EXHIBIT 2.7
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ASSET CONTRIBUTION AND EXCHANGE AGREEMENT
among
MEDSOURCE TECHNOLOGIES, INC.
THE MICROSPRING COMPANY, LLC
as the Transferee
and
THE MICROSPRING CO., INC.
as the Transferor
and
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and In Sup ▇▇▇▇, M.D.
as Shareholders of the Transferor
Dated as of March 24, 1999
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TABLE OF CONTENTS
PAGE
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Contribution and Exchange of Assets ..........................................1
Contribution and Exchange .................................................1
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Excluded Assets ...........................................................3
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Consents ..................................................................4
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Assumption of Specified Liabilities...........................................4
Assumption ................................................................4
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Excluded Liabilities ......................................................4
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Consideration; Payment........................................................6
Consideration .............................................................6
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Payment ...................................................................6
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Transfer Taxes ............................................................7
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Allocation of Consideration ...............................................7
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Closing.......................................................................8
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Representations and Warranties of the Transferor and the Shareholders.........8
Organization ..............................................................8
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Capitalization ............................................................8
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Authorization; Validity of Agreement ......................................9
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No Violations; Consents and Approvals .....................................9
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Financial Statements .....................................................10
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No Material Adverse Change ...............................................11
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No Undisclosed Liabilities ...............................................11
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Litigation; Compliance with Law; Licenses ................................11
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Employee Benefit Plans; ERISA ............................................12
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Real Property ............................................................13
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Intellectual Property; Computer Software .................................14
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Title to Acquired Assets; Capital Budget .................................15
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Material Contracts .......................................................16
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Taxes ....................................................................16
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Affiliated Party Transactions ............................................18
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Environmental Matters ....................................................19
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No Brokers ...............................................................21
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Receivables ..............................................................21
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Inventories ..............................................................21
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Product Claims ...........................................................21
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Warranties and Returns ...................................................22
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Assets Utilized in the Business ..........................................22
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Insurance ................................................................22
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Delivery of Documents; Corporate Records .................................22
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TABLE OF CONTENTS (Cont'd.)
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Customers, Suppliers and Distributors ....................................23
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Labor Matters ............................................................23
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Bank Accounts ............................................................23
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Directors, Officers and Certain Employees ................................23
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Year 2000 ................................................................23
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No Misstatements or Omissions ............................................24
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Investment Undertaking ...................................................24
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Size of Person for Purposes of HSR Act ...................................24
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Representations and Warranties of the MedSource and Transferee...............25
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Organization .............................................................25
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Capitalization ...........................................................25
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Authorization; Validity of Agreement .....................................26
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No Violations; Consents and Approvals ....................................26
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No Material Adverse Change ...............................................27
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Litigation; Compliance with Laws; Licenses ...............................27
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Title to Properties ......................................................28
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Brokers ..................................................................28
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Information Supplied to Transferor and Shareholders ......................28
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Shares of Capital Stock ..................................................28
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Certain Tax Matters ......................................................28
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Size of Person for Purposes of HSR Act ...................................29
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Other Agreements of the Parties..............................................29
Conduct of Business by the Transferor ....................................29
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Conduct of Business by MedSource .........................................31
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Access and Information ...................................................32
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Tax Returns; Taxes .......................................................32
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Notice of Developments ...................................................32
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Non-Disclosure of Confidential Information ...............................33
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No Solicitation of Employees, Suppliers or Customers .....................33
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Non-Competition ..........................................................33
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Public Statements ........................................................34
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Other Actions ............................................................35
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Change of Name ...........................................................35
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Cooperation on Taxes .....................................................35
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Employees ................................................................35
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Consents; Releases .......................................................36
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Reserved .................................................................36
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Employment Agreements ....................................................37
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Stockholders Agreement and Registration Rights Agreement .................37
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Exclusivity ..............................................................37
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Equipment, Intellectual Property and Other Assets ........................37
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TABLE OF CONTENTS (Cont'd.)
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Certain Payments .........................................................37
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Transfer of Interests in Real Property ...................................37
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Inventory Count ..........................................................39
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Accounts Receivable ......................................................39
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Revised Memorandum .......................................................40
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Conditions Precedent to the Closing..........................................40
Conditions Precedent to MedSource's and the Transferee's
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Obligations to Close ..................................................40
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Conditions Precedent to the Transferor's Obligations to Close ...............42
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Documents to be Delivered at the Closing ....................................44
Deliveries of the Transferor and the Shareholders ........................44
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Deliveries of the Transferee .............................................45
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Termination .................................................................46
Survival of Representations and Warranties ..................................46
Survival of Representations and Warranties of the Transferor
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and the Shareholders ..................................................46
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Survival of Representations and Warranties of MedSource and
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the Transferee ........................................................47
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Indemnification .............................................................47
Indemnification by the Transferor and the Shareholders ...................47
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Indemnification by MedSource and the Transferee ..........................48
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Indemnification Procedures ...............................................48
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Limitations on Indemnification ...........................................50
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Miscellaneous ...............................................................51
Transaction Fees and Expenses ............................................51
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Notices ..................................................................51
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Amendment ................................................................52
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Waiver ...................................................................52
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Governing Law ............................................................52
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Jurisdiction .............................................................52
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Remedies .................................................................53
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Severability .............................................................53
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Further Assurances .......................................................53
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Assignment ...............................................................53
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Binding Effect ...........................................................53
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No Third Party Beneficiaries .............................................53
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Entire Agreement .........................................................53
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Headings .................................................................54
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Counterparts .............................................................54
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Bulk Sales Law ...........................................................54
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SIGNATURES...................................................................55
Schedules
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Schedule A Addresses for the Transferor and the Shareholders
Schedule 3.4 Asset Allocation
Schedule 5.2 Options, Warrants Etc.
Schedule 5.4(b) Governmental Consents and Approvals
Schedule 5.4(c) Non-Governmental Consents and Approvals
Schedule 5.4(d) Certain Licenses
Schedule 5.5 Financial Statements
Schedule 5.6 Material Adverse Change
Schedule 5.8 Litigation; Compliance with Laws; Licenses
Schedule 5.9(a) Employee Benefit Plans
Schedule 5.9(b) Employee Benefit Plans subject to Title IV of ERISA
Schedule 5.10(b) Leases; Site Issues
Schedule 5.11(a) Intellectual Property; Rights of Ownership
Schedule 5.12(a) Liens
Schedule 5.12(b) Fixed Assets Ledger
Schedule 5.12(c) Capital Budget
Schedule 5.13(a) Material Contracts
Schedule 5.13(b) Defaults
Schedule 5.13(c) Other Contracts
Schedule 5.14(a) Subchapter S elections
Schedule 5.14(b) Tax Proceedings
Schedule 5.16 Environmental Matters
Schedule 5.20 Service and Product Liability Claims
Schedule 5.21 Warranties and Returns Policies; Product Failures or Defects
Schedule 5.22 Assets Utilized in the Business
Schedule 5.23 Insurance Policies
Schedule 5.25 Sales; Sales to Customers; Suppliers and Distributors
Schedule 5.27 Bank Accounts
Schedule 5.28 Directors, Officers, Certain Employees
Schedule 5.29 Year 2000
Schedule 6.2(a) MedSource Stockholders
Schedule 7.4(b) Request for Waiver of Corporate Tax Lien
Schedule 7.13(a) Employees
Exhibits
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Exhibit 7.13(g) Form of Plan Assumption
Exhibit 7.16 Form of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit 7.17A Form of Stockholders Agreement
Exhibit 7.17B Form of Registration Rights Agreement
Exhibit 7.21(a) Form of Lease Assignment
Exhibit 7.21(c) Form of Landlord-Lender Agreement
Exhibit 8.1(l) Form of ▇▇▇▇ of Sale, Assignment and Assumption Agreement
ASSET CONTRIBUTION AND EXCHANGE AGREEMENT
Dated as of March 24, 1999
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The parties to this Asset Contribution and Exchange Agreement (this
"Agreement") are MedSource Technologies, Inc., a Delaware corporation
("MedSource"), The MicroSpring Company, LLC, a Delaware limited liability
company (the "Transferee"), The MicroSpring Co., Inc., a Massachusetts
corporation (the "Transferor"), and ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and In Sup ▇▇▇▇, M.D., who will collectively own
all of the outstanding capital stock of the Transferor on the Closing Date
(collectively, the "Shareholders").
Recitals
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A. The Transferor is engaged in the business of designing, developing,
manufacturing and marketing wire formed and microspring-based components and
wire formed and microspring-based completed devices and related products and
services (collectively, the "Business").
B. The Transferee desires to acquire from the Transferor, and the
Transferor desires to contribute to the Transferee, all of the Transferor's
assets and properties relating to the Business in consideration for the payment
of cash and Common Stock (as defined in section 3.1) and the assumption of the
liabilities specified below, on the terms and subject to the conditions set
forth herein.
C. The transactions contemplated by this Agreement are an integral part of
a single transaction pursuant to which MedSource is raising money and acquiring
its initial business (directly or indirectly), including the Acquired Assets (as
defined section 1.1).
Agreement
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The parties agree as follows:
1. Contribution and Exchange of Assets.
1.1 Contribution and Exchange. Upon the terms and subject to the conditions
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contained in this Agreement, at the Closing (as defined in section 4), the
Transferor shall contribute, exchange, assign, transfer and deliver to the
Transferee, and the Transferee shall purchase and accept from the Transferor,
all of the assets and rights of every nature, kind and description, tangible and
intangible, wherever located, that are owned, used or held for use by the
Transferor in or for the Business, as the same shall exist on the Closing Date
(as defined in section 4) (collectively, the "Acquired Assets"), free and clear
of any and all liens, charges, claims, pledges, security interests or other
encumbrances ("Liens") including, without limitation, the following:
(1) cash, cash equivalents and marketable securities;
(2) accounts receivable, notes receivable, drafts or other similar
instruments;
(3) inventory, including but not limited to finished goods, work in
process, raw materials and supplies;
(4) prepaid expenses and deposits;
(5) machinery, equipment, tools and dies, hand tools, vehicles,
computers and other data processing hardware (and all software related thereto
or used therewith) and other tangible personal property of similar nature,
including but not limited to all items set forth on the Transferor's fixed asset
ledger attached to this Agreement on Schedule 5.12(b) (collectively, the
"Machinery and Equipment");
(6) office furniture, office equipment, fixtures and other tangible
personal property of similar nature (collectively, the "Furniture and
Fixtures");
(7) interests to the extent owned by the Transferor in any patent,
copyright, trademark, trade name, brand name, service ▇▇▇▇, service name,
assumed name, logo, symbol, trade dress, design or representation or expression
of any thereof, or registration or application for registration thereof, or any
other invention, trade secret, technical information, know-how, proprietary
right or intellectual property, technologies, methods, designs, drawings,
software (including documentation and source code listings), processes and other
proprietary properties or information (collectively, the "Intellectual
Property");
(8) real property interests described in Schedule 5.10(b) to this
Agreement together with all buildings, facilities and other improvements thereon
and all licenses, leases, rights, privileges and appurtenances thereto
including, without limitation, all leases, agreements and other rights to use,
occupy or possess, or otherwise with respect to, real property or machinery,
equipment, vehicles, and other tangible personal property of similar nature to
which the Transferor is a party, and all rights arising under or pursuant to
such leases, agreements and rights;
(9) to the extent not included above, and subject to sections 1.2 and
1.3, the Material Contracts (other than those Material Contracts listed as
Excluded Assets) listed on Schedule 5.13 (including, without limitation, the
rights under, and proceeds from, any arrangement with Medtronic, Inc. relating
to the OEM Agreement between the Transferor and
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Medtronic, Inc.) and all Contracts (as defined in section 5.4(a)) that arose in
the ordinary course and are not required to be listed on Schedule 5.13 because
they are not included in the definition of "Material Contracts" (collectively,
the "Assigned Contracts");
(10) customer and supplier lists, mailing lists, catalogs, brochures
and handbooks relating to the Business;
(11) other books, records, files, contracts, plans, notebooks,
production and sales data and other data of the Transferor relating to the
Business, whether or not in tangible form or in the form of intangible computer
storage media such as optical disks, magnetic disks, tapes and all similar
storage media;
(12) the goodwill associated with the Business, the name "MicroSpring"
and any and all variations thereof and all similar names and the goodwill
associated therewith, together with all trademarks, service marks and trade
names of the Transferor related to the Business, if any;
(13) rights related to any portion of the Business or the Acquired
Assets, including third party warranties and guarantees and other similar
contractual rights, as to third parties held by or in favor of the Transferor,
and arising out of, resulting from or relating to the Business or the Acquired
Assets; and
(14) rights to insurance and condemnation proceeds relating to any
damage, destruction, taking or other similar impairment of any of the Acquired
Assets.
1.2 Excluded Assets. The only assets of the Transferor that the Transferee
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is not acquiring hereby (the "Excluded Assets") are:
(1) the consideration to be delivered to the Transferor pursuant to
this Agreement for the Acquired Assets to be sold to the Transferee hereunder
and the rights of the Transferor hereunder;
(2) any and all Contracts other than the Assigned Contracts;
(3) the rights of the Transferor under the Commercial Lease Agreement,
effective February 16, 1999 between Longwater Realty Trust and the Transferor,
subject to section 7.21(g);
(4) any and all employment agreements between the Transferor and its
employees;
(5) the key man life insurance policy of the Transferor with ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ as the insured;
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(6) the articles of organization, corporate seals, minute books, stock
books, Tax Returns (as defined in section 5.14(d)) and supporting data prepared
expressly in connection therewith, and other records prepared directly in
connection with the corporate organization and capitalization of the Transferor
and/or its operation as a corporation under applicable Laws (as defined in
section 5.8(b)); and
(7) shares of the capital stock of the Transferor.
1.3 Consents. To the extent that the assignment of any Assigned Contract
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shall require the Consent (as defined in section 5.4(c)) of the other parties
thereto or of any third parties, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or of other obligations or commitments of the Transferor. The
Transferor shall take any and all action necessary to obtain all such Consents
prior to the Closing Date. If any such Consent is not obtained, and the
Transferee waives the obtaining of such Consent as a condition precedent
hereunder, then the Transferor shall continue such efforts after the Closing
Date and until such Consent is obtained and shall cooperate with the Transferee
in any arrangement (such as subcontracting, sublicensing or subleasing)
requested by the Transferee intended to provide for the Transferee all of the
benefits of the Transferor under such Contract.
2. Assumption of Specified Liabilities.
2.1 Assumption. Upon the terms and subject to all of the conditions
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contained herein, at the Closing, the Transferee shall assume, and agree to pay,
perform and discharge (i) the liabilities of the Transferor that are reflected
as "accounts payable," "accrued compensation," "accrued liabilities," "accrued
state taxes payable" (only to the extent set forth on Schedule 5.14(b)) and
"deferred revenue" on the December 31 Balance Sheet (as defined in section 5.5
and attached to Schedule 5.5 hereto) and not discharged by the Transferor before
the Closing and (ii) the obligations and liabilities of the Transferor incurred
as "accounts payable," "trade payables," "accrued compensation," "accrued
liabilities," "accrued state taxes payable" and "deferred revenue" since
December 31, 1998 in the ordinary course of business and that are unpaid as of
the Closing Date and related to the ordinary operation of the Business and not
in contravention of section 7.1 (all of the foregoing, collectively, the
"Assumed Liabilities" and, individually, an "Assumed Liability"), such that the
Transferor will incur no liability in connection therewith, and the Transferee
shall indemnify the Transferor with respect to and shall hold the Transferor
harmless from and against all Assumed Liabilities.
