ASSET PURCHASE AGREEMENT
TMS, INC., an Oklahoma corporation
PIC ACQUISITION, INC., an Oklahoma corporation
PEGASUS IMAGING CORPORATION, a Florida corporation
Dated as of August 5, 2004
TABLE OF CONTENTS
Page
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1. DEFINITIONS..............................................................1
1.1 Defined Terms......................................................1
2. PURCHASE AND SALE OF PURCHASED ASSETS....................................4
2.1 Purchased Assets...................................................4
2.2 Assumed Liabilities................................................5
2.3 Non-Assumption of Liabilities......................................5
2.4 Patent License; Relationship.......................................5
2.5 Conveyance of the Purchased Assets.................................5
2.6 Additional Consideration for Purchase of Assets....................5
2.7 Payment of Purchase Price..........................................5
2.8 Adjustment Amount..................................................6
2.9 Adjustment Procedure...............................................6
2.10 Operation of Business after Closing Balance Sheet Date.............7
2.11 Prorations.........................................................7
3. CLOSING AND POST CLOSING MATTERS.........................................8
3.1 Time and Place of the Closing......................................8
3.2 Procedure at Closing...............................................8
3.3 Accounts Receivable; Promissory Note Adjustment....................8
4. REPRESENTATIONS AND WARRANTIES OF TMS....................................9
4.1 Due Organization...................................................9
4.2 Power and Authority...............................................10
4.3 Authority for Agreement...........................................10
4.4 No Violation to Result............................................10
4.5 Title to Purchased Assets.........................................10
4.6 Brokers...........................................................11
4.7 Financial Statements..............................................11
4.8 Pending Litigation................................................11
4.9 Contracts.........................................................12
4.10 No Material Adverse Effect........................................12
4.11 Compliance with Existing Laws.....................................12
4.12 Accounts Receivable...............................................12
4.13 Employees.........................................................13
4.14 Employee Benefit Plans............................................13
4.15 Personal Property.................................................14
4.16 Leased Real Property..............................................14
4.17 OSHA..............................................................14
4.18 Taxes.............................................................14
4.19 Insurance.........................................................15
4.20 Adequacy of Purchased Assets......................................15
4.21 Credit Cards......................................................15
4.22 Intangible Property...............................................15
4.23 Proprietary Information of Third Parties..........................16
4.24 Solvency..........................................................17
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE PARENT..............17
5.1 Organization......................................................17
5.2 Power and Authority...............................................17
5.3 Authority for Agreement...........................................17
5.4 No Violation to Result............................................18
5.5 Brokers...........................................................18
5.6 Financial Ability; No Material Adverse Effect.....................18
5.7 Diligence.........................................................18
6. COVENANTS...............................................................18
6.1 Confidentiality...................................................18
6.2 Regulatory and Other Approvals....................................19
6.3 Reasonable Efforts................................................19
6.4 Allocation of Purchase Price......................................20
6.5 Employee Matters..................................................20
6.6 Professional Fees.................................................20
6.7 Access And Investigation..........................................20
6.8 No Solicitation...................................................21
6.9 Use of Assets During Transition...................................21
6.10 Payment of Vendors and Other Indebtedness.........................21
6.11 Sales and Transfer Taxes..........................................22
6.12 Conduct of the Business...........................................22
6.13 TMS Name..........................................................23
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TMS..............................23
7.1 Representations and Warranties True at the Closing Date...........24
7.2 Performance.......................................................24
7.3 No Litigation.....................................................24
7.4 Governmental, Regulatory and Other Consents and Approvals.........24
7.5 Good Standing Certificates; Corporate Resolutions.................24
7.6 Deliveries........................................................24
7.7 Shareholder Approval; Fairness Opinion............................25
7.8 VSC LLC Interest..................................................25
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND THE PARENT.........25
8.1 Representations and Warranties True as of the Closing Date........25
8.2 Performance.......................................................25
8.3 No Litigation.....................................................25
8.4 Good Standing Certificates; Corporate Resolutions.................25
8.5 Deliveries........................................................25
9. INDEMNIFICATION.........................................................26
9.1 General Indemnification...........................................26
9.2 Procedure and Limitation..........................................27
10. GENERAL.................................................................27
10.1 Termination.......................................................27
10.2 Effect of Termination.............................................28
10.3 Successors and Assigns............................................28
10.4 Entire Agreement..................................................28
10.5 Counterparts......................................................28
10.6 Expenses..........................................................28
10.7 Specific Performance; Remedies Not Exclusive......................28
10.8 Notices...........................................................29
10.9 Governing Law.....................................................30
10.10 Arbitration.......................................................30
10.11 Survival of Representations, Warranties and Covenants.............31
10.12 Severability......................................................31
10.13 Absence of Third Party Beneficiary Rights.........................31
10.14 Press Releases and Announcements..................................31
10.15 Further Representations...........................................32
10.16 Amendment; Waiver.................................................32
10.17 Gender............................................................32
10.18 Continuing Access to Records......................................32
10.19 No Strict Construction............................................32
10.20 Knowledge.........................................................32
10.21 Headings..........................................................33
10.22 Further Action; Future Cooperation................................33
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (together with the schedules and exhibits
attached hereto, this "Agreement") is entered into effective as of August 5,
2004 (the "Effective Date"), by and among (i) TMS, INC., an Oklahoma corporation
("TMS"), and (ii) PIC ACQUISITION, INC., an Oklahoma corporation (the "Buyer")
and (iii) PEGASUS IMAGING CORPORATION, a Florida corporation (the "Parent").
A. TMS is engaged in the computer software business and develops, sells and
maintains assessment scoring products which are part of the Retained Assets (as
defined herein) and develops, sells and maintains custom and standard imaging
software products and services (the "Business") and owns certain assets which
are further described below; and
B. The Buyer desires to purchase the Business, as a going concern,
including the Purchased Assets (as defined below), and TMS desires to sell the
Purchased Assets, on the terms and conditions set forth in this Agreement (the
"Asset Purchase").
In consideration of the foregoing, the mutual promises in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 Defined Terms. As used herein, the terms defined below shall have the
following meanings. Any of these terms, unless the context otherwise requires,
may be used in the singular or plural depending on the reference.
"Accountants" shall have the meaning given to such term in Section 2.9.
"Adjusted Purchase Price" shall have the meaning given to such term in
Section 2.6.
"Asset Purchase" shall have the meaning given to such term in the Recitals.
"Assumed Contracts" shall have the meaning given to such term in Schedule
2.2 hereof.
"Assumed Liabilities" shall have the meaning given to such term in Section
2.2.
"Balance Sheet" shall have the meaning given to such term in Section 4.7.
"Buyer Group" shall have the meaning given to such term in Section 6.7.
"Buyer's Indemnified Parties" shall have the meaning given to such term in
Section 9.1.
"Cash Purchase Price" shall have the meaning given to such term in Section
2.7.
"Closing" shall have the meaning given to such term in Section 3.1.
"Closing Current Net Asset Value" shall have the meaning given to such term
in Section 2.8.
"Closing Date" shall have the meaning given to such term in Section 3.1.
"Closing Statement" shall have the meaning given to such term in Section
2.9.
"Competing Proposal" shall have the meaning given to such term in Section
10.1.
"Confidentiality Agreement" shall have the meaning given to such term in
Section 6.1.
"Current Net Asset Adjustment" shall have the meaning given to such term in
Section 2.8
"Current Net Asset Value" shall have the meaning given to such term in
Section 2.8.
"Damages" shall mean any and all damages, including without limitation, all
liabilities, losses, claims, causes of action, damages, punitive damages,
assessments, judgments, settlement payments, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses,
including, without limitation, reasonable attorneys' fees.
"Education Market" shall mean all customers and potential customers
(including, but not limited to, educational testing companies, private and
governmental departments of education, colleges, universities and similar
institutions) which conduct testing, surveys or otherwise collect and/or archive
information in or for educational systems or institutions.
"Effective Date" shall have the meaning given to such term in the opening
paragraph of this Agreement.
"Effective Time" shall have the meaning given such term in Section 3.1.
"Employee Expenses" shall have the meaning given to such term in Section
2.8.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
security interest, right-of-way, encumbrance, mortgage, deed of trust or other
right, whether existing of record or not, of any kind or nature whatsoever.
"GAAP" shall mean United States generally accepted accounting principles,
consistently applied.
"Initial Note Adjustment Notice" shall have the meaning given to such term
in Section 3.3.
"Intellectual Property" shall mean all (i) patents, patent applications,
patent continuations, patent disclosures and inventions, (ii) trademarks,
service marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with all of the
goodwill associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, including without
limitation, all source and object code and all related flow charts, know-how,
logic diagrams, documentation, manuals, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable official and marketing
plans and customer and supplier lists and information), (vii) other intellectual
property rights, (viii) "technical data" as defined in 48 Code of Federal
Regulations, Chapter 1, and (ix) copies and tangible embodiments thereof (in
whatever form or medium) from all jurisdictions foreign and domestic which TMS
either owns or has rights to as licensee.
"Interim Balance Sheet" shall have the meaning given to such term in
Section 4.7.
"Key Employees" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
and ▇▇▇▇▇▇▇ "▇▇▇▇▇" ▇▇▇▇▇▇, and shall not include ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Liabilities" shall mean, without limitation, any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss, damage, either
accrued, absolute, contingent, mature, unmature or otherwise and whether known
or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated,
secured or unsecured. Without limiting the generality of the preceding sentence,
Liabilities include all obligations and liabilities of TMS (i) not reflected in,
reserved, or accrued against in the Balance Sheet, the Interim Balance Sheet or
the Closing Balance Sheet or any other financial statements of TMS or are in
excess of the amounts reflected in, reserved, or accrued against in such
financials, and (ii) not expressly stated on Schedule 2.2.
"Liquidation Date" shall mean the date, selected by TMS in its sole and
absolute discretion, as of which TMS is liquidated, provided, however, such date
shall not be prior to November 30, 2004.
"Material Adverse Effect" shall mean a change, event, development or effect
that has had or is likely to have a material adverse effect on (i) TMS, the
Purchased Assets or the Business, financial condition, Liabilities, sales or
sales activities related to the Business, or relations with material customers
or material suppliers of the Business, or (ii) the right or ability to
consummate the transactions contemplated hereby; provided, however, that any
adverse change, event, development or effect (x) affecting the United States
economy generally, (y) affecting TMS's or Buyer's (as applicable) industry in
general, or (z) caused by or results from the announcement of this Agreement,
shall not be taken into account in determining whether there has been a
"Material Adverse Effect".
