K.A. CAPITAL K.K.
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made effective as of Xxxxx 0, 0000 xxxxxxx
Xxxxxxx-Xxxxxx Xxxxx Co., Ltd., a company incorporated in Japan whose principal
place of business is at Nishi-Shinbashi Aiko Building, 0-0-00, Xxxxx-Xxxxxxxxx,
Xxxxxx-xx, Xxxxx, Xxxxx ("K-W") and Xxxxxxx Investments Japan Ltd., a company
incorporated in Japan whose principal place of business is at Xxxx Xxxxxxxx,
0-0-0 Xxxxxxxxxx, Xxxxxxx-xx, Xxxxx, 000, Xxxxx ("CIJL").
WHEREAS, K-W and CIJL have agreed to establish K.A. Capital K.K., a
joint stock company (the "Company") as a joint venture whose business shall
include but not be limited to dealing in real estate related investments in
loans and properties; and
WHEREAS, K-W and CIJL wish to set out the terms and conditions upon
which the business of the Company is to be carried on and to govern their
respective rights and obligations.
NOW, THEREFORE, in consideration of the premises and undertakings
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS. When used in the Agreement the following terms shall have
the following meanings:
"Accountancy Firm" means a firm of independent public accountants that
is the Japanese affiliate of one of the "big five" accountancy firms in
the world, which at the date of this Agreement were agreed to be Xxxxxx
Xxxxxxxx, Deloitte and Touche, Ernst and Young, KPMG Peat Marwick and
Price Waterhouse Coopers LLP;
"Board of Directors" means the board of directors of the Company;
"Employee Secondment and Consulting Agreement" means that certain
Employee Secondment and Consulting Agreement of even date herewith
between K-W and the Company.
"Confidential Information" includes (i) know-how, trade secrets,
information relating to the activities of the Company, its finances,
confidential arrangements with agents, customers or sellers, and other
proprietary information of the Company, and (ii) other information that
a Shareholder may, by written notice, notify the other Shareholder as
being confidential;
"Deadlock" means any situation that has persisted for not less than
fourteen (14) days in which a matter that is material to the Company
cannot be resolved (i) by
virtue of a substantial disagreement between the Shareholders and which
is manifested by an equality of votes at any meeting of the
Shareholders or the Board of Directors; or (ii) by virtue of an
inability to form a quorum at any meeting or adjourned meeting of the
Board of Directors or Shareholders;
"Shareholders" means K-W and CIJL or their respective successors and
permitted assigns and "Shareholder" shall mean either one of them; and
"Shares" means those shares of (Y)50,000 par value each in the capital
of the Company.
"Work Rules" means the Work Rules of K.A. Capital K.K. Concerning Loan
Servicing and Asset Management substantially in the form attached
hereto as Exhibit B, as amended or supplemented from time to time.
2. THE COMPANY
2.1 FORMATION OF THE COMPANY. The Shareholders have established the Company
as a joint stock corporation (kabushiki kaisha) incorporated under the
Commercial Code of Japan with an authorized share capital of eighty
million Yen ((Y)80,000,000) divided into one thousand six hundred
(1,600) ordinary Shares of fifty thousand Yen ((Y)50,000) each. The
Shareholders agree to invest in and operate the Company in accordance
with the terms and conditions set forth in this Agreement.
2.2 ARTICLES OF ASSOCIATION. The Articles of Association of the Company
are substantially in the form attached as Exhibit A.
2.3 PURPOSE. The purposes of the Company include dealing in loan and real
estate related investments, including but not limited to investment by
means of loan purchase, real estate purchase and loan participation.
2.4 COSTS. The costs of the preparation, registration and execution of this
Agreement and the incorporation of the Company shall be borne by the
Company.
