Exhibit 99.5
[TSRC, INC. LETTERHEAD]
July 26, 2002
Open Plan Systems, Inc.
0000 Xxxxxxxx Xxx.
Building C
Richmond, VA 23222
This letter confirms that TSRC, Inc. ("Buyer") is interested in
acquiring substantially all of the assets used in the business (the "Business")
of Open Plan Systems, Inc., a Virginia corporation ("Seller"). However, this
letter is intended only as a preliminary indication of our interest, and except
for paragraph 14 below, we will be legally bound only upon execution and
delivery of the mutually-agreed, definitive agreement as outlined below.
1) Acquired Assets. Buyer will purchase the following assets of the Seller used
in the operation of the Business (the "Acquired Assets"):
a. Inventory and work in process
b. Furniture and fixtures
c. Machinery and equipment
d. All intangibles of the Business, including goodwill, customer
lists, telephone numbers, facsimile numbers, internet domain
names, trademarks and tradenames.
2) Excluded Assets. Except as expressly provided herein, Seller shall retain the
balance of its assets, including cash. Buyer will collect the accounts
receivable, as outlined below.
3) Liabilities. Except for the leases described in paragraph 8(g) below, Buyer
will not assume any liabilities of the Seller, including without limitation, any
liability for Seller's employees or employee benefits or severance benefits.
4) Purchase Price. The aggregate consideration payable for the Acquired Assets
(the "Consideration") based on the Penta Advisory Services ("Penta")
"Confidential Offering Memorandum ("COM") dated July 16, 2002, will be as
follows:
a. Showroom inventory $ 32,000 (10% x $323,000)
Balance of Inventory $350,000 (20% x $1,751,000)
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Total Inventory $382,000
b. Fixed assets, based on the net book value at 05/31/02 in the COM will
be $148,000
(Computer Equip. $60,000, Machinery $635,000 and Other $45,000, for a
total net book value of $740,000 X 20%)
c. For the intangible assets, Buyer will pay $100.00 in cash at Closing.
The total proceeds to the Seller, including collections from accounts
receivable pursuant to Paragraph below, would be approximately $1,791,000.
5) Assumptions. Xxxxx has relied upon and assumed the accuracy of the
financial information provided to it by Xxxxxx and Xxxxx. Changes,
inaccuracies or omissions in this information will require adjustment to
the Consideration.
6) Accounts Receivable. Xxxxx will collect Seller's accounts receivable
and make monthly remittances to Seller (or Seller's lender, if so
ordered by the U.S. Bankruptcy Court), less a fifteen percent (15%) fee
of the amount collected. Only Seller (or Seller's lender, if so ordered
by the U.S. Bankruptcy Court) would be able to approve any compromise
of an account receivable. If the Buyer is authorized to incur out of
pocket expenses to collect any account receivable, the Buyer would bear
15% of the out of pocket expense, and the Seller would bear 85%. If
collected, based on the July 2, 2002 account receivable balance of
$1,483,000, the Seller would receive $1,261,000.
7) Closing. Closing of the transaction ("Closing") will occur five days
following the date on which the order from the U.S. Bankruptcy Court for
the Eastern District of Virginia (the "Bankruptcy Court") approving the
sale becomes final and nonappealable.
8) Conditions. This proposal is conditioned on:
(a) Due Diligence. Xxxxx's satisfaction with the results of its
due diligence review of the Business, including operational,
financial and legal matters. The due diligence period will
commence on the date this letter of intent is executed, and
expire at 5:00 p.m. on the day prior to the hearing before the
Bankruptcy Court on the motion to approve the transaction
described herein, free and clear of all liens, interests and
encumbrances (the "Hearing Date").
(b) No Adverse Changes. The absence of any material adverse change
in financial condition, business or assets of the Seller
between the date hereof and the Hearing Date.
(c) Financing. Xxxxx being able to obtain a financing commitment
on terms satisfactory to Buyer in its sole discretion on or
prior to the Hearing Date.
(d) Asset Purchase Agreement. The execution of a definitive asset
purchase agreement (the "Definitive Agreement") within seven
days after the date hereof, containing representations and
warranties by the Seller with respect to the ownership of the
Acquired Assets and otherwise on mutually-agreeable terms.
(e) Employment Agreement. Xxxxx and Xxxx Xxxxxx entering into an
employment agreement on terms and conditions acceptable to
Buyer in its sole discretion on or prior to Closing.
(f) Consents. The receipt of all necessary consents to the
transaction from government agencies, if required.
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(g) Leases. Buyer's review and assumption of certain leases of
Seller which Buyer determines during its due diligence process
are essential to the transaction, subject to the consent of
each lessor. Buyer will provide Seller with a list of such
leases during the due diligence period.
(h) GSA Contract. Seller's existing contract with the General
Services Administration must be assigned to Buyer on terms and
conditions acceptable to Buyer.
(i) Relocation of Equipment. Buyer will need sixty days following
Closing to relocate the equipment to Seller's facility.
However, Seller shall have no obligation or liability for rent
or other expenses incurred post-Closing and Purchaser shall
negotiate directly with any landlords for post-Closing lease
and/or rent obligations.
9) Additional Provisions in the Event of Other Bids. Buyer understands that if
Seller accepts its offer to purchase the Acquired Assets and the parties enter
into a Definitive Agreement, other bids may be considered by the Bankruptcy
Court at the Hearing. Accordingly, the Definitive Agreement will provide:
a. That the minimum increase in the purchase price for the
Acquired Assets must be at least $50,000.00; and
b. In the event any person other than Buyer is the successful
bidder, then and in that event, the Buyer shall be reimbursed
$30,000 for costs incurred in connection with the due
diligence, legal, accounting, or other professional expenses
that were incurred by it. The same shall be reimbursed to
Buyer within two days following the closing of the sale to the
successful bidder.
10) Access. During the due diligence period and prior to Closing, Seller will
make available to Buyer and its representatives all information which they may
reasonably request concerning the business, operations and affairs of the
Seller and will afford Buyer the full opportunity to have access to the
personnel of the Seller. Xxxxx agrees that if the transaction is not
consummated, Xxxxx will return all documents, notes and other material
(including any copies thereof) obtained during the course of its review of the
Seller and will keep all such information confidential except to the extent
that such information is otherwise known to Buyer or in the public domain.
11) Ordinary Course. During the period from the date hereof to the Closing Date,
Seller will use its best efforts to continue to operate the Business in the
ordinary course and will consult with Buyer with respect to all matters which
could materially affect such business.
12) Termination. This letter of intent will automatically terminate and be of no
further force and effect upon the earliest to occur of (a) execution of the
Definitive Agreement, and (b) 5:00 p.m., Wednesday, July 31, 2002.
13) Closing Date. The parties will use good faith efforts to work with each
other on the transaction such that it is consummated on or before August 31,
2002.
14) Costs. Except as provided in paragraph 9 hereof, each party will bear all of
its own fees and expenses (including all fees of attorneys, accountants and
brokers) incurred in connection with the transaction, whether or not the
transaction is consummated.
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If the foregoing is acceptable, please indicate your approval by
signing a copy of this letter and returning it to the undersigned.
Very truly yours,
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President
Agreed and Accepted on July 31 , 2002.
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/s/ Xxxxxx X. Xxxxxx, Xx.
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President & CEO
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