EXHIBIT 10.26
JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT is made and entered into this ___th day
of ________, 1998, ("Effective Date") by and between PRI Automation, Inc., a
Massachusetts corporation with its principal offices located at 000 Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxx XX 00000, XXX, ("PRI"), and Xxxxx Song System Co., Ltd., a
South Korean corporation with its principal offices located at 00, Xxxx-Xxxx,
Xxxxxxxxx, Xxxxxxx-Xx, Xxxxx ("CSSC"), and Shinsung Eng. Co., Ltd., a South
Korean corporation with its principal place of business located at 000
XxxxxxXxxx, 0Xx, Xxxxxxxxxxxx-Xx, Xxxxx, 150-046, Korea, ("SEC") with reference
to the following facts:
RECITALS
A. PRI designs and manufactures factory automation systems primarily used by
semiconductor manufacturers to automate the fabrication of integrated
circuits.
B. CSSC and SEC are companies with substantial prior experience in the
development and marketing of products and services for the semiconductor
industry within South Korea.
C. Xx. X.X. Xxx ("Suh") is an officer and employee of CSSC, and is a highly
qualified business executive with experience and expertise in the area of
promoting the sale of semiconductor equipment and other products to
semiconductor manufacturers within South Korea.
D. PRI, on the one hand, and CSSC and SEC, on the other hand, wish to act as
equal participants in the formation and operation of a company within South
Korea for the purpose of marketing, selling, installing and supporting PRI
products within South Korea and for the purpose of jointly developing a
manufacturing strategy to be implemented by the joint venture company upon
agreement by the partners.
E. PRI, CSSC and SEC wish to appoint Suh as the initial chief executive
officer of such company, once the company is formed pursuant to the terms
of this Agreement.
Now, therefor, in consideration of the promises and mutual covenants and
agreements set forth in this Agreement, PRI, CSSC and SEC agree as follows:
1. Definitions.
1.1 All defined terms used in this Agreement will be identified by the use
of initial capitalization and will have the meaning ascribed to them
by the Schedule of Defined Terms attached as Exhibit A to this
Agreement.
2. Formation of the Company.
2.1 Within ninety (90) days of the execution of this Agreement, PRI, CSSC
and SEC will cause to be formed a company (the "Company") pursuant to
the terms of this Agreement with its principal place of business
located in the City of Seoul, South Korea adopting as its Articles of
Incorporation attached to this Agreement as Exhibit B.
2.2 All costs and fees associated with the formation of the Company will
be borne by the Company. Such fees include, without limitation, any
applicable Registration Tax, Education, Tax, Public Bond, Notarization
Fee, Stamp Fees, and any other costs or fees recognized by law in
South Korea. Each party will bear its own legal fees.
3. Capitalization of the Company.
3.1 Contemporaneous with, and in connection with, the formation of the
Company pursuant to Section 2, the Company will be capitalized as
follows.
3.2 Subject to the terms and conditions of this Agreement, and subject to
Governmental Approval in form and substance satisfactory to PRI, CSSC
and SEC, PRI and CSSC will each subscribe to the equity capital of the
Company as follows. CSSC will contribute capital in the form of two
hundred and sixty million South Korean won (KW260,000,000) in cash and
will receive 260 shares of the common stock of the Company. SEC will
contribute capital in the form of two hundred and sixty million South
Korean won (KW260,000,000) in cash and will receive 260 shares of the
common stock of the Company. PRI will contribute capital in the form
of two billion and eighty million South Korean won (KW2,080,000,000)
in cash and will receive 2,080 shares of the common stock of the
Company.
3.3 During the period that expires two years after the Effective Date CSSC
and SEC will each have, at their sole discretion, the option each to
purchase up to seven hundred and eighty (780) additional shares of the
common stock of the Company, subject to the following terms and
conditions:
3.3.1 The option price is one million South Korean won (KW1,000,000)
per share of common stock, and the purchaser must purchaser a
minimum of one hundred and ninety five (195) in any one purchase
event.
3.3.2 The purchase option may only be exercised upon thirty (30) days
prior written notice to PRI and the Company.
3.3.3 SEC and CSSC must exercise the option to purchase shares
2
simultaneously, and at no point will either SEC or CSSC acquire
a larger percentage of issued shares than the percentage owned
by the other.
3.3.4 The Company's actual receipt of the purchase money from the
purchaser in a commercially reasonable form designated by the
Company, and SEC's and CSSC's good faith performance of all of
their obligations under this Agreement, jointly and severally,
are express conditions precedent to SEC's and CSSC's right to
purchase shares pursuant to this Section 3.3.
3.4 Other than the purchase of shares of common stock by SEC and CSSC
pursuant to Section 3.3 above, if at any time after the issuance of
shares as provided in Section 3.2 the Company increases the number of
equity shares or other equity securities issued, then PRI, CSSC and
SEC will each have the right, but not the obligation, to subscribe to
such new issuance and pay fully at par value for such shares or other
equity security, up to the number of shares required to maintain the
subscribing party's percentage ownership of the total outstanding
shares issued by the Company at the time of the subsequent offering.
3.5 PRI, CSSC and SEC will each make their cash contributions by making
payment to the Company at the time of the incorporation of the Company
in a commercially reasonable manner chosen by the Company consistent
with the requirements of South Korean law.
4. Acquisition of Assets by Purchase.
4.1 Within sixty (60) days of the formation and capitalization of the
Company the Company will enter into the Purchase and Sale Agreement
attached hereto as Exhibit C, and will purchase the specified assets
and materials from PRI pursuant to the terms of the Purchase and Sale
Agreement. The completion of the Purchase and Sale Agreement and the
transactions contemplated therein are an express condition of the
effectiveness of this Agreement.
