CHANGEPOINT - ARTEMIS INTERNATIONAL JOINT VENTURE
MEMORANDUM OF UNDERSTANDING
1. PURPOSE AND OVERVIEW: Artemis International Germany Gmbh ("AI")
and Changepoint Europe Ltd. ("CPE")
intend to create a corporate joint
venture in Germany, Changepoint Germany
Gmbh("CPG").
CPG's objective is to become the leading
centre of excellence in the provision of
Professional Services Automation solutions
(the "Changepoint Products") and related
services in the German speaking regions of
the Euro zone.
The objective will be achieved through CPG
becoming the exclusive marketing
representative of the Changepoint Products
in Germany and the other German speaking
regions of Europe (the "Territory"). CPG
will provide consulting, sales support,
implementation and integration services,
pre-sales support, first and second-line
software support and maintenance services,
and the coordination of the translation of
Changepoint products into the German
language.
The development and launch of a
myChangepoint service and an ASP service
offering access to Changepoint products in
the Territory is also an objective of CPG,
however the timing of the development of
these services has not been determined and
the financial terms governing their offering
may differ from those set out herein.
2. SHARE OWNERSHIP AND
INITIAL CAPITALIZATION: CPE will own 60% and AI will
own 40% of the issued and outstanding shares
in the capital of CPG and the initial
capitalization costs of CPG will be shared
by the parties in the same ratio as their
ownership of shares.
3. START-UP COSTS: The start-up costs, beginning on the
effective date of the Shareholder Agreement,
related to the joint venture will be shared
by the parties in the same ratio as their
ownership of shares. The parties will each
be responsible for their respective legal
and other professional fees (e.g., tax
advisors).
4. GOVERNANCE: The parties will enter into a shareholder
agreement to provide for the conduct of the
business of CPG, to provide for the transfer
and ownership of shares in the capital of
CPG and to govern the relationship between
the parties. The shareholder agreement will
address the issue of termination of the
joint venture.
The board of directors will be responsible
for the overall management of CPG. The
initial board of directors will include 2
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representatives of CPE and 1 representative
of AI. The board of directors will determine
the size and frequency of dividend payments
to shareholders and will consider the
retained earnings proposals submitted by
management
The parties will agree upon a list of
corporate actions that require the approval
of the board of directors, including:
- All financing by debt or equity;
- Changes to the capital structure of CPG;
- Changes in the financial year;
- Non-arm's length dealings;
- Approval of the annual budget;
- Expenditures in excess of relevant
budgets;
- Changes in senior management.
5. MANAGEMENT: AI will appoint the majority of the initial
officers of CPG from its ranks.. The
officers of CPG will be responsible for
day-to-day operations.
The officers of CPG will prepare in June of
each year for the following two years a
strategic plan and budget (including
revenue, expense and profit forecasts) for
the approval of a majority of the board of
directors
The officers of CPG will from time to time
submit proposals to the board of directors
regarding the suggested level of retained
earnings to promote the growth of the joint
venture.
All employees and officers of CPG will sign
Changepoint standard confidentiality,
non-competition and intellectual property
agreement.
6. INITIAL BUDGET The initial business plan and budget for CPG
is attached as Appendix A.
7. EXPENSES: CPG will not incur or commit to expenses
other than as contemplated in the budget
described in clause 5, without requisite
board approval.
8. PUT AND CALL OPTIONS 1. Subject to the conditions below:
i) Changepoint Europe (CPE) may at its
option exercise its CALL option to
buy the 40% of Changepoint Germany
(CPG) it does not currently own.
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ii) Artemis International (AI) may at its
option exercise its PUT option,
requiring CPE to purchase the 40% of
CPG it does not currently own.
2. Conditions:
a) Either party will provide the other 3
months notice of their intention
to exercise either a PUT or a CALL
b) The price of the PUT and CALL
options will be determined by
applying the following formula:
CPG Revenue
Divided by:
Consolidated CPNT Corp Revenue
Times:
Value of CPNT
Times:
Percentage Ownership
Times:
Discount for PUT or CALL
Where:
- CPG REVENUE is the revenue (from
license sales, maintenance and
consulting) from Changepoint Germany
in the previous 3 months.
- CONSOLIDATED CPNT CORP REVENUE is the
GAAP revenue recognized by
Changepoint Corporation from
operations in the previous 3 months.
The
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revenue from CPG is consolidated at
the rate of 60% of CPG REVENUE
- VALUE OF CPNT is the Stock Price
multiplied by the number of
outstanding shares. The Stock Price
will be the lesser of the average
trading price of CPNT over the
previous 3 months and the price of
CPNT at the date of exercising the
option. If CPNT is not publicly
traded than the value of CPNT will be
determined by an independent third
party valuator agreeable to both AI
and CPE. CPE will pay for the
services of the valuator.
- PERCENTAGE OWNERSHIP is the portion of
CPG owned by AI (ie 40%)
- DISCOUNT FOR PUT OR CALL is: 20% for
CALL and 60% for PUT during the first
24 months of the Shareholder Agreement
and 50% thereafter.
c) During the first 18 months
following the effective
date of the Shareholder
Agreement, the value of
the CALL option will be
the greater of the formula
in a) above and the
appropriate value from the
following table:
Months of Operation
Value
From month 1 to month 6 inclusive
$600,000
From month 7 to month 12 inclusive
$1,200,000
From month 13 to month 18 inclusive
$1,800,000
d) If the profitability of CPG measured
on a cumulative year to date basis
from the beginning of CPG's budget
year is not:
i. equal to or greater than the
board approved budget or
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ii. above 10%
then the value of the PUT option
will be equal to any loses incurred
by AI in CPG from the effective
date of the Shareholder Agreement
e) If all or substantially all of the
shares of Changepoint Corp are
acquired by a third party, AI will
have the right to execute a PUT at
the same value as the Changepoint
CALL.
f) Changepoint will have the right to
exercise a CALL by repaying AI any
loses AI has incurred in CPG from
the effective date of the Shareholder
Agreement, if during the first 24
months following the effective date
of the Shareholder Agreement
the management shareholdings in
AI are reduced below 50% by a
sale to any other third party
than Artemis Xxxxxxxxxx.Xxxxxxx
or its shareholders.
iii) At its option, Changepoint will
have the right to pay amounts
owning AI from the exercise of
the PUT or CALL options in cash
or shares, if those shares are
liquid, in Changepoint.
