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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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):
October 30, 1998 (October 15, 1998)
HORIZON MEDICAL PRODUCTS, INC.
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(Exact name of Registrant as specified in its charter)
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GEORGIA 000-24025 58-1882343
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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One Horizon Way, Post Office Box 627, Manchester, Georgia 31816
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(Address of principal executive offices) (Zip Code)
706-846-3126
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective October 15, 1998 Horizon Medical Products, Inc. ("Horizon")
consummated the acquisition (the "Acquisition") of the outstanding stock of
Stepic Corporation ("Stepic") pursuant to the terms of the Stock Purchase
Agreement, dated October 15, 1998 by and among Horizon, Steven Picheny, Howard
Fuchs, Christine Selby and Stepic. The following summary of the transaction is
qualified in its entirety by the more detailed information contained in the copy
of the Stock Purchase Agreement included as Exhibit 2 to this Current Report.
Pursuant to the Stock Purchase Agreement, Horizon acquired the assets and
liabilities of Stepic. The assets acquired consisted primarily of Accounts
Receivable and Inventory which were used by Stepic for the distribution of
medical products. Horizon intends to use the acquired assets in a similar
manner. As consideration for the Acquisition, Stepic received $8.0 million in
cash at the closing date and has the opportunity to earn up to an additional
$12.0 million under the terms of the Stock Purchase Agreement, upon the
successful achievement of certain specified future earnings targets by Stepic.
Horizon funded the Acquisition from its line of credit with NationsCredit
Commercial Corporation. The purchase price was determined through arm's-length
negotiations between the management of Stepic and management of Horizon and was
approved by the owners of Stepic and the Board of Directors of Horizon. Stepic
was a significant distributor of Horizon products prior to the acquisition. In
partial response to this item, Horizon's press release dated October 19, 1998 is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) It is currently impracticable to provide the financial
statements and pro forma financial information for Stepic required by this item.
Such financial statements will be filed in an amendment to this Form 8-K as soon
as practicable, but not later than 60 days after the required filing date
hereof.
(c) Exhibits.
2. Stock Purchase Agreement, by and among Horizon Medical Products, Inc.,
Steven Picheny, Howard Fuchs, Christine Selby and Stepic Corporation, effective
October 15, 1998. Pursuant to Item 601(b) of Regulation S-K, the Company has
omitted certain Schedules and Exhibits to the Stock Purchase Agreement (all of
which are listed therein) from this Exhibit 2. The Company hereby agrees to
furnish supplementally a copy of such omitted items to the Securities and
Exchange Commission upon its request.
99. Press release dated October 19, 1998.
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SIGNATURE
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 thereunto duly authorized.
Horizon Medical Products, Inc.
Dated: October 30, 1998 By: /s/ Mark A. Jewett
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Mark A. Jewett
Vice President of Finance
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STOCK PURCHASE AGREEMENT
by and among
HORIZON MEDICAL PRODUCTS, INC.
STEVEN PICHENY
HOWARD FUCHS
CHRISTINE SELBY
and
STEPIC CORPORATION
As of October 15, 1998
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TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE OF STEPIC STOCK
Section 1.1. Purchase and Sale of Stepic Stock.............................................1
Section 1.2. Purchase Price................................................................1
Section 1.3. Adjustment of Purchase Price..................................................2
Section 1.4. Definitions...................................................................5
Section 1.5. Security......................................................................6
Section 1.6. Interest......................................................................6
Section 1.7. Method of Payment.............................................................7
Section 1.8. Apportionment of Purchase Price...............................................7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE
STEPIC SHAREHOLDERS
Section 2.1. Power and Authority...........................................................7
Section 2.2. Ownership of the Shares.......................................................8
Section 2.3. Absence of Other Claims.......................................................8
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF STEPIC
AND THE STEPIC SHAREHOLDERS
Section 3.1. Organization..................................................................9
Section 3.2. Authorization.................................................................9
Section 3.3. Absence of Restrictions and Conflicts.........................................9
Section 3.4. Capitalization...............................................................10
Section 3.5. Financial Statements.........................................................10
Section 3.6. No Undisclosed Liabilities...................................................11
Section 3.7. Absence of Certain Changes...................................................11
Section 3.8. Legal Proceedings............................................................12
Section 3.9. Compliance with Law..........................................................12
Section 3.10. Stepic Material Contracts....................................................13
Section 3.11. Tax Returns; Taxes...........................................................14
Section 3.12. Officers, Directors and Employees............................................15
Section 3.13. Employee Benefit Plans.......................................................15
Section 3.14. Labor Relations..............................................................17
Section 3.15. Insurance....................................................................17
Section 3.16. Software, Patents, Trademarks, Trade Names...................................18
Section 3.17. Subsidiaries.................................................................18
Section 3.18. Transactions with Affiliates.................................................18
Section 3.19. Brokers, Finders and Investment Bankers......................................18
Section 3.20. Year 2000 Performance and Compatibility......................................19
Section 3.21. Accounts Receivable..........................................................19
Section 3.22. Property.....................................................................19
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Section 3.23. Assets.......................................................................20
Section 3.24. Disclosure...................................................................20
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1. Organization.................................................................20
Section 4.2. Authorization................................................................20
Section 4.3. Absence of Restrictions and Conflicts........................................20
Section 4.4. Disclosure...................................................................21
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by Stepic................................................21
Section 5.2. Efforts; Further Assurances; Cooperation.....................................22
Section 5.3. Public Announcements.........................................................24
Section 5.4. Books and Records............................................................24
Section 5.5. Transition Services..........................................................24
Section 5.6. Section 338(h)(10) Election..................................................24
Section 5.7. Further Assurances...........................................................24
Section 5.8. Noncompetition Agreements....................................................25
Section 5.9. Products Liability Insurance.................................................25
Section 5.10. Purchaser Covenant...........................................................25
ARTICLE 6. CONDITIONS
Section 6.1. Closing......................................................................25
Section 6.2. Conditions to Each Party's Obligations.......................................25
Section 6.3. Conditions to Obligations of Purchaser.......................................25
Section 6.4. Conditions to Obligations of Stepic..........................................26
ARTICLE 7. TERMINATION
Section 7.1. Termination and Abandonment..................................................28
Section 7.2. Specific Performance and Other Remedies......................................28
Section 7.3. Effect of Termination........................................................28
ARTICLE 8. INDEMNIFICATION
Section 8.1. Indemnification Obligations of Stepic Shareholders...........................29
Section 8.2. Indemnification Obligations of Purchaser.....................................30
Section 8.3. Indemnification Procedure....................................................30
Section 8.4. Claims Period................................................................31
Section 8.5. Liability Limits.............................................................32
Section 8.6. Disputes.....................................................................32
Section 8.7. Jurisdiction and Forum.......................................................33
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ARTICLE 9. MISCELLANEOUS PROVISIONS
Section 9.1. Notices......................................................................34
Section 9.2. Disclosure Letters and Exhibits..............................................36
Section 9.3. Computation of Time..........................................................36
Section 9.4. Assignment; Successors in Interest...........................................36
Section 9.5. Investigations; Representations and Warranties...............................36
Section 9.6. Number; Gender...............................................................37
Section 9.7. Captions.....................................................................37
Section 9.8. Stepic Executives; Knowledge.................................................37
Section 9.9. Controlling Law; Integration; Amendment......................................37
Section 9.10. Severability.................................................................37
Section 9.11. Counterparts.................................................................38
Section 9.12. Enforcement of Certain Rights................................................38
Section 9.13. Waiver.......................................................................38
Section 9.14. Fees and Expenses............................................................38
Section 9.15. Best Efforts.................................................................39
Section 9.16. Non-Stepic Assets............................................................39
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List of Exhibits
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Exhibit 1.3(a) Form of Letter of Credit
Exhibit 5.5 Form of Transition Agreement
Exhibit 5.8 Form of Noncompetition Agreements for Sales Representatives
Exhibit 6.3(c) Form of Opinion of Stepic's Counsel
Exhibit 6.3(h) Form of Employment Agreements for Picheny, Fuchs and Selby
Exhibit 6.4(c) Form of Opinion of Purchaser's Counsel
Schedule 5.6 Allocation Schedule
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated as of, and effective as of October 15, 1998 (the
"Agreement"), by and among HORIZON MEDICAL PRODUCTS, INC., a Georgia
corporation, ("Purchaser"), STEPIC CORPORATION, a New York corporation
("Stepic"), and the shareholders of Stepic listed on the signature page hereto
(collectively, the "Stepic Shareholders").
W I T N E S S E T H:
WHEREAS, the Stepic Shareholders own 100% of the issued and outstanding
capital stock of Stepic, no par value per share (the "Stepic Stock");
WHEREAS, the Stepic Shareholders desire to sell to Purchaser, and
Purchaser desires to buy from the Stepic Shareholders, all of the Stepic Stock
in accordance with the terms and conditions hereof;
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 do hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF STEPIC STOCK
Section 1.1. Purchase and Sale of Stepic Stock. Upon the terms and
subject to the conditions of this Agreement, Purchaser agrees to purchase from
the Stepic Shareholders, and each of the Stepic Shareholders agrees to sell,
transfer, assign and deliver to Purchaser, on the date hereof, all of its right,
title and interest in and to the Stepic Stock owned by such Stepic Shareholder,
free and clear of all Liens (as defined in Section 2.2 hereof), and with no
defects of title whatsoever. The number and class of shares of Stepic Stock
owned by each Stepic Shareholder is set forth in Section 2.2(a) of the Stepic
Disclosure Letter.
Section 1.2. Purchase Price. Subject to the adjustments described in
Section 1.3 hereof, the aggregate purchase price for all of the Stepic Stock
(the "Purchase Price") shall be $20,000,000, payable in cash in accordance with
the following schedule:
(a) $8,000,000 payable at the Closing (as defined in Section
6.1 hereof), subject to the reduction provided in Section 1.3(a) hereof
(the "Closing Payment");
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(b) $4,000,000 payable within 60 days after the first
anniversary of the Closing Date (as defined in Section 6.1 hereof) (the
"First Anniversary Date"), subject to the reduction provided in Section
1.3(b) hereof and any acceleration pursuant to Section 1.3(d) hereof
(the "First Anniversary Payment");
(c) $4,000,000 payable within 60 days after the second
anniversary of the Closing Date (the "Second Anniversary Date"),
subject to the reduction provided in Section 1.3(b) hereof and any
acceleration pursuant to Section 1.3(d) hereof (the "Second Anniversary
Payment"); and
(d) $4,000,000 payable within 60 days after the third
anniversary of the Closing Date (the "Third Anniversary Date," each of
the First Anniversary Date, the Second Anniversary Date and the Third
Anniversary Date, an "Anniversary Date"), subject to Section 1.3(d)
hereof, and to the reduction provided in Section 1.3(b) hereof and any
acceleration pursuant to Section 1.3(d) hereof (the "Third Anniversary
Payment").
Section 1.3. Adjustment of Purchase Price. Notwithstanding the
foregoing, each of the payments of the Purchase Price described above shall be
subject to the following reductions and adjustments:
(a) (i) Within 45 days of the Closing Date,
Stepic shall deliver to Purchaser a balance sheet (the
"Closing Balance Sheet") of Stepic as of the Closing Date. The
Closing Balance Sheet shall be audited, at Purchaser's
expense, by the accounting firm of Chassin Levine Rosen &
Company. If retained earnings reflected on the Closing Balance
Sheet are less than $1,577,000, the Stepic Shareholders shall
pay to Stepic the amount by which retained earnings is less
than $1,577,000. If retained earnings reflected on the Closing
Balance Sheet are greater than $1,577,000, then Stepic shall
pay Stepic Shareholders the amount by which retained earnings
exceeds $1,577,000.
