Joint Venture Agreement

JOINT VENTURE AGREEMENT







by and between







SOFTBANK CORP.













E-LOAN, INC.







MARCH 31, 1999









JOINT VENTURE AGREEMENT



This JOINT VENTURE AGREEMENT ("AGREEMENT") is made as of March 31, 1999, by and between E-LOAN, Inc., a Delaware corporation ("E-LOAN"), and SOFTBANK CORP., a Japanese corporation ("SOFTBANK"). E-LOAN and SOFTBANK are hereunder also referred to collectively as the "PARTIES" and individually as a "PARTY."





A. SOFTBANK is a leading provider of information and distribution services in Japan and worldwide as infrastructure for the digital information industry.



B. E-LOAN is an electronic commerce company serving consumers and the home loan industry through a comprehensive Internet loan marketplace in which consumers can, by accessing an online site, identify appropriate loan providers and lenders can identify interested consumers.



C. The Parties desire to form a joint venture to pursue the Business, as hereafter defined.



NOW THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:





1. DEFINITIONS



1.1 "AFFILIATE" means any Person: (a) that is controlled by, controls, or is under common control with a Party (collect ively, a "CONTROLLED PERSON"); or (b) that is controlled by, controls, or is under common control with any such Controlled Person, in each case for so long as such control continues; provided, however, that for purposes of Section 3.2(a) Affiliates of SOF T BANK shall include Persons in which SOFTBANK owns, directly or indirectly, at least thirty percent (30%) of the outstanding voting shares, regardless of whether such control actually exists. For purposes of this definition and the definition of Fund in Se ction 1.20, "CONTROL" shall mean the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or other ownership interests, by contract or otherwise).



1.2 "ANNU AL PLAN" means a business operations plan detailing the Company's goals and procedures for personnel, technical, financial, administrative, marketing, and other significant activities for the Company's next succeeding fiscal year, as approved each year an d revised from time to time by the Board.



1.3 "APPLICABLE LAW" means, as to any Person, any statute, law, rule, regulation, directive, treaty, judgment, order, decree or injunction of any Governmental Authority that is applicable to or binding upon such Person or any of its properties.



1.4 "ARTICLES" means the articles of incorporation of the Company in the form of attached Exhibit 1.4, as amended from time to time.







1.5 "BOARD" means the board of directors of the Company.



1.6 "BUSINESS" means the business of the Company as described in the Articles, from time to time.



1.7 "BUSINESS DAY" means a day on which commercial banks in California and Japan are generally open to conduct their regular banking business.



1.8 "CLOSING DATE" is defined in Section 3.2(a).



1.9 "COMMERCIAL CODE" means the Commercial Code of Japan, as amended and in effect from time to time.



1.10 "COMMON STOCK" means common stock of the Company as authorized by the Articles.



1.11 "COMPANY" is defined in Section 3.1.



1.12 "COMPANY INTEREST" means, as to any Person, the percentage interest represented by the Securities then held by such Person divided by all then outstanding Securities (on an as-converted to Common Stock basis).



1.13 "CONFIDENTIAL INFORMATION" is defined in Section 5.2(a).



1.14 "CONSULTING SERVICES AGREEMENT" means the Consulting Services Agreement to be entered into between SOFTBANK and the Company on the Closing Date in the form of attached Exhibit 1.14, as amended from time to time.



1.15 "CORPORATE AUDITOR" means a corporate auditor (Kansa-yaku) of the Company with the powers and duties as specified in the Commercial Code.



1.16 "DIRECTOR" means a director of the Company with the powers and duties as specified in the Commercial Code and the Articles.



1.17 "DISCLOSING PARTY" is defined in Section 5.2(a).



1.18 "EFFECTIVE DATE" means the date of this Agreement.



1.19 "ESTABLISHMENT DATE" is defined in Section 3.1.



1.20 "FUND" means any investment fund controlled by SOFTBANK or any SOFTBANK Affiliate.



1.21 "GOVERNMENTAL AUTHORITY" means any domestic or foreign government, governmental authority, court, tribunal, agency or other regulatory, administrative or judicial agency, commission or organization, and any subdivision, branch or department of any of the foregoing.



1.22 "LAUNCH DATE" is defined in Section 3.1.







1.23 "LICENSE AGREEMENT" means the License Agreement to be entered into between E-LOAN and the Company on the Closing Date in the form of attached Exhibit 1.23, as amended from time to time.



1.24 "PARTNERS" means such Persons as SOFTBANK deems strategically important to the success of the Company and proposes to include in the SOFTBANK Group pursuant to Section 3.2(a).