2.2 Excluded Liabilities. The Transferee is only assuming the liabilities
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and obligations of the Transferor expressly set forth in section 2.1. Without
limiting the generality of the foregoing, the Transferee shall not be assuming,
and the Transferor shall remain responsible for and shall promptly pay, perform
and discharge, all of the liabilities and obligations of the
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Transferor other than the Assumed Liabilities (the "Excluded Liabilities") such
that the Transferee will incur no liability in connection therewith, and the
Transferor shall indemnify the Transferee with respect to and shall hold the
Transferee harmless from and against all such Excluded Liabilities, including
but not limited to the following:
(1) any obligation or liability of the Transferor arising from a
breach of a representation or warranty herein on its part or its failure to
fully, faithfully and promptly perform any agreement or covenant on its part
contained herein;
(2) any obligation or liability of the Transferor to the extent the
same arose prior to the Closing pursuant to any federal, state or local Laws,
whether relating to the environment, the health and safety standards applicable
to employees, employee benefit plans, wage and hour Laws or other labor related
matters or otherwise;
(3) any obligation or liability of the Transferor to the extent that
the Transferor shall be indemnified by an insurer;
(4) any expenses of the Transferor incurred in connection with the
transactions contemplated hereunder (including but not limited to fees and
expenses of finders, investment bankers, business brokers, attorneys and
accountants), it being understood that all such expenses shall be paid by the
Transferor out of the Excluded Assets or the consideration to be delivered to
the Transferor pursuant to this Agreement for the Acquired Assets to be
exchanged with the Transferee hereunder, and not out of any of the Acquired
Assets;
(5) any obligations relating to an Excluded Asset;
(6) any liability for Taxes (as defined in section 5.14(d)) of the
Transferor with respect to any period on or prior to the Closing Date, except
for "accrued corporate state taxes" included as Assumed Liabilities;
(7) any indebtedness for borrowed money or any guaranty thereof,
including, without limitation, any and all obligations of the Transferor under
any capitalized leases;
(8) any amount due to any Shareholder or Affiliate;
(9) any pension, profit-sharing or workmen's compensation or other
employee benefit or post retirement plan and any liability or obligation arising
thereunder;
(10) any liability or obligation for, with respect to, related to or
arising out of any goods sold, shipped or delivered by the Transferor prior to
Closing, including but not limited to any liability as a result of any injury to
persons or property;
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(11) any liability for, or obligation under, any options, warrants,
calls, preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating the Transferor to issue,
transfer or sell any shares of capital stock, options, warrants, calls or other
equity interests of any kind whatsoever or securities convertible into or
exchangeable for securities or equity interests, including, without limitation,
any and all of the foregoing that may convert into an equity interest of a
successor to the Transferor; and
(12) all claims of employees arising out of events, conditions and
circumstances existing or occurring prior to Closing, including, but not limited
to, medical and health claims and disability claims.
3. Consideration; Payment.
3.1 Consideration. As consideration (the "Consideration") for the
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contribution, exchange, assignment, transfer and delivery of the Acquired Assets
by the Transferor to the Transferee, and upon the terms and subject to the
conditions contained herein, the Transferee shall assume the Assumed Liabilities
and shall pay, in the manner set forth in section 3.2, an aggregate amount as
follows: (a) $5,050,000 (the "Cash Consideration") by wire transfer of
immediately available funds to an account designated in writing by the
Transferor at least three days prior to the Closing and (b) 42,500 shares (the
"Shares") of the common stock, par value $.01 per share, of MedSource ("Common
Stock").
3.2 Payment.
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(1) At the Closing, the Transferee shall deliver to the Transferor (i)
the Cash Consideration and (ii) certificates representing the Shares.
(2) In the event that (i) the Transferor purchases any equipment,
intellectual property or other assets from any Shareholder or any Affiliate (as
defined in section 5.15) of any Shareholder pursuant to section 7.18, then the
Cash Consideration delivered to the Transferor shall be reduced by an amount
equal to the amount of cash or value of property paid to such Shareholders or
such Affiliates, if any, or (ii) the Massachusetts Department of Revenue informs
the Transferee that the Transferor owes any Taxes, then the Cash Consideration
delivered to the Transferor shall be reduced by the amount of Taxes that such
state informs the Transferee are owed by the Transferor and such amount on
behalf of the Transferor shall be paid to such state by the Transferee.
(3) Any indemnification payment under this Agreement shall be treated
as an adjustment to the Consideration.
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3.3 Transfer Taxes. All sales, use, transfer, excise and similar taxes
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imposed by any state, county, local or other governmental entity or Taxing
Authority (as defined in section 5.14(b)) as a result of the transfer of the
Acquired Assets hereunder shall be duly and timely paid by the Transferor. The
Transferor shall duly and timely file all Tax Returns in connection with such
Taxes. The Transferor shall give a copy of each such Tax Return to the
Transferee for its review with sufficient time for incorporation of the
Transferee's comments prior to filing, and shall give the Transferee a copy of
the Tax Return as filed, together with proof of payment of the Tax shown
thereof, promptly after filing. At or prior to the Closing, the Transferee shall
deliver to the Transferor (i) a properly completed and executed Massachusetts
Sales Tax Resale Certificate, Form ST-4, indicating that it holds a valid
Massachusetts Sales tax registration and that the Acquired Assets which
constitute inventory of the Transferor are being acquired by the Transferee for
resale and (ii) a properly completed and executed Massachusetts Exempt Use
Certificate, Form ST-12, relating to the acquisition of the Acquired Assets that
constitute machinery and equipment to be used directly and exclusively in the
actual manufacture of tangible personal property to be sold hereunder; provided,
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however, that if, notwithstanding the foregoing clause (i), the Transferee is
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unable to deliver to the Transferor by the Closing a properly completed and
executed Form ST-4, the Transferee shall (x) deliver to the Transferor by the
Closing a letter in which the Transferee represents that the Transferee is
acquiring such inventory for resale in the ordinary course of its business, (y)
provide to the Transferor a copy of such Form ST-4 as soon as practicable after
the Closing and (z) indemnify the Transferor pursuant to this Agreement if the
transfer of any such inventory to the Transferee hereunder is subject to
Massachusetts sales tax.
3.4 Allocation of Consideration.
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(1) MedSource, the Transferee and the Transferor hereby agree that the
Consideration shall be allocated among the Acquired Assets in accordance with
Schedule 3.4. MedSource, the Transferee, the Transferor and the Shareholders (i)
shall be bound by such allocation for all purposes, including determining any
Tax resulting from the transfer of the Acquired Assets, (ii) shall prepare and
file all Tax Returns, including the information required under Treasury
Regulation Section 1.351-3 (the "Section 351 Schedule"), in a manner consistent
with such allocations, and (iii) shall not take any position inconsistent with
such allocations in any Tax Return, any proceeding before any Taxing Authority
or otherwise. In the event that any allocation is questioned, audited or
disputed by any Taxing Authority, the party receiving notice thereof shall
promptly notify and consult with the other party concerning the strategy for the
resolution thereof, and shall keep the other party apprised of the status of
such question, audit or dispute and the resolution thereof.
(2) MedSource, the Transferee and the Transferor shall duly and timely
file their respective Tax Returns containing the Section 351 Schedule in
accordance with this section 3.4. Each of MedSource, the Transferee and the
Transferor shall furnish a copy of the Section 351 Schedule filed by it to the
other promptly after filing.
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(3) Within 60 days after the Closing, the Shareholders shall cause the
Transferor to, and the Transferor shall, deliver to the Transferee a schedule
that sets forth the true, complete and correct tax basis of each Acquired Asset
in the hands of the Transferor immediately prior to the Closing.
4. Closing. The closing (the "Closing") of the transactions contemplated by this
-------
Agreement shall take place at the offices of the Transferee's counsel in New
York City, at 10:00 a.m. local time (i) on or before ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) or at
such other date and time on which all the conditions set forth in section 8 of
this Agreement are satisfied or (iii) on such date on or before April 30, 1999
on which the Transferee informs the Transferor in writing that such Closing
shall take place and all of the conditions set forth in section 8 of this
Agreement are satisfied (the "Closing Date").
5. Representations and Warranties of the Transferor and the Shareholders.
The Transferor represents and warrants to MedSource and the Transferee, and
the Shareholders severally (and not jointly) represent and warrant to MedSource
and the Transferee, as follows:
5.1 Organization. The Transferor is a corporation duly organized, validly
------------
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Transferor is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary. The Transferor has delivered to the Transferee true, correct and
complete copies of the Transferor's articles of organization and bylaws, as
currently in effect. The Transferor is not in violation of any term of its
articles of organization or bylaws, or in violation of any term of any
agreement, instrument, judgment, decree, order, statute, rule or government
regulation applicable thereto or to which it is a party.
5.2 Capitalization. The Shareholders are the only shareholders of the
--------------
Transferor and collectively own all of the issued and outstanding capital stock
of the Transferor of record and beneficially, free and clear of all Liens. The
Transferor does not own any shares of capital stock (or other equity interests
of entities other than corporations) of any partnership, joint venture, trust,
corporation, limited liability company or other entity. Except as set forth on
Schedule 5.2, there are no (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating the Transferor or any of the Shareholders to issue,
transfer or sell any shares of capital stock, options, warrants, calls or other
equity interest of any kind whatsoever in the Transferor or securities
convertible into or exchangeable for such shares or equity interests, (ii)
contractual obligations of the Transferor to repurchase, redeem or otherwise
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acquire any capital stock or equity interest of the Transferor or (iii) voting
trusts, proxies or similar agreements to which the Transferor or any of the
Shareholders is a party with respect to the voting of the capital stock of the
Transferor.
5.3 Authorization; Validity of Agreement. Each of the Transferor and the
------------------------------------
Shareholders has the requisite capacity and authority to execute, deliver and
perform this Agreement and each of the other agreements, instruments, documents
and certificates to be executed and delivered pursuant to this Agreement,
including but not limited to, any item referred to in section 9 (collectively,
with this Agreement, the "Transaction Documents") to which it is a party and to
assume and perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. Each of this Agreement and the
other Transaction Documents has been duly executed, authorized and delivered by
each of the Transferor and the Shareholders party thereto and is a valid and
binding obligation of each of the Transferor and the Shareholders, enforceable
against each of the Transferor and the Shareholders in accordance with their
respective terms, except as such enforceability may be subject to or limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally.
5.4 No Violations; Consents and Approvals.
-------------------------------------
(1) The execution, delivery and performance of each of this Agreement
and the other Transaction Documents by each of the Transferor and the
Shareholders parties thereto do not, and the consummation by each of the
Transferor and the Shareholders of the transactions contemplated hereby and
thereby will not, (i) violate any provision of the articles of organization or
bylaws of the Transferor, (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, lease, option, contract,
undertaking, understanding, covenant, agreement or other instrument or document
(collectively, a "Contract") to which either the Transferor or any Shareholder
is a party or by which any of the properties or assets of the Transferor or any
Shareholder may be bound or otherwise subject or (iii) violate any order, writ,
judgment, injunction, decree, law, statute, rule or regulation applicable to the
Transferor or any Shareholder or any of their respective properties or assets.
(2) No prior or subsequent filing or registration with, notification
to, or authorization, consent or approval of, any foreign, provincial, United
States federal, state, county, municipal or other local jurisdiction, political
entity, body, organization, subdivision or branch, legislative or executive
agency or department or other regulatory service, authority or agency, including
but not limited to the United States Food and Drug Administration (the "FDA"),
the United States Health Care Financing Administration ("HCFA") and any foreign,
state or local agency with authority or responsibility similar to that of the
FDA or HCFA (a "Governmental Entity") is required in connection with the
execution, delivery and performance of this Agreement or any of the other
Transaction Documents to which the Transferor or any
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Shareholder is a party or the consummation by the Transferor or any Shareholder
of the transactions contemplated hereby and thereby, except for such filings,
registrations, notifications, authorizations, consents and approvals as are set
forth on Schedule 5.4(b) hereof.
(3) No prior or subsequent filing or consent, approval, order,
authorization, notification to, notice to, estoppel certificate, registration,
ratification, declaration, waiver, exemption or variance (collectively, together
with the filings, registrations, notifications, authorizations, consents and
approvals of Governmental Entities set forth in section 5.4(b), "Consents") of
any individual or entity (a "Person") is required in connection with the
execution, delivery and performance of this Agreement or any of the other
Transaction Documents to which the Transferor, any Shareholder or any other
shareholder of the Transferor is a party or the consummation by the Transferor,
any Shareholder or any other shareholder of the Transferor of the transactions
contemplated hereby and thereby, except for such Consents as are set forth on
Schedule 5.4(b) or (c) hereof.
(4) Schedule 5.4(d) sets forth a list of all licenses, permits,
filings, qualifications, registrations, franchises, certifications,
authorizations and similar credentials and documents from any Governmental
Entity or any private licensing or certifying organization (collectively,
"Licenses") that the Transferor now holds, or at any time since December 31,
1995 held, in connection with its business, including but not limited to any
Licenses from the FDA with respect to the qualification of the Transferor's
facilities under "good manufacturing practices" requirements and any Licenses
pertaining to ISO 9000 or ISO 9002 certification. The Transferor makes no
representation as to the transferability of any of its Licenses. However, no
License is at risk of being forfeited, canceled or not renewed and no fact or
circumstance relating to the Transferor's business activities, personnel,
products or facilities would cause any License to be forfeited, canceled or not
renewed. Except as set forth on Schedule 5.4(d), since December 31, 1995,
neither the FDA nor any similar Governmental Agency has issued any "483 reports"
or similar reports, findings or citations and there are no outstanding matters
with respect to any such "483 reports" or similar reports, findings or
citations.
5.5 Financial Statements. Attached to Schedule 5.5 are true, correct and
--------------------
complete copies of the balance sheet of the Transferor as of December 31, 1998
(the "December 31 Balance Sheet"), together with the related statements of
operations and cash flows for the year ended December 31, 1998, and the balance
sheets of the Transferor as of December 31, 1996 and 1997, together with the
related statements of operations and cash flows (including the related notes)
for the two fiscal years then ended (all of the foregoing, the "Financial
Statements"). The foregoing financial statements for the years ended December
31, 1996 and 1997 have been audited by PricewaterhouseCoopers LLP (and its
predecessor, Coopers & ▇▇▇▇▇▇▇ L.L.P.). The Financial Statements have been
derived from, and agree with, the books and records of the Transferor and fairly
present the financial position of the Transferor as of the respective dates
thereof and the results of operations of the Transferor for the respective
periods set forth therein. Each of the Financial Statements has been prepared in
accordance with generally accepted
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accounting principles as of the date of this Agreement ("GAAP") as of the dates
and for the periods involved.
5.6 No Material Adverse Change. Except as disclosed on Schedule 5.6, since
--------------------------
December 31, 1997, (a) no event, condition or circumstance has occurred that
could, or could be reasonably likely to, have a material adverse effect on the
Business, Acquired Assets or Assumed Liabilities, or on the condition (financial
or otherwise), results of operations or prospects of the Transferor or the
Business (a "Material Adverse Effect"); and (b) the Business has been conducted
in the ordinary course and consistent with past practice. As amplification and
not in limitation of the foregoing, since December 31, 1997, the Transferor has
not (i) made any change in any method of accounting or accounting practice,
principle or policy used by the Transferor, (ii) incurred any indebtedness,
obligation or liability or paid, satisfied or discharged any indebtedness,
obligation or liability prior to the due date or maturity thereof, except
current indebtedness, obligations and liabilities in the ordinary course of
business, or (iii) made any change or modification in any manner of the
Transferor's (A) billing and collection policies, procedures and practices with
respect to accounts receivable or unbilled charges, (B) policies, procedures and
practices with respect to the provision of discounts, rebates or allowances, or
(C) payment policies, procedures and practices with respect to accounts payable.
5.7 No Undisclosed Liabilities.
--------------------------
(1) The Transferor does not have, and as of the Closing will not have,
any liabilities (whether accrued, contingent, known, or otherwise) other than
those that (i) are set forth or reserved against in the balance sheets referred
to in section 5.5; or (ii) were incurred since December 31, 1997 in the ordinary
course of business, none of which, individually or in the aggregate, is material
to the business, operations, condition or prospects of the Business.