(ii) If Purchaser disagrees with the Closing
Balance Sheet, it shall, within 30 days after receipt of the
Closing Balance Sheet, give written notice ("Purchaser's
Objection") to the Stepic Shareholders setting forth the basis
of Purchaser's Objection in reasonable detail and, to the
extent practicable, the adjustments to the Closing Balance
Sheet which Purchaser believes should be made. Failure to so
notify the Stepic Shareholders shall constitute acceptance and
approval of the Closing Balance Sheet. If the Stepic
Shareholders agree that any change proposed by Purchaser is
appropriate, the change shall be made to the Closing Balance
Sheet. If the proposed change is in dispute by the Stepic
Shareholders, then Purchaser and the Stepic Shareholders shall
negotiate in good faith to resolve such dispute as
expeditiously as possible. If, after a period of 30 days
following the date on which Purchaser gives Stepic
Shareholders notice of
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any proposed change, any such proposed change still remains
disputed, then a major accounting firm mutually acceptable to
Purchaser and Stepic Shareholders (the "Accounting Firm")
shall be engaged to resolve any remaining disputes. If the
Stepic Shareholders and Purchaser fail to reach agreement on
the Accounting Firm, then each party shall appoint an expert
and the two experts shall select the Accounting Firm. The
Accounting Firm shall determine, based solely on independent
review of material it deems appropriate, only those issues
still in dispute. The Accounting Firm's determination shall be
made within 30 days following the date on which the dispute is
submitted and shall be final, binding and conclusive. The fees
and any expenses of the Accounting Firm shall be shared
equally by the Stepic Shareholders and Purchaser.
(iii) Once the Accounting Firm makes a final
determination of retained earnings, any amount due under this
Section 1.3(a) shall be remitted to the appropriate party
along with interest on such amount from the Closing Date to
the payment date calculated at a rate equal to the prime rate
(Chase Manhattan Bank) less 1%.
(b) Subject to the provisions of subsection (c) of this
Section 1.3, the First Anniversary Payment, the Second Anniversary
Payment and the Third Anniversary Payment will be reduced and adjusted
as follows:
(i) If Stepic's EBITDA (as hereinafter defined) for
Year 1 (as hereinafter defined) is less than $3,900,000, the
First Anniversary Payment shall be reduced by the amount of
$1.00 for each $1.00 that Stepic's EBITDA is less than
$3,900,000; provided, however that such First Anniversary
Payment shall not be reduced below $2,400,000.
(ii) If Stepic's EBITDA for Year 2 (as hereinafter
defined) is less than $3,900,000, the Second Anniversary
Payment shall be reduced by the amount of $1.00 for each $1.00
that Stepic's EBITDA is less than $3,900,000; provided,
however that such Second Anniversary Payment shall not be
reduced below $2,400,000.
(iii) If Stepic's EBITDA for Year 3 (as hereinafter
defined) is less than $3,900,000, the Third Anniversary
Payment shall be reduced by the amount of $1.00 for each $1.00
that Stepic's EBITDA is less than $3,900,000; provided,
however that such Third Anniversary Payment shall not be
reduced below $2,400,000.
(c) Notwithstanding the foregoing, if Stepic's EBITDA during
Year 2 or Year 3 is greater than $3,900,000, the amount of such excess
will offset any reduction in Purchase Price resulting from Stepic's
EBITDA being below $3,900,000 for any prior or
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subsequent Year, and will reduce the amount of any reduction in
Purchase Price taken in accordance with subsection (b) of this Section
1.3. For example, if Stepic's EBITDA in Year 1 is $3,500,000 and in
Year 2 is $4,400,000, the $400,000 reduction in the First Anniversary
Payment taken as a result of the deficit in Year 1 will be recouped in
Year 2 up to the amount of the excess in Year 2, and the amount of the
Second Anniversary Payment will be $4,500,000. As a further example, if
Stepic's EBITDA in Year 1 is $3,500,000, in Year 2 is $3,800,000, and
in Year 3 is $4,800,000, the combined deficit of $500,000 in Year 1 and
Year 2 will be recouped as a result of the excess in Year 3, and the
Third Anniversary Payment will be $4,500,000.
(d) Payment of the Second Anniversary Payment and/or the Third
Anniversary Payment under Section 1.2(b), 1.2(c) and 1.2(d) above will
be accelerated in the event Stepic's EBITDA during Year 1 or Year 2 is
greater than $3,900,000, as described below:
(i) If Stepic's EBITDA for Year 1 is in excess of
$3,900,000, the amount of such excess will be paid together
with the First Anniversary Payment of $4,000,000 provided that
the total amount paid on the First Anniversary Date shall not
exceed $12,000,000. Such excess payment will result first in a
reduction in the amount of the Third Anniversary Payment and
thereafter a reduction in the Second Anniversary Payment.
(ii) If Stepic's EBITDA for Year 2 is in excess of
$3,900,000, the amount of such excess will be paid together
with the Second Anniversary Payment; provided that the
aggregate amount paid in both the First Anniversary Payment
and the Second Anniversary Payment shall not exceed
$12,000,000.
(iii) In the event the First Anniversary Payment
and/or the Second Anniversary Payment is in excess of
$4,000,000, the Third Anniversary Payment will not exceed the
remaining unpaid portion of the aggregate of $12,000,000 owed
under Sections 1.2(b), 1.2(c) and 1.2(d) above.
(e) Within 30 days after the First Anniversary Date, the
Second Anniversary Date and the Third Anniversary Date, Purchaser shall
prepare and deliver to Stepic Shareholders a profit and loss statement
(a "Profit and Loss Statement") for Stepic (including Stepic's EBITDA)
for Year 1, Year 2 and Year 3, respectively. Stepic Shareholders and
their accounting firm shall be entitled to review the books, records,
work papers and other documents used by Purchaser and its accountants
in preparing the Profit and Loss Statements. If Stepic Shareholders
disagree with the Profit and Loss Statement, they shall, within 30 days
after receipt of such Profit and Loss Statement, give written notice
("Stepic Shareholders' Objection") to Purchaser setting forth in
reasonable detail the basis of the Stepic Shareholders' Objection and,
to the extent practicable, the adjustments to the Profit and Loss
Statement which Stepic Shareholders believe should
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be made. Failure to so notify Purchaser shall constitute acceptance and
approval of the Profit and Loss Statement. If Purchaser agrees that any
change proposed by Stepic Shareholders is appropriate, the change shall
be made to the Profit and Loss Statement. If the proposed change is in
dispute by Purchaser, then Purchaser and Stepic Shareholders shall
negotiate in good faith to resolve such dispute as expeditiously as
possible. If, after a period of 30 days following the date on which
Stepic Shareholders give Purchaser notice of any such proposed change,
any such proposed change still remains disputed, then the Accounting
Firm (selected in accordance with Section 1.3(a)(iii)) shall be engaged
to resolve any remaining disputes. The Accounting Firm shall determine,
based solely on independent review of material it deems appropriate,
only those issues still in dispute. The Accounting Firm's determination
shall be made within thirty (30) days following the date on which the
dispute is submitted and shall be final, binding and conclusive. The
fees and any expenses of the Accounting Firm shall be shared equally by
Stepic Shareholders and Purchaser.
(f) Notwithstanding anything herein to the contrary, any
amounts payable on the First, Second or Third Anniversary Date that are
not being disputed pursuant to Section 1.3(e) or subject to Offset (as
hereinafter defined) shall be paid within 60 days of the First, Second
or Third Anniversary Date, respectively.
Section 1.4. Definitions. For purposes of this Article 1, the following
terms shall have the following meanings:
(a) In the calculation of Stepic's EBITDA for Year 1, Year 2,
or Year 3, Stepic will receive credit for (i) the margin on sales of
Pall products to customers in the CVS territory (as to Pall, the
territory defined in the CVS/Pall agreement) during Year 1, Year 2 or
Year 3, as the case may be, excluding sales of Pall products under the
existing CVS/Pall agreement prior to the expiration of that agreement
on November 13, 1998 and sales of Pall products to existing CVS
customers who have agreements with CVS (and approved by Pall) requiring
CVS to continue to sell Pall products to such customers after November
13, 1998; (ii) the margin on incremental sales of products in the CVS
territory during Year 1, Year 2 or Year 3, as the case may be,
excluding sales of Pall products and of Horizon products (both
manufactured or distributed by Horizon), with incremental sales being
those sales in excess of CVS's sales of such products during the 12
months prior to its acquisition by Horizon; (iii) expense savings
achieved in the CVS operations during Year 1, Year 2 or Year 3, as the
case may be; (iv) twenty percent (20%) on sales of Horizon products to
customers in the CVS territory during Year 1, Year 2, or Year 3, as the
case may be, excluding sales of Pall products and Norfolk Medical
products; and (v) the distribution margin on incremental sales of
Norfolk Medical products in the CVS territory, with incremental sales
being those sales in excess of CVS's sales of Norfolk Medical products
in the 12 months prior to the acquisition of CVS by Horizon. Margin
will be net sales minus cost of sales. Distributor margin will be net
sales minus
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distributor cost as set forth in paragraph 1.4(b) below; however,
rebate protection on sales to CVS customers will require approval of
Horizon's Management.
(b) In connection with the calculation of Stepic's EBITDA for
purposes of Section 1.3(b): (i) Purchaser will not charge to Stepic
management fees, rent, relocating costs, or moving expenses; (ii) any
acquisition of another business by Purchaser will not affect such
EBITDA calculation unless written consent is received from Picheny; and
(iii) with respect to Purchaser products (both manufactured and
distributed products) sold by Purchaser to Stepic for resale, Stepic
will be charged the lower of (A) product prices that are as favorable
as product prices charged by Purchaser to any other Purchaser domestic
distributor or (B) product prices presently charged by Purchaser to
Stepic.
(c) "Stepic's EBITDA" means the earnings of Stepic before
interest, taxes, depreciation, and amortization for the applicable
period as determined under the generally accepted accounting principles
adopted by Purchaser for its consolidated financial statements.
(d) "Year 1" means the period beginning November 1, 1998
through October 31, 1999.
(e) "Year 2" means the period beginning November 1, 1999
through October 31, 2000.
(f) "Year 3" means the period beginning November 1, 2000
through October 31, 2001.
Section 1.5. Security. As security for the payments of the Purchase
Price to be paid pursuant to subsections (b), (c) and (d) of Section 1.2 above,
Purchaser shall provide each Stepic Shareholder with a Standby Letter of Credit
for such shareholder's share of the Purchase Price in the form attached hereto
as Exhibit 1.3(a). Purchaser agrees to use its best efforts to obtain
replacement letters of credit with a Bank acceptable to the Stepic Shareholders
for those delivered on the Closing Date within 30 days of the Closing Date, and
fees and expenses relating to such replacement letters of credit in excess of
the fees (2% on the Closing Date) for the letters delivered on the Closing Date
shall be borne equally by Purchaser, on the one hand, and Stepic Shareholders on
the other hand, provided, that Purchaser shall not be required to incur any such
fees or expenses in excess of $36,000.
Section 1.6. Interest. With respect to the First Anniversary Payment,
the Second Anniversary Payment and the Third Anniversary Payment, Purchaser will
pay interest on the amount of each unpaid portion of each payment for the period
beginning on the day after the First Anniversary Date, the Second Anniversary
Date and the Third Anniversary Date, as applicable, and continuing through the
date of payment. Interest will be calculated as simple
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Section 1.7. interest on a per annum basis equal to the prime rate
(Chase Manhattan Bank) less 1%. Any interest payable hereunder shall be paid on
the date of payment of the applicable installment of the Purchase Price.
