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EXHIBIT 10.0
[AMPERSAND VENTURES LETTERHEAD]
May 23, 2001
Xx. Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
Sheldahl, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Dear Xxx:
This letter agreement (the "Agreement") is written in response to your request
for a proposal from Ampersand IV Limited Partnership, Ampersand IV Companion
Fund Limited Partnership (collectively "Ampersand") and Xxxxxxxxxxxx Venture
Partners V, L.P. ("Xxxxxxxxxxxx" and collectively with Ampersand the
"Investors") to address the immediate and longer term liquidity and capital
resources requirements for Xxxxxxxx, Inc. ("Sheldahl" or the "Company").
Pursuant to this Agreement, the Investors and Molex Incorporated ("Molex") will
immediately extend $5 million in bridge financing to Xxxxxxxx. In addition, the
Investors will immediately undertake an evaluation of the possible acquisition
by the Investors of certain assets of Xxxxxxxx'x Materials Business (as
hereinafter defined).
While we understand management is aggressively pursuing all avenues for expense
reduction, we understand that the Company will need an immediate cash infusion
of at least $5 million over the next 10 days to strengthen Xxxxxxxx during this
quarter, and substantial additional funding in the future to give the Company
time to restore itself to a positive cash flow.
We further understand that management has been exploring the complete range of
financing alternatives for meeting this need, including investigating other
means of raising capital, and has initiated a variety of actions to dispose of
specific assets, such as the potential sale of the Materials Business. Although
you have initiated discussions with other parties relating to the sale of the
Materials Business, you have also made clear that neither that sale nor other
alternatives you have explored can be brought to closure in the time frame
necessary to address the short-term cash needs of the Company.
Therefore, as a last resort, the Investors are prepared to make the following
accommodation to the Company:
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o provide an immediate cash infusion of $5 million in the form of a secured
subordinated loan; and
o initiate due diligence analyses and enter into negotiations to acquire the
Materials Business for cash in a leveraged buyout transaction.
These transactions would be designed to accomplish several simultaneous
objectives, including:
o to provide Xxxxxxxx with the cash that is necessary to solve its immediate
needs, without creating any additional dilution for the Company's current
shareholders; and
o to provide Xxxxxxxx with an opportunity to pursue other potential buyers of
the Materials Business while the Investors evaluate the purchase.
Let us hasten to add that the Investors are motivated by the desire to protect
Xxxxxxxx and the Investors' current investment in Xxxxxxxx rather than by a
desire to purchase the Materials Business.
Each of the parties hereto acknowledges agreement in principle to the following
terms and conditions of the transaction and agrees that it will proceed in good
faith in negotiating any refinements and clarifications of such terms and the
proposal of any additional terms. It is expressly agreed that the terms of this
Agreement shall be legally binding. The parties hereto also agree that the
consummation of the purchase of the assets of the Materials Business of Xxxxxxxx
is expressly conditioned on agreement on price, and is subject to the
finalization of a definitive acquisition agreement, the satisfactory completion
of a due diligence investigation of Xxxxxxxx'x Materials Business and the
completion of a debt financing in the form of term debt and a working capital
revolver in favor of NEWCO (as hereinafter defined) to fund a portion of the
purchase price of the Materials Business, transaction costs and working capital.
In consideration of the foregoing, the Investors and Xxxxxxxx hereby agree as
follows:
1. Loan Financing. Simultaneously with the execution of this Agreement, the
Investors and Molex have agreed to loan the Company $5 million (the "Loan")
pursuant to the Subordinated Secured Note Purchase Agreement attached hereto as
Exhibit A (the "Note Purchase Agreement").
