SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 22, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 0-17637 45-0411501
- ---------------------------- ------------------- ------------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 860-1700
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 22, 1998, Fronteer Financial Holdings, Ltd. (the "Company") and
Fronteer Marketing Group, Inc., a wholly owned subsidiary of the Company, sold
all of their right, title, interest and claims in and to the assets, properties,
rights, claims, contracts and business of every kind, character and description,
whether tangible or intangible, real, personal or a combination thereof,
accrued, contingent or otherwise, which are utilized in, related to or accounted
for as a part of the Company's directory and telemarketing business in Bismarck,
North Dakota ("Bismarck Assets") to North Country Yellow Pages, Inc. and Dennis
W. Olson (collectively "Buyer"). The transaction was effective March 1, 1998,
for accounting purposes. Until February 18, 1998, Mr. Olson was the president
and a director of the Company.
The purchase price of the Bismarck Assets was 493,500 shares of the common
stock of the Company that were assigned to the Company by the Buyer. The
purchase price was determined by allocating the number of shares of the Company
held by the Buyer to the approximate value of the Bismarck Assets minus their
liabilities. The purchase price was based on third party appraisals and
management's estimates relating to specific assets and liabilities.
In the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, the Company included as of and for the six and three months ended
March 31, 1998, the loss on disposition related to the sale of the net assets to
the Buyer in the Company's consolidated financial statements and accounted for
the 493,500 shares of common stock to be received as treasury stock. Loss on the
sale of the net assets was approximately $318,000.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Financial Statements. Not required.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated
financial statements are filed with this report:
Pro Forma Condensed Consolidated Balance Sheet as of March 31,
1998
Pro Forma Condensed Consolidated Statement of Operations:
Year ended September 30, 1997
Six Months ended March 31, 1998
The Pro Forma Condensed Consolidated Balance Sheet of the Company
as of March 31, 1998, reflects the financial position of the
Company after giving effect to the disposition of the assets
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discussed in Item 2 and assumes the disposition took place on
March 31, 1998. The Pro Forma Condensed Consolidated Statements
of Operations for the fiscal year ended September 30, 1997, and
the six months ended March 31, 1998, assume that the disposition
occurred on October 1, 1996, and are based on the operations of
the Company for the year ended September 30, 1997, and the six
months ended March 31, 1998.
The unaudited pro forma condensed consolidated financial
statements have been prepared by the Company based on assumptions
deemed proper by it. The unaudited pro forma condensed
consolidated financial statements presented herein are shown for
illustrative purposes only and are not necessarily indicative of
the future financial position or future results of operations of
the Company or of the financial position or results of operations
of the Company that would have actually occurred had the
transaction been in effect as of the date or for the periods
presented. In addition, it should be noted that the Company's
financial statements will reflect the disposition from the
effective date of the disposition, which is March 1, 1998.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the historical
financial statements and related notes of the Company.
(c) Exhibits.
2.1 Asset Purchase Agreement dated March 1, 1998 by and among
Fronteer Financial Holdings, Ltd. and Fronteer Marketing
Group, Inc. and North Country Yellow Pages, Inc. and Dennis
W. Olson.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 7, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.
By: /s/ Gary L. Cook
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Gary L. Cook, Secretary
Treasurer and Chief Financial Officer
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<TABLE>
<CAPTION>
FRONTEER FINANCIAL HOLDINGS, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
ASSETS March 31, 1998
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<S> <C>
Cash and cash equivalents ................................... 3,325,247
Receivables ................................................. 1,811,106
Securities owned, at market value ........................... 3,495,465
Other assets ................................................ 75,860
----------
Total current assets ................................... 8,707,678
PROPERTY, FURNITURE AND EQUIPMENT, NET ...................... 1,280,228
OTHER LONG TERM ASSETS ...................................... 1,369,672
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Total assets ........................................... 11,357,578
==========
Payables and accrued expenses ............................... 2,443,312
Current portion of long-term debt ........................... 115,784
Other current liabilities ................................... 391,763
----------
Total current liabilities .............................. 2,950,859
LONG-TERM DEBT .............................................. 102,943
CONVERTIBLE DEBENTURE ....................................... 4,000,000
DEFERRED RENT CONCESSIONS ................................... 1,688,014
OTHER LIABILITIES ........................................... 316,403
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Total liabilities ...................................... 9,058,219
MINORITY INTEREST IN SUBSIDIARY ............................. 267,874
STOCKHOLDERS' EQUITY ........................................ 2,031,485
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. 11,357,578
==========
</TABLE>
The condensed consolidated balance sheet presented represents the balance sheet
of the Company as filed with Securities and Exchange Commission on Form 10Q for
the three months ended March 31, 1998. Accounting for the related Bismarck Asset
sells were accounted for as March 1, 1998 which has been reflected in the
balance sheet as of March 31, 1998.
