Exhibit 10.23
AGREEMENT RELATING TO JOINT VENTURE
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This AGREEMENT RELATING TO JOINT VENTURE is made and entered into this 1st
day of August, 1995, by and between XXXXXXXX, INC., a corporation established
and existing under the laws of the State of Minnesota having its principal place
of business at 0000 Xxxxxxxx Xxxx, Xxxxxxxxxx, XX 00000-0000, U.S.A.
("SHELDAHL"), JIANGXI CHANGJIANG CHEMICAL PLANT, a corporation established and
existing under the laws of China, having its principal place of business at 0
Xxxxxxx Xxxx (X), Xxxxxxxx Xxxxxxx Xxxxx 000000 ("JCCP"), HONG XXXX XXX HING
(CHINA) DEVELOPMENT CO., LTD., a corporation established and existing under the
laws of Hong Kong having its principal place of business at 00 Xxxxxxxxx Xxxx,
0/X X, Xxx San Factory Building, Quarry Bay, Hong Kong ("WAH HING"), and
JIUJIANG FLEX CO., LTD., a corporation established and existing under the laws
of China, having its principal place of business at 0 Xxxxxxx Xxxx (X), Xxxxxxxx
Xxxxxxx Xxxxx 000000 ("SNW").
Jiujiang Wahhing Norinco Electronics Industry Co. Ltd. is an enterprise
with foreign investment (a limited liability company) established by JCCP and
WAH HING to manufacture and to sell flexible copper laminates and associated
coverfilms and tapes. Jiujiang Wahhing Norinco Electronics Industry Co. Ltd.
was registered and approved by the city government of Jiujiang in Jiangxi
province in China on August 18, 1994.
During the establishment of Jiujiang Wahhing Norinco Electronics Industry
Co. Ltd., XXXXXXXX expressed its interest in participating as an equity owner of
Jiujiang Wahhing Norinco Electronics Industry Co. Ltd. after assessing its
strategic planning and technical competitive advantages. After a series of
discussions, both JCCP and WAH HING have agreed to have XXXXXXXX participate as
an equity owner of Jiujiang Wahhing Norinco Electronics Industry Co. Ltd.
BACKGROUND:
A. JCCP is actively engaged in the business of developing, manufacturing
and marketing various kinds of electronic material in China and the
international markets.
X. XXXXXXXX is actively engaged in the business of developing,
manufacturing and marketing flexible copperclad laminates and associated
coverfilm tapes throughout the world.
C. Wah Hing is actively engaged in the businesses of manufacturing and
marketing toys, real estate development, construction contracting and investment
development.
D. The following additional agreements ("Additional Agreements") are being
entered into this date: (i) Manufacturing
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Agreement; (ii) Marketing and License Agreement; and (iii) Agreement Relating to
Payments.
E. All three parties desire to establish a long-term business relationship
through investment in SNW.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein, the parties agree as follows:
1. Purpose, Scope, Duration.
1.1 JCCP, XXXXXXXX and XXX XXXX have decided to jointly form a limited
liability company in Jiujiang, Jiangxi China under the name Jiujiang Flex Co.,
Ltd. The formation of the company is based on principles of shared risk, shared
management and shared profit. The duration of SNW shall be thirty (30) years,
unless extended by mutual agreement of the parties.
1.2 The total investment of XXXXXXXX, XXX HING and JCCP in SNW is
approximately $5,000,000. SNW is expected to have the capability to produce
600,000 square meters of flexible copperclad laminates and 600,000 square meters
of associated coverfilm tapes.
1.3 The purpose and scope of SNW shall be to manufacture and sell
flexible copperclad laminates and associated coverfilm tapes through SNW's
distribution channels in China (including Taiwan, Hong Kong and Macau) and to
XXXXXXXX for resale in all other markets.
1.4 Neither JCCP nor WAH HING shall, while it owns shares in SNW and
for a period of three years after it sells its shares in SNW, manufacture or
market, directly or indirectly, for sale anywhere in the world, products which
are competitive with products manufactured or marketed by SNW. Neither JCCP nor
WAH HING shall, directly or indirectly pursue business opportunities related to
the technology licensed to SNW by XXXXXXXX except through SNW.