5. Conditions Subsequent.
5.1 The formation of the Company pursuant to Section 2, CSSC's, SEC's, and
PRI's contribution of cash pursuant to Section 3, and the unanimous
approval of the Business Plan by the shareholders pursuant to Section
11 of this Agreement, are each conditions subsequent to the
effectiveness of this Agreement. The failure of any party to perform
such acts will not give rise to any claim against the other party,
including, without limitation, claims for damages based upon alleged
breach of contract, but such failure will cause this Agreement to
expire and have no further effect except for those provisions
specified in Section 17.6 which will survive the termination or
expiration of this Agreement. There are no other
3
conditions subsequent in this Agreement other than those expressly
described in this Section 5.
6. Purpose of the Company; Strategic Alliance with PRI.
6.1 The purpose of the Company will be to market, sell, install and
support PRI's factory automation products within the Territory,
including, without limitation, PRI's hardware and software products,
and to provide services to consumers of such products within the
Territory including, without limitation, installation and operational
support, repair, and responding to customer queries. The parties will
jointly develop a strategy for expanding the activities of the Company
to include manufacturing to be implemented by the Company upon
agreement by the venture partners.
6.2 In furtherance of the purposes of the Company, within thirty (30) days
of the formation of the Company, or such further time as may be
required by South Korean law, the parties will cause the Company to
execute and enter into the Strategic Alliance Agreement attached as
Exhibit D to this Agreement and to perform the obligations and duties
stated therein. The acts and performances required by the Strategic
Alliance Agreement are cumulative and in addition to the acts and
performances required by this Agreement. In the event of any
unavoidable conflict between the terms of the Strategic Alliance
Agreement and the terms of this Agreement, then this Agreement will
control. If this Agreement is terminated, expires and becomes of no
further effect for any reason, then the Strategic Alliance Agreement
will also and simultaneously terminate, expire, and be of no further
effect.
7. Restrictions on the Transfer of shares.
7.1 In addition to such restrictions on the transfer of shares as may be
provided in the Articles of Incorporation of the Company at the time
of the Company's formation or in the future, the shareholders agree to
the following.
7.2 PRI, CSSC and SEC each agree not to voluntarily transfer, pledge or
encumber shares in the Company held by such shareholder without the
prior written consent of the other shareholder. Any transfer in
violation of Section 7 of this Agreement gives rise to an action for
damages in the Company and in the shareholder not in violation of
Section 7, and all such additional relief or remedies as may be
provided for or permitted by South Korean law as of the date of the
violation of Section 7.
7.3 Since damages arising from a breach of the above mentioned obligations
under this Section 7 may be difficult to determine with precision, the
shareholders agree
4
that the shareholder who breaches the terms of this Section 7 shall
pay to the other shareholder as liquidated damages a sum equivalent to
twice the fair market value of the shares, as determined in Section
8.5, sold, transferred or otherwise disposed of or twice the proceeds
received by the breaching shareholder in the transaction whereby the
breach occurred, whichever is greater. The shareholders agree that
such liquidated damages are fair and reasonable and will be without
prejudice to, and cumulative with other remedies provided by law or
this Agreement.
7.4 In the event of an involuntary transfer of shares in the Company held
by PRI, CSSC or SEC, the shareholders will have the rights set forth
in Section 8 of this Agreement.
7.5 In subscribing to shares in the Company, PRI, CSSC and SEC each
represent and warrant that: (i) such shares were acquired by such
shareholder solely for such shareholder's own account and not with a
view to, or for resale in connection with, the distribution or other
disposition thereof; (ii) such shareholder is intimately familiar with
the prospects of the Company and the significant risks associated with
an investment in the shares of the Company; and (iii) an investment in
such shares may not be liquidated by the holder thereof, even in an
emergency.
7.6 Any certificates evidencing PRI's, CSSC's or SEC's shares in the
Company will bear the following legend, along with such security law
legends as counsel for the Company may deem necessary or appropriate:
"ANY TRANSFER OR SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN CONDITIONS CONTAINED IN THAT JOINT VENTURE
AGREEMENT BY AND BETWEEN PRI AUTOMATION, INC., XXXXX SONG SYSTEM CO.,
LTD AND SHINSUNG ENG. CO., LTD. DATED AS OF THE ___ DAY OF ___ 1998,
AND APPROVAL BY THE BOARD OF DIRECTORS IN ACCORDANCE WITH THE ARTICLES
OF INCORPORATION OF THE COMPANY, COPIES OF WHICH ARE AVAILABLE FOR
REVIEW AT THE REGISTERED HEADQUARTERS OF THE COMPANY. ANY TRANSFER OR
SALE OF THESE SHARES OR ANY INTEREST THEREIN, IN VIOLATION OF THE SAID
CONDITIONS SHALL BE AND IS PROHIBITED."
8. Buy-Sell Agreement.
8.1 As to CSSC and SEC only, and expressly excluding PRI, each of the
following will be "Triggering Events": (i) a written notice of
Triggering Event from any party to the other parties upon the death or
adjudication of incompetency of Suh; (ii) Suh ceasing to devote a
significant portion of his time to the business of the Company for any
reason; (iii) the disability (defined to mean failure by reason of
5
physical or mental impairment to perform material duties of his
position for the Company for a period of four continuous months or
four non-continuous months over an 18-month period) of Suh; (iv) a
change in ownership control of CSSC or SEC; and (v) the transfer of
more than 33% of all outstanding issued shares in CSSC or SEC to a
third party.
8.2 As to CSSC, SEC and PRI, each of the following will be "Triggering
Events": (i) a notice of Triggering Event from a non-breaching party
identifying a material breach of the terms this Agreement, which
breach was not cured within thirty (30) days of prior written notice
thereof; and (ii) any involuntary transfer of the respective
shareholder's shares in the Company.
8.3 Upon the occurrence of a Triggering Event, the following will apply:
8.3.1 If the shareholder causing the Triggering Event or to whom the
Triggering Event applies is SEC alone (or the recipient of the
shares from SEC in the event of an involuntary transfer) then
SEC will be obligated to sell, and PRI and CSSC will be
obligated to buy in quantities that will maintain the 2 to 1
ratio of the relative ownership positions of PRI and CSSC
respectively, all of the shares of the Company held by the SEC
(or said recipient of shares) upon written notice ("Purchase
Notice") to SEC within thirty (30) days from the date on which
PRI and CSSC became aware of the occurrence of the Triggering
Event. Said purchase and sale will occur thirty days after the
Purchase Notice; provided, however, that if SEC may not legally
sell, or either or both of the purchasing shareholders may
not legally purchase such shares, such purchase and sale will
take place as soon as the shareholders are legally permitted to
effect such purchase.
