EXHIBIT 10.90
SALE AND PURCHASE AGREEMENT
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This Agreement is made this 27th day of January, 1997, by and between McLeodUSA
Publishing Company, formerly known as Telecom*USA Publishing Company, an Iowa
corporation ("McLeod"), Fronteer Financial Holdings, Ltd., a Colorado
corporation ("Fronteer"), Classified Directories, Inc., a North Dakota
corporation ("Classified"), Larry A. Scott ("Scott"), James Greff ("Greff"),
Randall L. Gowin ("Gowin"), Edwin Dressler ("Dressler") and certain directors,
officers and shareholders of Fronteer.
McLeod and Fronteer entered into a Sale and Purchase Agreement dated April 27,
1995 ("the Idaho Sale Agreement"), also executed by Scott, Greff, Dressler and
Gowin. McLeod and Fronteer entered into an Option Agreement dated April 27, 1995
("the Option Agreement"). Scott, Greff, Dressler and Gowin are the principal and
only shareholders, directors and officers of Classified. McLeod and Scott
entered into a Covenant not to Compete and Confidentiality Agreement dated May
5, 1995, pursuant to terms of the Idaho Sale Agreement and agreed to enter into
a separate Covenant not to Compete and Confidentiality Agreement pursuant to
terms of the Option Agreement. McLeod and Greff entered into a Covenant not to
Compete and Confidentiality Agreement dated May 2, 1995, pursuant to terms of
the Idaho Sale Agreement. McLeod and Dressler entered into a Covenant not to
Compete and Confidentiality Agreement dated May 5, 1995, pursuant to terms of
the Idaho Sale Agreement and agreed to enter into a separate Covenant not to
Compete and Confidentiality Agreement pursuant to terms of the Option Agreement.
McLeod and Gowin entered into a Covenant not to Compete and Confidentiality
Agreement dated April 28, 1995, pursuant to terms of the Idaho Sale Agreement
and agreed to enter into a separate Covenant not to Compete and Confidentiality
Agreement pursuant to terms of the Option Agreement.
The parties desire to modify the various agreements described or mentioned above
(referred to collectively as "the Various Agreements"). The parties have agreed
to modify certain rights, obligations, terms and conditions of the Various
Agreements pursuant to this Agreement and as set out in this Agreement.
McLeod and Classified desire to purchase certain telephone directory business of
Fronteer. Fronteer desires to sell certain of its telephone directory business
to McLeod and Classified under the terms and conditions set out below. The
parties desire to fully resolve all rights and duties regarding Fronteer's
telephone directories listed on Exhibit "A" attached hereto and incorporated
herein (collectively referred to as the "Directories").
In consideration of the representations set out above and the following
covenants, promises and representations, the parties agree as follows:
1. VARIOUS AGREEMENTS
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This Agreement modifies, replaces and supplements certain rights and
obligations of the parties as set out in the Various Agreements and to the
extent any of the terms of this Agreement conflict with any of the terms of
the Various Agreements this Agreement controls. In the event
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this Agreement is declared null and void pursuant to any provision of this
Agreement, all rights, obligations, terms and conditions of the Various
Agreements shall remain in full force and effect without any modifications,
replacements or supplements.
2. DIRECTORIES TO BE PURCHASED BY McLEOD
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Fronteer hereby sells and McLeod hereby purchases Fronteer's telephone
directories designated on Exhibit "A" as being purchased by McLeod, and, in
the event McLeod is required to pay the consideration due from Classified
pursuant to Section 5 below, the Durum Triangle directory listed on Exhibit
"A," (referred to as the "McLeod Purchase Directories"), including all
product designs and drawings (subject to the rights of advertising
subscribers or third parties in such literary property), catalogs, data,
files, records, price lists, and other documents relating to suppliers of
Fronteer, and all customer lists and contracts, catalogs and marketing
materials, and contract lead systems used by Fronteer in connection with
the McLeod Purchase Directories. This transaction includes all patents,
trademarks, licenses, copyrights, brand names, and trade names (whether
registered or subject to being registered), including specifically and not
by way of limitation, the name "Fronteer Directory Company" all proprietary
information and all trade secrets used or owned by Fronteer, except (1) the
licenses, copyrights and directory names used in connection with the "Durum
Triangle," "Souris River," and "Southeast North Dakota" directories, and
(2) the following corporate names: Fronteer Financial Holdings, Fronteer
Personnel Service and Fronteer Marketing Group.
The purchase specifically includes Fronteer's audiotex and similar
equipment associated with or used in connection with the McLeod Purchase
Directories or audiotex services identified in the McLeod Purchase
Directories, such equipment being listed on Exhibit "B" attached hereto and
incorporated herein, which Fronteer warrants is not presently in need of
and on Closing (as described below) will not be in need of maintenance or
service work. Such equipment shall be delivered by Bill of Sale in the form
attached as Exhibit "C." After Closing, Fronteer will use such audiotex
equipment is accordance with the provisions of Section 8 of this Agreement,
but McLeod will perform all maintenance and service work on such audiotex
equipment.
