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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): February 13, 1998
-----------------
MURDOCK COMMUNICATIONS CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
Iowa
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(State or other jurisdiction or incorporation)
000-21463 42-1337746
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(Commission File (I.R.S. Employer I.D.
Number) Number)
1112 29th Avenue S.W. 52404
Cedar Rapids, Iowa ---------------------
----------------------------------- (Zip Code)
(Address of Principal Executive
Offices)
319-362-6900
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(Registrant's telephone number; including area code)
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Item 2. Acquisition or Disposition of Assets.
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On February 13, 1998, Murdock Communications Corporation (the "Company")
completed its acquisition of Incomex, Inc. ("Incomex"). Incomex is a provider
of international operator services to resort hotels in Mexico. Incomex
specializes in providing operator services from Mexican hotels to the United
States, and, as of February 13, 1998, provided these services to more than 80
hotel and resort properties representing more than 18,000 rooms.
Pursuant to the Stock Purchase Agreement, dated as of February 13, 1998
(the "Stock Purchase Agreement"), among MCC Acquisition Corp., a wholly owned
subsidiary of the Company ("MCC Sub"), Incomex and the shareholders of Incomex,
MCC Sub acquired all of the outstanding capital stock of Incomex in exchange
for the issuance at closing of 400,000 shares of the Company's common stock
("Common Stock").
Under the Stock Purchase Agreement, the Incomex shareholders also have the
right to receive additional consideration based on the net income before income
taxes ("IBT") of Incomex during certain periods after closing. The Incomex
shareholders will receive cash consideration equal to 60% of the IBT of Incomex
during the period from February 1, 1998 through July 31, 1998. In addition,
the Incomex shareholders will receive additional shares of Common Stock at the
end of each of the two periods of 12 consecutive full calendar months during
the 24 month period beginning August 1, 1998 to the extent that Incomex's IBT
exceeds $400,000 during either such 12 month period. Shares of Common Stock
with a market value of $1.50 will be issued for each dollar of IBT over
$400,000 during either of the twelve month periods.
Item 7. Financial Statements and Exhibits.
- --------------------------------------------
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits
2.1--Stock Purchase Agreement, dated as of February 13, 1998, among MCC
Acquisition Corp., Incomex, Inc. and the shareholders of
Incomex, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Murdock Communications Corporation has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
MURDOCK COMMUNICATIONS
CORPORATION
Date: March 2, 1998
BY /s/ Thomas E. Chaplin
---------------------------
Thomas E. Chaplin, Chief
Executive Officer
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EXHIBIT INDEX
Exhibit Page No.
------- --------
2.1 Stock Purchase Agreement,
dated as of February 13, 1998,
among MCC Acquisition Corp.,
Incomex, Inc. and the
shareholders of Incomex, Inc.
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STOCK PURCHASE AGREEMENT
by and among
MCC ACQUISITION CORP.,
INCOMEX, INC.,
and
THE SHAREHOLDERS OF INCOMEX, INC.
dated as of
February 13, 1998
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF SHARES 1
1.1 Purchase and Sale of Shares 1
1.2 Closing of Purchase and Sale of Shares 2
1.3 Earn-Out Rights 2
ARTICLE II. CONDITIONS TO OBLIGATIONS 2
2.1 Conditions to Obligations of MCCAC,
INCOMEX and the INCOMEX Shareholders 2
2.2 Conditions to Obligations of MCCAC 3
2.3 Conditions to the Obligations of the
INCOMEX Shareholders 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF
INCOMEX AND THE MANAGING SHAREHOLDERS 5
3.1 Corporate Organization 5
3.2 Subsidiaries and Other Entities 5
3.3 Corporate Authorization 5
3.4 Capital Stock 6
3.5 Compliance with Laws 6
3.6 No Conflict 7
3.7 Litigation 7
3.8 Insurance 8
3.9 Intellectual Property 8
3.10 Assets 8
3.11 Financial Statements 9
3.12 Liabilities 9
3.13 Transactions Not in the Ordinary Course 9
3.14 Capital Projects 10
3.15 Taxes 10
3.16 Bank Accounts; Powers of Attorney 10
3.17 Real Estate 11
3.18 Title to Properties 11
3.19 Contracts 11
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3.20 Brokers 12
3.21 Special Liabilities; Warranties 12
3.22 Employee Benefit Matters 12
3.23 Materially Correct 13
3.24 Information 13
3.25 Relationships with Related Persons 13
3.26 Year 2000 Compliance 13
ARTICLE IV. ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE INCOMEX SHAREHOLDERS 14
4.1 Authority 14
4.2 Ownership of Shares 14
4.3 No Conflict 14
4.4 Investment Intent 14
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF MCCAC 15
5.1 Corporate Organization; Authorization 15
5.2 No Conflict 15
5.3 Murdock Shares 16
ARTICLE VI. COVENANTS OF INCOMEX AND THE INCOMEX
SHAREHOLDERS 16
6.1 Conduct of Business 16
6.2 Reasonable Efforts 17
6.3 Inspection 17
6.4 Best Efforts 17
6.5 Update Information 17
6.6 Holding Period; Trading Prohibitions 17
ARTICLE VII. JOINT COVENANTS 18
7.1 Support of Transactions 18
ARTICLE VIII.INDEMNIFICATION 18
8.1 Survival; Right to Indemnification Not
Affected by Knowledge 18
8.2 Indemnification and Payment of Damages by
INCOMEX Shareholders 19
8.3 Indemnification and Payment of Damages by
MCCAC 20
8.4 Procedure for Indemnification 20
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8.5 The Shareholder Representative 22
8.6 Limitations on Indemnification Obligations
of the INCOMEX Shareholders 23
8.7 Additional Indemnification Obligations of the
Managing Shareholders 23
ARTICLE IX. TERMINATION 23
9.1 Termination 23
9.2 Effect 24
ARTICLE X. DEFINITIONS 25
10.1 Defined Terms 25
10.2 Other Definitional Provisions 27
ARTICLE XI. MISCELLANEOUS 28
11.1 Waiver 28
11.2 Notices 28
11.3 Assignment 29
11.4 Rights of Third Parties 29
11.5 Reliance 29
11.6 Expenses 30
11.7 Construction 30
11.8 Captions; Counterparts 30
11.9 Entire Agreement 30
11.10 Amendments 30
11.11 Publicity 30
EXHIBITS
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Exhibit A - INCOMEX Shareholders
Exhibit B - Form of Opinion of Counsel for INCOMEX
Exhibit C - Form of Non-Interference Agreement
Exhibit D - INCOMEX Disclosure Statement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of February 13, 1998 by and
among MCC Acquisition Corp. ("MCCAC"), an Iowa corporation and a wholly owned
subsidiary of Murdock Communications Corporation ("Murdock"), INCOMEX, INC., a
California corporation ("INCOMEX"), and all of the shareholders of INCOMEX (the
"INCOMEX Shareholders").
Unless the context otherwise requires, terms that are capitalized and not
otherwise defined in context have the meanings set forth or cross-referenced in
Article X of this Agreement.
RECITAL
MCCAC desires to purchase from the INCOMEX Shareholders all of the
issued and outstanding shares of capital stock of INCOMEX, and the INCOMEX
Shareholders desire to sell to MCCAC the shares of INCOMEX Common Stock listed
on Exhibit A hereto which together constitute all of the issued and outstanding
capital stock of INCOMEX.
AGREEMENT
In order to consummate the transactions contemplated hereby, and in
consideration of the mutual agreements hereinafter contained, each party to
this Agreement agrees as follows:
ARTICLE I. PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date, each of the INCOMEX Shareholders
shall sell to MCCAC, and MCCAC shall purchase from each of the INCOMEX
Shareholders, the shares of INCOMEX Common Stock set forth opposite each such
INCOMEX Shareholder's name on Exhibit A hereto, as applicable, in each case
free and clear of all Encumbrances, for such INCOMEX Shareholder's Proportional
Share of the aggregate purchase consideration payable to the INCOMEX
Shareholders at Closing (the "Purchase Price").
