For use with loans
to both AKT and
AKTA "EIP Participants"
APPLIED KOMATSU TECHNOLOGY, INC.
1994 EXECUTIVE INCENTIVE STOCK PURCHASE PLAN
LOAN AND SECURITY AGREEMENT ("Joto-Tampo")
THIS AGREEMENT, dated _________, 199_, by and between
___________________ ("Lender"), and ___________ ("Borrower").
WITNESSETH:
WHEREAS, Lender wishes to extend a loan to Borrower, and
Borrower wishes to obtain such loan from Lender so that Borrower
can purchase with the loan proceeds _____________ shares of
nonvoting preferred stock ("Preferred Stock") from Applied
Komatsu Technology, Inc. ("AKT");
WHEREAS, the parties desire that Borrower enter into this
Agreement and transfer to Lender the shares of Preferred Stock
Borrower purchases from AKT, as security for the obligations of
Borrower to Lender under the loan to be extended hereunder:
NOW, THEREFORE, in consideration of the agreements
contained herein and intending to be legally bound hereby, the
parties agree as follows:
1. Extension of Loan Subject to the terms and conditions
hereinafter set forth, Lender shall extend to Borrower a loan
(the "Loan") in the principal sum equal to the initial principal
balance of that promissory note executed by Borrower in favor of
Lender, a copy of which is attached hereto as Exhibit A (the
"Note").
2. Method of Borrowing On the date hereof, Borrower
shall cause the aggregate principal amount of the Loan to be
paid to AKT, in accordance with procedures to be mutually agreed
between Lender and Borrower.
3. Note The Loan shall be evidenced by the Note. The
Note is denominated in Japanese yen if Borrower is not a U.S.
taxpayer and U.S. Dollars if Borrower is a U.S. taxpayer. For
U.S. Dollar denominated Notes, the initial principal balance of
the Note is the appropriate yen amount, converted into U.S.
Dollars based on the average daily Bank of Tokyo - "OPN" rate as
published on Reuter's for the three Japanese banking days
preceding the date the issue price for the Preferred Stock was
determined by a Committee of the Shareholders Committee of AKT
responsible for administering the 1994 Executive Incentive Stock
Purchase Plan (the "Committee").
4. Principal Loan Terms The Loan shall be full
recourse and bear interest as set forth in the Note, which is
incorporated into this Agreement. The terms of the Note shall
prevail if there is any discrepancy, conflict or ambiguity of
interpretation between this Agreement and the Note. Subject to
the terms and conditions contained in the Note, the Loan shall
be repayable by Borrower to Lender as follows:
Interest on the Note shall be payable annually as set
forth therein,
The principal amount evidenced by the Note shall
become due on January 31, 2004, and
The Note may not be prepaid without the prior written
consent of Lender or as specifically provided in the Note.
5. Stock Assignment and Transfer For Security Purposes;
Appointment as Attorney-in-Fact
A. In order to secure Borrower's obligations to Lender
under the Loan evidenced by the Note, promptly after the date
hereof Borrower hereby assigns and transfers to Lender the
shares of Preferred Stock, which shares are convertible into
AKT's common stock in accordance with AKT's Articles of
Incorporation ("Conversion Shares"), represented by stock
certificates ("Share Certificates") as shown in Exhibit B
attached hereto, the originals of which are herewith delivered
to Lender or its agents.
B. Lender shall itself or through its agent hold all
Share Certificates delivered as security for the full and prompt
repayment of any and all sums due to Lender from Borrower under
the Loan evidenced by the Note ("Joto-Tampo"). Such Joto-Tampo
shall continue to exist and be valid with respect to all of the
Preferred Stock and any Conversion Shares until the loan
evidenced by the Note is paid in full in accordance with the
Note and this Agreement. Lender shall not in any manner
encumber, transfer or dispose of the Preferred Stock and any
Conversion Shares except in accordance with the provisions of
this Agreement.