Section 1.8. Method of Payment. All payments of cash under this
Agreement shall be made by wire transfer of immediately available federal funds
to an account designated in writing by the person or entity to receive such
payment, or by such other method as is mutually agreed upon by the parties.
Section 1.9. Apportionment of Purchase Price. The Purchase Price shall
be apportioned among Stepic Shareholders in proportion to each Stepic
Shareholder's ownership of Stepic Stock as reflected on Schedule 2.2(a) of the
Stepic Disclosure Letter (as hereinafter defined).
ARTICLE 2.
REPRESENTATIONS AND
WARRANTIES OF THE STEPIC SHAREHOLDERS
With such exceptions as are set forth in a letter (the "Stepic
Disclosure Letter") delivered by Stepic to Purchaser prior to the execution
hereof, each of the Stepic Shareholders hereby represents and warrants to
Purchaser that, as of the date hereof:
Section 2.1. Power and Authority. Each Stepic Shareholder has the
right, power and capacity to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each Stepic Shareholder and constitutes
such Stepic Shareholder's legal, valid and binding obligation, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies. The execution, delivery and performance by each Stepic Shareholder of
this Agreement and the consummation of the transactions contemplated hereby will
not, with or without the giving of notice or the lapse of time, or both, (i)
violate any provision of law, statute, rule or regulation to which such Stepic
Shareholder is subject, (ii) violate any order, judgment or decree applicable to
such Stepic Shareholder, or (iii) violate, conflict with, or result in a breach
or default under, or cause the termination of, any term or condition of any
court order, trust document, will, agreement, document or other instrument to
which such Stepic Shareholder is a party or by which such Stepic Shareholder or
such Stepic Shareholder's properties may be bound.
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Section 2.2. Ownership of the Shares.
(a) Each Stepic Shareholder owns good and marketable record
and beneficial title to the number of shares of Stepic Stock (as
hereinafter defined) set forth beside such Stepic Shareholder's name on
Section 2.2(a) of the Stepic Disclosure Letter, and such shares of
Stepic Stock are (i) validly issued, fully paid and nonassessable, and
(ii) free and clear of any Liens, with no defects of title whatsoever.
Other than the shares of Stepic Stock set forth on Section 2.2(a) of
the Stepic Disclosure Letter, no Stepic Shareholder owns any shares of
capital stock of Stepic or any other equity security of Stepic, or
right of any kind to have any such equity security issued. Upon
consummation of the Closing, Purchaser shall have obtained good and
marketable title to all shares of Stepic Stock owned by each Stepic
Shareholder, free and clear of any Liens, and with no defects of title
whatsoever. For purposes of this Agreement, the term "Lien" means any
pledge, security interest, lien, charge, equity, claim, option, right
of first refusal or other restriction on transfer of any nature
whatsoever, or any other encumbrance of any nature whatsoever,
including without limitation any mortgage, lease, chattel mortgage,
conditional sales contract, collateral security arrangement or other
title or interest retention arrangement (other than restrictions on
transfer imposed by federal or state securities laws).
(b) Each Stepic Shareholder has the exclusive right, power and
authority to vote the shares of Stepic Stock owned by such Stepic
Shareholder.
(c) No Stepic Shareholder is a party to or bound by any
agreement affecting or relating to such Stepic Shareholder's right to
transfer or vote the shares of Stepic Stock owned by such Stepic
Shareholder. Except as set forth in Section 2.2(b) of the Stepic
Disclosure Letter, there are no proxies outstanding or powers of
attorney granted by any Stepic Shareholder with respect to any shares
of Stepic Stock.
Section 2.3. Absence of Other Claims. There is no legally cognizable
claim against or interest in Stepic based on any prior offer, issue, redemption,
call, purchase, sale, transfer, negotiation or other transaction of any nature
or kind with respect to any capital stock (including shares, offers, options,
warrants, or debt convertible into shares, options or warrants) of Stepic or any
corporation that has been merged into Stepic, and, to the knowledge of each
Stepic Shareholder, no fact or circumstance exists that could give rise to any
such claim on behalf of any person.
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<PAGE> 14
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF
STEPIC AND THE STEPIC SHAREHOLDERS
With such exceptions as are set forth in the Stepic Disclosure Letter,
each of Stepic and the Stepic Shareholders hereby, severally, proportionate to
their Stepic stock ownership, and not jointly, represents and warrants to
Purchaser as follows:
Section 3.1. Organization. Stepic is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as is now being conducted. Stepic is
duly qualified to transact business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of Stepic. Stepic has heretofore made
available to Purchaser accurate and complete copies of the Articles of
Incorporation, and Bylaws, as currently in effect, of Stepic, and has made
available to Purchaser the minute books and stock transfer records of Stepic.
Section 3.1 of the Stepic Disclosure Letter contains a true and correct list of
the jurisdictions in which Stepic is qualified to transact business as a foreign
corporation.
Section 3.2. Authorization. Stepic has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Stepic and the performance by Stepic
of its obligations hereunder and the consummation of the transactions provided
for herein by Stepic has been duly and validly authorized by all necessary
corporate action on the part of Stepic. Stepic's Board of Directors and the
Stepic Shareholders have approved the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby in
accordance with the requirements of applicable state and federal law and the
Articles of Incorporation and Bylaws of Stepic. This Agreement has been duly
executed and delivered by Stepic and constitutes the valid and binding agreement
of Stepic, enforceable against Stepic in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in granting equitable remedies.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit
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<PAGE> 15
under, or permit the acceleration of any obligation under, (i) any term or
provision of the Articles of Incorporation or Bylaws of Stepic, (ii) any
Material License (as defined in Section 3.9(a) hereof), Stepic Material Contract
(as defined in Section 3.10 hereof) or Scheduled Lease (as defined in Section
3.22 hereof), (iii) any judgment, decree or order of any court or governmental
authority or agency to which Stepic is a party or by which Stepic or any of its
properties is bound, or (iv) any statute, law, regulation or rule applicable to
Stepic, so as to have, in the case of subsections (ii) through (iv) above, a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of Stepic. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental agency or public or regulatory unit, agency, body or authority with
respect to Stepic is required in connection with the execution, delivery or
performance of this Agreement by Stepic or the consummation of the transactions
contemplated by this Agreement by Stepic, the failure of which to obtain would
have a material adverse effect upon (x) the assets, liabilities, results of
operations, financial condition, business or prospects of the business of
Stepic, or (y) the ability of Stepic or the Stepic Shareholders to execute and
deliver this Agreement or to consummate the transactions contemplated hereby.
Section 3.4. Capitalization. The authorized capital stock of Stepic
consists of 100 shares of common stock, no par value (the "Stepic Stock"), of
which 100 shares are issued and outstanding. All outstanding shares of Stepic
Stock are, and when issued were, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights; and all such shares have
been issued in compliance with applicable federal and state securities laws.
Except as set forth in the preceding sentence, there are no shares of capital
stock or other equity interests of Stepic outstanding, and, except as set forth
in Section 3.4 of the Stepic Disclosure Letter, there are no outstanding
subscriptions, options, warrants or rights to purchase or acquire from Stepic
any capital stock or other equity interests of Stepic; there are no existing
registration covenants with Stepic with respect to outstanding Stepic Stock; and
there are no convertible securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which Stepic is bound to issue
any additional shares of its capital stock or other securities or equity
interests. The Stepic Shareholders are the owners of all of the issued and
outstanding capital stock of Stepic, free and clear of any Liens with no defects
in title whatsoever.
Section 3.5. Financial Statements. Stepic has delivered (or, in the
case of (c) below, will deliver) to Purchaser: (a) the audited balance sheet of
Stepic as of December 31, 1997 (the "1997 Balance Sheet") and the related
statements of revenues and expenses for the fiscal year then ended; (b) the
unaudited balance sheet of Stepic as of August 31, 1998 (the "Interim Balance
Sheet") and the related unaudited statements of revenues and expenses for the
eight month period then ended which were prepared for internal purposes only;
and (c) the Closing Balance Sheet. The 1997 Balance Sheet and related statements
of revenues and expenses for the fiscal year then ended and the Closing Balance
Sheet are hereinafter collectively referred to as the "Stepic Financial
Statements." The Stepic Financial Statements are complete and accurate in all
material respects, are consistent with the books and records of Stepic and
fairly present the
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<PAGE> 16
financial position of Stepic as of the dates mentioned and the results of
operations, changes in stockholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles applied on a
consistent basis (subject to any exceptions as to consistency specified therein
or as may be indicated in the notes thereto). The Interim Balance Sheet and the
related unaudited statements of revenues and expenses for the eight month period
then ended are consistent with the books and records of Stepic and represent the
financial position of Stepic as of the date mentioned and the results of
operations for the period then ended and were prepared in accordance with
Stepic's past practice, but do not contain the required disclosures to conform
to generally accepted accounting principles.
Section 3.6. No Undisclosed Liabilities. Stepic has no liabilities or
obligations that are not adequately reflected or provided for in the 1997
Balance Sheet, except liabilities and obligations incurred since the 1997
Balance Sheet Date in the ordinary course of business and consistent with past
practices of Stepic.
Section 3.7. Absence of Certain Changes.
(a) Since the 1997 Balance Sheet Date, there has not been (i)
any adverse change in the business, financial condition, results of
operations or prospects of Stepic, or (ii) any damage, destruction,
loss or casualty to property or assets of Stepic, whether or not
covered by insurance, which property or assets are material to Stepic.
(b) Since the 1997 Balance Sheet Date, there have not been (i)
any extraordinary losses suffered by Stepic, (ii) any material assets
of Stepic mortgaged, pledged or made subject to any Lien, (iii) any
liability or obligation (absolute, accrued or contingent) incurred by
Stepic, or any bad debt, contingency or other reserve increase suffered
by Stepic, except, in each such case, in the ordinary course of
business and consistent with past practice, (iv) any claims,
liabilities or obligations of Stepic (whether absolute, accrued or
contingent) paid, discharged or satisfied, other than the payment,
discharge or satisfaction of claims, liabilities and obligations
reflected or reserved against in Stepic Financial Statements or
incurred in the ordinary course of business and consistent with past
practice, (v) any guaranteed checks, notes or accounts receivable of
Stepic that have been written off as uncollectible, except write-offs
in the ordinary course of business and consistent with past practice,
(vi) any write down of the value of any asset or investment on the
books or records of Stepic, except for depreciation and amortization
taken in the ordinary course of business and consistent with past
practice, (vii) any cancellation of any debts owed to Stepic or waiver
of any claims or rights of substantial value, or sale, transfer or
other disposition of any properties or assets (real, personal or mixed,
tangible or intangible) of substantial value, except, in each such
case, in transactions in the ordinary course of business and consistent
with past practice and which in any event do not exceed $50,000 in the
aggregate, (viii) any single capital expenditure or commitment by
Stepic in excess of $50,000 for additions to property or equipment, or
aggregate capital expenditures and commitments in excess of $100,000
for
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<PAGE> 17
additions to property or equipment, (ix) any transactions entered into
by Stepic other than in the ordinary course of business, (x) any
agreements to do any of the foregoing or (xi) any other events,
developments or conditions of any character that have had or are
reasonably likely to have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or
prospects of Stepic.