F-1
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<TABLE>
<CAPTION>
FRONTEER FINANCIAL HOLDINGS, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended Six Months Ended
September 30, 1997 March 31, 1998
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<S> <C> <C>
REVENUE:
Brokerage commissions ........................................................... $ 13,779,477 $ 6,848,614
Investment banking .............................................................. 3,003,794 1,557,974
Trading profits, net ............................................................ 274,563 283,763
Other broker/dealer ............................................................. 774,329 462,806
Computer hardware and software operations ....................................... 6,982,143 5,087,822
Other ........................................................................... 286,108 --
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25,100,414 14,240,979
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COST OF SALES AND OPERATING EXPENSES:
Broker/dealer commissions ....................................................... 10,268,764 5,216,489
Computer cost of sales .......................................................... 5,767,136 4,383,746
General and administrative ...................................................... 11,252,747 6,233,642
Depreciation and amortization ................................................... 338,945 178,758
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27,627,592 16,012,635
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Operating loss ................................................................ (2,527,178) (1,771,656)
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OTHER INCOME (EXPENSE):
Interest income ................................................................. 150,203 140,721
Interest expense ................................................................ (27,940) (119,733)
Equity in loss of affiliate ..................................................... (22,580) (26,435)
----------- ----------
99,683 (5,447)
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Loss before minority interest and income taxes ..................................... (2,427,495) (1,777,103)
----------- ----------
Minority interest in earnings ...................................................... (11,331) (12,546)
----------- ----------
Loss before income taxes ........................................................... (2,438,826) (1,789,649)
Income tax benefit (expense) ....................................................... 448,524 (32,871)
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Net Loss ........................................................................... (1,990,302) (1,822,520)
=========== ==========
Weighted average number of common shares outstanding ............................... 16,267,097 16,378,057
=========== ==========
Basic and diluted earnings (loss) per common share: ................................ $ (.12) $ (.11)
=========== ==========
</TABLE>
The proforma condensed statements of operations presented represent the
continuing operations per the statements of operations filed with the Securities
and Exchange Commission in Form 10K for the year ended September 30, 1997 and
Form 10Q for the three months ended March 31, 1998. Operating activity relating
to the Bismarck Assets was accounted for as discontinued operations in those
filings. As a result, there are no adjusting entries. Weighted average number of
common shares outstanding have been adjusted for the 493,500 Common shares
received as consideration.
F-2
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EXHIBIT INDEX
Exhibit 2.1 Asset Purchase Agreement dated March 1, 1998 by and among
Fronteer Financial Holdings, Ltd. and Fronteer Marketing
Group, Inc. and North Country Yellow Pages, Inc. and Dennis
W. Olson.
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ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (the "Agreement") effective this 1st day of March,
1998 by and among Fronteer Financial Holdings, Ltd. and Fronteer Marketing
Group, Inc. (collectively "Seller") and North Country Yellow Pages, Inc. and
Dennis W. Olson (collectively "Buyer").
WHEREAS, Seller desires to sell and Buyer desires to buy, upon the terms
and subject to the conditions of this Agreement, the business, assets and the
assumption of certain specified liabilities, that are related to and utilized in
the Seller's directory and telemarketing business located in Bismarck, North
Dakota, (the "Bismarck Operations").
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and upon the terms and subject to the conditions
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Purchase of Assets
1.1 Assets to be Sold. Subject to the terms of this Agreement, at the
Closing (as hereinafter defined), Seller shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer's successors and permitted assigns, forever, all
of Seller's right, title, interest and claims in and to the assets, properties,
rights, claims, contracts and business of every kind, character and description,
whether tangible or intangible, real, personal or a combination thereof,
accrued, contingent or otherwise, which are utilized in, related to or accounted
for as part of the Seller's directory and telemarketing business in Bismarck,
North Dakota (collectively referred to hereinafter as the "Bismarck Assets").