(2) The accounts payable of the Transferor set forth in the balance
sheets referred to in section 5.5 or arising subsequent thereto are the result
of bona fide transactions in the ordinary course of business and have been paid
---- ----
or are not yet due and payable as at the Closing Date, in accordance with the
respective invoices relating thereto.
5.8 Litigation; Compliance with Law; Licenses.
-----------------------------------------
(1) Except as set forth on Schedule 5.8, there is no claim, suit,
action or proceeding ("Proceeding") pending, nor, to the best knowledge of the
Transferor and each of the Shareholders, is there any investigation or
Proceeding threatened, that involves or affects the Transferor or the Business,
by or before any Governmental Entity, court, arbitration panel or any other
Person.
(2) Except as disclosed under "Site Issues" on Schedule 5.10(b), the
Transferor and the Business have, and on the Closing Date will have, complied
with all applicable foreign, provincial, United States federal, state, county,
municipal or other local
-11-
criminal, civil or common laws, statutes, ordinances, orders, codes, rules,
regulations, permits, policies, guidance documents, judgments, decrees,
injunctions, or agreements of any Governmental Entity (collectively, "Laws"),
including but not limited to Laws relating to zoning, building codes, antitrust,
occupational safety and health, industrial hygiene, the manufacture, sale,
lease, import and export of medical devices and equipment and components
thereof, environmental protection, water, ground or air pollution, the
generation, treatment, storage or disposal of Hazardous Substance (as defined in
section 5.16), consumer product safety, product liability, hiring, wages, hours,
employee benefit plans and programs, collective bargaining and the payment of
withholding and social security taxes. Since January 1, 1995, the Transferor has
not received any notice of any violation of any Law.
(3) Each of the Transferor and the Business has every License, permit,
certification, qualification or franchise issued by any Governmental Entity
(each, a "Permit") required for it to conduct its business as presently
conducted. All such Licenses and Permits are in full force and effect and
neither the Transferor nor any Shareholder has received notice of any pending
cancellation or suspension of any thereof nor, to the best knowledge of the
Transferor and each of the Shareholders, is any cancellation or suspension
thereof threatened. The applicability and validity of each such License and
Permit will not be adversely affected by the consummation of the transactions
contemplated by this Agreement.
5.9 Employee Benefit Plans; ERISA.
-----------------------------
(1) Schedule 5.9(a) lists each "employee benefit plan" (as defined in
Section 3(3) of ERISA), and all other material employee benefit (including,
without limitation, any non-qualified plans), bonus, deferred compensation,
incentive, stock option (or other equity-based), severance, change-in-control,
medical insurance and fringe benefit plans maintained for the benefit of, or
contributed to by the Transferor or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974 ("ERISA"), for the benefit of any employee or former employee of the
Transferor (the "Plans"). The Transferor has heretofore delivered to the
Transferee true, correct and complete copies of each of the Plans, including all
amendments to date.
(2) Each of the Plans that is subject to ERISA complies with ERISA and
the applicable provisions of the Code and has been administered in accordance
with ERISA and, where applicable, the Code. Each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
timely determination letter from the Internal Revenue Service that it is so
qualified and neither the Transferor nor any Shareholder knows of any facts or
circumstances that would materially adversely affect such qualification prior to
and including the close of business on the day immediately preceding the Closing
Date. Except as set forth in Schedule 5.9(b), none of the Plans is subject to
Title IV of ERISA. No "reportable event", as such term is defined in Section
4043(c) of ERISA (for which the 30-day notice requirement to the Pension Benefit
Guaranty Board ("PBGC") has not been waived), has occurred with respect
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to any Plan. There are no pending or, to the best knowledge of each of the
Transferor and the Shareholders, threatened claims (other than routine claims
for benefits), actions, suits or proceedings by, on behalf of or against any of
the Plans or any trusts related thereto.
(3) No Plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Transferor beyond their retirement or other termination
of service (other than (i) coverage mandated by applicable law, (ii) death
benefits or retirement benefits under any "pension plan," as that term is
defined in Section 3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)).
(4) With respect to each Plan, neither the Transferor, any Shareholder
nor any ERISA Affiliate has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA) that would
subject the Transferor or the Transferee to any taxes, penalties or other
liabilities under Section 4975 of the Code and the regulations thereunder or
Section 409 or 502(i) of ERISA.
(5) The Transferor has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to each plan that is, or was during any taxable year of
the Transferor for which the statute of limitations on the assessment of federal
income taxes remains open, by consent or otherwise, a group health plan within
the meaning of Section 4980B(g) of ERISA.
(6) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302(a) of ERISA or Section 412(a) of the Code), whether or
not waived.
(7) Neither the Transferor nor any ERISA Affiliate has incurred or
would incur a "complete withdrawal" or "partial withdrawal," as defined in
Sections 4203 and 4205 of ERISA, from any Plan that has resulted or would result
in a withdrawal liability of the Transferor or any ERISA Affiliate under such
Plan.
5.10 Real Property.
-------------
(1) The Transferor owns no real property.
(2) Schedule 5.10(b) sets forth a list and description of all real
property leases and subleases under which the Transferor is tenant or subtenant
(the "Leases"), including the date of the Lease, the premises demised
thereunder, the name of the lessee and lessor, the commencement date and
expiration date of the Lease and the annual rent payable by the lessee under the
Lease. As used herein, the term "Leased Real Property" shall mean the real
property demised by the Leases.
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(3) The Transferor has heretofore delivered to the Transferee true,
correct and complete copies of the Leases. Each of the Leases is in full force
and effect and is enforceable in accordance with its terms. The Transferor is in
possession of and quietly enjoys the Leased Real Property applicable to it and
the Transferor has a valid and enforceable leasehold interest, subject to no
Liens except such immaterial easements and rights-of-way, none of which
interferes with the operation of the business as currently conducted by the
Transferor. No event has occurred or failed to occur that, with the giving of
notice or the passage of time or both, would constitute a default under any
Lease. The Transferor has not entered into any assignment of any Lease or
sublease, sublease of all or any portion of any Leased Real Property and, to the
knowledge of the Transferor and the Shareholders, no person has any right to
occupy the Leased Real Property other than the Transferor.
(4) With respect to the Leased Real Property (i) there is a right of
ingress and egress to public thoroughfares to and from the Leased Real Property,
(ii) the Leased Real Property has adequate water supply and sewer service for
the Transferor's present use thereof.
(5) All licenses, permits and certificates of occupancy (the
"Approvals"), in connection with the Transferor's use, occupancy and maintenance
of the Leased Real Property are in full force and effect in accordance with the
respective terms thereof, and none of the Approvals has been amended, assigned,
pledged or otherwise transferred by the Transferor. There is no alteration,
improvement or change in use of any Leased Real Property that would require any
new Approvals or amendment of an existing Approval. The condition and use of the
Leased Real Property conforms to each Approval. Except as set forth on Schedule
5.10(b), the Transferor is in compliance with all Laws including, without
limitation, those relating to zoning, building and land use restrictions that
are applicable to any portion of the Leased Real Property.
(6) The Leased Real Property is in good condition and repair and
adequate for the conduct of the business of the Transferor as presently and
proposed to be conducted, and there are no defects in the same that would hinder
or impair the business and operations of the Transferor.
(7) Neither the Transferor nor any Shareholder has received notice
from any insurance company or Board of Fire Underwriters (or organization
exercising functions similar thereto) or from any mortgagee requesting the
performance of any work or alteration in respect of any of the Leased Real
Property, and, to the best knowledge of each of the Transferor and the
Shareholders, there are no outstanding requirements or recommendations from any
of the foregoing.
(8) There has been no damage to any portion of the Leased Real
Property within the last 24 months caused by fire or other casualty that has not
been repaired.
5.11 Intellectual Property; Computer Software.
----------------------------------------
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(1) Schedule 5.11(a) lists all Intellectual Property that is owned by
the Transferor or any other Person and used by the Transferor in the operations
of the Business, and other than as described on Schedule 5.11(a), there are no
pending or threatened claims by any Person relating to the Transferor's use of
any Intellectual Property. Except as described on Schedule 5.11(a), the
Transferor has such rights of ownership (free and clear of all Liens) of, or
such rights by license, lease or other agreement to use (free and clear of all
Liens) the Intellectual Property as are necessary to permit the Transferor to
conduct its business and the Transferor is not obligated to pay any royalty or
similar fee to any Person in connection with the Transferor's use or license of
any of the Intellectual Property.
(2) The Transferor has such rights of ownership (free and clear of all
Liens) of, or such rights by license, lease or other agreement to use (free and
clear of all Liens), the computer software programs including, without
limitation, application software, that are used by the Transferor and that are
material to the conduct of the Business as currently conducted. None of the
Transferor's ownership rights or rights to use any of the computer programs
referred to above will be adversely affected by any of the transactions
contemplated hereby.
5.12 Title to Acquired Assets; Capital Budget.
----------------------------------------
(1) The Transferor has good and marketable title to the Acquired
Assets, including, without limitation, all assets shown on the Financial
Statements, free and clear of all Liens, other than (i) Liens, if any, for
personal property taxes and assessments not yet due and payable, (ii)
inventories sold since the date of the Financial Statements in the ordinary
course of business and consistent with past practice and (iii) Liens disclosed
on Schedule 5.12(a). At the Closing, the Transferor will have caused each Lien
referred to on Schedule 5.12(a) (other than Liens relating to leased equipment)
to have been terminated, and the Transferee will obtain good and marketable
title to all of the Acquired Assets free and clear of all Liens.
(2) All items of machinery, equipment, tooling and other tangible
personal property owned or leased by the Transferor and used in the conduct of
its business (other than items of inventory) are listed on Schedule 5.12(b)
(collectively, the "Personal Property"). The Personal Property conforms in all
respects to all requirements of applicable Laws. All of the items of machinery,
equipment and tooling included within the Personal Property are fully
operational and operating in the ordinary course of the Transferor's business,
as applicable, are in good operating condition and in a good state of
maintenance and repair, are adequate for use in the conduct of the Transferor's
business as previously conducted and as proposed to be conducted and are capable
of manufacturing the products of the Transferor's business on an efficient and
profitable basis.
(3) Schedule 5.12(c) includes a true, correct and complete capital
budget of the Transferor for the fiscal year ending December 31, 1999. Except as
set forth on Schedule 5.12(c), no capital expenditures are contemplated by the
Transferor for the Business.
-15-
5.13 Material Contracts.
------------------
(1) Schedule 5.13(a) sets forth a true, complete and correct list of
every Contract that (i) provides for aggregate future payments by the Transferor
or to the Transferor of more than $50,000 and has an unexpired term exceeding
six months and may not be canceled upon 60 days notice without any liability,
penalty or premium (excluding purchase orders and invoices arising in the
ordinary course of business); (ii) was entered into by the Transferor with any
Shareholder, or an officer, director or key employee of the Transferor; (iii) is
a collective bargaining or similar agreement; (iv) guarantees or indemnifies or
otherwise causes the Transferor to be liable or otherwise responsible for the
obligations or liabilities of another or provides for a charitable contribution
by the Transferor; (v) involves an agreement with any bank, finance company or
similar organization; (vi) restricts the Transferor or the Business from
engaging in any business or activity anywhere in the world; (vii) is an
employment agreement, consulting agreement or similar arrangement with any
employee of the Transferor; (viii) involves an agreement or any other Contract
providing for payments from the Transferor to any other Person, or by any Person
to the Transferor, based on sales, purchases or profits, other than direct
payments for goods; or (ix) any other Contract that is material to the rights,
properties, assets, business or operations of the Transferor or the Business
(the foregoing, collectively, "Material Contracts"). The Transferor has
heretofore provided true, complete and correct copies of all Material Contracts
to the Transferee.
(2) (i) Except as described on Schedule 5.13(b), there is not, and to
the best knowledge of each of the Transferor and the Shareholders there has not
been claimed or alleged by any Person with respect to any Material Contract, any
existing default, or event that with notice or lapse of time or both would
constitute a default or event of default, on the part of the Transferor or, to
the best knowledge of each of the Transferor and the Shareholders, on the part
of any other party thereto and (ii) no consent, approval, authorization or
waiver from, or notice to, any Governmental Entity or other Person is required
in order to maintain in full force and effect any of the Material Contracts,
other than such consents and waivers that shall have been obtained prior to the
Closing and are unconditional and in full force and effect and such notices that
have been duly given and copies of such consents, waivers and notices have been
delivered to the Transferee.
(3) Except as set forth on Schedule 5.13(c), the Contracts (other than
Material Contracts) to which the Transferor is a party do not involve the
payment by the Transferor thereunder of more than $50,000 per year in the
aggregate (excluding purchase orders received from customers in the ordinary
course for the sale of products at standard prices) and are not otherwise
material, individually or in the aggregate, to such Transferor or the Business.
5.14 Taxes.
-----
(1) The Transferor elected to be treated as an "S" corporation for
federal income Tax purposes effective for its taxable year beginning January 1,
1987, and such election
-16-
is effective for each year thereafter up to and including the Closing Date.
Schedule 5.14(a) hereto sets forth each other jurisdiction for which the
Transferor has made an "S" election (or similar election), or for which an "S"
election (or similar election) is effective, including the date of the election,
its effective date, the date of any termination of such election, if any, and
the cause of such termination. Except as set forth on Schedule 5.14(a), each
such election is effective for each year from its effective date up to and
including the Closing Date.
(2) (i) The Transferor has (A) duly and timely filed or caused to be
filed with the Internal Revenue Service or other applicable Governmental Entity
(collectively, "Taxing Authorities") all Tax Returns (as defined below) that are
required to be filed by or on behalf of the Transferor or that include or relate
to any Acquired Asset or the Business, which Tax Returns are true, correct and
complete in all material respects, and (B) duly and timely paid in full or
caused to be paid in full all Taxes shown to be due on such Tax Returns. The
Transferor has recorded a provision for such payment on the Financial Statements
and on the books and records of the Transferor in accordance with GAAP for the
payment of, all such Taxes that are not yet due and payable.
(ii) The Transferor has duly and timely complied with all
applicable Laws relating to the collection or withholding of Taxes, and the
reporting and remittance thereof to the applicable Taxing Authorities.
(iii) Except as set forth on Schedule 5.14(b), no audit,
examination, investigation, reassessment or other administrative or court
proceeding (collectively, a "Tax Proceeding") is currently ongoing or, to the
best knowledge of the Transferor and each of the Shareholders, proposed, with
regard to any Tax or Tax Return referred to in clause (i) above, and, to the
best knowledge of the Transferor and each of the Shareholders, no Taxing
Authority is contemplating such a Tax Proceeding and there is no basis for any
such Tax Proceeding that would have Material Adverse Effect on the Tax basis of
any Acquired Asset.
(iv) There is no Lien for any Tax upon any of the Acquired Assets
or the Business, except for Taxes not yet due and payable.
(v) There is no outstanding request for a ruling from any Taxing
Authority, or any request or consent to change a method of accounting, that
could have a Material Adverse Effect on the Tax basis of any Acquired Asset.
(vi) None of the Acquired Assets is "tax-exempt bond financed
property" or "tax-exempt use property" within the meaning of Section 168(g) or
(h), respectively, of the Code or any similar provision of applicable Law.
(vii) None of the Acquired Assets is required to be treated as
being owned by any other person pursuant to the "safe harbor" leasing provisions
of Section 168(f)(8)
-17-
of the Internal Revenue Code of 1954 as in effect prior to the repeal of those
"safe harbor" leasing provisions or any similar provision of applicable Law.
(viii) No claim has ever been made by a Taxing Authority in a
jurisdiction where the Transferor has not paid any Tax or filed Tax Returns
relating to the Business or any Acquired Asset asserting that the Transferor is
or may be subject to Tax in such jurisdiction.
