the terms and conditions of the Corporate

Structure Changes. (v) Exercise period: The exercise period shall be from the latter of the starting date of the exercise period set

forth in Section 4. (3) and the effective date of the Corporate Structure Changes, through until the expiration date of the exercise period of the Stock Options set forth in Section 4. (3).

(vi) The matters regarding the capital and the capital reserves to be increased at the time of issuance of the shares upon exercise of stock options:

To be determined according to Section 4. (9). (vii) Restriction on transfer of stock options: Transfer of stock options shall be subject to the approval of the Restructured Company. (viii) Acquisition of the stock options by the Restructured Company: To be determined according to Section 4. (5).

(7) Restriction on Transfer of Stock Options:

Acquisition of Stock Options under the transfer shall be subject to approval by the Board of Directors.

(8) Stock Option Certificates:

Stock Option certificates shall not be issued unless requested by the holder of the Stock Options.

(9) Capital Account:

(i) The capital amount to be increased at the time of issuance of the shares upon exercise of Stock Options shall be half of the maximum amount of increase of the capital, etc. calculated pursuant to Article 17, Paragraph 1 of the Ministerial Ordinance Concerning Accounting under the Companies Act of Japan, with any fraction less than one (1) yen being rounded up.

(ii) The capital reserves to be increased at the time of issuance of the shares upon exercise of Stock Options shall be the remaining of the maximum amount of the capital, etc. as prescribed in Section 4. (9) (i) less the amount of increase of the capital as determined in accordance with Section 4. (9) (i) the preceding item.

5. Allottees of Stock Options

The Board of Directors shall specify the Allottees among directors and employees of the Company and its subsidiaries as of one day before the date of allotment.

6. Other

The Board of Directors shall determine the other terms and conditions of the Stock Options not provided for herein.

Attachment 2 (O4 Group)

Offering Conditions of Stock Options

1. Number of Stock Options:

The Board of Directors shall determine the total number of Stock Options to be granted, with a maximum number of 200.

2. Issue Price of Stock Options: To be issued for free

3. The Date of Allotment: The Board of Directors shall determine the date of allotment of Stock Options within one (1) year from the date of the resolution to issue Stock Options at the shareholders' meeting.

4. Terms of Stock Options:

(1) Shares to be Issued upon Exercise of Stock Options:

The number and type of shares to be issued upon exercise of one (1) Stock Option ("Entitled Shares") is 1 share of common stock of the Company. Upon a split or consolidation of shares, the number of Entitled Shares for unexercised Stock Options shall be adjusted by the following formula, with any fraction less than 1 share resulting from such adjustment being rounded down:

Adjusted number Pre-adjusted number of Entitled Shares = of Entitled Shares X Rate of split/consolidation

(2) Amount to be Paid upon Exercise of Stock Option:

Amount to be paid upon exercise of Stock Options shall be the amount to be paid upon exercise of a Stock Option per share ("Exercise Price") multiplied by the number of Entitled Shares as described below. The Exercise Price shall be the average price of the closing prices of a share of common stock of the Company on the Tokyo Stock Exchange of every day of the preceding month to the month in which the Stock Option is issued (except for those days where no deal was made) multiplied by 1.05, with a fraction less than 100 yen resulting from such adjustment rounded down. Provided however, in the event that such price is below the closing price of the execution date of the Stock Option Agreement (in the event that no deal was made on such day, the most recent preceding day), such closing price shall be the Exercise Price. Upon a split or consolidation of shares of common stock of the Company after the issuance of the Stock Options, the Exercise Price shall be adjusted by the following formula, with a

fraction less than one (1) yen resulting from such adjustment being rounded down: Adjusted Pre-adjusted 1 Exercise Price = Exercise Price X Rate of stock split/consolidation

In the event that the Company issues common stocks for consideration less than the Market Price (as defined in Section (E) below), other than by way of exercise of stock options, or the Company issues securities entitling the holders thereof to exercise conversion or stock options for the common stock of the Company at a conversion price or Exercise Price (being the per share issue price of the Company's common stock subject to conversion or exercise of such securities, hereinafter the same) less than the Market Price of the Company's common stock, then the Exercise Price of the Stock Option will be adjusted by the following formula. Provided, however, that the adjustment will not be made when new shares are issued upon the exercise of stock options granted to employees, directors, corporate auditors, or outside consultants of the Company.

Number of new

common stocks to

be issued ×

Amount to be

paid per share Number of issued and

outstanding common

stocks ＋

Market price Adjusted

Exercise Price ＝ Pre-adjusted

Exercise Price ×

Number of issued and

outstanding common stocks＋ Number of new common

stocks to be issued

For the above formula,

(A) “Pre-adjusted Exercise Price” means the exercise price on the date immediately preceding the date on which the Adjusted Exercise Price becomes effective.

