EXHIBIT 2.12
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AGREEMENT AND PLAN OF MERGER
by and among
MedSource Trenton, Inc.
(the "Buyer"),
and
its parent company,
MedSource Technologies, Inc.,
("MedSource")
HV Technologies, Inc.
(the "Company")
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(the "Shareholders Representative")
December 31, 2001
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TABLE OF CONTENTS
Page
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1. The Merger........................................................................1
1.1 The Merger...............................................................1
1.2 Effect of the Merger.....................................................1
1.3 Consummation of the Merger...............................................2
1.4 Charter; Bylaws; Directors and Officers..................................2
1.5 The Closing..............................................................2
1.6 Further Assurances.......................................................2
1.7 Tax Consequences.........................................................2
2. Conversion of Shares..............................................................2
2.1 Conversion of Shares.....................................................2
2.2 Stock Options, Warrants, Treasury Shares, Etc............................3
2.3 Surrender and Exchange of Shares; Payment of Merger Consideration........3
2.4 Working Capital Adjustment...............................................3
3. Representations and Warranties of the Company.....................................5
3.1 Organization.............................................................5
3.2 Capitalization...........................................................5
3.3 Authorization; Validity of Agreement.....................................5
3.4 No Violations; Consents and Approvals....................................6
3.5 Financial Statements.....................................................6
3.6 No Material Adverse Change...............................................7
3.7 No Undisclosed Liabilities...............................................7
3.8 Litigation; Compliance with Law; Licenses and Permits....................7
3.9 Employee Benefit Plans; ERISA............................................8
3.10 Real Property............................................................9
3.11 Intellectual Property; Computer Software................................11
3.12 Tangible Personal Property..............................................12
3.13 Material Contracts......................................................12
3.14 Taxes...................................................................13
3.15 Affiliated Party Transactions...........................................16
3.16 Environmental Matters...................................................17
3.17 No Brokers..............................................................19
3.18 Receivables.............................................................19
3.19 Inventories.............................................................19
3.20 Product Claims..........................................................19
3.21 Warranties and Returns..................................................19
3.22 Assets Utilized in the Business.........................................19
3.23 Insurance...............................................................19
3.24 Delivery of Documents; Corporate Records................................20
3.25 Customers, Suppliers and Distributors...................................20
3.26 Labor Matters...........................................................20
3.27 Bank Accounts...........................................................20
3.28 Directors, Officers and Certain Employees...............................20
Table of Contents
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(continued)
Page
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3.29 Allocation of Merger Consideration......................................20
3.30 No Misstatements or Omissions...........................................20
3.31 Knowledge of the Company................................................20
4. Representations and Warranties of the Buyer and MedSource........................21
4.1 Organization of the Buyer Group.........................................21
4.2 Authorization; Validity of Agreement....................................21
4.3 No Violations; Consents and Approvals...................................21
4.4 Litigation; Compliance with Law; Licenses and Permits...................22
4.5 Capital Structure.......................................................22
4.6 Valid Issuance of Shares, Etc...........................................23
4.7 Financial Statements....................................................23
4.8 No Material Adverse Change..............................................23
4.9 No Undisclosed Liabilities..............................................24
4.10 Taxes...................................................................24
4.11 No Misstatements or Omissions...........................................24
5. Covenants........................................................................24
5.1 Conduct of Business by the Company Pending the Closing..................24
5.2 Access to Information...................................................26
5.3 Public Announcements....................................................26
5.4 Notification of Material Adverse Events.................................26
6. Other Agreements of the Parties..................................................27
6.1 Tax Returns; Taxes......................................................27
6.2 Non-Disclosure of Confidential Information..............................28
6.3 Noncompetition and Nonsolicitation Agreements...........................29
6.4 Required Consents.......................................................29
6.5 Stockholders Agreement and Registration Rights Agreement................29
6.6 Geneva Agreement........................................................29
6.7 Lock-Up Agreement.......................................................29
6.8 Sale of Condominium.....................................................29
6.9 SAR Payment Agreements..................................................29
6.10 "Green Shoe" Agreement..................................................29
6.11 Grant of MedSource Options..............................................30
6.12 Payment of SunTrust Debt................................................30
6.13 Termination of 401(k) Plan..............................................30
6.14 Assignment of Stale Accounts............................................30
6.15 Certain Employment Agreements...........................................30
6.16 Owner's Affidavit and Non-Imputation Endorsement........................31
6.17 Extinguishing ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇' Interest in the ▇▇▇▇ Property..........31
7. Closing Conditions...............................................................31
7.1 Conditions to the Seller Group's Obligations............................31
7.2 Conditions to the Buyer Group's Obligations.............................31
8. Closing Deliveries...............................................................32
8.1 Closing Deliveries by the Seller Group Regarding Real Property..........32
ii
Table of Contents
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(continued)
Page
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8.2 Other Deliveries of the Seller Group....................................34
8.3 Deliveries of the Buyer Group...........................................36
9. Termination......................................................................36
9.1 Termination.............................................................36
9.2 Effect of Termination...................................................37
10. Indemnification..................................................................37
10.1 Survival of Representations and Warranties of the Seller Group..........37
10.2 Survival of Representations and Warranties of the Buyer Group...........37
10.3 Indemnification by the Shareholders.....................................37
10.4 Indemnification by the Buyer Group......................................39
10.5 Indemnification Procedures..............................................39
10.6 Limitations on Indemnification by the Shareholders......................41
10.7 Limitations on Indemnification by the Buyer Group.......................43
11. Miscellaneous....................................................................43
11.1 Shareholders Representative.............................................43
11.2 Transaction Fees and Expenses...........................................44
11.3 Notices.................................................................45
11.4 Amendment...............................................................46
11.5 Waiver..................................................................46
11.6 Governing Law...........................................................46
11.7 Service of Process......................................................46
11.8 Remedies................................................................46
11.9 Severability............................................................46
11.10 Further Assurances......................................................46
11.11 Binding Effect; Assignment..............................................47
11.12 No Third Party Beneficiaries............................................47
11.13 Entire Agreement........................................................47
iii
Schedules
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Schedule 2.3(b) Allocation of Payment of Merger Consideration
Schedule 2.4(a) Adjustments to Working Capital
Schedule 3.2(a)(i) Certain Exceptions
Schedule 3.2(a)(ii) Rights, Agreements, Interests in Connection with Company Shares
Schedule 3.4(b) Consents and Approvals
Schedule 3.5(a) Financial Statements of the Company
Schedule 3.8(a) Litigation
Schedule 3.9(a) Employee Benefit Plans
Schedule 3.9(b) Employee Benefit Plans subject to Title IV of ERISA
Schedule 3.9(c) Employee Benefit Plans Provisions; Death and Medical Benefits
Schedule 3.10(a)(i) Owned Real Property
Schedule 3.10(a)(ii) Permitted Exceptions relating to Owned Real Property
Schedule 3.10(b) Real Property Leases
Schedule 3.10(c)(i) Rights relating to the Owned Real Property
Schedule 3.10(c)(ii) Service Contracts
Schedule 3.10(d) Permitted Exceptions relating to Leased Real Property
Schedule 3.10(g) Condition
Schedule 3.11(a) Intellectual Property
Schedule 3.12(a) Liens on Tangible Personal Property
Schedule 3.13 Material Contracts
Schedule 3.14(a) Taxes
Schedule 3.14(b) Tax Returns and Subchapter S Election
Schedule 3.14(c) Jurisdictions - Tax Proceedings
Schedule 3.15 Affiliated Party Transactions
Schedule 3.16 Environmental Matters
Schedule 3.17 Brokers
Schedule 3.19 Inventories
Schedule 3.20 Service and Product Liability Claims
Schedule 3.21 Warranties and Returns Policies; Product Failures or Defects
Schedule 3.22 Liens
Schedule 3.23 Insurance
Schedule 3.25 Customers and Suppliers
Schedule 3.27 Bank Accounts
Schedule 3.28 Key Employees
Schedule 4.3 Consents and Approvals
Schedule 4.5(c) MedSource Equity Holding
Schedule 4.7(a) Financial Statements - MedSource
Schedule 4.10 Taxes - MedSource
Schedule 5.1 Business Pending the Closing
Schedule 6.3 Shareholders party to the Noncompetition and Nonsolicitation Agreements
Exhibits
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Exhibit 1.3 Forms of Certificates of Merger (Georgia and Delaware)
Exhibit 2.3 Form of Letter of Transmittal
iv
Exhibit 6.3(a) Form of Noncompetition and Nonsolicitation Agreement - Senior
Management
Exhibit 6.3(b) Form of Noncompetition and Nonsolicitation Agreement - Other
Employees
Exhibit 6.5(a) Form of Stockholders Agreement
Exhibit 6.5(b) Form of Registration Rights Agreement
Exhibit 6.6 Form of Geneva Agreement
Exhibit 6.7 Form of Lock-Up Agreement
Exhibit 6.9(a) Form of SAR Payment Agreement with ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Exhibit 6.9(b) Form of SAR Payment Agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit 6.10 Form of Green Shoe Agreement
Exhibit 8.2(b) Form of Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Exhibit 8.3(b) Form of Opinion of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
v
Index of Defined Terms
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Definition Section
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"Affiliates" 3.15
"Agreement" First paragraph
"Approvals" 3.10(f)
"Arbitration Firm" 2.4(b)
"Basket" 10.6(a)
"Buyer Acquisition Agreement" 4.2
"Buyer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Adverse Effect" 4.8
"Buyer Group" First paragraph
"Buyer Indemnitee" 10.3(a)
"Buyer" First paragraph
"Cap" 10.6(a)
"▇▇▇▇▇▇▇" 3.31
"Cash Consideration" 2.3(b)(ii)
"Certificates of Merger" 1.3
"Claims" 3.16(k)
"Closing Date" 1.5
"Closing" 1.5
"Code" 3.9(b)
"Company Audited Financial Statements" 3.5(a)
"Company Material Adverse Effect" 3.6
"Company Shares" 2.1
"Company" First paragraph
"Condominium" 6.8
"Consents" 3.4(b)
"Contract" 3.4(a)
"Damages" 10.3(a)
"DGCL" 1.1
"Effective Time" 1.3
"Environment" 3.16(k)
"Environmental Claim" 3.16(k)
"Environmental Laws" 3.16(k)
"Environmental Permit" 3.16(k)
"ERISA Affiliate" 3.9(a)
"ERISA" 3.9(a)
"Final Working Capital" 2.4(b)
"Financial Statements" 3.5(a)
"GAAP" 2.4(a)
"Geneva Agreement" 6.6
"Geneva" 6.6
"GBCC" 1.1
"Governmental Entity" 3.4(b)
"Green Shoe Agreement" 6.10
"Hazardous Substance" 3.16(k)
vi
Definition Section
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"Institutional Indebtedness" 5.1(d)
"Intellectual Property" 3.11(a)
"Interim Financial Statement" 3.5(a)
"▇▇▇▇▇" 3.31
"Landlord-Lender Agreement" 8.1(b)
"Latest Balance Sheet" 3.5(a)
"Laws" 3.8(b)
"Leased Real Property" 3.10(b)
"Leases" 3.10(b)
"Letter of Transmittal" 2.3
"License" 3.8(c)
"Liens" 3.2(a)
"Litigation Conditions" 10.5(b)
"Lock-Up Agreement" 6.7
"Material Contracts" 3.13(a)
"MedSource Audited Financial Statements" 4.7(a)
"MedSource Common Shares" 2.1
"MedSource Common Stock" Second paragraph
"MedSource Financial Statements" 4.7(a)
"MedSource Preferred Shares" 2.1
"MedSource Preferred Stock" Second paragraph
"MedSource Shares" 2.1
"MedSource" First paragraph
"Memorandum of Lease" 8.1(b)
"Merger Consideration" 2.1
"Merger" 1.1
"Noncompetition and Nonsolicitation Agreement" 6.3
"Nonvoting Common Stock" 3.2(a)
"October 2001 Balance Sheet" 4.7(a)
"Owned Real Property" 3.10(a)
"Permitted Exceptions" 3.10(a)
"Person" 3.4(b)
"Personal Property" 3.12(b)
"Plans" 3.9(a)
"Pre-Closing Period" 6.1(b)
"Preferred Stock" 4.5(a)(1)
"Proceeding" 3.8(a)
"Real Property Laws" 3.10(k)
"Real Property" 3.10(e)
"Registration Rights Agreement" 6.5
"Release" 3.16(k)
"Required Consents" 3.4(b)
"SAR Payment Agreements" 6.9
"Seller Group" First paragraph
"Series A Preferred Stock" 4.5(a)(1)
"Series B Preferred Stock" 4.5(a)(1)
vii
Definition Section
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"Series C Preferred Stock" 4.5(a)(1)
"Series D Preferred Stock" 4.5(a)(1)
"Series E Preferred Stock" 4.5(a)(1)
"Series Z Preferred Stock" 4.5(a)(1)
"Shareholder Indemnitee" 10.4
"Shareholders Representative" First paragraph
"Shareholders" First paragraph
"Site" 3.16(k)
"Stale Accounts" 6.14
"Stockholders Agreement" 6.5
"SunTrust" 6.12
"SunTrust Debt" 6.12
"Surviving Corporation" 1.1
"Tax Authority" 3.14(f)(2)
"Tax Proceeding" 3.14(f)(3)
"Tax Return" 3.14(f)(4)
"Tax" 3.14(f)(1)
"Taxpayer" 6.1(c)
"Title Defects" 3.10(a)
"Transaction Documents" 3.3
"Treas. Reg." 3.14(f)(5)
"Utilities" 3.10(g)(iii)
"Voting Common Stock" 3.2(a)
"Working Capital Statement" 2.4(a)
"401(k) Plan" 6.13
viii
AGREEMENT AND PLAN OF MERGER
Dated as of December 31, 2001
The parties to this Agreement and Plan of Merger (this "Agreement") are
MedSource Trenton, Inc., a Delaware corporation (the "Buyer"), and its parent
company, MedSource Technologies, Inc., a Delaware corporation ("MedSource"), on
the one hand, and HV Technologies, Inc., a Georgia corporation (the "Company"),
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as the representative (the "Shareholders
Representative") of all of the shareholders of the Company (the "Shareholders"),
on the other hand. The Buyer and MedSource are hereinafter referred to
collectively as the "Buyer Group" while the Company and the Shareholders are
hereinafter referred to collectively as the "Seller Group."
This Agreement contemplates a transaction in which the Company will merge
with and into the Buyer with the result that the Buyer will continue as the
surviving corporation and the separate existence of the Company shall cease. As
a result of the Merger, upon the Effective Time (as hereinafter defined) all of
the outstanding shares of the capital stock of the Company shall be converted
into the right to receive an aggregate of 804,424 shares of MedSource Class A
common stock, par value $.01 per share ("MedSource Common Stock"), 4,000 shares
of MedSource Series F Preferred Stock, par value $.01 per share ("MedSource
Preferred Stock") and the Cash Consideration (as defined in section 2.3(b)). The
parties hereto intend that this merger transaction be a reorganization under
Section 368 of the Code (as hereinafter defined) and intend that this Agreement
be a "plan of reorganization" within the meaning of the regulations promulgated
under such section of the Code.
