<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-20028
VALENCE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0214673
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
301 Conestoga Way, Henderson, Nevada 89015
-----------------------------------------------------------
(Address of principal executive offices including zip code)
(702) 558-1000
-----------------------------------------------------------
(Registrant s telephone number, including area code)
-----------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
----- ----- ----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $0.001 par value 21,671,993 shares
----------------------------- -------------------------------
(Class) (Outstanding at August 6, 1996)
Page 1 of 12
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PAGES
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of
June 30, 1996 and March 31, 1996 . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the period from March 3, 1989 (date of inception)
to June 30, 1996 and for each of the three months
ended June 30, 1996 and June 25, 1995. . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the period from March 3, 1989 (date of inception)
to June 30, 1996 and for each of the three months
ended June 30, 1996 and June 25, 1995 . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . .11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .11
SIGNATURES
2
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
_____
June 30, March 31,
1996 1996
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 27,097 $ 24,569
Short-term investments 23,758 26,492
Accounts receivable 451 545
Interest receivable 334 444
Prepaids and other current assets 257 299
-------- ---------
Total current assets 51,897 52,349
Investments 2,999 5,790
Property, plant and equipment, net 11,081 11,752
Other assets 331 356
-------- ---------
Total assets $ 66,308 $ 70,247
-------- ---------
-------- ---------
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 2,137 $ 2,277
Accounts payable 2,121 1,251
Accrued expenses 4,955 6,180
Accrued compensation 1,579 1,360
-------- ---------
Total current liabilities 10,792 11,068
Long-term debt, less current portion 5,777 6,169
-------- ---------
Total liabilities 16,569 17,237
Contingencies (Note 3).
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value:
Authorized: 10,000 shares;
Issued and outstanding: none
Common stock, $0.001 par value:
Authorized: 50,000 shares;
Issued and outstanding: 21,672 and 21,665
shares at June 30, 1996 and March 31, 1996,
respectively 140,359 140,308
Deficit accumulated during the development stage (90,832) (87,638)
Cumulative translation adjustment 212 341
-------- ---------
Total stockholders' equity 49,739 53,010
-------- ---------
Total liabilities and stockholders'
equity $ 66,308 $ 70,247
-------- ---------
-------- ---------
The accompanying notes are an integral part of these
consolidated financial statements.
3
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
_____
Period
from
March 3,
1989
(date of
inception) Three Months Ended
through ----------------------
June 30, June 30, June 25,
1996 1996 1995
----------- -------- --------
Revenue:
Research and
development
contracts $ 21,605
----------
Costs and expenses:
Research and
development 60,782 $2,558 2,051
Marketing 2,539 67 214
General and
administrative 27,313 1,118 1,373
Purchase of
in-process
technology 8,212 - -
Investment in
Danish
subsidiary 3,489 - -
Special charges 18,872 - -
----------- -------- --------
Total costs and
expenses 121,207 3,743 3,638
----------- -------- --------
Operating loss (99,602) (3,743) (3,638)
Interest income 11,843 674 775
Interest expenses (3,073) (125) (281)
----------- -------- --------
Net loss $(90,832) $(3,194) $(3,143)
----------- -------- --------
----------- -------- --------
Net loss per share $ - $ (0.15) $ (0.16)
----------- -------- --------
----------- -------- --------
Shares used in
computing net loss per share - 21,669 20,116
----------- -------- --------
----------- -------- --------
The accompanying notes are an integral part of
these consolidated financial statements.
4
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
(unaudited)
_____
<TABLE>
<CAPTION>
Period from
March 3, 1989 Three Months Three Months
(date of inception) Ended Ended
through June 30, June 30,
June 30, 1996 1996 1995
------------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (90,832) $ (3,194) $ (3,143)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 17,579 1,270 1,043
Write-off of equipment 14,767 - (1,674)
Write-off of in-process technology 8,212 - -
Compensation related to stock options 1,447 26 -
Nonfat charge related to acquisition
of Danish subsidiary 2,245 - -
Changes in assets and liabilities:
Accounts receivable 638 94 (104)
Interest receivable (328) 110 84
Notes receivable (118) 25 -
Prepaid expenses and other current assets (1,215) 43 69
Accounts payable 2,020 870 (1,289)
Accrued liabilities (1,753) (1,007) (429)
------------------- ------------ ------------
Net cash used in operating activities (47,338) (1,763) (5,443)
------------------- ------------ ------------
Cash flows from investing activities:
Purchase of in-process technology (2,001) - -
Maturities of long-term investments (429,721) (32,632) (51,698)
Proceeds from long-term investments 402,963 38,157 57,869
Capital expenditures (36,190) (317) (281)
Other (222) - -
------------------- ------------ ------------
Net cash provided by (used in)
investing activities (65,170) 5,208 5,890
------------------- ------------ ------------
Cash flows from financing activities:
Property and equipment grants 4,011 (283) 222
Borrowings of long-term debt 15,502 - -
Payments of long-term debt:
Product development loan (482) - -
Shareholder and director (6,173) - -
Other long-term debt (9,271) (532) (846)
Proceeds from issuance of common stock,
net of costs 136,511 - -
------------------- ------------ ------------
Net cash provided by (used in)
financing activities 140,098 (815) (624)
------------------- ------------ ------------
Effect of foreign exchange rates on
cash and cash equivalents (493) (102) 186
Increase in cash and cash equivalents 27,097 2,528 9
Cash and cash equivalents, beginning of period - 24,569 16,602
------------------- ------------ ------------
Cash and cash equivalents, end of period $ 27,097 $ 27,097 $ 16,611
------------------- ------------ ------------
------------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
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VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
(unaudited)
_____
1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These interim condensed consolidated financial statements are unaudited but
reflect, in the opinion of management all normal recurring adjustments
necessary to present fairly the financial position of Valence Technology,
Inc. and Subsidiaries (the Company) as of June 30, 1996 and March 31, 1996,
its consolidated results of operations and cash flows for the period from
March 3, 1989 (date of inception) to June 30, 1996 and for each of the
three-month periods ended June 30, 1996 and June 25, 1995. Because all the
disclosures required by generally accepted accounting principles are not
included, these interim condensed consolidated financial statements should be
read in conjunction with the audited financial statements and notes thereto
in the Company's Annual Report on Form 10-K as of and for the year ended
March 31, 1996. The year end condensed consolidated balance sheet data as of
March 31, 1996 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The Company's current research prototype batteries do not meet all of the
specifications demanded by the marketplace, and the Company presently has no
products available for sale. To achieve profitable operations, the Company
must successfully develop, manufacture and market its products. There can be
no assurance that any products can be developed or manufactured at an
acceptable cost and with appropriate performance characteristics, or that
such products will be successfully marketed.
The results of operations and cash flows for the three-month periods ended
June 30, 1996 are not necessarily indicative of results of operations and
cash flows for any future period.
2. NET LOSS PER SHARE
The computation of net loss per share is based on the weighted average number
of common shares outstanding during the period. Common stock options and
warrants have not been included in the computation since their inclusion
would be antidilutive.
3. CONTINGENCIES
LITIGATION:
In May 1994, a series of class action lawsuits was filed in the United States
District Court for the Northern District of California against the Company
and certain of its present and former officers and directors. These lawsuits
were consolidated, and in September 1994 the plaintiffs filed a consolidated
and amended class action complaint. Following the Court's Orders on motions
to dismiss the complaint, which were granted in part and denied in part, the
plaintiffs filed an amended complaint in October 1995 ("Complaint"). The
Complaint alleges violations of the federal securities laws against the
Company, certain of its present and former officers and directors, and the
underwriters of the Company's public stock offerings, claiming that the
defendants issued a series of false and misleading statements, including
filings with the Securities and Exchange Commission, with regard to the
Company's business and future prospects. The plaintiffs seek to represent a
class of persons who purchased the Company's common stock between May 7, 1992
and August 10, 1994. The Complaint seeks unspecified compensatory and
punitive damages, attorney's fees and costs. On January 23, 1996, the Court
dismissed, with prejudice, all claims against the underwriters of the
Company's public stock offerings, and one claim against the Company and its
present and former officers and directors. On April 29, 1996, the Court
dismissed with prejudice all remaining claims against a present director and
limited claims against a former officer and director to the period when that
person was an officer. The Company believes that it has meritorious defenses
and intends to defend the lawsuit vigorously.
