25.04 [2] Sample Preliminary Nonbinding Term Sheet. Joint Venture

Transcription

1 25.04 [2] Sample Preliminary Nonbinding Term Sheet Joint Venture ABC Company and XYZ Company will be joint-venture partners as sole members of a limited liability company to be named (the "Joint Venture"). The Joint Venture will be organized under the laws of the State of Delaware. The Limited Liability Company Agreement (the "Joint Venture Agreement") of the Joint Venture shall set forth the agreement between ABC Company and XYZ Company concerning the Joint Venture, including governance matters. Each of ABC Company and XYZ Company will acquire a 50% ownership interest in the Joint Venture. The Scope of the Business of the Joint Venture The purpose of the Joint Venture shall be to develop, and commercialize Alpha Technology for use in the manufacturing of semiconductors (the "Business"). The Joint Venture will operate as an independent enterprise with the goals of creating a market for Alpha Technology and maximizing value to ABC Company and XYZ Company. The Joint Venture Agreement shall specify certain agreed upon milestones for measuring the progress of the Joint Venture. After completion of the critical milestone (the "Critical Milestone"), the parties shall commit to bringing a product based on the Alpha Technology to market. If the Joint Venture, after commercially reasonable efforts by both parties, is unable to complete the Critical Milestone [prior to ], then either party may cause the dissolution and winding up of the Joint Venture. The scope of the Business may be expanded beyond Alpha Technology only with the consent of both ABC Company and XYZ Company, which may be withheld in the sole discretion of either party. ABC Company and XYZ Company, and their affiliates, shall, with respect to activities falling within the scope of the Business, conduct such activities exclusively through the Joint Venture. With respect to business opportunities that fall within the scope of the Business, each of ABC Company and XYZ Company, and their affiliates, will be required to present such opportunities to the Joint Venture. Financing the Joint Venture The Joint Venture shall initially be funded through an initial cash capital contribution in the aggregate amount of $[ ] (the "Initial Capital Contribution"), to be paid 50% by each of ABC Company and XYZ Company at the closing of the formation of the Joint Venture (the "Closing"). Upon the completion of the Critical Milestone, ABC Company and XYZ Company shall make an additional cash capital contribution in the aggregate amount of $[ ] (the "Critical Milestone Capital Contribution" and, together with the Initial Capital Contribution, the "Minimum Capital Contribution"), to be paid 50% by each of ABC Company and XYZ Company. Except for the Minimum Capital Contribution, neither XYZ Company nor ABC Company shall be required to make any other capital contribution without the consent of each of XYZ Company and ABC Company, which may be withheld by each party in its sole discretion.

2 The Respective Roles of ABC Company and XYZ Company Each of ABC Company and XYZ Company will use their commercially reasonable efforts to contribute to the success of the Joint Venture. Employee Matters Each of ABC Company and XYZ Company shall initially be required to contribute a number of employees to the Joint Venture to be agreed upon. Salaries for such employees shall be paid by the Joint Venture, but benefits for such employees shall continue to be furnished by ABC Company or XYZ Company, as the case may be. It is anticipated that after completion of the Critical Milestone, the Joint Venture will begin to furnish such benefits, and such employees shall become full-time personnel of the Joint Venture with no further connection with ABC Company or XYZ Company, as the case may be. Intellectual Property Matters Each of XYZ Company and ABC Company shall enter into a Technology License Agreement (each a "Partner Technology Agreement") with the Joint Venture upon the Closing setting forth the technology that each party shall license to the Joint Venture. It is contemplated that each of XYZ Company and ABC Company will license to the Joint Venture all of the intellectual property that it owns that is necessary for the development and commercialization by the Joint Venture of the Alpha Technology. The Partner Technology Agreements shall provide that: (1) the licenses shall be narrowly defined to apply only to preexisting intellectual property required for the use of the Alpha Technology, (2) the licenses shall be exclusive (but with reservation) on a royalty-free basis and (3) the party licensing technology to the Joint Venture shall be entitled to the use of any improvements or modifications to such technology created by the Joint Venture on a royalty-free, fully paid-up basis (whether or not such party remains a member of the Joint Venture). Management The Joint Venture shall be managed directly by its members, rather than through a Board of Managers. Each of ABC Company and XYZ Company shall appoint one officer (each, a ""Designated Representative"") who shall be responsible for the management of the Joint Venture. XYZ Company shall have the [exclusive] right to nominate [and elect] the Chief Executive Officer[, subject to the approval of ABC Company, which shall not be unreasonably withheld]. ABC Company shall have the [exclusive] right to nominate [and elect] the [ ][, subject to the approval of XYZ Company, which shall not be unreasonably withheld]. Other officers shall be nominated and elected by the Chief Executive Officer. Meetings of the Designated Representatives Regular meetings of the Designated Representatives shall be convened in such frequency as they may determine, provided that such meetings shall be held on at least a[n] [annual] basis. Ordinary and Reserved Matters All matters for management direction of the business and affairs of the Joint Venture shall be resolved by affirmative vote of both Designated