The Purchase Price will be (a) 400,000 shares of Murdock Common Stock
(the "Closing Consideration") the amount payable by MCCAC pursuant to Section
1.3(a), plus (b) shares of Murdock Common Stock which may be earned by the
INCOMEX Shareholders pursuant to Section 1.3(b).
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1.2 Closing of Purchase and Sale of Shares. The closing of the purchase
and sale of shares of INCOMEX Common Stock contemplated herein (the "Closing")
will occur after all of the conditions set forth in Article II have either been
fulfilled or waived. Subject to the prior fulfillment or waiver of the
conditions in Article II, at the Closing: (a) MCCAC will deliver to each
INCOMEX Shareholder certificates for Murdock Common Stock representing such
INCOMEX Shareholder's Proportional Share of the Closing Consideration; and (b)
each INCOMEX Shareholder will deliver to MCCAC certificates representing the
shares of INCOMEX Common Stock held by such INCOMEX Shareholder, duly endorsed
(or accompanied by duly executed stock powers), for transfer to MCCAC.
1.3 Earn-Out Rights.
(a) After September 1, 1998, and upon the satisfaction of the
conditions of this Section 1.3(a), MCCAC will pay to the INCOMEX Shareholders,
according to their respective Proportional Shares, an aggregate amount equal to
60% of the IBT (as defined below) of INCOMEX during the period from February
1, 1998 through July 31, 1998. "IBT" shall mean net income before income
taxes, determined according to GAAP except that, solely for purposes of
calculating IBT, the cost of operator services provided to INCOMEX by ATN
Communications Inc. shall be the lower of (i) the actual costs of such services
billed to INCOMEX plus bad debt expense and uncollectible charges or (ii) $5.90
per eight-minute call billed to INCOMEX plus bad debt expense and uncollectible
charges.
(b) At the end of each of the two periods of 12 consecutive full
calendar months during the 24 month period beginning August 1, 1998,
Murdock Common Stock with an aggregate Quarterly Average Market Value of $1.50
for each dollar of IBT earned in the relevant 12-month period in excess of
$400,000 will be delivered by MCCAC to the INCOMEX Shareholders, according to
their respective Proportional Shares, within 120 days after the end of the
applicable 12-month period.
ARTICLE II. CONDITIONS TO OBLIGATIONS
2.1 Conditions to Obligations of MCCAC, INCOMEX and the INCOMEX
Shareholders. The obligations of MCCAC, INCOMEX and the INCOMEX Shareholders
to consummate, or cause to be consummated, the transactions contemplated by
this Agreement are subject to the satisfaction of the following conditions, any
one or more of which may be waived in writing by such parties:
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(a) All necessary approvals, clearances and consents of governmental
and regulatory authorities required to be procured by MCCAC or INCOMEX in
connection with the transactions contemplated by this Agreement, and all
approvals and consents of third parties that are required to be obtained in
connection with the transactions contemplated by this Agreement, shall have
been procured.
(b) There shall not be in force any order or decree, statute, rule or
regulation nor shall there be on file any complaint by a governmental agency
seeking an order or decree, restraining, enjoining or prohibiting the
consummation of the transactions contemplated by this Agreement, and none of
MCCAC, INCOMEX or the INCOMEX Shareholders shall have received notice from any
governmental agency that it has determined to institute any suit or proceeding
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement or to nullify or render ineffective this Agreement if consummated, or
to take any other action which would result in the prohibition or material
change in the transactions contemplated by this Agreement.
2.2 Conditions to Obligations of MCCAC. The obligation of MCCAC to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional
conditions, any one or more of which may be waived in writing by MCCAC:
(a) Each of the representations and warranties of INCOMEX and the
INCOMEX Shareholders contained in this Agreement shall be true and correct in
all material respects both on the date hereof and as of the Closing, as if
made anew at and as of that time, and each of the covenants and agreements of
INCOMEX and the INCOMEX Shareholders to be performed as of or prior to the
Closing shall have been duly performed.
(b) INCOMEX shall have delivered to MCCAC a certificate signed by its
President, dated the Closing Date, certifying, in form reasonably satisfactory
to MCCAC and to its counsel that, to the best of the knowledge and belief of
such officer, the conditions specified in Section 2.1 and Section 2.2(a) as
they relate to INCOMEX, as applicable, and in Section 2.2(e), (g), (h) and (j)
have been fulfilled.
(c) Each Managing Shareholder shall have delivered to MCCAC a
certificate, dated the Closing Date, certifying, in form reasonably
satisfactory to MCCAC and to its counsel that, to the best of the knowledge and
belief of such
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INCOMEX Shareholder, the conditions specified in Section 2.1 as they relate to
INCOMEX and such INCOMEX Shareholder and in Sections 2.2(a), (e), (g), (h) and
(j) have been fulfilled.
(d) MCCAC shall have received opinions, dated the Closing Date, from
counsel for INCOMEX in the form of Exhibit B.
(e) INCOMEX shall have no liabilities or obligations except Permitted
Liabilities. The terms of any such Permitted Liabilities outstanding as of the
Closing Date shall permit payment in full at the borrower's election, without
prepayment penalties, similar charges or any lender's or third party consents.
(f) Each INCOMEX Shareholder shall have entered into a
Non-Interference and Non-Disruption Agreement with MCCAC in
substantially the form attached as Exhibit C to this Agreement (the
"Non-Interference Agreement").
(g) The assets to be held by INCOMEX after the Closing Date shall
be free and clear of any Encumbrances except for Permitted Liens.
(h) INCOMEX shall have resolved the Eilco financing issues in a
manner satisfactory to MCCAC.
(i) This Agreement shall have been approved by Murdock's Board of
Directors.
(j) INCOMEX shall have purchased all of the partnership interests of
INCOMEX L.P., and shall own as of the Closing Date all right, title and
interest therein.
2.3 Conditions to the Obligations of the INCOMEX Shareholders. The
obligation of the INCOMEX Shareholders to consummate the Acquisition is subject
to the satisfaction of the following additional conditions, any one or more of
which may be waived in writing by all of the INCOMEX Shareholders:
(a) Each of the representations and warranties of MCCAC contained in
this Agreement shall be true and correct in all material respects both on
the date hereof and as of the Closing, as if made anew at and as of that time,
and each of the covenants and agreements of MCCAC to be performed as of or
prior to the Closing shall have been duly performed.
(b) MCCAC shall have delivered to the INCOMEX Shareholders a
certificate signed by an officer of MCCAC, dated the Closing Date,
certifying, in form reasonably satisfactory to the INCOMEX Shareholders and
their counsel, to
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the effect that to the best of the knowledge and belief of such officer, the
conditions specified in Section 2.1 as they relate to MCCAC and in Section
2.3(a) have been fulfilled.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF INCOMEX AND THE MANAGING
SHAREHOLDERS
For purposes of this Article III, references to the knowledge of
INCOMEX or the Managing Shareholders shall mean matters within the actual
knowledge of any Managing Shareholder and matters which any Managing
Shareholder should have known after due investigation concerning the subjects
discussed in this Article III. INCOMEX and the Managing Shareholders jointly
and severally represent and warrant to MCCAC that, except as set forth on the
INCOMEX Disclosure Statement attached as Exhibit D to this Agreement:
3.1 Corporate Organization.
(a) INCOMEX has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California and has
the corporate power and authority to own or lease its properties and to conduct
its business as it has been and is now being conducted. The copies of the
Articles of Incorporation of INCOMEX certified by the Secretary of State of the
State of California, and the By-Laws of INCOMEX , certified by the Secretary of
INCOMEX, delivered to MCCAC as of the Closing Date, are true, correct and
complete.
(b) INCOMEX is not required to be licensed or qualified to do business
as a foreign corporation in any jurisdiction.
