APPLIED KOMATSU TECHNOLOGY, INC.
1994 EXECUTIVE INCENTIVE STOCK PURCHASE AGREEMENT
Description of Shares
The shares you purchase will be the nonvoting
Preferred Stock of Applied Komatsu Technology,
Inc. ("Company") with rights and privileges,
including conversion into the Common Stock of
the Company, as set forth in the Company's
Articles of Incorporation.
Payment for Shares
You must pay to the Company the fair market
value of the shares of Preferred Stock you
receive (taking into account the fact that the
Preferred Stock is convertible into Common
Stock) ("Shares"), as determined by the
Committee. The number of Shares you are
purchasing and the fair market value per share
are shown on the cover sheet of this Agreement.
The purchase price must be paid in full, in
cash, using the proceeds of the mandatory loan
described below.
Funds necessary to purchase your Shares will be
loaned to you by Applied Materials, Inc. and
Komatsu Ltd. (the "Lenders"), in equal amounts
unless they agree among themselves to a
different lending ratio. Your indebtedness
must be evidenced by a full recourse promissory
note with each of the Lenders in the form
attached ("Note"), secured by an assignment for
security to each Lender under Japanese law
("Joto-Tampo"), in the form attached, of all
the Shares purchased by you. You must sign the
attached Note(s) and the attached Loan and
Security Agreement(s) when you sign this
Agreement. You must make use of this secured
loan to purchase your Shares, and you may not
purchase your Shares if you do not sign your
Note and Loan and Security Agreement with the
Lender(s).
The Notes are payable interest only, annually,
with a balloon payment of all outstanding
principal and interest on January 31, 2004.
The interest rate on your notes will be the
lowest rate required by U.S. tax law to prevent
a U.S. taxpayer from incurring imputed
compensation income from a "below market inter-
est rate loan." Any dividends paid on your
Shares will automatically be applied to your
annual and accrued interest obligations, any
partial principal repayments you elect to make
under your Notes and the remainder (if any)
will be distributed to you in cash so long as a
default has not occurred.
As a condition to your right to purchase your
Shares, you agree to make or enter into such
arrangements as the Company may require from
time-to-time for the satisfaction of any
national, federal, state, local or foreign
withholding tax obligations that may arise in
connection with such purchase and/or the
payment of dividends on your Shares.
Note Prepayment
The Notes will not permit prepayment of your
loans to purchase your Shares prior to the
closing of an initial public offering of the
Company's Common Stock on any stock exchange or
stock quotation system approved for listing by
the Shareholders Committee of the Company (a
"Company IPO"), except with the written
approval of the Lenders or as described in the
next sentence. Each Note provides that on each
date an interest payment is due, you may make a
partial principal prepayment in an amount not
to exceed the outstanding principal balance of
your Note as of that date, divided by the
number which is equal to ________ minus the
number of installment payments of interest
previously due under your Note. Each Note also
permits you to prepay your Note, in whole or
part, without penalty or limitation at any time
on or after the closing of a Company IPO.
Stock Certificates
Unless the Lenders agree to a different lending
ratio, your Shares will be held one-half by
each Lender, the assignee under the Loan and
Security Agreement, as collateral for the
repayment of your Notes. You acknowledge and
agree that a default under either Note is a
default under both Notes and that a default
under either Loan and Security Agreement is a
default under both such Agreements. Until the
Notes are paid in full, the Lenders will have
all of the rights pertaining to your Shares,
including the sole right to vote the Shares and
to exercise the conversion privilege. Any
dividends and other distributions paid will be
received on your behalf, and will be applied
against your Notes as described above with any
dividends remaining paid to you. Until the
loans are paid in full, the shareholders'
registry of the Company will reflect the
transfer and assignment of the Shares to the
Lenders pursuant to the Loan and Security
Agreements. After your Notes have been paid in
full, your Shares will be re-assigned to you
and a stock certificate for those Shares will
be provided.
The stock certificate for your Shares will
contain certain legends which restrict your
ability to sell the Shares (see "Stock Legends"
below).
Voting Rights
Until both of your Notes are paid in full, the
Lenders under the Loan and Security Agreements
will have the sole right to vote your Shares.
Conversion to
Common Stock
The nonvoting shares of Preferred Stock that
you purchase are convertible one for one into
shares of the Company's Common Stock in
accordance with the Company's Articles of
Incorporation; provided, however, the Lenders,
as assignees under the Loan and Security
Agreements, shall have the sole right to
exercise the conversion privilege and to vote
the Shares during any period in which your
Notes are not fully paid.
Repurchase Rights (Call Option)
The Lenders may (but are not obligated to) repurchase
some or all of your Shares if any of
the following events occur:
* You resign or are removed, or are terminated
voluntarily or involuntarily, as an officer,
employee or advisor of the Company and its
subsidiaries or die, prior to a Company IPO;
or
* you attempt to prepay either or both Notes
other than as specifically permitted therein
prior to a Company IPO; or
* you attempt to transfer your Shares in
violation of the provisions set forth below
in "Restrictions on Resale."