8.3.2 If the shareholder causing the Triggering Event or to whom the
Triggering Event applies is CSSC alone, or CSSC and SEC together
or contemporaneously (or the recipient of the shares from CSSC
and/or SEC in the event of an involuntary transfer or transfers)
then CSSC and SEC will be obligated to sell, and PRI will have
the option, at its sole discretion, to buy, all of the shares of
the Company held by the SEC and CSSC (and/or said recipient of
shares) upon written notice ("Purchase Notice") to SEC and CSSC
within thirty (30) days from the date on which PRI became aware
of the occurrence of the Triggering Event. Said purchase and
sale will occur thirty days after the Purchase Notice; provided,
however, that if SEC or CSSC may not legally sell, or PRI may
not legally purchase such shares, such purchase and sale will
take place as soon as the shareholders are legally permitted to
effect such purchase.
8.3.3 If the shareholder causing the Triggering Event or to whom the
Triggering
6
Event applies is PRI (or the recipient of shares from PRI in the
event of an involuntary transfer or transfers) then PRI will be
obligated to sell, and CSSC and SEC will be jointly and
severally have the option, at their sole discretion, to buy, all
shares of the Company held by PRI (or the recipient of shares)
upon written notice ("Purchase Notice") to PRI within thirty
(30) days from the date on which CSSC and SEC became aware of
the occurrence of the Triggering Event. Said purchase and sale
will occur thirty days after the Purchase Notice; provided,
however, that if PRI may not legally sell, or CSSC or SEC may
not legally purchase such shares, such purchase and sale will
take place as soon as the shareholders are legally permitted to
effect such purchase.
8.3.4 With regard to any purchase and sale carried out pursuant to any
provision of this Section 8.3, at the closing of the purchase
and sale, the selling shareholder or shareholders (and/or the
recipient of shares in an involuntary transfer) will deliver
certificates representing the shares duly endorsed for transfer,
together with any applicable transfer taxes, against payment by
the purchasing shareholder for such shares as provided in this
Agreement. The purchasing shareholder may assign his or its
rights to purchase shares so long as it guarantees payment of
any note issued in connection with the purchase of shares.
8.4 The purchase price for shares of the Company to be purchased as
provided in any portion of this Section 8, above, will be as follows.
In the event of a purchase triggered by a Triggering Event, the price
per share will be the fair market value of each share as determined:
(i) by the written agreement of the parties, (ii) if no written
agreement is reached within ten (10) business days of the date on
which the purchase notice is given, then by an independent appraiser
agreed to in writing by the parties, or (iii) if no agreement is
reached as to value or an independent appraiser, then by the
Accountant of Company (as defined in Section 12.4) applying, first,
the terms of this Agreement and, second, generally accepted methods
for conducting such a valuation. The cost of the appraisal will be
paid by the Company. For the purposes of this Section 8 "fair market
value" means the price paid by a willing buyer to an unrelated willing
seller in an arm's length transaction, taking into account the purpose
of the Company to sell and support PRI products and the unique
services provided by Suh to the Company, but without regard to number
of shares at issue or whether such shares do or do not constitute a
controlling block of shares in the Company.
8.5 In order to confirm proper payments and share deliveries pursuant to
this Section 8 above, a shareholder having rights to receive payments
or shares pursuant to this Section 8 will have the right to audit the
relevant books and records of the Company after commercially
reasonable advance notice, at the Company's main
7
offices during the Company's ordinary business hours. In performing
any such audit, the relevant shareholder will maintain the
confidentiality of all information obtained as a result of such audit,
will use such information only for the purposes of enforcing rights
hereunder and will conduct such audit in a manner that causes a
minimum disruption to the business. The costs of any such audit will
be borne by the shareholder requesting the audit.
8.6 The remedies under this Section 8 will be in addition to, but not in
lieu of, the remedies or relief as may be provided for or permitted
under the South Korean laws, the Article of Incorporation or other
provisions of this Agreement. In the event of any conflict between the
provisions of this Section 8 and the provisions of any other Section
of this Agreement, the provisions of this Section 8 will control.
9. Governance of the Company.
9.1 Board of Directors.
9.1.1 Unless otherwise agreed in writing by PRI, CSSC and SEC, the
Company will have five directors, of whom two will be designated
by PRI at the sole discretion of PRI ("PRI Directors"), one will
be designated by CSSC at the sole discretion of CSSC ("CSSC
Director"), one will be designated by SEC at the sole discretion
of SEC ("SEC Director") and one of whom will be appointed
jointly by PRI and CSSC ("Fifth Director"). PRI, CSSC and SEC
agree to vote all shares of the Company owned or controlled by
them, and otherwise to use their respective best efforts, to
elect directors as specified in the preceding sentence. The
initial directors of the Company will be as follows. PRI
designates Xxxxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx as the PRI
Directors. CSSC designates X.X. Xxx as the CSSC Director. SEC
designates Wan-Xxxx Xxx as the SEC Director. PRI and CSSC
jointly appoint Xxxxxx Xxxxxx as the Fifth Director.
9.1.2 The Company's Board of Directors (the "Board") will meet at
least quarterly and at such locations as the Board may from time
to time agree. The presence of at least one PRI Director and one
CSSC or SEC Director will be required to constitute a quorum for
the transaction of business. The Fifth Director must be present
within the meaning of the Company's bylaws or other governing
rules of procedure in order to vote, and the Fifth Director will
be invited to attend every meeting and will be allowed to vote
on all matters submitted to a vote at any meeting where the
Fifth Director is present.
9.1.3 The Chairman of the Board will be appointed by the vote of the
Board. If
8
the Chairman so appointed is unable to attend any meeting of the
Board, then PRI will be entitled to appoint another Director to
act as Chairman in his or her place at such meeting.
