<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission File Number 0-28904
AWARD SOFTWARE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
California 94-2893462
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
777 EAST MIDDLEFIELD ROAD, MOUNTAIN VIEW, CALIFORNIA 94043-4023
(Address of principal executive offices, including zip code)
(650) 237-6800
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Based on the closing sale price of $10.50 on March 17, 1998, the aggregate
market value of the voting stock held by non-affiliates of the Registrant was
$42,880,551.
On March 17, 1998, there were outstanding 6,963,862 shares of the Registrant's
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III--Portions of the Registrant's definitive Proxy Statement for the
Registrant's Annual Meeting of Shareholders to be held June 4, 1998, which will
be filed with the Securities and Exchange Commission, are incorporated by
reference to the extent stated herein.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
Part I........................................................................................... 3
Item 1 Business....................................................................... 3
Item 2 Properties..................................................................... 18
Item 3 Legal Proceedings.............................................................. 19
Item 4 Submission of Matters to a Vote of Security Holders............................ 19
PART II.......................................................................................... 20
Item 5 Market for the Registrant's Common Stock and Related Stock Matters............. 20
Item 6 Selected Financial Data........................................................ 21
Item 7 Management's Discussion and Analysis of Financial Condition and Results of..... 22
Operations
Item 8 Financial Statements and Supplementary Data.................................... 29
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 45
PART III......................................................................................... 46
Item 10 Directors and Executive Officers of the Registrant............................. 46
Item 11 Executive Compensation......................................................... 46
Item 12 Security Ownership of Certain Beneficial Owners and Management................. 46
Item 13 Certain Relationships and Related Transactions................................. 46
PART IV.......................................................................................... 47
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............... 47
</TABLE>
2
<PAGE>
PART I
Item 1. Business
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21A of the Securities Exchange Act of 1934, as amended, which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Business --Business Risks" and elsewhere in
this Form 10-K and in other documents on file with the Securities and Exchange
Commission.
GENERAL
Award Software International, Inc. ("Award," the "Company" or the
"Registrant"), designs, develops and markets system enabling and management
software for the global computing market. System enabling and management
software is one of the fundamental layers in any microprocessor-based system
(including personal computers) architecture and provides an essential interface
between the system's operating system software and hardware. The Company's
principal system enabling and management software products include a suite of
Basic Input/Output System software ("BIOS"). Award's customers include designers
and manufacturers of motherboards, personal computer ("PC") systems and other
microprocessor-based (or "embedded") devices. The Company believes that its
products and engineering services enable customers to rapidly develop new
motherboard designs for state-of-the-art computer systems. The Company markets
and licenses its products and services worldwide and has established itself as a
leading provider of desktop system management software in Asia, which accounts
for over 60% of worldwide desktop motherboard production.
The BIOS, which is the software initially executed after the system is turned
on, tests and initializes hardware components, initiates the operating system
and then provides advanced interface functions. Award's desktop BIOS products
enable a PC to support a number of key advanced technologies, including Plug and
Play, Peripheral Component Interconnect ("PCI"), Desktop Management Interface
("DMI"), Universal Serial Bus ("USB") and Advanced Configuration and Power
Interface ("ACPI"). The Company is currently developing further enhancements to
its BIOS, including support for emerging standards such as IEEE-1394 and
Intelligent I/O ("I2O"). IEEE-1394 is a high-speed data interface for PCs,
peripherals and consumer electronic products. I2O is an intelligent input and
output subsystem used primarily with data storage devices. The Company also
provides BIOS upgrades to end-users of desktop PCs who wish to extend the life
of their systems without replacing them entirely. In addition to the Company's
proprietary suite of system enabling and management software products, Award
offers PC Card software that enables PCs and other electronic devices to
recognize, install, configure and operate peripheral devices, such as network
and modem cards.
The Company has recently embarked on a program to provide the leading PC
technologies to manufacturers of embedded devices. Supporting systems using
real time operating systems ("RTOS"), for example, the Company's products
provide PC bus connectivity, PC software compatibility and PC hardware enabling.
Certain vertical markets within the embedded systems arena, such as Internet
appliance manufacturers, are also targeted with industry specific solutions.
The Company currently licenses its products to more than 200 customers
worldwide, including Compaq Computer Corporation ("Compaq"), LG Electronics Inc.
("LG Electronics), Micron Electronics, Inc. ("Micron"), Motorola, Inc.
("Motorola"), NEC Corporation ("NEC") and Packard Bell. In response to its
customers' need to develop and integrate new technologies rapidly, the Company
has developed its business with a particular emphasis on providing local
engineering service and support in each of its major target regions: Asia
(primarily Taiwan), North America and Europe.
Award Software International(R), Award Software(TM), Award(TM), APIAccess(TM),
AwardBIOS(TM), CardWare(R), MR BIOS(R), PC DIAG(R), POSTcard(R), SMSAccess(R),
Unicore(R), USBAccess(TM) and WWWAccess(TM) are either pending trademark
approval or are trademarks of the Company.
3
<PAGE>
INDUSTRY BACKGROUND
PC systems consist of four layers: the hardware, the BIOS, the operating
system and the application software. The computer's primary hardware component,
the motherboard, is connected to peripheral hardware devices, such as a
keyboard, hard disk drive and mouse. The BIOS is stored in a non volatile memory
chip on the motherboard while the operating system and application software are
stored on the hard disk drive. The BIOS, which is the software initially
executed after the system is turned on, tests and initializes hardware
components and initiates the operating system. After the BIOS completes the
start up or "booting" of the system, it serves as the interface between the
computer hardware and the operating system. By acting as the bridge between the
operating system and the computer hardware, the BIOS makes it possible to
develop hardware and software independently. As a result, the pace of innovation
for hardware products in the PC industry, where the typical life cycle of a
hardware design is six to twelve months, has not been constrained by the slower
pace of operating system development, where generational advances can take
several years to develop.
Enhanced BIOS and other system management software have been developed to
support implementation of new industry standards and technologies, such as Plug
and Play, PC Card, DMI, "hot-docking" and ACPI. Improved versions of BIOS are
currently being developed to support IEEE-1394 and the latest PC industry
standards. Many of these new technologies will play an important part in the
development of PCs and embedded devices for the Internet and other network
computing environments.
Several important trends are currently affecting the system management
software industry:
Outsourcing of System Management Software Development. The rapid pace of
technological innovation in recent years has required system makers to adapt to
short production cycles and operate in an environment of continuous innovation.
As PC and motherboard designers and manufacturers continuously improve their
hardware products, they must ensure the compatibility of these new designs with
existing operating systems through a customized BIOS. While some PC and
motherboard manufacturers develop system management software internally,
increasingly complex technology, demand for compatibility with industry
standards and competitive market pressures are driving many manufacturers to
rely on dedicated system management software providers. These manufacturers
demand high levels of support at all stages of product development, making it
necessary for system management software vendors to provide effective localized
engineering support during the production process.
Outsourcing of Motherboard Production. Competitive pressures in the PC
market, including sub-$1,000 PCs ("Segment Zero"), have also caused system
manufacturers to outsource PC motherboard production to reduce cost and stay
current with advancing technologies. Manufacturers in Taiwan have taken
advantage of this trend to become significant participants in the world desktop
system and motherboard production market. Further, their role has expanded to
include design decisions, such as the selection of the BIOS and other system
management software. To rapidly integrate new motherboard designs into the
overall PC system, these manufacturers require locally based system management
software engineering resources.
Rapid Growth of the Embedded Device Market. Embedded devices perform a single
or limited number of tasks for a dedicated purpose. These devices require
advanced capabilities for data analysis, communication, control and ease-of-use
and depend upon highly customized system management software solutions to ensure
performance, reliability and functionality. Two distinct trends are emerging in
the embedded systems market. First, traditional PC architecture, which is based
on the x86 design, is being adopted for use in the embedded computer market. The
implementation of x86 architecture permits the development of open systems that
can employ standard software, development tools and peripheral hardware
products. Second, new generations of high-performance, low-cost Reduced
Instruction Set Computing ("RISC")-based processors are fostering the invention
of new types of devices and the miniaturization of existing products such as
Internet telephones and personal communicators. To minimize time to market,
these classes of designs are relying more and more on technologies and standards
emanating from the PC industry.
Need to Reduce Total Cost of Ownership ("TCO"). As PC use by less
technically sophisticated home and business users has grown, PC system
manufacturers have been searching for cost-effective solutions to reduce TCO.
Today's computing environment potentially provides system manufacturers with
the ability to access the hardware and operating systems to ascertain the
problems of the user and to make repairs. Additionally, manufacturers of
embedded systems are searching for cost-effective ways to maintain and support
their products, which are broadly
4
<PAGE>
distributed and sometimes installed in remote locations that cannot be directly
accessed by support personnel. To address this opportunity, providers of system
management software are beginning to work closely with system manufacturers to
develop products with remote access, diagnostic and repair capabilities.
Management Information System ("MIS") organizations and individuals are seeking
ways to prolong the useful life of PCs that have enough computing power for
daily usage, but are no longer compatible with hardware technologies introduced
after the PCs were manufactured.
AWARD STRATEGY
The Company's objective is to become the leading designer, developer and
marketer of system enabling and management software by providing innovative
solutions to the desktop PC, mobile PC and embedded device markets. The
Company's strategy includes the following key elements:
Build on Desktop Leadership in Asia. Award is currently a leading provider
of system management software to the Asian desktop motherboard market and will
attempt to increase market share in this important region. The Company believes
that PC manufacturers worldwide increasingly outsource PC design decisions,
including the selection of system management software and solutions used to
reduce TCO, to the OEMs and original design manufacturers in Taiwan that form
the core of the Company's client base. Award further believes its long-standing
focus on Asia positions it to take advantage of this market growth, and the
Company plans to maintain a high level of engineering and management resources
in this region. See "Business --Business Risks, International Operations;
Currency Fluctuations; International Unrest."
Leverage Existing Customer Relationships and Desktop PC Expertise to Pursue
the Mobile Market. The Company believes that it can leverage its desktop
system management software expertise to design and develop products for the
mobile PC. To complement its mobile BIOS products, the Company also offers
system management software to support the PC Card standard, which is broadly
implemented in the mobile PC market. The Company believes that the leading
Taiwanese desktop system and motherboard manufacturers, many of which are Award
customers, will enter the mobile PC market and provide the Company with
opportunities to license its mobile BIOS products. In addition, the Company has
established a full-service joint venture subsidiary operation in Yokohama, Japan
to market, customize and support system management software to the mobile PC
manufacturers in Japan, which are significant participants in the mobile PC
market.
Provide the Embedded Systems Marketplace with Innovative Products based on The
Company's PC Industry Core Competencies. With the increasing uniformity of the
PC industry, where products generally must be Intel- and Microsoft- compatible,
software developers and peripherals manufacturers can design products with very
large and instantaneous markets. Designers of embedded systems cannot benefit
from this broad product availability, given the traditional embedded system's
incompatibility with Microsoft Corp. ("Microsoft") Windows and Intel Corporation
("Intel") products. Award's strategy is to bridge the two environments by
leveraging its PC expertise and making PC technologies available on embedded and
real-time systems. In 1997, the Company released several products based on PC
technology and geared toward the embedded systems market. The Company's
USBAccess provides embedded system connectivity to USB devices. WWWAccess, which
includes web browser technology licensed from third parties, provides embedded
devices -- including intelligent terminals, set-top boxes and telephones -- with
Internet capabilities. APIAccess enables developers of embedded systems to
develop application software using PC development tools and paradigms, including
the Win32(R) application program interface standard.
Provide Localized Customer Service in Key Markets. The Company provides
responsive and competitive system management software engineering and support by
maintaining engineering, marketing and sales staff in the four key PC design
centers around the world: Taiwan, the U.S., Germany and Japan. For many of its
customers, Award serves as an important source of research and development,
providing customized solutions within the tight timeframes required in the
competitive motherboard market. In addition, the Company's local service centers
allow it to act as an important conduit between the technology centers in the
U.S. and key PC design centers. Easy accessibility, frequent communication and
localized interaction are crucial to the selection and implementation of Award
system enabling and management software. The Company believes that its emphasis
on local service enables it to perform high-quality, reliable and timely
engineering and support services and provides it with a competitive advantage.
5
<PAGE>
BUSINESS RISKS
Dependence on the Underlying PC Industry; Dependence on Current PC Industry
Standards
The demand for the Company's system management software depends principally on
(i) PC manufacturers and other customers licensing the Company's software rather
than developing their own system management software, (ii) market acceptance of
the products incorporating the Company's software sold by the Company's original
equipment manufacturer ("OEM") customers, (iii) the emergence of new PC
technologies that require system management software solutions to provide
functionality, user value and performance, and (iv) the technological competence
of the Company's core products. Sales of PCs fluctuate substantially from time
to time based on numerous factors, including general economic conditions in the
markets for the Company's customers' products, new hardware and software product
introductions, demand for new applications, shortages of key components and
seasonality. Further, the markets in the PC industry are extremely competitive
and characterized by rapid and frequent price reductions.
The introduction of new hardware architectures, microprocessors, peripheral
equipment and operating systems within the PC industry has increased the
complexity, time to market and total cost of ownership. A number of computer
manufacturers, including IBM Corporation ("IBM") and Compaq, develop some of
their own BIOS products to achieve compatibility with and integrate new
technologies into their products. While the Company believes that price and
time-to-market pressures will continue to foster a trend among its customers and
potential customers to out-source system management software requirements to
third parties, there can be no assurance that this trend will continue or will
not reverse itself, which would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Industry Background" and "--Award Strategy."
The Company's software to date has been primarily based on central processing
units ("CPUs") designed by or compatible with those of Intel and operating
system software designed by Microsoft. If the market for Intel and Intel-
compatible CPUs with x86 architecture is materially diminished or if another
CPU, such as Motorola's PowerPC, achieves a high degree of success, demand for
the Company's current software would be reduced. In addition, most of the
Company's software has been installed on computers using Microsoft's MS/DOS or
Windows operating systems. If Microsoft's operating systems cease to be the
dominant operating systems for the PC industry, or if PC manufacturers use other
operating systems, which are not compatible with MS/DOS or Windows, the Company
could experience increased product development costs and/or diminished revenues.
Concentration of Revenues from Desktop BIOS
The Company depends on sales of desktop BIOS for a substantial majority of its
revenues. The Company has not generated substantial revenues from the sale of
other products to date, including sales of mobile PC products. If sales of the
Company's desktop BIOS decline for any reason, or if the average price of
desktop BIOS declines as the trend toward "Segment Zero" continues, the
Company's business, financial condition and results of operations would be
adversely affected unless the Company is able to replace those sales with
increased sales of other products. Sales of desktop BIOS could decline for a
number of reasons, including a shift in the market for PCs away from desktop PCs
in favor of mobile PCs and a delay in expected new hardware and software
technologies from Intel and Microsoft.
Competition from System Management Software Companies and Other Participants,
including Microsoft and Intel, in the PC Industry
The markets for the Company's software are highly competitive. The Company
faces competition primarily from other system management software companies,
including American Megatrends, Inc. ("AMI"), Phoenix Technologies Ltd. ("Phoenix
Technologies") and SystemSoft Corporation ("SystemSoft"), as well as in-house
software development staffs of current and prospective customers. Certain of the
companies with which the Company competes or may in the future compete have
substantially greater financial, marketing, sales and support resources and
greater brand name and technology leadership recognition than the Company. There
can be no assurance that the Company will be able to develop software comparable
or superior to software offered by its competitors. In addition, the PC market
experiences intense price competition and the Company expects that, to
6
<PAGE>
remain competitive, it may have to decrease unit prices on some or all of its
software products. Any such decrease would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company believes that interdependencies may develop between system
management software companies and their customers, which would need to be
overcome to replace an entrenched competitor. While the Company believes that
such entrenchment may benefit the Company in its existing relationships with key
participants in the desktop PC market, customer entrenchment may make it more
difficult for the Company to displace entrenched competitors or increase market
presence, particularly in the mobile PC market, where competitors may already
have strong relationships with certain mobile PC manufacturers. Intel has
entered into formal agreements with, and has become a significant shareholder
in, Phoenix Technologies and SystemSoft. In addition, SystemSoft has entered
into agreements with Microsoft, IBM and Compaq to license its PC Card software.
Operating system software vendors may in the future enter the Company's
primary markets as direct competitors or may incorporate enough features into
their products to reduce the need for the Company's products. Microsoft includes
basic PC Card software in its Windows 95 operating system and announced the
inclusion of full PC Card software support in its next generation Windows 98 and
Windows NT 5.0 operating systems. Microsoft's recently released Windows CE 2.0
operating system includes embedded toolkit software that incorporates system
management software features and some PC Card capabilities. As software
developers provide greater functionality and features, user value and
performance in their products that eliminate or reduce the need for the
Company's system management software, the market for the Company's products
could be materially diminished. In addition, chipset manufacturers, including
Intel, may increase their presence in the motherboard manufacturing market,
which may have an adverse effect on the Company's OEM customers. There can be no
assurance that other participants in the PC industry will not develop products
and solutions that reduce the demand or obviate the need for the Company's
products. See "Business --Competition."
Ability to Respond to Rapid Technological Change
The market for system management software is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The general trend in the PC industry is toward shorter product life cycles,
resulting in rapid product and technology obsolescence. The life cycle of the
Company's products is highly dependent on the life cycles of the products sold
by its customers, who are primarily in the desktop PC industry. Although the
Company's core products, specifically, the desktop and embedded device BIOS, PC
Card software and embedded system enabling products, may have a life cycle as
long as several years, specific customized adaptations of the Company's core
products are generally expected to have a life cycle of six months to one year.
The Company's future success will depend on its ability to enhance its core
software and to develop and introduce new software that keeps pace with
technological developments and evolving industry standards, as well as its
ability to respond to its customers' and end-users' demand for greater features
and functionality. The Company is currently developing certain technologies that
it will need to remain competitive. There can be no assurance that the Company
will be successful in developing such enhancements or new software, or, even if
successful, that it will not experience delays in achieving such developments.
Any failure or delay by the Company to develop such enhancements or new software
or the failure of its software to achieve market acceptance would adversely
affect the Company's business, financial condition and results of operations. In
addition, there can be no assurance that products or technologies developed by
others will not render the Company's software or technologies non-competitive or
obsolete. See "Business --Industry Background" and "--Product Development."
Dependence on Key Customer Relationships; Concentration of Credit Risk
The Company believes that its success to date has been largely due to its
relationship with participants in the desktop PC industry, particularly OEMs in
the desktop PC market. The Company works closely with its customers to provide
quick response to their product design needs and assists them in evaluating new
technological developments as they affect future products and enhancements to be
sold by the Company's customers. The loss of any one of these strategic
relationships or any other significant customer in the PC industry could
adversely affect the Company's product development efforts, business, financial
condition and results of operations.
The Company's customer base consists primarily of motherboard manufacturers
and OEMs in the desktop PC market, and as a result the Company maintains
individually significant receivable balances from these customers. If
7
<PAGE>
these customers fail to satisfy their payment obligations, the Company's
business, financial condition and results of operations would be adversely
affected.
Uncertain Acceptance in New and Developing Markets
The Company's future success is dependent on customer acceptance of new
products and penetration of markets outside the desktop PC market. There can be
no assurance that the Company will be able to expand its products and
technologies into the mobile PC, embedded device and network computing and
Internet markets or that the Company will be able to increase its market
presence in the desktop PC market. Expansion of the Company's software and
technology into the mobile PC market will depend primarily on the Company's
ability to replace entrenched competitors. Penetration of markets outside the
desktop PC market, such as the embedded device market, will depend upon the
development and availability of system management software providing the
necessary functionality and customer acceptance of such new technology. There
can be no assurance that the Company will be able to develop or obtain from
third parties the necessary software and technology to penetrate these markets,
or that, if such software and technology are developed by the Company or
obtained from third parties through licensing, which may include payments of
license fees or royalties in advance, the Company will be able to successfully
distribute such products. There can be no assurance that such products will not
be developed by others, rendering the Company's products non-competitive or
obsolete. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of such new products, or that such products will
achieve market acceptance. In addition, there can be no assurance that the
introduction of Microsoft Windows CE into the embedded device and Internet
appliance market will not have a material impact on the Company's new products
for these markets.
Any increase in the demand for the Company's embedded device products is
dependent upon the increasing use and complexity of embedded computer systems in
new and traditional products. No assurance can be given that this trend will
continue or, even if it does, that the Company will be able to design system
management software that will address the unique requirements of the embedded
device market. Further, since the Company's experience and expertise are based
on Intel x86 architecture, the Company's success in the embedded device market
is significantly dependent on Intel's continued commitment to, and the increased
presence of x86 architecture in, this market. There can be no assurance that
Intel will not de-emphasize or withdraw its support of the embedded device
market, or that the trend toward x86 architecture in the embedded device market
will continue, any of which could result in a material adverse effect on the
Company's growth strategies, financial condition and results of operations.
Certain of the markets for the Company's existing and future products, such as
the Internet and private internet protocol networks ("Intranet"), have only
recently begun to develop and are rapidly evolving. Demand and market acceptance
for recently introduced or developing products are subject to a high level of
uncertainty and risk. Critical issues concerning the commercial use of the
Internet remain unresolved and could adversely affect the growth of Internet
use. There can be no assurance that commerce and communication over the Internet
or Intranet will become widespread, or that the Company's planned products
addressing the Internet and Intranet markets will become widely accepted.
Because these markets for the Company's existing and developing products are new
and rapidly emerging, it is difficult to predict the future growth rate, if any,
and size of these markets. There can be no assurance that such markets for the
Company's existing and developing products and technology will develop or that
such products will be accepted. If these markets fail to develop, develop more
slowly than anticipated or become saturated with competitors, or if the
Company's products do not obtain customer acceptance, the Company's business,
financial condition and results of operations could be materially adversely
affected. See "Business --Award Strategy.
Fluctuations In Quarterly Operating Results; Seasonality
The Company has experienced and expects to continue to experience fluctuations
in its quarterly results of operations. The Company's revenues are affected by a
number of factors, including the demand for PCs and embedded devices, timing of
new product introductions, product mix, volume and timing of customer orders,
activities of competitors and the ability of the Company to penetrate new
markets. The Company's business is seasonal with revenues generally increasing
in the fourth quarter as the result of increased PC shipments during the holiday
season. Consequently, during the three quarters ending in March, June and
September, the Company has historically not been as profitable as in the quarter
ending in December. In addition, the Company's profits have historically
decreased in the first quarter of each year as compared with the fourth quarter
of the previous year. The
8
<PAGE>
Company generally ships orders as they are received and, as a result, has little
or no backlog. Quarterly revenues and results of operations therefore depend on
the volume and timing of orders received during the quarter, which are difficult
to forecast. Because the Company's staffing and other operating expenses are
based on anticipated revenues, delays in the receipt of orders can cause
significant variations in results of operations from quarter to quarter. The
Company also may choose to reduce prices, increase spending in response to
competition or pursue new market opportunities, each of which decisions may
adversely affect the Company's business, financial condition and results of
operations. Therefore, the Company believes that period-to-period comparisons of
its revenues and operating results are not necessarily meaningful and should not
be relied upon as indicators of future performance.
Due to all of the foregoing factors, it is likely that in some future quarters
the Company's operating results will be below the expectations of public market
analysts and investors. Regardless of the general outlook for the Company's
business, the announcement of quarterly results of operations below analyst and
investor expectations is likely to result in a decline in the trading price of
the Company's Common Stock.
Variations in Operating Results
The revenue growth rates experienced by the Company to date may not be
indicative of future growth rates and there can be no assurance that the Company
will remain profitable in the future. Future results of operations may fluctuate
significantly based on numerous factors including the demand for PCs and
embedded devices, the timing of new product introductions, product mix, volume
and timing of customer orders, activities of competitors and the ability of the
Company to penetrate new markets. The volume and timing of new contracts and
delays in the achievement of milestones could have a significant impact on
operating results for a particular quarter. In addition, the delay of Windows
98 by Microsoft could slow the growth of the PC market until such time as that
product is released.
Dependence on Key Personnel; Ability to Attract and Retain Key Technical
Employees
The Company's success to date has depended to a significant extent upon a
number of key management and technical employees. The loss of services of one or
more of these key employees, particularly George C. Huang, the Company's
Chairman of the Board, President and Chief Executive Officer; and Lyon T. Lin,
General Manager, Taiwan and President, Award Software Hong Kong Limited, Taiwan
Branch, could have a material adverse effect on the Company's business,
financial condition and results of operations. Except for two employees in the
U.S. and all employees in Germany, none of the Company's employees is party to
an employment agreement with the Company. The Company believes that its future
success will also depend in large part upon its ability to attract and retain
highly skilled technical, management and sales and marketing personnel.
Moreover, because the development of the Company's software requires knowledge
of computer hardware, operating system software, system management software and
application software, key technical personnel must be proficient in a number of
disciplines. Competition for such technical personnel is intense, and the
failure of the Company to hire and retain talented technical personnel or the
loss of one or more key employees could have an adverse effect on the Company's
business, financial condition and results of operations.
Future growth, if any, of the Company will require additional engineering,
sales and marketing, and financial and administrative personnel to expand
customer services and support and to expand operational and financial systems.
There can be no assurance that the Company will be able to attract and retain
the necessary personnel to accomplish its growth strategies or that it will not
experience constraints that will adversely affect its ability to satisfy
customer demand in a timely fashion. If the Company's management is unable to
manage growth effectively, the Company's business, financial condition and
results of operations could be adversely affected.
Management of Growth
The growth of the Company's business and, in particular, the Company's
customer base, has placed, and is expected to continue to place, a strain on the
Company's management systems and resources. The Company's ability to compete
effectively and manage future growth, if any, will require the Company to
continue to improve its financial and management controls, reporting systems and
procedures on a timely basis, and to expand, train and manage its work force.
There can be no assurance that the Company will be able to do so successfully,
and the failure to do so would have a material adverse effect upon the Company's
business, financial condition and results
9
<PAGE>
of operations. The Company's success will depend to a significant degree on the
ability of its executive officers and other members of its senior management,
none of whom has any prior experience managing public companies in their current
roles, to manage future growth, if any.
International Operations; Currency Fluctuations; International Unrest
The Company operates on a multinational basis, and a significant portion of
its business is conducted in currencies other than the U.S. Dollar. As a result,
the Company is subject to various risks, including exposure to currency
fluctuations, greater difficulty in administering its global business, multiple
regulatory requirements and other risks associated with international sales,
such as import and export licenses, political and economic instability,
overlapping or differing tax structures, trade restrictions, changes in tariff
rates, different legal regimes, difficulty in protecting intellectual property,
enforcing agreements and collecting accounts receivable. During the year ended
December 31, 1997, approximately 41% and 3% of the Company's revenues were
denominated in New Taiwan Dollars and German Marks, respectively. The Company's
revenues denominated in Japanese Yen were immaterial during the year ended
December 31, 1997. While the impact of foreign exchange rate movements have not
had a material impact on the Company's financial statements, there can be no
assurance that fluctuation in foreign currency exchange rates will not have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company does not currently engage in foreign currency
hedging transactions. There can be no assurance that exchange rate fluctuations
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
The Company operates in Taiwan, Hong Kong, Japan, and Germany. Its business,
financial condition or results of operations could be adversely affected by
factors associated with international operations such as changes in foreign
currency exchange rates, uncertainties relative to regional economic
circumstances, political instability in emerging markets, and difficulties in
staffing and managing foreign operations, as well as by other risks associated
with international activities. In particular, the recent currency devaluations
in South East Asia and the general downturn of the economies in Asia, including
Japan, could materially adversely affect the Company's business, financial
condition or results of operations. As a result of such economic instability,
Dataquest, Inc., has revised downward its forecasts of demand for PCs in the
region. Any such reduction in demand for PCs would adversely affect the
Company's business, financial condition or results of operation. See
"Dependence on the Underlying PC Industry; Dependence on Current PC Industry
Standards."
Award Software Hong Kong Limited, the company's wholly owned subsidiary, is
incorporated under the laws of Hong Kong ("Award Hong Kong"). Substantially all
of the Company's Asian desktop motherboard and OEM development and design
facilities are operated through Award Hong Kong's branch office located in
Taipei, Taiwan. These operations could be severely affected by national or
regional political instability in China, including instability which may occur
in connection with a change in leadership in China, change of control of Hong
Kong from the United Kingdom to China, by evolving interpretation and
enforcement of legal standards, by conflicts, embargoes, increased tensions or
escalation of hostilities between China and Taiwan and by other trade customs
and practices that are dissimilar to those in the United States. Interpretation
and enforcement of China's laws and regulations continue to evolve and the
Company expects that differences in interpretation and enforcement will continue
in the foreseeable future.
Intellectual Property and Proprietary Rights
The Company's success depends in significant part on the development,
maintenance and protection of its intellectual property. The Company regards all
of its software as proprietary and attempts to protect it with a combination of
patents, copyrights, trademarks and trade secrets, employee and third-party
nondisclosure agreements and other methods of protection. Despite these
precautions and the protection of copyright laws, it may be possible for
unauthorized third parties to copy the Company's software or to reverse engineer
or obtain and use information that the Company regards as proprietary. The
Company currently holds a patent in the U.S. for one invention and a patent
abroad for one invention which is jointly owned with a third party. The
Company has patent applications pending in the U.S. and/or abroad on seven
inventions, two of which are owned jointly with a third party. However, the
Company does not generally rely on patents to protect its products. The Company
licenses its object and source code under written license agreements. Certain
provisions of such licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed programs, may
be unenforceable under the laws of certain jurisdictions. In addition, the laws
of some foreign jurisdictions, including Taiwan, do not protect the Company's
proprietary rights to the same extent as do the
10
<PAGE>
laws of the United States. There can be no assurance that the protections put in
place by the Company will be adequate.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property to determine the scope of the proprietary rights
of others or to defend against claims of infringement. Moreover, although the
Company is not currently involved in any litigation with respect to intellectual
property rights, in the past there have been allegations that certain portions
of the Company's core BIOS infringed on a third party's copyrights. In response,
the Company rewrote certain software routines in a "clean room" procedure and
upgraded its customers to the new version of such software routines to avoid any
further allegations of infringement. The Company believes that its software does
not presently infringe the copyrights of any third parties. However, there can
be no assurance that other parties will not make allegations of infringement in
the future. Such assertions could require the Company to discontinue the use of
certain software codes or processes, to cease the manufacture, use and sale of
infringing products, to incur significant litigation costs and expenses and to
develop non-infringing technology or to obtain licenses to the alleged
infringing technology. Although the Company has been able to acquire licenses
from third parties in the past, there can be no assurance that the Company would
be able to develop alternative technologies or to obtain such licenses or, if a
license were obtainable, that the terms would be commercially acceptable to the
Company in the event such assertions are made in the future.
