CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 and 240.24b-2
JOINT VENTURE AGREEMENT
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between
HANIL TELECOM CO., LTD.
and
VALENCE TECHNOLOGY B.V.
on
JULY 10, 1996
THIS AGREEMENT, entered into as of July 10, 1996 ("Effective Date") by and
between Valence Technology B.V. with offices at ▇▇▇▇▇▇ Gebouw, ▇▇▇▇▇▇▇▇▇▇▇
▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("Valence") and Hanil Telecom Co.,
Ltd., with offices at Wooduk ▇▇▇▇., ▇▇▇-▇ ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇,
▇▇▇▇▇ ("Hanil").
WHEREAS, Valence has the knowledge, expertise and technology to design,
develop, manufacture and sell solid polymer electrolyte batteries, and
Valence owns or has rights to certain patents, trademarks, know-how,
technology and other intellectual property related to the design,
manufacture, and sell such batteries, and the laminates that are used in such
batteries;
WHEREAS, Hanil, through its affiliates, has the knowledge, expertise and
technology to design, develop, manufacture and sale of products that can
incorporate solid polymer electrolyte batteries;
WHEREAS, Hanil will form a company in Korea for the purpose of carrying on
the business of designing, manufacturing, marketing, selling, repairing,
installing, maintaining, exploiting, applying, distributing and dealing in
products that use such batteries;
WHEREAS, Hanil desires to invite the participation of Valence in such a
company in order to obtain new capital and technology from Valence, relating
to the manufacture of solid polymer electrolyte batteries, and Valence is
willing to participate as shareholders in the ownership and operating of such
a company;
WHEREAS, the parties hereto in order to give effect to the aforesaid have
agreed to enter into this Agreement and accordingly are desirous of
regulating their relationship inter se as shareholders of the joint venture
company and the activities of the joint venture company in the manner
hereinafter described.
NOW, THEREFORE, In consideration of the mutual covenants and promises herein
set forth, Hanil and Valence agree as follows:
1. DEFINITIONS
1.1 AFFILIATE shall mean any corporation, association or other legal entity
which directly, or indirectly controls Hanil or Valence, or is controlled by
Hanil or Valence, or is under common control of Hanil or Valence, where the
term "control" means the power and ability to direct the management and
policies of the controlled enterprise through ownership of voting shares of
the controlled enterprise, or by contract or otherwise.
1.2 APPLICATIONS shall mean any application into which the Batteries may be
incorporated, except for those applications for which Valence has already
granted an exclusive license to another party, such as automotive, traction
and utility load leveling markets licensed to General Motors, and
personalized lighting systems and uninterruptable power supplies licensed to
Goldtron Ltd.
1.3 BATTERIES shall mean the advanced rechargeable solid polymer electrolyte
batteries manufactured by Hanil Valence Co. utilizing Laminates based on the
solid polymer electrolyte technology owned and licensed by Valence.
1.4 BATTERY LAMINATE SUPPLY AGREEMENT shall mean the agreement to be entered
into between Hanil Valence Co. and Valence.
1.5 BOARD shall mean the board of directors of Hanil Valence Co.
1.6 GOVERNMENT APPROVAL shall mean of this Agreement, and other Transaction
Documents, and the parties performance under the Agreement and other
Transaction Documents ("Agreements and Performance"), such approval of or
confirmation or consent to the Agreements and Performance together with such
license, permits, or other permissions reasonably required for the
Page 2
Agreements and Performance, all as the statutes, decrees, regulations, and
rules of governmental authority within Korea (collectively "Legal
Authority"), may require to be obtained in connection with the Agreements and
Performance from such Legal Authority or from political subdivisions thereof.
Wherever "Government Approval" is used herein, it shall be interpreted and
construed to include the requirement that such approval be in form and
substance acceptable to the parties hereto.
1.7 HANIL INDIVIDUAL SHAREHOLDER shall mean the corporations, associations,
legal entities and/or individuals listed in Hanil Shares Ownership Exhibit,
attached hereto as an exhibit.
1.8 HANIL VALENCE CO. shall mean the Korean company Hanil Valence Co., Ltd.
1.9 LAMINATES shall mean cathode, separator and anode laminates, or films,
of the Battery, produced exclusively by Valence.
1.10 LICENSE AND SUPPORT AGREEMENT shall mean the agreement to be entered
into between Hanil Valence Co. and Valence.
1.11 TERRITORY shall mean Korea.
1.12 TRANSACTION DOCUMENTS shall mean this Agreement, the License and
Support Agreement, the Battery Laminate Supply Agreement and any other
document contemplated in this Agreement or entered into by the parties or
between each party and Hanil Valence Co. in connection with this Agreement.
1.13 US$ shall mean the lawful currency of the United States of America.
1.14 WON shall mean the lawful currency of Korea.
2. JOINT VENTURE COMPANY FORMATION
2.1 Within thirty (30) days of the Effective Date of this Agreement, Hanil
shall form a new Korean company to become, under the name "Hanil Valence Co.,
Ltd."
2.2 The Articles of Incorporation of Hanil Valence Co. shall be as mutually
agreed upon by the parties.
2.3 Hanil shall cause Hanil Valence Co. to enter into the License and
Support Agreement, and the Battery Laminate Supply Agreement within sixty
(60) days of the Effective Date of this Agreement.
3. REORGANIZATION
3.1 A purpose of this Agreement is to provide for the restructure of
ownership and operation of Hanil Valence Co. by Valence and Hanil. Further,
it is the intention of Valence and Hanil that they will work together in good
faith within reasonable commercial expectations and requirements to promote
the Business.