The ultimate outcome of these actions cannot presently be determined.
Accordingly, no provision for any liability or loss that may result from
adjudication or settlement thereof has been made in the accompanying
consolidated financial statements.
6
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4. RECENT ACCOUNTING PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires the Company to review
for impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
certain situations, an impairment loss would be recognized. It will be
effective for the Company's fiscal year 1997. The Company has studied the
implications of the statement, and based on its initial evaluation, does not
expect it to have a material impact on the Company's financial condition or
results of operations.
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans. The Company is currently following the requirements of
APB Opinion No 25, "Accounting for Stock Issued to Employees". The Company
plans to adopt SFAS No. 123 during fiscal 1997 utilizing the disclosure
alternative.
5. OTHER DEVELOPMENTS
In July, 1996, the Company, through its Dutch subsidiary, and Hanil Telecom
Co., Ltd. ("Hanil Telecom") signed an agreement to establish a joint venture
company to Korea to manufacture, package and distribute advanced rechargeable
solid polymer electrolyte batteries utilizing the Company's solid polymer
technologies for the Korean markets. Hanil Telecom is subsidiary of Hanil
Cement Mfg. Co., Ltd., a major conglomerate in Korea producing a wide variety
of products for the Korean market. Hanil Valence Co., Ltd. ("Hanil Valence
Co."), the joint venture company, will be located in a Korean facility and
has an initial capitalization of $5 million, to be increased to $10 million
within one year. All funds are to be provided to the joint venture by Hanil
Telecom. Hanil Telecom and the Company, through its Dutch subsidiary, each
hold a 50% stake of the company. Additionally, Hanil Telecom will provide $40
million in loan guarantees to Hanil Valence Co. It is anticipated that the
Company will supply Hanil Valence Co. with its proprietary laminates, from
which Hanil Valence Co. will manufacture batteries for the Korean market.
Additionally, Valence will supply the technology, initial equipment and
product designs and technical support out of its Northern Ireland facility.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company was founded in 1989 to develop and commercialize advanced
rechargeable batteries based on lithium and polymer technologies. Since its
inception, the Company has been a development stage company primarily engaged
in acquiring and developing its initial technology, manufacturing limited
quantities of prototype batteries recruiting personnel, and acquiring
capital. To date, other than insubstantial revenues from limited sales of
prototype batteries, the Company has not received any significant revenues
from the sale of products. Substantially all revenues to date have been
derived from a research and development contract with the Delphi Automotive
Systems Group ("Delphi," formerly the Delco Remy Division), and operating
group of the General Motors Corporation. The Company has incurred cumulative
losses of $90,832,000 from its inception to June 30, 1996.
The discussion and analysis below contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth herein
and in the Company's Annual Report on Form 10-K as of and for the year ended
March 31, 1996.
This Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the accompanying condensed
consolidated financial statements and notes thereto contained herein and
the Company's consolidated financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K as of and for the year ended
March 31, 1996.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 25, 1995.
During the three months ended June 30, 1996, the Company continued
development activities under a research and development agreement with
Delphi. Payments were generally made in accordance with the achievement of
certain milestones. No revenues were recognized during the first three months
of fiscal 1997 and 1996.
In September, 1994 the Company and Delphi signed a new five year agreement to
combine efforts in developing the Company's rechargeable solid state lithium
polymer battery technology. Under the agreement, Delphi and the Company
combined their research and development activities in a new facility in
Henderson, Nevada. The new facility is owned by the Company, with Delphi
paying a fee of $50,000 per month over the five year term of the new
agreement for access to the Company's research and development (of which
$150,000 and $200,000 were recognized during the first three months of fiscal
1997 and 1996, respectively, as an offset to research and product development
expenses). In addition, Delphi is paying a majority of the facility's
operating costs over the term of the new five year agreement. The Company is
treating both of these payments as an offset to research and development
expense.
Research and development expenses were $2,558,000 during the three months
ended June 30, 1996 as compared to $2,051,000 during the same period of
fiscal 1996. The increase between comparable periods was primarily due to
costs incurred to proceed with manufacturing product in the first quarter of
calendar year 1997.
Marketing expenses were $67,000 for the first quarter of fiscal year 1997, as
compared to $214,000 during the similar period of fiscal year 1996. The
comparative decrease is the result of a decrease in headcount and relocation
expenses.
General and administrative expenses decreased to $1,118,000 during the first
quarter of fiscal year 1997, down from $1,373,000 during the fiscal year 1996
comparable period. The decrease primarily reflects a reduction in legal and
relocation spending.
8
<PAGE>
Interest income decreased to $674,000 during the first quarter of fiscal year
1997, as compared to $775,000 during the prior fiscal year's same period. The
difference is a result of fewer funds available for investment purposes.
Interest expense was $125,000 during the first quarter of fiscal year 1997,
as compared to $281,000 during the prior fiscal year's comparable period.
This decrease is a result of reduction in long-term debt outstanding as well
as one-off adjustments to the IDB loan.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $1,763,000 net cash for operating activities during fiscal
year 1997's first three months whereas it used $5,443,000 during the first
three months of fiscal year 1996, a decrease between comparable periods of
$3,680,000. This net decrease primarily resulted from a reduction in special
charges partially offset by an increase in accounts payable.
During the three months ended June 30, 1996, the Company provided $5,208,000
net cash from investing activities compared to $5,890,000 provided during the
first three months of fiscal year 1996, a decrease of $682,000 between
comparable periods. The decrease primarily was a result of an increase in
operating funds required.
The Company used $815,000 net cash from financing activities during fiscal
year 1997's first three months versus using $624,000 during the first three
months of fiscal year 1996. This decrease resulted from lower grant levels.
As a result of the above, the Company had a net increase in cash and cash
equivalents of $2,528,000 during the fiscal year 1996's first three months,
whereas it had a net increase of $9,000 during the same period of fiscal year
1996.
The Company's $2,000,000 working capital line of credit is available through
March, 1997. The working capital line collateralizes outstanding letters of
credit, which reduce borrowings otherwise available under the line. As of
June 30, 1996, there are no outstanding letters of credit.
During fiscal year 1994, the Company through its Dutch subsidiary, signed an
agreement with the Northern Ireland Industrial Development Board (IDB) to
open an automated manufacturing plant in Northern Ireland in exchange for
capital and revenue grants from the IDB. The Company has also received offers
from the IDB to receive additional grants. The grants available under the
agreement and offers, for an aggregate of up to L27,555,000, generally become
available over a five year period through October 31, 1998. As of June 30,
1996, the Company had received grants aggregating L3,978,050 reducing
remaining grants available to L23,576,950 (US. $36,612,000 as of June 30,
1996).
As a condition to receiving funding from the IDB, the subsidiary must
maintain a minimum of L12,000,000 in debt or equity financing from the
Company. Aggregate funding under the grants is limited to L4,035,000 until
the Company has recognized $4,000,000 in aggregate revenue from the sale of
its batteries produced in Northern Ireland. Given that the Company has no
agreements to supply batteries using its current technology, there are no
assurances that the Company will be able to meet the agreement's revenue test.
The amount of the grants available under the agreement and offers is
primarily dependent on the level of capital expenditures made by the Company.
Substantially all of the funding received under the grants is repayable to
the IDB if the subsidiary is in default under the agreement and offers, which
includes the permanent cessation of business in Northern Ireland. Funding
received under the grants to offset capital expenditures is repayable if
related equipment is sold, transferred or otherwise disposed of during a four
year period after the date of grant. In addition, a portion of funding
received under the grants may also be repayable if the subsidiary fails to
maintain specified employment levels for the two year period immediately
after the end of the five year grant period. The Company has guaranteed the
subsidiary's obligations to the IDB under the agreement.