The above-described items relating to the McLeod Purchase Directories
published by Fronteer prior to Closing shall be delivered to McLeod on or
before Closing. The above-described items relating to the McLeod Purchase
Directories to be published by Fronteer after Closing shall be delivered to
McLeod on the date each of the McLeod Purchase Directories is delivered to
a printer for printing. Fronteer shall deliver to McLeod fifty (50) copies
of the Fargo directory at Closing and fifty (50) copies of each of the
other Directories within ten (10) days after each such Directory is
published.
This transaction does not include any receivables of Fronteer, and McLeod
is not assuming any liabilities of Fronteer. Fronteer is entitled to all
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receivables in connection with the Directories from the editions listed on
Exhibit "A" and prior editions of the Directories sold, published and
delivered by Fronteer. McLeod is entitled to all receivables generated from
all future editions of the McLeod Purchase Directories.
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3. DIRECTORIES TO BE PURCHASED BY CLASSIFIED
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Fronteer hereby sells and Classified hereby purchases Fronteer's Durum
Triangle directory, designated on Exhibit "A" as being purchased by
Classified, including all product designs and drawings (subject to the
rights of advertising subscribers or third parties in such literary
property), catalogs, data, files, records, price lists, and other documents
relating to suppliers of Fronteer for the Durum Triangle directory, and all
customer lists and contracts, catalogs and marketing materials, and
contract lead systems used by Fronteer in connection with the Durum
Triangle directory. This transaction includes any licenses, copyrights and
the directory name used by Fronteer in connection with the Durum Triangle
directory, but specifically does not include any right to use in any manner
the name "Fronteer" or "Fronteer Directory Company."
The above described items relating to the Durum Triangle directory shall be
delivered to the purchaser of the Durum Triangle directory on the date of
payment of consideration for the Durum Triangle directory. Fronteer shall
deliver to the purchaser of the Durum Triangle directory fifty (50) copies
of the Durum Triangle directory within ten (10) days after the Durum
Triangle directory is published.
McLeod hereby assigns to Classified its right, title and interest in or to
the Souris River and Southeast North Dakota directories and, in the event
Classified pays the cash consideration for the Durum Triangle directory, in
and to the Durum Triangle directory.
This transaction does not include any receivables of Fronteer, and
Classified is not assuming any liabilities of Fronteer. Fronteer is
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entitled to all receivables in connection with the Directories from the
editions listed on Exhibit "A" and prior editions of the Directories sold,
published and delivered by Fronteer. Classified is entitled to all
receivables generated from all future editions of the directories purchased
by Classified.
4. PAYMENT BY OF CONSIDERATION BY McLEOD
-------------------------------------
The cash consideration from McLeod for this Agreement is estimated to be
$4,000,000.00, which is based upon estimated net cash revenue of
$3,700,000.00 from the first six directories listed on Exhibit "A", plus
$300,000.00 over and above said estimated net cash revenue, and is subject
to the adjustment requirements of Section 6 below. $1,000,000.00 of the
consideration from McLeod will be allocated and paid to the
officers/shareholder/directors of Fronteer in exchange for the Covenant not
to Compete and Confidentiality Agreements described and required below, and
the remaining consideration will be allocated and paid to Fronteer. The
consideration from McLeod will be paid, subject to the conditions set out
in Sections 10, 13, 14 & 21 below, as follows:
(1) $1,000,000.00 to Fronteer on March 1, 1997, to be paid in the
form of $500,000.00 in cash and $500,000.00 by payoff of the full amount of
the promissory note given to McLeod by Fronteer pursuant to the Option
Agreement, which will then be marked by McLeod as paid on March 1, 1997,
(2) $1,000,000.00 to officers/shareholders/directors, in the
percentage amounts shown on Exhibit "D," within five (5) business days
after the later of [a] the date when Fronteer certifies to
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McLeod that Fronteer has completed publication and distribution of the
Fargo and Badlands (Dickinson) directories listed on Exhibit "A," or [b]
March 1, 1997,
(3) $900,000.00 to Fronteer within five (5) business days after
Fronteer certifies to McLeod that Fronteer has completed publication and
distribution of the fifth directory listed on Exhibit "A," and,
(4) all remaining unpaid consideration to Fronteer within five (5)
business days after [a] Fronteer certifies that all McLeod Purchase
Directories have been published and distributed, and, [b] the total net
cash revenue for the McLeod Purchase Directories has been determined
pursuant to Section 6 below, with the final payment adjusted pursuant to
the provisions of Section 6 below.
5. PAYMENT OF CONSIDERATION BY CLASSIFIED
--------------------------------------
The cash consideration from Classified for this Agreement is equal to the
net cash revenue from the April, 1997 edition of the Durum Triangle
directory listed on Exhibit "A." Twenty-five percent (25%) of the
consideration from Classified will be allocated and paid to the
officers/shareholder/directors of Fronteer listed, and in the percentage
amounts shown, on Exhibit "D" in exchange for the Covenant not to Compete
and Confidentiality Agreements described and required below, and the
remaining consideration will be allocated and paid to Fronteer. The
consideration from Classified will be paid to Fronteer within fourteen (14)
days after Fronteer certifies that publication and distribution of the
Durum Triangle directory has been completed and the total net cash revenue
for the Durum Triangle directory has been determined pursuant to Section 6
below, adjusted pursuant to the provisions of Section 6 below.