The board of directors of the Buyer and the board of directors of the
Company have each determined that the Merger is in the best interests of their
respective shareholders and have each duly adopted resolutions approving this
Agreement and the transactions contemplated hereby. In accordance with the
foregoing, the Buyer desires to merge with the Company and the Company desires
to merge with and into the Buyer, upon and subject to the terms and conditions
set forth below.
It is therefore agreed as follows:
1. The Merger
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1.1 The Merger. Upon the terms and subject to the conditions set forth
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in this Agreement, upon the Effective Time, and in accordance with the Delaware
General Corporation Law (the "DGCL") and the Georgia Business Corporation Code
(the "GBCC"), MedSource and the Shareholders shall cause the Company to be
merged with and into the Buyer (the "Merger"). Upon the Effective Time, the
separate existence of the Company shall cease, and the Buyer shall continue as
the surviving corporation (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth
--------------------
in Section 259 of the DGCL and Section 14-2-1106 of the GBCC. Without limiting
the generality of the foregoing, and subject thereto, upon the Effective Time,
all the assets, properties, rights, privileges, powers and franchises of the
Company shall vest in the Surviving Corporation and all
debts, liabilities and duties of the Company shall become the debts, liabilities
and duties of the Surviving Corporation.
1.3 Consummation of the Merger. The Merger shall become effective as
--------------------------
of the close of business on the day of filing with the Secretary of State of the
State of Georgia and the State of Delaware of properly executed certificates of
merger in the forms attached hereto as Exhibit 1.3 (the "Certificates of
Merger") (such date is referred to as the "Effective Time"); provided, however,
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that the parties agree that for business, tax, financial reporting and other
purposes of this Agreement, the Merger shall be deemed effective as of 12:01
a.m. on January 1, 2002.
1.4 Charter; Bylaws; Directors and Officers. The Certificate of
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Incorporation of the Buyer from and after the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation immediately prior to
the Effective Time unless amended pursuant to the Certificate of Merger and
thereafter amended in accordance with the provisions thereof and as provided by
applicable law. The Bylaws of the Buyer from and after the Effective Time shall
be the Bylaws of the Surviving Corporation as in effect immediately prior to the
Effective Time. The initial directors and officers of the Surviving Corporation
on and after the Effective Time shall be the directors and officers,
respectively, of the Buyer immediately prior to the Effective Time, in each case
until their respective successors are duly elected and qualified.
1.5 The Closing. The consummation of the Merger and the other
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transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, Volunteer Building, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on January 3, 2002, or
at such other time and on such other date as agreed to by the parties hereto,
subject in any event to Article 9 (Termination). The date on which the Closing
occurs is referred to as the "Closing Date."
1.6 Further Assurances. On and after the Effective Time, each of the
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parties to this Agreement shall from time to time, at the request of any of the
other parties, promptly execute such instruments and take such other actions as
the requesting party may reasonably request to vest, perform or confirm, of
record or otherwise, in the Surviving Corporation, its respective rights, title
or interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of the Company, or otherwise to evidence or implement the
transactions contemplated by this Agreement.
1.7 Tax Consequences. It is intended that the Merger shall constitute
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a reorganization described in Sections 368(a)(l)(A) and 368(a)(2)(D) of the
Code, and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code. The parties shall treat the
transactions contemplated hereby consistently with such intention.
2. Conversion of Shares.
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2.1 Conversion of Shares. By virtue of the Merger and without any
--------------------
action on the part of the Shareholders, at the Effective Time, all of the
outstanding shares of common stock of the Company, no par value per share (the
"Company Shares"), as shown on Schedule 2.3(b),
2
shall be converted into the right to receive (i) an aggregate of 804,424 shares
of MedSource Common Stock (the "MedSource Common Shares") and 4,000 shares of
MedSource Preferred Stock (the "MedSource Preferred Shares" and, collectively
with the MedSource Common Shares, the "MedSource Shares") and (ii) the Cash
Consideration, all as set forth on Schedule 2.3(b) (collectively, the "Merger
Consideration").
2.2 Stock Options, Warrants, Treasury Shares, Etc. At the Effective
---------------------------------------------
Time, the Shareholders shall cause each outstanding stock option, stock
appreciation right, warrant or other right to purchase any capital stock of the
Company, whether or not then exercisable or vested, to be canceled, and no
capital stock of MedSource, cash or other consideration shall be paid or
delivered in exchange therefor. Any Company Shares held in the treasury of the
Company shall be canceled and retired and no cash, securities or other
consideration shall be paid in respect of such shares.
2.3 Surrender and Exchange of Shares; Payment of Merger Consideration.
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(a) At the Effective Time, the Shareholders shall deliver to MedSource
their respective letters of transmittal (the "Letter of Transmittal") in the
form attached hereto as Exhibit 2.3 and all certificates representing the issued
and outstanding Company Shares. The Shareholders shall thereupon be entitled to
receive in exchange therefor the MedSource Shares and the Cash Consideration in
accordance with section 2.3(b), and the certificate or certificates so
surrendered in exchange for such consideration shall forthwith be canceled by
MedSource.
(b) At the Effective Time, upon the surrender for cancellation of the
certificates representing all of the issued and outstanding Company Shares
pursuant to section 2.3(a) above, MedSource shall deliver to the Shareholders
Representative:
(i) certificates representing the MedSource Shares in the
relative amounts and to the individuals as set forth on Schedule
2.3(b), each registered in the name of such individual evidencing the
applicable number of MedSource Shares; and
(ii) $4,465,061 (the "Cash Consideration"), allocated as set
forth on Schedule 2.3(b). The Cash Consideration shall be paid by
delivery of bank or cashier's checks or by wire transfer of
immediately available funds to accounts designated in writing prior to
Closing by the Shareholders Representative.
2.4 Working Capital Adjustment.
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(a) Within 60 days after the Closing Date, the Buyer shall cause to be
prepared and delivered to the Shareholders Representative a working capital
statement (the "Working Capital Statement"), setting forth the calculation of
the amount, if any, by which (i) the Company's accounts receivable, other
receivables, prepaid assets in an amount not to exceed $71,216, cash and
inventories as of the Closing Date exceed (ii) the Company's accounts payable,
accrued expenses and taxes payable as of the Closing Date. The Working Capital
Statement shall be prepared in accordance with U.S. generally accepted
accounting principles, consistently applied ("GAAP"), except as otherwise set
forth on Schedule 2.4(a).
3
(b) Within 30 days following receipt by the Shareholders
Representative of the Working Capital Statement, the Shareholders Representative
shall deliver written notice to the Buyer of any dispute the Shareholders
Representative has with respect to the preparation or content of the Working
Capital Statement. In the event that the Shareholders Representative does not
notify the Buyer of a dispute with respect to the Working Capital Statement
within such 30-day period, such Working Capital Statement will be final,
conclusive and binding on the parties. In the event of such notification of a
dispute, the Shareholders Representative and the Buyer shall negotiate in good
faith to resolve such dispute. If the Buyer and the Shareholders Representative,
notwithstanding such good faith effort, fail to resolve such dispute within 30
days after the Shareholders Representative advises the Buyer of his objections,
then the Buyer and the Shareholders Representative jointly shall engage the firm
of PricewaterhouseCoopers (the "Arbitration Firm") to resolve such dispute and
to determine the final working capital (the "Final Working Capital"). All
determinations made by the Arbitration Firm shall be final, conclusive and
binding on the parties. The Buyer, on the one hand, and the Shareholders, on the
other hand, shall share equally the fees and expenses of the Arbitration Firm.
(c) For purposes of complying with the terms set forth in this section
2.4, each party shall cooperate with and make available to the other parties and
their respective representatives all information, records, data and working
papers, and will permit access to its facilities and personnel, as may be
reasonably required in connection with the preparation and analysis of the
Working Capital Statement, and, to the extent applicable, the Final Working
Capital and the resolution of any disputes thereunder.
(d) If the Final Working Capital (as finally determined pursuant to
section 2.4(b) above) or, provided there is no dispute pursuant to section
2.4(b) above, the Working Capital Statement referred to in section 2.4(a) above,
is less than $1,610,000, then the Merger Consideration will be adjusted by the
amount of such difference and the Shareholders shall pay to the Buyer, within
five business days after such Final Working Capital or Working Capital
Statement, as the case may be, is finally determined in accordance with
paragraphs (a) and (b) of this section 2.4, by bank wire transfer of immediately
available funds to an account designated in writing by the Buyer, an amount in
cash equal to such difference, together with interest thereon from the Closing
Date at a rate of 7% per annum.
(e) If the Final Working Capital (as finally determined pursuant to
section 2.4(b) above), or, provided there is no dispute pursuant to section
2.4(b) above, the Working Capital Statement referred to in section 2.4(a) above,
is greater than $1,610,000, then the Merger Consideration will be adjusted by
the amount of such difference and the Buyer shall pay or cause to be paid to the
Shareholders Representative, within five business days after such Working
Capital Statement or Final Working Capital, as the case may be, is finally
determined in accordance with paragraphs (a) and (b) of this section 2.4, an
amount in cash equal to such difference, in the proportions set forth in
Schedule 2.3(b), together with interest thereon from the Closing Date at a rate
of 7% per annum.
4
3. Representations and Warranties of the Company. The Company represents
and warrants to the Buyer and MedSource as follows:
3.1 Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Georgia and has the
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 Company 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 Shareholders
Representative has delivered to the Buyer Group true, correct and complete
copies of the Company's Articles of Incorporation and Bylaws, as currently in
effect.
3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 200,000
Company Shares, of which 100,000 shares are voting common stock ("Voting Common
Stock") and 100,000 shares are nonvoting common stock ("Nonvoting Common
Stock"). The holders of issued and outstanding Company Shares are set forth on
Schedule 2.3(b). To the knowledge of the Company, except as set forth on
Schedule 3.2(a)(i), all of the issued and outstanding Company Shares are owned
of record and beneficially by the Shareholders in the amounts shown on Schedule
2.3(b), free and clear of all claims, liens, mortgages, encumbrances, pledges,
and other security interests of any kind (collectively, "Liens"). All of the
issued and outstanding Company Shares are duly authorized, validly issued, fully
paid and nonassessable. Except as set forth on Schedule 3.2(a)(ii), there are no
(i) options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character obligating
now or in the future, the Company to issue, transfer or sell any shares of
capital stock, options, warrants, calls or other equity interest of any kind
whatsoever in the Company or securities convertible into or exchangeable for
such shares or equity interests, (ii) contractual obligations of the Company to
repurchase, redeem or otherwise acquire any capital stock or equity interest of
the Company or (iii) voting trusts, proxies or similar agreements to which the
Company is a party with respect to the voting of the capital stock of the
Company.
(b) The Company does not own any outstanding 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.
3.3 Authorization; Validity of Agreement. The Company has the
------------------------------------
requisite capacity or corporate power and authority, as the case may be, to
execute, deliver and perform this Agreement and each of the other agreements,
instruments, documents and certificates executed or to be executed and delivered
by the Company pursuant to this Agreement (collectively, with this Agreement,
the "Transaction Documents"), to which the Company is a party, and to assume and
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of each of the Transaction Documents and the
consummation of the transactions contemplated thereby have been duly executed,
validly authorized by the board of directors of the Company and its shareholders
and delivered by the Company, and is a valid and binding obligation of the
Company, enforceable against it in accordance with its terms. No other
5
corporate proceedings on the part of the Company or the Shareholders are
necessary to authorize the execution, delivery and performance of any of the
Transaction Documents by the Company or the Shareholders, as the case may be, or
the consummation of the transactions contemplated hereby and thereby.
3.4 No Violations; Consents and Approvals.
-------------------------------------
(a) The execution, delivery and performance of each of the Transaction
Documents by the Company, and the consummation by it of the transactions
contemplated hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation or Bylaws of the Company, (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 (each, a "Contract") to
which the Company is a party or by which any of its properties or assets may be
bound or otherwise subject except for such items referred to as Required
Consents (as defined in section 3.4(b)) set forth on Schedule 3.4(b), or (iii)
violate any Law (as defined in section 3.8(b)) applicable to the Company or any
of its properties or assets.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any legislative or executive agency or department or
other regulatory service, authority or agency or any court, arbitration panel or
other tribunal or judicial authority of any foreign, provincial, United States
federal, state, county, municipal or other local jurisdiction, political entity,
body, organization, subdivision or branch (a "Governmental Entity") or any other
individual or entity (each, a "Person"), is required in connection with the
execution, delivery and performance of any of the Transaction Documents by the
Company or the consummation by the Company of the transactions contemplated
hereby and thereby, except for such consents, approvals, orders, authorizations,
notifications, notices, estoppel certificates, releases, registrations,
ratifications, declarations, filings, waivers, exemptions or variances
(individually, a "Consent" and collectively, "Consents") with respect to any
License (as defined in section 3.8(c)) or Law or otherwise as are set forth on
Schedule 3.4(b) hereof (the "Required Consents").
3.5 Financial Statements.
--------------------
(a) Attached to Schedule 3.5(a) are the balance sheet of the Company
as of November 30, 2001 (the "Latest Balance Sheet"), together with the related
statements of income for the eleven-month period ended November 30, 2001
("Interim Financial Statements") and the balance sheets of the Company as of
December 31, 2000 and 1999, together with the related statements of income
(including the related notes) for the fiscal years then ended (the "Company
Audited Financial Statements"). The Interim Financial Statements and Company
Audited Financial Statements are herein collectively called the "Financial
Statements".
(b) The Company Audited Financial Statements have been audited by
▇▇▇▇▇ & ▇▇▇▇▇▇ PC, Certified Public Accountants, and the reports of that firm
are attached hereto as part of Schedule 3.5(a). The Financial Statements fairly
present the financial position of the Company as of the respective dates thereof
and the results of operations of the Company for the
6
respective periods set forth therein. The Company Audited Financial Statements
have been prepared in accordance with GAAP, as of the dates and for the periods
involved. The Interim Financial Statements have been prepared consistent with
the Company's past practice for preparation of interim financial statements, and
are subject to normal fiscal year-end adjustments in the ordinary course.
3.6 No Material Adverse Change. Since the date of the Latest Balance
--------------------------
Sheet, no event, condition or circumstance has occurred that could be reasonably
likely to have a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of the Company, other than
events, conditions or circumstances solely attributable to general economic
conditions (a "Company Material Adverse Effect").