There can be no assurance that the Company will be able to meet the
requirements necessary for it to receive and retain grants under the IDB
agreement and offers.
The Company expects that its existing funds as of June 30, 1996, together
with the interest earned thereon, will be sufficient to fund the Company's
operations through the end of fiscal year 1997. The Company anticipates that it
9
<PAGE>
may need substantial additional funds in the future for capital expenditures,
research and product development, marketing and general and administrative
expenses and to pursue joint venture opportunities. The Company's cash
requirements, however, may vary materially from those now planned because of
changes in the Company's operations, including changes in OEM relationships
or market conditions. There can be no assurance that funds for these
purposes, whether from equity or debt financing agreements with strategic
partners or other sources, will be available on favorable terms, if at all.
Forward looking statements involve a number of risks and uncertainties
including, but not limited to, market acceptance, changing economic
conditions, risks in product and technology development, effect of the
Company's accounting policies and other risk factors detailed in the
Company's Securities and Exchange Commission filings.
RECENT ACCOUNTING PRONOUNCEMENTS
During March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires the Company to review
for impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
certain situations, an impairment loss would be recognized. It will be
effective for the Company's fiscal year 1997. The Company has studied the
implications of the statement, and based on its initial evaluation, does not
expect it to have a material impact on the Company's financial condition or
results of operations.
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans. The Company is currently following the requirements of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" while it
studies the implications of SFAS No. 123 and evaluates the effect, if any, on
the financial condition and results of operations of the Company. SFAS No.
123 will be effective for the Company's fiscal year 1997.
OTHER DEVELOPMENTS
In July, 1996, the Company, through its Dutch subsidiary, and Hanil Telecom
Co., Ltd. ("Hanil Telecom") signed an agreement to establish a joint venture
company in Korea to manufacture, package and distribute advanced rechargeable
solid polymer electrolyte batteries utilizing the Company's solid polymer
technologies for the Korean markets. Hanil Telecom is subsidiary of Hanil
Cement Mfg. Co., Ltd., a major conglomerate in Korea producing a wide variety
of products for the Korean market. Hanil Valence Co., Ltd. ("Hanil Valence
Co."), the joint venture company, will be located in a Korean facility and
has an initial capitalization of $5 million, to be increased to $10 million
within one year. All funds are to be provided to the joint venture by Hanil
Telecom. Hanil Telecom and the Company, through its Dutch subsidiary, each
hold a 50% stake of the company. Additionally, Hanil Telecom will provide $40
million in loan guarantees to Hanil Valence Co. It is anticipated that the
Company will supply Hanil Valence Co. with its proprietary laminates, from
which Hanil Valence Co. will manufacture batteries for the Korean market.
Additionally, Valence will supply the technology, initial equipment and
product designs and technical support out of its Northern Ireland facility.
10
<PAGE>
PART II - OTHER INFORMATION
The discussion and analysis below, and throughout this report, contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from those projected or
suggested in the forward-looking statements as a result of the risk factors
set forth herein and in the Company's Annual Report on Form 10-K as of and
for the year ended March 31, 1996.
ITEM 5. OTHER INFORMATION
In July, 1996, the Company, through its Dutch subsidiary, and Hanil Telecom
Co., Ltd. ("Hanil Telecom") signed an agreement to establish a joint venture
company in Korea to manufacture, package and distribute advanced rechargeable
solid polymer electrolyte batteries utilizing the Company's solid polymer
technologies for the Korean markets. Hanil Telecom is subsidiary of Hanil
Cement Mfg. Co., Ltd., a major conglomerate in Korea producing a wide variety
of products for the Korean market. Hanil Valence Co., Ltd. ("Hanil Valence
Co."), the joint venture company, will be located in a Korean facility and
has an initial capitalization of $5 million, to be increased to $10 million
within one year. All funds are to be provided to the joint venture by Hanil
Telecom. Hanil Telecom and the Company, through its Dutch subsidiary, each
hold a 50% stake of the company. Additionally, Hanil Telecom will provide $40
million in loan guarantees to Hanil Valence Co. It is anticipated that the
Company will supply Hanil Valence Co. with its proprietary laminates, from
which Hanil Valence Co. will manufacture batteries for the Korean market.
Additionally, Valence will supply the technology, initial equipment and
product designs and technical support out of its Northern Ireland facility.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
Exhibit 11.1 Statement of Calculation of Net Loss Per Share
Exhibit 10.35 Joint Venture Agreement between Valence Technology
B.V. and Hanil Telecom Co., Ltd., dated as of
July 10, 1996.
Exhibit 10.36 Form of License and Support Agreement to be entered
into between Valence Technology B.V. and Hanil
Valence Co., Ltd.
Exhibit 10.37 Form of Battery Laminate Supply Agreement to be
entered into between Valence Technology B.V. and
Hanil Valence Co., Ltd.
Exhibit 10.38 Letter Agreement from the Company to Hanil Telecom
Co., Ltd.
b. REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended
June 30, 1996.
11
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EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NUMBER EXHIBIT PAGE NUMBER
- --------------------------------------------------------------------------------
11.1 Statement of Calculation of Net Loss Per Share xx
10.35(*) Joint Venture Agreement between Valence Technology xx
B.V. and Hanil Telecom Co., Ltd., dated as of
July 10, 1996.
10.36(*) Form of License and Support Agreement to be entered xx
into between Valence Technology B.V. and Hanil
Valence Co., Ltd.
10.37(*) Form of Battery Laminate Supply Agreement to be xx
entered into between Valence Technology B.V. and
Hanil Valence Co., Ltd.
10.38 Letter Agreement from the Company to Hanil Telecom xx
Co., Ltd.
- -------------------------------------------------------------------------------
(*) PORTIONS OF THE TEXT HAVE BEEN OMITTED. A SEPARATE FILING OF THE OMITTED
TEXT HAS BEEN MADE WITH THE COMMISSION AS PART OF REGISTRANT'S APPLICATION
FOR CONFIDENTIAL TREATMENT.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
VALENCE TECHNOLOGY, INC.
(Registrant)
Date: August 14, 1996 By: /s/ David Archibald
--------------------------------
David Archibald
Director of Finance
(Principal Financial and Accounting
Officer)
13
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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 and 240.24b-2
JOINT VENTURE AGREEMENT
- ------------------------------------------------------------------------------
between
HANIL TELECOM CO., LTD.
and
VALENCE TECHNOLOGY B.V.
on
JULY 10, 1996
<PAGE>
THIS AGREEMENT, entered into as of July 10, 1996 ("Effective Date") by and
between Valence Technology B.V. with offices at Hirsch Gebouw, Leidseplein
29, 1017 PS Amsterdam, The Netherlands ("Valence") and Hanil Telecom Co.,
Ltd., with offices at Wooduk Bldg., 832-2 Yuksam-Dong, Kangnam-Ku, Seoul,
Korea ("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
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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.
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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
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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
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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.;
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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;
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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;
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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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<PAGE>
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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<PAGE>
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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<PAGE>
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 grant Hanil Valence Co. a non-exclusive,
world-wide, royalty-free, non-transferable, non-sublicensable, personal
license to all intellectual property created by
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Valence or Hanil during the term of the exclusive license that directly
relates to Joint Venture Markets, specifically not including[
]
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 [
] 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.
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<PAGE>
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.
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<PAGE>
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
Melvern Slates
- -------------------------------------- -------------------------------------
printed name printed name
Managing Director
- -------------------------------------- -------------------------------------
title title
- -------------------------------------- -------------------------------------
date date
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<PAGE>
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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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 and 240.24b-2
LICENSE AND SUPPORT AGREEMENT
- ------------------------------------------------------------------------------
between
HANIL VALENCE CO., LTD.
and
VALENCE TECHNOLOGY B.V.
on
_____________, 1996
<PAGE>
THIS AGREEMENT, entered into as of ___________, 1996 ("Effective Date") by
and between Valence Technology B.V. with offices at Hirsch Gebouw,
Leidseplein 29, 1017 PS Amsterdam, The Netherlands ("Valence") and Hanil
Valence Co., Ltd., with offices at YoJin Tower, 713-6, PungDukChun-Ri,
SuJi-Eup, YongIn-Si, KyongGi-Do, Korea ("Hanil Valence Co.").