* You repay either or both Notes in full upon
maturity but there is no Company IPO.
[Add this paragraph for a seconded employee.
If you are seconded to AKT or AKTA by AMAT or
Komatsu, your Shares will automatically be
called if you do not become a direct employee
of AKT or AKTA on or before the earlier of the
day before the commencement of a "restricted
period" with respect to AKT as that term is
defined under Japanese IPO regulations or the
date two years from when you first became
assigned to AKT or AKTA.]
Except in the case where a Note is repaid in
full but there has not been a Company IPO, this
repurchase right (call option) shall be
exercised by written notice to you within one
hundred twenty (120) days after the occurrence
of the event triggering the right to exercise
(the time period for the repurchase rights is
unlimited in the case of your death). In the
case where a Note is repaid in full but there
has not been a Company IPO, the call option
shall be deemed to be automatically exercised
without further notice, and all the Shares must
be repurchased, unless the Lender in question
notifies you in writing, within thirty (30)
days after repayment of the Note, that it has
elected to decline to exercise the call option
by reason of that triggering event. The
purchase price (see below) for any Shares so
repurchased will be first applied against any
amounts that remain due under your Notes and
the remainder (if any) payable in cash within
thirty (30) days after option exercise.
Executive Put Option
The Loan and Security Agreements provide that
you may (but are not obligated to) require the
Lender to purchase all, but not a portion, of
your Shares if any of the following events
occur:
* the Company notifies you in writing on or
before January 1, 1999 that its Shareholders
Committee has determined (without prejudice
to reconsideration of the issue) that the
Company does not intend to commence, at any
time prior to the end of its FY1999, the
process for a Company IPO; or
* the Company does not so notify you, but all
outstanding Shares of Preferred Stock are
not converted to the Company's Common Stock
on or before April 30, 1999, or
* the Company does not so notify you and said
conversion occurs on or before April 30,
1999, but the Company subsequently abandons
and withdraws entirely (without prejudice to
reconsideration of the issue) all intention
and all then pending applications and good
faith efforts to achieve a Company IPO on
any stock exchange or stock quotation
system.
The Company has an affirmative obligation to
notify you of the foregoing events.
This right (put option) shall be exercised by
you with respect to all of the Shares only by
simultaneous written notice to both Lenders at
any time during the term of the Loan and
Security Agreements and during the period which
is (1) after the occurrence of the event trig-
gering the right to exercise the put option and
(2) prior to the date (if any) on which the
Company subsequently has commenced, or re-
commenced, the process for a Company IPO. This
put option shall be reinstated if said Company
IPO is later withdrawn or abandoned prior to
completion. The purchase price (see below) for
any Shares so repurchased will be first applied
against any amounts that remain due under your
Notes and the remainder (if any) payable in
cash within thirty (30) days after option
exercise.
You acknowledge and agree that the Company
and/or its parents reserve all rights not to
commence a Company IPO, to abandon any Company
IPO at any time prior to completion and to
make, in their sole and unfettered discretion,
any and all decisions and determinations
regarding a Company IPO (including, without
limitation, all decisions regarding timing,
pricing and all other terms and conditions and
considerations) and that there shall be no
liability or obligation to you by either the
Company or either parent (other than your right
to exercise this put option on these specific
terms) as a result of any decision or
determination made regarding a Company IPO; if
a Company IPO is not commenced, is commenced
but is withdrawn or otherwise does not occur;
or if a Company IPO occurs at any time after an
exercise of this put option by you.
Purchase Price for Put/Call Options
The purchase price payable for Shares subject
to an exercise of the put option or call option
shall be: 1) if a certain price is required by
applicable Japanese (or other) law and, with
respect to the call option, IPO regulations,
then the lowest price permitted by such
Japanese (or other) law or IPO regulations and
2) if said certain price is not required, then
the fair market value for the Company's Shares
(on an as-converted into Common Stock basis) as
determined by the Committee in its sole
discretion, based on the performance and degree
of success of the Company and its subsidiaries.
The Committee may make reference to at least
three companies that trade during the relevant
time on the U.S. Nasdaq National Market and are
selected by the Committee as being reasonably
comparable to the Company. The valuation
process may also take into account relative,
historical and projected growth rates, capital
structures, industry attractiveness and such
other or alternate factors the Committee deems
relevant. The price/earnings ratio of such
companies may also be among the factors
utilized by the Committee to determine fair
market value.
Restrictions on Resale
By signing this Agreement, you agree not to
sell any of your Shares (or any options or
other rights to acquire the same):
* to a third party other than the Lenders, and
then only pursuant to this Agreement and the
Loan and Security Agreements, at any time
prior to the effective date of a Company
IPO, and
* in any event, at any time when applicable
securities or other laws or IPO regulations
prohibit or restrict the sale of your
Shares.
You also agree, so long as your Notes remain
unpaid, to sell your Shares only as and to the
extent permitted by the Loan and Security
Agreements.