Volatile Market for Stock
The market for the Company's stock is highly volatile. The trading price of
the Company's Common Stock has been and will continue to be subject to
fluctuations in response to financial condition and results of operations,
announcements of technological innovations or new products by the Company and
its competitors, changes in the Company's or its competitors' product mix or
product direction, changes in the Company's revenue mix and revenue growth
rates, changes in expectations of growth for the PC industry, as well as other
events or factors which the Company may not be able to influence or control.
Statements or changes in opinions, ratings or earnings estimates made by
brokerage firms and industry analysts relating to the market in which the
Company does business, companies with which the Company competes or relating to
the Company specifically could have an immediate and adverse effect on the
market price of the Company's stock. In addition, the stock market has from time
to time experienced extreme price and volume fluctuations that have particularly
affected the market price for many high-technology companies and that often have
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock.
PRODUCTS--SYSTEM MANAGEMENT AND ENABLING SOFTWARE
Personal Computer Software Products
Award System BIOS
The Company's Award System BIOS, or AwardBIOS, consists of core software code
that can be combined with additional software modules to add specific functions
and features, including Plug and Play, PCI, APM, USB and DMI. The Company
integrates the core software code with some or all of these software modules to
create a product that meets the needs of its three principal markets: desktop
PCs, embedded devices and mobile PCs. To date, the majority of the Company's
software license fees have been derived from sales in the desktop PC market.
Desktop BIOS integrates the core software code with modules that support the
following technological advancements:
. Plug and Play permits the BIOS and operating system software to
automatically recognize and configure PC hardware and peripherals, such as
printers, network cards and multimedia accessories. A variation of this
technology, known as "hot" Plug and Play, allows for the installation,
recognition and removal of peripherals while power is on.
11
<PAGE>
. PCI was developed by a consortium led by Intel and provides an
automatically configured interface between high-speed peripheral components
and PC systems.
. APM reduces power consumption by continuously monitoring system activity,
sensing idle time and powering down or powering off components.
. DMI is an industry standard that allows the desktop configuration data to
be easily accessed locally or over a network. This software is capable of
detecting and storing configuration information from devices and systems
that comply with the industry standard Desktop Management Task Force
specification.
. USB is a new Plug and Play interface designed to provide an easy connection
of slow- and medium-speed peripherals to a PC by supplying a uniform
connector to make installing a peripheral as simple as plugging in a
telephone.
Mobile PC BIOS is a customized BIOS solution for use in notebook and other
portable PCs. It integrates the core software code with modules that support
Plug and Play, PCI, APM, DMI and USB. In addition, this new product supports
the hardware associated with mobile PCs, such as chipsets and keyboard
controllers, as well as other advanced technologies. For example, "hot
docking" allows users to connect to and disconnect from their mobile PCs to
desktop docking stations without turning off their machines. The Company has
also developed smart battery support that ensures compatibility and monitors
diagnostic information for the advanced batteries found in mobile PCs.
Remote Management Software
Award Preboot Manager, and its companion product, Award Preboot Agent, is a
patent-pending solution developed by the Company that allows technical support
personnel to remotely access a disabled PC via a modem or network connection.
The Company believes that this software is unique because it operates without a
functioning hard drive or operating system and thus can solve a number of
system problems. Award Preboot Manager allows an expert system or technical
support person to run BIOS setup, see error messages, download files and
download diagnostic software. Consequently, PC manufacturers will be able to
efficiently diagnose and potentially repair systems without the usual user
telephone relay or site visit. The Award Preboot Manager and Award Preboot Agent
solution benefits PC system manufacturers as well as third-party service
providers because it can reduce both the time and cost expended to diagnose and
repair the system.
PC Card Software
The Personal Computer Memory Card International Association ("PCMCIA") was
formed to enact standards for credit card size computer memory and peripheral
add-on products called PC Cards. Award supplies software to enable PCs and other
electronic devices to recognize, install, configure and operate peripheral
devices that comply with PCMCIA standards. Award's PC Card software, CardWare,
provides a number of benefits over traditional PC Card software, including the
efficient use of system memory, greater portability, ease of maintenance and a
more modular design.
BIOS Upgrade Solutions
Computers manufactured a few years ago often have enough computing power to
meet the users' needs, but may lack support for certain technologies, such as
large, removable media, which did not exist when the PC was built. Award
provides BIOS upgrades for PCs based on the Company's and its competitors' BIOS,
allowing the end-users to extend the useful life of their PC systems.
12
<PAGE>
PC Diagnostics Software
With the mounting complexity of today's PCs, the ability to distinguish
between user mistakes ("operator errors") and actual system failures becomes
more important. The Company's PC DIAG and POSTcard offer standalone software
and hardware diagnostic solutions, respectively, allowing MIS personnel and PC
end-users alike to quickly determine the causes of their system failures.
Embedded Systems Software Products
Embedded System BIOS
AwardBIOS for Embedded Systems integrates the core software code with selected
modules and additional custom features. Award works closely with embedded device
customers to incorporate BIOS into design intensive embedded hardware. Unlike PC
products, which typically experience short product cycles, a typical embedded
device solution has a relatively long product life, with most designs lasting
through the life cycles of the products into which they are integrated.
Win32-Compatible Software for Embedded Devices
The Win32 application program interface ("API") standard has become the
computer industry's most popular programming environment. As such, large
numbers of application programs and software development tools are available for
Microsoft Windows software end-users and developers. The Company's APIAccess
product enables developers of embedded systems to use many of the same software
development tools that they currently use for developing PC applications, and
then to compile, link and run these applications on non-Windows-based, RISC or
x86 systems, reducing time to market and development costs.
Internet-Enabling Software for Embedded Devices
To reduce time to market, manufacturers of Internet-enabled embedded devices,
such as Internet telephones, set-top boxes and intelligent terminals, require
off-the-shelf, integrated solutions combining the operating system, an Internet
browser and other connectivity or productivity applications. The traditional
approach is to license a RTOS and a RTOS-specific version of a browser,
requiring the manufacturer to develop other supporting applications using the
RTOS vendor's development tools. The Company's WWWAccess product brings the
Win32 paradigm to these classes of embedded devices, providing a complete
Internet Appliance solution while also enabling the manufacturer to develop or
select Windows-based commercial applications, such as email tools or
connectivity solutions for inclusion on their devices.
USB-Enabling Software
USB is the emerging standard for PC connectivity of slow- and medium-speed
peripherals such as keyboards, mice, printers and scanners. Windows 98,
currently scheduled to be released in mid-1998, will be the first operating
system to support USB, although PC systems have had USB hardware connectivity
built-in since 1997. The Company's USBAccess product enables non-Windows
operating systems, including RTOS, to support the same USB standard and the same
PC peripherals available on the market.
CUSTOMERS
The Company services over 200 customers worldwide, including designers and
manufacturers of desktop PC motherboards, PC systems and notebooks, hardware
components and embedded devices. Current customers include Compaq, LG
Electronics, Micron, Motorola, NEC and Packard Bell. From time to time, the
Company has worked with selected customers to co-develop certain products and
expects to pursue additional co-development
13
<PAGE>
opportunities in the future. For the years ended December 31, 1997, 1996 and
1995, Vobis Microcomputer AG ("Vobis") accounted for approximately 5%, 11% and
13% of the Company's revenues, respectively.
Sales and Marketing
The Company markets its products directly and through independent sales
representatives. In North America, Award sales managers operate from the
Company's headquarters in Mountain View, California and North Andover,
Massachusetts. In Asia, the Company operates from its office in Taipei, Taiwan,
Hong Kong, China; Yokohama, Japan, and through an independent sales
representative in Korea. In Europe, the Company markets through its office in
Munich, Germany. The Company supports its sales efforts with marketing programs
that include exhibitions at trade shows, participation in industry associations
and events, attendance at technical seminars and designation as hardware
reference platform designs by processor and chipset manufacturers.
The Company believes that customer service and technical support are important
competitive factors in the system management software market. Accordingly, the
Company provides local service and support for its customers in the U.S., Asia
and Europe. In addition, the Company provides worldwide technical support from
the U.S. for end-users of its products through dial-in telephone services,
facsimile, e-mail and the Company's web site on the World Wide Web. Information
contained in the Company's home page shall not be deemed to be a part of this
Form 10-K. Award believes that close contact with its customers not only
improves its customers' level of satisfaction, but also provides early access to
its customers' new product plans and requirements.
PRODUCT DEVELOPMENT
Award's research and development efforts consist of new product development,
product enhancements and product customization for individual customers. The
Company develops new products in response to emerging PC standards such as IEEE-
1394 and I2O, and to address perceived opportunities in related markets such as
mobile computing, remote diagnostics and embedded systems. Award's engineers
actively participate in a number of relevant industry standard groups, such as
the I2O Special Interest Group, the Personal Computer Memory Card International
Association, the Desktop Management Task Force, the Peripheral Component
Interconnect Special Interest Group and the IEEE-1394 Trade Association, which
help guide the Company's product planning. The Company's software is developed
in a modular fashion to facilitate changes and updates as needed to meet
customer requirements and rapid development of new products.
An important function of the Company's engineering group is to perform the
customization of the BIOS for each new motherboard and the customization of
other enabling software for new embedded designs. The Company works closely with
the customer's engineers to ensure that the final motherboard design and the
Award BIOS, or the customers' embedded systems and the Company's other enabling
software, are developed efficiently. The turnaround time for customizing a BIOS
for a customer can be as short as one week. Customization of embedded products
can take longer, depending on the Company's product in question. Customization
of BIOS or other enabling software can be done in the U.S., Taiwan, Japan or
Germany, depending on resource availability and customer needs.
Because the development of the Company's software products requires knowledge
of computer hardware, operating system software, system management software and
application software, key technical personnel must be proficient in a number of
disciplines. Competition to attract and retain such personnel is intense, and
the failure of the Company to hire and retain talented technical personnel or
the loss of one or more key technical employees could have an adverse effect on
the Company's business, financial condition and results of operations. See
"Business Risks --Dependence on Key Personnel; Ability to Attract and Retain
Key Technical Employees."
COMPETITION
The markets for the Company's products are highly competitive. The principal
competitive factors affecting the markets for the Company's software include
technological excellence, timeliness of product introduction,
14
<PAGE>
responsiveness to customer requirements, customer relationships, industry
relationships, engineering services, ease of use, ease of integration and price.
Due to its technological competence, large customer base in the desktop PC
market, and strong relationships with industry participants, the Company
believes it competes favorably with respect to all of these factors. Further,
part of the Company's strategy is to develop innovative software product
solutions to address the emerging trends in the PC and embedded device markets.
There can be no assurance that such products or technologies will be
successfully developed by the Company or that such products will not be
developed by others, rendering the Company's software or technologies non-
competitive or obsolete. Failure to successfully implement this strategy could
have a material adverse effect upon the Company's business, financial condition
and results of operations. See "Business --Industry Background" and " --Product
Development."
The Company faces competition primarily from other PC and embedded systems
management software companies, including AMI, Phoenix Technologies and
SystemSoft, and also from the in-house software development staffs of current
and prospective customers. Certain of the companies with which the Company
competes or may in the future compete have substantially greater financial,
marketing, sales and support resources and greater brand name and technological
leadership recognition than the Company. There can be no assurance that the
Company will be able to develop software comparable or superior to software
offered by its competitors. In addition, the PC market experiences intense price
competition and the Company expects that, to remain competitive, it may have to
decrease unit prices on some or all of its software products. Any such decrease
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company believes that interdependencies may develop between system
management software companies and their customers, which would need to be
overcome to replace an entrenched competitor. While Award believes such
entrenchment may benefit the Company in its existing relationships with key
participants in the PC market, especially with its customers in Taiwan, customer
entrenchment may make it more difficult for the Company to displace competitors
or increase market presence, particularly in the mobile PC market, where
competitors may have strong relationships with certain mobile PC manufacturers.
Intel, for example, has entered into formal agreements with, and become a
significant shareholder in, Phoenix Technologies and SystemSoft. In addition,
SystemSoft has entered into agreements with Microsoft, IBM and Compaq to license
its PC Card software.
The Company believes that competitive pressures in the system management
software market may increase as operating software system software vendors
incorporate more system management software into their products. As software
manufacturers provide greater functionality and features, user value and
performance to their products that eliminate or encroach upon the need for the
Company's software products, the market for such products could be materially
diminished. Microsoft's recently released Windows CE operating system includes
embedded toolkit software that incorporates system management software features.
Microsoft includes basic PC Card software in its Windows 95 operating system
and has announced the inclusion of full PC Card software support in its next
generation Windows 98 and Windows NT 5.0 operating systems. The Company has
developed PC Card software for Microsoft's Windows NT. If end-users of
Microsoft's version of the basic PC Card and Plug and Play software included in
its operating systems perceive such software as being adequate for their
computing needs, Award's revenues from PC Card software would be adversely
affected. While the Company believes that the trend in the PC industry toward
greater complexity will continue and that the Company's products offer a
technologically proven, timely and cost-effective solution to this need, there
can be no assurance that other participants in the PC industry will not develop
products and solutions that encroach upon the demand, or obviate the need, for
the Company's products. See "Business Risks --Dependence on Key Customer
Relationships; Concentration of Credit Risk."
INTELLECTUAL PROPERTY
The Company's success depends in significant part on the development,
maintenance and protection of its intellectual property. The Company regards all
of its software as proprietary and attempts to protect it with a combination of
patents, copyrights, trademarks and trade secrets, employee and third-party
nondisclosure agreements and other methods of protection. Despite these
precautions and the protection of copyright laws, it may be possible for
unauthorized third parties to copy the Company's software or to reverse engineer
or obtain and use information that the Company regards as proprietary. The
Company currently holds a patent in the U.S. for one invention and a patent
abroad for one invention which is jointly owned with a third party. The
Company has patent applications pending in the U.S. and/or abroad on seven
inventions, two of which are owned jointly with a third party.
15
<PAGE>
However, the Company does not generally rely on patents to protect its products.
The Company licenses its object and source code under written license
agreements. Certain provisions of such licenses, including provisions protecting
against unauthorized use, copying, transfer and disclosure of the licensed
programs, may be unenforceable under the laws of certain jurisdictions. In
addition, the laws of some foreign jurisdictions, including Taiwan, do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the protections put in place
by the Company will be adequate.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights to determine the scope of the proprietary
rights of others or to defend against claims of infringement. Moreover, although
the Company is not currently involved in any litigation with respect to
intellectual property rights, in the past there have been allegations that
certain portions of the Company's core BIOS infringed on a third party's
copyrights. In response, the Company rewrote certain software routines in a
"clean room" procedure and upgraded its customers to the new version of such
software routines to avoid any further allegations of infringement. The Company
believes that its software does not presently infringe the copyrights of any
third parties. However, there can be no assurance that other parties will not
make allegations of infringement in the future. Such assertions could require
the Company to discontinue the use of certain software routines, to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non infringing technology or to
obtain licenses to the alleged infringing technology. Although the Company has
been able to acquire licenses from third parties in the past, there can be no
assurance that the Company would be able to develop alternative technologies or
to obtain such licenses or, if a license is obtainable, that the terms would be
commercially acceptable to the Company in the event such assertions are made in
the future.
EMPLOYEES
As of December 31, 1997, the Company had 163 full-time employees, of whom 82
are engaged in engineering and technical positions, 49 in sales and marketing,
and 32 in finance, operations and administration. Except for two employees in
the U.S. and all employees in Germany, none of the Company's employees is party
to an employment agreement with the Company. No employee of the Company is
represented by a labor union or is subject to a collective bargaining agreement.
The Company has never experienced a work stoppage due to labor difficulties and
believes that its employee relations are good.
EXECUTIVE OFFICERS
Management
The executive officers of the Company and their ages as of December 31, 1997
are as follows:
16
<PAGE>
<TABLE>
<CAPTION>
NAME AGE Position
- ------------------------------------------------- ------- -------------------------------------------
<S> <C> <C>
George C. Huang.................................. 56 Chairman of the Board, President, Chief
Executive Officer and Director
Reza Afghan...................................... 37 Vice President and General Manager, System
Software; President, Award Japan KK
Kevin J. Berry................................... 48 Vice President, Finance, Chief Financial
Officer, Treasurer and Secretary
Maurice W. Bizzarri.............................. 42 Vice President, Research and Development
Laurent K. Gharda................................ 39 Vice President, Marketing
Lyon T. Lin...................................... 45 General Manager, Taiwan; President, Award
Software Hong Kong Limited
Pierre A. Narath................................. 34 Vice President and President, Unicore
Software, Inc.
Ann P. Shen...................................... 57 Senior Vice President, Strategic Business
David J. Wippich................................. 33 Vice President and General Manager,
Internet and Embedded Products
</TABLE>
GEORGE C. HUANG has served as Chairman of the Board of Directors, President,
Chief Executive Officer and Director since July 1993. From January 1984 to the
present, Dr. Huang has served as Chairman of the Board of Directors of GCH
Systems, Inc. ("GCH"), a company that develops and markets embedded controllers,
application specific integrated circuits and PC systems; and from January 1984
until November 1994, he also served as Chief Executive Officer of GCH. From
February 1987 to the present Dr. Huang has served as a Director of GCH-Sun
Systems Company Ltd. ("GSS"), a subsidiary of GCH. From January 1990 to May
1996, Dr. Huang served as a Director of Fidelity Venture Capital Corporation
("FVCC"), a shareholder of GCH and the Company. Dr. Huang received a B.S. from
National Taiwan University, an M.S. from Washington State University, and a
Ph.D. in Electrical Engineering from the University of Washington.
REZA AFGHAN has served as Vice President and General Manager of System
Software since January 1998, and President of Award Japan KK since March 1997.
From January 1997 to January 1998, Mr. Afghan served as Vice President, Mobile
Products. From January 1994 to December 1997, he served as Vice President,
Operations. From November 1987 to January 1994, Mr. Afghan served as Vice
President, Sales and Operations of GCH. He received his B.S. in Electrical
Engineering and Mathematics from Oregon State University.
KEVIN J. BERRY has served as Vice President, Finance, Chief Financial Officer
and Treasurer since June 1995 and Secretary since October 1995. From December
1988 to May 1995, Mr. Berry served as Vice President, Finance for the CMX and
Aurora divisions of Chyron Corporation, a developer and manufacturer of software
and systems for the video marketplace. Mr. Berry received a B.S. in Finance and
an M.B.A. from New York University.
MAURICE W. BIZZARRI has served as Vice President, Research and Development
since January 1998. From July 1995 to January 1998, Mr. Bizzarri served as Vice
President, Engineering. From June 1992 to July 1995, he consulted in the systems
software industry. From November 1990 to June 1992, he served as Vice President,
Research and Development of Connective Strategies, Inc., a hardware/software
company.
LAURENT K. GHARDA has served as Vice President, Marketing since February 1997.
From July 1996 to February 1997, Mr. Gharda served as Vice President, Marketing
and Sales of Willows Software, a developer of software used to migrate Windows
applications to alternative platforms. In April 1995, he founded and served as
17
<PAGE>
President of QualSoft Corp., a provider of UNIX and Windows software development
and migration tools, until it was merged with Willows Software. From 1993 to
April 1995, Mr. Gharda served as Vice President, Sales of Veritas Software, a
developer of storage management technology. Mr. Gharda received a B.A. in
Computer Science from the University of California at Berkeley.
LYON T. LIN has served as General Manager, Taiwan, and President, Award
Software Hong Kong Limited, since July 1993. From January 1984 to June 1993, Mr.
Lin served as Vice President of GCH. Mr. Lin is also a director of GSS. Mr. Lin
received a B.S. in Electrical Engineering from National Chiao-Tung University
and an M.S. in Electrical Engineering from Santa Clara University. Mr. Lin is
the brother-in-law of George C. Huang.
PIERRE A. NARATH has served as Vice President, and President, Unicore
Software, Inc., since May 1997. From February 1990 to May 1997, Mr. Narath
founded and served as President of Unicore Software, Inc.
ANN P. SHEN has served as Senior Vice President, Strategic Business since
January 1997. From December 1994 to January 1997, Dr. Shen served as Vice
President, Sales and Marketing. From June 1994 to December 1994, she served as
Vice President, Engineering and Marketing and from August 1993 to June 1994 she
served as Vice President, Engineering. Dr. Shen served as Vice President,
Engineering at GCH from October 1992 to June 1994. From March 1990 to August
1992, Dr. Shen served as Vice President, Engineering and Manufacturing of OPTA,
a digital camera and high-end graphic/video card company. Dr. Shen received a
B.S. in Physics from National Taiwan University, an M.S. in Physics from the
University of California, Los Angeles and a Ph.D. in Solid State Physics from
New York Polytechnical University.
DAVID J. WIPPICH has served as Vice President and General Manager, Internet
and Embedded Products since January 1997. From November 1995 to January 1997,
Mr. Wippich served as Director of Sales, North America. From December 1994 to
November 1995, he served as Chief Operating Officer and Executive Vice President
of TEI Contract Manufacturing Services, a contract manufacturing company. From
September 1992 to December 1994, Mr. Wippich served as Director of Marketing and
Sales. Mr. Wippich received a B.S. in Business from the University of Phoenix.
ITEM 2. PROPERTIES
The Company's headquarters are located in Mountain View, California. The
Company subleases approximately 36,800 square feet in this facility renewable on
a yearly basis after December 31, 1996. The Company also leases office space in
Irvine, California; North Andover, Massachusetts; Taipei, Taiwan; Hong Kong,
China; Yokohama, Japan; and Munich, Germany. These offices provide sales and
technical support to its customers in Southern California, Canada and the
Eastern U.S., Asia, Japan and Europe, respectively. The Company believes that
its facilities are adequate to support operations for the next twelve months. In
the event that additional space is needed, the Company believes that suitable
additional or alternative space adequate to serve its needs will be readily
available on commercially reasonable terms.
The Company currently leases office space (the "Taiwan Office") in Taipei,
Taiwan, from GCH and Sun Corporation ("Sun"), a shareholder. In the fourth
quarter of 1997, the Company indicated its intent to purchase the Taiwan Office
from GCH and Sun for a price to be determined by a third party appraisal.
Consummation of this transaction is awaiting approval by the appropriate
Taiwanese governmental authorities. The purchase of the Taiwan Office was
approved by a majority of the independent and disinterested members of the Board
of Directors on terms that the Company believes are no less favorable than could
be obtained from unaffiliated third parties. The Company believes that the
purchase of the Taiwan Office helps the Company maintain certain of its
competitive advantages in the region -- including proximity to current and
potential customers in the region; ability to retain and attract local key
employees; and sufficient space for future expansion. In addition, in light of
market factors affecting the price of property in Taiwan, the Company believes
that securing affordable office space for the long-term is important to the
Company's continued operations in Taiwan.
18
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently engaged in any material litigation or legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the quarter ended December 31, 1997.
19
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stock Matters
Price Range of Common Stock. The Company's Common Stock is traded on the
Nasdaq National Market under the symbol "AWRD." Public trading of the Common
Stock commenced on October 25, 1996. Prior to that, there was no public market
for the Common Stock. The following table sets forth for the period indicated
the high and low closing price per share of the common stock on the Nasdaq
National Market.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31, 1996 HIGH LOW
<S> <C> <C>
Fourth Quarter ended December 31, 1996 $ 9.88 $ 6.50
FISCAL YEAR ENDED HIGH LOW
DECEMBER 31, 1997
First Quarter ended March 31, 1997 $18.13 $ 9.38
Second Quarter ended June 30, 1997 $14.75 $10.25
Third Quarter ended September 30, 1997 $13.00 $ 9.13
Fourth Quarter ended December 31, 1997 $13.50 $ 6.88
</TABLE>
Dividend Policy. The Company has never paid cash dividends on its Common
Stock. The Company presently intends to retain earnings for use in the operation
and expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.
Number of Holders. On March 17, 1998, there were 88 holders of record of the
Company's Common Stock.
Recent Sales of Unregistered Securities.
In May 1997, the Company acquired all of the outstanding stock of Unicore
Software, Inc. ("Unicore") through the merger of Unicore with and into a wholly
owned subsidiary of the Company (the "Unicore Merger") pursuant to an Agreement
and Plan of Merger and Reorganization (the "Merger Agreement"), dated as of May
29, 1997, by and among the Company, its wholly owned subsidiary, Unicore and
Pierre A. Narath ("Narath"). Pursuant to the terms of the Merger Agreement, the
Company issued to Narath, the selling shareholder, 218,571 shares of the
Company's Common Stock.
The sale and issuance of securities in the transaction described above were
deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Regulation D promulgated under the Securities Act. The
purchaser represented his intention to acquire the securities for investment
only and not with a view to the distribution thereof. Appropriate legends are
affixed to the stock certificates issued in such transaction. The purchaser
either received adequate information about the Company or had access, through
employment or other relationships, to such information.
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth, for the periods indicated, certain selected
consolidated financial data. This data should be read in conjunction with the
audited consolidated financial statements and notes related thereto included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
----------- -----------
YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER ENDED ENDED
31, DECEMBER 31, JULY 1,
(In thousands, except per share data) 1997 1996 1995 1994 1993 1993
------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues
Software license fees.................... $19,502 $11,721 $6,989 $5,585 $ 1,903 $ 1,763
Engineering services..................... 2,366 472 239 161 107 47
Related parties.......................... 1,499 1,878 1,902 972 50 --
------- ------- ------ ------ ------- -------
Total revenues............................ $23,367 $14,071 $9,130 $6,718 $ 2,060 $ 1,810
======= ======= ====== ====== ======= =======
Income (loss) from operations............. $ 5,641 $ 3,961 $1,861 $2,057 $(1,125) $ (628)
======= ======= ====== ====== ======= =======
Net income (loss)......................... $ 4,680 $ 2,885 $1,165 $1,258 $(1,178) $ (655)
======= ======= ====== ====== ======= =======
Basic net income (loss) per share(1)...... $0.68 $0.54 $0.28 $0.33 $(0.31)
======= ======= ====== ====== =======
Weighted average common shares............ 6,867 5,335 4,136 3,842 3,842
Diluted net income (loss) per share(1).... $0.61 $0.47 $0.25 $0.33 $(0.31)
======= ======= ====== ====== =======
Weighted average number of common
and common equivalent shares............. 7,705 6,095 4,650 3,842 3,842
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------- -----------
DECEMBER 31, JULY 1,
------------ -------
(Dollars in thousands) 1997 1996 1995 1994 1993 1993
------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents ................ $24,631 $23,248 $6,498 $1,374 $ 280 $ 156
Working capital (deficit) ................ 27,416 23,792 6,642 1,173 (1,113) (1,189)
Total assets ........................... 34,381 28,410 9,083 3,119 1,807 1,088
Shareholder's equity (deficit) ........... 29,812 25,091 7,169 1,695 (468) (1,099)
</TABLE>
_______
(1) For an explanation of the number of shares used to compute basic net income
(loss) per share and diluted net income (loss) per share, see Note 2 of
Notes to Consolidated Financial Statements.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21A of the Securities Exchange Act of 1934, as amended, which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Business --Business Risks" and elsewhere in
this Form 10-K and in other documents on file with the Securities and Exchange
Commission.
OVERVIEW
The Company's predecessor, Award Software, Inc. (the "Predecessor"), was
founded in 1983 to design, develop and market a suite of Basic Input/Output
System software ("BIOS") for the system management software market. During the
mid- and late-1980s, the Company established a significant market presence by
providing BIOS for the 286/386 PC markets and achieved early market success as a
BIOS supplier to the Taiwanese motherboard market. The Company was acquired in
July 1993 by GCH Systems, Inc. ("GCH"), an independent developer of
microcomputers and application-specific integrated circuits, and operated as a
wholly owned subsidiary. On October 25, 1996, the Company consummated the
initial offering of its Common Stock to the public. The Company markets and
licenses its products and services worldwide and is a leading provider of system
management software to the PC motherboard market in Asia, which accounts for
over 60% of worldwide motherboard production.
The Company has historically generated the substantial majority of its
revenues from the licensing of desktop system management software, primarily to
motherboard manufacturers and PC OEMs. Sales from international operations,
particularly to customers in Taiwan, comprise a substantial portion of the
Company's total revenues. During the three year periods ended December 31, 1997,
1996 and 1995, revenues from international operations represented 55%, 71% and
68% of the Company's total revenues, respectively. Software license fees are
recognized upon delivery of the product, fulfillment of acceptance terms, if
any, and satisfaction of significant support obligations, if any. Engineering
services revenues generally consist of amounts charged for customization of the
software prior to delivery and are generally recognized as the services are
performed. Related parties revenues include software license fees and non-
recurring engineering services provided to a Common Stock shareholder and a
Common Stock warrant holder. The Company believes that its business is subject
to seasonal fluctuations, with shipments in the fourth calendar quarter being
somewhat higher due to higher levels of PC shipments in that time period.
The Company has an established international presence and consequently
generates a significant portion of its revenues and expenses in currencies other
than the U.S. Dollar, primarily the New Taiwan Dollar and the German Mark. As a
result, any appreciation or depreciation in the U.S. Dollar against these
currencies could adversely affect the Company's business, financial condition,
results of operations and cashflows. In addition, foreign currency transaction
gains and losses arising from normal business operations are credited to or
charged against earnings in the period incurred. During the years ended December
31, 1997, 1996 and 1995, fluctuations in the value of currencies in which the
Company conducts its business relative to the U.S. Dollar were not significant
on an annual basis. See "Business Risks--International Operations; Currency
Fluctuations; International Unrest."
