May 24, 2018
Name of Company:
Stock Code:Head Office:Representative:

KAGA ELECTRONICS CO., LTD.
8154 Tokyo Stock Exchange, First Section
20 Kandamatsunagacho, Chiyoda-ku,
Ryoichi Kado, President & COO

Contact:

Eiji Kawamura, ManagingDirector,
Head of Administration Headquarters
Phone: 03-5657-0111

KAGA ELECTRONICS to Discontinue Directors’ Retirement Benefits Plan andIntroduce Restricted Stock Compensation Plan
KAGAELECTRONICS CO., LTD. (T SE:8154;the “Company”) announcedthat at a Board of Directors meeting
held today, it reviewed the directors’ compensation plan and as part of that it resolved to discontinue the directors’retirement benefit plan, to make termination payments associated with said discontinuance, to introduce a restricted
stock compensation plan (the “Plan”), andto submit a proposal regarding these mattersto the 50th Ordinary Meetingof Shareholdersscheduled for June 28, 2018 (the “General Meeting of Shareholders”).

1. Discontinuance of the directors’ retirement benefit planAs part of its review of the directors’ compensation plan, the Company has decided to discontinue thedirectors’ retirement benefit plan, which has a strong deferred payment-like component, effective as of the closeof the GeneralMeeting of Shareholders scheduledfor June 28, 2018. Accordingly, the Company also decidedto
make a termination payment of retirement benefits, in accordance with standards prescribed by the Company, tocurrent directors and company auditors (hereinafter “Eligible Persons”) for their term in office up until
discontinuance of this plan. Upon obtaining approval at the General Meeting of Shareholders, the payments
shall be made at the time of retirement of each Eligible Person.
The effect on business performance of the discontinuance of this plan will be negligible, as necessary
paymentbased on prescribed standards has been appropriated as allowance for retirement benefits for directors.
2. Restricted stock compensation plan
(1) Purpose and conditions for introducing the Plana. Purpose for introducing the Plan
The purpose of the Plan is to provide incentive for directors, excluding outside directors, of the Company(“Eligible Directors”) to pursue sustainable enhancement of the Company’s corporate value and, in addition,
to further promote shared value between Eligible Directors and shareholders through the holding of theCompany’s shares.
b. Conditions for introducing the PlanAs the Plan amounts to payment of monetary claims as compensation by granting restricted stocks toEligible Directors, a condition for introducing the Plan to Eligible Directors shall be to obtain shareholders’approval at the GeneralMeeting of Shareholders for the payment of the pertinent compensation.
- 1 -While the compensation for directors of the Company was approved at an amount no more than ¥700
million per year (no more than ¥50 million for outside directors) at the 47th Ordinary General Meeting ofShareholders held on June 26, 2015, the Company plans to request shareholders’ approval at the General
Meeting of Shareholders for establishment of the compensation amounts under the Plan for Eligible Directorsof the Company, separate from the above compensation, with the Plan introduced as a newsystem.
(2) Overviewof the Plan
Eligible Directors shall take all monetary compensation claims they are paid by the Company under thePlan and use them to make in-kind contributions in return for the Company’s common stock, which will beissued or disposed of by the Company.
The total amount of monetary compensation claims paid to Eligible Directors under the Plan shall be nomore than ¥100 million (however, this does not include the portion of employee’s salary for directors whoconcurrently serve as employees). The specific timing of payment and distribution to each Eligible Director
shall be determined at Board of Directors meetings.
The totalnumber of shares of common stock to be newly issued or disposed of by the Company under thePlan shall be no more than 60,000 shares per year (however, in the event of a share split [including a gratis
allotment of the Company’s common stock] or consolidation of shares of common stock of the Company onor after the date the Plan is approved at the General Meeting of Shareholders, the totalnumber of shares shallbe adjusted as necessary within a reasonable range, in accordance with the split ratio or consolidation ratio, etc.
from the effective date onward). The amount to be paid in per share shall be the closing price of theCompany’scommon stock on the Tokyo Stock Exchange on the business day immediately precedingthe dateof the resolution of the Board of Directors (if such date is a non-trading day, the closing price on the mostrecent trading day prior to that date).
Furthermore, a condition for issuing or disposing of common stock of the Company under the Plan (the“ Stock”) shall be that a restricted stock allotment contract is entered into between the Company and theEligible Directors who are expected to receive payment of restricted stock compensation, with the contractcontaining content including: 1) prohibition of transfer to a third party, creation of security interest on, or any
other disposal of the Stock during a certain period; and 2) the fact that the Company may acquire the stock
without consideration if certain eventsoccur. In order to prevent the transfer, creation of a security interest on,or other disposal of the Stock during the restriction period, the Stock will be managed in dedicated accounts
opened by Eligible Directors at Nomura Securities Co., Ltd.

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