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  7. Regarding the Background of the Resignation of Former President, Mr. Kuniaki Nozoe, and the Company's Position on the Matter

Regarding the Background of the Resignation of Former President, Mr. Kuniaki Nozoe, and the Company's Position on the Matter

April 14, 2010

[Regarding Receipt of Notice of Retraction of Resignation, Dated February 26, 2010]

The Company received a notice of retraction of resignation by certified mail from Mr. Nozoe, dated February 26, 2010 and addressed to Mr. Michiyoshi Mazuka, chairman and president of the Company. The notice was received on March 1, 2010 (February 26 was a Friday). A copy of the notice was shared with all the members of the Board of Directors of the Company. The notice contained the following contents:

・ The statement that Mr. Nozoe was retracting his resignation of September 25, 2009.
・ The request to hold an extraordinary meeting of the Board of Directors.
・ If the Company did not make a sincere response by March 3, 2010, Mr. Nozoe would take certain legal actions or non-legal actions.

The Company received no prior notification from Mr. Nozoe indicating that he would make these requests.

[Regarding Extraordinary Meeting of the Board of Directors on March 6, 2010 and Decision to Dismiss Mr. Nozoe as Senior Executive Advisor]

・ On March 5, 2010, the media began to publish reports on this matter.
・ The Company determined that Mr. Nozoe was actively discussing the matter with the media, and that the relationship of trust with Mr. Nozoe had been broken. An extraordinary meeting of the Board of Directors was held on March 6, at which the Board of Directors rejected Mr. Nozoe's requests and decided to dismiss him as senior executive advisor.
・ On March 6, the Company also filed a notice with the Tokyo Stock Exchange to explain the background of Mr. Nozoe's resignation.

1. Regarding Mr. Nozoe's Request for a Preliminary Injunction to Preserve Standing as a Member of the Board

On March 15, 2010, Mr. Nozoe filed a petition with the Yokohama District Court, Kawasaki Branch, requesting a "preliminary injunction to preserve his standing as a member of the board."

[Contents]
Mr. Nozoe was requesting his reinstatement as a member of the Board of Directors on the basis of his allegations that his resignation was fraudulent, coerced or in error.

[Background]

  • The court held two hearings, on March 23 and April 6, to gather evidence and hear allegations from both sides.
  • At the hearings, the Company refuted Mr. Nozoe's allegations and submitted as evidence audio recordings of the meeting in which Mr. Nozoe was asked to resign, as well as results of an investigation which provided the basis for Mr. Nozoe's resignation.
  • At the March 23 first hearing, Mr. Nozoe requested the court to issue a judgment on his request for a preliminary injunction without hearing the Company's evidence or allegations. The court rejected the request and began hearing allegations.
  • At the April 6 second hearing, the court asked both sides whether they planned to submit further evidence or make further allegations. Both sides responded that they did not, and the court concluded the hearings.
  • [* On April 7, Mr. Nozoe held a press conference regarding legal action he was requesting the Company take against members of the board. At the press conference, Mr. Nozoe claimed he was not seeking reinstatement to the Board of Directors and that he was requesting the establishment of an external investigation committee to have the background of his resignation clarified.]
  • On April 8, the Company was served by the court a notification of withdrawal of the pending petition, which indicated that Mr. Nozoe had withdrawn his request on April 6, the day prior to his press conference.

[The Company's Position]
There are serious questions about Mr. Nozoe's withdrawal of the petition. A court of law can be considered an ideal external investigation committee because of its objectivity and fairness. If Mr. Nozoe was sincere about his statement at his press conference that he desired a judgment by an external investigation committee, then the court offered the opportunity for both sides to present their evidence and allegations and receive a judgment by the court. From this viewpoint, it is very regrettable that Mr. Nozoe withdrew his petition after the conclusion of the hearings.

Even as Mr. Nozoe avoided the decision of the court, he continued to repeat the same allegations at his press conference. Moreover, at the press conference, Mr. Nozoe stated that he was not seeking reinstatement to the Board of Directors, which is inconsistent with the facts.