"Note Payment Date" shall mean the date that is fifteen (15) days after the
Liquidation Date, or July 15, 2005, whichever is earlier.
"Note Purchase Price" shall have the meaning given to such term in Section
2.7.
"Patent License" shall have the meaning given to such term in Section 2.1.
"Person" shall mean any person, corporation, partnership, trust,
corporation, business, group, Government or other entity.
"Plans" shall have the meaning given to such term in Section 4.14.
"Purchase Price" shall have the meaning given to such term in Section 2.6.
"Purchased Assets" shall have the meaning given to such term in Section
2.1.
"Retained Assets" shall have the meaning given to such term in Section
2.1(b).
"Shareholder Approval" shall have the meaning given to such term in Section
4.3.
"Subsidiary" shall mean with respect to any Person, any other Person whose
shares of stock or other securities having a majority of the general voting
power in electing the Board of Directors or equivalent governing body of such
Person are, at the time as of which any determination is being made, owned by
such Person, either directly or indirectly through one or more other entities
constituting Subsidiaries.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and other
taxes, assessments or other Government charges, including, without limitation,
income, estimated income, business, occupation, franchise, property, sales,
transfer, use, employment, payroll, commercial rent or withholding taxes,
including interest, penalties and additions in connection therewith.
"Tax Return" means any return, report, information return or other document
(including any related or supporting information) required to be supplied, or
actually supplied, to a Governmental or Regulatory Authority with respect to
Taxes.
"Termination Fee" shall have the meaning given to such term in Section
10.1.
"TMS's Indemnified Parties" shall have the meaning given to such term in
Section 9.1.
"VSC LLC" means VSC Technologies, LLC, a Delaware limited liability
company.
"VSC Agreements" (the agreements related to the VSC LLC and Virtual Scoring
Center(TM) software, described on Schedule 1.1 hereof.
"Work In Process" shall have the meaning given to such term in Section 2.8.
2. PURCHASE AND SALE OF PURCHASED ASSETS
2.1 Purchased Assets. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
conditions in this Agreement, TMS agrees to sell, convey, assign, transfer and
deliver to the Buyer all right, title and interest in and to and the Buyer
agrees to purchase, accept and take possession from TMS, all of the assets,
properties and other rights owned or leased by TMS in and to the Business as a
going concern, including, without limitations, those listed on Schedule 2.1 of
this Agreement (the "Purchased Assets"), free and clear of all Encumbrances,
except the Assumed Liabilities and the VSC Agreement, as they exist at the
Effective Time. Notwithstanding the foregoing, TMS shall not sell, convey,
assign, transfer or deliver, and TMS shall retain the assets listed on Schedule
2.1A (collectively, the "Retained Assets").
2.2 Assumed Liabilities. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
conditions in this Agreement, the Buyer shall assume, discharge and perform when
lawfully due each of the obligations and duties of TMS with respect to the
Purchased Assets, all of which are described on Schedule 2.2 of this Agreement
(the "Assumed Liabilities").
2.3 Non-Assumption of Liabilities. Except for the Assumed Liabilities, the
Buyer shall not assume any Liabilities or Encumbrances of TMS.
2.4 Patent License; Relationship.
(a) As of the Effective Time, TMS or its designee will be granted an
exclusive royalty free license to the patent rights (including the
underlying source code) for DMR(R) technology which includes the DMR
toolkit functionality, DMR image processing application sample code, DMR
demonstration application sample code, and Form ID, Registration and Image
Filtering functionality that work in conjunction with the DMR technology,
for use in the Education Market only (the "Patent License Agreement"). The
Patent License Agreement will be in a form reasonably acceptable to Buyer
and TMS to reflect the terms set forth in Exhibit A.
(b) Notwithstanding the fact that the names "TMS" and "TMS Sequoia"
are transferred to Buyer hereunder, neither Buyer nor Parent will, on or
after the Closing Date, state that TMS or any Subsidiary of TMS is in any
way involved as a partner, joint venturer or otherwise in the business of
the Buyer or Parent or hold themselves out in such capacities.
2.5 Conveyance of the Purchased Assets. On the Closing Date, TMS shall
convey good and marketable title to the Purchased Assets to the Buyer free and
clear of any Encumbrances, other than the Assumed Liabilities.
2.6 Additional Consideration for Purchase of Assets. In consideration for
the transfer, sale and delivery to the Buyer of the Purchased Assets, and in
addition to the assumption of the Assumed Liabilities by the Buyer, the Buyer
shall pay the sum of $2,000,000 (the "Purchase Price") plus or minus the Current
Net Asset Adjustment pursuant to Section 2.8(b) below (as adjusted, the
"Adjusted Purchase Price").
2.7 Payment of Purchase Price. The Buyer shall pay the Adjusted Purchase
Price as follows:
(a) On the Closing Date at the Effective Time, the Buyer shall pay the
amount of $1,600,000 (the "Cash Purchase Price"), as adjusted pursuant to
Section 2.8(c), by a wire transfer of immediately available funds to an
account to be designated by TMS at least two calendar days prior to the
Closing Date; and
(b) On the Closing Date, the Buyer shall deliver a Promissory Note in
the form of Exhibit B in the face amount of the remaining balance of the
Adjusted Purchase Price (the "Note Purchase Price").
2.8 Adjustment Amount.
(a) "Closing Current Net Asset Value" shall be determined by a Closing
Balance Sheet as of September 30, 2004 (the "Closing Balance Sheet Date"),
and shall be determined in accordance with GAAP and prepared in accordance
with the procedure stated in Section 2.9(a). For purposes of this
Agreement, Current Net Asset Value means as of the Closing Balance Sheet
Date (i) all cash and cash equivalents, plus (ii) all accounts receivable,
less the reserve for uncollectible accounts, plus (iii) accrued royalties
in an amount equal to $62,500, and less (iv) all accounts payable and
Employee Expenses, but only to the extent the foregoing deductions are
included in Assumed Liabilities. "Employee Expenses" shall include accrued
payroll, accrued commissions/bonuses, accrued vacation and employment
taxes, accrued in the ordinary course of business, less the amount of
accrued vacation calculated for all technical and business development
staff which will be assumed by the Buyer.
(b) To the extent the Closing Current Net Asset Value is greater than
$1,400,000, the Purchase Price shall be increased on a dollar-for-dollar
basis for such difference. To the extent the Closing Current Net Asset
Value is less than $1,400,000, the Purchase Price shall be reduced on a
dollar-for-dollar basis by such difference. The amount of such increase or
decrease, as the case may be, shall be the "Current Net Asset Adjustment."
(c) If, as of the opening of business on the Closing Date, the amount
of cash and cash equivalents of TMS is less than $1,200,000 ("Minimum
Cash"), then the amount of the Cash Purchase Price (but not the face amount
of the Promissory Note or the amount of the Adjusted Purchase Price) shall
be reduced on a dollar-for-dollar basis by such difference, provided,
however, the amount of the cash reduction shall be added to the face amount
of the Promissory Note.
(d) The Adjusted Purchase Price shall be increased by any amount
designated as work related to the Purchased Assets which has been delivered
and accepted by the applicable customer, but not yet invoiced by TMS, as
reflected in the records of TMS as of the Closing Balance Sheet Date (the
"Work In Process"); provided, any adjustment for Work in Process will be
limited to no more than $30,000, except with respect to the Boeing Company
or its subsidiaries or affiliates (which will not exceed $273,000).
2.9 Adjustment Procedure.
(a) Within seven (7) days before the Closing Date, TMS shall deliver
to Buyer a written statement (the "Closing Statement") setting forth the
Closing Current Net Asset Value and the Work In Process, if any, and the
Closing Balance Sheet. The Closing Balance Sheet and the Closing Statement
will be prepared in accordance with the following procedures and rules:
(i) The Closing Balance Sheet and Closing Statement shall be in a
format substantially the same as the format of the Balance Sheet and
Interim Balance Sheet, including the spreadsheets and formulas
provided to Buyer and Parent electronically prior to the Effective
Date.
(ii) Except as necessary to reflect the adjustments described in
Section 2.8 above, the Closing Balance Sheet and Closing Statement
shall (i) be prepared from the books and records of TMS, (ii) present
fairly the financial condition of TMS as of the Effective Time, (iii)
be prepared in accordance with GAAP consistently with the accounting
principles historically used by TMS to prepare the audited financial
statements of TMS (other than footnotes); and
(b) If within three (3) days following delivery of the Closing
Statement Buyer has not given TMS written notice of its objection to such
statement (which notice shall state the basis of Buyer's objection), then
the Closing Current Net Asset Value set forth in the Closing Statement
shall be binding and conclusive on the parties and be used in computing the
Current Net Asset Adjustment.
(c) If Buyer duly gives TMS such notice of objection prior to three
(3) days following delivery of the Closing Balance Sheet and the Closing
Statement, and if TMS and Buyer fail (despite good faith negotiations by
each of the Buyer and TMS) to resolve the issues outstanding with respect
to the Closing Statement within two (2) days of TMS's receipt of Buyer's
objection notice, TMS and Buyer shall submit the issues remaining in
dispute to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (or such other independent accounting firm
mutually agreed to by the parties if ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will not accept the
assignment) (the "Independent Accountants") for resolution applying GAAP
pursuant to Section 2.9(a) above. If issues are submitted to the
Independent Accountants for resolution, (i) TMS and Buyer shall immediately
furnish or cause to be furnished to the Independent Accountants such work
papers and other documents and information relating to the disputed issues
as the Independent Accountants may request and are available to that party
or its agents; (ii) the determination by the Independent Accountants, as
set forth in a notice to be delivered to both TMS and Buyer within two (2)
days of the submission to the Independent Accountants of the issues
remaining in dispute, shall be final, binding and conclusive on the parties
and shall be used in the calculation of the Closing Current Net Asset
Value; and (iii) the party against whom the Independent Accountants renders
its decision shall bear all of the fees and costs of the Independent
Accountants for such determination.
2.10 Operation of Business after Closing Balance Sheet Date. The parties
intend that TMS shall operate for its own account the Business from the date
Effective Date until the Closing Balance Sheet Date. After the Closing Balance
Sheet Date, the Buyer shall, through its appointed representative, be present on
the premises of TMS in Stillwater, Oklahoma, monitor the operation of the
Business, as related to the Purchased Assets, which will continue to be operated
by TMS, as provided in Section 6.12(b). TMS shall consult with Buyer, and
receive its consent where required by 6.12(b) prior to incurring any new or
extraordinary expenses or entering agreements of any kind other than in the
ordinary course of business.