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 Valence Co. desires to enter the business of designing,
manufacturing, marketing, selling, repairing, installing, maintaining,
exploiting, applying, distributing and dealing in products that use such
batteries;
WHEREAS, Hanil Valence Co., initially having no technology or know-how of its
own on solid polymer electrolyte battery technology, desires to license from
Valence the certain technology and know-how, and obtain from Valence certain
support.
NOW, THEREFORE, In consideration of the mutual covenants and promises herein
set forth, Joint Venture Hanil Valence Co. and Valence agree as follows:
1. DEFINITIONS
1.1 AFFILIATED COMPANIES shall mean all subsidiaries, parent companies, and
subsidiaries of parent companies, where the party or parent owns at least
fifty percent (50%) of the subsidiary, or where the party's parent owns at
least fifty percent (50%) of the party.
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 Laminate
based on the solid polymer electrolyte technology owned by Valence.
1.4 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 Agreements
and Performance, all as the statutes, decrees, regulations, and rules of
governmental authority within Korea (collectively "Legal Authority"), may
require to be obtain 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.
1.5 INTELLECTUAL PROPERTY RIGHTS shall mean all copyright, patent rights,
trademark rights and all common law rights connected therewith and all other
intellectual property rights, and shall include rights to new inventions,
discoveries, works of authorship and improvements made during the term of
this agreement. Improvement shall mean any modification and/or innovation of
Batteries for Applications developed by a party during the term of this
Agreement, which is related to, or is useful in the commercial production of
Batteries for Applications.
1.6 LAMINATES shall mean cathode, separator and anode laminates, or films,
of the Battery, produced exclusively by Valence.
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CONFIDENTIAL TREATMENT REQUESTED
1.7 SUBSIDIARY shall mean a subsidiary, where the party owns at least fifty
percent (50%) of the subsidiary.
1.8 TERRITORY shall mean Korea.
1.9 TRANSACTION DOCUMENTS shall mean this 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 Telecom Co.,
Ltd., including the Joint Venture Agreement, in connection with this
Agreement.
1.10 US$ shall mean the lawful currency of the United States of America.
1.11 WON shall mean the lawful currency of Korea.
2. LICENSES
2.1 Valence hereby grants to Hanil Valence Co. a personal,
non-transferable, non-sublicensable license to all of Valence's Intellectual
Property Rights and know-how necessary to design, manufacture, use, sell, and
distribute Batteries, using Laminate supplied exclusively by
Valence [ ] for use in
Applications in the Territory. This license shall be exclusive in the
Territory.
2.2 Valence hereby grants to Hanil Valence Co. the right to manufacture,
assemble, fabricate and package Batteries, using Valence supplied Laminate,
for Applications of Valence as a sub-contractor of Valence, upon terms and
conditions to be agreed between Hanil Valence Co. and Valence.
2.3 Hanil Valence Co. hereby grants to Valence, and its Affiliated
Companies, a non-exclusive, personal non-transferable, non-sublicensable
license to all of Hanil Valence Co.'s Intellectual Property Rights in respect
of Batteries and associated technologies such as [
] except to design, manufacture, use, sell, and distribute Batteries
for use in Applications in the Territory. Notwithstanding the forgoing, such
license shall be assignable incident to the transfer of all or substantially
all of Valence's, or its Affiliated Companies', business.
2.4 Patents arising out of inventions made jointly by employees of Valence
and Hanil Valence Co. shall be jointly owned by the parties. The parties
shall mutually agree as to which party shall file any resulting patent
applications. The cost for such applications shall be equally shared.
2.5 Valence hereby grants to Hanil Valence Co. a non-exclusive, personal,
non-transferable, non-sublicensable license to Valence's Trademarks necessary
to market, sell, and distribute Batteries for use in Applications, in the
Territory. Hanil Valence Co.'s use of the Valence trademarks shall inure to
the benefit of Valence, and Hanil Valence Co. shall not register nor attempt
to register such trademarks in its own name. Other than the rights granted
herein, 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, other than provided herein. 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. Valence must approve any
specifications prior to publication or distribution.
2.6 Hanil Valence Co. shall mark all its Batteries with the Valence logo
and/or name under the license provided above. 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 Hanil Valence Co. to conduct a recall of Batteries, if such a
defect is discovered in Batteries already distributed outside Hanil Valence
Co. Further, Valence shall review design and quality of products
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
to assure such products meet Valence design and quality standards. Hanil
Valence Co. shall provide representative samples of Batteries prior to their
first sale, and upon incorporation of any material change.
2.7 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. Such Hanil Valence Co. created trademarks,
except for any marks derived from, identical with or similar to Valence's
trademarks or trade name, shall belong to and be the absolute property of
Hanil Valence Co.
2.8 Hanil Valence Co. shall pay Valence license and support fees of:
2.8.1[ ] and
2.8.2[ ], or sooner as mutually agreed by
the parties.
2.9 However, should a tax exemption not be available for these license and
support fees, and Valence incurs a withholding tax, Hanil Valence Co. shall
increase the fee amounts such that Valence has the above amounts after the
payment of the withholding taxes.
2.10 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.
3. EXCLUSIVE USE OF VALENCE SUPPLIED LAMINATE
3.1 Hanil Valence Co. shall only design, manufacture, use, sell, and
distribute Batteries, using Laminate supplied by Valence,[
]
3.2 Hanil Valence Co. hereby covenants and warrants that it will not design,
develop, manufacture Laminate or any replacement or substitute for Laminate.
Hanil Valence Co. further warrants that it will not decompose or reverse
engineer Laminate. These requirements are subject to change by mutual
agreement of the parties.
4. VALENCE PERSONNEL SUPPORT
4.1 During the term of this Agreement, Valence shall supply such Valence
personnel as necessary to support Hanil Valence Co., without any additional
charge to Hanil Valence Co.
4.2 Valence may fulfill this obligation by providing a variety of qualified
Valence engineers, depending on the needs of Hanil Valence Co., and their
availability from Valence. Hanil Valence shall establish, within a
reasonable amount of time, a complete battery design and test laboratory.
Hanil Valence Co. may, if it so desires, direct these Valence engineers to
assist Hanil Valence Co. in setting up the complete battery design and test
laboratory.
4.3 Valence employees at Hanil Valence Co., shall at all times remain
employees of Valence. Hanil Valence Co. shall not be liable for any expenses
of such visiting Valence employees.
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CONFIDENTIAL TREATMENT REQUESTED
5. INITIAL APPLICATIONS DESIGNS AND PROTOTYPES
5.1 Valence shall provide design services for [ ]
Additionally, Hanil Valence Co. shall be entitled to [
] without any additional charge to Hanil Valence Co.
5.2 Following [ ] Hanil Valence Co. shall be responsible
for its own Battery designs.
5.3 Valence may provide Hanil Valence Co. [
] at mutually agreeable costs, terms and
scheduling.
6. TRAINING
6.1 Valence will provide to Hanil Valence Co. the formal training program
described in the Formal Training Program Exhibit, attached, without any
additional charge to Hanil Valence Co.
6.2 In addition to the formal training program, Hanil Valence Co. may send a
reasonable number of its employees to Valence in Mallusk, Northern Ireland,
to observe and learn what information is needed to design and manufacture
Batteries.
6.3 Hanil Valence Co. employees at Valence, shall at all times remain
employees of Hanil Valence Co. Valence shall not be liable for any expenses
of such visiting Hanil Valence Co. employees.
7. MANUFACTURING EQUIPMENT
7.1 Valence grants, without any additional charge, Hanil Valence Co. the
rights to use battery manufacturing equipment designed by or for Valence, and
manufactured by Valence or its authorized equipment suppliers. These rights
include the rights to the designs of the battery manufacturing equipment
designed by or for Valence listed in the Manufacturing Equipment Exhibit.