3.7 No Undisclosed Liabilities. The Company does not have, and as of
--------------------------
the Effective Time will not have, any liabilities (whether accrued, contingent,
known, or otherwise) other than those that (i) are set forth or reserved against
on the Latest Balance Sheet; (ii) were incurred since the date of the Latest
Balance Sheet in the ordinary course of business, or (iii) are expressly set
forth and identified as such herein or in any Schedule hereto, which
liabilities, individually or in the aggregate, are not material to the Company's
business, operations or financial condition. Without limiting the foregoing, the
Company hereby represents that the SunTrust Debt (as defined in section 6.12) is
the Company's only Institutional Indebtedness (as defined in section 5.1(d))
outstanding.
3.8 Litigation; Compliance with Law; Licenses and Permits.
-----------------------------------------------------
(a) Except as set forth on Schedule 3.8(a), there is no claim, suit,
action, investigation or proceeding (each, a "Proceeding") pending, nor is
there, to the knowledge of the Company, any Proceeding threatened, that involves
the Company, by or before any Governmental Entity or any other Person.
(b) The Company has complied with all applicable criminal, civil or
common laws, statutes, ordinances, orders, codes, rules, regulations, policies,
guidance documents, writs, judgments, decrees, injunctions, or agreements of any
Governmental Entity (collectively, "Laws"), including but not limited to Laws
and Real Property Laws (as defined in Section 3.10(k)) relating to Taxes (as
defined in section 3.14(e)), zoning, building codes, antitrust, occupational
safety and health, industrial hygiene, environmental protection, water, ground
or air pollution, the generation, handling, treatment, storage or disposal of
Hazardous Substances (as defined in section 3.16(k)), 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, 2000, no member of the Seller Group has received any notice of
any material violation of any Law.
(c) (i) The Company has every license, permit, certification,
qualification or franchise issued by any Governmental Entity (each, a
"License"), and every Consent by or on behalf of any other Person that is not a
party to this Agreement, required for it to conduct its business as presently
conducted, and (ii) all such Licenses and Consents are in full force and effect
and the Company has not received notice of any pending cancellation or
suspension of any thereof nor, to the knowledge of the Company, is any
cancellation or suspension thereof
7
threatened. The applicability and validity of each such License and Consent will
not be adversely affected by the consummation of the transactions contemplated
by this Agreement.
3.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) Schedule 3.9(a) lists each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("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 Company 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 ERISA, for the benefit of any employee or former employee of
the Company (the "Plans"). The Seller Group has heretofore delivered to the
Buyer, true, correct and complete copies of each of the Plans, including all
amendments to date.
(b) Each of the Plans which are subject to ERISA comply with ERISA and
the applicable provisions of the Internal Revenue Code of 1986, as amended (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 Code section 401(a) has received a timely determination letter from
the Internal Revenue Service that it is so qualified and, to the knowledge of
the Company, there is no fact or circumstance that would adversely affect such
qualification. Except as set forth in Schedule 3.9(b), none of the Plans is
subject to Title IV of ERISA. No "reportable event," as such term is defined in
Section 4043(b) of ERISA, has occurred with respect to any Plan. There are no
pending or, to the knowledge of the Company, 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.
(c) Except as set forth on Schedule 3.9(c) or as set forth in the
terms of the Plans, 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 Company beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee 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).
(d) With respect to each Plan, neither the Company, the Shareholders
nor any ERISA Affiliate has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 or Section 406 of ERISA) that would subject the
Company to any taxes, penalties or other liabilities resulting from prohibited
transactions under Code section 4975 or Sections 409 or 502(i) of ERISA.
(e) The Company has complied with the notice and continuation of
coverage requirements of Code section 4980B and the regulations thereunder with
respect to each Plan that is, or was during any taxable year of the Company 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.
8
(f) No Plan is or has been in the last five years subject to Section
302(a) of ERISA or Code section 412(a).
(g) Neither the Company, the Shareholders nor any ERISA Affiliate has
incurred or would incur a "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 Company or any ERISA Affiliate under such Plan.
3.10 Real Property.
-------------
(a) Schedule 3.10(a)(i) sets forth a list and description of all real
property owned by the Company and the Company owns all the buildings, structures
and other improvements located thereon (collectively, the "Owned Real
Property"). The Company has good, marketable and insurable title to and owns the
Owned Real Property in fee simple free and clear of all Title Defects (as
hereinafter defined) except as set forth in Schedule 3.10(a)(ii) (collectively,
"Permitted Exceptions"). The Company has not received notice of any default or
breach by the Company under any Permitted Exception or other Title Defect
affecting the Owned Real Property or any portion thereof, and no such default or
breach now exists, and no event has occurred or is continuing which with notice
or the passage of time or both, would constitute a default thereunder. As used
in this Agreement, "Title Defects" shall mean and include any mortgage, deed of
trust, lien, pledge, security interest, claim, lease, sublease, option, right of
first refusal, easement, restrictive covenant, encroachment, encumbrance,
restriction, limitation or document of record.
(b) Schedule 3.10(b) contains a true, correct and complete list and
summary of all the leases, subleases, licenses and other agreements
(collectively, the "Leases") under which the Company uses or occupies or has the
right to use or occupy, now or in the future, any real property (the land,
buildings and other improvements covered by the Leases being herein called the
"Leased Real Property"). The Company has heretofore delivered to Buyer true and
correct copies of all Leases. Each Lease is in full force and effect, all rent
and other sums and charges payable by the Company thereunder are current, no
written notice of default or termination under any Lease is outstanding, and, to
the knowledge of the Company, no termination event or condition or default which
has remained uncured beyond applicable cure periods on the part of the Company
or any other Person exists under any Lease, and no event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition. To the
knowledge of the Company, no Shareholder, Affiliate (as defined in section 3.15
hereof) of the Company or Affiliate of any of the Shareholders is the landlord
or owner of, or has any ownership, economic or similar interest in, any Lease.
Except to the extent set forth in Schedule 3.10(b), none of the Leases have been
amended, modified or extended as of the date hereof.
(c) The Company has heretofore delivered to the Buyer a true, correct
and complete copy of the most recent survey and title insurance policy (if any)
in its possession with respect to each parcel of Owned Real Property. Other than
as set forth on Schedule 3.10(c)(i), the Company has not entered into any
leases, subleases, licenses or occupancy agreements relating to the Owned Real
Property and, to the knowledge of the Company, no Person has any rights to
acquire, lease, sublease or otherwise occupy the Owned Real Property or any part
9
thereof or to otherwise obtain any interest therein, and there are no
outstanding options, rights of first refusal or rights of reverter relating to
the Owned Real Property or any interests therein. Schedule 3.10(c)(ii) sets
forth all service or maintenance contracts, management agreements or similar
agreements relating to the Real Property (as hereinafter defined). To the
knowledge of the Company, there has been no service, material or other work
provided or supplied to the Real Property that has not been paid in full.
(d) The Company is in possession of and quietly enjoys the Leased Real
Property applicable to it and the Company has a valid and enforceable leasehold
interest, subject to no Title Defects except as set forth on Schedule 3.10(d)
and rights-of-way, none of which interferes with the operation of the business.
The Company has not entered into any assignment of any Lease, sublease of all or
any portion of any Leased Real Property and the Company has not permitted any
Person, and to the knowledge of the Company no Person other than the Company has
any right, to occupy the Leased Real Property.
(e) The Company has heretofore delivered to the Buyer true, correct
and complete copies of any certificates of operation in its possession for any
incinerator, boiler or other burning equipment on the Real Property. There is no
real property of any kind whatsoever used by the Company in its business, except
for the Owned Real Property and the Leased Real Property (collectively, the
"Real Property"), and the Real Property constitutes all of the real property
necessary to conduct such business.
(f) All licenses, permits and certificates of occupancy (the
"Approvals") in connection with the construction, use, occupancy and maintenance
of any Real Property of all Governmental Authorities or from all insurance
companies and fire rating and similar boards and organizations required to have
been issued to enable the Real Property to be lawfully occupied and used for all
of the purposes for which it is presently occupied have been lawfully issued and
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. There is no alteration, improvement or change in use of any
building or other improvement located on the Real Property that would require
any new Approvals or amendment of an existing Approval.
(g) To the knowledge of the Company, except as set forth on Schedule
3.10(g):
(i) The Real Property including, without limitation, all building
systems and equipment, all structural components, the roof, the
basement, all plumbing, electrical, mechanical, heating, ventilating,
air conditioning and sprinkler systems, and all sewer, waste water,
storm water, paving and parking equipment, systems and facilities, are
operating and adequate for the conduct of the business of the Company
as presently conducted.
(ii) There are no defects in the same that would materially
hinder or impair the business and operations of the Company.
(iii) The electricity, water, gas and telephone service and all
other public or private utilities ("Utilities") serving the Real
Property are operating and
10
adequate for the conduct of the business of the Company as presently
conducted, and all installation, connection and capital recovery
charges in connection with the Utilities have been paid in full.
(h) The Seller Group has not received any written notice with respect
to, and to the knowledge of the Company there is no pending or proposed (i)
annexation, condemnation, eminent domain or similar proceeding affecting, or
that may affect any of the Real Property, (ii) proceeding to change or redefine
the zoning classification of any of the Real Property, (iii) imposition of any
special or other assessments for public betterments or otherwise, or (iv)
special assessments affecting any of the Real Property that are or would be
payable by the Company and could result in a Lien against any of the Real
Property.
(i) The Company has not 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 Real Property, and, to the knowledge of the
Company, there are no outstanding requirements or recommendations from any of
the foregoing.
(j) Since January 1, 1998, there has been no material damage to any
portion of the Real Property caused by fire or other casualty that has not been
repaired and restored.
(k) To the knowledge of the Company, the Real Property (including all
improvements thereon) and the uses to which the Real Property (and all
improvements thereon) are put, and all operations conducted thereon, are in
compliance with, and are not in default under or in violation of any Real
Property Law, including, without limitation, any building, zoning, land use,
public health, public safety, sewage, water or sanitation Law (collectively,
"Real Property Laws"), or any Environmental Law or any Title Defect affecting
the Real Property and the Company has received no notice of any such default or
violation of any Real Property Law.
(l) To the knowledge of the Company, no portion of the Real Property
is located in a special flood hazard area designated by Federal governmental
authorities.
(m) Copies of the current real estate tax bills for the Owned Real
Property have been delivered to the Buyer by the Company. No application or
proceeding is pending with respect to a reduction of the taxes on the Owned Real
Property.
(n) The Company does not owe any monies to any contractor,
subcontractor or materialman for labor or materials performed, rendered or
supplied in connection with any Real Property for which such person could claim
a lien against any of the Real Property.
(o) The Company has not transferred any development rights applicable
to the Real Property.
(p) There are no brokerage commissions due and payable by the Company
with respect to the Real Property or with respect to the Leases.
3.11 Intellectual Property; Computer Software.
----------------------------------------
11
(a) Schedule 3.11(a) lists all items of intellectual property
including, without limitation, trademarks, trade names, service marks, service
names, domain names, uniform resource locators (URLs), keywords, logos, assumed
names, copyrights, mask works, patents and all applications therefor, and
invention disclosures, that are owned by any Shareholder, the Company or any
other Person and used by the Company in the operation of its business
(collectively, "Intellectual Property"), and there are no pending or, to the
knowledge of the Company, threatened claims by any Person relating to the
Company's use of any Intellectual Property. The Company 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 Company to conduct its business and the Company
is not obligated to pay any royalty or similar fee to any Person in connection
with the Company's use or license of any of the Intellectual Property.
(b) The Company 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), all computer software programs including, without
limitation, application software that are used by the Company and that are
material to the conduct of its business as currently conducted, as are necessary
to permit the conduct of its business as currently conducted. None of the
Company'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.
3.12 Tangible Personal Property.
--------------------------
(a) The Company has good, marketable and valid title to all material
tangible personal property used in its business or located on its premises free
and clear of all Liens, except as set forth on Schedule 3.12(a).
(b) All material items of machinery, equipment, tooling and other
tangible personal property owned or leased by the Company and used in the
conduct of its business (other than items of inventory) (collectively, the
"Personal Property") are in operating condition and are adequate for use in the
conduct of the Company's business as currently conducted.
3.13 Material Contracts.
------------------
(a) Schedule 3.13 sets forth a true, complete and correct list of
every Contract that: (i) provides for aggregate future payments by the Company
or to the Company of more than $50,000 and has an unexpired term exceeding three
(3) months and may not be canceled upon thirty (30) 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 Company with any
of the Shareholders, or an officer, director or significant employee of the
Company; (iii) is a collective bargaining or similar agreement; (iv) guarantees
or indemnifies or otherwise causes the Company to be liable or otherwise
responsible for the obligations or liabilities of another or provides for a
charitable contribution by the Company; (v) involves an agreement with any bank,
finance company or similar organization; (vi) restricts the Company from
engaging in any business or activity anywhere in the world; (vii) is an
employment agreement, consulting agreement, independent sales representative
agreement or similar arrangement with any employee of the Company; or (viii) is
otherwise material to the rights, properties, assets, business
12
or operations of the Company (the foregoing, collectively, "Material
Contracts"). The Seller Group has heretofore provided true, complete and correct
copies of all Material Contracts to the Buyer.
(b) Each of the Material Contracts is in full force and effect and
there is not now and, to the knowledge of the Company, 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 Company, or to the
knowledge of the Company, on the part of any other party thereto and, except as
set forth on Schedule 3.4(b), no Consent 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 that have been obtained
and are in full force and effect and delivered to Buyer and such notices that
have been duly given.
3.14 Taxes.
-----
(a) Except as set forth in Schedule 3.14(a):
(1) the Company has elected to be treated as an "S" corporation
for federal income Tax purposes at all times since its date of incorporation and
such election is effective for each taxable year thereafter up to and including
the Closing Date. Schedule 3.14(b) hereto sets forth each other jurisdiction for
which the Company 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 3.14(b),
such election is effective for each year from its effective date up to and
including the Closing Date.