(ix) The Transferor is not required to include any adjustment
under Section 481 of the Code (or any similar provision of applicable Law) in
income for any period ending after the Closing Date. The Transferor uses the
accrual method of accounting (within the meaning of Treasury Regulation Section
1.446-1(c)(ii)) for determining each of its items of income and deduction in
computing its taxable income.
(x) None of the Assumed Liabilities constitutes an agreement,
contract or arrangement that could not be deductible by reason of Section 280G
or 404 of the Code.
(3) The Transferor has provided to the Transferee true, complete and
correct copies of (i) all Tax Returns relating to, and (ii) all reports,
correspondence and documents relating to, each proposed adjustment, if any, made
by any Taxing Authority with respect to any taxable period ending after December
31, 1993.
(4) As used herein, (i) "Tax Return" means any return, declaration,
report, information return or statement, and any amendment thereto, including
without limitation any consolidated, combined or unitary return or other
document (including any related or supporting information), filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, payment, refund or credit of any federal, state, local
or foreign Tax or the administration of any Laws relating to any Tax, and (ii)
"Tax" or "Taxes" means any and all taxes, charges, fees, levies, deficiencies or
other assessments of whatever kind or nature including, without limitation, all
net income, gross income, profits, gross receipts, excise, real or personal
property, sales, ad valorem, withholding, social security, retirement, excise,
-- -------
employment, unemployment, minimum, estimated, severance, stamp, property,
occupation, environmental, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other taxes, customs
duty, fees assessments or charges of any kind whatsoever, imposed by any Taxing
Authority, including any liability therefor as a transferee, including without
limitation as a transferee under Section 6901 of the Code or any similar
provision of applicable Law, as a result of Treasury Regulation Section 1.1502-6
or any similar provision of applicable Law, or as a result of any Tax sharing or
similar agreement, together with any interest, penalties or additions to tax
relating thereto.
5.15 Affiliated Party Transactions. Except for obligations arising under
-----------------------------
this Agreement, immediately following the Closing, the Transferor will not have,
directly or indirectly, any obligation to or claim against the Business and no
Shareholder or any of such
-18-
Shareholder's immediate family or Persons controlled by or are under common
control with such Shareholders or such Shareholder's immediate family
(collectively, "Affiliates") will have, directly or indirectly, any obligation
to or cause of action or claim against the Transferor, except by virtue of their
holding shares of the common stock of the Transferor, or the Business, except by
virtue of their holding shares of Common Stock.
5.16 Environmental Matters. To the knowledge of the Transferor and the
---------------------
Shareholders, except as set forth on Schedule 5.16:
(1) The Transferor is in compliance with, and the Business has been
conducted in compliance with, all Environmental Laws (as defined below) and
Environmental Permits (as defined below);
(2) no Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., is on or ever was listed or is
-- ---
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., or on any similar state list of sites requiring
-- ---
investigation or cleanup;
(3) Neither the Transferor nor any Shareholder has received any notice
(i) alleging, or giving notice of, any liability or any potential liability
under any Environmental Law or (ii) that remains pending or outstanding with
respect to its business or any Site from any Governmental Entity or Person
alleging that the Transferor is not in material compliance with any
Environmental Law;
(4) there has been no Release (as defined below) at, from, in, to, on
or under any Site caused by the acts or omissions of the Transferor, and to the
knowledge of the Transferor and the Shareholders, no Hazardous Substances are
present in, on, about or migrating to or from any Site that could give rise to
an Environmental Claim (as defined below) against the Transferor;
(5) there are no pending or outstanding corrective actions requested,
required or being conducted by any Governmental Entity for the investigation,
remediation or cleanup of any Site, and there have been no such corrective
actions, whether still pending or otherwise;
(6) the Business has obtained and holds all necessary Environmental
Permits, and those Environmental Permits will remain in full force and effect
after the consummation of the transactions contemplated hereby;
(7) there are no past or pending, or to the best knowledge of each of
the Transferor and the Shareholders threatened, Environmental Claims against the
Transferor or, with respect to the Business, the Transferor or the Acquired
Assets, the Shareholders, and neither
-19-
the Transferor nor any Shareholder is aware of any facts or circumstances which
could be expected to form the basis for any Environmental Claim against the
Business or the Transferor;
(8) neither the Transferor, any predecessor of the Transferor, nor any
entity previously owned by the Transferor, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that could result in an Environmental Claim
against the Transferor;
(9) there are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, (iii) asbestos containing
material, (iv) "recognized environmental conditions" as that term is used in
ASTM E-1527-97, and (v) "environmental issues or conditions" as that term is
used in ASTM E-1527-97 section 12, at any Site; and
(10) there have been no environmental investigations, studies, audits,
tests, reviews or other analyses (which have been reduced to writing) conducted
by, on behalf of, or that are in the possession of the Transferor with respect
to any Site or any transportation, handling or disposal of any Hazardous
Substance that has not been delivered to the Transferee prior to execution of
this Agreement.
(11) As used herein, (i) "Environment" means all air, surface water,
groundwater, or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources; (ii) "Environmental Claim"
means any and all administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints, requests for
information, proceedings or other communications (written or oral), whether
criminal or civil, pursuant to or relating to any applicable Environmental Law
by any person (including, but not limited to, any Governmental Entity, Person
and citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (x) violation of or liability under any Environmental Law, (y)
violation of any Environmental Permit, or (z) liability for investigatory costs,
cleanup costs, removal costs, remedial costs, response costs, natural resource
damages, property damage, personal injury, fines, or penalties arising out of,
based on, resulting from, or related to the presence, Release, or threatened
Release into the Environment, of any Hazardous Substances at any location,
including, but not limited to, any off-Site location to which Hazardous
Substances or materials containing Hazardous Substances were sent for handling,
storage, treatment, or disposal; (iii) "Environmental Law" means any and all
Laws relating to the protection of health and the Environment, worker health and
safety, and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, or Release of Hazardous Substances, whether now existing or
subsequently amended or enacted, and the state analogies thereto, all as amended
or superseded from time to time; and any common law doctrine, including, but not
limited to, negligence, nuisance, trespass, personal injury, or property damage
related to or arising out of the presence, Release, or exposure to a Hazardous
Substance; (iv) "Environmental Permit" means any permits, licenses, approvals,
consents or authorizations required by any Governmental Entity under or in
-20-
connection with any Environmental Law; (v) "Hazardous Substance" means
petroleum, petroleum hydrocarbons or petroleum products, petroleum by-products,
radioactive materials, asbestos or asbestos-containing materials, gasoline,
diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing
materials, polychlorinated biphenyls; and any other chemicals, materials,
substances or wastes in any amount or concentration which are now included in
the definition of "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "regulated substances," "solid
wastes," or "contaminants" or words of similar import, under any Environmental
Law; (vi) "Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment; and (vii) "Site" means any of the real
properties currently or previously owned, leased, used or operated by the
Transferor, any predecessors of the Transferor or any entities previously owned
by the Transferor, including all soil, subsoil, surface waters and groundwater
thereat.
5.17 No Brokers. Neither the Transferor nor any Shareholder has employed,
----------
or otherwise engaged, any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' fees or other
similar fees in connection with the transactions contemplated by this Agreement.
5.18 Receivables. All accounts receivable of the Transferor have arisen,
-----------
and as of the Closing Date will have arisen, from bona fide transactions in the
ordinary course of the Transferor's business consistent with past practice and
established in the ordinary course of such Transferor's business consistent with
past practice. Each of the accounts receivable of the Transferor either has been
or will be collected in full, without any set-off, within 90 days after the day
on which it first becomes due and payable.
5.19 Inventories. As reflected on the Financial Statements, the inventories
-----------
of the Transferor have been valued at the lower of cost (on the first-in,
first-out method) or market in accordance with GAAP, consistently applied, and
the value of obsolete materials, materials of below standard quality and excess
materials has been written down in accordance with GAAP, consistently applied.
Except as reflected in the December 31 Balance Sheet referred to in section 5.5,
the inventories of the Transferor contain no amount of items not saleable or
usable within 12 months from the date thereof at normal profit margins
consistent with historical sales practices. Except as described on Schedule
5.21, the Transferor is not under any liability or obligation with respect to
the return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers.
5.20 Product Claims. No product liability claim is pending, or to the best
--------------
knowledge of each of the Transferor and the Shareholders threatened, against the
Transferor or against any other party with respect to the products of the
Business. Schedule 5.20 lists all service and product liability claims seeking
damages in excess of $1,000 asserted against the Transferor (or in respect of
which the Transferor or any Shareholder has received notice)
-21-
with respect to the products of the Business or the Transferor during the last
five years. Claims not listed on Schedule 5.20 do not aggregate more than
$20,000.
5.21 Warranties and Returns. Schedule 5.21 sets forth a summary of the
----------------------
practices and policies followed by the Transferor with respect to warranties and
returns of any products manufactured or sold by it, whether such practices are
oral or in writing or are deemed to be legally enforceable. There is not
presently, nor has there been since December 31, 1995, any failure or defect in
any product sold by the Transferor that has required, or that may require, a
general recall or replacement campaign or similar action with respect to such
product or a reformulation or change of such product, nor has there been any
acceptance of defective goods of the Transferor in excess of $450,000 in the
aggregate for all such transactions with respect to products sold by it since
December 31, 1996.
5.22 Assets Utilized in the Business. The assets, properties and rights
-------------------------------
owned, leased or licensed by the Transferor or used in connection with the
Business and that will be owned, leased or licensed by the Transferor as of the
Closing Date, and all the agreements to which the Transferor is a party,
constitute all of the properties, assets and agreements necessary to the
Transferor in connection with the operation and conduct by the Transferor of the
Business as presently conducted. Included in Schedule 5.22 are all services
provided by each Shareholder to the Transferor and all other arrangements
involving each Shareholder and the Transferor that are not included in the
Acquired Assets.
5.23 Insurance. Schedule 5.23 contains a complete and correct list of all
---------
policies of insurance of any kind or nature covering the Transferor, including
policies of life, fire, theft, casualty, product liability, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance, indicating the type of coverage, name of insured, the
insurer, the expiration date of each policy, the amount of coverage and whether
on an "occurrence" or "claims made" basis. All such policies (i) are with
insurance companies that are financially sound and reputable and are in full
force and effect; (ii) are sufficient for compliance with all requirements of
law and of all applicable agreements; and (iii) are valid, outstanding and
enforceable policies. Complete and correct copies of such policies have been
furnished to the Transferee. All such insurance policies or comparable coverage
shall be continued in full force and effect through the Closing Date. Since
December 31, 1995, the Transferor has not been denied any insurance coverage
which it has requested.
5.24 Delivery of Documents; Corporate Records. The Transferor has
----------------------------------------
heretofore delivered to the Transferee true, correct and complete copies of all
documents, instruments, agreements and records referred to in this section 5 or
in the Schedules to this Agreement and copies of the minute and stock record
books of the Transferor. The minute and stock record books of the Transferor,
except as noted therein, contain true, correct and complete copies of the
records of all meetings and consents in lieu of a meeting of the Board of
Directors (and any committee thereof) and the stockholders of the Transferor
since the date of its incorporation.
-22-
5.25 Customers, Suppliers and Distributors. Schedule 5.25 sets forth (i)
-------------------------------------
the sales of the Transferor for the fiscal years ended December 31, 1997 and
1998, (ii) the ten customers with the highest dollar volume of purchases from
the Transferor during each of those periods indicating the approximate total
sales to each of those customers; and (iii) the ten largest suppliers and the
ten largest distributors of the Transferor during each of those periods. Except
as set forth on Schedule 5.25, there has not been any adverse change in the
business relationship of the Transferor with any such customer, supplier or
distributor, and neither Transferor nor any Shareholder is aware of any
threatened loss of any such customer, supplier or distributor.
5.26 Labor Matters. There are no labor strikes, slow-downs or stoppages or
-------------
other labor troubles pending or, to the best knowledge of the Transferor and
each of the Shareholders, threatened with respect to the employees of the
Transferor; to the best knowledge of the Transferor and each of the
Shareholders, no representation questions exist; there is no collective
bargaining agreement binding on the Transferor and there is no agreement which
restricts the Transferor from relocating or closing any or all of its businesses
or operations; there are no grievances asserted that might have an adverse
effect upon the Transferor's business, or the financial condition or prospects
of the Transferor, nor is there pending any arbitration proceeding arising out
of or under any labor union agreement; the Transferor has not experienced any
work stoppage during the last five years.
5.27 Bank Accounts. Schedule 5.27 sets forth the names and locations of all
-------------
banks, depositories and other financial institutions in which the Transferor has
an account or safe deposit box and the names of all persons authorized to draw
thereon or to have access thereto.
5.28 Directors, Officers and Certain Employees. Schedule 5.28 sets forth a
-----------------------------------------
complete and correct list of the names, current annual salary, bonus and title,
for each director and officer and each other employee of the Transferor who is a
party to an employment agreement with the Transferor or who received annual
compensation during the Transferor's most recently ended fiscal year, or who is
entitled to receive compensation, on an annualized basis, whether or not paid to
date, in excess of $50,000. Neither the Transferor nor any Shareholder is aware
of any employee in the Transferor's senior management who intends to terminate
his or her employment relationship with the Business, either as a result of the
transactions contemplated hereby or otherwise.
5.29 Year 2000. Upon completion of the plan set forth on Schedule 5.29, all
---------
of the Transferor's equipment, systems, software, data and databases (other than
data provided to it by its customers) (collectively, the "Systems") are Year
2000 Compliant (as hereinafter defined). For purposes of this Agreement, "Year
2000 Compliant" shall mean: (i) the occurrence in or use by the Systems of dates
before, on or after January 1, 2000 will not adversely affect the performance of
the Systems with respect to date-dependent data, computations, output or other
functions, including, without limitation, calculating, comparing and sequencing;
(ii) the Systems will not abnormally end or provide invalid or incorrect results
as a result of date-dependant data;
-23-
and (iii) the Systems can accurately recognize, manage, accommodate and
manipulate date-dependant data, including, without limitation, single century
formulas and leap years.
5.30 No Misstatements or Omissions. No representation or warranty by the
-----------------------------
Transferor or any Shareholder contained in this Agreement and no statement
contained in any certificate, list, Schedule, Exhibit or other instrument
specified or referred to in this Agreement, whether heretofore furnished to the
Transferee or hereafter furnished to the Transferee pursuant to this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary to make the statements contained therein,
in light of the circumstances under which it was made, not misleading.
5.31 Investment Undertaking. Each Shareholder and the Transferor
----------------------
acknowledge that the shares of Common Stock to be issued to the Transferor
pursuant to this agreement will be "restricted securities" within the meaning of
Rule 144 of the General Rules and Regulations under the Securities Act of 1933
("Rule 144"). Each Shareholder and the Transferor acknowledge that the
Transferor is acquiring such shares for the Transferor's own account and not
with a view to their distribution within the meaning of Section 2(11) of the
Securities Act of 1933. Each Shareholder and the Transferor acknowledge that the
Transferor understands that Rule 144 requires that such shares issued hereunder
may not be disposed of for a period of at least one year. Each Shareholder and
the Transferor acknowledge that the Transferor understands that it must bear the
economic risk of the investment indefinitely because such shares may not be
sold, hypothecated or otherwise disposed of unless subsequently registered under
the Securities Act of 1933 and applicable state securities laws or an exemption
from registration is available.
5.32 Size of Person for Purposes of HSR Act. Capitalized terms used in this
--------------------------------------
section 5.32, but not otherwise defined herein are used as defined in the rules
adopted under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (said act and rules, collectively, the "HSR Act"). Financial information
described in this section 5.32 is to be determined in accordance with the HSR
Act. As of the date hereof and as of the Closing Date:
(1) The only outstanding class of Voting Securities (excluding
Convertible Voting Securities) of the Transferor is common stock, par value $.01
per share ("Transferor Common Stock"). No Person is the record or beneficial
owner of shares of Transferor Common Stock constituting 50% or more of all of
the shares of Transferor Common Stock outstanding (excluding shares of
Transferor Common Stock issuable upon conversion of Convertible Voting
Securities that will not be issued on or prior to the Closing Date). There is no
shareholders' agreement or other arrangement whereby any Person has the right to
designate 50% or more of the directors of the Transferor. The Transferor is its
own sole Ultimate Parent Entity.