1.5 Except for XXXXXXXX'x obligations under the Manufacturing
Agreement and the Marketing and License Agreement, XXXXXXXX shall be free to
pursue other business opportunities outside of SNW. XXXXXXXX may grant a license
under the Technical Information and the Industrial Property Rights of XXXXXXXX
to manufacture Licensed Products in any country in Asia other than third parties
which would manufacture the Licensed Products in mainland China, Taiwan, Hong
Kong or Macau. In such event, XXXXXXXX agrees to purchase, in replacement of its
120,000 square meter commitment under the Manufacturing Agreement, a total of
150,000 square meters of Licensed Products which are flexible copperclad
laminates each year during the period beginning with
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such license granted and ending the tenth (10th) Royalty Year. In the event
XXXXXXXX desires to grant such a license, it agrees to inform the Board of
Directors of SNW six (6) months before the license grant and discuss and
consider with the SNW Board of Directors SNW's participation. If SNW desires to
participate, XXXXXXXX shall give special consideration to such request.
2. Formation and Capitalization.
2.1 The name of the company is Jiujiang Flex Co., Ltd. JCCP shall
cause the joint venture to be approved under the laws of China and in connection
therewith, shall cause Articles of Association to be filed and approved as
required by China law.
2.2 The total investment of XXXXXXXX, XXX HING and JCCP in SNW is
approximately $5,000,000 which is equal to 100% equity ownership interest. JCCP
will contribute to SNW the manufacturing facilities, the secondary equipment
inside mainland China, the supporting infrastructure of the factory and the
right to use the land and will receive 40% ownership in SNW. WAH HING will
contribute to SNW certain imported equipment and capital and will receive 40%
ownership interest in SNW. All equipment and facilities shall be free and clear
of any rights of third parties and title to such items shall be transferred to
SNW. XXXXXXXX will provide SNW with licensed technology valued at $900,000 and
technical assistance valued at $100,000 (as specified in both the Marketing and
License Agreement and the Manufacturing Agreement) and will receive 20%
ownership interest in SNW valued at $1,000,000 and the payments required under
the Additional Agreements. Each party shall provide SNW with a clear and
separate list of all investment items from each party with such items verified
by the parties. SNW will submit the complete list of all investment items to the
China Business Registration Agency which will verify the investment and issue
the legal binding verification report. The parties will utilize this Agency
report as the basis to determine the exact value of the contribution from each
party to calculate the ownership interest of each party.
2.3 All expenses related to the formation and organization of SNW
shall be paid by SNW. Other than those costs, each party shall pay their
respective costs and expenses of finalizing the transactions contemplated by
this Agreement.
3. Management of SNW.
3.1 The Board of Directors of SNW shall become effective the date when
SNW receives governmental approval.
3.2 The Board of Directors consists of 8 Board members, out of which
JCCP shall have 3 members; WAH HING shall have 3 members; and XXXXXXXX shall
have 2 members. The Chairman
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of the Board is from WAH HING. The Vice Chairmen are from JCCP and XXXXXXXX.
The term of the Chairman of the Board, Vice Chairman of the Board and each Board
member is four (4) years. Board members' terms may be renewed after approval by
the party which they represent. Each party shall notify the Board in writing
when it decides to replace its designated Board member.
3.3 The overall management and control of the business and affairs of
SNW shall be vested in the Board of Directors. Each member of the Board of
Directors shall be entitled to one vote. Each party shall be entitled to remove
and replace its designated directors. Five directors shall be required for all
meetings of the Board of Directors; provided, that no meeting shall be held
unless one director designated by each party is present. The initial President
of SNW responsible for its day-to-day operations shall be Xx. Xxx You-Wi. All
successors to Xx. Xxx You-Wi, and all other officers of SNW shall be appointed
and removed by the Board of Directors.
3.4 JCCP, WAH HING and XXXXXXXX, as shareholders, will cause SNW to be
operated and managed in a manner that is fair to all shareholders of SNW.
4. Consents. The written consent of the Board of Directors and JCCP, WAH
HING and XXXXXXXX must be obtained prior to SNW:
a. authorizing, issuing or acquiring any capital stock, warrants,
options or other rights in or for capital stock of SNW other than
those to be issued under Sections 2.2 or 5.2;
b. entering into any transaction with JCCP, WAH HING or XXXXXXXX
(other than those contemplated by the Additional Agreements), or
any of their affiliates;
c. changing the purpose or scope of SNW's business in a manner
inconsistent with Section 1.3 or otherwise engaging in activities
outside said scope; or
d. entering into any transaction for the merger, consolidation,
sale, lease or transfer of substantially all of the assets or
dissolution or liquidation of SNW.