(a) Except as set forth in Section 1.2 herein, all personal property and
other tangible assets which are owned, held, or leased (to the extent of the
lessee's interest therein), by Seller and used in or related to the Bismarck
Operations, including without limitation the equipment, vehicles, furniture,
office furnishings, telephone, computer and communications hardware and software
specifically set forth or described on Schedule 1.1(a) hereto (collectively
referred to hereinafter as the "Tangible Personal Property");
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(b) The condominium set forth or described on Schedule 1.1(b) hereto,
together with the improvements and fixtures located thereon;
(c) The real property set forth or described on Schedule 1.1(c) hereto,
together with the buildings, improvements and fixtures located thereon, but
subject to any and all existing liens and encumbrances;
(d) The trade and other accounts receivable, claims, demands, judgments,
rights, bills and notes receivable (other than inter-company accounts and notes)
(collectively referred to hereinafter as the "Receivables"), relating to the
Bismarck Operations and set forth or described on Schedule 1.1(d) hereto; to the
extent the Receivables can be assigned, with consent of third parties where
required;
(e) All financial, marketing, personnel and other records, product
literature, advertising customer lists and files, which are utilized by or
related to the Bismarck Operations;
(f) Seller's rights and claims under and to all contracts, agreements,
arrangements, vendor orders, customer orders, pre-payments, advances, deposits
and commitments set forth or described on Schedule 1.1(f) hereto; to the extent
such rights, claims and interests can be assigned, with the consents of third
parties where consents are so required;
(g) Except as set forth in Section1.2 hereof, all other intangible assets,
including without limitation, trade secrets, know-how, proprietary or technical
information, trademarks, tradenames, service marks, and licenses or agreements
to use any of the foregoing, which are utilized by or related to the Bismarck
Operations, including without limitation those intangible assets set forth or
described on Schedule 1.1(g) hereto; and
(h) The checking account held at BNC National Bank (Account # 606231)
subject to a reconciliation to be conducted jointly by the parties on the day
prior to the Closing (as defined hereinafter) in accordance with the
reconciliation formula set forth on Schedule 1.1(h) hereto.
1.2 Excluded Assets. The Bismarck Assets shall not include any right, title
or interest of Seller in, to or under any of the following:
(a) Except for the BNC National Bank Checking Account #606231 and that
portion of the account balance assigned to Buyer on Schedule 1.1(h), all cash,
deposits, bank accounts, certificates of deposit, securities and other cash
equivalents as of March 1, 1998;
(b) All inter-company accounts and notes;
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(c) All rights to the names Fronteer Financial Holdings, Ltd. and Fronteer
Marketing Group, Inc. and any variations thereof and any and all trademarks or
service marks which embody such names, except that Seller grants to Buyer a
revocable nonexclusive license to use the name Fronteer Directory Company upon
the following limited conditions;
(i) during the license period Buyer shall use the name Fronteer
Directory Company only to assist in the collection of the receivables set
forth in Schedule 1.1(d) hereto;
(ii) Buyer shall not use the name Fronteer Directory Company in any
other manner or for any other purpose;
(iii) Buyer shall, anytime it uses the name Fronteer Directory
Company, limit the use of the name to the following specific phrase
"Formerly Known As Fronteer Directory Company" and shall not use the name
in any other form or context; and
(iv) Buyer's nonexclusive license shall terminate on the earlier of
(a) the date on which all receivables set forth on Schedule 1.1(d) are
collected or such collection is abandoned by Buyer; (b) Seller terminates
Buyer's license upon Notice as provided in Section 7.5 hereof; or (c)
December 31, 1998; and
(d) Any equipment, fixtures, receivables, contracts, agreements, rights or
instruments not purchased or assumed by Buyer pursuant to this Agreement.
1.3 Purchase Price. The Buyer shall pay as a portion of the purchase price
for the Bismarck Assets 493,500 shares of the voting common stock of Fronteer
Financial Holdings, Ltd. (the "Shares"). At the Closing (as defined hereinafter)
the Shares shall be endorsed in blank by the execution by Buyer of a blank stock
power or, at Seller's option to Fronteer Financial Holdings, Ltd.
1.4 Assumption of Obligations. At the Closing (as defined hereinafter)
Buyer shall assume those obligations and duties of Seller specifically relating
to the Bismarck Operations evidenced by those contracts, agreements, equipment
leases, arrangements, commitment and vendor and customer orders and accounts
specifically set forth in this Agreement, or on Schedule 1.4, hereto. Except as
expressly provided elsewhere in this Agreement and on Schedule 1.4, Buyer shall
not assume and shall not be liable for the payment, performance or discharge of
any debts, obligations or commitments of Seller, whether relating to the
Bismarck Operations or otherwise.
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ARTICLE II
Representations and Warranties of Seller
Seller hereby makes the following representations and warranties to Buyer:
2.1 Due Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Colorado. Seller has all requisite corporate power and authority to own and use
the Bismarck Assets and to transact the business in which it is engaged.
2.2 Corporate Power and Authority. The Board of Directors of Seller has
duly approved this Agreement and the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of Seller
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, reorganization or insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors and by general
principles of equity.
2.3. Taxes. All tax liabilities to which the Bismarck Assets may be subject
have been paid and discharged except for taxes assessed but not yet payable.
2.4 Availability of Documents. Seller has made available for inspection by
Buyer, true, correct and complete copies of all contracts, agreements, leases,
commitments, deeds, policies of insurance and other materials referred to or
described on any Schedule attached or related to any such document or item
referred to on such Schedules.
ARTICLE III
Representations and Warranties of Buyer
3.1 Due Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
North Dakota. Buyer has the corporate power and authority to own and use its
properties and to transact the business in which it is engaged.