(2) The Transferor does not Control any other Entity.
-24-
(3) The worldwide, consolidated annual net sales of the Transferor for
its most recent full fiscal year were less than $100,000,000. The worldwide,
consolidated total assets of the Transferor, as reflected on the Transferor's
most recent regularly prepared balance sheet, were less than $100,000,000.
6. Representations and Warranties of the MedSource and Transferee. MedSource and
--------------------------------------------------------------
the Transferee jointly and severally represent and warrant to the Transferor and
each Shareholder as follows (the term "Subsidiary" as used in the Agreement
shall mean each wholly-owned subsidiary of MedSource, whether direct or
indirect):
6.1 Organization. The Transferee is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. MedSource is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and carry on its business as it is now being
conducted. Each Subsidiary other than the Transferee is duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation
and has all requisite power and authority to own, lease and operate its
properties and carry on its business as it is now being conducted. The
Transferee and MedSource are each duly qualified or licensed to do business as a
foreign limited liability company or corporation, as the case may be, and are in
good standing in each jurisdiction in which the nature of the business conducted
by them makes such qualification or licensing necessary. The Transferee has
heretofore delivered to the Transferor true, complete and correct copies of its
certificate of formation and limited liability company agreement as currently in
effect, and true, complete and correct copies of the certificate of
incorporation and bylaws (or similar organizational documents) of each
Subsidiary as currently in effect true, correct and complete copies of the
certificate of incorporation and bylaws of MedSource as currently in effect.
Neither MedSource nor any Subsidiary is in violation of any term of its
certificates of organization or by-laws (or similar organizational documents),
or in violation of any term of any agreement, instrument, judgment, decree,
order, statute, rule or government regulation applicable thereto or to which it
is a party.
6.2 Capitalization.
--------------
(1) Schedule 6.2(a) sets forth a complete list of all holders of
shares of Common Stock of MedSource and the number and class of shares that will
be held by each on the Closing Date and a description of the number of shares of
other classes or series of stock to be issued on such date. On the date hereof,
the holders of shares of Common Stock listed on Schedule 6.2(a) collectively own
all of the issued and outstanding capital stock of MedSource of record and
beneficially. On the date hereof, except as set forth on Schedule 6.2(a), there
are no (i) options, warrants, calls, preemptive rights, subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating MedSource or any Subsidiary to issue, transfer or sell any shares of
capital stock, options, warrants, calls or other equity interest of any
-25-
kind whatsoever or securities convertible into or exchangeable for such shares
or equity interests, (ii) contractual obligations of MedSource or any Subsidiary
to repurchase, redeem or otherwise acquire any capital stock or equity interest
of MedSource or any Subsidiary or (iii) voting trusts, proxies or similar
agreements to which MedSource or any Subsidiary is a party with respect to the
voting of any equity interests.
(2) Each of the subsidiaries of MedSource is a wholly-owned subsidiary
of MedSource, either directly or indirectly.
6.3 Authorization; Validity of Agreement. The Transferee and MedSource each
------------------------------------
have the requisite limited liability company or corporate power and authority,
as the case may be, to execute, deliver and perform this Agreement and each
other agreement executed or to be executed by them pursuant to the terms of this
Agreement, including, without limitation, any item referred to in section 9
(collectively, the "MedSource Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Transferee of this Agreement and the other MedSource Agreements to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by the manager of the Transferee, and no
other proceedings on the part of the Transferee are necessary to authorize the
execution, delivery and performance of this Agreement and the other MedSource
Agreements to which the Transferee is a party and the consummation of the
transactions contemplated hereby and thereby. The execution, delivery and
performance by MedSource of the MedSource Agreements to which it is a party and
the consummation of the transactions contemplated thereby have been duly and
validly authorized by the Board of Directors of MedSource, and no other
proceedings on the part of MedSource are necessary to authorize the execution,
delivery and performance of the MedSource Agreements to which MedSource is a
party and the consummation of the transactions contemplated thereby. This
Agreement and each other MedSource Agreement to which the Transferee is a party
has been duly executed and delivered by the Transferee and, assuming due
authorization, execution and delivery of this Agreement and each other MedSource
Agreement by the Transferor and each Shareholder party thereto, is a valid and
binding obligation of the Transferee, enforceable against the Transferee in
accordance with their respective terms, except as such enforceability may be
subject to or limited by applicable bankruptcy, insolvency, reorganization, or
other similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights generally. Each MedSource Agreement to which MedSource is a
party has been duly executed and delivered by MedSource and, assuming due
authorization, execution and delivery of each such MedSource Agreement by the
Transferor and each Shareholder party thereto, is a valid and binding obligation
of MedSource, enforceable against MedSource in accordance with their respective
terms, except as such enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws, now or hereafter
in effect, affecting the enforcement of creditors' rights generally.
6.4 No Violations; Consents and Approvals.
-------------------------------------
-26-
(1) The execution, delivery and performance of this Agreement and the
MedSource Agreements by the Transferee and MedSource, as the case may be, do
not, and the consummation by the Transferee and MedSource of the transactions
contemplated hereby and thereby will not, (i) violate any provision of the
certificate of formation or limited liability company agreement of the
Transferee or the certificate of incorporation or Bylaws of MedSource, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, contract, agreement or other instrument to which the
Transferee or MedSource is a party or by which the Transferee or MedSource or
any of their respective properties or assets may be bound or otherwise subject
or (iii) violate any order, writ, judgment, injunction, decree, law, statute,
rule or regulation applicable to the Transferee or MedSource or any of their
respective properties or assets.
(2) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity or Person is required in
connection with the execution, delivery and performance of this Agreement or the
other MedSource Agreements by the Transferee or MedSource or the consummation by
the Transferee or MedSource of the transactions contemplated hereby and thereby,
except filings as may be required under state and federal securities laws to
give effect to the registration rights granted under the Registration Rights
Agreement (as defined in section 7.17).
6.5 No Material Adverse Change. Since December 31, 1998, (a) no event,
--------------------------
condition or circumstance has occurred that could, or could be reasonably likely
to, have a material adverse effect on the business, assets or liabilities, or on
the condition (financial or otherwise), results of operations or prospects of
MedSource and the Subsidiaries, taken as whole; and (b) the business of
MedSource and the Subsidiaries, taken as a whole, have been conducted in the
ordinary course and consistent with past practice.
6.6 Litigation; Compliance with Laws; Licenses.
------------------------------------------
(1) There is no Proceeding pending nor, to the best knowledge of the
Transferee, is there any investigation or Proceeding threatened, that involves
or affects MedSource and each of its Subsidiaries, by or before any court,
Governmental Entity or arbitration panel or any other Person.
(2) MedSource and each Subsidiary have, and on the Closing Date will
have, complied with all Laws, including but not limited to Laws relating to
zoning, building codes, antitrust, occupational safety and health, industrial
hygiene, the manufacture, sale, lease, import and export of medical devices and
equipment and components thereof, environmental protection, water, ground or air
pollution, the generation, treatment, storage or disposal of a Hazardous
Substance, consumer product safety, product liability, hiring, wages, hours,
employee benefit plans and programs, collective bargaining and the payment of
withholding and social security
-27-
taxes except where such failure to comply would not have a material adverse
effect on their business, taken as a whole. Since January 1, 1999, neither
MedSource nor any Subsidiary has received any notice of any violation of any
Law.
(3) Each of MedSource and each Subsidiary have every License and
Permit required for it to conduct its business as presently conducted, except
where the failure to have such License or Permit would not have a material
adverse effect on their business, taken as a whole. All such Licenses and
Permits are in full force and effect and neither MedSource nor any Subsidiary
has received notice of any pending cancellation or suspension of any thereof
nor, to the best knowledge of MedSource and each Subsidiary, is any cancellation
or suspension thereof threatened. The applicability and validity of each such
License and Permit will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
6.7 Title to Properties. On the date hereof, each of MedSource and each
-------------------
Subsidiary have good and marketable title to all of their respective properties
and assets, free and clear of all liens, restrictions or encumbrances. All
machinery and equipment included in such properties that is necessary to the
business of MedSource or any Subsidiary is in good condition and repair, and all
leases of real or personal property to which MedSource or any Subsidiary is a
party are fully effective and afford MedSource or such Subsidiary, as the case
may be, peaceful and undisturbed possession of the subject matter of the lease.
6.8 Brokers. The obligation for any fees due to any broker or finder
-------
employed by MedSource or any Subsidiary, and liability for any brokerage or
investment banking fees, commissions, finders' fees or other similar fees in
connection with the transactions contemplated by this Agreement, are the
responsibility of MedSource and the Subsidiaries and not the Transferor or the
Shareholders.
6.9 Information Supplied to Transferor and Shareholders. No representation
---------------------------------------------------
or warranty by MedSource or the Transferee contained in this Agreement and no
statement contained in the confidential memorandum dated January 12, 1999
previously furnished to the Transferor (the "Memorandum"), as revised pursuant
to section 7.24, or in any certificate, list, Schedule, Exhibit or other
instrument specified in this Agreement, whether heretofore furnished to the
Transferor or hereafter furnished to the Transferor pursuant to this Agreement,
contains, or will contain, any untrue statement of a material fact, or omits or
will omit any material fact necessary to make the statement contained therein,
in light of the circumstances under which it was made, not misleading.
6.10 Shares of Capital Stock. Assuming the accuracy of the representations
-----------------------
and warranties of the Shareholders contained in section 5.31, the offer,
issuance and sale of the Common Stock in accordance with this Agreement is and
will be in compliance with applicable federal and state securities laws and all
shares of Common Stock issued to the Transferor pursuant to this Agreement will
be duly authorized and validly issued, fully paid and nonassessable.
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6.11 Certain Tax Matters. The transactions described in this Agreement are
-------------------
an integral part of a single, integrated transaction (as contemplated by Section
351 of the Code) in which MedSource (or its wholly-owned limited liability
company) is acquiring certain property (within the meaning of Section 351 of the
Code) in exchange for cash and stock of MedSource representing "control" of
MedSource within the meaning of section 368(c) of the Code (the "Section 351
Exchange"). MedSource and the Transferee will not, and, to the knowledge of
MedSource and the Transferee, there is no plan or intention on the part of any
other transferor in the Section 351 Exchange to, take any action that would
prevent the transaction described in this agreement from being treated for
federal income tax purposes as a transfer to which section 351 of the Code
applies.
6.12 Size of Person for Purposes of HSR Act. Capitalized terms used in this
--------------------------------------
section 6.12 but not otherwise defined herein are used as defined in the rules
adopted under the HSR Act. Financial information described in this section 6.12
is to be determined in accordance with the HSR Act. As of the date hereof and as
of the Closing Date:
(a) The only outstanding classes of Voting Securities (excluding
Convertible Voting Securities) of MedSource are Common Stock and, as of the
Closing Date, Series B Preferred Stock, par value $.01 per share. As of the
Closing Date, no Person Holds 50% or more of the outstanding Voting Securities
of MedSource. There is no shareholders' agreement or other arrangement whereby
any Person has the contractual power presently to designate 50% or more of the
directors of MedSource. MedSource is its own sole Ultimate Parent Entity.
(b) MedSource does not Control any other Entity, except for
wholly-owned subsidiaries of MedSource.
(c) The annual net sales of the Person within which MedSource is
included under the HSR Act (the "MedSource HSR Person"), determined in
accordance with the HSR Act, for its most recent fiscal year were less than
$100,000,000. The total assets of the MedSource HSR Person, determined in
accordance with the HSR Act, were less than $100,000,000.
7. Other Agreements of the Parties.
7.1 Conduct of Business by the Transferor. During the period from the date
-------------------------------------
hereof (or earlier, as set forth below) through the Closing Date, the Transferor
shall conduct its business in the ordinary course, consistent with past
practice, and in such a manner that would not result in a Material Adverse
Effect. Without limiting the generality of, and in addition to, the foregoing,
prior to the Closing Date, the Transferor shall not, except as the Transferee
may otherwise consent to in writing:
-29-
(1) amend its articles of organization or bylaws (other than the
change of name contemplated by section 7.11);
(2) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities;
(3) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) to any stockholder or otherwise in
respect of its capital stock or redeem or otherwise acquire any of its
securities, or make any payments or distributions to any of the Shareholders,
any of the Shareholders' Affiliates, any Person (other than institutional bank
lenders) to which the Transferor has any liability (other than trade accounts
payable incurred in the ordinary course of business, subject to the other
provisions of this section 7) or any officer or director of the Transferor
(including, without limitation, ▇▇▇▇▇▇ ▇▇▇▇▇), except (i) compensation at the
applicable annual rates in effect on January 1, 1998 in the ordinary course of
business and consistent with past practice (other than ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇) and
(ii) distributions to each Shareholder in an amount sufficient to pay estimated
Taxes not yet paid and attributable to such Shareholder's pro rata share of the
--- ----
Transferor's income for the period commencing January 1, 1998 and (iii) amounts
due to Affiliates of the Transferor for rental of real estate, equipment and
royalties paid in connection with Intellectual Property used by the Business, in
each case in annualized amounts not to exceed payments made or accrued in the
year ended December 31, 1997.
(4) (i) incur or assume any indebtedness other than trade payables
incurred in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any obligations of any other Person; or (iii) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than loans or advances to employees in the ordinary course of business in
accordance with past practices);
(5) enter into, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans, funds
or other arrangements of or for the benefit or welfare of any employee, or
increase in any manner the compensation or fringe benefits of any employee or
pay any benefit not required by any existing plan and arrangement (including,
without limitation, the granting of stock options, stock appreciation rights,
shares of restricted stock or performance units);
(6) acquire, sell, lease, transfer or dispose of any of its properties
or assets except in the ordinary course of business and consistent with past
practice or enter into any material commitment or transaction;
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(7) except as may be required by law, take any action to terminate or
materially amend any of its employee benefit plans with respect to or for the
benefit of employees;
(8) modify any policy or procedure with respect to credit to customers
or collection of receivables;
(9) pay, discharge or satisfy before it is due any claim or liability
of the Transferor, or fail to pay any such item in a timely manner given the
Transferor's prior practices, other than payments to USTrust at or prior to the
Closing (as contemplated by section 7.20);
(10) cancel any debts or waive any claims or rights of substantial
value;
(11) except to the extent required by applicable law, change any
accounting principle or method or make any election for purposes of foreign,
federal, state or local income Taxes;
(12) take or suffer any action that would result in the creation, or
consent to the imposition, of any Lien on any of the properties or assets of the
Transferor;
(13) make or incur any capital expenditure, lease or commitment for
additions to property, plant, equipment or other capital assets in excess of
$25,000;
(14) except in the ordinary course of business consistent with past
practice, and, with the exception of the OEM Agreement between the Transferor
and Medtronic, Inc., amend, waive, surrender or terminate or agree to the
amendment, waiver, surrender or termination of any Material Contract, Lease or
Approval;
(15) except in the ordinary course of business consistent with past
practice, exercise any right or option under any Lease or extend or renew any
Material Contract or Lease; or
(16) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
7.2 Conduct of Business by MedSource. During the period from the date
--------------------------------
hereof through the Closing Date, MedSource shall conduct its business consistent
with the plan set forth in the Memorandum, and in addition to the foregoing,
prior to the Closing Date, MedSource shall not, except as the Transferor may
otherwise consent to in writing, amend its certificate of incorporation (except
for the filing of any certificates of designation) or bylaws (except for changes
regarding the timing and call of meetings).
