Exhibit 10.91
SALE AND PURCHASE AGREEMENT
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THIS AGREEMENT is made and entered into this 27th day of February, between
McLeodUSA Publishing Company, an Iowa corporation ("McLeod"), and Indiana
Directories, Inc., a Michigan Corporation ("IDI"), John Morgan ("Morgan"), Hank
Meijer ("Meijer"), Jack Hendricks ("Hendricks"), Brad Nelson ("Nelson") and
Talking Directories, Inc., a Michigan corporation ("TDI").
RECITALS
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McLeod desires to purchase certain telephone directory business of IDI;
and,
IDI desires to sell certain of its telephone directory business to McLeod
under the terms and conditions set out below.
Morgan, Meijer, Hendricks, Nelson and TDI have an interest in concluding
the transactions contemplated by this Agreement and wish to facilitate this
Agreement and its contemplated transactions.
AGREEMENT
---------
In consideration of the terms, conditions, promises and mutual covenants in
this Agreement, McLeod, IDI, Morgan, Meijer, Hendricks, Nelson and TDI agree as
follows:
1. DIRECTORIES AND OTHER ASSETS TO BE PURCHASED
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1.1. IDI hereby sells and McLeod hereby purchases all of IDI's telephone
directories shown on the list of directories attached hereto as Exhibit "A"
and incorporated herein by this reference (the "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
IDI and all customer lists, contracts and catalogs and marketing materials
used by IDI in connection with the Directories. This transaction includes
any patents, trademarks, licenses, copyrights, directory names, brand
names, trade names, trade dress, propriety information and trade
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secrets, whether registered or subject to being registered, owned by IDI
and used in connection with the Directories, including specifically and not
by way of limitation the corporate and trade names "Info Indiana," "INFO
INDIANA," "Indiana Directories, Inc.," and "U.S. Directories, Inc.," and to
the extent any such property or rights are not owned by IDI, IDI will
assign its interest or right to use said property throughout the geographic
distribution area of the Directories to McLeod. IDI and McLeod will execute
any federal, state, local and/or other forms necessary to carry out the
transactions described in this Section.
1.2. The above described items relating to the Directories on Exhibit "A"
delivered to a printer for printing before Closing (as described in
Section 4 below) be delivered to McLeod on or before Closing. The above
described items relating to the Directories to be delivered to a printer
for printing after Closing shall be delivered to McLeod on the date each of
those Directories is delivered to a printer for printing. IDI shall deliver
to McLeod fifty (50) copies of each of the Directories within ten (10) days
after each such Directory is published. "Publish" and "publication" as used
throughout this Agreement means the sale of advertising, acquisition of
material and information, production of directories and primary
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distribution of directories.
1.3. The purchase includes the equipment, including two audiotex equipment
systems, and furniture identified on the List of Equipment and Furniture
attached hereto as Exhibit "B" and incorporated herein by this reference.
IDI agrees to sell and McLeod agrees to buy the equipment and furniture
listed on Exhibit "B," pursuant to the terms of this Agreement and IDI will
deliver the equipment and furniture by providing a Bill of Sale, in the
form attached as Exhibit "C," at Closing and providing possession on April
1, 1997.
1.4. This transaction does not include any receivables of IDI, and McLeod
is not assuming any liabilities of IDI, except the obligations under the
leases specifically addressed in Section 12 below. IDI is entitled to all
receivables in connection with all editions of the Directories previously
published by IDI or to be published IDI with the Publication Dates shown on
Exhibit "A." If a receivable to which IDI is entitled is not collected by
IDI, through no fault, error or negligence on the part of IDI or reasonable
customer dissatisfaction, McLeod
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agrees not to permit the advertiser that generated such unpaid receivable
to advertise in the next edition of any of the Directories, to be published
by McLeod, provided IDI provides McLeod written notice of the name,
address, telephone number of the advertiser and the amount due no later
than 30 days prior to the Local Market Close date for such Directory, which
date will be provided by McLeod upon request. McLeod is entitled to all
receivables generated from the next editions of the Directors published
after the edition described on Exhibit "A."
2. CONSIDERATION
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The consideration for this Agreement is estimated to be
$10,660,000.00 (which is 100% of the estimated Net Cash Revenue (as defined
below) of the Directories as shown on Exhibit "A," plus $150,000.00 for
equipment and furniture,) subject to any adjustments pursuant to Section 3
below. The consideration for this Agreement shall be allocated to the
various assets and the Covenant not to Compete and Confidentiality
Agreements described in Section 11 below as set forth on the Purchase Price
Allocation Schedule ("Allocations") attached as Exhibit "D" and
incorporated herein by this reference. IDI and McLeod shall file their
respective tax returns and required Internal Revenue Service forms in
accordance with the Allocations and shall not take any position
inconsistent with the Allocations. If an examination of the income tax
returns of IDI or McLeod by the Internal Revenue Service ("Service")
results in a different allocation of the consideration under Section 1060
of the Internal Revenue Code of 1986, as amended, however, IDI and McLeod
shall amend their federal, state and local income tax returns to conform to
the allocation determined by the Service. IDI and McLeod shall execute any
federal, state, local and/or other forms required to be filed with respect
to the Allocations. The consideration, subject to full and complete
satisfaction of all conditions set out in this Agreement, will be paid as
follows:
2.1. $4,880,000.00 to IDI, $30,000.00 to TDI, $30,000.00 to Morgan,
$30,000.00 to Meijer, $15,000.00 to Hendricks and $15,000.00 to Nelson, at
Closing;
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2.2. $1,000,000.00 into escrow upon execution of this Agreement pursuant
to the terms of the Escrow Agreement attached as Exhibit "E," and
incorporated herein by this reference, which will thereafter be paid out
and applied to the final payment due hereunder pursuant to said Escrow
Agreement;
2.3. $1,500,000.00 to IDI ten (10) days after IDI certifies to McLeod that
publication of those Directories listed on Exhibit "A" with a Publication
Date of February, 1997 has been completed in accordance with Section 5
below;
2.4. $500,000.00 to IDI ten (10) days after IDI certifies to McLeod that
publication of those Directories listed on Exhibit "A" with a Publication
Date of March, 1997 has been completed in accordance with Section 5 below;
2.5. $2,000,000.00 to IDI ten (10) days after IDI certifies to McLeod that
publication of those Directories listed on Exhibit "A" with a Publication
Date of April, 1997 has been completed in accordance with Section 5 below;
2.6. all remaining unpaid consideration to IDI after publication of all
Directories has been completed in accordance with Section 5 below, the
total Net Cash Revenue for all of the Directories combined has been
determined pursuant to Section 3 below and all terms and conditions of the
Escrow Agreement have been satisfied, with the final payment adjusted
pursuant to the provisions of Section 3 below.