(2) the Company has (A) as of the Closing Date, duly and timely
filed or caused to be filed with Tax Authorities each Tax Return that is due and
is required to be filed by or on behalf of the Company or that includes or
relates to the Company, its income, sales, assets or business, which Tax Return
is true, correct and complete, and (B) duly and timely paid in full all Taxes
due and payable on or prior to the Closing Date;
(3) the Company has not requested an extension of time within
which to file any Tax Return in respect of any Tax period which has not since
been filed;
(4) the Company has complied in all respects with all applicable
laws relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities, including, but not limited
to, Code section 3402;
(5) there is no lien for Taxes upon any asset or property of the
Company (except for any statutory lien for any Tax not yet due);
(6) the Company does not have, and is not expected to have, any
liability in respect of any Tax as a transferee or successor of any Person
(including, but not limited to, any liability arising under Treas. Reg. Section
1.1502-6), and the Company is not, and never has been, a party to any Tax
allocation, Tax indemnification or Tax sharing contract or agreement;
13
(7) all Taxes assessed with respect to the Company's income,
sales, assets or business, or for which the Company is liable have been paid;
(8) any assessment, deficiency or adjustment related to or in
connection with any Tax for which the Company is liable or with respect to the
Company's income, sales, assets or business that is or was required to be
reported to any Tax Authority has been so reported, and any additional Taxes
owed with respect thereto have been paid;
(9) there are no pending, proposed, or, to the knowledge of the
Company, threatened Tax Proceedings with respect to any Tax, the payment,
collection or withholding of any Tax or any Tax Return filed by or on behalf of
the Company;
(10) there are no presently outstanding waivers or extensions or
requests for waivers or extensions of the time within which unpaid Tax may be
assessed or asserted;
(11) there is no outstanding subpoena or request for information
or documents from any Tax Authority with respect to any Tax for which the
Company is or may be liable or with respect to the Company's income, sales,
assets or business;
(12) the Company is not a party to any agreement with any Tax
Authority (including, but not limited to, any closing agreement within the
meaning of Code section 7121 or any analogous provision of applicable law or any
agreement relating to transfer or intercompany pricing) or requested or received
a private letter or other ruling from any Tax Authority relating to any Tax for
which the Company is or may be liable or with respect to the Company's income,
sales, assets or business;
(13) the Company is not a party to any contract, agreement or
other arrangement that could result, alone or in conjunction with any other
contract, agreement or other arrangement, in the payment of any amount that
would not be deductible by reason of Code section 280G or 404 or any similar
provision of applicable law;
(14) the Company is not a "consenting corporation" within the
meaning of Code section 341(f) or any similar provision of applicable law and
has not agreed to have Code section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Code section 341(f)(4)) owned
by the Company;
(15) the Company does not have any "tax-exempt use property"
within the meaning of Code section 168(g) or Code section 168(h) or any similar
provision of applicable law with respect to the Company, its income, sales,
assets or business;
(16) none of the assets of the Company is required to be treated
as being owned by any other Person pursuant to any provision of applicable law,
including, but not limited to, the "safe harbor" leasing provisions of Code
section 168(f)(8) as in effect prior to the repeal of those "safe harbor"
leasing provisions;
(17) the Company is not, nor has it been, a "United States real
property holding corporation" within the meaning of Code section 897(c)(2) at
any time during the applicable period referred to in Code section
897(c)(l)(A)(ii);
14
(18) no election under Code section 338 or any similar provision
of applicable law has been made or required to be made by or with respect to the
Company (or a subsidiary, if any, of the Company);
(19) the Company (i) has not adjusted, changed or received any
request, demand, or proposal from a Tax Authority to adjust or change any
accounting method, (ii) is not required to include in income any adjustment
pursuant to Code section 481(a) (or any similar provision of applicable law) by
reason of a change in accounting method, and (iii) has neither deferred any
income to a period after the Closing Date that has economically accrued or is
otherwise attributable to a period prior to the Closing Date nor accelerated any
deductions into a period ending on or before the Closing Date that will or may
economically accrue after the Closing Date;
(20) there is no power of attorney in effect relating to any Tax
for which the Company is or may be liable or with respect to the Company's
income, sales, assets or business;
(21) no jurisdiction where the Company does not file a Tax Return
has made or threatened to make a claim that the Company is required to file a
Tax Return for such jurisdiction; and
(22) Schedule 3.14(a) sets forth a list of all elections
currently in effect (or made within the three most recent Tax periods ending on
or prior to the Closing Date) with respect to any Tax or Tax Return.
(b) Schedule 3.14(b) sets forth a list of all jurisdictions (foreign
and domestic) in which any Tax Returns have been filed by or on behalf of the
Company, or with respect to the Company's income, assets or business since
December 31, 1998 and a description of each such Tax Return and the period for
which it was filed.
(c) Schedule 3.14(c) sets forth a list of all jurisdictions (foreign
and domestic) in which state income, franchise and other Tax Returns referred to
in clause (a)(2) are or may be the subject of Tax Proceedings and a description
of each such Tax Return and the period for which it was filed.
(d) The Seller Group has provided to the Buyer Group: (i) a copy of
all Tax Returns filed since December 31, 1998, and (ii) all audit reports,
closing agreements, letter rulings, or technical advice memoranda relating to
any Taxes for which the Company is or may be liable with respect to the
Company's income, assets or business.
(e) With respect to the Merger:
(1) Neither the Shareholders nor the Company nor any Person
related to the Seller Group has redeemed or acquired nor does the Seller Group
or any Person related (within the meaning of Treas. Reg.Section 1.368-1(e)(3))
to the Seller Group have any plan or intention to redeem or acquire any Company
Shares or make any distribution (within the meaning of Treas. Reg.Section
1.368-l(e)(l)(ii)) with respect to any Company Shares;
15
(2) The Company has not and will not be paying any amounts to the
Shareholders in connection with the Merger, or otherwise immediately prior to
the Closing Date, including as part of a redemption or distribution made by the
Company (other than as a regular normal dividend);
(3) the liabilities of the Company were incurred by the Company
in the ordinary course of its business, other than liabilities incurred in
connection with the Merger; and
(4) the Company is not an investment company as defined in Code
section 368(a)(2)(F).
(f) For purposes of this Agreement,
(1) "Tax" or "Taxes" means any tax, charge, fee, levy, deficiency
or other assessment of whatever kind or nature of, against or pertaining to the
Company including, without limitation, any 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 tax, duty, fee, assessment or charge of
any kind whatsoever, imposed on the Company by any Tax Authority, including any
liability therefor as a transferee (including without limitation under Code
section 6901 or any similar provision of applicable law), as a result of Treas.
Reg. 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.
(2) "Tax Authority" means any branch, office, department, agency,
instrumentality, court, tribunal, officer, employee, designee, representative,
or other Person that is acting for, on behalf or as a part of any foreign or
domestic government (or any political subdivision thereof) that is engaged in or
has any power, duty, responsibility or obligation relating to the legislation,
promulgation, interpretation, enforcement, regulation, monitoring, supervision
or collection of or any other activity relating to any Tax or Tax Return.
(3) "Tax Proceeding" means any audit, examination, review,
reassessment, litigation or other administrative or judicial proceeding relating
to any Tax for which the Company is (or is asserted to be) or may be liable, the
collection, payment or withholding of any Tax, or any Tax Return filed by or on
behalf of the Company.
(4) "Tax Return" means any return, election, declaration, report,
schedule, information return, document, information, opinion, statement, or any
amendment to any of the foregoing (including without limitation any
consolidated, combined or unitary return) submitted or required to be submitted
to any Tax Authority.
(5) "Treas. Reg." means any temporary, proposed or final
regulation promulgated under the Code.
3.15 Affiliated Party Transactions. Except for obligations arising
-----------------------------
under this Agreement and other than as set forth on Schedule 3.15, as of the
Effective Time neither the
16
Company nor any of its affiliates, nor, to the knowledge of the Company, any
Shareholder or any immediate family member of, or any Person controlled by, such
Shareholder (collectively, the "Affiliates"), will have, directly or indirectly,
any obligation to or cause of action or claim against the Company.
3.16 Environmental Matters. Except and to the extent specifically set
---------------------
forth in Schedule 3.16 or the Phase I Environmental Site Assessment of ▇▇▇▇▇▇▇
Consultants Inc. dated November 23, 2001:
(a) The Company is in compliance with, and its business has been
conducted in compliance with, all Environmental Laws (as defined below) and
Environmental Permits (as defined below);
(b) 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 listed on or, to the knowledge
of the Company, was ever listed or is proposed to be listed 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;
(c) No member of the Seller Group has received any written notice that
remains pending or outstanding with respect to the Company's business or any
Site from any Governmental Entity or Person alleging that the Company is not in
compliance with any Environmental Law;
(d) There has been no Release (as defined below) of a Hazardous
Substance (as defined below) by the Seller Group at, from, in, to, on or under
any Site and no unpermitted Hazardous Substances are present in, on, about or
migrating to or from any Site that will give rise to an Environmental Claim (as
defined below) against the Company;
(e) To the knowledge of the Company, there are no outstanding or
pending 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;
(f) The Company has obtained and holds all necessary material
Environmental Permits, and those Environmental Permits will remain in full force
and effect after the consummation of the transactions contemplated hereby;
(g) There are no unresolved past or pending, or to the knowledge of
the Company, threatened, Environmental Claims against the Company, and Seller
Group is not aware of any facts or circumstances that could be expected to form
the basis for any Environmental Claim against the Company;
(h) Neither the Company, any entity previously owned by the Company,
nor any predecessor of the Company, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that will result in an Environmental Claim
against the Company;
17
(i) There are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, (iii) friable asbestos, or
(iv) recognized environmental condition, as defined by ASTM E1527-97, at any
Site; and
(j) 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 Company with respect to
any Site or any transportation, handling or disposal of any Hazardous Substance
that has not been delivered to the Buyer Group prior to execution of this
Agreement.
(k) 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, (collectively, "Claims") 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: (A) violation of or liability
under any Environmental Law, (B) violation of any Environmental Permit, or (C)
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,
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 Licenses or Consents required
by any Governmental Entity under or in connection with any Environmental Law;
(v) "Hazardous Substance" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, friable 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 Company, any predecessors of
the Company or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater thereat.
18
3.17 No Brokers. Except as set forth in Schedule 3.17, the Company has
----------
not 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.
3.18 Receivables. All accounts receivable of the Company have arisen,
-----------
and as of the Closing Date will have arisen, from bona fide transactions in the
ordinary course of the Company's business consistent with past practice and
established in the ordinary course of the Company's business consistent with
past practice. Each of the accounts receivable of the Company either has been or
will be collected in full, without any set-off, within one hundred and twenty
(120) days after the day on which it first becomes due and payable.
3.19 Inventories. Except as set forth in Schedule 3.19, the Company 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.
3.20 Product Claims. No product liability claim is pending, or to the
--------------
knowledge of the Company, threatened, against the Company or against any other
party with respect to the products of the Company's business. Schedule 3.20
lists all product liability claims seeking damages in excess of $10,000 asserted
against the Company (or in respect of which any member of the Seller Group has
received notice) with respect to the products of the Company's business or the
Company during the last three years.
3.21 Warranties and Returns. Schedule 3.21 sets forth a summary of the
----------------------
practices and policies followed by the Company 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. Except as set forth
on Schedule 3.21, there is not presently, nor has there been since December 31,
1999, any failure or defect in any product sold by the Company that has
required, or will 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 returned or defective goods of the
Company in excess of $10,000 in the aggregate for all such transactions with
respect to products sold by it since January 1, 2000.
3.22 Assets Utilized in the Business. The assets, properties and
-------------------------------
rights owned, leased or licensed by the Company and used in connection with the
Company's business and that will be owned, leased or licensed by the Company as
of the Effective Time, constitute all of the properties, assets and rights
utilized and employed by the Company in connection with the operation and
conduct by the Company of its business. As a result of the Merger, upon the
Effective Time the Buyer will obtain good title to all of such assets,
properties and rights, free and clear of all Liens, except as set forth on
Schedule 3.22.
3.23 Insurance. Schedule 3.23 contains a complete and correct list of
---------
all policies of insurance of any kind or nature covering the Company, including
policies of life, fire, theft, casualty, product liability, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance. All such policies are (i) in full force and effect and (ii)
sufficient for compliance with the terms of all Material Contracts. Complete and
correct copies of such policies have been furnished to the Buyer.
19
3.24 Delivery of Documents; Corporate Records. The Seller Group has
----------------------------------------
heretofore delivered to the Buyer true, correct and complete copies of all
documents, instruments, agreements and records referred to in this Article 3 or
in the Schedules to this Agreement.
3.25 Customers, Suppliers and Distributors. Schedule 3.25 sets forth
-------------------------------------
(i) the ten customers with the highest dollar volume of purchases from the
Company during the 2000 calendar year and 10-month period ended October 31, 2001
indicating the approximate total sales to each of those customers, and (ii) the
ten largest suppliers of the Company during such periods. Except as set forth on
Schedule 3.25, there has not been any adverse change in the business
relationship of the Company with any such customer or supplier, and the Seller
Group has no knowledge of any threatened loss of any such customer or supplier.
3.26 Labor Matters. There are no labor strikes, slow-downs or
-------------
stoppages or other labor troubles pending or, to the knowledge of the Company,
threatened with respect to the employees of the Company. There is no collective
bargaining agreement binding on the Company and there is no agreement which
restricts the Company's businesses or operations, there are no grievances
asserted that would likely have a Company Material Adverse Effect; nor is there
pending any arbitration proceeding arising out of or under any labor union
agreement; the Company has not experienced any work stoppage during the last
three years.
3.27 Bank Accounts. Schedule 3.27 sets forth the names and locations
-------------
of all banks, depositories and other financial institutions in which the Company
has an account or safe deposit box and the names of all persons authorized to
draw thereon or to have access thereto.
3.28 Directors, Officers and Certain Employees. A complete and correct
-----------------------------------------
list of the names, current annual salary, bonus and title, for each Person who
received from the Company annual compensation during the Company'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 has previously been
provided to the Buyer Group. Schedule 3.28 sets forth a list of the Company's
only key employees and their titles.
3.29 Allocation of Merger Consideration. All of the Shareholders have
----------------------------------
agreed with and consent to the allocation of the Merger Consideration as set
forth on Schedule 2.3(b).
3.30 No Misstatements or Omissions. No representation or warranty by
-----------------------------
the Company 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 Buyer Group or
hereafter furnished to the Buyer Group pursuant to this Agreement or any other
Transaction Document on the part of any member of the Seller Group 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 they were made, not misleading.
3.31 Knowledge of the Company. As used herein, the phrase "to the
------------------------
knowledge of the Company" and variations thereof shall mean the knowledge of any
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇.
20
4. Representations and Warranties of the Buyer and MedSource. Each of the
Buyer and MedSource, jointly and severally, represents and warrants to the
Shareholders and the Company as follows:
4.1 Organization of the Buyer Group. Each of the Buyer and MedSource
-------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except, as to subsidiaries, for those
jurisdictions where the failure to be so organized, existing or in good standing
individually or in the aggregate would not, directly or indirectly, have a Buyer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Adverse Effect (as defined in Section 4.9). Each of the Buyer and
MedSource is duly qualified or licensed to do business and is in good standing
(with respect to jurisdictions that recognize such concept) in each jurisdiction
in which the nature of its business or the ownership, leasing or operation of
its properties makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to be in good
standing individually or in the aggregate would not have a Buyer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Adverse Effect. The Buyer has heretofore delivered to the Company true and
correct copies of the Certificate of Incorporation and Bylaws of each of the
Buyer and MedSource as currently in effect.