C. Lender and Borrower shall cause AKT to, pursuant to
instructions from Borrower and Lender which are hereby given,
make all necessary and appropriate entries into the shareholders
registry of AKT to reflect the transfer and assignment to Lender
of the Preferred Shares and any Conversion Shares based on the
Joto-Tampo and in accordance with the provisions of this
Agreement.
D. Borrower hereby irrevocably appoints Lender as
Borrower's attorney-in-fact with full power and authority
throughout the term of this Agreement to take such actions as
Lender deems necessary or desirable to arrange for such transfer
and registry, to exercise the conversion privilege and right to
vote as contemplated by Section 7.B, and to otherwise carry out
the provisions and intentions of this Agreement.
6. Representations and Warranties Borrower hereby
represents and warrants to Lender as follows:
As of the date Borrower assigns and transfers the
shares of Preferred Stock to Lender pursuant to Section
5.A, Borrower owns all of the Preferred Stock beneficially
and of record, free and clear of any lien, security
interest, pledge, prior assignment, encumbrance, or other
restriction, other than the Joto-Tampo created by this
Agreement in favor of Lender.
As of the date Borrower assigns and transfers the
shares of Preferred Stock to Lender pursuant to Section
5.A, Borrower has the full and unqualified legal right,
power and authority to sell, transfer and convey complete
and absolute legal and equitable title to the Preferred
Stock, free and clear of any lien, security interest,
pledge, prior assignment, encumbrance, or other restriction
other than the Joto-Tampo created by this Agreement in
favor of Lender.
As of the date hereof, Borrower is not a party to or
bound by any contract or agreement of any nature whatsoever
relating to the ownership, sale, exchange, disposition or
purchase of any of the Preferred Stock, other than the
agreement with AKT pursuant to which the Preferred Stock
was acquired.
7. Rights of Borrower and Lender
A. During the term of this Agreement:
All regular dividends with respect to the Preferred
Stock and any Conversion Shares shall be paid or
distributed by AKT to Lender, which shall receive the same
on behalf of Borrower. Borrower irrevocably instructs, and
Lender agrees, that all such dividends shall be applied by
Lender to the payment of interest and any other sums then
due under the Note; the remainder of such dividends (if
any) shall be distributed by Lender to Borrower so long as
Borrower is not in Default (as defined in Section 8)
hereunder.
Any special dividends, distributions and other amounts
or shares payable or distributable with respect to the
Preferred Stock and Conversion Shares as a result of stock
redemption, consolidation, split, conversion or purchase
shall be paid or distributed by AKT to Lender, which shall
receive the same on behalf of Borrower. Such special
dividends, distributions and other amounts shall be
retained and held by Lender, together with the Share
Certificates, as security for the full and prompt repayment
of any and all sums due to Lender from Borrower under the
Note so long as Borrower is not in Default (as defined in
Section 8) hereunder.
B. During the term of this Agreement, Lender shall have
the sole and exclusive rights pertaining to the Preferred Stock
and the Conversion Shares, including without limitation the sole
and exclusive right to exercise the privilege to convert some or
all of the Preferred Stock into Conversion Shares and the sole
and exclusive right to vote the Preferred Stock and any
Conversion Shares on all corporate questions of AKT on which
such shares are entitled to vote as if it were the outright
owner thereof. Borrower hereby irrevocably authorizes and
instructs Lender to exercise such conversion privilege and right
to vote as and when Lender, in its sole discretion, determines.
C. Lender may (but is not obligated to, except as
provided below) repurchase some or all of the Preferred Stock
and any Conversion Shares, if any of the following events occur:
The Borrower resigns or is removed, or is terminated
voluntarily or involuntarily, as an officer, employee or
advisor of AKT and its subsidiaries or dies prior to an
initial public offering of AKT's Common Stock on any stock
exchange or stock quotation system approved for listing by
the Shareholders Committee of AKT (an "IPO of AKT"); or
The Borrower attempts to prepay the Note other than as
specifically permitted therein prior to an IPO of AKT; or
The Borrower repays the balance of the Note on its
maturity but there has been no IPO of AKT; or
The Borrower attempts to transfer any Preferred Stock
or Conversion Shares in violation of the provisions set
forth below in Article 7.F.