3. NET CASH REVENUE REQUIREMENT
----------------------------
IDI represents and warrants that the total Net Cash Revenue of the
last edition of each of the Directories shown on Exhibit "A" published by
IDI (or to be published by IDI, as the case may be) shall be as shown as
estimated Net Cash Revenue on Exhibit "A." "Net Cash Revenue" shall include
all contracted for gross revenue in the form of cash paid or accounts
receivable, including national revenue, but shall exclude cancellations,
promotional
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discounts, payment plan discounts, cash discounts, and any revenue traded
for value other than cash or accounts receivables. If the total Net Cash
Revenue from all the Directories combined is more or less than
$10,510,000.00, the consideration paid by McLeod, as set out in Section 2
above, shall be increased or reduced accordingly by one dollar for each one
dollar the total Net Cash Revenue from the Directories is above or below
$10,510,000.00. McLeod and IDI shall determine the total net cash revenue
for the Directories on or before the due date for the final payment set out
in Section 2.6 above.
4. CLOSING
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Closing shall take place at McLeod's offices, 201 Third Avenue S.E.,
Suite 500, Cedar Rapids, Iowa, forty-eight (48) hours after complete
satisfaction of the conditions and contingencies described in Sections 7 and
10 below, but in no event prior to 11:00 a.m., on March 18, 1997 or later
than 2:00 p.m., on April 1, 1997, or at such other time, date, and place as
may be agreed by the parties ("Closing").
5. CONDUCT OF IDI
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5.1. Publication of the editions of the Directories set out on Exhibit "A"
shall be (1) continued and completed by IDI in accordance with past
practices, (2) completed no later than the fifteenth day of the month
immediately following the Publication Date set out on Exhibit "A," and (3)
continued and completed in the 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"), the distribution area,
the pricing, the credit terms, the quality and size of print and paper, and
the past general production standards and practices, except as specifically
noted, described and agreed on Exhibit "F." IDI shall promptly pay all
sales and production expenses for editions of the Directories with the
Publication Dates as shown on Exhibit "A" and for all prior editions of the
Directories. The above requirements notwithstanding, [a] IDI will have the
Directories with a Publication Date of April, 1997 delivered to a printer
for printing no later than April 1, 1997, and [b] IDI will make every effort
to have the Directories with a Publication Date of May, 1997
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delivered to a printer for printing no later than April 1, 1997. If production
work remains on April 1, 1997, however, then McLeod will finish the remaining
production work at the LaPorte, Indiana facilities now occupied by IDI and IDI
will reimburse McLeod $60.00 per page for each page of said remaining production
work finished by McLeod, and IDI will distribute the directories upon
conclusion of said remaining production work. Performance by IDI under this
section shall be excused in the event of strike, interruption of mail or common
carrier service, fire, riot, disaster, act of God or other cause beyond the
reasonable and ordinary control of IDI.
5.2. IDI 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. IDI will have the right to continue to use the audiotex equipment
sold and transferred pursuant to this Agreement at no charge and McLeod, as
owner of said equipment, will service and maintain said equipment beginning on
April 1, 1997.
5.3. If McLeod determines that IDI has failed to complete publication of the
Directories and provision of all elements of audiotex service, as described in
Section 5.2 set out above, McLeod shall have, in addition to any other right it
may have, the right to notify IDI of such failure and request a full refund of
any and all amounts paid for each of the Directories with which such failure is
associated. Upon receipt of such notice IDI will have twenty (20) days to
correct such failure or to offer to compensate McLeod for such failure. If such
failure remains uncorrected after twenty (20) days and McLeod does not accept
any reasonable offer of compensation from IDI, then McLeod shall be entitled to
receive a refund of any and all amounts paid for each of the Directories with
which said remaining failure is associated.
5.4. Beginning on the date hereof, McLeod shall have the right to conduct an
investigation of IDI and its telephone directory business as McLeod deems
necessary. IDI shall cooperate fully with McLeod in such investigation.
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6. PRE-SALES
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IDI has made sales for editions of the Directories to be published by
McLeod ("Pre-Sales"). McLeod will have the right to review and approve any
such Pre-Sales, but such approval shall not be unreasonably withheld. All
approved receivables, contracts, cash, trade agreements, artwork, finished
copies and any other items held by IDI in connection with such approved
Pre-Sales will be delivered to McLeod on or before Closing, or as soon
thereafter as is commercially possible and McLeod will publish such Pre-
Sales. McLeod will pay IDI, in addition to the consideration set out in
Section 2 above, a commission equal to 15% of the Net Cash Revenue from
such approved Pre-Sales on or before the date of the last payment due under
Section 2 above.
7. REPRESENTATIONS AND WARRANTIES OF IDI
-------------------------------------
IDI hereby covenants, represents and warrants to McLeod that:
7.1. Due Organization. IDI is a corporation duly organized, validly
-----------------
existing, and in good standing under the laws of the state of Michigan and
has the power and authority, corporate and otherwise, to own its properties
and conduct the business in which it is presently engaged.
7.2. Authorization of Agreement. The execution and delivery of this
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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 IDI and this Agreement constitutes a valid and
legally binding obligation of IDI enforceable according to its terms. The
execution and delivery of this Agreement, consummation of the transactions
contemplated by this Agreement and compliance by IDI 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 IDI'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
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which IDI is a party; or, (iii) violate any order, writ, injunction, or decree,
statute, rule or regulation applicable to IDI or any of its property or assets.
7.3. Payment of Taxes. IDI has filed all federal, state, and local tax returns
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required to be filed, and has made timely payment of all taxes shown by those
returns to be due and payable, or has timely filed the necessary documents to
contest the amount of tax due. All filed tax returns are complete, true and
correct in all material respects.