(B) “Number of issued and outstanding common stocks” means (a) in the case of issuance of new shares or securities where the date of allotment of such shares or securities is determined, the number of issued and outstanding common stocks as of the previous day of the allotment date, (b) in other cases, the number of issued and outstanding common stocks as of the date one (1) month prior to the date on which the Adjusted Exercise Price becomes effective. In addition, if there are outstanding securities entitling the holders thereof to convert into or exercise stock acquisition rights (“SARs”) with respect to common stocks in the Company, the “Number of issued and outstanding common stocks” shall include the number of common stocks to be acquired or issued if such securities were to be converted or exercised at the effective price at the relevant time.

(C) "Amount to be paid per share" means (a) in the case of issuance of new shares at a price less than Market Price, an amount to be paid on such new shares (in case of the payment other than by cash, a fairly valued amount), (b) in the case of issuance of securities entitling the

holders thereof to convert into or exercise SARs with respect to common stocks in the Company at a price less than Market Price, such price.

(D) "Number of new common stocks to be issued" means (a) in the case of issuance of new shares at a price less than Market Price, number of common stocks to be issued, (b) in the case of issuance of securities entitling the holders thereof to convert into or exercise SARs with respect to common stocks at a price less than Market Price, the number of common stocks to be acquired or issued upon the conversion or exercise thereof at the initial Exercise Price.

(E) “Market Price” means the average closing price of the common stock of the Company for thirty (30) successive trading days immediately following the day forty-five (45) days prior to the date on which the Adjusted Exercise Price as determined below becomes effective. Any fraction less than one (1) yen counted among the average price shall be rounded up.

The effective date of the adjustment above shall be as follows:

(F) In the case of issuance of new shares at a price less than Market Price, the Adjusted Exercise Price shall be effective on the payment date for such new shares; provided, however, that in the case of allotment to the existing shareholders, it shall be effective on the date immediately following the allocation date of such new shares.

(G) In the case of issuance of new shares pursuant to a share split of common stocks, the Adjusted Exercise Price shall be effective as of the date immediately following the record date for such share split. Provided, however, that in the case of the issuance of new shares by way of share split at the time of capitalization of distributable surplus, and the record date for such share split falls prior to the date of the close of the relevant shareholders meeting at which the capitalization of distributable surplus is approved, it shall be effective as of the date immediately following the date on which such shareholders meeting approving the capitalization is concluded.

(H) In the case of issuance of securities entitling the holders thereof to convert into or exercise SARs with respect to common stocks at a price less than Market Price, the Adjusted Exercise Price shall be effective as of the date immediately following the date of issuance of such securities. Provided, however, that in the case of allotment to existing shareholders, it shall be effective as of the date immediately following the allotment date.

In the event of inheritance of the Stock Options as a result of the Company being subject to a merger or amalgamation or in the event that the Company conducts an amalgamation or merger or any similar event which requires the adjustment of the Exercise Price, the Company shall adjust the Exercise Price as it deems necessary.

(3) Exercise Period of Stock Options:

From the Date of Allotment until the 10th anniversary of the day on which the resolution of the Board of Directors (the "Date of Resolution"), subject to the restrictions set forth below:

(i) During the period from the Date of Allotment to the 2nd anniversary of Date of Resolution, the Stock Options shall be exercisable only if exercisable pursuant to the Stock Option Agreement. (ii) During the period from the next day of the 2nd anniversary of Date of Resolution to the 3rd anniversary of Date of Resolution, the Stock Options shall be exercisable up to a quarter (1/4) of the number of granted Stock Options. (iii) During the period from the next day of the 3rd anniversary of Date of Resolution to the 4th anniversary of Date of Resolution, the Stock Options shall be exercisable up to a half (1/2) of the number of granted Stock Options. (iv) During the period from the next day of the 4th anniversary of Date of Resolution to the 10th anniversary of the Date of Resolution, the Stock Options shall be exercisable for all granted Stock Options.

(4) Conditions of Exercise of Stock Options:

(i) Any part of the Stock Options allotted may be exercised. The Stock Options may be exercised only for an integral number of Shares. (ii) In order to exercise the Stock Options, the Allottee shall complete and sign and seal the "Request Form for New Share Issue" (“Request Form”) prescribed by the Company, and submit such Request Form together with the Stock Option certificate (“Certificate”) to the Company. Provided, however, in the event that the Certificates have not been issued or the same have been deposited to the Company, the Allottee shall not be required to submit the Certificate to the Company. (iii) The Allottee shall, along with the submission of the Request Form and by the time designated by the Company, remit in cash the full amount to be paid for the exercise of the Stock Options into the bank account designated by the Company. (iv) The Allottee shall, upon the request of the Company, if any withholding tax is imposed on the economical benefit receivable by the exercise of the Stock Options, pay the amount of withholding tax into the bank account designated by the Company, by the time designated by the Company.