5. Initial Capital; XXXXXXXX Option.
5.1 The capital contributions in Section 2.2 shall be supplemented by
debt financing as the Board of Directors deem appropriate to fund SNW's cash
requirements for working capital
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and additional equipment necessary to establish and finance the operations of a
manufacturing plant capable of producing the Licensed Products described in the
Marketing and License Agreement. The debt financing will be secured by the
assets of SNW to the extent allowed by law. If additional security is required
to obtain necessary working capital, the three parties shall assist SNW. JCCP
and WAH HING shall assist by providing any required guarantees to lenders.
Xxxxxxxx shall assist by providing flexible payment terms for products or
materials which SNW may purchase from Xxxxxxxx and advance payments for products
purchased by Xxxxxxxx from SNW (as determined by the SNW Board of Directors and
Xxxxxxxx at the time JCCP and WAH HING provide guarantees), but such assistance
shall be required only if and when JCCP or WAH HING are called upon to perform
their obligations under their guarantees.
5.2 XXXXXXXX shall have the right and option, at any time and from
time to time during the option periods described below, to purchase additional
ownership interests in SNW; provided that XXXXXXXX'x total ownership interest in
SNW shall not exceed 30% as a result of such purchases under this Section 5.2.
XXXXXXXX shall receive a 1% ownership interest in SNW for each $50,000 of
funding during the first option period which shall begin on the fourth month
after the Licensed Products manufactured by SNW meet the performance and quality
standards of such products manufactured by XXXXXXXX and shall end two years
thereafter. XXXXXXXX shall receive a 1% ownership interest in SNW for each
$60,000 of funding during the second option period which shall begin at the end
of the first option period and shall end two years thereafter.
6. Facilities, Equipment and Personnel.
6.1 JCCP will take the leadership role, in working with XXXXXXXX and
WAH HING, to develop a comprehensive plan for the project, to design the layout
and specifications of the facilities and the schedule. JCCP will provide SNW
the facility, land and secondary equipment.
6.2 XXXXXXXX will take the leadership role, in working with JCCP and
WAH HING, to plan the production equipment specifications and schedule and
optimal process flow techniques.
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6.3 JCCP, XXXXXXXX and XXX XXXX shall work together to complete
construction of the manufacturing plant and begin operations at the earliest
possible date.
6.4 All investment from each party, be it tangible or intangible,
shall be clearly stated as provided in Section 2.2.
6.5 JCCP shall identify and select the initial employees of SNW,
subject to approval of the Board of Directors of SNW. All employee benefits
shall be approved by the Board of Directors.
7. Accounting and Tax Matters.
7.1 Within three (3) months after the end of each fiscal year, the
President shall cause to be prepared and shall submit to the directors the
balance sheet, statement of income and loss and a distribution plan.
7.2 Three months prior to the end of each fiscal year, the President
shall cause to be prepared and shall submit to the directors for consideration a
business plan and budget of SNW for the next fiscal year ("Annual Plan and
Budget"). When approved by the directors, the Annual Plan and Budget shall be
SNW's operational and spending plan.
7.3 The books of account of SNW shall be kept and maintained at SNW's
offices in accordance with the approved international standards. All parties
shall have the right at all reasonable times to audit, examine, makes copies of
and extracts from, the books of account of SNW. All documents will be written
in Chinese.
7.4 The President shall cause such financial statements and tax
returns and statements to be prepared and furnished to the parties as requested
by the Board of Directors or required by the laws of China. Financial
statements shall be distributed to the parties at least twice a year. SNW shall
provide XXXXXXXX with an English version of the statements.
8. Distributions.
Within ninety (90) days following the end of each fiscal year, the
Board of Directors shall determine the reasonable working capital requirements
of SNW for the next fiscal year, including any required reserves. The Board of
Directors shall approve all distributions which shall be made in proportion to
each parties equity ownership in SNW.
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9. Representations of Parties.
