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EXHIBIT 10(u)
ERGOBILT, INC.
0000 Xxxxxx-Xxxxx 000
Xxxxxx, Xxxxx 00000
Tel (000) 000-0000 Fax (000) 000-0000
January 8, 1997
Xx. Xxxxx X. Xxxxxxxxx
Metamorphosis Design & Development, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Dear Win:
As we have discussed, ErgoBilt is interested in purchasing from you and
Metamorphosis (1) all intellectual property rights relating to the
Metamorphosis work station, boogie board, tilt mechanism, power station, and
computer processing unit, (2) an assignment of the license agreement with
X'Xxxxxxxx, Inc., and (3) all other patents pending, designs, and future
patents, designs, and other intellectual property rights of Metamorphosis or
you, including the Metamorphosis chair/seating concept (XXX) currently under
development.
The purchase price for all of these assets would include the following:
(1) $500,000 cash, $300,000 of which Metamorphosis would use
for such product development as you and ErgoBilt may agree upon.
(2) ErgoBilt would make contingent payments for intellectual
property acquired as follows:
(A) an additional $350,000 if ErgoBilt's cumulative
after tax earnings from the sale or licensing of
Metamorphosis-related products reaches $500,000 within three
years after closing, plus an amount equal to 70% of net income
in excess of $500,000 from all such sales or licensing during
the three-year period;
(B) amounts payable pursuant to (2)(A) would be due
quarterly beginning within a reasonable time after the quarter
in which the $500,000 has been earned from Metamorphosis-related
products and continuing each subsequent quarter up to and
including but not continuing after the third anniversary of the
closing; and
(C) in no event would amounts payable pursuant to
(2)(A) exceed $5,000,000.
(3) ErgoBilt would issue five-year warrants to purchase
150,000 shares of unregistered ErgoBilt common stock at a price per
share equal to the last reported sale price on the NASDAQ
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Xx. Xxxxx X. Xxxxxxxxx
January 8, 1997
Page 2
National Market System on the closing date, exercisable beginning on the
first anniversary of the closing.
Additionally, if ErgoBilt is sold for at least $350 million or its
market capitalization exceeds that amount for a period of 180 days at any time
within five years after closing, and at such time at least one-third of its
gross revenues are from sales or license fees with respect to products
utilizing the patents, designs, and intellectual property rights that ErgoBilt
acquired from you and Metamorphosis or products derived from such intellectual
property, then ErgoBilt would also pay to Metamorphosis contingent additional
consideration of $10 million in cash or securities, at the option of ErgoBilt.
ErgoBilt would license to you and Metamorphosis the right to make and
sell turnkey integrated workstations that include a power station and computer
processing unit ("CPU") or to make or license for sale the CPU on a
stand-alone basis. ErgoBilt would receive a fee of 3.0% on gross sales of all
products sold under this license.
The consummation of any transaction on the terms described in this
letter is expressly conditioned on the following:
1. ErgoBilt's satisfactory completion of its due diligence review.
2. Our good faith negotiations toward and execution of a
definitive agreement with additional terms, conditions, representations, and
warranties acceptable to all parties.
3. If any of us desires to terminate negotiations at any time
before a definitive agreement is executed, then we will so advise the other
parties in writing, and may do so without any obligation or liability. Until
such termination, however, you agree not to negotiate with any other parties
with respect to the sale of assets covered by this letter.
This letter is only a proposal and not a contract. None of us will be
entitled to any recourse if, for any reason, we fail to agree on and enter
into a definitive agreement.
If you agree to move forward with the possible sale of assets and
options on the terms outlined in this letter, please sign, date, and return the
enclosed copy of this letter.
Very truly yours,
/s/ XXXXXX XxXXXXXX
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Xxxxxx XxXxxxxx, Chairman of the Board
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Xx. Xxxxx X. Xxxxxxxxx
January 8, 1997
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AGREED this 8th day of January 1997.
METAMORPHOSIS DESIGN & DEVELOPMENT, INC.
By: /s/ XXXXX X. XXXXXXXXX
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Xxxxx X. Xxxxxxxxx, President
/s/ XXXXX X. XXXXXXXXX
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Xxxxx X. Xxxxxxxxx, in his individual capacity