(5) Acquisition of Stock Options:

(i) By a resolution by the Board of Directors, the Company may acquire and cancel at no cost the Stock Options that become unable to exercise. (ii) If the Company becomes the subject of a merger, corporate split, share-for-share exchange (kabushiki-kokan), share transfer (kabushiki-iten), or similar corporate structure changes, or if the Company's common stocks cease to be traded over Stock Exchanges or OTC Markets due to cancellation of registration, delisting or the like, the Company may, should its Board consider it necessary, acquire and cancel all outstanding Stock Options at no cost or for any price as determined by the Board of Directors at its discretion.

(6) Treatment of Stock Options upon Corporate Structure Changes:

If the Company is merged into another company, transfers its rights and obligations by way of corporate split, or becomes a wholly-owned subsidiary as a result of share-for-share exchange (kabushiki-kokan) or share transfer (kabushiki-iten) (collectively, the “Corporate Structure Changes”), the stock options of the companies listed in Article 236, Paragraph 1, Item 8 of the Companies Act of Japan (the “Restructured Company (ies)”) shall be respectively granted to the existing holders of the Stock Options at the time of the effective date of the Corporate Structure Changes. Stock Options shall cease to exist upon the Corporate Structure Changes. Provided, however, that the preceding sentences shall apply only when the plan on the grant of stock options of the Restructured Companies are set forth respectively in the agreement of amalgamation, the agreement or plan of corporate split, the agreement of share-for-share exchange (kabushiki-kokan) or the plan of share transfer (kabushiki-iten), in accordance with the following terms and conditions:

(i) Number of stock options of the Restructured Company to be granted: The same number of stock options as that of existing Stock Options held by the grantee

at the time of the effective date of the Corporate Structure Changes shall be granted. (ii) Type of shares of the Restructured Company for which the stock options shall be

exercised: The shares of common stock of the Restructured Company shall be issued.

(iii) Number of shares of the Restructured Company for which the stock options shall be exercised:

To be determined according to Section 4. (1) considering the terms and conditions of the Corporate Structure Changes.

(iv) Exercise Price: To be reasonably adjusted considering the terms and conditions of the Corporate

Structure Changes. (v) Exercise period: The exercise period shall be from the latter of the starting date of the exercise period set

forth in Section 4. (3) and the effective date of the Corporate Structure Changes, through until the expiration date of the exercise period of the Stock Options set forth in Section 4. (3).

(vi) The matters regarding the capital and the capital reserves to be increased at the time of issuance of the shares upon exercise of stock options:

To be determined according to Section 4. (9). (vii) Restriction on transfer of stock options: Transfer of stock options shall be subject to the approval of the Restructured Company. (viii) Acquisition of the stock options by the Restructured Company: To be determined according to Section 4. (5).

(7) Restriction on Transfer of Stock Options:

Acquisition of Stock Options under the transfer shall be subject to approval by the Board of Directors.

(8) Stock Option Certificates:

Stock Option certificates shall not be issued unless requested by the holder of the Stock

Options.

(9) Capital Account:

(i) The capital amount to be increased at the time of issuance of the shares upon exercise of Stock Options shall be half of the maximum amount of increase of the capital, etc. calculated pursuant to Article 17, Paragraph 1 of the Ministerial Ordinance Concerning Accounting under the Companies Act of Japan, with any fraction less than one (1) yen being rounded up.

(ii) The capital reserves to be increased at the time of issuance of the shares upon exercise of Stock Options shall be the remaining of the maximum amount of the capital, etc. as prescribed in Section 4. (9) (i) less the amount of increase of the capital as determined in accordance with Section 4. (9) (i) the preceding item.

5. Allottees of Stock Options

The Board of Directors shall specify the Allottees among corporate auditors of the Company and its subsidiaries as of one day before the date of allotment in accordance with the discussion of corporate auditors of the Company; provided, however, that the Board of Directors shall follow the discussions between the corporate auditors of the Company regarding allotment to the corporate auditors of the Company.

6. Other

The Board of Directors shall determine the other terms and conditions of the Stock Options not provided for herein.

(abridged translation) june 1, 2012 notice of convocation ... · telecom limited (currently...

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