9.1 In order to induce the other to enter into and perform this
Agreement, JCCP, WAH HING and XXXXXXXX (each constituting a "Representing Party"
for purposes of this Section 9) each hereby represents and warrants to the
others as follows:
a. The Representing Party is a corporation duly organized and
validly existing under the laws of its jurisdiction of
organization.
b. The Representing Party has taken all corporate actions necessary
for the authorization, execution, delivery and performance of
this Agreement, and when accepted by the other parties this
Agreement will constitute a valid and binding obligation,
enforceable against it in accordance with the terms hereof.
c. Except as provided in Section 14.2(b), no consent, approval or
authorization of, or exemption by, or filing with, any
governmental body is required in connection with the execution,
delivery and performance by the Representing Party of this
Agreement or the taking of any other action contemplated hereby,
except XXXXXXXX is currently applying for all necessary licenses
required by the government of the United States.
d. There are no undisclosed facts of which the Representing Party is
aware that could materially effect the operations, business or
financial condition of SNW after the date hereof or its ability
to perform its obligations under this Agreement.
9.2 JCCP and WAH HING represent and warrant to XXXXXXXX that SNW has
no debts or liabilities and has incurred no obligations since its formation on
August 18, 1994. To the extent SNW has debts, liabilities or other obligations,
JCCP and WAH HING shall provide additional funds to SNW to eliminate them or
shall assume and become responsible for them.
10. Pre-Emptive Rights.
In the case of issuance of new shares by SNW other than under Section
5.2, JCCP, WAH HING and XXXXXXXX shall have the right to subscribe for such
number of shares to maintain their respective ownership percentage in SNW.
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11. Co-Sale Right.
Neither party shall sell or otherwise transfer any interest in its
shares in SNW without allowing the other parties to participate on the same
terms in the contemplated transfer in proportion to the number of shares each
party holds.
12. First Refusal Right.
No party will sell, transfer or otherwise dispose of any of the shares
of SNW at any time (other than to majority owned subsidiaries of that party)
unless the other parties shall have been given the opportunity, in the following
manner, to purchase (or cause a corporation, entity, person or group designated
by them to purchase) such shares:
a. The selling party shall notify the other parties in writing of
such intention, specifying the shares proposed to be disposed of
and the proposed terms thereof.
b. The other parties shall have the right, exercisable by written
notice given by them to the selling party within 30 days after
receipt of such notice of intention, to purchase (or to cause a
corporation, entity, person or group designated by them to
purchase) all or any part of the shares specified in such notice
of intention on the terms and at the price set forth therein.
c. If the other parties exercise their right of first refusal
hereunder, the closing of the purchase of the shares with respect
to which such right has been exercised shall take place within 60
days after the other parties give notice of such exercise.
d. If the other parties do not exercise their right of first refusal
hereunder within the time specified for such exercise, the
selling party shall be free during the period of 60 days
following the expiration of such time for exercise to sell the
shares to the purchaser specified in such notice of intention at
the price specified therein or at any price in excess thereof.
Any shares not sold by the selling party within said 60 day
period shall continue to be subject to the provisions of this
Section 12.
e. If the other parties shall designate another corporation, entity,
person or group as the purchaser pursuant to this Section 12, the
giving
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of notice of acceptance of the right of first refusal by the
other parties shall constitute a legally binding obligation of
the other parties to complete such purchase if such other
corporation, entity, person or group shall fail to do so.
f. The right of any party to sell its shares to a third party shall
be subject to the condition that any such purchaser agree in
writing to be bound by all of the terms and conditions of this
Agreement.
13. Confidentiality.
Neither JCCP nor WAH HING shall have access to confidential
information of SNW or XXXXXXXX exchanged or pursuant to the Marketing and
License Agreement and the Manufacturing Agreement. In the event either JCCP or
WAH HING receives such information, it agrees to keep such information strictly
secret and confidential and not to disclose it to any third persons or use it
The obligations of this Section 13 shall survive any termination of this
Agreement.
14. Closing and Conditions.
14.1 The Closing of the transactions provided for in Section 2 shall
take place at a place to be agreed by the parties on or before December 31, 1995
(the "Closing"). At the Closing, the parties shall execute and deliver such
documents and instruments, together with the cash required by Section 2.2, as
required to effect the intents and purposes of this Agreement.
