Date: October 2009 Interested Persons U.S. Securities Laws Considerations and Options for Japanese Cash Tender Offers

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1 New York Menlo Park Washington DC London Paris Madrid Tokyo Beijing Hong Kong Davis Polk & Wardwell LLP Izumi Garden Tower 33F Roppongi Minato-ku, Tokyo (03) tel (03) fax MEMORANDUM Date: October 2009 To: Re: Interested Persons U.S. Securities Laws Considerations and Options for Japanese Cash Tender Offers U.S. securities laws regulate tender offers for securities of Japanese companies registered in the United States, as well as tender offers for securities of Japanese companies that are not registered if the offers have relevant connections to the United States. This memorandum discusses U.S. securities law considerations relevant to an all-cash tender offer (a tender offer ) by a Japanese company (the bidder ) for the common stock of another Japanese company (the target ), where the target is not a U.S. registered company and at least some of the target s common stock is held by residents of the United States ( U.S. holders ). For purposes of this memorandum, we assume that the tender offer is not unsolicited; i.e., the target will agree to the bidder s tender offer. We also assume that the bidder and target qualify as foreign private issuers. 1 This memorandum does not discuss considerations relevant to rights offerings, exchange offers, or share exchanges or similar business combination transactions, 2 or targets with multiple classes of stock. This memorandum also does not discuss considerations relevant to an issuer tender offer for its own securities. See Annex A for a list of practical considerations in connection with planning a Japanese tender offer transaction. I. General Considerations Section 14(e) of the U.S. Securities Exchange Act of 1934, as amended, (the Exchange Act ) and Regulation 14E promulgated thereunder by the U.S. Securities and Exchange Commission (the SEC ) regulate tender offers (together, the Tender Offer Rules ) for debt and equity securities. 3 Section 14(e), and the Tender Offer Rules generally, are designed to prevent acts 1 Annex B provides the definition of the term foreign private issuer. 2 Please see Davis Polk memoranda on these and other topics at under Related Publications. 3 Regulation 14D promulgated under Section 14(d) of the Exchange Act, which also regulates tender offers, is generally applicable only to tender offers for equity securities registered in the United States pursuant to Section 12 of the Exchange Act and certain other limited types of securities. When Regulation 14D is applicable, its requirements are incremental to those of the Tender Offer Rules.

2 pg. 2 October 2009 and practices in connection with tender offers that are fraudulent, deceptive or manipulative. The Tender Offer Rules generally apply to tender offers that are extended to U.S. holders, unless an exemption is available. One meaningful exemption from many of the Tender Offer Rules under Rule 14d-1(c) may be available for cross-border tender offers by foreign private issuers if not more than 10% of the target s outstanding shares are held by U.S. holders and certain other conditions are met (the Tier I exemption ). A second, more limited exemption under Rule 14d-1(d) may be applicable where at least 10% but no more than 40% of the target s outstanding shares are held by U.S. holders (the Tier II exemption ). However, for Japanese tender offers, the Tier II exemption is generally not meaningful because it does not provide relief from the most burdensome Tender Offer Rules. So, except for the Tier II provisions allowing purchases outside of a tender offer, which are described under Section II.H and in Annex C, this memorandum will not discuss the Tier II exemption. As described in subsequent sections, the bidder will often have three options for conducting a tender offer in compliance with U.S. legal requirements: Comply with All Relevant Tender Offer Rules. Allow U.S. holders to participate in the tender offer and comply with the relevant requirements of the Tender Offer Rules, and, if applicable, rely on the Tier II exemption to make certain purchases outside of the tender offer; Rely on the Tier I Exemption. Allow U.S. holders to participate in the tender offer, and rely on the Tier I exemption from many of the Tender Offer Rules; or Exclude U.S. Holders. Prevent U.S. holders from participating in the tender offer and avoid the use of U.S. jurisdictional means. II. Allow U.S. Holders to Participate and Comply with All Relevant Tender Offer Rules A tender offer that is made to U.S. holders will be subject to all of the Tender Offer Rules, unless an exemption applies. These rules, 14e-1 to 14e-8 under Regulation 14E, regulate the timing and procedures for and prohibit certain actions in connection with a tender offer. Not relevant to this memorandum are: Rule 14e-6, which applies to mutual funds, and Rule 14e-7, which applies to roll-ups of limited partnerships. Where a tender offer is the first step and a share exchange or similar business combination transaction is the second step of a two-step transaction, the bidder should consider the benefits of conducting the tender offer under Tier I before choosing to comply with all of the Tender Offer Rules. See Annex D.I.C for an explanation. A. Antifraud Rules The Tender Offer Rules generally do not require specific information to be included in tender offer materials and do not require that such materials be filed with the SEC. Although the Tender Offer Rules do not require tender offer documents to be translated into English, the bidder may want to provide English translations of tender offer documents to U.S. holders to protect against the small but not insignificant risk that U.S. holders may claim that the information they received about the tender offer was misleading.