Section 3.8. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending, or, to the best knowledge of Stepic's
Executives (as defined in Section 9.8 hereof), threatened against, relating to
or involving Stepic (or any of its officers or directors as relating to Stepic)
before any court, arbitrator or administrative or governmental body. All pending
suits, actions, claims, proceedings or investigations relating to or involving
Stepic (or any of its officers or directors) before any court, arbitrator or
administrative or governmental body are adequately provided for in the Stepic
Financial Statements. Stepic is not subject to any judgment, decree, injunction,
rule or order of any court, nor is it subject to any governmental restriction,
which is reasonably likely (i) to have an adverse effect on (x) the assets,
liabilities, results of operations, financial condition, business or prospects
of Stepic, or (y) the ability of Stepic or the Stepic Shareholders to execute
and deliver this Agreement or to execute and deliver the transactions
contemplated hereby; or (ii) to cause a material limitation on Purchaser's
ability to operate the business of Stepic after the Closing.
Section 3.9. Compliance with Law.
(a) Stepic has all material authorizations, approvals,
licenses and orders of and from all governmental and regulatory
offices, agencies, officers and bodies necessary to carry on its
business as it is currently being conducted, to own or hold under lease
the properties and assets it owns or holds under lease and to perform
all of its obligations under all agreements to which it is a party
(collectively, the "Material Licenses") and Stepic has been and is in
compliance with all applicable laws, regulations and administrative
orders of any country, state or municipality or of any subdivision
thereof to which its business and its employment of labor or its use or
occupancy of properties or any part thereof are subject, the failure to
obtain or the violation of which would have a material adverse effect
upon the assets, liabilities, results of operations, financial
condition, business or prospects of Stepic. Section 3.9(a) of the
Stepic Disclosure Letter sets forth a true and complete list of all
Material Licenses. Stepic previously has delivered to Purchaser all
reports and filings made or filed by Stepic pursuant to the
Occupational Safety and Health Act.
(b) Stepic has been and is in compliance with all current and
otherwise applicable statutes, rules, regulations, standards, guides or
orders administered or issued by the Federal Food and Drug
Administration ("FDA") and all other Federal, state, local or foreign
governmental departments, regulatory agencies, authorities,
commissions, boards or courts or other law, rule or regulation-making
entities having regulatory authority over Stepic or its business (the
"Authorities"). Stepic has not received any
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<PAGE> 18
Notice of Adverse Findings, Warning Letters, Section 305 notices,
subpoenas or other similar communications by any Authorities with
respect to its business, and there have been no recalls, field
notifications, alerts or seizures requested or threatened relating to
its business that have not been handled by Stepic in accordance with
FDA rules and regulations.
(c) Within the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules
promulgated thereunder, Picheny is the only ultimate parent entity of
Stepic, the total assets of Picheny are less than $100,000,000, and the
annual net sales of Picheny are less than $100,000,000.
Section 3.10. Stepic Material Contracts. Section 3.10 of the Stepic
Disclosure Letter contains a true and complete list of the following, whether
oral or written (hereinafter referred to as the "Stepic Material Contracts"):
(a) all bonds, debentures, notes, mortgages, indentures or
guarantees to which Stepic is a party or by which Stepic or its assets
are otherwise bound;
(b) all loans and credit commitments to Stepic that are
outstanding, together with a brief description of such commitments and
the name of each financial institution granting the same;
(c) all agreements, contracts and commitments between Stepic
and each of its ten largest suppliers exclusive of oral purchasing
commitments and pricing arrangements;
(d) all contracts or agreements which limit or restrict Stepic
(or any of the individuals described in Section 3.12(a) hereof) from
engaging in any business in any jurisdiction or that limit any third
party from engaging in competition with Stepic; and
(e) all existing contracts and commitments (other than those
described in subparagraphs (a), (b), or (d) of this Section 3.10, and
contracts with Stepic's suppliers which resulted in sales to customers
in 1997 in excess of $100,000, and any Scheduled Leases involving an
annual commitment or annual payment by any party thereto of more than
$100,000 individually).
True and complete copies of all Stepic Material Contracts, including
all amendments thereto, have been made available to Purchaser. The Stepic
Material Contracts are valid and enforceable in accordance with their respective
terms with respect to Stepic. Except for events or occurrences the consequences
of which, individually or in the aggregate, would not have a material adverse
effect on the assets, liabilities, results of operations, financial condition,
business or prospects of Stepic, there is not under any of the Stepic Material
Contracts any existing breach, default or event of default by Stepic or event
that with notice or lapse of time or both would constitute a breach, default or
event of default by Stepic, nor do the Stepic
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<PAGE> 19
Executives know of, and Stepic has not received notice of, or made a claim with
respect to, any breach or default by any other party thereto. Section 3.10 of
the Stepic Disclosure Letter contains an accurate description of any and all
disagreements, complaints, disputes or defaults arising under or with respect to
any Stepic Material Contract that could reasonably be expected to result in the
termination of such Stepic Material Contract (or, in the case of a client of
Stepic, a termination of such client's relationship with Stepic). The execution,
delivery and performance of this Agreement by Stepic and the consummation of the
transactions contemplated hereby will not, with the passing of time or giving of
notice or both, violate or conflict with or constitute a breach of or default
under, result in the loss of any material benefit under or give rise to a
termination right under any Material Stepic Contract.
Section 3.11. Tax Returns; Taxes. Stepic has duly filed all federal,
state, local and foreign tax returns required to be filed by it, all such
returns are accurate in all material respects, Stepic has duly paid all taxes
(including any interest, penalties and additions to tax) which are due or
payable pursuant to such returns and has no liability for unpaid taxes of any
kind or nature whatsoever for any period ending before the date hereof other
than those accrued on the Closing Balance Sheet. Stepic (and any predecessor of
Stepic) has been a validly electing S corporation within the meaning of Code ss.
1361 and 1362 for federal and state income tax purposes since September 1, 1990
and Stepic will be an S corporation up to and including the Closing Date. Stepic
will not be liable for any federal or state tax under Code ss. 1374 in
connection with the deemed sale of Stepic's assets caused by a Section
338(h)(10) Election (as hereinafter defined). Stepic has not, in the past ten
years, (A) acquired assets from another corporation in a transaction in which
Stepic's tax basis for the acquired assets was determined, in whole or in part,
by reference to the tax basis of the acquired assets (or any other property) in
the hands of the transferor or (B) acquired the stock of any corporation which
is a qualified subchapter S subsidiary. The liability for taxes reflected in the
Closing Balance Sheet is sufficient for the payment of all unpaid taxes of
Stepic, whether or not disputed, that are accrued or applicable for the period
ended October 15, 1998 and for all years and periods ended prior thereto
(without regard to any reserve for deferred taxes established to reflect timing
differences between tax income and financial accounting income). All
deficiencies asserted as a result of any examinations by the Internal Revenue
Service or any other taxing authority have been paid, fully settled or
adequately provided for in the Stepic Financial Statements. There are no pending
claims asserted for taxes of Stepic or outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of
Stepic or outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of Stepic for any period. Stepic has
made all estimated income tax deposits and all other required tax payments or
deposits and has complied for all prior periods in all material respects with
the tax withholding provisions of all applicable federal, state, local and other
laws. Stepic has made available to Purchaser true, complete and correct copies
of its federal income tax returns, state and local income and sales tax returns
and such other tax returns as it has been required to file. No claim has ever
been made by any authority in a jurisdiction where Stepic does not file returns
that it is or may be subject to taxation by that jurisdiction.
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<PAGE> 20
Section 3.12. Officers, Directors and Employees. Section 3.12 of the
Stepic Disclosure Letter contains (a) a true and complete list of all of the
officers, directors and key employees of Stepic, specifying their office, and
(b) a true and complete list of all of the employees of Stepic as of the date
hereof together with an appropriate notation next to the name of any employee on
such list with whom Stepic has a written employment agreement or to whom Stepic
has made verbal commitments which are binding on Stepic.
Section 3.13. Employee Benefit Plans.
(a) Definition of Benefit Plans. For purposes of this Section
3.13, the term "Stepic Benefit Plan" means any plan, program,
arrangement, fund, policy, practice or contract which, through which or
under which Stepic or any Stepic ERISA Affiliate (as hereinafter
defined) provides benefits or compensation to or on behalf of employees
or former employees of Stepic or any Stepic ERISA Affiliate, whether
formal or informal, whether or not written, including but not limited
to the following:
(i) Arrangements - any bonus, incentive compensation,
stock option, deferred compensation, commission, severance
pay, golden parachute or other compensation plan or rabbi
trust;
(ii) ERISA Plans - any "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), including, but
not limited to, any multiemployer plan (as defined in Section
3(37) and Section 4001(a) (3) of ERISA), defined benefit plan,
profit sharing plan, money purchase pension plan, 401(k) plan,
savings or thrift plan, stock bonus plan, employee stock
ownership plan, or any plan, fund, program, arrangement or
practice providing for medical (including post-retirement
medical), hospitalization, accident, sickness, disability, or
life insurance benefits; and
(iii) Other Employee Fringe Benefits - any stock
purchase, vacation, scholarship, day care, prepaid legal
services, dependent care or other fringe benefit plans,
programs, arrangements, contracts or practices.
(b) Stepic ERISA Affiliate. For purposes of this Section 3.13,
the term "Stepic ERISA Affiliate" means each trade or business (whether
or not incorporated) which together with Stepic is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code.
(c) Identification of Benefit Plans. Except for (i) those
Stepic Benefit Plans identified in Section 3.13 of the Stepic
Disclosure Letter, and (ii) Stepic Benefit Plans which have been
terminated and with respect to which neither Stepic nor any Stepic
ERISA Affiliate has any financial, administrative or other liability,
obligation or
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<PAGE> 21
responsibility, neither Stepic maintains, nor have they at any time
established or maintained, nor have they at any time been obligated to
make, or otherwise made, contributions to or under or otherwise
participated in any Stepic Benefit Plan.
(d) MEPPA Liability/Post-Retirement Medical Benefits/Defined
Benefit Plans/Supplemental Retirement Plans. Neither Stepic, nor any
Stepic ERISA Affiliate maintains, or has at any time established or
maintained, or has at any time been obligated to make, or made,
contributions to or under any multiemployer plan (as defined in Section
3(37) and Section 4001(a) (3) of ERISA). Stepic does not maintain, nor
has at any time established or maintained, nor has at any time been
obligated to make, or made, contributions to or under (i) any plan
which provides post-retirement medical or health benefits with respect
to employees of Stepic, (ii) any organization described in Sections
501(c) (9) or 501(c) (20) of the Code, (iii) any defined benefit
pension plan subject to Title IV of ERISA or (iv) any plan which
provides retirement benefits in excess of the limitations of Section
401(a) (17), Section 401(k), Section 401(m), Section 401(g) or Section
415 of the Code.
(e) Compliance with Laws. Each Stepic Benefit Plan is in
compliance with the provisions of all applicable laws including, but
not limited to, ERISA and the Code with respect to the administration
and documentation of said plan, in addition, all medical benefit plans
are in compliance with the provisions of the Consolidated Omnibus
Budget Reconciliation Act relating to the continuance of insurance
coverage or benefit coverage and with the requirements of the Health
Insurance Portability and Accountability Act.
(f) Qualified Status. Each Stepic Benefit Plan that is an
employee benefit plan (within the meaning of Section 3(2) of ERISA)
that is funded through a trust or insurance contract or is a welfare
benefit plan (within the meaning of Section 3(1) of ERISA) funded
through a trust has at all times satisfied in all material respects, by
its terms and in its operation, all applicable requirements for an
exemption from federal income taxation under Section 501(a) of the
Code. Neither Stepic or any Stepic ERISA Affiliate maintains or has
previously maintained a Stepic Benefit Plan which meets or was intended
to meet the requirements of Section 401(a) of the Code.