4.2 Authorization; Validity of Agreement. Each of the Buyer and
------------------------------------
MedSource has the requisite corporate power and authority to execute, deliver
and perform this Agreement and each of the other agreements, instruments,
documents and certificates executed or to be executed by the Buyer and/or
MedSource, as applicable, pursuant to the terms of this Agreement (collectively,
the "Buyer Acquisition Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
of the Buyer and MedSource of this Agreement and the other Buyer Acquisition
Agreements to which the Buyer or MedSource is a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of each of the Buyer and MedSource and by
the sole stockholder of the Buyer, and no other corporate proceedings on the
part of the Buyer and MedSource are necessary to authorize the execution,
delivery and performance of this Agreement and the other Buyer Acquisition
Agreements by the Buyer and MedSource, as the case may be, and the consummation
of the transactions contemplated hereby and thereby. Each of this Agreement and
each Buyer Acquisition Agreement has been duly executed and delivered by the
Buyer and MedSource, as the case may be, and is a valid and binding obligation
of the party signatory thereto, enforceable against such party in accordance
with its terms.
4.3 No Violations; Consents and Approvals.
-------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Buyer Acquisition Agreements by each of the Buyer or MedSource, as the case may
be, do not, and the consummation by each of the Buyer and MedSource of the
transactions contemplated hereby and thereby will not, (i) violate any provision
of the Certificate of Incorporation or Bylaws of the Buyer or MedSource, as the
case may be, (ii) except as set forth on Schedule 4.3, 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 material
Contract to which the Buyer or MedSource is
21
a party or by which the Buyer or MedSource or any of their respective properties
or assets may be bound or otherwise subject, or (iii) violate any Law applicable
to the Buyer or MedSource or any of their respective properties or assets.
(b) Except as set forth on Schedule 4.3, 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 Buyer Acquisition Agreements
by each of the Buyer and MedSource, as the case may be, or the consummation by
the Buyer or MedSource of the transactions contemplated hereby and thereby.
4.4 Litigation; Compliance with Law; Licenses and Permits.
-----------------------------------------------------
(a) There is no Proceeding pending, nor is there, to the knowledge of
the Buyer Group, any Proceeding threatened, that involves the Buyer or
MedSource, by or before any Governmental Entity or any other Person.
(b) Each member of the Buyer Group has, and on the Closing Date will
have, complied with all applicable Laws, including but not limited to Laws and
Real Property Laws relating to Taxes, zoning, building codes, antitrust,
occupational safety and health, industrial hygiene, environmental protection,
water, ground or air pollution, the generation, handling, treatment, storage or
disposal of Hazardous Substances, 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, 2000,
neither the Buyer nor MedSource has received any notice of any material
violation of any Law.
(c) (i) Each of Buyer and MedSource has every License, and every
Consent by or on behalf of any Person that is not a party to this Agreement,
required for it to conduct its business as presently conducted; and (ii) all
such Licenses and Consents are in full force and effect and neither the Buyer
nor MedSource has received notice of any pending cancellation or suspension of
any thereof nor, to the knowledge of the Buyer Group, is any cancellation or
suspension thereof threatened. The applicability and validity of each such
License and Consent will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
4.5 Capital Structure.
-----------------
(a) The authorized capital stock of MedSource consists of:
(1) 1,000,000 shares of preferred stock, par value $.0l per share
(the "Preferred Stock"), of which 100,000 shares have been designated as Series
A (the "Series A Preferred Stock"), 400,000 shares have been designated as
Series B (the "Series B Preferred Stock"), 52,329 shares have been designated as
Series C (the "Series C Preferred Stock"), 43,000 shares have been designated as
Series D (the "Series D Preferred Stock"), 6,000 shares have been designated as
Series E (the "Series E Preferred Stock"), 4,000 shares have been designated as
shares of MedSource Preferred Stock, 65,000 shares have been designated as
Series Z (the "Series Z Preferred Stock"), and 329,671 shares of Preferred Stock
remain undesignated; and
(2) 40,000,000 shares of MedSource Common Stock.
22
(b) As of the Closing Date, and after giving effect to the issuance of
the MedSource Shares hereunder, there will be outstanding 6,060,582 shares of
MedSource Common Stock, 38,370 shares of Series A Preferred Stock, 332,728
shares of Series B Preferred Stock, 40,300 shares of Series C Preferred Stock,
35,165 shares of Series D Preferred Stock, 6,000 shares of Series E Preferred
Stock, 4,000 shares of MedSource Preferred Stock, and 65,000 shares of Series Z
Preferred Stock. As of the Closing Date, and after giving effect to the issuance
of the MedSource Shares hereunder, 3,855,000 shares of MedSource Common Stock
will be reserved for issuance upon exercise of options that have been or may be
granted under MedSource's 1999 Stock Plan and warrants to purchase shares of
MedSource Common Stock, 525 shares of Series C Preferred Stock will be reserved
for issuance upon exercise of a warrant and 85 shares of Series D Preferred
Stock will be reserved for issuance upon exercise of options that have been
granted under the ACT Medical, Inc. 1998 Omnibus Stock Plan.
(c) Except as set forth on Schedule 4.5(c), MedSource 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.
4.6 Valid Issuance of Shares, Etc. Each of the MedSource Shares to be
-----------------------------
issued in connection with the Merger pursuant to the terms of section 2.3(b)
will, upon such issuance, be free of any Liens created by the Buyer Group (other
than restrictions under the terms of the Stockholders Agreement (as defined in
Section 6.5), the Registration Rights Agreement (as defined in Section 6.5), the
Lock-Up Agreement (as defined in Section 6.7) or applicable securities laws),
duly authorized, validly issued, fully paid and non-assessable.
4.7 Financial Statements.
--------------------
(a) Attached to Schedule 4.7(a) are the audited consolidated balance
sheets of MedSource as of July 3, 2001 and July 1, 2000, together with the
related audited statements of operations for the periods then ended ("MedSource
Audited Financial Statements") and the unaudited consolidated balance sheet of
MedSource as of November 4, 2001 (the "October 2001 Balance Sheet"), together
with the related consolidated statement of operations for the period ended
November 4, 2001 (all of the foregoing collectively, the "MedSource Financial
Statements").
(b) The MedSource Audited Financial Statements have been audited by
Ernst & Young LLP and the reports of that firm are attached hereto as Schedule
4.7(a). The MedSource Financial Statements fairly present the financial position
of MedSource as of the respective dates thereof and the results of operations of
MedSource for the respective periods set forth therein. The MedSource Audited
Financial Statements have been prepared in accordance with GAAP as of the dates
and for the periods involved. The October 2001 Balance Sheet and the related
statement of operations for the period ended November 4, 2001 have been prepared
consistent with MedSource's past practice for preparation of interim financial
statements, and are subject to normal fiscal year-end adjustments in the
ordinary course.
4.8 No Material Adverse Change. Since November 4, 2001 (i) no event,
--------------------------
condition or circumstance has occurred that could, or could be reasonably likely
to, have a material adverse effect on the condition (financial or otherwise),
business, assets or results of
23
operations of MedSource or Buyer, other than events, conditions or circumstances
solely attributable to general economic conditions (a "Buyer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Adverse Effect").
4.9 No Undisclosed Liabilities. MedSource does not have, and as of the
--------------------------
Effective Time will not have, any liabilities (whether accrued, contingent,
known, or otherwise) other than those that (i) are set forth or reserved against
on the October 2001 Balance Sheet; or (ii) were incurred since November 4, 2001
in the ordinary course of business, none of which, individually or in the
aggregate, is material to MedSource's business, operations.
4.10 Taxes.
-----
(a) Except as set forth in Schedule 4.10, each of Buyer and MedSource
has:
(1) (A) On or before the Closing Date, duly and timely filed or
caused to be filed with Tax Authorities each Tax Return that is due and required
to be filed by it or on its behalf or that includes or relates to its income,
sales, assets or business, which Tax Return is true, correct and complete, (B)
duly and timely paid in full, or caused to be paid in full, all Taxes due and
payable on or prior to the Closing Date, and (C) properly accrued on its books
and records in accordance with GAAP a provision for the payment of all Taxes due
or claimed to be due or for which it otherwise is or may be liable;
(2) not requested an extension of time within which to file any
Tax Return in respect of any Tax period which has not since been filed;
(3) complied in all respects with all applicable laws relating to
the payment, collection or withholding of any Tax, and the remittance thereof to
any and all Tax Authorities; and
(4) no lien for Taxes upon any of its assets or property (except
for any statutory lien for any Tax not yet due).
(b) The MedSource Shares, for purposes of Section 368 of the Code,
will have an aggregate value greater, as of the Closing Date, than the Cash
Consideration.
4.11 No Misstatements or Omissions. No representation or warranty by
-----------------------------
the Buyer or MedSource 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 Seller Group
or hereafter furnished to the Seller Group pursuant to any Buyer Acquisition
Agreement on the part of the Buyer Group 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 they were made, not misleading.
5. Covenants
5.1 Conduct of Business by the Company Pending the Closing. During the
------------------------------------------------------
period from the date hereof to the Closing, unless the Buyer Group otherwise
agrees in writing, the Company shall conduct its business in the ordinary
course, consistent with past practice.
24
Without limiting the generality of and in addition to the foregoing, except as
otherwise expressly provided in this Agreement or as set forth in Schedule 5.1,
prior to the Closing, the Company shall not do any of the following; provided,
--------
however, that if the Company is required by Law to do any of the following, it
shall give the Buyer Group advance notice of any such action:
(a) amend its articles of incorporation, certificate of incorporation
or bylaws;
(b) 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;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend (other than a cash dividend not to exceed
an aggregate of $1,300,000, to be declared and paid prior to the close of
business on December 31, 2001) or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock or redeem
or otherwise acquire any of its securities;
(d) (i) incur or assume any obligations under any revolving credit
facilities, term loans, notes or lines of credit or loans due to banks, lending
or similar financial institutions or any other Person (including prepayment
fees, if any) (collectively, "Institutional Indebtedness"); (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;
(e) enter into, adopt or amend (except as required by law) any bonus
(other than year-end cash bonuses payable to employees of the Company in an
aggregate amount not to exceed $775,000, to be paid prior to the close of
business on January 3, 2002), 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
the compensation or fringe benefits of any employee or pay any material 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);
(f) except as required under section 6.13 hereof, take any action to
terminate or materially amend any of its employee benefit plans with respect to
or for the benefit of employees;
(g) except in the ordinary course of its business, pay, discharge or
satisfy before it is due any claim or liability of the Company, or fail to pay
any such item in a timely manner given the prior practices of the Company;
(h) cancel any material debts or waive any substantial claims or
rights of substantial value except in the ordinary course of business;
(i) change any accounting principle or method or, except as required
by any Law, make, amend or terminate any election or any Tax accounting method
or procedure;
25
(j) 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
Company except in the ordinary course of the Company's business;
(k) amend, waive, surrender or terminate or agree to the amendment,
waiver, surrender or termination of any Material Contract, Lease or Approval or
modify any arrangement with any customer of the Company;
(l) except in the ordinary course of the Company's business consistent
with past practice, extend or renew any Material Contract;
(m) acquire, sell, lease, transfer or dispose of any of its properties
or assets other than inventory acquired or sold in the ordinary course of the
Company's business, or enter into any commitment or transaction or acquire any
business or entity;
(n) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions; or
(o) sell, lease, transfer or dispose of any Owned Real Property or
enter into any commitment or agreement to do so.
5.2 Access to Information. Between the date of this Agreement and the
---------------------
Closing Date, the Company shall provide the Buyer Group and the representatives
thereof with reasonable access during normal business hours to all offices and
other facilities, and to all books and records of the Company, and shall permit
the Buyer Group to make such inspections and to make copies of such books and
records during normal business hours as the Buyer Group may reasonably require,
and shall cause its officers and employees to furnish the Buyer Group or any of
its representatives with such financial and operating data and other information
as the Buyer Group may from time to time reasonably request.
5.3 Public Announcements. Prior to the Closing, the Buyer Group, on
--------------------
the one hand, and the Seller Group, on the other hand, shall consult with each
other and obtain each other's consent, which consent shall not be unreasonably
withheld or delayed, before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated hereby and shall
not issue any such press release or make any such public statement prior to such
consultation and obtaining such consent, except if the issuance of any such
press release or the making of any such public statement prior to such
consultation and obtaining such consent is required by applicable Law. Following
the Closing, the foregoing restrictions shall apply solely to the Shareholders.
5.4 Notification of Material Adverse Events.
---------------------------------------
(a) The Company shall promptly notify the Buyer in writing of (i) any
event following the date hereof and through the Closing Date of which the
Company is or becomes aware that will, or is likely to, have a Company Material
Adverse Effect or which could have the effect of making any representation or
warranty of the Company in this Agreement untrue or incorrect in any material
respect, and (ii) all other material developments affecting the Company, its
business, or the financial condition, operations, results of operations, client
relations,
26
employee relations, projections or prospects of the Company of which the Company
has knowledge.
(b) The Buyer shall promptly notify the Company in writing of any
event following the date hereof and through the Closing Date of which the Buyer
is or becomes aware that will, or is likely to, have a Buyer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Adverse Effect or which could have the effect of making any representation or
warranty of the Buyer Group in this Agreement untrue or incorrect in any
material respect and all other material developments affecting the Buyer Group,
the business, or the financial condition, operations or results of operations,
projections or prospectus of the Buyer Group of which the Buyer Group has
knowledge.
6. Other Agreements of the Parties.
6.1 Tax Returns; Taxes.
------------------
(a) No Shareholder shall take or fail to take any action or permit the
Company to take or fail to take any action which could result in the termination
of any "S" corporation election (or similar election) of the Company, other than
as anticipated by this Agreement. The Shareholders shall duly file or cause to
be filed on a timely basis all Tax Returns of the Company, its income, assets or
business, for all Pre-Closing Periods. Such Tax Returns shall be true, correct
and complete, shall be filed on a basis consistent with prior Tax Returns of or
relating to the Company, its income, assets or business, and shall not make,
amend or terminate any election by the Company (or to which the Company is
subject) or change any Tax accounting method, practice or procedure of the
Company, other than as anticipated by this Agreement, without MedSource's prior
written consent, which shall not be unreasonably withheld. The Shareholders
shall give MedSource a copy of each such Tax Return for its review with
sufficient time for comments and corrections prior to filing and in any event at
least 21 days before the earlier of the filing or due date for any such Tax
Returns. MedSource shall cause an appropriate officer of the Company or the
legal successor thereof to sign such Tax Returns (which officer may, by
appointment of MedSource and at MedSource's direction, be a former officer of
the Company). The Shareholders shall cause the Company to timely and properly
withhold and collect, pay over and report all Taxes required to be withheld or
collected by the Company on or before the Closing Date.