1.25 "PARTY" and "PARTIES" are defined in the opening paragraph of this Agreement.



1.26 "PERSON" means a natural individual, Governmental Authority, partnership, firm, corporation, or other business association.



1.27 "PRESIDENT" means the president of the Company with the powers and duties as specified in the Commercial Code and the Articles.



1.28 "RECEIVING PARTY" is defined in Section 5.2(a).



1.29 "SECURITIES" means all outstanding shares of Common Stock, and any other equity securities of the Company or instruments exercisable for or convertible into Common Stock.



1.30 "SB FINANCE" means SOFTBANK Finance Corporation, a wholly-owned Japanese subsidiary of SOFTBANK.



1.31 "SOFTBANK GROUP" is defined in Section 3.2(a).



1.32 "SPECIAL EXCEPTIONS LAW" means the law pertaining to Special Exceptions to the Commercial Code concerning Auditors of Companies (Kabushiki Kaisha).



1.33 "TERRITORY" means Japan and the Republic of South Korea.



1.34 "TERM" is defined in Section 7.1.



1.35 "TRANSACTION DOCUMENTS" means this Agreement, the Articles, the License Agreement, and the Consulting Services Agreement.



1.36 "TRANSFERRED SHARES" is defined in Section 3.2(a).



2. PURPOSE OF JOINT VENTURE



The Parties hereby associate themselves in a joint venture relationship which shall have as its principal purpose the establishment and de velopment of the Business. The Business will be limited initially to (1) developing, marketing and providing an online loan and mortgage marketplace for consumers and the loan and mortgage industry in Japan and the Republic of Korea, including developing l ocalized versions of the E-LOAN's U.S. services and providing information about the availability and terms of loans for distribution to end users in the Territory and providing an electronic means to apply for such loans and complete the loan process and (2) activities incidental thereto.







3. ESTABLISHMENT AND CAPITALIZATION OF THE COMPANY



3.1 Establishment. The Parties agree that the joint venture contemplated by this Agreement shall be carried out exclusively through a newly-formed Japanese kab ushiki kaisha initially established by SOFTBANK (the "COMPANY"). The Company's corporate name shall be "E-Loan Kabushiki Kaisha" in Japanese and "E-Loan Japan K.K." in English. The Parties shall use commercially reasonable efforts to cause the Establishme n t Date to occur on or before May 1, 1999 and the Launch Date to occur on or before a date to be agreed upon by the Parties after consultations with Governmental Authorities in the Territory. For the purposes of this Agreement, "ESTABLISHMENT DATE" means t he date on which the Company is established in accordance with the Commercial Code and "LAUNCH DATE" means the date on which the Company commences commercial operations.



3.2 Capitalization.



(a) Initial Capitalization. The Company sh all, as of the Establishment Date, have authorized capital stock consisting of one class of shares designated as Common Stock with the rights set forth in the Articles. The Articles shall initially provide for 40,000 authorized shares of Common Stock with par value of Yen50,000 per share. At least five (5) Business Days prior to the Closing Date, SOFTBANK shall notify E-LOAN in writing of the SOFTBANK Affiliates, Funds and Partners which SOFTBANK proposes to include among the initial SOFTBANK shareholders of the Company (the "SOFTBANK GROUP"). The Company's initial equity shall be funded as follows:



(i) SOFTBANK Initial Subscription. On or prior to the Establishment Date, SOFTBANK shall subscribe for 10,000 shares of Common Stock, repr esenting a one-hundred-percent (100%) Company Interest, for an aggregate purchase price of Yen500,000,000.



(ii) E-LOAN Purchase. On a date within fifteen (15) days after the Establishment Date mutually agreed by the Parties (the "CLO SING DATE"), SOFTBANK shall (x) sell to E-LOAN, and E-LOAN shall purchase from SOFTBANK, 4,000 shares of Common Stock representing a forty-percent (40%) Company Interest (the "TRANSFERRED SHARES") for an aggregate purchase price of Yen200,000,000 and (y) s ell to the members of the SOFTBANK Group (other than SOFTBANK) up to 6,000 shares of Common Stock, subject in each case to the SOFTBANK Group member agreeing in writing to be bound by the terms hereof. SOFTBANK covenants that, at all times through the Clo sing Date, SOFTBANK shall own the Transferred Shares beneficially and of record, free and clear of all adverse claims.