On September 10, 1997, the Company entered into a Master Original Equipment
Manufacturer (OEM) Software License Agreement ("the License Agreement") with
Intel to market and distribute Intel's LANDesk Client Manager software to its
Taiwan customers. Products incorporating this software, coupled with or without
Company products, would then be distributed throughout the world. The License
Agreement is non-exclusive, royalty-bearing, and automatically renews for
additional one-year terms subject to certain termination rights. Intel's
software, because it is designed as a PC and network-based solution to ease both
client and system administration to reduce the total cost of PC ownership,
compliments the existing system management software offerings of the Company to
existing and potential customers around the world.
On May 30, 1997, the Company acquired all of the outstanding stock of Unicore
through the Unicore Merger pursuant to the Merger Agreement, dated as of May 29,
1997, by and among the Company, its wholly owned subsidiary, Unicore and Narath.
Unicore is engaged in the business of providing basic input/output software
upgrades for
22
<PAGE>
personal computers and embedded systems. Pursuant to the terms of the Merger
Agreement, the Company issued to Narath, the selling shareholder, 218,571 shares
of the Company's common stock. The Merger is being treated as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended, and is being
accounted for as a pooling of interests. The terms of the Merger Agreement were
determined through arms'-length negotiations between the Company and Unicore and
Narath. In addition, Narath entered into an employment agreement with the
Company pursuant to which Narath shall serve as a Vice President of the Company
and President of Unicore, the Company's wholly owned subsidiary.
On April 30, 1997, the Company entered into a memorandum of understanding with
Sun and Axis Corporation ("Axis") to establish a majority-owned subsidiary,
Award Software Japan KK ("Award Japan"), a joint venture corporation
incorporated under the laws of Japan and based in Yokohama, Japan (the "Japan
Joint Venture"). The objective of Award Japan is to market and distribute the
Company's products in Japan. The Company, Sun and Axis contributed approximately
$310,000, $95,000 and $95,000 for 62%, 19% and 19% ownership of Award Japan,
respectively.
On February 21, 1997, the Company acquired certain assets of Willows software
("Willows acquisition") for $400,000 cash, direct acquisition costs of $40,000
and the assumption of liabilities totaling $44,000. The purchase price was
allocated based upon the estimated fair market value of identifiable tangible
and intangible assets and liabilities assumed, including $289,000 to in-process
research and development. The amount allocated to in-process research and
development relates to acquired development projects that had not reached
technological feasibility at the acquisition date and had no alternative future
use.
The Unicore Merger, Japan Joint Venture and Willows acquisition were
motivated by many factors, including the desire to obtain new technologies, the
desire to expand and enhance the Company's product lines and the desire to
attract key personnel. The integration of such operations is typically
difficult, time consuming and subject to a number of inherent risks. In the case
of software development enterprises, the success of acquisitions is dependent
upon the integration and retention of existing employees. There can be no
assurance that key employees of an acquired enterprise will remain with the
Company after an acquisition. The success of acquisitions and joint ventures
will also be dependent upon the Company's ability to fully integrate the
management information and accounting systems and procedures of such entities
with those of the Company. The Company's management will be required to devote
substantial time and attention to the integration of these businesses and to any
material operational or financial problems that may occur as a result of such
transactions. There can be no assurance that operational or financial problems
will not occur as a result of any acquisition, business combination or joint
venture. Failure to effectively integrate such businesses could have a material
adverse effect on the Company's business, results of operations and financial
condition.
From time to time, the Company reviews, evaluates and holds discussions
regarding strategic acquisition, business combination and joint venture
opportunities as a way of enhancing its business and shareholder value. In
connection therewith the Company's Board of Directors formed a committee
authorized to evaluate such opportunities. Enhancement of the Company's
business and shareholder value through strategic acquisitions, business
combinations and joint ventures has a number of risks including the failure to
realize anticipated benefits (such as cost savings and synergies) and issues
related to product transition (such as distribution, engineering and customer
support). There can be no assurance that the Company will consummate any
strategic acquisition, business combination or joint venture in the future, or
if consummated, that any such strategic acquisition, business combination or
joint venture will ultimately be beneficial to the Company and its shareholders.
As a general rule, the Company only discloses publicly such transactions upon
execution of a definitive agreement.
23
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
consolidated statement of income information as a percentage of the Company's
total revenues represented by each item. The Company's historical results are
not necessarily indicative of results in any future period.
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(AS A PERCENTAGE OF
TOTAL REVENUES)
<S> <C> <C> <C>
Revenues:
Software license fees ................................................ 84% 83% 77%
Engineering services ................................................. 10 4 2
Related parties ...................................................... 6 13 21
---- ---- ----
Total revenues ..................................................... 100 100 100
---- ---- ----
Cost of revenues:
Software license fees ................................................ 8 4 4
Engineering services ................................................. 3 1 1
Related parties ...................................................... 0 2 2
---- ---- ----
Total cost of revenues ............................................. 11 7 7
---- ---- ----
Gross profit ......................................................... 89 93 93
---- ---- ----
Operating expenses:
Research and development ............................................. 28 30 30
Sales and marketing .................................................. 21 20 25
General and administrative ........................................... 16 15 17
---- ---- ----
Total operating expenses ........................................... 65 65 72
---- ---- ----
Income from operations ................................................. 24 28 21
Interest expense ....................................................... -- -- --
Interest and other income, net ......................................... 5 4 1
---- ---- ----
Income before income taxes ............................................. 29 32 22
Provision for income taxes ............................................. 9 12 9
---- ---- ----
Net income ............................................................. 20% 20% 13%
==== ==== ====
</TABLE>
Comparison of Years Ended December 31, 1997 and December 31, 1996
Revenues. The Company's revenues increased 66% from $14.1 million in 1996
to $23.4 million in 1997. Software license fees increased 66% from $11.7 million
in 1996 to $19.5 million in 1997. The increase was primarily due to higher unit
shipments to new and existing motherboard customers in Taiwan and the U.S. and
to embedded systems customers in the U.S. Revenues from the distribution of the
Company's PC Card software accounted for 3% and 6% of the Company's total
revenues in the years ended December 31, 1997 and 1996, respectively.
Engineering services revenues increased from $472,000 in 1996 to $2.4 million in
1997, primarily due to higher engineering services revenues from customers in
the U.S. and Japan. Related parties revenues decreased 20% from $1.9 million in
1996 to $1.5 million in 1997 primarily due to lower volume of software license
fees and engineering services. Revenues from international operations were 55%
and 71% of the Company's revenues in 1997 and 1996, respectively. During the
year ended December 31, 1997, 41% and 3% of the Company's revenues were
denominated in New Taiwan Dollars and German Marks, respectively. Fluctuations
in foreign currency exchange rates did not have a material impact on total
revenues in either 1997 or 1996. However, there can be no
24
<PAGE>
assurance that future fluctuations in foreign currency exchange rates will not
have a material adverse effect on the Company's future revenues, business,
financial condition and results of operations.
Cost of Revenues. Cost of revenues increased from $980,000, or 7% of
revenues, in 1996 to $2.6 million, or 11% of revenues, in 1997. Cost of
software license fees increased from $521,000 in 1996 to $1.8 million in 1997.
This increase was primarily due to increased volume and higher costs of royalty
fees associated with the Intel LANDesk Client Management software, which the
Company began shipping in the fourth quarter. Cost of engineering services
revenues increased from $131,000 in 1996 to $686,000 in 1997. This increase was
primarily due to higher engineering salary and related costs. Cost of related
parties revenues decreased 77% from $328,000 in 1996 to $76,000 in 1997. This
decrease was primarily due to a decrease in cost of software license fees and
cost of engineering services revenues from a related party product development
effort. The Company anticipates that if sales of the Intel Software increase,
there will be additional increases in cost of revenues.
Research and Development. Research and development expenses increased 57%
from $4.2 million, or 30% of revenues in 1996, to $6.6 million, or 28% of
revenues, in 1997. This increase was primarily due to the growth in research
and development personnel from 55 to 82 individuals during the year hired as
part of the effort to develop new software products and to service new and
existing customers, and a one-time charge of $289,000 for in-process research
and development as a result of the Willows acquisition. The Company anticipates
that it will continue to devote substantial resources to product research and
development and that such expenses will continue to increase in absolute
dollars.
Sales and Marketing. Sales and marketing expenses increased 74% from $2.9
million, or 20% of revenues, in 1996 to $5.0 million, or 21% of revenues, in
1997. This increase was primarily due to the hiring of sales and marketing
personnel and related expenses, higher sales commissions for increased revenues,
increased participation in trade shows and higher professional services fees.
General and Administrative. General and administrative expenses increased
73% from $2.1 million, or 15% of revenues, in 1996 to $3.6 million, or 16% of
revenues, in 1997. This increase was primarily due to higher public company
expenses, the hiring of general and administrative personnel and related
expenses, higher professional services fees and higher facilities costs.
Amortization of deferred compensation expense of $74,000 and $75,000 is included
in general and administrative expense in 1997 and 1996, respectively.
Interest expense. Interest expense increased from $6,000 in 1996 to
$33,000 in 1997 due to a short-term borrowing under an existing loan agreement
of one of the Company's subsidiaries, which credit line was terminated in the
third quarter.
Interest and Other Income. Interest and other income increased from
$552,000 in 1996 to $1.2 million in 1997 primarily due to an increase in
interest income earned on higher cash balances.
Provision for Income Taxes. The Company's effective tax rate decreased
from 36% in 1996 to 31% in 1997. The decrease in effective tax rate was
primarily due to an increase in income taxable in Taiwan at rates lower than the
applicable statutory rates in the U.S. and Germany.
Comparison of Years Ended December 31, 1996 and December 31, 1995
Revenues. The Company's revenues increased 54% from $9.1 million in 1995 to
$14.1 million in 1996. Software license fees increased 68% from $7.0 million in
1995 to $11.7 million in 1996. The increase was primarily due to higher unit
shipments to the Company's existing Taiwanese motherboard customers, and to a
lesser degree to existing U.S. customers, partially offset by a decrease in
software license fees from a European customer due to weak economic conditions
and a decrease in demand for PCs in the German economy. A significant customer,
which accounted for 5% of total revenues and approximately 83% of revenues from
distribution of the Company's PC Card software for the year ended December 31,
1996, discontinued licensing the Company's PC Card software in the second half
of 1996. Accordingly, the Company does not currently expect to receive any
revenues from that customer from the distribution of the Company's PC Card
software in the foreseeable future. Revenues from the distribution of the
Company's PC Card software accounted for 6% and 15% of the Company's total
revenues in the
25
<PAGE>
years ended December 31, 1996 and 1995, respectively. Engineering services
revenues increased from $239,000 in 1995 to $472,000 in 1996. This increase was
primarily due to higher engineering services revenues from customers in the U.S.
Related parties revenues were unchanged at $1.9 million in 1996 and 1995.
Revenues derived from international operations were 71% and 68% of the Company's
revenues in 1996 and 1995, respectively. During the year ended December 31,
1996, 47% and 8% of the Company's revenues were denominated in New Taiwan
Dollars and German Marks, respectively. Fluctuations in foreign currency
exchange rates did not have a material impact on total revenues in 1995 or 1996.
However, there can be no assurance that future fluctuations in foreign currency
exchange rates will not have a material adverse effect on the Company's future
revenues, business, financial condition and results of operations.
Cost of Revenues. Cost of revenues increased 54% from $636,000, or 7% of
revenues, in 1995 to $980,000, or 7% of revenues, in 1996. Cost of software
license fees increased 35% from $387,000 in 1995 to $521,000 in 1996. This
increase was primarily due to increased volume. Cost of engineering services
revenues increased 205% from $43,000 in 1995 to $131,000 in 1996. This increase
was primarily due to increased engineering services provided to customers. Cost
of related parties revenues increased 59% from $206,000 in 1995 to $328,000 in
1996. This increase was primarily due to direct costs associated with
engineering services partially offset by a decrease from cost of engineering
services revenues associated with a related party product development effort.
Research and Development. Research and development expenses increased 53%
from $2.8 million, or 30% of revenues, in 1995 to $4.2 million, or 30% of
revenues, in 1996. This increase was primarily due to the growth in research and
development personnel from 45 to 55 individuals during the year. These
additional personnel were hired as part of the effort to develop new software
products, such as mobile BIOS and the SMSAccess product suite. The Company
anticipates that it will continue to devote substantial resources to product
research and development and that such expenses will continue to increase in
absolute dollars.
Sales and Marketing. Sales and marketing expenses increased 25% from $2.3
million, or 25% of revenues, in 1995 to $2.9 million, or 20% of revenues, in
1996. This increase was primarily due to the hiring of sales and marketing
personnel and related expenses and higher sales commissions for increased
revenues.
General and Administrative. General and administrative expenses increased
30% from $1.6 million, or 17% of revenues, in 1995 to $2.1 million, or 15% of
revenues, in 1996. The increase was primarily due to higher professional
services fees and a one-time employee severance cost of $90,000 in the Company's
European operations and amortization of deferred stock compensation expense.
Amortization of deferred compensation expense of $75,000 and $42,000 is included
in general and administrative expense in 1996 and 1995, respectively.
Interest Expense. Interest expense decreased from $9,000 in 1995 to $6,000
in 1996, due to a decrease in short-term borrowings.
Interest and Other Income. Interest and other income increased from $105,000
in 1995 to $552,000 in 1996, primarily due to an increase in interest income
earned on higher cash balances.
Provision for Income Taxes. The Company's effective tax rate decreased from
40% in 1995 to 36% in 1996. The decrease in effective tax rate was primarily due
to an increase in income taxable in Taiwan at rates lower than the applicable
statutory rates in the U.S. and Germany.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily through the sale of equity
securities and from cash generated from operations. As of December 31, 1997,
the Company had cash and cash equivalents of $24.6 million and working capital
of $27.4 million. Net cash provided by operating activities was $3.0 million in
1997 and was primarily due to higher net income partially offset by reductions
in accrued liabilities and increases in accounts receivable and other current
assets.
26
<PAGE>
Net cash used in investing activities was $1.8 million in 1997 and was
primarily due to the Company's purchase of computer hardware and software
equipment, the purchase of equipment resulting from the Willows acquisition and
an increase in capitalized software development costs.
Net cash provided by financing activities was $255,000 in 1997 and was
primarily due to proceeds from Common Stock issuances as a result of purchases
of stock under the Employee Stock Purchase Plan partially offset by payments
under note obligations.
On October 25, 1996, the Company completed the initial offering of its
Common Stock to the public ("IPO"). Pursuant to the IPO, the Company sold an
aggregate of 1,250,000 shares of Common Stock at $8.00 per share, resulting in
net proceeds to the Company of approximately $7.8 million. The Company believes
that the net proceeds from the sale of Common Stock, together with anticipated
cash flows from operations and existing cash balances, will satisfy the
Company's projected expenditures through 1998 for working capital and general
corporate purposes, including an increase in the Company's internal product
development, staffing in connection with new product introductions and other
related product-development expenditures. From time to time, in the ordinary
course of business, the Company enters into strategic relationships with its
customers or other participants in the PC industry. Such strategic
relationships may include equity investments in the Company. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of the shareholders of the Company will be reduced, shareholders may
experience additional dilution, or such equity securities may have rights,
preferences or privileges senior to those of the holders of the Company's Common
Stock
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income," and No. 131 ("SFAS No. 131"), "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements and is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 supersedes SFAS No. 14 and
requires segment information to be reported on the basis that is used entirely
for evaluating segment performance and deciding how to allocate resources to
segments in quarterly and annual reports. SFAS No. 131 is effective for annual
reports for fiscal years beginning after December 15, 1997, and is applicable to
interim financial statements beginning with the second year of application. The
Company believes that the effect of adopting the new standards will not be
material to its consolidated financial statements.
In October 1997, the Accounting Standards Executive Committee issued Statement
of Position 97-2 ("SOP 97-2"), "Software Revenue Recognition," which is
effective for transactions entered into in fiscal years beginning after December
15, 1997. Retroactive application of the provision of this SOP is prohibited.
The Company has reviewed the SOP and believes that, based on its current
policies, the application of this SOP will not have a material impact on the
recording of future revenue.
THE YEAR 2000
The Year 2000 Issue is the result of computer programs using two digits rather
than four to define the applicable year. The Company's internal programs that
have time-sensitive software may recognize a date using "00" as the calendar
year 1900 rather than the calendar year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. Because the Company licenses and provides services relating to PC
software and firmware, the Company may become involved in investigations or
allegations regarding the Year 2000 Issue.
The Company is in the process of conducting a comprehensive review of its
internal computer systems to identify the systems that could be affected by the
Year 2000 Issue and is developing an enterprise-wide implementation plan to
resolve any identified issues. The Company also believes, with modifications to
existing operational software, the Year 2000 Issue will not pose significant
operational problems for the Company's computer systems as so modified and
converted. The Company expects to incur internal staff costs as well as
consulting and other expenses related to the enhancements necessary to prepare
the systems for the year 2000. The
27
<PAGE>
Company has no reasonable estimate of the amount associated with the transitions
of the Company's remaining systems. If modifications and conversions are not
completed in a timely manner, the Year 2000 Issue may have a material impact on
the Company's operations. Furthermore, there can be no assurance that the
systems of other companies with which the Company deals and on which the
Company's systems rely will also be timely converted or that any such failure to
convert by another company would not have a material impact on the Company's
operations.
The Company believes its current products do not require modification for the
Year 2000 Issue, and does not anticipate any material exposures related to the
Year 2000 Issue for its products and services. The Company cannot anticipate
the degree to which it may be the subject of claims or complaints regarding the
Year 2000 Issue.
28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Accountants
To the Board of Directors and Shareholders of
Award Software International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Award Software
International, Inc., and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
January 29, 1998
29
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................ $24,631 $23,248
Accounts receivable, net ......................................................... 4,256 2,068
Accounts receivable from related parties ......................................... 747 1,197
Deferred income taxes ............................................................ 483 131
Other current assets ............................................................. 1,698 467
------- -------
Total current assets .......................................................... 31,815 27,111
Property and equipment, net ........................................................ 1,367 683
Other assets ..................................................................... 1,199 616
------- -------
$34,381 $28,410
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 449 $ 215
Accrued liabilities .............................................................. 3,950 3,104
------- -------
Total current liabilities ..................................................... 4,399 3,319
Minority interest .................................................................. 170 --
------- -------
4,569 3,319
------- -------
Commitments (Note 10)
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized; no par value;
no shares issued or outstanding ........................................... -- --
Common stock, 40,000,000 shares authorized; no par value; 6,941,846 and 6,538,951
shares issued and outstanding ................................................... 22,571 21,269
Deferred stock compensation ........................................................ (106) (180)
Retained earnings .................................................................. 8,320 4,130
Cumulative translation adjustment .................................................. (973) (128)
------- -------
Total shareholders' equity .................................................... 29,812 25,091
------- -------
$34,381 $28,410
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Software license fees....................................... $19,502 $11,721 $6,989
Engineering services........................................ 2,366 472 239
Related parties............................................. 1,499 1,878 1,902
------- ------- ------
Total revenues........................................... 23,367 14,071 9,130
------- ------- ------
Cost of revenues:
Software license fees....................................... 1,828 521 387
Engineering services........................................ 686 131 43
Related parties............................................. 76 328 206
------- ------- ------
Total cost of revenues................................... 2,590 980 636
------- ------- ------
Gross profit.................................................. 20,777 13,091 8,494
------- ------- ------
Operating expenses:
Research and development.................................... 6,571 4,198 2,751
Sales and marketing......................................... 4,963 2,855 2,282
General and administrative.................................. 3,602 2,077 1,600
------- ------- ------
Total operating expenses................................. 15,136 9,130 6,633
------- ------- ------
Income from operations........................................ 5,641 3,961 1,861
Interest expense.............................................. (33) (6) (9)
Interest and other income..................................... 1,167 552 105
Minority interest............................................. 7 -- --
------- ------- ------
Income before income taxes.................................... 6,782 4,507 1,957
Provision for income taxes.................................... 2,102 1,622 792
------- ------- ------
Net income.................................................... $ 4,680 $ 2,885 $1,165
======= ======= ======
Basic net income per share.................................... $0.68 $0.54 $0.28
======= ======= ======
Weighted average common shares................................ 6,867 5,335 4,136
======= ======= ======
Diluted net income per share.................................. $0.61 $0.47 $0.25
======= ======= ======
Weighted average common and common equivalent shares.......... 7,705 6,095 4,650
======= ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEFERRED CUMULATIVE TOTAL
-------- ---------- -----
STOCK RETAINED TRANSLATION SHAREHOLDERS'
----- -------- ----------- -------------
COMMON STOCK COMPENSATION EARNINGS ADJUSTMENT EQUITY
--------------------- ------------- ------------- ------------ --------------
SHARES AMOUNT
---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994......... 3,841,801 $ 1,627 -- $ 80 $ (12) $ 1,695
Issuance of Common Stock and war-
rants, net of issuance costs of
$165............................... 1,166,669 6,837 -- -- -- 6,837
Repurchase of Common Stock........... (499,687) (2,998) -- -- -- (2,998)
Exercise of Common Stock warrants.... 70,000 70 -- -- -- 70
Exercise of Common Stock options..... 7,500 8 -- -- -- 8
Warrants issued for services......... -- 374 -- -- -- 374
Deferred stock compensation.......... -- 297 (297) -- -- --
Amortization of deferred stock
compensation........................ -- -- 42 -- -- 42
Cumulative translation adjustment.... -- -- -- -- (24) (24)
Net income........................... -- -- -- 1,165 -- 1,165
--------- ------- ----- ------ ----- -------
Balance at December 31, 1995......... 4,586,283 6,215 (255) 1,245 (36) 7,169
Issuance of Common Stock and war-
rants, net of issuance costs of
$79................................ 801,180 9,573 -- -- -- 9,573
Repurchase of Common Stock........... (250,000) (2,500) -- -- -- (2,500)
Exercise of Common Stock warrants.... 107,500 108 -- -- -- 108
Initial public offering, net of
issuance costs of $2,172............ 1,250,000 7,828 -- -- -- 7,828
Exercise of Common Stock
Options............................. 43,988 45 -- -- -- 45
Amortization of deferred stock
compensation........................ -- -- 75 -- -- 75
Cumulative translation adjustment.... -- -- -- -- (92) (92)
Net income........................... -- -- -- 2,885 -- 2,885
--------- ------- ----- ------ ----- -------
Balance at December 31, 1996......... 6,538,951 21,269 (180) 4,130 (128) 25,091
Issuance of Common Stock, net........ 72,391 482 -- -- -- 482
Tax benefits related to
disqualifying dispositions
of stock options.................... -- 622 -- -- -- 622
Pooling of interests with Unicore.... 218,571 35 -- (490) -- (455)
Exercises of Common Stock options.... 111,933 163 -- -- -- 163
Amortization of deferred stock
compensation........................ -- -- 74 -- -- 74
Cumulative translation adjustment.... -- -- -- -- (845) (845)
Net income........................... -- -- -- 4,680 -- 4,680
--------- ------- ----- ------ ----- -------
Balance at December 31, 1997......... 6,941,846 $22,571 $(106) $8,320 $(973) $29,812
========= ======= ===== ====== ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1996 1995
----------- ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 4,680 $ 2,885 $ 1,165
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ................................. 706 223 132
Deferred income taxes ......................................... (352) 130 (143)
Warrants issued for services .................................. -- -- 374
Deferred stock compensation ................................... 74 75 42
Minority interest ............................................. 170 -- --
Changes in assets and liabilities, net of acquisition:
Accounts receivable, net .................................... (2,396) (1,057) (40)
Accounts receivable from related parties .................... 449 (347) (1,205)
Other current assets ........................................ (1,221) (539) 138
Other assets ................................................ (53) (211) 24
Accounts payable ............................................ 160 24 49
Accrued liabilities ......................................... 821 1,372 899
------- ------- -------
Net cash provided by operating activities ................. 3,038 2,555 1,435
------- ------- -------
Cash flows from investing activities:
Purchase of property and equipment ............................... (1,170) (579) (147)
Capitalized software development costs ........................... (613) (209) --
------- ------- -------
Net cash used in investing activities ..................... (1,783) (788) (147)
------- ------- -------
Cash flows from financing activities:
Net proceeds from Common Stock issuances ......................... 482 17,401 6,837
Proceeds from exercise of options and warrants ................... 163 153 78
Repurchases of Common Stock ...................................... -- (2,500) (2,998)
Repayments under note obligations ................................ (390) -- (73)
------- ------- -------
Net cash provided by financing activities ................. 255 15,054 3,844
------- ------- -------
Effect of exchange rate changes on cash .......................... (585) (71) (8)
------- ------- -------
Net increase in cash and cash equivalents ........................ 925 16,750 5,124
Cash and cash equivalents at beginning of period ................. 23,706 6,498 1,374
------- ------- -------
Cash and cash equivalents at end of period ....................... $24,631 $23,248 $ 6,498
======= ======= =======
Supplemental cash flow information:
Cash paid for interest ........................................... $ 33 $ 6 $ 10
Cash paid for income taxes ....................................... $ 2,300 $ 996 $ 282
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. Organization and Business
The Company
Award Software International, Inc. ("Award" or the "Company") designs,
develops and markets system management software for the global computing market.
System management software is one of the fundamental layers in personal computer
("PC") architecture and provides an essential interface between a PC's
operating system software and its hardware. The Company's principal system
management software products include a suite of Basic Input/Output System
software ("BIOS"). Award's customers include designers and manufacturers of
motherboards, PC systems and other microprocessor-based (or "embedded")
devices.
The Company was incorporated in California, in 1983, and operates in one
business segment through its headquarters facility in Mountain View, California,
a branch office in Irvine, California, a wholly owned subsidiary in North
Andover, Massachusetts, a branch office in Munich, Germany, a joint venture in
Yokohama, Japan and a wholly owned subsidiary in Hong Kong with a branch office
in Taipei, Taiwan. On October 25, 1996, the Company completed its initial public
offering of Common Stock.
Merger and Acquisition
In May 1997, the Company merged with Unicore Software, Inc. ("Unicore"), a
privately held company providing basic input/output software upgrades for
personal computers and embedded systems. Under the terms of the Agreement and
Plan of Merger and Reorganization, the Company issued 218,571 shares of Common
Stock for all of the outstanding stock of Unicore in a transaction accounted for
as a pooling of interests. The historical operations of Unicore were not
material and, as a result, the business combination has been reported by
restating the Company's consolidated financial statements to include the
consolidated financial statements of Unicore effective January 1, 1997.
On February 21, 1997, the Company acquired certain assets of Willows software
("Willows acquisition") for $400 cash, direct acquisition costs of $40 and the
assumption of liabilities totaling $44. The purchase price was allocated based
upon the estimated fair market value of identifiable tangible and intangible
assets and liabilities assumed, including $289 to in-process research and
development. The amount allocated to in-process research and development
relates to acquired development projects that had not reached technological
feasibility at the acquisition date and had no alternative future use.
Formation of Joint Venture
In April 1997, the Company entered into an agreement with Sun Corporation
("Sun"), a shareholder, and Axis Corporation ("Axis") to establish a majority-
owned subsidiary, Award Software Japan KK ("Award Japan"). The objective of
Award Japan is to market and distribute the Company's products in Japan. The
Company, Sun and Axis contributed approximately $310, $95 and $95 for 62%, 19%
and 19% ownership of Award Japan, respectively.
GCH Acquisition
On July 2, 1993, GCH Systems, Inc. ("GCH"), an independent developer of
microcomputers and application- specific integrated circuits, acquired 100
percent of Award's outstanding Common Stock for $1,905, consisting of $725 in
cash and the assumption of $1,180 in liabilities. From the acquisition date
through December 30, 1994, Award operated as a wholly owned subsidiary of GCH.
On December 31, 1994, Award and GCH became separate companies through a spinoff
of 100 percent of Award's Common Stock on a pro rata basis to GCH shareholders.
Award and GCH have certain common members on their Boards of Directors. Award
and GCH, from time to time have made non-interest-bearing cash advances to each
other for working capital purposes.
34
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements of the Company include the accounts of
Award Software International, Inc., its wholly owned subsidiaries and the
Company's 62% ownership of Award Japan. All inter-company accounts and
transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue recognition
The Company's revenues are derived primarily from software license fees and
non-recurring engineering services. Software license fees are recognized upon
delivery of the product, fulfillment of acceptance terms, if any, and
satisfaction of any significant support obligations. The Company's normal sales
terms are net 30 days and return privileges are not offered or provided to any
customers. Payments received in advance of revenue recognition are recorded as
deferred revenue. Engineering services revenue primarily consist of amounts
charged for customization of the software and are generally recognized as the
services are performed. Amounts received under engineering contracts that
require software delivery are deferred until delivery and customer acceptance
occur. Related parties revenues include software licenses and non-recurring
engineering services to holders of the Company's Common Stock and Common Stock
warrants.
The Company does not offer separate post-contract customer support contracts,
and due to the nature of the Company's product offerings, has not incurred any
significant post-sale warranty or support obligations. The costs of
insignificant support obligations are accrued at the time of revenue
recognition. Allowances for uncollectible amounts and warranties are recorded in
the same period as the related revenues based upon the Company's historical
experience.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents. Cash equivalents consist
principally of time deposits and money-market deposit accounts that are stated
at cost, which approximates fair value.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets, which range from three to five years.
Software development costs
Costs incurred in the research and development of new products and
enhancements to existing products are charged to expense as incurred until the
technological feasibility of the product or enhancement has been established.
After establishing technological feasibility through the development of a
working model, any additional
35
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
costs incurred through the date the product is available for general release, if
any, are capitalized and amortized over the estimated life, generally three
years, using the greater of the amounts determined using the straight-line
method or the ratio of current period product revenues over total estimated
product revenues. Capitalized software development costs are included in other
assets in the accompanying financial statements. Amortization of capitalized
software development costs totaled $207, $22 and $18 for the three years ended
December 31, 1997, 1996 and 1995, respectively.
Goodwill
Goodwill resulting from the acquisition of Award Common Stock by GCH is
included in other assets at December 31, 1997 and 1996, and is being amortized
using the straight line method over five years.