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3.2 Corporate Power and Authority. The Board of Directors of Buyer has duly
approved this Agreement and the transactions contemplated hereby, and no further
corporate action or approval is required in order to permit Buyer to consummate
the transactions contemplated hereby. This Agreement constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as the same may be limited by bankruptcy, reorganization,
insolvency or similar laws of general application relating to or affecting the
enforcement of rights of creditors and by general principles of equity. The
making and performance of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with the Certificate of
Incorporation or Bylaws of the Buyer.
3.3 Litigation. There are no actions, suits, claims proceedings,
investigations or grievances, whether in equity or at law, pending, or to the
best knowledge of Buyer, threatened against or affecting Buyer before any court
or agency in which it is sought to restrain or prohibit or obtain damages in
respect to the consummation of the purchase and sale of the Bismarck Assets or
any of the transactions contemplated hereby. Buyer is, to the best of its
knowledge, not in default with respect to any order, writ, injunction or decree
of any court or agency with respect to the consummation of the purchase and sale
of the Bismarck Assets or any of the transactions contemplated hereby.
3.4 Consents. Except as has been obtained by Buyer, no consents, approvals,
authorizations or orders of any court, agency or other person or entity are
required in order to permit Buyer to consummate the transactions contemplated
hereby.
3.5 Shares Free and Clear. Buyer has, and at the Closing (as defined
hereinafter) will have, good and marketable title to the Shares free and clear
of any and all options, rights, pledges, mortgages, security interests, liens
and other encumbrances whatsoever.
3.6 Use of Names. As of the Closing (as defined hereinafter) Buyer will
cease using the names Fronteer Financial Holdings, Ltd. and Fronteer Marketing
Group, Inc. and any variations thereof and any and all trademarks or
servicemarks which embody such names, except as provided in Section 1.2(c)
above.
3.7 Liabilities. Those liabilities and obligations set forth on Schedule
1.4 hereof, represent all of the liabilities and obligations, except for the
accrued vacation benefits of Patti Muskik in the amount of $3,109.38, relating
to, arising out of or in connection with the Bismarck Operations.
3.8 Continuous Operation by Buyer. Buyer and its principal shareholders,
officers and directors, have operated the Bismarck Operations since its
inception and, as such, they and each of them have actual knowledge of the
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condition of the Bismarck Assets, including without limitation, the physical,
structural and operational condition of the Tangible Personal Property, real
property, condominium and automobiles, the condition of and marketability of
Seller's title to the Bismarck Assets, and the contamination , if any, of the
Bismarck Assets by hazardous or toxic waste or other environmental contaminant.
3.9 Full Disclosure. No representation or warranty of Buyer made in this
Agreement, nor any written statement, schedule or certificate furnished to
Seller by Buyer pursuant hereto, or in connection with the transactions
contemplated hereby, contains, or will contain, any untrue statement of a
material fact, or omits, or will omit, to state a material fact necessary to
make the statement or facts contained herein or therein not misleading. Buyer
has not withheld nor will it withhold from Seller, knowledge of any events,
conditions or facts of which Buyer has knowledge and which may materially or
adversely affect the Bismarck Assets, the Bismarck Operations or the business
conducted at the Bismarck Operations.
3.10 Assumption of Risk. Buyer warrants that it has taken such actions as
it deems necessary to ensure that the transfer of ownership of the condominium
described in Schedule 1.1(b), does not violate or otherwise contravene the
applicable condominium laws or association rules. Buyer assumes the risk of any
action taken by the condominium association, its agent or any condominium owner
to prevent Buyer from acquiring Seller's interest in the condominium or from
using the condominium or any amenities associated therewith.
ARTICLE IV
Closing
4.1 Date and Place of Closing. Subject to the satisfaction or waiver of the
conditions to the obligations of the parties, the purchase and sale of the
Bismarck Assets shall be consummated at a Closing on May 18, 1998 or such other
date as the parties mutually agree, to be held at the offices of Birge & Mayers,
P.C., Denver, CO., or such other place as mutually agreed upon by the parties
(the "Closing"). Except as otherwise provided herein, upon execution of this
Agreement, title to the Bismarck Assets shall be deemed to pass from Seller to
Buyer as of 12:01 a.m., Denver, Colorado time, on the day of Closing.
