EXHIBIT 10.23
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered into this
3rd day of March, 1998, by and between E-Tek Dynamics, Inc., a California
corporation ("E-Tek"), and Walsin Lihwa Corp., a Taiwanese corporation
("Walsin"). E-Tek and Walsin may hereafter be referred to individually or
collectively as "Shareholder" or "Shareholders."
W I T N E S S E T H
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WHEREAS, E-Tek is engaged in the business of developing, manufacturing and
marketing fiber optic components and systems for the telecommunications and CATV
industries; and,
WHEREAS, Walsin is a leading manufacturer of wire and cable in Taiwan, with
strong distribution channels throughout Asia; and,
WHEREAS, the parties wish to form, with the financial assistance of
investor-designees as described below, a joint venture whereby a third party
Taiwanese company, limited by shares ("JV"), would be created to, among other
things, develop, manufacture and distribute certain fiber optic products; and,
WHEREAS, in contemplation of forming JV, the parties have entered into a
December 17, 1997 Technical Licensing Agreement ("Licensing Agreement") whereby
JV shall assume all rights and obligations of Walsin as licensee thereunder.
NOW THEREFORE, for good and valuable consideration (including the mutual
covenants contained herein), the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
A G R E E M E N T
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1. Incorporation of Recitals. The parties hereby acknowledge the accuracy
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of the foregoing recitals and incorporate each of them by reference in this
Agreement.
2. Formation of Joint Venture Company. Walsin and E-Tek shall promptly
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form JV, a Taiwanese company limited by shares. The parties shall attempt, but
not be obligated, to incorporate JV in Hsinchu under the Statute for the
Establishment and Administration of a Science-Based Industrial Park and thereby
qualify JV for various incentives provided by the laws of Taiwan. Subject to
governmental approval, attached hereto as Exhibit A is the form of the Articles
of Incorporation of JV. Once approved by the government, they shall become a
part of this Agreement. In the event of any discrepancy between the Articles of
Incorporation and the terms of this Agreement, the terms of this Agreement shall
prevail as between the parties.
3. Purpose. This Agreement has been formed for the limited purposes of
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allowing JV to: (i) assume Walsin's rights and obligations under the Licensing
Agreement; and, (ii) develop, manufacture and distribute certain fiber optic
products pursuant to the terms of the business plan ("Business Plan") attached
hereto as Exhibit B, and to engage in such other business practices as the Board
(as defined below) may hereafter decide.
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4. Capitalization of JV.
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a. Capital Structure. At the time of its formation, the authorized
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capital of JV shall be Six Hundred Eighty Million New Taiwan Dollars
(NT$680,000,000). The shares of JV shall all be common, registered shares, each
having a par value of Ten New Taiwan Dollars (NT$10). All shares of JV shall
carry the same rights and privileges and be subject to the same restrictions and
conditions. Unless otherwise required by law, each share shall be entitled to
one vote. If and for so long as JV does not have the minimum number of seven
shareholders required by applicable law, E-Tek shall allocate one JV share to
each person(s) designated by E-Tek until JV has the minimum number of
shareholders required by law.
b. Initial Contributions.
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(i) The initial paid-in capital of JV shall be Four Hundred
Seventy Six Million New Taiwan Dollars (NT$476,000,000). Upon execution of this
Agreement, E-Tek and its investor-designees shall pledge a total of Two Hundred
Thirty Eight Million New Taiwan Dollars (NT$238,000,000), and Walsin and its
investor-designees shall pledge a total of Two Hundred Thirty Eight Million New
Taiwan Dollars (NT$238,000,000), such sums representing the parties' respective
initial capital contributions to JV. Once these amounts are fully deposited: E-
Tek and its investor-designees shall hold a fifty percent equity interest in JV;
and, Walsin and its investor-designees shall hold a fifty percent equity
interest therein. JV's records shall note the respective stated capital
investments of the parties.