3. SHARES
3.1 SHARE CAPITAL AND SHAREHOLDINGS. From the time of establishment of the
Company to the date of this Agreement, the Company issued and the
Shareholders subscribed for one thousand six hundred (1,600) Shares at
the price of (Y)50,000 per Share for an aggregate paid in capital of
eighty million Yen ((Y)80,000,000), as follows:
(a) K-W subscribed for eight hundred (800) Shares constituting
50% of the issued capital of the Company for which it paid
to the Company the sum of forty million Yen
((Y)40,000,000); and
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(b) CIJL subscribed for eight hundred (800) Shares constituting 50%
of the issued capital of the Company for which it paid to the
Company the sum of forty million Yen ((Y)40,000,000).
3.2 PREEMPTIVE RIGHTS. The Shareholders shall have pro-rata preemptive
shareholder's rights to subscribe for and acquire any additional Shares
which the Company may propose to issue subsequent to its establishment.
4. MANAGEMENT
4.1 BOARD OF DIRECTORS. Responsibility for the management, direction and
control of the Company shall be vested in the Board of Directors in
accordance with the laws of Japan, the Articles of Association and this
Agreement.
4.2 NUMBER. The Company shall have four directors, two of whom shall be
nominated by K-W and two of whom shall be nominated by CIJL. Each of
the Shareholders shall cause their Shares to be voted to elect each
person so nominated.
4.3 VACANCIES. In the event the position of a director of the Company
becomes vacant for any reason, the Shareholder that nominated the
director whose office is vacant shall nominate another person to fill
the vacancy.
4.4 REPRESENTATIVE DIRECTOR. The Company shall have one Representative
Director to be selected by K-W from among the directors nominated by
K-W. The Representative Director shall be assigned the title of
President and shall have the day-to-day operating responsibility for
the Company under the overall supervision of the Board of Directors and
the Statutory Auditor (see Section 4.8); provided, however, that such
day-to-day operation responsibility may be delegated or subcontracted
to consultants and/or asset managers as approved by the Board of
Directors.
4.5 MEETINGS OF THE BOARD. Meetings of the Board of Directors shall be held
when necessary as determined by the Board of Directors or as otherwise
required or permitted in accordance with the laws of Japan. Board of
Directors meetings shall be held at the head office of the Company
provided that such meetings may also be held at such other places as
may be agreed upon by the Board of Directors. Any costs incurred by any
director in attending meetings of the Board of Directors shall be borne
by the Shareholder which nominated such director.
4.6 QUORUM AND VOTING. Resolutions of the Board of Directors shall be
adopted by the affirmative vote of a majority of the directors of the
Company provided however, notwithstanding any other provision in this
Agreement to the contrary, the directors nominated by CIJL, in their
sole and absolute discretion and without the consent or approval of the
directors nominated by K-W, shall have the right to
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cause the Company to take action under the Employee Secondment and
Consulting Agreement, including termination of such agreement.
4.7 LANGUAGE. The notices, agendas, proposed resolutions and minutes of all
of the meetings of the Board of Directors of the Company shall be
prepared in English, which shall be the original and controlling
version, and also translated into Japanese.
4.8 STATUTORY AUDITOR. The Company shall have one statutory auditor (as
required by and defined in Chapter IV, Section III, Subsection III of
the Commercial Code of Japan). The Statutory Auditor shall be nominated
by CIJL and approved by the Board of Directors.
5. SHAREHOLDERS MEETINGS
5.1 MEETINGS. An ordinary general meeting of Shareholders shall be held
within three months after the end of each fiscal year of the Company at
the principal office of the Company or at any other location which
shall have been unanimously agreed by the Shareholders. Extraordinary
General Meetings of Shareholders shall be held whenever necessary
pursuant to a determination of the Board of Directors or otherwise in
accordance with the provisions of the Commercial Code of Japan.
5.2 QUORUM AND VOTING. Except for the matters set out in Clause 5.3 or as
otherwise required by law, resolutions of a general meeting of
Shareholders shall be adopted by the affirmative vote of a majority of
the Shares represented at a meeting of Shareholders attended by
Shareholders holding a majority of the total outstanding shares. Each
Shareholder shall be entitled to one vote for each Share owned by it.