7.4. No Adverse Conditions. To the best of the knowledge of IDI and its
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officers, directors and shareholders, there are no adverse conditions or
circumstances that may interfere with Mcleod's use and enjoyment of or
opportunity to operate the directory business of IDI to be purchased by McLeod
pursuant to this Agreement.
7.5. No Omissions or Misrepresentations. To the best of the knowledge of IDI
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and its officers, directors and shareholders, no representation, warranty, or
statement of IDI 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.
7.6. Investigation by McLeod. No investigation conducted by McLeod shall affect
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the representations and warranties of IDI herein, and each such representation
and warranty shall survive the execution hereof.
7.7. Consents. IDI has obtained any and all necessary consents with respect to
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the transaction contemplated by this Agreement.
7.8. Title and liens. IDI on the date of Closing will own and deliver good and
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marketable fee title and all right, title and interest, free and clear of any
and all liens or encumbrances, or other interests, in and to all assets, rights,
property, equipment and furniture to be sold and delivered pursuant to this
Agreement.
7.9. Consent of Creditors. IDI has obtained, or will obtain before Closing, all
---------------------
necessary consents and releases with respect to the transactions contemplated by
this Agreement from IDI's lenders, said lenders have executed and recorded,
prior to Closing, releases of any and all liens or security interests covering
the Directories and other assets to being purchased by
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McLeod pursuant to this Agreement, and copies of such consents and releases
will be delivered by IDI to McLeod on or before Closing. A List of Lenders
prepared by IDI identifying all lenders from whom consents and releases are
needed is attached as Exhibit "G" and incorporated herein by this
reference. In the event the conditions set out in this section are not
satisfied, or are violated, McLeod will so notify IDI. Closing will be
postponed for a period of not more than fourteen (14) days and IDI will
satisfy the condition or correct the violation prior to the postponed
Closing. If the conditions remain unsatisfied or the violations remain
uncorrected for fourteen days after notice to IDI, 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.
7.10. Employees. IDI will deliver a list of all current employees of IDI,
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and each employees job title or position and date of initial hiring by IDI,
to McLeod on the date of Public Announcement pursuant to Section 9 below.
7.11 Corporate Actions. IDI shall take such action and shall file all
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documents necessary to comply with all federal, state and local laws
regulations which may require shareholder or director consent or approval
of this Agreement or the transactions contemplated or required by this
Agreement.
8. REPRESENTATIONS AND WARRANTIES OF McLEOD
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McLeod covenants, represents and warrants to IDI:
8.1. Due Organization. McLeod is a corporation duly organized, validly
----------------
existing, 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.
8.2 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 delivery of this Agreement, consummation of the
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transactions contemplated by this Agreement and compliance by McLeod with
all 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 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.
8.3. Authority to do Business. McLeod is a corporation duly authorized to
-------------------------
do business in Indiana, Michigan and Ohio and is currently in good standing
in those states.
8.4. No Omissions or Misrepresentations. To the best of the knowledge of
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McLeod and its officers, no representation, warranty, or statement of
McLeod 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 IDI accurate and not misleading
in any material respect.
9. PUBLIC ANNOUNCEMENT
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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 announcement of this Agreement or
the transactions contemplated hereby to the press or general public prior
to 5:00 p.m., Eastern Time, Tuesday, March 4, 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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10. EMPLOYEES AND INDEPENDENT CONTRACTORS
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10.1. Sales Employees of IDI. A list of employees of IDI who sell
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advertising or manage those who sell advertising, excluding senior
executives, is attached as Exhibit "H" and incorporated herein by this
reference. Beginning upon execution of this Agreement, McLeod will have the
right and authority to interview all such employees. On the date of Public
Announcement pursuant to Section 9 above, IDI will provide a current and
up-to-date list of employees of IDI who sell advertising or manage those
who sell advertising, except senior executives, (collectively "the Sales
Force" and individually "member of the Sales Force") and McLeod will
subsequently offer to employ the Sales Force, pursuant to McLeod's standard
employment practices and benefits packages for sales employees and sales
management, and all of IDI's sales support staff. All members of the Sales
Force hired by McLeod and all sales support staff hired by McLeod will be
made available by IDI beginning April 1, 1997, or on such earlier dates as
may be feasible on an individual basis. Payment of any amount under this
Agreement is contingent on McLeod hiring, as described above, no less than
ninety percent (90%) of the Sales Force. 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. Within ten (10) days after the date of Public Announcement
pursuant to Section 9 above, McLeod will notify IDI that (1) the conditions
are satisfied, (2) the conditions are waived, or (3) the conditions are not
satisfied and McLeod is declaring this Agreement null and void. If McLeod
declares this Agreement null and void and receives an immediate return of
all amounts paid by it, McLeod will not employ and any person who was an
employee of IDI on the date of Public Announcement pursuant to Section 9
above for a period of twelve (12) months following such declaration and
receipt.
10.2. Other Employees of IDI. IDI represents that it will cease all of its
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directory production operations in Indiana, including, in particular, those
at its LaPorte, Indiana facility, and plans to discharge all production
employees effective April 1, 1997 and all distribution employees effective
upon completion of distribution of the last edition of the Directories
published by IDI. IDI will prepare and deliver, at its expense, all notices
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required by state or federal laws or regulations to be given prior to
closing or shutdown of a plant, including but not limited to those notices
required by the Worker Adjustment and Retraining Notification Act.
Beginning upon execution of this Agreement, McLeod has the right, in its
sole discretion, to interview, and to subsequently hire, any or all of
IDI's employees unrelated to sales, as McLeod chooses. All employees
unrelated to sales who are hired by McLeod will be made available by IDI
beginning no later than April 1, 1997, except employees involved in
distribution who will be made available upon conclusion of distribution of
those directories remaining to be distributed on April 1, 1997, but in no
event later than June 16, 1997.
10.3. All Employees of IDI. McLeod is not, as a term or condition of this
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Agreement, assuming any of IDI's obligations with respect to employment
contracts or independent contractor contracts, or other agreements with its
employees, whether written or oral. IDI will assist McLeod in the
interviewing and hiring of IDI employees by McLeod. IDI, Morgan, Meijer,
Hendricks, Nelson and TDI will not, without the prior written consent of
McLeod, interview, offer new employment positions to, or offer to continue
employment of, IDI's employees who are members of the Sales Force or sales
support staff, (1) during the interview and hiring process of McLeod; or
(2) who McLeod hires, or desires to hire, pursuant to this section, for a
period of three years after April 1, 1997.