(ii) The parties and their investor-designees shall pay for the
shares of JV stock at par value in cash within ten days of the later of either
the party's timely acceptance of the Business Plan or E-Tek's receipt of notice
that the Taiwanese governmental authorities have approved the proposed partial
capitalization of JV by E-Tek and its investor-designees as foreign investors.
c. Future Issuances of Securities. Each Shareholder and its
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investor-designees shall have preemptive rights to subscribe to future issuances
of JV securities in accordance with Article 267 of Taiwan's Company Law,
irrespective of whether such law is hereafter modified or abolished. This right
does not extend to securities issued in connection with any merger, acquisition,
consolidation or reorganization. Unless the Shareholders hereafter agree in
writing, JV shall not issue, or attempt to issue, to any person or entity any
securities of any kind or any options or other devices to acquire the same, nor
shall either Shareholder be required or permitted to contribute any additional
capital to JV.
d. JV Employee Stock Ownership. The JV shall adopt an equity
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participation plan and thereby offer to its employees an opportunity to acquire
equity interests in JV on terms to be established by the Shareholders and/or
Board; provided, however, that no such offer shall ever be made at any time when
JV employees own collectively more than a ten percent equity interest therein
(assuming all options or other devices to acquire equity interests are fully
vested and have been exercised).
e. Investor-Designees. A Shareholder can at any time, including in
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connection with JV's initial capital contribution contemplated above, substitute
any third party(ies) in its place, in whole or in part, to acquire through
financial investment an equity interest in JV; provided, however, that: (i) any
such investor-designee enters into an agreement with JV and its owners whereby
it agrees to
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transfer restrictions on its interest in JV that are the same as those contained
in this Agreement; and, (ii) the other Shareholder must first provide its
consent to any such investor-designee, which consent shall not be unreasonably
withheld. For purposes of this subparagraph, it shall be deemed reasonable for a
Shareholder to withhold its consent with respect to any investor-designee that
is an actual or potential competitor of such Shareholder.
5. Restrictions on Transfer of Equity Interests.
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a. Neither Shareholder (nor its investor-designees) may hereafter
sell or engage in any transaction which results in, or may result in, a change
in the beneficial or record ownership of any JV equity interest held by such
Shareholder or its investor-designees, including without limitation a voluntary
or involuntary sale, assignment, transfer, pledge, hypothecation, encumbrance,
disposal, loan, gift, attachment or levy. Any such transfer or attempted
transfer in contravention of this Agreement shall be void and ineffective.
b. The restrictions on transfer set forth in subparagraphs 5.a.,
5.d., and 5.e. shall not apply to: (i) transfers made by operation of law
(including in connection with a merger, acquisition, consolidation or
reorganization of a Shareholder); or, (ii) transfers made to a Shareholder
and/or its investor-designee by any of its other investor-designees (unless such
transferring investor-designee has eighty percent or more of its stock owned or
controlled by Walsin).
c. Notwithstanding the provisions of subparagraphs 5.d. and 5.e.,
below, but subject to paragraph 8, below, neither Shareholder, nor any entity
whose stock is at least eighty percent owned or controlled by Walsin, shall
transfer, or attempt to transfer, any equity interest that they individually
hold in JV at anytime before March 1, 2000.
d. Before there can be a valid sale of any equity interest in JV,
the Shareholder who either owns, or whose investor-designee(s) owns, the
interest (the "Selling Shareholder") shall deliver to the other Shareholder
satisfactory proof of a bona fide offer by a third party along with a written
notice ("Notice") stating the identity of the third party, the precise amount of
equity interest proposed to be transferred, and the price and other terms of
such proposed sale. If the other Shareholder (or its investor-designees) desire
to acquire all or part of such equity interest, then the other Shareholder
shall, no later than thirty days after delivery of the Notice, deliver to the
Selling Shareholder a written offer to purchase specifying the amount of equity
interest proposed to be acquired. If the other Shareholder (or its investor-
designees) propose to purchase all of the equity interest specified in the
Notice, then such sale shall be made at the price and on the terms specified in
said Notice. Any purchases by the other Shareholder or its investor-designees of
less than all of the equity interest described in the Notice shall be made at
pro rata prices based on the amount specified in the Notice.
