EXHIBIT 10.1
July 28, 2008
Pine River Cable
RE: Letter Agreement
This letter is a non-binding agreement by and between NexHorizon
Broadband of Michigan, Inc., a Colorado corporation (the "Buyer"), to acquire
100% of the assets and the business located and operated in and around the
following Michigan towns: McBain (hereinafter jointly referred to as the
"Acquired Business"), each of which is owned 100% by Phoenix Communications,
Inc., a Michigan corporation (the "Seller").
Seller has represented that the Acquired Companies own and operate a
business, including without limitation, plant, equipment and infrastructure,
engaged in providing cable television and Internet services in and around McBain
(such business, including the plant, equipment, vehicles, tools, franchise,
subscribers, spares, inventory and infrastructure, the "TV and Internet
Systems") serving a minimum of 2,500 subscribers. Following are the terms and
conditions of the acquisition:
1. Assets and Business to be Acquired. The Business to be acquired by the
Buyer (shall be placed into a wholly-owned subsidiary, NexHorizon Broadband of
Michigan, Inc.) have tangible and intangible assets applicable to operations of
the businesses, including but not limiting to the following:
o CATV and Internet systems in McBain, Michigan.
o Franchising Authority Agreements covering the TV and Internet Systems.
o Cable and Internet Assets: buildings, land and all equipment,
including distribution systems, head-ends and related satellite and
off-air receiving equipment, including without limitation the physical
components of the cable and internet systems from the earth stations,
head-ends, cabling, pedestals, amplifiers and drop cabling, switches,
voice mail systems, towers, all related wireless technologies, servers
and routers used by the Acquired Businesses in their cable television
and Internet systems and any other equipment to be addressed in the
final purchase agreement.
o Vehicles used in the operations of the current business. At closing,
title to these vehicles shall be transferred to the Buyer.
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July 28, 2008
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o Furniture, computer equipment and fixtures as used within the
Business.
o General equipment.
o Spare cable and voice parts and all other inventory, and all tools and
test gear used in the operations of the current business.
o Subscribers that are current paying customers, such number not to be
fewer than 2,500 subscribers as of the Closing Date, as defined
herein.
o Outstanding accounts receivable from subscribers as of the Closing
Date.
o All prepaid receivables.
o As-built and design maps of each System to the extent the Acquired
Businesses have the same.
o Retransmission consents, licenses, leases for real property and all
other agreements that are required or needed to continue to operate
the businesses of the Acquired Assets.
o All other assets of the Acquired Businesses.
With the exception of any existing warranties provided by the manufacturer or
the original party who sold the assets to the Seller, all assets being acquired
by the Buyer are being sold on an "as is" and "with all faults" basis, except
however, in the event the systems being sold to Buyer are not in normal working
order at Closing, the Seller shall be obligated to cure any defects necessary to
return the same to normal working order, upon written notice of the same from
Buyer received at or before Closing. If Seller fails to cure any such defects in
appropriate fashion, Buyer shall have the right to correct such defects and
credit the cost of the same against the principal balance due.
2. Purchase Price. Except as provided in Section 1, above, the total
purchase price for the Assets and the Businesses to be Acquired shall be $1,500
per subscriber less the assumption of one senior note of approximately
$1,000,000 and less a to be negotiated allocation of CAPEX (not to exceed $150
per subscriber) contingent upon Buyer's completion of its due diligence (the
"Purchase Price"). The Purchase Price may be adjusted in accordance with the
terms included below.
The Purchase Price will be paid as follows:
a. Preferred Stock: $2,375,000 worth of Series B Preferred Stock
issued at $10 per share.
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The Preferred stock will be eligible to be converted to common shares
beginning one (1) year after the effective date of this transaction. The
final conversion terms are to be negotiated.
Debt assumption: Approximately $1,000,000
b. Closing shall occur on or before ninety (90 days) following the
date of this agreement once Buyer notifies Seller of its intent to close
the transaction with all Franchise Authorities approve the proposed herein.
3. Exclusivity. Upon execution hereof and for a period of ninety (90) days
thereafter, Seller agrees to not engage in any negotiations or discussions with
any third parties for the sale of the Acquired Companies or the assets contained
therein.
4. Access; Due Diligence. Sellers will permit Buyer and its agents to have
reasonable access to the premises in which the Acquired Businesses conduct their
business and to all of the Acquired Businesses books, records, and personnel
files. Seller will furnish to Buyer audited financials of the Acquired
Businesses for the fiscal years ended December 31, 2007 and 2006, and unaudited
financial statements for the interim period immediately prior to Closing, which
shall be prepared in accordance with Generally Accepted Accounting Principles.
Seller agrees to provide other financial data, operating data, and other
information, as Buyer shall reasonably request. In addition, Buyer will perform
standard due diligence on the Acquired Businesses and the parties hereto hereby
acknowledge that Buyer has executed that certain Non-Disclosure Agreement,
attached hereto as Appendix A, which includes Buyer's obligation not to disclose
the following;
o Anything learned from Buyer's review of subscribers and receipt of
two years GAAP compiled financials prepared by a PCAOB compliant CPA to
verify accuracy of historical and current operating levels, and;
o Anything learned from Buyer's review of agreements, licenses and
other legal documents that would be transferred as a result of the
transaction, including without limitation, agreements for
retransmission consent and easement agreements.
5. Closing Conditions. (a) The Closing of the transactions contemplated
herein shall occur upon conclusion of the following:
i. Buyer shall have conducted its due diligence, on a best
efforts basis.