9.1.4 All decisions of the Board will be by simple numerical majority
of all of the Directors in office and will require a numerical
majority of all of the Directors in office, except regarding
Fundamental Board Issues, as hereinafter defined, which will
require a four-fifths majority of all Directors. In the event
that a required majority cannot be achieved on any material
matter moved before the Board, and in the event the party moving
the matter continues to desire a decision from the Board, then
the party moving the matter will provide a notice of failure to
achieve the required majority to the Fifth Director who will
schedule at the first reasonable opportunity, and in no event
more than thirty (30) days after receiving such notice a meeting
of the Board at which all Directors will be required to attend
and at which the matter may be moved for a second vote in the
presence of all five Directors. In the event that the required
majority of Directors is not achieved regarding any Fundamental
Board Issue, either PRI, CSSC or SEC may by written notice to
the other shareholders declare that a deadlock (a "Board
Deadlock") exists and the procedure described in Section 9.5
below will be followed.
9.1.5 The Board will elect the General Manager or Representative
Director of the Company. PRI will have the right, at its sole
discretion and at all times, to appoint the Chief Financial
Officer, Statutory Auditor or other chief financial officer of
the Company, however denominated.
9.1.6 Subject to applicable law, the compensation of directors and
officers will be decided by the shareholders at a duly
constituted shareholders' meeting.
9.1.7 The following matters will constitute "Fundamental Board
Issues":
9.1.7.1 Transactions between the Company and a director, officer
or shareholder of the Company, or a person or entity
related to a director, officer or shareholder of the
Company which have not been disclosed to all
shareholders and previously approved by the Board. For
the purpose of this Section 9.1.7.1, a person or entity
will be deemed to be related to a director, officer or
shareholder of the Company if: (i) in the case of a
person, such person is related by kinship to the
shareholder, officer, or director within two removes or
degrees; (ii) in the case of an entity, the shareholder,
officer or director owns five percent (5%) or more of
the issued equity of the entity or if the shareholder,
officer or director of the
9
Company is also an officer or director of such entity.
9.1.7.2 Adoption of, or change in, major activities or policies
with regard to the business of the Company, and the
adoption or amendment of the Business Plan and Budget for
the Company;
9.1.7.3 Creation, assumption or guarantee of indebtedness for
borrowed money, creation of any encumbrance (including
any fixed or floating charge, security interest or
consensual lien), issuance of debt securities or lending
of money;
9.1.7.4 Payment, directly or indirectly, of any cash or assets of
the Company to CSSC, PRI or SEC, or any person or entity
affiliated with any of them, except as authorized by
unanimous vote of the Board;
9.1.7.5 Termination of the appointment of the Accountant or
outside auditor;
9.1.7.6 Acquisition or purchase of, or subscription for, by the
Company of any shares, debentures, mortgages or
securities (or any interest therein) in any entity;
9.1.7.7 Appointment of any committee of the directors or
delegation of any of the powers of the directors to such
committee;
9.1.7.8 Entering into any license, distribution, dealership,
consultancy, volume purchase, requirements, supply or
similar agreement or arrangement with any person or
entity other than PRI that involves revenues, fees,
royalties or payments of any kind in excess of forty
thousand dollars (US$40,000) or the cash equivalent in
South Korean won; or,
9.1.7.9 Entering into any agreement with regard to any of the
foregoing.
9.2 Shareholder Meetings.
Meetings of the shareholders may be periodically convened and
conducted as required by the Board or the articles or bylaws of the
Company, except as follows. In no event will there be held any meeting
of the shareholders or any business transacted on behalf of the
shareholders at any purported shareholders meeting unless there is
present duly authorized representatives of or proxies for PRI, SEC and
CSSC. There will be no quorum at a shareholders meeting unless the
duly
10
authorized representative of or proxies for PRI, CSSC and SEC are
present.
9.3 Fundamental Shareholder Issues.
The following matters will constitute "Fundamental Shareholder
Issues", which will require the unanimous consent of the shareholders
pursuant to a shareholders' meeting held in person or by other means
permitted by the articles and bylaws of the Company:
9.3.1 Authorization or issuance of share capital of the Company or
other securities except as provided by Section 2 above, or
authorization or issuance of warrants, options, convertible
securities or other agreements, instruments or commitments
pursuant to which the Company is or may become obligated to
issue any shares of its capital or other securities except as
provided in Section 2 above;
9.3.2 Dissolution, liquidation or winding up of the Company;
9.3.3 Merger or consolidation of the Company with or into another
company;
9.3.4 Amendment of the articles of incorporation;
9.3.5 Organization, acquisition or disposition of any subsidiary;
9.3.6 Sale, transfer, lease or other disposition of a part of the
property or assets of the Company or any subsidiary of the
Company (or any interest therein) with a value in excess of
twenty thousand dollars (US$20,000);
9.3.7 Alteration of any rights attaching to any shares or additional
shares of the Company;
9.3.8 Consolidation, sub-division, conversion or reclassification of
any of the Company's share capital or alteration of any of the
rights attaching thereto;
9.3.9 Entering into any partnership, joint venture or profit sharing
agreement with any person or entity;
9.3.10 Making of any tax election by the Company;
9.3.11 The distribution of profits, if any, pursuant to this
Agreement; or,
9.3.12 Entering into any agreement with regard to any of the
foregoing.
11
9.4 Shareholder Deadlock.
9.4.1 In the event that PRI, CSSC and SEC fail to agree on any
Fundamental Shareholder Issue, either PRI, SEC, or CSSC may by
written notice to the other shareholders and to the Company
declare that a deadlock (a "Shareholders' Deadlock") exists.
Following the giving of any such notice, the parties and the
Company will follow the procedure set forth in Section 9.5 of
this Agreement.