3 pg. 3 October 2009 Section 14(e) makes it unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive or manipulative acts or practices, in connection with any tender offer. This is essentially the same as the general standard for securities fraud claims under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. B. Minimum Offering Period and Prompt Payment Rule 14e-1 provides that the bidder in a tender offer may not: hold the tender offer open for fewer than 20 U.S. business days from the date the offer is first published, sent or given to the target s security holders; increase or decrease the percentage of the class of securities being sought, the consideration offered or the dealer s soliciting fee to be paid in connection with the tender offer unless the tender offer is kept open for at least 10 U.S. business days from the date that notice of such increase or decrease is first published, sent or given to the target s security holders; fail to promptly pay the consideration offered or return the securities deposited by or on behalf of security holders, upon termination or withdrawal of the tender offer; or extend the length of the tender offer without issuing a notice of such extension by press release or other public announcement, which notice must include disclosure of the approximate number of securities deposited to date and must be issued no later than the 9:00 a.m. (U.S. Eastern time), on the next business day after the scheduled expiration date of the offer. C. Target s Statement of Position with Respect to the Tender Offer Rule 14e-2 requires that, in responding to the bidder s solicited tender offer, the target must, no later than 10 U.S. business days from the date the tender offer is first published, sent or given to the target s security holders, issue a statement in which it discloses to its security holders that it recommends acceptance of the tender offer. 4 Such statement must also include the reasons for the target s recommendation to accept the tender offer. If any material change occurs in this position, the target must promptly publish, send or give a statement disclosing the material change to security holders. D. Prohibition on Insider Trading Rule 14e-3 prohibits trading in the target s securities (other than purchasing by or on behalf of the bidder) while in possession of material, nonpublic information relating to the tender offer, unless within a reasonable time prior to the purchase or sale such information and its source are 4 In response to an unsolicited tender offer a target may also (i) recommend rejection of the tender offer, (ii) express no opinion and remain neutral to the tender offer or (iii) decide that it is unable to take a position with respect to the tender offer. In this case, the target s statement of position must include the reason or reasons for its position, or inability to take a position, and if any material change occurs in the target s position, it must promptly publish, send or give a statement disclosing the material change to security holders.

4 pg. 4 October 2009 publicly disclosed. The rule also prohibits the bidder, the target and certain persons associated with them from communicating material, nonpublic information relating to the tender offer to any person under circumstances where it is reasonably foreseeable that the rule described in the prior sentence will be violated. E. Prohibition on Short Tendering into a Partial Tender Offer Rule 14e-4 essentially prohibits any person, directly or indirectly, from tendering into a partial tender offer stock that such person does not own. In a partial tender offer, it would be advisable for the bidder to include in its tender offer documents disclosure to the effect that the short tendering rule applies. F. Prohibition on Purchases Outside of the Tender Offer Rule 14e-5 prohibits covered persons from purchasing, or making any arrangement to purchase, the target s securities, whether directly or indirectly, outside of the tender offer from the time the tender offer is publicly announced until it expires. 5 The term covered person means: the bidder and its affiliates; the bidder s dealer-manager and its affiliates; any advisor to the bidder, dealer-manager or their affiliates, if such advisor s compensation is dependent on the completion of the offer; the target; 6 and any person acting, directly or indirectly, in concert with any of the other covered persons in connection with any purchase or arrangement to purchase the target s securities or any related securities. A financial adviser of the bidder or target may be subject to the prohibition on purchases outside of the tender offer if it is acting as the dealer-manager or tender offer agent for the bidder, its compensation is contingent upon completion of the tender offer, or it is acting in concert with a covered person. Rule 14e-5 prevents several types of trading activities of financial advisors, only some of which are expressly exempted from the operation of the rule. Notwithstanding the general prohibition on purchases by a covered person of a target s securities outside of a tender offer, the SEC has permitted such purchases in a few specific situations. A no-action letter allows a Japanese target that is a covered person to purchase shares constituting less than one unit as required under Japanese law, subject to certain 5 Rule 14e-5 sometimes restricts the activities of market makers who act as tender offer agents. We understand, however, that there are no market makers in Japan as that term is defined in Section 3(a)(38) of the Exchange Act. 6 In a negotiated transaction, the target is a covered person because it is acting in concert with the bidder. It is not clear whether affiliates of the target would also be covered persons.

