Exploring Joint Ventures and Agreement Structures

Class 4: JVs; Supply Agreements; License Agreements Monday, September 21
MCC decided to spend class 4 working together on an Agenda. We broke out into groups and discussed the elements of a JV then prepared a high-level agenda.
MCC’s Second Written Communication to KJH
Team 3 sent MCC’s Second Communication including the agenda prepared in class. The second communication was very strong. It started thanked KJH, reiterated our desire to move forward tougher with KJH, and recapped our understanding of KJH’s and MCC’s primary interests, as we understood them during Saturday’s negotiations. It also reiterated that we think the best way to achieve our shared goals is a JV that incorporates a supply agreement and license and proposed an agenda to of JV topics for conversation at

our next meeting on Saturday. I think it was good that we recapped the first negotiation session and
KJH’s Second Written Communication: KJH's alternative business proposal.
KJH’s second written proposal was a complete surprise. They completely rejected the our letter and discussing a JV. Instead they proposed discussing an alternate to a straight JV. It is unclear where this is coming form or why the sudden change. They sent diagram that illustrates what they call a co-venture with are three phases. The first phase is short term supply contract only whereby MCC will supply KJH with the cassava necessary for KJH to produce the extract. However, we told them we were not interested in a supply only contract. KJH does not appear to be listening at all or showing any willingness to discuss MCC’s interests.
In Phase Two they proposed a JV where MCC would gain more equity interest and responsibility throughout the duration of the phase.

We are a stable profitable business that is successfully operating in the country they want to building a factory. The phrase gaining responsibility makes me think of a parent saying to a teenage that he can drive the once he shows that he is responsible. It is paternalistic and obnoxious. However, if we could get KJH to skip phase one and start with phase two, a structure where MCC gains more equity interest and “management” roles could be acceptable.
KJH’s letter also says that Phase Three will include the opportunity to explore new uses for the cassava and extract. This is the only tech transfer they have mentioned. It does not bode well for the next negotiations that KJH appears to be saying tech transfer is they very last thing they will give KJH.
Most confusing is they say they see this long-term arrangement being mutually beneficial for both MCC and KJH. I do not see how this arrangement benefits MCC other than increase our Cassava sales. Given that we have repeatedly told them MCC wants a tech transfer, it does not appear that KJH is

listening.