7.2 Valence shall use its best efforts to either sell, upon terms and
conditions acceptable to Valence and Hanil Valence Co., or assist Hanil
Valence Co. in procuring from Valence's equipment vendors, Battery
manufacturing equipment. However, Hanil Valence Co. may also purchase
Battery manufacturing equipment from vendors other than Valence or its
vendors.
7.3 Valence will specify the first manufacturing line for Hanil Valence Co.
Additionally, Valence shall assist in the start up of that line and offer
assistance until Hanil Valence Co. has sufficient technical support to do so
by itself. Hanil Valence Co. shall use its reasonable efforts to become self
sufficient . Valence shall provide Hanil Valence Co. with the documents
listed in the Documentation Exhibit, attached hereto, subject to the
availability of such documents.
8. COVENANTS AND WARRANTIES
8.1 The parties each covenants to the other that it shall fully comply with
any legislative and regulatory requirements (including any regulations,
statutory or otherwise, relating to environmental controls) directly or
indirectly applicable to the performance of its obligations hereunder.
Because the rights licensed under this Agreement are in part based on some
technology of United States origin, Hanil Valence Co. shall comply with all
current and future United States export regulations, including export
embargoes and export licensing provisions. Valence shall use its best efforts
to notify Hanil Valence Co. of such regulations, and any changes thereto.
8.2 Valence warrants to Hanil Valence Co. that it is the legal and
beneficial owner or licensee of the technology, intellectual property rights,
knowledge and expertise granted to Hanil Valence Co. pursuant to this
Agreement and has the power and capacity to enter into this Agreement.
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8.3 Each party ("Indemnitor") shall, at its own expense, defend any suit
that is instituted against the other ("Indemnitee") to the extent such suit
alleges that any goods, information, designs, or any part, of Indemnitee,
thereof sold hereunder infringe any patent, trademark, copyright, or trade
secret. Indemnitor shall not be liable to Indemnitee if such alleged
infringement arises from any modification or addition made by anyone other
than the Indemnitor, or the use as a part of or in combination with any other
devices or parts or from the use to practice any method or process, if there
would have been no infringement but for such acts. Indemnitee shall give the
Indemnitor immediate notice in writing of any such suit and permits the
Indemnitor, through counsel of its choice, to answer the charge of
infringement and defend such suit. Indemnitee shall give the Indemnitor all
the needed information, assistance and authority, at the Indemnitor's
expense, to enable the Indemnitor to defend or settle such suit. In the case
of a final award of damages in any suit the Indemnitor, shall pay such award,
but shall not be responsible for any settlement made without its prior
written consent. In the event the use, lease or sale of the goods is
enjoined, the Indemnitor may at its own option and expense (i) procure for
the Indemnitee the right to use, lease or sell such goods, (ii) replace such
goods, (iii) modify such goods, or (iv) remove such goods and refund the
aggregate payments made by the Indemnitee, less a reasonable sum for use,
damage and obsolescence. THIS ABOVE STATES THE INDEMNITOR'S TOTAL
RESPONSIBILITY AND LIABILITY, AND THE INDEMNITEE'S SOLE REMEDY, FOR ANY
ACTUAL OR ALLEGED INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT BY ANY
GOODS DELIVERED HEREUNDER OR ANY PART THEREOF. THIS SECTION IS IN LIEU OF
AND REPLACES ANY OTHER EXPRESS, IMPLIED OR STATUTORY WARRANTY AGAINST
INFRINGEMENT.
8.4 The above indemnity obligation with regard intellectual property rights
is the sole and only indemnity obligation owed by each party to the other
party under this Agreement.
9. TERM AND TERMINATION
9.1 This Agreement shall continue in effect until terminated pursuant to the
provisions of this Agreement or by mutual agreement of the parties.
9.2 A party shall be deemed to have breached or defaulted if:
9.2.1 any representation, warranty or statement by such party in this
Agreement or in any document delivered under this Agreement is not
complied with or is or proves to have been incorrect in any
material respect when made;
9.2.2 such party does not perform or comply with any one or more of its
material obligations under the Agreement 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; or
9.2.4 a winding up or bankruptcy petition is presented, an order is made,
an effective resolution passed or legislation enacted for the
winding-up other than for the purpose of reconstruction or
amalgamation of such party or if a receiver and/or manager is
appointed of the undertaking or part thereof of such party; or
9.2.5 such party is unable to pay its debts as they fall due or stops
payment of its debts generally or commences negotiations with its
creditors with a view to readjustment or rescheduling of its debts
or compounds or enters into any arrangement with or makes any
assignment for the benefit of its creditors generally or attempts
to do any of the foregoing (except as part of or pursuant to a
scheme for reconstruction or amalgamation);
9.3 In the event a party commits a breach or default, as described above in
Section 2.1, 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.
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9.4 In the event of a termination of this Agreement because of the breach
or default of a party, all licenses granted to the other party, and its
Affiliated Companies, under this Agreement shall terminate.
9.5 The provisions of this Agreement with regard to confidential information
and intellectual property rights indemnity shall survive the termination of
this Agreement.
9.6 If Hanil Valence Co. does not receive all necessary Government
Approvals, including approvals on this Agreement, the Battery Laminate Supply
Agreement, the Joint Venture Agreement, and any tax privileges available
under the Foreign Capital Inducement Act of Korea, in from the Korean
government within ninety (90) days of the Effective Date of this Agreement,
then this Agreement shall immediately be terminated.
9.7 In the event of any termination of the Battery Laminate Supply Agreement
between the parties or the Joint Venture Agreement between Valence and Hanil
Telecom Co., Ltd., for any reason, then this Agreement shall immediately
terminate.
10. TAXES
10.1 Each party hereto shall be responsible for its own taxes, whether
present or future including income tax payable in respect of any sum received
by it, levies, goods and services tax, value added tax, impost, deductions or
withholding imposed, assessed or collected by any political subdivision or
taxing authority of any country in respect of this Agreement, any transaction
or any documents contemplated herein. In no circumstances shall either party
be obliged to gross up the amount of any payment which it is otherwise
obliged to make pursuant to this Agreement so as to ensure that the net
amount received by the recipient equals that amount which the recipient would
have been entitled to receive in the absence of any applicable withholding
tax. However, Hanil Valence Co. shall be liable for any value added tax
incurred by Valence's delivery of any goods or services to Hanil Valence Co.
11. CONFIDENTIALITY AND PUBLIC DISCLOSURE
11.1 "Confidential Information" shall mean that information of either party
which is disclosed to the other party ("Recipient") by reason of the parties'
relationship hereunder, 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.
11.2 Recipient shall receive and use the Confidential Information only for
performance of Recipient's obligations hereunder, 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.
Recipient further agrees that except as authorized by the Export
Administration Regulations of the U. S. Department of Commerce it will not
transmit, directly or indirectly, any "technical data" acquired from the
other party hereto to any "Q, S, W, Y or Z" country as those terms are
defined in the Regulations.
11.3 It is expressly understood that Recipient shall not be liable for
disclosure of any Confidential Information if the same:
11.3.1 was in the public domain at the time it was disclosed;
11.3.2 was known to Recipient at the time of disclosure;
11.3.3 is disclosed with the prior written approval of the other party
hereto;
11.3.4 is disclosed after five (5) years from the termination of
this Agreement;
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<PAGE>
11.3.5 was independently developed by Recipient; or
11.3.6 becomes known to Recipient, on a non-confidential basis, from a
source other than the other party hereto, without breach of this
Agreement by Recipient.
11.4 Each party hereto shall not, except for Hanil Valence Co., except as
authorized by the Board of Directors of Hanil Valence Co., or except for
either party, as 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 hereunder and shall keep with complete secrecy all trade secrets
and other confidential information entrusted to him 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.