[IF APPLICABLE, ADD: The Preferred Stock and any
Conversion Shares of a Borrower who is a seconded employee
of AKT or Applied Komatsu Technology America, Inc. ("AKTA")
shall be automatically called if such Borrower does not
decide to 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 in Japanese IPO regulations or the date two years
from when the Borrower first became assigned to AKT or
AKTA.]
Except in the case of death or where the Note is repaid in full
but there has not been an IPO of AKT, this repurchase right
(call option) shall be exercised by written notice to Borrower
within one hundred twenty (120) days after the occurrence of the
above event. The repurchase period shall be unlimited in the
case of death. In the case where the Note is repaid in full but
there has not been an IPO of AKT, the call option shall be
deemed to be automatically exercised without further notice, and
all the Preferred Stock and any Conversion Shares must be
repurchased, unless Lender notifies Borrower in writing, within
thirty (30) days after repayment of the Note, that Lender has
elected to decline to exercise the call option by reason of that
triggering event. The purchase price (see below) for any
Preferred Stock or Conversion Shares so repurchased will be
first applied against any amounts that remain due under the Note
and the remainder (if any) payable in cash within thirty (30)
days after option exercise.
D. Borrower may require Lender to purchase all, but not a
portion, of the Preferred Stock or Conversion Shares if any of
the following events occur:
AKT notifies Borrower in writing on or before
January 1, 1999 that its Shareholders Committee has
determined (without prejudice to reconsideration of the
issue) that AKT does not intend to commence, at any time
prior to the end of its FY1999, the process for an IPO of
AKT, or
AKT does not so notify Borrower, but all outstanding
shares of Preferred Stock are not converted to Conversion
Shares on or before April 30, 1999, or
AKT does not so notify Borrower and said conversion
occurs on or before April 30, 1999, but AKT 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 an
IPO of AKT on any stock exchange or stock quotation system.
AKT has an affirmative obligation to notify the Borrower of the
foregoing events.
This right (put option) shall be exercised by Borrower by
written notice to Lender at any time during the term of this
Agreement and during the period which is (1) after the
occurrence of the event triggering the right to exercise the put
option and (2) prior to the date (if any) on which AKT
subsequently has commenced, or re-commenced, the process for an
IPO of AKT. This put option shall be reinstated if said IPO is
later withdrawn or abandoned by AKT prior to completion. The
purchase price (see below) for any shares so repurchased will be
first applied against any amounts that remain due under the Note
and the remainder (if any) payable in cash within thirty (30)
days after option exercise.
E. The purchase price under Subsections C and D shall be:
1) if a certain price is required by applicable Japanese law (or
other applicable law) and, with respect to Subsection C, IPO
regulations, then the lowest price permitted by such Japanese
law (or other applicable law) or IPO regulations and 2) if said
certain price is not required, then the fair market value for
the Preferred Stock and Conversion 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 AKT 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 AKT. 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.
F. Borrower agrees not to sell any of the Preferred Stock
or Conversion Shares (or any options or other rights to acquire
the same) 1) to a third party at any time prior to the closing
date of an IPO of AKT and 2) in any event at any time when
applicable securities or other laws or IPO regulations prohibit
or restrict the sale of Preferred Stock or Conversion Shares.
G. Borrower agrees that, if required by applicable IPO
regulations, Conversion Shares may be submitted to the lead
manager of the IPO of AKT and kept in its custody until up to
one year following the effective date of the IPO (or longer, if
such regulations so require), regardless of whether the Note has
been paid in full and regardless of whether this Agreement
remains in effect.
8. Default
A. The occurrence of the following events with respect to
Borrower shall constitute a default hereunder ("Default"):
If Borrower fails to perform any of its obligations
hereunder and such failure continues for more than 10 days
after Borrower receives written notice of such failure from
Lender.
If Borrower fails to perform any of its obligations
under the Note for more than 10 days after Borrower
receives written notice of Lender's election to accelerate
payment of the Note by reason of such failure.