(b) Certain Deliveries. On or before the Closing Date, and as a condition to the purchase and sale of the Transferred Shares:



(i) the Establishment Date shall have occurred;



(ii) SOFTBANK shall have executed and delivered the Consulting Services Agreement to the Company;



(iii) The Parties shall have agreed on the royalty rate payable to E-LOAN under the License Agreement and E-LOAN shall have executed and delivered the License Agreement to the Company;





(iv) SOFTBANK shall have caused the Company to (A) execute and deliver the License Agreement to E-LOAN and (B) execute and deliver the Consulting Services Agreement to SOFTBANK; and



(v) each Party shall have received one original of each of the fully executed Transaction Documents.



(c) Acknowledgmen t of Agreement; Delivery of Share Certificates. Promptly after the Closing Date, SOFTBANK shall cause the Company (i) to deliver to each Party its written acknowledgment of, and agreement to abide by, the terms of this Agreement, and (ii) at the request o f either SOFTBANK or E-LOAN, to promptly issue and deliver to the SOFTBANK Group and to E-LOAN share certificates representing the shares of Common Stock purchased pursuant to this Section 3.2.



3.3 Preemptive Rights; Financial Assistance.



(a) Preemptive Rights. Each Party shall at all times have a preemptive right to purchase a pro rata portion (equal to such Party's then current Company Interest) of any new issuances of Common Stock or other Securities (other than issuances pursuan t to an incentive stock option plan established pursuant to Section 3.4). The Company agrees to notify each Party in writing of any proposed new issuance of Securities to which such preemptive rights apply. Each Party shall notify each other Party and the C ompany, within ten (10) Business Days after receipt of such notice, of its decision to participate in any proposed new issuance of Securities (failure to so respond during such period constituting an election not to participate). In the event that a Party elects not to subscribe for such Party's full pro rata share of any newly issued Securities, the other Party shall be entitled to purchase any of the unsubscribed Securities. All new issuances of shares of Common Stock pursuant to this Section 3.3 shall b e made at a price equal to or greater than par. The preemptive rights granted pursuant to this Section 3.3(a) shall cease to be of any further force or effect upon the closing of an initial public offering of Securities.



(b) Financial Assist ance. The Board may, by written notice to the Parties pursuant to the terms of this Agreement, request that the Parties provide additional financial assistance to the Company, including in the form of credit support or loans, and, in such event, if such P a rty agrees to provide such additional financial assistance (either directly or through its designees to the Board), such Party shall make such financial assistance available to the Company pro rata in accordance with its respective Company Interest and th e Company Interests of all Parties so approving such financial assistance.



3.4 Incentive Stock Option Plan. The Parties agree that an incentive stock option plan providing for reasonable grants of incentive stock options to the employees of the Com pany, E-LOAN and SOFTBANK would be beneficial to the Company, and agree to cooperate in good faith with a view towards establishing such a plan within twelve (12) months after the Closing Date on terms mutually agreed by the Parties. The Securities alloca t ed to an incentive stock option plan shall not, initially, represent more than a ten percent (10%) Company Interest. Any Securities allocated to an incentive stock option plan shall be newly issued and, accordingly, shall dilute the Parties' respective Co mpany Interests on a pro rata basis.



3.5 SOFTBANK Group Company Interest. The Parties acknowledge that it is SOFTBANK's intent that, subject to dilution in the event that it elects not to exercise its





preemptive rights pursuant to Section 3.3(a) , the SOFTBANK Group's Company Interest (on a fully-diluted basis taking into account any shares reserved for issuance pursuant to the Stock Option Plan) shall, at all times prior to Company's initial public offering, be not less than fifty and one-tenth percent (50.1%).



3.6 Additional Party. The Parties acknowledge that, in order for the Company to effectively pursue the Business in the Territory, it may be necessary or desirable to bring one or more additional Persons into the joint venture relat ionship established hereunder (each an "ADDITIONAL PARTY"). Notwithstanding any provision hereof to the contrary, SOFTBANK may, in its discretion, sell up to a total of [*] shares of Common Stock to one or more Additional Parties provided that, in each ca s e, SOFTBANK provides E-LOAN with notice of the sale. If E-LOAN has not, prior to [*], expanded its U.S. service to include electronic means to apply for [*] and complete the [*] processing, then SOFTBANK shall have the right to propose one or more Additio n al Parties that provide such services and E-LOAN will offer to sell such Additional Parties either (i) [*] shares of Common Stock or (ii) such lesser number of shares of Commons Stock as would leave E-LOAN, after the closing of the proposed sales, with [* ] Company Interest, at a price not exceeding the sum of (A) Yen50,000/share plus (B) interest on the total amount paid by E-LOAN for the shares being transferred calculated at a rate of five percent (5%) per annum and the actual number of days elapsed from the Closing Date to and including the closing of the sale of such shares to the Additional Parties. Any such sale by SOFTBANK or E-LOAN to an Additional Party shall be subject to the Additional Party's written agreement to be bound by the terms hereof. Up on the closing of any such sale, each Additional Party shall be deemed a Party for all purposes hereof.