2.11 Prorations. Except as otherwise specifically provided in this
Agreement, items of expense directly attributable to the operation of the
business associated with the Purchased Assets shall be prorated as of the
opening of business on October 1, 2004, whether or not such adjustment would
normally be made as of such time, including, without limitation, (i) telephone,
electric, gas, water and other utility services (to the extent it is not
possible to transfer such services into the name of the Buyer as of October 1,
2004), (ii) personal property, ad valorem or similar taxes associated with any
of the Purchased Assets, (iii) payments due on the Assumed Contracts specified
in Schedule 2.2 of this Agreement, and (iv) similar expenses related to the
Purchased Assets transferred hereunder. Notwithstanding anything to the
contrary, no obligations or Liability hereunder shall accrue to the Buyer or the
Parent if the Closing does not occur from no fault of Buyer or Parent.
3. CLOSING AND POST CLOSING MATTERS
3.1 Time and Place of the Closing. The closing of the Asset Purchase and
the consummation of the other transactions contemplated by this Agreement (the
"Closing") shall take place on October 15, 2004 or such other date as shall be
mutually agreed by TMS and the Buyer, as soon as practicable after all
conditions to the Closing shall have been satisfied or waived, which date shall
be referred to as the "Closing Date." The Closing will occur at TMS' offices
unless otherwise agreed and will be effective as of 9:00 a.m. Central Standard
Time (the "Effective Time").
3.2 Procedure at Closing. Subject to the provisions and conditions in this
Agreement, on the Closing Date, the parties agree to take the following steps
listed below (provided, however, that upon their completion all such steps shall
be deemed to have occurred simultaneously):
(a) The Buyer shall deliver to TMS the items specified in Section 7.
(b) TMS shall deliver to the Buyer the items specified in Section 8.
(c) The Buyer shall pay or shall have paid the Adjusted Purchase
Price, as provided in Section 2.7.
3.3 Accounts Receivable; Promissory Note Adjustment
(a) On the Note Payment Date, the Buyer shall pay the amount due under
the Promissory Note (as adjusted pursuant to this section), by a wire
transfer of immediately available funds to the account designated by TMS
pursuant to Section 2.7(b).
(b) The original face amount of the Promissory Note shall be decreased
by any accounts receivable (less the reserve for uncollectible accounts)
which (i) were included in the determination of Closing Current Net Asset
Value and (ii) are uncollected as of the Note Payment Date; provided,
however, that in no event shall the face amount of the Promissory Note or
the Adjusted Purchase Price be reduced for any uncollected account
receivable attributable to (x) The Boeing Company/NATO Project so long as
The Boeing Company or its subsidiaries or affiliates have accepted such
project by March 31, 2005 or (y) Perceptive Vision, Inc., or its
subsidiaries or affiliates.
(c) The original face amount of the Promissory Note shall be increased
by all amounts which were included as reserves for uncollectible accounts
in determining the Closing Current Net Asset Value and which have been
collected as of the Note Payment Date.
(d) The original face amount of the Promissory Note shall be decreased
by any Work In Process that has not been collected as of the Note Payment
Date; provided, however, that in no event shall the face amount of the Note
or the Adjusted Purchase Price be reduced for any Work In Process
attributable to The Boeing Company/NATO Project so long as The Boeing
Company or its subsidiaries or affiliates have accepted such project by
March 31, 2005, even if such amounts are uncollected and/or have not been
converted to accounts receivable as of the Note Payment Date.
(e) Within five (5) days prior to the Note Payment Date, the Buyer
shall deliver to TMS the "Initial Note Adjustment Notice," which shall set
forth the amount by which the face amount of the Promissory Note will be
increased or decreased, as applicable, as provided in this Section 3.3.
(f) If within two (2) days following delivery of the Initial Note
Adjustment Notice TMS has not given Buyer written notice of its objection
to such statement (which notice shall state the basis of TMS's objection),
then the Initial Note Adjustment Notice shall be binding and conclusive and
shall be considered the Final Note Adjustment Notice.
(g) If TMS duly gives the Buyer such notice of objection prior to two
(2) days following delivery of the Initial Note Adjustment Notice, and if
TMS and the Buyer fail (despite good faith negotiations by each of the
Buyer and TMS) to resolve the issues outstanding with respect to the
adjustment to the face amount of the Promissory Note within two (2) days of
the Buyer's receipt of TMS's objection notice, TMS and the Buyer shall
submit the issues remaining in dispute to the Independent Accountants for
resolution applying GAAP. If issues are submitted to the Independent
Accountants for resolution, (i) TMS and the Buyer shall immediately furnish
or cause to be furnished to the Independent Accountants such work papers
and other documents and information relating to the disputed issues as the
Independent Accountants may request and are available to that party or its
agents; (ii) the determination by the Independent Accountants, as set forth
in a notice to be delivered to both TMS and the Buyer within one (1) day of
the submission to the Independent Accountants of the issues remaining in
dispute, shall be final, binding and conclusive on the parties and shall be
considered the Final Note Adjustment Notice; and (iii) the party against
whom the Independent Accountants decides shall bear all the fees and costs
of the Independent Accountants for such determination.
4. REPRESENTATIONS AND WARRANTIES OF TMS
To induce the Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, TMS represents and warrants to the
Buyer, except as disclosed in the Disclosure Schedules (TMS may amend and
supplement the Disclosure Schedules for all matters occurring after the
Effective Time and before the Closing Balance Sheet Date and the Disclosure
Schedules will be deemed amended to include all items or matters occurring after
the Closing Balance Sheet Date, provided TMS is not in breach of Sections 2.10
and 6.12(b)) delivered in connection herewith:
4.1 Due Organization. TMS is a corporation duly organized, existing and in
good standing under the laws of the State of Oklahoma.
4.2 Power and Authority. TMS has all requisite power and authority to own,
lease and operate its properties and to conduct its business as it is presently
being conducted. TMS is duly qualified or licensed as a foreign corporation in
good standing under the laws of each jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it requires such qualification, except where the failure to be so
qualified or licensed would not have a Material Adverse Effect on TMS. Schedule
4.2 lists each jurisdiction in which TMS is qualified or authorized to transact
business.
4.3 Authority for Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been authorized by all requisite corporate action on the part of TMS other than
the required approval of TMS's shareholders (the "Shareholder Approval). After
TMS obtains the Shareholder Approval, it will have full corporate power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby. Upon receiving the Shareholder Approval, this
Agreement will have been duly executed and delivered by TMS and, assuming the
due authorization, execution and delivery by the Buyer of this Agreement, this
Agreement shall be a legal, valid and binding obligation of TMS enforceable
against TMS in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights in general. In
approving and authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated thereby, the Board of Directors of
TMS determined that the Purchase Price to be paid by Buyer to TMS is fair
consideration for the sale of the Purchased Assets and the Business, subject to
the Board of Directors rights described in Sections 6.8 and 10.1(d).
4.4 No Violation to Result. Assuming the Shareholder Approval has been
obtained, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and the fulfillment of the
terms hereof will not (i) violate any law, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
governmental authority, or court to which TMS is subject or any provision of
TMS's certificate of incorporation or bylaws, or (ii) except as described in the
Disclosure Schedules, conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
TMS is a party by which it is bound, related to the Business or to which any of
the Purchased Assets are subject, or (iii) result in the imposition of any
security interest upon any of the Purchased Assets. No filings with, or any
permit, authorization, consent, or approval from any governmental authority or
any other Person are necessary in order for TMS to consummate the transactions
contemplated by this Agreement, except the Shareholder Approval and preparing
and filing the necessary proxy matters with the Securities and Exchange
Commission.
4.5 Title to Purchased Assets. TMS has good and marketable title to all
assets comprising the Purchased Assets and will transfer to Buyer good and valid
title to the Purchased Assets free and clear of all Encumbrances, subject only
to the Assumed Liabilities. The Purchased Assets are sufficient in all respects
and include all material assets needed to operate Business as historically
operated by TMS, and are individually and collectively free from material
damages by fire, accident or casualty, and free from material defects. In the
event title to one or more assets used in the conduct of the Business is
actually held by an affiliate of TMS, TMS will cause such affiliate to transfer
the asset in question to Buyer at closing.
4.6 Brokers. No Person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon the
Buyer for any commission, fee or other compensation payable as a finder or
broker because of any act or omission by TMS.
4.7 Financial Statements. TMS has filed all registration statements, forms,
reports and other documents required to be filed by TMS with the Securities and
Exchange Commission ("SEC") and has made available to Purchaser copies of all
registration statements, forms, reports and other documents filed by TMS with
the SEC since August 31, 2003. All such registration statements, forms, reports
and other documents (including those that TMS may file after the date hereof
until the Closing) are referred to herein as the "TMS SEC Reports." The TMS SEC
Reports, at the time filed, were or will be prepared in compliance in all
material respects with the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
TMS SEC Reports. TMS has delivered, or will deliver when prepared, to the Buyer:
(a) an audited balance sheet of TMS as of August 31, 2003 (including the notes
thereto, the "Balance Sheet"), and the related audited statements of operations,
shareholders' equity and cash flows for the fiscal year then ended, including in
each case the notes thereto, together with the report thereon of KPMG,
independent certified public accountants; (c) an unaudited balance sheet of TMS
as of May 31, 2004, (the "Interim Balance Sheet") and the related unaudited
statements of operations, shareholders' equity and cash flows for the nine (9)
months then ended, including in each case the notes thereto; and (d) an
unaudited year end Balance Sheet as of August 31, 2004 and a Closing Balance
Sheet as of September 30, 2004, and the related unaudited statements of
operations, shareholders' equity and cash flows for each applicable period then
ended, including notes thereto. Such financial statements fairly present, or
will fairly present, the financial condition and the results of operations,
shareholders' equity and cash flows of TMS as at the respective dates of and for
the periods referred to in such financial statements, all in accordance with
GAAP. Additionally, TMS has provided the Buyer with unaudited statements of
operations, shareholders' equity and cash flows, updated monthly and prepared in
accordance with GAAP except that such statements have not included any notes
which may be required by GAAP. The financial statements referred to in this
Section 4.7 reflect and will reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
the notes to such financial statements, subject to normal year-end adjustments
in the case of the unaudited financial statements which were not or are not
expected to be material in amount.
Since the respective dates of the most recent of such financial statements
and related information documents provided by TMS to Buyer, until the Closing
Balance Sheet Date, the operation of the Business by TMS has been conducted in
the ordinary course and consistent with past practices and there has not been
any Material Adverse Effect in the financial condition, assets, liabilities,
revenues, expenses or operations of the Business.
