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EXHIBIT 10.24
March 11, 1996
Mr. George Meredith
Executive Vice President
Life Sciences & Corporate Services
3M
220-13W-39
Maplewood, MN 55144-1000 Via Telefax 612-736-8715
Re: LETTER OF INTENT for Purchase of Certain Assets of 3M Hearing Health
Business
Dear Mr. Meredith:
The purpose of this letter is to outline the manner in which we (the "Buyer")
propose to acquire from Minnesota Mining and Manufacturing Company (the
"Corporation") all the assets, tangible and intangible, owned or used directly
and primarily by the Corporation in connection with its Hearing Health business
(the "Business") including but not limited to those set forth on Exhibit A
attached hereto (the "Assets") and to assume certain specified liabilities of
the Corporation. The parties recognize that the transaction will require further
documentation and approvals, including the preparation and approval of a formal
agreement setting forth the terms and conditions of the proposed purchase
("Asset Purchase Agreement"); nevertheless, they execute this letter to evidence
their intention to proceed in mutual good faith to complete work required to
negotiate terms of an Asset Purchase Agreement that are consistent with this
letter.
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The proposed terms and conditions include, but are not limited to, the
following:
PURCHASE OF
ASSETS: The Buyer will purchase the Assets from the Corporation.
ASSUMPTION
OF LIABILITIES: The Buyer will assume certain liabilities of the
Corporation to be agreed upon by the parties. The Buyer
will not assume nor be liable for any other liabilities or
obligations of the Corporation (including but not limited
to accounts payable and any other amounts owed to third
parties) except as agreed to by the parties.
INDEMNIFICATION: The Corporation shall indemnify and hold harmless the
Buyer against each and every liability and obligation of
the Corporation other than those specifically assumed by
the Buyer and all liabilities, obligations, and costs
relating to the conduct of the Business prior to the
Closing. The Buyer shall indemnify and hold harmless the
Corporation against each and every liability and
obligation of the Business relating to the conduct of the
Business after the closing.
PURCHASE PRICE: The Buyer will pay Corporation $25 million ("Purchase
Price"), payable as follows: $1 million in cash upon the
signing of this letter by both parties and $24 million in
cash at the Closing.
CLOSING: The parties shall execute the Asset Purchase Agreement and
close the transactions contemplated herein (the "Closing")
on or before May 31, 1996.
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ASSET PURCHASE
AGREEMENT: The transaction will be subject to the negotiation and
execution of a definitive Asset Purchase Agreement with
terms satisfactory to Corporation and Buyer. The Asset
Purchase Agreement will contain representations,
warranties, covenants, conditions, and indemnification
provisions customary in transactions of this size and type
and will provide for allocation of the Purchase Price
among the Covenant Not To Compete and the Assets based on
their agreed value and, in addition, shall provide for the
following:
a. Buyer will be licensed to use the trademark "3M" until
the earlier of a) the date Buyer no longer has inventory
bearing the "3M" logo and b) one year following the
Closing (the "License Termination Date"). Buyer shall use
reasonable commercial efforts to transition to the
manufacture of Products without the trademark "3M" and to
sell inventory bearing such trademark before selling
Product without such trademark. Notwithstanding the
foregoing Buyer shall be free to sell Products bearing the
trademark "3M" following the License Termination Date if
such product was in inventory as of the Closing or
returned to inventory as a result of a return for
reimbursement or credit in accordance with customary
practice. Buyer is hereby licensed for a period of five
years following the Closing to reference 3M, subject to
3M's prior written approval of said reference, which
approval shall not unreasonable be withheld, as one of the
sources of the technology used in any ReSound product so
long as such product embodies the technology included in
one of the patents included among the Assets.
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b. Standard Sellers representations regarding selected
financial data, liabilities, inventory, employees, and
stating that Corporation's disclosures are materially
complete, accurate, and not misleading.
c. Buyer will be allowed for two years following the
Closing on a rent-free basis to retain the use of the
facilities currently used by the Business, such additional
space as is required for the transfer of certain employees
of the Business from their current office at the
Corporation to the facility currently occupied by the
Business and to accommodate additional personnel as are
required to grow the business at a mutually agreed upon
growth rate and square footage allowance. Notwithstanding
the foregoing, Buyer will be responsible for non-rent
costs related to Buyer's use of facilities including but
not limited to facility operating expenses, real estate
taxes, telephone and improvement/remodeling expenses.
d. Buyer may offer employment and Buyer's benefit package
to employees of its choice of the Business; Buyer will not
be responsible for relocating or severing those employees
who decline Buyer's offer or to whom no offer was given or
who return from disability leave; Corporation, at the
Closing, will pay all employees in cash for vacation
accrued as of the Closing. Buyer agrees to recognize all
years of employment with Corporation as years of service
with Buyer for the purpose of computing years of service
for benefits plan purposes for all of Corporation's
employees who become employees of Buyer at and as a result
of the Closing.
