EXHIBIT 10.7
CONTACT COMMUNICATIONS, INC.
0000 XXX XXXXXXX
XXXXXX, XXXXX 00000
October 10, 1995
SENT VIA FACSIMILE
C/O XXXX XXXXXXX, ESQUIRE
(000) 000-0000
--------------
Xx. Xxxxx X. Xxxx, III
President
Xxxxxxxxx, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Dear Xx. Xxxx:
This letter will confirm the understanding that Xxxxx X. Xxxx, III and
Xxxxxx X. Xxxxx (the "Shareholders") have reached with Contact Communications
Inc., a Delaware corporation ("Buyer"), and wholly owned subsidiary of ProNet
Inc. ("ProNet"), with respect to the acquisition ("Acquisition") by Buyer of all
issued and outstanding shares of common stock (the "Shares") of Cobbwells, Inc.
d/b/a Page One/Airtel, a Georgia corporation (the "Company") from the
Shareholders.
1. The parties hereto shall immediately proceed with the further
negotiation, preparation and execution of a Definitive Agreement (herein so
called) containing, among other things, the terms and conditions set forth in
EXHIBIT A attached hereto. The parties intend that the Definitive Agreement be
executed no later than 5:00 p.m., Dallas time, November 17, 1995, unless they
shall otherwise agree in writing.
2. Following the date of execution hereof, the Shareholders and the
Company shall afford to Buyer through its officers, attorneys, accountants,
lenders and authorized representatives and affiliates free and full access to
the properties, books and records of the Company on reasonable notice during
normal business hours in order to permit Buyer to make such investigation of
the business, properties and operations of the Company as Buyer may deem
necessary. In the event Buyer determines not to proceed with the Acquisition,
any information furnished to, or obtained by, any party hereto, its officers,
attorneys, accountants, lenders or authorized representatives, as a result of
its investigations or otherwise in connection with the Acquisition, shall be
treated as confidential information except (a) to the extent such
Xx. Xxxxx X. Xxxx, III
October 10, 1995
Page -2-
information is otherwise public or generally available to the public or (b) as
required by law. In the event the Acquisition does not occur, each party shall
return to the other parties all written confidential information furnished by
the other parties to it or him and will not thereafter use, for any purposes
whatsoever, such confidential information, or permit any such confidential
information to be made publicly available.
3. The Shareholders and the Company represent and warrant to Buyer that
neither the Shareholders nor the Company has entered into any agreement
pursuant to which any person or entity has obtained the right to acquire any
portion of the securities or assets of the Company (whether by purchase of
assets or stock, by merger, or otherwise) and (b) the execution, delivery and
performance of this letter of intent by the Shareholders and the Company do not
and will not breach, violate or conflict with, or permit the cancellation of,
any agreement to which the Company is a party or by which it or its properties
is bound. In order to induce Buyer to undertake the considerable effort and to
incur the major expenses associated with the Acquisition, the Shareholders and
the Company shall not, and shall use their best efforts to cause the officers,
directors, employees, and agents of the Company not to, (a) solicit, initiate
or encourage the submission of proposals or offers from any person or entity
for, or enter into any agreement or arrangement relating to, any acquisition or
purchase of any or all of the assets of, or securities of, or any merger,
consolidation, or business combination with, the Company or any subsidiary
thereof or (b) participate in any negotiations regarding, or, except as
required by legal process, furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate, or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing until 5:00 p.m., Dallas,
Texas time, on November 17, 1995. In addition, until 5:00 p.m., Dallas, Texas
time, on November 17, 1995, the Shareholders and the Company agree that neither
the Shareholders nor the Company will enter into any agreement or consummate
any transaction that would interfere with the consummation of the Acquisition.
The Shareholders and the Company shall promptly notify Buyer if any such
proposal or offer described in this paragraph, or any inquiry or contact with
any person or entity with respect thereto, is made. The notification under this
paragraph shall include the identity of the person or entity making such
acquisition, offer or other proposal, the terms thereof, and any other
information with respect thereto as Buyer may reasonably request and which may
be legally provided to Buyer by the Company and the Shareholders.