(b) The Shareholders shall be responsible for and shall timely pay all
Taxes, including, without limitation, any Taxes resulting from a Tax Proceeding
for which the Company is or may be liable with respect to any Pre-Closing
Period. In addition, the Shareholders shall be entitled to receive all refunds
of Taxes with respect to any Pre-Closing Period, to the extent that such Taxes
were originally paid by the Shareholders. For purposes of this Agreement,
"Pre-Closing Period" shall mean any tax period ending on or before the Closing
Date.
(c) The Buyer Group shall promptly forward to the Shareholders a copy
of all written communications from any Tax Authority received by the Company,
the Buyer Group or their respective Affiliates (each, a "Taxpayer") relating to
the Company and the Shareholders for any Pre-Closing Period. The Shareholders
Representative shall promptly forward to the Buyer Group a copy of all written
communications from any Tax Authority received by the Seller Group relating to
any Pre-Closing Period for which the Taxpayer is or may be liable.
27
(d) After the Closing Date, the Buyer Group and the Shareholders
Representative shall each make available to the other, upon reasonable request,
all information, records or other documents in its possession relating to any
Tax and shall preserve all such information, records or other documents until
the date that is six (6) months after the expiration of the statute of
limitations applicable to such Tax. In addition, the Buyer Group and the
Shareholders Representative shall cooperate with the other upon request in
connection with all matters relating to the preparation of any Tax Returns
relating to the Company and in connection with any Proceeding referred to in
this provision. Any investigation, review, comment or discussion related to or
in connection with the payment of Taxes, the preparation of Tax Returns or
drafts of Tax Returns, the filing of Tax Returns, any Tax Proceeding or any
provision of this section 6.1 shall not affect the indemnity provisions of
Article 10 or limit the scope of such provisions (including but not limited to
section 10.1) in any way, or affect any other representations, warranties or
obligations of any party hereto. Each party shall bear its own costs and
expenses in complying with the provisions of this section 6.1(d).
(e) The Buyer Group and the Seller Group will treat the Merger as a
reorganization within the meaning of Code sections 368(a)(l)(A) and 368(a)(2)(D)
and will report, disclose, account for and maintain all records relating to the
Merger as such.
(f) Neither the Buyer Group nor the Seller Group shall take any
position that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Code sections 368(a)(l)(A) and
368(a)(2)(D).
(g) Neither the Buyer Group nor the Seller Group has taken or shall
take any actions either prior to, in connection with or subsequent to the Merger
that will prevent the Merger from qualifying as a reorganization within the
meaning of Code sections 368(a)(l)(A) and (a)(2)(D).
6.2 Non-Disclosure of Confidential Information.
------------------------------------------
(a) From and after the date hereof, no member of the Seller Group
shall divulge, communicate, use to the detriment of the Buyer Group or for the
benefit of any other Person, or misuse in any way, any confidential information
or trade secrets relating to the Company, the Surviving Corporation or MedSource
or their respective Affiliates including, without limitation, Intellectual
Property, personnel information, secret processes, know-how, customer lists or
other technical data.
(b) All information, data and material furnished to the Buyer Group by
the Seller Group prior to the date of this Agreement or hereafter furnished to
the Buyer Group by the Seller Group is confidential. Except for disclosures
which may be necessary to satisfy conditions of this Agreement, the Buyer Group
agrees that the Buyer Group will not, and no agent representing the Buyer Group
to which such information, data and material may be furnished will, disclose or
otherwise make available, at any time, any such information, data or material to
any other person whomsoever who does not have a confidential relationship with
the Buyer Group; that the Buyer Group and the Seller Group will protect such
information, data and material with a high degree of care to prevent the
disclosure thereof, and that if, for any reason, the transactions contemplated
by this Agreement are not consummated, all information, data and
28
material concerning the Company obtained by the Buyer Group and its
representatives, and all copies thereof, will be delivered to the Company.
6.3 Noncompetition and Nonsolicitation Agreements. At the Closing,
---------------------------------------------
each of the Shareholders listed on Schedule 6.3 shall execute and deliver to the
Buyer a noncompetition and nonsolicitation agreement substantially in the form
of either Exhibit 6.3(a) or Exhibit 6.3(b) attached hereto (collectively, the
"Noncompetition and Nonsolicitation Agreements").
6.4 Required Consents. The Seller Group shall use reasonable
-----------------
commercial efforts to cause the Company to obtain all Required Consents and
provide them to the Buyer prior to the Closing Date. The Shareholders
Representative and/or the Company shall promptly provide the Buyer, and the
Buyer and MedSource shall promptly provide the Seller Group, with copies of all
filings made by them with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
6.5 Stockholders Agreement and Registration Rights Agreement. At the
--------------------------------------------------------
Closing, each Shareholder shall enter into the stockholders agreement with
MedSource in the form annexed hereto as Exhibit 6.5(a) (the "Stockholders
Agreement") and the registration rights agreement with MedSource in the form
annexed hereto as Exhibit 6.5(b) (the "Registration Rights Agreement").
6.6 Geneva Agreement. At the Closing, MedSource shall assume and
----------------
perform all of the Company's obligations under a certain agreement dated as of
the Closing Date (the "Geneva Agreement") between the Company and The Geneva
Companies, Inc. ("Geneva"), a copy of which is attached hereto as Exhibit 6.6.
6.7 Lock-Up Agreement. At the Closing, each Shareholder receiving
-----------------
MedSource Shares as consideration for his Company Shares shall enter into a
lock-up agreement in the form annexed hereto as Exhibit 6.7 (the "Lock-Up
Agreement").
6.8 Sale of Condominium. As soon as practicable after the Closing, (i)
-------------------
the Buyer shall sell to ▇▇▇▇▇▇▇, who will purchase from the Buyer certain real
property known as Villa Unit Number 2087 of the Beach Wood Villas, a
Condominium, located at ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ (the
"Condominium"), for a consideration of 5,500 shares of MedSource Common Stock,
(ii) the Buyer will deliver a quit claim deed in favor of ▇▇▇▇▇▇▇, and (iii)
▇▇▇▇▇▇▇ will pay all fees and expenses in connection therewith, including but
not limited to state, local and condominium association transfer taxes and fees,
recording fees, title insurance premiums and mortgage loan pay-offs.
6.9 SAR Payment Agreements. At the Closing, MedSource shall assume and
----------------------
perform all of the Company's obligations under certain agreements between the
Company and each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, copies of which are
attached hereto as Exhibits 6.9(a) and Exhibit 6.9(b), respectively (the "SAR
Payment Agreements").
6.10 "Green Shoe" Agreement. At the Closing, MedSource shall enter
----------------------
into the "Green Shoe" letter agreement in the form annexed hereto as Exhibit
6.10 (the "Green Shoe Agreement") with each Shareholder.
29
6.11 Grant of MedSource Options. Following the Effective Time,
--------------------------
MedSource shall grant to certain members of the Company's management,
non-qualified stock options to purchase a minimum of 30,000 shares of MedSource
Common Stock in accordance with MedSource's 1999 Stock Plan and standard form of
stock option contract.
6.12 Payment of SunTrust Debt. No later than one business day after
------------------------
the Closing, the Buyer Group shall (i) pay to SunTrust Bank, N.A. ("SunTrust")
the amount of $566,877.60 (plus per diem interest of $132.812 if not paid by
January 3, 2002, which interest, if any, will be accrued as a liability on the
Working Capital Statement) owed by the Company to SunTrust (which amount
includes any and all prepayment fees, penalties and other related expenses) (the
"SunTrust Debt") and (ii) cause to be recorded the release of the SunTrust lien
set forth on Schedule 3.10(d) hereof. No later than one business day after the
SunTrust Debt is paid off by the Buyer Group, ▇▇▇▇▇▇▇ shall deliver to the Buyer
Group (i) a duly executed Termination Statement on Form UCC-3 relating to the
SunTrust Debt, and (ii) a duly executed and acknowledged release of leasehold
deed to secure debt and security agreement in recordable form relating to the
SunTrust Debt and to the SunTrust lien set forth on Schedule 3.10(d) hereof.
6.13 Termination of 401(k) Plan. Prior to the Closing, the Company
--------------------------
shall cause to be terminated the H.V. Technologies, Inc. Retirement Savings Plan
(the "401(k) Plan"). MedSource agrees that it will provide employees of the
Company with substantially the same benefits which they would otherwise receive
under the 401(k) Plan, for a period of not less than one year following the
Closing.
6.14 Assignment of Stale Accounts. To the extent any account
----------------------------
receivable of the Company at Closing is not collected within 120 days thereafter
and the Buyer Group asserts a claim for Damages (as defined in section 10.3(a)
hereof) hereunder because of such noncollection (the "Stale Accounts"), the
Buyer Group shall assign all Stale Accounts to the Shareholders Representative.
The Shareholders Representative may attempt to collect such Stale Accounts
consistent with the Company's past practices and shall not file suit to collect
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld. In addition, to the extent the Buyer Group receives any
payment on any Stale Account, the Buyer Group shall remit such payments to the
Shareholders Representative within 10 business days of receipt. All amounts
collected by the Shareholders Representative under this section shall either be
applied to amounts then owed by the Shareholders Representative, deposited into
the escrow fund established by the Shareholders, or paid over pro rata to the
Shareholders, in the discretion of the Shareholders Representative.
6.15 Certain Employment Agreements. The Buyer shall assume the
-----------------------------
Company's obligations under the employment agreements described in item 6 of
Schedule 3.13 hereto, but the Buyer Group agrees that the Buyer shall in no
manner attempt to enforce the noncompetition obligations of the Company's
employees parties to such employment agreements pursuant to section 5 of such
employment agreements; provided, however, that the Buyer Group shall have the
-------- -------
right to enforce any other right of the Company under such employment
agreements. The Buyer Group acknowledges and agrees that all such employees
shall be third party beneficiaries to this provision.
30
6.16 Owner's Affidavit and Non-Imputation Endorsement. The parties
------------------------------------------------
agree that any claims for Damages by the Buyer Group against ▇▇▇▇▇▇▇ asserted by
reason of any misrepresentation or other inaccuracy contained in any Owner's
Affidavit or Non-Imputation Affidavit delivered pursuant to section 8.1 shall be
deemed to be a breach of a representation or warranty by the Company under
section 3.10 hereof rather than a breach by ▇▇▇▇▇▇▇ individually.
6.17 Extinguishing ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇' Interest in the ▇▇▇▇ Property.
--------------------------------------------------------------
After Closing, the Shareholders Representative will take all necessary action to
ensure that undisputed fee simple title with respect to the ▇▇▇▇ Property (as
defined in Schedule 3.10(d)) is vested in Buyer and that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'
claims thereto are extinguished.
7. Closing Conditions
7.1 Conditions to the Seller Group's Obligations. The obligations of
--------------------------------------------
the Seller Group to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver by the Company (any such waiver to be
evidenced in writing), at or prior to the Closing, of the following conditions:
(a) The representations and warranties of the Buyer Group contained in
this Agreement shall be true and correct in all material respects as of the date
made and as of the Closing Date as if made on and as of the Closing Date;
(b) The Buyer Group shall have performed in all material respects each
of its obligations under this Agreement required to be performed by it at or
prior to the Closing pursuant to the terms hereof;
(c) 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 Buyer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Adverse Effect;
(d) No Law shall be in effect that prohibits any party hereto from
consummating the transactions contemplated hereby, and no Proceeding by any
Governmental Authority or any other Person shall have been instituted or
threatened which (i) could reasonably be expected to result in a Buyer ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Adverse Effect or could reasonably be expected to materially impair,
hinder or adversely affect the ability of the Company to consummate the
transactions contemplated hereby; or (ii) questions the validity of the
transactions contemplated hereby or seeks to obtain damages in respect thereof;
(e) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity, or any Proceeding
commenced, that prevents or seeks to prevent the consummation of the
transactions contemplated by this Agreement; and
(f) The form and substance of all certificates, opinions, instruments
and all other documents delivered to the Seller Group under this Agreement shall
be satisfactory in all reasonable respects to the Company and counsel thereof.
7.2 Conditions to the Buyer Group's Obligations. The obligations of
-------------------------------------------
the Buyer Group to consummate the transactions contemplated hereby shall be
subject to the
31
satisfaction or waiver by the Buyer Group (any such waiver to be evidenced in
writing), at or prior to the Closing, of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects as of the date
made and as of the Closing Date as if made on and as of the Closing Date;
(b) The Seller Group shall have performed in all material respects
each of its obligations under this Agreement required to be performed by it at
or prior to the Closing pursuant to the terms hereof;
(c) The Buyer Group shall have received, each in form and substance
reasonably satisfactory to the Buyer Group, all Required Consents for the
consummation of the transactions contemplated hereby;
(d) 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 Company Material Adverse Effect;
(e) No Law shall be in effect that prohibits any party hereto from
consummating the transactions contemplated hereby, and no Proceeding by any
Governmental Authority or any other Person shall have been instituted or
threatened which (i) could reasonably be expected to result in a Company
Material Adverse Effect or could reasonably be expected to materially impair,
hinder or adversely affect the ability of the Seller Group to consummate the
transactions contemplated hereby; (ii) arises out of or relates to this
Agreement or the transactions contemplated therein or (iii) questions the
validity of the transactions contemplated hereby or seeks to obtain damages in
respect thereof;
(f) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity, or any Proceeding
commenced, that prevents or seeks to prevent the consummation of the
transactions contemplated by this Agreement; and
(g) The form and substance of all certificates, opinions, consents,
instruments, and other documents delivered to the Buyer Group under this
Agreement shall be satisfactory in all reasonable respects to the Buyer Group
and its counsel.
