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EXHIBIT 10.18
NON BINDING HEADS OF AGREEMENT
This document forms the basis of an agreement between the parties
but is not intended to form a binding contract.
The parties:
Template Software Inc of Dulles, Virginia, USA
and Milestone Software GmbH of Neuss, Germany
DEFINITIONS
For the purpose of this agreement the following definitions shall hold true:
"Template" shall mean Template Software Inc of Dulles, Virginia, USA
"TSG" shall mean Template Software GmbH, a new joint venture company Inc in
Germany
"Milestone" shall mean Milestone Software GmbH
"Territory" shall mean Germany and Austria
PREAMBLE
Both parties have agreed that they wish to form a joint venture (TSG) to
represent Template's interests in the Territory and to market Template's
products, solutions and related services exclusively into the Territory. This
joint venture will be owned 51% by Template and 49% by Milestone and its sole
business purpose shall be the sale and marketing of Template's products,
solutions and related services. Milestone Software shall act as a sales agent
and preferred consultancy partner for TSG although TSG shall deal directly with
all 3rd parties and shall be free to enter into partnership relationships with
other companies. This document forms the basis of the Joint Venture Agreements
which will be entered into by the parties to effect the formation of TSG.
TERM
The initial term of the JV agreements between the parties shall be one year
from signature and they shall automatically renew for subsequent years unless
terminated in accordance with the cancellation terms of the agreements or the
purchase of Milestone's holding as provided for in the Exit Vehicle section
herein.
STRUCTURE OF TSG
The ownership of TSG shall be 51% Template, 49% Milestone.
The Board of directors shall consist of 4 people, Chairman: E. Xxxxxxx Xxxxxx,
CEO of Template; other Directors: Xxxxxxx X. Xxxxxxx, Vice President of
European Operations for Template; Heinz-Xxxxxx Xxxxxxxx, President of
Milestone; and one other to be advised representing Milestone.
Heinz-Xxxxxx Xxxxxxxx shall take the role of General Manager of TSG and shall
be responsible for selecting his replacement subject to Board approval after 12
months.
All administrative services including Accounting, Personnel Management,
TAX/Audit, Secretarial Support, Office Premises (TSG shall be entitled to use
space in all Milestone offices), Administration shall be provided by Milestone
for a fixed charge per full time employee on a monthly basis. This charge shall
be 4066 DM per month initially and shall be agreed at the commencement of each
year.
Initial cash funding for TSG for at least the first year shall be provided by
Milestone.
All debts owing to Milestone shall be subordinate to debts to third parties--no
preference shall be given to Milestone.
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Template Software and Milestone Heads of Agreement
Subject to Contract
The operating personnel shall be initially selected by Milestone. A minimum of
three professionals shall be hired initially, this number to grow in accordance
with revenue. Further hires will be selected by the management of TSG and
shall be subject to approval by the Board.
The Business Plan of TSG for the first year shall be in line with the Business
Plan submitted by Milestone appended to this document, subject to final
approval by the Board of Directors of TSG.
PRICING/COMMISSION STRUCTURE
The following transfer prices, commission payments and discounts shall operate.
Licence Sales
While the initial JV agreements are in force, without material amendment, TSG
shall pay licence fees to Template at a rate of 35% of the International List
Price ruling at the time of shipment to the End User, or other price as shall
have been previously agreed by Template. Payment shall be due to Template 30
days after receipt by TSG of the media containing the Template software. No
shipment shall be made unless TSG has procured a Software Licence executed by
the End User with Template.
For sales of licences where the order has been taken by Milestone (although
invoiced by TSG) a commission of 20% of the final invoice price shall be payable
to Milestone by TSG as a sales commission.
Training
TSG shall operate as an exclusive agent for the provision of training and
related services in the Territory. TSG shall ensure that all personnel involved
in training are properly accredited and have successfully attended the course
necessary to attain such accreditation.
Template shall provide services and consumables at the following rates to
support TSG in training in Template's products in the territory:
For the training of TSG's personnel consumables shall be supplied at cost
and the out of pocket expenses of the training personnel supplied by Template
shall be charged but there will be no charge for their time.
For the training of Milestone personnel consumables shall be supplied at cost,
training personnel shall be supplied at their cost to Template, on a daily
basis, and their out of pocket expenses shall be charged at cost.
For the training of End User customers consumables shall be supplied at cost,
training personnel shall be supplied at their cost to Template, on a daily
basis, and their out of pocket expenses shall be charged at cost and in
addition Template shall charge an additional fee such that Template makes a 20%
profit on the transaction.
Consultancy Services
Template shall provide TSG with a reasonable amount of consultancy support to
assist their pre sales effort at no charge to TSG save that TSG shall be
expected to meet the cost of internal travel and subsistence within the
Territory. In the event that extended support is necessary for example for the
building of prototypes for demonstration to End Users, then Template shall in
its sole discretion be entitled to charge TSG for the costs of the consultant's
time and out of pocket expenses. Long term consultancy for the development of
applications for which TSG shall receive payment from End Users will be
provided at Template's normal commercial rates.
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Template Software and Milestone Heads of Agreement
Subject to Contract
MARKETING
Collateral
Template shall supply small quantities of all support documentation and
literature. TSG shall be responsible for translation and production of local
language literature which shall substantively provide the same information,
without embellishment, and shall be in style consistent with Template's house
style as defined by Template's marketing department.
Promotion
Template shall be responsible for global marketing at its own expense. TSG
shall be responsible for local promotion and marketing which shall be
consistent with Template's standard house style insofar as local practice
permits. Template will authorise TSG to use Template's logo, name and other
trademarks during the life of the agreements. Such right shall be immediately
revoked if the agreements are cancelled for any reason.
Licensing
Template shall provide TSG with free of charge copies of Template's licensed
products for use in marketing and sales activities and for use in building
demonstration prototypes which are not charged to the End User. The development
of chargeable pilots or applications for sale to the End User or paid work by
TSG consultants on the End User's site requires the purchase of a Development
Licence for each developer at normal rates. While licences purchased by TSG may
be used internally to develop multiple applications for End Users there must be
at least one Development Licence purchased for and assigned to each deployed
application for the purposes of application maintenance and support. This
licence may be purchased by either the End User or by TSG depending on who is
maintaining the application.
Runtime licence fees shall be payable for all deployed applications in
accordance with Templates standard licensing terms.
EXIT VEHICLE
It is agreed that Template shall have an option to purchase the share of TSG
held by Milestone in accordance with the following terms:
During the first year of operation Template shall only be able to buy out
Milestone at a price negotiated by agreement.
During the second year of operation Template may purchase the Milestone share at
a price equivalent to valuing TSG at 3 times sales revenue provided that the
acquisition of TSG at that price is not dilutive for Template.
During the 3rd year of operation Template may purchase the Milestone share at a
price equivalent to valuing TSG at 2 times sales revenue provided that the
acquisition of TSG at that price is not dilutive for Template.
For subsequent years Template may purchase the Milestone share at a price
equivalent to valuing TSG at 1 times sales revenue provided that the
acquisition of TSG at that price is not dilutive for Template. At any time the
parties may agree to the buy out at a price not provided by the above terms by
mutual agreement.
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Template Software and Milestone Heads of Agreement
Subject to Contract
TERMINATION
Notwithstanding the provision of the Exit Vehicle clause of the agreement, the
JV agreements may be terminated by either party for cause on ninety days written
notice to the other for any of the following reasons (termination not to be
effective if the cause is corrected within the ninety day period):
If any of the parties become insolvent, petition for bankruptcy, apply for
protection from creditors, failure to pay debts when due.
If any of the parties materially fail in their duties as set out in this
agreement, such failure not being rectified within 90 days of notification by
the other party that such failure has occurred.
Effect of termination
Should the agreement be terminated in accordance with this clause then the
following actions will occur:
If termination is not due to the insolvency of Template, Template shall revoke
the right for TSG to offer Templates products solutions and related services,
revoke the right to use Template's trademarks, trading name etc. The right to
trade in the Territory using the name Template Software shall pass to Template.
In addition TSG shall pass to Template full information regarding all customers
and potential customers for Template's products, solutions and related services
in the territory. Template will take on the responsibility for ongoing support
for all existing customers.
AGREEMENT TIMETABLE
The timetable of events agreed by the parties to bring about the establishment
of the Joint Venture is as follows:
BY 14 OCTOBER 1996
Terms of Heads of Agreement shall be finally agreed and the document shall
be signed.
14 OCTOBER to 1ST DECEMBER
Drafting and negotiation of final contract terms.
From 14th October to 1st January 1997 Milestone Software shall act as Template's
representative in the Territory under the same basic terms and conditions as
provide by this document for TSG and in accordance with the Business Plan
appended to this document.
1ST DECEMBER
Signing of Joint Venture Contracts
1ST JANUARY 1997
TSG commences official trading.
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Template Software and Milestone Heads of Agreement
Subject to Contract
signed
for and on behalf of Template Software US,
/s/ E. Xxxxxxx Xxxxxx Date: 10/11/96
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E. Xxxxxxx Xxxxxx, Chief Executive Officer
for and on behalf of Milestone Software GmbH
/s/ Heinz-Xxxxxx Xxxxxxxx Date: 10/11/96
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Heinz-Xxxxxx Xxxxxxxx, President
Attachments:
Template Standard Licensing Agreement
Milestone Business Plan for Template Germany
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