11. NON-COMPETE AGREEMENTS
----------------------
11.1. In consideration of McLeod's purchase of the Directories and payment
of cash consideration, IDI, Morgan, Meijer, TDI and all officers,
directors, shareholders and equity holders of IDI and TDI shall execute a
Covenant Not to Compete and Confidentiality Agreement at Closing
substantially in the form attached hereto as Exhibit "I." In consideration
of McLeod's purchase of the Directories and payment of cash consideration,
Hendricks and Nelson shall execute a Covenant Not to Compete and
Confidentiality Agreement at Closing substantially in the form attached
hereto as Exhibit "J."
11.2. IDI will assign to McLeod, by Assignment in the form attached hereto
as Exhibit "K," all of IDI's rights under its Consulting and
Non-Competition Agreement with Norman
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H. and Barbara A. Steigely, dated November 10, 1994, a copy of which is
attached as Exhibit "L,"
11.3. IDI will obtain and deliver to McLeod a Consent to the assignment of
the Consulting and Non-Competition Agreement with Norman H. and Barbara A.
Steigely, in the form attached as Exhibit "M," executed by Norman H. and
Barbara A. Steigely, in accordance with Section 15 of said Consulting and
Non-Competition Agreement.
11.4. In the event it becomes necessary for McLeod to take any action to
enforce the terms of any of the non-compete agreements, other than those
executed by IDI, IDI will use its best efforts to assist McLeod in proving
that full and adequate consideration for the non-compete agreements was
paid to and received by the parties making the agreement not to compete.
12. LEASES
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12.1. IDI and U. S. Directories, Inc. ("USD") are parties to a lease of
property commonly known as 333 Bosserman Street, LaPorte, Indiana (the
"LaPorte premises"). IDI represents and warrants it is the sole owner and
holder of an assignable leasehold interest in the LaPorte premises, free
and clear of all liens and encumbrances. IDI will assign it's interest in
its current lease with USD to McLeod and McLeod will negotiate with USD to
reach a new lease of the premises under terms acceptable to McLeod and
which will allow IDI to be completely released from all further obligations
under it's current lease with USD. This Agreement and all transactions
contemplated hereby are contingent upon IDI, McLeod and USD reaching [a] an
agreement for the termination of the existing lease between IDI and USD and
[b] new lease agreement between McLeod and USD on or before April 1, 1997.
In the event this contingency is not timely satisfied, McLeod will accept
assignment of the lease from IDI and will assume all of IDI's obligations
under the lease referred to above.
12.2. Flashes Publishers, Inc. and James Z. and Christine E. Sieradzki are
parties to a lease of property commonly known as Cambridge Office Plaza
Suite D, 230 Catalpa Road, Suite D, Mishawaka, Indiana (the "Mishawaka
premises"). IDI represents and warrants it now owns and controls all right,
title and interest of Flashes Publishers, Inc. in, to and under said lease
and is the sole holder of an assignable leasehold interest in the Mishawaka
premises,
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free and clear of all liens and encumbrances. IDI will assign it's interest in
the current lease of the Mishawaka premises to McLeod. McLeod will accept
assignment of the lease from IDI and will assume all of IDI's obligations
under the lease referred to above.
12.3. Flashes Publishers, Inc. and Muncie Gateway Center Limited Partnership
are parties to a lease of approximately 1500 square feet of space in the
property commonly known as 400 N. High, Suite 302, Muncie, Indiana (the "Muncie
premises"). IDI represents and warrants it now owns and controls all right,
title and interest of Flashes Publishers, Inc. in, to and under said lease and
is the sole holder of an assignable leasehold interest in the Muncie premises,
free and clear of all liens and encumbrances. IDI will assign it's interest in
the current lease of the Muncie premises to McLeod. McLeod will accept
assignment of the lease from IDI and will assume all of IDI's obligations under
the lease referred to above.
12.4. INFO America Phone Books, Inc. and OPN Systems, Inc. are parties to a
lease of property commonly known as 6208-B Constitution Drive, Ft. Wayne,
Indiana (the "Ft. Wayne premises"). IDI represents and warrants it now owns and
controls all right, title and interest of INFO America Phone Books, Inc. in, to
and under said lease and is the sole holder of an assignable leasehold interest
in the Ft. Wayne premises, free and clear of all liens and encumbrances. IDI
will assign it's interest in the current lease of the Ft. Wayne premises to
McLeod. McLeod will accept assignment of the lease from IDI and will assume all
of IDI's obligations under the lease referred to above.
12.5 IDI and Brite Voice are parties to a lease of in the audiotex equipment
systems described on Exhibit "N" (the "leased audiotex equipment"). IDI
represents and warrants that it is the sole owner and holder of an assignable
leasehold interest in the leased audiotex equipment, free and clear of all liens
and encumbrances. IDI will assign it's interest in the current lease of the
leased audiotex equipment to McLeod. McLeod will accept assignment of said
lease from IDI and will assume all of IDI's obligations under said lease, except
as provided in Section 5.2 above.
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13. INDEMNIFICATION OF McLEOD
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IDI hereby indemnifies and saves McLeod harmless from and against
any and all costs, liability, or expenses, including reasonable attorney's
fees arising out of (i) any material breach of warranty, covenant,
agreement, or representation made by IDI, Morgan, Meijer or TDI, (ii) any
material nonfulfillment of any agreement of IDI, Morgan, Meijer or TDI
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, (iii) any cause of action or expense directly or
indirectly related to IDI's publication of the editions of the Directories
published by IDI; and (iv) all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incident to any of the
foregoing.
14. INDEMNIFICATION OF IDI
----------------------
McLeod hereby indemnifies and saves IDI harmless from and against
any and all costs, liability, or expenses, including reasonable attorney's
fees, arising out of (i) any material breach of warranty, covenant,
agreement, or representation made by McLeod; (ii) any material
nonfulfillment of any agreement 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 IDI; and
(iii) any cause of action or expense directly or indirectly related to
McLeod's publication of the editions of the Directories published by
McLeod; and (iv) all actions, suits, proceedings, demands, assessments,
judgments, costs, and expenses incident to any of the foregoing.