9.5 Rights on Deadlock.
9.5.1 Upon (i) a declaration of a Shareholders' Deadlock in
accordance with Section 9.4 above, or (ii) a declaration of a
Board Deadlock in accordance with Section 9.1.4 above, the
following procedures will be followed. The shareholder
declaring the Deadlock will provide notice of such declaration
to the Fifth Director. At the earliest reasonable opportunity,
and in no event more than twenty (20) days after his or her
receipt of such notice, the Fifth Director will schedule a
meeting which must be attended in person by all Directors at a
commercially reasonable location within or without South Korea,
but in no event at the offices of CSSC, SEC, PRI or the
Company. At this meeting the Fifth Director, or a third party
appointed by the Fifth Director and approved by PRI, SEC, and
CSSC, will attempt to mediate a resolution to the Deadlock.
The mediation will follow any method or procedure chosen by the
Fifth Director or the appointed mediator except that the
mediation will terminate no more than seventy two (72) hours
after it commences and all costs associated with the mediation
will be divided and paid evenly by CSSC, PRI, and SEC. If the
mediation does not result in the resolution of the Deadlock,
then the Company will shut down and cease operations, liquidate
all of its assets, pay any debts or obligations, and distribute
any residual value to the shareholders on the basis of their
share holdings at the time of the distribution. The shut down,
liquidation, satisfaction of debts and obligations, and
distribution will be supervised by the Treasurer, Auditor or
other chief financial officer of the Company at the time of
Deadlock and will be carried on in a commercially reasonable
manner on a commercially reasonable schedule.
10. Management of Operations.
10.1 The day-to-day business of the Company will be managed by the
Representative Director of the Company. The Representative Director of
the Company will report and be accountable to the Board. The initial
Representative Director will be Suh, who will serve for a term of one
year from the Effective Date of this
12
Agreement, or until he is removed or replaced. Thereafter, the
Representative Director will be designated by the unanimous consent of
the shareholders and will serve in accordance with resolutions adopted
by the Board and the shareholders.
10.2 In the event any person serving as Representative Director is unable
to perform his or her duties as a Representative Director because of
medical disability (as evidenced by a written opinion of a physician),
the business of the Company will be managed jointly for up to sixty
days by one PRI Director chosen by PRI and the CSSC Director. If an
incumbent Representative Director continues to be disabled after 60
days, the Board will appoint a new Representative Director by
unanimous consent and each shareholder or such shareholder's duly
authorized representative will vote its shares in favor of appointing
the Representative Director and take all other action necessary to
provide for such appointment.
10.3 As often as necessary to keep the Board and the shareholders
reasonably informed of material events, and in no event less than once
each calendar month, the Representative Director will provide to the
Directors and the shareholders a written report summarizing the
material facts arising from or relating to the Company's operational
performance since the last such written report. In addition to such
other information as the Representative Director may include at his
discretion such operational reports will include the following: (i)
the operational plans of the Company and any changes thereto; (ii) the
acquisition and allocation of operational resources, including human
resources, office space, equipment and other non-monetary resources;
(iii) the efforts of the Company to market and promote the products of
PRI; (iv) material matters relating to third party disputes and
litigation, government relations including all necessary permits and
approvals, and public relations and public image; and (v) all quotes
for the sale of PRI Products that have been made and remain
outstanding.
11. Creation and Amendment of the Business Plan.
11.1 The first act of the Representative Director of the Company will be to
cooperate and work together with PRI to develop promptly a business
plan for the Company, to be approved and agreed upon by all
shareholders ("Business Plan"). The Business Plan will include a
description of: the scope of work the parties expect to be undertaken
by the Company; staffing, organization and management requirements;
marketing plans; methods of operation of the Company, and; such other
subjects as the Representative Directors may choose to include or the
shareholders may require. The period covered by the initial Business
Plan will be three (3) years.
11.2 Within sixty (60) days of the end of each fiscal year, the
Representative Director will prepare a revised Business Plan to be
approved and agreed upon by all
13
shareholders prior to the end of the next fiscal year. The revised
Business Plan will include additional plans necessary to extend the
plan for the next three years, and will include such other revisions
as the Representative Director may suggest and the shareholders may
agree upon.
11.3 The Business Plan may be revised at any time but only with unanimous
written consent of the shareholders. Unless he or she receives
unanimous written permission to the contrary, the Representative
Director will operate the Company by implementing the Business Plan.
12. Financial Management and Reporting.
12.1 The fiscal year of the Company will end on September 30 of each year.
12.2 In addition to financial records maintained according to the
requirements of applicable law, the Company will at all times keep
records and books of account in which complete and correct entries
will be made, in accordance with generally accepted accounting
principles and practices adopted from time to time by the Company and
utilized in the preparation of its annual audited financial
statements. The Company will afford to each shareholder and its
employees, counsel, accountants and other authorized representatives
free and full access, at all reasonable times, to all its books,
records and properties and to all its officers and other employees of
the Company having responsibility for financial or accounting matters
generally, for any reasonable purpose whatsoever. Each shareholder
will use all reasonable efforts to maintain the confidentiality of any
confidential and proprietary information so obtained by it that is not
otherwise available.
14
12.3 The Company will prepare and submit to all shareholders at least
ninety days prior to the beginning of each fiscal year an annual
budget for the next fiscal year, including, on an annual and quarterly
basis, an operating plan, capital plan and staffing plan in the
format, and with such detail, as the shareholders may reasonably
request. These plans will be accepted as the budget for such fiscal
year when they have been approved by the shareholders (the "Budget").
------
The Budget will be reviewed by the Company no less frequently than
quarterly. All proposed changes to and material deviations from the
Budget will be submitted to the shareholders in advance of their
adoption by the Company and will only be adopted by the Company after
such changes or deviations are approved by all shareholders.
12.4 The financial statements of the Company will be audited as of the end
of each fiscal year by independent certified public accountants of
established international reputation agreed upon in writing by the
shareholders (the "Accountant"). The Company will pay the costs of
each such audit. All questions of accounting will be determined by the
Accountant based on generally accepted accounting principles, and the
determination of any such questions by the Accountant will be
conclusive.