e. If the other Shareholder (or its investor-designees) fail to
offer to purchase all of the equity interest described in the Notice by the end
of the thirty-day period, then the Selling Shareholder or its investor-designees
may sell the remaining shares referred to in the Notice to the listed third-
party offeror, provided, that: (i) the sale is completed no later than forty-
five days after the date the Notice was originally tendered to the other
Shareholder and at a pro rata price no lower than, and on terms no more
favorable to the third-party purchaser than, those specified in such Notice;
and, (ii) any such third-party purchaser enters into an agreement with JV and
its owners
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whereby it receives preemptive rights as described in subparagraph 4.c., above,
and agrees to transfer restrictions on its interest in JV that are the same as
those contained in this Agreement
f. If JV is required to register as a "public status company" under
Article 156 of the Taiwanese company law to issue shares to the public, or if JV
otherwise becomes subject to regulation under the Taiwanese Securities Exchange
Law or any other applicable laws relating to share issuance or distribution,
shareholder eligibility, the exercise and/or enjoyment of shareholder rights, or
other areas which may affect the parties' respective rights with respect to the
ownership or management of JV, then each party shall cause such registration,
issuance, and/or subjection to be structured, and shall otherwise act and cause
JV to act, so as to preserve, to the maximum extent possible, the terms of this
Agreement, both in letter and in spirit.
6. Management of JV.
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a. Board of Directors.
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(i) The affairs of JV shall be managed by or through a board
("Board") of five directors, three of whom shall be nominated tri-annually by E-
Tek and two of whom shall be nominated tri-annually by Walsin. E-Tek and Walsin
each irrevocably agree to vote all of their respective equity interest in JV,
and to cause the voting of their respective investor-designees' equity interest
in JV, for the election and maintenance in office of the persons so nominated.
In the event that, between regular nominations, either E-Tek or Walsin wishes to
replace any or all of its nominees on the Board, the other Shareholder shall
join in all necessary steps, acts and proceedings, including causing the voting
of its, and its investor-designees,' equity interest in JV, to facilitate the
removal of such nominee(s) and the election of replacement board member(s), who
shall be selected by the Shareholder hereto whose nominee(s) shall have been so
removed.
(ii) The chairman of the Board, who shall be nominated by
Walsin and shall at all times also serve as a director, shall be appointed for
tri-annual terms and shall, if present, preside at meetings of the Board and of
the JV shareholders. If the chairman is not present, then a director (as set
forth in Exhibit A) shall preside at such meetings. Walsin shall appoint one
Supervisor, who shall serve the JV on tri-annual terms. Except as provided in
this Agreement or in JV's Articles of Incorporation, neither the Chairman nor
the Supervisor shall have any further rights or powers, including the right to
bind, or act on behalf of, JV.
(iii) Nothing contained in this Agreement shall be construed to
bind the members of the Board as to the method or manner of the exercise of
their discretion concerning their management of the affairs of JV.
Notwithstanding the foregoing, neither Walsin nor JV shall ever commit an act,
or fail to take any action, that would impede or restrict E-Tek's ability to
continue to conduct its normal business operations, wherever practiced.
(iv) JV shall indemnify any member of the Board who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a board member,
against all expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement, actually and reasonably incurred by him or her in connection
with such action, suit of proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of JV, and, with respect to any criminal action or
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proceeding, had no reasonable cause to believe, and did not believe, that his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of no contest or its
equivalent, shall not, of itself, create a presumption that the subject board
member did not act in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of JV, and, with
respect to any criminal action or proceeding, had reasonable cause to believe,
and did believe, that his or her conduct was unlawful.
(v) Eighty percent of the authorized number of board members,
whether in person or proxy, constitutes a quorum of the Board for the
transaction of business. All decisions of the Board shall require a simple
majority vote of the number of board members present at such meeting, whether in
person or proxy; provided, however, that on any of the following matters, a
decision of the Board requires an affirmative vote from at least eighty percent
of the board members so present:
i. approving the annual budget;
ii. appointing and removing the President, and setting and
defining the duties and powers of the principal officers;
iii. materially amending the Articles of Incorporation;
iv. changing the capital, debt or equity structure of JV
(including applying for a listing of JV's stock on the over-the-
counter market or securities exchange market);
v. merging JV or selling substantially all of its assets or
business;
vi. commencing voluntary bankruptcy, dissolution or
liquidation proceedings;
vii. deviating from the terms of the Business Plan (which
deviation would include, among other things, establishing a
manufacturing facility in any location other than Taiwan); or,
viii. Executing any agreement with any Shareholder with a value
of over NT$34 Million (other than the Supplier Agreement and
Distributorship Agreement contemplated in Paragraph 26, below).
