EXHIBIT 10.24
MEMORANDUM OF UNDERSTANDING
[*] INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2.
1. SCOPE OF OBJECTIVES OF JOINT VENTURE
Initially, Sun Corporation ("Sun"), Axis Corporation ("Axis") and Award
Software International, Inc. ("Award:" Sun, Axis and Award individually, a
"Partner" and collectively, the "Partners") will jointly own a business (the
"Joint Venture") that markets and distributes Award's notebook BIOS (the
"Products") to the portable PC market and provides technical and other
customer support.
The Joint Venture will combine Sun's reputation, and marketing and sales
expertise, Axis's technical and design expertise and Award's products,
engineering and customer support to penetrate the portable PC market in Japan
(the "Territory").
2. FORMATION OF AWARD JAPAN
The Partners shall organize and incorporate a new joint stock company
(Kabushiki Kaisha) under the laws of Japan ("Award Japan"). All reasonable
costs of incorporation and qualification shall be borne by Award Japan to the
extent legally permitted. The remainder of such costs shall be offered by the
Partnership in proportion to their respective ownership interests.
Sun shall be responsible for completing and/or assisting Award Japan in
completing any approval and/or notification procedures required by law
involving the Japanese government (national and/or local) with respect to the
formation of the Joint Venture, including but not limited to assisting Award
Japan in filing with the relevant Japanese governmental ministries all
required notices under the Foreign Exchange and Foreign Trade Control Law of
Japan, as amended, concerning Award's purchase of stock in the Company. Award
Japan shall: (i) file any and all reports and notices and take any and all
other further action as necessary or appropriate to establish and maintain its
existence under the laws of Japan, and (ii) be responsible for completing any
approval procedures required by law involving the Japanese government with
respect to the importation, marketing, distribution, licensing, sale and
support of the Products in the Territory. The Joint Venture shall retain
Japanese counsel reasonably acceptable to the Partners.
3. PURCHASE OF INTEREST/CREATION OF JOINT VENTURE
The Partners will jointly determine the number of primary and/or secondary
shares of Award Japan which are to be purchased by each Partner, based upon
tax, accounting and other considerations. After such purchase, Award, Sun and
Axis will own a 62% interest, a 19% interest and a 19% interest in Award
Japan, respectively.
4. PURCHASE PRICE
According to the provisions in the Definitive Agreements (see Section 25
below) which will be signed by the Partners, each of the Partners will
purchase for cash its respective interest in Award Japan at a price to be
mutually agreed.
5. INITIAL CAPITALIZATION; ADDITIONAL CAPITALIZATION
The Initial Strategic Plan (see Section 9 below) will specify the initial
capital requirements for the Joint Venture, which is expected to be
US$500,000. The Partners will discuss securing additional sources of capital
for the Joint Venture, if necessary, including bank credit facilities and
long-term loans. In addition, the Partners will agree to be jointly
responsible on a pro rata basis for any future capital calls by the Joint
Venture approved pursuant to Section 6 below.
6. GOVERNANCE OF JOINT VENTURE
The Joint Venture shall be governed and managed by a Board of Directors
initially comprised of five (5) members (the "Board"). Award shall have the
right to elect a majority of the Directors and a majority of the Board shall
elect the Chairman. Each of Sun and Axis shall have the right to appoint one
Director to the Board.
(a) A majority of the Directors shall constitute a quorum. The
approval of a majority of the Directors present at a meeting at which a quorum
is present shall constitute the act of the Board.
(b) An act of the Board shall be required to approve the following
transactions:
(i) the merger, consolidation, liquidation or dissolution of
the Joint Venture, or sale of all substantially all of the assets of the Joint
Venture;
(ii) amendments to the Joint Venture Agreements; and
(iii) the issuance of equity interest in the Joint Venture to
third parties.
Notice and other information provided to the Directors shall be given in both
Japanese and English languages.