5 pg. 5 October 2009 specified conditions. 7 The other two situations pertain to the Tier II exemption, which is described in Section II.H. G. Prohibition of Certain Pre-Commencement Communications Rule 14e-8 prohibits public announcement of a tender offer unless the bidder: intends to commence and complete the tender offer within a reasonable time; has no intention to manipulate the stock price of the bidder or target; and reasonably believes that it has the means to purchase securities to complete the tender offer. H. Tier II Exemption Although the Tier II exemption is generally not meaningful to Japanese companies, if not more than 40% of target s outstanding shares are held by U.S. holders, 8 and the bidder complies with all applicable Tender Offer Rules, certain covered persons may purchase the target s securities outside of the tender offer based on one of the following two exemptions from Rule 14e-5: 9 the bidder is permitted to purchase the target s securities outside the tender offer to U.S. holders through concurrent, or substantially concurrent, tender offers in Japan and other non-u.s. jurisdictions, subject to the following conditions set forth in Rule 14e-5(b)(11): o o o o the economic terms and consideration of the tender offers must all be the same, provided that any cash consideration to be paid to U.S. holders may be converted to U.S. dollars at an exchange rate disclosed in the U.S. offering documents; the procedural terms of the tender offer to U.S. holders must be at least as favorable as those of the Japan and other non-u.s. tender offers; the intention of the bidder to make purchases pursuant to the Japan and other non- U.S. tender offers must be disclosed in the U.S. offering documents; and the bidder s purchases in the Japan and other non-u.s. tender offers must be made solely pursuant to the Japan and other non-u.s. tender offers and not pursuant to open market transactions, private transactions or other transactions; or 7 See Annex C for an explanation of the conditions required to rely upon this exemption. 8 Requirements for determining who is a U.S. holder and calculating the percentage of U.S. holders are described in Annex D to this memorandum. 9 If the tender offer is eligible to rely on the Tier I exemption, it will benefit from a broader exemption from Rule 14e-5; see Section III.A.

6 pg. 6 October 2009 the bidder and its affiliates and affiliates of financial advisors who engage in certain trading activities are exempt from the prohibition on purchases outside of the tender offer, subject to certain conditions set forth in Rule 14e-5(b)(12). 10 III. Allow U.S. Holders to Participate in Reliance on the Tier I Exemption The bidder may allow U.S. holders to participate in the tender offer, relying on the Tier I exemption from many of the Tender Offer Rules if not more than 10% of the target s outstanding shares are held by U.S. holders and certain other conditions are met. A. Scope of Tier I Exemption A tender offer conducted in reliance on the Tier I exemption will be exempt from the following Tender Offer Rules: minimum offering periods and prompt payment requirements under Rule 14e-1; disclosure by the target of its position with respect to the tender offer as required by Rule 14e-2; and the prohibition on purchases outside of the tender offer under Rule 14e-5, assuming that the following additional conditions of Rule 14e-5(b)(10) are met: o o o o the offering documents given to U.S. holders must prominently disclose the possibility of any such purchases, or arrangements to purchase, or the intent to make such purchases; the offering documents must disclose the manner in which any information about any such purchases or arrangements to purchase will be disclosed; the bidder must disclose in the United States information about any such purchases or arrangements in a manner similar to disclosure in Japan; and the purchases must comply with the applicable tender offer laws and regulations of Japan. A tender offer conducted in reliance on the Tier I exemption will remain subject to the following Tender Offer Rules: the prohibition on insider trading under Rule 14e-3; the prohibition on short-tenders in a partial tender offer under Rule 14e-4; the prohibition on certain pre-commencement communications under Rule 14e-8; and the anti-fraud rules under Section 14(e). 10 See Annex C for a summary of the conditions for and the trading activities covered by the exemption under Rule 14e-5(b)(12).

7 pg. 7 October 2009 B. Conditions for Reliance The availability of the Tier I exemption is conditioned on the following: Limitations on U.S. Ownership. U.S. holders must, in the aggregate, possess not more than 10% of the target s common stock; 11 Equal Treatment of U.S. Shareholders. U.S. holders of the target s stock must be permitted to participate in the offer on terms at least as favorable as those offered to non- U.S. holders; Informational Documents. The bidder must disseminate the offer and any informational documents 12 (translated into English) to U.S. holders on a basis comparable to the methods used with respect to non-u.s. holders; 13 and U.S. Publication. When the bidder disseminates information by publication in Japan, information must be published in the United States in a manner reasonably calculated to inform U.S. holders of the offer. 14 C. Determining U.S. Holder Percentage Ownership The U.S. holder percentage ownership is determined as follows: Calculation Reference Dates. The percentage should generally be calculated on a date within a 90-day period that is no more than 60 days (in some cases 120 days) before and no more than 30 days after the public announcement of the tender offer; 15 and Determination of U.S. holders. The percentage is calculated as a ratio of (i) the number of shares of the target held by U.S. holders (the numerator) divided by (ii) the number of outstanding shares of the target (the denominator). Shares owned by the bidder or target are excluded from the numerator and the denominator. 11 Requirements for determining who is a U.S. holder and calculating the percentage of U.S. holders are described in Annex D. 12 The phrase informational document is not defined in the Tier I exemption, but will generally be read to include any document (or amendments) published or otherwise disseminated by bidder to the holders of target shares in connection with the Tender Offer. It may also include documents, such as earnings announcements, that do not mention the Tender Offer but that are relevant to the decision by holders concerning whether to tender shares in response to the Tender Offer. 13 Although not required in order to obtain the Tier I exemption, it is recommended that informational documents include a prominent legend similar to the sample legend in Annex E. 14 As the target is not a U.S. reporting company, the Tier I exemption will not require the bidder to: (i) furnish to the SEC on Form CB English translations of any informational materials sent by it to non-u.s. security holders; or (ii) file with the SEC on Form F-X an appointment of an agent for service of process in the United States with respect to the Tender Offer. 15 The adopting release for the most recent amendment of the Tier I exemption says that public announcement is any oral or written communication by a bidder or any party acting on its behalf, which is reasonably designed to inform or has the effect of informing the public or security holders in general about the transaction. See