In the event Classified fails to timely pay consideration to Fronteer in
accordance with this section, Fronteer will notify McLeod of such fact and
McLeod will pay to Fronteer the consideration due from Classified within
fourteen (14) days of said notice. Upon payment by McLeod, (1) Fronteer
will convey to McLeod all right, title and interest in the Durum Triangle
directory, (2) the Durum Triangle directory will thereafter be treated as
though it were one of the McLeod Purchase Directories and McLeod will have
the same rights with respect to the Durum Triangle directory as Classified
had to the Durum Triangle directory and as it has in and to the McLeod
Purchase Directories, and, (3) all rights of Classified in and to the Durum
Triangle directory will be terminated and Classified will have no further
right, title or interest in or to the Durum Triangle directory.
6. NET CASH REVENUE REQUIREMENT
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Fronteer represents and warrants that the net cash revenue of the editions
of each of the Directories listed on Exhibit "A" was, or will, be as shown
on Exhibit "A." Net cash revenue shall include all contracted for gross
revenue in the form of cash paid or accounts receivable (reduced by any
commissions or share paid to any telephone company), including national
revenue, but shall exclude cancellations, promotional discounts, payment
plan/cash discounts, and any revenue traded for value other than cash or
accounts receivables for each directory. If the net cash revenue from any
directory listed on Exhibit "A" is more or less than as shown on Exhibit
"A," the consideration paid, as set out in Section 4 or 5 above, as
applicable, shall be increased or reduced
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accordingly by one dollar for each dollar the net cash revenue for such
directory is above or below that shown on Exhibit "A". McLeod and Fronteer
shall determine the net cash revenue for each of the McLeod Purchase
Directories upon certification of completion of each such directory by
Fronteer as described in Section 8 below and such determination shall be
acceptable to McLeod, in its sole discretion. Fronteer and the purchaser of
the Durum Triangle directory shall determine the net cash revenue for the
Durum Triangle directory upon certificate of completion of such directory
by Fronteer as described in Section 8 below.
7. CLOSING
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Closing shall take place at Fronteer's offices at 216 North 23 Street,
Bismarck, North Dakota, at 2:00 p.m., c.s.t., on January 27, 1997, or at
such other time, date, and place as may be agreed by the parties
("Closing").
8. CONDUCT OF FRONTEER
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All sales, production and distribution of the Directories set out on
Exhibit "A" shall be (1) continued and completed by Fronteer, (2) completed
no later than the last day of the month immediately following the month of
publication set out on Exhibit "A," and (3) continued and completed in the
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same manner as the last published editions of such Directories, including
but not limited to, the number of Directories printed and distributed (as
set out on Exhibit "A" or, where no number is set out, the number will be
the same number of directories as printed and distributed during the
immediately preceding calendar year), the distribution area, the pricing,
the credit terms, the quality and size of print and paper, and the general
production standards. Fronteer shall promptly pay all sales and production
expenses for said editions of the Directories and for all prior editions of
the Directories.
Fronteer shall, at its cost, continue to provide all information, updates,
data and telephone lines for audiotex service described in, related to or
associated with any of the Directories for one year after the date each of
the Directories is published, in the same manner as provided in the prior
edition of each such directory. Fronteer will have the right to continue to
use the audiotex equipment sold and transferred pursuant to this Agreement
at no charge.
If McLeod determines, in its sole discretion, that Fronteer has failed to
complete all sales, production and distribution of the Directories and
provision of all elements of audiotex service, as set out above, McLeod
shall have, in addition to any other right it may have, the right to
terminate this Agreement, declare this Agreement null and void and receive
a full refund of any and all of the purchase price previously paid.
Beginning on the date hereof, McLeod shall have the right to conduct an
investigation of Fronteer and its telephone directory business as McLeod
deems necessary. Fronteer shall cooperate fully with McLeod in such
investigation.
9. PRE-SALES
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Fronteer may have made sales for editions of the McLeod Purchase
Directories to be published by McLeod ("Pre-Sales"), but will make no more
Pre-Sales after Closing. McLeod will have the right
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to review and approve any such Pre-Sales, but such approval shall not be
unreasonably withheld. All approved receivables, contracts, cash, trade
agreements, finished copies and any other items held by Fronteer in
connection with such approved Pre-Sales will be delivered on or before
Closing, or as soon thereafter as is commercially possible. McLeod will pay
Fronteer, in addition to the consideration set out in Section 4 above, a
commission equal to 25% of the net cash amount of such approved Pre-Sales
on or before the date of the last payment due under Section 4 above.
10. REPRESENTATIONS AND WARRANTIES OF FRONTEER
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Fronteer hereby covenants, represents and warrants to the other parties
that:
Due Organization. Fronteer is a corporation duly organized, validly
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existing, and in good standing under the laws of the State of Colorado and
has the power and authority, corporate and otherwise, to own its properties
and conduct the business in which it is presently engaged.