3.2 Subsidiaries and Other Entities. Except as described in section 3.2 of
the INCOMEX Disclosure Statement, INCOMEX has no Subsidiaries. Except as
described in section 3.2 of the INCOMEX Disclosure Statement, and except for
its ownership of 100% of the general and limited partnership interests of
INCOMEX L.P., which INCOMEX owns free and clear of any Encumbrances (except for
Permitted Liens), INCOMEX does not own, directly or indirectly, any
partnership, equity, profit, participation or similar ownership interest in any
corporations, partnerships, joint ventures, trusts, unincorporated
organizations, associations or similar entities.
3.3 Corporate Authorization. The Board of Directors of INCOMEX has approved
the transactions contemplated by this Agreement. INCOMEX has all
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necessary corporate power and authority to enter into this Agreement and to
perform all of the obligations to be performed by it hereunder. Upon the
execution and delivery hereof by MCCAC, this Agreement will constitute the
valid and legally binding obligation of INCOMEX, enforceable against INCOMEX in
accordance with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally or by equitable principles of general
applicability with respect to the availability of equitable remedies.
3.4 Capital Stock. The entire authorized capital stock of INCOMEX consists
of 880,000 shares of INCOMEX Common Stock, of which 40,804 shares are issued
and outstanding. All of the issued and outstanding shares of INCOMEX Common
Stock are owned by the INCOMEX Shareholders as set forth on the signature page
of this Agreement. All the outstanding capital stock of INCOMEX is duly
authorized, validly issued, fully paid and nonassessable. Except as disclosed
in section 3.4 of the INCOMEX Disclosure Statement, there are no warrants,
options, subscriptions, other convertible instruments, and no commitments,
obligations, or agreement (whether firm or conditional) pursuant to which
INCOMEX is or may be obligated to issue, transfer, deliver or sell shares of
capital stock or other securities of INCOMEX. Except as disclosed in section
3.4 of the INCOMEX Disclosure Statement, none of the capital stock or other
securities of INCOMEX is entitled or subject to preemptive rights or
registration rights. The authorization or consent of no person is required in
order to consummate the transactions contemplated herein by virtue of any such
person having an equitable or beneficial interest in the INCOMEX Common Stock.
There are not now, and at the Closing Date there will not be, any voting trusts
or other agreements or understandings to which INCOMEX or any INCOMEX
Shareholder is a party or is bound with respect to the voting of INCOMEX Common
Stock. All outstanding shares of INCOMEX Common Stock were offered, sold and
issued in compliance with all applicable laws and regulations, including,
without limitation, federal and state securities laws.
3.5 Compliance with Laws. Except as set forth in Section 3.5 of the INCOMEX
Disclosure Statement, (i) INCOMEX is not currently in violation (nor is it
currently liable or otherwise currently responsible with respect to prior
violations) of any statute, law or regulation applicable to any of their
presently or formerly owned properties or to the conduct of their current or
past businesses; (ii) INCOMEX has timely obtained all licenses and permits and
timely filed all reports required to be filed under any applicable laws or
regulations; (iii) neither INCOMEX nor any other person has stored, dumped or
otherwise disposed of any chemical substances, including any "Hazardous
Substances," "Pollutants" or "Contaminants" (as such terms are defined in the
Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, as amended ("CERCLA")) on,
beneath or about any of the properties of INCOMEX; (iv) INCOMEX has not
received written notice that it is a "potentially responsible party" under any
environmental law or of any violation of any environmental, zoning or other
land use ordinance, law or regulation relating to the operation of its
business, or to any of the processes followed, results obtained, services
provided or products made, modified or installed (in the ordinary course of its
business or otherwise), including, but not limited to, the Toxic Substances
Control Act of 1976, as amended, the Resource Conservation Recovery Act of
1976, as amended, the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, CERCLA or the Occupational Safety and Health Act of
1970, as amended, nor is INCOMEX aware of any such violation. There are no
environmental reports known to INCOMEX relating to any owned or leased real
property of INCOMEX.
3.6 No Conflict.
(a) The execution and delivery of this Agreement by INCOMEX and the
INCOMEX Shareholders and the consummation of the transactions contemplated
hereby do not, and will not constitute an event which, after notice or lapse of
time or both would (a) violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by the terms
of: (i) any applicable law, rule or regulation of any governmental body in the
United States or Mexico, (ii) the Articles of Incorporation or By-Laws of
INCOMEX; (iii) any indenture, material agreement, or other material instrument
to which INCOMEX is a party or by which INCOMEX may be bound; (iv) any order,
judgment or decree applicable to INCOMEX; or (v) the Writ (as defined in
section 3.6(b), or (b) terminate or result in the termination of any indenture,
material agreement or other material instrument, or result in the creation of
any Encumbrance upon any of the properties or assets of INCOMEX under any
agreement to which it is a party.
(b) The Writ held by CIM pursuant to which INCOMEX provides
long-distance telephone services in Mexico (the "Writ") is in full force and
effect, valid and the ability of INCOMEX to continue to enjoy the benefits of
the Writ will not be impaired by the transactions contemplated by this
Agreement.
3.7 Litigation. There are no actions, suits, proceedings, claims or
investigations formally instituted and pending or, to the knowledge of INCOMEX
or any of the Managing Shareholders, threatened against or specifically
affecting INCOMEX or involving any of its properties or assets, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any
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arbitration panel or alternative dispute resolution body. Neither INCOMEX nor
any INCOMEX Shareholder is subject to any action, suit, proceeding, claim or
investigation formally instituted and pending or, to the knowledge of INCOMEX
or any Managing Shareholder, threatened, challenging or seeking to enjoin or
otherwise affecting the transactions contemplated by this Agreement. INCOMEX
is not subject to or in default under, any order, writ, injunction or decree of
any court or Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any arbitration panel
or alternative dispute resolution body.
3.8 Insurance. Set forth in Section 3.8 of the INCOMEX Disclosure Statement
is a list of (a) all insurance policies held by INCOMEX (indicating the
insurer, type, amount and term of coverage, deductible, description of
vehicles, latest property insurable values by location, workers' compensation
payroll (separately for clerical, sales and technical employees), and
additional named insureds with respect to each such policy); and (b) all claims
pending under any of such insurance policies. All of these policies are in
full force and effect and all premiums due thereon have been paid or accrued.
INCOMEX has previously delivered to MCCAC complete copies of each such
insurance policy.
3.9 Intellectual Property. Except as set forth in Section 3.9 of the
INCOMEX Disclosure Statement, there are no patents or patent applications;
trademarks, service marks, trade dress, trade names, corporate names or any
applications to register any of the foregoing marks or names; copyrights or
copyright registrations; or any licenses, other than software licenses acquired
solely through the purchase of the underlying software, to or from third
parties with respect to any of the foregoing (including, without limiting the
generality of the foregoing, all computer software, data and documentation)
relating to the business of INCOMEX as now conducted or as presently proposed
to be conducted. INCOMEX has not infringed, misappropriated or otherwise
conflicted with any proprietary rights of any third parties. INCOMEX is not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of INCOMEX the business of INCOMEX as now
conducted or as presently proposed to be conducted. INCOMEX has not received
any notices of any infringement or misappropriation from any third party.
3.10 Assets. Section 3.10 of the INCOMEX Disclosure Statement lists all
fixed capital assets owned by INCOMEX (the "Asset List"). The assets on the
Asset List include (i) substantially all of the tangible assets presently used
by INCOMEX in the conduct of its business and (ii) all assets reflected under
"Property, Plant & Equipment" on the Interim Balance Sheet.
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3.11 Financial Statements. INCOMEX has delivered to MCCAC the following
financial statements (including any notes thereto), all of which have been
prepared in accordance with GAAP consistently applied throughout the periods
involved and present fairly in all material respects the consolidated financial
position of INCOMEX, at the dates stated in such financial statements and the
results of their operations for the periods stated therein (subject in the case
of the financial statements referenced in paragraph (b) to the absence of notes
and to normal year-end adjustments):
(a) a Balance Sheet at December 31, 1996, and a Statement of Income and
Retained Earnings, Statement of Liabilities and Stockholders' Equity and
Statement of Cash Flows for the year ended December 31, 1996 ;and
(b) a Balance Sheet at December 31, 1997 (the "Interim Balance Sheet"),
and a Statement of Income and a Consolidated Statement of Cash Flows for the
eight months ended December 31, 1997.