4.2 Conditions to Buyer Obligations. The obligations of Buyer to consummate
the transactions contemplated in this Agreement shall be subject to the
satisfaction of each of the following conditions by Seller on or before Closing,
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subject, however, to the right of Buyer to waive any one or more of such
conditions:
(a) Conveyances. Seller shall execute and deliver to Buyer, in a form
reasonably satisfactory to Buyer, (i) an assignment of Seller's leasehold
interest in, and claims, rights and benefits to and under, the leases to be
transferred to and assumed by Buyer, pursuant to Section 1.4; (ii) quit claim
deeds transferring Seller's right, title and interest in and to the real
properties transferred to Buyer pursuant to Sections 1.1(b) and (c); (iii) bills
of sale conveying to Buyer all items of personal property, including the
Tangible Personal Property, included among the Bismarck Assets; (iv) a
reconciliation of and documents reasonably necessary to transfer ownership of
Account # 606231 held at BNC National Bank; (v) all other conveyances, bills of
sale, assignments, endorsements and instruments of transfer as shall be
reasonably necessary or appropriate to carry out the intent of this Agreement,
and as shall be reasonably sufficient to vest in Buyer, Seller's right, title
and interest in and to the Bismarck Assets, except those Bismarck Assets which
are leased, to which Buyer will acquire the interest of Seller as lessee.
4.3 Conditions to Seller Obligations. The obligations of Seller to
consummate the transactions contemplated in this Agreement shall be subject to
the satisfaction of each of the following conditions by Buyer on or before the
Closing, subject, however, to the right of Seller to waive any one or more of
such conditions:
(a) Delivery of Shares. Buyer shall deliver to Seller the Shares free and
clear from all options, pledges, mortgages, security interests, liens and other
encumbrances whatsoever.
(b) Assignment of Leases. Buyer shall deliver to Seller the executed
consents of the lessors, to the assignments of the leases set forth on Schedules
1.1(a) and 1.4, along with such documents as are satisfactory to Seller,
removing Seller as the lessee, sublessee, obligor or guarantor under such
leases.
(c) Letter of Credit. Buyer shall deliver to Seller a letter of credit in
an amount and in form and substance satisfactory to Seller and to the lessor on
the Matrix Lease described on Schedule 1.4, which removes Seller as an obligor
or guarantor under the current letter of credit, note and security agreement
securing the Matrix Lease.
(d) Payment of Liabilities. Buyer shall deliver to Seller evidence of
payment satisfactory to Seller that those obligations assumed by Buyer in
Schedule 1.4 hereto, have been paid in full.
(e) Transfer of Condominium. Buyer shall obtain at Buyer's expense such
approvals as may be necessary to transfer Seller's right, title and interest in
the Condominium to Buyer.
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(f) Vehicle Inspections. Buyer shall obtain at Buyer's expense such
inspections and permits as are required by the state and local governments in
the various states where each vehicle is maintained as may be necessary or
appropriate to transfer Seller's right, title and interest in such vehicles to
Buyer.
(g) Pledge of Shares. Dennis W. Olson ("Olson") shall pledge, as further
security for the performance by Buyer of the Matrix and Wilton Leases described
in Schedule 1.4, 68,000 Shares (the "Pledge Shares"), which shall be in addition
to the Shares delivered by Buyer at Closing as the purchase price. Olson shall
take such actions and execute such documents, including delivering the Pledge
Shares to Seller, together with a blank stock power executed by Olson, as Seller
deems necessary or appropriate, in its sole discretion to perfect a security
interest in the Pledge Shares in favor of Seller.
4.4 Expenses, Further Obligations. In addition to the foregoing, the
parties agree as follows:
(a) Prorations. Any real estate and personal property taxes and utility
charges for the tax year and utility billing period, including the date of
Closing, shall be prorated between the Buyer and Seller as set forth on Schedule
4.4(a) hereto.
(b) Transfer Taxes and Fees. Sales, use and other taxes (except taxes based
on income), real estate transfer and documentary fees and filing and recording
fees incident to the transfer of the Bismarck Assets shall be paid by Buyer.
ARTICLE V.
Indemnification
5.1 Seller's Losses. Buyer agrees to indemnify Seller and save and hold
Seller harmless from, against, for and in respect of any and all damages
(including leases, obligations, liabilities, liens, claims, deficiencies, costs
and expense, including, without limitation, reasonable attorneys' fees and costs
incurred to comply with injunctions and other court or agency orders, and other
costs and expenses incident to any suit, action, investigation, claim or
proceeding or to establish the right of Seller to indemnification hereunder
(collectively referred to as "Seller's Losses") suffered, sustained, incurred or
required to be paid by Seller by reason of (i) any representation or warranty
made by Buyer in or pursuant to this Agreement being untrue or incorrect in any
material respect; (ii) any failure by Buyer to observe or perform its
obligations and agreements set forth in this Agreement; (iii) any failure by
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Buyer to satisfy and discharge any liability or obligation expressly assumed by
Buyer pursuant to this Agreement; or (iv) any liability arising with respect to
the conduct of the Bismarck Operations subsequent to the Closing.