4. OPERATION AND MANAGEMENT OF THE COMPANY



4.1 Operation of the Company. Each Party agrees to take all actions necessary to ensure that the Com pany shall be operated in accordance with the terms of this Agreement and the other Transaction Documents, including, without limitation, to vote all Securities held by it (and to cause all Securities held by its permitted transferees under Section 8 to b e voted) to effect the terms hereof.



4.2 Board of Directors. The Company will be managed by the Board in accordance with the terms of this Agreement and Applicable Law. The Board shall initially consist of five (5) Directors, three (3) of whom shal l be appointed by SOFTBANK and two (2) of whom shall be appointed by E-LOAN. If E-LOAN's Company Interest at any time decreases to less than twenty percent (20%), the Parties shall cause the Board constituency to be adjusted within thirty (30) Business Da ys of such decrease so that only one (1) Director is appointed by E-LOAN.



4.3 Removal; Reappointment of Directors. Any Director may be removed for cause in accordance with Applicable Law. In addition, each Party having the right to appoint a Direct or pursuant to this Section 4 shall also have the right, in its sole discretion, to remove such Director at any time, effective upon delivery of written notice to the Company, the Director to be removed and to the other Party. In the case of a vacancy in the office of a Director for any reason (including removal pursuant to the preceding sentence), the vacancy shall be filled by the Party that appointed the Director in question.



4.4 Board Meetings. The President shall have the authority to convene Board meetings, including the authority to specify the time and place of such meetings. Directors





*Certain information on this page has been omitted and filed separately with

the Commission. Confidential treatment has been requested with respect to the

omitted portions.

may attend Board meetings in person or by any other means of attendance permitted under the Commercial Code, provided, however, that (a) the Board shall meet at least once during each semi-annual fiscal period and (b) written notice of all Board meetings shall be given not less than ten (10) Business Days in advance of each meeting (which ten (10) Business Day period may be shortened by written waiver of Directors or actual attendance by Directors, without objection, at a Board meeting ) . Board meetings shall be conducted in the Japanese language (with English interpretation) and minutes of such meetings shall be prepared by the Company in Japanese and English and distributed to each Director promptly following each meeting. Proposals or reports brought before any Board meeting for information or action (including without limitation the Company's annual and semi-annual financial statements) shall be prepared in Japanese and English (provided that E-LOAN shall bear the expense of translati ng any financial statements into English).



4.5 Board Quorum; Resolutions. A quorum shall be deemed to exist for purposes of Board actions so long as at least three (3) Directors are present. Any action, determination or resolution of the Board shal l require the affirmative vote of a majority of Directors present at a meeting at which a valid quorum pursuant to this Section 4.5 is present.



4.6 E-LOAN Approval Rights. Notwithstanding any other provision of this Agreement, in addition to appro val by the Board, E-LOAN's prior written approval (either in the form of a written consent or in the form of E-LOAN's Director(s) voting in favor of such action at a duly held Board meeting) shall be required for any of the actions described in attached E x hibit 4.6. In the event the actions identified in Exhibit 4.6 are required by the Commercial Code to be approved by the Company's shareholders, then authorization shall require an affirmative vote of each of SOFTBANK and E-LOAN in their capacities as shar eholders of the Company.



4.7 Representative Director. The Company's day-to-day operations will be managed by the President, who shall be the Representative Director of the Company in accordance with the Articles. The President shall be elected by t he Board from among the Directors nominated by SOFTBANK pursuant to Section 4.2. SOFTBANK shall have the right, exercisable in its sole discretion, to remove and replace the President at any time, effective upon the delivery of written notice to the Compa ny, the President and E-LOAN.



4.8 Corporate Auditors. The Company shall have three (3) Corporate Auditors, each of whom shall be appointed by SOFTBANK (one (1) of whom shall serve on a full-time basis). A Corporate Auditor may be removed for cause in accordance with Applicable Law. SOFTBANK shall also have the right, exercisable in its sole discretion, to remove and replace any Corporate Auditor at any time, effective upon the delivery of written notice to the Company, the Corporate Auditor to be r emoved and E-LOAN.



