International Joint Ventures What should I know before doing business with a foreign partner? Cheryl Thompson Brian Hansen

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What is a Joint Venture?

Where are you going and how will you get there? Objectives of the Joint Venture Where are you going and how will you get there?

Transaction Cost Analysis Expertise Technology Know-How of Separate Businesses with Shared Costs and Risks Time and Expense of Creating the JV Conflicts of Management Style Cultural Differences

Compatibility Alignment of Goals Business Cultures Financial Resources Operational Savvy Leadership Commitment Business Plan Reputation Legal Compliance/Ongoing Disputes Geographic Stability

Financing Sweat Equity / Cash

Contribution of Assets

Cross-border / Local Law Issues

Competition

Alternative International Strategies Outsourcing Contracts (ex: Exclusive Distributor Agreement) Less Commitment/Less Control/Risk of Losing Partner Easy/Fast/Cheap Strategic Alliances Equity/Non-Equity Traditional M&A Control/Full Acquisition Higher Commitment/More Control/Less Risk of Losing Relationship Create a Wholly-Owned Subsidiary Complex/Longer to Establish/More Expensive

Share Capital Share Capital Contributions Ongoing Financing Needs Classes of Shares/Interests

Board of Directors/Management/Shareholders Appointment and Removal of Directors Approval Requirements Quorum and Notice Requirements Director and Officer Liability Shareholder Decision Making Authority

Profit Distribution Party expectations – reinvest in business or distribute cash? Distributions out of capital or profits Special allocations

Transfers of Interests Restrictions on transfer What transfer restrictions are enforceable? Co-Sale, Drag-Along, Right of First Refusal

Restrictive Covenants Restrictions from competing with Joint Venture Requirement to refer opportunities to Joint Venture Access to, or rights over, confidential information belonging to Joint Venture

Records Information on business of Joint Venture provided to parties and how frequently Rights of shareholders to inspect records

Intellectual Property IP rights transferred or licensed and on what terms Who owns IP rights developed by the Joint Venture What happens to IP upon dissolution

Employee Issues How will employees be transferred to the Joint Venture Will Joint Venture have its own employees Employee benefits

Ancillary Arrangements Supply of goods Transitional arrangements for sharing information technology Technical assistance Secondment of staff Provision of facilities

Dispute Resolution and Deadlock Referral to CEOs Reference to an independent director or third party Arbitration

Termination Fixed term or indefinite Permitted termination Any restrictions on parties after termination

Questions? Cheryl Thompson Brian Hansen cwthompson@hollandhart.com bthansen@hollandhart.com 208-383-3902 Cheryl Thompson cwthompson@hollandhart.com 208-383-3986