Authorization of Agreement. The execution and delivery of this Agreement
--------------------------
and consummation of the transactions contemplated by this Agreement have
been duly and validly authorized by all necessary corporate action on the
part of Fronteer and this Agreement constitutes a valid and legally binding
obligation of Fronteer enforceable according to its terms. The execution
and delivery of this Agreement, consummation of the transactions
contemplated by this Agreement and compliance by Fronteer with all the
provisions of this Agreement will not (i) violate any provision of the
terms of any applicable law, rule, or regulation of any governmental body
having jurisdiction; (ii)conflict with or result in a breach of any
provision of Fronteer's Articles of Incorporation or Bylaws or constitute a
default under any of the terms, conditions, or provisions of, or result in
the breach of, or accelerate or permit the acceleration of the performance
required by any note, bond, mortgage, indenture, license, agreement, or
other instrument or obligation of any nature whatsoever to which Fronteer
is a party; or (iii) violate any order, writ, injunction, decree, statute,
rule, or regulation applicable to Fronteer or any of its property or
assets.
Payment of Taxes. Fronteer has filed all federal, state, and local tax
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returns required to be filed, and has made timely payment of all taxes
shown by those returns to be due and payable. All filed tax returns are
complete, true and correct in all material respects.
No Adverse Conditions. There are no adverse conditions or circumstances
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that may interfere with the use and enjoyment of or opportunity to operate
the directory business of Fronteer to be purchased and sold pursuant to
this Agreement.
No Omissions or Misrepresentations. No representation, warranty or
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statement of Fronteer contains any misrepresentation or misstates any
material fact or omits to state any material fact necessary to make each
representation or warranty or statement in this Agreement, or in any
certificates or other instruments furnished or to be furnished to McLeod,
accurate and not misleading in any material respect.
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Investigation by McLeod. No investigation conducted by McLeod shall
-----------------------
affect the representations and warranties of Fronteer herein, and each such
representation and warranty shall survive the execution and closing hereof.
Title and liens. Fronteer on the date of delivery will own and deliver
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good and marketable title and all right, title and interest, free and clear
of any and all liens or encumbrances, in and to all assets, rights and
equipment to be sold and delivered pursuant to this Agreement.
Consent of Creditors. Fronteer has obtained, or will obtain no later than
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February 28, 1997, any and all necessary consents with respect to the
transactions contemplated by this Agreement, including and not limited to
all necessary consents and/or necessary releases from all of Fronteer's
lenders and said lenders have executed prior to Closing, or will execute no
later than February 28, 1997, a release of any and all liens or security
interests covering the Directories and the audiotex equipment being
purchased pursuant to the terms of this Agreement, such consents are
attached hereto as Exhibit "E." In the event the conditions set out in this
section are not satisfied, or are violated in the sole opinion of McLeod,
McLeod may declare this Agreement null and void and shall be entitled to an
immediate return of all amounts paid by it pursuant to this Agreement.
Publication Agreements. Fronteer is a party to agreements with
----------------------
telecommunications carriers listed on Exhibit "F," attached hereto and
incorporated herein, in connection with the McLeod Purchase Directories and
copies of those agreements, or written explanation of the agreements if
oral, are attached to Exhibit "F."
Corporate Actions. Fronteer shall take such action and shall file all
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documents necessary to comply with all federal, state and local laws and
regulations which may require shareholder or director consent or approval
of this Agreement or the transactions contemplated or required by this
Agreement.
Sales Force. Fronteer presently employs ten individuals in a position
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involving the sale of advertising in the Directories, which includes nine
sales representatives and one sales manager and all individuals employed in
a position involving the sale of advertising in the Directories are listed
on Exhibit "G."
11. REPRESENTATIONS AND WARRANTIES OF McLEOD
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McLeod covenants, represents and warrants to the other parties:
Due Organization. McLeod is a corporation duly organized, validly existing,
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and in good standing under the laws of the State of Iowa and has the power
and authority, corporate and otherwise, to own its properties and conduct
the business in which it is presently engaged.
Authorization of Agreement. The execution and delivery of this Agreement
--------------------------
and consummation of the transactions contemplated by this Agreement have
been duly and validly authorized by all necessary corporate action on the
part of McLeod and this Agreement constitutes a valid and legally binding
obligation of McLeod enforceable according to its terms. The execution and
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delivery of this Agreement, consummation of the transactions contemplated
by this Agreement and compliance by McLeod with all the provisions of this
Agreement will not (i) violate any provision of the terms of any applicable
law, rule, or regulation of any governmental body having jurisdiction; (ii)
conflict with or result in a breach of any provision of McLeod's Articles
of Incorporation or Bylaws or constitute a default under any of the terms,
conditions, or provisions of, or result in the breach of, or accelerate or
permit the acceleration of the performance required by any note, bond,
mortgage, indenture, license, agreement, or other instrument or obligation
of any nature whatsoever to which McLeod is a party; or (iii) violate any
order, writ, injunction, decree, statute, rule, or regulation applicable to
McLeod or any of its property or assets.
12. REPRESENTATIONS AND WARRANTIES OF CLASSIFIED
--------------------------------------------
Classified covenants, represents and warrants to the other parties that:
Due Organization. Classified is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of North Dakota
and has the power and authority, corporate and otherwise, to own its
properties and conduct the business in which it is presently engaged.