15. CONFIDENTIAL INFORMATION
------------------------
15.1. Definition. For Purposes of this Section, "Confidential
----------
Information" means any information or compilation of information not
generally known, which is propriety 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 federal state tax
returns, and the financial terms of this transaction. Information shall be
treated as Confidential Information
15
irrespective of its source and all information that is identified as being
"confidential," "trade secret," or is identified or marked with any similar
reference, or any information that IDI treats as confidential or McLeod
should know is being treated by IDI as confidential, shall be presumed to
be Confidential Information.
15.2. Convenants by Parties. McLeod, IDI, Morgan, Meijer, Hendricks,
---------------------
Nelson and TDI agree and covenant with respect to all Confidential
Information received or learned by either of them as follows:
15.2.1. that they will treat as confidential all Confidential
Information made available to them or any of their employees, agents
or representatives;
15.2.2. 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;
15.2.3. 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
publication of directories by McLeod, including competition with the
other party or solicitation of the other party's customers; and,
15.2.4. that each party will assume liability for any breach of this
paragraph by it or any of its employees, agents, or representatives.
16. MISCELLANEOUS
-------------
16.1 Broker or Finder. The parties represent to each other that no
----------------
person is entitled to any brokerage commission, finder's fee, or any other
like payment in connection with any
16
transaction contemplated by this Agreement by reason of the action of any party
to this Agreement.
16.2. Failure by McLeod. In the event McLeod fails to complete the Closing
-----------------
of this Agreement as described above through no fault on the part of IDI and
unrelated to any failure of any condition or postponement described in this
Agreement and not as the result of a breach of this Agreement by McLeod, McLeod
will pay to IDI the $1,000,000.00 paid into escrow pursuant to Section 2.2
above, pursuant to the terms of the Escrow Agreement attached as Exhibit "E."
IDI agrees that this payment shall be its sole and exclusive remedy for a
material breach by and failure by McLeod to complete the transactions
contemplated by the Agreement.
16.3. Severability. If any provisions 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.
16.4. Applicable Law. This Agreement shall be construed in accordance with
--------------
the laws selected by choice of law provisions of the state of venue described
below. Venue for any action to enforce this Agreement brought by McLeod shall be
in Kent County, Michigan and venue for any action to enforce this Agreement by
any other party shall be in Linn County, Iowa.
16.5. Notices. Any notices or other communications required or permitted
-------
under this Agreement shall be sufficiently given if sent by certified mail,
return receipt requested, addressed as follows:
McLeod: McLeodUSA Publishing Company
P.O. Box 3162
Cedar Rapids, IA 52406-3162
Attn: Arthur L. Christoffersen, President
IDI: Indiana Directories, Inc.
c/o Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, MI 49509
Attn: John Morgan
17
TDI: Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, MI 49509
Attn: John Morgan
Morgan: John Morgan
1615 Beard Drive, S.E.
Grand Rapids, Michigan 49509
Meijer: Hank Meijer
c/o Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, Michigan 49509
Nelson: Brad Nelson
c/o Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, Michigan 49509
Hendricks: Jack Hendricks
c/o Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, Michigan 49509
16.6. Captions. The captions in this Agreement are for convenience of reference
--------
only and shall not limit or otherwise affect the meaning hereof.
16.7. 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 use of multiple
counterparts each of which shall constitute and original and all of which
together will constitute one and the same instrument.
16.8. Survival. Each and every provision of this Agreement shall survive the
--------
execution hereof and shall remain binding on the parties hereto until all
performance called for hereunder is complete.
16.9. 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
18
Agreement or any interest herein without the prior written consent of the
other parties hereto. Assignments without such consent shall be void.
McLeodUSA Publishing Company Indiana Directories, Inc.
By: /s/ Arthur L. Christoffersen By: /s/ John P. Morgan
------------------------------------ --------------------------
Arthur L. Christoffersen, President John P. Morgan, President
Talking Directories, Inc.
By: /s/ John P. Morgan
--------------------------
/s/ John P. Morgan /s/ Hendrik G. Meijer
- ----------------------------- ----------------------------
John P. Morgan Hendrik G. Meijer
/s/ Jack E. Hendricks /s/ Brad Nelson
- ----------------------------- ----------------------------
Jack E. Hendricks Brad Nelson
19
Exhibit "A"
Last IDI Minimum Est. Net
Publication Sales End Number Cash Rev
Directory Date Date Distributed (in 000's)
- --------- -------------- -------- ----------- ----------
1. Boone February, 1997 12/31/96 21,000 79
2. St. Joseph (South Bend) February, 1997 12/27/96 205,000 1,060
3. Delaware February, 1997 01/10/97 70,000 659
4. Huntington* March, 1997 02/14/97 23,000 111
5. Kosciusko March, 1997 01/21/97 47,000 364
6. Whitley* March, 1997 02/14/97 18,000 85
7. Allen Co. (Ft. Wayne) April, 1997 02/03/97 200,000 1,800
8. Henry April, 1997 02/21/97 29,000 116
9. LaPorte April, 1997 02/26/97 90,000 912
10. Grant (Marion) April, 1997 03/11/97 51,000 215
11. Marshall May, 1997 03/28/97 27,000 255
12. Wells/Adams May, 1997 03/31/97** 22,000 151
13. Jay-Randolph May, 1997 03/31/97** 13,000 68
- -----------------------------------------------------------------------------------------------
First McLeod
Sales Start Date
----------------
14. Fulton June, 1996 04/01/97** 16,000 119
15. Starke June, 1996 04/01/97** 16,000 90
16. Porter July, 1996 04/01/97** 97,000 446
17. Cass, MI July, 1996 04/01/97** 25,000 140
18. Miami/Wabash September, 1996 05/01/97 42,000 317
19. DeKalb/Noble September, 1996 04/01/97** 42,000 228
20. Madison September, 1996 04/01/97** 80,000 536
21. Cass, IN October, 1996 04/01/97** 28,000 313
22. Elkhart November, 1996 05/01/97 100,000 586
23. Howard/Tipton November, 1996 07/01/97 78,000 498
24. Berrien, MI November, 1996 04/01/97** 100,000 1,000
25. Allen/Auglaize, OH December, 1996 08/01/97 85,000 246
26. Darke/Mercer, OH December, 1996 07/01/97 30,000 116
--------- ------
TOTALS 1,555,000 10,510
* combined into one directory in 1997
** estimated dates
Exhibit "C"
Bill of Sale
------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Indiana
Directories, Inc., a Michigan corporation ("IDI"), 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 IDI's right, title and interest
in and to the property described on Exhibit "A," attached to this Bill of Sale
and made a part hereof for all purposes.
