1
EXHIBIT 10.75
OPTION AGREEMENT
This Option Agreement is made and entered into this 27th day of April,
1995, between FRONTEER DIRECTORY COMPANY, INC., a Colorado corporation
("Fronteer"), and TELECOM*USA PUBLISHING COMPANY, an Iowa corporation
("Telecom").
RECITALS
Fronteer and Telecom have, of even date herewith, entered into a Sale
and Purchase Agreement whereby Telecom is acquiring Fronteer's telephone
directory business in the states of Idaho, Montana, Utah and Wyoming (the
"Idaho Sale Agreement"). In consideration of the Idaho Sale Agreement, and the
additional consideration set out below, Fronteer is willing to grant, and
Telecom desires to receive, the option set out below.
NOW THEREFORE, it is agreed between the parties as follows:
1. OPTION GRANTED. Fronteer grants Telecom the right and option
to acquire all of Fronteer's telephone directories listed on Exhibit "A"
attached hereto (the "Directories"), the sale and purchase of the Directories
shall be pursuant to the terms of a Sale and Purchase Agreement substantially
in the form of Exhibit "B" attached hereto (the "North Dakota Sale Agreement").
As part of this transaction, Telecom shall receive assignments from Fronteer of
all of Fronteer's rights under any directory publication contracts with
telephone utility companies.
2. OPTION CONSIDERATION. In addition to entering into the Idaho
Sale Agreement, Telecom has, of even date herewith, loaned Fronteer $500,000 as
consideration for this Option Agreement, said loan evidenced by a promissory
note of even date herewith in the form of Exhibit "C" attached hereto. The
promissory note is non-interest bearing and non-recourse, secured by a first
lien security interest in the publishing rights to the Fargo, North Dakota
directory. Upon Telecom's exercise of the option granted by this Option
Agreement, the full amount of the promissory note shall be applied to the
initial payment due by Telecom under the North Dakota Sale Agreement. If
Fronteer materially fails to perform its obligations under the terms of this
Option Agreement or files for protection from creditors under the United States
Bankruptcy Code during the term of this Option Agreement, then this note shall
be immediately due and payable and Telecom may then exercise its rights under
the applicable security agreement covering the publishing rights in the Fargo,
North Dakota directory. If Fronteer does not default under the terms of this
Option Agreement or file for protection from creditors under the United States
Bankruptcy Code during the term of this Option Agreement, and if Telecom does
not exercise the option granted herein, the full amount of the promissory note
shall be forgiven by Telecom. Each party hereto agrees to execute any
additional documents reasonably necessary to effectuate the terms hereof.
3. PRICE. The price for the Directories shall be equal to the
total net cash revenue for the most recent edition of the Directories published
and distributed by Fronteer as of the date of Closing (as described below,
except the Souris River directory). Net cash
2
revenue shall include all contracted for gross revenue in the form of cash paid
or accounts receivable (reduced by any telephone company commissions),
including national revenue, but shall exclude cancellations, promotional
discounts, payment plan discounts and any revenue traded for value other than
cash or accounts receivable. The price shall be subject to the adjustments
described in Section 6 below.
The price shall be increased by an amount equal to the net cash
revenue for the most recent edition of the telephone directory for the Souris
River, North Dakota area, published and distributed by Fronteer as of the date
of Closing. Net cash revenue shall be calculated as set out above. If the
directory publication contract with the telephone utility company for the
Souris River directory does not have five or more editions remaining on its
term, the price shall be reduced by 20% of the net cash revenue for the Souris
River directory multiplied by the sum of five minus the number of editions
included in the remaining term of such directory publication contract. If the
directory publishing contract allows the telephone utility company to cancel or
terminate the contract without fault of Fronteer, any editions subject to such
right shall not be deemed part of the remaining term of the contract. If
Telecom continues to publish the Souris River directory under the original term
of the directory publishing contract or any renewal, extension or replacement
of such contract, with the same telephone utility company, Telecom shall pay
Fronteer 20% of the net cash revenue for each year such directory is published
by Telecom for up to five years, less any editions for which Fronteer was
compensated at Closing.
4. METHOD OF PAYMENT. Twenty-five percent (25%) of the price
shall be paid to the officers/shareholders/directors listed on Exhibit "D"
attached hereto in the percentages set out beside each such
officers/shareholders/directors' name, with such amount payable as set out in
the attached North Dakota Sale Agreement. The remaining seventy-five percent
(75%) of the price shall be divided by the total number of Directories to be
published and distributed by Fronteer under the North Dakota Sale Agreement to
determine the "per directory price." At Closing, Telecom shall pay Fronteer the
"per directory price" for the number of Directories distributed by Fronteer as
of Closing. Thereafter, in increments of not less than $500,000, Telecom shall
pay Fronteer the "per directory price" for the number of Directories Fronteer
certifies have been delivered; provided, however, Telecom shall have the right
to retain the greater of (i) $500,000, or (ii) the per directory price for the
last two (2) Directories scheduled to be published by Fronteer under this
Agreement (up to a maximum of $1,000,000) until Telecom receives certification
that the last Directories have been distributed.