8 pg. 8 October 2009 Note: The methodology for determining the U.S. holder percentage is complex. A detailed description of the methodology is in Annex D. Where a tender offer is the first step and a share exchange or similar business combination transaction is the second step of a two-step transaction, the bidder should consider the benefits of the U.S. holder calculation exception that is potentially available for the transaction. See Annex D.I.C for an explanation. In limited situations, where the bidder and target are unable to conduct the required look-through analysis for exceptional reasons, the Tier I exemption will allow the determination to be conducted based on an alternative average daily trading volume test. Entities relying on the Tier I exemption must query some record holders and review public beneficial holder filings to determine beneficial ownership by U.S. holders. IV. Prevent U.S. Holders from Participating and Avoid the Use of U.S. Jurisdictional Means The Tender Offer Rules will generally not apply to a tender offer that excludes U.S. holders and avoids the use of U.S. jurisdictional means (an Exclusionary Offer ). In evaluating this approach, the bidder and target should also consider, as a business matter, whether the success of the offer may be impaired and whether they are comfortable with potential ill will that may be generated among U.S. holders excluded from the tender offer. If the bidder wishes to conduct an Exclusionary Offer, it should review the following general considerations and procedures. Even if the bidder takes the precautionary steps outlined below to avoid U.S. jurisdictional means, there will be some risk that the SEC or a U.S. court may nonetheless deem the Exclusionary Offer to be subject to U.S. jurisdiction. The SEC has recently indicated that it will more closely monitor Exclusionary Offers to determine whether SEC action is necessary to protect U.S. holders of the target s securities. Note that there is tension between the requirements for an Exclusionary Offer, which strictly limit the information about the tender offer which can be released into the United States, and the U.S. disclosure requirements of Rule 12g3-2(b) or Form 6-K applicable to some issuers, which require that certain material information be made available to U.S. holders. Bidders faced with a potential conflict between these two requirements should contact Davis Polk for guidance well in advance of commencing an Exclusionary Offer. A. General Considerations and Procedures In order to avoid the application of the Tender Offer Rules, an Exclusionary Offer must be conducted without implicating U.S. jurisdictional means. However, the term U.S. jurisdictional means is interpreted very broadly. It may include, for example: mailing tender offer materials to the agents in Japan acting as standing proxies (jonin dairi nin) if the agents are required or expected to forward the materials to beneficial holders resident in the United States; making tender offer materials available, electronically or physically, in the United States, including by means of posting the documentation on a company s website;

9 pg. 9 October 2009 directing communications with respect to a tender offer into the United States; permitting the participation of U.S. securities analysts or reporters in telephone conferences, meetings or other similar events relating to the tender offer; permitting tenders to be mailed from the United States; or sending the payment for the shares into the United States. The SEC has stated that it will skeptically view exclusionary offers for securities of foreign private issuers that trade on a U.S. exchange, where the participation of U.S. holders is necessary to meet the minimum acceptance condition in the tender offer. Where purportedly exclusionary offers are made under those circumstances, the SEC has said that it will look closely to determine whether bidders are taking reasonable measures to keep the offer out of the United States. It is possible that the SEC will challenge the exclusion of U.S. holders in transactions where the participation of U.S. investors is necessary to make the transaction successful. In addition, the bidder may implicate U.S. jurisdictional means if it fails to take adequate measures to prevent tenders by U.S. holders of the target s securities, while purporting to exclude such U.S. holders. If the bidder seeks to avoid the application of the Tender Offer Rules, it should take special precautions to assure that an Exclusionary Offer is not made in the United States, for example by: including legends on the tender offer materials themselves and on any Internet website on which they are posted; 16 putting in place measures to ensure that tenders are not accepted from U.S. holders, including, when responding to inquiries and processing letters of transmittal, obtaining adequate information to identify U.S. holders; obtaining representations from tendering investors, or nominees or other persons tendering on investors behalf, 17 that the investors tendering are not U.S. holders; avoiding the mailing into the United States of cash or other consideration to tendering holders; and checking for indications that the tendering holder is a U.S. holder, including receipt of payment drawn on a U.S. bank, or provision of a U.S. taxpayer identification number or other statements by the tendering holder suggesting that, notwithstanding a foreign address, the holder is a U.S. holder. 16 A legend or disclaimer stating that a tender offer is not being made into the United States, or that the offer materials may not be distributed there, is not likely to be sufficient in and of itself. 17 The SEC has provided guidance that where tenders are made by nominees on behalf of U.S. holders, and nominees or holders misrepresent their status as non-u.s. persons in order to participate in an Exclusionary Offer, the bidder will not be viewed as having targeted the United States.