IDI 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 IDI will warrant and defend title to said property
against any and every person claiming rights therein.
IDI 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 IDI'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 IDI. IDI acknowledges that the foregoing
power is coupled with an interest and shall be irrevocable.
Dated: March _____, 1997.
Indiana Directories, Inc.
By:
---------------------------------
John P. Morgan, President
STATE OF )
--------------------
)ss:
COUNTY OF )
-------------------
On this ____th day of March, 1997, before me, the undersigned, a Notary
Public in and for the State of _____________________, personally appeared John
P. Morgan, 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 he 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
Exhibit "D"
Purchase Price Allocation Schedule
----------------------------------
Purchase Price Allocation Under IRC Section 1060
Purchase Price $10,660,000
1.) Paid to Indiana Directories, Inc.
Class I Assets
No Class I assets purchased
Class II assets purchased
No Class II assets purchased
Class III Assets
Machinery & Equipment and Furniture and Fixtures $ 150,000
-----------
Remaining Purchase Price $10,510,000
Class IV Assets
Product designs and drawings, catalogs, data, files, records,
price lists, and other documents relating to suppliers, customer
lists, contracts, catalogs, marketing materials, patents,
trademarks, licenses, copyrights, directory names, brand names,
trade dress, propriety information and trade secrets, existing
non-compete agreements and all other section 197 intangible assets
listed in the purchase agreement. $10,390,000
-----------
Remaining Purchase Price $ 120,000
2.) Paid to others for Covenant not to Compete and Confidentiality
Agreements
Talking Directories, Inc. $ 30,000
John P. Morgan 30,000
Hendrik Meijer 30,000
Brad Nelson 15,000
Jack Hendricks 15,000
Remaining Purchase Price $ -0-
Exhibit "E"
Escrow Agreement
----------------
THIS AGREEMENT is by and between Norwest Bank Iowa, N.A., Cedar Rapids, Iowa
(the "Escrow Agent"), McLeodUSA Publishing Company, an Iowa corporation
("McLeod"), and Indiana Directories, Inc., a Michigan corporation ("IDI"):
WHEREAS, McLeod has, of even date herewith, purchased certain telephone
directory business from IDI pursuant to a Sale and Purchase Agreement between
McLeod and IDI dated February 21, 1997 (the "Sale Agreement"); and
WHEREAS, pursuant to the Sale Agreement $1,000,000.00 of the purchase
price has been deposited in escrow with the terms set out below; and
WHEREAS, the Escrow Agent is willing to hold and disburse such funds, in
accordance with this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. McLeod has established, with Escrow Agent, Escrow Account No.
4030507660, (the "Escrow Account") and has, even date herewith, deposited the
sum of $1,000,000.00 into the Escrow Account in accordance with the terms of the
Sale Agreement.
2. If IDI notifies the Escrow Agent that McLeod failed to complete the
Closing of the Sale Agreement through no fault or breach on the part of IDI and
unrelated to any failure of any condition or postponement described in this
Agreement and not as the result of a breach of this Agreement by McLeod, the
Escrow Agent shall disburse the entire balance in the Escrow Account to IDI;
provided, however, before a disbursement is made to McLeod due to any such
notice, McLeod shall be given written notice and shall have (10) days to notify
the Escrow Agent that it disputes such disbursement. In such event, no
distribution shall be made to IDI and Section 8 below shall control the dispute.
3. Subject to Section 4 below, the balance in the Escrow Account,
including interest, shall be paid directly to IDI or its designee within fifteen
(15) days after McLeod and IDI jointly certify that all invoices for all
expenses of the Directories have been submitted for payment and paid and that
primary distribution of the Directories has been completed pursuant to the Sale
Agreement. All invoices and any other necessary documentation shall be
presented to James Haddad of McLeod, who shall direct the Escrow Agent to
advance funds for payment of same.
4. Pursuant to the Sale Agreement, if the net cash revenue for the
Directories is less than $10,510,000.00, the consideration paid by McLeod to IDI
for the Directory shall reduce in a dollar-for-dollar basis. Any such reduction
is to be repaid to McLeod from the balance remaining in the escrow account after
payment of all printing and distribution costs for the Directories. Therefore,
if McLeod notifies the Escrow Agent that the consideration to be paid to IDI
should reduce pursuant to the terms of the Sales Agreement, the amount of such
reduction shall be disbursed from the escrow
account to McLeod after payment of all printing and distribution costs for the
Directory; provided, however, before a disbursement is made to McLeod due to any
such notice of a reduction in the consideration to be paid to IDI, IDI shall be
given written notice of a reduction and shall have ten (10) days to notify the
Escrow Agent that it disputes such disbursement. In such event, no distribution
shall be made to McLeod and Section 8 below shall control the dispute.
5. During the time the funds are held in the Escrow Account, the
Escrow Agent shall, at the direction of McLeod and IDI, invest such funds in
savings or time deposits, U.S. government securities, securities guaranteed by
the United States, Certificates of Deposit with maturities approved by McLeod
and IDI, or shares of a Money Market Fund, and all accrued interest shall be
paid to IDI together with the last disbursement to IDI under this Escrow
Agreement.
6. The Escrow Agent shall not be liable for any error in judgment
or for any act done or omitted by it in good faith, or for anything that it may,
in good faith, do or refrain from doing in connection herewith, nor will any
liability be incurred by the Escrow Agent if, in the event of any dispute or
question as to the construction of this Agreement, it acts in accordance with
the written opinion of its legal counsel.
7. The Escrow Agent is authorized to act upon any document believed
by it to be genuine and signed by the proper party or parties and will incur no
liability in so acting.
8. If either party disputes any disbursement by the Escrow Agent
under this Agreement, the Escrow Agent shall promptly refer the dispute to the
American Arbitration Association for Settlement by arbitration in accordance
with the Association's rules, unless it is settled by mutual agreement of McLeod
and IDI. As part of any such arbitration award, the arbitrator may establish
his fee and expenses in connection therewith, which the unsuccessful party shall
pay. Any award shall be a conclusive determination of the matter and shall be
binding upon all parties. Arbitration proceedings shall be held in Cedar
Rapids, Iowa, unless the parties hereto agree on another location.