Income taxes
Income taxes are accounted for using an asset and liability approach in
accordance with SFAS No. 109, "Accounting for Income Taxes." The asset and
liability approach requires the recognition of taxes payable or refundable for
the current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. The measurement of current and deferred tax
liabilities and assets are based on provisions of the enacted tax law; the
effects of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
Foreign currency translation
The Company's operations in Taiwan, Hong Kong, Japan and Germany use the local
currencies as their functional currencies. Accordingly, all assets and
liabilities of these entities are translated at the current exchange rate in
effect at the balance sheet date and revenues and expenses are translated at the
average exchange rates in effect during the reporting period. Gains and losses
resulting from foreign currency translation are recorded directly into a
separate component of shareholders' equity. Foreign currency transaction gains
and losses were immaterial for all periods presented.
Net income per share
Basic net income per share is computed by dividing net income available to
Common Shareholders by the weighted average number of common shares outstanding
during the period. Diluted net income per share is calculated using the
weighted average number of outstanding shares of Common Stock plus dilutive
Common Stock equivalents. Common Stock equivalents consist of common stock
options and warrants, using the treasury stock method based on the average stock
price for the period.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, between the quoted market price
of the Company's stock on the date of grant and the amount an employee must pay
to acquire the stock.
New Accounting Pronouncements
36
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In June 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income," and No. 131 ("SFAS No. 131"), "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements and is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 supersedes SFAS No. 14 and
requires segment information to be reported on the basis that is used entirely
for evaluating segment performance and deciding how to allocate resources to
segments in quarterly and annual reports. SFAS No. 131 is effective for annual
reports for fiscal years beginning after December 15, 1997, and is applicable to
interim financial statements beginning with the second year of application. The
Company believes that the effect of adopting the new standards will not be
material to its consolidated financial statements.
In October 1997, the Accounting Standards Executive Committee issued Statement
of Position 97-2 ("SOP 97-2"), "Software Revenue Recognition," which is
effective for transactions entered into in fiscal years beginning after December
15, 1997. Retroactive application of the provision of this SOP is prohibited.
The Company has reviewed the SOP and believes that, based on its current
policies, the application of this SOP will not have a material impact on the
recording of future revenue.
3. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of bank deposits and accounts
receivable. The Company places its cash and cash equivalents in checking and
market rate accounts with two major financial institutions and has not incurred
any losses related to these investments.
The Company markets its products to OEMs in the personal computer market,
designers of motherboards and other microprocessor-embedded system manufacturers
and, as a result, maintains individually significant receivable balances from
major customers located throughout the world. The Company performs ongoing
credit evaluations of its customers' financial condition and maintains an
allowance for uncollectible accounts receivable based on the expected
collectability of all accounts receivable.
The following table summarizes the net accounts receivable from customers
located in the following geographic areas:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
--------- -------
<S> <C> <C>
United States ..................................................... $2,074 $ 327
Asia Pacific ...................................................... 2,100 1,669
Europe ............................................................ 82 72
------ ------
$4,256 $2,068
====== ======
</TABLE>
All related party receivables are from United States customers. No customer
accounted for over 10.0% of accounts receivable at December 31, 1997. One
customer accounted for 26.1% of accounts receivable at December 31, 1996.
4. BALANCE SHEET COMPONENTS
37
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Accounts receivable:
Accounts receivable................................ $4,345 $2,183
Less: allowance for doubtful accounts.............. (89) (115)
------ ------
$4,256 $2,068
====== ======
Property and equipment:
Computer equipment................................. $1,453 $ 796
Office equipment................................... 334 124
Furniture and fixtures............................. 381 102
------ ------
2,168 1,022
Less accumulated depreciation...................... (801) (339)
------ ------
$1,367 $ 683
====== ======
Other assets:
Goodwill........................................... $ 265 $ 265
Capitalized software............................... 1,346 344
Other.............................................. 104 263
------ ------
1,715 872
Less accumulated amortization:
Goodwill...................................... (239) (186)
Capitalized software.......................... (277) (70)
------ ------
$1,199 $ 616
====== ======
Accrued liabilities:
Salaries and benefits.............................. $1,195 $ 584
Royalties.......................................... 543 90
Income taxes payable............................... 1,686 1,160
Deferred revenue................................... 195 615
Other.............................................. 331 655
------ ------
$3,950 $3,104
====== ======
</TABLE>
5. NET INCOME PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted net income per share calculations for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
(in thousands, except per share data) 1997 1996 1995
------------ ------------ -----------
BASIC NET INCOME PER SHARE
<S> <C> <C> <C>
Net income available to Common Shareholders $4,680 $2,885 $1,165
=========================================
Weighted average common shares 6,867 5,335 4,136
=========================================
Basic net income per share $ 0.68 $ 0.54 $ 0.28
=========================================
DILUTED NET INCOME PER SHARE
Net income available to Common Shareholders $4,680 $2,885 $1,165
=========================================
Weighted average common shares 6,867 5,335 4,136
Dilutive common stock equivalents 838 760 514
-----------------------------------------
Weighted average common shares and equivalents 7,705 6,095 4,650
=========================================
Diluted net income per share $ 0.61 $ 0.47 $ 0.25
=========================================
</TABLE>
38
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
During 1997, 1996 and 1995, options to purchase 32,699, 180,062 and 0 shares
of Common Stock, respectively, were antidilutive and excluded from the dilutive
net income per share calculations because the options' exercise price was
greater than the average market price of the common shares.
6. SHAREHOLDERS' EQUITY
On October 25, 1996, the Company completed an initial public offering (the
"Offering") of 1,250,000 shares of its Common Stock at $8.00 per share.
Proceeds to the Company totaled $7,828, net of underwriting discounts and
issuance costs of $2,172. Prior to the Offering, in May 1996, the Board of
Directors approved an increase in the number of common shares authorized to
40,000,000, authorized 5,000,000 shares of Preferred Stock and approved a 1-for-
2 reverse stock split of the Company's Common Stock. The reverse stock split was
effected on August 21, 1996. All references to the number of common shares and
per share amounts have been retroactively restated in the accompanying
consolidated financial statements to reflect the reverse stock split.
During January and February 1996, the Company repurchased 250,000 shares of
Common Stock from existing shareholders at a price of $10.00 per share.
In connection with the issuance and sale of 570,033 shares of Common Stock in
January 1996, the Company issued 272,394 Common Stock warrants with an exercise
price of $12.28 per share for $0.02 per warrant. The warrants are exercisable at
any time up to September 30, 2000. No proceeds were separately allocated to the
warrants.
In June 1996, the Company entered into a joint technology development and
support agreement with Advanced Micro Devices, Inc. ("AMD"), to support the
design and development of products related to AMD's K6 microprocessor. As part
of this relationship, in July 1996, the Company sold to AMD 160,000 shares of
Common Stock at a price of $12.50 per share for approximately $2,000 in cash.
In June 1995, the Company granted 20,000 Common Stock warrants with an
exercise price of $1.00 per share to a holder of approximately 0.4% of the
Company's Common Stock at the time of grant in exchange for marketing services.
The warrants are exercisable at any time up to the later of (i) June 15, 1998 or
(ii) the six month anniversary of the closing of an initial public offering. The
Company recorded the difference between the estimated fair market value and the
exercise price of the warrants of approximately $36 as sales and marketing
expense. The warrants were exercised in December 1995.
In connection with the issuance of shares of Common Stock in 1995, the Company
issued 123,333 Common Stock warrants with an exercise price of $1.00 per share
for $0.02 per warrant. The warrants are exercisable at any time up to September
30, 2000. No proceeds were separately allocated to the warrants.
In October 1994, the Company granted 200,000 Common Stock warrants to a
customer under a software licensing agreement. The warrants were deemed to have
a nominal value on the date of grant. The warrants have an exercise price of
$1.00 per share and are exercisable at any time through March 31, 1998. During
the period from October 1994 through June 1995, the customer earned 45,500 of
the Common Stock warrants based on purchasing volumes. In July 1995, to solidify
the Company's long-term relationship with the customer, the Company issued the
remaining 154,500 warrants to the customer and recorded the difference between
the estimated fair market value and the exercise price of the warrants of
approximately $283 as sales and marketing expense. In July 1996, 77,500 of these
warrants were exercised, resulting in proceeds totaling $78.
In December 1994, in exchange for marketing services, the Company granted
80,000 Common Stock warrants with an exercise price of $1.00 per share to
holders of approximately 16.1% of the Company's Common Stock at December 31,
1995. The warrants had a nominal value when granted and were exercised in
November 1995.
39
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. EMPLOYEE BENEFIT PLANS
Equity Incentive and Stock Option Plan
During 1997, the Company adopted the 1997 Equity Incentive Plan, under which
700,000 shares of common stock are reserved for issuance to eligible employees,
directors and consultants upon exercise of the stock options. Stock options are
granted at prices determined by Board of Directors and generally may not be less
than 110% and 85%, for incentive and nonstatutory options, respectively, of the
estimated fair value of the related shares on the date of grant. Options granted
under the Plan are for periods not to exceed ten years, are exercisable
generally one year after date of grant and vest ratably over a maximum period of
five years following the date of grant. For options expired or canceled, the
stock not purchased under such options shall revert to and again become
available for re-issuance under the plan. The Plan provides for an unvested
share repurchase option on behalf of the Company. In the event an optionee
ceases to be eligible under the Plan for any reason, shares acquired on the
exercise of an option which have not yet vested may be repurchased by the
Company at the optionee's original cost per share. At December 31, 1997, no
shares were subject to repurchase.
During 1994, the Company adopted the 1995 Stock Option Plan, under which
1,250,000 shares of common stock are reserved for issuance to eligible
employees, directors and consultants upon exercise of the stock options. Stock
options are granted at prices determined by Board of Directors and generally may
not be less than 100% and 85%, for incentive and nonstatutory options,
respectively, of the estimated fair value of the related shares on the date of
grant. Options granted under the Plan are for periods not to exceed ten years,
are exercisable generally one year after date of grant and vest ratably over a
maximum period of five years following the date of grant. For options expired or
canceled, the stock not purchased under such options shall revert to and again
become available for re-issuance under the plan. The Plan provides for an
unvested share repurchase option on behalf of the Company. In the event an
optionee ceases to be eligible under the Plan for any reason, shares acquired on
the exercise of an option which have not yet vested may be repurchased by the
Company at the optionee's original cost per share. At December 31, 1997, no
shares were subject to repurchase.
On June 30, 1997, the Company registered an additional 268,446 shares of
Common Stock under the 1995 Stock Option Plan for issuance to new hires and
existing employees of the Company, excluding directors and executive officers of
the Company.
During 1995, the Company recorded $297 of deferred stock compensation for the
excess of the deemed fair market value over the exercise price at the date of
grant related to certain options granted in 1995. The compensation expense is
being recognized over the option vesting period of four years. Compensation
expense recognized in 1997 1996 and 1995 aggregated $74, $75 and $42,
respectively.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method prescribed by SFAS No. 123, the Company's net
income and earnings per share would have been further reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net income
As reported ............................................... $4,680 $2,885 $1,165
====== ====== ======
Pro forma ................................................. $3,475 $2,717 $1,155
====== ====== ======
Net income per share
As reported:
Basic ................................................ $ 0.68 $ 0.54 $ 0.28
====== ====== ======
Diluted .............................................. $ 0.61 $ 0.47 $ 0.25
====== ====== ======
Pro forma:
Basic ................................................ $ 0.51 $ 0.51 $ 0.28
====== ====== ======
Diluted .............................................. $ 0.48 $ 0.45 $ 0.25
====== ====== ======
</TABLE>
40
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Under SFAS No. 123, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
STOCK OPTION ASSUMPTIONS: YEAR ENDED DECEMBER 31,
----------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Stock Option Plan
Expected dividend yield ........................................ 0.00% 0.00% 0.00%
Expected stock price volatility ................................ 60.75% 55.00% 55.00%
Risk-free interest rate ........................................ 6.19% 6.05% 5.50%
Expected life (years) .......................................... 5 5 5
Stock Purchase Plan
Expected dividend yield ........................................ 0.00% -- --
Expected stock price volatility ................................ 60.75% -- --
Risk-free interest rate ........................................ 5.37% -- --
Expected life (years) .......................................... 0.5 -- --
</TABLE>
A summary of the status of the Company's stock option plan as of December 31,
1997, 1996 and 1995, and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
SHARES SUBJECT TO OUTSTANDING OPTIONS
-----------------------------------------------
-------------- WEIGHTED-
OPTIONS AVERAGE
AVAILABLE FOR NUMBER OF PRICE PER EXERCISE
GRANT SHARES SHARE PRICE
-------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 ........................... 685,950 564,050 $ 1.00 $ 1.00
Granted .............................................. (191,105) 191,105 1.00-6.00 2.01
Exercised ............................................ -- (7,500) 1.00 1.00
Canceled ............................................. 1,500 (1,500) 1.00 1.00
-------- --------- ----------- ------
Balance at December 31, 1995............................. 496,345 746,155 1.00-6.00 1.26
Granted .............................................. (329,000) 329,000 6.75-11.00 9.97
Exercised ............................................ -- (43,988) 1.00 1.00
Canceled ............................................. 61,709 (61,709) 1.00-10.00 2.24
-------- --------- ----------- ------
Balance at December 31, 1996 ........................... 229,054 969,458 1.00-11.00 4.16
Authorized............................................. 968,446 -- -- --
Granted .............................................. (904,400) 904,400 9.25-11.25 10.37
Exercised ............................................ -- (111,933) 1.00-10.00 1.46
Canceled ............................................. 41,539 (41,551) 1.00-10.63 9.79
-------- --------- ----------- ------
Balance at December 31, 1997 ........................... 334,639 1,720,374 $1.00-11.25 $ 7.46
======== ========= =========== ======
</TABLE>
Options for 577,516, 345,685 and 106,500 shares of Common Stock were
exercisable at December 31, 1997, 1996 and 1995, respectively. Weighted average
fair value of options granted during the year were $5.98, $2.59 and $2.13 for
1997, 1996 and 1995, respectively.
41
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------- -------------------------
Weighted-
AVERAGE WEIGHTED- WEIGHTED-
Range of NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
Prices AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE
- --------------------- --------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 1.000 -- 5.000 535,411 7.11 years $ 1.24 372,310 $ 1.18
6.000 -- 10.250 581,213 9.09 years 9.60 99,317 9.45
10.625 -- 13.125 603,750 9.21 years 10.91 105,889 10.69
--------- ------ ------- ------
1,720,374 8.52 years $ 7.46 577,516 $ 4.35
========= ====== ======= ======
</TABLE>
Employee Stock Purchase Plan
In May 1996, the Board of Directors adopted the Employee Stock Purchase Plan
(the "Purchase Plan"), which provides for the issuance of a maximum of 150,000
shares of Common Stock. Eligible employees may have up to 15% of their earnings
withheld, to be used to purchase shares of the Common Stock on specified dates
determined by the Board of Directors. The price of Common Stock purchased under
the Purchase Plan will be equal to 85% of the lower of the fair market value of
the Common Stock on the commencement date of each offering period or the
specified purchase date. During 1997, the Company issued 72,391 shares of its
Common Stock under the Purchase Plan.
401 (k) Plan
In January 1995, the Board of Directors adopted an employee savings and
retirement plan (the "401(k) Plan") covering substantially all of the
Company's employees. Under the 401 (k) Plan, eligible employees may elect to
reduce their current compensation by up to the statutory prescribed limit and
have the amount of such reduction contributed to the 401 (k) Plan. The Company
may make contributions to the 401 (k) Plan on behalf of eligible employees. The
Company made no contributions to the 401 (k) Plan in 1997, 1996 or 1995.
8. INCOME TAXES
Income before income taxes was subject to tax in the following jurisdictions:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1997 1996 1995
----------- ---------- -----------
<S> <C> <C> <C>
United States ............... $1,438 $2,108 $ 464
Foreign ..................... 5,344 2,399 1,493
------ ------ ------
$6,782 $4,507 $1,957
====== ====== ======
</TABLE>
The provision (benefit) for income taxes is composed of the following:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1997 1996 1995
------------ ---------- ------------
<S> <C> <C> <C>
Current:
Federal ..................................... $1,000 $ 709 $ 484
State ....................................... 98 59 46
Foreign ..................................... 1,356 724 405
------ ------ -----
Total current ............................. 2,454 1,492 935
------ ------ -----
Deferred:
Federal....................................... (382) 95 (133)
State......................................... 30 35 (10)
Foreign ..................................... -- -- --
------ ------ -----
Total deferred ............................ (352) 130 (143)
------ ------ -----
$2,102 $1,622 $ 792
====== ====== =====
</TABLE>
42
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Significant components of the Company's deferred tax assets (liabilities) were
as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
----------- ------------
<S> <C> <C>
Deferred tax liabilities:
Capitalized software .................... $(320) $ (90)
----- -----
Deferred tax assets:
Accrued liabilities ..................... 67 79
Depreciation ............................ 77 18
Allowance for doubtful accounts ......... 34 34
State tax deduction ..................... 2 6
Tax credits ........................ 478 0
Other .............................. 145 84
----- -----
803 221
----- -----
Net deferred tax assets ................... $ 483 $ 131
===== =====
</TABLE>
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate to
income before income taxes as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Tax provision at the U.S. federal statutory rate $2,306 $1,532 $ 666
of 34%............................................
Foreign income taxed at different rates .......... (486) (80) (77)
State and local taxes, net of federal benefit .... 69 221 117
Release of valuation allowance ................... -- -- (117)
Nondeductible charges and accruals ............... 207 -- 166
Other ............................................ 6 (51) 37
------ ------ -----
Provision for income taxes ....................... $2,102 $1,622 $ 792
====== ====== =====
Effective tax rates .............................. 31% 36% 40%
====== ====== =====
</TABLE>
9. REVENUES, GEOGRAPHIC INFORMATION AND EXPORT SALES
Revenues from customers representing 10% or more of consolidated revenues were
as follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Customer A ................... -- -- 13.9%
Customer B--Related party .... 5.4% 11.0% 13.4%
</TABLE>
43
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The components of related parties revenues and costs of revenues are:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Software license fees ......................... $1,479 $1,148 $1,084
Engineering services .......................... 20 730 818
------ ------ ------
Total related party revenues ................ $1,499 $1,878 $1,902
====== ====== ======
Cost of revenues:
Software license fees ......................... $ 74 $ 58 $ 60
Engineering services .......................... 2 270 146
------ ------ ------
Total related party cost of revenues ........ $ 76 $ 328 $ 206
====== ====== ======
</TABLE>
The following is a summary of the Company's geographic operations:
<TABLE>
<CAPTION>
UNITED ASIA
---------- ----------
STATES EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
---------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Revenues from unaffiliated customers .... $ 1,017 $2,216 $ 3,995 $ -- $ 7,228
Revenue from related parties ............ 1,902 -- -- -- 1,902
Income from operations .................. 393 59 1,409 -- 1,861
Identifiable assets ..................... 6,907 976 2,764 (1,564) 9,083
Year ended December 31, 1996:
Revenues from unaffiliated customers .... $ 2,176 $1,195 $ 8,822 $ -- $12,193
Revenue from related parties ............ 1,878 -- -- -- 1,878
Income (loss) from operations ........... 1,651 (482) 2,792 -- 3,961
Identifiable assets ..................... 23,642 728 6,498 (2,458) 28,410
Year ended December 31, 1997:
Revenues from unaffiliated customers .... $ 9,016 $ 640 $12,212 $ -- $21,868
Revenue from related parties ............ 1,499 -- -- -- 1,499
Income (loss) from operations ........... 1,161 (604) 5,084 -- 5,641
Identifiable assets ..................... 27,088 465 11,082 (4,254) 34,381
</TABLE>
Substantially all of the financial information for the Europe and Asia Pacific
geographic areas results from the Company's operations in Germany and Taiwan,
respectively.
Export sales from the United States to international customers were as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Europe, principally Germany ...... $2,164 $2,003 $1,315
Asia Pacific, principally Japan .. 850 164 95
------ ------ ------
$3,014 $2,167 $1,410
====== ====== ======
</TABLE>
10. Commitments
Operating leases
The Company leases its office facilities in the U.S., Taiwan, Hong Kong, Japan
and Germany. Future minimum payments under non-cancelable operating leases, as
of December 31, 1997, were $651 and $148 for 1998 and 1999, respectively.
44
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Under an agreement that extends through 1998, the Company subleases office
facilities in Mountain View, California with GCH and was charged rent totaling
$362, $161 and $84 for 1997, 1996 and 1995, respectively. The Company also
leases office facilities in Taipei, Taiwan from GCH and a shareholder on a
month-to-month basis and was charged rent totaling $269, $225 and $101 for 1997,
1996 and 1995, respectively. In addition, the Company leases office facilities
in North Andover, Massachusetts from a realty company owned by an executive
officer of the Company and was charged rent totaling $69 in 1997. Management
believes the terms of these transactions are no less favorable than could be
obtained from unaffiliated third parties.
Total rent expense, including amounts to related parties above, was $799, $470
and $273 for the years ended December 31, 1997, 1996 and 1995, respectively.
AWARD SOFTWARE INTERNATIONAL, INC.
SUPPLEMENTARY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------------------------------------
1997 1996
-------------------------------------- ---------------------------------------
Dec. 31 SEPT. 30 JUNE 30 MAR. 31 DEC. 31 SEPT. 30 JUNE 30 MAR. 31
-------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenues ............. $7,535 $5,603 $5,202 $5,028 $4,522 $3,395 $3,342 $ 2,812
Gross profit ............... 6,237 5,080 4,773 4,688 4,231 3,137 3,199 2,524
Income from operations ..... 1,941 1,408 1,195 1,098 1,573 835 1,034 519
Net income ................. 1,660 1,128 1,000 892 1,174 608 717 386
Basic net income per share .. $ 0.24 $ 0.16 $ 0.15 $ 0.13 $ 0.19 $ 0.12 $ 0.14 $ 0.08
Diluted net income per share. $ 0.22 $ 0.15 $ 0.13 $ 0.12 $ 0.17 $ 0.10 $ 0.13 $ 0.07
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
45
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Shareholders, to be held on June 4, 1998, under the captions "Election of
Directors--Nominees" and is hereby incorporated by reference herein. The
information relating to executive officers of the Company is contained in Part
I, Item 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Shareholders, to be held June 4, 1998, under the caption "Executive
Compensation," and is hereby incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Shareholders, to be held June 4, 1998, under the caption "Security Ownership of
Certain Beneficial Owners and Management," and is hereby incorporated by
reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Shareholders, to be held June 4, 1998, under the caption "Certain
Transactions," and is hereby incorporated by reference herein.
46
<PAGE>
PART IV
Item 14. Financial Statement Schedules, Exhibits and Reports on Form 8-K.
(a) (1) Index to Financial Statements
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Accountants ................................................................ 29
Consolidated Balance Sheet at December 31, 1997 and 1996 ......................................... 30
Consolidated Statement of Income for the three years ended December 31, 1997 ..................... 31
Consolidated Statement of Shareholders' Equity for the three years ended December 31, 1997 ....... 32
Consolidated Statement of Cash Flows for the three years ended December 31, 1997 ................. 33
Notes to Consolidated Financial Statements ....................................................... 34
Supplementary Data (Unaudited) ................................................................... 45
</TABLE>
(2) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or in the notes thereto.
(3) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
2.1+(2) Agreement and Plan of Merger and Reorganization, dated as of May 29, 1997, by and among the
Company, Award Merger Sub Corp., Unicore Software, Inc. and Pierre A. Narath.
3.1(1) Amended and Restated Articles of Incorporation of the Registrant.
3.1.1(1) Form of Amended and Restated Articles of Incorporation of the Registrant effecting the
1-for-2 reverse stock split.
3.1.2(1) Form of Amended and Restated Articles of Incorporation of the Registrant, effective upon the
completion of the IPO.
3.2(1) Amended and Restated Bylaws of the Registrant.
3.2.1(1) Form of Amended and Restated Bylaws of the Registrant, effective upon the completion of the
IPO.
4.1(1) Reference is made to Exhibits 3.1 through 3.2
4.5(1) Specimen stock certificate.
10.1(1) Form of Indemnity Agreement to be entered into between the Registrant and its directors and
officers, with related schedule.
10.2(1) Registrant's 1995 Stock Option Plan, as amended (the "Option Plan").
10.3(1) Form of Incentive Stock Option under the Option Plan.
10.4(1) Form of Nonstatutory Stock Option under the Option Plan.
10.5(1) Registrant's Amended and Restated Executive Compensation Plan.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
EXHIBIT
NUMBER DESCRIPTION
10.6(1) Registrant's amended and Restated Executive Compensation Plan.
10.7(1) Lease, dated January 1, 1996, between GCH Systems, Inc. and the Registrant.
10.8(1) Summary of Leases, dated March 1, 1996, between Sun Corporation, GSS Corporation and the
Registrant.
10.9(1) Voting Agreement, dated January 12, 1996, between the Registrant and certain persons named
therein.
10.10(1) Investors' Rights Agreement among the Registrant and certain other persons named therein,
dated as of January 12, 1996.
10.11(1) Warrant issued to Synnex Information Technologies, Inc.
10.12(1) Warrant issued to Vobis Microcomputer AG.
10.13(1) Warrant issued to Venrock Associates.
10.14(1) Warrant issued to Venrock Associates II, L.P.
10.15(1) Warrant issued to Walden Capital Partners II, L.P.
10.16(1) Warrant issued to Walden Technology Ventures II, L.P.
10.17+(1) Technology Development and Support Agreement, dated June 28, 1996, between Registrant and
Advanced Micro Devices, Inc.
10.18(3) 1997 Compensation Plan.
10.19(2) Registration Rights Agreement, dated as of May 30, 1997, between the Company and Pierre A.
Narath.
10.20(2) Escrow Agreement, dated as of May 30, 1997, by and among the Company, Pierre A. Narath and
First Trust of California, N.A.
10.21(2) Employment Agreement, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.22(2) Employee Proprietary and Inventions Agreement, dated as of May 30, 1997, between the Company
and Pierre A. Narath.
10.23(2) Noncompetition Agreement, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.24(2) General Release, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.25+(4) Memorandum of Understanding by and among Sun Corporation, Axis Corporation and the Company.
10.26(6) Commercial Lease, dated as of January 5, 1996 by and between Unicore Software, Inc. and 114 Realty Trust,
as amended on May 30, 1997 and September 1, 1997.
10.27(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and George C. Huang.
10.28(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Lyon T. Lin.
10.29(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Kevin J. Berry.
10.30(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Ann P. Shen.
10.31(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Maurice W.
Bizzarri.
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.32(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and David J.
Wippich.
10.33(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Reza Afghan.
10.34(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Laurant K.
Gharda.
10.35(6) Promissory Note, dated March 1, 1998, issued by Pierre A. Narath to the Company.
10.36(6) Letter Agreement, dated March 1, 1998, between Pierre A. Narath and the Company.
10.37++(6)Master Original Equipment Manufacturer (OEM) Software License Agreement, dated September 10,
1997, between the Company and Intel Corporation.
21(2) Subsidiaries of the Registrant.
21(5) Subsidiaries of the Registrant.
23.1(6) Consent of Independent Accountants.
24.2(6) Power of Attorney. See signature page.
27(6) Financial Data Schedule.
</TABLE>
- -------------
+ The Securities and Exchange Commission has granted confidential treatment
for portions of this document.
++ The Company has requested confidential treatment for portions of this
document.
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-1, File No. 333-05107, filed on
June 3, 1996, as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K filed on June 16, 1997, as amended on
October 14, 1997.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q filed on May 6, 1997.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10- Q filed on August 13, 1997.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10- Q filed on November 13, 1997.
(6) Filed herewith.
(B) REPORTS ON FORM 8-K
A Form 8-K/A was filed on October 14, 1997 solely for the purpose of amending
Exhibit 2.1 to the Form 8-K Current Report dated May 30, 1997 and filed on June
16, 1997.
49
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS ANNUAL REPORT ON FORM
10-K TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY ORGANIZED, ON
THE 30TH DAY OF MARCH 1998.
Award Software International, Inc.
By: /s/ George C. Huang
--------------------------
GEORGE C. HUANG
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George C. Huang and Kevin J. Berry or either of
them, his or her attorney-in-fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendments to this Report, and to
file the same, with exhibits thereto and other documents in connections
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES STATED.
<TABLE>
<CAPTION>
Signature TITLE DATE
- --------------------------- ----------------------------------- --------------
<S> <C> <C>
Chairman of the Board, President, March 30, 1998
/s/ George C. Huang Chief Executive Officer and
- --------------------------- Director (Principal Executive
GEORGE C. HUANG Officer )
/s/ Kevin J. Berry Vice President, Finance, Chief March 30, 1998
- --------------------------- Financial Officer, Treasurer and
KEVIN J. BERRY Secretary (Principal Financial and
Accounting Officer )
/s/ Cheng Ming Lee Director March 30, 1998
- ---------------------------
CHENG MING LEE
/s/ David S. Lee Director March 30, 1998
- ---------------------------
DAVID S. LEE
/s/ Masami Maeda Director March 30, 1998
- ---------------------------
MASAMI MAEDA
/s/ Anthony Sun Director March 30, 1998
- ---------------------------
ANTHONY SUN
/s/ William P. Tai Director March 30, 1998
- ---------------------------
WILLIAM P. TAI
/s/ Willy Weck Director March 30, 1998
- ---------------------------
WILLY WECK
</TABLE>
50
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------
<C> <S>
2.1+(2) Agreement and Plan of Merger and Reorganization, dated as of May 29, 1997, by and among the Company,
Award Merger Sub Corp., Unicore Software, Inc. and Pierre A. Narath.
3.1(1) Amended and Restated Articles of Incorporation of the Registrant.
3.1.1(1) Form of Amended and Restated Articles of Incorporation of the Registrant effecting the 1-for-2
reverse stock split.
3.1.2(1) Form of Amended and Restated Articles of Incorporation of the Registrant, effective upon the
completion of the IPO.
3.2(1) Amended and Restated Bylaws of the Registrant.
3.2.1(1) Form of Amended and Restated Bylaws of the Registrant, effective upon the completion of the IPO.