-31-
7.3 Access and Information. From the date hereof until the Closing Date,
----------------------
the Shareholders shall cause the Transferor to, and the Transferor shall, and
shall cause each of the Transferor's officers, directors, employees, agents,
accountants and counsel to, upon reasonable notice, (i) afford the officers,
employees and authorized agents, accountants, counsel and representatives of the
Transferee reasonable access, during normal business hours, to (A) the offices,
properties, plants, other facilities, books, Contracts and records of the
Transferor and any records concerning the Transferor maintained and accumulated
by its representatives, and (B) those officers, directors, employees, agents,
accountants and counsel of the Transferor who have any knowledge relating to the
Transferor or the Acquired Assets, and (ii) furnish to the officers, employees
and authorized agents, accountants, counsel and representatives of the
Transferee such additional financial and operating data and other information
regarding the Acquired Assets (including, without limitation, any Contracts,
licenses and patents in effect as of the date hereof and any Contracts or
licenses being negotiated or entered into between the date hereof and the
Closing Date), properties and goodwill of the Transferor as the Transferee may
from time to time reasonably request.
7.4 Tax Returns; Taxes.
------------------
(1) The Transferor shall, and the Shareholders shall cause the
Transferor to, file or cause to be filed with the applicable Taxing Authorities
all Tax Returns that are required to be filed by it on or after the Closing Date
relating to the ownership of the Acquired Assets or the operation of the
Business for taxable periods (or portions thereof) ending on or before the
Closing Date in a manner consistent with the prior practices of the Transferor,
and the Transferor shall not (and the Shareholders shall not suffer or permit
the Transferor to) change its accounting method or make any Tax election that
would affect the Transferor's basis in the Acquired Assets with respect to any
such Tax Return without the Transferee's prior written consent.
(2) The Transferor has filed a request for a Waiver of Corporate Tax
Lien under the provisions of the General Laws of Commonwealth of Massachusetts
of 1932, Chapter 62C, Section 52, a copy of which is attached as Schedule
7.4(b). The Transferor shall promptly provide to the Transferee a copy of any
notice received from the Commonwealth of Massachusetts with respect to such
filing not later than 30 days after the receipt of such notice.
(3) The Transferee shall promptly forward to the Shareholders a copy
of all written communications from any Taxing Authority received by the
Transferee or its affiliates relating to any period on or before the Closing
Date.
(4) Any real estate or personal property Taxes relating to the
Acquired Assets shall be allocated between the Transferor and the Transferee on
the basis of the relative number of days in the period on or before the Closing
Date and in the balance of the applicable period.
7.5 Notice of Developments.
----------------------
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(1) Prior to the Closing, the Shareholders shall cause the Transferor
to, and the Transferor shall, promptly notify the Transferee in writing of (i)
all events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement that could result in any material breach of a representation
or warranty or covenant of the Transferor in this Agreement or which could have
the effect of making any representation or warranty of the Transferor in this
Agreement untrue or incorrect in any material respect, and (ii) all other
material developments affecting the Acquired Assets, liabilities, Business,
financial condition, operations, results of operations, customer or supplier
relations, employee relations, projections or prospects of the Transferor.
(2) Prior to the Closing, MedSource shall promptly notify the
Transferor in writing of (i) all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement that could result in any
material breach of a representation or warranty or covenant of MedSource or the
Transferee in this Agreement or which could have the effect of making any
representation or warranty of MedSource or the Transferee in this Agreement
untrue or incorrect in any material respect, and (ii) all other material
developments affecting the business, assets, liabilities, financial condition,
operations, results of operations, customer or supplier relations, employee
relations, projections or prospects of MedSource or any Subsidiary.
7.6 Non-Disclosure of Confidential Information. From and after the date
------------------------------------------
hereof, the Transferor and the Shareholders agree not to divulge, communicate,
use to the detriment of the Transferee or for the benefit of any other Person,
or misuse in any way, any confidential information or trade secrets included in
or relating to the Acquired Assets including, without limitation, personnel
information, secret processes, know-how, customer lists or other technical data.
The foregoing shall not apply to information that: (i) was in the public domain
prior to the time of its disclosure under this Agreement; (ii) entered the
public domain after the time of its disclosure under this Agreement through
means other than an unauthorized disclosure resulting from an act or omission by
the Transferor or a Shareholder; or (iii) is required to be disclosed by the
Transferor or any Shareholder to comply with applicable laws or regulations, or
with a court or administrative order.
7.7 No Solicitation of Employees, Suppliers or Customers. Neither the
----------------------------------------------------
Transferor nor any Shareholder shall, and neither shall permit any Affiliate of
the Transferor or any Shareholder to, from and after the Closing Date, and for a
period of three years thereafter, directly or indirectly, for itself or on
behalf of any other Person, employ, engage or retain any Person who, at any time
during the preceding 12-month period, shall have been an employee of MedSource
or the Transferee or any of their respective direct or indirect subsidiaries
immediately following consummation of the transactions contemplated hereby
(collectively, the "Companies"), or contact any supplier, customer or employee
of the Companies for the purpose of soliciting or diverting any such supplier,
customer or employee from the Companies.
7.8 Non-Competition.
---------------
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(1) Until the third anniversary of the Closing Date, neither the
Transferor, any Shareholder (other than In Sup ▇▇▇▇) nor any Affiliate of any of
the foregoing shall, anywhere in North America or Europe, directly or
indirectly, alone or in association with any other Person, firm, corporation or
other business organization (i) acquire or own in any manner, any interest in
any Person that is engaged in any facet of the Business or the business of the
Companies, (ii) engage in any facet of the Business or the Companies or compete
in any way with the Business or the Companies, (iii) be employed in any capacity
by, serve as an employee of, or consultant or advisor to, or otherwise
participate in the management or operation of, any Person that (x) engages in
any facet of the Business or the business of the Companies, or (y) competes with
the Business or the Companies in any way; provided, however, that
-------- -------
notwithstanding the foregoing, the Transferor, the Shareholders and the
Affiliates of the foregoing (collectively and not individually) may own up to 2%
of the voting securities of any publicly-traded company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ may (x) engage in any of the activities set forth in the preceding
clauses (i) or (ii) to the extent such activities are not included in clause
(iii), (y) serve on the board of directors (or similar body) of a Person that is
engaged in any facet of the Business or the business of the Companies (and
provide advice in connection with such service) and (z) engage in any activity
in which they are currently engaged; provided, further, however, that
-------- ------- -------
notwithstanding the foregoing, this section 7.8(a) shall apply to ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ until (and not after) the first anniversary of the Closing
Date.
(2) The parties hereto intend that the covenant contained in section
7.8(a) shall be construed as a series of separate covenants, one for each state
or country specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in section
7.8(a) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in section 7.8(a), then such
unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(3) The Transferor and each of the Shareholders acknowledge that the
provisions of this section 7.8, and the period of time, geographic area and
scope and type of restrictions on its activities set forth herein, are
reasonable and necessary for the protection of the Transferee and are an
essential inducement to the Transferee's entering into the Transaction Documents
to which it is a party and consummating the transactions contemplated thereby.
7.9 Public Statements. From and after the date hereof and until the Closing
-----------------
Date, none of MedSource, the Transferee, the Shareholders nor the Transferor
shall, or shall permit any Affiliate thereof to, either make, issue or release
any press release or any oral or written public announcement or statement
concerning or with respect to, or acknowledgment of the existence of, or reveal
the terms, conditions and status of, the Transaction Documents or the
transactions contemplated thereby, without the prior written consent of each of
the other parties
-34-
hereto (which consent shall not be unreasonably withheld or delayed), unless
such announcement is required by Law or a Governmental Authority, in which case
the other parties shall be given notice of such requirement prior to such
announcement and the parties shall consult with each other as to the scope and
substance of such disclosure.
7.10 Other Actions. Each of the parties hereto shall use all reasonable
-------------
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper or advisable under
applicable Laws, or reasonably required in order to carry out the terms and
provisions of this Agreement and to consummate and make effective the
transactions contemplated hereby.
7.11 Change of Name. Simultaneously with the Closing, the Transferor shall
--------------
take such action necessary to change its name to a name that does not include
the words "Micro" or "Spring."
7.12 Cooperation on Taxes. The Transferor and each of the Shareholders, on
--------------------
one hand, and MedSource and the Transferee, on the other hand, shall cooperate
with each other by executing or causing to be executed any required documents
and by making available to the other, all books and records relating to the
Acquired Assets or the Business (including work papers, records and notes of any
kind) at all reasonable times, for the purpose of allowing the appropriate party
to complete its Tax Returns, respond to defend or prosecute any Tax Proceeding,
make any determination required under this Agreement (including, but not limited
to, determinations as to which period any asserted Tax liability is
attributable) and verify issues.
7.13 Employees.
---------
(1) The Transferee and the Transferor shall prepare a mutually
agreeable list of employees of the Transferor to be attached to this Agreement
as Schedule 7.13(a). The Transferee shall offer employment effective as of the
Closing to all employees of the Transferor listed on Schedule 7.13(a) to this
Agreement (all such employees who accept such offer of employment being the
"Transferred Employees"). The Transferor shall obtain, and provide the
Transferee with, the written agreement of each Transferred Employee to the
Transferee's review of the personnel file of such Transferred Employee, prior to
the Transferee's review of such personnel file. In addition to the obligation of
the Transferor set forth below, all responsibility for employees of the
Transferor, other than Transferred Employees, including, without limitation,
claims arising out of the decision not to include such employees on Schedule
7.13(a), shall be Excluded Liabilities.
(2) The Transferee shall not be responsible for any payments, expenses
and costs paid or required to be paid in connection with the employment or
termination of employment of any employees of the Transferor who are not listed
on Schedule 7.13(a) to this
-35-
Agreement, or who are listed on Schedule 7.13(a) and do not accept the
Transferee's offer of employment with the Transferee.
(3) Except to the extent expressly provided in the other subsections
of this section 7.13 or section 2.1, the Transferor shall remain responsible for
(i) payment of any and all wages, accrued vacation pay, bereavement pay, jury
duty pay, disability income, supplemental unemployment benefits, fringe benefits
or other perquisites of employment, termination indemnities or similar benefits
(whether arising under any plan, program, policy or arrangement of the
Transferor or under applicable local law), payroll taxes and other payroll
related expenses and (ii) payments to or under employee benefit plans (within
the meaning of Section 3(3) of ERISA) maintained or contributed to by the
Transferor, in either case arising out of or relating to the employment of any
of the Transferred Employees by the Transferor prior to the Closing.
(4) The Transferor shall retain responsibility and liability for all
workers' compensation claims of the Transferred Employees to the extent relating
to events, conditions or circumstances that occur or exist prior to the Closing.
The Transferee shall have sole responsibility and liability for any workers'
compensation claims of Transferred Employees to the extent relating to any
event, condition or circumstance that occurs after the Closing.
(5) In respect of grievances or EEOC Claims of Transferred Employees
to the extent relating to their employment by the Transferor including, without
limitation, any such grievances or EEOC Claims filed before state or local
authorities for which payment has not been made prior to the Closing, the
Transferor shall retain responsibility and liability for all amounts due with
respect thereto including, without limitation, the payment of any amounts in the
nature of back pay or employee compensation, and any state or federal taxes in
connection with such back pay or employee compensation. Handling of such
grievances and EEOC Claims shall be at the Transferor's cost and expense. The
Transferee shall have sole responsibility and liability for any EEOC Claims of
Transferred Employees that relate to their employment with Transferee.
(6) Nothing in this section 7.13 shall limit the at will nature of the
employment of the Transferred Employees or the right of the Transferee to alter
or terminate any employee benefit plan.
(7) At the Closing, the Transferee shall assume the Transferor's
401(k) plan, but only to the extent provided in Exhibit 7.13(g) (the "Plan
Assumption").
7.14 Consents; Releases. The Transferor and the Shareholders shall cause
------------------
the Transferor to receive all Consents on or prior to the Closing Date. At or
prior to the Closing, the Shareholders and the Transferor shall cause the
Business and the Acquired Assets to be released from all liabilities, liens or
other obligations not constituting an Assumed Liability.
7.15 Reserved.
--------
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7.16 Employment Agreements. Simultaneously with the execution and delivery
---------------------
hereof, the Transferee and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall enter into an employment
agreement in the form of Exhibit 7.16 (the "▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment
Agreement"). At the Closing, the Shareholders and the Transferor shall cause the
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment Agreement to be in full force and effect.
7.17 Stockholders Agreement and Registration Rights Agreement. At the
--------------------------------------------------------
Closing, MedSource and the Transferor shall enter into a stockholders agreement
in the form of Exhibit 7.17A (the "Stockholders Agreement") and a registration
rights agreement in the form of Exhibit 7.17B (the "Registration Rights
Agreement"). MedSource shall cause each other holder of shares of Common Stock
issued on or before the Closing Date to enter into a stockholders agreement and
a registration rights agreement substantially the same as those signed by the
Transferor.
7.18 Exclusivity. From and after the date hereof and unless and until this\
-----------
Agreement is terminated as provided in section 10, neither the Transferor nor
any Shareholder shall, and neither shall knowingly permit the Transferor or any
of their respective Affiliates, officers, directors, employees, agents or
representatives, directly or indirectly, to encourage, solicit, initiate or
participate in discussions or negotiations with, provide any information to,
receive any proposals or offers from, or enter into any agreement with, any
third party, in each case other than the Transferee, that involves the sale,
joint venture or the other disposition of all or any portion of the Transferor,
the Acquired Assets or the Business or any merger, consolidation,
recapitalization or other business combination of any kind involving the
Transferor. If the Transferor or any Shareholder receives or becomes aware of
any such offer or proposed offer, the Transferor or such Shareholder, as the
case may be, shall promptly notify the Transferee.
7.19 Equipment, Intellectual Property and Other Assets. Prior to the
-------------------------------------------------
Closing Date, the Shareholders shall take all steps necessary to contribute all
real property, equipment, Intellectual Property and other assets owned by any
Shareholder or any Affiliate of any Shareholder that is used or usable by the
Transferor in or for the Business. Any consideration paid by the Transferor in
such transactions shall be deducted from the Cash Consideration.
7.20 Certain Payments. At or prior to the Closing, the Shareholders and
----------------
their Affiliates shall repay in cash all amounts owed by them to the Transferor.
The parties hereby agree that such cash may be used to repay obligations of the
Transferor to USTrust and that the excess of such cash, if any, shall be
included in the Acquired Assets.
7.21 Transfer of Interests in Real Property.
--------------------------------------
(1) At the Closing the Shareholders shall cause the Transferor to, and
the Transferor shall, enter into assignments, each in the form attached hereto
as Exhibit 7.21(a) (collectively, the "Assignments" and, individually, an
"Assignment") of each of the Leases (other
-37-
than the Lease referred to in section 7.21(g)) (including, without limitation,
any security interests/pledge liens created thereby) with respect to any parcel
of the Leased Real Property not covered by the New Lease, collateral guarantees
with respect to such real property and all security deposits made thereunder,
each such Assignment containing a covenant of good title and the Transferor's
and Shareholders' representation and warranty that (i) there have been no prior
assignments of the Leases, (ii) such Leases are in full force and effect and are
enforceable in accordance with their terms, and (iii) neither the Leases nor the
security deposits made thereunder are then subject to any liens, security
interests or adverse claims. At the Closing, the Shareholders and the Transferor
shall deliver to the Transferee consents and estoppel certificates (the
"Landlord Consent and Estoppel Certificates"), in form reasonably acceptable to
the Transferee, executed by the landlord under each of the Leases consenting to
the assignment of the Leases and stating that there are no defaults thereunder.
(2) At the Closing, the Shareholders and the Transferor shall cause
the holder of any mortgage covering the Leased Real Property or any leasehold
interest therein and any ground, superior or underlying lessors to enter into
subordination, non-disturbance and attornment agreements and lender's estoppel
certificates each in a form reasonably acceptable to the Transferee
(collectively, the "SNDA Agreements" and, individually, a "SNDA Agreement") for
each of the Leases.