7. BOARD COMMITTEE
The Board may establish committees to govern such important areas as
audit/finance, compensation, technology, distributions, marketing, etc.
8. DEADLOCK RESOLUTIONS
In the event that the Board cannot reach a decision on any matter within the
scope of its responsibilities, the Partners will use their best efforts to
resolve their differences.
9. MANAGEMENT STRATEGIC PLAN AND OPERATIONS
At the outset the management of the Joint Venture shall be approved by all of
the Partners. Thereafter, the Board (by majority vote) shall have the right to
appoint (or remove) the President and other key operating officers of the
Joint Venture.
Upon the formation of the Joint Venture, the Partners shall agree on the
Strategic Plan of the Joint Venture. Thereafter, the Strategic Plan shall be
subject to the approval of the Board. The Strategic Plan shall include (i)
technology strategy, (ii) product strategy, (iii) target markets and
customers, (iv) capital requirements, and (v) other matters of key strategic
importance to the Joint Venture.
Subject to the Strategic Plan, Mr. Toshihiko Kumashiro will control the
day-to-day operations of the Joint Venture (including marketing and other
matters customarily considered in the ordinary course of business). Decisions
which may be made by management of the Joint Venture will include, for
example, the hiring, firing and compensation of personnel; the selection of
the office in Japan; the selection of office equipment, supplies and
negotiations of agreements with them; and the decision to take a license under
third party technology so long as such licenses do not involve an affiliate of
a Partner or a cross-license under Joint Venture technology. In any event, all
operations of the Joint Venture must be consistent with the Strategic Plan.
10. TRANSFER RESTRICTIONS
During a period equal to the term of the Distribution Agreement, none of the
Partners shall be permitted to transfer, sell, pledge or dispose of its equity
interest in the Joint Venture, except for pledges of assets in connection with
debt financing transaction by Axis from Award, without the written consent of
the other Partners.
11. DISTRIBUTION AGREEMENT
The Joint Venture shall enter into an agreement with Award whereby the Joint
Venture shall be appointed as Award's exclusive distributor with respect to the
marketing, distribution, licensing, sale and support of the Products in the
Territory during the term of such agreement. The Joint Venture would earn
commission equal to [*] of net revenues generated from sale of the Products in
the Territory.
12. INTELLECTUAL PROPERTY
All intellectual property, including enhancements and derivative, that is
developed by the Joint Venture shall be owned exclusively by Award. Award
shall retain all rights to such intellectual property without any restrictions
and none of the other Partners shall have any rights, title or interests
thereto.
13. TECHNICAL SUPPORT AGREEMENT
Axis shall enter into an agreement with the Joint Venture whereby Axis will
provide technical design, engineering and support services.
14. BUDGETING AND STRATEGIC PLANNING
The Joint Venture shall operate generally in accordance with a Strategic Plan
and annual operating plan. The Strategic Plan will include a long-range
financial plan and will encompass a period of three or more years. The annual
operating plan will include the budget and will
[*]--CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN EQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
encompass the current 12 month period. The annual operating plan and budget
shall be consistent with the Strategic Plan. The following table summarizes
the preparation, term, frequency of review and required approval for the four
plans.
FREQUENCY OF
NAME OF PLAN PREPARED BY TERM REVIEW REQUIRED APPROVAL
- ------------ ----------- ---- ------------ -----------------
Strategic Plan Board and over 3 every year Majority of Board
Management years
Long-range Board and over 3 every year Majority of Board
Management years
Annual Operating Board and 1 year every year Majority of Board
Plan Management
Budget Board and 1 year every year Majority of Board
Management
The initial Strategic Plan shall require the approval of all Partners.
Meetings between management and the Board of the Directors will be held at
least quarterly. In addition to yearly financial reports, management of the
Joint Venture will provide each Partner with monthly and quarterly reports and
forecasts.
15. PROFITS AND LOSSES
Profits and losses of the Joint Venture will be allocated according to the
percentage ownership of each Partner.