Authorization of Agreement. The execution and delivery of this Agreement
--------------------------
and consummation of the transactions contemplated by this Agreement have
been duly and validly authorized by all necessary corporate action on the
part of Classified and this Agreement constitutes a valid and legally
binding obligation of Classified enforceable according to its terms. The
execution and delivery of this Agreement, consummation of the transactions
contemplated by this Agreement and compliance by Classified with all the
provisions of this Agreement will not (i) violate any provision of the
terms of any applicable law, rule, or regulation of any governmental body
having jurisdiction; (ii) conflict with or result in a breach of any
provision of Classified's Articles of Incorporation or Bylaws or constitute
a default under any of the terms, conditions, or provisions of, or result
in the breach of, or accelerate or permit the acceleration of the
performance required by any note, bond, mortgage, indenture, license,
agreement, or other instrument or obligation of any nature whatsoever to
which Classified is a party; or (iii) violate any order, writ, injunction,
decree, statute, rule, or regulation applicable to Classified or any of its
property or assets.
Scope of Directories. Classified will not expand the white page coverage,
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yellow page coverage or distribution area of the Souris River, Southeast
North Dakota or Durum Triangle directories beyond that of the last edition
of the Souris River, Southeast North Dakota or Durum Triangle directories
published by Fronteer, except, if any telecommunications carrier which is a
party to a written, valid, binding and enforceable Publication Agreement
with Classified as of the date of this Agreement purchases additional
exchanges, and a copy of the Publication Agreement with such carrier has
been delivered to McLeod on or before February 28, 1997, then, to the
limited extent of such purchase, the listings associated with the exchanges
so purchases may be added to the white pages and yellow pages of the Souris
River, Southeast North Dakota or Durum Triangle directory and the
subscribers associated with the exchanges so purchased may be added to the
distribution area of the same directory.
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Employees of other parties. Classified will not hire, interview, solicit,
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or attempt to interview or hire any individual employed in any capacity,
now or hereafter, by Fronteer or McLeod.
13. ASSIGNMENT OF AGREEMENT AND RIGHTS
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Fronteer will deliver an assignment to McLeod, in the form attached as
Exhibit "H," of the Publication Agreements with telecommunications carriers
described in Section 10 above and listed on Exhibit "F," accompanied by
fully executed consents to the assignment, in the form attached as Exhibit
"I," executed by no less than five of those seven telecommunications
carriers, including specifically those associated with the Bismarck/Mandan
Metro directory, no later than February 28, 1997. Fronteer will assign any
and all rights and privileges it may have in any non-compete agreements it
now has to the fullest extent such agreements apply to the distribution
area of any directories published by McLeod, including the McLeod Purchase
Directories. Fronteer will assign all its right, title and interest in the
intellectual property, proprietary information and trade secrets described
in Section 2 to McLeod at Closing, and McLeod hereby grants a limited
license to Fronteer to use such property and information to complete the
publication of the Directories in accordance with this Agreement and the
collection of receives generated by such publication. In the event the
conditions set out in this section are not satisfied, or are violated in
the sole opinion of McLeod, McLeod may declare this Agreement null and
void and shall be entitled to an immediate return of all amounts paid by it
pursuant to this Agreement.
14. EMPLOYEES AND INDEPENDENT CONTRACTORS
-------------------------------------
McLeod has the right to interview and hire all of the Fronteer sales force
identified on Exhibit "G" and plans and desires to do so. Fronteer will
assist McLeod in said interviewing and hiring. Payment of any amount under
this Agreement is contingent on McLeod hiring, no later than February 28,
1997, no less than seven of nine sales representatives and the sales
manager listed on Exhibit "G," under arrangements for the same to begin
employment with McLeod no later than seven days after the close of sales by
Fronteer in the Bismarck/Mandan Metro directory. McLeod will not, as a term
or condition of this Agreement, assume any of Fronteer's obligations with
respect to employment contracts or independent contractor contracts, if
any, and is not doing so by this Agreement. Classified will not, as a term
and condition of this Agreement, interview or hire any employees of
Fronteer. In the event the conditions set out in this section are not
satisfied, or are violated in the sole opinion of McLeod, McLeod may
declare this Agreement null and void and shall be entitled to an immediate
return of all amounts paid by it pursuant to this Agreement.
15. PUBLIC ANNOUNCEMENT
-------------------
Except to the extent disclosure, filing, reporting or announcement of this
Agreement is required by law, including any rules or regulations of any
applicable governmental, regulatory or stock exchange agency or authority,
(i) no party shall make any public announcement of this Agreement or the
transactions contemplated hereby prior to March 1, 1997, and (ii) after
that date public announcement may be made only after notification the
content of such announcement has been approved by the other parties hereto,
which approval will not be unreasonably withheld.
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16. NON-COMPETE AGREEMENTS
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In favor of McLeod. In consideration of McLeod's purchase of the McLeod
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Purchase Directories, McLeod's payment of cash consideration, McLeod's
assignment of rights in and to the Souris River, Southeast North Dakota and
possibly Durum Triangle directories and McLeod's execution of a Covenant
not to Compete and Confidentiality Agreement as described below, Scott,
Greff, Dressler and Gowin each execute, jointly with execution by
Classified, a Covenant Not to Compete and Confidentiality Agreement at
Closing substantially in the form attached hereto as Exhibit "J," and
Fronteer and all other Directors, Officers and Shareholders listed on
Exhibit "D" will each execute a Covenant Not to Compete and Confidentiality
Agreement substantially in the form attached hereto as Exhibit "K."
