Exhibit 10
Confidential treatment has been requested with respect to portions of this
document. Such portions are indicated by "[*]".
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING, dated March 31, 1998 (this "Memorandum"),
sets forth certain understandings of Hakuto Co. Ltd., a Japanese corporation
(together with its controlled subsidiaries, "Hakuto") and Emcore Corporation, a
New Jersey corporation ("Emcore").
WHEREAS, Hakuto and Emcore have entered into various distributorship
agreements, as listed on Exhibit A hereto, with respect to the distribution of
products of Emcore in Japan and other Asian countries (collectively, the
"Distributorship Agreements"); and
WHEREAS, Hakuto and Emcore have agreed to amend and restate the existing
Distributorship Agreements to cover the distribution by Hakuto of the Emcore
products listed on Exhibit B hereto (collectively, the "Products") in certain
defined markets (such amended and restated agreements, collectively, the
"Definitive Restated Agreements").
NOW, THEREFORE, this Memorandum sets forth the understandings of Hakuto and
Emcore with respect thereto.
1. Products in Japan. Under the Definitive Restated Agreements:
(a) Exclusive Distribution Rights. Hakuto would have exclusive distribution
rights for the Products in Japan.
(b) Term. Hakuto would have such exclusive distribution rights for the
Products in Japan for 10 years from the date of this Memorandum.
(c) MODE Commissions. The commissions that would be received by Hakuto for
sales of MODE Items in Japan would be a minimum of 12% of the total amount
invoiced to any customer. (As used herein, the term "MODE Items" has the meaning
given to such term in Exhibit B hereto.)
(d) Pegasus and E2M Commissions. The commissions that would be received by
Hakuto for sales of Pegasus and E2M Items in Japan will be determined. (As used
herein, the term "Pegasus and E2M Items" has the meaning given to such term in
Exhibit B hereto.)
(e) No Minimum Purchase Requirement. There would be no minimum purchase
requirement with respect to the Products in Japan.
2. Products in Territories Other Than Japan. Under the Definitive Restated
Agreements:
(a) Non-Exclusive Distribution Rights; Right of First Refusal. Hakuto would
have non-exclusive distribution rights for the Products in the territories,
other than Japan, specified in the Distributorship Agreements ( the "Non-Japan
Territories"). Hakuto would have a right of first refusal for exclusive
distribution rights for the Products in the Non-Japan Territories.
(b) Term. Hakuto would have the rights described in Paragraph 2(a) above
for a period of 10 years from the date of this Memorandum.
(c) Commissions. The commissions that would be receivable by Hakuto for
sales of the Products in the Non-Japan Territories will be determined.
(d) No Minimum Purchase Requirement. There would be no minimum purchase
requirement with respect to the Products in the Non-Japan Territories.
3. License Royalties. Under the Definitive Restated Agreements, Hakuto would be
entitled to 10% of license royalties for MODE Items which are designed in by any
parties in Japan or by any customers procured by Hakuto in the Non-Japan
Territories and later licensed to such party or customer.
4. Transfer of Production. Under the Definitive Restated Agreements, Emcore
would pay to Hakuto a commission of 10% of the total invoice amount of all sales
of Products that are designed in Japan by any party or in the Non-Japan
Territories by customers procured by Hakuto but produced or further designed
outside of Hakuto's Territory.
5. Review of Commissions. Under the Definitive Restated Agreements, Hakuto and
Emcore would: (1) review commissions and licensing royalties on the second
anniversary of the date of this Memorandum and on every other anniversary
thereafter; and (2) alter such commissions and licensing royalties, if agreed to
by both Hakuto and Emcore.
6. Extension of Distributorship Agreements. The term of the Japan
Distributorship Agreement is extended for a period of 10 years from the date of
this Memorandum.
7. Payment Terms. Hakuto will pay, and Emcore will earn, [*] in fees as follows:
(1) [*] upon execution of this Memorandum, such payment being a one-time,
non-refundable payment for the distribution rights to the Products and not
contingent upon any future performance by Emcore or delivery of any Products
under this Memorandum; and (2) an additional [*] will be due in four equal
installments, such installments equaling [*] for each $2,000,000 in sales orders
generated in Japan and in the Non-Japan territories.