11.5 Valence and Hanil Valence Co. agree that the terms and conditions of
this Agreement 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 Valence Co. shall publish or use any
advertising, sales promotion, press release or publicity matters relating to
this Agreement, without the prior written approval of the other, which
approval shall not be unreasonably withheld. Notwithstanding the forgoing,
either party may make such disclosures and press releases as are necessary to
meet its disclosure requirements under the laws, regulation and rules of
Korea, the Cayman Islands, the Netherlands or the United States of America.
11.6 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.
12. GOOD FAITH AND RELATIONSHIP BETWEEN PARTIES
12.1 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.
12.2 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.
12.3 Nothing in this Agreement shall be construed to imply the existence of a
partnership between the parties hereto. Valence and Hanil Valence Co. 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 Valence Co. 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
Valence Co. 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.
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<PAGE>
13. 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. Neither parties' liability
hereunder shall exceed the amounts paid hereunder.
14. GENERAL
14.1 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.
14.2 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.
14.3 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. In
the event Valence's production is curtailed, Valence may allocate its
available production, as reasonably equitable, among its various customers.
14.4 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).
14.5 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.
14.6 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.
14.7 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.
14.8 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.
14.9 Section titles used herein are for reference only and shall not be for
purposes of interpretation.
14.10 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.
14.11 This Agreement, including exhibits, 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
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<PAGE>
additional or conflicting terms which may be contained in either party's
purchase orders or order acknowledgment forms.
ACCEPTED AND AGREED:
VALENCE TECHNOLOGY B.V. HANIL VALENCE CO., LTD.
By: By:
------------------------ ------------------------
signature of authorized signature of authorized
representative representative
Melvern Slates
- -------------------------- -------------------------
printed name printed name
Managing Director
- ---------------------- -------------------------
title title
- ---------------------- -------------------------
date date
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Formal Training Exhibit
Valence shall provide the following formal training in one continuous
training course for two to ten Hanil Valence Co. employees at the Valence
Technology, Inc. facilities in Mallusk, Northern Ireland. Starting date for
the training course shall mutually be agreed upon.
[
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CONFIDENTIAL TREATMENT REQUESTED
]
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Manufacturing Equipment Exhibit
[
]
Page 13
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Documentation Exhibit
[
]
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 and 240.24b-2
BATTERY LAMINATE SUPPLY AGREEMENT
- ------------------------------------------------------------------------------
between
HANIL VALENCE CO., LTD.
and
VALENCE TECHNOLOGY B.V.
on
_____________, 1996
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
THIS AGREEMENT, entered into as of ___________, 1996 ("Effective Date") by
and between Valence Technology B.V. with offices at Hirsch Gebouw,
Leidseplein 29, 1017 PS Amsterdam, The Netherlands ("Valence") and Hanil
Valence Co., Ltd., with offices at YoJin Tower, 713-6, PungDukChun-Ri,
SuJi-Eup, YongIn-Si, KyongGi-Do, Korea ("Hanil Valence Co.").
WHEREAS, Valence has the knowledge, expertise and technology to design,
develop, manufacture and sell solid polymer electrolyte batteries and the
components thereof, such as battery laminate, and Valence owns or has rights
to all patents, trademarks, know-how, technology and other intellectual
property necessary to design, manufacture, and sell the laminates that are
used in such batteries;
WHEREAS, Hanil Valence Co. desires to obtain battery laminate from Valence.
NOW, THEREFORE, In consideration of the mutual covenants and promises herein
set forth, Hanil Valence Co. and Valence agree as follows:
1.DEFINITIONS
1.1 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.
1.2 BATTERIES shall mean the advanced rechargeable solid polymer electrolyte
batteries manufactured by Hanil Valence Co. utilizing Laminate based on the
solid polymer electrolyte technology owned by Valence.
1.3 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 Agreements
and Performance, all as the statutes, decrees, regulations, and rules of
governmental authority within Korea (collectively "Legal Authority"), may
require to be obtain 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.
1.4 FULLY-LIQUIDATED MANUFACTURING COSTS shall mean the sum of direct
material, direct labor and fully absorbed factory overhead based on an annual
average cost derived from the current year's operating plan at the relevant
range of activity. Fully-absorbed factory overhead includes the
[
Specifically excluded from factory overhead costs are [ ]
]
1.5 LAMINATES shall mean cathode, separator and anode laminates, or films of
the Battery, produced exclusively by Valence.
1.6 TERRITORY shall mean Korea.
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CONFIDENTIAL TREATMENT REQUESTED
1.7 TRANSACTION DOCUMENTS shall mean this Agreement, the License and Support
Agreement and any other document contemplated in this Agreement or entered into
by the parties or between each party and Hanil Telecom Co., Ltd., including the
Joint Venture Agreement, in connection with this Agreement.
2. LAMINATE SUPPLY
2.1 Valence shall sell, to Hanil Valence Co., Laminate at a cost of
Valence's Fully-Liquidated Manufacturing Cost plus [ ]. This
cost may be verified or certified by an accountant nominated by both parties.
2.2 Valence shall sell the Laminate to Hanil Valence Co. according to
Valence's standard Terms and Conditions of Sale, attached as the Terms and
Conditions of Sale Exhibit. Hanil Valence Co. shall place purchase orders
with Valence to purchase Laminate. Preprinted terms on Hanil Valence Co.'s
purchase orders and Valence's order acknowledgment forms shall have no effect
and shall not be considered part of this Agreement. In the event of any
conflict between the Terms and Conditions of Sale Exhibit and this Agreement,
the terms of this Agreement shall prevail.
2.3 Hanil Valence Co. may only use Laminate to manufacture Batteries for use
in Applications sold in the Territory.
2.4 Hanil Valence Co. shall only design, manufacture, use, sell, and
distribute Batteries, using Laminate supplied by Valence, [
]
2.5 Hanil Valence Co. hereby covenants and warrants that it will not design,
develop, manufacture Laminate or any replacement or substitute for Laminate.
Hanil Valence Co. further warrants that it will not decompose or reverse
engineer Laminate. These requirements are subject to change by mutual
agreement of the parties.
2.6 Valence shall use its best efforts to supply [ ] Laminates as
required by Hanil Valence Co.
3. COVENANTS AND WARRANTIES
3.1 The parties each covenants to the other that it shall fully comply with
any legislative and regulatory requirements (including any regulations,
statutory or otherwise, relating to environmental controls) directly or
indirectly applicable to the performance of its obligations hereunder.
Because Laminate is in part based on some technology of United States origin,
Hanil Valence Co. shall comply with all current and future United States
export regulations, including export embargoes and export licensing
provisions. Valence shall use its best efforts to notify Hanil Valence Co.
of such regulations, and any changes thereto.
3.2 Each party ("Indemnitor") shall, at its own expense, defend any suit
that is instituted against the other ("Indemnitee") to the extent such suit
alleges that any goods, information, designs, or any part thereof sold
hereunder infringe any patent, trademark, copyright, or trade secret.
Indemnitor shall not be liable to Indemnitee if such alleged infringement
arises from any modification or addition made by anyone other than the
Indemnitor, or the use as a part of or in combination with any other devices
or parts or from the use to practice any method or process, if there would
have been no infringement but for such acts. Indemnitee shall give the
Indemnitor immediate notice in writing of any such suit and permits the
Indemnitor, through counsel of its choice, to answer the charge of
infringement and defend such suit. Indemnitee shall give the Indemnitor all
the needed information, assistance and authority, at the Indemnitor's
expense, to enable the Indemnitor to
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CONFIDENTIAL TREATMENT REQUESTED
defend or settle such suit. In the case of a final award of damages in any
suit the Indemnitor, shall pay such award, but shall not be responsible for
any settlement made without its prior written consent. In the event the use,
lease or sale of the goods is enjoined, the Indemnitor may at its own option
and expense (i) procure for the Indemnitee the right to use, lease or sell
such goods, (ii) replace such goods, (iii) modify such goods, or (iv) remove
such goods and refund the aggregate payments made by the Indemnitee, less a
reasonable sum for use, damage and obsolescence. THIS ABOVE STATES THE
INDEMNITOR'S TOTAL RESPONSIBILITY AND LIABILITY, AND THE INDEMNITEE'S SOLE
REMEDY, FOR ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY INTELLECTUAL PROPERTY
RIGHT BY ANY GOODS DELIVERED HEREUNDER OR ANY PART THEREOF. THIS SECTION IS
IN LIEU OF AND REPLACES ANY OTHER EXPRESS, IMPLIED OR STATUTORY WARRANTY
AGAINST INFRINGEMENT.