3. AI will provide CPE with pre-emption
rights and rights of first refusal
prior to sale to a third party
9. NON-COMPETE FOLLOWING
TERMINATION AI will refrain from competing directly with
the business of CPE or for two years from
the date that either CPG is dissolved or CPE
purchases AI's shares in CPG.
10. DISTRIBUTION AGREEMENT: Changepoint will appoint CPG as the
exclusive distributor of Changepoint
products in the Territory. CPG will sign a
CPE distributor agreement which will provide
for the terms of distribution, including:
1. End user contracts:
CPG will contract directly with end
users in the Territory using a
contract form that is acceptable
to CPE.
2. Revenue share:
CPG will pay CPE a 40% share of the
license revenue, net of delivery
charges, taxes, and returns from
licenses for Changepoint products to
end users in the Territory.
3. Support and maintenance:
CPG will contract directly with end
users in the Territory for the
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provision of software support and
maintenance. CPG will provide first
and second level support and CPE will
provide third level support through
CPG for Changepoint products licensed
to end users in the Territory. Support
and maintenance revenue will be split
60% for CPG and 40% for CPE.
4. Master distributor:
CPG will have the right to appoint
sub-distributors in the Territory. CPG
agrees to cooperate in good faith with
CPE if CPE signs a distribution
agreement with a distributor outside
the territory allowing them to
distribute in the territory. This
cooperation will include the right to
sign a single distribution agreement
with the out of territory distributor.
(Revenue recognition rules to be
defined in the latter case)
Training
g) CPG will train its sales staff to
sell Changepoint products.
h) CPG will train its technical
staff to provide technical
sales support (i.e. ability to
conduct demonstrations and
develop a business case based on
the Changepoint Return of
Investment methodology)
i) CPE will provide training to CPG
staff. CPG will be responsible
for Travel and Expenses of
CPE staff.
j) CPE will provide implementation
assistance to CPG for the first
three engagements at twenty (20)
percent discount to its standard
services rates as part of the
initial ramp up of the CPE
services group. The expectation
is that CPE staff would lead
the first engagement; CPG staff
would take the lead on the two
subsequent opportunities with CPE
shadowing and supporting the
latter two implementations.
5. Reporting
CPG will provide a monthly report of
activity and opportunities in a format
to be mutually agreed upon.
6. Demonstration Software and Hardware
Changepoint will provide CPG with
copies of Changepoint products for
demonstration purposes.
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7. CONSULTING SERVICES CPG will provide consulting services to end
users in the territory and will keep 100% of
the consulting revenue.
On request, CPG may also provide consulting
services to end users outside the Territory
and, in this case, the consulting revenue
will be split 80% to CPG and 20% to the
appropriate Changepoint operation. If, at
CPG's request, another Changepoint operation
provides consulting services to end users in
the territory, the consulting revenue will
be split 80% to the Changepoint affiliate
and 20% to CPG.
8. LOCALIZATION CPE will develop a German language version
of the Changepoint products for sale in the
Territory. CPG will provide assistance, at
no charge, as required. This assistance will
include co-ordination with in-Territory
organizations that provide translation
services and QA reviews.
9. NEW PRODUCTS,
TRADEMARKS, TRADE
NAMES AND LOGOS: CPG will not, without CPE's consent,
develop, market, license, sell or otherwise
commercialize any product provided by or
based on a product from any third party
that would compete with the products
marketed from time to time by CPE.
Subject to the terms herein, CPG will have
an exclusive license to use the CPE
trademarks, trade names and logos in the
Territory. CPG will be subject to CPE's
trademark and logo policy as provided from
time to time.
All (a) marketing and advertising materials,
(b) website (initial and revisions), and (c)
sales and marketing collateral will be
provided to CPE by CPG for approval by CPE
prior to any use by CPG.
10. GENERAL: The terms of the Joint Venture will be
formalized in agreements to be drafted by
counsel and will be subject to tax advice.
All announcements to third parties
(including public announcements) about the
joint venture require the prior written
approval of both parties.
11. TIMING: Upon execution of this term sheet, the
parties will take the necessary steps to
create the joint venture as soon as
possible.
12. NON-BINDING TERM SHEET: This term sheet summarizes the parties'
intentions regarding the joint venture. This
term sheet is not binding on either party.
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13. CONFIDENTIALITY: The parties agree to keep the contents of
this term sheet and the discussions about
the joint venture confidential and neither
party will disclose any information about
the joint venture to a third party, other
than legal and tax advisors, without the
prior written consent of the other party.
Notwithstanding that the term sheet is not
binding, the confidentiality obligations in
this section are intended to be legally
binding.
ARTEMIS INTERNATIONAL GERMANY GMBH. CHANGEPOINT EUROPE LTD.
Accepted and agreed to Accepted and agreed to
this _____________ day of ______________, 2000. this _____________ day of ____________, 2000.
By: __________________________ By: __________________________
Name: _______________________ Name: _______________________
Title: ______________________ Title: ______________________