4.1(1) Reference is made to Exhibits 3.1 through 3.2
4.5(1) Specimen stock certificate.
10.1(1) Form of Indemnity Agreement to be entered into between the Registrant and its directors and
officers, with related schedule.
10.2(1) Registrant's 1995 Stock Option Plan, as amended (the "Option Plan").
10.3(1) Form of Incentive Stock Option under the Option Plan.
10.4(1) Form of Nonstatutory Stock Option under the Option Plan.
10.5(1) Registrant's Amended and Restated Executive Compensation Plan.
10.6(1) Registrant's Amended and Restated Executive Compensation Plan.
10.7(1) Lease, dated January 1, 1996, between GCH Systems, Inc. and the Registrant.
10.8(1) Summary of Leases, dated March 1, 1996, between Sun Corporation, GSS Corporation and the Registrant.
10.9(1) Voting Agreement, dated January 12, 1996, between the Registrant and certain persons named therein.
10.10(1) Investors' Rights Agreement among the Registrant and certain other persons named therein, dated as
of January 12, 1996.
10.11(1) Warrant issued to Synnex Information Technologies, Inc.
10.12(1) Warrant issued to Vobis Microcomputer AG.
10.13(1) Warrant issued to Venrock Associates.
10.14(1) Warrant issued to Venrock Associates II, L.P.
10.15(1) Warrant issued to Walden Capital Partners II, L.P.
10.16(1) Warrant issued to Walden Technology Ventures II, L.P.
10.17+(1) Technology Development and Support Agreement, dated June 28, 1996, between Registrant and Advanced
Micro Devices, Inc.
10.18(3) 1997 Compensation Plan.
10.19(2) Registration Rights Agreement, dated as of May 30, 1997, between the Company and Pierre A. Narath.
10.20(2) Escrow Agreement, dated as of May 30, 1997, by and among the Company, Pierre A. Narath and First
Trust of California, N.A.
10.21(2) Employment Agreement, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.22(2) Employee Proprietary and Inventions Agreement, dated as of May 30, 1997, between the Company and
Pierre A. Narath.
10.23(2) Noncompetition Agreement, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.24(2) General Release, dated as of May 30, 1997, between Pierre A. Narath and the Company.
10.25+(4) Memorandum of Understanding by and among Sun Corporation, Axis Corporation and the Company.
10.26(6) Commercial Lease, dated as of January 5, 1996 by and between Unicore Software, Inc. and 114 Realty Trust,
as amended on May 30, 1997 and September 1, 1997
10.27(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and George C. Huang.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.28(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Lyon T. Lin.
10.29(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Kevin J. Berry.
10.30(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Ann P. Shen.
10.31(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Maurice W. Bizzarri.
10.32(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and David J. Wippich.
10.33(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Reza Afghan.
10.34(6) Severance Benefits Agreement, dated December 1, 1997, between the Company and Laurant K. Gharda.
10.35(6) Promissory Note, dated March 1, 1998, issued by Pierre A. Narath to the Company.
10.36(6) Letter Agreement, dated March 1, 1998, between Pierre A. Narath and the Company.
10.37++(6)Master Original Equipment Manufacturer (OEM) Software License Agreement, dated September 10, 1997,
between the Company and Intel Corporation.
21(2) Subsidiaries of the Registrant.
21(5) Subsidiaries of the Registrant.
23.1(6) Consent of Independent Accountants.
24.2(6) Power of Attorney. See signature page.
27(6) Financial Data Schedule.
</TABLE>
_______________
+ The Securities and Exchange Commission has granted confidential treatment
for portions of this document.
++ The Company has requested confidential treatment for portions of this
document.
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-1, File No. 333-05107, filed on
June 3, 1996, as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K filed on June 16, 1997, as amended on
October 14, 1997.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form
10- Q filed on May 6, 1997.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10- Q filed on August 13, 1997.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10- Q filed on November 13, 1997.
(6) Filed herewith.
52
<PAGE>
EXHIBIT 10.26
FROM THE OFFICE OF
STANDARD FORM COMMERCIAL LEASE
1. PARTIES
(fill in) LESSOR, which expression shall include 114 Realty Trust
----------------
heirs, successors, and assigns where the context so admits,
does hereby lease to
LESSEE, which expression shall include Unicore Software,
----------------
Inc. successors, executors, administrators, and assigns
---
where the context so admits, and the LESSEE hereby leases
the following described premises:
2 units on 4th floor and 1 unit on 3rd floor at 1538
----------------------------------------------------
Turnpike St., N. Andover, MA, 01845
-----------------------------------
2. PREMISES
(fill in and
include, if
applicable,
suite number,
floor number,
and square
feet)
together with the right to use in common, with others
entitled thereto, the hallways, stairways, and elevators,
necessary for access to said leased premises, and lavatories
nearest thereto.
3. TERM
(fill in) The term of this lease shall be for 5 years commencing on
--------
1/1/96 and ending on 12/31/00
------ --------
4. RENT
(fill in) The LESSEE shall pay to the LESSOR fixed rent at
the rate of Year 1 - $39,000.00; Year 2 - $60,000.00; Year
----------------------------------------------
3 -$72,000.00; Year 4 - $78,000.00; Year 5 - $78,000.00
-------------------------------------------------------
dollars per year, payable in advance in monthly
installments of,
5. SECURITY
DEPOSIT
(fill in) Upon the execution of this lease, the LESSEE shall pay to
the LESSOR the amount of N/A dollars, which
-------------------
shall be held as a security for the LESSEE's performance as
herein provided and refunded to the LESSEE at the end of
this lease, without interest, subject to the LESSEE's
satisfactory compliance with the conditions hereof.
6. RENT
ADJUSTMENT If in any tax year commencing with the fiscal year , the
real estate taxes on the land and buildings, of which the
leased premises are a part, are in excess of the amount of
the real estate taxes thereon for the fiscal year
(hereinafter called the "Base Year"), LESSEE will pay to
LESSOR as additional rent hereunder, when and as designated
A. TAX by notice in writing by LESSOR, per cent of such excess that
ESCALATION may occur in each year of the term of this lease or any
(fill in or extension or renewal thereof and proportionately for any
delete) part of a fiscal year. If the LESSOR obtains an abatement
of any such excess real estate tax, a proportionate share of
such abatement, less the reasonable fees and costs incurred
in obtaining the same, if any, shall be refunded to the
LESSEE.
B. OPERATING The LESSEE shall pay to the LESSOR as additional rent
COST hereunder when and as designated by notice in writing by
LESSOR, per cent of any increase in
<PAGE>
ESCALATION operating expenses over those incurred during the calendar
(fill in year
or delete) Operating expenses are defined for the purposes of this
agreement as: Any cost increase from operations in 1996
-----------------------------------------
prorated.
--------
This increase shall be prorated should this lease be in
effect with respect to only a portion of any calendar year.
C. CONSUMER INTENTIONALLY OMITTED
PRICE ---------------------
ESCALATION
(fill in or delete)
7. UTILITIES The LESSEE shall pay, as they become due, all bills for
electricity and other utilities (whether they are used for
furnishing heat or other purposes) that are furnished to the
leased premises and presently separately metered, and all
bills for fuel furnished to a separate tank servicing the
* delete "air leased premises exclusively. The LESSOR agrees to provide
conditioning" all other utility service and to furnish reasonably hot and
if not cold water and reasonable heat and air conditioning* (except
applicable to the extent that the same are furnished through separately
metered utilities or separate fuel tanks as set forth above)
to the leased premises, the hallways, stairways, elevators,.
and lavatories during normal business hours on regular
business days of the heating and air conditioning* seasons
of each year, to furnish elevator service and to light
passageways and stairways during business hours, and to
furnish such cleaning service as is customary in similar
buildings in said city or town, all subject to interruption
due to any accident, to the making of repairs, alterations,
or improvements to labor difficulties, to trouble in
obtaining fuel, electricity, service, or supplies from the
sources from which they are usually obtained for said
building, or to any cause beyond the LESSOR's control.
<PAGE>
LESSOR shall have no obligation to provide utilities or
equipment other than the utilities and equipment within the
premises as of the commencement date of this lease. In the
event LESSEE requires additional utilities or equipment, the
installation and maintenance thereof shall be the LESSEE's
sole obligation, provided that such installation shall be
subject to the written consent of the LESSOR.
8. USE OF The LESSEE shall use the leased premises only for the
LEASED purpose of computer software, development and sales.
PREMISES ----------------------------------------
(fill in)
9. COMPLIANCE The LESSEE acknowledges that no trade or occupation shall be
WITH LAWS conducted in the leased premises or use made thereof which
will be unlawful, improper, noisy or offensive, or contrary
to any law or any municipal by-law or ordinance in force in
the city or town in which the premises are situated.
10. FIRE The LESSEE shall not permit any use of the leased premises
INSURANCE which will make voidable any insurance on the property of
which the leased premises are a part, or on the contents of
said property or which shall be contrary to any law or
regulation from time to time established by the New England
Fire Insurance Rating Association, or any similar body
succeeding to its powers. The LESSEE shall on demand
reimburse the LESSOR, and all other tenants, all extra
insurance premiums caused by the LESSEE's use of the
premises.
11. MAINTENANCE The LESSEE agrees to maintain the leased premises in good
condition, damage by fire and other casualty only excepted,
and whenever necessary, to replace plate glass and other
glass therein, acknowledging that the leased premises are
A. LESSEE'S now in good order and the glass whole. The LESSEE shall not
OBLIGATIONS permit the leased premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste. LESSEE shall
obtain written consent of LESSOR before erecting any sign on
the premises.
B. LESSOR'S The LESSOR agrees to maintain the structure of the building
OBLIGATIONS of which the leased premises are a part in the same
condition as it is at the commencement of the term or as it
may be put in during the term of this lease, reasonable wear
and tear, damage by fire and other casualty only excepted,
unless such maintenance is required because of the LESSEE or
those for whose conduct the LESSEE is legally responsible.
12. ALTERATIONS-- The LESSEE shall not make structural alterations or
ADDITIONS additions to the leased premises, but may make non-
structural alterations provided the LESSOR consents thereto
in writing, which consent shall not be unreasonably withheld
or delayed. All such allowed alterations shall be at
LESSEE's expense and shall be in quality at least equal to
the present construction. LESSEE shall not permit any
mechanics' liens, or similar liens, to remain upon the
leased premises for labor and material furnished to LESSEE
or claimed to have been furnished to LESSEE in connection
with work of any character performed or claimed to have been
performed at the direction of LESSEE and shall cause any
such lien to be released of record forthwith without cost to
LESSOR. Any alterations or improvements made by the LESSEE
shall become the property of the LESSOR at the termination
of occupancy as provided herein.
13. ASSIGNMENT-- The LESSEE shall not assign or sublet the whole or any part
SUBLEASING of the leased premises without LESSOR's prior written
consent. Notwithstanding such consent, LESSEE shall remain
liable to LESSOR for the payment of all rent and for the
full performance of the covenants and conditions of this
lease.
14. SUBORDINATION This lease shall be subject and subordinate to any and all
mortgages, deeds of trust and other instruments in the
nature of a mortgage, now or at any time hereafter, a lien
or liens on the property of which the leased premises are a
part
<PAGE>
and the LESSEE shall, when requested, promptly execute and
deliver such written instruments as shall be necessary to
show the subordination of this lease to said mortgages,
deeds of trust or other such instruments in the nature of a
mortgage.
15. LESSOR'S The LESSOR or agents of the LESSOR may, at reasonable times,
ACCESS enter to view the leased premises and may remove placards
and signs not approved and affixed as herein provided, and
make repairs and alterations as LESSOR should elect to do
and may show the leased premises to others, and at any time
within three (3) months before the expiration of the term,
may affix to any suitable part of the leased premises a
notice for letting or selling the leased premises or
property of which the leased premises are a part and keep
the same so affixed without hindrance or molestation.
16. INDEMNIFICATION The LESSEE shall save the LESSOR harmless from all loss and
AND LIABILITY damage occasioned by anything occurring on the leased
(fill in) premises unless caused by the negligence or misconduct of
the LESSOR, and from all loss and damage wherever occurring
occasioned by any omission, fault, neglect or other
misconduct of the LESSEE. The removal of snow and ice from
the sidewalks bordering upon the leased premises shall be
responsibility.
17. LESSEE'S The LESSEE shall maintain with respect to the leased
LIABILITY premises and the property of which the leased premises are a
INSURANCE part comprehensive public liability insurance in the amount
(fill in) of $300,000.00 with property damage insurance in
------------------
limits of in responsible companies qualified to do
business in Massachusetts and in good standing therein
insuring the LESSOR as well as LESSEE against injury to
persons or damage to property as provided. The LESSEE shall
deposit with the LESSOR certificates for such insurance at
or prior to the commencement of the term, and thereafter
within thirty (30) days prior to the expiration of any such
policies. All such insurance certificates shall provide that
such policies shall not be canceled without at least ten
(10) days prior written notice to each assured named
therein.
18. FIRE, Should a substantial portion of the leased premises, or of
CASUALTY - the property of which they are a part, be substantially
EMINENT damaged by fire or other casualty, or be taken by eminent
DOMAIN domain, the LESSOR may elect to terminate this lease. When
such fire, casualty, or taking renders the leased premises
substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and the
LESSEE may elect to terminate this lease if:
(a) The LESSOR fails to give written notice within
thirty (30) days of intention to restore leased
premises, or
(b) The LESSOR fails to restore the leased premises to a
condition substantially suitable for their intended use
within ninety (90) days of said fire, casualty or
taking.
The LESSOR reserves. and the LESSEE grants to the LESSOR,
all rights which the LESSEE may have for damages or injury
to the leased premises for any taking by eminent domain,
except for damage to the LESSEE's fixtures, property, or
equipment.
19. DEFAULT In the event that:
AND (a) The LESSEE shall default in the payment of any
BANKRUPTCY installment of rent or other sum herein specified and
(fill in) such default shall continue for ten (10) days after
written notice thereof; or
(b) The LESSEE shall default in the observance or
performance of any other of the LESSEE's covenants,
agreements, or obligations hereunder and such default
shall not be corrected within thirty (30) days after
written notice thereof; or
<PAGE>
(c) The LESSEE shall be declared bankrupt or insolvent
according to law, or, if any assignment shall be made of
LESSEE's property for the benefit of creditors,
then the LESSOR shall have the right thereafter, while such
default continues, to re-enter and take complete possession
of the leased premises. to declare the term of this lease
ended, and remove the LESSEE's effects, without prejudice to
any remedies which might be otherwise used for arrears of
rent or other default. The LESSEE shall indemnify the LESSOR
against all loss of rent and other payments which the LESSOR
may incur by reason of such termination during the residue
of the term. If the LESSEE shall default, after reasonable
notice thereof, in the observance or performance of any
conditions or covenants on LESSEE's part to be observed or
performed under or by virtue of any of the provisions in any
article of this lease, the LESSOR, without being under any
obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the
expense of the LESSEE. If the LESSOR makes any expenditures
or incurs any obligations for the payment of money in
connection therewith, including but not limited to,
reasonable attorney's fees in instituting, prosecuting or
defending any action or proceeding, such sums paid or
obligations insured, with interest at the rate of per cent
per annum and costs, shall be paid to the LESSOR by the
LESSEE as additional rent.
20. NOTICE Any notice from the LESSOR to the LESSEE relating to the
(fill in) leased premises or to the occupancy thereof, shall be deemed
duly served, if left at the leased premises addressed to the
LESSEE, or if mailed to the leased premises, registered or
certified mail, return receipt requested, postage prepaid,
addressed to the LESSEE. Any notice from the LESSEE to the
LESSOR relating to the leased premises or to the occupancy
thereof, shall be deemed duly served, if mailed to the
LESSOR by registered or certified mail, return receipt
requested, postage prepaid, addressed to the LESSOR at such
address as the LESSOR may from time to time advise in
writing. All rent notices shall be paid and sent to the
LESSOR at
21. SURRENDER The LESSEE shall at the expiration or other termination of
this lease remove all LESSEE's goods and effects from the
leased premises, (including, without hereby limiting the
generality of the foregoing, all signs and lettering affixed
or painted by the LESSEE, either inside or outside the
leased premises). LESSEE shall deliver to the LESSOR the
leased premises and all keys, locks thereto, and other
fixtures connected therewith and all alterations and
additions made to or upon the leased premises, in good
condition, damage by fire or other casualty only excepted.
In the event of the LESSEE's failure to remove any of
LESSEE's property from the premises, LESSOR is hereby
authorized, without liability to LESSEE for loss or damage
thereto, and at the sole risk of LESSEE, to remove and store
any of the property at LESSEE's expense, or to retain same
under LESSOR's control or to sell at public or private sale,
without notice any or all of the property not so removed and
to apply the net proceeds of such sale to the payment of any
sum due hereunder, or to destroy such property.
22. BROKERAGE INTENTIONALLY OMITTED
---------------------
(fill in or delete)
23. OTHER It is also understood and agreed that Unicore Software,
PROVISIONS -----------------
Inc. has option to renew lease for another five year term
----------------------------------------------------------
at no more than a 50% increase in rent.
--------------------------------------
IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this
5th day of January , 1996.
- ----------- -------------- --
<PAGE>
Unicore Software, Inc. 114 Realty Trust
- -------------------------------- ----------------------------------
LESSEE LESSOR
- -------------------------------- ----------------------------------
by Pierre Narath, President by Pierre Narath, Trustee
- --------------------------------
BROKER(S)
<PAGE>
AMENDMENT TO COMMERCIAL LEASE
THIS AMENDMENT is made this 30th day of May , 1997 (the
-------- ----------------
"Amendment"), by and between UNICORE SOFTWARE, INC., a Massachusetts corporation
with a principal place of business of 1538 Turnpike Street, North Andover,
Massachusetts ("Lessee") and Pierre A. Narath, Trustee of 114 REALTY TRUST
("Lessor").
WHEREAS, Lessor and Lessee are parties to a certain Commercial Lease dated
January 5, 1996 ("Lease"), for the property known and identified as 1538
Turnpike Street, North Andover, Massachusetts, such leasehold interest
consisting of two (2) units on the fourth (4th) floor and one (1) unit on the
third (3rd) floor (the "Premises").
WHEREAS, the parties to the Lease wish to amend the terms, conditions and
provisions of said Lease.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and the mutual modification of rights, the parties hereto
agree as follows:
1. Ratification and Confirmation. The Lease is hereby ratified and
-----------------------------
confirmed, except as amended, as set forth in this Amendment.
2. Increase in Taxes and Operating Expense. Notwithstanding anything to
---------------------------------------
the contrary contained therein, Paragraphs 6(a) and 6(b) of the Lease are hereby
amended, such that the Base Year (as such term is defined in the Lease) shall be
1996, and Lessee shall pay to Lessor, as additional rent, when and as designated
by notice in writing by Lessor, one hundred (100%) percent of any tax escalation
or any increase in operating expenses that may occur in each year of the term of
the Lease, or any extension or renewal thereof, and proportionally for any part
of a fiscal year for taxes and any part of a calendar year for operating
expenses.
3. Use of Premises. Paragraph 8 of the Lease is hereby ratified,
---------------
confirmed and amended as follows: The Lessor shall use the Leased Premises only
for the purposes of operating a computer software development and sales
business, and to conduct all business operations ancillary or related thereto.
Notwithstanding anything to the contrary contained herein, in the event that the
Lessee wishes to sublet or assign its leasehold interest in the Premises, and
such sublessee's or assignee's business operations do not conform with such
stated and allowed use of the Premises, Lessor may, at its option, grant its
consent to such alternate use of the Premises, in accordance with the terms of
Paragraph 13 of the Lease, as amended. Lessor's consent shall not be
unreasonably withheld or delayed.
4. Fire Insurance. Notwithstanding anything to the contrary contained in
--------------
Paragraph 10 of the Lease, Lessor, at its sole cost and expense, shall cause
fire and casualty insurance to be maintained on the Premises in such amounts as
may be determined by Lessor.
<PAGE>
5. Assignment and Subletting. Notwithstanding anything to the contrary
-------------------------
contained in Paragraph 13 of the Lease, the Lessor consents to the merger of
near or even date by and between Lessee and Award Acquisition Sub Corp., a
wholly owned subsidiary of Award Software International, Inc. This Amendment
shall in no way be deemed to affect Lessee's requirement to obtain Lessor's
consent to any assignment or sublet of its leasehold interest in the Premises,
not otherwise provided for in this Paragraph, nor shall it affect Lessee's full
responsibility to Lessor for the payment of all rent and for the full
performance of the covenants and conditions of the Lease.
6. Lessee's Insurance. Notwithstanding anything to the contrary contained
--------------------
in Paragraph 17 of the Lease, Lessee shall maintain with respect to the Premises
and the property which the Premises are a part, comprehensive public liability
insurance in the amount of One Million and 00/100 ($1,000,000.00) Dollars for
injury or death to one person and Two Million and 00/100 ($2,000,000.00) Dollars
for injury or death to more than one person in the same accident with property
damage insurance in limits of Five Hundred Thousand and 00/100 ($500,000.00)
Dollars.
7. Option To Extend.
----------------
a. Option. So long as Lessee (or permitted successors or assigns) is
------
not in default at or after the time of exercise of the option to extend as
set forth herein, and is still the Lessee on the date of exercise, Lessee
may extend this Lease for one (1) additional five (5) year term ("Extended
Term"). In order to exercise said option, Lessee shall, no later than six
(6) months prior to the expiration of the initial term, give Lessor written
notice to its intention to so extend. Rent for the Extended Term shall be
as hereinafter provided in Subparagraph (b) below.
b. Rent During Extended Term. Rent shall be payable during the Extended
-------------------------
Term in the same manner as during the initial term, except that for such
Extended Term, the annual (monthly) rate at which base rent is payable
shall be as follows:
Year Base Annual (Monthly) Rent
---- --------------------------
6 $85,800.00 ($7,150.00)
7 $93,600.00 ($7,800.00)
8 $101,400.00 ($8,450.00)
9 $109,200.00 ($9,100.00)
10 $117,000.00 ($9,750.00)
<PAGE>
c. Assignment of Option. Lessee may assign its option to extend the
--------------------
term of the Lease, as provided in Subparagraph (a), provided that on or
before such time Lessee notifies Lessor of its exercise of its option to
extend, Lessee requests from, and receives, Lessor's consent to such
assignment. Lessor's consent to such assignment shall not be unreasonably
withheld or delayed. In the event that such consent is granted, Lessee
shall remain liable to Lessor for the payment of all rent and for the full
performance of the covenants and conditio ns under the Lease, as extended.
IN WITNESS WHEREOF, the parties hereunto have set their hands and seals
this 30th day of May , 1997.
----- ----------------
LESSEE:
UNICORE SOFTWARE, INC.
By:
----------------------------------
Pierre A. Narath, President
LESSEE:
114 REALTY TRUST
By:
----------------------------------
Pierre A. Narath, Trustee
<PAGE>
2nd AMENDMENT TO COMMERCIAL LEASE
THIS 2nd AMENDMENT to COMMERCIAL LEASE is made as of the first 1st day of
September, 1997 (the "Amendment"), by and between UNICORE SOFTWARE, INC., a
Massachusetts corporation with a principal place of business of 1538 Turnpike
Street, North Andover, Massachusetts ("Lessee") and Pierre A. Narath, Trustee of
114 REALTY TRUST ("Lessor").
WHEREAS, Lessor and Lessee are parties to a certain Commercial Lease dated
January 5, 1996 ("Lease"), for the property known and identified as 1538
Turnpike Street, North Andover, Massachusetts, such leasehold interest
consisting of two (2) units on the fourth (4th) floor and one (1) unit on the
third (3rd) floor (the "Original Premises").
WHEREAS, Lessee has requested that Lessor rent additional space to the
Lessee consisting of the other third (3rd) floor unit, which Lessor is willing
to do on the terms and conditions herein appearing:
WHEREAS, the parties to the Lease enter into that certain Amendment to
Commercial Lease dated May 30, 1997 (the "First Amendment");
WHEREAS, the parties to the Lease wish to further amend the terms,
conditions and provisions of said Lease so as to add the additional third (3rd)
floor unit to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and the mutual modification of rights, the parties hereto
agree as follows:
1. Ratification and Confirmation. The Lease as affected by the First
-----------------------------
Amendment is hereby ratified and confirmed, except as amended as set forth in
this Amendment.
2. Expansion of Leasehold Premises.
-------------------------------
Lessor and Lessee hereby agree that additional third (3rd) floor unit shall
be added to the Original Premises such that the total leasehold premises shall
now consist of two units on the fourth (4th) floor and two units on the third
(3rd) floor, which taken together are sometimes hereinafter referred to as the
"Amended Premises".
3. Increase in Rent. In consideration of Lessor making available to
----------------
Lessee the additional third (3rd) floor unit, the parties agree that Paragraph 4
of the Lease is hereby amended to read as follows:
The Lessee shall pay the Lessor rent at the rate set forth below:
<PAGE>
<TABLE>
<CAPTION>
Annual Amount Monthly Amount
------------- --------------
<S> <C> <C>
(in advance, on the first of
each month)
September 1 - December 31, 1997 $ 26,666.66 $6,666.66
January 1 - December 31, 1998 $ 96,000.00 $8,000.00
January 1 - December 31, 1999 $104,000.00 $8,666.66
January 1 - December 31, 2000 $104,000.00 $8,666.66
</TABLE>
3. Rent During Extended Term. Lessor and Lessee agree that Paragraph 7(b)
-------------------------
of the First Amendment is hereby amended to read as follows:
Year Base Annual (Monthly) Rent
---- --------------------------
6 (1-1 to 12-31-01) $114,400.00 ($9,533.33)
7 (1-1 to 12-31-02) $124,800.00 ($10,400.00)
8 (1-1 to 12-31-03) $135,200.00 ($11,266.66)
9 (1-1 to 12-31-04) $145,600.00 ($12,133.33)
10 (1-1 to 12-31-05) $156,000.00 ($13,000.00)
IN WITNESS WHEREOF, the parties hereunto have set their hands and seals as
of the 1st day of September, 1997.
LESSEE:
UNICORE SOFTWARE, INC.
By: ________________________
Pierre A. Narath, President
LESSOR:
114 REALTY TRUST
By: ________________________
Pierre A. Narath, Trustee
-2-
<PAGE>
EXHIBIT 10.27
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between GEORGE C. HUANG ("EXECUTIVE") and
AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to three hundred percent (300%) of the sum of Base Pay plus Deemed Bonus,
subject to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the eighteen
(18) month period following the date of Executive's Covered Termination;
provided, however, that payment of such COBRA premiums by the Company shall
cease upon Executive commencing employment with a new employer which provides
comparable benefits to Executive and Executive's covered dependents. Executive
and Executive's covered dependents shall be entitled to an additional period of
health care coverage of eighteen (18) months beyond the COBRA continuation
coverage period at no cost to Executive; provided, however, that payment of the
necessary premiums by the Company shall cease upon Executive commencing
employment with a new employer which provides comparable benefits to Executive
and Executive's covered dependents, and provided further, however, that if such
additional health care coverage cannot be provided under the Company's health
plan covering active employees, it shall be provided under such conversion or
other policy as may be available to Executive, and the Company shall pay all
premiums associated with such policy for such additional period of coverage.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
2
<PAGE>
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
3
<PAGE>
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
(A) an intentional act which materially injures the Company;
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position,
status or circumstances of employment; provided, however, that a mere
change in Executive's title or reporting relationship shall not
constitute a Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities
of the Company, in which Executive is participating (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect Executive's participation in or
reduce Executive's benefits under any Benefit Plans or deprive
Executive of any fringe benefit then enjoyed by Executive; provided,
however, that Executive's termination shall not be deemed a
Constructive Termination if the Company offers a range of benefit
plans and programs which, taken as a whole, are comparable to the
Benefit Plans, as determined in good faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement
or any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
4
<PAGE>
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered Termination occurs if one hundred percent (100%) of target
performance had occurred, whether or not such bonus at such level of performance
has actually been paid to Executive.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
Article VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
5
<PAGE>
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. GEORGE C. HUANG
By:________________________________ __________________________________
Name:______________________________
Title:_____________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
Exhibit A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information and
inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. GEORGE C. HUANG
By:__________________________________ ______________________________________
Title:_______________________________ Date:_________________________________
<PAGE>
EXHIBIT 10.28
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between LYON T. LIN ("EXECUTIVE") and AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY"). This
Agreement is intended to provide Executive with the compensation and benefits
described herein upon the occurrence of specific events. Certain capitalized
terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
Article II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to one hundred percent (100%) of the sum of Base Pay plus Deemed Bonus,
subject to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the twelve
(12) month period following the date of Executive's Covered Termination;
provided, however, that payment of such COBRA premiums by the Company shall
cease upon Executive commencing employment with a new employer which provides
comparable benefits to Executive and Executive's covered dependents. Nothing in
this Section 2.4 is intended to limit the availability of COBRA continuation
coverage to Executive (subject to Executive paying all associated premiums and
costs) beyond the twelve (12) month period following the date of Executive's
Covered Termination for the remainder of the COBRA continuation of coverage
period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such
2
<PAGE>
Release within the subsequent seven (7)-day period, no benefits shall be
payable under this Agreement, and this Agreement shall be null and void.