3.2 Following the Effective Date but no later than Valence's initial
subscription pursuant to Article 4.1 below, Hanil shall cause Hanil Valence
Co. to be reorganized as a joint venture company in accordance with the
Foreign Capital Inducement Act, other relevant laws of Korea and this
Agreement.
3.3 Hanil Valence Co. shall be a joint stock company (Chusikhoesa) named in
Korean "Chusikhoesa Hanil Valence," and in English "Hanil Valence Co., Ltd."
3.4 The business objects of Hanil Valence Co. shall be as follows:
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CONFIDENTIAL TREATMENT REQUESTED
3.4.1 the design, application, manufacture, distribution and sale
of the Battery utilizing Laminates supplied by Valence, [
] for Applications in the
Territory;
3.4.2 foreign trade business for the importation of raw materials
and manufacturing facilities/equipment; and
3.4.3 any and all acts, things, business and activities that are
related, incidental or conducive directly or indirectly to the
attainment of the foregoing object.
3.5 Within thirty (30) days of the Effective Date hereof, Hanil shall cause
the Articles of Incorporation of Hanil Valence Co. to be amended in such form
to be agreed by Valence and Hanil. In case of any conflict between the
provisions of this Agreement and the Articles of Incorporation of the Hanil
Valence Co., the provisions of this Agreement shall prevail.
4. REPRESENTATIONS AND WARRANTIES
4.1 Hanil hereby represents and warrants that:
4.1.1 The total number of shares of Hanil Valence Co. authorized
for the issuance is one million six hundred thousand (1,600,000)
shares of common stocks having a par value of five thousand won
(Won 5,000) each.
4.1.2 The total number of shares of Hanil Valence Co. issued and
outstanding at the time of incorporation is four hundred thousand
(400,000) shares of common stock having a par value of five
thousand won (Won 5,000) each, for a paid-in capital of two billion
won (Won 2,000,000,000).
4.1.3 The number of shares owned by the Hanil Individual
Shareholders is as listed in Hanil Shares Ownership Exhibit, and
the Hanil Individual Shareholders shall collectively subscribe to
those shares for two billion won (Won 2,000,000,000), as paid-in
capital. All the shares owned by the Hanil Individual Shareholders
must be controlled and voted as single block of shares by Hanil.
Since, other than Hanil, the Hanil Individual Shareholders are not
parties to this Agreement, Hanil shall take complete responsibility
that the Hanil Individual Shareholders abide by all terms of this
Agreement and shall indemnify and hold harmless Valence from any
and all damages and other expenses that may arise from any action
by the other Hanil Individual Shareholders.
4.1.4 All of the assets and the liabilities of Hanil Valence Co.
as of the date of Valence's initial subscription are as per the
balance sheet, profit and loss statement and list of assets, which
shall be prepared and delivered to Valence as of the date of
Valence's initial subscription of its shares.
4.2 Hanil hereby agrees that in the event there are any shortages in the
total assets described in the said balance sheet or if there are any
liabilities or claims of third parties which are not disclosed in the balance
sheet, Hanil shall jointly and severally make such deficits good and settle
any of such liabilities and claims at their own cost and expense. Hanil
hereby commits that there will be no changes in assets and liabilities of
Hanil Valence Co. from the Effective Date to the date of Valence's initial
subscription of its shares, except such changes as normally occur in the
ordinary operation of a business. Hanil declares and promises that any and
all of the assets are and will be free of liens, encumbrances, leases,
ownership of third parties, particular claims, and limitations or threatened
limitations resulting either from earlier agreements or from laws or
regulations in force in Korea as of the date of Valence's initial
subscription of its shares, except as disclosed in the above balance sheet,
and except as required for the normal and ordinary operations of Hanil
Valence Co.
Page 4
5. INCREASE OF CAPITAL AND PARTICIPATION
5.1 No later than ninety (90) days following the Effective Date, Hanil shall
cause Hanil Valence Co. to increase its paid-in capital to four billion won
(Won 4,000,000,000) and issue four hundred thousand (400,000) new shares of
common stock, which new shares shall be subscribed solely by Valance at the
par value. Provided, however, that the foregoing subscription of Valence
shall be subject to the satisfaction of following conditions;
5.1.1 all necessary Government Approvals have been obtained,
including approvals on this Agreement, the License and Support
Agreement, and any tax privileges available under the Foreign
Capital Inducement Act of Korea; and
5.1.2 The revision of the Articles of incorporation of Hanil
Valence Co. to both parties satisfaction.
5.2 One (1) year after the Effective Date, or sooner upon mutual agreement
of the parties, Valence and Hanil shall cause Hanil Valence Co. to increase
its paid-in capital to eight billion won (Won 8,000,000,000) and issue an
additional eight hundred thousand (800,000) new shares of common stock, for a
total of one million six hundred thousand (1,600,000) shares of common stock,
which new shares subscribed equally by Valence and Hanil at the par value.
The detailed schedule for said subscription shall be as agreed upon between
the parties.
5.3 Upon the completion of subscriptions set forth in sections 5.1 and 5.2
above, the equity ownership and the shareholding ratio of Valence and Hanil
shall be as follows:
Valence 800,000 shares 4,000,000,000 Won 50%
Hanil 800,000 shares 4,000,000,000 Won 50%
___________________________________________________________
Total 1,600,000 shares 8,000,000,000 Won 100%
5.4 All shares issued by Hanil Valence Co. shall be common shares registered
in nominative form evidenced by share certificates bearing a legend as
follows:
"This certificate is held subject to the terms of an agreement
between Valence Technology B.V. and certain local entities referred
to as Hanil in the aforementioned agreement, a copy of which is on
file at the principal office of the Company. Any transfer of
shares in violation of aforementioned agreement shall be
ineffective against the Company; and any violation of this
restriction may result in termination of the aforementioned
agreement and in the liquidation of the Company."