5.3 SPECIAL MAJORITY. In addition to any statutory rights of the
Shareholders and except as otherwise required by mandatory provisions
of Japanese law, the following actions may be taken by the Company only
upon a resolution having the affirmative vote of the Shareholders
representing a two-third's (2/3) majority of the Shares represented at
the meeting:
(a) amendment, addition, change, modification or deletion of
any portion of the Articles of Association of the Company;
(b) liquidation or dissolution of the Company; or
(c) sale, lease, transfer or any other disposal of all or
substantially all of the assets or business of the Company.
5.4 VOTING BY PROXY. A Shareholder may exercise its vote by proxy, provided
the proxy is submitted to the Representative Director of the Company
prior to the
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Shareholders meeting at which the vote is to be taken.
5.5 LANGUAGE. The notices, agendas, proposed resolutions and minutes of all
of the meetings of the shareholders of the Company shall be prepared in
English.
6. INTENTIONALLY OMITTED.
7. TRANSFER OF SHARES. Without the prior written consent of the other
Shareholder which may be granted or denied in such other Shareholder's
sole and absolute discretion, a Shareholder shall not sell, transfer,
encumber, gift, donate, assign, pledge, hypothecate or otherwise
dispose of its shares, whether voluntarily or involuntarily, and
whether during a Shareholder's existence or upon or after its
insolvency and/or dissolution, including but not limited to, pursuant
to operation of law, court order, judicial process or foreclosure, levy
or attachment.
8. REPRESENTATIONS AND WARRANTIES.
Each Shareholder represents and warrants to each other that:
(a) it is a corporation validly organized and existing under
the laws of Japan and has full corporate power to enter into
and perform this Agreement; and
(b) the execution, delivery and performance of this Agreement
(i)have been duly authorized by all necessary corporate
action, (ii) will not violate or conflict with any provision,
law, rule or regulation to which such Shareholder is subject
or (iii) will not violate any of such Shareholder's
organizational documents; and
(c) this Agreement constitutes a valid and binding obligation
of such Shareholder.
9. DIVIDEND POLICY. All legally distributable net cash flow less
reasonable reserves, as determined by the Board of Directors, shall be
paid out each year to the Shareholders by way of dividends as such
times and in such amounts as may be determined by the Board of
Directors.
10. CONFIDENTIALITY. Each Shareholder agrees that the terms of this
Agreement are confidential and shall not be disclosed to any other
party without the other Shareholder's prior written consent; provided,
however, that either Shareholder may disclose the existence and/or
terms and conditions hereof to its employees, agents and financial,
legal and other advisors and if so required by law, so long as such
party first provides a copy of any such written request to the other
Shareholder and reasonably consults with it.
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11. TERM. This Agreement shall continue and remain in full force and effect
for the life of the Company unless sooner terminated in the manner as
specified below.
12. TERMINATING EVENTS. This Agreement shall terminate upon the occurrence
of any of the following events: (a) the liquidation of the Company; (b)
when all the Shares in the Company are beneficially held by one party;
or (c) the unanimous written agreement of the Shareholders upon the
unanimous recommendation of the Board of Directors.
13. CALL OPTION. If:
(a) K-W commits a material breach of its obligations under
this Agreement or the Employee Secondment and Consulting
Agreement and such breach is not capable of remedy or if
capable of remedy is not remedied within thirty (30) days
of notice; or
(b) The Company has not complied with the Work Rules and such
non-compliance is not cured within 30 days of the notice
of such non-compliance by either Shareholder to the Board
of Directors; or
(c) K-W becomes insolvent or enters bankruptcy, liquidation or
any form of winding up or similar proceedings under any
applicable law; or
(d) A Deadlock exists,
then CIJL, or its nominee, shall (without prejudice to its other rights
and remedies) have the right to purchase all of the Shares of K-W free
from any encumbrance or security interest, at any time during the
period of three (3) months from the date of the occurrence of the
events referred to in paragraph (a), (b), (c) or (d) above (the "Call
Option").