(g) Legal Actions. There are no actions, audits, suits or
claims which are pending or, to the knowledge of Stepic Executives (as
hereinafter defined), threatened against any Stepic Benefit Plan, any
fiduciary of any of Stepic Benefit Plans with respect to Stepic Benefit
Plans or against the assets of any of Stepic Benefit Plans, except
claims for benefits made in the ordinary course of the operation of
such plans.
(h) Funding. Each of Stepic and each Stepic ERISA Affiliate
has made full and timely payment of all amounts required to be
contributed under the terms of each Stepic Benefit Plan and applicable
law or required to be paid as expenses under such Stepic Benefit Plan
and no excise taxes are assessable as a result of any nondeductible or
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<PAGE> 22
other contributions made or not made to a Stepic Benefit Plan. The
assets of all Stepic Benefit Plans which are required under applicable
laws to be held in trust are in fact held in trust, and the assets of
each such Stepic Benefit Plan equal or exceed the liabilities of each
such plan. The liabilities of each other plan are properly and
accurately reported on the financial statements and records of Stepic.
The assets of each Stepic Benefit Plan are reported at their fair
market value on the books and records of each plan.
(i) Liabilities. Neither Stepic nor any Stepic ERISA Affiliate
is subject to any material liability, tax or penalty whatsoever to any
person whomsoever as a result of Stepic's or any ERISA Affiliate's
engaging in a prohibited transaction under ERISA or the Code, and
Stepic Executives have no knowledge of any circumstances which
reasonably might result in any such material liability, tax or penalty
as a result of a breach of fiduciary duty under ERISA. No Stepic
Benefit Plan has suffered any accumulated funding deficiency within the
meaning of Section 302 of ERISA and Section 412 of the Code. There is
no lien upon any property of Stepic or any Stepic ERISA Affiliate
outstanding pursuant to Section 412(n) of the Code in favor of any
Stepic Plan. No assets of Stepic or any Stepic ERISA Affiliate have
been provided as security to any Stepic Plan pursuant to Section 401(a)
(29) of the Code.
Section 3.14. Labor Relations. Stepic is in compliance in all material
respects with all federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and Stepic is
not engaged in any unfair labor or unlawful employment practice. There is no
unlawful employment practice or discrimination charge pending before the Equal
Employment Opportunity Commission ("EEOC"), EEOC recognized state "referral
agency" or any other governmental agency. There is no unfair labor practice
charge or complaint against Stepic pending before the National Labor Relations
Board ("NLRB"). There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the best knowledge of Stepic Executives, threatened against or
involving or affecting Stepic and no NLRB representation question exists
respecting the employees of Stepic. No grievance or arbitration proceeding
relating to the employees of Stepic is pending, and, to the knowledge of Stepic
Executives, no written claim therefor exists with respect to any such employees.
There is no collective bargaining agreement that is binding on Stepic.
Section 3.15. Insurance. Section 3.15 of the Stepic Disclosure Letter
sets forth a true and complete list of Stepic's current insurance policies and
coverages (true and complete copies of which have been made available to
Purchaser), including names of carriers, amounts of coverage and premiums
thereof. Except as otherwise provided in Section 3.15 of the Stepic Disclosure
Letter, all such insurance policies are in full force and effect, and all
premiums, including retrospective premiums, retention amounts and other expenses
related thereto due with respect to any period ending on or prior to the Closing
Date have been timely paid or accrued, and Stepic has not received any, and to
the knowledge of Stepic's Executives there is no threatened notice of
cancellation with respect thereto. Stepic has not been refused any insurance by
an insurance carrier to which it has applied for insurance during the last 5
years. There are no
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<PAGE> 23
pending claims against such insurance by Stepic as to which insurers are
defending under reservation of rights or have denied liability.
Section 3.16. Software, Patents, Trademarks, Trade Names. Section 3.16
of the Stepic Disclosure Letter sets forth a true and complete list of (i) all
computer software, patents, trademarks, trade names and registered copyrights
owned by Stepic and used in connection with its business (collectively, the
"Proprietary Intellectual Property") and (ii) all computer software, patents,
trademarks, trade names, copyrights, technology and processes used by Stepic in
connection with its business which are used pursuant to a license or other right
granted by a third party (collectively, the "Licensed Intellectual Property",
and together with the Proprietary Intellectual Property herein referred to as
"Intellectual Property"). Stepic owns, or has the right to use pursuant to valid
and effective agreements set forth in the Stepic Disclosure Letter, all
Intellectual Property, and, all such rights shall be assigned and transferred to
Purchaser in connection with the consummation of the transactions contemplated
hereby. No claims are pending against Stepic by any person with respect to the
use of any Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same, and, to the
knowledge of Stepic's Executives, the current use by Stepic of the Intellectual
Property does not infringe on the rights of any third party. Section 3.16 of the
Stepic Disclosure Letter sets forth a list of all jurisdictions in which Stepic
is operating under a trade name, and each jurisdiction in which any such trade
name is registered.
Section 3.17. Subsidiaries. Except as set forth in Section 3.17 of the
Stepic Disclosure Letter, there is no corporation, association, subsidiary,
partnership, limited liability company or other entity of which Stepic owns or
controls, or has in the past owned or controlled, directly or indirectly, more
than 50% of the outstanding equity interests.
Section 3.18. Transactions with Affiliates. No officer, director,
Stepic Executive, or the spouse of any such person, or any entity in which any
such person, owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by all such persons) has any interest in: (i) any contract, arrangement or
understanding with, or relating to, Stepic; (ii) any loan, arrangement,
understanding, agreement or contract to or with Stepic; or (iii) any property
(real, personal or mixed), tangible or intangible, used or currently intended to
be used by Stepic in the conduct of its business.
Section 3.19. Brokers, Finders and Investment Bankers. Except as set
forth in Section 3.19 of the Stepic Disclosure Letter (which shall be Stepic's
sole responsibility), neither Stepic nor any of its respective officers,
directors, partners or employees has employed any broker, finder or investment
banker or incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated hereby.
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Section 3.20. Year 2000 Performance and Compatibility. Schedule 3.20 of
the Stepic Disclosure Letter sets forth a complete and accurate description of
Stepic's Year 2000 compliance efforts to date.
Section 3.21. Accounts Receivable. The accounts receivable of Stepic
have arisen from bona fide transactions in the ordinary course of business
consistent with past practice. All accounts receivable of Stepic reflected on
the Stepic Financial Statements are, to the knowledge of Stepic's Executives,
good and collectible at the aggregate recorded amounts thereof, net of any
allowances for doubtful accounts reflected thereon, which reserves adequately
cover such events and were calculated in a manner consistent with past practice
and in accordance with generally accepted accounting principles.
Section 3.22. Property.
(a) Stepic has good and valid title to or valid leasehold
interests in its properties reflected in the Stepic Financial
Statements or acquired after December 31, 1997 (other than properties
sold or otherwise disposed of in the ordinary course of business), and
all of such properties are held free and clear of all Liens and
restrictions, except, with respect to all such properties, (a)
mortgages and liens securing debt reflected as liabilities on the
Financial Statements and (b) (i) liens for current taxes and
assessments not in default, and (ii) mechanics', carriers', workmen's,
repairmen's, statutory or common law liens either not delinquent or
being contested in good faith.
(b) Section 3.22 of the Stepic Disclosure Letter sets forth a
true and complete list of all leases and agreements of Stepic granting
possession of or rights to real or personal property and involving an
annual commitment or annual payment of more than $50,000 individually
in the case of any real property and $50,000 individually in the case
of any personal property (the "Scheduled Leases"). All such Scheduled
Leases are in full force and effect and constitute the legal, valid,
binding and enforceable obligations of Stepic. Stepic has physical
possession of all real property, equipment and other assets that are
covered by Scheduled Leases. There are no existing defaults of Stepic
with respect to such Scheduled Leases, or of any of the other parties
to such Scheduled Leases (or events or conditions which, with notice or
lapse of time, or both, would constitute a default).
(c) The structures and equipment owned or leased by Stepic are
in operating condition and are adequate for the uses to which they are
being put, except for maintenance performed in the ordinary course of
business.
(d) The rights, properties and other assets presently owned,
leased or licensed by Stepic and reflected on the Stepic Financial
Statements include all rights, properties and other assets necessary to
permit Stepic to conduct its business in the same manner as presently
conducted.
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Section 3.23. Assets. Schedule 3.23 of the Stepic Disclosure Letter
sets forth a depreciation schedule for Stepic's assets.
Section 3.24. Disclosure. No representation, warranty or covenant made
by any of Stepic in this Agreement, the Stepic Disclosure Letter or the Exhibits
attached hereto contains an untrue statement of a material fact or omits to
state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
With such exceptions as are set forth in a letter (the "Purchaser
Disclosure Letter") delivered by Purchaser to Stepic prior to the execution
hereof, Purchaser hereby represents and warrants to Stepic as follows:
Section 4.1. Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Section 4.2. Authorization. Purchaser has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Purchaser, the performance by
Purchaser of its obligations hereunder and the consummation by Purchaser of the
transactions provided for herein have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and constitutes the valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the transactions
contemplated by this Agreement, and the fulfillment of and compliance with the
terms and conditions of this Agreement do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision of
the Articles of Incorporation or Bylaws of Purchaser, (ii) any contract,
agreement, commitment or understanding to which Purchaser is a party or to which
Purchaser or any of its respective properties is subject, (iii) any judgment,
decree or order of any court or governmental authority
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or agency to which Purchaser is a party or by which Purchaser or any of its
respective properties is bound, or (iv) any statute, law, regulation or rule
applicable to Purchaser, so as to have, in the case of subsections (ii) through
(iv) above, a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of Purchaser. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any government agency or public or regulatory unit, agency, body or
authority with respect to Purchaser is required in connection with the
execution, delivery or performance of this Agreement by Purchaser or the
consummation of the transactions contemplated by this Agreement by Purchaser,
the failure to obtain which would have a material adverse effect upon Purchaser
and its subsidiaries taken as a whole.
Section 4.4. Disclosure. No representation, warranty or covenant made
by Purchaser in this Agreement, the Purchaser Disclosure Letter or the Exhibits
hereto contains an untrue statement of a material fact or omits to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by Stepic. From August 31, 1998 to the
Closing Date, Stepic will, except as required in connection with the
transactions contemplated by this Agreement and except as otherwise disclosed in
Stepic's Disclosure Letter or consented to in writing by Purchaser:
(a) Carry on its business in the ordinary and regular course
in substantially the same manner as heretofore conducted and not engage
in any new line of business or enter into any agreement, transaction or
activity or make any commitment, except those in the ordinary and
regular course of business and not otherwise prohibited under this
Section 5.1;
(b) Exercise reasonable efforts to preserve intact the
corporate existence, goodwill and business organization of Stepic, to
keep the officers and employees of Stepic available to Purchaser and to
preserve the relationships of Stepic with customers, suppliers and
others having business relations with Stepic;
(c) Not (i) sell any of the material assets or properties of
Stepic other than sales in the ordinary course of business consistent
with past practice; (ii) acquire or enter into any agreement to
acquire, by merger, consolidation or the purchase of stock or assets,
any business or entity; (iii) create, incur or assume any indebtedness
other than short-term indebtedness incurred in the ordinary course of
business under existing lines of credit; (iv) grant, create, incur, or
suffer to exist any Liens, (v) make any loans or
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advances to any other person, except in the ordinary course of business
and consistent with past practice, or (vi) make any capital expenditure
in excess of $50,000 in the case of any single expenditure or $100,000
in the case of all capital expenditures;
(d) Other than in the ordinary course of business and
consistent with past practices, not enter into, modify or extend in any
manner the terms of any employment, severance or similar agreements
with officers, directors or key employees of Stepic nor grant or agree
to grant (either in writing or verbally) any increase in the
compensation of officers, directors or employees, whether now or
hereafter payable, including any such increase pursuant to any option,
bonus, stock purchase, pension, profit-sharing, deferred compensation,
retirement or other plan, arrangement, contract or commitment;
(e) Use its reasonable efforts to maintain in full force and
effect and in the same amounts policies of insurance comparable in
amount and scope of coverage to that now maintained by Stepic;
(f) Use its reasonable efforts to continue to collect its
accounts receivable and pay all accounts payable and similar
obligations in the ordinary course of business and consistent with past
practices;
(g) Use its reasonable efforts to maintain the supplies and
inventory maintained by Stepic at levels which are consistent with the
past practices of Stepic;
(h) Prepare and file all federal, state, local and foreign
returns for taxes and other tax reports, filings and amendments thereto
required to be filed by Stepic, and allow Purchaser, at its request, to
review all such returns, reports, filings and amendments at Stepic's
offices prior to the filing thereof, which review shall not interfere
with the timely filing of such returns;
(i) Not amend any Stepic Benefit Plan, nor commit to make any
amendment to any Stepic Benefit Plan or commit to continue any Stepic
Benefit Plan or adopt any new Stepic Benefit Plan for the benefit of
any employees;
(j) Neither change nor amend its Articles of Incorporation or
Bylaws.