9. IDI and McLeod hereby agree to hold the Escrow Agent harmless
from any and all claims, liabilities, losses, actions, suits or proceedings at
law or in equity, or any other expenses, fees or charges of any character or
nature, that it may incur or with which it may be threatened by reason of its
acting as Escrow Agent, and against any and all expenses, including attorney
fees and the cost of defending any action, suit or proceeding or resisting any
claim, interpleader or otherwise, or any other expenses, that may be incurred by
the Escrow Agent by reason of disputes arising under this Escrow Agreement.
10. Any notices or other communications required or permitted under
this Agreement shall be sufficiently given if sent by certified mail, return
receipt requested, addressed as follows:
McLeod: McLeodUSA Publishing Company
P.O. Box 3162
Cedar Rapids, IA 52406-3162
Attn: Arthur L. Christoffersen, President
IDI: Indiana Directories, Inc.
c/o Talking Directories, Inc.
5311 Clyde Park Avenue, S.W.
Grand Rapids, MI 49509
Attn: John Morgan
Escrow Agent: Norwest Bank Iowa, N.A.
P.O. Box 1967
Cedar Rapids, IA 52406
Attn: Greg Neumeyer
11. The Escrow Agent shall be entitled to a fee of $250.00 per year
for service as Escrow Agent, to be paid to McLeod.
Dated this 27th day of February, 1997.
McLeodUSA Publishing Company Indiana Directories, Inc.
By: By:
------------------------------------- -----------------------------------
Arthur L. Christoffersen, President John Morgan, President
Norwest Bank Iowa, N.A.
By:
-------------------------------------
Gregory W. Neumeyer, Vice President
Exhibit "I"
Covenant not to Compete and Confidentiality Agreement
-----------------------------------------------------
McLeodUSA Publishing Company, an Iowa corporation, ("McLeod"), Indiana
Directories, Inc., a Michigan Corporation ("IDI"), John Morgan ("Morgan"), Hank
Meijer ("Meijer"), Jack Hendricks ("Hendricks"), Brad Nelson ("Nelson") and
Talking Directories, Inc., a Michigan corporation ("TDI") have entered into a
Sale and Purchase Agreement dated February 21, 1997 ("the Agreement") which
provides for the execution of this Covenant not to Compete and Confidentiality
Agreement.
In fulfillment of the terms of the Agreement, adequate, good and valuable
consideration recited herein, ______________, IDI and TDI, jointly and
severally, (referred to hereafter as "the undersigned," meaning any one, some or
all of them) enter into this agreement with McLeod, as follows:
1. For a period of ten (10) years from the date hereof, the undersigned shall
not, within the distribution area of any directory purchased by McLeod from IDI
pursuant to the Agreement, (a) directly or indirectly, as a shareholder,
proprietor, partner, consultant, employee, agent, officer, director, associate,
lender, investor or in any other capacity, engage in the telephone directory
business in competition with McLeod, nor (b) invest in, lend money to, guarantee
loans of, make gifts to, advise or by any other means assist or contract with
any other person or entity in the telephone directory business or to so compete
with McLeod.
2. The undersigned will not disclose any Confidential Information to others
outside McLeod or use same for any unauthorized purposes without written
approval from an officer of McLeod. "Confidential Information" means any
information or compilation of information not generally known, that is
proprietary to the business of McLeod or IDI or related to McLeod's publication
of any directory which is a subject of the Agreement, and includes, without
limitation, trade secrets, inventions, information pertaining to development,
marketing, sales, accounting, and licensing of the business products and
services, customer lists and contracts, customer information contained in
or related to customer records, papers, correspondence or files and all
financial information contained in federal and state tax returns. Confidential
Information does not include information that is independently developed or
received from a third party unrelated to McLeod or IDI, or information that IDI
or TDI currently uses for or in directories published in other markets by IDI,
_______ or TDI. In addition, the undersigned shall not be in default under this
agreement if the undersigned's disclosure of Confidential Information is
pursuant to a subpoena or other court order.
3. The parties acknowledge and agree that customer lists and contracts,
customer information and customer trust and good will are the primary assets of
McLeod, are the primary assets previously purchased by McLeod from IDI and are
the primary assets being purchased pursuant to the Agreement. The parties
desire and agree to protect these interests, assets and information in order to
maintain the adequacy of the consideration for the Agreement, for this agreement
and for the payments made by McLeod pursuant to the Agreement.
4. The undersigned acknowledges that (i) McLeod is paying substantial and
valuable consideration for this agreement, (ii) the undersigned will directly
benefit from the transactions contemplated by the Agreement and the terms of the
Agreement, described above, including the receipt of adequate cash consideration
from McLeod for this Covenant not to Compete and Confidentiality Agreement,
(iii) all officers, directors, shareholders and equity holders of IDI and TDI
will benefit directly and financially from the Agreement, (iv) that the terms of
this agreement are reasonable and necessary to protect the legitimate interest
of McLeod and (vi) competition by the undersigned as herein prohibited would
cause substantial loss and expense, irreparable damage and harm to McLeod, its
assignees or successors, which cannot be fully compensated by monetary award.
5. The parties agree that in the event the provisions of this agreement should
ever be adjudicated to exceed the time or geographic limitations permitted by
law, then such provisions shall be deemed reformed by the parties to this
agreement pursuant to this sentence to the maximum time and geographic
limitation allowed by law.
6. The undersigned agree that upon a violation of this agreement, McLeod or an
assignee or successor in interest to it, shall have the following rights, which
are cumulative, separate causes of action that may be asserted against the
undersigned, jointly and severally. McLeod, its successors or assigns, in the
event of violation by the undersigned of this agreement, may:
6.1. Commence an action to secure an injunction to enjoin the undersigned
from violating this agreement;
6.2. Commence an action to require the undersigned to specifically perform
this agreement;
6.3. Commence an action to secure a judgment for monetary damages for
violation of this agreement, including, if applicable, punitive
damages; or
6.4. Commence an action to assert any and all of the rights that McLeod,
or its successor or assign, may have against the undersigned at such
time because of any breach of this agreement.
6.5. In addition, McLeod, its successor or assignee, may secure reasonable
attorney's fees and costs incurred as a result of judgment, order or
injunction being rendered against the undersigned.