3.12 Liabilities. INCOMEX does not have any liability or obligation, secured
or unsecured (whether accrued, absolute, contingent or otherwise), except for
the following "Permitted Liabilities:"
(i) trade payables and accrued expenses incurred in the ordinary
course of business and consistent with past practices for which the
stated due date has not passed ("Current Payables");
(ii) those liabilities or obligations (for which the stated due
date has not passed) relating to operating contracts or leases entered into
in the ordinary course of business consistent with past practice;
(iii) liabilities and obligations of the type shown on the Interim
Balance Sheet; and
(iv) the Transaction Costs.
3.13 Transactions Not in the Ordinary Course. Except as disclosed in section
3.13 of the INCOMEX Disclosure Statement, during the period commencing December
31, 1997 and ending on the date of this Agreement, INCOMEX has not (a) incurred
any liability or obligation not in the ordinary course of business or entered
into any transaction other than in the ordinary course of business; (b)
declared or made any payment or distribution to shareholders or other holders
of equity or other similar ownership or participation interests, including
stock splits, stock dividends and profit distributions, or purchased or
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redeemed any shares or other equity or other similar ownership or participation
interests except as provided for in this Agreement; (c) placed any Encumbrance
on any of its assets, tangible or intangible; (d) sold or transferred any of
its other assets, tangible or intangible, except in the ordinary course of
business; (e) canceled any debts or claims except in each case in the ordinary
course of business; (f) increased the rate of compensation of any officer or of
any employee receiving (giving effect to such increase) more than $50,000 per
annum or paid or declared any bonus (excluding fixed-formula compensation
incentive payments such as may be paid to certain sales employees from time to
time); or (g) agreed to or amended or instituted any employment contract, bonus
plan, stock option plan, profit sharing plan, pension plan, retirement plan or
other similar arrangement or plan.
3.14 Capital Projects. Set forth in Section 3.14 of the INCOMEX Disclosure
Statement is a description of all Capital Expenditures currently committed for
or authorized by INCOMEX.
3.15 Taxes. Except as set forth in Section 3.15 of the INCOMEX Disclosure
Statement, INCOMEX has accurately prepared and has duly and timely filed with
all appropriate Federal, foreign, state and local governmental agencies, all
tax returns and reports required to be filed by it. All taxes owed or
withheld, or which may be claimed to be owed or required to be withheld by
INCOMEX, to or for the benefit of any governmental agency for or with respect
to the periods covered by such returns and reports or with respect to any
period (or portions thereof) ending at or before the Closing, and all interest,
penalties, assessments and deficiencies connected therewith, have been or will
be timely paid in full or provided for in full. INCOMEX has not executed or
filed with any taxing authority any agreement extending the period for
assessment or collection of any taxes. INCOMEX is not a party to any pending
audit, inquiry, action or proceeding, nor has INCOMEX been notified of the
inception of any such audit, inquiry, action or proceeding by any Federal,
foreign, state or local governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency, court
or instrumentality for the assessment or collection of taxes. No deficiency or
assessment notices or reports or statements of tax due have been received by
INCOMEX in respect of any of its tax returns. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will have no material effect upon the tax treatment of any previously
consummated transaction in which INCOMEX acquired all or any part of the assets
or capital stock of another entity.
3.16 Bank Accounts; Powers of Attorney. Set forth in Section 3.16 of the
INCOMEX Disclosure Statement is a complete list of (a) all banks in which
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INCOMEX has an account or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto; and (b) the names of all
persons holding powers of attorney from INCOMEX.
3.17 Real Estate. Section 3.17 of the INCOMEX Disclosure Statement lists all
real estate, real estate options and leaseholds owned or held by INCOMEX. To
the best knowledge of the Managing Shareholders and except as set forth in
Section 3.17 of the INCOMEX Disclosure Statement, there are no title defects,
issues of validity or enforceability, deficiencies in rights of possession or
use or similar matters relating to or affecting any real estate owned or
leased, or which is subject to an option to buy, sell or lease, of or by
INCOMEX. Except for Permitted Liens, INCOMEX has good and marketable title in
fee simple to all real estate owned by it and good leasehold interests in all
of its leaseholds, none of which interests will be materially and adversely
affected by the transactions contemplated hereby, and each lease with an
initial term of more than one year is, to the knowledge of INCOMEX, enforceable
against the lessor thereunder and INCOMEX enjoys quiet possession of all
leaseholds.
3.18 Title to Properties. INCOMEX has good title to all of its personal
properties and assets, tangible and intangible (including, without limitation,
those on the Asset List). Except for Encumbrances set forth in Section 3.18 of
the INCOMEX Disclosure Statement, none of such properties or assets is subject
to any Encumbrance other than (a) any Encumbrances connected with operating
leases entered into in the ordinary course of business consistent with past
practice, (b) such other Encumbrances that do not secure indebtedness and do
not materially detract from the value of, or interfere with the present or
future use of, the property subject thereto and affected thereby or otherwise
materially impair the business, financial condition, results of operations or
operations of INCOMEX, or (c) as otherwise disclosed to and approved by MCCAC
in writing (collectively, "Permitted Liens").
3.19 Contracts. Except as set forth in Section 3.19 of the INCOMEX
Disclosure Statement, INCOMEX is not a party to or bound by any (a) agreement
or other arrangement not made in the ordinary course of business, involving
payments or receipts in excess of $10,000 individually or more than $50,000 in
the aggregate; (b) employment or consulting contract; (c) contract with any
labor union; (d) employee bonus, pension, profit-sharing, retirement, stock
purchase or other benefit or welfare plan or agreement; (e) lease with respect
to real or personal property, whether as lessor or lessee; (f) contract or
commitment for the purchase of raw materials or supplies or the sale of
products involving more than $10,000 per annum or $50,000 in the aggregate;
(g) indenture, agreement, note, mortgage, guaranty or other writing which
evidences or relates to any loan of
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money to, or indebtedness for money borrowed by, INCOMEX; (h) license agreement
or other contract or agreement relating to patents, trademarks, trade names,
techniques or copyrights or applications for any thereof, inventions, trade
secrets or other proprietary know-how or technical assistance; or (i) any loan
to officers, directors or employees of INCOMEX (all of which loans will be
repaid in full by the Closing). Except as set forth in Section 3.19 of the
INCOMEX Disclosure Statement, to the knowledge of INCOMEX, neither INCOMEX, nor
any other party thereto, is in default under the terms of any commitments
described in Subsections (a) through (i) of this Section.
3.20 Brokers. INCOMEX has not directly or indirectly dealt with anyone
acting in the capacity of a finder or broker and has not incurred and will not
incur any obligation for any finder's or broker's fees or commissions in
connection with this Agreement.
3.21 Special Liabilities; Warranties. Except as set forth in Section 3.21 of
the INCOMEX Disclosure Statement, (i) INCOMEX has no liability under any
contracts under which the consideration to be paid or received by INCOMEX is
determined in whole or in part based on profits or operating results, nor are
there any contingent payments owing to any person in connection with the
acquisition of any business or entity by INCOMEX; (ii) INCOMEX has not extended
any warranties to its customers; and (iii) INCOMEX is not now subject to any
outstanding, pending or, to the knowledge of INCOMEX, threatened claims based
on warranty coverage.