Stock Legends
All certificates representing Shares purchased
under this Agreement shall be endorsed with the
following legends:
"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY
MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH
THE TERMS OF WRITTEN "LOAN AND SECURITY AGREE-
MENTS" BETWEEN THE LENDERS UNDER SAID
AGREEMENTS, AND THE REGISTERED HOLDER OF THE
SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENTS ASSIGN TO THE LENDERS
ALL RIGHTS PERTAINING TO THE SHARES, AS
COLLATERAL FOR THE REPAYMENT OF LOANS TO
PURCHASE THE SAME, GRANTS CERTAIN REPURCHASE
RIGHTS TO THE LENDERS, AND IMPOSES CERTAIN
RESTRICTIONS ON THE RESALE OF THE SHARES. THE
COMPANY WILL UPON WRITTEN REQUEST FURNISH A
COPY OF SUCH AGREEMENTS TO THE HOLDER HEREOF
WITHOUT CHARGE."
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES LAWS AND
REGULATIONS OF EITHER THE UNITED STATES OR
JAPAN AND MAY NOT BE SOLD, PLEDGED, OR OTHER-
WISE TRANSFERRED WITHOUT AN EFFECTIVE REGIS-
TRATION THEREOF UNDER ALL APPLICABLE SECURITIES
LAWS AND REGULATIONS OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE CORPORATION AND ITS COUN-
SEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
"ANY TRANSFER OF THE SHARES OF THE COMPANY
SHALL REQUIRE THE WRITTEN APPROVAL OF THE BOARD
OF DIRECTORS."
U.S. Purchaser Representations
If you are a resident or a citizen of the
United States, you hereby represent and warrant
to the Company as follows, in connection with
the issuance and acquisition of Shares under
this Agreement:
You are acquiring and will hold the Shares
for investment for your account only and not
with a view to, or for resale in connection
with, any "distribution" thereof within the
meaning of the U.S. Securities Act of 1933.
You understand that the Shares have not been
registered under the Securities Act of 1933
by reason of a specific exemption therefrom
and that the Shares must be held
indefinitely, unless they are subsequently
registered under the Securities Act of 1933
or you obtain an opinion of counsel, in form
and substance satisfactory to the Company
and its counsel, that such registration is
not required. You further acknowledge and
understand that the Company is under no
obligation to register the Shares on any
exchange or stock quotation system.
You are aware of the adoption of Rule 144 by
the Securities and Exchange Commission under
the Securities Act of 1933, which permits
limited public resales of securities
acquired in a non-public offering, subject
to the satisfaction of certain conditions,
including (without limitation) the
availability of certain current public in-
formation about the issuer, the resale
occurring not less than two years after the
securities to be sold have been purchased
and paid for, the sale being through an
unsolicited "broker's transaction," and the
amount of securities being sold during any
three-month period not exceeding specified
limitations. You acknowledge and understand
that the conditions for resale set forth in
Rule 144 have not been satisfied and that
the Company has no plans to satisfy these
conditions in the foreseeable future.
You will not sell, transfer or otherwise
dispose of the Shares in violation of the
Securities Act of 1933, the Securities
Exchange Act of 1934, or the rules
promulgated thereunder, including Rule 144
under the Securities Act of 1933.
You have had the opportunity to ask ques-
tions of the Company concerning the
Company's business and financial condition
and to obtain any information which you
consider necessary to make an informed
investment decision with respect to the
acquisition of the Shares. You have
personally discussed the Company's business,
financial condition and future plans, as
well as the terms and conditions of the
issuance and sale of the Shares, with an
officer of the Company and have received
satisfactory answers to all questions.
You are aware that your investment in the
Company is a speculative investment which
has limited liquidity and is subject to the
risk of complete loss. You are able, with-
out impairing your financial condition, to
hold the Shares for an indefinite period and
to suffer a complete loss of your investment
in the Shares.
No Retention Rights
This Agreement is not an employment agreement
and does not give you the right to be retained
by Company or any of its subsidiaries in any
capacity. The Company (and its subsidiaries)
reserve the right to, and may, terminate your
Service at any time and for any reason without
liability or obligation.
Applicable Law
This Agreement will be interpreted and enforced
under the laws of Japan; provided, however, the
English language version of this Agreement, the
Plan, your Note(s), and the Loan and Security
Agreement(s) will prevail and control.
The Plan and Other Agreements
This Agreement, the Plan, your Note(s), and the
Loan and Security Agreement(s) collectively
constitute the entire understanding between you
and the Company regarding this purchase of
Shares and are incorporated herein by
reference. Any prior agreements, commitments
or negotiations are superseded.
By signing the cover sheet of this Agreement, you agree to all
of the terms and conditions described above and in the Plan.
In order to purchase the Shares and participate in the Plan, you
must sign the attached cover sheet, your Loan and Security
Agreement(s) and Note(s) and return them all to AKT or AKTA on
or before _____, 199_.
Applied Komatsu Technology, Inc.
1994 Executive Incentive Stock Purchase Agreement
Cover Sheet
Name of Participant: _________________________________
Number of Shares Purchased: _________________________________
Purchase Price per Share: _________________________________
Total Purchase Price: _________________________________
_____________________________
Signature
Date: ______________________