EXHIBIT 2.9
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AGREEMENT AND PLAN OF MERGER
by and among
A.P.X. Acquisition Corp.
(the "Buyer")
and
its sole stockholder,
MedSource Technologies, Inc.
("MedSource")
and
Apex Engineering, Inc.
(the "Company")
and
its shareholders,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(collectively, the "Shareholders")
January 31, 2000
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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
2. Conversion of Shares......................................................................2
2.1 Conversion of Shares.............................................................2
2.2 Stock Options, Warrants, Treasury Shares, Etc....................................2
2.3 Surrender and Exchange of Shares; Payment of Merger Consideration................3
2.4 Payment of the Earn-Out Amount...................................................3
2.5 Closing of Stock Transfer Book...................................................5
3. Representations and Warranties of the Shareholders and 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 Company 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........................................12
3.12 Tangible Personal Property; Capital Budget......................................13
3.13 Material Contracts..............................................................13
3.14 Taxes...........................................................................14
3.15 Affiliated Party Transactions...................................................19
3.16 Environmental Matters...........................................................19
3.17 No Brokers......................................................................21
3.18 Accounts Receivable and Accounts Payable........................................21
3.19 Inventories.....................................................................21
3.20 Product Claims..................................................................21
3.21 Warranties and Returns..........................................................22
3.22 Assets Utilized in the Business.................................................22
3.23 Insurance.......................................................................22
3.24 Delivery of Documents; Corporate Records........................................22
3.25 Customers, Suppliers and Distributors...........................................22
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TABLE OF CONTENTS (Cont'd)
PAGE
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3.26 Labor Matters...................................................................23
3.27 Bank Accounts...................................................................23
3.28 Directors, Officers and Certain Employees.......................................23
3.29 Year 2000.......................................................................23
3.30 No Misstatements or Omissions...................................................23
3.31 Investment Undertaking..........................................................23
3.32 Conduct of Business............................................................24
3.33 Notice of Developments..........................................................26
3.34 Equipment and Other Assets......................................................26
3.35 Repayment of Certain Obligations to the Company.................................26
4. Representations and Warranties of the Buyer and MedSource................................26
4.1 Organization of the Buyer Group.................................................26
4.2 Authorization; Validity of Agreement............................................27
4.3 No Violations; Consents and Approvals...........................................27
4.4 Litigation......................................................................27
4.5 Compliance with Law; Licenses and Permits.......................................28
4.6 Capital Structure...............................................................28
4.7 Valid Issuance of Shares, Etc...................................................29
4.8 MedSource Financial Statements..................................................29
4.9 Compliance with Securities Laws.................................................29
4.10 No Misstatements or Omissions...................................................29
5. Other Agreements of the Parties..........................................................30
5.1 Tax Returns; Taxes..............................................................30
5.2 Non-Disclosure of Confidential Information......................................30
5.3 No Solicitation of Employees, Suppliers or Customers............................31
5.4 Non-Competition.................................................................31
5.5 Other Actions...................................................................32
5.6 Stockholders' Agreement and Registration Rights Agreement.......................32
5.7 Employment and Non-Competition Agreements.......................................32
5.8 Interests in Real Property......................................................32
5.9 Supply Agreement................................................................33
5.10 Accounts Receivable ............................................................33
5.11 Company Financial Statements....................................................33
5.12 Sale of Bryton Molds 34
5.13 Cost of Environmental Tests
6. Conditions Precedent to the Closing......................................................34
6.1 Conditions Precedent to the Buyer Group's Obligations to Close..................34
6.2 Conditions Precedent to the Seller Group's Obligations to Close.................36
7. Documents to be Delivered at the Closing.................................................36
7.1 Deliveries of the Seller Group..................................................36
7.2 Deliveries of the Buyer.........................................................37
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TABLE OF CONTENTS (Cont'd)
PAGE
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8. Termination..............................................................................37
8.1 Termination.....................................................................37
9. Indemnification..........................................................................38
9.1 Survival of Representations and Warranties of the Seller Group..................38
9.2 Survival of Representations and Warranties of the Buyer Group...................38
9.3 Determination of Damages Without Regard to "Materiality" or "Knowledge"
Qualifications..................................................................39
9.4 Indemnification by the Shareholders.............................................39
9.5 Indemnification by the Buyer Group..............................................40