4.8 Pending Litigation. There are no claims, charges, arbitrations,
grievances, actions, suits, proceedings, or investigations pending or to the
knowledge of TMS threatened against, or affecting Business, any of the Purchased
Assets, or TMS' right to sell the Purchased Assets at law or in equity, or
before or by any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
which involves the likelihood of any adverse judgment or liability, whether or
not fully covered by insurance, nor is there any basis known to TMS for such
claims. The Business is not in default concerning any order, writ, injunction or
decree of any federal, state, municipal court, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting the Purchased Assets or the Business.
4.9 Contracts. Schedule 4.9 of the Disclosure Schedule correctly and
completely lists and describes all Designated Contracts (as herein defined). The
Buyer has been given access to complete and accurate copies of all Designated
Contracts (including any amendments or supplements thereto). For purposes of
this Agreement, "Designated Contracts" shall mean, to the extent related to the
Business: executory purchase orders and purchase contracts and executory sales
orders and sales contracts accounting for $15,000 or more, annually in any one
transaction or series of transactions; contracts for capital expenditures in
excess of $3,000; agreements or arrangements regarding confidentiality or
non-competition; loan agreements; notes; security agreements; employment and
employment-related agreements; collective bargaining agreements; leases and
subleases of real estate; leases and subleases of personal property listed in
Schedules 4.15(b) and 4.16; material license agreements; and all other
agreements which are not terminable by TMS without premium, penalty, or other
obligation upon not more than thirty (30) days notice. There are no defaults by
TMS under, or to TMS' knowledge, by any other party to, any of such leases or
contracts and with the giving of notice or the passage of time or both there
would be no such defaults under any of such leases or contracts. Such leases and
contracts are in full force and effect and constitute legal, valid, and binding
agreements of TMS, enforceable against TMS, in accordance with their respective
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance, and similar laws affecting creditors' rights generally
from time to time and to general principles of equity. There is no Designated
Contract that contains any contractual requirement with which there is a
reasonable likelihood that TMS or any other party thereto will be unable to
comply. None of the Designated Contracts is for materials, supplies, equipment,
or services in excess of normal requirements of TMS or as needed for reasonably
anticipated business. TMS has not granted any power of attorney with respect to
the Business, or the Purchased Assets that remains outstanding.
4.10 No Material Adverse Effect. Since the date of the Balance Sheet, until
the Closing Balance Sheet Date, there has not been any Material Adverse Effect
with respect to TMS or the Business, and no event has occurred or circumstance
exists that may reasonably be expected to result in such a Material Adverse
Effect.
4.11 Compliance with Existing Laws. To the knowledge of TMS, TMS possesses
all material licenses, certificates, permits, and authorizations of any kind
required to conduct the Business as historically operated by TMS and TMS is in
material compliance with all applicable federal, state and foreign laws and
regulations.
4.12 Accounts Receivable. The accounts receivable reflected on the Balance
Sheet or on the accounting records of TMS as of the Closing Balance Sheet Date
represent or will represent valid obligations arising from sales actually made
or services actually performed by TMS in the ordinary course of business. Except
to the extent paid prior to the Closing Balance Sheet Date, such accounts
receivable are or will be as of the Closing Balance Sheet Date current and
collectible net of the respective reserves shown on the Closing Balance Sheet or
on the accounting records of TMS as of the Closing Balance Sheet Date (which
reserves are adequate and calculated consistent with past practice and, in the
case of the reserve on the accounting records of TMS as of the Closing Balance
Sheet Date, will not represent a Material Adverse Change in the composition of
such accounts receivable in terms of aging).
4.13 Employees. The Disclosure Schedules contain a complete and accurate
list of the following information for each employee, consultants and independent
contractors of TMS, including each such person on leave of absence or layoff
status: name; job title; date of hiring; date of commencement of employment;
current compensation paid or payable; sick and vacation leave that is accrued
but unused; and service credited for purposes of vesting and eligibility to
participate under any of the Plans. Neither TMS, with respect to the Business,
nor any of its officers, directors, or employees has been charged or, to TMS'
knowledge, threatened with the charge of any unfair labor practice, with respect
to the Business. With respect to the Business, there are no pending or, to TMS'
knowledge, threatened claims, investigations, charges, citations, hearings,
consent decrees, or litigation concerning: wages, compensation, bonuses,
commissions, awards, or payroll deductions; equal employment or human rights
violations regarding race, color, religion, sex, national origin, age, handicap,
veteran's status, marital status, disability, or any other recognized class,
status, or attribute under any federal, state, or foreign equal employment law
prohibiting discrimination; representation petitions or unfair labor practices;
grievances or arbitrations pursuant to current or expired collective bargaining
agreements; occupational safety and health; workers' compensation; wrongful
termination, negligent hiring, invasion of privacy or defamation; or
immigration. Except as described on Schedule 4.13, all officers, employees, and
agents of TMS engaged in the Business are employees at-will and for indefinite
terms and there is no outstanding agreement or arrangement with respect to
severance payments.
4.14 Employee Benefit Plans. The Disclosure Schedules contain a complete
list of (i) "employee welfare benefit plans" (as that term is defined in Section
3(1) of ERISA) in which employees of TMS participate; (ii) "employee pension
benefit plans" (as that term is defined in Section 3(2) of ERISA). None of the
employee pension benefit plans have incurred any "accumulated funding
deficiency" (as defined in Section 412(a) of the Code). TMS has not incurred any
liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063
or 4064 of ERISA which has not been paid with respect to any of the Plans or any
withdrawal liability under Title IV of ERISA with respect to any of the employee
pension benefit plans. No other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical, life insurance or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which TMS maintain or to which TMS have any
outstanding, present or future obligations to contribute or make payments under,
whether voluntary, contingent or otherwise exists, except as disclosed on
Schedule 4.14.
The plans, programs, policies, or arrangements described in subparagraph
(i) or (ii) above are hereinafter collectively referred to as the "Company
Plans." TMS has delivered to Buyer true and complete copies of all written plan
documents and contracts evidencing the Company Plans and other benefit plans, as
they may have been amended to the date hereof, together with all documents
relating to any tax- qualified retirement plan maintained by TMS which documents
are required to have been filed prior to the date hereof with governmental
authorities for each of the three most recently completed plan years.
4.15 Personal Property.
(a) Schedule 4.15(a) contains a true and correct list and a brief
description of all Equipment (excluding items of Equipment having a book
value of less than $1,000) owned by TMS. The Equipment is adequate and
usable for the continued operation of the Business as the same is presently
conducted. Schedule 4.15(a) contains a true and correct list and a brief
description of all Furniture and Fixtures (excluding items of Furniture and
Fixtures having a book value of less than $1,500) owned by TMS and related
to the Business. The Equipment, Furniture and Fixtures is sold "AS IS"
without recourse or any warranty, express or implied, of any kind except as
to title as provided in Section 4.5 and as provided in this 4.15(a).
(b) Schedule 4.15(b) contains a true and correct list and brief
description of all Equipment, Fixtures, Furniture, or other items of
personal property leased by TMS. True, correct and complete copies of all
documents evidencing the leases described in Schedule 4.15(b) are attached
thereto or have been provided to Buyer.
4.16 Leased Real Property. Schedule 4.9 contains a true and correct list of
each office or real property lease to which TMS is a party and any amendments,
extensions, and renewals thereof (the "Real Property Leases"). To the knowledge
of TMS, each Real Property Lease is in full force and effect and there is no
existing default or event of default, real or claimed, or event which with
notice or lapse of time or both would constitutes default thereunder. TMS has
not been advised of any pending or threatened claims which contest its ability
to occupy and use for its intended purposes the property covered by the Real
Estate Leases.
4.17 OSHA. To the knowledge of TMS, TMS is in material compliance with all
applicable laws relating to employee health and safety; and TMS has not received
any notice that past or present conditions of the Purchased Assets violate any
applicable legal requirements or otherwise can be made the basis of any claim,
proceeding, or investigation, based on OSHA violations or otherwise related to
employee health and safety.
4.18 Taxes.
(a) To the knowledge of TMS, TMS has timely filed, and as of the
Closing Balance Sheet Date will have timely filed, all federal income tax
returns, and all state, county and local income, franchise, property,
sales, use, and other tax returns relating to the Business required to be
filed on or prior to the Closing Balance Sheet Date, taking into account
any extensions of the filing deadlines which have been validly granted to
TMS, and such returns are and will be true and correct in all material
respects. TMS has paid, or by the Closing Balance Sheet Date will have
paid, all federal, state, county and local income, franchise, property,
sales, use and all other taxes and assessments (including penalties and
interest in respect thereof, if any) that have become or are due with
respect to the Business or the Purchased Assets regarding any period ended
on or prior to the Closing Balance Sheet Date whether shown on such returns
or not.
(b) To the knowledge of TMS, there are no pending property, sales, use
or other tax dispute relating to or arising out of the Business or
affecting the Purchased Assets.
4.19 Insurance. The Purchased Assets and TMS are insured under various
policies of general liability and other forms of insurance, set forth in
Schedule 4.19. To the knowledge of TMS, TMS has not been refused any insurance
with respect to the Business, nor has its coverage been limited, by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five (5) years. To the knowledge of TMS, there
are no outstanding requirements or recommendations by any current insurer or
underwriter with respect to the business of TMS or the Purchased Assets which
require or recommend changes in the conduct of TMS's business, or require any
repairs or other work to be done with respect to any of the Purchased Assets or
operations of TMS.
4.20 Adequacy of Purchased Assets. Purchased Assets include all material
rights, properties, interests in properties, and assets used by TMS to conduct
the Business as presently conducted by TMS.
4.21 Credit Cards. Schedule 4.21 lists the name of each person who has a
credit card which is billed to TMS. Except as described in Schedule 4.21, TMS
has no credit card account.
4.22 Intangible Property.
(a) TMS has the right and authority to use, and to continue to use
after the date of this Agreement the Intellectual Property included in the
Purchased Assets (the "Intangible Property") in connection with the conduct
of the Business in the manner presently conducted, and to the knowledge of
TMS, such use or continuing use does not and will not conflict with,
infringe upon or violate any rights of any other person, corporation or
entity.