5.5 It is the firm intention of the parties that their ownership of Hanil
Valence Co. and its stock shall always be equal. Any change in the equal
ownership of Hanil Valence Co. and its stock shall only be effective upon
unanimous approval of the Board and shareholders. If a change in this equal
ownership is so approved and additional shares are created, the following
terms shall apply:
5.5.1 Valence and Hanil shall have preemptive rights in each
additional issue of shares in Hanil Valence Co. in proportion to
their existing shareholdings at the time of issuance.
5.5.2 Should any shareholder not wish, or not be able to take up
and pay for its proportionate shares of any such additional issue
of shares, that shareholder shall immediately offer its rights in
writing to the other shareholder. In the event offered shares have
not been taken up by other party within thirty (30) days following
its offer, such shares shall be disposed in accordance with the
resolution of the Board.
5.5.3 However, prior to Hanil offering such shares in section
5.5.2 to Valence, any such Hanil Individual Shareholder may first
offer its rights to the other Hanil Individual Shareholders in
proportion the total shareholding of such other members in Hanil
Valence Co., and the Hanil Individual Shareholders shall be free to
alter their respective proportions of shareholding within the fifty
percent (50%) shareholding allotted to the Hanil Individual
Shareholders as a
Page 5
group. Only if no other Hanil Individual Shareholders agrees to
take up the shares of that Hanil Individual Shareholders will such
shares be offered to Valence.
5.5.4 If Valence is not able to take up its proportionate share of
any additional issue of shares due to its failure to secure the
Government Approval for such subscription, Valence shall be
entitled to designate any person qualified acceptable to Hanil,
such acceptance shall not unreasonably be withheld, in its place to
take up the shares.
6. GOVERNMENT APPROVAL
6.1 After the execution of this Agreement, Hanil, with Valence's assistance
as required, shall take all necessary steps to obtain the Government Approval
required for the foreign investment by Valence pursuant to this Agreement,
including without limitation any tax privileges available under the Foreign
Capital Inducement Act of Korea. The parties shall cooperate fully with each
other, including providing necessary information, and shall furnish
satisfactory evidence of the obtaining of Government Approval. Valence shall
have a right of access to all correspondence and discussions with the Korean
authorities and the right to make representations or to be present when
representations are made to such authorities.
6.2 In the event that the Government Approval has not been obtained within
ninety (90) days after the Effective Date, either party shall have the right
and option, exercisable by notice in writing served upon the other party, to
declare this Agreement, and the License and Support, and Laminate Supply
Agreements, if executed, null and void and of no effect. In such event, each
of the parties hereto shall thereupon be relieved from any and all
obligations and commitments hereunder, and no party shall be liable to any
other on any account whatsoever, expect that if Valence has received the
license and support fee from Hanil Valence Co. and has not paid Hanil Valence
Co. for the subscribed shares, Valence shall return the fee to Hanil Valence
Co. The aforementioned period of ninety (90) days may be extended by mutual
agreement in writing by the parties.
6.3 If any of the provisions contained in this Agreement regarding the
restructure of Hanil Valence Co. should not be approved by the appropriate
authority, then the parties agree to make such amendments thereto as shall be
acceptable to the said appropriate authority, without prejudice to their
underlying purpose and intention for this Agreement, and are completely
acceptable to each party.
6.4 The expense directly relating to the obtaining of Government Approval on
the investment of Valence shall be borne by Hanil Valence Co., while the
expenses relating to the preparation, negotiation and execution of this
Agreement and other agreements supplementary hereto shall be borne by each
party which incurs such expenses. In the event Hanil fails to obtain the
approval of the Korean Government, such expenses relating the Government
Approval shall be born by Hanil.
7. TRANSFER OF SHARES
7.1 Without the written consent of the other party, neither party shall
sell, assign, transfer or otherwise dispose its shares of Hanil Valence Co.,
except in the case of a Hanil Individual Shareholder to:
7.1.1 another Hanil Individual Shareholder;
7.1.2 any direct-line descendant of such Hanil Individual Shareholder; or
7.1.3 an Affiliate of such Hanil Individual Shareholder,
or in case of Valence to an Affiliate of Valence. If Hanil or Valence is the
party so disposing of such shares, then such disposal shall be contingent on
that party's guarantee, to the other party, assuring
Page 6
that the Affiliate shall carry out all of that party's obligations under this
Agreement, and written agreement from the Affiliate assuming such obligations.
7.2 Any such a disposal permitted by section 7.1, other than by a party to
an Affiliate, shall be processed strictly in accordance with Article 335 to
Article 335-5 of the Commercial Code of Korea.
7.3 No party, or other Hanil Individual Shareholder, shall pledge,
hypothecate or otherwise apply collateral, or for any other purpose, or in
any other manner, encumber shares of Hanil Valence Co. such as could result
in an involuntary transfer or assignment of such shares to third parties,
unless consent to such pledge, hypothecation or other such application has
been received in writing from the other party.
7.4 Should a Hanil Individual Shareholder so dispose, or so encumber shares
of Hanil Valence Co. as prohibited by this section 7, Hanil shall do
everything in its power to correct the situation, and shall indemnify and
hold harmless Hanil Valence Co. and Valence from any and all damages and
other expenses that may arise from any action by the Hanil Individual
Shareholder or any other party, resulting from such prohibited disposal or
encumberance.