10 pg. 10 October 2009 B. Press Activities We suggest that a bidder conducting an Exclusionary Offer should generally seek to exclude members of the U.S. press from press conferences and other press activities conducted in connection with the offer. Naturally, no press activities in connection with an Exclusionary Offer should be conducted in the United States. If there is a desire or need to include members of the U.S. press in such press activities, please contact Davis Polk well in advance of such press activities. The SEC has provided a limited safe harbor which is intended to allow bidders, in advance of a Regulation 14D tender offer, to conduct certain press activities outside the United States without triggering certain of the procedural requirements of U.S. tender offer laws and regulations. 18 As it is written, this safe harbor would seem to also be available for an Exclusionary Offer and might permit members of the U.S. press to attend such press activities. Pursuant to this safe harbor under Rules 14d-1(e) and (f), U.S. journalists can participate in foreign press conferences and other press activities. A bidder choosing to rely on the safe harbor need not comply with the requirements of a minimum offering period and prompt payment under Rule 14e-1 or the requirement of a disclosure by the target of its position with respect to the tender offer under Rule 14e-2, which are the main substantive differences between the Tender Offer Rules and many foreign tender offer rules. When the bidder chooses to rely on this safe harbor, however, the tender offer is still subject to Rules 14e-3 (prohibiting insider trading), 14e-4 (prohibiting short tenders into a partial tender offer), 14e-5 (prohibiting purchases outside a tender offer 19 ) and 14e-8 (prohibiting market manipulation) and Section 14(e) (prohibiting fraud). The conditions for the safe harbor are as follows: 20 Any press release must be issued outside the United States and may not be transmitted into the United States. Any press conference or other meeting with the press must be held outside the United States. U.S. journalists may be present at any press meeting held outside the United States so long as foreign journalists are also present. No U.S. journalist can participate by conference call originating in the United States. A U.S. journalist may not undertake follow-up conversations from a base in the United States. No one-on-one meetings may be held with a U.S. publication or U.S. journalist. C. Use of the Internet and U.S. Jurisdictional Means Materials relating to Exclusionary Offers are often posted on the websites of the parties involved and thus widely accessible on the Internet. If the bidder uses a website to publicize an Exclusionary Offer, it must take special care that the website is not used as a means to induce indirect participation in the tender offer by U.S. holders. As a general matter, however, we believe that website materials in the Japanese language are of less concern than those in the English language. 18 Offshore Press Conferences, etc., Exchange Act Release No. 39,227 III.A (Oct. 17, 1997). 19 For assistance in determining if an exception to Rule 14e-5 applies to a tender offer conducted under the safe harbor, please contact Davis Polk. 20 Certain other conditions pertaining to written materials are presented as requirements in Rule 14d-1(e)(2), but the SEC rule release makes clear that these requirements only apply to a tender offer for securities registered under Section 12 of the Exchange Act. Offshore Press Conferences, etc., Exchange Act Release No. 39,227 n. 43 (Oct. 17, 1997).

11 pg. 11 October 2009 In addition to the general precautions described above, certain other measures should be adopted if tender offer documents are posted to a website, such as utilizing technology to obtain adequate information (such as the location of internet access, a mailing address or a telephone number) to determine whether persons attempting to access the documents are U.S. holders before providing access, responding to inquiries or processing letters of transmittal. D. Risk That Procedures May Be Deemed Ineffective Any decision to structure a tender offer as an Exclusionary Offer necessarily involves a degree of risk (which must be evaluated in light of the facts and circumstances of the particular bid) that the SEC or a U.S. court may deem that, irrespective of the steps taken, the offer is subject to U.S. jurisdiction. For example, a court or the SEC could conclude that a tender offer should be subject to U.S. jurisdiction because the level of ownership by U.S. holders is significant enough to impact the tender offer. Other factors may conceivably cause the SEC or a U.S. court to deem an Exclusionary Offer to be subject to U.S. jurisdiction, including one or more of the following: the size of the offer; the percentage of the target s securities held in the United States; whether there is a market for the target s securities in the United States; pressure by U.S. holders on the SEC or other U.S. government bodies to protect their ability to participate in the tender offer; the amount of publicity the offer receives in the United States; whether fraud or other illegality occurs as part of the offer; whether the offer complies with Japanese laws and regulations; whether U.S. jurisdictional means are in fact used by U.S. holders (or by their custodians) to tender shares; whether offer materials or other materials concerning the press release are distributed in English; and whether actions are taken by the bidder to increase publicity in the United States (e.g., timing a press release to maximize U.S. exposure). V. Other U.S. Laws with Possible Application The following other U.S. laws may apply to a tender offer whether or not the tender offer is subject to the Tender Offer Rules.