Section 5.2. Efforts; Further Assurances; Cooperation. Subject to the
other provisions of this Agreement, the parties hereto shall each use their
reasonable, good faith efforts to perform their obligations herein and to take,
or cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals and satisfy
all conditions to the obligations of the parties under this Agreement and to
cause the transactions contemplated herein to be effected on or prior to October
15, 1998 in accordance with the terms hereof and shall cooperate fully with each
other and their respective officers, directors, partners, employees, agents,
counsel, accountants and other designees in connection with any steps
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required to be taken as a part of their respective obligations under this
Agreement, including without limitation:
(a) Stepic and Purchaser shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to obtain any required
approval of any federal, state, or local governmental agency or
regulatory body with jurisdiction over the transactions contemplated by
this Agreement.
(b) In the event any claim, action, suit, investigation or
other proceeding by any governmental body or other person is commenced
which questions the validity or legality of any of the transactions
contemplated hereby or seeks damages in connection therewith, the
parties agree to cooperate and use all reasonable efforts to defend
against such claim, action, suit, investigation or other proceeding
and, if an injunction or other order is issued in any such action, suit
or other proceeding, to use all reasonable efforts to have such
injunction or other order lifted, and to cooperate reasonably regarding
any other impediment to the consummation of the transactions
contemplated by this Agreement.
(c) Stepic shall give prompt written notice to the Purchaser
of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or
warranty of Stepic contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to
the Closing Date or that will or may result in the failure to satisfy
any of the conditions specified in Article 6 hereof and (ii) any
failure of any of Stepic, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by any of them
hereunder.
(d) Each of the parties hereto agrees that with respect to
each item appearing on the Stepic Disclosure Letter and the Purchaser
Disclosure Letter, Stepic and Purchaser, as the case may be, shall
specifically reference a Section of this Agreement as to which such
item relates and, if such disclosure is required by more than one
Section of this Agreement, only one Section must be referenced for such
disclosure.
(e) Subsequent to the Closing Date, Picheny shall use his best
efforts to secure all necessary consents of third parties to the
assignment to Purchaser of all Stepic Material Contracts and Scheduled
Leases as set forth in the Stepic Disclosure Letter.
(f) Without the prior written consent of Purchaser, Stepic
will not terminate any employee if such termination will result in the
payments of any amounts pursuant to "change in control" provisions of
any employment agreement or arrangement.
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Section 5.3. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated hereby to the financial community, government agencies, employees
or the general public shall be agreed upon among the parties hereto in advance
(unless Stepic or Purchaser is advised by counsel that any such announcement or
other disclosure not mutually agreed upon in advance is required to be made by
law or applicable rule of the Nasdaq Stock Market and then only after making a
reasonable attempt to comply with the provisions of this Section).
Section 5.4. Books and Records. Purchaser agrees to exercise reasonable
efforts to maintain and not to destroy the various books and records associated
with the operation of Stepic prior to Closing which are delivered by Stepic to
Purchaser at Closing for such period of time as is reasonably consistent with
Purchaser's record retention policies or as may be required by applicable
governmental rules, regulations or directives and to grant Stepic and its agents
and representatives reasonable access to such books and records on or after the
Closing Date as they shall reasonably request for bona fide purposes and for so
long as such books and records are maintained pursuant to the provisions hereof.
Section 5.5. Transition Services. On or prior to the Closing Date,
Purchaser and Picheny shall have entered into a transition agreement
substantially in the form attached hereto as Exhibit 5.5 (the "Transition
Agreement").
Section 5.6. Section 338(h)(10) Election. Stepic and each of Stepic
Shareholders will join with Purchaser in making an election under Code ss.
338(h)(10) of the Code (and any corresponding election under state, local, and
foreign tax law) with respect to the purchase and sale of the stock of Stepic
hereunder (a "Section 338(h)(10) Election"). Stepic Shareholders will include
any income, gain, loss, deduction, or other tax item resulting from the Section
338(h)(10) Election on their tax returns to the extent permitted by applicable
law. Stepic Shareholders shall also pay any tax imposed on Stepic attributable
to making the Section 338(h)(10) Election, including, but not limited to, (i)
any tax imposed under Code ss. 1374, (ii) any tax imposed under Reg. ss.
1.338(h)(10)--1(e), or (iii) any state, local, or foreign tax imposed on
Stepic's gain. Stepic Shareholders shall file tax returns for Stepic's S
corporation period ending on the Closing Date and pay any taxes attributable to
Stepic for the period then ending, including all federal, state and local income
taxes. For purposes of the Section 338(h)(10) Election, the parties shall
allocate the Purchase Price in accordance with the allocation set forth on
Schedule 5.6 hereof, and none of the parties will take a position which is
inconsistent with such allocation. Stepic shall permit Stepic Shareholders to
participate in the preparation of Stepic's New York City general corporation tax
return for the calendar year 1998.
Section 5.7. Further Assurances. From time to time after the Closing,
at Purchaser's request, the Stepic Shareholders will execute, acknowledge and
deliver to Purchaser such other instruments of conveyance and transfer and will
take such other actions and execute and deliver such other documents,
certifications and further assurances as Purchaser may reasonably request in
order to transfer more effectively to Purchaser, the Stepic Stock. Each of the
parties hereto
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will cooperate with the other and execute and deliver to the other such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any party hereto as necessary to carry out,
evidence and confirm the intended purposes of this Agreement.
Section 5.8. Noncompetition Agreements. Following the Closing Date,
Picheny shall use his best efforts to obtain from each of Stepic's sales
representatives noncompetition and nondisclosure agreements in the form attached
hereto as Exhibit 5.8.
Section 5.9. Products Liability Insurance. Following the Closing Date,
Purchaser shall allow Stepic to maintain its products liability insurance
coverage as currently in effect.
Section 5.10. Purchaser Covenant. Until the earlier to occur of (i) the
Third Anniversary Date or (ii) the date on which the entire Purchase Price
payable hereunder has been paid, Purchaser agrees not to sell any product
competitive with products Stepic sells in any territory in which Stepic is the
authorized distributor of such products.
ARTICLE 6.
CONDITIONS
Section 6.1. Closing. The consummation of the transactions contemplated
by this Agreement is herein referred to as the "Closing." The "Closing Date"
shall be the date on which the Closing occurs. The Closing shall take place on
or before October 15, 1998 at the offices of King & Spalding in New York, New
York, or at such other time and location as the Purchaser and Stepic shall
mutually agree; provided, however, that the Closing shall not take place until
such time as the conditions to Closing set forth in this Article 6 shall have
been satisfied.
Section 6.2. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the absence at the Closing of any (a) effective injunction, writ
or preliminary restraining order or any order of any nature issued by a court or
governmental agency of competent jurisdiction to the effect that the
transactions contemplated by this Agreement may not be consummated as herein
provided, (b) proceeding or lawsuit by any governmental or regulatory agency for
the purpose of obtaining any such injunction, writ or preliminary restraining
order and (c) written notice from any such agency indicating an intent to
restrain, prevent, materially delay or restructure the transactions contemplated
by this Agreement.
Section 6.3. Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of each of the following
additional conditions:
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(a) Representations and Warranties. The representations and
warranties of the Stepic Shareholders and Stepic set forth in Articles
2 and 3, respectively, of this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date.
(b) Performance of Obligations of Stepic. Stepic and the
Stepic Shareholders shall have performed in all material respects all
covenants and agreements required to be performed by him, her or it
under this Agreement.
(c) Opinion of Stepic's Counsel. Purchaser shall have received
an opinion of Mandell Freedman & Mandell, dated the Closing Date,
substantially in the form attached hereto as Exhibit 6.3(c).
(d) Authorization of Transaction. All corporate action
necessary by Stepic to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body required in connection with
the execution, delivery and performance of this Agreement shall have
been obtained or made, except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on (i) the
business of Purchaser or Stepic following the Closing, or (ii) the
ability of Stepic to consummate the transactions contemplated by this
Agreement.
(f) Certificates. Stepic shall furnish Purchaser with a
certificate as to compliance with the conditions set forth in Sections
6.3(a), (b) and (d).
(g) Transition Agreement. Stepic shall have executed the
Transition Agreement in the form attached hereto as Exhibit 5.5.
(h) Employment Agreements. Each of Picheny, Fuchs and Selby
shall have entered into employment agreements in the form attached
hereto as Exhibit 6.3(h).
Section 6.4. Conditions to Obligations of Stepic. The obligations of
Stepic to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of each of the following
additional conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in Article 4 of this Agreement shall
be true and correct as of the date
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of this Agreement and as of the Closing Date as though made on and as
of the Closing Date.
(b) Performance of Obligations of Purchaser. Purchaser shall
have performed in all material respects all covenants and agreements
required to be performed by it under this Agreement.
(c) Opinion of Purchaser Counsel. Stepic shall have received
an opinion of King & Spalding, Counsel for Purchaser, dated the Closing
Date, substantially in the form attached hereto as Exhibit 6.4(c).
(d) Authorization of Transaction. All corporate action
necessary by Purchaser to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(e) Consents. All consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental
commission, board or other regulatory body required in connection with
the execution, delivery and performance of this Agreement shall have
been obtained or made, except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the ability of
Purchaser to consummate the transactions contemplated by this
Agreement.
(f) Certificates. Purchaser shall furnish Stepic with a
certificate of their appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a), (b) and (d).
(g) Transition Agreement. Purchaser shall have executed the
Transition Agreement in the form attached hereto as Exhibit 5.5.
(h) Letter of Credit. Purchaser's lender shall have issued a
stand-by letter of credit to Stepic securing payment of the Purchase
Price under Sections 1.2(b), 1.26(c) and 1.2(d).
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ARTICLE 7.
TERMINATION
Section 7.1. Termination and Abandonment. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of the Boards of Directors of
Purchaser and Stepic;
(b) by Stepic, if the conditions set forth in Sections 6.2 and
6.4 hereof shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by Purchaser on or
before October 31, 1998; and
(c) by Purchaser, if the conditions set forth in Sections 6.2
and 6.3 hereof shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated
(or by its nature cannot be cured or eliminated) by Stepic on or before
October 31, 1998.