2. Negotiation for Purchase of Materials Business. The Investors and Xxxxxxxx
shall negotiate in good faith towards the purchase by a new company to be
created by the Investors ("NEWCO") and sale by Xxxxxxxx of all of the assets and
certain liabilities of the Materials Business in the manner set forth below:
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(a) Assets. NEWCO will purchase all of the assets of the Materials
Business, including, but not limited to: Accounts Receivable,
Inventory, Plant, Property and Equipment, Patents, Trademarks,
Know-How, Formulae, Customer Lists and other intangible property
necessary for or used in the conduct of the Materials Business. For
the purposes of this Agreement "Materials Business" shall mean
Xxxxxxxx'x adhesive-based tapes, laminates and composite materials
business, excluding the Company's Accentia, Comclad and lithium
batteries products and assets associated exclusively with these
products. The Materials Business shall also exclude Xxxxxxxx'x
flexible interconnect division including Novaclad, Novaflex and
Flexbase products and assets associated exclusively with that
division. The parties will work out acceptable arrangements with
respect to shared assets.
(b) Retained Liabilities. Xxxxxxxx will retain, and be responsible for,
the eventual repayment of the outstanding loan balance due to Xxxxx
Fargo, which is estimated to be approximately $25 million at closing,
as well as all liabilities associated with the $5 million Loan
financing extended by the Investors. While it is XXXXX's intention to
assume all of the ordinary course liabilities associated with
Xxxxxxxx'x Materials Business, NEWCO will only assume those
liabilities that are scheduled at closing and Xxxxxxxx will indemnify
NEWCO against any claims relating to any unscheduled liabilities or
encumbrances pertaining to the purchased assets. Xxxxxxxx will retain
its interest in Sidrabe and in the joint venture with Molex
Incorporated.
3. Timing. The Investors and Xxxxxxxx will use their best efforts to negotiate
the sale of the Materials Business and close the sale as soon as possible, with
a target of 75 days from the date of execution of this Agreement by all the
parties hereto (the "Signing Date"). The Investors shall immediately begin to
conduct their due diligence investigation regarding the Materials Business. In
any event, this Agreement will expire at the earlier of 90 days from the Signing
Date or the signing of a definitive agreement by the parties. Subject to the
sections entitled Delayed Exclusive Purchaser Clause, Liability of Xxxxxxxx Upon
Certain Events and Transaction Costs below, this Agreement may be terminated (a)
by written notice by Xxxxxxxx or the Investors at any time during the first 60
days after the Signing Date, or (b) by the mutual written consent of Xxxxxxxx
and the Investors at any time after the first 60 days after the Signing Date.
4. Delayed Exclusive Purchaser Clause. During the first 60 days following the
Signing Date, Xxxxxxxx, its agents or representatives will be free to engage in
conversations with, solicit or consider proposals from, or enter into
non-exclusive letters of intent or agreements with, any other party regarding
acquisition or investment with respect to the Materials Business assets, and
provide information to such parties to the extent such information does not
violate the terms of this Agreement.
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Notwithstanding the foregoing, if during this 60-day period Xxxxxxxx receives a
proposal (letter of intent, agreement in principle, purchase agreement, or other
like agreement) and Xxxxxxxx desires to enter into an exclusive relationship
with that party regarding the sale of the Materials Business to such party,
then, subject to the remainder of the terms of this Agreement (including the
section entitled Liability of Xxxxxxxx Upon Certain Events), Xxxxxxxx shall be
free to enter into an agreement with such party. In such an event, Xxxxxxxx
shall be required to repay Investor's and NEWCO's legal, consulting, due
diligence or other expenses related to the pursuit of this transaction, in an
amount not to exceed $300,000, in accordance with the section entitled
Transaction Costs. In addition, if Xxxxxxxx enters into any agreement that
contains exclusivity provisions regarding the sale of the Materials Business or
any financial obligations on the part of Xxxxxxxx to any potential acquirer in
the event the business is not acquired by such potential acquirer, then Xxxxxxxx
must arrange for repayment in full of the Loan by such potential acquirer to the
Investors and Molex in accordance with the terms of the Note Purchase Agreement
and a transfer or assignment of the Loan to such potential acquirer.