3.3 The above indemnity obligation with regard intellectual property rights
is the sole and only indemnity obligation owed by each party to the other
party under this Agreement.
3.4 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.
4. TERMINATION
4.1 A party shall be deemed to have breached or defaulted if:
4.1.1 any representation, warranty or statement by such party in this
Agreement or in any document delivered under this Agreement is not
complied with or is or proves to have been incorrect in any material
respect when made;
4.1.2 such party does not perform or comply with any one or more of its
material obligations under the Agreement 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; or
4.1.4 a winding up or bankruptcy petition is presented, an order is made,
an effective resolution passed or legislation enacted for the winding-up
other than for the purpose of reconstruction or amalgamation of such party
or if a receiver and/or manager is appointed of the undertaking or part
thereof of such party; or
4.1.5 such party is unable to pay its debts as they fall due or stops
payment of its debts generally or commences negotiations with its
creditors with a view to readjustment or rescheduling of its debts
or compounds or enters into any arrangement with or makes any assignment
for the benefit of its creditors generally or attempts to do any of the
foregoing (except as part of or pursuant to a scheme for reconstruction or
amalgamation);
4.2 In the event a party commits a breach or default, as described above in
Section 4.1, 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.
4.3 [
]
4.4 The provisions of this Agreement with regard to confidential information
and intellectual property rights indemnity shall survive the termination of
this Agreement.
4.5 If Hanil Valence Co. does not receive all necessary Government
Approvals, including approvals on this Agreement, the License and Support
Agreement, the Joint Venture Agreement, and any tax privileges available
under the Foreign Capital Inducement Act of Korea, in from the
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<PAGE>
Korean government within ninety (90) days of the Effective Date of this
Agreement, then this Agreement shall immediately be terminated.
4.6 In the event of any termination of the License Support Agreement between
the parties or the Joint Venture Agreement between Valence and Hanil Telecom
Co., Ltd., for any reason, then this Agreement shall immediately terminate.
5. TAXES
5.1 Each party hereto shall be responsible for its own taxes, whether
present or future including income tax payable in respect of any sum received
by it, levies, goods and services tax, value added tax, impost, deductions or
withholding imposed, assessed or collected by any political subdivision or
taxing authority of any country in respect of this Agreement, any transaction
or any documents contemplated herein. In no circumstances shall either party
be obliged to gross up the amount of any payment which it is otherwise
obliged to make pursuant to this Agreement so as to ensure that the net
amount received by the recipient equals that amount which the recipient would
have been entitled to receive in the absence of any applicable withholding
tax. However, Hanil Valence Co. shall be liable for any value added tax
incurred by Valence's delivery of any goods or services to Hanil Valence Co.
5.2 Where Hanil Valence Co. is obliged to withhold any tax or other charge
from payments otherwise due by Hanil Valence Co. under this Agreement, Hanil
Valence Co. shall promptly forward to Valence the original tax payment
certificates evidencing that such withholding taxes or other charges have
been paid.
6. CONFIDENTIALITY AND PUBLIC DISCLOSURE
6.1 "Confidential Information" shall mean that information of either party
which is disclosed to the other party ("Recipient") by reason of the parties'
relationship hereunder, 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.
6.2 Recipient shall receive and use the Confidential Information only for
performance of Recipient's obligations hereunder, 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.
6.3 It is expressly understood that Recipient shall not be liable for
disclosure of any Confidential Information if the same:
6.3.1 was in the public domain at the time it was disclosed;
6.3.2 was known to Recipient at the time of disclosure;
6.3.3 is disclosed with the prior written approval of the other party
hereto;
6.3.4 is disclosed after five (5) years from the termination of this
Agreement;
6.3.5 was independently developed by Recipient; or
6.3.6 becomes known to Recipient, on a non-confidential basis, from a
source other than the other party hereto, without breach of this Agreement
by Recipient.
6.4 Each party hereto shall not except, for Hanil Valence Co., as authorized
by the Board of Directors of Hanil Valence Co., or except, for either party,
as required by any applicable law or
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<PAGE>
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 hereunder and shall keep with complete
secrecy all trade secrets and other confidential information entrusted to him
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.
6.5 Valence and Hanil Valence Co. agree that the terms and conditions of
this Agreement 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 Valence Co. shall publish or use any
advertising, sales promotion, press release or publicity matters relating to
this Agreement, without the prior written approval of the other, which
approval shall not be unreasonably withheld. Notwithstanding the forgoing,
either party may make such disclosures and press releases as are necessary to
meet its disclosure requirements under the laws, regulation and rules of
Korea, the Cayman Islands or the United States of America.
6.6 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.
7. RELATIONSHIP BETWEEN THE PARTIES
Nothing in this Agreement shall be construed to imply the existence of a
partnership between the parties hereto. Valence and Hanil Valence Co. 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 Valence Co. 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
Valence Co. 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.
8. 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. Neither parties' liability
hereunder shall exceed the amounts paid hereunder.
9. GENERAL
9.1 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.
9.2 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.
Page 6
<PAGE>
9.3 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. In
the event Valence's production is curtailed, Valence may allocate its
available production, as reasonably equitable, among its various customers.
9.4 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).
9.5 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.
9.6 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.
9.7 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.
9.8 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.
9.9 Section titles used herein are for reference only and shall not be for
purposes of interpretation.
9.10 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 7
<PAGE>
9.11 This Agreement, including exhibits, 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.
ACCEPTED AND AGREED:
VALENCE TECHNOLOGY B.V. HANIL VALENCE CO., LTD.
By:______________________________ By:________________________________
signature of authorized representative signature of authorized representative
Melvern Slates
- --------------------------------- ---------------------------------
printed name printed name
Managing Director
- --------------------------------- ---------------------------------
title title
- --------------------------------- ---------------------------------
date date
Page 8
<PAGE>
Terms and Conditions of Sale Exhibit
1. ACCEPTANCE
This acknowledgment is an acceptance of the Customer's purchase order only
for those goods and services with a Valence scheduled date attached hereto.
Acceptance is conditional upon the Customer's consent to the terms and
conditions set forth herein which will be in lieu of and replace any and all
terms and conditions set forth on Customer's purchase order if they are in
conflict with any terms and conditions set forth in this Terms and Conditions
of Sale Exhibit, or the Agreement itself. No waiver or amendment of any of
the provisions hereof shall be binding on Valence unless made in a writing
expressly stating that it is such a waiver or amendment and signed by an
authorized representative of Valence.
2. TERMS OF PAYMENT
Unless otherwise stated on the face hereof (or otherwise agreed upon as, for
instance, a letter of credit) all payments are due and payable forty-five
(45) days from the date of invoice, and shall be in United States Dollars.
All payments shall be made to such address as Valence may request. If all
the goods or services covered hereby are not delivered or performed at one
time, the Customer shall pay the unit prices considered applicable to the
goods delivered or services performed. Each shipment shall be considered a
separate and independent transaction. All shipments, deliveries and
performance of work covered hereby shall at all times be subject to the
credit approval of Valence, and Valence may at any time decline to make any
shipments or deliveries, or perform any work, except upon receipt of payment
or upon terms and conditions or security arrangement satisfactory to Valence.
3. PRICES
The prices for the goods covered hereby shall be those shown on the face
hereof, provided, however, that if such prices are based on the purchase of a
particular quantity of goods and Customer fails to purchase such quantity,
Valence shall have the right (in addition to any other rights and remedies
Valence may have) to collect from Customer the difference between the price
paid by Customer for the goods purchased and Valence's standard price for
such goods in the quantity purchased by Customer. Unless otherwise stated on
the face thereof, the prices for the goods covered hereby do not include
costs of special packaging or shipping.