Cash dividends will be declared by the Board at its discretion, subject to
giving priority to reinvestment and internal reserves specified in the
financial plans, and will be allocated according to ownership percentage.
Cash distributions upon termination or liquidation of the Joint Venture will
be allocated according to ownership percentage.
16. EMPLOYEE ARRANGEMENTS
Initially, the joint venture would require a [*]. By the end of 1997, the
personnel staff would include a [*]. The joint venture should be staffed based
on the following schedule:
[*] INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2.
Q1 1997 Q2 1997 Q3 1997 Q4 1997
------- ------- ------- -------
[*]
17. ADDITIONAL PERSONNEL
Award at its sole discretion will provide additional technical personnel to
the Joint Venture as may be reasonably requested.
18. NON-COMPETITION
So long as each Partner holds an interest in the Joint Venture, none of the
Partners shall compete with the Joint Venture.
19. SUBSCRIPTION RIGHTS
Subject to approval of a capital call pursuant to Section 6 above, if the
Joint Venture needs additionally equity capital, then the Joint Venture must
offer each of the Partners the right to purchase its pro-rata share of such
equity. If any of the Partners does not elect to purchase their share of such
additional equity, the other Partner(s) may purchase any additional equity not
purchased.
20. ACCOUNTING MATTERS
Records, accounting standards/controls and financial statements will conform
to the generally accepted accounting principles of both U.S. (G.A.A.P.) and
Japan. An independent auditor for the Joint Venture will be hired and will
conduct a full audit at the end of each fiscal year and a periodic review on a
quarterly basis.
Each Partner will have the right to inspect the books and records of the Joint
Venture.
21. NON-BINDING UNDERSTANDING
This Memorandum of Understanding ("MOU") constitutes a non-binding
understanding among Sun, Axis and Award regarding the proposed Joint Venture.
[*] INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2.
22. TIMETABLE
Upon the signing of this MOU, each of Sun, Axis and Award will move
expeditiously to complete their due diligence, to continue negotiating in good
faith to reach and execute a definitive Joint Venture Agreement by June 30,
1997.
23. DOCUMENTATION
The agreement of the parties with respect to the Joint Venture shall be set
forth in definitive joint venture, distribution, technical support and other
agreements (the "Definitive Agreement") containing mutually agreeable
representations, warranties, covenants, indemnification, dispute resolution
and termination provisions.
The Definitive Agreements shall be governed and construed under the laws of
Japan; provided that to the extent that any agreement contains its own choice
of law provision, the terms of that choice of law provision shall govern and
prevail over this provision. The Definitive Agreements will be negotiated and
executed in the English language, and the rules of construction and
definitions of the English language shall be applied in interpreting the
Definitive Agreements. Unless otherwise specifically required hereunder, all
notices and other communications required or contemplated by this MOU shall be
written in the English language.
24. CONFIDENTIALITY
Each Partner agrees to keep confidential the existence of the ongoing
negotiations regarding the Joint Venture, except as required by law or stock
exchange rules. Each of the Partners will agree to keep confidential and not
use or disclose any confidential information acquired during the term of Joint
Venture, except as described in Section 13.
25. PUBLICITY
Each Partner will agree to a joint press releases and other forms of publicity
upon the signing of a definitive Joint Venture Agreement. Subject to the
foregoing paragraph, none of the Partners will issue a press release regarding
the negotiations without the consent of the others.
SUN CORPORATION AXIS CORPORATION
By: /s/ Masami Maeda By: /s/ Toshihiko Kumashiro
---------------------- ------------------------
Masami Maeda Toshihiko Kumashiro
Date: April 30, 1997 Date: April 30, 1997
-------------------- ----------------------
AWARD SOFTWARE INTERNATIONAL, INC.
By: /s/ George C. Huang
----------------------
George C. Huang
Date: April 30, 1997
--------------------