9.6 Indemnification Procedures......................................................40
9.7 Limitations on Indemnification by the Shareholders..............................41
10. Miscellaneous............................................................................42
10.1 Transaction Fees and Expenses...................................................42
10.2 Notices.........................................................................42
10.3 Amendment.......................................................................43
10.4 Waiver..........................................................................43
10.5 Governing Law...................................................................43
10.6 Jurisdiction....................................................................44
10.7 Remedies........................................................................44
10.8 Severability....................................................................44
10.9 Further Assurances..............................................................44
10.10 Assignment......................................................................44
10.11 Binding Effect..................................................................44
10.12 No Third Party Beneficiaries....................................................45
10.13 Entire Agreement................................................................45
10.14 Headings........................................................................45
10.15 Counterparts....................................................................45
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Schedules
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Schedule 2.3(b)(i) Allocation of MedSource Shares
Schedule 2.3(b)(ii) Allocation of Cash Consideration
Schedule 2.3(b)(iii) Allocation of Earn-Out Amount
Schedule 3.2(a)(i) Ownership of Company Shares
Schedule 3.2(a)(ii) Rights, Agreements and Interests in connection with Company Shares
Schedule 3.4(a) Violations of Contracts
Schedule 3.4(b) Required Consents
Schedule 3.5(a) Financial Statements of the Company
Schedule 3.7(a) Liabilities Incurred since September 30, 1999
Schedule 3.8(a) Litigation
Schedule 3.8(b) Violations of Law
Schedule 3.9(a) Employee Benefit Plans
Schedule 3.9(b) Employee Benefit Plans subject to Title IV of ERISA
Schedule 3.10(a)(i) Owned Real Property
Schedule 3.10(a)(ii) Permitted Exceptions
Schedule 3.10(b)(i) Leased Property
Schedule 3.10(b)(ii) Rights of Third Parties with respect to Company-Owned Real Estate
Schedule 3.10(c) Real Estate Related Contracts
Schedule 3.11(a) Intellectual Property
Schedule 3.11(b) Licenses
Schedule 3.12(a) Title to Tangible Personal Property
Schedule 3.12(b) Fixed Assets Ledger
Schedule 3.12(c) Capital Budget
Schedule 3.13 Material Contracts
Schedule 3.14(a) Taxes
Schedule 3.14(c) Tax Returns
Schedule 3.14(d) Jurisdictions
Schedule 3.15 Affiliated Party Transactions
Schedule 3.16 Environmental Matters
Schedule 3.19 Inventories
Schedule 3.20 Service and Product Liability Claims
Schedule 3.21 Warranties and Returns Policies; Product Failures or Defects
Schedule 3.23 Insurance
Schedule 3.25 Customers; Suppliers and Distributors
Schedule 3.27 Bank Accounts
Schedule 3.28 Directors, Officers and Certain Employees
Schedule 3.29 Year 2000
Schedule 3.32(c) Dividends and Distributions by the Company
Schedule 3.32(e) Permitted Benefits
Schedule 3.32(f) Permitted Transactions
Schedule 3.32(m) Permitted Expenditures
Schedule 4.4 Buyer Group Litigation
Schedule 4.6(c) Rights, Agreements and Interests in connection with MedSource Shares
Schedule 4.8(a) Financial Statements of MedSource
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Schedule 6.2(b) Company Institutional Indebtedness
Exhibits
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Exhibit 1.3 Form of Articles of Merger (Massachusetts)
Exhibit 5.6A Form of Stockholders' Agreement
Exhibit 5.6B Form of Registration Rights Agreement
Exhibit 5.7A Form of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 5.7B Form of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 5.8 Form of Amended and Restated Lease
Exhibit 5.9 Form of Supply Agreement with PC Card
Exhibit 7.1(b) Form of Opinion of Counsel for the Seller Group
Exhibit 7.2(b) Form of Opinion of Counsel for the Buyer Group
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AGREEMENT AND PLAN OF MERGER
Dated January 31, 2000
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The parties to this Agreement and Plan of Merger (this "Agreement") are
A.P.X. Acquisition Corp., a Delaware corporation (the "Buyer") and a
wholly-owned subsidiary of MedSource Technologies, Inc., a Delaware corporation
("MedSource"), on the one hand, and Apex Engineering, Inc., a Massachusetts
corporation (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as
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 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, on the Closing Date (as hereinafter defined) the
outstanding shares of the capital stock of the Company shall be converted into
the right to receive an aggregate of 236,950 shares of MedSource common stock,
par value $.01 per share ("MedSource Common Stock"), the Cash Consideration (as
defined in section 2.3(b)) and the Earn-Out Amount (determined in accordance
with section 2.4). The parties hereto intend that this merger transaction be a
tax-free 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, as the case may be, 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.
1.1 The Merger. Subject to the terms and conditions of this Agreement, upon
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the Closing (as hereinafter defined), in accordance with this Agreement, the
terms and conditions set forth herein and in accordance with the Massachusetts
Business Corporation Law and Chapter 156B of the Massachusetts General Laws
(collectively, the "MBCL"). MedSource and the Shareholders shall cause the
Company to be merged with and into the Buyer (the "Merger").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
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the MBCL. Without limiting the generality of the foregoing, and subject thereto,
upon the Closing all the assets, properties, rights, privileges, powers and
franchises of the Company shall vest in the Buyer and, subject to section 3.35,
all debts, liabilities and duties of the Company shall become the debts,
liabilities and duties of the Buyer.
1.3 Consummation of the Merger. The Merger shall become effective upon the
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filing with the Secretary of State of the Commonwealth of Massachusetts of a
properly executed certificate or articles of merger or ownership and other
documents in the form of Exhibit 1.3 (the "Articles of Merger") on the Closing
Date. The Merger shall be effective when the Articles of Merger have been filed.