Section 7.2. Specific Performance and Other Remedies. The parties
hereto each acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique and of extraordinary
character, and that, in the event that any party violates or fails or refuses to
perform any covenant or agreement made by it herein, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that in
the event that either party violates or fails or refuses to perform any covenant
or agreement made by such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any remedies at law
for damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
Section 7.3. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 7, this Agreement shall forthwith become void
and there shall be no liability on the part of any party or its respective
officers, directors, partners or stockholders, except for obligations under
Section 5.3, Section 9.14 and this Section 7.3, all of which shall survive the
termination. Notwithstanding the foregoing, nothing contained herein shall
relieve any party from liability for any breach of any covenant or agreement in
this Agreement prior to termination.
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ARTICLE 8.
INDEMNIFICATION
Section 8.1. Indemnification Obligations of Stepic Shareholders. From
and after the Closing, the Stepic Shareholders shall, severally and not jointly,
indemnify and hold harmless Purchaser and Stepic, each of their respective
officers, directors, employees, agents and representatives and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "Purchaser Indemnified Parties") from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to: (a) any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations against any
Purchaser Indemnified Party that relate to Stepic to the extent the principal
event giving rise thereto occurred prior to the Closing Date or which result
from or arise out of any action or inaction prior to the Closing Date of Stepic
or any affiliate, officer, director, partner, employee, agent, representative or
subcontractor of Stepic; (b) any breach of any representation, warranty,
covenant, agreement or undertaking made by Stepic in this Agreement or in any
certificate, agreement, exhibit, schedule or other writing delivered by Stepic
to Purchaser in connection with the matters contemplated hereby or pursuant to
the provisions hereof (collectively, the "Stepic's Ancillary Documents"); (c)
any fraud, willful misconduct, bad faith or any intentional breach of any
representation, warranty, covenant, agreement or undertaking made by Stepic or
the Stepic Shareholders in this Agreement or Stepic's Ancillary Documents; (d)
any losses relating to or in any manner arising out of any claim pursuant to any
statutes, regulations and ordinances relating to the protection of human health
and the environment (i) governing the operations of Stepic prior to the Closing
Date or (ii) existing as of the Closing Date, at any real property owned,
leased, occupied or used by Stepic including, without limitation, any items
identified in that certain Phase I Environmental Site Assessment (C.E.S. File
#960320), dated October 29, 1996, for Stepic's location at 37-31 30th Street,
Long Island City, New York and that certain Phase I Environmental Site
Assessment (C.E.S. File #960321), dated October 29, 1996, for Stepic's location
at 37-37 30th Street, Long Island City, New York; (e) any losses or costs
incurred by Stepic for Stepic's failure to be qualified to do business in
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, Rhode Island or
Vermont, provided, that this Section 8.1(e) shall not apply to the extent Stepic
Shareholders deliver a good standing certificate to Purchaser within ten days of
the Closing Date stating that Stepic is in good standing in such state as of the
Closing Date; or (f) any losses incurred by Stepic as a result of any Stepic
guaranty of any of Picheny's personal debt. The claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and damages of the
Purchaser Indemnified Parties described in this Section 8.1 as to which the
Purchaser Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as "Purchaser Losses" and, together with Purchaser
Losses, "Damages."
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Section 8.2. Indemnification Obligations of Purchaser. From and after
the Closing, Purchaser shall indemnify and hold harmless the Stepic Shareholders
and their respective agents and representatives, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Stepic Indemnified Parties") from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages whenever arising or incurred
(including, without limitation, amounts paid in settlement, costs of
investigation and reasonable attorneys' fees and expenses) arising out of or
relating to: (a) any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations against any
Stepic Indemnified Party that relate to the Purchaser or Stepic to the extent
the principal event giving rise thereto occurred after the Closing Date or which
result from or arise out of any action or inaction after the Closing Date of the
Purchaser or any affiliate, officer, director, partner, employee, agent,
representative or subcontractor of Purchaser; (b) any breach of any
representation, warranty, covenant, agreement or undertaking made by Purchaser
in this Agreement or in any certificate, agreement, exhibit, schedule or other
writing delivered by Purchaser to Stepic in connection with the matters
contemplated hereby or pursuant to the provisions hereof (the "Purchaser
Ancillary Documents"); or (c) any fraud, willful misconduct, bad faith or any
intentional breach of any representation, warranty, covenant, agreement or
undertaking made by Purchaser in this Agreement or the Purchaser Ancillary
Documents. The claims, liabilities, obligations, losses, costs, expenses,
penalties, fines and damages of Stepic Indemnified Parties described in this
Section 8.2 as to which Stepic Indemnified Parties are entitled to
indemnification are hereinafter collectively referred to as "Stepic Losses" and,
together with Purchaser Losses, "Damages."
Section 8.3. Indemnification Procedure.
(a) Promptly after receipt by a Purchaser Indemnified Party or
a Stepic Indemnified Party (hereinafter collectively referred to as an
"Indemnified Party") of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such Indemnified Party shall
notify Purchaser or Stepic, whoever is the appropriate indemnifying
party hereunder (the "Indemnifying Party"), of such complaint or of the
commencement of such action or proceeding; provided, however, that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying
Party shall relieve the Indemnifying Party from liability which the
Indemnifying Party may have hereunder with respect to such claim if,
but only if, and only to the extent that, such failure to notify the
Indemnifying Party results in the forfeiture by the Indemnifying Party
of rights and defenses otherwise available to the Indemnifying Party
with respect to such claim. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, to assume the
defense of such action or proceeding, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the
payment of the fees and disbursements of such counsel. In the event,
however, that the Indemnifying Party declines or fails to assume the
defense of the
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action or proceeding or to employ counsel reasonably satisfactory to
the Indemnified Party, in either case in a timely manner, then such
Indemnified Party may employ counsel to represent or defend it in any
such action or proceeding and the Indemnifying Party shall pay the
reasonable fees and disbursements of such counsel as incurred;
provided, however, that the Indemnifying Party shall not be required to
pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which
indemnification is being sought hereunder, the Indemnified Party or the
Indemnifying Party, whichever is not assuming the defense of such
action, shall have the right to participate in such litigation and to
retain its own counsel at such party's own expense. The Indemnifying
Party or the Indemnified Party, as the case may be, shall at all times
use reasonable efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the
status of the defense of any action the defense of which they are
maintaining and to cooperate in good faith with each other with respect
to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or
consent to the entry of any judgment with respect to which
indemnification is being sought hereunder without the prior written
consent of the Indemnifying Party, unless (i) such settlement,
compromise or consent includes an unconditional release of the
Indemnifying Party from all liability arising out of such claim and
(ii) the Indemnifying Party is not contesting the matter in good faith.
An Indemnifying Party may not, without the prior written consent of the
Indemnified Party, settle or compromise any claim or consent to the
entry of any judgment with respect to which indemnification is being
sought hereunder unless such settlement, compromise or consent includes
an unconditional release of the Indemnified Party from all liability
arising out of such claim and does not contain any equitable order,
judgment or term which in any manner affects, restrains or interferes
with the business of the Indemnified Party or any of the Indemnified
Party's respective affiliates.
(c) In the event an Indemnified Party shall claim a right to
payment pursuant to this Agreement, such Indemnified Party shall send
written notice of such claim to the appropriate Indemnifying Party.
Such notice shall specify the basis for such claim. As promptly as
possible after the Indemnified Party has given such notice, such
Indemnified Party and the appropriate Indemnifying Party shall
establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) business
days of the final determination of the merits and amount of such claim,
the Indemnifying Party shall deliver to the Indemnified Party
immediately available funds in an amount equal to such claim as
determined hereunder.
Section 8.4. Claims Period. Except as provided in this Section 8.4, no
claim for indemnification under this Agreement may be asserted by an Indemnified
Party after the expiration of the appropriate claims period (the "Claims
Period") which shall commence on the
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Closing Date and shall terminate on the earlier of (i) March 15, 2000 or (ii)
the date of issuance of the Purchaser's audit report for the fiscal year ended
December 31, 1999; provided, however, that the Claims period with respect to
Purchaser Losses (i) arising under Sections 8.1(d), 8.1(e) and 8.1(f), (ii)
arising out of the breach of any representations and warranties set forth in
Sections 2.2, 3.4 and 3.11 and (iii) arising out of the breach of the covenant
contained in Section 5.6 of this Agreement, shall commence on the date hereof
and shall survive and remain in effect without limitation, except as limited by
law; provided, further, however, that if prior to the close of business on the
last day of the Claims Period, an Indemnifying Party shall have been properly
notified of a claim for indemnity hereunder and such claim shall not have been
finally resolved or disposed of at such date, the basis of such claim shall
continue to survive with respect to such claim and shall remain a basis for
indemnity hereunder with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.
Section 8.5. Liability Limits. Notwithstanding anything to the contrary
set forth herein:
(a) Stepic Shareholders shall be liable to Purchaser
Indemnified Parties and Purchaser shall be liable to Stepic Indemnified
Parties for Damages only to the extent that any such Damages exceed, in
the aggregate, Two Hundred Thousand Dollars ($200,000) (the "Basket
Amount"); provided, however, that Damages arising under or pursuant to
Sections 2.2, 3.4, 3.11, 5.6, 8.1(d), 8.1(e) and 8.1(f) shall not be
subject to the Basket Amount, nor shall the amount of any such Damages
or indemnification be included in determining whether such Basket
Amount has been reached.
(b) The indemnification obligations of Stepic Shareholders or
Purchaser hereunder shall not exceed the $5,000,000 (the "Cap Amount");
provided, however, that any Damages arising under or pursuant to
Sections 2.2, 3.4, 3.11, 5.6, 8.1(d), 8.1(e) and 8.1(f) shall not be
subject to the Cap Amount and there shall be no limitation on the
indemnification obligations of Stepic Shareholders or Purchaser with
respect to Damages or indemnification arising under or pursuant to such
Sections.
Section 8.6. Disputes.
(a) Purchaser shall be entitled to offset (the "Offset") any
amount which it is owed by Stepic Shareholders under this Article 8
against any sum which it owes Stepic Shareholders under this Agreement.
(b) If Stepic Shareholders fail to object to the calculation
of the Offset as set forth in a written notice from Purchaser to Stepic
Shareholders describing such Offset, then such Offset set forth therein
shall be deemed to constitute the final and binding Offset for the
purposes hereof. In connection with such written notice, Purchaser
agrees to provide Stepic Shareholders with copies of material documents
utilized by Purchaser in arriving at its basis for the Offset and
substantiation of the amount of such Offset. If
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Stepic Shareholders provide Purchaser with a written objection to the
calculation of the Offset as set forth in such written notice within 30
days of the receipt thereof, then Stepic Shareholders and Purchaser
shall negotiate in good faith for a period not to exceed 30 days to
resolve such dispute and reach agreement upon the final and binding
calculation of the Offset. If, at the end of such 30-day negotiation
period, Stepic Shareholders and Purchaser shall have failed to resolve
such a dispute and to reach agreement upon the proper calculation of
the Offset, then Stepic Shareholders and Purchaser shall pursue, at
their election, remedies available at law.
(c) All such monies in dispute shall be held in escrow in an
interest-bearing account by a United States bank reasonably acceptable
by the parties hereto pursuant to an escrow agreement reasonably
acceptable by the parties thereto pending resolution of the matters set
forth herein.
Section 8.7. Jurisdiction and Forum.
(a) By the execution and delivery of this Agreement, each
Indemnifying Party irrevocably designates and appoints each of the
parties set forth under its name below as its authorized agent upon
which process may be served in any suit or proceeding arising out of or
relating to this Agreement all of which must be instituted in federal
court in the State of New York.
STEPIC SHAREHOLDERS:
Dennis Mandell, Esq.