14. PUT OPTION. If:
(a) CIJL commits a material breach of its obligations under this
Agreement and such breach is not capable of remedy or if capable
of remedy is not remedied within thirty (30) days of notice; or
(b) CIJL becomes insolvent or enters bankruptcy, liquidation or any
form of winding up or similar proceedings under any applicable
law; or
(c) A Deadlock exists,
then K-W shall (without prejudice to its rights and remedies) have the
right to require CIJL, or its nominee, to purchase all of its Shares,
free from any security
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interest, at any time during the period of three (3) months from the
date of the occurrence of the breach referred to above (the "Put
Option").
15. OPTION NOTICE, PRICE AND PURCHASE.
15.1 NOTICE. CIJL and K-W may exercise the Call Option and Put Option,
respectively, by delivering written notice (an "Option Notice") of its
intention to exercise the relevant option to K-W or CIJL, respectively
(the Shareholder exercising such Call Option or Put Option shall be
referred to as the "Exercising Shareholder" and the other Shareholder
shall be referred to as the "Non-exercising Shareholder"). The Option
Notice shall not be revocable without the consent of the Non-exercising
Shareholder. Upon service of the Option Notice, the Exercising
Shareholder shall become bound to buy or to sell, as the case may be,
the Shares specified in the Option Notice at the price and in
accordance with the terms set out below.
15.2 PRICE. The price at which such purchase or sale shall take place shall
be the fair market value of the relevant Shares which shall be the
value agreed upon by the Shareholders, or, if not agreed within ten
(10) days, then as determined by an independent expert appraiser (the
"Expert"). The Expert shall be chosen by two independent expert
appraisers who are from different Accountancy Firms, one appointed by
the Exercising Shareholder and one appointed by the Non-exercising
Shareholder. The Expert shall be chosen from a third Accountancy Firm.
The parties shall use their respective reasonable endeavors to ensure
that the Expert is appointed within thirty (30) days of the Option
Notice and that the determination of the Expert is made within thirty
(30) days of referral of the matter to the Expert.
15.3 COMPLETION. Completion of the purchase or sale pursuant to an Option
Notice shall take place no later than fourteen (14) calendar days after
the date on which the applicable fair market value shall have been
determined.
16. NOTICES. All notices given under this Agreement shall be delivered
personally, sent by confirmed facsimile or by prepaid registered mail
to the address set out at the beginning of this Agreement or the last
address of a party as shall have been communicated in writing to the
other party. Notices sent by facsimile shall be deemed delivered on the
first business day after transmission. Notices sent by mail shall be
deemed delivered on the fourth business day after posting.
17. GOVERNING LAW. This Agreement shall be governed by and construed in all
respects in accordance with the laws of Japan.
18. LANGUAGE. English shall be used officially in respect of all matters in
connection with this Agreement, unless otherwise agreed in writing by
all the parties to this Agreement. This Agreement has been prepared in
the English language. In the case where any translations have been
prepared and any dispute arises over the
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meaning of any provision, the English language version shall prevail.
19. NON-ASSIGNMENT. This Agreement shall not be assigned to any third party
without prior written consent of all parties to this Agreement and the
approval of the Board of Directors.
20. ENTIRE AGREEMENT. This Agreement represents the entire agreement and
understanding between the parties to this Agreement with respect to the
subject matter of this Agreement and supersedes any other agreements or
understandings, written or verbal, that the parties may have had with
respect thereto.
21. SEVERABILITY. In the event that any provision contained herein shall be
held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of all remaining provisions shall not in any way be
affected or impaired thereby.
22. FURTHER ASSURANCES. The parties shall promptly do and sign or execute
or procure to be done, signed or executed all such other acts, deeds,
documents and things as may be necessary or desirable to give effect to
this Agreement.