8. Emcore Warranty. Under the Definitive Restated Agreements, Emcore would make
standard and customary representations and warranties for the type of
distributorship arrangement contemplated hereby, and the Products would be
covered by Emcore's standard warranty policy.
9. Hakuto's Organization. Upon the execution of this Memorandum, Hakuto would
assign a full time sales manager and, 60 days thereafter, Hakuto would appoint
an additional sales person to specialize in the distribution of the Products.
Within one year from the execution of this Memorandum, Hakuto would form a group
to specialize in the distribution of the Products.
10. Change of Ownership. If a "change of control" (as such term will be defined
in the Definitive Restated Agreements) occurs with respect to Emcore or its MODE
or Pegasus Divisions, then Emcore would have the option: (1) to refund on a
pre-determined proportionate basis (as specified in the Definitive Restated
Agreements) payments made by Hakuto as described in Paragraph 7 above or (2)
transfer and delegate the Definitive Restated Agreements and all obligations and
liabilities of Emcore thereunder to, and have such obligations and liabilities
assumed by, the party who is taking control of Emcore or its MODE or Pegasus
Division. For purposes of establishing such proportionate basis, the payments
would be allocated as follows: 50% to MODE Items, 25% to Pegasus Items and 25%
to E2M Items.
11. Definitive Restated Agreements. Hakuto and Emcore will finalize and enter
into the Definitive Restated Agreements by June 30, 1998 or sooner. The
Definitive Restated Agreements will be dated as of March 31, 1998.
12. Confidentiality. Except as legally required, neither Emcore nor Hakuto shall
make any public announcement relating to the transaction contemplated by this
Memorandum without the prior agreement thereto by the other. To the extent
permitted, Emcore shall cooperate with Hakuto with respect to any legally
required disclosure.
13. Exclusive Dealing. At least and until June 30, 1998, Emcore will not enter
into any agreement, discussion, or negotiation with, or provide information to,
any other corporation, firm or other person, or solicit, encourage, entertain or
consider any inquiries or proposals, with respect to distribution rights of the
Products in Japan or in the Non-Japan Territories.
14. Waiver of Right to Jury Trial. Each of the undersigned irrevocably,
willingly and voluntarily waives any right of trial by jury in any judicial
proceeding involving, directly or indirectly, any matter in any way arising out
of, related to or connected with the proposed transactions contemplated by this
Memorandum.
[Remainder of page left intentionally blank.]
THIS MEMORANDUM OF UNDERSTANDING sets forth the understandings of the
undersigned with respect to the above mentioned Definitive Restated Agreements.
HAKUTO CO. LTD. EMCORE CORPORATION
By: /s/ Shigeo Takayama By: /s/ Thomas G. Werthan
Name: Mr. Shigeo Takayama Name: Thomas G. Werthan
Title: President Title: Vice President, Finance
and Administration
Exhibit A
Current Distributorship Agreements
1. Amended and Restated Distributorship Agreement, dated January 20, 1998, by
and between Emcore and Hakuto (the "Japan Distributorship Agreement").
2. Agreement, dated as of January 20, 1998, by and between Emcore and S&T
Enterprises Ltd., a corporation of Hong Kong.
3. Agreement, dated as of January 20, 1998, by and between Emcore and S&T
Enterprises (Singapore) Pte. Ltd., a corporation of Singapore.
Exhibit B
Emcore Products
1. The term "MODE Items" shall refer to all Vertical Cavity Surface Emitting
Lasers and all other Products of Emcore's MODE Division and all
Improvements thereon.
2. The term "Pegasus and E2M Items" shall refer to all MR Sensors and all
other Products of Emcore's Pegasus Division and all Epitaxial Wafers and
all other Products of the Emcore Electronic Materials Division and all
Improvements thereon.
3. As used above, the term "Improvements" means any and all alterations,
whether patentable or not, to the Products or of the method of manufacture,
design, construction, installation, maintenance or sale of the Products.