14.2 The obligations of the parties hereunder and under the Additional
Agreements are subject to the fulfillment, prior to or at Closing, of the
following conditions:
(a) The representations of the parties in this Agreement shall be
true and correct;
(b) JCCP shall have obtained all authorizations, consents, waivers
and approvals from the government of China and any agencies
thereof as may be necessary to form SNW, to enable SNW to conduct
its business as contemplated herein and to allow SNW and JCCP to
satisfy their obligations in this Agreement and the Additional
Agreements; and
(c) XXXXXXXX shall have obtained all licenses required from the
government of the United States to allow it to satisfy its
obligations in this Agreement and the Additional Agreements.
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(d) XXXXXXXX'x Board of Directors shall have approved the terms of
this Agreement and the Additional Agreements.
15. Term and Termination.
15.1 The term of this Agreement shall commence on the date hereof and
continue for a period of thirty (30) years unless terminated in accordance with
the provisions of this Agreement or by force of law. The term of this Agreement
may be extended by mutual agreement of all parties.
15.2 This Agreement shall terminate in any one of the following
circumstances:
a. Failure of the parties to satisfy the conditions set forth in
Section 14.2;
b. Receivership, bankruptcy, other insolvency proceedings,
liquidation, or dissolution of SNW;
c. The sale or transfer of all or substantially all of the assets or
shares of capital stock of SNW;
d. The voluntary agreement of all parties to this Agreement; or
x. XXXXXXXX fails to agree to its final ownership interest if such
interest is more or less than 20%.
16. Arbitration.
Any dispute between the parties arising out of or concerning the
subject matter of, or the respective rights and obligations of the parties
under, this Agreement shall be submitted to arbitration if it cannot be resolved
by the parties. The arbitration proceeding shall be conducted in the place
where the party against which the arbitration is requested has its principal
office and in accordance with the rules of the Commercial Arbitration
Association then in effect at such place.
17. Governing Law.
This Agreement and the rights and obligations of the parties hereunder
shall be construed and interpreted in accordance with the laws of China.
18. Force Majeure.
Both parties to this Agreement shall be excused from the performance
of their obligations hereunder, and shall be
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excused for so long as such condition continues, if such performance is
prevented by conditions beyond the control of the parties, such as acts of God,
voluntary or involuntary compliance with any regulation, law or order of any
government, war, civil commotion, strike, epidemic, failure or default of public
utilities or common carriers, destruction of production facilities or materials
by fire, earthquake, storm or like catastrophe.
19. Notice Provisions.
Any notice required or permitted to be given hereunder shall be in
writing and any notice shall be deemed to have been given when delivered in
person or seven (7) days after the date upon which it was mailed, postage
prepaid, by certified or registered air mail properly addressed to the addresses
on page 1 of this Agreement; provided, however, that the presumption of actual
receipt shall be subject to rebuttal by probative evidence showing that such
notice was not actually received.
20. Modification.
No modification or any claimed waiver of any of the provisions of this
Agreement shall be effective unless in writing and signed by a duly authorized
officer of the party against whom such modification or waiver is sought.
21. Entire Agreement.
This Agreement and the Additional Agreements shall constitute the
entire agreement of the parties with respect to the subject matter of this
Agreement and this Agreement will be attached to the Joint Venture Contract and
Articles of Association.
22. Translation.
The parties acknowledge that a Chinese translation of this Agreement
is being executed by the parties on the date hereof. In interpreting this
Agreement, the English version and the Chinese version shall be given equal
weight. There shall be signed four (4) copies of this Agreement in Chinese and
four (4) copies in English. Each party shall receive one (1) copy in English
and one (1) copy in Chinese.
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IN WITNESS WHEREOF, the parties have caused their respective
representatives to sign and execute this Agreement in counterpart and each party
holds one copy.
JIANGXI CHANGJIANG CHEMICAL HONG XXXX XXX HING (CHINA)
PLANT OF CHINA DEVELOPMENT CO., LTD.
By /s/ Xxxx-Xxxxx Xxx By /s/ Xxxxxxx C.H. Ma
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Its President Its Managing Director
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XXXXXXXX, INC. JIUJIANG FLEX CO., LTD.
By /s/ Xxxxxx Xxxxxxxxx By /s/ Xxxxxx Xxxxxxxxx
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Its V.P./Sales & Marketing Its Vice Chairman
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By /s/ Xxxx-Xxxxx Xxx
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By /s/ Xxxxxxx C.H. Ma
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