The Lender will not accelerate payment of the Note
prior to maturity for nonpayment of interest.
B. If Borrower is in Default hereunder, then Lender may
declare that all sums lawfully owed by Borrower under the Loan
evidenced by the Note shall be immediately due and payable, and
Lender shall have, in addition to all other rights and remedies
which it may have under Japanese law, all of the following
rights and remedies:
Lender may continue to receive dividends and other
distributions regarding Preferred Stock and Conversion
Shares on behalf of Borrower and exercise all voting and
other rights and give all consents, waivers and
ratifications in respect thereof and otherwise act with
respect thereto as though it were the outright owner
thereof; and/or
Lender may foreclose its security interest hereunder
and obtain outright ownership to all or any Preferred Stock
and Conversion Shares (if the then price of the same
determined in accordance with Article 7.E hereof is greater
than all of the sums owed by Borrower under the Loan, then
Lender shall pay such balance to Borrower within thirty
(30) days thereafter); and/or
Lender may sell, transfer or otherwise dispose of the
Preferred Stock and Conversion Shares and other property
held by Lender or its agent hereunder and apply the
proceeds thereof to any outstanding amount payable by
Borrower hereunder, ten (10) days after prior written
notice to Borrower of Lender's intention to do so.
C. The failure to give any such notice and/or to exercise
any such right or remedy shall not constitute a waiver of any
Default or right associated with any Default and shall be
without prejudice to giving such notice and/or exercise such
right or remedy at any later date.
9. Duration and Termination
A. This Agreement shall continue in effect from the date
hereof until the occurrence of the events prescribed in Section
9B, at which time this Agreement and all of the rights and
obligations of the parties hereto shall terminate.
B. Upon the full payment by Borrower of all sums due
under the Note to Lender, this Agreement shall terminate except
for Sections 7C, 7D, 7E and 7F (which Sections shall survive
such termination until the effective date of an IPO of AKT) and
Section 7G (which Section shall survive such termination until
the end of the period specified therein). Upon such termination
(except as provided in Section 7G), Lender shall return, or have
them returned, to Borrower all of the Preferred Stock and
Conversion Shares and other property held by Lender or its agent
hereunder for security purpose.
10. Miscellaneous
A. This Agreement may only be modified, supplemented or
amended by a written instrument signed by the parties hereto.
B. This Agreement shall inure to the benefit of and be
legally binding upon the parties and their respective heirs,
personal representatives, successors and assigns.
C. This Agreement shall be governed by and construed in
accordance with the laws of Japan; provided, however, the
English language version of this Agreement will prevail and
control. Borrower and Lender acknowledge and agree that the
choice of Japanese law to govern this Agreement is reasonable
and binding, and elected based upon mutually acceptable factors
including the fact that the rights, duties and privileges of a
shareholder of AKT are governed by Japanese law. Borrower
hereby irrevocably submits to the jurisdiction of the Tokyo
District Court in connection with enforcement of this Agreement
and/or any disputes hereunder.
D. If any provision of this Agreement is construed to be
invalid or unenforceable, then the remainder of this Agreement
shall not be affected thereby and shall be enforceable without
regard to the invalid or unenforceable provision.
E. Any heading preceding the text of the Sections hereof
are inserted solely for the convenience of reference and shall
not constitute a part of this Agreement.
F. All notices required or permitted hereunder shall be
given in writing, and either hand delivered, delivered by
courier, or mailed by certified mail, postage prepaid, return
receipt requested, to the parties at their respective addresses
for notice herein. The address for notice for Lender shall be:
to the attention of its General Counsel, at the address of
Lender's corporate headquarters. The address for notice for
Borrower shall be as set forth below on the last page of this
Agreement. Either party may change its address for notices
hereunder by written notice to the other party as provided for
in this Section.
G. Neither party shall, directly or indirectly, assign or
transfer this Agreement or any of the rights and/or obligations
hereunder, in whole or in part, without the prior written
consent of the other party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed the day and year first above
written.
Lender:
By:
As Its:
Borrower:
Address: