Exhibit 10.34
AGREEMENT TO FORM A JOINT VENTURE
BY AND BETWEEN COMPOSITECH LTD.
AND
FIDELITY VENTURE CAPITAL CORP. AND FIDELITY INVESTORS
Agreement effective February 9, 1998 by and between COMPOSITECH LTD.
(hereinafter referred to as "CTL"), having a place of business at 000 Xxxxxxxxx
Xxxx, Xxxxxxxxx, Xxx Xxxx 00000-0000, U.S.A.; and Fidelity Venture Capital Corp.
and Fidelity's Investors (hereinafter referred to as "Fidelity") having a place
of business at 5th Fl., Xx. 000, Xxx.0, Xxx-Xxxxx Xxxx Xxxx, Xxxxxx, Xxxxxx,
Xxxxxxxx of China ("R.O.C.").
WHEREAS, CTL and Fidelity have expressed interest in forming a joint venture in
R.O.C. for the purpose of the establishment in R.O.C. of a factory to produce
copper-clad laminates using the patented CTL process and equipment (the
"Equipment"); and
WHEREAS, the parties wish to record their agreement to form a company to be
established for such purposes;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree
as follows:
ARTICLE I
FORMATION
1.1 General. CTL and Fidelity (hereafter referred to collectively as the
"Partners") hereby agree to form jointly a limited liability company pursuant to
the laws of R.O.C. (hereafter referred to as the "Company"). The Company shall
carry out its activities in accordance with R.O.C. law, this Agreement and its
Articles of incorporation and By-Laws. The Company shall commence its operations
from the date of its official registration as a legal entity
within R.O.C.
1.2 Offices. The initial principal office of the Company shall be at 5th fl.,
Xx. 000, Xxx. 0, Xxx-Xxxxx Xxxx Xxxx, Xxxxxx, X.X.X. The name of the Company in
Chinese, ________________________________and in English, Compositech Taiwan, or
Composite Technologies, Inc. The Company shall be authorized to open such other
offices within and outside of R.O.C. as its management, consistent with the
By-Laws of the Company, shall decide.
1.3 Share Capital. The Share Capital of the Company shall consist of 64,000,000
common shares fully paid. The value of each share shall be NT$10. All capital
investment must be made in NT$ or in technology.
1.4 Ownership Interests. In exchange for the capital contributions or
contributions in kind to the Company, as set out in the foregoing paragraph, the
Partners shall receive common stock reflecting, on a fully diluted basis, the
percentages below:
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i. 10.5% by CTL of which 8.0% is Technical shares and 2.5% is to be
obtained as an investment by CTL in Compositech Taiwan for the sum of
US$500,000 (NT$16 million). The investment is to be made within 30
days of the approval of the license of the Joint Venture by the
Xxxx-Xxxx Science Base Industrial Park and shall be based upon the
total capitalization equity of US$20 million (NT$ 640 million) of
Compositech Taiwan.
ii. 2.0% by Fidelity Venture Capital and its affiliates as founder
shares in the Joint Venture.
iii. 87.5% owned by Fidelity's Investors.
The cash capital contribution of the Partner (s), other than CTL's 2.5% cash
capital contribution, to the Joint Venture shall equal 97.5% of the cash capital
requirement of the Joint Venture.
1.5 Investment in CTL by Joint Venture. Investment in CTL by the Joint Venture
in the sum of US$2.0 million worth of CTL common shares of stock shall be priced
at the weighted average closing price for the 30 day period prior to the signing
of this Joint Venture Agreement as follows:
i. US$1.0 million at the signing of this Joint Venture Agreement which
shall take place on or before February 15, 1998.
ii. US$1.0 million within 30 days of the approval of the license of
the Joint Venture by Xxxx-Xxxx Science Base Industrial Park.
1.6 Long Term Debt. All long term debt shall be provided by one or more
financial institutions.
1.7 Modification of Capital Structure. Any decision to increase, decrease or
otherwise modify the terms of the share capital of the Company shall be made by
the Board Directors of the Company and shall be approved by the shareholder's
meeting of the Company.
1.8 Authorized Funds and Reserves. The Company shall maintain such funds and
reserve accounts as may be prescribed from time to time by R.O.C. law and and
the Company's lenders.
1.9 Duration of Joint Venture. The Joint Venture shall remain in force until the
Partners agree to sell or liquidate their assets. In the event of bankruptcy,
dissolution, insolvency or other form of liquidation, the Partners shall
negotiate in good faith to establish a fair market value for the Joint Venture
and to arrange for its disposition for the benefit of their shareholders.
1.10 Non-Transferability of Interests. Neither Partner shall sell, pledge and
otherwise transfer any right to his interest in the Company to any third party
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without the consent of the other Partner, which consent shall not be
unreasonably withheld.
1. 11 Mutual Responsibilities. Pending the start of operations of the Company,
the Partners shall divide among themselves the following responsibilities:
Fidelity shall take primary responsibility for:
(a) obtain all necessary R.O.C. government approvals for the formation and
operation of the Company and the execution by the Company of the various
agreements relating to this transaction;
(b) provide the building in which to house the manufacturing and administrative
operations, and preparing the same for all utilities, including electrical, air,
water, fuel, sewerage and others from outside the plant to the locations on the
plant floor where such utilities are to be hooked up to the Equipment to be
purchased from CTL; and
(c) arrange for any necessary financing.
CTL shall take primary responsibility for:
(a) delivering the technical information relating to the Equipment necessary for
Fidelity to plan the plant building and to arrange necessary hook-ups; and
(b) coordinating the supplying, installing (with the assistance of Fidelity) and
commissioning of the Equipment and transfer of related technical know-how.
ARTICLE II
PURPOSES
2.1 Business Purposes. The Company shall have as its main business purposes:
(a) the production and marketing of copper-clad laminates bearing the trademark
CL 200+;
(b) the research and development of copper-clad laminates including general
production methods and applications, consistent with the Company's maintenance
of a strong competitive position within the R.O.C.;
(c) such other and incidental business as the Partners shall unanimously
determine are related to the foregoing business; and
(d) the regular earning of profits and the distribution of such profits to the
Partners.
(e) the Joint Venture shall have the option to participate in future joint
ventures in the Asia-Pacific region inclucing countries such as Japan, China
(including
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Hong Kong), Korea and Singapore subject to the approval of the leading joint
venture party in these countries.
2.2 Powers of the Company. The Company shall have the right, in its own name,
to:
(a) enter into agreements;
(b) purchase, own, sell or lease real and personal property, as well as
intangible rights;
(c) borrow funds in convertible and domestic currency:
(d) be a plaintiff and defendant in judicial or arbitration forums within or
outside of R.O.C.;
(e) conduct such export operations as its Partners deem necessary or appropriate
for its economic activities, including through one or more of its Partners; and
(f) employ and discharge domestic and foreign employees.
ARTICLE III
DIVIDENDS
3.1 Dividends. Dividends shall be paid to the Partners, according to their share
of the Company, from the net earnings of the Company and in accordance with the
direction of the Board of Directors and with the approval of shareholder's
meeting.
ARTICLE IV
GOVERNANCE: MAINTENANCE OF RECORDS
4.1 Governing Bodies. The Company shall have as permanent governing bodies a
Board of Directors, Executive Committee of the Board of Directors and an Audit
Committee. The rules governing the election of members to these bodies, and the
convening and conduct of their meetings, shall be set forth in the By-Laws of
the Company.
CTL shall be entitled to nominate at least one voting member to the Board of
Directors and each committee thereof, which nomination(s) is hereby confirmed
and accepted by Fidelity.
4.2 Maintenance of Financial Records. The Company shall maintain its books in
such a manner as is required by R.O.C. law for tax and accounting purposes, as
well as by the providers of any equity or debt financing for the Company. In
addition, the Company shall prepare on a quarterly basis income and cash flow
statements and balance sheets, in accordance with generally accepted
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accounting principles of the United States. Either Partner (including through
their professional advisors) shall have the right, at any time, to review all
the books and records of the Company.
4.3 Reporting. The Company shall prepare and provide each of the Partners with a
written report (in English and Chinese languages) on the operations and finances
of the Company's activities each quarter.
ARTICLE V
CONFIDENTIALITY
5.1 Confidentiality. Each of the Partners will strictly maintain the
confidentiality of the technical, financial, commercial and other information
received from the other Partner and from the Company, allowing officers and/or
employees access to any such information only on a need-to-know basis and only
if such persons are under written and binding confidentiality obligations
satisfactory to both parties. Fidelity agrees to be bound by Article IX of the
Patent, Information and Trademark Agreement (Exhibit A) (the "Patent Agreement")
as if a party thereto and as if the "Licensee", as defined therein.
ARTICLE VI
DISPUTE RESOLUTIONS
6.1 Arbitration. In the event of any dispute between the parties relating to
this Agreement, including its scope or validity, they shall first try to resolve
the matter through good faith negotiation and, if a resolution cannot be
achieved in that manner, then it shall be submitted to binding arbitration in
Geneva, Switzerland (or such other place as the parties may agree to) under the
applicable rules of the American Arbitration Association. The arbitration shall
be by a single arbitrator selected in accordance with the procedures of the
American Arbitration Association but who shall be technically grounded and whose
experience and training shall enable him or her to readily comprehend the
technical aspects of the issues to be decided. At the request of either party,
the arbitrator may permit discovery of documents and things as provided in the
Federal Rules of Civil Procedure of the United States. The costs of the
arbitration shall be shared equally by both parties but the arbitrator shall
award costs, including the amount paid to the arbitrator but excluding
attorney's fees, to the prevailing party.
6.2 Arbitrator's Award. The arbitrator's award may be enforced in any court of
competent jurisdiction, and the parties hereby submit themselves to the
jurisdiction of the federal or state court within the State of New York for that
purpose.
6.3. Emergency Relief. Notwithstanding the provisions of Sections 6.1 and 6.2,
in the event either party requires emergency relief to protect the value or
confidentiality of its Information (as defined in the Patent Agreement), it may
seek the same in any federal or state court sitting in the State of New York,
and both parties agree to and hereby submit to the jurisdiction of any such
court for
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that purpose and agree further that service of process to initiate such action
may be made (and shall be sufficient if so made) by certified or registered
mail, with return receipt.
ARTICLE VII
MISCELLANEOUS
7.1 Limited Liability. Neither of the Partners shall liable to the other
Partner, the Company or to any third party for any obligation of such other
Partners or Company.
7.2 Other Business. Either Partner may engage in business with the Company,
provided it does so with the consent of the other Partner.
7.3 Waiver of Compliance. The failure of any party to this Agreement to object
to or take steps to remedy any one or more failures to perform any of the terms,
covenants or conditions of this Agreement or to exercise any right hereunder
shall not be construed as a waiver of or relinquishment of the future
performance of any such terms, covenants or conditions or the future exercise of
such right, or of the performance of any other term, covenant or condition of
this Agreement, but the obligations of the respective parties with respect to
such future performance shall continue in full force and effect.
7.4 Severability.o In the event that any one or more of the provisions of this
Agreement shall for any reason be held to be void, invalid, illegal or
unenforceable in any respect, such holding shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such void,
invalid, illegal or unenforceable provision had never been contained herein.
7.5 Changes or Modifications. No representation or statement made on behalf of
either party shall in any way change or modify the terms or conditions contained
herein unless made in a writing signed by the party to be charged.
7.6 Amendments and Assignments, This Agreement may be modified, and the rights
and/or obligations hereunder may be assigned to any other party, only by written
document signed by all the parties, provided that any Partner may assign its
rights and obligations hereunder to any other Company under common management
and control of such Partner.
7.7 Entire Agreement. The Patent, Information and Trademark Agreement (Exhibit
A) attached to this Agreement shall form and be read as integral parts of this
Agreement. Together with this Agreement, they form the entire agreement between
the parties, and supersede all prior written and oral understandings, conditions
or warranties between the parties on the subjects covered by such agreements.
7.8 Governing Law and Language. This agreement shall be constructed in
accordance with R.O.C. law. It shall be executed in four originals.
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7.9 Headings. The headings of the Articles and sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof or affect
in any way the meaning or interpretation of this Agreement.
7.10 Effectiveness. This agreement shall come into full force and effect upon
the approval of it by the Board of Directors of the Partners, subject to any
necessary governmental approvals
7.ll Notices. All notices, requests, demands and other communications required
or permitted hereunder shall be writing and shall be deemed to have been duly
given if delivered by hand, telecopied (with receipt confirmed), by overnight
courier service or mailed, by certified or registered mail:
(a) If to CTL, to:
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attn: Xx. Xxxx Xxxxxx
or to such other person or address as CTL shall furnish to Fidelity in writing.
(b) to Fidelity, to:
Fidelity Venture Capital Corp
5th Fl., Xx. 000, Xxx 0, Xxx-Xxxxx X. Xxxx
Xxxxxx, Xxxxxx, X.X.X.
Attn: Xx. Xxxxx-Xxxx Xxx
or to such other person or address as Fidelity shall furnish to CTL in
writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
COMPOSITECH LTD.
BY:_______________________
Name: Xxxx X. Xxxxxx
Title: President
FIDELITY VENTURE CAPITAL CORP.
FIDELITY'S INVESTORS
BY:_________________________
Name: Xx. Xxxxx-Xxxx Xxx
Title: President
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