3.22 Employee Benefit Matters. Except as set forth in Section 3.22 of the
INCOMEX Disclosure Statement, INCOMEX does not have and never has had any
employee benefit plan, retirement plan or contractual health plan. INCOMEX does
not maintain, contribute to, or have any liability under or with respect to any
plan or arrangement, whether or not terminated, which provides or provided
medical, health, life insurance or other welfare-type benefits for current or
future retired or terminated employees. The execution, delivery and
performance of this Agreement will not, solely in and of itself, (i) constitute
a stated triggering event that will result in any payment (whether of
severance pay or otherwise) becoming due from INCOMEX to any present or former
officer, employee, director, shareholder or consultant, or former employee (or
dependents of any thereof), or (ii) accelerate the time of payment or vesting,
or increase the amount, of compensation due to any employee, officer, director,
shareholder or consultant of INCOMEX. INCOMEX has not agreed or committed to
make any amendments to any employee benefit programs. All contributions,
transfers and payments by INCOMEX in respect of any employee benefit program
have been or are fully deductible under the Code.
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The financial statements of INCOMEX at and for the period ended December 31,
1997 contain and, at and for the period ending on the Closing, will contain
adequate accruals for bonuses, sales commissions and vacation pay earned but
not received as of such dates.
INCOMEX provides no benefits to any individual who is not a current or former
employee of INCOMEX, or the dependents or other beneficiaries of any such
individual.
3.23 Materially Correct. To the best knowledge of the Managing Shareholders,
Article III of this Agreement together with the INCOMEX Disclosure Statement
does not contain any untrue statement of a material fact or omit to state any
material fact.
3.24 Information. Neither INCOMEX nor anyone acting on behalf of INCOMEX has
prepared, used or delivered any private placement, confidential offering or
similar memoranda and other offering or solicitation materials at any time in
connection with any offer or sale of securities of INCOMEX.
3.25 Relationships with Related Persons. Except as set forth in Section 3.25
of the INCOMEX Disclosure Statement, no INCOMEX Shareholder or any Related
Person of any INCOMEX Shareholder:
(a) has, or since January 1, 1996 has had any interest in any property
(whether real, personal or mixed and whether tangible or intangible), used in
or pertaining to the business of INCOMEX;
(b) has owned (beneficial or of record) an equity interest or any other
financial or profit interest in an entity that has had business dealings or a
material financial interest in any transaction with INCOMEX or engaged in
competition with INCOMEX; or
(c) is a party to any contract with, or has any claim or right against,
INCOMEX.
3.26 Year 2000 Compliance. The computer programs and software used by
INCOMEX (the "Software"), including such Software as is utilized by INCOMEX's
PBXs can be modified or replaced without material expense to allow them to
correctly recognize, calculate, sort, store, display and/or process dates
outside of the range of 1900-1998, including the years 1999, 2000 and beyond,
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and to correctly recognize that the year 2000 is a Leap Year and to correctly
handle all date calculations involving the date February 29, 2000.
ARTICLE IV. ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE INCOMEX
SHAREHOLDERS
Each of the INCOMEX Shareholders, individually and not jointly and severally,
represents and warrants to MCCAC that:
4.1 Authority. He has all necessary power and authority to execute and
deliver this Agreement and consummate the transactions contemplated hereby.
Upon the execution and delivery hereof by, respectively, MCCAC, INCOMEX and the
other INCOMEX Shareholders, this Agreement will constitute his valid and
legally binding obligation enforceable against him in accordance with its
terms, except as enforceability thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally or by equitable principles of general applicability
with respect to the availability of equitable remedies.
4.2 Ownership of Shares. He owns the shares of INCOMEX Common Stock set
forth opposite his name on Exhibit A free and clear of all Encumbrances.
4.3 No Conflict. Neither his execution, delivery and performance of this
Agreement nor the consummation by him of the transactions contemplated hereby
will require the consent, waiver, approval, license or authorization of or
filing with any person or public authority and will not conflict with,
constitute a violation of or default under or result in a breach of any
contract, commitment, agreement, arrangement, judgment, order, ordinance,
regulation, decree or restriction of any kind to which he is a party or by
which he or his shares of INCOMEX Common Stock is bound.
4.4 Investment Intent. He is acquiring the shares of Murdock Common Stock
deliverable under this Agreement for investment purposes and not with a view to
a distribution of such shares within the meaning of applicable securities laws.
He has sufficient information regarding Murdock Communications Corporation to
enable him to make an informed investment decision regarding the Murdock Common
Stock.
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF MCCAC
MCCAC represents and warrants to INCOMEX and the INCOMEX Shareholders that:
5.1 Corporate Organization; Authorization.
(a) MCCAC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Iowa and has the
corporate power and authority to own or lease its properties and to conduct its
business as it is now being conducted.
(b) MCCAC has all necessary corporate power and authority to enter into
this Agreement and to perform all of the obligations to be performed by it
hereunder. The execution, delivery and performance of this Agreement by MCCAC
have been duly authorized by MCCAC, and upon the execution and delivery hereof
by MCCAC, this Agreement will constitute the valid and legally binding
obligation of MCCAC, enforceable against it in accordance with its terms,
except as enforceability thereof may be limited by applicable bankruptcy,
reorganization, insolvency or other similar laws affecting creditors' rights
generally or by equitable principles of general applicability with respect to
the availability of equitable remedies.
5.2 No Conflict. The execution and delivery of this Agreement by MCCAC and
the consummation of the transactions contemplated hereby do not and will not
violate any provision of, or result in the breach of, or accelerate or permit
the acceleration of the performance required by the terms of, any applicable
law, rule or regulation of any governmental body, the Restated Articles of
Incorporation or the By-Laws of MCCAC or any agreement, indenture or other
instrument to which MCCAC is a party or by which MCCAC may be bound, or of any
order, judgment or decree applicable to it, or terminate or result in the
termination of any such agreement, indenture or instrument, or result in the
creation of any Encumbrance upon any of the properties or assets of MCCAC under
any agreement to which it is a party, or constitute an event which, after
notice or lapse of time or both, would result in any such violation, breach,
acceleration, termination or creation of an Encumbrance, except where any such
violation, breach, acceleration, termination or creation would not impair
MCCAC's ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which MCCAC is a party in
connection with the transactions contemplated herein.
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5.3 Murdock Shares. The shares of Murdock Common Stock to be issued
pursuant to sections 1.1 and 1.2 of this Agreement are duly authorized, validly
issued, fully paid and non-assessable and such shares of Murdock Common Stock
are not subject to any Encumbrance.
ARTICLE VI.COVENANTS OF INCOMEX AND THE INCOMEX SHAREHOLDERS
6.1 Conduct of Business. From the date of this Agreement until the Closing
Date, INCOMEX shall conduct its business only in the ordinary course in
substantially the same manner as heretofore conducted and, without limiting the
generality of the foregoing, INCOMEX shall not, without the prior written
consent of MCCAC:
(a) dispose of or contract to dispose of any other assets, tangible or
intangible, except in the ordinary course of business, consistent with past
practice and, with respect to capital assets, in connection with the
replacement of the asset being disposed of;
(b) voluntarily incur any absolute or contingent debt obligation
except in the ordinary course of business under currently existing
lines of credit;
(c) enter into any material contract, including, without limitation,
any lease or contract for the purchase or sale of real estate or of any interest
therein;
(d) encumber any property or other assets except for Encumbrances
constituting Permitted Liens;
(e) declare or pay any dividend or purchase or redeem any of its
shares, notes or other securities or make any other distribution to
shareholders;
(f) adopt any new or amend any existing employee benefit plan or any
employment agreement;
(g) form or cause to be formed any subsidiary;
(h) issue, sell, distribute or dispose of any shares, notes or other
securities of INCOMEX or commit itself to do so;
(i) make any commitments for Capital Expenditures; or
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(j) fail to keep its properties insured substantially to the same
extent as they are currently insured.
6.2 Reasonable Efforts. The Managing Shareholders and INCOMEX shall use all
reasonable efforts to preserve intact its business organization and to preserve
its goodwill as to customers, suppliers and others having business relations
with it.
6.3 Inspection. INCOMEX shall permit representatives of MCCAC, upon
reasonable prior notice, during normal business hours and under reasonable
circumstances, to examine the properties, books, contracts, tax returns and
other records of INCOMEX, and shall furnish such representatives with all such
information concerning such affairs as they may reasonably request.