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
3
<PAGE>
(A) an intentional act which materially injures the Company;
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a
Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred
to as "Benefit Plans"), or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce
Executive's benefits under any Benefit Plans or deprive Executive of any
fringe benefit then enjoyed by Executive; provided, however, that
Executive's termination shall not be deemed a Constructive Termination
if the Company offers a range of benefit plans and programs which, taken
as a whole, are comparable to the Benefit Plans, as determined in good
faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement or
any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered
4
<PAGE>
Termination occurs if one hundred percent (100%) of target performance had
occurred, whether or not such bonus at such level of performance has actually
been paid to Executive, plus one hundred percent (100%) of sales commissions
for such fiscal year.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
5
<PAGE>
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. LYON T. LIN
By:__________________________________ ___________________________________
Name:________________________________
Title:_______________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. LYON T. LIN
By:__________________________________ __________________________________
Title:_______________________________ Date:_____________________________
8
<PAGE>
EXHIBIT 10.29
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between KEVIN J. BERRY ("EXECUTIVE") and
AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT BY THE COMPANY
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to
1
<PAGE>
one hundred percent (100%) of the sum of Base Pay plus Deemed Bonus, subject
to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the twelve
(12) month period following the date of Executive's Covered Termination;
provided, however, that payment of such COBRA premiums by the Company shall
cease upon Executive commencing employment with a new employer which provides
comparable benefits to Executive and Executive's covered dependents. Nothing in
this Section 2.4 is intended to limit the availability of COBRA continuation
coverage to Executive (subject to Executive paying all associated premiums and
costs) beyond the twelve (12) month period following the date of Executive's
Covered Termination for the remainder of the COBRA continuation of coverage
period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
2
<PAGE>
ARTICLE IV
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
DEFINITIONS
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
(A) an intentional act which materially injures the Company;
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
3
<PAGE>
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a
Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred
to as "Benefit Plans"), or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce
Executive's benefits under any Benefit Plans or deprive Executive of any
fringe benefit then enjoyed by Executive; provided, however, that
Executive's termination shall not be deemed a Constructive Termination
if the Company offers a range of benefit plans and programs which, taken
as a whole, are comparable to the Benefit Plans, as determined in good
faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement or
any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered Termination occurs if one hundred percent (100%) of target
performance had occurred, whether or not such bonus at such level of performance
has actually been paid to Executive.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of
4
<PAGE>
Executive's death or disability will not be deemed to be an Involuntary
Termination Without Cause.
ARTICLE VI
GENERAL PROVISIONS
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
5
<PAGE>
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. KEVIN J. BERRY
By:___________________________________ ___________________________________
Title:________________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
Exhibit A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information and
inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. KEVIN J. BERRY
By:___________________________________ __________________________________
Title:________________________________ Date:_____________________________
8
<PAGE>
EXHIBIT 10.30
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between ANN P. SHEN ("EXECUTIVE") and AWARD
SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY"). This
Agreement is intended to provide Executive with the compensation and benefits
described herein upon the occurrence of specific events. Certain capitalized
terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to fifty percent (50%) of the sum of Base Pay plus Deemed Bonus, subject
to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the six (6)
month period following the date of Executive's Covered Termination; provided,
however, that payment of such COBRA premiums by the Company shall cease upon
Executive commencing employment with a new employer which provides comparable
benefits to Executive and Executive's covered dependents. Nothing in this
Section 2.4 is intended to limit the availability of COBRA continuation coverage
to Executive (subject to Executive paying all associated premiums and costs)
beyond the six (6) month period following the date of Executive's Covered
Termination for the remainder of the COBRA continuation of coverage period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such
2
<PAGE>
Release within the subsequent seven (7)-day period, no benefits shall be
payable under this Agreement, and this Agreement shall be null and void.
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
3
<PAGE>
(A) an intentional act which materially injures the Company;
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a
Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred
to as "Benefit Plans"), or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce
Executive's benefits under any Benefit Plans or deprive Executive of any
fringe benefit then enjoyed by Executive; provided, however, that
Executive's termination shall not be deemed a Constructive Termination
if the Company offers a range of benefit plans and programs which, taken
as a whole, are comparable to the Benefit Plans, as determined in good
faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement or
any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered
4
<PAGE>
Termination occurs if one hundred percent (100%) of target performance had
occurred, whether or not such bonus at such level of performance has actually
been paid to Executive, plus one hundred percent (100%) of sales commissions
for such fiscal year.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
5
<PAGE>
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. ANN P. SHEN
By:________________________________ __________________________________
Name:______________________________
Title:_____________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. ANN P. SHEN
By:_________________________________ __________________________________
Title:______________________________ Date:_____________________________
8
<PAGE>
EXHIBIT 10.31
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between MAURICE W. BIZZARRI ("EXECUTIVE")
and AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the
"COMPANY"). This Agreement is intended to provide Executive with the
compensation and benefits described herein upon the occurrence of specific
events. Certain capitalized terms used in this Agreement are defined in Article
V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to fifty percent (50%) of the sum of Base Pay, subject to applicable tax
withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the six (6)
month period following the date of Executive's Covered Termination; provided,
however, that payment of such COBRA premiums by the Company shall cease upon
Executive commencing employment with a new employer which provides comparable
benefits to Executive and Executive's covered dependents. Nothing in this
Section 2.4 is intended to limit the availability of COBRA continuation coverage
to Executive (subject to Executive paying all associated premiums and costs)
beyond the six (6) month period following the date of Executive's Covered
Termination for the remainder of the COBRA continuation of coverage period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
2
<PAGE>
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
(A) an intentional act which materially injures the Company;
3
<PAGE>
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position,
status or circumstances of employment; provided, however, that a mere
change in Executive's title or reporting relationship shall not
constitute a Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities
of the Company, in which Executive is participating (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect Executive's participation in or
reduce Executive's benefits under any Benefit Plans or deprive
Executive of any fringe benefit then enjoyed by Executive; provided,
however, that Executive's termination shall not be deemed a
Constructive Termination if the Company offers a range of benefit
plans and programs which, taken as a whole, are comparable to the
Benefit Plans, as determined in good faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement
or any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
4
<PAGE>
ARTICLE VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive
5
<PAGE>
embodiment of their agreement with regard to this subject matter, wholly
superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. MAURICE W. BIZZARRI
By:_______________________________ ____________________________________
Name:_____________________________ ____________________________________
Title:____________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. MAURICE W. BIZZARRI
By:____________________________________
Title:_________________________________ Date:_______________________________
<PAGE>
EXHIBIT 10.32
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between DAVID J. WIPPICH ("EXECUTIVE") and
AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
EMPLOYMENT BY THE COMPANY
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
SEVERANCE BENEFITS
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to fifty percent (50%) of the sum of Base Pay plus Deemed Bonus, subject
to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the six (6)
month period following the date of Executive's Covered Termination; provided,
however, that payment of such COBRA premiums by the Company shall cease upon
Executive commencing employment with a new employer which provides comparable
benefits to Executive and Executive's covered dependents. Nothing in this
Section 2.4 is intended to limit the availability of COBRA continuation coverage
to Executive (subject to Executive paying all associated premiums and costs)
beyond the six (6) month period following the date of Executive's Covered
Termination for the remainder of the COBRA continuation of coverage period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
2
<PAGE>
ARTICLE IV
OTHER RIGHTS AND BENEFITS
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
DEFINITIONS
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
(A) an intentional act which materially injures the Company;
3
<PAGE>
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position,
status or circumstances of employment; provided, however, that a mere
change in Executive's title or reporting relationship shall not
constitute a Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities
of the Company, in which Executive is participating (hereinafter
referred to as "Benefit Plans"), or the taking of any action by the
Company which would adversely affect Executive's participation in or
reduce Executive's benefits under any Benefit Plans or deprive
Executive of any fringe benefit then enjoyed by Executive; provided,
however, that Executive's termination shall not be deemed a
Constructive Termination if the Company offers a range of benefit
plans and programs which, taken as a whole, are comparable to the
Benefit Plans, as determined in good faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement
or any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered Termination occurs if one hundred percent (100%) of target
performance had occurred, whether
4
<PAGE>
or not such bonus at such level of performance has actually been paid to
Executive, plus one hundred percent (100%) of sales commissions for such
fiscal year.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE VI
GENERAL PROVISIONS
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other
5
<PAGE>
party seeks to compel arbitration by court order, if such other party
prevails, it shall be entitled to recover reasonable attorneys fees, costs and
necessary disbursements. Pursuant to California Civil Code Section 1717, each
party warrants that it was represented by counsel in the negotiation and
execution of this Agreement, including the attorneys' fees provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. DAVID J. WIPPICH
By:_______________________________ ____________________________________
Name:_____________________________
Title:____________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. DAVID J. WIPPICH
By:_________________________________ _____________________________________
Title:______________________________ Date:________________________________
<PAGE>
EXHIBIT 10.33
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between M. REZA AFGHAN ("EXECUTIVE") and
AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to fifty percent (50%) of the sum of Base Pay plus Deemed Bonus, subject
to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the six (6)
month period following the date of Executive's Covered Termination; provided,
however, that payment of such COBRA premiums by the Company shall cease upon
Executive commencing employment with a new employer which provides comparable
benefits to Executive and Executive's covered dependents. Nothing in this
Section 2.4 is intended to limit the availability of COBRA continuation coverage
to Executive (subject to Executive paying all associated premiums and costs)
beyond the six (6) month period following the date of Executive's Covered
Termination for the remainder of the COBRA continuation of coverage period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such
2
<PAGE>
Release within the subsequent seven (7)-day period, no benefits shall be
payable under this Agreement, and this Agreement shall be null and void.
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
3
<PAGE>
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position,
status or circumstances of employment; provided, however, that a mere
change in Executive's title or reporting relationship shall not
constitute a Constructive Termination;
(b) a reduction by the Company in Executive's Base Salary;
(c) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred
to as "Benefit Plans"), or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce
Executive's benefits under any Benefit Plans or deprive Executive of any
fringe benefit then enjoyed by Executive; provided, however, that
Executive's termination shall not be deemed a Constructive Termination
if the Company offers a range of benefit plans and programs which, taken
as a whole, are comparable to the Benefit Plans, as determined in good
faith by the Executive;
(d) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(e) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(f) any failure by the Company to obtain the assumption of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment by any successor or assign of the Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered
4
<PAGE>
Termination occurs if one hundred percent (100%) of target performance had
occurred, whether or not such bonus at such level of performance has actually
been paid to Executive, plus one hundred percent (100%) of sales commissions
for such fiscal year.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
5
<PAGE>
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover reasonable attorneys
fees, costs and necessary disbursements. Pursuant to California Civil Code
Section 1717, each party warrants that it was represented by counsel in the
negotiation and execution of this Agreement, including the attorneys' fees
provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. M. REZA AFGHAN
By:______________________________ _________________________________
Name:____________________________
Title:___________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. M. REZA AFGHAN
By:_______________________________ __________________________________
Title:____________________________ Date:_____________________________
8
<PAGE>
EXHIBIT 10.34
EXECUTIVE
SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered
into this 1st day of December, 1997, between LAURENT K. GHARDA ("EXECUTIVE") and
AWARD SOFTWARE INTERNATIONAL, INC., a California corporation (the "COMPANY").
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article V.
The Company and Executive hereby agree as follows:
ARTICLE I
Employment by the Company
1.1 Executive is currently employed by the Company.
1.2 The Company and Executive wish to set forth the compensation and benefits
which Executive shall be entitled to receive in the event Executive's employment
with the Company is terminated under the circumstances described herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall remain in full force and effect so long as Executive
is employed by the Company; provided, however, that Executive's rights to
payments and benefits under Article II shall continue until the Company's
obligation to provide such payments and benefits is satisfied.
1.5 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE II
Severance Benefits
2.1 SEVERANCE BENEFITS. If Executive's employment terminates due to an
Involuntary Termination Without Cause or a Constructive Termination at any time
after the date of execution of this Agreement, such termination of employment
will be deemed a Covered Termination. A Covered Termination entitles Executive
to receive the following benefits set forth in Sections 2.2 through 2.4.
1
<PAGE>
2.2 LUMP SUM CASH PAYMENT. Within thirty (30) days following the date of
Executive's Covered Termination, Executive shall receive a lump sum cash payment
equal to fifty percent (50%) of the sum of Base Pay plus Deemed Bonus, subject
to applicable tax withholding.
2.3 ACCELERATION OF STOCK OPTION VESTING. Notwithstanding the language in
Executive's option agreement(s) or any other language to the contrary, the
vesting of Executive's stock option(s) shall accelerate and immediately become
vested and exercisable with respect to all of those option shares which
otherwise would not be vested and exercisable on the date of Executive's Covered
Termination.
2.4 COBRA CONTINUATION. Executive and Executive's covered dependents will be
eligible to continue their health care benefit coverage as permitted by COBRA
(Internal Revenue Code Section 4980B) at no cost to Executive for the six (6)
month period following the date of Executive's Covered Termination; provided,
however, that payment of such COBRA premiums by the Company shall cease upon
Executive commencing employment with a new employer which provides comparable
benefits to Executive and Executive's covered dependents. Nothing in this
Section 2.4 is intended to limit the availability of COBRA continuation coverage
to Executive (subject to Executive paying all associated premiums and costs)
beyond the six (6) month period following the date of Executive's Covered
Termination for the remainder of the COBRA continuation of coverage period.
2.5 MITIGATION. Except as otherwise specifically provided herein, Executive
shall not be required to mitigate damages or the amount of any payment provided
under this Agreement by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or by any retirement benefits received by Executive after the date of the
Covered Termination, or otherwise.
ARTICLE III
Limitations And Conditions On Benefits
3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder.
3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the
occurrence of a Covered Termination, and prior to the receipt of any benefits
under this Agreement on account of such Covered Termination, Executive shall
execute the Employee Agreement and Release (the "Release") in the form attached
hereto as Exhibit A. Such Release shall specifically relate to all of
Executive's rights and claims in existence at the time of such execution and
shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within
the twenty-one (21)-day period, or if Executive revokes such
2
<PAGE>
Release within the subsequent seven (7)-day period, no benefits shall be
payable under this Agreement, and this Agreement shall be null and void.
ARTICLE IV
Other Rights And Benefits
4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination shall be payable in accordance with such plan, policy,
practice or program.
4.2 CERTAIN ADDITIONAL PAYMENTS. If it shall be determined that any
payments, distributions or other benefits by or from the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payment required under this Section 4.2) (collectively,
the "Payment") would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code or any interest or penalties are incurred by Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive from the Company an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and the Excise Tax imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
ARTICLE V
Definitions
For purposes of the Agreement, the following terms are defined as follows:
5.1 "BASE SALARY" means Executive's annual base salary in effect during the
last regularly scheduled payroll period immediately preceding any termination of
Executive's employment.
5.2 "BOARD" means the Board of Directors of the Company.
5.3 "CAUSE" means termination of Executive's employment with the Company for
any of the following reasons as determined in good faith by the Company (or in
the case of the CEO, a majority of the Board) which is not cured within fifteen
(15) days following delivery of written notice of such infraction to Executive:
3
<PAGE>
(A) an intentional act which materially injures the Company;
(B) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(C) a willful and habitual neglect of duties; or
(D) a conviction of a felony involving moral turpitude which is reasonably
likely to inflict or has inflicted material injury on the Company.
5.4 "CONSTRUCTIVE TERMINATION" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(A) the assignment to Executive of any duties or responsibilities which
result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a
Constructive Termination;
(B) a reduction by the Company in Executive's Base Salary;
(C) any failure by the Company to continue in effect any benefit plan or
arrangement, including incentive plans or plans to receive securities of
the Company, in which Executive is participating (hereinafter referred
to as "Benefit Plans"), or the taking of any action by the Company which
would adversely affect Executive's participation in or reduce
Executive's benefits under any Benefit Plans or deprive Executive of any
fringe benefit then enjoyed by Executive; provided, however, that
Executive's termination shall not be deemed a Constructive Termination
if the Company offers a range of benefit plans and programs which, taken
as a whole, are comparable to the Benefit Plans, as determined in good
faith by the Executive;
(D) a relocation of Executive's business office to a location more than
thirty (30) miles from the location at which Executive performs duties
as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially
consistent with Executive's business travel obligations;
(E) any breach by the Company of any provision of this Agreement or any
other material agreement between Executive and the Company concerning
Executive's employment; or
(F) any failure by the Company to obtain the assumption of this Agreement or
any other material agreement between Executive and the Company
concerning Executive's employment by any successor or assign of the
Company
5.5 "COVERED TERMINATION" means an Involuntary Termination Without Cause or a
Constructive Termination.
5.6 "DEEMED BONUS" means the bonus that would have been paid to Executive
under the Company's bonus plan with respect to the fiscal year of the Company in
which a Covered
4
<PAGE>
Termination occurs if one hundred percent (100%) of target performance had
occurred, whether or not such bonus at such level of performance has actually
been paid to Executive.
5.7 "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE VI
General Provisions
6.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
6.2 NOTICES. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
6.4 WAIVER. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6.5 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in Santa Clara County, California through Judicial Arbitration
& Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration
rules. However, nothing in this section is intended to prevent either party
from obtaining injunctive relief in court to prevent irreparable harm pending
the conclusion of any such arbitration. Each party in any such arbitration
shall be responsible for its own attorneys' fees, costs and necessary
disbursement; provided, however, that in the event one party refuses to
arbitrate and the other
5
<PAGE>
party seeks to compel arbitration by court order, if such other party
prevails, it shall be entitled to recover reasonable attorneys fees, costs and
necessary disbursements. Pursuant to California Civil Code Section 1717, each
party warrants that it was represented by counsel in the negotiation and
execution of this Agreement, including the attorneys' fees provision herein.
6.6 COMPLETE AGREEMENT. This Agreement, including Exhibit A, constitutes the
entire agreement between Executive and the Company and is the complete, final,
and exclusive embodiment of their agreement with regard to this subject matter,
wholly superseding all written and oral agreements with respect to payments and
benefits to Executive in the event of employment termination. It is entered
into without reliance on any promise or representation other than those
expressly contained herein.
6.7 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive.
The written consent of the Company to a change or termination of this Agreement
must be signed by an executive officer of the Company after such change or
termination has been approved by the Board.
6.8 COUNTERPARTS. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
6.9 HEADINGS. The headings of the Articles and Sections hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
6.10 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
6.11 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
6.12 NON-PUBLICATION. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
6.13 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year written above.
AWARD SOFTWARE INTERNATIONAL, INC. LAURENT K. GHARDA
By:______________________________ __________________________________
Name:____________________________
Title:___________________________
Exhibit A: Employee Agreement and Release
7
<PAGE>
EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Company's proprietary information
and inventions agreement.
I acknowledge that I have read and understand Section 1542 of the California
Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have against the Company.
Except as otherwise set forth in this Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys fees, damages, indemnities and obligations of
every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to the date I execute
this Agreement, including but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; discrimination; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and fair
dealing; provided, however, that nothing in this paragraph shall be construed in
any way to release the Company from its obligation to indemnify me pursuant to
the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) this Agreement shall not be
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Agreement is executed by me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
AWARD SOFTWARE INTERNATIONAL, INC. LAURENT K. GHARDA
By:________________________________ __________________________________
Title:_____________________________ Date:_____________________________
<PAGE>
EXHIBIT 10.35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED
PROMISSORY NOTE
$200,000 Mountain View, California
March 1, 1998
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to pay
to the order of the Company, at 777 East Middlefield Road, Mountain View,
California 94043, or at such other place as the holder hereof may designate in
writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of Two Hundred Thousand Dollars ($200,000)
together with interest accrued from the date hereof on the unpaid principal at
the rate of 8.25% per annum, or the maximum rate permissible by law (which under
the laws of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less, as
follows:
PRINCIPAL REPAYMENT. The outstanding principal amount hereunder shall
be due and payable in full on March 1, 2000; and
INTEREST PAYMENTS. Interest shall be payable quarterly in arrears and
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed;
provided, however, notwithstanding the foregoing, that in the event the
undersigned's employment by, or association with, the Company is Terminated for
Cause, or terminated voluntarily by the undersigned, prior to payment in full of
this Note, this Note shall be accelerated and all remaining unpaid principal and
interest shall become due and payable immediately upon such termination. As used
herein "TERMINATION FOR CAUSE" shall mean termination of the undersigned's
employment with the Company for any of the following reasons as determined in
good faith by the Company:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and reasonable
directions of the Company's Board of Directors or an individual to whom
the undersigned reports (as appropriate);
(c) a willful and habitual neglect of duties;
(d) a breach of any agreement between undersigned and the Company pursuant to
the terms thereof; or
(e) a conviction of, or plea of no contest to, a felony.
1.
<PAGE>
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed /s/ Pierre A. Narath
---------------------------
Pierre A. Narath
2.
<PAGE>
EXHIBIT 10.36
LETTER AGREEMENT
This LETTER AGREEMENT (the "Letter Agreement") relating to that certain
REGISTRATION RIGHTS AGREEMENT dated as of May 30, 1997 (the "Registration Rights
Agreement") by and between Pierre Narath ("Narath") and Award Software
International, Inc., a California corporation (the "Company") is entered into as
of March 1, 1998.
WITNESSETH:
WHEREAS, pursuant to Section 3.5 of the Registration Rights Agreement,
Narath and the Company desire to terminate the Registration Rights Agreement.
NOW, THEREFORE, in consideration of the Company entering into a loan
transaction to lend the principal aggregate amount of two hundred thousand
dollars ($200,000) to Narath pursuant to the terms and conditions set forth in a
promissory note of even date herewith, Narath and the Company hereby agree to
waive all rights pursuant to, and effect the termination of, the Registration
Rights Agreement such that the Registration Rights Agreement shall have no
further force and effect.
IN WITNESS WHEREOF, the undersigned have duly caused this Letter Agreement to
be executed as of the date first above written.
AWARD SOFTWARE INTERNATIONAL, INC.
By: /s/ Kevin J. Berry /s/ Pierre A. Narath
______________________________ ___________________________________
Name: KEVIN J. BERRY PIERRE A. NARATH
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.37
MASTER ORIGINAL EQUIPMENT MANUFACTURER (OEM)
SOFTWARE LICENSE AGREEMENT
BETWEEN
INTEL CORPORATION
AND
AWARD SOFTWARE INTERNATIONAL, INC.
AGREEMENT NUMBER [*]
----------
SEPTEMBER 10 , 1997
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 1 OF 27
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1 - DEFINITIONS 3
2 - DELIVERABLES 6
3 - COPYRIGHT LICENSES AND RESTRICTIONS 6
4 - RESERVATION OF RIGHTS AND OPERATIONAL REQUIREMENTS 7
5 - OWNERSHIP AND OEM CERTIFICATION 8
6 INTEL ATTRIBUTION 9
7 - ROYALTY 10
8 - REPORTS AND PAYMENTS FOR LICENSED SOFTWARE 11
9 - TRAINING AND SUPPORT 12
10 - MARKETING 12
11 - TERM AND TERMINATION 12
12 - ADDITIONAL TERMS 13
</TABLE>
EXHIBITS
- --------
A - LICENSED SOFTWARE, ROYALTY AND AUTHORIZED TERRITORY
B - BRANDING/INTEL ATTRIBUTION GUIDELINES
C - LICENSEE AND INTEL SUPPORT
D- CORPORATE NON-DISCLOSURE AGREEMENT NUMBER
E - MARKETING COMMITMENTS
F - ADMINISTRATOR CONSOLE SOFTWARE
PAGE 2 OF 27
<PAGE>
MASTER ORIGINAL EQUIPMENT MANUFACTURER (OEM)
SOFTWARE LICENSE AGREEMENT
This Agreement ("Agreement") is made by and between Award Software
--------------
International, Inc., 777 East Middlefield Road, Mountain View, CA 94043
- --------------------------------------------------------------------------
("Award") and Intel Corporation, having offices at 2200 Mission College Blvd.,
Santa Clara, CA 95052 ("Intel"). Licensee and Intel are each individually
referred to herein as a "Party," and collectively as the "Parties." This
Agreement shall become effective on September 10, 1997 ("Effective Date").
-------------------
RECITALS
--------
1. Intel is a developer, manufacturer, and marketer of network manageability
technology and certain network manageability software products.
2. These software products are designed by Intel to operate on certain personal
computers ("PCs") and server systems ("Servers") using microprocessors that
are instruction set compatible with certain Intel architecture
microprocessors.
3. Licensee is a developer, manufacturer, and distributor of BIOS software for
PCs and Server products.
4. Licensee and Intel intend to establish a business relationship in which
Licensee, as a provider of BIOS software and other products and support
services to original equipment manufacturers ("OEM"), may distribute and
sublicense to its oem customers within a defined territory, Intel licensed
software which shall be incorporated in and distributed in OEM customer
products as set forth in this Agreement.
5. To further the above intended business relationship, Intel desires to license
to Licensee and Licensee desires to obtain from Intel specific license rights
to certain copyrighted work, all for the purpose of enabling Licensee to
sublicense and support certain Intel software products which shall be
incorporated in or distributed as an integral part of Licensee's OEM
customers products as set forth in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of and conditioned on the Recitals set forth
above and incorporated in this Agreement, the covenants stated herein, and for
other good and valuable consideration, the receipt and sufficiency of which the
Parties hereby acknowledge, the Parties hereby agree as follows:
Section 1
---------
Definitions
In addition to the terms defined above and elsewhere in this Agreement, the
following terms shall have the meaning set forth below:
1.1 "APPLICATION PROGRAMMING INTERFACE(s) OR API(s)" shall mean interfaces by
which the functions of the Licensed Software, can be called.
1.2 "AUTHORIZED TERRITORY" shall mean that geographic area set forth in
Exhibit A within which the Licensee may, pursuant to the terms and
conditions of this Agreement, sublicense the Licensed Software to its OEM
customers which are either incorporated under the laws of, or have a
regular and established place of business in, such geographic area at the
time of entering into an OEM Software License Agreement with Licensee.
this restriction shall not limit where OEM Sublicensee's may market and
sell their respective OEM Sublicensee Products. in the event that it is
unclear if a potential OEM Sublicensee is included in the Authorized
Territory as defined hereunder, Licensee shall make a written request to
Intel to make such determination and Intel shall promptly communicate its
decision to Licensee.
1.2 "BACKUP COPY/COPIES" shall mean a copy/copies of a software program or
related files intended for use exclusively for backup or archive purposes.
Backup Copies specifically exclude the copy of the software
PAGE 3 OF 27
<PAGE>
program primarily intended for use in the loading, execution, or display of
software or related files on a computer system.
1.3 "DOCUMENTATION" shall mean Design Documentation and End-User Documentation.
1.3.1 "DESIGN DOCUMENTATION" shall mean any documentation relating to (i)
how the Licensed Software was developed, (ii) how the Licensed
Software works, is organized or is partitioned internally, (iii) how
a Licensee other than an end user can, if granted the right , modify
or add to the Licensed Software functionality, (iv) any non-public
APIs, and/or (v) any confidential and trade secret information of a
technical nature provided to Licensee by Intel under this Agreement.
1.3.2 "END-USER DOCUMENTATION" shall mean any end user installation and
user guides, manuals, and other technical information in printed and
machine-readable form that is normally provided by Intel to end
users of the Licensed Software. End User Documentation specifically
excludes Design Documentation and any documentation related to
source code.
1.4 "DISTRIBUTOR" shall mean a third party, including any OEM Sublicensee or
subsidiary thereof, that receives a limited license or authorization from
Licensee to market and distribute OEM Sublicensee Products. The term
"Distributor" shall include, but not be limited to, resellers, original
equipment manufacturers, value added resellers, dealers, agents, and
subdistributors of OEM Sublicensee Products.
1.5 "End User Object Code Software" means that portion of the Licensed Software
identified in Exhibit A, in object code form, which is licensed hereunder
to be integrated into or shipped with OEM Sublicensee Products to end
users. End User Object Code does not include OEM Utility Software.
1.6 "FIRST CUSTOMER SHIPMENT" or "FCS" shall mean the date of first commercial
shipment of an OEM Sublicensee Product.
1.7 "INTEL ARCHITECTURE" or "IA" shall mean combination 16-32 bit and thirty-
two (32) bit or greater microprocessor architectures and instruction sets
compatible with combination 16-32 bit and thirty-two (32) bit or greater
microprocessors made or sold by Intel now or in the future.
1.8 "LICENSED PARTY" shall mean the Licensee and any authorized OEM Sublicensee
hereunder, both individually and collectively, as indicated by the context.
1.9 "LICENSEE" shall mean Award Software International, Inc. and shall also
include all of Award's wholly owned subsidiaries, provided that Award shall
remain directly and primarily responsible to Intel for all obligations
undertaken by Award in this Agreement, including, but not limited to,
obligations regarding the reporting and payment of royalties for the
Licensed Software, compliance with the license granted hereunder to the
Licensed Software, and the Authorized Territory limitation. Inclusion of
Award's wholly owned subsidiaries shall in no event be deemed to broaden
Intel's obligations hereunder, including, without limitation, the scope of
Intel's indemnity obligation with regard to any claim of copyright
infringement.
1.10 "LICENSED SOFTWARE" shall mean the specific Intel Release of the End User
Object Code Software and the OEM Utility Software, identified by their
respective version numbers in Exhibit A, and any software contained in
Intel Maintenance Updates or new Intel Releases specifically added to this
Agreement as provided in Section 12.19. Licensed Software also includes any
copies thereof in whole or in part.
1.10.1 "INTEL RELEASE" shall mean a major release or point release so
designated by Intel in its sole discretion as a new release. A
major release means a significantly enhanced or revised release of
Licensed Software, as customarily signified in the software
industry by a change in the digit which appears immediately to the
left of the decimal point in the version number. A point release
means a new release of Licensed Software that contains significant
new features and functionality and is customarily signified by the
software industry by a change in the digit that
PAGE 4 OF 27
<PAGE>
appears to the right of the decimal point in the version number.
"Intel Release" specifically excludes "Intel Maintenance Updates".
1.10.2 "INTEL MAINTENANCE UPDATES" shall mean changes to fix a bug or
correct an error to an existing release of Licensed Software, made
by or for Intel, in its sole discretion and which is designated by
Intel as an Intel Maintenance Update.
1.10.3 "ROYALTY UNIT" shall mean each individual copy of the End User
Object Code, in whole or in part, distributed, incorporated in, or
packaged with an OEM Sublicensee Integrated PC/Server Product or
OEM Sublicensee Upgrade Product. Royalty Units specifically exclude
copies of End User Object Code as set forth in Section 7.1.1.
1.11 "OBJECT CODE" shall mean software, including all computer programming code,
entirely in binary form, which is directly executable by a computer and
includes those, help, message, overlay, and other files necessary for
supporting the intended use of the executable code.
1.12 "OEM SUBLICENSEE PRODUCTS" shall mean OEM Sublicensee Integrated PC/Server
Products, OEM Sublicensee Upgrade Products and OEM Sublicensee Maintenance
Updates as defined below and described in Exhibit A.