(3) Each Assignment and each SNDA Agreement shall be in recordable
form and the Assignments and the SNDA Agreements shall be duly executed,
delivered and acknowledged by each party thereto. At or prior to the Closing,
the Transferor shall cause each of the landlords under the Leases, and each
ground, superior or underlying lessor of the Leased Real Property to execute and
deliver a landlord-lender agreement (each, a "Landlord-Lender Agreement" and,
collectively, the "Landlord-Lender Agreements") in favor of MedSource's lender
in the form annexed hereto as Exhibit 7.21(c).
(4) At or before the Closing, the Shareholders and the Transferor
shall deliver to the Transferee (i) true and complete maintenance records for
the Leased Real Property, to the extent available; (ii) a validly issued
permanent certificate of occupancy for each of the buildings comprising a part
of the Leased Real Property, to the extent available; (iii) all original
licenses and permits, authorizations and approvals pertaining to the Leased Real
Property; and (iv) all guarantees and warranties which the Transferor has
received in connection with any work or services performed or equipment
installed in the aforementioned buildings and all improvements erected on the
Leased Real Property.
(5) At or before the Closing, the Shareholders and the Transferor
shall deliver to the Transferee a set of plans and specifications of the
buildings and all improvements comprising a part of the Leased Real Property.
(6) The following are to be apportioned between the parties as of and
on the Closing Date:
-38-
(1) ad valorem, real estate and personal property taxes, water
charges, and sewer rents;
(2) charges and payments payable under the transferable contracts
and agreements; and
(3) utilities, including telephone, steam, electricity and gas.
(7) For so long as Messrs. ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ receive compensation from
the Transferee (but in no event after January 1, 2001), the Transferee shall pay
the current rent under the Lease Agreement effective February 16, 1999 between
the Transferor and Longwater Realty Trust.
7.22 Inventory Count. The Transferee intends to conduct an observation of
---------------
the inventory included or to be included within the Acquired Assets under the
supervision of the Transferee's independent accountants and as of a date near
the Closing (the "Inventory Count"). The primary purpose of the Inventory Count
is to facilitate the Transferee's consolidation accounting. In the event the
Transferee's accountants determine that the Inventory Count should be conducted
on a date prior to the Closing, the Shareholders shall cause the Transferor to,
and the Transferor shall, reasonably cooperate with the Transferee in connection
therewith, provided that the Transferee shall ensure that the Inventory Count is
scheduled and conducted in a manner that minimizes any disruption of the
Transferor's business activities.
7.23 Accounts Receivable.
-------------------
(1) After the Closing, the Transferor shall permit the Transferee to
collect, in the name of the Transferor, all accounts receivable constituting
part of the Acquired Assets and to endorse with the name of the Transferor for
deposit in the Transferee's account any checks or drafts received in payment
thereof. The Transferor shall take any and all steps reasonably requested by the
Transferee to effectuate the intent of the preceding sentence.
(2) The Transferor shall promptly turn over to the Transferee any
cash, checks or other property that it may receive after the Closing in respect
of any receivable constituting part of the Acquired Assets.
(3) Following the Closing, the Transferee shall use commercially
reasonable efforts to collect all accounts receivable included in the Acquired
Assets in accordance with their respective terms. Any amounts received by the
Transferee from the obligor of any such accounts receivable shall be credited as
follows: (i) if such obligor has specified the receivable in respect of which
payment is being made, against such receivable and (ii) if such obligor has not
specified the receivable against which such payment is being made, against the
oldest unpaid receivable due from such obligor.
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7.24 Revised Memorandum. At or before the Closing, MedSource shall deliver
------------------
to the Transferor a revised memorandum that updates the Memorandum.
8. Conditions Precedent to the Closing.
8.1 Conditions Precedent to MedSource's and the Transferee's Obligations to
-----------------------------------------------------------------------
Close. The obligation of MedSource and the Transferee to enter into this
-----
Agreement and to consummate the transactions contemplated hereby is subject to
the satisfaction prior to or on the Closing Date of each of the following
conditions; provided, however, that the Transferee shall have the right to waive
-------- -------
all or any part of each such condition and to close the transactions
contemplated hereby without, however, releasing the Transferor or any
Shareholder from any covenant, obligation, agreement or condition contained
herein or from any liability for any loss or damage sustained by the Transferee
by reason of the breach by the Transferor or any Shareholder of any covenant,
obligation, agreement or condition contained herein or by reason of any
misrepresentation made by the Transferor or any Shareholder; and provided
--------
further, however, that MedSource's and the Transferee's participation in the
------- ------
Closing shall not in any way be deemed to be a waiver of any claim it may have
hereunder for any breach of any representation, warranty, covenant or agreement:
(1) The representations and warranties of the Transferor and the
Shareholders contained in this Agreement shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects as of the Closing Date, with the same force and effect as if made on
the Closing Date, except for such representations and warranties as are made as
of a specific date, which shall be true and correct in all material respects as
of such date.
(2) The covenants and agreements of the Transferor and the
Shareholders contained in this Agreement and required to be complied with or
performed on or prior to the Closing Date shall have been complied with or
performed in all material respects.
(3) The Transferee shall have received (i) a certificate dated the
Closing Date and executed by an executive officer of the Transferor, and (ii) a
certificate dated the Closing Date and executed by each of the Shareholders, in
each case certifying the satisfaction of the conditions referred to in sections
8.1(a) and (b).
(4) The Transferee shall have received, each in form and substance
reasonably satisfactory to the Transferee, all Consents of, and estoppel
certificates and releases from, and shall have delivered all notices to, any
Governmental Entity or other Person that is required for the consummation of the
transactions contemplated hereby and for the Transferee to conduct and operate
the Business, which Consents, notices and estoppel certificates are listed in
Schedule 5.4(b) attached hereto and which releases are listed in Schedule 7.13.
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(5) No event or events shall have occurred between the date hereof and
the Closing Date which, individually or in the aggregate, have, or are
reasonably likely to have, a material adverse effect on the Acquired Assets or
the Business.
(6) The Transferee shall have received a certificate of the Transferor
(the "Transferor Clerk's Certificate") certifying as to the articles of
organization and bylaws of the Transferor and as to resolutions, duly and
validly adopted by the Board of Directors and the Shareholders of the
Transferor, evidencing its and their authorization of the execution and delivery
of this Agreement and the other Transaction Documents to which the Transferor is
a party and the consummation of the transactions contemplated hereby and
thereby, and the names and signatures of the officers of the Transferor
authorized to sign this Agreement and the other Transaction Documents.
(7) The Transferee shall have received all such documents and
instruments including, without limitation, such deeds of transfer, title reports
and property surveys with respect to the transfer of all legal rights in the
real property to be transferred pursuant to this Agreement.
(8) The form and substance of all certificates, transfer documents,
title reports, property surveys, deeds, opinions, consents, instruments, and
other documents delivered to the Transferee under this Agreement shall be
satisfactory in all reasonable respects to the Transferee and its counsel.
(9) MedSource and the Transferee shall have received from ▇▇▇▇▇▇ &
Dodge LLP, counsel for the Transferor and the Shareholders, a legal opinion that
is dated the Closing Date, customary for transactions of the type contemplated
by this Agreement and reasonably satisfactory to MedSource and the Transferee.
(10) The Transferee shall have received from the Transferor at the
Closing an affidavit of non-foreign status, in the form required by Section 1445
of the Code and the regulations thereunder, signed under penalties of perjury.
(11) The Transferee shall have received a copy of a Phase I
Environmental Report and a Phase II Environmental Report relating to the
Transferor's Real Property that shall be satisfactory in the sole judgment of
the Transferee.
(12) The Transferee shall have received a ▇▇▇▇ of Sale, Assignment and
Assumption Agreement, in the form of Exhibit 8.1(l) (the "▇▇▇▇ of Sale,
Assignment and Assumption Agreement") attached hereto, duly executed by the
Transferor, and a patent assignment in a form reasonably acceptable to the
Transferee (the "Patent Assignment"), duly executed by the Transferor.
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(13) The Transferee and its affiliates shall have received the
financing required to fund the transactions hereunder and the transactions
contemplated by the parties hereto on terms and conditions acceptable to the
Transferee and its affiliates.
(14) The ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Employment Agreement shall be in full force
and effect.
(15) Reserved.
(16) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
8.2 Conditions Precedent to the Transferor's Obligations to Close. The
-------------------------------------------------------------
obligation of the Transferor to consummate the transactions contemplated hereby
is subject to the satisfaction prior to or on the Closing Date of each of the
following conditions; provided, however, that the Transferor shall have the
-------- -------
right to waive all or any part of each such condition, and to close the
transactions contemplated hereby without, however, releasing the Transferee from
any covenant, obligation, agreement or condition contained herein or from any
liability for any loss or damage sustained by the Transferor by reason of the
breach by the Transferee of any covenant, obligation, agreement or condition
contained herein, by reason of any misrepresentation made by the Transferee; and
provided further, however, that the Transferor's participation in the Closing
-------- ------- -------
shall not in any way be deemed to be a waiver of any claim it may have hereunder
for any breach of any representation, warranty, covenant or agreement:
(1) The representations and warranties of the Transferee and MedSource
contained in this Agreement shall have been true and correct in all material
respects when made and shall be true and correct in all material respects as of
the Closing Date, with the same force and effect as if made as of the Closing
Date, other than such representations and warranties as are made as of a
specific date, which shall be true and correct in all material respects as of
such date.
(2) The covenants and agreements contained in this Agreement to be
complied with by the Transferee or MedSource on or before the Closing Date shall
have been complied with in all material respects.
(3) The Transferor shall have received a certificate dated the Closing
Date and executed by an officer of the Transferee, certifying to the
satisfaction of the conditions referred to in sections 8.2(a) and (b). The
Transferor shall have received a certificate dated the Closing Date and executed
by an officer of MedSource, certifying to the satisfaction of the conditions
referred to in sections 8.2(a) and (b).
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(4) The Transferor shall have received a certificate of the Secretary
of the Transferee (the "Transferee Secretary's Certificate") certifying as to
the certificate of formation and limited liability company agreement of the
Transferee and as to the resolutions, duly and validly adopted by the
Transferee, evidencing its authorization of the execution and delivery of this
Agreement and the other Transaction Documents to which the Transferee is a party
and the consummation of the transactions contemplated hereby and thereby, and
the names and signatures of the officers of the Transferee authorized to sign
this Agreement and the other Transaction Documents to be delivered hereunder.
The Transferor shall have received a certificate of the Secretary of the
MedSource (the "MedSource Secretary's Certificate") certifying as to the
certificate of incorporation and bylaws of MedSource and as to the resolutions,
duly and validly adopted by MedSource, evidencing its authorization of the
execution and delivery of this Agreement and the other Transaction Documents to
which MedSource is a party and the consummation of the transactions contemplated
hereby and thereby, and the names and signatures of the officers of MedSource
authorized to sign this Agreement and the other Transaction Documents to be
delivered hereunder.
(5) The form and substance of all certificates, opinions, consents,
instruments and other documents delivered to the Transferor under this Agreement
shall be satisfactory in all reasonable respects to the Transferor and its
counsel.
(6) The Transferor and the Shareholders shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, counsel for MedSource and the Transferee, a
legal opinion that is dated the Closing Date, customary for transactions of the
type contemplated by this Agreement and reasonably satisfactory to the
Transferor and the Shareholders.
(7) No Law shall be in effect which prohibits any party hereto from
consummating the transactions contemplated hereby.
(8) The Transferor shall have received a ▇▇▇▇ of Sale, Assignment and
Assumption Agreement, duly executed by the Transferee.
(9) Reserved.
(10) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
(11) MedSource shall concurrently acquire no less than four of the
seven businesses identified in the Memorandum.
(12) The Transferor shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP, counsel for the Transferee, an opinion dated the Closing Date to
the effect that the transfer
-43-
by the Transferor of the Acquired Assets and the payment by the Transferee of
the Consideration will constitute a contribution to which the provisions of
Section 351(a) of the Code apply.
(13) No event or events shall have occurred between the date hereof
and the Closing Date which, individually or in the aggregate, have, or are
reasonably likely to have, a material adverse effect on the business or assets
of MedSource and the Subsidiaries, taken as a whole.
(14) At or prior to the Closing, MedSource shall have delivered to the
Transferor an appraisal of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, which will include
customary assumptions and otherwise be in customary form and which will indicate
that the fair market value of the Common Stock at the Closing is $50 per share.
9. Documents to be Delivered at the Closing.
9.1 Deliveries of the Transferor and the Shareholders. At the Closing, the
-------------------------------------------------
Transferor and the Shareholders shall deliver or cause to be delivered the
following items to the Transferee:
(1) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement and the
Patent Assignment, each duly executed by the Transferor;
(2) the releases referred to in section 7.14;
(3) the certificates referred to in section 8.1(c) duly executed by an
executive officer of the Transferor and by each of the Shareholders;
(4) the Consents referred to in section 8.1(d);
(5) the Transferor's Clerk's Certificate referred to in section 8.1(f)
duly executed by the Secretary of the Transferor;
(6) the opinion of counsel to the Transferor and the Shareholders
referred to in section 8.1(i);
(7) the affidavit referred to in section 8.1(j), duly executed by the
Transferor, under penalties of perjury;
(8) a Tax, lien and judgment search of the Transferor and the Acquired
Assets showing no items not disclosed in the schedules to this Agreement;
(9) the Stockholders Agreement, duly executed by the Transferor;
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(10) the Registration Rights Agreement, duly executed by the
Transferor;
(11) a certificate from the Secretary of State of Massachusetts
attesting to the good standing of the Company in the Commonwealth of
Massachusetts as of a date on or near the Closing Date;
(12) the Landlord Consent and Estoppel Certificates and the
Landlord-Lender Agreements, duly executed by each landlord under a Lease, and
the Assignments and the SNDA Agreements, each duly executed by each party
thereto; and
(13) the Plan Assumption, duly executed by the Transferor.
9.2 Deliveries of the Transferee. At the Closing, the Transferee shall
----------------------------
deliver or cause to be delivered the following items to the Transferor:
(1) the certificates referred to in section 8.2(c) duly executed by
officers of MedSource and the Transferee, respectively;
(2) the Transferee Secretary's Certificate referred to in section
8.2(d), duly executed by the Secretary of the Transferee and the MedSource
Secretary's Certificate referred to in Section 8.2(d), duly executed by the
Secretary of MedSource;
(3) the opinion of counsel referred to in section 8.2(f);
(4) the Cash Consideration;
(5) the stock certificates representing the shares of Common Stock
referred to in section 3.1;
(6) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement, duly
executed by the Transferee;
(7) the Stockholders Agreement, duly executed by MedSource;
(8) the Registration Rights Agreement, duly executed by MedSource;
(9) certificates from the Secretary of State of Delaware attesting to
the good standing of each of MedSource and the Transferee in the state of
Delaware as of a date on or near the Closing Date;
(10) Assignments, duly executed by the Transferee; and
(11) the Plan Assumption, duly executed by the Transferee.
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10. Termination.
(1) This Agreement may be terminated at any time prior to the Closing:
(1) by the mutual agreement of the Transferee and the Transferor;
(2) by the Transferee or the Transferor (if such party is not in
breach of or default under this Agreement) giving written notice to such effect
to the other party if the Closing shall not have occurred on or before April 30,
1999, or such later date as the parties shall have agreed upon prior to the
giving of such notice; or
(3) by either the Transferee or the Transferor in the event of a
material breach by or default of the other party hereto.
(2) Upon termination of this Agreement pursuant to section 10(a), all
obligations of the parties shall terminate except those under section 12;
provided, however, that no such termination shall relieve the Transferor or any
-------- -------
Shareholder of any liability to the Transferee or MedSource, or the Transferee
or MedSource of any liability to the Transferor or any Shareholder, by reason of
any breach of or default under this Agreement.