6.4 Best Efforts. INCOMEX and the Managing Shareholders shall use their
reasonable best efforts to obtain all approvals or consents necessary to permit
the consummation of the transactions contemplated by this Agreement.
6.5 Update Information. Not earlier than 10 and not less than 5 days before
the Closing Date, INCOMEX shall correct and supplement in writing any
information furnished on the INCOMEX Disclosure Statement that, to the
knowledge of INCOMEX, is incorrect or incomplete (or otherwise expressly
contemplated by Article III of this Agreement), and shall promptly furnish such
corrected and supplemented information to MCCAC, so that such information shall
be correct and complete at the time such updated information is so provided.
Thereafter, up to the Closing, INCOMEX shall notify MCCAC in writing of any
changes or supplements to the updated information needed, to the knowledge of
INCOMEX, to make such information correct and complete at all times up to the
Closing. It is agreed that the furnishing of such corrected and supplemental
information, in and of itself, shall not create any presumption that such
information constitutes or evidences the existence of a material change or any
breach or violation by INCOMEX of any provision of this Agreement.
6.6 Holding Period; Trading Prohibitions. Each INCOMEX Shareholder hereby
agrees that such INCOMEX Shareholder will not offer, sell, pledge, contract to
sell, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of the Murdock Common Stock issued to such INCOMEX
Shareholder pursuant to this Agreement for a period of 24 months after the
Closing Date. INCOMEX and each INCOMEX Shareholder hereby acknowledges that as
a result of disclosures by MCCAC contemplated under this Agreement, INCOMEX and
its Affiliates may, from time to time, have material, non-public
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information concerning Murdock. INCOMEX and each INCOMEX Shareholder confirms
that it and its Affiliates are aware and INCOMEX has advised its
representatives that (a) the United States securities laws may prohibit a
person who has material, non-public information from purchasing or selling
securities of any company to which such information relates, and (b) material
non-public information shall not be communicated to any other person except as
permitted herein.
ARTICLE VII. JOINT COVENANTS
7.1 Support of Transactions. MCCAC, INCOMEX, the INCOMEX Shareholders and
their respective Affiliates shall each (a) use his or its reasonable best
efforts to assemble, prepare and file any information (and, as needed, to
supplement such information) as may be reasonably necessary to obtain as
promptly as practicable all governmental and regulatory consents required under
Article II, (b) exert his or its reasonable best efforts to obtain all material
consents and approvals of third parties that any of MCCAC, INCOMEX, the INCOMEX
Shareholders or their respective Affiliates are responsible to obtain in order
to consummate the transactions contemplated by this Agreement, (c) take such
other action as may reasonably be necessary or as another party may reasonably
request to satisfy the conditions of Article II or otherwise to comply with
this Agreement, and (d) provide the other parties, and such other party's
employees, officers, accountants, lawyers, financial advisors and other
representatives with access to its personnel, properties, business and records
under all reasonable circumstances.
ARTICLE VIII. INDEMNIFICATION
8.1 Survival; Right to Indemnification Not Affected by Knowledge. All
representations, warranties, covenants, and obligations of INCOMEX, the
Managing Shareholders, any of the INCOMEX Shareholders and MCCAC in this
Agreement, the Transaction Documents, the certificates delivered pursuant to
Section 2.2, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted, or any
knowledge acquired (or capable of being acquired) at any time, whether before
or after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
to Closing will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
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8.2 Indemnification and Payment of Damages by Managing Shareholders. The
Managing Shareholders, jointly and severally, (and solely with respect to
Article IV, the INCOMEX Shareholders) will indemnify and hold harmless MCCAC
and its representatives, officers, directors, employees, agents, stockholders,
controlling persons, subsidiaries and Affiliates (collectively, the "MCCAC
Indemnitees") for, and will pay to the MCCAC Indemnitees the amount of, any
Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by INCOMEX, the
Managing Shareholders or the INCOMEX Shareholders in this Agreement (without
giving effect to any supplement to the INCOMEX Disclosure Statement), the
INCOMEX Disclosure Statement, the supplements to the INCOMEX Disclosure
Statement, any Transaction Document or any other certificate or document
delivered by INCOMEX, the Managing Shareholders or the INCOMEX Shareholders
pursuant to this Agreement (except that the indemnification with respect to
representations and warranties in Article IV of this Agreement shall be several
and not joint for each INCOMEX Shareholder for Damages arising, directly or
indirectly, from or in connection with a breach of any of such INCOMEX
Shareholder's representations or warranties in Article IV);
(b) any breach by INCOMEX or any INCOMEX Shareholder of any covenant or
obligation of INCOMEX or any INCOMEX Shareholder in this Agreement or any
Transaction Document;
(c) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such person with INCOMEX or any INCOMEX
Shareholder (or any person acting on their behalf) in connection with any of
the transactions contemplated by this Agreement;
(d) any liabilities or obligations not incurred in the ordinary
course of business by INCOMEX prior to the Closing Date (whether known or
unknown) that are not reflected on the Interim Balance Sheet or disclosed in
the INCOMEX Disclosure Statement; or
(e) any claims, liabilities or obligations arising prior to the Closing
Date relating to any of the INCOMEX Employees including, without limitation,
any liability under any employee benefit plan or relating to severance or
wrongful termination; or
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The remedies provided in this Section 8.2 will not be exclusive of or limit
any other remedies that may be available to MCCAC or the other MCCAC
Indemnitees.
8.3 Indemnification and Payment of Damages by MCCAC. MCCAC will indemnify
and hold harmless each of the INCOMEX Shareholders and each of their respective
representatives, officers, directors, employees, agents, stockholders,
controlling persons, subsidiaries and Affiliates (collectively, the "INCOMEX
Indemnitees") for, and will pay to the INCOMEX Indemnitees the amount of, any
Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by MCCAC in this
Agreement, any Transaction Document or any other certificate or document
delivered by MCCAC;
(b) any breach by MCCAC of any covenant or obligation of MCCAC in this
Agreement or any Transaction Document;
(c) any claim by any person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such person with MCCAC (or any person acting
on its behalf) in connection with any of the transactions contemplated by this
Agreement; or
(d) any liabilities or obligations incurred by INCOMEX prior to the
Closing Date in the ordinary course of business or disclosed on the INCOMEX
Disclosure Statement and any liabilities or obligations incurred by INCOMEX
after the Closing Date.
The remedies provided in this Section 8.3 will not be exclusive of or
limit any other remedies that may be available to the INCOMEX Shareholders or
the other INCOMEX Indemnitees.
8.4 Procedure for Indemnification.
(a) As soon as is reasonably practicable after any MCCAC Indemnitee or
INCOMEX Indemnitee becomes aware of any claim, event or circumstance (a
"Claim") that has or might give rise to an indemnification obligation under
Section 8.2 or Section 8.3 of this Agreement, such MCCAC Indemnitee or INCOMEX
Indemnitee, as the case may be (an "Indemnified Person"), shall give written
notice thereof (a "Claim Notice") to the party or parties from which
indemnification is sought (the "Indemnifying Persons"). The
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Claim Notice shall describe the Claim in reasonable detail, and shall indicate
the amount (estimated if necessary and to the extent feasible) of the Damages
that have been or may be suffered by the Indemnified Person. The failure of
any Indemnified Person to promptly give the Indemnifying Persons a Claim Notice
shall not preclude such Indemnified Person from obtaining indemnification under
this Article VIII, except to the extent, and only to the extent, that such
Indemnified Person's failure has actually prejudiced the rights or increased
the liabilities and obligations of any of the Indemnifying Persons hereunder.
(b) With respect to any Claim Notice, the Indemnifying Persons shall have
the right by written notice to the Indemnified Person not later than 30 days
after receipt of such Claim Notice, to assume the control of the defense,
compromise or settlement of such Claim, provided that (i) such assumption
shall, by its terms, be without cost to the Indemnified Person, (ii) each of
the Indemnifying Persons agree in writing that they are responsible to
indemnify (fully and completely) the Indemnified Person for such Claim, and
(iii) any settlement of such Claim shall involve only the payment of money
damages by the Indemnifying Persons.