2. Regarding the Background of Mr. Nozoe's Resignation

The Nifty Project and the Involvement of a Certain Investment Fund

(Warnings to Mr. Nozoe in February 2009)

  • In the early part of February 2009, Mr. Nozoe began a project to reorganize Nifty Corp., a subsidiary of the Company. There were discussions about a business merger between Nifty and another IT company.
  • At that time, Mr. Nozoe considered involving a certain investment fund into this project. Multiple financial institutions had told the Company that this fund had an unfavorable reputation.
  • The Company determined that relations with this fund were inappropriate in light of the Company's corporate philosophy, the Fujitsu Way. Mr. Naoyuki Akikusa, the Company's senior executive advisor, warned Mr. Nozoe of the problem. Mr. Nozoe acknowledged the fund was a dubious organization and agreed to exclude it from the project. Mr. Nozoe also made a report to Mr. Masamichi Ogura, a statutory auditor of the Company, that he had excluded the fund because it was dubious.
  • Thereafter, however, Mr. Nozoe made statements to the effect that the Japanese representative of the fund was the person he trusted most, and because of those statements, Mr. Mazuka, Mr. Akikusa, Mr. Ogura, Mr. Hiroshi Oura, a member of the board, Mr. Megumi Yamamuro, an auditor of the Company, and Mr. Hiroaki Kurokawa, a senior executive advisor of the Company, decided to continue to monitor the actions of the fund in relation to the project.

(Following the Warnings)

  • Following the warnings in February 2009, on the premise that the fund had been excluded from the project, the IT company considered as a buyer of Nifty conducted due diligence on the deal. At that time, rumors spread in the financial sector that the Company planned to sell Nifty. The Company then received multiple offers from others companies, some at higher purchase prices than the proposal from the IT company.
  • Mr. Nozoe canceled the planned sale to the IT company. During the course of the project, neither the Company's Management Council nor its Board of Directors ever made a formal decision on selling Nifty.
  • In July 2009, Mr. Nozoe resumed discussions about selling Nifty, and informed Nifty of the resumption through a manager of the Company.
  • Through the Company's investigation of the project, it was determined that despite previous warnings, Mr. Nozoe continued to have relations with the Japanese representative of the fund.
  • Multiple investigation firms investigated the fund and had told the Company that this fund had an unfavorable reputation.
  • The Company determined that the Japanese representative of the fund continued to take part in meetings on the proposed sale of Nifty.
  • In further investigations following Mr. Nozoe's resignation, the Company found electronic mail between Mr. Nozoe and the Japanese representative of the fund which proved that even after Mr. Nozoe said he had excluded the fund from the project, Mr. Nozoe had involved the fund.

(Events in September 2009)

  • In September 2009, Mr. Mazuka, Mr. Oura, and Mr. Akikusa held a meeting in which they agreed that Mr. Nozoe was unfit to be representative director and president of the Company because the relations between Mr. Nozoe and the Japanese representative of the fund were very strong and Mr. Nozoe had continued to involve the fund after stating himself that it was dubious and he would exclude it. They then consulted the outside members of the Board of Directors on their decision to confirm the situation with Mr. Nozoe, and if the investigation results into his relations with the Japanese representative of the fund were true, to ask Mr. Nozoe to resign, and that if Mr. Nozoe refused to resign, to seek his dismissal as representative director and president.

[The Company's Position]
It is unusual for a president to resign or be dismissed before his expected retirement, but at issue is Mr. Nozoe's very fitness as representative director and president of the Company. It was inappropriate for Mr. Nozoe to think that he could continue to have relations with the fund as long as it could not be proven that its reputation was in fact true. Rather, the results of multiple investigations into the fund had proven largely consistent, and Mr. Nozoe should have recognized that there were very significant risks to the Company if the reputation of the fund proved to be true. Even if Mr. Nozoe personally trusted the Japanese representative, it was necessary as president to refrain from having business dealings with the representative and exclude the fund from dealings with the Company. This is the behavior expected of the leader of a corporate group with more than 170,000 employees and a person seen as the highest embodiment of the Fujitsu Way corporate philosophy.

This position and the investigation results were explained to board members Mr. Ikujiro Nonaka, Mr. Chiaki Ito, Mr. Masayasu Kitagawa, and auditors Mr. Tamiki Ishihara, Mr. Yamamuro, and Mr. Hiroshi Mitani, and all of the above officers agreed with the position.