Fronteer will assign to McLeod, in the form attached as Exhibit "H," any
and all non-competition agreements or covenants binding upon any of
Fronteer's sales representatives or sales managers to the fullest extent
such non-competition agreements apply to the current distribution areas of
any directories published by McLeod, including the directories purchased by
McLeod pursuant to this Agreement.
In Favor of Classified. In consideration of Classified's possible purchase
----------------------
of the Durum Triangle directory and execution of a Covenant not to Compete
and Confidentiality Agreement, McLeod will execute at Closing a Covenant
not to Compete and Confidentiality Agreement in favor of Classified
substantially in the form attached as Exhibit "L."
17. INDEMNIFICATION OF McLEOD
-------------------------
Fronteer hereby indemnifies and saves McLeod harmless from and against any
and all costs, liability, or expenses, including reasonable attorneys'
fees, arising out of (i) any breach of warranty, covenant, agreement, or
representation made by Fronteer; (ii) any nonfulfillment of any agreement,
conditions or covenants of Fronteer under this Agreement or any
misrepresentation in or omission from this Agreement or from any
certificates or other instrument furnished or to be furnished to McLeod;
and (iii) all actions, suits, proceedings, demands, assessments, judgments,
costs, and expenses incident to any of the foregoing.
Classified, Scott, Greff, Dressler and Gowin, jointly and severally, hereby
indemnify and hold McLeod harmless from and against any and all costs,
liability, or expenses, including reasonable attorneys' fees, arising out
of (i) any breach of warranty, covenant, agreement, or representation made
by any of them; (ii) any nonfulfillment of any condition or covenant under
this Agreement, or any misrepresentation in or omission from this
Agreement, or any certificates or other instrument furnished or to be
furnished to McLeod, by any of them; (iii) any cause of action or expense
directly or indirectly related to Classified's sale, publication or
distribution of directories published by Classified; and (iv) all actions,
suits, proceedings, demands, assessments, judgments, costs, and expenses
incident to any of the foregoing.
18. INDEMNIFICATION OF FRONTEER
---------------------------
McLeod hereby indemnifies and saves Fronteer harmless from and against any
and all costs, liability, or expenses, including reasonable attorneys'
fees, arising out of (i) any breach of warranty, covenant, agreement, or
representation made by McLeod; (ii) any nonfulfillment of any agreement,
condition or covenant of McLeod under this Agreement or any
misrepresentation in or
page 10
omission from this Agreement or from any certificates or other instrument
furnished or to be furnished to Fronteer; and (iii) all actions, suits,
proceedings, demands, assessments, judgments, costs, and expenses incident
to any of the foregoing.
Classified, Scott, Greff, Dressler and Gowin, jointly and severally, hereby
indemnify and hold Fronteer harmless from and against any and all costs,
liability, or expenses, including reasonable attorneys' fees, arising out
of (i) any breach of warranty, covenant, agreement, or representation made
by any of them; (ii) any nonfulfillment of any condition or covenant under
this Agreement, or any misrepresentation in or omission from this
Agreement, or any certificates or other instrument furnished or to be
furnished to Fronteer, by any of them; (iii) any cause of action or expense
directly or indirectly related to Classified's sale, publication or
distribution of directories published by Classified; and (iv) all actions,
suits, proceedings, demands, assessments, judgments, costs, and expenses
incident to any of the foregoing.
19. INDEMNIFICATION OF CLASSIFIED
-----------------------------
McLeod hereby indemnifies and saves Classified harmless from and against
any and all costs, liability, or expenses, including reasonable attorneys'
fees, arising out of (i) any breach of warranty, covenant, agreement, or
representation made by McLeod; (ii) any nonfulfillment of any agreement,
condition or covenant of McLeod under this Agreement or any
misrepresentation in or omission from this Agreement or from any
certificates or other instrument furnished or to be furnished to
Classified; and (iii) all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incident to any of the
foregoing.
20. CONFIDENTIAL INFORMATION
------------------------
Definition. For purposes of this Section, "Confidential Information" means
----------
any information or compilation of information not generally known, which is
proprietary to the business, and includes, without limitation, trade
secrets, inventions, and information pertaining to development, marketing,
sales, accounting, and licensing of the business products and services,
customer information contained in customer records, working papers or
correspondence files, all financial information contained in federal and
state tax returns, and the financial terms of this transaction. Information
shall be treated as Confidential Information irrespective of its source and
all information that is identified by Fronteer, McLeod or Classified as
being "confidential", "trade secret", or is identified or marked with any
similar reference, or any information that Fronteer, McLeod or Classified
should know is being treated by Fronteer, McLeod or Classified as
confidential, shall be presumed to be Confidential Information.
Covenants by Parties. McLeod, Classified, Scott, Greff, Dressler, Gowin and
--------------------
Fronteer agree and covenant with respect to all Confidential Information
received or learned by any of them as follows:
A. that they will treat as confidential all Confidential
Information made available to them or any of their employees, agents or
representatives;
page 11
B. that they will maintain the same in a secure place and limit
access to the Confidential Information to those employees, agents and
representatives to whom it is necessary to disclose the Confidential
Information in furtherance of the transactions contemplated by this
Agreement;
C. that they and their employees, agents and representatives will not
copy any Confidential Information (unless authorized), disclose any
Confidential Information to any unauthorized party, or use any Confidential
Information for any purpose other than the publication of the directories
purchased pursuant to this Agreement, including competition with the other
party or solicitation of the other party's customers; and
D. that each party will assume liability for any breach of this
paragraph by him or it, or any of its employees, agents or representatives.