b. Daily Management. The general manager of JV shall be deemed the
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president ("President") and shall be appointed and removed by the Board. The
duties and responsibilities of this officer shall be to administer the day-to-
day affairs of JV in the ordinary course of its business, subject to the
ultimate direction and control of the Board. Among other matters, the President
shall have general supervision, direction and control of the business and
affairs of JV and of its employees and agents, including the obligation to
employ, discharge and prescribe the duties and compensation of all employees and
agents of JV, and the obligation to supervise all administrative and production
functions of the company, including such areas as accounting, inventory control,
purchasing, corporate maintenance, quality assurance, product testing, equipment
maintenance, customer service, shipping, manufacturing and marketing. The
President shall be authorized to sign all contracts, documents and instruments
in writing in the name of JV, subject to such limitations and restrictions as
the Board may hereafter establish.
c. Ownership Control. Unless Taiwanese company law requires a higher
number, a quorum of a meeting of the JV owners shall consist of the holders,
appearing personally or through proxy, of a simple majority of the then-
outstanding equity interest of such company. Subject to Taiwanese company law,
all actions of JV that are required or permitted to be performed by its
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owners must receive the affirmative vote of the holders of a simple majority of
the then-outstanding equity interest of JV.
7. Books and Records. Proper books and records of account shall be kept
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by JV, and shall be freely accessible to representatives of both E-Tek and
Walsin at all reasonable times. JV shall promptly deliver copies of all such
books and records to E-Tek and Walsin upon request. In addition, within the
first ten days of every calendar month, JV shall prepare a financial statement
detailing all pertinent activities and events of the preceding month, and
provide E-Tek and Walsin with copies of the same within five days thereof. At
the end of each year, JV shall prepare an audited balance sheet setting forth
its financial position as of the end of that year and an audited statement of
operations (income and expenses) for such year. A certified copy of the same
shall be delivered to Walsin and E-Tek as soon as it is available. JV's auditors
shall be appointed by the Board, and shall be independent and of national
standing.
8. Forced Sale: Dissolution.
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a. Notwithstanding any other provision in this Agreement, a
Shareholder may, upon or during the occurrence of any the following situations,
force a sale and purchase of JV stock in accordance with subparagraphs 8.b. and
8.c., below:
(i) The members of the Board are divided and unable to agree on
the management of JV's affairs, and as a result of such deadlock, JV's business
cannot be conducted advantageously or there is a risk that its property or
business may be impaired;
(ii) There is internal dissension between JV's shareholders, and
they are so deadlocked that it is impairing JV's ability to conduct business;
(iii) Those in control of JV have committed or knowingly
countenanced persistent and pervasive fraud, mismanagement or abuse of
authority, have persistently acted unfairly toward any shareholder(s), or have
wasted or misapplied JV's property;
(iv) Liquidation is reasonably necessary for the protection of
the rights or interests of the complaining shareholder; or,
(v) JV is unable to pay its debts as they fall due.
b. Subject to subparagraph 8.a., above, a Shareholder ("Optionee")
may deliver a written notice to the other Shareholder ("Optionor") with a price-
per-share at which Optionee would be willing, at Optionor's election, to either
sell to Optionor no less than all JV stock held by Optionee and its investor-
designees ("Optionee Stock"), or, purchase (or have purchased through investor-
designees) no less than all JV stock held by Optionor and its investor-designees
("Optionor Stock"). If the Optionor (or its investor-designees) desire to either
purchase or sell the applicable lot of JV stock at the offered price-per-share,
then the Optionor shall, no later than thirty days after delivery of the
Optionee's notice, deliver to the Optionee a written statement, specifying
acceptance of either the sale or purchase.
c. If Optionor (including its investor-designees) fails to accept
within the thirty-day period the offer to purchase or sell the applicable lot of
JV stock, then the Optionee (or its investor-
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designees) shall be entitled, at Optionee's election and upon written notice
delivered to Optionor within fifteen days from the expiration of such thirty-day
period, to either purchase the Optionor's Stock, or sell to Optionor the
Optionee's Stock, at the price-per-share first offered by Optionee in its
original notice.
d. The parties shall take all reasonable steps to promptly
consummate any sale or purchase of stock contemplated in subparagraphs 8.b. or
8.c., above. If, instead, neither party (nor its investor-designees) elects to
make such a sale or purchase, then within sixty days from the delivery of
Optionee's original notice, each Shareholder shall join in all necessary steps,
acts and proceedings to facilitate the initiation and full prosecution of
dissolving, liquidating and winding-up JV and its business.
e. In the event that JV shall take steps to dissolve for any reason
whatsoever, then:
(i) a full and general account of its assets, liabilities and
accounts shall at once be taken. Subject to the provisions of subparagraph
8.e.(ii), below, such assets may be sold and converted into cash as soon as
possible, and all debts and other amounts due JV collected. The proceeds thereof
shall thereupon be applied, in descending order, to discharge the debts and
liabilities of JV and the expenses of liquidation, to repay to each equity owner
a pro rata amount of the stated capital contributions respectively made, and, to
divide the surplus, if any, among the owners according to each owner's then-
current equity interest therein; and,
(ii) JV shall immediately and without further consideration grant
to each Shareholder a perpetual, nonexclusive right (including sublicense and
have-made rights) in and to any and all patents, patent applications, all
divisions, continuations and continuations-in-part of such patent applications,
all patents issuing on any of the foregoing applications, all re-issues of any
of the foregoing patents, all foreign counterparts to any of the foregoing
patent applications and patents, and all copyrights, know-how, technical
information, processes, trade secrets and any and all other intellectual
property rights held by or in the name of JV (excluding only the intellectual
property license granted to JV under the Licensing Agreement, which shall, by
its own terms, automatically terminate upon dissolution of JV). All information,
whether in tangible form or otherwise, relating to such JV intellectual property
rights shall be transferred immediately to each Shareholder.
9. Technology Licensing: Training. Pursuant to the terms of the Licensing
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Agreement, E-Tek shall perform certain training and installation services and
grant to JV, as assignee to Walsin's rights and duties thereunder, a limited
license to certain technology to develop, manufacture and sell certain fiber
optic products. In consideration therefor, JV, as Walsin's successor thereto,
shall pay to E-Tek the sum of Seven Million US Dollars.
10. Publicity. Nothing in this Agreement shall be construed as conferring
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upon JV or its agents any right to include in advertising, packaging or other
commercial activity relating to any product it manufactures or sells, any
reference to E-Tek, its trade names, trade marks or service marks in any manner
whatsoever, including a manner which would indicate that any such product is in
any way certified or produced, in whole or in part, by E-Tek. Walsin and JV each
agree that, unless otherwise first agreed by E-Tek in writing, they shall not
use E-Tek's name, likeness or other identifying factor in connection with any
effort to sell or otherwise promote JV or its products.
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11. Confidentiality. The parties hereby incorporate the terms of their
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September 2, 1997 Mutual Confidentiality Agreement ("MCA") as if fully set forth
herein. Moreover, JV shall, effective upon its incorporation, be deemed a
signatory to the MCA, and shall be afforded all the rights and duties thereunder
with respect to Confidential Information (as defined therein) disclosed to or
received from the other parties, or either of them.
12. Indemnities. Except as otherwise expressly provided herein, each party
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shall indemnify, defend and hold harmless each of the other parties against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies that both or either of the
other parties shall incur or suffer by reason of any breach of any
representation, warranty or other term of this Agreement by the indemnifying
party.
13. Attorneys' Fees. If any legal action is brought for the enforcement of
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this Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action, in addition to any other relief to which
that party may be entitled.
14. Binding Arbitration.
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a. If any dispute whatsoever arises relating to this Agreement, the
parties shall attempt in good faith to promptly and informally resolve the same.
