KITO : Notice on the Disposal of Treasury Shares as Share Compensation with Restriction on Transfer

News Release (6409 TSE 1)

July 9, 2021

Company	KITO CORPORATION
President and CEO	Yoshio Kito
Identification Code	6409 (TSE 1)
Contact	Shigeki Osozawa
	Managing Director
	Chief Financial Officer
	TEL: [phone]

Notice on the Disposal of Treasury Shares as Share Compensation

with Restriction on Transfer

At the meeting of the Board of Directors held today, KITO Corporation (the "Company") resolved to dispose of its treasury shares as share compensation with restriction on transfer (Transfer Restriction) (hereinafter referred to as the "Treasury Share Disposal") as follows:

1. Outline of the disposal

(1)	Disposal date	30th July, 2021
(2)	Class and number of	The Company's 39,284 shares of common stock
shares to be disposed of
(3)	Disposal price	JPY 1,631 per share
(4)	Total amount of shares	JPY 64,072,204
to be disposed of
(5)	Planned disposal	Director of the Company(*)	: 4 persons/ 16,561 shares
receiver	Executive Officer of the Company: 6 persons/ 12,138 shares
		Directors of the Company's subsidiaries: 3 persons/ 7,469 shares
		Employees of the Company's subsidiaries: 2 persons/ 3,116 shares
		* excluding outside directors
(6)	Other	The Treasury Share Disposal is conditioned on the Securities
		Registration Statement taking effect in accordance with the Financial
		Instruments and Exchange Act.

2. Purpose and reason for the disposal

At the meeting of the Board of Directors held on 23rd April, 2019, the Company resolved to introduce the share compensation system with the Transfer Restriction (hereinafter referred to as the "System") as a new compensation system for the Company's Directors and Executive Officers in order to provide the Company's Directors (excluding outside directors; the same shall apply hereinafter) and Executive Officers with incentives for the continued improvement of the Company's corporate value, as well as for

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News Release (6409 TSE 1)

the purpose of promoting value sharing with the Company and its shareholders. Further to the resolution, the 75th Ordinary General Meeting of Shareholders held on 21st June, 2019 approved the provision of monetary compensation within 100 million yen per annum to the Company's Directors excluding the Company's Outside Directors, separately from the existing Director compensation, etc., as the property of contribution in kind related to the granting of shares with the Transfer Restriction ("Restricted Shares") based on the System.

Currently, based on the System, the Company decided to allocate 39,284 shares of the Company's common stock to the Directors and Executive Officers of the Company and the Directors, etc. of the Company's subsidiaries (hereinafter referred to as the "Applicable Officers") recognized by the Board of Directors of the Company, in exchange for the payment of a total of JPY 64,072,204 in monetary compensation receivables for granting the Restricted Shares to the Applicable Officers, taking into consideration of the purpose of this System, the performance of the Company and the scope of duties of each Applicable Officer.

In addition, in consideration of the purpose of this System, to give incentives to our management team for the continued improvement of corporate value and promoting value sharing with our shareholders, in principle, the Company has set a transfer restriction period from the disposal date to the date when the subject officer resigns from the Company or the Company's subsidiary.

3. Outline of the Restricted Share Allotment Agreement

In conjunction with the disposal of the treasury stock, the Company and the Applicable Officers will individually enter into the Restricted Share Allotment Agreement (hereinafter referred to as the "Allotment Agreement"), the outline of which is as follows.

(1) Transfer Restriction Period

Applicable Officers can't transfer, pledge as security, or otherwise dispose of their Allotted Shares (the "Allotted Shares") during the period from 30th July, 2021 (disposal date) to the date on which the Applicable Officer resigns or retires from the position of the Director or Executive Officer of the Company or the Company's subsidiaries or any other position stipulated by the Company's Board of Directors.

(2) Conditions for the removal of the Transfer Restriction

On the conditions that the Applicable Officer has continuously remained in the position of the Director or Executive Officer of the Company or the Company's subsidiaries or any other position stipulated by the Company's Board of Directors during the period commencing on 22nd June, 2021 and ending on the date of the Company's Ordinary General Meeting of Shareholders one year later (hereinafter referred to as the "Service Period"), the Company shall remove the Transfer Restriction on all of the

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Allotted Shares upon expiry of the Transfer Restriction Period. However, if the Applicable Officer resigns or retires from all positions of the Director or Executive Officer of the Company or the Company's subsidiaries or any other position stipulated by the Company's Board of Directors during the Service Period (i) due to death, expiry of its term of office, mandatory retirement age or expiry of the employment period (expiry of the reemployment period if the Applicable Officer was reemployed after retirement at the mandatory retirement age) or (ii) for a reason deemed as reasonable by the Company's Nomination and Compensation Committee and Board of Directors, the Company shall remove the Transfer Restriction upon expiry of the Transfer Restriction Period, with respect to the Allotted Shares of the number of months from the month including the disposal date until the month including the resignation/retirement date divided by 12, which is multiplied by the number of the Allotted Shares held by the Applicable Person (provided, however, any fractional sum less than a share of stock as a result of calculation shall be disregarded).

(3) Acquisition by the Company without consideration

The Company shall rightfully acquire without consideration the Allotted Shares from which the Transfer Restriction has not been removed at the time of expiry of the Transfer Restriction Period.

(4) Management of shares

During the Transfer Restriction Period, the Allotted Shares shall be managed using the account dedicated to Restricted Shares which is established by the Applicable Officer at Daiwa Securities Co., Ltd. so that such shares may not be transferred, pledged as security, or otherwise disposed of during such Period.

(5) Handling in the event of organizational restructuring

In the event that a matter relating to a merger agreement under which the Company will become the dissolving company, an absorption-type split agreement or a new-type split plan under which the Company will become a split company, a share exchange agreement or a share transfer plan under which the Company will become a wholly-owned subsidiary, or any other organizational restructuring is approved at a General Meeting of Shareholders of the Company during the Transfer Restriction Period (or, if an approval at a General Meeting of Shareholders of the Company is not required regarding such organizational restructuring, approved by the Company's Board of Directors), the Company shall, in accordance with the resolution of the Board of Directors, remove the Transfer Restriction pertaining to the Allotted Shares of the number which is calculated by multiplying months from the month including the disposal date until the month including the date of such approval divided by 12 (provided, however, any fractional sum less than a share of stock as a result of calculation shall be disregarded), and the number of the Allotted Shares held by the Applicable Person at the time immediately preceding the business day preceding the effective date of organizational restructuring.

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4. Calculation basis and specific details of the disposal price

The Treasury Share Disposal will be carried out by using monetary compensation receivables provided to the Planned disposal receivers based on the Plans as property of contribution. The disposal price per share is set at JPY 1,631, which is the closing price of the Company's common shares on the Tokyo Stock Exchange on 8th July, 2021 (the business day prior to the date of the Board of Directors' resolution regarding the Treasury Share Disposal), in order to eliminate arbitrariness. This is the market price immediately before the date of the Board of Directors' resolution and the reasonable price that properly reflects the Company's corporate value when there are no special circumstances that indicate the unreliability of the most recent stock price. We believe that the price is not particularly favorable for Applicable Officers.

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