Establishment of the Amount of Remuneration for the Directors of the Company in the Form of Stock Options and the Details

Komatsu Ltd. (hereinafter "Company") hereby gives announcement that at the meeting of the Board of Directors held on May 15, 2007, the Company resolved to propose to the 138th Ordinary General Meeting of Shareholders which will be held on June 22, 2007, an agendum to establish an amount for stock options as a remuneration and to issue Stock Acquisition Rights as stock options to the Directors of the Company, as set forth below:

1. Reasons for Resolution

At the 137th Ordinary General Meeting of Shareholders, held on June 23, 2006, the shareholders approved the yearly remuneration amount for Directors of the Company in the form of stock options of up to JPY360 million (provided however, that the salaries for Directors who also serve as Company employees are not included) and details of the Stock Acquisition Rights to be issued as the aforesaid stock option to the Directors of the Company for a one year period beginning on June 24, 2006.
The Company is proposing the amount of remuneration in the form of the aforementioned stock option for this fiscal year and each fiscal year thereafter, will be no more than JPY360 million (of which, up to JPY50 million is allocated for Outside Directors). The Company wishes to propose that it will be possible to flexibly plan the details of the Stock Acquisition Rights issued to the Directors of the Company (including Outside Directors) as stock options within a set range of amount and details that the Company requests for the shareholders' approval at this General Meeting of Shareholders, as stated in below 2. (2).
The amount of remuneration in the form of the above mentioned stock options (including Outside Directors) is calculated after considering the situation until present regarding stock option grants, and various other factors. With respect to the details of the Stock Acquisition Rights issued to the Directors of the Company (including Outside Directors) as the stock options proposed in this item for the shareholders' approval, the Stock Acquisition Rights are issued as stock options for the purposes of raising the motivation and morale of the Directors of the Company, which shall contribute to the improvement of the consolidated performance of the Company as stated above, the details are decided based on various factors including the situation until present regarding stock option grants, and, in light of the factors above mentioned the details that are decided are considered reasonable.
After this agenda item is approved, the Company plans to issue and allocate Stock Acquisition Rights as stock options to the Directors of the Company every year upon resolution of the Board of Directors and within the range of amount and details that are approved at this Ordinary General Meeting of Shareholders.
The Company currently has ten (10) Directors (including three (3) Outside Directors), and assuming that the Item 2 of the Agenda is approved as the original proposal, the number of Directors will be the same ten (10).

2. Details of Agenda Item

(1) Separate from the monthly remuneration amount for Directors of the Company, the Company asks shareholders to approve a yearly amount of not more than JPY360 million for a year from the day of the Ordinary General Meeting of Shareholders of the respective fiscal year that comprises the yearly amount for remuneration in the form of stock options issued to the Directors of the Company (provided however, that the salaries for Directors who also serve as Company employees are not included), and in this, not more than JPY50 million for a year from the day of the Ordinary General Meeting of Shareholders of the respective fiscal year is yearly remuneration for Outside Directors.

(2) The Stock Acquisition Rights to be issued as stock options to Directors of the Company (including Outside Directors) are as follows:

1) Type and number of ordinary shares to be issued upon the exercise of the Stock Acquisition Rights
The maximum number of Stock Acquisition Rights to be issued on a date within a year from the day of the Ordinary General Meeting of Shareholders of the respective fiscal year shall be 239 (of which, a total number of 33 is allocated for Outside Directors).
The maximum number of ordinary shares of the Company that Directors of the Company may receive through the exercise of the Stock Acquisition Rights to be issued on a date within a year from the day of the Ordinary General Meeting of Shareholders of the respective fiscal year shall be 239,000 shares (of which, 33,000 shares are allocated for Outside Directors). When the Number of Granted Shares (defined below) is adjusted, the maximum number of shares granted to Directors and Outside Directors will be obtained by multiplying the total number of the aforementioned Stock Acquisition Rights by the Number of Granted Shares after adjustment, respectively.
The number of shares subject to one Stock Acquisition Right (hereinafter "Number of Granted Shares") shall be 1,000 shares. If, however, the Company either effects a stock split of its ordinary shares (including allotment of ordinary shares of the Company to shareholders without consideration; the same applies hereinafter) or effects a stock consolidation after the date of resolution of this agenda item (hereinafter "Resolution Date"), the Number of Granted Shares in connection with the aforementioned Stock Acquisition Rights shall be adjusted proportionately, in accordance with the ratio of the stock split or the stock consolidation in question. Also, if it is necessary to adjust the Number of Granted Shares after the Resolution Date for other reasons, the Company can adjust the Number of Granted Shares in connection with the aforementioned Stock Acquisition Rights to the extent reasonable.
Fractions of less than one (1) share resulting from the foregoing adjustments shall be rounded down.

2) Amount of assets to be paid upon exercise of the Stock Acquisition Rights
The amount of assets to be paid upon exercise of the Stock Acquisition Rights shall be the amount calculated by multiplying the paid-in amount per share to be transferred upon exercise of the Stock Acquisition Rights (hereinafter "Exercise Price") by the Number of Shares subject to one Stock Acquisition Right.
The Exercise Price shall be the amount calculated by multiplying 1.05 by the average of the closing price of the Company's ordinary shares of each day in regular trading during the month (excluding days when there were no transactions of the Company's ordinary shares) (hereinafter "Closing Price") at the Tokyo Stock Exchange, immediately preceding the month in which the date of allotment of the Stock Acquisition Rights falls (hereinafter "Allotment Date"), with fractions of less than one (1) yen rounded up to a whole yen. However, if the Exercise Price is lower than the Closing Price on the Allotment Date (if there is no Closing Price on that date, the Closing Price on the immediately preceding transaction date shall be applied), the Closing Price on the Allotment Date shall be applied.
The Company can suitably adjust the Exercise Price to the extent reasonable after the Allotment Date of the Stock Acquisition Rights when the Company effects a stock split or stock consolidation of ordinary shares of the Company; issues new ordinary shares or disposes ordinary shares of the Company at a price below the market price; allots, without consideration, shares of the Company of a class other than the ordinary shares to holders of the ordinary shares of the Company; or pays dividends in the form of shares of another company to the holders of ordinary shares of the Company; and if, in consideration of all factors in the situation, there is a need to adjust the Exercise Price.

3) Exercise period for the Stock Acquisition Rights
The exercise period for the Stock Acquisition Rights will be the period decided by the Board of Directors and within 7 years starting from the Response Day of the year following the year of the Allotment Date.

4) Restrictions on the transfer and acquisition of Stock Acquisition Rights
Transfer and acquisition of Stock Acquisition Rights shall be required the approval by resolution of the Board of Directors of the Company.

5) Conditions for exercising the Stock Acquisition Rights
If a holder of Stock Acquisition Rights, be they Director, Corporate Auditor, or employee of the Company, or Director, Corporate Auditor, or employee of an affiliate of the Company, loses all their respective positions, that person is able to exercise the Stock Acquisition Rights only within a period of three years from the day they lost their position, and other terms and conditions concerning the exercise of Stock Acquisition Rights shall be decided at a meeting of the Company's Board of Directors.


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