21. PRODUCTION SERVICES
-------------------
Following the Closing, McLeod will negotiate with Marlow Lindblom at
Fronteer to finalize an white page production agreement between McLeod and
Fronteer for Fronteer to produce the white page listings of the
telecommunications carriers who have executed consents pursuant to Section
13 for a period of three years. The agreement will include the provisions
that only Dennis W. Olson or Marlow Lindblom will have direct contact with
the telecommunications carriers, that the agreement is non-assignable and
non-delegable without prior written consent of all parties to that
agreement, and that the agreement can be canceled by McLeod in its sole
discretion in the event of a change in control in Fronteer to anyone other
than a group including Dennis W. Olson or Marlow Lindlom. Fronteer may also
provide production services for Classified for production of the Souris
River, Southeast North Dakota and possibly Durum Triangle directories to be
published by Classified, limited as described in Section 12. Except as
provided in this Section 20, Fronteer will no longer publish the
Directories.
22. INVESTIGATION CONDITION
-----------------------
McLeod's obligations hereunder are expressly contingent upon McLeod's
successful completion of its investigation of Fronteer's telephone
directory business, as set out in Section 8 above.
23. MISCELLANEOUS
-------------
Broker or Finder. The parties represent that no person is entitled to any
----------------
brokerage commission, finder's fee, or any other like payment in connection
with any transaction contemplated by this Agreement by reason of the action
of any party to this Agreement.
Severability. If any provision of this Agreement is held for any reason to
------------
be unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall, nevertheless, remain in full force and effect.
Applicable Law. This Agreement shall be construed in accordance with the laws of
- --------------
the State of Iowa. Venue for any action to enforce this Agreement shall be in
Iowa or in North Dakota, at the option of the party filing such action.
Notices. Any notices or other communications required or permitted under this
- -------
Agreement shall be sufficiently given if sent by certified mail, return receipt
requested, postage prepaid, addressed as follows:
McLeod: McLeodUSA Publishing Company
P.O. Box 3162
Cedar Rapis, IA 52406-3162
Attn: Arthur L. Christoffersen, President
Fronteer: Fronteer Financial Holdings, Ltd.
P.O. Box 5542
Bismarck, ND 58502
Attn: Dennis W. Olson, President
Classified: Classified Directories, Inc.
1500 East Front Street
Bismarck, ND 58504
Attn: Larry Scott
Scott Larry A. Scott
532 Macom Drive
Bismarck, ND 58504
Greff James Greff
3039 Greenwood Drive
Bismarck, ND 58501
Gowin Randall L. Gowin
1932 Adams Lane
Bismarck, ND 58501
Dressler Edwin Dressler
610 Easy Street
Bismarck, ND 58504
Captions. The captions and Section numbers in this Agreement are for convenience
- --------
of reference only and shall not limit or otherwise affect the meaning hereof
Signatures. The parties hereto expressly consent to the use of facsimile
- ----------
signatures and agree that such facsimile signatures shall be binding as
originals. The parties hereto expressly consent to the
page 13
use of multiple counterparts each of which shall constitute and original and all
of which together will constitute one and the same instrument.
Survival. Each and every provision, representation and warranty of this
- --------
Agreement shall survive the execution and closing hereof and shall remain
binding on the parties hereto until all performance called for hereunder is
complete.
Binding Effect. This Agreement and all of the provisions hereof shall be binding
- --------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party hereto may make any
assignment of this Agreement or any interest herein without the prior written
consent of the other parties hereto. Assignments without such consent shall be
void.
Executed effective the date first written above.
McLeodUSA Publishing Company Fronteer Directory Company, Ltd.
By:/s/ Arthur L. Christoffersen By:/s/ Dennis W. Olson
----------------------------- -----------------------------
Arthur L. Christoffersen, President Denis W. Olson, President
page 14
Executed the date first above written.
/s/ Dennis W. Olson /s/ Roland Haux
- ---------------------- -------------------
Dennis W. Olson Roland Haux
/s/ Marlow E. Lindblom /s/ James B. Qualls
- ---------------------- -------------------
Marlow E. Lindblom James B. Qualls
/s/ Calvin Helgeson /s/ Lance L. Olson
- ---------------------- -------------------
Calvin Helgeson Lance L. Olson
page 16
Executed the date first above written.