If the dispute is not so resolved, then any party may submit the matter to
arbitration in accordance with the provisions of subparagraphs 14.b.-g., below;
provided, that, as a condition to invoking arbitration, such party must have
first attempted in good faith to informally resolve such dispute.
b. Subject to the conditions of subparagraph 14.a., above, and at
the option of either party, any and all disputes and controversies whether of
law or fact and of any nature whatsoever relating to this Agreement shall be
decided through binding arbitration. If E-Tek initiates the arbitration, then
such arbitration shall be conducted in Taipei, Taiwan in accordance with the
rules of the Commercial Arbitration Association of Taiwan. If Walsin initiates
the arbitration, then such arbitration shall be conducted in San Jose,
California in accordance with the rules of the American Arbitration Association.
c. The arbitrators shall be selected as follows. In the event the
parties agree on one arbitrator, such arbitrator shall conduct the arbitration.
In the event the parties do not so agree, then each party shall select an
arbitrator, and the two arbitrators so selected shall select the third
arbitrator. If a party fails or refuses to select an arbitrator, then the other
party's selected arbitrator shall solely arbitrate the dispute. If the two
arbitrators selected by the parties fail or refuse to select a third arbitrator,
then either party may request the applicable arbitration association to make
such selection.
d. Any controversy concerning whether an issue is arbitratable shall
be determined by the arbitrator(s), but such arbitrator(s) may not limit, expand
or otherwise modify the terms of this Agreement. The parties, their
representatives, other participants and the arbitrator(s) shall, unless
otherwise required by applicable law or ordinance, hold the existence, content,
and result of the arbitration in confidence. The arbitrator(s), who shall act by
majority vote, shall be able to decree any and all relief of an equitable or
legal nature, subject to the limitations on liability provided in
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this Agreement. The decree or judgment of an award rendered by the arbitrator(s)
shall be conclusive and binding, and may be entered in any court having
jurisdiction thereof.
e. The arbitrator(s) shall give effect to the applicable statutes of
limitations in determining any claim.
f. The fees and expenses of the arbitrator(s) shall initially be
split evenly between the parties, and each party shall initially bear its own
costs in any arbitration proceeding; provided, however, that the arbitrator(s)
shall award the prevailing party its reasonable attorneys' fees and costs
(including the fees and expenses of the arbitrator(s)) incurred therein.
g. The institution and maintenance of any civil action for judicial
relief or for a provisional or ancillary remedy shall not constitute a waiver of
the right of any party to submit the dispute to arbitration if any other party
contests such action.
15. Governing Law. With respect to any claim, action or proceeding dealing
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solely with the dissolution, liquidation or corporate governance of JV, this
Agreement shall be governed by and construed in accordance with the laws of
Taiwan. With respect to any other claim, action or proceeding arising from or
relating to this Agreement, this Agreement shall be governed by and construed in
accordance with the laws of the State of California (excluding laws and
principles relating to the conflict of laws), as if made, executed and performed
within this State.
16. Non-Competition.
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a. Walsin represents that, during the term of this Agreement,
neither Walsin nor any of its affiliates shall, directly or indirectly, engage
in any business in competition with JV, or invest in, operate, license to,
participate in, or otherwise support a company or other enterprise which engages
in any business in competition with JV, unless E-Tek first provides its written
consent thereto. For purposes of this subparagraph, an affiliate of Walsin shall
be defined as any entity that owns more than fifty percent of the voting
securities of Walsin, or any entity in which Walsin owns more than fifty percent
of such entity's voting securities. The foregoing representation shall not apply
to business activities in the People's Republic of China conducted by Walsin
affiliates who are principally located in such country, provided that Walsin
informs E-Tek within a reasonable time of any such activities that are
competitive with JV's.
b. During the term of this Agreement, E-Tek shall not establish a
manufacturing facility in Taiwan that would compete with JV, unless Walsin first
provides its written consent thereto.
17. Severability. If any term or provision of this Agreement shall be held
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invalid or unenforceable to any extent, the remainder of this Agreement shall
not be affected and each other term and provision shall be valid to the fullest
extent permitted by law.