1.12.1 "OEM SUBLICENSEE INTEGRATED PC/SERVER PRODUCTS" shall mean OEM
Sublicensee Intel Architecture ("IA") products which consist of the
Licensed Software integrated into OEM Sublicensee's IA-based PC or
Server products.
1.12.2 "OEM SUBLICENSEE UPGRADE PRODUCTS" shall mean OEM Sublicensee
products which consist of the Licensed Software, either alone or in
combination with other OEM Sublicensee Products which are offered
only to OEM Sublicensee's customers who have previously purchased
OEM Sublicensee's Integrated PC/Servers Products.
1.12.3 "OEM SUBLICENSEE MAINTENANCE UPDATES" shall mean OEM Sublicensee
software products which contain Intel Maintenance Updates and the
Intel Maintenance Updates licensed and distributed as Licensee
Products.
1.13 "OEM SOFTWARE LICENSE AGREEMENT" shall mean that software license agreement
between Licensee and its OEM customer under which Licensee provides an OEM
Sublicense to the Licensed Software pursuant to this Agreement. The OEM
Software License Agreement shall include, without limitation, those
specified rights and obligations set forth in the Agreement noted as
requirements of the OEM Software License Agreement. And such other terms to
which Licensee and OEM Sublicensee agree in writing provided, however, OEM
Software License Agreement shall be no less stringent than this Agreement.
The OEM Software License Agreement shall not allow the OEM Sublicensee to
sublicense or distribute the Licensed Software, or any portion thereof, in
any form, except for the limited right to grant a license for the End User
Object Code Software to end users of OEM Sublicensee Products as elsewhere
set forth herein. Upon request, Intel will provide Licensee with an
example of the form agreement used by Intel to license Intel Software
Products to its other OEM customers, however, Licensee shall be solely
responsible to develop an OEM Software License Agreement for use with its
OEM Sublicensees which fully complies with the requirements of this
Agreement.
1.14 "OEM SUBLICENSE" shall mean any authorized sublicense hereunder, granted by
Licensee to a Licensee OEM customer for the Licensed Software under a
Licensee OEM Software License Agreement with terms no less stringent, nor
any more expansive, than this Agreement.
1.15 "OEM SUBLICENSEE" shall mean a third party OEM who is granted an OEM
Sublicense, directly or indirectly, by Licensee.
1.16 "OEM UTILITY SOFTWARE" shall mean that software and related materials
(including, without limitation, Design Documentation) which is identified
in Exhibit A and provided and licensed by Intel hereunder for Licensee's
and OEM Sublicensees internal use for support of OEM Sublicensees and their
respective end users.
PAGE 5 OF 27
<PAGE>
Section 2
---------
Deliverables
------------
2.1 Intel shall deliver the Licensed Software in accordance with the Milestones
in Exhibit A.
2.2 During the term of this Agreement, Intel Maintenance Updates may be added
to this Agreement at the sole discretion of Intel. In the event Intel
chooses to add such Intel Maintenance Updates, Intel will provide Licensee
with written notice of such addition and provide such Intel Maintenance
Updates upon their commercial availability. Furthermore, new Intel
Releases may be added by written agreement in accordance with Section
12.19.
2.3 Notwithstanding any other provision of this Agreement:
a. Except for any example interface or other such source code which may be
contained in the OEM Utility Software provided hereunder for Licensee's
and OEM Sublicensees internal use only, Licensee shall not be entitled
to access or receive any source code from Intel under this Agreement.
b. Licensee shall not be entitled to access or receive any Intel Release
which is not covered under this Agreement or a mutually agreeable
written amendment that includes price and other terms governing any such
Intel Release.
c. Intel is not required to and will not deliver to Licensee any software
relating to unique features developed by or for Intel solely for a
single customer.
Section 3
---------
Copyright Licenses And Restrictions
3.1 COPYRIGHT LICENSE FOR LICENSED SOFTWARE: Subject to the terms and
conditions of this Agreement, Intel hereby grants to Licensee a
nonexclusive, nontransferable, worldwide, revocable, royalty-bearing
license under Intel copyrights, with the limited right to grant OEM
Sublicenses solely within the Authorized Territory, to publicly display and
perform, copy and distribute the Licensed Software directly to OEM
Sublicensees subject to Licensee's strict compliance with the following:
a. Licensee may have the Licensed Software reproduced solely to supply and
support Licensee's OEM Sublicensees under this Agreement.
b. Licensee shall not reverse engineer, decompile, or disassemble the
Licensed Software Object Code, nor shall Licensee permit or otherwise
allow any OEM Sublicensee to reverse engineer, decompile, or disassemble
the Licensed Software Object Code.
c. Licensee shall require in its OEM Software License Agreement that OEM
Sublicensee's may distribute only the End User Object Code to OEM
Sublicensee's end users either directly or indirectly through OEM
Sublicensee's Distributors in accordance with Section 6 of this
Agreement, and Exhibits B and E, and then only under a license between
OEM Sublicensee and such end users with terms no less stringent, nor
more expansive, than the OEM Sublicensee uses for its own standard end
user Object Code software products. Notwithstanding the foregoing,
distribution of that portion of the End User Object Code Software known
as the Administrator Console Software is subject to the notices
regarding its use and distribution as set forth in Exhibit F.
d. Licensee shall provide each authorized OEM Sublicensee hereunder with
one (1) master "golddisk" copy of the Licensed Software provided by
Intel to Licensee hereunder, and shall only permit OEM Sublicensees to
copy and distribute one copy of the End User Object Code with each OEM
Sublicensee Integrated PC/Server Product unit. Distribution of other
Licensee software on the master goldisk provided to OEM Sublicensees
shall be subject to Intel's prior written approval, which approval shall
not be unreasonably withheld.
PAGE 6 OF 27
<PAGE>
e. Nothing in this Agreement authorizes or grants any license to Licensee
to allow any OEM Sublicensee to license and sell End User Object Code
Software on a stand alone basis with the sole exception being if it
constitutes an OEM Sublicensee Maintenance Update. OEM Utility Software
is for Licensee and OEM Sublicensee internal use only and may not be
distributed or licensed in whole or in part by OEM Sublicensees in any
form. Licensee may elect to provide the Licensed Software to its OEM
Sublicensees under an OEM Software License Agreement in conjunction
with Licensee's own software products, but is not required to do so.
Licensee shall not make availability of the Licensed Software to an OEM
Sublicensee subject to the purchase or licensing of Licensee's own
software products.
f. The OEM Software License Agreement between Licensee and the OEM
Sublicensee will require that that the OEM Sublicensee's end user
license:
(i) include prohibitions against reverse engineering, disassembly, or
decompilation of the End User Object Code Software;
(ii) include prohibitions against any licensing or sublicensing from
any such end user to any other party (excluding a transfer of all
of any such end user's license rights); and
(iii) include the following notice:
"U.S. GOVERNMENT RESTRICTED RIGHTS LEGEND
The Software and documentation were developed at private expense
and are provided with "RESTRICTED RIGHTS." Use, duplication, or
disclosure by the Government is subject to restrictions as set
forth in FAR 52.227-14, DFAR 252.227-7013, its successor or
applicable agency rights in technical data or computer software.
In the event that this License, or any part thereof, is deemed
inconsistent with the minimum rights identified in the Restricted
Rights provisions, the minimum rights shall prevail."
g. [*]
3.2 COPYRIGHT LICENSE FOR END USER DOCUMENTATION. Subject to the terms and
conditions of this Agreement, Intel hereby grants to Licensee a
nonexclusive, nontransferable, worldwide, revocable, royalty-free license
under Intel copyrights, with the limited right to grant OEM Sublicenses
solely within the Authorized Territory, to publicly display and perform,
create derivatives (including translation into another language), copy and
distribute the End User Documentation directly to OEM Sublicensees, subject
to Licensee's strict compliance with the following:
a. Licensee may have the End User Documentation reproduced solely to supply
and support OEM Sublicensees under this Agreement;
b. Licensee and/or Licensee's OEM Sublicensees may create derivative works
of the End User Documentation; and
c. Licensee's OEM Sublicensee's may, either directly or through
Distributors, distribute the End User Documentation to end users of OEM
Sublicensee Products, only in accordance with Section 6 and Exhibits B
and E.
Section 4
---------
Reservation of Rights and Operational Requirements
4.1 All rights not expressly granted herein are reserved to the owner, and no
other licenses are granted herein by implication, estoppel or otherwise.
Specifically, (1) nothing in the licenses in Section 3 or otherwise
contained in this Agreement shall either expressly or by implication,
estoppel or otherwise give either party any right to license the other
party's patent rights to others, and (2) no license or immunity is granted
by Intel either directly or by implication, estoppel or otherwise to any
third parties acquiring
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 7 OF 27
<PAGE>
Licensed Software from either party for the combination of Licensed
Software with other items or for the use of such combination. Furthermore,
notwithstanding anything herein to the contrary, Intel grants no licenses
or other rights under any of its intellectual property rights for technical
information to any microprocessor (including, without limitation, co-
processors and embedded controllers), associated core logic device
(including without limitation chip sets), flash memory or semiconductor
manufacturing technology. Licensee acknowledges that the licenses received
from Intel herein are intended for Licensee to sublicense and provide
support for the Licensed Software to OEM Sublicensees for incorporation in
or packaged with the OEM Sublicensee Products only and that no license is
granted hereunder to design or develop or to assist in designing or
developing any other product including any product for a third party.
4.2 COPYRIGHT PROTECTION: Licensee agrees to reproduce Intel's and its
vendor's copyright notices on each copy of the Licensed Software provided
to OEM Sublicensees and to require OEM Sublicensees to reproduce Intel's
and its vendors' copyright notices on each copy of any OEM Sublicensee
Product and to reproduce Intel's and its vendors' copyright notices on each
copy of any End User Documentation or derivatives thereof distributed by
OEM Sublicensee. Licensee agrees not to remove or obscure and to require
OEM Sublicensee not to remove or obscure any of Intel's or its vendors'
copyright notices or other proprietary notices on the Licensed Software.
4.3 INTEROPERABILITY AND COMPATIBILITY OF OEM SUBLICENSEE PRODUCTS:
Licensee agrees to the following terms and conditions with respect to
Licensee's use of the Licensed Software, and agrees to include such terms
and conditions in each OEM Software License Agreement with OEM Sublicensees
such that they shall also apply to the OEM Sublicensee's use of the
Licensed Software.
4.3.1 Licensee agrees not to alter, obscure, or remove from the Licensed
Software and/or End User Documentation, the primary product user
interface, behavior and graphics to include name, program manager
icon, about box and splash screen, any Intel trademark, brand,
label, other proprietary notice, or marketing device (including but
not limited to free trials and complementary products) included in
the Licensed Software and/or End User Documentation when such
Licensed Software and/or End User Documentation is included in an
OEM Sublicensee Product.
4.3.2 Licensee agrees not to take any actions that would prevent or
interfere with a user of an OEM Sublicensee Product from
communicating with a user of the End User Object Code Software such
that both users can make full use of all capabilities of the End
User Object Code Software.
4.3.3 Licensee agrees not to alter, obscure, block, or otherwise interfere
with any Application Programming Interfaces or features available in
the End User Object Code Software when such End User Object Code
Software is included in an OEM Sublicensee Product.
4.3.4 If Intel in its discretion provides Licensee with an Intel
Maintenance Update or Intel Release under this Agreement under the
same terms and pricing as the previous Licensed Software, Licensee
agrees to ship any such Intel Maintenance Update or Intel Release to
its OEM Sublicensees and to cease shipping, and require that OEM
Sublicensees cease shipping, the previous release of the End User
Object Code Software, within 90 days after delivery by Intel to
Licensee or within a shorter period, if so requested by Intel, to
remedy bugs or errors in the software or to avoid claims for
indemnification.
Section 5
---------
Ownership and OEM Certification
5.1 ACKNOWLEDGMENT OF OWNERSHIP: Licensee acknowledges, as between any
Licensed Party hereunder and Intel, that Intel or Intel's vendors or
development associates have exclusive right, title and interest in and to
all of the intellectual property rights in the Licensed Software made by:
(i) Intel, (ii) its employees, contractors, consultants, or agents; or
(iii) its vendors, or development associates.
5.2 In accordance with the license in Sections 3.1 and 3.2 of this Agreement,
Licensee represents and warrants that it shall require that each OEM
Sublicensee incorporate the End User Object Code Software
PAGE 8 OF 27
<PAGE>
and End User Documentation solely as an integral part or component of OEM
Sublicensee Product which such OEM Sublicensee manufactures, licenses, and
sells or leases in the regular course of its business, or will package and
distribute the End User Object Code Software and/or End User Documentation
with the OEM Sublicensee Product. Licensee shall further require in each
OEM Software License Agreement with an OEM Sublicensee that any standalone
distribution of the End User Object Code Software will only be in the form
of OEM Sublicensee Upgrade Products and OEM Sublicensee Maintenance Updates
offered to OEM Sublicensee's installed customer base and no others.
Licensee agrees to promptly notify Intel if the Licensed Software, in whole
or in part, is used in any manner except as expressly authorized hereunder
and to require the same notification requirement of its OEM Sublicensees.
The above restrictions are subject to the audit right in Section 8.
Additionally, the Parties agree that this Section 5.2 of this Agreement was
an essential, material term in establishing the consideration under this
Agreement and that upon any uncured breach hereof in accordance with
Section 11, Intel may terminate this Agreement.
Section 6
---------
Intel Attribution
-----------------
6.1 Marking of Products:
--------------------
(a) When a Licensed party promotes, represents, or otherwise refers to the
capabilities and/or functions of the Licensed Software in Materials, as
defined below, the Licensed party shall include the Intel text attribution
for the Licensed Software (Text Attribution), as set forth in Exhibit B.
Materials include any marketing, advertising, announcements, packaging,
manuals, instruction materials, documentation, presentations, brochures,
catalogs, point of purchase displays and other similar collateral for
Licensee Products.
(b) In addition, each Licensed Party shall be required to use its best
efforts to ensure that the Text Attribution is maintained, as required
herein, in all of its customers' marketing collateral for OEM Sublicensee
Product to the same extent as such Licensed Party is required to maintain
the Text Attribution on OEM Sublicensee Products hereunder.
(c) These Attribution Requirements are in addition to the obligations of
the Licensed Parties set forth in Section 4 of the main body of this
Agreement.
6.2 Inspection of Materials: [*]
------------------------
6.3 Modifications of Text Attribution:
----------------------------------
(a) Intel reserves the right to modify the Text Attribution or add new
Text Attribution or other marking requirements at any time.
(b) Licensee agrees to use commercially reasonable efforts to comply with
such modifications or additions within thirty (30) days after written
notice from Intel to Licensee and to require OEM Sublicensees to do the
same. In the event Licensee or any OEM Sublicensee authorized hereunder is
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 9 OF 27
<PAGE>
unable to comply with such modifications within the prescribed period,
Licensee shall notify Intel immediately and the Parties shall meet to
discuss an extension of the prescribed period.
6.4 Additional Remedy: [*]
------------------
6.5 No Representation: It is expressly understood that the Text Attribution
------------------
inspection rights held by Intel are for purposes of advising the end user
of the Intel products contained in the OEM Sublicensee Product(s), and do
not in any way indicate Intel's approval, endorsement, or support of the
OEM Sublicensee Product(s). Licensee expressly agrees that Licensee shall
not use, and shall prohibit OEM Sublicensees from using, the Text
Attribution or the Intel name in any way so as to indicate Intel's
approval, endorsement, or support of OEM Sublicensee Products.
6.6 Material Element: The Parties expressly acknowledge that the provisions of
-----------------
this Section governing Text Attribution constitute a material term of this
Agreement.
Section 7
---------
Royalty
7.1 ROYALTY FOR LICENSED SOFTWARE: For each OEM Software License Agreement
entered into between Licensee and an OEM Sublicensee, Licensee shall pay to
Intel the respective volume based royalty specified in Exhibit A for each
Royalty Unit shipped by such OEM Sublicensee.
7.1.1 ROYALTY EXEMPT LICENSED SOFTWARE: Notwithstanding the foregoing, no
royalty will be due Intel for any (A) OEM Sublicensee Maintenance
Updates; (B) Backup copies; and (C) for up to a total of [*] copies
of the Licensed Software made by Licensee and [*] copies of the
Licensed Software made by each OEM Sublicensee for each Intel
Release of the Licensed Software which are: (i) used internally by
OEM Sublicensee for customer support; (ii) used by OEM Sublicensee
for evaluation, demonstration, or marketing purposes to promote the
sale of Royalty Units of the Licensed Software (provided OEM
Sublicensee does not receive any remuneration therefor); or (iii)
used by OEM Sublicensee internally for demonstration or training. In
addition, no royalty will be due Intel for copies of End User Object
Code which are: (i) shipped by OEM Sublicensee as replacement copies
for Royalty Units which were returned as defective; or (ii)
distributed as OEM Sublicensee Maintenance Updates to OEM
Sublicensee's existing customers which were licensed for the
previous release of the End User Object Code.
7.2 MAINTENANCE UPDATES: Licensee shall require in its OEM Software License
Agreements that OEM Sublicensees make commercially reasonable efforts, in
accordance with then current industry practice, to ensure that OEM
Sublicensee Maintenance Updates are licensed (i) only to OEM Sublicensee's
then existing customers for use on their systems which are an OEM
Sublicensee Product and (ii) only in accordance with such other
restrictions as Intel may specify as a condition of the specific Intel
Maintenance Update.
7.3 ROYALTY REVIEWS: During the term of this Agreement, including any
extension thereof as may be agreed upon by the Parties, Intel and Licensee
shall, no more than quarterly, review each OEM Sublicensee's respective
performance under its OEM Software License Agreement with Licensee, and,
if necessary,
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 10 OF 27
<PAGE>
re-negotiate the royalty amount due Intel for each Royalty Unit under such
Agreement as specified in Exhibit A.
Section 8
---------
Reports and Payments for Licensed Software
8.1 REPORTS: Within [*] days following the end of each calendar month,
Licensee shall furnish to Intel an itemized written statement, in a form
reasonably acceptable to Intel and signed by an authorized employee or
agent of Licensee, showing the number of Royalty Units of Licensed Software
made and distributed, licensed or sold by each OEM Sublicensee having a
current OEM Software License Agreement with Licensee. Such report shall
also include the name of each OEM Sublicensee with its respective annual
volume commitment for distribution of Licensed Software Royalty Units, the
range of serial number labels issued to the respective OEM Sublicensee for
tracking official Royalty Unit copies and the status (balance) of any
prepaid royalties required hereunder for the respective OEM Sublicensee.
If in any reporting period no copies have been made, distributed,
licensed, or sold by an OEM Sublicensee, that fact shall be shown on such
statement, such that each monthly statement reflects the account activity
for each OEM Sublicensee. Such reports shall be sent to the following
address:
Intel Corporation Intel Corporation
Attention: Finance Attention: Post Contract Management
734 E. Utah Valley Drive 2111 NE 25th Ave.
American Fork, Utah 84003 Hillsboro, OR 97124
Mailstop: UT-1 Mailstop: JF3-149
----
8.2 PAYMENTS: Within [*] days following the end of each calendar month,
Licensee shall, irrespective of its own business and accounting methods,
pay to Intel in United States currency the total prepaid royalties due and
payable to Intel as set forth in Exhibit A for each OEM Software License
Agreement entered into between Licensee and an OEM Sublicensee during such
calendar month. In addition, within [*] days following the end of each
calendar quarter ("Quarter"), Licensee shall, irrespective of its own
business and accounting methods, pay to Intel in United States currency the
total royalties due and payable to Intel for such Quarter for each
respective OEM Sublicense Agreement, less any existing credit for prepaid
royalties, if any. The royalty amount due payment to Intel under each such
OEM Software License Agreement shall be determined pursuant to the volume
based royalty amounts set forth in Exhibit A for each Royalty Unit made,
licensed or sold during such calendar quarter by the OEM Sublicensee. For
ease of payment, Licensee may total the royalties due Intel under all OEM
Software License Agreements between Licensee and its OEM Sublicensees and
issue to Intel one total Quarterly payment therefor, however, Licensee
shall not be allowed to aggregate the total number of Royalty Units shipped
under all OEM Software License Agreements for purposes of determining the
relevant royalty amount payable to Intel. Royalties due to Intel pursuant
hereto will be paid by check tendered or wire transfer at the following
addresses:
Remittance Address Wire Transfer Account
------------------ ---------------------
Intel Corporation [*]
[*]
or to such other payment address(es) as Intel shall hereafter designate in
a notice given in accordance with Section 12.13.
8.3 RECORDS: For so long as Licensee is obligated to pay any royalties or
payments under this Agreement, and for a period of [*] years thereafter,
Licensee agrees to keep and maintain complete and accurate records for the
current year and the preceding three years of all data reasonably required
for the verification and computation of the amounts to be paid and the
information to be reported under or relevant to performance of this
Agreement. This shall include, without limitation, copies of all OEM
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 11 OF 27
<PAGE>
Software License Agreements entered into between Licensee and its OEM
Sublicensees, together with all monthly royalty reports issued thereunder
to Licensee.
8.4 AUDIT RIGHTS: During the term of this Agreement or any renewal thereof,
upon reasonable notice, Intel may request an audit of the Licensee's and
OEM Sublicensees' records and a written certification by a mutually
acceptable independent certified public accountant ("CPA") that the reports
and payments are correct or that the Licensee and OEM Sublicensees are
performing in accordance with this Agreement. In the event that any
Licensed Party hereunder cannot in good faith agree with Intel as to an
auditor within ten (10) days of the date of the audit request, Intel may
select any of the top six CPA firms to conduct the audit. Such auditor
will report to Intel only whether the amounts due or payable to Intel
pursuant to this Agreement were correct, any amount that is due and payable
to Intel, and information related to compliance or non-compliance with this
Agreement. Such auditor will hold such information in confidence and will
not disclose such information to any person or entity other than Intel
without the prior written consent of the Licensed Party. Audits of any
individual Licensed Party hereunder will occur no more frequently than once
in any twelve (12) month period. The cost of such audits will be borne by
the Intel unless a payment discrepancy unfavorable to Intel greater than or
equal to [*] of the amounts owed for any reporting period covered by the
audit is discovered, in which case the Licensee shall pay the entire costs
of the audit, in addition to remitting to Intel any underpayment amounts
discovered. Licensee shall include in its OEM Software License Agreements
with its OEM Sublicensees sufficient rights to permit Intel to exercise the
audit rights reserved by Intel hereunder.
Section 9
---------
Training and Support
9.1 TRAINING AND SUPPORT: Licensee and Intel will provide training and support
for each other as specified in Exhibit C.
9.2 NO ADDITIONAL SUPPORT: Except as expressly set forth in Exhibit C, Intel
shall not have any obligation to provide any support to Licensee under this
Agreement.
Section 10
----------
Marketing
10.1 LICENSEE AND OEM SUBLICENSEE MARKETING COMMITMENTS: Licensee shall
require in its OEM Software License Agreement that each OEM Sublicensee
shall fulfill their respective commitments to market the Licensee Products
as set forth in Exhibit E. Upon reasonable request and notice by Intel,
Licensee and Intel will, prior to the expiration of each calendar year of
this Agreement, perform an account review of each OEM Sublicensee and agree
to a marketing plan which will be negotiated by Licensee with the
respective OEM Sublicensee and attached to its OEM Software License
Agreement as an addendum to Exhibit E for the following calendar year.
Section 11
----------
Term and Termination
11.1 TERM: The term of this Agreement shall be One (1) year beginning on the
Effective Date, which term shall be automatically renewed at the end of
such initial term on the anniversary date of the Effective Date for
additional one (1) year renewal terms, unless terminated by either Party at
any time in writing with a minimum of ninety (90) days prior written
notice.
11.2 TERMINATION: Intel may terminate this Agreement if Licensee fails to pay
for Licensed Software in accordance with the terms of this Agreement, or if
Licensee fails to comply with any material term or condition of this
Agreement, within thirty (30) days of written notice of such failure from
Intel. Additionally, Intel may terminate this Agreement for cause
immediately if Licensee (a) files or has filed against it a petition in
bankruptcy, and Licensee does not continue to pay the royalties set forth
in this Agreement, (b) has a receiver appointed to handle its assets or
affairs, (c) makes or attempts to make an assignment for benefit of
creditors, or (d) undergoes a change of control through an acquisition
which has not received Intel's prior written approval. Licensee may
terminate this Agreement if Intel fails to
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 12 OF 27
<PAGE>
comply with any material term or condition of this Agreement within thirty
(30) days of written notice of such failure from Licensee. Either party's
rights to terminate are in addition to any other rights that party may
have.
11.3 EFFECT OF TERMINATION OR EXPIRATION: In the event of termination or
expiration of this Agreement, in whole or in part, all licenses granted
hereunder shall terminate and Licensee shall immediately cease any further
sublicensing and distribution of the Licensed Software. Upon such
termination or expiration, Licensee shall immediately proceed to terminate
all OEM Software License Agreements with its OEM Sublicensees, including,
without limitation, providing any required prior written termination notice
to such OEM Sublicensees. During the "wind down" period during which
Licensee is terminating the OEM Software License Agreement with its OEM
Sublicensees, Licensee shall continue its support to the OEM Sublicensees
for the Licensed Software and shall continue to the make all monthly
royalty payments due to Intel hereunder. As of the date of termination or
expiration, any existing licenses granted by OEM Sublicensees to end users
of OEM Sublicensee Products either directly or indirectly through their
respective Distributors shall not be affected by any termination or
expiration of this Agreement or the termination or expiration of the
respective OEM Software License Agreements between Licensee and its OEM
Sublicensees. Upon termination or expiration of this Agreement, all copies
of the Licensed Software and End User Documentation owned by Intel which is
in the possession of the Licensee or its OEM Sublicensees, shall be
promptly returned to Intel at the conclusion of the wind down period, and
each such Licensed Party shall, except as specifically set forth in Section
12.14, cease any and all direct or indirect exercise of license rights
under this Agreement and any OEM Sublicense.
Section 12
----------
Additional Terms
12.1 CONFIDENTIALITY GENERALLY: The existence, terms, and conditions of this
Agreement are confidential and neither party may make any disclosures,
express or implied, regarding this Agreement without the express prior
written consent of the other, with the following exceptions:
a. subject to (b) below, as otherwise may be required by law or legal
process, to legal and financial advisors in their capacity of advising a
party in such matters;
b. if disclosure of this Agreement or any of the terms hereof is required
by applicable law, rule or regulation, or is compelled by a court or
governmental agency, authority or body: (i) the Parties shall use all
legitimate and legal means available to minimize the disclosure to third
parties of the content of the Agreement, including, without limitation,
seeking a confidential treatment request or protective order; (ii) the
disclosing Party shall inform the other party at least ten (10) business
days (i.e., not a Saturday, Sunday or a day on which banks are not open
for business in the geographic area in which the non-disclosing Party's
principal office is located) in advance of the disclosure; and (iii) the
disclosing Party shall provide the other Party with a reasonable and
adequate opportunity to review and comment upon the disclosure, and any
request for confidential treatment or a protective order pertaining
thereto, prior to making such disclosure;
c. in confidence to its legal counsel, accountants, banks and financing
sources and their advisors solely in connection with complying with
financial transactions; or
d. each Party may, under terms of its respective standard nondisclosure
agreement, disclose the existence of this Agreement and the license
rights granted to Licensee hereunder, exclusive of any pricing terms, in
its efforts to market the Licensed Software to potential OEM
Sublicensees.
12.2 CONFIDENTIAL INFORMATION: Disclosures of confidential and proprietary
information by either Party to the other Party shall be governed by the
Intel Corporate Non-disclosure Agreement ("CNDA") number 21565, and
related Confidential Information Transmittal Records ("CITR(s)"). Attached
as Exhibit D is the above referenced CNDA.
12.3 NO WARRANTY. INTEL AND ITS SUPPLIERS MAKE NO WARRANTIES, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO LICENSED SOFTWARE, END USER DOCUMENTATION, INTEL
MAINTENANCE UPDATES, INTEL RELEASES, AND ANY OTHER MATERIAL PROVIDED UNDER
THIS AGREEMENT. INTEL SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY WARRANTY
PAGE 13 OF 27
<PAGE>
AGAINST INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY.
LICENSED SOFTWARE, END USER DOCUMENTATION, INTEL MAINTENANCE UPDATES, INTEL
RELEASES, AND ANY OTHER MATERIAL PROVIDED UNDER THIS AGREEMENT ARE PROVIDED
AS IS, WITHOUT WARRANTY OF ANY KIND.
12.4 INTEL INDEMNIFICATION: [*]
12.5 LICENSEE INDEMNIFICATION: Licensee agrees to indemnify, and require in its
OEM Software License Agreements that each OEM Sublicensee indemnify, and
hold Intel harmless from and against any and all actions, claims, damages,
expenses (including attorney's fees) and liabilities arising from such
Licensed Party's respective use, modification, distribution and sale of OEM
Sublicensee Products, including but not limited to, suits and claims
brought against Intel by any third parties for the Licensed Party's breach
of warranty to such third party or the Licensed Party's negligence to such
third party. The Licensed Party's respective duties under this Section
extend to any matters arising out of the alleged infringement by OEM
Sublicensee Products of any United States copyright provided that: (i) the
Licensed Party is notified promptly in writing of such claim; (ii) the
Licensed Party controls the defense or settlement of the claim; and (iii)
Intel cooperates reasonably and gives all necessary authority, information
and assistance (at the Licensed Party's expense). Intel will not be liable
for any costs or damages, and the respective Licensed Party will indemnify,
defend and hold Intel harmless from any expenses, damages, costs or losses
resulting from any suit or proceeding based upon a claim arising from: (a)
Intel's compliance with the Licensed Party's designs, specifications or
instructions; (b) modification of the Licensed Software at the Licensed
Party's direction by a party other than Intel after delivery by Intel, (c)
the Licensed Party's use of the Licensed Software or any part thereof
furnished hereunder in combination with any other product; (d) the
Licensed Party's direct or contributory infringement of any process patent
using the Licensed Software furnished hereunder.