(Events on September 25, 2009)

  • Prior to a meeting of the Board of Directors, Mr. Nozoe was given an opportunity to respond to the results of the investigation.
  • Mr. Nozoe acknowledged that under no conditions was the fund allowed to be involved in the Nifty project and he stated that he had given instructions to that effect. In respect to the Japanese representative of the fund, Mr. Nozoe described the person as playing the role as a contact for the representative of the fund. Mr. Nozoe admitted that he still had personal contact with the Japanese representative and that he had asked him to act as an intermediary for the Nifty sale.
  • Since Mr. Nozoe's explanation was generally consistent with the findings of the Company's investigation, Mr. Nozoe was asked to resign.
  • Present at the meeting with Mr. Nozoe were Mr. Mazuka, Mr. Oura, Mr. Yamamuro, Mr. Akikusa, and Mr. Takuma Yamamoto, advisor to the Company, and Mr. Mitsuya Yasui, president of the legal unit, was present as secretary.
  • Mr. Nozoe signed a resignation and signed a contract as a senior executive advisor to the Company.
  • Following this meeting, a meeting of the Board of Directors formally accepted Mr. Nozoe's resignation.

[The Company's Position]
There is no truth to some media reports that Mr. Nozoe was taken into a windowless room and pressured to resign without the approval of the Board of Directors. A majority of the members of the board had approved the Company's position to request Mr. Nozoe's resignation and some of the members undertook the role of asking Mr. Nozoe to resign. If Mr. Nozoe had refused to resign, then the Board of Directors would have debated whether or not to dismiss Mr. Nozoe, and Mr. Nozoe was informed of this option.

In addition, when members of the board asked Mr. Nozoe to resign, Mr. Nozoe acknowledged the problem and agreed that his resignation was preferable to dismissal.

* The Company cannot reveal details of the investigation and other information gathered by the Company in relation to Mr. Nozoe's resignation, as it would have a significant impact on third parties, including the providers of the information. The Company did, however, provide details of the investigation as evidence to the court in the petition hearings, along with audio recordings from the meeting with Mr. Nozoe on September 25 when he was asked to resign. Therefore, the court was in a position to review this information and determine whether or not the resignation was fraudulent or coerced.

3. Regarding the Disclosure of the Resignation

[Background]

  • On September 25, at the time of the resignation, the Company said it was due to illness.
  • Before being asked to resign, Mr. Nozoe was asked whether he had been involved in any illegal conduct that would lead the Board of Directors to dismiss him, including insider trading or the receipt of money or goods. Mr. Nozoe confirmed that there had been no such incidents.
  • It seemed that the only issue was the fund's involvement in the Nifty project.
  • Based on the discussion, since there seemed to be no illegal conduct, Mr. Nozoe was advised to resign.
  • With Mr. Nozoe's approval, the Company decided on illness as the reason for the resignation.
  • At the time, considering that the background information was sensitive, the Company sought to prevent potential damage to the reputation of the fund, the honor of Mr. Nozoe, and the reputation of the Company.

[The Company's Position]
The Company made a decision to cite illness as the reason for resignation in order to prevent potential damage to the reputation of third parties. In the end, however, considering the recent events and the Company's eventual disclosure of the background to Mr. Nozoe's resignation, the Company recognizes that it has caused inconvenience to shareholders and investors, the Tokyo Stock Exchange, along with other stakeholders. The Company wishes to take this opportunity to express a sincere apology to all its stakeholders.

4. Mr. Nozoe's Request that the Company File Suit Against Members of the Board

  • On March 30, 2010, Mr. Ogura received a letter from Mr. Nozoe requesting that the Company file a lawsuit against two members of the Board of Directors.
  • The members of the board named in the request are Mr. Mazuka and Mr. Akikusa.
  • Mr. Nozoe alleges that he was unfairly forced to resign, and therefore the sale of Nifty was never completed and the Company suffered an opportunity loss.
  • In accordance with Japanese law, the Board of Auditors of the Company is now reviewing the request. The Company is aware of the contents of the request.

[The Company's Position]
During the meeting on September 25 between Mr. Nozoe and members of the board and auditors, Mr. Nozoe was asked about the status of the sale of Nifty. Mr. Nozoe answered that the sale of Nifty was not decided, and that to raise the corporate value of Nifty, the Company was still only reviewing various plans. Mr. Nozoe stated that there had been no decision to sell Nifty to any specific third party, and that there were about three offers under consideration. Within the Company, neither the Management Council nor the Board of Directors had made any decision on selling Nifty. There was no understanding by the management of the Company that a sale of Nifty was imminent.


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