(b) TMS has not received notice of, and to the best knowledge of TMS
there is not any basis for, a pleading or threatened claim, interference,
action or other judicial or adversarial proceeding against TMS that any of
the operations, activities, products, services or publications of TMS or
any of its suppliers, customers or subcontractors involves unfair
competition with respect to any intangible property right of any third
person or entity, or infringes or will infringe any patent, trademark,
trade name, copyright, trade secret or other property right of a third
party, or that it is illegally or otherwise using the trade secrets,
formulae or property rights of others, or that any trademark, trade name,
service ▇▇▇▇ or logo in use or proposed for use by TMS is likely to be
confused with a trademark, trade name, service ▇▇▇▇ or logo of a third
party.
(c) There are no outstanding, nor to the best knowledge of TMS are
there any threatened, disputes or other disagreements with respect to
ownership of the Intangible Property or with respect to infringement by a
third party of any of the Intangible Property.
(d) The Intangible Property owned or licensed by TMS is sufficient to
conduct TMS' business as presently conducted.
(e) TMS has at all times used commercially reasonable efforts to
protect its Intellectual Property, including without limitation, trade
secrets and has not disclosed or otherwise dealt with such items in such a
manner as to cause the loss of such trade secrets by release thereof into
the public domain. TMS has at all times used commercially reasonable
efforts to protect the confidentiality of all of its other confidential and
proprietary information and that of third parties which is or has been in
its possession.
(f) Each person currently or formerly employed by TMS (including
independent contractors, if any) that has or had access to confidential
information of TMS has executed a confidentiality and non-disclosure
agreement which are, to the knowledge of TMS, enforceable in accordance
with their terms.
(g) No officer, manager, director, shareholder, Member, employee or
representative of TMS, nor any spouse, child or other relative thereof or
person or entity related thereto, owns directly or indirectly, in whole or
in part, any of the Intangible Property.
(h) To TMS's knowledge, no employee of TMS is in violation of any term
of any employment contract or confidentiality agreement or any other
contract or agreement relating to the relationship of any such person with
TMS.
(i) Except for product returns and technical support provided in the
ordinary course of TMS' business, no material warranty claim with respect
to the Business has been communicated to or overtly threatened against TMS
nor, to the best of TMS' knowledge, is there any specific situation, set of
facts or occurrence that provides a basis for any such claim.
4.23 Proprietary Information of Third Parties.. To the knowledge of TMS, no
employee or consultant of TMS is obligated under any contract or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would conflict with the obligation of such employee
to use best efforts to promote the interests of TMS. To the knowledge of TMS, no
third party has claimed or has reason to claim that any person employed by or
affiliated with TMS has (a) violated or may be violating any of the terms or
conditions of any employment, non-competition, or non-disclosure agreement
between such employee and such third party, (b) disclosed or may be disclosing,
or utilized or may be utilizing, any trade secret or proprietary information or
documentation of such third party, except as set forth in Schedule 4.23 of the
Disclosure Schedule, or (c) interfered or may be interfering in the employment
relationship between such third party and any of TMS's present or former
employees. To the knowledge of TMS, no third party has requested information
from TMS which suggests that such a claim might be contemplated. To the
knowledge of TMS, no person employed by or affiliated with TMS has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer or violated any confidential relationship
which such person may have had with any third party, in connection with the
development, manufacture, or sale of any product or proposed product, or the
development or sale of any service or proposed service of TMS, and TMS has no
reason to believe there will be any such employment or violation.
4.24 Solvency. As of the Effective Time the value of the assets of TMS
exceed its Liabilities and TMS has sufficient funds and cash flow to enable it
to satisfy its Liabilities as they come due. TMS does not intend to engage in
any business or transaction for which its assets are unreasonably small in
relation thereto.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE PARENT
To induce TMS to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, the Buyer and the Parent, jointly
and severally, represent and warrant to TMS, as of the date hereof as set forth
below:
5.1 Organization. The Buyer is a corporation duly organized, existing and
in good standing under the laws of the State of Oklahoma. The Parent is a
corporation duly organized, existing and in good standing under the laws of the
State of Florida. All of the outstanding stock of the Buyer is owned, of record
and beneficially, by the Parent.
5.2 Power and Authority. The Buyer has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as it is presently being conducted. The Buyer is duly qualified or licensed as a
foreign corporation in good standing in each jurisdiction in which the character
of its properties or the nature of its business activities requires such
qualification, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect on the Buyer. The Parent has all requisite
corporate power and authority to own, lease and operate its properties and to
conduct its business as it is presently being conducted. The Parent is duly
qualified or licensed as a foreign corporation in good standing in each
jurisdiction in which the character of its properties or the nature of its
business activities requires such qualification, except where the failure to be
so qualified or licensed would not have a Material Adverse Effect on the Parent.
5.3 Authority for Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been authorized by all requisite corporate action on the part of each of the
Buyer and the Parent. Each of the Buyer and the Parent has full corporate power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Parent and, assuming the due authorization, execution and
delivery by TMS of this Agreement, is a legal, valid and binding obligation of
the Parent enforceable against the Parent in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general. This Agreement has been duly executed and
delivered by the Buyer and, assuming the due authorization, execution and
delivery by TMS of this Agreement, this Agreement is a legal, valid and binding
obligation of the Buyer enforceable against the Buyer in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general.
5.4 No Violation to Result. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not (i) violate any law, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
governmental authority, or court to which the Buyer or the Parent is subject or
any provision of Buyer's certificate of incorporation or bylaws, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer or the Parent is a party or
by which it is bound. No filings with, or any permit, authorization, consent, or
approval from any governmental authority or any other Person are necessary in
order for the Buyer or the Parent to consummate the transactions contemplated by
this Agreement.
5.5 Brokers. No Person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon TMS
for any commission, fee or other compensation payable as a finder or broker
because of any act or omission by the Buyer or the Parent.
5.6 Financial Ability; No Material Adverse Effect. The Buyer has or has
available, either by itself or with the assistance or contribution of Parent,
the financial ability to perform all its obligations, covenants, and agreements
under this Agreement and the related documents.
5.7 Diligence. Each of the Buyer and Parent represents that it is a
sophisticated entity knowledgeable about TMS' products and industry that was
advised by knowledgeable counsel and financial advisors and hereby acknowledges
that it has been conducting and will complete its investigation with respect to
the Purchased Assets prior to the Closing Date. Each of Buyer and Parent further
represents that it has (a) had the opportunity to meet with representative
officers and other representatives of TMS to discuss its business, assets,
liabilities, financial condition, cash flow, and operations, (b) received all
materials, documents and other information that it deems necessary or advisable
to evaluate the Asset Purchase, (c) made its own independent examination,
investigation, analysis and evaluation of the Purchased Assets, including its
own estimate of the value of the Purchased Assets, and (d) undertaken such due
diligence (including a review of TMS's assets, properties, liabilities, books,
records, and contracts) as it deems adequate; provided, Buyer and Parent may
continue the foregoing diligence prior to Closing. Each of Buyer and Parent
acknowledges that TMS makes no warranty, express or implied, as to the condition
of the Purchased Assets except as expressly set forth in this Agreement. Neither
Buyer nor Parent has relied upon, and TMS shall not be liable for or bound in
any manner by, any express or implied verbal or written information, warranties,
guarantees, promises, statements, inducements, representations or opinions
pertaining to the Purchased Assets, except as may be contained in this Agreement
or certificates and other instruments and documents delivered hereunder.
6. COVENANTS
6.1 Confidentiality. The Buyer and the Parent recognize and acknowledge
that they have in the past, currently have, and in the future may possibly have,
access to certain confidential information of TMS, including but not limited
lists of customers, operational policies, and contracts, that are valuable and
unique assets of TMS. The Buyer and the Parent each agrees that it will not
disclose confidential information with respect to TMS to any Person for any
purpose or reason whatsoever. TMS agrees and acknowledges that it will not
disclose confidential information with respect to Buyer and Parent for any
purpose whatsoever, except as required or permitted by this Agreement. The Buyer
and the Parent and TMS agree and acknowledge that this provision shall in no way
modify, amend, alter or supersede the Confidentiality Agreement between the
Parent and TMS dated September 22, 2003 (the "Confidentiality Agreement") and
that the Confidentiality Agreement is separate from this Agreement. The Buyer
hereby agrees to be bound by the Confidentiality Agreement as if it had been a
party to and executed the same.
6.2 Regulatory and Other Approvals.
(a) Subject to the terms and conditions of this Agreement and, as
applicable, the Confidentiality Agreement, each of TMS, the Buyer and the
Parent will proceed diligently and in good faith to, as promptly as
practicable, obtain all consents, approvals or actions of, make all filings
with and give all notices to governmental or regulatory authorities or any
other public or private third parties required of TMS, the Buyer or the
Parent to consummate the Agreement and the other matters contemplated
hereby.
(b) As promptly as practicable after the Effective Date, TMS will
prepare and file with the SEC a proxy statement and any other filings
required by the Exchange Act. Buyer and Parent will provide TMS with any
information which is specifically requested by TMS in writing and which may
be required in order to effectuate the preparation and filing of the Proxy
Statement. TMS will use its commercially reasonable efforts to respond to
any comments from the SEC. TMS will notify Buyer and Parent promptly upon
the receipt of any comments from the SEC or its staff in connection with
the filing of, or amendments or supplements to, the Proxy Statement.
Whenever any event occurs which is required to be set forth in an amendment
or supplement to the Proxy Statement, TMS will promptly inform Buyer and
Parent of such occurrence. TMS shall provide Buyer and Parent (and its
counsel) with a reasonable opportunity to review and comment on the Proxy
Statement and any amendment or supplement to the Proxy Statement prior to
filing such with the SEC, and will provide Buyer and Parent with a copy of
all such filings made with the SEC. Notwithstanding anything to the
contrary in this Agreement, the substance and content of any materials
filed with the SEC and all required responses to comments or requirements
of the SEC will be the sole and exclusive decision of TMS.
(c) TMS will use its reasonable best efforts to (i) call a special
meeting of its stockholders ("Special Meeting") to be held as promptly as
practicable after the filing of the Proxy Statement with the SEC for the
purpose of voting upon this Agreement and the transactions to be completed
hereunder, (ii) cause the Proxy Statement to be mailed to its stockholders
and (iii) subject to the fiduciary duties of the board of directors of TMS
under Oklahoma law, to obtain stockholder approval of this Agreement.
6.3 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts
promptly to take, or cause to be taken, all actions and do or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
including the satisfaction of all conditions thereto.