4. No public announcement shall be made by Buyer, ProNet, the Company or
either Shareholder with respect to the transactions contemplated hereby without
the approval of the respective parties, unless otherwise required by law;
provided, however, it is specifically understood that ProNet may issue press
releases regarding the execution of this letter of intent, the execution of the
Definitive Agreement and/or the Closing of the Acquisition.
Xx. Xxxxx X. Xxxx III
October 10, 1995
Page -3-
5. This letter is intended merely to be a guide in the preparation of a
Definitive Agreement satisfactory to the parties hereto and nothing contained
herein shall be construed to preclude other provisions that are inconsistent
with the terms of the Acquisition outlined herein from being included in the
Definitive Agreement, provided such other provisions are satisfactory to all
parties to the Definitive Agreement. While the parties presently intend to
proceed promptly to complete the Definitive Agreement, it is expressly
understood that this is a letter of intent and that no liability or obligation
of any nature whatsoever is intended to be created between or among any of the
parties hereto except as set forth in paragraphs 2, 3 and 4 hereof.
6. Upon the execution of this letter by all parties, the Letter of Intent
by and among the same parties dated August 7, 1995 shall terminate.
If the foregoing sets forth your understanding with respect to this matter,
please execute the enclosed copies of this letter in the space provided below
for your signatures and return one fully executed copy to the undersigned,
whereupon this letter shall become a binding agreement among the parties hereto
and our respective heirs, successors and assigns as of the date hereof.
CONTACT COMMUNICATIONS INC.
By:___________________________________
Title: _________________________________
Accepted and agreed to in all respects
as of ______ day of __________, 1995
COBBWELLS, INC.
By:_________________________________
Title:________________________________
____________________________________
Xxxxx X. Xxxx, III
____________________________________
Xxxxxx X. Xxxxx
EXHIBIT A
COBBWELLS, INC.
TERM SHEET
Nature of Transaction Sale Of Stock of Cobbwells, Inc.
Purchase Price The Purchase Price shall be $16,200,000.
The Purchase Price shall be paid as
follows:(a) 70% in cash at closing, and
(b) 30% payable in shares of common
stock ("Common Stock") of ProNet Inc.
(valued at the then current trading
price) or cash (the "Deferred Amount"),
in Buyer's sole discretion, within 12
months after the closing of the
Acquisition. The Purchase Price shall be
allocated between the Shares and the
Shareholders' Noncompetition Agreements
(in an amount to be agreed to by the
parties hereto). On the date of
execution of the definitive agreement,
Xxxxx shall deposit with an escrow
agent, a $500,000 xxxxxxx money deposit
("Xxxxxxx Money"). Such Xxxxxxx Money
would be credited toward the Purchase
Price at Closing. In the event the
transaction does not close due solely to
Buyer's breach of its obligations under
the definitive agreement, then the
Xxxxxxx Money shall be payable to
Shareholders; otherwise, the Xxxxxxx
Money shall be payable to Buyer. Buyer
shall pay the Shareholders interest at
the rate of 6 1/2% per annum on any
portion of the Deferred Amount
outstanding (calculated from the date of
Closing until paid).
The shares of common stock to be
delivered in payment of the Deferred
Amount, if any, shall be the subject of
a Registration Rights Agreement between
the Shareholders and ProNet pursuant to
which ProNet shall agree that such
shares shall be registered with the
Securities and Exchange Commission (the
"SEC") within 14 days after the delivery
of such shares to the Shareholders.
Cobbwells, Inc.
Terms -2-
Accounts Receivable The Purchase Price shall be increased by the
Company's accounts receivable pursuant
to a formula reflecting the Company's
aging to be mutually agreed by the
parties.
Recurring Revenue The Company shall have at least $328,000 in
recurring monthly revenue (as defined
from the summary billing by price code
generated by the Company in its ordinary
course) for the last complete month
prior to the date of Closing ("Recurring
Monthly Revenue"). In the event
Recurring Monthly Revenue is less than
$328,000, the Buyer shall have the
option to terminate the transaction with
the Xxxxxxx Money payable to the Buyer.
In the event Recurring Monthly Revenue
exceeds $328,000, the purchase price
shall be increased by $25,000 for each
$1,000 over $328,000.
