October 18, 2004
Pegasus Imaging Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Re: That certain ASSET PURCHASE AGREEMENT dated as of
August 5, 2004 by and among (i) TMS, INC., an Oklahoma
corporation ("TMS"), and (ii) PIC ACQUISITION, INC., an
Oklahoma corporation ("Buyer") and (iii) PEGASUS
IMAGING CORPORATION, a Florida corporation ("Parent")
(the "Purchase Agreement")
Ladies and Gentlemen:
This letter amends the Purchase Agreement effective as of October 16, 2004.
Capitalized terms that are not defined in this letter have the meanings given
them in the Purchase Agreement.
By your execution of the acknowledgement to this letter set forth below,
you hereby agree to the following.
1. TMS and Parent agree that, subject to the overall direction and approval
of the Board of Directors and the President of TMS, Parent shall (i) supervise
and direct the management and operation of the Business, (ii) provide the
necessary technical, marketing and sales personnel to supplement TMS's existing
personnel in or order that the Business continue to operate in the ordinary
course, and (iii) use its commercially reasonable efforts to maintain customer
relations related to the Purchased Assets (the "Management Services") beginning
October 16, 2004 through the date of the Special Meeting of TMS's
shareholders (the "Special Meeting"). If TMS obtains Shareholder Approval, the
Management Services shall continue through the Closing Date. If TMS does not
obtain Shareholder Approval, the Management Services shall cease on the day of
the Special Meeting or December 15, 2004, whichever occurs first.
a) TMS shall pay to Parent a fee for the Management Services in the
amount of $1,000 per calendar day beginning on October 16, 2004 and
ending on the earlier of (i) the day the Management Services cease, or
(ii) the day preceding the Closing Date.
b) In addition to the amount described in subparagraph (a) above, TMS
shall reimburse Parent for reasonable travel, hotel and related
out-of-pocket expenses directly attributable to the Management
Services, which expenses are currently estimated at no more than
$25,000 for the period beginning October 16, 2004 and ending December
15, 2004. To the extent that travel costs exceed the estimated
amounts, TMS shall reimburse Parent only for those costs which are
approved by TMS's President in advance, which approval shall not
unreasonably be withheld.
c) In addition to the amounts identified in subparagraphs (a) and (b)
above, TMS shall reimburse Parent for non-travel costs which are
directly attributable to the Management Services as provided in this
paragraph. To the extent non-travel costs exceed $500 per item, such
costs shall be submitted to TMS's President for approval and TMS shall
reimburse Parent only for those costs which are approved by TMS's
President and which do not require such approval, which approval shall
not unreasonably be withheld. The amounts identified in subparagraphs
(a), (b), and (c) of this paragraph 1 are collectively referred to as
the "Management Fee."
d) TMS shall reimburse Parent for its reasonable legal and financial
service fees directly attributable to the discussions and agreements
which led to the granting of the extension of the Closing Date, but
only in an amount up to $5,000.
e) The Management Fee is intended to compensate Parent and Buyer for all
expenses that may be incurred as a result of TMS retaining the
Business and Purchased Assets longer than was contemplated under the
Purchase Agreement. TMS agrees, however, to continue to work with
▇▇▇▇▇▇ and Buyer to minimize all expenses so long as TMS is not
required to compromise the integrity of information related to its
business or its ability to continue as a going concern if the
transaction is not approved. TMS acknowledges and agrees that Parent
is providing the Management Services as the intended purchaser of the
Business and Purchased Assets for Parent and ▇▇▇▇▇'s benefit. This
paragraph 1 shall not be construed as creating any obligation of TMS
to reimburse Parent or Buyer for expenses other than as expressly
stated herein and in the Purchase Agreement.
f) The amount described in subparagraph (a) will be paid to Parent
bi-monthly in the weekly check run that occurs on or about the 15th or
30th day of each month, as applicable. Amounts described in
subparagraphs (b) and (c) will be paid within five business days after
Parent presents an invoice to TMS's President. Each invoice shall
include a reasonably detailed description of each expense item along
with the corresponding amount.
g) If the transaction is closed, any amounts paid by TMS to Parent and/or
Buyer pursuant this paragraph 1 shall not reduce the amount due from
Buyer at Closing.
2. The Closing Date and the date specified in Section 10.1(b) of the
Purchase Agreement each shall be extended to December 15, 2004.
3. The Note Payment Date (which is defined in Section 1.1 of the Agreement)
is extended to the date which is the earlier of (a) the date that is fifteen
(15) days after the Liquidation Date, or (b) August 15, 2005.
4. The definition of the Liquidation Date is revised to state that the
Liquidation Date is 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 January 31, 2005.
5. The Work In Process attributable to the Boeing NATO contract shall be
included in Current Net Asset Value at September 30, 2004 and will be calculated
to apportion the margin under the contract to TMS as of September 30, 2004 and
to Buyer after September 30, 2004 using the method shown on the Boeing NATO
Schedule (the "Schedule") attached to this letter. The final calculation will
update the "Projected Hours" described on the Schedule to "Actual Hours" upon
delivery of the final release candidate of the software to Boeing.
6. TMS agrees that the $10,440 adjustment for transaction costs paid by TMS
prior to September 30, 2004 shall be added back to cash for purposes of
calculating Current Net Asset Value at September 30, 2004 and shall be invoiced
and paid to Buyer by TMS at Closing.
Except as expressly amended in this letter, the provisions of the Purchase
Agreement are and shall remain in full force and effect and are hereby ratified
and confirmed by the parties.
This letter may be executed and acknowledged in multiple counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same.
Very truly yours,
TMS, Inc.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Acknowledged and agreed to this 22nd day of October, 2004.
PIC Acquisition, Inc.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
Pegasus Imaging Corporation
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President