7. No delay or omission by McLeod in exercising any right under this agreement
shall operate as a waiver of that or any other right. A waiver or consent given
by McLeod on any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other occasion. In case
any provision of this agreement shall be invalid, illegal, or otherwise
unenforceable, the parties shall negotiate in good faith with respect to a
substitute provision, such unenforceable provision will be deemed severable and
all remaining provisions will remain in full force and effect.
8. The parties hereto expressly consent to the use of multiple counterparts
each of which shall constitute an original and all of which together will
constitute one and the same instrument.
9. This agreement shall be governed by and construed in accordance of the laws
of the State of Iowa.
Dated: March __, 1997
McLeodUSA Publishing Company Indiana Directories, Inc.
By: By:
--------------------------- -------------------------------
Talking Directories, Inc.
By:
- ----------------------------------- -------------------------------
name
Exhibit "J"
Covenant not to Compete and Confidentiality Agreement
-----------------------------------------------------
McleodUSA Publishing Company, an Iowa corporation, ("McLeod"), Indiana
Directories, Inc., a Michigan Corporation ("IDI"), John Morgan ("Morgan"), Hank
Meijer ("Meijer"), Jack Hendricks ("Hendricks"), Brad Nelson ("Nelson") and
Talking Directories, Inc., a Michigan corporation ("TDI") have entered into a
Sale and Purchase Agreement dated February 21, 1997 ("the Agreement") which
provides for the execution of this Covenant not to Compete and Confidentiality
Agreement.
In fulfillment of the terms of the Agreement, adequate, good and valuable
consideration recited herein, _________________ enters into this agreement with
McLeod, as follows:
1. For a period of five (5) years from the date hereof, the undersigned shall
not, within the distribution area of any directory currently being published by
McLeod upon conclusion of the transactions described in the Agreement, including
those being purchased by McLeod from IDI pursuant to the Agreement, (a) directly
or indirectly, as a shareholder, proprietor, partner, consultant, employee,
agent, officer, director, associate, lender, investor or in any other capacity,
engage in the telephone directory business in competition with McLeod, nor (b)
invest in, lend money to, guarantee loans of, make gifts to, advise or by any
other means assist or contract with any other person or entity in the telephone
directory business or to so compete with McLeod.
2. The undersigned will not disclose any Confidential Information to others
outside McLeod or use same for any unauthorized purposes without written
approval from an officer of McLeod. "Confidential Information" means any
information or compilation of information not generally known, that is
proprietary to the business of McLeod or IDI or related to McLeod's publication
of any directory which is a subject of the Agreement, and includes, without
limitation, trade secrets, inventions, information pertaining to development,
marketing, sales, accounting, and licensing of the business products and
services, customer lists and contracts, customer information contained in or
related to customer records, papers, correspondence or files and all financial
information contained in federal and state tax returns. Confidential Information
does not include information that is independently developed or received from a
third party unrelated to McLeod or IDI, or information that IDI or TDI currently
uses for or in directories published in other markets by IDI or TDI. In
addition, the undersigned shall not be in default under this agreement if the
undersigned's disclosure of Confidential Information is pursuant to a subpoena
or other court order.
3. The parties acknowledge and agree that customer lists and contracts,
customer information and customer trust and good will are the primary assets of
McLeod, are the primary assets previously purchased by McLeod from IDI and are
the primary assets being purchased pursuant to the Agreement. The parties desire
and agree to protect these interests, assets and information in order to
maintain the adequacy of the consideration for the Agreement, for this agreement
and for the payments made by McLeod pursuant to the Agreement.
4. The undersigned acknowledges that (i) McLeod is paying substantial and
valuable consideration for this agreement, (ii) the undersigned will directly
benefit from the transactions contemplated by the Agreement and the terms of the
Agreement, described above, (iii) the undersigned will receive adequate cash
consideration from McLeod for this Covenant not to Compete and Confidentiality
Agreement, (iv) the undersigned will receive substantial additional cash
consideration from IDI as the result of the undersigned facilitating and
participating in the conclusion of the transactions contemplated by the
Agreement, including, specifically, the execution of this Covenant not to
Compete and Confidentiality Agreement, (v) that the terms of this agreement are
reasonable and necessary to protect the legitimate interests of McLeod and (vi)
competition by the undersigned as herein prohibited would cause substantial loss
and expense, irreparable damage and harm to McLeod, its assignees or successors,
which cannot be fully compensated by monetary award.
5. The parties agree that in the event the provisions of this agreement
should ever be adjudicated to exceed the time or geographic limitations
permitted by law, then such provisions shall be deemed reformed by the parties
to this agreement pursuant to this sentence to the maximum time and geographic
limitation allowed by law.
6. The undersigned agree that upon a violation of this agreement , McLeod or
an assignee or successor in interest to it, shall have the following
rights, which are cumulative, separate causes of action that may be asserted
against the undersigned, jointly and severally. McLeod, its successors or
assigns, in the event of violation by the undersigned of this agreement, may:
6.1 Commence an action to secure an injunction to enjoin the undersigned
from violating this agreement;
6.2 Commence an action to require the undersigned to specifically perform
this agreement;
6.3 Commence an action to secure a judgment for monetary damages for
violation of this agreement, including, if applicable, punitive damages;
or
6.4 Commence an action to assert any and all of the rights that McLeod,
or its successor or assign, may have against the undersigned at such time
because of any breach of this agreement.
6.5 In addition, McLeod, its successor or assignee, may secure reasonable
attorney's fees and costs incurred as a result of judgment, order or
injunction being rendered against the undersigned.
7. No delay or omission by McLeod in exercising any right under this
agreement shall operate as a waiver of that or any other right. A waiver or
consent given by McLeod on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion. In case any provision of this agreement shall be invalid, illegal, or
otherwise unenforceable, the parties shall negotiate in good faith with respect
to a substitute provision, such unenforceable provision will be deemed severable
and all remaining provisions will remain in full force and effect.
8. The parties hereto expressly consent to the use of multiple counterparts
each of which shall constitute an original and all of which together will
constitute one and the same instrument.
9. This agreement shall be governed by and construed in accordance of the
laws of the State of Iowa.
Dated: March_________, 1997
McLeodUSA Publishing Company
By:_________________________ ___________________________
name