4.9 Shareholders' Meetings. Shareholders of the Company shall receive notice of each shareholders' meeting at least thirty (30) calendar days before the scheduled date of such meeting. The Company shall have at least one sharehol ders' meeting each calendar year. Such meeting will take place in Tokyo, Japan at such time and place as is determined by the Board. Meetings shall be conducted in the Japanese language (with English interpretation), and minutes of such meetings shall be prepared by the Company in Japanese and English.



4.10 Annual Plan. The Company's President shall prepare, and the Board shall approve, an Annual Plan with respect to each fiscal year of the Company no later than sixty







(60) days prior to the com mencement of the fiscal year, provided, however, that the initial Annual Plan shall be approved promptly following the Effective Date and shall cover the period from the Establishment Date until the end of the first full fiscal year of the Company. The Bo a rd shall cause the Company to conduct its operations in accordance with the Annual Plan, which shall set forth in reasonable detail certain financial performance goals, including, without limitation, with respect to revenues, profits, return on net assets and return on equity for the period subject thereto.



4.11 Financial Statements and Accounting Records. Financial statements for the Company, including, without limitation, a balance sheet, income statement, statement of cash flows and statement of shareholders' equity, shall be submitted by the Company to each of the Parties (a) within sixty (60) days after the end of the first six (6) months of each fiscal year for such six (6) month period and (b) within eighty (80) days after the end of each fi s cal year for such year. Each of the annual financial statements shall be audited and certified by an internationally recognized accounting firm (which will act as an independent auditor under the Special Exceptions Law) retained by the Company, selected b y SOFTBANK and approved by E-LOAN, which approval shall not be unreasonably withheld. All financial statements shall be prepared in accordance with generally accepted accounting principles in Japan and in reasonable detail, and shall contain such financial data as SOFTBANK and E-LOAN may deem necessary in order to keep the Parties advised of the Company's financial status (although quarterly statements need not include footnotes and may be subject to year-end adjustments). The Company shall, at E-LOAN's req u est, provide E-LOAN with such financial information as E-LOAN may reasonably deem necessary for purposes of complying with its periodic reporting obligations under U.S. securities law and shall cooperate with E-LOAN in connection therewith, including coop e rating with the Company's accounting firm in preparing quarterly financial statements requested by E-LOAN; provided, that E-LOAN shall bear any costs incurred in preparing or providing such information, including, without limitation, in preparing quarterl y financial statements for the Company and reconciling the Company's financial statements with U.S. generally accepted accounting principles for such purposes.



4.12 Right of Inspection. During the regular office hours of the Company, and upon reaso nable notice to the Company, each Party that maintains at least a twenty percent (20%) Company Interest shall have (a) full access to all properties, books of account, and records of the Company, and (b) the right to make copies from such books and record s at its own expense. Any information obtained by the Parties through exercise of rights granted under this Section 4.12 shall, to the extent constituting Confidential Information hereunder, be subject to the confidentiality provisions set forth in Section 5.2.



4.13 Translations. The Company shall prepare English translations of any minutes of any Board or shareholder meetings initially prepared in Japanese. Such translations shall be prepared by either the Company's own staff, or an outside transla tion service, at the Company's election and expense. If there is any discrepancy between the Japanese version of any minutes and the English translation thereof, the Japanese version shall control.



5. ADDITIONAL COVENANTS



5.1 Cooperation. In acco rdance with the License Agreement, E-LOAN shall (a) provide the Company with an exclusive license, under all of its intellectual property rights (including, without limitation, its software, operations and procedures, brands, trademarks, patents and know- how), sufficient to conduct the Business and (b) make a sufficient number







of its personnel available to provide the Company with such technical support as it may reasonably require to localize E-LOAN's online technology for use in the Territory, all as provided in the License Agreement. In accordance with the Consulting Services Agreement, SOFTBANK shall provide consulting services to the Company regarding (a) necessary Japanese regulatory approvals required for the Business, (b) strategic business oppo r tunities relating to the Business and (c) the staffing, management and operation of the Company, all as provided in the Consulting Services Agreement. Except for reimbursement of reasonable out-of-pocket expenses incurred in connection with the foregoing s ervices, the Company shall not be required to pay any royalties or other fees other than as provided in the License Agreement or the Consulting Services Agreement; provided, however, that if the Company fails to complete its initial public offering prior t o the fourth (4th) anniversary of the Effective Date, royalties shall be payable under the License Agreement and consulting fees shall be payable under the Consulting Services Agreement, in an equal amount, calculated as a percentage of the Company's gros s revenues agreed upon by the Parties and approved by the Board, such amounts to be payable quarterly from and after the fourth (4th) anniversary of the Effective Date.



5.2 Confidentiality.



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