5. MANNER OF EXERCISE. Telecom may exercise this Option at any
time on or after June 1, 1997. This Option expires on June 1, 1999, unless
sooner exercised by Telecom. This Option may be exercised by written notice
from Telecom to Fronteer, specifying a closing date not less than 90 days from
the date of such notice ("Closing"). Upon receipt of such notice from Telecom,
Fronteer shall be responsible for completing all sales, production and
distribution of any edition of the Directories for which such sales, production
or distribution has commenced prior to the date of the notice.
-2-
3
6. ADJUSTMENT TO OPTION PRICE. The rights to be acquired by
Telecom to publish a telephone directory for Southeast, North Dakota shall
include an assignment of the directory publication contract with the telephone
utility company in that area with at least three directory editions remaining
on its term. If the directory publication contract with the telephone utility
company does not have three or more editions remaining on its term, the price
for the Directories shall be reduced by 20% of the net cash revenue for the
Southeast, North Dakota directory multiplied by the sum of three minus the
number of editions included in the remaining term of such directory publication
contract. If the directory publishing contract allows the telephone utility
company to cancel or terminate the contract without fault of Fronteer, any
editions subject to such right shall not be deemed part of the remaining term
of the contract. If Telecom continues to publish the Southeast, North Dakota
directory under the original term of the directory publishing contract or any
renewal, extension, or replacement of such contract, with the same telephone
utility company, Telecom shall pay Fronteer 20% of the net cash revenue for
each year such directory is published by Telecom for up to three years, less
any editions for which Fronteer was compensated at Closing.
7. ALLOCATION OF PURCHASE PRICE. The price for the Directories
shall be allocated 25% to the Non-Competition Agreements described in the North
Dakota Sale Agreement below (with a maximum to be paid for the Non-Competition
Agreements of $1,200,000), and 75% (or more if the maximum is met for the
Non-Competition Agreements) to Fronteer for the assets described above.
8. CONDUCT OF BUSINESS. From the date hereof until June 1, 1999,
unless the option set out herein is sooner exercised by Telecom, Fronteer shall
carry on its business in the usual and ordinary manner. Fronteer will not
enter into any contracts or make any commitments affecting the operation of the
business not in the ordinary course of business or sell any publishing or other
rights in the Directories. During the term of this Option Agreement, Telecom,
through its agents and representatives, shall have full and complete access, at
all reasonable times, to the premises and to all of Fronteer's books and
records. Fronteer shall provide Telecom with copies of all financial records
and filings reasonably requested by Telecom.
9. APPROVAL. This Option Agreement has been approved at a duly
held meeting of Fronteer's Board of Directors. A certified copy of the
Director's Resolutions has been delivered to Telecom.
10. BROKER OR FINDER. Telecom and Fronteer 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 Option Agreement.
11. SEVERABILITY. If any provision of this Option Agreement is
held for any reason to be unenforceable by a court of competent jurisdiction,
the remainder of this Option Agreement shall, nevertheless, remain in full
force and effect.
-3-
4
12. APPLICABLE LAW. This Option Agreement shall be construed in
accordance with the laws of the State of Iowa. Venue for any action to enforce
this Option Agreement shall be in Iowa or in North Dakota, at the option of the
party filing such action.
13. NOTICES. Any notices or other communications required or
permitted under this Option Agreement shall be sufficiently given if sent by
certified mail, return receipt requested, postage prepaid, addressed as
follows:
TELECOM: Telecom*USA Publishing Company
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Fronteer: Fronteer Directory Company, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
14. CAPTIONS. The captions in this Option Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
15. USE OF FACSIMILE. The parties hereto expressly consent to the
use of facsimile signatures and agree that such facsimile signatures shall be
binding as originals.
16. SURVIVAL. Each and every provision of this Option Agreement
shall survive the execution hereof and shall remain binding on the parties
hereto until all performance called for hereunder is complete.
17. BINDING EFFECT. This Option 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 Option Agreement or any interest
herein without the prior written consent of the other parties hereto.
Assignments without such consent shall be void.
TELECOM*USA PUBLISHING COMPANY FRONTEER DIRECTORY COMPANY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------- ----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, President ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
-4-