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e. Corporation shall provide the Business, at no charge,
information systems access, information services,
accounting, billing, and cost reports services for thirty
days following Closing. Corporation shall charge Buyer its
cost therefor for 60 days thereafter and for sixty
additional days at cost plus 20%. Upon the signing of this
letter by both parties information service personnel from
both Corporation and Buyer shall promptly meet to develop
a program for the provision of such services.
f. Buyer shall assume all Warranty expenses relating to
Products sold prior to the Closing, including the cost of
returns, remakes and repairs. The term "Warranty expenses"
shall not include the cost of damages, liabilities or
expense relating to personal injury or property damage
cause by or related to such Products.
g. Corporation shall make available to Buyer Corporation's
employees, namely Gabi Sabongi and Terry Rogers, formerly
associated with the Business for consulting purposes
during the three months following the Closing for up to
104 hours per each such employee. Other corporation
employees formerly associated with the Business shall be
made available on a limited basis at the discretion of
Corporation.
h. On the ninetieth (90th) day following Closing,
Corporation shall reimburse Buyer for all accounts
receivable not collected by Buyer by such date, provided
however that the Buyer shall assign such uncollected
accounts to Corporation.
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i. Corporation shall be liable for excessive and obsolete
inventory determined following an evaluation conducted by
Buyer's independent auditors prior to Closing.
j. In the event Buyer cannot or elects not to assume
certain agreements related to the Business, then Buyer and
Corporation will work together in a mutually acceptable
arrangement in order for Corporation to fulfill its
obligations under said agreements. Buyer shall receive a
non-exclusive license to the CID Patents included among
the Assets. Corporation shall not grant another
non-exclusive license for such patents without Buyer's
permission. Corporation will use its best efforts to
assist Buyer to negotiate a direct contractual
relationship with the owner of the CID Patents and will,
if requested by Buyer, assign to Buyer all rights under
its license agreement concerning the CID Patents or
relinquish all its rights under such agreement.
k. Corporation shall grant Buyer a royalty free license
for any patent used in the Business but not part of the
Assets.
ACCESS: To permit Buyer to conduct its due diligence
investigation, from March 20, 1996 and as long as this
Letter of Intent remains in effect, the Corporation will
permit the Buyer and its agents to have reasonable access
to the premises in which the Corporation conducts the
Business and to its books and records and will furnish to
Buyer such financial data, operating data, and other
information as Buyer shall reasonably request. The Buyer
agrees to retain all information so obtained from
Corporation on a confidential basis. Upon the termination
of this Letter of Intent for
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any reason, the Buyer shall return promptly to the
Corporation all printed information received by the Buyer
from the Corporation in connection with the proposed
transaction.
ORDINARY COURSE
OF BUSINESS: The parties agree that the Business will be operated from
the date hereof through the Closing in the ordinary course
of its business, consistent with past practices. Without
limiting the foregoing, there shall be no change in
accounting policies applied on a consistent basis and no
accruals for payment of investment bankers or counsel fees
with respect to the transaction for the Buyer or the
Corporation. There shall not be any change in or
restrictions placed on the payment of liabilities pending
the Closing. There shall not be any change in the method
by which bonuses or other payments are made to employees
of the Business.
EXCLUSIVITY: The parties agree to negotiate in good faith the
provisions of an Asset Purchase Agreement not later than
June 15, 1996 ("Exclusivity Period"). The parties agree
that during the Exclusivity Period the Buyer shall have
the exclusive right to negotiate with the Corporation for
the purchase of the Assets and during such Exclusivity
Period the Corporation agrees not to directly or through
intermediaries solicit, entertain or otherwise discuss
with any person any offers to purchase all or any portion
of the Assets or of the Business out of its ordinary
course of business.