12 pg. 12 October 2009 A. Antifraud Laws Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by the SEC and U.S. state laws prohibit manipulation, fraud and misleading statements or omissions in connection with the purchase or sale of any security. B. U.S. Antitrust Laws U.S. antitrust laws, including the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, may apply in connection with a tender offer even where each of the bidder and the target is a Japanese company. Davis Polk can provide additional information on this topic upon request.

13 pg. 13 October 2009 * * * * * If you have any questions about the matters covered in this memorandum, please contact any of the lawyers listed below or your regular Davis Polk contact: Theodore A. Paradise, Tokyo phone: theodore.paradise@davispolk.com Eugene C. Gregor, Tokyo phone: eugene.gregor@davispolk.com Michael T. Dunn, Tokyo phone: michael.dunn@davispolk.com Mörk Murdock, New York phone: mork.murdock@davispolk.com Stephen Lindholm, Tokyo phone: stephen.lindholm@davispolk.com This memorandum is a summary for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice Davis Polk & Wardwell LLP

14 Annex A Practical Considerations in Connection with Planning for a Tender Offer Consider Issues Surrounding the Confirmation of the Tier I Exemption Availability Well in Advance of Announcement. The availability of a regular shareholder registry 60 days prior to announcement of a tender offer will often permit confirmation prior to the announcement of the transaction of satisfaction of the U.S. ownership element of the Tier I exemption. In other situations, the bidder and target may need to obtain a special registry (i) prior to announcement, which could signal to the market that a transaction is in contemplation, or (ii) after announcement, which may raise issues since it will not be known until well thereafter whether compliance with Tender Offer Rules will be required or the Tier I exemption will be available. In order to allow time to determine whether the Tier I exemption is available and adjust the structure of the tender offer, if necessary, Davis Polk should be contacted well in advance of that date for assistance with planning. Arrange Assistance for Identification of U.S. Holders. Consider hiring a professional service provider to assist with identifying U.S. holders. Prepare a Contingency Plan. If it is determined that the Tier I exemption will not be available, a decision needs to be made whether to modify the tender offer to comply with all relevant requirements of Regulation 14E or avoid the use of U.S. jurisdictional means. Determine Date and Content of Communications. It will be important to plan ahead with respect to transaction communications. If the Tier I exemption will be relied upon and documents are disseminated by publication, arrangements will need to be made to reserve space in a U.S. publication, such as The Wall Street Journal, and to hire an advertising firm to coordinate typesetting, media and production work.

15 Annex B Scope of the Term Foreign Private Issuer Under Rule 3b-4 under the Exchange Act, as amended, the term foreign private issuer means the following: Foreign Private Issuer. (a) The term foreign private issuer means any foreign issuer other than a foreign government, except an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) More than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States; and (2) Any of the following: (i) The majority of the executive officers or directors are United States citizens or residents; (ii) More than 50 percent of the assets of the issuer are located in the United States; or (iii) The business of the issuer is administered principally in the United States. (b) Notwithstanding paragraph (a) above, in the case of a new registrant with the Commission, the determination of whether an issuer is a foreign private issuer shall be made as of a date within 30 days prior to the issuer s filing of an initial registration statement under either the U.S. Securities Act of 1933, as amended (the Securities Act ) or the Exchange Act. (c) Once an issuer qualifies as a foreign private issuer, it will immediately be able to use the forms and rules designated for foreign private issuers until it fails to qualify for this status at the end of its most recently completed second fiscal quarter. An issuer s determination that it fails to qualify as a foreign private issuer governs its eligibility to use the forms and rules designated for foreign private issuers beginning on the first day of the fiscal year following the determination date. Once an issuer fails to qualify for foreign private issuer status, it will remain unqualified unless it meets the requirements for foreign private issuer status as of the last business day of its second fiscal quarter.

16 pg. B-2 * * * * * Instructions to paragraph (a)(1) of this definition: To determine the percentage of outstanding voting securities held by U.S. residents: A. Use the method of calculating record ownership in Rule 12g3-2(a) under the Exchange Act, except that your inquiry as to the amount of shares represented by accounts of customers resident in the United States may be limited to brokers, dealers, banks and other nominees located in: (i) the United States, (ii) your jurisdiction of incorporation, and (iii) the jurisdiction that is the primary trading market for your voting securities, if different than your jurisdiction of incorporation. B. If, after reasonable inquiry, you are unable to obtain information about the amount of shares represented by accounts of customers resident in the United States, you may assume, for purposes of this definition, that the customers are residents of the jurisdiction in which the nominee has its principal place of business. C. Count shares of voting securities beneficially owned by residents of the United States as reported on reports of beneficial ownership that are provided to you or publicly filed and based on information otherwise provided to you.