4. TAXES
Unless otherwise stated on the face hereof, the prices for the goods covered
hereby do not include customs duties or sales, use, excise, or other similar
taxes. The Customer shall pay, in addition to the prices quoted, the amount
of any present or future customs duties or sales, use, excise or other
similar tax applicable to the sale of goods or performance of services
covered by this acknowledgment, or in lieu thereof the Customer shall supply
Valence with an appropriate tax exemption certificate.
5. DELIVERY
Delivery shall be F.O.B. Valence's factory. The delivery dates set forth on
this acknowledgment are approximate only, and Valence shall not be liable
for, nor shall Valence be in breach of its obligations to the Customer
because of, any delivery made within a reasonable time before or after the
stated delivery date. Valence may, by written notice to Customer, change any
delivery date, and such date shall become the agreed upon delivery date
unless Customer objects to such date in writing delivered to Valence within
ten (10) days of receipt of Valence's notice.
6. INSPECTION AND ACCEPTANCE
All Material ordered by Buyer hereunder shall be subject to inspection and
acceptance of Buyer at its facility. Material which fails to conform to the
mutually agreed upon specifications and/or descriptions provided or
incorporated herein, may be rejected by Buyer and returned to Valence for
credit, rebate of purchase price or replacement at Valence's option. Valence
shall bear all cost of transportation for the return of all non-conforming
Material. Valence shall issue a Return Material Authorization (RMA) number
on defective Material that has been dispositioned to be returned to Valence.
Buyer shall accept Material included in each shipment within thirty (30)
days from Buyer's receipt of such shipment. If Buyer fails to notify Valence
in writing of its rejection and the reasons therefor within such time period,
Buyer will be deemed to have accepted such Material. Valence shall notify
Buyer of major process changes (as defined by Valence) incurred by Valence in
the manufacturing of Material to be purchased under this Agreement, if such
changes affect form, fit, or function of Material. If deemed necessary by
Buyer, requalification procedures for said Material may then be required.
Valence may implement manufacturing improvements which do not affect form,
fit or function of Material. Any such improvements shall be implemented only
upon the successful completion of reasonable qualification testing.
Additionally, Valence shall determine which of it's qualified manufacturing
sites shall be used to manufacture Material. Valence shall have no
obligation to notify Buyer of such manufacturing improvements or
manufacturing site selection.
7. WARRANTY
Valence warrants that goods delivered hereunder shall be free from defects in
material and workmanship under normal use and service for a period of one (1)
year from the date of shipment from Valence's facility. If during such one
year period: (i) Valence is notified promptly in writing upon discovery of
any defect in the goods, including a detailed description of such defect;
(ii) such goods are returned to Valence, F.O.B. Valence's facility; and (iii)
Valence's examination of such goods discloses to Valence's satisfaction that
such goods are defective and such defects are not caused by accident, abuse,
misuse, neglect, alteration, improper installation, repair or alteration by
someone other than Valence, improper testing, or use contrary to any
instructions issued by
Page 9
<PAGE>
Valence; then within a reasonable time Valence shall (at its sole option)
either repair, replace, or credit the Customer for, such goods. Valence
shall return any goods repaired or replaced under this warranty to customer
transportation prepaid, and reimburse Customer for the transportation charges
paid by Customer for such goods. The performance of this warranty does not
extend the warranty period for any goods beyond the period applicable to the
goods originally delivered. Prior to any return of goods by the Customer
pursuant to this Section, the Customer shall afford Valence the opportunity
to inspect such goods at the Customer's location at the cost of the default
party, or on a cost-sharing basis if no fault is found with either party, and
any such goods so inspected shall not be returned to Valence without its
prior written consent. The foregoing warranty constitutes Valence's
exclusive liability, and the exclusive remedy of the Customer, for any breach
of any warranty or other nonconformity of the goods covered by this
acknowledgment. THIS WARRANTY IS EXCLUSIVE, AND IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE
HEREBY EXPRESSLY DISCLAIMED.
8. BREACH
Any one of the following acts by Customer shall constitute a breach of
Customer's obligation hereunder: (i) failure to make payment for any goods or
services from Valence when due; (ii) failure to accept conforming goods or
services supplied hereunder; (iii) the return of any goods shipped to
Customer hereunder without the prior written consent of Valence; (iv) the
filing of a voluntary or involuntary petition in bankruptcy against Customer,
the institution of any proceedings in insolvency or bankruptcy (including
reorganization) against Customer, the appointment of a trustee or receiver of
Customer, or an assignment for the benefit of creditors of Customer; or (v)
any other act by Customer in violation of any of the provisions hereof. In
the event that Customer breaches in any manner set forth above, Valence may,
by written notice to Customer, terminate the order covered hereby, or any
part thereof, without any liability whatsoever. Customer shall pay all
costs, including reasonable attorney's fees, incurred by Valence in any
action brought by Valence to collect payments owing or otherwise enforces its
rights hereunder.
9. CUSTOM PRODUCT ORDER CANCELLATION
If an order for any design unique to Customer ("Custom Products") is
cancelled, in addition to the actual cost of any buyer specific materials,
Customer shall pay the following charges for orders scheduled for delivery
within ninety (90) days of Valence's receipt of cancellation notice: (i) for
finished laminate at time of receipt of cancellation - full purchase price;
(ii) for partially coated at time of receipt of cancellation - fifty percent
of full purchase price; or (iii) for custom current collector material at
time of receipt of cancellation - fifty percent of full purchase price.
10. USE IN LIFE SUPPORT APPLICATIONS
Buyer is not authorized to use any goods supplied under this Agreement in any
Life Support Application without the express written consent of Valence. Life
Support Applications include: (i) a device to be implanted in a human body;
or (ii) a system or device which supports or monitors a human life, such that
its failure could cause serious injury or death.
Page 10
<PAGE>
July 10, 1996
Hanil Telecom Co., Ltd.
Wooduk Bldg.
832-2 Yuksam-Dong
Kangnam-Ku
Seoul, Korea
Dear Sirs
With respect to the Joint Venture Agreement ("JVA") duly executed by Valence
Technology B.V. ("Valence BV") and Hanil Telecom Co., Ltd., and the License and
Support Agreement ("LSA") and Battery Laminate Supply Agreement ("BLSA"), to be
entered into by and between Valence BV and Hanil Valence Co., Ltd. Valence
Technology, Inc. ("Valence US") hereby guarantees the obligations of Valence BV
under the JVA, the LSA and the BLSA. In the event that Valence BV ceases
business, operation or existence, for whatever reason, Valence US or a Valence
US subsidiary (including a subsidiary of a subsidiary), will assume the
responsibility to perform such obligations of Valence BV, as if Valence US, or
the subsidiary, were a party to the JVA, the LSA, and the BLSA.
Sincerely,
Calvin L. Reed
President and CEO
<PAGE>
Exhibit 11.1
VALENCE TECHNOLOGY, INC. AND SUBSIDIARIES
(companies in the development stage)
STATEMENT OF CALCULATION OF NET LOSS PER SHARE
(in thousands, except per share amounts)
_____
Three Months Ended
-------------------
June 30, June 25,
1996 1995
-------- --------
Actual weighted average shares
of common stock outstanding 21,669 20,116
for the period
Net loss for period $(3,194) $(3,143)
Net loss per share for period $ (0.15) $ (0.16)
Dilutive common stock warrants and stock options have not been included in
the calculations of common and common equivalent shares to calculate net loss
per share, as their inclusion would be antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 27,097
<SECURITIES> 23,758
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 51,897
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,308
<CURRENT-LIABILITIES> 10,792
<BONDS> 5,777
0
0
<COMMON> 140,359
<OTHER-SE> (90,832)
<TOTAL-LIABILITY-AND-EQUITY> 66,308
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (3,743)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (125)
<INCOME-PRETAX> (3,194)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,194)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,194)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