6.4 Allocation of Purchase Price. Prior to the Liquidation Date, TMS shall
deliver to the Buyer an allocation schedule, prepared in accordance with the
Code, allocating the Purchase Price among the Purchased Assets which TMS, the
Buyer and, if required, the Parent, will mutually agree upon (which agreement
will not be unreasonably withheld). In connection with the determination of such
schedule, the parties shall cooperate with each other and provide such
information as any of them shall reasonably request. The parties shall (i) each
report the federal, state and local and other tax consequences of the purchase
and sale contemplated hereby (including the filing of Internal Revenue Service
Form 8594) in a manner consistent with such allocation schedule and (ii) take no
position in any tax filing, return, proceeding, audit or otherwise which is
inconsistent with such allocation. To the extent the services of any third party
are used to prepare these allocations, the fees and expenses of each third party
shall be shared equally by the parties.
6.5 Employee Matters.
(a) Subject to Section 10.13 hereof, the Buyer shall (i) offer
full-time employment to all Key Employees under terms substantially
equivalent to their existing arrangements with TMS, as of the Closing Date;
and (ii) offer full-time employment to all full-time employees of TMS under
terms substantially equivalent to their existing arrangements with TMS as
of the Closing Date; except as to the extent standard benefits and policies
of Buyer and Parent may differ from TMS.
(b) The Buyer hereby acknowledges that certain of TMS' employees
currently may be dedicated to completing projects related to VSC
Technologies, LLC (the "LLC"), a Delaware limited liability company, of
which TMS is a member. The Buyer agrees that until December 31, 2004, the
Buyer will, on a cost-recovery basis only, utilize those persons (or other
of the Buyer's employees with substantially similar experience, including
experience with the specific products to which such projects relate) to
facilitate the timely completion of such projects which are in progress or
not completed for the LLC as of the Closing Date. To the extent
requirements exceed December 31, 2004, TMS and the LLC will mutually agree
with the Buyer and Parent as to projects and costs associated with such
additional requirements projects which TMS is required to complete under
the Operating Agreement of VSC Technologies, LLC, dated October 10, 2002.
6.6 Professional Fees. Notwithstanding any provision of this Agreement,
including the definition of Current Net Asset Value, the parties agree that
professional fees such as legal, accounting, and other costs associated with the
Closing will be segregated and excluded from Current Net Asset Value, as defined
in this Agreement. The obligation for such costs will not be part of the Assumed
Liabilities and will be retained by TMS.
6.7 Access And Investigation. Between the Effective Date and the Closing
Date, and upon reasonable advance notice received from the Buyer, TMS shall (a)
afford the Buyer and its representatives (collectively, the "Buyer Group") full
and free access, during regular business hours, to TMS' business premises and
such records and data as the Buyer reasonably requests to evaluate the Purchased
Assets and perform its obligations under this Agreement, such rights of access
to be exercised in a manner that does not unreasonably interfere with the
operations of TMS; (b) furnish Buyer Group with copies of all such existing
documents and data as the Buyer may reasonably request to evaluate the Purchased
Assets and perform its obligations under this Agreement; and (c) otherwise
cooperate and assist, to the extent reasonably requested by the Buyer, with the
Buyer's investigation of the Purchased Assets. The parties agree and acknowledge
that any access or other right under this Section 6.7 is subject to Section 6.1
and the Confidentiality Agreement.
6.8 No Solicitation.
(a) Until the earlier of (i) such time as this Agreement shall be
terminated pursuant to Section 10.1 or (ii) the Closing Date, TMS shall
not, and shall not permit any of its subsidiaries, officers or directors,
or any of its representatives, directly or indirectly to solicit or
initiate (including by way of furnishing any non-public information
concerning TMS' business properties, assets or prospects) any inquiries,
discussions, or proposals from or initiate in any negotiations with any
Person relating to any business combination transaction involving the
Business and/or Purchased Assets (other than in the ordinary course of
business or as provided in this Agreement) regardless of the type of
transaction involved.
(b) Provided TMS is not in violation of Section 6.8(a), TMS may accept
Competing Proposals and provide a reasonable response to any such Competing
Proposals. TMS shall notify the Buyer of a Competing Proposal within five
business days of receipt of the same by TMS. After TMS has provided such
notification to the Buyer, and provided that TMS did not solicit the
inquiry or proposal or initiate negotiations with such Person as prohibited
above, TMS may negotiate with such person if TMS's board of directors
determines, in good faith, in its sole and absolute discretion, after
consultation with independent counsel and TMS's financial advisor, if any,
that failing to take such action would be inconsistent with its fiduciary
obligations under Oklahoma law. TMS shall incur no penalty, liability or
obligation, specifically including but not limited to any obligation to pay
the Termination Fee as provided in Section 10.1(d), to the Buyer for such
negotiation until TMS provides the Buyer with notice of termination as
provided in Section 10.1. At the time of providing any notice of
termination, TMS will provide Buyer a description of the material terms of
the Competing Proposal.
6.9 Use of Assets During Transition. Notwithstanding any other provision of
this Agreement, the officers and employees of TMS, specifically including but
not limited to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, shall, until the Liquidation Date, (a)
continue to use the office, computers, telephones, and other similar items used
by such persons immediately prior to the Closing Date and (b) shall have access
to the records of TMS, including but not limited to any records that may be
included in the Purchased Assets, for the purposes of selling the Retained
Assets, winding down the business of TMS and effecting the dissolution and
liquidation of TMS. Notwithstanding anything to the contrary, in the event
expenses related to such continued use exceed $2,500 per month, Buyer shall,
within two (2) business days of invoice to TMS, be paid the excess amount over
the monthly fee.
6.10 Payment of Vendors and Other Indebtedness. TMS will make payment in
full to all vendors, suppliers, merchants, wholesalers, distributors, service
companies or similar suppliers of products and services to the Business
(collectively, "Vendors") for all amounts payable to such Vendors in respect of
products and services provided to the Business prior to the Closing Date. Buyer
and Parent shall have no liability whatsoever for any invoices from Vendors
relating to the Business or to the ownership and/or operation of any of the
Purchased Assets prior to the Closing Balance Sheet Date, except for the Assumed
Liabilities. Buyer and Parent will have responsibility for purchase orders of
the Business outstanding at the Effective Time, provided that purchase orders
that individually exceed $1,500 must be approved by Buyer and Parent in writing
prior to the Closing and TMS will retain all liability and obligation pursuant
to purchase orders that have not been approved by Buyer and Parent in writing
prior to the Closing. TMS will pay all of its debts and discharge all of its
obligations as and when they become due consistent with past practices. TMS
covenants that before the Effective Time all assessments levied against the
Purchased Assets, if any, that are payable by TMS shall be paid in full by TMS
even if the assessments are due in installments after the Closing Date. Each TMS
covenants that it shall pay any income, sales, use, business, franchise,
occupation, withholding, employment, security or similar tax, and all other
taxes of any kind whatsoever with respect to the Purchased Assets and/or the
operation of the Business relating to any period prior to the Effective Time
will accrue to Buyer and Parent after the Closing Balance Sheet Date and Buyer
and Parent shall pay all such taxes relating to periods after the Closing
Balance Sheet Date.
6.11 Sales and Transfer Taxes. Each of TMS and Buyer and Parent will use
reasonable efforts to take all necessary action to cause the consummation of the
transactions hereunder to qualify for an exemption from any obligation to pay
sales, use, transfer, recording and similar taxes (federal, state, city or
otherwise) in connection therewith. To the extent any such taxes are payable,
however, Buyer shall be responsible for the payment of such taxes.
6.12 Conduct of the Business.
(a) From and after the Effective Date until the earlier of the
termination of this Agreement in accordance with its terms or the Closing
Date, TMS shall (i) carry on the Business in the usual, regular and
ordinary course in substantially the same manner as previously conducted
and, to the extent consistent therewith, will use commercially reasonable
efforts to preserve intact its current organization, maintain the Purchased
Assets and the Business in good condition in a manner consistent with past
practice, keep available the services of its current officers and
employees, preserve its relationships with persons having business dealings
with it, solicit and process orders for products and services in the
ordinary course of business, consistent with past practice, and promptly
deliver to Buyer and Parent true and correct copies of any agreements TMS
enters into in accordance with the terms of this Agreement; and (ii) use
its commercially reasonable efforts to maintain insurance coverage of the
types and in the amounts carried by it prior to the Effective Date and
promptly report all known claims within the applicable claims period.
(b) From and after the Closing Balance Sheet Date until the earlier of
the termination of this Agreement or the Closing Date, TMS shall not,
directly or indirectly, do any of the following without the prior consent
of Buyer and Parent (which consent will not be withheld unreasonably) or of
their on-site representative:
(i) purchase, sell, lease or dispose of any material property
related to the Business or Purchased Assets and not incur any material
liability or make any material commitment or enter into any other
material transaction related to the Business, except in the ordinary
and usual course of business or pursuant to contracts existing on the
Effective Date; (ii) agree to amend, modify or terminate any existing
contract assumed hereunder, whether or not in the ordinary and usual
course of business; (iii) acquire any Purchased Assets that are
material, in the aggregate, to TMS, taken as a whole, except purchases
of Purchased Assets in the ordinary course of business; (vi) pledge or
encumber, sell, lease, license, dispose of or otherwise transfer any
Purchased Assets material to the Business, taken as a whole (including
any accounts, leases, contracts or intellectual property or any
Purchased Assets) other than (A) in the case of pledges, encumbrances
and leases, in connection with the purchase of equipment subject to
capital lease or other similar financing arrangements in the ordinary
course of business consistent with TMS' past practice, and (B)
dispositions in the ordinary course of business of equipment no longer
used in the businesses of TMS; (vii) enter into an agreement with
respect to any acquisition or disposition of all or substantially all
of the Purchased Assets (viii) make any changes in accounting methods,
principles or practices or any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, except as may
have been required by a change in GAAP or applicable law; (ix) waive,
modify, pay, discharge, settle or satisfy any material claims,
liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the in ordinary
course of business or in accordance with their terms as in effect on
the date of this Agreement, unless such payment, discharge, settlement
or satisfaction would not reasonably be expected to impose upon TMS
any material burden that would remain in effect and apply to the
Purchased Assets after the Closing, (x) knowingly waive, release or
assign any material rights or claims hereunder in a manner adverse to
the Business or the Purchased Assets (including any write-off or other
compromise of any material accounts receivable of TMS related to the
Business or the Purchased Assets); (xi) except on a non-exclusive
basis in the ordinary course of business, license any material
intellectual property rights related to the Business or the Purchased
Assets to any other Person; (xii) permit the prepayment of or
compromise or discount any of Account Receivables; (xiii) amend or
modify compensation or benefits payable to or for the benefit of any
person Buyer has indicated it is considering hiring as an employee,
including any raises in salary or wages, any modification of any
Plan(s), or TMS' vacation or medical leave of absence policy; or (xiv)
authorize any of, or commit or agree, in writing or otherwise, to take
any of, the foregoing actions or any action which would materially
impair or prevent the satisfaction of any conditions in Sections 7 or
8.