5.2 Buyer's Losses. Seller agrees to indemnify Buyer and save and hold
Buyer harmless from, against, for and in respect of any and all damages
(including leases, obligations, liabilities, liens, claims deficiencies, costs
and expenses), including, without limitation, reasonable attorneys' fees and
costs, incurred to comply with injunctions and other court or agency orders, and
other costs and expenses incident to any suit, action, investigation, claim or
proceeding or to establish the right of Buyer to indemnification hereunder
(collectively referred to as "Buyer's Losses") suffered, sustained, incurred or
required to be paid by Seller by reason of (i) any representation or warranty
made by Seller in or pursuant to this Agreement being untrue or incorrect in any
respect; (ii) any failure by Seller to observe or perform its obligations and
agreements set forth in this Agreement; or (iii) any liability arising with
respect to the conduct of the Bismarck Operations prior to the Closing.
5.3 Notice of Loss. Notwithstanding anything herein contained, neither
Buyer nor Seller shall have any liability under the indemnity provision of this
Agreement with respect to a particular matter unless a notice setting forth in
reasonable detail the breach which is asserted has been given to the
Indemnifying Party (as hereinafter defined), and, in addition, if such matter
arises out of a suit, action, investigation, claim or proceeding, such notice is
given promptly after the Indemnified Party (as hereinafter defined) shall have
been given notice of the claim or the commencement of the suit, action,
investigation, claim or proceeding. Failure of the Indemnified Party to give
notice hereunder shall not release the Indemnifying Party from its obligations
under this Article V except to the extent the Indemnifying Party is actually
prejudiced by such failure to give notice. With respect to Buyer's Losses,
Seller shall constitute the Indemnifying Party and Buyer shall be the
Indemnified Party. With respect to Seller's Losses, Buyer shall be the
Indemnifying Party and Seller shall constitute the Indemnified Party.
5.4 Right to Defend. Upon receipt of notice of any suit, action,
investigation, claim or proceeding for which indemnification might be claimed by
an Indemnified Party, the Indemnifying Party shall be entitled promptly to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at its own cost and expense. The Indemnified
Party shall have the right, but not the obligation, to participate at its own
cost and expense in a defense thereof by counsel of its own choosing, but the
Indemnifying Party shall be entitled to control the defense unless the
Indemnified Party has relieved the Indemnifying Party from liability with
9
<PAGE>
respect to the particular matter or the Indemnifying Party fails to assume the
defense of the matter or cause. In the event the Indemnifying Party shall fail
to defend, contest or otherwise protect in a timely manner against any such
suit, action, investigation, claim or proceeding, the Indemnified Party shall
have the right, but not the obligation, to defend, contest or otherwise protect
against the same, and make any compromise or settlement thereof and recover the
entire cost thereof from the Indemnifying Party, including reasonable attorneys'
fees, disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding, or the compromise or settlement thereof.
However, if the Indemnifying Party undertakes the defense of such matters in a
timely manner, the Indemnified Party shall not be entitled to recover from the
Indemnifying Party any legal or other expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof other than the
reasonable costs of investigation undertaken by the Indemnified Party with the
prior written consent of the Indemnifying Party.
ARTICLE VI
Termination
6.1 Termination.
(a) This Agreement may be terminated and abandoned at any time prior to or
on the date of Closing:
(i) By the mutual consent in writing of Buyer and Seller;
(ii) By Buyer in writing if any of the material conditions to the
obligations of Buyer contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing.
(iii) By Seller in writing if any of the conditions to the obligations
of Seller contained herein shall not have been satisfied or, if
unsatisfied, waived as of the Closing; or
(iv) By Buyer or Seller in writing if the Closing shall not have
occurred by midnight on May 18, 1998.
6.2 No Further Force or Effect. In the event of a termination or
abandonment of this Agreement pursuant to the provisions of Section 6.1 hereof,
this Agreement shall be of no further force or effect, except for Section 7.2
hereof, which shall not be affected by the termination of this Agreement.
ARTICLE VII
Miscellaneous
7.1 Arbitration. Any controversy or dispute arising out of or in connection
with this Agreement, its interpretation, performance or termination, which the
parties hereto are unable to resolve within a reasonable time after written
10
<PAGE>
notice by one party to the other of the existence of such controversy or
dispute, shall be determined by arbitration. Such arbitration shall be in
accordance with the rules and procedures then in effect of the American
Arbitration Association. Any such arbitration, including the rendering of any
award, shall take place in Bismarck, ND. Any award of the arbitrator(s) will be
final, and a judgment on such award may be entered in any court having
jurisdiction.
7.2 Expenses. Except as otherwise expressly provided herein, Seller and
Buyer shall each pay its own expenses in connection with the preparation of this
Agreement and the consummation of the transactions contemplated hereby,
including without limitation, fees of its respective counsel, accountants and
other experts, whether or not the transactions contemplated hereby be
consummated.
7.3 Brokerage Commissions. Each party hereto represents and warrants to the
other party that there are no claims for, or rights to, brokerage commissions or
agent's or finder's fees resulting from any action taken by it in connection
with the transactions contemplated by this Agreement.