17 Annex C Summary of Certain Exemptions and Exemptive Relief From Rule 14e-5 I. Exemption for Certain Purchases Outside of a Tender Offer by Affiliates of Financial Advisors and the Bidder and its Affiliates Rule 14e-5(b)(12) codified no-action letters by the staff of the SEC Division of Market Regulation that had granted exemptive relief to an affiliate of a financial advisor and the bidder and its affiliates who purchase or arrange to purchase securities, otherwise prohibited by Rule 14e-5 in the context of a tender offer. The exemption is premised upon fulfillment of a number of conditions (as described below). A. Conditions for Exemption The conditions to the availability of the Rule 14e-5(b)(12) exemption include: 1. the target is a foreign private issuer as defined in Rule 3b-4(c) of the Exchange Act; 2. the financial advisor reasonably believes that the tender offer meets the conditions for reliance on the Tier II cross-border exemptions set forth in Rule 14d-1(d) of the Exchange Act; 3. the trading activities are only conducted outside the U.S.; 4. U.S. offering materials disclose prominently the possibility of, or the intention to make, purchases or arrangements to purchase securities of the target or related securities outside the tender offer, and if there will be public disclosure of such purchases, the manner in which information regarding such purchases will be disseminated; 5. there is public disclosure in the United States, to the extent that such information is made public in the target s home jurisdiction, of information regarding all purchases of securities of the target otherwise than pursuant to the tender offer; and 6. the tender offer price will be increased to match any consideration paid outside the tender offer that is greater than the tender offer price. In the case of an affiliate of a financial advisor that purchases or arranges to purchase securities outside of a tender offer, the following additional conditions must be met: 7. the financial advisor and its affiliates maintain and enforce written policies and procedures that are reasonably designed to prevent, through the establishment of information barriers, the transfer of information among the financial advisor and its affiliates that might result in a violation of the U.S. federal securities laws; 8. the financial advisor has an affiliate that is registered as a broker-dealer under Section 15(a) of the Exchange Act; 9. the affiliate has no officers (or persons performing similar functions) or employees (other than clerical, ministerial or support personnel) who direct, effect or recommend transactions in the securities of the target or related securities who also will be involved

18 pg. C-2 in providing the bidder or target in such transactions with financial advisory services or dealer-manager services; and 10. the purchases or arrangements to purchase are not made to facilitate the tender offer. B. Trading Activities The no-action letter upon which the exemption for purchases by affiliates of financial advisors provided exemptive relief for certain trading activities, including: 1. market-making activities in the securities; 2. purchasing and selling securities as part of ordinary course portfolio and asset management activities for third-party customers (other than any covered person) in which activities the financial advisors and their affiliates and departments would generally have discretionary trading authority, as well as purchasing and selling securities as principal for their own accounts; 3. principal facilitation to buy the securities to facilitate client orders on the relevant stock exchanges or in the over-the-counter markets; 4. creation of derivatives products (including futures, forwards, options, swaps or similar instruments) and dynamic hedging and covering activities, short sales and other forms of hedging and covering, such as purchasing and selling securities, with respect to positions in these derivatives contracts that are created after the announcement of the tender offer in question, as well as such hedging and covering activities with respect to (a) derivatives contracts in place prior to such announcement and (b) any such trading and positions as would be permitted otherwise pursuant to this relief; 5. index arbitrage activities (other than risk arbitrage trading) that are not to facilitate the tender offer and are limited in scope, so that such index arbitrage activities are consistent with activities undertaken by the financial advisors and their affiliates and departments in the ordinary course of business prior to the announcement of the tender offer and reflect the same balance and constituency as the index being hedged, and hedging and covering activities, including dynamic hedging, short sales and other forms of hedging, such as purchasing and selling securities, with respect to such index-related activities; 6. program trades of securities by the financial advisors and their affiliates and departments in relation to a basket of securities the composition of which has been proposed by a client (other than any covered person), and hedging and covering activities with respect thereto, including dynamic hedging, short sales and other forms of hedging, such as purchasing and selling securities with respect to such activities; 7. hedging activities, including dynamic hedging, short sales and other forms of hedging, such as purchasing and selling securities or with respect to the market-making activities in securities described in (1) above; 8. lending and borrowing securities to and from other intermediaries to assist the financial advisors and their affiliates and departments in managing their market-making activities in securities described in (1) above;

19 pg. C-3 9. purchasing securities for purposes of delivering securities upon exercise of call options or warrants or creation or redemption of exchange-traded funds, or buying securities in respect of the exercise of put options or warrants or creation or redemption of exchangetraded funds, all in connection with the market-making and related hedging activities described in (1) and (7) above; 10. buying securities to cover short positions entered into after the announcement of the tender offer in question; and 11. purchases of securities in a proprietary capacity. II. No-Action Letter that Granted Exemptive Relief to Japanese Target Companies for Purchases of Less Than Whole Unit Common Stock In a no-action letter dated February 20, 2007, the staff of the SEC Division of Market Regulation granted exemptive relief to any Japanese target company that is a covered person as defined in Rule 14e-5 and that is required to make purchases of its shares during the period from the time the tender offer is announced until the expiration of the tender offer pursuant to a provision of the Japanese Corporation Law which requires Japanese companies to purchase, when requested by a holder, such holder s common stock representing less than a unit (the statutory put ). The availability of this exemptive relief is conditioned upon the following: the target company must be a foreign private issuer within the meaning of Rule 3b-4(c) under the Exchange Act; the target company must have no class of securities registered under Section 12 of the Exchange Act and must not be subject to the periodic reporting requirements of the Exchange Act; apart from the limited exemption to allow purchases pursuant to the statutory put, the tender offer must comply with the provisions of Regulation 14E of the Exchange Act and the other applicable rules and regulations promulgated under the Exchange Act; the Japanese Corporation Law must provide for a statutory put for all holders of shares constituting less than one unit; the tender offer must be subject to, and shall be structured to comply with, applicable Japanese statutory and regulatory requirements governing tender offers and the rules and regulations of the relevant Japanese stock exchanges on which the target s shares are listed; and the tender offer must include appropriate disclosure in the Japanese offering materials regarding the possibility of the exercise by odd-lot holders of the statutory put during the tender offer.