8. Closing Deliveries.
8.1 Closing Deliveries by the Seller Group Regarding Real Property.
--------------------------------------------------------------
(a) At or prior to the Closing, the Company shall execute and deliver
to Buyer the Certificate of Merger in recordable form. At the Closing, the Buyer
shall pay the appropriate tax collecting agency all taxes and charges in
connection with the recording of the Certificate of Merger;
(b) As a condition to the Closing, the Company 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
32
Agreement" and, collectively, the "Landlord-Lender Agreements") in favor of
MedSource's lenders and a memorandum of lease in recordable form (the
"Memorandum of Lease");
(c) At or prior to the Closing, the Company shall deliver to the Buyer
copies of each of the following in the possession of the Company: (i) a validly
issued permanent certificate of occupancy for the Real Property, (ii) all
original licenses and permits, authorizations and approvals pertaining to the
Real Property, (iii) all guarantees and warranties which the Company has
received in connection with any work or services performed or equipment
installed in the Real Property; and (iv) a set of plans and specifications of
all the buildings and all improvements comprising the Owned Real Property;
(d) The form and substance of all certificates, transfer documents,
title reports, property surveys, deeds, opinions, consents, instruments, and
other documents delivered to the Buyer under this agreement shall be
satisfactory in all reasonable respects to the Buyer and its counsel;
(e) At or prior to the Closing, the Buyer shall have received a
current survey of each parcel of Owned Real Property, in each case prepared in
insurable form in accordance with standards applicable to registered and
licensed land surveyors making surveys in the states in which such parcels are
located and in accordance with the further provisions of this section. Each such
survey shall be certified to Buyer and shall show (i) the courses and distances
of all boundary lines of such parcel (including appurtenant easements), (ii) the
location of all buildings and improvements situated on or above such parcel and
on or above any easements or rights of way affecting said parcel, (iii) the
absence of any title defect materially affecting the use of the Real Property or
its value; (iv) the fact that no portion of the Owned Real Property is located
in a special flood hazard area designated by Federal governmental authorities;
(v) the location of all easements burdening such parcel and the absence of any
material encroachment by any building or improvement onto the area of any such
easement, and (vi) unrestricted access from such parcel to a public street at
and over the drive-ways and access-ways currently being used in connection with
the operation of such parcel. Each such survey shall otherwise be in form and
shall reveal a state of facts reasonably satisfactory to counsel for Buyer. The
Shareholders and the Buyer will share in equal parts the cost of the survey and
the title insurance policy pursuant to paragraph (f) of this section 8.1;
(f) At or prior to the Closing, the Buyer shall have received an
owner's extended coverage marked commitment for title insurance evidencing the
title insurer's obligation to issue a title insurance policy in such form with
respect to each parcel of Owned Real Property (excluding the Condominium) and
the leased parcel located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, in each
case issued on the date of Closing by a title insurance company acceptable to
counsel for Buyer. Such title insurance policy shall be in an amount of $900,000
and shall insure the Seller's ownership of fee title free and clear of all Title
Defects and other exceptions to or exclusions from coverage other than Permitted
Exceptions and each such policy shall include an ALTA-9 comprehensive
endorsement. Without limiting the foregoing, no such title insurance policy
shall create an exception for or exclusion from the coverage of such policy or
from the liability of the title insurance company on account of acts or
omissions of the insured or facts known to the insured (or to its current or
former partners, directors, officers, agents or employees) where such acts or
omissions occurred, or where such knowledge was gained, prior
33
to the effective date of such insurance policy. Each such title insurance policy
shall otherwise be in form reasonably satisfactory to counsel to Buyer;
(g) At or prior to the Closing, ▇▇▇▇▇▇▇ shall deliver to Buyer such
reasonable affidavit, indemnities and information (including, without
limitation, an owner's title affidavit and a non-imputation endorsement) as the
Buyer's title insurance company shall require in order to issue policies of
title insurance in the form required by this Agreement;
(h) As a condition to the Closing, the Company shall deliver to Buyer
a current estoppel certificate from the landlord under each Lease stating (i)
that such Lease has not been amended, modified or supplemented except as noted
therein and is in full force and effect, (iii) that all rent and other sums and
charges payable under such Lease are current and setting forth the date through
which such payments have been made, (iii) that no rent or other charge has been
paid more than one month in advance, (iv) the amount of any security or other
similar deposit held by or on behalf of such landlord under such Lease, (v) that
no notice or default or termination under such Lease is outstanding, (vi) that
to the best of such landlord's knowledge and belief, no uncured default or
termination event or condition exists under such Lease and no event has occurred
or condition exists which, with the giving of notice or the lapse of time or
both, would constitute such a default or termination event or condition, (vii)
that, as of the date such certificate, such landlord has no charge, lien, claim,
defense or offset of any kind under such Lease or otherwise against the Company,
(viii) that the consummation of the transactions herein provided will not
constitute a default under such Lease or grounds for the termination thereof or
for the exercise of any right or remedy adverse to the interests of the tenant
thereunder (ix) and if a consent is required under the Lease to the transfer of
this Lease effectuated by the transaction contemplated by this Agreement, that
the landlord consents thereto; and
(i) At or prior to the Closing, the Company shall have obtained and
delivered to Buyer from each Person holding a mortgage or superior or underlying
lease on the real property that is the subject of each Lease an executed
Subordination and Non-disturbance Agreement, in form and substance satisfactory
to the Buyer, recognizing existence of such Lease and agreeing to honor the
landlord's obligations thereunder in the event that such real property is
foreclosed upon.
8.2 Other Deliveries of the Seller Group. In addition to the
------------------------------------
deliveries pursuant to section 8.1 hereof, the Company shall deliver the
following items to the Buyer Group at the Closing:
(a) The Required Consents;
(b) The opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP in the form annexed hereto as
Exhibit 8.2(b);
(c) A tax, lien and judgment search of the Company showing no items
not disclosed in the schedules to this Agreement;
(d) The Stockholders Agreement and the Registration Rights Agreement,
duly executed by each Shareholder and by each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ and Geneva, and the Letter of Transmittal, duly executed by each
Shareholder;
34
(e) The Noncompetition and Nonsolicitation Agreements, duly executed
by each Shareholder listed on Schedule 6.3;
(f) The Lock-Up Agreement and the Green Shoe Agreement, duly executed
by each Shareholder and by each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and
Geneva;
(g) The SAR Payment Agreements, duly executed by each of the Company,
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇;
(h) Stock certificates representing all of the issued and outstanding
Company Shares, duly endorsed in blank or accompanied by stock transfer powers
and with all requisite stock transfer tax stamps attached;
(i) A certificate duly executed by the Secretary of the Company,
certifying (i) the resolutions duly and validly adopted by the board of
directors of the Company and by the Shareholders, evidencing the authorization
of the execution and delivery of this Agreement and the other Transaction
Documents to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby, (ii) the Articles of Incorporation
and Bylaws of the Company and (iii) the incumbency of each of the Company's
executive officers authorized to sign any Transaction Document on behalf of the
Company;
(j) A certificate duly executed by an executive officer of the Company
attesting to the satisfaction of the conditions set forth in sections 7.2(a) and
(b) and the satisfaction or waiver of the conditions set forth in sections
7.1(d), (e) and (f) and 8.3;
(k) Duly executed agreements terminating certain employment agreements
between the Company and each of ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.;
(l) A certificate with respect to the Company from the Secretary of
the State of Georgia attesting as to its valid existence as of a date recent to
the Closing Date;
(m) A letter of resignation from the Company's board of directors
dated the Closing Date, duly executed by each person who is a member of the
Company's board of directors as of the Closing Date;
(n) A pay-off letter from SunTrust, setting forth the full amount of
the SunTrust Debt;
(o) Written evidence of the termination of the 401(k) Plan;
(p) The Geneva Agreement, duly executed by the Company and Geneva;
(q) Duly executed agreements terminating certain term sheet agreements
between the Company and each of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇; and
(r) Duly executed agreement terminating the stock award agreement
between the Company and ▇▇▇▇▇ ▇▇▇▇▇▇.
35
8.3 Deliveries of the Buyer Group. At the Closing, the Buyer Group
-----------------------------
shall deliver the following items to the Seller Group:
(a) A certificate duly executed by the Secretary of each member of the
Buyer Group, certifying (i) the resolutions duly and validly adopted by the
board of directors of such member and, with respect to the Buyer, its sole
stockholder, evidencing the authorization of the execution and delivery of this
Agreement and the other Buyer Acquisition Agreements to which the members of the
Buyer Group are parties and the consummation of the transactions contemplated
hereby and thereby, (ii) the certificate of incorporation and by-laws of such
member of the Buyer Group, and (iii) the incumbency of each of the executive
officers of such member of the Buyer Group authorized to sign any Buyer
Acquisition Agreement on behalf of such member of the Buyer Group;
(b) A certificate duly executed by an executive officer of each of
MedSource and the Buyer attesting to the satisfaction of the conditions set
forth in sections 7.1(a) and (b) as applicable to MedSource and the Buyer,
respectively, and the satisfaction or waiver of the conditions set forth in
sections 7.2(c), (e), (f) and (g), 8.1 and 8.2;
(c) The opinion of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP in the form
annexed as Exhibit 8.3(b);
(d) The Cash Consideration pursuant to section 2.3;
(e) The MedSource Shares required to be delivered pursuant to sections
2.1 and 2.3(b);
(f) The Stockholders Agreement and Registration Rights Agreement, duly
executed by MedSource;
(g) The Noncompetition and Nonsolicitation Agreements, duly executed
by each of MedSource and the Buyer;
(h) The Green Shoe Agreement, duly executed by MedSource; and
(i) A certificate with respect to each of the Buyer and MedSource from
the Secretary of State of Delaware attesting as to its valid existence as of a
date recent to the Closing Date.
9. Termination.
9.1 Termination. Notwithstanding anything herein to the contrary, this
-----------
Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of the Buyer Group and the Company;
(b) by the Buyer Group, on the one hand, or the Company, on the other
hand, if the Closing shall not have occurred on or before January 11, 2002;
provided, however, that the right to terminate this Agreement under this section
-------- -------
9.1(b) shall not be available to the
36
terminating party if its failure to fulfill or comply with any of its
obligations or conditions under this Agreement shall have been the primary
reason that the Closing shall not have been consummated on or before said date;
or
(c) by the Buyer Group, on the one hand, or the Company, on the other
hand, if any Governmental Entity shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and such order, decree, ruling or other action
shall have become final and non-appealable.
9.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided in section 9.1, written notice thereof shall forthwith be
given to the other party specifying the section of this Agreement pursuant to
which such termination is made, and upon any such permitted termination this
Agreement shall forthwith terminate, without, however, any waiver of the rights
of the parties for breaches of this Agreement.
10. Indemnification.
10.1 Survival of Representations and Warranties of the Seller Group.
--------------------------------------------------------------
Notwithstanding any right of the Buyer or MedSource to investigate the affairs
of the Company and the Shareholders and notwithstanding any knowledge of facts
determined or determinable by the Buyer or MedSource pursuant to such
investigation or right of investigation, the Buyer and MedSource have the right
to rely upon the representations and warranties of the Shareholders and the
Company 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.
10.2 Survival of Representations and Warranties of the Buyer Group.
-------------------------------------------------------------
Notwithstanding any right of the Shareholders and the Company to investigate the
affairs of the Buyer Group and notwithstanding any knowledge of facts determined
or determinable by the Shareholders or the Company pursuant to such
investigation or right of investigation, the Shareholders and the Company have
the right to rely upon the representations and warranties of the Buyer and
MedSource contained in this Agreement or in any other Buyer Acquisition
Agreement. 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.
10.3 Indemnification by the Shareholders.
-----------------------------------
(a) The Shareholders (other than ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇) shall
jointly and severally indemnify and defend the Buyer and MedSource and each of
its respective officers, directors, employees, stockholders, agents, advisors or
representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless from, any loss, liability, obligation, deficiency, damage,
Tax or expense including, without limitation, interest, penalties, reasonable
attorneys' and consultants' fees and disbursements (collectively, "Damages"),
that any Buyer Indemnitee suffers or incurs 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):
(i) The inaccuracy of any representation or warranty made by the
Company contained in this Agreement or in any other Transaction
Document or,
37
subject to section 10.5(b), in respect of any claim made by a third
party and based upon facts that would, if true, render such
representation or warranty inaccurate;
(ii) The Company's failure to perform or to comply with any
covenant required to be performed or complied with by the Company
contained in this Agreement or in any other Transaction Document;
(iii) Any Taxes for which the Company is liable with respect to
any Pre-Closing Period (whether or not shown on any Tax Return) with
respect to periods or portions thereof ending on or before the Closing
Date, including Taxes accruable upon income earned through the Closing
Date which have not been paid in full or accrued as current
liabilities for Taxes on the Working Capital Statement or otherwise
reflected in the determination of the Final Working Capital;
(iv) Any claim relating to dissenters' rights raised by any
Shareholder;
(v) The existence of, or a claim with respect to, any interest of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the ▇▇▇▇ Property;
(vi) Any claim by any Person for monetary or any other
consideration or any other interest arising out of this Agreement,
that is in any way inconsistent with Schedule 2.3(b);
(vii) Both of the matters referred to in Schedule 3.8(a); or
(viii) Any Institutional Indebtedness of the Company outstanding
as of the Closing Date other than the SunTrust Debt.
(b) Each Shareholder shall severally indemnify any Buyer Indemnitee
for any Damages that such Buyer Indemnitee suffers or incurs 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):
(i) The inaccuracy of any representation or warranty made by such
Shareholder in the Letter of Transmittal executed by such Shareholder;
or
(ii) Such Shareholder's failure to perform or comply with any
covenant required to be performed or complied with by such Shareholder
contained herein, in the Letter of Transmittal executed by such
Shareholder or in any other Transaction Document to which such
Shareholder is a party.
(c) Notwithstanding anything in this Agreement to the contrary, the
payment of any amounts due to a Buyer Indemnitee under this Article 10 may be
satisfied by the Shareholders by the payment and delivery of cash and MedSource
Shares, but in no event shall the percentage of cash paid hereunder be less than
the percentage of cash received by the Shareholder as set forth in Schedule
2.3(b). To the extent a Shareholder has sold or otherwise transferred his
MedSource Shares prior to the time of such delivery, the cash/stock ratio of
such delivery shall be increased accordingly. Notwithstanding anything to the
contrary in this section
38
10.3(c), the value of any MedSource Shares delivered by a Shareholder to a Buyer
Indemnitee hereunder shall be determined at the time of such delivery, as
follows:
(i) If the MedSource Shares are listed or admitted to trading on
any principal national securities exchange or on the Nasdaq Stock
Market, if that is the principal market for the MedSource Shares, the
value of the MedSource Shares delivered hereunder shall be equal to
the average of the daily closing price for the 20 consecutive business
days immediately prior to the time of delivery of the MedSource Shares
hereunder. The closing price for each day shall be the last reported
sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices;
(ii) If the MedSource Shares are not listed or admitted to
trading on any national securities exchange or on the Nasdaq Stock
Market at the time of such delivery, and provided that MedSource shall
have completed, within six (6) month immediately prior to such
delivery, any transaction in which shares of its capital stock have
been valued and issued for cash only in accordance with such
valuation, the value of the MedSource Shares delivered hereunder shall
be equal to such valuation; or
(iii) If paragraphs (i) and (ii) are inapplicable, the value of
such MedSource Shares delivered hereunder shall be as determined in a
written valuation by a nationally recognized investment banker
retained and paid for by MedSource.
10.4 Indemnification by the Buyer Group. The Buyer and MedSource shall
----------------------------------
jointly and severally indemnify and defend the Shareholders and their agents,
advisors or representatives (each, a "Shareholder Indemnitee") against, and hold
each Shareholder Indemnitee harmless from, any Damages that the Shareholder
Indemnitee suffers or incurs arising out of, related to or in connection with
any of the following (whether or not in connection with any third party claim):
(a) The inaccuracy of any representation or warranty made by the Buyer
or MedSource contained in this Agreement or in any other Buyer Acquisition
Agreement or, subject to section 10.5(b), in respect of any claim made by a
third party and based upon facts that would, if true, render such representation
or warranty inaccurate; or
(b) The Buyer's or MedSource's failure to perform or to comply with
any covenant required to be performed or complied with by the Buyer Group
contained in this Agreement or in any other Buyer Acquisition Agreement.