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EARNEST
PAYMENT: Buyer and Corporation recognize that Corporation has
provided to Buyer valuable competitive and proprietary
information regarding the Business including but not
limited to information regarding the Business' customers,
products, manufacturing operations and personnel. Buyer
and Corporation each further recognize that in the event
the aforementioned transaction is not consummated, then
Corporation's Business will be irreparably damaged and
harmed. Accordingly, Buyer agrees that the first One
Million Dollars ($1,000,000) of the Purchase Price
referred to above shall constitute an earnest payment (the
"Earnest Payment") to be deposited immediately upon
payment in an interest bearing account at a reputable
institution acceptable to both Buyer and Corporation with
all interest accrued on such amount prior to the Closing
or the date the parties reasonably conclude that the
transaction contemplated hereby will not occur ("the
Termination Date"), whichever occurs first, to be paid to
Buyer. In the event the transaction is not consummated due
to (i) the failure to obtain the receipt of all required
approvals, consents and authorizations of state and
federal regulatory authorities, including but not limited
to expiration without regulatory challenge of the required
waiting period under the Hart-Scott-Rodino Improvements
Act of 1986; (ii) a material change in sales revenue or
costs defined as a 20% deviation of the Business; or (iii)
failure to obtain Corporation's management committees'
approval and Corporation's Board of Directors' approval,
then the Earnest Payment shall be returned to Buyer,
otherwise, Corporation retains the right to the Earnest
Payment and all
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interest earned thereon from and after the Termination
Date. In the event the transaction is consummated, then
the Earnest Payment shall constitute the first $1 million
of the Purchase Price.
COVENANT NOT
TO COMPETE: In the Asset Purchase Agreement, Corporation will agree
that it will not, directly or indirectly, through a
subsidiary or otherwise, compete with the Buyer in its
business for a period of five (5) years after the Closing.
NEWS RELEASE: Unless required in the opinion of Counsel, neither
Corporation nor Buyer will issue a news release or other
announcement concerning the transaction without the prior
approval of the other as to the contents of the
announcement and its release, which approval will not be
unreasonably withheld.
REIMBURSEMENT
OF EXPENSES: Each party shall bear its own cost involved in the
negotiation, documentation and conclusion of the
transaction contemplated herein. Buyer will pay the filing
fee associated with the Hart-Scott- Rodino Improvements
Act of 1986.
This offer is contingent upon: (i) the completion by the Buyer, to its
satisfaction, of due diligence on the Business, its markets, prospects and
potential; (ii) satisfactory completion of legal due diligence, including,
without limitation, review of material
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contracts and due diligence with respect to evaluation of potential liabilities
related to environmental and other issues and tax matters; (iii) receipt of all
required approvals, consents and authorizations of state and federal regulatory
authorities, including but not limited to expiration without regulatory
challenge of the required waiting period under the Hart-Scott-Rodino
Improvements Act of 1986; (iv) receipt of all required consents of third
parties; (v) the occurrence of no material adverse change in sales revenue or
cost, as defined as 20% deviation from forecasts made available to Buyer prior
to the date of this letter; and (vi) the completion of satisfactory legal
documentation including adequate indemnifications and representations; (vi)
Buyer obtaining adequate financing for the Purchase Price on or prior to the
Closing; (vii) approved by appropriate management committees and Boards of
Directors of Buyer and Corporation.
The parties agree that any discussions or information in any form related to the
possible terms of the transaction (including but not limited to valuations of
any of the Assets by either party as part of the negotiations) have been
disclosed in part in contemplation of settlement of the pending patent
litigation involving the parties and shall be inadmissible as evidence in any
patent litigation between the partners should the transaction contemplated
hereby not take place.
This Letter of Intent may be executed in several counterparts and all so
executed shall constitute one letter binding on all the parties hereto even
though all the parties are not signatories to the original or the same
counterpart.
Our signature on this Letter of Intent shall not be valid unless you have
executed and we have received from you a copy of this Letter of Intent with your
original signature on it. If the foregoing is acceptable to you, kindly execute
a copy of this letter to us at your earliest convenience.
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Very truly yours,
RESOUND CORPORATION
By: /s/ Paul Busse
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Paul Busse
Sr. Vice President, Finance & Administration
& Chief Financial Officer
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND
MANUFACTURING COMPANY
By: /s/ George Meredith
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George Meredith
Executive Vice President
Life Sciences & Corporate Services
cc: Peter Riepenhausen
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EXHIBIT A
ASSETS
a. Fixed Assets, machinery, manufacturing equipment, laboratory and test
equipment, and office equipment, raw materials, packaging, factory
supplies, work-in-progress, and finished goods inventories, accounts
receivable, customer lists and business records as may exist at the Closing
(and not materially different in value and quality from those in existence
as of the date of this letter) directly and primarily related to the
Business.
b. Trademarks and trade names specific to the Business, and all associated
goodwill and rights to inventions disclosed by employees of the Business,
patent applications as well as all divisions, reissues,
continuations-in-part, renewals, extensions and counterparts thereof in any
country of all patents relevant to the Business.
c. Corporation's entire right, title, and interest under any claims specific
to the Business against any party which claim arose at any time prior to,
and up to the Closing, including but not limited to all of Corporation's
rights under any claim in any choses in action against Buyer and others
related to intellectual property included in the Assets specific to the
Business, which arose at any time prior to and up to the Closing.
d. The Assets shall not include the agreements related to HearX and the HearX
stock (and rights related to the HearX stock).
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