18. Headings. The paragraph and subparagraph headings contained in this
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Agreement are for reference only, and shall not be construed as substantive
parts of the Agreement.
19. Entire Agreement; Modification; Waiver. This Agreement constitutes the
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entire agreement between the parties with respect to the subject matter
contained herein and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No
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supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by all the parties. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party to be
charged.
20. Binding Effect. This Agreement shall be binding on and shall inure to
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the benefit of the parties hereto and their respective representatives,
successors and assigns.
21. Counterparts. This Agreement may be executed in counterparts, each of
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which shall constitute an original and all of which shall be one and the same
instrument.
22. Time of the Essence. Time is of the essence in the performance of each
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of the parties' respective obligations contained in this Agreement.
23. Survival Of Provisions. The respective rights, duties and obligations
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of the parties pursuant to paragraphs 6.a.(iii), 7, and 10 through 14,
inclusive, among others, shall survive any expiration or termination of this
Agreement.
24. Force Majeure. Neither party shall be liable, or be deemed to be in
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breach of this Agreement, for any delay or failure in performance under this
Agreement or interruption of service resulting from acts of God, civil or
military authority, acts of the public enemy, war, riots, civil disturbances,
insurrections, accidents, fire, explosions, earthquakes, floods, the elements,
strikes, labor disputes, shortages of suitable parts, materials or labor, or,
any other cause or causes beyond such party's reasonable control.
25. Representation By Counsel. Each party to this Agreement represents
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that it has had an opportunity to be represented by counsel of its own choosing
in the review and execution of the same, that it has carefully and fully read
this Agreement, that it is entering into the same voluntarily and without
duress, and that any statute, rule or doctrine regarding the interpretation of
contracts against a particular party, including California Civil Code Section
1654, shall not apply to this Agreement.
26. Conditions Precedent.
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a. This Agreement and all rights and obligations hereunder are
subject to the satisfaction of the following conditions precedent:
(i) E-Tek and Walsin shall have agreed upon the Business Plan,
and shall have attached the same to this Agreement as Exhibit B.
(ii) Walsin shall have assigned completely to JV, and JV shall
have accepted from Walsin, all of Walsin's rights, licenses, duties and
obligations under the Licensing Agreement, and JV shall have agreed to assume
all the same; it being understood and agreed that no licenses or rights under
the Licensing Agreement shall thereafter remain in Walsin.
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(iii) E-Tek and Walsin shall have entered into a supply agreement
whereby, among other things, E-Tek has a right of first refusal with respect to
products manufactured by Walsin.
(iv) Walsin shall have assigned completely to JV, and JV shall
have accepted from Walsin, all of Walsin's rights, duties and obligations under
the aforesaid supply agreement, and JV shall have agreed to assume all the same;
it being understood and agreed that no rights under said agreement would
thereafter remain in Walsin.
(v) E-Tek shall have entered into a distributorship agreement
with either Walsin, or an affiliate or designee thereof that is acceptable to E-
Tek, to develop demand for and sell certain of E-Tek's products nonexclusively
in the People's Republic of China and, after January 1, 1999, exclusively in
Taiwan.
(vi) All governmental approvals that are necessary for the
formation of JV and all related agreements (including the Taiwanese governmental
approval of E-Tek and its investor-designees as foreign investors) shall have
been obtained, and such approvals shall not be conditioned upon, or materially
alter or affect, this Agreement, JV or any related agreement.
b. All of the foregoing conditions precedent must occur by June 18,
1998, (except for items 26.a.(iii) and (v), which must occur by March 3, 1998,
and item 26.a(i) which must occur by March 13, 1998) or else this Agreement
becomes null and void. The parties shall engage in good faith discussions to
attempt to satisfy the foregoing conditions precedent; however, neither party is
obligated to conclude any agreement(s) or the Business Plan, or to continue any
discussions. No obligations shall arise under this Agreement unless and until
the Business Plan is finalized by the stated due date to the satisfaction of
each party.