20 Annex D Methodology for Determining the U.S. Holder Percentage The method for determining U.S. holders and their percentage ownership for purposes of the Tier I exemption is set forth in instructions to Rule 14d-1(c) and (d) and may be summarized as follows: The U.S. holder percentage ownership is determined as follows: Calculation Reference Dates. The percentage should generally be calculated on a date within a 90-day period that is no more than 60 days (in some cases, as described below, 120 days) before and no more than 30 days after the public announcement of the tender offer; and Determination of U.S. holders. The percentage is calculated as a ratio of (i) the number of shares of the target held by U.S. holders (the numerator) divided by (ii) the number of outstanding shares of the target (the denominator). Shares owned by the bidder or target are excluded from the numerator and the denominator. In limited situations, where the parties to a tender offer are unable to conduct the required lookthrough analysis for exceptional reasons, the Tier I exemption will allow the determination to be conducted based on an alternative average daily trading volume test. The following is a detailed description of the methodology for determining the U.S. holder percentage under the Tier I exemption in the context of a tender offer as well as the alternative average daily trading volume test. I. Calculation Reference Dates A. The 90-Day Determination Period The U.S. holder determination under the Tier I exemption is made based upon a register of beneficial holders of the target s securities dated within a 90-day period that is no more than 60 days before or 30 days after the public announcement of the tender offer. The determination will generally need to be made within this 90-day period if: a regular register of the target s securities dated within the 90-day period is available; assuming a March 31 fiscal year-end (as is common for Japanese issuers), a regular register will generally be available for tender offers publicly announced between: (i) March 1 and May 30; and (ii) August 31 and November 29; or a special register of the target s securities dated within the 90-day period is obtained or can be made available; this may require pre-planning and at least nine business days advance notice We understand a request for a special register will need to be made to JASDEC at least nine business days prior to the requested record date. We are told that a special register can be requested to determine whether a proposed transaction will need to be registered with the SEC. Making such a request, however, increases the risk that information about a proposed transaction will be leaked to the public.

21 pg. D-2 The Tier I exemption will not be available if publicly filed reports of beneficial ownership or other information provided to the bidder and target indicate that as of the relevant reference date the U.S holder level is greater than 10%. B. The 120-Day Determination Period If the U.S. holder determination cannot be made within the 90-day period, the Tier I exemption provides that the determination may be made as of the most recent practicable date before public announcement, but in no event earlier than 120 days before announcement of the tender offer. The calculation will need to be made within this 120-day period if: a regular register of the target s securities within the 90-day period is not available; a special register of the target s securities within the 90-day period is not available; publicly filed reports of beneficial ownership or other information provided to the bidder and target do not indicate U.S ownership of the outstanding securities of the target within the 90-day period is greater than 10%; and a shareholder register of the target s securities dated within the 120-day period is otherwise available; assuming a March 31 fiscal year-end, a regular register dated within the 120-day period will generally be available for tender offers publicly announced between: (i) March 31 and July 29; and (ii) September 30 and January 28. We are told that upon request of the target, JASDEC will produce a special register of the target s security holders as of any requested date. If so, the 120-day determination period for Japanese issuers will generally only be relevant in the context of a hostile transaction. C. Use of Tier I U.S. Holder Determination for Certain Multistep Transactions In certain multistep transactions, such as where a tender offer is the first step of a two-step transaction (e.g., a tender offer followed by a share exchange or similar business combination transaction), the U.S. holder determination may be calculated based upon a register of beneficial holders current as of a date relating to the initial step tender offer. 22 This first step/single calculation approach will generally be permitted if: the bidder properly relies for the first step on the Tier I exemption; the disclosure document for the first step tender offer discloses the bidder s intent to conduct the second step and the terms of the second transaction; 23 and the second step is consummated within a reasonable time following the first step tender offer. 22 Manual of Publicly Available Telephone Interpretations, Third Supplement, II.E.9 (July 2001). 23 Statements to the effect that the bidder may engage in or is considering engaging in or reserves the right to engage in the second step transaction generally will not be sufficient to permit the single calculation approach.