12.6 LIMITATION OF LIABILITY. [*]
12.7 CRITICAL CONTROL APPLICATIONS: Intel specifically disclaims liability for
use of the Licensed Software in critical control applications (including,
for example only, safety or health care control systems, nuclear
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
PAGE 14 OF 27
<PAGE>
energy control systems, or air or ground traffic control systems) by
Licensee or OEM Sublicensees, and such use is entirely at the user's risk.
12.8 PRODUCT LIABILITY: In the event that Intel is named in a personal injury
or product liability suit arising out of use of the Licensed Software
licensed by a Licensed Party under this Agreement, Licensee agrees to
defend, indemnify, and hold Intel harmless from and against such claims,
and to require in its OEM Software License Agreements that each OEM
Sublicensee defend, indemnify and hold Intel harmless from and against
such claims, which are attributable to (a) Intel's compliance with the
Licensed Party's designs, specifications or instructions, (b) modification
of the Licensed Software at a Licensed Party's direction by a party other
than Intel after delivery by Intel, or (c) the Licensed Party's use of the
Licensed Software, or any part thereof, in combination with any other
product.
12.9 CONFLICTS: In the event of a conflict between this Agreement and any other
document related to the subject matter of this Agreement, or the body of
this Agreement and any of the Exhibits to this Agreement, the terms of
this Agreement, or the body of this Agreement as the case may be, shall
govern.
12.10 PRODUCT AND MANUFACTURING CHANGES: Intel may modify the Licensed Software
specifications or manufacturing processes at any time. Intel will notify
Licensee of such changes when they affect form, fit, or function.
12.11 FORCE MAJEURE: Neither Party will be liable for any failure to perform due
to unforeseen circumstances or causes beyond its reasonable control,
including, but not limited to, acts of God, war, riot, embargoes, acts of
civil or military authorities, delay in delivery by vendors, fire, flood,
accident, strikes, inability to secure transportation, facilities, fuel,
energy, labor, or materials. In the event of a force majeure event, time
for delivery or other performance will be extended for a period equal to
the duration of the delay caused thereby.
12.12 EXPORT: Neither party shall export or permit to be exported, either
directly or indirectly, any Licensed Software or OEM Sublicensee Products
without first obtaining any required license or other approval from the U.
S. Department of Commerce or any other agency or department of the United
States Government. In the event any Licensed Software or OEM Sublicensee
Products are exported from the United States or re-exported from a foreign
destination by either Intel or a Licensed Party, such party shall ensure
that the distribution and export/re-export of the Licensed Software or
Licensee Products is in compliance with all laws, regulations, orders, or
other restrictions of the U.S. Export Administration Regulations. Licensee
agrees that neither it nor any of its OEM Sublicensees will export/re-
export any technical data, process, Licensed Software, OEM Sublicensee
Products or service, directly or indirectly, to any country for which the
United States government or any agency thereof requires an export license,
other governmental approval, or letter of assurance, without first
obtaining such license, approval or letter.
12.13 NOTICES: Any notice required or permitted to be given under this Agreement
shall be effective if it is in writing and sent by certified or registered
mail, return receipt requested, to the appropriate Party hereto at the
address set forth below and appropriate postage affixed. Either Party may
change its address for receipt of notice by notice to the other Party in
accordance with this Section. Notices shall be deemed given on the date of
mailing and the date of notice shall be the date of mailing.
If to Licensee: Award Software International, Inc.
777 East Middlefield Road
Mountain View, CA 94043
Attn: [*]
With a copy to: Award Software International, Inc.
777 East Middlefield Road
Mountain View, CA 94043
Attn: [*]
If to Intel: Intel Corporation
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 15 OF 27
<PAGE>
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: [*]
With a copy to: Intel Corporation
2111 NE 25th Ave
Hillsboro, OR 97124
[*]
Attn: [*]
12.14 SURVIVAL: All of the provisions in Sections 1, 4, 8 and 12 shall survive
expiration or termination of this Agreement.
12.15 ASSIGNMENT: Licensee may not assign this Agreement or any obligations,
rights, or benefits hereunder without the express written consent of
Intel, which written consent shall not be unreasonably withheld. Intel, at
its sole discretion, may assign this Agreement or any obligations, rights,
or benefits hereunder to any Intel subsidiary without the consent of
Licensee.
12.16 CHANGE OF CONTROL: If a third party acquires control over Licensee during
the term of this Agreement and has not received Intel's prior written
approval, Intel may at its discretion choose to terminate this Agreement.
Licensee shall provide Intel with thirty (30) days prior written notice of
any such change in control.
12.17 RELATIONSHIP BETWEEN THE PARTIES: In all matters relating to this
Agreement, Licensee and Intel shall act as independent contractors. Except
as may be otherwise expressly permitted hereunder, neither Party will
represent that it has any authority to assume or create any obligation,
expressed or implied, on behalf of the other Party, or to represent the
other Party as agent, employee, or in any other capacity. Neither Party
shall have any obligation, expressed or implied, except as expressly set
forth herein.
12.18 INTERPRETATION: This Agreement, including any exhibits, addenda, schedules
and amendments, has been negotiated at arm's length and between persons
sophisticated and knowledgeable in the matters dealt with in this
Agreement. Each Party has been represented by experienced and
knowledgeable legal counsel. Accordingly, any rule of law (including,
without limitation, California Civil Code Section 1654) or legal decision
that would require interpretation of any ambiguities in this Agreement
against the Party that has drafted it is not applicable and is waived.
12.19 ENTIRE AGREEMENT: This Agreement sets forth the entire Agreement between
the Parties and supersedes prior and contemporaneous proposals,
agreements, and representations between them, whether written or oral,
relating to the subject matter contained herein. This Agreement may be
changed only if agreed to in writing and signed by an authorized signatory
of each Party.
12.20 SEVERABILITY: All rights and remedies, whether conferred hereunder, or by
any other instrument or law will be cumulative and may be exercised
singularly or concurrently. The failure of any Party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of
such Party thereafter to enforce such provisions. The terms and conditions
stated herein are declared to be severable. If any provision or provisions
of this Agreement shall be held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
12.21 COUNTERPARTS: This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.22 INJUNCTIVE RELIEF: The Parties agree that preliminary injunctive or other
equitable relief will be a necessary and proper remedy in the event of a
breach of this Agreement in violation of either Party's intellectual
property rights. The Parties further agree that in the event such
equitable relief is granted in the United States, they will not object to
courts in other jurisdictions granting provisional remedies enforcing such
U.S. judgments.
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 16 OF 27
<PAGE>
12.23 TAX: Licensee is responsible for all taxes on transactions between Intel
and Licensee under this Agreement other than taxes based on Intel's
income. All payments shall be made free and clear without deduction for
any and all present and future taxes imposed by any taxing authority. In
the event that Customer is prohibited by law from making such payments
unless such deductions are made or withheld therefrom, then Customer shall
pay such additional amounts as are necessary in order that the net amounts
received by Intel, after such deduction or withholding, equal the amounts
which would have been received if such deduction or withholding had not
occurred. Customer shall promptly furnish Intel with a copy of an official
tax receipt or other appropriate evidence of any taxes imposed on payments
made under this Agreement, including taxes on any additional amounts paid.
In cases other than taxes referred to above, including but not limited to
sales and use taxes, stamp taxes, value added taxes, property taxes and
other taxes or duties imposed by any taxing authority on or with respect
to this Agreement, the costs of such taxes or duties shall be borne by
Customer. In the event that such taxes or duties are legally imposed
initially on Intel or Intel is later assessed by any taxing authority,
then Intel will be promptly reimbursed by Customer for such taxes or
duties plus any interest and penalties suffered by Intel. This clause
shall survive the termination of the Agreement.
12.24 GOVERNING LAW: Any claims arising under or relating to this Agreement
shall be governed by the internal substantive laws of the State of
Delaware or federal courts located in Delaware, without regard to
principles of conflict of laws. Each party hereby agrees to jurisdiction
and venue in the courts of the State of California for all disputes and
litigation arising under or relating to this Agreement.
INTEL CORPORATION LICENSEE
By: ______________________________ By: ____________________________
Printed Name: ____________________ Printed Name: __________________
Title: ___________________________ Title: _________________________
Date: ____________________________ Date: __________________________
PAGE 17 OF 27
<PAGE>
EXHIBIT A
LICENSED SOFTWARE DESCRIPTION, MILESTONES, ROYALTY AND AUTHORIZED TERRITORY
1. Description of End User Object Code Software
- ------------------------------------------------
LANDesk Client Manager software, Version 3.x.
2. Description of OEM Utility Software and related materials
- ----------------------------------------------------------------
LANDesk Client Manager Software Development Kit for Version 3.x
LANDesk Client Manager Technical Documentation (Internal use developer and tech
notes) for Version 3.x
3. Milestones for Delivery of Licensed Software.
- -------------------------------------------------
Delivery Date from Intel: [*]
4. Royalty For Licensed Software
- ---------------------------------
In consideration for the rights granted under this Agreement and for each OEM
Software License Agreement entered into between Licensee and an OEM Sublicensee,
Licensee shall pay to Intel a per copy royalty for each Royalty Unit of the
Licensed Software made by the respective OEM Sublicensees. The royalties due to
Intel from Licensee for the Licensed Software shall be determined separately
for, and without aggregation of, each OEM Software License Agreement in
accordance with the volume base royalty schedule set forth below. [*]
VOLUME BASED ROYALTY SCHEDULE
[*]
(in thousands of Units)
<TABLE>
<CAPTION>
0 - 50Ku 50 - 100Ku 100 - 250Ku 250 - 500Ku
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per unit royalty due to [*] [*] [*] [*]
Intel from Licensee
for each Royalty Unit
shipped by its OEM
Sublicensee
</TABLE>
Such royalties will be paid as follows:
For each OEM Sublicense granted by Licensee with a [*] volume [*] greater than
[*] Units, upon execution of the OEM Software License Agreement between Licensee
and the OEM Sublicensee, Licensee agrees to pay to Intel a pre-paid royalty
equal to [*] of the [*] volume of Royalty Units committed by the OEM Sublicensee
in its respective OEM Software License Agreement with Licensee. This pre-paid
royalty shall be tracked by Licensee and applied to the first [*] percent ([*]%)
of Royalty Units distributed by such OEM Sublicensee as set forth above until
fully earned. After the [*] percent ([*]%) pre-paid royalty for the respective
OEM Sublicensee is drawn down to zero based upon actual volume of Royalty Units
made and distributed, licensed or sold by such OEM Sublicensee, Licensee shall
pay to Intel the per copy royalty as set
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 18 OF 27
<PAGE>
forth in this Agreement for each Royalty Unit made and distributed, licensed or
sold by the respective OEM Sublicensee.
For purposes of tracking authorized Royalty Units of the Licensed Software, upon
execution of the OEM Software License Agreement between Licensee and the OEM
Sublicensee, Licensee agrees to provide the OEM Sublicensee with serialized
labels in an amount sufficient to cover such OEM Sublicensee's [*] volume [*] of
Royalty Units and to require in its respective OEM Software License Agreement
that the OEM Sublicensee affix one label to each Royalty Unit made and
distributed, licensed or sold by the OEM Sublicensee. Licensee shall contact
Intel immediately upon becoming aware of any unauthorized copying and/or
distribution of the Licensed Software and shall take active steps to prevent
such in the same measure as which Licensee takes to prevent unauthorized copying
and/or distribution of its own software products.
Intel and Licensee understand and agree that the volume based royalty rates for
a new release of the Licensed Software beyond the release specified above may be
higher due to increased features and functionality, and that any such royalty
increase will be mutually agreed upon by the parties prior to delivery of a
master copy of any such release to Licensee.
4. Royalty Review
- ------------------
The royalty set forth in this Exhibit A for each OEM Sublicensee shall be
reviewed by Intel and Licensee during an account review at the end of each
calendar quarter throughout the term of this Agreement and any renewal period
thereof.
At the end of each review period, the Licensed Software royalty due to Intel
from Licensee may be adjusted for the respective OEM Sublicensee based on (i)
the OEM Sublicensee's actual distribution quantities; (ii) the then current
Intel volume based royalty schedule for the Licensed Software; and (iii) good
faith negotiations and mutual agreement between the Parties' authorized
representatives. In the event of a change in the royalty due to the addition of
a new Intel Release, an amendment to this Agreement to such effect will be
executed by mutual written agreement of the parties which will specify the new
royalty for the new Intel Release and the effective date therefor. Until such
agreement and amendment is made by the parties, the then current royalty for the
Licensed Software will remain in effect.
5. Authorized Territory
- ------------------------
[*]
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 19 OF 27
<PAGE>
EXHIBIT B
INTEL ATTRIBUTION REQUIREMENTS
1.0 TEXT ATTRIBUTION/GENERAL OVERVIEW:
----------------------------------
1.1 These Attribution Requirements set forth the treatment and use of the
Intel text attribution for the Licensed Software ("Text Attribution"), on OEM
Sublicensee Products, and on marketing, advertising, announcements, packaging,
manuals, instruction materials, documentation, presentations, brochures,
catalogs, point of purchase displays and other similar collateral ("Materials").
Compliance with these Attribution Requirements is solely the responsibility of
the respective Licensed Party hereunder and Licensee shall make compliance
therewith a contractual obligation in its OEM Software License Agreement with
OEM Sublicensees.
1.2 "LANDesk" is a registered trademark of Intel Corporation. Failure of
any Licensed Party to comply with the Attribution Requirements, as set forth
below, or in the main body of this Agreement shall be a material breach of the
Agreement.
2.0 USE OF TEXT ATTRIBUTION:
------------------------
2.1 When a Licensed Party promotes, represents, or otherwise refers to the
capabilities and/or functions of the Licensed Software in Materials, the
Licensed Party shall use the Text Attribution in the manner set forth in Section
3.0 of this Exhibit B. The Licensed Party shall use the Text Attribution only
in conjunction with OEM Sublicensee Product(s). No Licensed Party shall use the
Text Attribution on or in connection with any other products, goods, or
services, and particularly not on novelty items or T-Shirts.
2.2 The Licensed Party shall not use the Text Attribution in a manner that
may cause confusion as to the source or origin of the products or services being
offered.
2.3 The Licensed Party shall correct any deficiencies in its use of the
Text Attribution, and cease and desist from further publication or distribution
of the offending Materials in accordance with Section 6.4 of the Agreement.
2.4 The Licensed Party shall refrain from falsifying or misrepresenting
any reference to the Text Attribution in its Materials.
3.0 TEXT ATTRIBUTION:
-----------------
3.1 A Licensed Party shall refer to the Licensed Software only as "LANDesk
Client Manager software".
3.2 Examples of acceptable ways to use Text Attribution:
(a) "Licensee Product includes the Intel LANDesk Client Manager
software.)
(b) Licensee is building a Server box and includes Intel LANDesk
Server Manager software as an option.
(c) Licensee buys and resells Intel LANDesk Workgroup Manager
software.
3.3 A Licensed Party shall not use the following markings in any way or in
any activities related to its products:
(a) Intel dropped "e" brand logo.
(b) Any alteration of an existing Intel logo.
(c) Intel Technology Inside or other verbiage not referring to Intel
product by definition.
(d) Intel "LAN man" logo.
(e) Changing Intel Look and Feel on software installation CD, Manual,
or splash screens.
PAGE 20 OF 27
<PAGE>
EXHIBIT C
LICENSEE AND INTEL SUPPORT
Each Party shall provide the following level of support to the other.
1. RESPONSIBILITIES
----------------
Licensee shall be responsible for supporting its OEM Sublicensees and shall
require in its OEM Software License Agreements with its OEM Sublicensees,
that the OEM Sublicensee is responsible for supporting their respective
customers and Distributors and Distributor's customers ("First and Second
Level Support") and shall clearly communicate to its customers and
Distributors that it is responsible for such support. OEM Sublicensees may
also choose to have their respective Distributors also provide support to
purchasers of their respective OEM Sublicensee Products. In such case, the
OEM Sublicensee will provide back up support and training for such
Distributors. In no event will Intel will Intel be required to provide any
support to OEM Sublicensees or their respective customers and/or
Distributors. If Intel receives calls from OEM Sublicensee's customers,
Distributors or Distributors' customers, it may refer such calls to
Licensee for disposition.
2. TRAINING
--------
Intel will provide [*] days of training to Licensee at no charge at Intel's
factory training facilities in [*]. In the event that Licensee determines
that additional training is required for its needs, Licensee may request an
additional day be added to such training at no additional charge, subject
to Intel's prior written approval of a Licensee proposed training agenda
for the additional day. A fourth day may be added to such training at a
cost of [*] Dollars ($[*]) and submittal by Licensee and approval by Intel
of a Licensee proposed training agenda. Additional on-site training may be
provided upon request by Licensee for a fee of [*] Dollars ($[*] -U.S.
currency) per day plus travel and lodging expenses.
Training will be provided by Intel as set forth in the preceding paragraph
for each major Intel release (see Section 6 below) of the End User Object
Code Software. Additionally, Licensee may request, at no additional
charge, training supplied by Intel's Taiwan-based field OEM sales support
staff. Such training shall be provided at Intel's sole discretion and is
subject to staff availability and Intel's approval of Licensee's proposed
training agenda.
3. TECHNICAL ADMINISTRATION
------------------------
Intel will designate one or more senior members of the support staff
(Technical Marketing Engineers) to be the technical contacts for the
ongoing relationship between the Parties. Licensee will designate up to two
members of its senior support staff to be the Intel counterparts. This
position will be referred to as the "Technical Administrator". The
respective Technical Administrator from each party will act as the primary
liaison for all technical matters between the parties.
4. OEM UTILITY SOFTWARE AND RELATED MATERIALS
------------------------------------------
Intel will provide Licensee with the OEM Utility Software and related
materials set forth in Exhibit A to assist Licensee in its support of its
OEM Sublicensees.
5. ACCESS TO INTEL MAINTENANCE UPDATES
-----------------------------------
If Intel Maintenance Updates are made by Intel, Intel will notify Licensee
and will provide one copy of the Intel Maintenance Update for evaluation.
If the Intel Maintenance Update is to documentation, it may be provided to
Licensee via Intel's BBS, FaxBack, or Internet service.
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 21 OF 27
<PAGE>
6. INTEL SUPPORT OF SOFTWARE UPDATES, UPGRADES, AND NEW RELEASES:
-------------------------------------------------------------
(a) Intel will provide support to Licensee for Intel point releases (where
Y is point: X.Y) at no additional charge to Licensee.
(b) Intel support and associated charges for Intel major releases (where X
= major: X.Y) will be negotiated by the parties in good faith.
7. ACCESS TO OEM SUBLICENSEE PRODUCTS
----------------------------------
Licensee will acquire and/or otherwise provide access to Intel, at no
charge, to each OEM Sublicensee Product for which Licensee escalates a
support issue to Intel. Intel shall use such OEM Sublicensee Product(s) to
facilitate the testing, reproduction, and resolution of problems which
Licensee has escalated to Intel. Access to such OEM Sublicensee Products
shall be for as long as Intel needs the platforms to assist in resolving
support issues escalated to Intel by Licensee under this Agreement.
8. ESCALATION SCHEDULE AND PROCEDURE
---------------------------------
8.1 All support issues from Licensee will be consolidated by Licensee's
Technical Administrator(s) and then directed to the Intel Technical
Administrator(s). Licensee will be expected to exhaust the support
resources already supplied to them (manuals, release notes, etc.) before
contacting Intel.
Licensee's Technical Administrator will open a call with an Intel Technical
Administrator. An Intel Technical Administrator will be available from
8:30a.m. to 5:30 p.m., Monday through Friday, Taiwan local time, excluding
national holidays. The Intel Technical Administrator will determine
priority and formulate action plans. Action plans may include referral to
Intel's test or development engineering organization as required. If Intel
determines, in its sole discretion, that Licensee support requests are
unreasonable or otherwise not consistent with Licensee's obligations to
support its OEM Sublicensees by first exhausting other available resources,
Intel reserves the right to limit the amount of support time and resources
available hereunder upon prior written notice to Licensee.
9. SUPERSEDED OR "DOWN-REV" VERSIONS
---------------------------------
One-hundred and eighty (180) days after Intel ceases to ship a version of
Licensed Software to any third party, Intel at its sole option may choose
to discontinue support for that version.
10. LICENSED SOFTWARE SUPPORT ROLES AND PROCESSES
---------------------------------------------
The Licensed Software Support Roles and Processes shall be as further
defined in Attachment 1 to this Exhibit C.
PAGE 22 OF 27
<PAGE>
Exhibit C - Attachment #1
LICENSED SOFTWARE SUPPORT ROLES AND PROCESSES
PROBLEM REPORTING, TRACKING AND RESOLUTION
The problem reporting, tracking and resolution process is used to facilitate the
two-way communication between Intel and the Licensee. In order to reduce
confusion and encourage efficiency, Intel requires that all communication with
Intel be done via the assigned Intel OEM FAE and TME. The Intel FAE acts as the
primary contact point into Intel for the Licensee. The Intel OEM TME will
manage the tracking, prioritization and resolution process of development
questions and issues between the Licensee and Intel's development staff. The TME
may call upon Intel engineering department personnel to participate in
conversations relating to development issues. In this way, the Intel FAE/TME
team works as a conduit for all information between the Licensee and Intel,
which assists in ensuring a clear and concise information exchange.
Prior to reporting the problem to Intel, the Licensee should ensure that the
problem is consistently reproducible, and be able to provide a detailed
characterization of the problem. The Licensee should then report the problem to
Intel by completing the OEM Problem Report Form and submitting it to the Intel
OEM TME via mail or FAX. Alternatively, the Licensee may use Email to provide
the required information to Intel, but all necessary information must be
included. The Licensee is responsible for assuring that it either owns or has
the legal right to provide any confidential information that may be included as
part of the problem being reported and that it is adequately protected under a
current Corporate Non-Disclosure Agreement and accompanying Confidential
Information Transmittal Form between the Parties. The Intel TME will employ
reasonable efforts to report the problem to Engineering within one business day.
The TME will then verify all the information and that the problem is not in the
development defect tracking database. Once the TME has verified that the problem
is not already in the database and all information is available from the
Licensee, the problem will be entered in the database.
All issues in the database will be tracked by Intel. In the future, a defect
report may be made available to the Licensee on a mutually agreed to periodic
basis. This report will include the current open issues for the current version
of the LANDesk product and OEM-specific issues.
It is imperative that a consistent and agreed upon definition of problem
severity and response is in place for this process. Intel will use the
following definitions for classification of problem severity and response:
<TABLE>
<CAPTION>
SEVERITY DESCRIPTION
====================================================================================================================================
<C> <S>
1 The defect causes the system to halt or causes persistent data to be corrupted. The system cannot continue.
RESPONSE: Intel will make reasonable efforts to respond to Licensee within [*] business [*] with an acknowledgment of
the error and will make diligent efforts to respond with a fix or workaround within [*]. If no solution has been found
within this time, Intel will develop an action plan and present it to the Licensee within [*] of the initial
notification of the error.
- ------------------------------------------------------------------------------------------------------------------------------------
2 The defect prevents major portions of the program from functioning correctly or causes a major component of the system
not to function with other components of the system. These defects cause the program not to be able to continue but do
not cause the system to crash.
RESPONSE: Intel will make diligent effort to provide a response within [*] and a solution within [*]. If no solution
has been found within this time, Intel will develop an action plan and present it to the Licensee within [*] of the
initial notification of the error.
- ------------------------------------------------------------------------------------------------------------------------------------
3 The defect prevents small portions of the program from functioning correctly. The program could produce incorrect
results, but the errors would not corrupt persistent data.
RESPONSE: Intel will use diligent efforts to provide a solution either as a correction or in a subsequent release of
the product.
- ------------------------------------------------------------------------------------------------------------------------------------
4 The defect is cosmetic or involves usability issues, which means that the screen or other output may not be drawn
correctly, but the program is still running and producing correct results. For usability issues, the user can
accomplish the defined functionality, but it is
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 23 OF 27
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
awkward to do so. This could also include some internal functionality which has been omitted in the interface. The
program can continue normally.
RESPONSE: Intel will use diligent efforts to provide a solution either as a correction or in a subsequent release of
the product.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
It is necessary to delineate between a product deficiency and a product
enhancement. A product deficiency may be related to the product specification,
not its implementation (i.e. product performs according to specification, but
enhancements are desired). Enhancements are assigned different levels of
severity as shown below:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
SEVERITY DESCRIPTION
======================================================================================================
5 Enh - High Important to product success.
- ------------------------------------------------------------------------------------------------------
6 Enh - Med Substantial product improvement.
- ------------------------------------------------------------------------------------------------------
7 Enh - Low Nice to have, but not critical to product success
- ------------------------------------------------------------------------------------------------------
</TABLE>
This definition of severity levels will ensure that Intel and the Licensee are
using the same terminology and are able to assign the appropriate priority to a
given problem report. Intel will not be obligated to create enhancements for
any reason, except at Intel's sole discretion.
PAGE 24 OF 27
<PAGE>
EXHIBIT D
CORPORATE NON-DISCLOSURE AGREEMENT NUMBER [*]
[*]
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 25 OF 27
<PAGE>
EXHIBIT E
MARKETING COMMITMENTS
1. [*]
2. MARKETING MATERIALS:
--------------------
2.1 [*]
2.2 Licensee shall at all times use, and require that OEM Sublicensee's
use, reasonable efforts during the term of this Agreement to ensure that
such materials completely and accurately represent OEM Sublicensee
Product(s) and comply with the Text Attribution Requirements in Exhibit B
of this Agreement.
3. REGISTERED USER: [*]
-----------------
4. PROGRAMS: The Licensee shall require in its OEM Software License
---------
Agreement with OEM Sublicensees that the OEM Sublicensee shall support the
following promotional programs:
(a) include promotional materials related to Licensee Software, which are
provided by Intel.
(b) participate in joint marketing/linking activities on the Internet; and
(c) promote upgrades or enhancements to OEM Sublicensee's customer
marketing database at mutually agreed marketing costs and business
returns.
5. OTHER COMMITMENTS: In accordance with the requirements set forth in this
------------------
Exhibit E, Section 1 above, the Parties agree that other marketing
commitments may be determined at a later date for inclusion in Licensee's
OEM Software License Agreement with a particular OEM Sublicensee. Such
other marketing commitments shall be determined through good faith
negotiations and mutual agreement between the Parties' authorized
representatives.
[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
PAGE 26 OF 27
<PAGE>
EXHIBIT F
LANDESK CLIENT MANAGER V3.0, ADMINISTRATOR CONSOLE SOFTWARE
DESCRIPTION AND SUGGESTED DISTRIBUTION GUIDELINES
BACKGROUND: LANDesk Client Manager version 3.x includes a separate peer-to-peer
management console as a tool for medium and large businesses to reduce the cost
of owning networked PCs. This tool is known as Administrator Console Software.
FUNCTIONAL OVERVIEW: The Administrator Console Software installs on any
Windows(R) 95 or Windows NT(R) based PC. When first launched, it discovers PCs
on the network segment via IP and IPX that are running Common Base Agent (CBA),
a basic component of the LANDesk Client Manager V. 3.X local software. These PCs
are registered with a notification monitor that continually runs in the
background of the administrator's PC and receives any alerts (DMI indicators)
generated by the local notification monitor. The Administrator Console Software
can install and communicate with LDCM V3.X software on PCs via IP or IPX over
the network and receive alerts from these PCs.
SECURITY: Three levels of security for remote access exist with LDCM V3.X:
. None--Administrator has no access rights
. Limited--Administrator can only view inventory
. Full--Administrator can transfer files and view/edit inventory
The default level set for each local installation of LDCM is Limited access.
Only the local user can modify the security level. If the local user grants Full
access for the purposes of remote troubleshooting and problem resolution, or for
any other reason, and does not change the access back to None or Limited access,
then any user of a network PC running the Administrator Software Console can
transfer files and reboot the local user's PC. At the time a remote user
transfers a file in or out of the local user's system, or reboots the system, a
message box momentarily displays on the local user's screen, indicating the
remote user name and type of activity. If the local user does not see or
ignores the message box, then the local user will be unaware of what has
happened. In that event, the only way the local user can determine whether a
remote user has accessed the system, is to manually access the remote access log
file (available from the LANDesk Client Manager software menu) to see what
remote activity has occurred on the system.
REDISTRIBUTION:
Following are distribution criteria to minimize the misuse of Administrator
Console Software by local users, IT administrators or MIS support personnel:
. Distribute directly to administrative personnel via CD or floppy disk
media or via password-protected or registered access on world-wide
web and/or BBS site.
. Do NOT pre-install or include the administrative software on each PC.
. Advise local end users of the necessity to ensure that their
respective systems are set at the appropriate level of security at
all times.
Windows(R) and Windows NT(R) are registered trademarks of Microsoft Corporation.
PAGE 27 OF 27
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement of Award Software International, Inc. on Form S-8 (File No. 333-17607)
of our report dated January 29, 1998 appearing on page 29 of this Annual Report
on Form 10-K of Award Software International, Inc. for the year ended December
31, 1997.
/s/ PRICE WATERHOUSE LLP
San Jose, California
March 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 24,631 23,248
<SECURITIES> 0 0
<RECEIVABLES> 4,345 2,183
<ALLOWANCES> (89) (115)
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,815 27,111
<PP&E> 2,168 1,022
<DEPRECIATION> (801) (339)
<TOTAL-ASSETS> 34,381 28,410
<CURRENT-LIABILITIES> 4,399 3,319
<BONDS> 0 0
0 0
0 0
<COMMON> 22,571 21,269
<OTHER-SE> 7,241 3,822
<TOTAL-LIABILITY-AND-EQUITY> 34,381 28,410
<SALES> 23,367 14,071
<TOTAL-REVENUES> 23,367 14,071
<CGS> 2,590 980
<TOTAL-COSTS> 2,590 980
<OTHER-EXPENSES> 15,136 9,130
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (33) (6)
<INCOME-PRETAX> 6,782 4,507
<INCOME-TAX> 2,102 1,622
<INCOME-CONTINUING> 4,680 2,885
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,680 2,885
<EPS-PRIMARY> .68 .54
<EPS-DILUTED> .61 .47
</TABLE>