8. MEETINGS AND RESOLUTIONS OF SHAREHOLDERS
8.1 The Board shall decide the time and place for convening all meetings of
the shareholders except where Korean law provides otherwise, and notice
thereof shall be given as set forth in the Articles of Incorporation of the
Hanil Valence Co.
8.2 All actions and resolutions of the shareholders (except where a special
resolution of the shareholders is required by Korean law) shall be adopted by
the affirmative vote of a majority of the voting shares represented at a
meeting where more than fifty percent (50%) of the issued and outstanding
shares are represented. All Hanil shares, including all shares held by Hanil
Individual Shareholders, and all Valence shares voting at the meeting, must
be voted as a block by Hanil and Valence, respectively.
8.3 The chairman of the Board shall serve as the chairman of the
shareholder meetings. In the event the chairman of the Board cannot serve as
chairman of a shareholder meeting, a director nominated by the Board shall
serve as chairman of the shareholder meeting.
8.4 The agenda of the annual general shareholder meeting shall include the
following items:
8.4.1 annual financial statements including the official report of
the Statutory Auditor;
8.4.2 removal and appointment of directors;
8.4.3 appointment of the statutory auditor;
8.4.4 remuneration and severance pay for the directors and
statutory auditor; and
8.4.5 declaration of dividends.
9. BOARD OF DIRECTORS
9.1 Valence and Hanil shall exercise their respective voting rights in
Hanil Valence Co. and take such other steps as are necessary to ensure that:
9.1.1 the Board of Hanil Valence Co. shall consist of six (6)
members;
9.1.2 Valence and Hanil shall have the right to designate the
equal number of directors, and that initial three (3) directors
designated by Valence shall be elected on the date of Valence's
initial subscription to shares of Hanil Valence Co.;
Page 7
9.1.3 the Board shall select a president / representative director
of the Hanil Valence Co. and the parties shall cause the nomination
and election of the president / representative director by the
shareholders
9.1.4 the president / representative director shall serve as
president / representative director of Hanil Valence Co.
9.1.5 the term of office of each director shall be two (2) years;
and if (and only if) a party wishes to replace any of its nominated
directors with or without cause, the other party will vote
accordingly; provided, however, that if such dismissal is without
cause, the party proposing the dismissal shall indemnify and hold
harmless Hanil Valence Co., and the other party, for any and all
damages and other expenses that may arise from such action.
9.2 In case the position of a director of Hanil Valence Co. becomes vacant
for any reason. Valence and Hanil agree to cause their shares to be voted to
elect as a replacement a person nominated by the party who nominated the
person whose office is vacant.
9.3 The Board shall be responsible for the establishment of the business
policy and the supervision of the management of Hanil Valence Co. in
accordance with this Agreement, the Articles of Incorporation, and
resolutions of the shareholders. The day-to-day business matters shall be
carried out by the president / representative director, in accordance with
the Articles of Incorporation, resolutions of the shareholders, resolutions
of the Board, and any corporate regulations of Hanil Valence Co.
9.4 Meetings of the Board may be called by the president / representative
director whenever he or she deems necessary or at the request of any
director. Notice of Board meetings shall be given as set forth in the
Articles or Incorporation of Hanil Valence Co. The regular Board meeting
shall be convened four (4) times per each fiscal year.
9.5 All actions and resolutions taken at a meeting of the Board shall be
adopted by a majority vote of all Directors present at the meeting, except
that at least one (1) Board member appointed by each party must vote in favor
of the action or resolution for it to be adopted. At least one (1) Board
member appointed by each party shall be present to constitute a quorum for a
Board meeting. The chairman shall not have the right to cast a tie-breaking
vote.
9.6 The president / representative director shall serve as the chairman of
Board meetings, unless otherwise agreed by the parties.
9.7 The following corporate actions shall not be taken unless authorized in
advance by a resolution of the Board:
9.7.1 convening and determining the agenda of any general meeting
of shareholders;
9.7.2 authorization of any documents and supplementary schedules
thereto to be submitted to a meeting of shareholders;
9.7.3 election and dismissal of president / representative
director;
9.7.4 establishing, relocating or closing of subsidiaries,
branches, plants or any other facility of Hanil Valence Co.;
9.7.5 adopting, amending or repealing any company major
regulation;
9.7.6 issuance of new shares;
9.7.7 disposal of unsubscribed or odd shares;
9.7.8 transfer of shares;
Page 8
9.7.9 issuance of debentures or convertible bonds;
9.7.10 issuance of bond with warranty;
9.7.11 acquisition of any license or other use of technology which
costs in excess of one hundred thousand dollars (US$100,000.00), or
the Won equivalent or in deviation of the annual budget;
9.7.12 acquisition or sale of any assets with a value in excess of
two hundred million won (Won 200,000,000) and in deviation of the
annual budget;
9.7.13 any of the following transactions in an amount in excess of
five hundred million won (Won 500,000,000):
9.7.13.1 borrowing funds;
9.7.13.2 pledging, mortgaging or otherwise encumbering
any assets (tangible or intangible) as security for loans
or otherwise; and
9.7.13.3 incurring any other commitment, contractual or
otherwise, other than in the normal course of business;
9.7.14 any making of loans;
9.7.15 recommending to the shareholders any merger or sale of all,
of substantially all, of the whole of the assets, undertaking, or
business of Hanil Valence Co.