10.5 Indemnification Procedures.
--------------------------
(a) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, or promptly after such indemnified party becomes
aware of any such claim or Proceeding, including any Proceeding by a third
party, involving any Damages, such indemnified party shall, if a claim for
indemnification in respect thereof is to be made against an indemnifying party
pursuant to this Article 10, give written notice to the latter of
39
the commencement of such claim or 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.
(b) In the case of any such 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; provided, however, that (i) the indemnifying party provides
-------- -------
the indemnified party with a written representation to the effect that the
indemnified party has sufficient financial resources to satisfy the amount of
any adverse monetary judgment that is reasonably likely to result; (ii) the
claim solely seeks (and continues to seek) monetary damages; and (iii) the
indemnifying party expressly agrees in writing that as between the indemnifying
party and the indemnified party, the indemnifying party shall be solely
obligated to satisfy and discharge the liability claim in accordance with this
Agreement (the conditions set forth in clauses (i) through (iii) are
collectively referred to as the "Litigation Conditions") and, after notice from
the indemnifying party to the indemnified party of its assumption of the defense
thereof and compliance with the Litigation Conditions, 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 the settlement or compromise thereof (without the written consent of the
indemnifying party). Notwithstanding the foregoing, the indemnifying party may
elect not to assume the defense of any Proceeding by a third party against an
indemnified party by providing the indemnified party, promptly after receipt of
written notice pursuant to paragraph (a) of the section 10.5, with written
notice to such effect, in which written notice the indemnifying party shall
agree to be responsible for and, upon demand, shall advance funds as necessary
for all reasonable costs and expenses to be incurred by the indemnified party in
the defense of such Proceeding, including but not limited to reasonable
attorneys' fees. Anything in this section 10.5(b) 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.
(c) 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
40
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. If the indemnifying party
shall (x) fail promptly and diligently to assume the defense of any Proceeding,
or (y) the Litigation Conditions cease to be met, then the indemnified party may
respond to, contest and defend against such Proceeding 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.
10.6 Limitations on Indemnification by the Shareholders.
--------------------------------------------------
(a) Subject to paragraph (b) of this section 10.6, the Shareholders'
indemnification obligations pursuant to section 10.3 shall apply only if the
aggregate of all Damages resulting from such breaches shall exceed $175,000 (the
"Basket"), and then only to the extent Damages exceed that amount. Anything
herein to the contrary notwithstanding, the Shareholders shall have no liability
with respect to Damages that result from breaches of representations or
warranties set forth in this Agreement for and to the extent that the aggregate
amount of such Damages exceeds $5,000,000 (the "Cap").
(b) Notwithstanding paragraph (a) of this section 10.6,
(i) Any Shareholder's indemnification obligations with respect
to:
(A) any inaccuracy of any representation or warranty, or any
breach of any agreement, made by such Shareholder in the Letter of Transmittal
executed by such Shareholder, including but not limited to such Shareholder's
agreements with respect to the allocation of the Merger Consideration and the
redemption of the shares of MedSource Preferred Stock to be issued to ▇▇▇▇▇▇▇ in
the Merger,
(B) any inaccuracy of any representation or warranty made by the
Company in section 3.3 (Authorization), section 3.14 (Taxes) (only with respect
to income Taxes), section 3.15 (Affiliated Party Transactions) and section 3.29
(Allocation of Merger Consideration) of this Agreement,
(C) the Company's failure to perform or to comply with any
covenant required to be performed or complied with by the Company contained in
this Agreement or in any other Transaction Document following 10 days' (or a
lesser period, if necessary to prevent irreparable damage to the Buyer) notice
from the Buyer specifying such failure,
(D) such Shareholder's failure to perform or comply with any
covenant required to be performed or complied with by it contained herein, in
the Letter of Transmittal executed by such Shareholder or in any other
Transaction Document to which such Shareholder
41
is a party following 10 days' (or a lesser period, if necessary to prevent
irreparable damage to the Buyer) notice from the Buyer specifying such failure,
(E) any claim described in section 10.3(a)(iv), (v), (vi), (vii)
or (viii), and
(F) subject to section 10.5(b), any claim made by a third party
with respect to any of the foregoing clauses (A) through (E) and based upon
facts that would, if true, result in Damages to any Buyer Indemnitee,
shall not be subject to the Basket; and
(ii) Any Shareholder's indemnification obligations with respect
to:
(A) the Company's failure to perform or to comply with any
covenant required to be performed or complied with by the Company contained in
this Agreement or in any other Transaction Document following 10 days' (or a
lesser period, if necessary to prevent irreparable damage to the Buyer) notice
from the Buyer specifying such failure,
(B) such Shareholder's failure to perform or comply with any
covenant required to be performed or complied with by it contained herein, in
the Letter of Transmittal executed by such Shareholder or in any other
Transaction Document to which such Shareholder is a party following 10 days' (or
a lesser period, if necessary to prevent irreparable damage to the Buyer) notice
from the Buyer specifying such failure,
(C) any inaccuracy of any representation or warranty made by the
Company in section 3.3 (Authorization), section 3.15 (Affiliated Party
Transactions), section 3.16 (Environment) and section 3.29 (Allocation of Merger
Consideration) of this Agreement,
(D) any inaccuracy of any representation or warranty, or any
breach of any agreement, made by such Shareholder in the Letter of Transmittal
executed by such Shareholder, including but not limited to such Shareholder's
agreements with respect to the allocation of the Merger Consideration and the
redemption of the shares of MedSource Preferred Stock to be issued to ▇▇▇▇▇▇▇ in
the Merger,
(E) any claim described in section 10.3(a)(iv), (v), (vi), (vii)
or (viii), and
(F) subject to section 10.5(b), any claim made by a third party
with respect to any of the foregoing clauses (A) through (E) and based upon
facts that would, if true, result in Damages to any Buyer Indemnitee,
shall not be subject to the Cap, but shall not exceed the portion of the Merger
Consideration received by such Shareholder; provided, however, that for purposes
of the indemnification obligations of each Shareholder under this section
10.6(b)(ii), the following items shall be added to, and shall be deemed part of,
the Merger Consideration: (v) the Cash Consideration, (w) the SunTrust Debt, (x)
the cash paid by MedSource to Geneva pursuant to the terms of the Geneva
42
Agreement, (y) the cash paid by MedSource to each of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to the SAR Payment Agreements, and (z) the legal and
accounting fees of the Company paid by MedSource pursuant to section 11.2
hereof.
(c) It is the intent of the parties that any amounts paid under this
Article 10 shall represent an adjustment of the purchase price and the parties
will report such payments consistent with such intent.
(d) Notwithstanding the foregoing, in no event may a claim be first
instituted under section 10.3 after the second anniversary of the Closing Date;
provided, however, that no such limitation shall apply with respect to claims
-------- -------
arising from any inaccuracy of any representation or warranty made by the
Company in section 3.3 (Authorization), section 3.15 (Affiliated Party
Transactions) and section 3.29 (Allocation of Merger Consideration) of this
Agreement, or with respect to claims arising from any inaccuracy of any
representation or warranty, or any breach of any agreement, made by any
Shareholder in the Letter of Transmittal executed by such Shareholder, including
but not limited to such Shareholder's agreements with respect to the allocation
of the Merger Consideration and the redemption of the shares of MedSource
Preferred Stock to be issued to ▇▇▇▇▇▇▇ in the Merger, and any such claim must
be asserted prior to the expiration of the applicable statute of limitations;
and provided further, however, that no claim shall be first instituted under
-------- ------- -------
section 10.3 with respect to any inaccuracy of any representation or warranty
made by the Company in section 3.14 (Taxes) after the three-month anniversary of
the expiration of the applicable statute of limitation; and provided further,
-------- -------
however, that no such limitation shall apply with respect to any claim described
-------
in section 10.3(a)(iv), (v), (vi), (vii) or (viii).
10.7 Limitations on Indemnification by the Buyer Group. The Buyer and
-------------------------------------------------
MedSource shall have indemnification obligations pursuant to section 10.4 only
if the aggregate of all Damages resulting from such breaches shall exceed
$175,000, and then only to the extent Damages exceed that amount. Anything
herein to the contrary notwithstanding, the Buyer and MedSource shall have no
liability with respect to Damages that result from breaches of representations
or warranties set forth in this Agreement, for and to the extent that the
aggregate amount of such Damages exceeds $5,000,000. Notwithstanding the
foregoing, (a) the Buyer Group's obligation to deliver the Merger Consideration
pursuant to section 2.3(b) shall not be subject to any basket or limit on
indemnification, and (b) in no event may a claim be first instituted under
section 10.4 after the second anniversary of the Closing Date; provided,
--------
however, that no such limitation shall apply with respect to the representations
-------
set forth in sections 4.2, 4.5 and 4.6 hereof.
11. Miscellaneous
11.1 Shareholders Representative.
---------------------------
(a) By its execution and delivery of the Letter of Transmittal, each
Shareholder hereby appoints ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as Shareholders Representative
with full power and authority to represent each Shareholder and such
Shareholder's successors and assigns with respect to all matters arising under
this Agreement, and all actions taken by the Shareholders Representative
hereunder shall be binding upon each such Shareholder and such Shareholder's
43
successors and assigns as if expressly ratified and confirmed in writing by each
of them. Without limiting the generality of the foregoing, the Shareholders
Representative shall have full power and authority, on behalf of each
Shareholder and such Shareholder's successors and assigns, to interpret the
terms and provisions of this Agreement, to dispute or fail to dispute any
liability claim hereunder, to negotiate and compromise any dispute which may
arise under this Agreement, and to sign any releases or other documents with
respect to any such dispute.
(b) Resignation; Successors. The Shareholders Representative, or any
-----------------------
successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Shareholders Representative as
hereinafter provided. In case of such resignation, or in the event of the death
or inability to act of the Shareholders Representative, a successor shall be
named from among the Shareholders by a majority of the members of the board of
directors of the Company who served on such board prior to the Closing Date.
Each such successor Shareholders Representative shall have all the power,
authority, rights and privileges hereby conferred upon the original Shareholders
Representative, and the term "Shareholders Representative" as used herein shall
be deemed to include such successor Shareholders Representative.
(c) Liability. In performing any of his duties under this Agreement,
---------
or upon the claimed failure to perform his duties hereunder, the Shareholders
Representative shall not be liable to the Shareholders for any Damages which the
Shareholders may incur as a result of any act, or failure to act by the
Shareholders Representative under this Agreement and the Shareholders
Representative shall be indemnified and held harmless by the Shareholders for
all Damages; provided, however, that the Shareholders Representative shall not
-------- -------
be entitled to indemnification for Damages to the extent that a court of
competent jurisdiction has finally determined that the actions or omissions of
the Shareholders Representative both (i) were taken or omitted not in good faith
and (ii) constituted willful default under this Agreement. Accordingly, the
Shareholders Representative shall not incur any such liability with respect to
(i) any action taken or omitted to be taken in good faith upon advice of his
counsel given with respect to any questions relating to the duties and
responsibilities of the Shareholders Representative hereunder, or (ii) any
action taken or omitted to be taken in reliance upon any document, including any
written notice or instructions provided for in this Agreement, not only as to
its due execution and to the validity and effectiveness of its provisions, but
also as to the truth and accuracy of any information contained therein, which
the Shareholders Representative shall in good faith believe to be genuine, to
have been signed or presented by the purported proper Person or Persons and to
conform with the provisions of this agreement. The limitation of liability
provisions of this section 11.1 shall survive the termination of this Agreement
and the resignation of the Shareholders Representative.
11.2 Transaction Fees and Expenses. The Buyer Group shall bear (i) all
-----------------------------
costs, fees and expenses of the Buyer Group as may be incurred in connection
with this Agreement and the transactions contemplated hereby, and (ii) all legal
and accounting fees and related expenses of the Seller Group as may be incurred
in connection with this Agreement and the transactions contemplated hereby in an
amount not to exceed $230,000. Without limiting the foregoing, the Shareholders
shall bear all other costs, fees and expenses as may be incurred by the Seller
Group in connection with this Agreement and the transactions contemplated
hereby.
44
11.3 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:
if to any of the Buyer Group, to:
MedSource Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to any of the Seller Group or the Shareholders Representative, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Volunteer Building
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any individual Shareholder, to the address provided by such Shareholder in
its Letter of Transmittal;
or such other address as any party hereto may at any time, or from time to time,
direct by notice given to the other parties in accordance with this section.
45
11.4 Amendment. Except as otherwise provided herein, no amendment of
---------
this 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.
11.5 Waiver. No course of dealing of any party hereto, no omission,
------
failure 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.
11.6 Governing Law. This Agreement shall be governed by, and
-------------
interpreted and enforced in accordance with, the laws of the state of Georgia.
11.7 Service of Process.
------------------
Each of the parties hereby agrees that service of any summons,
complaint, notice or other process relating to any Proceeding may be effected in
the manner provided by section 8.3 hereof.
11.8 Remedies. In the event of any actual or prospective breach or
--------
default by any party hereto, the other parties shall be entitled to equitable
relief, including remedies in the nature of 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.
11.9 Severability. The provisions hereof are severable and if any
------------
provision 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.
11.10 Further Assurances. Each party hereto covenants and agrees to
------------------
promptly execute, deliver, file or record, or cause to be executed, delivered,
filed or recorded, such agreements, instruments, certificates and other
documents and to perform, or cause to be performed, such other and further acts
as the other parties hereto may reasonably request or as may otherwise be
necessary, proper or advisable under applicable Laws, or reasonably required in
order to consummate and perfect the transactions contemplated hereby.
46
11.11 Binding Effect; Assignment. This Agreement and all of the
--------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto, their heirs and their respective successors and permitted assignees.
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. Permitted assignees of the rights hereunder of the Buyer or MedSource
shall include any Person controlling, controlled by or under common control with
the Buyer or MedSource and any successor entity which acquires stock, business
or assets of Buyer or MedSource, whether by acquisition, merger, sale of assets
or otherwise, provided, that MedSource remains unconditionally liable for all
obligations of any such assignee hereunder or under any other Buyer Acquisition
Agreement.
11.12 No Third Party Beneficiaries. Nothing contained in this
----------------------------
Agreement, 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.
11.13 Entire Agreement. This Agreement, together with the Exhibits,
----------------
Schedules, certificates and other agreements and documentation referred to
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 thereof and supersedes any and all prior agreements,
commitments, understandings, discussions, negotiations or arrangements of any
nature relating thereto.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MEDSOURCE TRENTON, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: VP, Corporate Development
MEDSOURCE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: VP, Corporate Development
HV TECHNOLOGIES , INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
Shareholders Representative
48