6.13 TMS Name. The parties acknowledge that one of the assets Buyer is
purchasing is the names "TMS" and "TMS Sequoia". At Closing TMS will grant to
Buyer the right to use such names and will cooperate with Buyer to permit Buyer
to immediately begin using such names in the Business. TMS may continue to use
its corporate name, provided, however, in the event the Liquidation Date has not
occurred by February 28, 2005, TMS will use all reasonable efforts to
immediately amend its name to a name that is not confusingly similar to TMS or
TMS Sequoia.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TMS
The obligations of TMS to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or partial or complete waiver (in
TMS's sole and absolute discretion), at or before the Closing Date, of the
following conditions:
7.1 Representations and Warranties True at the Closing Date. All of the
representations and warranties of the Buyer and the Parent contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, except for those representations and
warranties which by their terms are made as of a specific date which shall be
true and correct on and as of such date.
7.2 Performance. The Buyer and the Parent shall have performed and complied
with, in all material respects, all agreements, covenants, obligations and
conditions required by this Agreement to be so performed or complied with by it
or he, as applicable, prior to or at the Closing.
7.3 No Litigation. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging the transactions
contemplated hereunder shall be in effect, nor shall any proceeding brought by
an administrative agency or commission or other governmental authority or other
instrumentality seeking any of the foregoing be pending.
7.4 Governmental, Regulatory and Other Consents and Approvals. All
consents, approvals and actions of, filings with and notices to any governmental
or regulatory authority or any other public or private third parties required of
TMS, the Buyer or the Parent to consummate the Asset Purchase and the other
matters and transactions contemplated hereby shall have been obtained,
including, without limitation, Shareholder Approval.
7.5 Good Standing Certificates; Corporate Resolutions. TMS shall have
received certificates of good standing with respect to (i) the Buyer issued by
the State of Oklahoma and (ii) Parent issued by the State of Florida. TMS shall
have received copies of the resolutions of the Buyer approving the Asset
Purchase, this Agreement and the other transactions contemplated herein,
certified by the appropriate officers.
7.6 Deliveries. At the Closing and concurrently with the making of the
deliveries by TMS as set forth in Section 8.7, the Buyer and the Parent, as
applicable, shall have delivered the following in form and substance reasonably
satisfactory to TMS:
(a) The Adjusted Purchase Price, as provided in Section 2.7;
(b) A duly executed Assignment and Assumption Agreement in form and
substance reasonably acceptable to the parties;
(c) Certificates of the officers of the Buyer and the officers of the
Parent to evidence performance and compliance with, in all material
respects, all agreements, covenants, obligations and conditions required by
this Agreement, in form and substance reasonably satisfactory to TMS; and
(d) Such other instruments and documents as are reasonably requested
by TMS and as are required or contemplated by this Agreement.
7.7 Shareholder Approval; Fairness Opinion. TMS shall have received (a) an
opinion from an investment banking or other firm acceptable to TMS to the effect
that the Asset Purchase and/or sale or disposition of the VSC LLC interest is
fair to TMS and its shareholders from a financial point of view (TMS will
provide any copies thereof to Buyer and Parent), and (b) the Shareholder
Approval.
7.8 VSC LLC Interest. TMS shall have sold or otherwise disposed of its
interest in the VSC LLC or in such manner as releases TMS from all further
Liabilities or obligations under the VSC Agreements and TMS is fully indemnified
for any pending or future litigation or claims related to the Virtual Scoring
CenterTM software and any Intellectual Property related thereto.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND THE PARENT
The obligations of the Buyer and the Parent to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or partial or
complete waiver (in the Buyer's and the Parent's sole and absolute discretion),
at or before the Closing Date, of the following conditions:
8.1 Representations and Warranties True as of the Closing Date. All of the
representations and warranties of TMS contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except for those representations and warranties which by their terms
are made as of a specific date which shall be true and correct on and as of such
date.
8.2 Performance. TMS shall have performed and complied with, in all
material respects, all agreements, covenants, obligations and conditions
required by this Agreement to be so performed or complied with by it prior to or
at the Closing.
8.3 No Litigation. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging the transactions
contemplated hereunder shall be in effect, nor shall any proceeding brought by
an administrative agency or commission or other governmental authority or other
instrumentality seeking any of the foregoing be pending.
8.4 Good Standing Certificates; Corporate Resolutions. The Buyer shall have
received certificates of good standing with respect to TMS issued by the
Secretary of State of Oklahoma. The Buyer shall have received copies of the
resolutions of TMS approving the Asset Purchase and the other transactions
contemplated herein, certified by the appropriate officers.
8.5 Deliveries. At the Closing and concurrently with the making of the
deliveries by Buyer and Parent as set forth in Section 7.6, TMS shall have
delivered the following in form and substance reasonably satisfactory to Buyer:
(a) A duly executed Assignment and Assumption Agreement in form and
substance reasonably acceptable to the parties;
(b) A duly executed ▇▇▇▇ of Sale in form and substance reasonably
acceptable to the parties and such assignments, certificates of title and
other documents as may be reasonably requested by the Buyer in order to
convey good and marketable title to all of the Purchased Assets, free and
clear of all Encumbrances (other than the Assumed Liabilities) and in order
to carry out the intentions and purposes of this Agreement;
(c) A certificate of the officers of TMS to evidence performance and
compliance with, in all material respects, all agreements, covenants,
representations and warranties obligations and conditions required by this
Agreement, in form and substance reasonably satisfactory to the Buyer;
(d) The Closing Statement;
(e) A non-foreign persons affidavit of TMS in form and substance
reasonably satisfactory to the Buyer; and
(f) Such other instruments and documents as are reasonably requested
by Buyer and as are required or contemplated by this Agreement.
9. INDEMNIFICATION
9.1 General Indemnification.
(a) TMS shall indemnify, hold harmless and defend the Buyer and
Parent, and their respective, its officers, managers, employees,
shareholders, assigns, successors and affiliates (collectively, the
"Buyer's Indemnified Parties") from and against any and all Damages
suffered by the Buyer's Indemnified Parties (i) arising out of a breach or
inaccuracy of or failure to comply with any representation, warranty or
covenant made by TMS in this Agreement which survives the Closing Date as
specified in Section 10.11 hereof, (ii) arising out of or resulting from or
based upon any Liabilities other than the Assumed Liabilities, (iii)
arising out of or resulting from TMS' and its representatives' use of the
Purchased Assets after the Closing Date, or (iv) arising out of or
resulting from or based upon the Retained Assets.
(b) The Buyer and the Parent, jointly and severally, covenant and
agree to indemnify, hold harmless and defend TMS, its officers, managers,
employees, shareholders, assigns, successors and affiliates (collectively,
the "Seller's Indemnified Parties") from and against any and all Damages
suffered by the Seller's Indemnified Parties (i) arising out of a breach or
inaccuracy of or failure to comply with any representation, warranty or
covenant made by the Buyer or the Parent in this Agreement which survives
the Closing Date as specified in Section 10.11 hereof, (ii) by reason of
any failure of the Buyer or the Parent to pay, honor, perform or otherwise
discharge the Assumed Liabilities on and after the Closing Date, or (iii)
arising out of or resulting from the Buyer or the Parent's use of or
operation of the Business related to the Purchased Assets on or after the
Closing Balance Sheet Date.
9.2 Procedure and Limitation.
(a) No indemnification will be provided under Section 9.1(a) or 9.1(b)
hereof for any claim for indemnification which is made more than one (1) year
following the Closing Date or such shorter period as may be specified in Section
10.11 hereof.
(b) TMS' obligation to indemnify a Buyer Indemnified Party shall become
operative only after and to the extent the aggregate amount of Losses incurred
by any Buyer Indemnified Party exceeds $25,000. The Buyer's and the Parent's
obligation to indemnify a Seller Indemnified Party shall become operative for
any amounts of the Purchase Price, the Promissory Note and any Losses arising
from the Assumed Liabilities from the first dollar, but as to any other Losses,
only after and to the extent the aggregate amount of such Losses incurred by any
Seller Indemnified Party exceeds $25,000.
(c) Any indemnified party shall give the indemnitor(s) prompt notice of any
claim hereunder; provided, the failure to give such notice shall not affect the
right to indemnification hereunder unless the indemnitor(s) was materially
prejudiced by such failure. The indemnitor(s) shall have the right to defend at
its own defense any claim for which the indemnitor is liable hereunder, but no
settlement or compromise of such claim may be affected which materially affects
the indemnified party without its consent thereto, which consent shall not be
unreasonably withheld or delayed. The indemnified party shall cooperate with the
indemnitor in the defense of any such claims and may participate therein with
its own counsel at its own expense.
10. GENERAL
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of TMS and the Buyer; or
(b) by TMS or by the Buyer, upon written notice to the other party, if
the Closing shall not have occurred on or before November 15, 2004;
provided that the right to terminate this Agreement under this Section
10.1(b) shall not be available to any party whose material
misrepresentation, breach of warranty or failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of
the Closing to occur on or before such date; or
(c) by TMS or by the Buyer, upon written notice to the other party, if
there is or has been a material breach, failure to fulfill or default on
the part of the other party of any of the representations and warranties
contained herein or in the due and timely performance and satisfaction of
any of the covenants, agreements or conditions contained herein, and the
curing of such default shall not have been made or shall not reasonably be
expected to occur before the Closing Date; or
(d) by TMS, upon written notice to the Buyer and payment to the Buyer
of $80,000 (the "Termination Fee") in immediately available funds, if TMS
has received a proposal (a "Competing Proposal") from an unrelated third
party and the board of directors of TMS has determined (in its sole and
absolute discretion) that the Competing Proposal is more favorable than
this Agreement.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1(a), (b), or (c), this Agreement shall
forthwith become void, and there shall be no liability or obligation on the part
of any party hereto or its officers, managers, directors or shareholders;
provided, however, that (i) the provisions of this Section 10 and Section 9
shall remain in full force and effect and survive any termination of this
Agreement; (ii) each party shall remain liable for any intentional breach of
this Agreement prior to its termination; and (iii) in the event of termination
of this Agreement pursuant to Section 10.1(c), then notwithstanding the
provisions of Section 10.7, the breaching party (if such breach was in effect as
of the date hereof) shall be liable to the other party to the extent of the
reasonable expenses incurred by such other party in connection with this
Agreement and the transactions contemplated by this Agreement, as well as any
damages in accordance with applicable law.