9.7.16 recommending to the shareholders any sale of any major
asset (tangible or intangible);
9.7.17 recommending to the shareholders dissolution or
liquidation of any business of Hanil Valence Co.;
9.7.18 recommending to the shareholders any change in the
business activities of Hanil Valence Co.;
9.7.19 recommending to the shareholders any diversification of
the existing business;
9.7.20 recommending to the shareholders any changes to the
Articles of Incorporation of Hanil Valence Co.;
9.7.21 acquisition of a company, or any portion, or shares in a
company;
9.7.22 selecting, hiring, discharging, and setting of
compensation of officers over the level of department chief
"Bujang" in Korean), upon the recommendation of the president /
representative director, including those who are responsible for:
9.7.22.1 manufacturing, operations (i.e. Chief
Operating Officer, Vice President of Manufacturing);
9.7.22.2 finance (i.e. Chief Financial Officer);
9.7.22.3 engineering, research and development (i.e.
Chief Technical Officer, Vice President of Engineering,
Vice President of Research and Development); and
9.7.22.4 sales, marketing (i.e. Vice President of
Marketing and Sales);
9.7.23 approval of annual budget and business plans;
Page 9
9.7.24 any matters affecting this Agreement or other
agreements executed by Hanil Valence Co. and its shareholders,
including the Affiliates of such shareholder; and
9.7.25 election of outside independent accounting firm.
10. STATUTORY AUDITOR
Hanil Valence Co. shall have one (1) statutory auditor, who shall be elected
at a shareholders meeting and perform the duties as provided in the Articles
of Incorporation and in accordance with the Korean Commercial Code. The term
of office of the statutory auditor shall commence from the date of acceptance
of office and expire at the close of the ordinary general meeting of
shareholders convened with respect to the last fiscal year which ends on or
before a date two (2) years from the date of acceptance of office.
11. FISCAL YEAR AND ACCOUNTING RECORDS
11.1 The fiscal year of Hanil Valence Co. shall commence on January 1 and
end on December 31 of each year. Provided that the first fiscal year shall
commence on the date of incorporation and end on December 31 of the same year.
11.2 Hanil Valence Co. shall maintain accounting books, records and
supporting documents in accordance with generally accepted accounting
principles and practices in Korea. Hanil Valence Co. shall also provide its
unaudited quarterly report of operation to each of its shareholders no later
than thirty days (30) days after each calendar quarter. The unaudited
quarterly report of operation to be delivered to Valence shall be prepared in
conformity with the accounting principles and practices of Valence and United
States Generally Accepted Accounting Principles ("US-GAAP").
11.3 Immediately upon the end of each fiscal year, Hanil Valence Co. shall
submit to the shareholders the balance sheet and profit and loss statement
prepared both in the Korean and English languages. Further, Hanil Valence
Co. shall keep its accounting books and records at its head office for
inspection by the shareholders or their representatives.
11.4 Hanil Valence Co., at its own expense, shall be audited annually by an
outside independent audit firm. Such firm shall provide the parties with a
financial report in English and Korean languages, in accordance with
generally accepted accounting principles of Korea and in conformity with the
account principles and practices of Valence and US-GAAP.
12. COMPENSATION OF DIRECTORS AND STATUTORY AUDITOR
12.1 Unless mutually agreed otherwise, only directors of Hanil Valence Co.,
who are also employees of Hanil Valence Co. shall be compensated. The other
Board members and the statutory auditor shall only be reimbursed for such
travel and other expenses as are reasonably incurred in their attendance of
Board meeting.
12.2 Other than the president / representative director, directors who are
also employees of Hanil Valence Co. may only serve as part-time employees.
Should such a director / employee become a full-time employee, then that
director shall immediately resign from the Board. The Board shall determine
the compensation of any such part-time director / employees.
12.3 Other than the president / representative director, director /
employees only may serve in such a dual capacity during the first two (2)
years from the Effective Date of this Agreement. At the end of two (2)
years, any such director / employee shall either resign from the Board or
shall terminate their employment with Hanil Valence Co.
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CONFIDENTIAL TREATMENT REQUESTED
13. INDEBTEDNESS AND ADDITIONAL CAPITALIZATION
13.1 Without any additional consideration, Hanil shall provide thirty-two
billion won (Won 32,000,000,000) in loan guarantees from Hanil to Hanil
Valence Co.
13.2 After Hanil Valence Co. has used all the loan guarantees provided by
Hanil under section 13.1, the parties hereto agree that in the event any
additional working capital is required by Hanil Valence Co., such working
capital shall be met, either by the increase of paid-in capital, by direct
shareholder loan or by providing bank guarantees for the favor of Hanil
Valence Co., always subject to the mutual agreement of the parties and in
proportion to their respective shareholding ratio.
13.3 While the parties have no current expectation that they will do so,
should the parties mutually agree that additional capitalization is required,
the parties shall contribute equally to any such additional capitalization in
order to maintain the equal ownership of Hanil Valence Co.
14. VARIOUS UNDERTAKINGS
14.1 Hanil Valence Co. shall have the right to make, have made, use and sell
Batteries for Applications in the Territory.
14.2 Hanil shall use its best efforts to procure suitable premises on terms
and conditions acceptable to Hanil Valence Co. for the purpose of
manufacturing the Batteries, however, the setting up of any manufacturing
plants in Korea shall be at Hanil Valence Co.'s sole cost and expense.
14.3 Hanil shall use its best endeavors to procure the relevant personnel
required by Hanil Valence Co. in respect of the management, administration
and operations of Hanil Valence Co. as well as the marketing of Hanil Valence
Co.'s products.
14.4 The parties acknowledge that other, potentially broader, business
opportunities may arise in the future, and either party may raise such
opportunities with the other party. In such an event, the parties may
mutually agreed to alter this Agreement, if necessary, to pursue such
opportunities.