(c) Upon the assumption of control by the Indemnifying Persons as provided
in Section 8.4(b), the Indemnifying Persons shall diligently proceed with the
defense, compromise or settlement of the Claim at the Indemnifying Persons'
sole expense, including employment of counsel reasonably satisfactory to the
Indemnified Person and, in connection therewith, the Indemnified Person shall
cooperate fully, but at the expense of the Indemnifying Persons, to make
available to the Indemnifying Persons all pertinent information and witnesses
under the Indemnified Person's control, and to take such other steps as in the
opinion of counsel for the Indemnifying Persons are necessary to enable the
Indemnifying Persons to conduct such defense.
(d) The final, non-appealable determination of any Claim, including all
related costs and expenses, shall be binding and conclusive upon the
Indemnifying Persons and the Indemnified Person as to the amount of the
indemnification; provided, however, that in the Indemnifying Persons' defense
of such Claim, except with the written consent of the Indemnified Person, the
Indemnifying Persons shall not consent to entry of any judgment or enter into
any settlement, which does not include as an unconditional term thereof the
provision by the claimant to the Indemnified Person of a release of the
Indemnified Person from all liability in respect of such Claim.
(e) Should the Indemnifying Persons fail to give notice to the Indemnified
Person as provided in Section 8.4(b), the Indemnified Person shall be
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entitled to defend, settle or compromise the Legal Claim as in its sole
discretion may appear advisable, and such final determination, settlement or
compromise of the Legal Claim shall be binding upon the Indemnifying Persons.
8.5 The Shareholder Representative.
(a) Each INCOMEX Shareholder hereby irrevocably makes, constitutes and
appoints John Rance as his agent (the "Shareholder Representative") and
authorizes and empowers him to fulfill the role of Shareholder Representative
hereunder.
(b) In the event of the death, resignation or incapacity of John Rance,
his successor shall be appointed within 30 days of such event by consent of the
majority in interest of the aggregate INCOMEX Common Stock held by the INCOMEX
Shareholders as of the Closing Date. The decisions and actions of any
successor Shareholder Representative shall be, for all purposes, those of a
Shareholder Representative as if originally named herein. The death or
incapacity of any Shareholder Representative shall not terminate the authority
and agency of the Shareholder Representative. The Shareholder Representative
may resign at any time upon notice to MCCAC and each INCOMEX Shareholder given
at least 30 days prior to the effective date of such resignation, provided that
no such resignation shall be effective until his successor has been appointed
in accordance with this Section 8.5(b), and has accepted such appointment.
(c) The Shareholder Representative shall take any actions as he may
deem appropriate with respect to any Claim Notice as provided in this
Article VIII. The INCOMEX Shareholders agree that the Shareholder
Representative shall have full power and authority to receive all Claims
Notices with respect to Claims by any MCCAC Indemnitee, to control the defense,
compromise or settlement of any Claims by any MCCAC Indemnitee and otherwise to
act on behalf of the INCOMEX Shareholders for all purposes of Section 8.4, and
any action by the Shareholder Representative within the scope of such authority
shall be binding on all of the INCOMEX Shareholders. In performing any of his
duties hereunder, the Shareholder Representative shall not incur any liability
to anyone for damages, losses or expenses, except for willful misconduct.
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8.6 Limitations on Indemnification Obligations of the INCOMEX Shareholders.
(a) Except as provided in Section 8.7, the indemnification
obligations of the INCOMEX Shareholders pursuant to this Article VIII will not
exceed the aggregate amount of $1,000,000 (the "Indemnification Limit").
(b) Except as provided in Section 8.7, the INCOMEX Shareholders will
have no indemnification obligations pursuant to this Article VIII until
the aggregate losses incurred by Indemnified Persons exceed $20,000 (the
"Indemnification Threshold"); thereafter, the INCOMEX Shareholders will,
subject to the other limitations set forth in this Section 8.6, indemnify the
Indemnified Persons for all Losses, including those used in calculating the
Indemnification Threshold.
8.7 Additional Indemnification Obligations of the Managing Shareholders.
Without regard to the limitations set forth in section 8.6, the Managing
Shareholders will indemnify and hold harmless MCCAC from and against all
Damages relating to any of the expenses described in the second sentence of
Section 11.6.
ARTICLE IX. TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of INCOMEX, the INCOMEX Shareholders and
MCCAC at any time prior to the Closing.
(b) By INCOMEX or MCCAC, upon written notice to each of the other
parties hereto, if the Closing has not occurred on or prior to February 28,
1998.
(c) Prior to the Closing, by written notice to INCOMEX from MCCAC, if
(i) there is a material breach of any representation, warranty, covenant or
agreement on the part of INCOMEX, any Managing Shareholder or any INCOMEX
Shareholder set forth in this Agreement, or if a representation or warranty of
INCOMEX, any Managing Shareholder or any INCOMEX Shareholder shall be untrue in
any material respect, in either case such that the condition specified in
Sections 2.2(a), 2.2(b) or 2.2(c) would not be satisfied at Closing (a
"Terminating INCOMEX Breach"), except that, if such Terminating INCOMEX Breach
is curable by INCOMEX through the exercise of its reasonable best efforts,
then, for up to 30 days, but only as long as INCOMEX continues to exercise such
reasonable
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best efforts, MCCAC may not terminate this Agreement under this Section
9.1(c)(i), (ii) any governmental or regulatory consent or approval required for
consummation of the transactions contemplated hereby is denied by or in a final
order or other final action issued or taken by the appropriate governmental or
regulatory authority, agency or similar body or (iii) consummation of any of
the transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a court
of competent jurisdiction.
(d) Prior to the Closing, by written notice to MCCAC from INCOMEX or
from the holders of a majority of shares of INCOMEX Common Stock, if (i) there
is a material breach of any representation, warranty, covenant or agreement
on the part of MCCAC set forth in this Agreement, or if a representation or
warranty of MCCAC shall be untrue in any material respect, in either case such
that the condition specified in Sections 2.3(a) or 2.3(b) would not be
satisfied at Closing (a "Terminating MCCAC Breach"), except that, if such
Terminating MCCAC Breach is curable by MCCAC through the exercise of its
reasonable best efforts then for up to 30 days, but only as long as MCCAC
continues to exercise such reasonable best efforts, INCOMEX may not terminate
this Agreement under this Section 9.1(d)(i), (ii) any governmental or
regulatory consent or approval required for consummation of the transactions
contemplated hereby is denied by or in a final order or other final action
issued or taken by the appropriate governmental or regulatory authority, agency
or similar body, or (iii) consummation of any of the transactions contemplated
hereby is enjoined, prohibited or otherwise restrained by the terms of a final,
non-appealable order or judgment of a court of competent jurisdiction.
9.2 Effect. Any termination of this Agreement, however effected, shall not
release MCCAC, INCOMEX, the Managing Shareholders or any of the INCOMEX
Shareholders from any liability or other consequences arising from any breach
or violation by any such party of the terms of this Agreement prior to the
effective time of such termination, nor shall any such termination release any
party from its obligations or duties under this Agreement which, by their terms
and/or expressed intent, may require performance subsequent to any such
termination, and all provisions of this Agreement which set forth such
obligations or duties and such other general or procedural provisions which may
be relevant to any attempt to enforce such obligations or duties, shall survive
any such termination of this Agreement until such obligations or duties shall
have been performed or discharged in full.
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ARTICLE X. DEFINITIONS
10.1 Defined Terms. As used in this Agreement, the following terms have the
following meanings:
"Affiliates" means, as to any person or entity, another person or entity
that directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such person or entity;
provided, however, that MCCAC's Affiliates will not include any person or
entity that may be deemed to control Murdock.
"Capital Expenditures" means investments in property, plant or equipment
involving the expenditure of more than $10,000 in any single case or more than
$50,000 in the aggregate.
"CIM" means Comunicaciones Internationales de Mexico, S.A. de C.V.