Mandell Freedman & Mandell
60 East 42nd Street, Suite 2112
New York, New York 10165
with a copy to:
Benjamin Raphan, Esq.
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
PURCHASER:
Jon R. Harris, Jr., Esq.
King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763
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<PAGE> 39
In addition, each party agrees that service of process upon
the above-designated parties shall be deemed in every respect effective
service of process upon such Indemnifying Party in any such suit or
proceeding. Each such Indemnifying Party further agrees to take any and
all action reasonably requested by an Indemnified Party, including the
execution and filing of any and all such documents and instruments, as
may be necessary to continue such designation and appointment of the
above-designated parties in full force and effect so long as this
Agreement shall be in effect. The foregoing shall not limit the rights
of any party to serve process in any other manner permitted by law.
(b) To the extent that any Indemnifying Party has or hereafter
may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, each Indemnifying Party hereby irrevocably
waives such immunity in respect of its obligations with respect to this
Agreement.
(c) The parties hereto hereby agree that the only appropriate
forum and venue for any disputes between any of the parties hereto
arising out of this Agreement shall be any federal court in the State
of New York and each of the parties hereto hereby submits to the
personal jurisdiction of any such court. The foregoing shall not limit
the rights of any party to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by
law, that a final and unappealable judgment against any of them in any
action or proceeding contemplated above shall be conclusive and may be
enforced in any other jurisdiction within or outside the United States
by suit on the judgment, a certified or exemplified copy of which shall
be conclusive evidence of the fact and amount of such judgment.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
Section 9.1. Notices. All notices, communications and deliveries
hereunder shall be made in writing signed by the party making the same, shall
specify the Section hereunder pursuant to which it is given or being made, and
shall be deemed given or made on the date delivered if delivered in person, on
the date initially received if delivered by telecopy transmission followed by
registered or certified mail confirmation, on the date delivered if delivered by
a nationally recognized overnight courier service or on the third (3rd) business
day after it is mailed if mailed by registered or certified mail (return receipt
requested) (with postage and other fees prepaid) as follows:
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<PAGE> 40
To Purchaser:
Horizon Medical Products, Inc.
4200 Northside Parkway
Building 7
Atlanta, Georgia 30327-1000
Attn: Marshall B. Hunt
Telecopy No.: (404) 264-2611
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: Jon R. Harris, Jr., Esq.
Telecopy No.: (404) 572-5146
Slaughter & Virgin
Suite 1110
400 Colony Square
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Attn: Nathaniel G. Slaughter, III, Esq.
Telecopy No.: (404) 872-7879
To Stepic:
Stepic Medical, Inc.
37-31 30th Street
Long Island City, New York 11101
Attn: Steven Picheny
Telecopy No.: (718) 784-0828
with a copy to:
Mandell Freedman & Mandell
60 East 42nd Street, Suite 2112
New York, New York 10165
Attention: Dennis Mandell, Esq.
Telecopy No.: (212) 808-9769
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<PAGE> 41
To the Stepic Shareholders:
Stepic Medical, Inc.
37-31 30th Street
Long Island City, New York 11101
Attn: Howard Fuchs
Telecopy No.: (718) 784-0828
with a copy to:
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attention: Benjamin Raphan, Esq.
Telecopy No.: (212) 885-5001
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
Section 9.2. Disclosure Letters and Exhibits. The recitals at the
forefront of this Agreement, the Stepic Disclosure Letter and the Purchaser
Disclosure Letter and all Exhibits hereto are hereby incorporated into this
Agreement and are hereby made a part hereof as if set out in full in this
Agreement.
Section 9.3. Computation of Time. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
a Saturday, Sunday, or any date on which banks in Atlanta, Georgia are closed,
the party having such privilege or duty may exercise such privilege or discharge
such duty on the next succeeding day which is a regular business day.
Section 9.4. Assignment; Successors in Interest. No assignment or
transfer by Purchaser, Stepic, or the Stepic Shareholders of their respective
rights and obligations hereunder shall be made except with the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns, and any reference to a party hereto shall also be a reference to a
permitted successor or assign.
Section 9.5. Investigations; Representations and Warranties. The
representations and warranties of Stepic, the Stepic Shareholders and Purchaser
set forth in this Agreement shall not be extinguished by the Closing and shall
survive the Closing Date until the earlier of (i) March 15, 2000 or (ii) the
date of issuance of Purchaser's audit report for the fiscal year ended December
31, 1999; provided, however, that the representations and warranties of Stepic
and the Stepic Shareholders set forth in Sections 2.2, 3.4, and 3.11 shall
survive without limit.
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<PAGE> 42
Notwithstanding anything to the contrary set forth in this Section 9.5, (i) the
covenants, agreements and undertakings of Stepic, the Stepic Shareholders and
Purchaser set forth herein shall survive the Closing and shall remain in full
force and effect until duly satisfied or performed by the appropriate party
hereto and (ii) this Section 9.5 shall not limit or restrict Purchaser's, the
Stepic Shareholders' or Stepic's remedy against the other or any other person
for fraud, willful misconduct or bad faith. The respective representations and
warranties of Purchaser, the Stepic Shareholders and Stepic contained herein or
in any certificate, or other document delivered by any party prior to Closing
shall not be deemed waived or otherwise affected by any investigation made by a
party hereto.
Section 9.6. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
Section 9.7. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Exhibits are
references to Exhibits to this Agreement and Stepic's Disclosure Letter and the
Purchaser Disclosure Letter.
Section 9.8. Stepic Executives; Knowledge. As used in this Agreement,
the terms "the best knowledge of Stepic's Executives," "known to Stepic
Executives" or words of similar import used herein with respect to Stepic, its
business, assets or properties, shall mean the actual knowledge of Stepic
Executives (as hereinafter defined). The "Stepic Executives" shall consist of
Picheny, Fuchs and Selby.
Section 9.9. Controlling Law; Integration; Amendment.
(a) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without reference to that state's choice of law rules. This Agreement
and the documents and agreements delivered pursuant hereto supersede
all negotiations, agreements and understandings among the parties with
respect to the subject matter hereof and constitute the entire
agreement among the parties hereto.
(b) This Agreement may be amended by the parties hereto by or
pursuant to action duly and property taken by each of them. Without
limiting the foregoing, this Agreement may not be amended, modified or
supplemented except by written agreement executed by each of the
parties hereto.
Section 9.10. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or
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<PAGE> 43
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by law, the parties hereto waive any provision of law which renders
any such provision prohibited or unenforceable in any respect.
Section 9.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
Section 9.12. Enforcement of Certain Rights. 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, and their
successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, or result in such person, firm
or corporation being deemed a third party beneficiary of this Agreement.
Section 9.13. Waiver. At any time prior to the Closing, the parties
hereto, by or pursuant to action duly and properly taken by each of them, may,
to the extent legally permitted: (i) extend the time for the performance of any
of the obligations or other acts of any other party, provided the party so
extending is the party hereunder for whom such obligation or act so extended was
to be performed; (ii) waive any inaccuracies in the representations or
warranties of any other party contained in the Agreement or in any document or
certificate delivered pursuant hereto, provided the party so waiving is the
Party hereunder for whom such representation or warranty was made; (iii) waive
compliance or performance by any other party with any of the covenants,
agreements or obligations of such party contained herein, provided the party so
waiving such compliance or performance is the party hereunder for whom such
covenant, agreement or obligation was to be performed; and (iv) waive the
satisfaction of any condition that is precedent to the performance by the party
so waiving of any of its obligations hereunder. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. A waiver by one party
of the performance of any covenant, agreement, obligation, condition,
representation or warranty shall not be construed as a waiver of any other
covenant, agreement, obligation, condition, representation or warranty. A waiver
by any party of the performance of any act shall not constitute a waiver of the
performance of any other act or an identical act required to be performed at a
later time.
Section 9.14. Fees and Expenses. Except as otherwise provided herein
Purchaser shall pay its own fees, costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, including, but not
limited to, the fees, costs and expenses of its accountants and counsel. Except
as otherwise provided herein, each Stepic Shareholder shall pay its own fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees, costs
and expenses of its accountants and counsel.
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<PAGE> 44
Section 9.15. Best Efforts. For purposes of this Agreement, use of the
term "best efforts" shall not require any party to expend in the aggregate an
amount in excess of $1,000.
Section 9.16. Non-Stepic Assets. Purchaser hereby acknowledges that all
furniture and decorations in Picheny's office at Stepic are the sole property of
Picheny and are not part of the transaction included herein.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.
HORIZON MEDICAL PRODUCTS, INC.
By: ____________________________________
William E. Peterson, Jr.
President
STEPIC CORPORATION
By: ____________________________________
Steven Picheny
President
THE STEPIC SHAREHOLDERS:
By: ____________________________________
Steven Picheny
By: ____________________________________
Howard Fuchs
By: ____________________________________
Christine Selby
<PAGE> 1
EXHIBIT 99
[HMP Horizon Medical Products, Inc. LETTERHEAD]
FOR IMMEDIATE RELEASE
- ---------------------
SOURCE: Horizon Medical Products, Inc.
INVESTOR CONTACT: Mark Jewett
Vice President-Finance
706-846-3126
Web site: http://www.hmpvascular.com
- ------------------------------------
HORIZON MEDICAL PRODUCTS, INC. ACQUIRES STEPIC CORPORATION
Atlanta, Ga - October 19, 1998 - Horizon Medical Products, Incc. (NASDAQ:HMPS),
announced today the acquisition of Stepic Corporation, a privately owned
specialty medical products distributor based in Long Island City, New York.
Stepic has annual revenues of approximately $41 million. The purchase price
included a payment of $8.0 million in cash at closing, the assumption of
approximately $10.0 million in bank debt, and the payment of up to an additional
$12.0 million in cash over the next three years if certain earnings targets for
Stepic are met.
Stepic Medical is a premier distributor of specialty medical products that
serves a variety of specialized healthcare markets including vascular surgery,
the operating room, oncology, intravenous therapy, apheresis, the blood bank,
critical care and interventional radiology.
The acquisition of Stepic Medical, which is the largest distributor of HMP
products, will increase Horizon's direct sales team by adding 20 sales and
marketing specialists. Stepic's management team will stay on with Horizon as
part of this transaction.
Marshall B. Hunt, Horizon's Chairman and CEO, stated: "The Stepic acquisition,
along with the acquisition of Columbia Vital Systems last month, gives HMP new
strategic capabilities. With these two acquisitions, we have increased our
distribution by approximately 50% and have added substantial infrastructure
capabilities that Stepic has implemented over the past 25 years. HMP has built
one of the largest sales forces in the vascular products market in the United
States."
Steven Picheny, President of Stepic Medical, said: "We are very proud to be
affiliated with Horizon and are confident that our two organizations will become
one of the strongest in the medical products industry. This transaction
capitalizes on the expertise of Horizon and the operating infrastructure that
Stepic is known for. Our commitment to each manufacturer we represent remains
the same and we are confident that our sales and marketing experience will
provide them with continued growth."
Certain statements and information included herein may constitute
"forward-looking statements" which are made pursuant to the safe harbor
provisions of the private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on current expectations and may be
significantly impacted by certain risks and uncertainties described herein and
in the Company's Prospectus on Form S-1 filed with the Securities and Exchange
Commission. There can be no assurance that statements made in this press release
relating to future events will be achieved. The Company undertakes no obligation
to update or revise forward-looking statements to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
Horizon, headquartered in Manchester, Georgia, is a rapidly growing specialty
medical device company focused on manufacturing and marketing vascular
products. The Company's vascular access product line include implantable ports,
which are used primarily in cancer treatment protocols, and specialty
catheters, which are used in hemodialysis and stem cell apheresis procedures.
###