Other Conditions to Closing (a) All third party consents, approvals and
waivers required to be obtained by the
Company or the Buyer to consummate the
transaction shall have been obtained or
waived.
(b) Between September 30, 1995 and Closing,
there shall have been no material
adverse change in the financial
condition, assets or business of the
Company and between September 30, 1995
and Closing, the business of the Company
shall have been conducted in the
ordinary course consistent with past
practice.
(c) Any required government filings shall
have been made and applicable waiting
periods shall have expired or been
terminated or waived by Buyer.
(d) No declared but unpaid dividends shall
be in effect on the date of the Closing.
Cobbwells, Inc.
Terms -3-
(e) No loans to officers or employees shall
be outstanding on the date of the
Closing.
(f) Since September 30, 1995, there shall
have been no dividends or distributions
(other than in the normal course
consistent with past practice), no
material increase in the compensation to
officers or other key employees of the
Company (other than in the normal course
consistent with past practice) and no
material commitments shall be made
without the consent of the Buyer, except
such distributions or compensation as is
mutually agreed to between the parties.
(g) The cash and cash equivalents (including
accounts receivable) of the Company
shall meet or exceed the amount of
Accounts Payable existing on the date of
the Closing.
(h) The Company's pagers in service shall
not be less than 27,328 at the date of
the Closing.
(i) The Acquisition shall include all of the
Company's radio paging systems,
including all affiliated networks for
continuity of such system (collectively
the "System"),and any frequencies
licensed for radio paging in such
metropolitan areas held by the Company
but not currently used in the operation
of the System and all tangible assets of
the System including receivers,
transmitters, base station equipment,
accounts receivable, inventory (of an
appropriate working level to supply the
System; provided however, that the value
of the inventory shall not be less than
$200,000), furniture, fixtures and
computer equipment.
Cobbwells, Inc.
Terms -4-
Excluded Assets (a) The Company's cash: the cash and cash
equivalents (excluding accounts
receivable) to the extent such cash and
cash equivalents exceed Accounts Payable
existing on the date of the Closing. .
(b) Two (2) leased automobiles.
(c) Spectrum Mail Machine.
(d) Postage Machine.
(e) The Company's telephone answering
service equipment.
Noncompetition Agreement The Shareholders will agree not to compete
with Buyer in the area in which the
Company serves its customers (Georgia
and South Carolina) for a period of
five years from the closing of the
Acquisition; provided however, the
Shareholders may operate as Resellers
on Buyer's system under terms to be
mutually agreed upon by the parties.
Representation and Warranties The Shareholders shall represent and warrant
that (a) neither they nor the Company
has entered into any agreement pursuant
to which any person or entity has
obtained the right to acquire any
portion of the securities or all or
substantially all of the assets of the
Company (whether by purchase of assets
or stock, by merger or otherwise), and
(b) except as otherwise disclosed on the
appropriate disclosure schedule, the
execution, delivery and performance of
the Definitive Agreement by such
Shareholders and the Company do not and
will not breach, violate or conflict
with, or permit the cancellation of, any
agreement to which the Shareholders or
the Company is a party or by which any
of them or their properties is bound.
Cobbwells, Inc.
Terms -5-
License Transfers Within ten (10) days after the parties
have signed this letter of intent, Buyer
(with the
Company's/Shareholders' assistance)
shall apply with the Federal
Communications Commission for the
transfer of all licenses currently
issued to the Company (including any
pending applications with respect to the
Company). The parties will each pay
one-half of the cost of such
applications.
Deferred Revenue/Deposits The Purchase Price shall be reduced by (a)
the amount of any revenues collected by
the Company prior to the Closing in
respect of services or merchandise to be
provided after the Closing and (b) the
amount of customer pager rental deposits
collected by the Company prior to the
Closing.
Liabilities The Company will pay or provide for payment
at Closing for all of its liabilities so
that the Company's assets are free and
clear of all liabilities, liens and
encumbrances as of the date of Closing.
Indemnification/Offset Buyer shall have a right to offset and
indemnification for any damages
resulting from breaches of the
Definitive Agreement by the Company or
the Shareholders.
ProNet Guarantee ProNet shall guarantee the obligations of
Buyer contained in the Definitive
Agreement.
Closing The Closing shall take place on or after
January 1, 1996.