"Claim" has the meaning set forth in section 8.4.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" means the date on which the Closing occurs as provided in
Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Damages" means any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim.
"Eilco" means Eilco Leasing Service, Inc.
"Encumbrance" means any lien, claim, charge, security interest, option,
mortgage, pledge or other legal or equitable encumbrance, excluding any
encumbrance arising under or pursuant to federal or state securities laws.
"Family" means, with respect to a particular individual, (i) the
individual, (ii) such individual's spouse, parents, children, siblings,
mothers and
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fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law (i)
the individual, and (iii) any other natural person who resides with such
individual.
"GAAP" means generally accepted accounting principles consistently applied
throughout the periods involved.
"IBT" has the meaning set forth in section 1.3(e).
"INCOMEX Common Stock" means the shares of INCOMEX's Common Stock.
"Managing Shareholders" shall mean John S. Rance, Michael Upshaw and
Fernando Ficachi, and "Managing Shareholder" shall mean any of them.
"Market Value" means the average closing sale price of the Murdock Common
Stock for the five trading days preceding the date of determination.
"Murdock Common Stock" means the issued and outstanding shares of common
stock of Murdock Communications Corporation.
"Non-Interference Agreements" have the meaning set forth in Section 2.2(h).
"Permitted Liabilities" means the liabilities and obligations described in
clauses (i), (ii) and (iv) of Section 3.12.
"Permitted Liens" has the meaning set forth in Section 3.18.
"Proportional Share" means, with respect to any INCOMEX Shareholder, (i) the
number of shares of INCOMEX Common Stock held by that INCOMEX Shareholder on
the Closing Date, divided by (ii) the total number of shares of INCOMEX Common
Stock held by all of the INCOMEX Shareholders on the Closing Date.
"Purchase Price" has the meaning set forth in Section 1.1.
"Quarterly Average Market Value" means the sum of the Market Value on the
last day of each calendar quarter, divided by four.
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"Related Person" means, with respect to a particular individual, (i) each
other member of such individual's Family, (ii) any entity that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family, (iii) any entity in which such individual or members of
such individual's Family directly or indirectly beneficially own (individually
or in the aggregate) at least 10% of the outstanding equity securities or
equity interests, and (iv) any entity with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
"Shareholder Representative" has the meaning set forth in section 8.5.
"Subsidiary" means any entity of which at least 50% of the equity
interests are owned, directly or indirectly, by INCOMEX.
"Transaction Costs" means reasonable accounting, legal and financial
advisory fees and expenses incurred by INCOMEX and the INCOMEX Shareholders in
connection with the Agreement and the transactions contemplated hereby.
"Transaction Documents" means this Agreement and the Non-Interference
Agreements.
"Writ" has the meaning set forth in section 3.6(b).
10.2 Other Definitional Provisions.
(a) All terms defined in this Agreement have the defined meanings when
used in any certificate, report or other documents made or delivered pursuant
hereto, unless the context otherwise requires.
(b) Terms defined in the singular have a comparable meaning when used
in the plural, and vice versa.
(c) As used herein, the neuter gender also denotes the masculine and
feminine, and the masculine gender also denotes the neuter and feminine, where
the context so permits.
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(d) The words "hereof," "herein" and "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular provision
of this Agreement.
(e) The words "include," "including" and "or" mean without
limitation by reason of enumeration.
ARTICLE XI. MISCELLANEOUS
11.1 Waiver. Any party to this Agreement may, at any time prior to the
Closing, waive any of the terms or conditions of this Agreement or agree to an
amendment or modification to this Agreement by an agreement in writing executed
in the same manner (but not necessarily by the same persons) as this Agreement.
11.2 Notices. All notices and other communications among the parties shall
be in writing and shall be deemed to have been duly given when (i) delivered in
person, (ii) one day after delivery to a reputable overnight courier service,
(iii) five days after posting in the United States mail having been sent
registered or certified mail return receipt requested, or (iv) delivered by
telecopy, and promptly confirmed by delivery in person or post as aforesaid in
each case, with postage prepaid, addressed as follows:
(a) If to MCCAC, to:
MCC Acquisition Corporation
Attn: Thomas E. Chaplin
1112 29th Avenue, S.W.
Cedar Rapids, IA 52404
Telephone No.: 319-362-6900
Telecopier No.: 319-363-7008
with a copy (which shall not
constitute notice) to:
Albert S. Orr, Esq.
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street
Suite 2100
Milwaukee, WI 53202
Telephone No.: 414-298-8209
Telecopier No.: 414-298-8097
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(b) If to INCOMEX or any INCOMEX Shareholder, to:
INCOMEX, Inc.
Attn: John Rance, President
7777 Center Avenue, Suite 500
Huntington Beach, CA 92647
Telephone No.: 714-903-1999
Telecopier No.: 714-903-1137
with a copy (which shall not
constitute notice) to:
David Stroud, Esq.
4695 MacArthur Court, #1200
Newport Beach, CA 92660
Telephone No.: 714-955-3283
Telecopier No.: 714-955-3220
or to such other address or addresses as the parties may from time to time
designate in writing.
11.3 Assignment. Except as provided in Section 7.1, and except that MCCAC
may assign this Agreement, or any right or benefit hereunder, to Murdock, no
party hereto shall assign this Agreement or any part hereof without the prior
written consent of the other parties. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
11.4 Rights of Third Parties. Nothing expressed or implied in this Agreement
is intended or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto, any subsidiary of MCCAC or Murdock
joining this Agreement under the circumstances described in Section 7.1 or any
Indemnified Person described in Section 8.4, any right or remedies under or by
reason of this Agreement.
11.5 Reliance. Each of the parties to this Agreement shall be deemed to have
relied upon the accuracy of the written representations and warranties made to
it in or pursuant to this Agreement, notwithstanding any investigations
conducted by or on its behalf or notice, knowledge or belief to the contrary.
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11.6 Expenses. MCCAC shall bear its own expenses incurred in connection with
this Agreement and the transactions herein contemplated whether or not such
transactions shall be consummated, including, without limitation, all fees of
its legal counsel and accountants. The INCOMEX Shareholders shall bear the
legal, financial advisory and accounting fees and expenses of INCOMEX and the
INCOMEX Shareholders incurred in connection with this Agreement.
11.7 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of Iowa without regard to conflicts of
law principles. Unless otherwise stated, references to Sections, Articles or
Exhibits refer to the Sections, Articles and Exhibits to this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
11.8 Captions; Counterparts. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
11.9 Entire Agreement. This Agreement (together with the other Transaction
Documents, the Exhibits and other writings referred to herein or delivered
pursuant hereto), constitutes the entire agreement among the parties and
supersedes any other agreements, whether written or oral, that may have been
made or entered into by or among Murdock or its subsidiaries, INCOMEX, the
INCOMEX Shareholders or by any director or directors or officer or officers of
such parties relating to the transactions contemplated hereby, or incident
hereto. No representations, warranties, covenants, understandings or
agreements, oral or otherwise, relating to the transactions contemplated by
this Agreement, exist between the parties except as expressly set forth in this
Agreement.
11.10 Amendments. This Agreement may be amended or modified in whole or in
part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
11.11 Publicity. All press releases or other public communications of any
nature whatsoever relating to the transactions contemplated by this Agreement,
and the method of the release for publication thereof, shall be subject to the
prior mutual approval of MCCAC and INCOMEX, which approval shall not be
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unreasonably withheld by any party; provided, however, that nothing herein
shall prevent any party from publishing such press releases or other public
communications as such party may consider necessary in order to satisfy such
party's legal or contractual obligations.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to be duly
executed as of the date first above written.
MCC ACQUISITION CORP.
By: Thomas E. Chaplin
----------------------
Title: CEO
-------------------
INCOMEX INC.
By: John Rance
----------------------
Title: President
-------------------
INCOMEX SHAREHOLDERS'
SIGNATURES APPEAR ON THE
FOLLOWING PAGES
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EXHIBIT A
INCOMEX SHAREHOLDERS
Name Number of Shares
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