If, after the first 60 days following execution of this Agreement, Xxxxxxxx has
not given the Investors written notice that Xxxxxxxx is terminating this
Agreement, then the negotiations with the Investors to purchase the assets of
the Materials Business shall become exclusive. Therefore, from that point
forward, during the term of this Letter Agreement, Xxxxxxxx, its agents,
directors, officers, employees or representatives (each a "Xxxxxxxx
Representative") will not be free to engage in conversations with, or solicit or
directly or indirectly consider proposals from, any other party regarding an
alternative acquisition or investment with respect to the Materials Business
assets. Any overtures that Xxxxxxxx or any Xxxxxxxx Representative receives from
a third party shall be immediately referred to the Investors. During the term of
this Letter Agreement neither Xxxxxxxx nor any Xxxxxxxx Representative will take
or omit to take any action that would result in a violation of the section of
this Agreement entitled Liability of Xxxxxxxx Upon Certain Events.
5. Liability of Xxxxxxxx Upon Certain Events. In the event that any of the
following shall occur prior to the 90th day after the Signing Date:
(a) Xxxxxxxx terminates this Agreement unless such termination results
from a breach by the Investors of any material provision of this
Agreement or the termination occurs as a result of the provisions of
(c) below, in which case the provisions of (c) shall apply;
(b) Xxxxxxxx closes an agreement for the sale of the Materials Business
with another buyer; or
(c) Xxxxxxxx enters into a letter of intent, agreement in principle or any
other agreement with any other party regarding the sale of the
Materials Business, provided that Xxxxxxxx'x obligation to pay the
Investors as provided below shall not be triggered until the closing
of such sale of the Materials Business,
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then Xxxxxxxx shall, within two business days after demand therefor by the
Investors, (i) pay to the Investors, in connection with this Agreement and the
transaction contemplated hereby, $900,000 plus an amount equal to all
out-of-pocket expenses and legal fees incurred by the Investors and NEWCO, not
to exceed $300,000 in cash, certified check or bank cashier's check to the
extent not previously paid, and (ii) assure that any outstanding principal and
accrued interest on the Loan provided by the Investors is repaid to the
Investors in full, provided however, that the timing of the obligations
hereunder shall be subject to the terms of that certain Subordination Agreement
among the Investors, Molex, the Company and Xxxxx Fargo Bank Minnesota, N.A.
dated this date.
6. Access. During the term of this Agreement, Xxxxxxxx will cooperate fully in
granting the Investors access to Xxxxxxxx'x premises, to all of Xxxxxxxx'x books
and records, and to Xxxxxxxx'x customers, suppliers, employees and independent
accountants to the extent related to the Materials Business.
7. Press Releases. Except as required by law, the timing and content of all
press releases and public statements concerning this transaction shall be made
by the mutual agreement of Xxxxxxxx and the Investors. The Investors acknowledge
that Xxxxxxxx will disclose this Agreement and the transactions contemplated
hereby in its filings under the Securities Exchange Act of 1934, as amended.
8. Transaction Costs. In the event that the Investors or NEWCO enter into a
definitive agreement with Xxxxxxxx to acquire the assets of the Materials
Business, Xxxxxxxx will bear all of its own and all of the Investors' and
NEWCO's out-of-pocket costs incurred in connection with this transaction, not to
exceed $300,000. In any other event (other than a material breach by the
Investors of their obligations hereunder), including, without limitation, (a)
the failure of the parties hereto to enter into a definitive agreement within 90
days of the Signing Date; or (b) the occurrence of any of the events specified
under the section entitled Liability of Xxxxxxxx Upon Certain Events, Xxxxxxxx
shall pay to the Investors an amount equal to all out-of-pocket expenses and
legal fees incurred by the Investors in connection with the transaction
contemplated by this Agreement, provided, however, such amount shall not exceed
$300,000.
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If you are in agreement with the foregoing, please execute and deliver to us the
enclosed copy of this letter.
AMPERSAND IV LIMITED PARTNERSHIP
By: AMP-IV Management Company Limited
Liability Company
By /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Its: Managing Member
AMPERSAND IV COMPANION FUND LIMITED
PARTNERSHIP
By: AMP-IV Management Company Limited
Liability Company
By /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Its: Managing Member
XXXXXXXXXXXX VENTURE PARTNERS V, L.P.
By /s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
Its: General Partner
ACCEPTED AND AGREED TO:
XXXXXXXX, INC.
By /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
Its: President and CEO
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