12.5 Unless otherwise agreed to by the shareholders in writing, the Company
will furnish to each shareholder the following financial statements
and other information:
12.5.1 Within ten (10) days after the end of each month, an unaudited
financial report of the Company, which report will be prepared
in accordance with generally accepted accounting principles
consistently applied and which will include: (i) an income
statement for such month, together with a cumulative income
statement from the first day of the then-current fiscal quarter
and year; (ii) a comparison between the actual income
statements for such periods and the Budget for such periods,
with an explanation of any material differences between them,
if any; and, (iii) a balance sheet as of the last day of such
month.
12.5.2 Within sixty (60) days after the end of each fiscal year of the
Company, audited financial statements of the Company, which
will include an income statement for such fiscal year and a
balance sheet as of the last day thereof, and statements of
stockholders' equity and cash flow statements for such fiscal
year, each prepared in accordance with generally accepted
accounting principles consistently applied, which will be
accompanied by the unqualified audit opinion of the Accountant
thereon, prepared in accordance with generally accepted
auditing standards, and the
15
Accountant's annual management letter. At such time, the
Company will also provide to the shareholders a certificate of
the Accountant certifying to shareholders that, based upon the
Accountant's examination of the affairs of the Company
performed in connection with the audit of such financial
statements in accordance with generally accepted auditing
standards, the Accountant is not aware of the occurrence or
existence during such fiscal year of any condition or event
which constitutes or would constitute, upon notice or lapse of
time or both, a default in the performance of any of the
Company's obligations under this Agreement or any other
agreement to which the Company is a party, or if they are aware
of such condition or event, specifying the nature thereof.
12.5.3 Promptly upon becoming available, any other financial or other
information available to management of the Company as any of
the shareholders will have reasonably requested on a timely
basis.
13. Distribution of Profits.
13.1 At the end of each fiscal year the Company will determine by generally
accepted accounting principles consistently applied the amount of
profit for such fiscal year. Unless otherwise required by South Korean
law, each year the Company will retain no more than twelve (12) months
and no less than six (6) months of operating working capital. All
other profits, as determined by generally accepted accounting
principles, will be either: (i) distributed to the shareholders based
upon their share holdings at the time of the distribution; or, (ii)
re-invested or retained by the Company. The decision to distribute,
re-invest, or retain profits will be made exclusively by the unanimous
vote of all shareholders.
14. Representations and Warranties.
14.1 PRI, CSSC and SEC each represent and warrant to the others that the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby: (i) do not, and
will not, conflict with or violate any provision of, and will not
constitute a default or breach under, any agreement to which PRI, SEC,
or CSSC is currently a party; (ii) do not, and will not, violate any
law, regulation, order, judgment or decree of any court or other
governmental agency to which PRI, SEC. or CSSC is subject; and, (iii)
do not and will not violate or infringe the proprietary rights of any
third party, including, without limitation, rights of confidentiality
and non-disclosure, copyrights, patents, trademarks, trade secrets, or
other proprietary rights.
16
15. Confidentiality.
15.1 Unless otherwise agreed to in writing by the other shareholders or the
Company, or otherwise provided in this Agreement, neither PRI, CSSC,
nor SEC will disclose any Confidential Information to any third party,
or use any Confidential Information for any purpose other than
furthering the purposes of this Agreement and of the Company. PRI,
CSSC, and SEC may disclose Confidential Information to their own
employees, consultants, parent or subsidiary entities, contractors,
agents, or representatives, but only to the extent necessary to
further the purposes of the Company and this Agreement, and only after
taking all steps reasonably necessary to insure that Confidential
Information is not improperly disclosed, including, without
limitation, procuring, where appropriate, nondisclosure agreements
from parties to whom Confidential Information is disclosed.
16. Non-Solicitation and Non-Competition.
16.1 Until the termination of this Agreement and for one year thereafter no
shareholder will induce any employee, contractor, consultant, or agent
of the Company or of the other shareholder to leave the employ of the
Company or the other shareholder for any reason.
16.2 During the term of this Agreement, no shareholder will directly or
indirectly engage in a business in South Korea or enter into any
business relationship with any other entity or person in South Korea,
which will or could compete with or which will or could have a
materially adverse effect on the business of the Company.
16.3 Unless this Agreement is terminated by the material breach of PRI, for
a period of four years after termination of this agreement, CSSC and
SEC agree, jointly and severally, that they will neither directly nor
indirectly engage in a business in South Korea or enter into any
business relationship with any other entity or person in South Korea,
which will or could compete with or which will or could have a
materially adverse effect on the business of PRI.
17. Term and Termination.
17.1 The Agreement will become effective as of the Effective Date and
remain in effect until it expires or is terminated pursuant to its
terms.
17.2 This Agreement will terminate immediately upon: (i) the completion of
the cessation of the business activity of the Company, (ii) the sale
or other disposition
17
of all of the Company's assets, and the distribution, if any, of any
residual value in the Company to the shareholders, or (iii) the
closing of the sale by a shareholder of all of his or its shares to
any other shareholder pursuant to any provisions of this Agreement.
17.3 All shareholders will have the right to cause the Company to terminate
its business and to sell or otherwise dispose of its assets following
the procedure set out in Section 17.4 below, in the event of the
following:
17.3.1 upon written notice to the other shareholders if: (i) the
Strategic Alliance Agreement entered into contemporaneously
herewith is terminated, expired, or becomes ineffective prior
to the termination, expiration, or ineffectiveness of this
Agreement; or (ii) any other shareholder has breached the terms
of this Agreement or any other agreement contemplated herein,
including, without limitation, those Agreements attached as
Exhibits hereto, and has failed to cure such breach thirty (30)
days after receiving notice of such breach from another
shareholder or other party to the agreement under which the
breach arises;
17.3.2 upon ten (10) days written notice to the other shareholders if
the Company has for two consecutive months failed to pay its
obligations when due or if a receiver has been appointed over
the whole or any part of the assets of any other shareholder or
of the Company, or if any petition is filed by or against any
other shareholder initiating any bankruptcy or reorganization
proceeding of such shareholder or the Company, if such
proceeding will not have been dismissed or stayed within sixty
(60) days after such filing, or if any order is made or
resolution is passed for the dissolution of such shareholder
(unless such order or resolution is a part of a scheme of
recapitalization, merger or consolidation), or if steps are
taken to dissolve another shareholder, subject in each such
case to the right of the affected shareholder to obtain a stay
of such proceedings; or,
17.3.3 upon thirty (30) days written notice if the shareholders fail
to approve, confirm or amend any Budget within sixty (60) days
following the commencement of the fiscal period to which such
Budget relates.