7.4 Substitution of Affiliate. Buyer shall be entitled to assign and
delegate its rights, interests and obligations hereunder to any subsidiary or
other affiliate of Buyer (whether or not the subsidiary is wholly-owned by
Buyer) upon written notice to Seller prior to or on the Closing. In the event
Buyer does so assign and delegate its rights, interests and obligations
hereunder, Buyer shall guarantee the performance by such subsidiary or affiliate
of all obligations assigned by Buyer hereunder.
7.5 Notices. All notices, consents, requests, instructions, approvals
and/or communications provided for herein, shall be validly given, made or
served if in writing and delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to Seller:
Gary Cook
1700 Lincoln Street
32nd Floor
Denver, CO 80203
With a copy to:
Thomas D. Birge, Esq.
Birge & Mayers P.C.
1700 Broadway, Suite 1501
Denver, CO 80290
11
<PAGE>
(b) If to Buyer:
Mr. Dennis Olson
216 North 23rd Street
Bismarck, ND 58502
With a copy to:
` Orell D. Schmitz
Schmitz, Moench & Schmidt
222 North 4th Street
P.O. Box 2076
Bismarck, ND 58502-2076
The designation of the person to be so notified or the address of such person
for the purposes of such notice, may be changed from time to time by a similar
notice. Any notice which is delivered personally in the manner provided herein,
shall be deemed to have been duly given to the party to whom it is directed upon
actual receipt by such party (or its agent for notices hereunder). Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the third
business day after the day it is so placed in the mail.
7.6 Entire Agreement; Modification and Waiver. This Agreement sets forth
all of the promises, covenants, agreements, conditions and understandings
between the parties hereto and supersedes all prior and contemporaneous
agreements and understandings, inducements or conditions, express or implied,
oral or written, including without limitation that certain Letter Agreement
dated March 20, 1998, between Buyer and Seller. This Agreement may be amended
modified, superseded or canceled and any of the terms, covenants,
representations, warranties or conditions herein may be waived only in writing
signed by Seller and Buyer, or in the case of a waiver, by the party waiving
compliance therewith. No waiver by either party of any condition, or the breach
of any term, covenant, representation or warranty contained herein, whether by
conduct or otherwise, in any one or more instances, shall be construed as a
further or continuing waiver of any such condition or breach or waiver of any
other condition or of the breach of any other term, covenant, representation,
warranty or condition set forth herein.
7.7 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of North Dakota (other than
the choice of law principles thereof), except that the transfer and conveyance
12
<PAGE>
of any real and tangible property, and any representations and warranties with
respect to real and tangible property, shall be governed by and construed in
accordance with the laws of the jurisdiction where such property is located.
7.8. Captions. The captions of the various Articles and Sections are for
convenience of reference only and shall not affect the interpretation of the
provisions hereof.
7.9 Successors and Assigns. Except as permitted by Section 7.4 hereof, this
Agreement may not be assigned by any party except with the prior written consent
of the other parties hereto. This Agreement, and all of the terms, covenants,
representations, warranties and conditions hereof, shall be binding upon, and
inure to the benefit of and be enforceable by the parties hereto and their
successors and assigns.
7.10 Survival. All covenants and obligations and agreements set forth
herein or in any Schedule or document furnished pursuant hereto, or any
agreement furnished pursuant hereto, shall survive the Closing and any
investigation made by or on behalf of any party hereto. All representations and
warranties set forth herein, or any schedule or document furnished pursuant
hereto, shall survive the Closing and any investigation made by or on behalf of
any party hereto for a period of twenty-four (24) months following the Closing,
except that:
(a) The representations and warranties contained in or made pursuant to the
first sentence of Section 2.2 hereof shall survive the Closing and the delivery
of such bills of sale, assignments, endorsements and instruments of transfer,
without any limitation; and
(b) The representations and warranties contained in or made pursuant to
Section 2.4 hereof shall survive the Closing, and the delivery of such bills of
sale, assignments, endorsements and instruments of transfer, so long as any
claim may be made with respect to such matters, whether under any applicable
statute of limitations or otherwise.
The expiration after twenty-four (24) months following the Closing of any
representation or warranty shall not affect any claim made with respect thereto
on or prior to such expiration.
7.11 Schedules and Certificates. All statements contained in any schedule,
exhibit, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the transactions contemplated hereby, are
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<PAGE>
an integral part of this Agreement and shall be deemed representations and
warranties hereunder.
7.12 Severability. If any provision or provisions of this Agreement, or any
portion of any provision hereof, shall be deemed invalid, illegal or
unenforceable pursuant to a final determination of any court of competent
jurisdiction or as a result of future legislative action, such determination or
action shall be construed so as not to affect the validity, legality or
enforceability hereof and shall not affect the validity or effect of any other
portion hereof.
