Making the Most of Joint Ventures Farmer Cooperatives Conference Mike Jackson December 6, 2010

1. Making the Most of Joint VenturesFarmer Cooperatives ConferenceMike JacksonDecember 6, 2010

2. Agenda

3. JV Overview • Strategic alliance between two or more entities • Various legal structures • Based on a specific business/project • Common goals and objectives • Specific purpose and duration • Share risks and rewards • Financial, intangible, management and control • Protects core asset ownership • Contractual agreements: create and unwind

4. Why a JV? Fundamentally, expand/grow volume/profits • Extend or maintain market position • Strengthen R&D/innovation • Improve distribution channels • Generate economies of scale • Diversify product offerings • Improve competitive position • Enter related businesses or new geographic markets • Spread risk (mainly on large investments)

5. Carefully Consider JV Pro’s and Con’s • Advantages • Flexibility: limited life span and specific roles reduce commitment and business exposure • Divesture: creative way for companies to exit non-core businesses • Acquisition: prelude to an eventual acquisition or cut its losses if the expected synergies do not materialize • Disadvantages • Failure: Historically, JV’s have a high failure rate • Reputation risks: Partner’s actions can adversely affect the reputation of the JV and the parent companies • Market Sharing: Less costly than acquiring but must also share profits • Competitive Risks: Possible creation of a serious competitor

6. Selecting a JV Partner Most often, the ideal JV partner has complementary resources, skills and assets Most important, look for cultural fit: • Company performance • Collaborative attitude and level of commitment • Trustworthiness • Complementary brand values • Reputation with Customers and Suppliers • Finances and credit • Existing JV/partnerships • Management team/philosophy

7. Tax and liability issues drive JV structure Commonly used JV structures: Corporations General Partnerships Limited Partnerships Limited Liability Company Each is appropriate in a given situation

8. The JV agreement must detail venture expectations and goals! • Scope and purpose of the JV • Identification of the participants • Identification of the business enterprise and its intended scope • Term of the agreement • Capital contributions/calls • Technology/IP contributions and related protective clauses • Accounting methods • Management of the business • Administrative matters • Confidentiality agreements/ Non-Compete Agreements • Dissolution terms

9. When to Unwind a JV • An unrecoverable breach of the joint venture agreement • Extended failure to meet business objectives • Achieving the core purpose for the venture • Purpose for the JV/partner goals change • Disagreement on fundamental management issues • Cultural and management style clashes • Lack of leadership or commitment • Inadequate capitalization by one or both partners • Insolvency of one of the partners

10. Plan the Divorce Before the Wedding! The JV agreement must clearly specify the grounds for termination, the rights of each partner in the event, mode of dissolution and dispute resolution. Items to be resolve during a JV dissolution: • Distributions: Share Capital/Technology/IP • Transfer of Ownership: Put/Call Rights, Right of First Offer/Refusal • Dispute Resolution: Mediation/Litigation/Arbitration • Cost and Termination Fees • Termination of licenses and other intra-corporate agreements • Regulatory Considerations

11. Best Practices for JV Success • Establish clear, strategic leadership • Detailed plan for operations, resources and contingencies • Objectives are clear, communicated and relevant • Align partner objectives/expectations • Balance levels of expertise, investment or assets brought into the venture by the different partners • Integrate cultural and management styles • Create a atmosphere of cooperation • Be flexible, recognize inevitable venture evolution • Evaluate success on more than the numbers