17.4 The party or parties receiving notice pursuant to Section 17.3 (the
"Selling Shareholders") hereby grant to the party which gave such
notice (the "Buying Shareholder") an irrevocable option to buy the
Selling Shareholders' shares in the Company upon the Selling
Shareholders' receipt of a notice of exercising the option, which
shall be given within thirty (30) days of the written notice provided
under Section 17.3.1(ii) or 17.3.2. The purchase price for the Selling
Shareholders' shares will be determined following the procedures
described in
18
Section 8.5 above. Immediately upon the Buying Shareholder's
acquisition of the Selling Shareholder's shares, the Buying
Shareholder will vote all of its shares in support of a resolution
requiring the termination of the Company's business and the
dissolution of the Company in a commercially reasonable manner and
the Treasurer, Auditor or other chief financial officer will dissolve
the Company pursuant to such vote.
17.5 Upon the expiration or termination of this Agreement each shareholder
and the Company will promptly return the providing shareholder all
copies of all Confidential Information previously provided to him or
it by such shareholder. The Confidential Information of the Company
will be retained in the files of Company and the shareholders, but
only to the extent such Company Confidential Information does not
contain or embody Confidential Information previously provided by a
shareholder.
18. General Provisions.
18.1 Entire Agreement; Language.
This Agreement and the Exhibits attached hereto and agreements
referred to herein represent the entire agreement among the parties
hereto with respect to the subject matter of this Agreement, and
supersedes all prior understandings or agreements among them and
relating thereto. The official language of this Agreement is the
American usage of English. All reports, documents, and information
required to be delivered by the Company or any party to this
Agreement will be delivered in English.
18.2 Amendment.
This Agreement will not be amended or modified except by a written
instrument executed by all shareholders.
18.3 Governing Law and Venue.
Except as otherwise required under the mandatory provisions of South
Korean laws, the interpretation and enforcement of this Agreement
will be governed by and construed under the laws of South Korea
without regard to its principles of conflicts of laws. Any dispute
arising from or relating to the interpretation and enforcement of
this Agreement will be resolved through binding arbitration before
the London Court of International Arbitration ("LCIA") in London,
England. The arbitration will follow the Arbitration Rules of the
LCIA applicable at the time of the dispute except that the arbitrator
or arbitrators chosen under the LCIA rules will be familiar with the
conventions and practices of the semiconductor
19
manufacturing industry. PRI, SEC, and CSSC stipulate and consent to
the jurisdiction of the LCIA over them and to the convenience and
fairness of proceeding before the LCIA.
18.4 Relationship of the Parties.
Nothing contained in this Agreement will be construed to constitute a
shareholder as a partner, agent, or representative of any other
shareholder. Except as otherwise expressly provided herein, no
shareholder will have any authority to act for or assume any
obligation or responsibility on behalf of the Company or any other
shareholder. Except as expressly provided herein, the liabilities of
the shareholders under this Agreement will be several and not joint,
and each shareholder will be responsible only for its obligations as
set forth herein, including all taxes, fees, costs, and charges
associated therewith.
18.5 Notices.
All notices permitted or required by this Agreement will be deemed to
be properly given if delivered personally, or sent by overnight
international courier of established reputation (such as UPS, DHL, or
FedEx), to the party to be notified at the address given at the outset
of this Agreement, marked "Attention: President" or such other address
as may be indicated in writing from time to time by the party to be
notified.
18.6 Assignment.
The rights and obligations of the parties to this Agreement are
personal and will not be assigned or delegated without the prior
written consent of the other party hereto. This Agreement will be
binding upon and inure to the benefit of, the parties and their
successors and approved assigns.
18.7 Equitable Relief.
The parties hereto agree that it would be impossible to measure in
money the damage to the Company and the shareholders in the event of a
breach of any of the terms and provisions of this Agreement, and the
parties hereto agree that in the event of any such breach, the Company
and the shareholders will not have an adequate remedy at law and will
be irreparably damaged if such provisions are not specifically
enforced. Each of the terms and provisions of this Agreement will be
enforceable in a court of equity by a decree of specific performance,
and each of the parties hereto hereby consents that preliminary and
final injunctive relief may be provided for and granted in connection
therewith. Specific performance and equitable relief will be
commutative
20
remedies that may be provided in addition to any other remedies or
forms of relief allowed by law or the terms of this Agreement.
18.8 Non-Waiver and Severability.
No failure or delay on the part of the Company or the shareholders or
any of them in exercising any right, power or privilege hereunder, and
no course of dealing between the Company and the shareholders or any
of them will operate as a waiver thereof, nor will any single or
partial exercise of any right, power or privilege hereunder preclude
the simultaneous or later exercise of any other right, power or
privilege. In the event that any provision of this Agreement will be
held invalid or unenforceable, the remaining provisions of this
Agreement will remain in full force and effect and be construed to
further the purposes of the Company and this Agreement.
18.9 Further Assurances and Cooperation.
PRI, CSSC and SEC each agree to execute and deliver such further
instruments, certificates, documents, and to provide such information
and cooperation as may be necessary from time to time to provide or
complete the performances required by this Agreement.
18.10 Counterparts.
This Agreement may be executed in counterparts, each of which will be
deemed to be an original and all of which when taken together will be
deemed to be one Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written
PRI Automation, Inc. Shinsung Eng. Co., Ltd.