11. Survival of Representations and Warranties.
11.1 Survival of Representations and Warranties of the Transferor and the
--------------------------------------------------------------------
Shareholders. Notwithstanding any right of the Transferee fully to investigate
------------
the affairs of the Transferor and the Shareholders and notwithstanding any
knowledge of facts determined or determinable by the Transferee pursuant to such
investigation or right of investigation, the Transferee has the right to rely
fully upon the representations and warranties of the Transferor contained in
this Agreement or in any other Transaction Document. All such representations
and warranties shall survive the execution and delivery of this Agreement and
the Closing hereunder and shall thereafter continue in full force and effect
until 18 months following the Closing Date, and the Transferor's and the
Shareholders' liability in respect of any breach of any such representation or
warranty shall terminate 18 months following the Closing Date, except for
liability with respect to which notice shall have been given on or prior to such
date to the party against which such claim is asserted pursuant to section 12.3,
which such liability shall remain an obligation of the party against whom such
claim is asserted. The foregoing notwithstanding, the representations and
warranties contained in sections 5.3, 5.12, 5.14 and 5.16 shall survive the
Closing and the Transferor's and the Shareholders' liability in respect of any
breach thereof shall continue until 30 days after all liability relating thereto
is barred by all applicable statutes of limitation, except for liability with
respect to which notice shall have been given on or prior to
-46-
such date to the party against which such claim is asserted pursuant to section
12.3, which such liability shall remain an obligation of the party against whom
such claim is asserted.
11.2 Survival of Representations and Warranties of MedSource and the
---------------------------------------------------------------
Transferee. The Transferor and the Shareholders have the right to rely fully
----------
upon the representations and warranties of MedSource and the Transferee
contained in this Agreement or in any other Transaction Document. All such
representations and warranties shall survive the execution and delivery of this
Agreement and the Closing hereunder and shall thereafter continue in full force
and effect until 18 months following the Closing Date, and Transferee's
liability in respect of any breach of any such representation or warranty shall
terminate 18 months following the Closing Date, except for liability with
respect to which notice shall have been given on or prior to such date to the
party against which such claim is asserted pursuant to section 12.3, which such
liability shall remain an obligation of the party against whom such claim is
asserted. The foregoing notwithstanding, the representations and warranties
contained in sections 6.3 and 6.11 shall survive the Closing and MedSource's and
the Transferee's liability in respect of any breach thereof shall continue until
30 days after all liability relating thereto is barred by all applicable
statutes of limitation, except for liability with respect to which notice shall
have been given on or prior to such date to the party against which such claim
is asserted pursuant to section 12.3, which such liability shall remain an
obligation of the party against whom such claim is asserted.
12. Indemnification.
12.1 Indemnification by the Transferor and the Shareholders. Subject to the
------------------------------------------------------
limitations contained in section 11 and section 12.4, the Transferor shall
indemnify and defend, and the Shareholders shall severally (and not jointly)
indemnify and defend (meaning that each Shareholder shall be liable only for the
percentage of the Damages (as defined below) that corresponds to such
Shareholder's ownership percentage of the Transferor on the Closing Date and any
payments made by the Transferor shall be deemed to have been made by the
Shareholders in proportion to such ownership percentage), the Transferee and
each of its officers, directors, employees, shareholders, agents, advisors or
representatives (each, a "Transferee Indemnitee") against, and hold each
Transferee Indemnitee harmless from, any loss, liability, obligation,
deficiency, damage or expense including, without limitation, interest,
penalties, reasonable attorneys' and consultants' fees and disbursements
(collectively, "Damages"), that any Transferee Indemnitee may suffer or incur
based upon, arising out of, relating to or in connection with any of the
following (whether or not in connection with any third party claim):
(1) any breach of any representation or warranty made by the
Transferor or any Shareholder contained in this Agreement or in any other
Transaction Document or in respect of any claim made based upon facts alleged
which, if true, would constitute any such breach;
-47-
(2) either the Transferor's or any Shareholder's failure to perform or
to comply with any covenant or condition required to be performed or complied
with by the Transferor or the Shareholders contained in this Agreement or in any
other Transaction Document;
(3) the ownership or operation of the Business or Acquired Assets
prior to the Closing Date, except for the Assumed Liabilities; or
(4) any Excluded Liability.
12.2 Indemnification by MedSource and the Transferee. Subject to the
-----------------------------------------------
limitations contained in section 11 and section 12.4, MedSource and the
Transferee shall jointly and severally indemnify and defend the Transferor and
the Shareholders and each of the Transferor's officers, directors, employees,
shareholders, agents, advisors or representatives (each, a "Transferor
Indemnitee") against, and hold each Transferor Indemnitee harmless from, any
Damages that such Transferor Indemnitee may suffer or incur arising from,
related to or in connection with any of the following:
(1) any breach of any representation or warranty made by MedSource or
the Transferee contained in this Agreement or in any other Transaction Document
or in respect of any claim made based upon facts alleged which, if true, would
constitute any such breach;
(2) either MedSource's or the Transferee's failure to perform or to
comply with any covenant or condition required to be performed or complied with
by MedSource or the Transferee contained in this Agreement or in any other
Transaction Document; or
(3) the ownership or operation of the Business or Acquired Assets
after the Closing Date or the Assumed Liabilities.
12.3 Indemnification Procedures.
--------------------------
(1) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damage referred to in sections 12.1 or 12.2, such indemnified
party shall, if a claim for indemnification in respect thereof is to be made
against an indemnifying party pursuant to this section 12, give written notice
to the indemnifying party of the notice of such claim or the commencement of
such Proceeding, setting forth in reasonable detail the nature thereof and the
basis upon which such party seeks indemnification hereunder; provided, however,
-------- -------
that the failure of any indemnified party to give such notice shall not relieve
the indemnifying party of its obligations under such section, except to the
extent that the indemnifying party is actually prejudiced by the failure to give
such notice. The provisions of this section 12.3 apply to claims under section
7.3.
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(2) (i) In the case of any Proceeding by a third party against an
indemnified party, the indemnifying party shall, upon notice as provided above,
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified party, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof (but the indemnified party shall have the right, but not the
obligation, to participate at its own cost and expense in such defense by
counsel of its own choice) or for any amounts paid or foregone by the
indemnified party as a result of any settlement or compromise thereof that is
effected by the indemnified party (without the written consent of the
indemnifying party).
(ii) Anything in section 12.3(b)(i) notwithstanding, if both the
indemnifying party and the indemnified party are named as parties or subject to
such Proceeding and either such party determines with advice of counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the other party or that a material conflict
of interest between such parties may exist in respect of such Proceeding, then
the indemnifying party may decline to assume the defense on behalf of the
indemnified party or the indemnified party may retain the defense on its own
behalf, and, in either such case, after notice to such effect is duly given
hereunder to the other party, the indemnifying party shall be relieved of its
obligation to assume the defense on behalf of the indemnified party, but shall
be required to pay any legal or other expenses including, without limitation,
reasonable attorneys' fees and disbursements, incurred by the indemnified party
in such defense.
(3) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
assume the defense thereof, then the indemnified party may respond to, contest
and defend against such Proceeding (but the indemnifying party shall have the
right to participate at its own cost and expense in such defense by counsel of
its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover from the indemnifying party the entire cost and
expense thereof including, without limitation, reasonable attorneys' fees and
disbursements and all amounts paid or foregone as a result of such Proceeding,
or the settlement or compromise thereof. The indemnification required hereunder
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or incurred.
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12.4 Limitations on Indemnification.
------------------------------
(1) (i) The Transferor and the Shareholders shall have indemnification
obligations pursuant to section 12.1(a) respecting Damages that result from
actual or claimed breaches of representations or warranties set forth in this
Agreement (other than the representations and warranties contained in sections
5.3, 5.12, 5.14 and 5.16), only if and only to the extent that the aggregate of
all Damages resulting from such actual or claimed breaches shall exceed
$250,000. Anything to the contrary notwithstanding, neither the Transferor nor
any Shareholder shall have any liability pursuant to section 12.1(a) with
respect to Damages that result from actual or claimed breaches of
representations or warranties set forth in this Agreement (other than the
representations and warranties contained in sections 5.3, 5.12, 5.14 and 5.16)
for and to the extent that the aggregate amount of such Damages exceeds
$2,500,000. In lieu of the payment of cash in satisfaction of any
indemnification obligation arising under this Agreement, the Shareholders and/or
the Transferor may tender shares of Common Stock to satisfy up to 66% of such
obligation, which shares of Common Stock shall be valued at their fair market
value on the date tendered, as agreed by the Transferee, on the one hand, and
the Shareholders or the Transferor, on the other hand, or if such parties cannot
agree within 10 days, the fair market value of such shares, as determined by an
independent third party appraiser selected by MedSource and reasonably
acceptable to the Shareholder or the Transferor, as the case may be when so
tendered.
(ii) MedSource and the Transferee shall have indemnification
obligations pursuant to section 12.2(a) respecting Damages that result from
actual or claimed breaches of representations or warranties set forth in this
Agreement (other than the representations and warranties contained in sections
6.3 and 6.11), only if and only to the extent that the aggregate of all Damages
resulting from such actual or claimed breaches shall exceed $250,000. Anything
to the contrary notwithstanding, MedSource and the Transferee shall have no
liability pursuant to section 12.2(a) with respect to Damages that result from
actual or claimed breaches of representations or warranties set forth in this
Agreement (other than the representations and warranties contained in sections
6.3 and 6.11) for and to the extent that the aggregate amount of such Damages
exceeds $2,500,000.
(2) The limitations set forth in paragraph (a)(i) of this section 12.4
shall not limit or reduce the Transferor's and the Shareholders' obligations to
indemnify the Transferee in respect of Damages that result from actual or
claimed breaches of the representations and warranties contained in sections
5.3, 5.12, 5.14 and 5.16. The limitations set forth in paragraph (a)(ii) of this
section 12.4 shall not limit or reduce MedSource's or the Transferee's
obligations to indemnify the Shareholders or the Transferor in respect of
Damages that result from actual or claimed breaches of the representations and
warranties contained in sections 6.3 or 6.11.
(3) In the event that any Damages are covered by insurance proceeds or
other reimbursement obligations, whether maintained by the Transferee, MedSource
or the Transferor,
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the Indemnified Party shall not be deemed to have any Damages if and to the
extent that the Indemnified Party actually realizes the proceeds of such
insurance, which payments shall in no event be included in the baskets set forth
in section 12.4(a).
13. Miscellaneous.
13.1 Transaction Fees and Expenses. Except as otherwise expressly provided
-----------------------------
herein, each party hereto shall bear such costs, fees and expenses as may be
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
13.2 Notices. Any notice, demand, request or other communication which is
-------
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail or (c) by personal delivery to such party at
the following address:
To the Transferee:
MedSource Technologies, Inc.
c/o Kidd & Company, LLC
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Transferor or any Shareholder, to their respective addresses as
set forth on Schedule A hereto.
with respect to the Transferor and each of the Shareholders, with a
copy to:
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▇▇▇▇▇▇ & Dodge LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
business days after such notice or demand is sent, and, in the case of clause
(b), the business day next following the date such notice or demand is sent. A
copy of any notice to the Shareholders shall be sent concurrently to the
Transferor and a copy of any notice to the Transferor shall be sent concurrently
to the Shareholders.
13.3 Amendment. Except as otherwise provided herein, no amendment of this
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Agreement shall be valid or effective unless in writing and signed by or on
behalf of the party against whom the same is sought to be enforced.
13.4 Waiver. No course of dealing of any party hereto, no omission, failure
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or delay on the part of any party hereto in asserting or exercising any right
hereunder, and no partial or single exercise of any right hereunder by any party
hereto shall constitute or operate as a waiver of any such right or any other
right hereunder. No waiver of any provision hereof shall be effective unless in
writing and signed by or on behalf of the party to be charged therewith. No
waiver of any provision hereof shall be deemed or construed as a continuing
waiver, as a waiver in respect of any other or subsequent breach or default of
such provision, or as a waiver of any other provision hereof unless expressly so
stated in writing and signed by or on behalf of the party to be charged
therewith. The Transferee's investigation, receipt of or commenting on Tax
Returns, waiver of Uniform Commercial Code bulk sales law, and other waivers and
receipt of information contained herein shall not be deemed to waive any of the
Transferee's rights under the indemnification provisions of section 12.
13.5 Governing Law. This Agreement shall be governed by, and interpreted
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and enforced in accordance with, the laws of the State of Delaware.
13.6 Jurisdiction. Each of the parties hereto hereby irrevocably consents
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and submits to the exclusive jurisdiction of the United States District Court
for the District of Massachusetts in connection with any Proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in such District (unless such court lacks jurisdiction
with respect to such Proceeding, in which case, each of the parties hereto
irrevocably consents to the jurisdiction of the courts of the Commonwealth of
Massachusetts in connection with such Proceeding and waives any objection to
venue in the Commonwealth of Massachusetts, and agrees that service of any
summons, complaint, notice or other process relating to such Proceeding may be
effected in the manner provided by clause (a) of section 13.2.
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13.7 Remedies. In the event of any actual or prospective breach or default
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by any party hereto, the other parties shall be entitled to equitable relief,
including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive. Nothing
contained herein and no election of any particular remedy shall be deemed to
prohibit or limit any party from pursuing, or be deemed a waiver of the right to
pursue, any other remedy or relief available now or hereafter existing at law or
in equity (whether by statute or otherwise) for such actual or prospective
breach or default, including the recovery of damages.
13.8 Severability. The provisions hereof are severable and if any provision
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of this Agreement shall be determined to be legally invalid, inoperative or
unenforceable in any respect by a court of competent jurisdiction, then the
remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any such invalid,
inoperative or unenforceable provision shall be deemed, without any further
action on the part of the parties hereto, amended and limited to the extent
necessary to render such provision valid, operative and enforceable.
13.9 Further Assurances. Each party hereto covenants and agrees promptly to
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execute, deliver, file or record such agreements, instruments, certificates and
other documents and to perform such other and further acts as the other party
hereto may reasonably request or as may otherwise be necessary or proper to
consummate and perfect the transactions contemplated hereby.
13.10 Assignment. This Agreement and all of the provisions hereof shall be
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binding upon and inure to the benefit of the parties hereto, their heirs and
their respective successors and permitted assignees. Permitted assignees of the
Transferee's rights hereunder shall include any Affiliate of the Transferee and
any or all financial institutions or other entities investing and/or lending
monies to finance the transactions herein contemplated. Permitted assignees of
the Transferor's rights hereunder shall include any Affiliate of the Transferor.
Neither Transferee nor Transferor may assign any of its obligations hereunder
without the consent of the other party. Except for the permitted assignees,
neither party shall have the right to assign any rights or delegate any duties
hereunder without the consent of the other party.
13.11 Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
13.12 No Third Party Beneficiaries. Nothing contained in this Agreement,
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whether express or implied, is intended, or shall be deemed, to create or confer
any right, interest or remedy for the benefit of any Person other than as
otherwise provided in this Agreement.
13.13 Entire Agreement. This Agreement (including all the schedules and
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exhibits hereto), together with the Exhibits, Schedules, certificates and other
documentation referred to
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herein or required to be delivered pursuant to the terms hereof, contains the
terms of the entire agreement among the parties with respect to the subject
matter hereof and supersedes any and all prior agreements, commitments,
understandings, discussions, negotiations or arrangements of any nature relating
thereto.
13.14 Headings. The headings contained in this Agreement are included for
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convenience and reference purposes only and shall be given no effect in the
construction or interpretation of this Agreement.
13.15 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.16 Bulk Sales Law. The parties waive compliance with the provisions of
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any Uniform Commercial Code bulk sales law that may be applicable to the
transactions contemplated hereby.
[The next page is a signature page]
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MedSource: MEDSOURCE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
Transferee: THE MICROSPRING COMPANY, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
Transferor: THE MICROSPRING CO., INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President/CEO
Shareholders: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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In Sup ▇▇▇▇, M.D.