15. DIVIDEND POLICY
15.1 The dividends of Hanil Valence Co. shall be such as shall be
recommended by the Board, to the shareholders from time to time who shall act
in the best interests of Hanil Valence Co. when making any recommendations
therefore it being the intention of the parties to distribute profits by way
of dividends subject to commercial necessity for reinvestment in Hanil
Valence Co. and subject to such method of distribution being to the mutual
advantage of the shareholders.
15.2 Should the payment of dividends to Valence be restricted by the Korean
Government in any way, Valence shall have the right to terminate this
Agreement, as well as the License and Support Agreement and the Laminate
Supply Agreement, if the amount restricted is equal to, or in excess of, the
equivalent of [ ] and the
amount has been restricted for at least six (6) months.
16. PAYMENTS
16.1 Any and all cash distributions or remittances of any kind, including,
but not limited to dividends, damages for breach of this Agreement or other
Transaction Documents, and distributions which may be made upon liquidation,
dissolution, or reorganization, which may be payable to Valence by Hanil or
Hanil Valence Co., shall be paid in United States Dollars, or other form
elected by Valence, and remitted to such bank as may reasonably be designated
by Valence.
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16.2 If, for any reason, Government Approval cannot be obtained by Hanil or
Hanil Valence Co., for any such payment, Hanil shall provide for such payment
in a manner acceptable to Valence.
17. TERM AND TERMINATION
17.1 This Agreement shall continue in effect until terminated pursuant to
the provisions of this Agreement or by mutual agreement of the parties.
17.2 A party shall be deemed to have breached or defaulted if;
17.2.1 any representation, warranty or statement by such party in any
Transaction Document or in any document delivered under any of them is not
complied with or is or proves to have been incorrect in any material
respect when made; or
17.2.2 such party does not perform or comply with any one or more of its
material obligations under any Transaction Document and such party in
breach shall fail to rectify that breach within sixty (60) days of written
notice of breach being given to that party in the terms of this Section.
17.3 In the event a party commits a material breach or default, as described
above in Section 17.2, the other party hereto shall, without prejudice to any
other rights and remedies such party may have, be entitled by notice in
writing to the party in breach or default to terminate this Agreement
forthwith as against such party and thereupon such defaulting party shall
transfer, at no cost, all of its shares in Hanil Valence Co. to the other
party and shall cause any directors appointed by such party to resign from
office.
17.4 Save as hereinafter provided, Hanil or Valence shall be entitled to
forthwith terminate this Agreement if the License and Support Agreement, or
Battery Laminate Supply Agreement, is terminated or ceases to be in full
force and effect for any reason whatsoever and without prejudice to any other
rights and remedies. If the License and Support Agreement, or Battery
Laminate Supply Agreement, was terminated because of a breach or default by
Hanil or Hanil Valence Co., then Hanil Valence Co. shall immediately be
liquidated and any surplus proceeds distributed to the shareholders. If,
however, the License and Support Agreement, or Battery Laminate Supply
Agreement, was terminated because of a breach or default of Valence, then
Valence shall transfer, at no cost, all of its shares in Hanil Valence Co. to
Hanil and shall cause any directors appointed by Valence to resign from
office.
17.5 In the event that a party becomes insolvent, dissolves, or other wise
ceases to exist, this Agreement shall immediately terminate. Further, in
such an event, Hanil Valence Co. shall be immediately and automatically
liquidated and dissolved, with its surplus assets (if any) upon such
liquidation distributed to the shareholders.
17.6 The termination of this Agreement from any cause shall not release any
party hereto from any liability which at the time of termination has already
accrued to any party hereto, or which thereafter may accrue in respect of any
act or omission prior to such termination.
17.7 In the event of any termination of this Agreement, regardless of cause
or breach by either party, the License and Support Agreement and Battery
Laminate Supply Agreement shall immediately be terminated.
17.8 If Hanil does not receive all necessary approvals from the Korean
government within ninety (90) days of the Effective Date of this Agreement,
then this Agreement, the License and Support Agreement and Laminate Supply
Agreement shall immediately be terminated.
17.9 In the event that this Agreement is terminated, for any reason, and
Hanil Valence Co. survives, according to the terms of this Agreement, then
the party who retains ownership shall immediate change the name of Hanil
Valence Co. to remove the other party's name from the joint
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venture company's name (i.e. if Hanil retained ownership, it would remove
"Valence" from "Hanil Valence Co., Ltd.).
18. GOOD FAITH AND RELATIONSHIP BETWEEN PARTIES
18.1 In entering into this Agreement the parties hereto recognize that it is
impracticable to make provisions for every contingency that may arise in the
course of the performance thereof. If by reason of any unforeseen occurrence
or development the operation of this Agreement is likely to cause any
inequitable hardship to any of the parties hereto, the parties hereto shall
negotiate immediately in good faith as to what manner the terms and
conditions of this Agreement may be modified in order to provide an equitable
solution in so far as such is possible within the spirit of this Agreement
for such unforeseen occurrence or development.
18.2 The parties hereto hereby agree and declare that they will execute and
do all such acts and things as are necessary and within their power and
authority for the time being to carry into effect and/or to comply with the
provisions of this Agreement, including voting by Board members and the
voting of shares.