7.13 Allocation of the Purchase Price. The purchase price shall be
allocated as provided on Schedule 7.13 hereto, provided, however, that the
allocation of the purchase price may be adjusted subsequent to the Closing as
deemed to be necessary by Seller's independent public accountants.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed as of the day and year first above written.
ATTEST: FRONTEER FINANCIAL
HOLDINGS, LTD.
By: /s/
- -------------------------------- -------------------------------------
Its:
---------------------------------
ATTEST: FRONTEER MARKETING
GROUP, INC.
By: /s/
- -------------------------------- -------------------------------------
Its:
---------------------------------
ATTEST: NORTH COUNTRY YELLOW
PAGES, INC.
By: /s/
- -------------------------------- -------------------------------------
Its:
---------------------------------
/s/ Denniw W. Olson
------------------------------------
DENNIS W. OLSON
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<PAGE>
Schedule 1.1(a)
Tangible Personal Property
1. The Furniture and Equipment listed below:
Description Quantity
Wood Desk 1
Metal Desks 10
Office Chairs 12
Credenza 1
Sofa and Love Seat 1 each
Book Case 2
Conference Table 1
Conference Table Chairs 5
Typewriter 2
Television 1
PC's 5
PC Printers 5
File Cabinets 13
Fireproof Files 3
Copier 1
Fax Machine 1
Large Book Case 1
Server 1
2. Vehicles Listed Below:
1995 Lincoln Continental VIN 1LNLM97V7SY607729
1988 Cadillac DeVille VIN 1G6CD515XJ4202219
1994 Plymouth Voyager VIN 1P4GH44RXRX234573
1994 Plymouth Voyager VIN 1P4GH44R9RX234581
<PAGE>
Schedule 1.1(b)
Condominium Description
Lot 216, Center Court, Scottsdale MCR
261-19
3031 North Civic Center Place
Scottsdale, Arizona 85251
<PAGE>
Schedule 1.1(c)
Office Building Description
Lots 4,5 and 6, Block 33, of Governor Pierce Addition to the City
of Burleigh County, North Dakota
<PAGE>
Schedule 1.1(d)
Receivables to be Assigned
1. Notes Receivable Listed Below
Maker Face Amount
Patti Mushik $7,000
Delores Pichter $1,000
D.P. Publishing $8,586
Bridgerland $3,659
2. Telephone Co-Op Receivable
3. Accounts Receivable
4. Quick Draw (ACH Receivables)
5. Contract America Note #1
6. Contract America Note #2
7. FMG Equipment
8. FMG Receivables
9. FMG Note Receivable - Rusch
10. Notes Receivable and Payroll Professionals
<PAGE>
Schedule 1.1(f)
Contracts, Agreements, Arrangements, Vendor Orders, Customer Orders,
Pre-Payments, Advances, Deposits and Commitments
(NONE)
<PAGE>
Schedule 1.1(g)
Intangible Assets
(NONE)
<PAGE>
Schedule 1.1(h)
BNC National Bank Account
(Account # 606231)
(The parties have agreed that no allocation
of the balances in the account is necessary)
<PAGE>
Schedule 1.4
Assumed Obligations
1. Souris River Telephone and Bridgerland Payables in the aggregate amount of
$97,425;
2. Commissions payable in the aggregate amount of $9,000;
3. Payable to Brite Voice Systems in the aggregate amount of $7,500;
4. Consolidated Telephone Payable in the amount of $22,630;
5. Matrix Lease;
6. Wilton Lease;
7. 1/6 of real estate taxes on the office building being purchased by Buyer;
8. Any and all indebtedness, vendor payables, accounts receivable, commitments
of any kind, equipment leases, open contractual commitments and customer or
vendor orders or accounts established or incurred by Seller or on Seller's
behalf after March 1, 1998.
9. All employee costs incurred either before or after Closing for the
employees of the Bismarck Operations including, without limitation, wages,
salaries, taxes, health and welfare benefits, retirement benefits, worker's
compensation premiums, unemployment compensation premiums and any and all
employee claims of any nature whatsoever but excluding specifically the
vacation pay benefits owed to Patti Muskik in the amount of $3,109.38.
<PAGE>
Schedule 4.4(a)
Prorations
(NONE)
<PAGE>
Schedule 7.13
1. Furniture & Equipment $ 10,000
2. Office Building $190,000
3. Arizona Condo $ 81,000
4. Vehicles $ 20,000
5. Notes Receivables $ 20,000
6. TelCO Receivables $ 15,800
7,8 9 Accounts Receivables $311,600
10. Contact America Note #1 $271,000
11. Contact America Note #2 $111,056
12-15 FMG Misc. #
--------
$1,029,656
Liabilities
- -----------
Telco Payables $ 97,425
Deferred Comm 9,000
Audio Text 7,500
Consolidated 22,630
Matrix Lease 288,545
Wilton Lease 111,056
-------
$ 536,156
-------
NET $ 493,500