27. Amendment to Licensing Agreement. The payment schedule of Article III
--------------------------------
of the Agreement is hereby amended as follows: The License Fee of Seven
Million US Dollars (minus any mandatory withholding taxes) shall be payable in
full immediately upon receipt by JV of any Taiwanese governmental approvals of
tax-exempt status of such fee, but in no event shall such fee be paid any later
than three months from the date E-Tek submits its initial capital contribution
to JV, as contemplated in subparagraph 4.b.(ii), above. Also, the license
granted to Walsin under the PATENTS (as defined in the Licensing Agreement) to
make LICENSED PRODUCTS (as defined in the Licensing Agreement) on a nonexclusive
basis in Taiwan, and the license granted to Walsin under the Information (as
defined in the Licensing Agreement) to use the Information on a nonexclusive
basis in Taiwan in connection with Walsin's efforts to design, test, manufacture
and assemble LICENSED PRODUCTS, are hereby expanded to an exclusive basis in
Taiwan, and only in Taiwan, and only for the term of this Joint Venture
Agreement. Thirdly, the license granted to Walsin under the PATENTS and
Information to offer for sale and sell any resulting LICENSED PRODUCTS on a
nonexclusive basis, and only in the Pacific Rim Countries (as defined in the
Licensing Agreement) is hereby modified such that Walsin can offer for sale and
sell any resulting Erbium-Doped Fiber Amplifiers on a worldwide, nonexclusive
basis. Except as so provided, the Licensing Agreement, and all rights and duties
therein, remain in full force and effect. E-Tek shall also explore, without any
obligation, the possibility of expanding the sales territory for LICENSED
PRODUCTS.
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28. Term and Termination. This Agreement shall continue in full force and
--------------------
effect for five years from the above date of this Agreement, unless sooner
terminated in accordance with the following:
a. This Agreement shall terminate at such time as the competent
governmental authority in charge of securities has approved the listing of JV's
shares of stock or the trading of such shares on the over-the-counter market or
securities market.
b. Either party may terminate this Agreement upon written notice to
the other party if such other party breaches any material term, warranty or
condition of this Agreement and fails to cure the same within thirty days of its
receipt of written notice of such breach. Notwithstanding the foregoing, this
Agreement may be terminated by the nondefaulting party immediately upon written
notice, in the event of an irremediable breach of a material term, warranty or
condition by the other party.
c. Either party may terminate this Agreement immediately: upon the
other party's cessation of business (excluding mergers, acquisitions,
consolidations or reorganizations), election to dissolve, dissolution,
insolvency, inability to pay debts as they become due, or general assignment for
the benefit of creditors; or, upon the appointment of a receiver or filing of
any bankruptcy petition, whether voluntary or involuntary, on behalf of such
other party.
29. Further Assurances. Each party hereby agrees that it will execute and
------------------
deliver such other and further documents as are or may become necessary or
convenient to effectuate and carry out the intent and purposes of this
Agreement.
30. Governing Language. English is the governing language of this
------------------
Agreement and of any arbitration proceeding or legal action.
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31. Notices. Any notice required or permitted to be given hereunder shall
--------
be in writing, unless otherwise provided herein, shall be delivered either by
overnight mail or by facsimile, and shall be addressed as follows:
If to E-Tek: If to Walsin:
E-Tek Dynamics, Inc. Walsin Lihwa Corp.
0000 Xxxxx Xxxxxx 00xx Xxxxx, 000, Section 3
Xxx Xxxx, XX 00000 Xxxx Xxxxx East Road
USA Taipei, Taiwan
Attn.: Legal Department Attn.: Legal Department
Fax 000.000.0000 Fax 000.0.0000.0000
Any notice given as aforesaid shall be deemed to have been effectively
given and received (i) if sent by overnight mail, on the date of such delivery,
or, (ii) if sent by facsimile, on the date of transmission. Each party may
change its respective address of service or facsimile number by written notice
given as provided above.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
E-Tek Dynamics, Inc. Walsin Lihwa Corp.
By: /s/ Xxxxxxx X. Xxxxxxxxxxx By: /s/ Yu-Xxx Xxxxx
------------------------------ ----------------------------
Xxxxxxx X. Xxxxxxxxxxx Yu-Xxx Xxxxx
President and CEO President
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