18.3 Nothing in this Agreement shall be construed to imply the existence of
a partnership between the parties hereto other than as shareholders in Hanil
Valence Co. in accordance with the terms of this Agreement. Valence and
Hanil each represent and warrant to the other that they have entered into no
contracts, nor are subject to any obligations, which prevent them from
entering into and performing this Agreement. It is understood and agreed
that Valence and Hanil are, and at all times shall remain, independent
contractors. At no time shall either Party represent to any third party that
it is the agent of the other for any reason whatsoever. Valence and Hanil
further covenant that no authorization shall be given to any employee to act
for the other Party to this Agreement. In no event shall either Party at any
time have authority to make any contracts or commitments on behalf of or as
an agent of the other or otherwise make use of its relationship with the
other, without the other's express consent in each instance.
19. LIMITATION OF LIABILITY
In no event shall either party be liable for any indirect, special,
incidental or consequential damages resulting from its performance or failure
to perform under this Agreement, whether due to a breach of contract, breach
of warranty, or such party's negligence.
20. CONFIDENTIALITY AND PUBLIC DISCLOSURE
20.1 "Confidential Information" shall mean that information of either party
which is disclosed to the other party or Hanil Valence Co. ("Recipient") by
reason of the parties' relationship under the Joint Venture Agreement, either
directly or indirectly in any written or recorded form, orally, or by
drawings or inspection of parts or equipment, and, either in writing and
marked as confidential or proprietary, or if oral, reduced to writing
similarly marked within thirty (30) days of disclosure.
20.2 Recipient shall receive and use the Confidential Information only for
performance of Recipient's obligations under the Joint Venture Agreement, and
will not use Confidential Information for any other purpose, and shall not
disclose such Confidential Information to any person or persons who do not
need to have knowledge of such Confidential Information in the course of
their employment.
20.3 It is expressly understood that Recipient shall not be liable for
disclosure of any Confidential Information if the same was in the public
domain at the time it was disclosed; was known to Recipient at the time of
disclosure; is disclosed with the prior written approval of the other party
hereto; is disclosed after five (5) years from the termination of the Joint
Venture Agreement; was independently developed by Recipient; or becomes known
to Recipient, on a non-confidential
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basis, from a source other than the other party hereto, without breach of the
Joint Venture Agreement or this letter by Recipient.
20.4 Each party hereto shall not, except as authorized by the Board, or
required by any applicable law or regulation of Korea, the Cayman Islands,
the Netherlands or the United States of America, reveal to any person, firm
or company any of the trade secrets, secret or confidential operations,
processes or dealings or confidential information of Hanil Valence Co. or any
information concerning the organization, business, finances, transitions or
affairs of Hanil Valence Co. which may come to his knowledge under the Joint
Venture Agreement and shall keep with complete secrecy all trade secrets and
other confidential information entrusted to it and shall not use or attempt
to use any such information in any manner which may injure or cause loss
either directly or indirectly to Hanil Valence Co. or its business or may be
likely to do so.
20.5 Valence and Hanil agree that the terms and conditions of the Joint
Venture Agreement and this letter shall not be disclosed to any other party
without the prior written consent of the other, which consent should not be
unreasonably withheld. Neither Valence nor Hanil shall publish or use any
advertising, sales promotion, press release or publicity matters relating to
the Joint Venture Agreement or this letter, without the prior written
approval of the other, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, either party may make such disclosures and
press releases as are necessary to meet its disclosure and regulatory
requirements under the laws, regulation and rules of Korea, the Cayman
Islands, the Netherlands or the United States of America.
20.6 Hanil Valence Co shall place all its employees and contractors under
appropriate confidential and intellectual property rights agreements prior to
such persons receiving any confidential information or doing any work for
Hanil Valence Co.
21. TRADEMARKS AND ADVERTISING, AND SAFETY
21.1 Hanil Valence Co. shall market and sell the Batteries for the
Applications under names, trade marks, trade names, designs, logos and get-up
and all other trademark rights relating to the marketing and sale of the
Batteries for the Applications shall belong to and be the absolute property
of the joint venture company.
21.2 Valence may require Batteries to be marked with the Valence logo and
name in a reasonable size so as to be noticed by a consumer of such
Batteries. Any promotional material produced by Hanil Valence Co. that
specifically references any Battery performance specifications or promotes
the additional value of such Batteries, shall also include a reference to
Valence and an appropriate promotional copy supplied by Valence, upon
Valence's request. Valence must approve any specifications prior to
publication or distribution outside Hanil Valence Co. or Valence.
21.3 Because Valence's logo and/or name will be on the Batteries, Valence
shall have right to stop manufacturing, sales and/or distribution of
Batteries, if, in Valence's sole judgement, there is any safety defect.
Additionally, Valence shall have the right to cause the joint venture company
to conduct a recall of Batteries, if such a defect is discovered in Batteries
already distributed outside the joint venture company. Hanil Valence Co.
shall install and maintain a lot tracking system adequate to allow an
effective and timely recall. Further, Valence shall review design and
quality of products to assure such products meet Valence's design and quality
standards.
21.4 Each party recognizes the right, title, and interest of the other party
and its affiliates in and to all service marks, trademarks, and trade names
used by the other and agrees not to use any of the other party's service
marks, trademarks, and trade names without the other party's express written
permission.
22. INTELLECTUAL PROPERTY CROSS-LICENSE
22.1 Valence and Hanil shall ▇▇▇▇▇ ▇▇▇▇▇ Valence Co. a non-exclusive,
world-wide, royalty-free, non-transferable, non-sublicensable, personal
license to all intellectual property created by
Page 14
Valence or Hanil during the term of the exclusive license that directly
relates to Joint Venture Markets, specifically not including intellectual
property related to the composition or manufacturing of Laminates.