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ii. The transactions contemplated herein have been approved by
the Board of Directors of Buyer.
iii. Any required approvals, consents and authorizations of state
and federal regulatory authorities and state and federal securities
authorities have been received. Any required consents of any other
third parties have been obtained.
iv. The Business to be acquired must be GAAP audited by a PCAOB
compliant CPA firm auditing the two (2) previous fiscal years and a
stub period for the current financial year.
(b) At Closing, the Buyer shall provide the following to the Seller:
i. Purchase Price payment:
ii. one or more Officer's Certificates, dated as of the Closing
Date, in form and substance reasonably satisfactory to Seller,
certifying that all of the representations and warranties of Buyer
contained in this Agreement (or any subsequent Agreement between the
parties hereto) shall be true and correct in all material respects at
and as of the Closing Date as though such representations and
warranties were made at and as of such time (except for individual
representations and warranties that expressly provide therein that
they are made at and as of a certain date); and Buyer shall have
performed and be in compliance in all material respects with all of
the covenants, agreements, terms and provisions set forth herein on
its part to be observed and performed; and no suit or action or other
proceeding shall be pending or threatened before any court or other
governmental agency against the Sellers or the Buyer in which the
consummation of the transactions contemplated by this Agreement are
sought to be enjoined;
(iii) resolutions of the Buyer's Board of Directors (a copy of
which shall be attached to the Certificate) authorizing the execution,
delivery and performance by the Buyer of the Buyer Transaction
Documents and the purchase of the Acquired Companies Shares and the
transactions contemplated hereby have been approved and adopted;
(c) At Closing, the Seller shall provide the following to the Buyer:
(i) one or more Officer's Certificates, dated as of the Closing
Date, in form and substance reasonably satisfactory to the Buyer,
certifying that all of the representations and warranties of the
Sellers contained in this Agreement (and any subsequent agreements
between the parties hereto) shall be true and correct in all material
respects at and as of the Closing Date as though such representations
and warranties were made at and as of such time; and the Seller shall
have performed and be in compliance in all material respects with all
of the covenants, agreements, terms and provisions set forth herein on
its part to be observed or performed; that the consents required from
all governmental agencies and entities and other third parties to the
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Buyer's acquisition of the Acquired Companies Shares shall have been
granted or obtained; that on the Closing Date, no suit or action or
other proceeding shall be pending or threatened before any court or
other governmental agency against the Sellers in which the
consummation of the transactions contemplated by this Agreement are
sought to be enjoined;
(ii) evidence that all of the necessary Consents relating to the
TV and Internet Systems' franchises have been obtained or given (or
deemed to have been given in accordance with Section 617 of the
Communications Act (47 U.S.C. Section 537)) and are in full force and
effect, this closing condition to be deemed satisfied when (A) the
number of Equivalent Subscribers in franchising areas where the
consent of the franchising authority is not required to transfer the
applicable franchise plus (B) the number of Equivalent Subscribers in
franchising areas where the local franchising authorities have
consented to the transfer of the applicable franchises equals or is
greater than 97% of the number of Equivalent Subscribers served by the
Systems;
(iii) resolutions of the Acquired Businesses' Boards of Directors
(a copy of which shall be attached to the Certificate) authorizing the
execution, delivery and performance of the Seller and the transactions
contemplated hereby have been approved and adopted;
(iv) at least two weeks prior to the Closing Date, lien searches
dated not more than 30 days prior to the Closing Date showing all
UCC-1 financing statements filed with any filing offices wherein the
Acquired Businesses are named a debtor, all federal, state or local
tax liens filed against the Acquired Companies, all recorded mortgages
naming any of the Acquired Businesses as a mortgagor, all unsatisfied
judgments naming any of the Acquired Businesses as a judgment debtor
and all pending litigation in which any of the Acquired Businesses are
a defendant, all of which shall be released or terminated prior to or
at the Closing, the expense of such lien searches to be shared by the
Buyer and the Seller.
6. Right to Cure. In the event either party hereto fails to perform in
accordance with the terms and conditions of this Agreement (or any subsequent
agreement by and between the parties hereto relevant to the transactions
contemplated herein), the other party shall provide written notice of such
failure to the defaulting party. Thereafter, the defaulting party shall have
thirty (30) days from the date of such notice to cure such default, unless such
right to cure is extended by the non-defaulting party, which extension shall be
in writing.
7. News Release: Confidentiality. Neither party shall issue any press
releases or other announcements concerning the transactions contemplated herein
without the express written consent of the other, which consent shall not be
unreasonably withheld.
8. Conduct of Business. Until the closing, Seller shall operate the
Acquired Businesses in a reasonable and prudent manner in accordance with past
practices, and will use their best efforts to preserve the Acquired Companies
existing business and relationships with their employees, customers, suppliers,
and others, to preserve and protect their properties, and to conduct their
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business in compliance with all applicable laws and regulations. Seller will not
make any material divestitures of any of the assets of the Acquired Businesses
and will not incur any additional liabilities outside of the normal course of
business. Seller will not make any extraordinary expenditures or otherwise
increase liabilities or decrease cash in the Acquired Businesses without the
prior written approval of the Buyer, except for in the ordinary course of
business of the Acquired Businesses.
9. Closing Date. It is the desire of both parties to cause the trans-
actions contemplated herein to have an Effective Date of October 1, 2008, or
earlier unless extended by the mutual consent of the parties.
10. Expenses. Except as provided herein, Buyer and Seller shall each be
responsible for payment of their own expenses with respect to the consummation
of the transactions contemplated herein.
If you agree with the terms and conditions contained hereinabove,
please sign in the appropriate space provided below.
Sincerely,
Xxxxxx X. Xxxxxx, Xx.
CEO
AGREED TO AND ACCEPTED this ___ day of July, 2008
Phoenix Communications, Inc.
By:______________________________________
Its:______________________________________