By: (sign) /s/ Xxxxxxxx X. Xxxxx By: (sign) /s/ X.X. Xxx
---------------------- ------------------------
(print) Xxxxxxxx X. Xxxxx (print) X.X. Xxx
--------------------- -----------------------
Its: President Its: President
---------------------------- ------------------------------
Xxxxx Song System Co., Ltd.
By: (sign) Xxxx X. Xxx
----------------------
21
(print) Xxxx X. Xxx
--------------------
Its: President
---------------------------
22
EXHIBIT A
Schedule of Defined Terms
"Accountant" will have the meaning ascribed to it in Section 12.4.
"Agreement" will mean this Joint Venture Agreement, including all schedules,
exhibits and addenda thereto.
"Board" will have the meaning ascribed to it in Section 9.1.2.
"Board Deadlock" will have the meaning ascribed to it in Section 9.1.4.
"Budget" will have the meaning ascribed to it in Section 12.3.
"Business Plan" will have the meaning ascribed to it in Section 11.1.
"Company" will mean the South Korean corporation formed by PRI pursuant to
Section 2.1 of this Agreement.
"Confidential Information" will mean the terms of this Agreement and all
information provided or disclosed to PRI or Suh by the Company, or regarding the
Company which is marked "CONFIDENTIAL", "TRADE SECRET" or "PROPRIETARY." In
addition, Confidential Information will include all information provided by PRI
to Suh, or by Suh to PRI that is with regard to the confidential business of PRI
or Suh and is marked "CONFIDENTIAL," "TRADE SECRET" or "PROPRIETARY."
Confidential Information will not include: (i) any information or material that
is retrieved through the public domain and was in or enters the public domain
through no fault of the retrieving party; (ii) any information independently and
properly developed by the party possessing such information; or, (iii) is
required to be disclosed by applicable law, regulation, or governmental or
judicial order, although a party disclosing information that would otherwise be
Confidential Information but for applicable law, regulation or governmental or
judicial notice will give notice of the disclosure to the other party in advance
of making such disclosure.
"CSSC" will have the meaning ascribed to it in the opening sentence of this
Agreement.
"CSSC Directors" will have the meaning ascribed to it in Section 9.1.1.
"Fifth Director" will have the meaning ascribed to it in Section 9.1.
"Fundamental Board Issues" will have the meaning ascribed to it in Section
9.1.7.
23
"Fundamental Shareholder Issues" will have the meaning ascribed to it in
Section 9.3.
"PRI" will have the meaning ascribed to it as it appears in context on the first
page of this Agreement.
"PRI Directors" will have the meaning ascribed to it in Section 9.1.1.
"SEC" will have the meaning ascribed to it as it appears in context on the first
page of this Agreement.
"Strategic Alliance Agreement" will refer to the form of agreement provided in
Exhibit D, attached hereto.
"Suh" will have the meaning ascribed to it in Recital C of this Agreement.
"Territory" will mean the following geographic region: South Korea.
"Triggering Events" will have the meaning ascribed to it in Section 8.1 &
8.2.
"Triggering Shareholder" will have the meaning ascribed to it in Section 8.3.
24
EXHIBIT C
Purchase and Sale Agreement
[See attached]
25
PURCHASE AND SALE AGREEMENT
In consideration of the parties performance of the Joint Venture Agreement
entered into by and between the same parties as of ___________________, l997,
which performance is an express condition to the continued effectiveness of this
Purchase and Sale Agreement, _______________, a _____________ corporation
("Seller"), has SOLD, ASSIGNED and TRANSFERRED and by these presents does SEAL,
ASSIGN, TRANSFER and DELIVER to Xxxxx Song Systems Co., Ltd., a South Korean
corporation, its successors and assigns ("Buyer"), effective as of ___________,
1997, all Seller's right, title and interest in and to each and all of the
assets and properties described below (the "Assets"):
Acquisition Description Value (KW)
4/09/96 Telephone 1,960,000
4/10/96 Hand Phone - Samsung Anycall 760,000
4/10/96 HP Laser Printer 1,900,000
4/10/96 Desk Top - Samsung 3,790,000
4/10/96 Desk Top - Samsung 3,790,000
4/10/96 Fax Machine - Shindoricho 2,300,000
4/16/96 Refrigerator 434,545
4/16/96 Hand Phone - Motorola 540,000
4/16/96 Copy Machine - Xerox 11,300,000
5/09/96 Note Book - Compaq LTE 5200 6,814,000
6/01/96 Monitor & Keyboard 630,000
6/01/96 Cordless Phone 560,000
7/01/96 Samsung Note Book 3,150,000
8/20/96 Book Binder 440,000
11/01/96 Samsung Laser Printer 650,000
4/08/96 Samsung Note Book 3,150,000
5/15/96 Handphone (Anycall) 2 sets 1,272,726
6/11/96 Samsung Note P.C. 3,100,000
6/11/96 Samsung Note P.C. 3,100,000
6/26/96 Television - CT-2955 909,090
6/26/96 VTR-SV-S200 472,727
8/21/97 Desk Top 2,460,000
8/21/97 HP Scanner 720,000
Furniture & Fixtures 54,203,088
4/4/96 Automobile 29,618,120
Seller hereby authorizes Buyer to take any appropriate action in connection
with any of the above described Assets to acquire, perfect, and defend its
rights therein, but at its own expense.
And Seller, subject to the terms of the Agreement, does hereby warrant,
covenant and agree that it:
(a) has good and marketable title to the Assets;
(b) will warrant and defend the sale of the Assets against all and
every person or persons whomsoever claiming to or making claim against any
or all of the same; and
(c) will take all steps reasonably necessary to put Buyer, its
successors or assigns, in actual possession and operating control of said
assets and business, except that any such steps requested by Buyer will be
at Buyer's expense.
IN WITNESS WHEREOF, Buyer and Seller have caused this Purchase and Sale
Agreement to be signed by their duly authorized representatives, as set forth
below.
BUYER SELLER
By: By:
---------------------------- ----------------------------
Name: Name:
-------------------------- --------------------------
Title: Title:
------------------------- -------------------------
Date: Date:
-------------------------- --------------------------