22.2 Hanil Valence Co. shall grant Valence, and its Affiliates, a
non-exclusive, world-wide, royalty-free, non-transferable, non-sublicensable,
personal license to all intellectual property created by the joint venture
during the term of the exclusive license that directly relates to the
composition or manufacturing of Batteries or Laminates, or relates to
charging or other control circuitry suitable for Batteries. Notwithstanding
the forgoing, such license shall be assignable incident to the transfer of
all or substantially all of its, or an Affiliate's, business.
23. DISPUTE RESOLUTION
23.1 Each party agrees that any dispute between the parties, the Board, or
shareholders relating to this Agreement will first be submitted in writing to
a panel consisting of the Chairman of Hanil Cement Mfg. Co., Ltd. and the
Chairman of Valence Technology, Inc., who will promptly meet and confer in an
effort to resolve such dispute. Any decisions of the Chairmen, that are
jointly agreed to in writing, will be final and binding on the parties. In
the event the Chairmen are unable to resolve any dispute within thirty (30)
days after submission to them, either party may then refer such dispute to a
mediation in accordance with the immediately succeeding paragraph.
23.2 If the parties are unable to settle any dispute arising out of this
Agreement in accordance with the immediately preceding paragraph, then the
dispute shall be submitted to a mutually-acceptable neutral advisor for
mediation, fact-finding or other form of Alternate Dispute Resolution (ADR)
selected by the parties. Neither party may unreasonably withhold acceptance
of such an advisor, and his or her selection must be made within forty-five
(45) days after written notice by one party demanding the use of ADR. The
cost of such mediation or other ADR procedure shall be shared equally by the
parties.
23.3 Any dispute which is not so resolved between the parties within three
(3) months of the date of the initial demand by either party for mediation or
another ADR procedure may then be submitted to the courts for resolution.
The use of any ADR procedures will not be construed under the doctrines of
laches, waiver or estoppel to affect adversely the rights of either party.
Nothing in this section will prevent either party from resorting to judicial
proceedings if:
23.3.1 good faith efforts to resolve the dispute under these
procedures have been unsuccessful; or
23.3.2 interim relief from a court is necessary to prevent
serious and irreparable injury to one party or to the other.
24. GENERAL
24.1 Neither party may assign its rights or obligations under this Agreement
without the prior consent of the other, and any purported assignment without
such consent shall have no force or effect, except that a party may assign
this Agreement incident to the transfer of all or substantially all of its
business. Subject to the foregoing, this Agreement shall bind and inure to
the benefit of the respective parties hereto and their successors and assigns.
24.2 No failure or delay by either party to enforce or take advantage of any
provision or right under this Agreement shall constitute a subsequent waiver
of that provision or right, nor shall it be deemed to be a waiver of any of
the other terms and conditions of this Agreement.
24.3 Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which such
performance is prevented by any cause beyond its reasonable control. In the
event of any such delay the date of delivery or performance hereunder shall
be extended by a period equal to the time lost by reason of such delay.
Page 15
24.4 The validity, performance and construction of this Agreement shall be
governed by the laws of the State of New York, United States (excluding its
conflict of laws provisions). Notwithstanding the foregoing, the structure,
operation and management of Hanil Valence Co. shall be governed by the
substantive laws of Korea.
24.5 Each party hereto shall bear its own costs and expenses in respect of
the preparation, negotiation, finalize and execution of this Agreement and
the other agreements or documents contemplated herein.
24.6 Each party shall comply with all applicable laws in performing under
this Agreement.
24.7 All notices or communications to be given under this Agreement shall be
in writing and shall be deemed delivered upon hand delivery, upon
acknowledged telex or facsimile communication, or seven (7) days after
deposit in the mail, postage prepaid, by certified, registered or first class
mail, addressed to the parties at their addresses set forth above.
24.8 In the event that any provision of this Agreement is prohibited by any
law governing its construction, performance or enforcement, such provision
shall be ineffective to the extent of such prohibition without invalidating
thereby any of the remaining provisions of the Agreement.
24.9 The terms and conditions of this Agreement may not be superseded,
modified, or amended except in writing which states that it is such a
modification, and is signed by an authorized representative of each party
hereto. This Agreement shall not be modified, supplemented, qualified, or
interpreted by any trade usage or prior course of dealing not made a part of
the order by its express terms.
24.10 Section titles used herein are for reference only and shall not be for
purposes of interpretation.
24.11 This Agreement may be executed in several counterparts, each of which
shall be deemed an original and all of which shall constitute one and the
same instrument.
Page 16
24.12 This Agreement, including exhibits, and the other Transaction
Documents, constitutes the entire Agreement between the parties as to the
subject matter hereof, and supersedes and replaces all prior or
contemporaneous agreements, written or oral, regarding such subject matter,
and shall take precedence over any additional or conflicting terms which may
be contained in either party's purchase orders or order acknowledgment forms.
In the event of any conflict between the provisions of this Agreement and
the Articles of Incorporation of Hanil Valence Co., the provisions of this
Agreement shall prevail over the Articles of Incorporation.
ACCEPTED AND AGREED:
VALENCE TECHNOLOGY B.V. HANIL TELECOM CO., LTD.
By: By:
----------------------------------- ---------------------------------
signature of authorized representative signature of authorized representative
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------- -------------------------------------
printed name printed name
Managing Director
-------------------------------------- -------------------------------------
title title
-------------------------------------- -------------------------------------
date date
Page 17
CONFIDENTIAL TREATMENT REQUESTED
Hanil Shares Ownership Exhibit
The amount, price and percentage of Hanil's first, and second, subscriptions
shall be as follows:
Shares Cost in Won Percentage
-------------------------------------------------------------------------------
[
]
-------------------------------------------------------------------------------
Totals 400,000 2,000,000,000 100.00
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