3 Representatives. The Designated Representatives may, to the extent consistent with applicable law, delegate decision-making authority with respect to ordinary matters to the management of the Joint Venture. However, action on the following matters (the "Reserved Matters") must be approved by the affirmative vote of both Designated Representatives and may not be delegated to management of the Joint Venture: (1) any fundamental change in the purpose or scope of the business of the Joint Venture or the abandonment of the Joint Venture; (2) the annual financial and operating plan of the Joint Venture and any material revisions or amendments thereto (provided that no such approval shall be required with respect to the Minimum Capital Contribution); (3) any expenditure which, when added to all other expenditures covered by such financial and operating plan, would make the total expenditures exceed the expenditure set forth in such plan by [twenty percent (20%)] or more; (4) except as expressly authorized in the current financial and operating plan, any merger, sale, lease, license, assignment or other disposition for value of any of the Joint Venture's assets with a fair market value in excess of $ at any one time or the aggregate value of which exceeds $ within any [six month] period [or otherwise outside of the ordinary course of business]; (5) except as expressly authorized in the current financial and operating plan or authorized under specifically delegated authority, any incurrence or guarantee of indebtedness or grant of any security interest in any of the Joint Venture's assets, involving in each case an amount in excess of $ ; (6) any action or inaction that might cause the breach or termination of any agreement to which the Joint Venture is a party involving an amount to be paid by the Joint Venture over the term of the agreement in excess of $ ; (7) except as expressly authorized in the current financial and operating plan, any investment in, contribution to the capital of, or acquisition for value for the Joint Venture's account of any stock or similar security issued by or any other ownership interest in, any other person; (8) any amendment, modification or extension of or suspension of performance under, or waiver or termination by the Joint Venture of either of the Partner Technology Agreements; (9) any agreement, contract, commitment, undertaking or expenditure not otherwise deemed a Reserved Matter as described herein, involving an amount in excess of $, or any amendment, modification or extension of or suspension of performance under any such agreement, contract, commitment or undertaking; (10) the surrender or abandonment of any property, tangible or intangible, or any rights thereunder; (11) hiring of any salaried employee with a total annual compensation in excess of $ or the retention of any person on a

4 commission or the termination of employment of any salaried employee with a total annual compensation in excess of $ ; (12) distributions to members; (13) leasing of any real property; (14) entering into any agreements or material transactions (including any amendments or modifications thereto) between the Joint Venture, on the one hand, and either (a) an executive officer of the Joint Venture, (b) ABC Company, or any associate, affiliate or subsidiary of ABC Company or (c) XYZ Company, or any associate, affiliate or subsidiary of XYZ Company, on the other hand; (15) any use of the name of, or any information regarding, any member of the Joint Venture or any affiliated company of any member of the Joint Venture, in any promotional materials or public relations for the Joint Venture, except as expressly permitted by separate written agreement of such member or affiliated company; (16) any determination to initiate or forego any claim or litigation and any settlement, compromise or confession of judgment as to any claim, controversy or litigation regarding in each case an amount in excess of $ and involving the Joint Venture as claimant or defendant (except that either member may unilaterally authorize the Joint Venture to bring suit against the other member to enforce the terms of the Partner Technology Agreement to which such other member is a party or to enforce the terms of any other agreement between the Joint Venture and a member); (17) the admission of a new member to the Joint Venture; Venture; (18) any amendment to the certificate of formation of the Joint (19) any dissolution or liquidation of the Joint Venture; (20) the final annual audited financial statements, the disposition of profits and [all annual income tax returns] of the Joint Venture; (21) any change in the independent auditor or fiscal year of the Joint Venture; and (22) any merger or consolidation of the Joint Venture with any other person or entity, or any transfer of all or any material part of the business of the Joint Venture, or any contract for the lease of the entire business of the Joint Venture or any other similar contract. Deadlocks In the event of a deadlock with respect to [any] Reserved Matter, either party shall have the right to submit to the other party a written offer (the "Offer") to purchase such other party's interest in the Joint Venture. The offeree must then either accept the Offer or purchase the offeror's interest in the Joint Venture on the terms set forth in the Offer. The Partner Technology Agreement of the selling party shall continue in effect solely for use in the Business.

5 Restrictions on Disposition of Ownership Interests Neither ABC Company nor XYZ Company shall be permitted, directly or indirectly, to sell, transfer, pledge or otherwise dispose of its ownership interest in the Joint Venture. [Transfer shall be broadly defined to include a change in control of either of the parties. Change in control shall also be broadly defined to include the acquisition by a person or "group" of persons (as defined under Rule 13d-5 of the Securities Exchange Act of 1934, as amended) of more than 10% of the voting stock of ABC Company or XYZ Company, as the case may be.] [Any attempted transfer shall be void and shall result in the immediate termination of: (1) the license of the nontransferring party's technology to the Joint Venture pursuant to its Partner Technology Agreement and (2) the license of the transferring party to any technology created by the Joint Venture through enhancement of the transferring party's technology.] Conditions to Closing Each of the following shall be a condition to the closing of the Joint Venture: (1) payment by each of XYZ Company and ABC Company of their allocated share of the Initial Capital Contribution; (2) the execution of the Partner Technology Agreements; (3) the execution of any other agreements that need to be in place prior to the Closing, e.g., with respect to facilities or equipment, (4) obtaining all necessary regulatory approvals; and (5) such other closing conditions as are customary for this type of transaction. Representations and Warranties; Indemnification The definitive agreements shall contain customary representations and warranties and indemnification provisions. Auditors The Joint Venture will have an independent certified public accountant to be agreed upon and named in the Joint Venture Agreement. Other Terms The definitive Joint Venture Agreement will contain other customary or appropriate terms related to, among other things, confidentiality, inspection rights and allocation of formation expenses of the joint venture. This Preliminary Nonbinding Term Sheet is not intended to set forth binding obligations of the parties. The proposed joint venture and other transactions described herein are conditioned upon mutually agreeable negotiation and execution of definitive agreements, the approval of such agreements by the respective boards of directors of each of XYZ Company and ABC Company, and the satisfaction of all closing conditions contained in the agreements. This Preliminary Nonbinding Term Sheet does not, by itself, create or imply any legal rights or obligations between the parties or any other person, including without limitation any obligation to engage in negotiations or discussions, all of which will come into existence only upon the execution of definitive agreements. This Preliminary Nonbinding Term Sheet may not cover all essential terms and conditions of the proposed joint venture and other transactions described herein.