/s/ Edwin Dressler
---------------------
Classified Directories, Inc. Edwin Dressler
By:/s/ Larry Scott /s/ Larry A Scott
----------------------- --------------------
Larry Scott, President Larry A. Scott
/s/ James Greff /s/ Randall L. Gowin
- -------------------------- --------------------
James Greff Randall L. Gowin
page 16
EXHIBIT "A"
-----------
MINIMUM NET CASH BEING
DISTRIBUTION NUMBER REVENUE PURCHASED
DIRECTORY DATE DISTRIBUTED (IN 000'S) BY
- --------- ------------ ----------- ---------- ---------
1. Fargo December,1996 177,000 1,240 McLeod
2. Badlands (Dickinson) January, 1997 37,000 380 McLeod
3. Jamestown February, 1997 18,000 127 McLeod
4. Valley City March, 1997 11,000 69 McLeod
5. Bismarck/Mandan Metro June, 1997 140,000 1,474 McLeod
6. Williston Basin July, 1997 66,000 410 McLeod
- --------------------------------------------------------------------------------
Durum Triangle April, 1997 34,000 270 Classified
- --------------------------------------------------------------------------------
Souris River October,1996 110,000 N/A N/A
Southeast ND September, 1996 30,000 N/A N/A
page 17
EXHIBIT "B"
-----------
AUDIOTEX EQUIPMENT
------------------
Description And Serial Number Directory Current location
----------------------------- --------- ----------------
1. BVS 2000 Chassis 48 hr/16 Lines Bismarck Metro Bismarck
S#B77489 216 N 23rd ST
Okidata 320 S# 30701023881 Bismarck, ND
1.2 Meter Satellite Dish and
Receiver WY -185 S#0J013600215
2. None.
3. None.
4. None.
5. BVS 2000 Chassis 48 hr/16 Lines Fargo Metro 1323 23 St South
S# Suite E
Okidata 320 S# Fargo, ND
1.2 Meter Satellite Dish and
Receiver
WY - 185 S#
6. None.
- --------------------------------------------------------------------------------
1. None
page 18
EXHIBIT "C"
-----------
BILL OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, FRONTEER FINANCIAL
HOLDINGS, LTD., a Colorado corporation ("Fronteer"), for and in consideration of
Ten Dollars ($10.00) and other good and valuable consideration, the receipt of
which is hereby acknowledged, does hereby bargain, sell, grant, convey, assign
and transfer to MCLEODUSA PUBLISHING COMPANY, an Iowa corporation ("McLeod"),
its successors and assigns forever, all of the Fronteer's right, title and
interest in and to the property described on Exhibit "A," printed on the back of
this Bill of Sale and made a part hereof for all purposes.
Fronteer covenants and agrees that it is the lawful owner of the above
described property, free and clear of all liens, claims, charges or other
encumbrances, and that Fronteer will warrant and defend title to said property
against any and every person claiming rights therein.
Fronteer further covenants and agrees that if it shall be necessary or
desirable at any time after the date hereof to do, execute, acknowledge or
deliver any further acts, deeds, assignments, transfers, conveyances, powers of
attorney, or other assurances, to bargain, sell, grant, convey, transfer or
assign to McleodUSA the property transferred hereby, McLeod shall be empowered
as Fronteer's attorney-in-fact to do, execute, acknowledge, and deliver any and
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney, or other assurances for and on behalf of Fronteer. Fronteer
acknowledges that the foregoing power is coupled with an interest and shall be
irrevocable.
Dated: January 27, 1997.
FRONTEER FINANCIAL HOLDINGS, LTD.
By:___________________________________
Dennis W. Olson, President
STATE OF NORTH DAKOTA)
)ss:
COUNTY OF____________)
On this ____th day of January, 1997, before me, the undersigned, a Notary
Public in and for the State of North Dokota, personally appeared Dennis W.
Olson, to me personally known, who being by me duly sworn, did say that he is
the president, of the corporation executing the within and foregoing instrument,
that no seal has been procured by the corporation; that said instrument was
signed on behalf of the corporation by authority of its Board of Directors; and
that Dennis W. Olson as such officer acknowledged the execution of the foregoing
instrument to be voluntary act and deed of the corporation, by it and by him
voluntarily executed.
_____________________________
Notary Public
page 19
EXHIBIT "D"
-----------
ALLOCATION OF CONSIDERATION TO DIRECTORS, OFFICERS AND SHAREHOLDERS
-------------------------------------------------------------------
AGREEING TO EXECUTE COVENANTS NOT TO COMPETE AND CONFIDENTIALITY AGREEMENTS
---------------------------------------------------------------------------
Name Percentage of payment
---- ---------------------
Dennis W. Olson 31.25%
Marlow Lindblom 21.25%
Roland Haux 17.50%
Larry Scott 10.00%
Lance Olson 6.25%
James B. Qualls 6.25%
Edwin Dressler 2.50%
Randall Gowin 2.50%
Calvin "Kelly" Helgeson 2.50%
page 20
EXHIBIT "E"
-----------
CONSENTS FROM CREDITORS
-----------------------
Bismark National Bank
322 East Main
Bismarck, ND 58531
The First National Bank
Biwabik Branch
P.O. Box 209
Biwabik, MN 55708
page 21
EXHIBIT "F"
----------
AGREEMENTS WITH TELECOMMUNICATIONS CARRIERS
-------------------------------------------
(COPIES, OR EXPLANATIONS IF ORAL, ARE ATTACHED TO THIS EXHIBIT)
1. BEK Communications Cooperative
2. West River Telecommunications Cooperative
3. Midstate Telephone Co.
4. Northwest Communications Cooperative
5. Noonan Farmers Telephone Co.
6. Reservation Telephone Cooperative
7. Consolidated Telephone Cooperative
8.
9.
10.
page 22