23. INCONSISTENCY WITH ARTICLES OF ASSOCIATION. In the event of any
conflict or inconsistency between the terms and conditions of this
Agreement, on the one hand, and the terms and conditions of the
Articles of Association of the Company, this Agreement shall prevail.
24. AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by all parties in existence at the time of the
amendment.
25. ARBITRATION.
25.1 ARBITRATION BODY. All questions and disputes arising under this
Agreement that cannot be settled by good faith discussions between the
parties shall be fully and finally settled by binding arbitration in
Tokyo, Japan (or such other location as the parties may agree), under
the then current Rules of the Japan Commercial Arbitration Association
("JCAA"). The arbitration shall be conducted in English before a panel
of three (3) arbitrators, each of whom shall have the following
qualifications: (i) at least fifteen (15) years of experience as a
lawyer or judge, (ii) at least five (5) years of experience handling
international financial transactions, and (iii) at least five (5) prior
experiences as an arbitrator.
25.2 SELECTION OF ARBITRATORS. Each of CIJL and K-W shall designate one
arbitrator with the above qualifications within fourteen (14) days of
receiving notice from the other party of a desire to arbitrate, and
those two (2) arbitrators shall then mutually agree within fourteen
(14) days upon the third arbitrator who shall become the chairperson of
the arbitration committee. If, within the stated time periods, (i) the
initiating party fails to designate its arbitrator, then the
arbitration
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shall lapse unless the original initiating party sends a second (or
subsequent) notice of arbitration to the other party which shall
restart the arbitration time schedule, and (ii) either the responding
party fails to designate its arbitrator or the two arbitrators
designated cannot agree upon the third arbitrator, then the JCAA shall
make the selection of the arbitrator for the responding party and/or
the third arbitrator, as applicable.
25.3 COMPLETION OF ARBITRATION; AWARDS. The arbitration shall be completed
within sixty (60) days of the selection or designation, as applicable,
of the third arbitrator unless the parties mutually agree to an
extension. The arbitrators shall award attorneys fees, expert witness
fees, costs and expenses (including the fees of the arbitration and any
such fees and costs related to enforcement proceedings), to the
party(ies) that substantially prevails in its position, which shall be
stated to the arbitrators in a written declaration at the commencement
of the arbitration. Any arbitration award shall be entitled to full and
immediate enforcement by the Tokyo District Court and any other
competent court.
25.4 PROVISIONAL RELIEF. Nothing in this Agreement shall be deemed to
preclude any party from seeking provisional relief before a competent
court.
26. U.S. TAXES. For purposes of the US Internal Revenue Code (the "Code"),
the Company will be treated as a Controlled Foreign Corporation. K-W
and CIJL agree that they will cause their respective ultimate U.S.
shareholders to take a consistent approach to the U.S. tax treatment of
the income of the Company and any foreign tax credits generated
therefrom. As the intention and business of the Company is to deal in
such real estate related investments in loans and properties in Japan,
K-W and CIJL hereby agree that it would be appropriate to treat such
income as "dealer" income pursuant to Section 945(c)2(C) of the code
and to treat the foreign tax credits arising from any Japanese tax paid
by the Company as falling within the "financial services" basket
pursuant to Section 904(d)(2)(A)(c) of the Code. If the business of the
Company should change materially, K-W and CIJL will cause their
ultimate U.S. shareholders to discuss in good faith a consistent
treatment of the Company's income and foreign tax credits relating
thereto, for U.S. tax purposes.
27. COUNTERPARTS. This Agreement may be signed in any number of
counterparts and all such counterparts taken together shall be deemed
to constitute one and the same document.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written:
XXXXXXX-XXXXXX JAPAN CO., LTD.:
/s/ Xxxxxxx Xxxxx
--------------------------------------------
Name: Xxxxxxx Xxxxx
Title: Representative Director
CARGILL INVESTMENTS JAPAN LIMITED:
/s/ Xxxxxx Xxxxxxx
--------------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Representative Director
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