10.3 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. This Agreement and the rights hereunder are not assignable by
either TMS, the Buyer or the Parent unless such assignment is consented to in
writing by each of the parties hereto, which consent may not be unreasonably
withheld or delayed; provided however, that after the Closing, any rights,
obligations or benefits of TMS under this Agreement may be assigned to TMS's
liquidating agent or may be performed or exercised by TMS's liquidating agent or
such agent's assignee in accordance with a plan of liquidation.
10.4 Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to the transactions contemplated hereby. Any
and all previous agreements and understandings (except the Confidentiality
Agreement) between or among the parties regarding the subject matter hereof,
whether written or oral, are superseded by this Agreement.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties.
10.6 Expenses. Except as provided in Section 6.4 and 6.10 of this
Agreement, TMS has paid and shall pay the fees, expenses and disbursements of
TMS and its representatives, accountants and counsel incurred in connection with
the subject matter of this Agreement and the Buyer and/or the Parent have paid
and shall pay the fees, expenses and disbursements of the Buyer and the Parent
and each of their respective representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement.
10.7 Specific Performance; Remedies Not Exclusive. Each party hereto
acknowledges that the other parties shall be irreparably harmed and that there
shall be no adequate remedy at law for any violation by any of them of any of
the covenants or agreements contained in this Agreement, including, without
limitation, the confidentiality obligations set forth in Section 6.1. It is
agreed that, in addition to, but not in lieu of, any other remedies which may be
available upon the breach of any such covenants or agreements, each party hereto
shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
parties' covenants and agreements contained in this Agreement. All rights and
remedies of the parties under this Agreement shall be cumulative, and the
exercise of one or more rights or remedies will not preclude the exercise of any
other right or remedy available under this Agreement or applicable law.
10.8 Notices. Any notice, request, claim, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally, sent by facsimile
transmission with confirmation of transmission, sent by registered or certified
mail (postage prepaid, return receipt requested), or by nationally recognized
overnight courier service, as follows:
If to TMS to:
TMS, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to
McAfee & ▇▇▇▇
Two Leadership Square, 10th Floor
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▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer or the Parent to:
Pegasus Imaging Corporation
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▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Berlin
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to
Trusted Counsel (Ashley) LLC
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.9 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Oklahoma
(without regard to its laws relating to choice-of-law or conflicts-of-law).
10.10 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or any related agreement shall be settled by arbitration in
accordance with the following provisions:
(a) The agreement of the parties to arbitrate covers all disputes of
every kind relating to or arising out of this Agreement, any related
agreement or the Asset Purchase or related transactions. Disputes include
actions for breach of contract with respect to this Agreement or the
related agreement, as well as any claim based upon tort or any other causes
of action relating to the Asset Purchase, such as claims based upon an
allegation of fraud or misrepresentation and claims based upon a federal or
state statute. In addition, the arbitrators selected according to
procedures set forth below shall determine the arbitrability of any matter
brought to them, and their decision shall be final and binding on the
parties.
(b) The forum for the arbitration shall be Oklahoma City, Oklahoma.
(c) The governing law for the arbitration shall be the law of the
State of Oklahoma, without reference to its conflicts of laws provisions.
(d) There shall be three arbitrators, unless the parties are able to
agree on a single arbitrator. In the absence of such agreement within ten
(10) days after the initiation of an arbitration proceeding, TMS shall
select one arbitrator and the Buyer shall, collectively or as applicable,
select one arbitrator, and those two arbitrators shall then select, within
ten (10) days, a third arbitrator. If those two arbitrators are unable to
select a third arbitrator within such ten-day period, a third arbitrator
shall be appointed by the commercial panel of the American Arbitration
Association. The decision in writing of at least two of the three
arbitrators shall be final and binding upon the parties.
(e) The arbitration shall be administered by the American Arbitration
Association.
(f) The rules of arbitration shall be the Commercial Arbitration Rules
of the American Arbitration Association, as may be amended, as modified by
any other instructions that the parties may mutually agree upon at the
time. If there is any conflict between Federal Rules of Civil Procedure and
the provisions of this section, the provisions of this section shall
prevail.
(g) The arbitrators shall be bound by and shall strictly enforce the
terms of this Agreement and may not limit, expand or otherwise modify its
terms. The arbitrators shall make a good faith effort to apply substantive
applicable law, but an arbitration decision shall not be subject to review
because of errors of law. The arbitrators shall be bound to honor claims of
privilege or work-product doctrine recognized at law, but the arbitrators
shall have the discretion to determine whether any such claim of privilege
or work product doctrine applies.
(h) The arbitrators' decision shall provide a reasoned basis for the
resolution of each dispute and for any award. The arbitrators shall not
have power to award any damages that are excluded under this Agreement.
(i) Each party shall bear its own fees and expenses with respect to
the arbitration and any proceeding related thereto and the parties shall
share equally the fees and expenses of the American Arbitration Association
and the arbitrators.
(j) The arbitrators shall have power and authority to award any remedy
or judgment that could be awarded by a court of law in Oklahoma. The award
rendered by arbitration shall be final and binding upon the parties, and
judgment upon the award may be entered in any court of competent
jurisdiction in the United States.
10.11 Survival of Representations, Warranties and Covenants. All
representations and warranties made by either party in or pursuant to this
Agreement or in any document delivered pursuant hereto shall survive for a
period ending on the earlier of the Liquidation Date or one year after the
Closing. The covenants and other agreements contained in this Agreement to be
performed on or after the Closing shall survive the Closing until the date or
dates specified therein or the expiration of the applicable statute of
limitations with respect to such matters, whichever is later. Notwithstanding
the foregoing, if a notice of a claim under Section 9 is sent, the
representation, warranty or covenant with respect to which such notice is sent,
and the related indemnification obligations set forth in Section 9 with respect
to the notice, shall survive until the resolution of the claim to which such
notice relates, or such longer period as provided herein.
10.12 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any jurisdiction, shall not be affected thereby,
and to this end the provisions of this Agreement shall be severable.
10.13 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, employee or partner of any party hereto or any
other person or entity.
10.14 Press Releases and Announcements Subject to the provisions of the
Confidentiality Agreement, no press releases, announcements or other disclosure
related to this Agreement, the transactions contemplated herein or the
consideration paid hereunder or pursuant to any agreement ancillary hereto will
be issued by any party hereto without the joint approval of the Buyer and TMS,
except for any public disclosure that any party hereto in good faith believes is
required by law (in which case the disclosing party will consult with the other
party a reasonable amount of time prior to making such disclosure). The Buyer,
the Parent, and TMS each shall be liable for any breaches of this provision by
any of their respective affiliates, employees or representatives.
10.15 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax or
securities consequences of the transactions contemplated by this Agreement and
is not relying on any representation or statements made by the other party as to
such tax and securities consequences.
10.16 Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time only by execution of an instrument in writing signed on
behalf of each of the parties hereto. Any extension or waiver by any party of
any provision hereto shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
10.17 Gender. Unless the context clearly indicates otherwise, where
appropriate the singular shall include the plural and the masculine shall
include the feminine or neuter, and vice versa, to the extent necessary to give
the terms defined herein and/or the terms otherwise used in this Agreement the
proper meanings.
10.18 Continuing Access to Records. For a period of not less than three (3)
years from the Closing Date (plus any additional time during which the Buyer has
been advised that (a) there is an ongoing tax audit with respect to periods
prior to the Closing Date, or (b) such period is otherwise open to assessment)
the Buyer agrees to give TMS or its liquidating agent or such agent's assignee
reasonable cooperation, access and staff assistance, as needed, during normal
business hours with respect to books and records and other financial data
delivered to the Buyer hereunder. TMS agrees to give the Buyer reasonable
cooperation, access and staff assistance, as needed, during normal business
hours with respect to books and records and other financial data retained by
TMS, as may be necessary for general business purposes, including, without
limitation for (i) the preparation of tax return and financial statements and
(ii) the management and handling of tax audits, to an extent as will not
unreasonably interfere with a party's conduct of its business, and to keep such
materials reasonably accessible either until TMS's liquidation or the expiration
of a period of three (3) years from the Closing Date, whichever is earlier.
Neither TMS nor the Buyer will destroy or otherwise dispose of such materials
for such time without the written consent of the other party, which shall not be
unreasonably withheld, or, in the alternative, without delivering to the other
party full and complete copies of such materials.
10.19 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
10.20 Knowledge. Whenever any statement in this Agreement is made by a
party to its "knowledge" or words of similar intent or effect, such statement
shall be deemed to include a representation that a reasonable investigation of
the subject matter thereof has been conducted. A reasonable investigation shall
mean that a senior representative of the party (which in the case of TMS shall
mean only the individuals named below) has reviewed the relevant statement,
consulted with the appropriate individuals as to whether they have knowledge of
any fact or circumstance that would make such statement untrue or misleading,
and reviewed documents in the possession of such representative, such
appropriate individuals, and the party. Knowledge of any Person shall be limited
to the actual knowledge of such Person after giving effect to the investigation
described above. The knowledge of TMS shall mean only the knowledge of ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇.
10.21 Headings. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.
10.22 Further Action; Future Cooperation. TMS and Buyer and Parent shall
take such actions, do all things reasonably necessary, and execute such
documents, certificates, instruments and other papers as may be reasonably
required or desirable to carry out the provisions of this Agreement and shall
each deliver or cause to be delivered to the other following the Closing such
additional instruments as the other may reasonably request for the purpose of
fully carrying out this Agreement. The Party requesting cooperation, information
or actions under this Section 10.22 shall reimburse the other Party for all
reasonable out-of-pocket costs and expenses paid or incurred in connection
therewith.
[EXECUTION PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the day and year first above written.
TMS TMS, Inc.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
BUYER PIC Acquisition, Inc.
By: ▇▇▇▇ ▇. BERLIN
Name: ▇▇▇▇ ▇. Berlin
Title: President
PARENT Pegasus Imaging Corporation
By: ▇▇▇▇ ▇. BERLIN
Name: ▇▇▇▇ ▇. Berlin
Title: President
THE FOLLOWING EXHIBITS AND SCHEDULES TO THIS ASSET PURCHASE AGREEMENT HAVE
BEEN OMITTED FROM THE SUBMISSION.
Exhibit A License Agreement Terms
Exhibit B Form of Promissory Note between PIC Acquisition, Inc. and
TMS, Inc.
Schedule 2.1 Purchased Assets
Schedule 2.1A Retained Assets
Schedule 2.2 Assumed Liabilities