1.4 Charter; Bylaws; Directors and Officers. The Articles of Organization
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of the Buyer from and after the Closing shall be the Articles of Organization of
the Buyer immediately prior to the Closing unless amended pursuant to the
Articles of Merger and thereafter amended in accordance with the provisions
thereof and as provided by the MBCL. The Bylaws of the Buyer from and after the
Closing shall be the Bylaws of the Buyer as in effect immediately prior to the
Closing. The initial directors and officers of the Buyer on and after the
Closing shall be the directors and officers, respectively, of the Buyer
immediately prior to the Closing, in each case until their respective successors
are duly elected and qualified.
1.5 The Closing. The consummation of the Merger and the other transactions
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contemplated by this Agreement (the "Closing") shall take place at the offices
of the Seller Group's counsel in Berkshire County, Massachusetts at 10:00 a.m.,
local time, on such date and such time as may be designated by the Buyer Group
to the Seller Group on not fewer than five (5) days written notice. The date on
which the Closing occurs is referred to as the "Closing Date."
1.6 Further Assurances. On and after the Closing Date, each of the parties
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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 Buyer, 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.
2. Conversion of Shares.
2.1 Conversion of Shares. By virtue of the Merger and without any action on
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the part of the Shareholders, at the Closing, all of the outstanding shares of
common stock (the "Company Shares") of the Company, no par value per share (the
"Company Common Stock"), as shown on Schedule 2.3(b), shall be converted into
the right to receive (i) the aggregate of 236,950 shares (the "MedSource
Shares") of MedSource Class A Common Stock, $.01 par value per share, (ii) the
Cash Consideration, and (iii) the Earn-Out Amount.
2.2 Stock Options, Warrants, Treasury Shares, Etc. At the Closing, the
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Shareholders shall cause each outstanding stock option, 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 shares of the
Company Common Stock 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.
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2.3 Surrender and Exchange of Shares; Payment of Merger Consideration
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(a) At the Closing, the Shareholders shall deliver certificates
representing all issued and outstanding Company Shares to MedSource. The
Shareholders shall be entitled, upon such surrender, to receive in exchange
therefor, without cost to them, the MedSource Shares and the amount of cash into
which the Company Shares represented by the certificate or certificates so
surrendered shall have been converted as provided in section 2.1 hereof, and the
certificate or certificates so surrendered in exchange for such consideration
shall forthwith be canceled by MedSource.
(b) At the Closing, upon the surrender for cancellation of the
certificates representing the Company Shares pursuant to section 2.3(a) above,
MedSource shall deliver to the Shareholders:
(i) certificates representing an aggregate of 236,950 MedSource
Shares, free and clear of all liens and encumbrances, claims, mortgages,
pledges and security interests of any kind (collectively, "Liens"), in the
relative amounts and to the individuals as set forth on Schedule 2.3(b)(i),
each registered in the name of such Shareholder evidencing the applicable
number of MedSource Shares; and
(ii) $2,661,000 less the aggregate amount of Institutional
Indebtedness (as defined in section 2.3(d)) at the Closing (the "Cash
Consideration"), subject to section 3.34, allocated as set forth on
Schedule 2.3(b)(ii). The Cash Consideration shall be paid by delivery of
bank or cashier's checks or by wire transfer of immediately available funds
to an account or accounts designated in writing, at least three (3) days
prior to Closing, by the Shareholders; and
(iii) the Earn-Out Amount, allocated as set forth on Schedule
2.3(b)(iii).
(c) As additional consideration in the Merger, promptly following the
determination of the Earn-Out Amount in accordance with section 2.4, MedSource
shall deliver to the Shareholders the Earn-Out Amount paid by delivery of bank
or cashier's check or by wire transfer of immediately available funds to an
account or accounts designated pursuant to section 2.3(b)(ii).
(d) For purposes of this Agreement, "Institutional Indebtedness" on
any date shall mean all of the Company's indebtedness on such date, after giving
effect to any application of Company cash and cash equivalents thereto prior to
Closing, including without limitation, all revolving credit facilities, term
loans and notes and lines of credit or loans due to banks, lending or investing
entities or Persons or similar financial institutions, negative book balances
and overdrafts, and capital leases.
2.4 Payment of the Earn-Out Amount.
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(a) The Earn-Out Amount shall be the product of 3.0 multiplied by the
remainder of EBITDA (as hereinafter defined) less $1,100,000; provided, however,
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that in no event shall the Earn-Out Amount exceed $425,000. As used herein,
"EBITDA" shall mean the
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Company's earnings before interest, taxes, depreciation and amortization as
reflected on the Company's statement of income for the 12-month period ending
June 30, 2000 disregarding any costs relating to (i) extraordinary income,
expenses or write down and (ii) charges from MedSource's Minneapolis Support
Center and other costs, fees and charges incurred in connection with the
Closing.
(b) MedSource shall deliver to the Shareholders in writing MedSource's
determination of the EBITDA figure as prepared by MedSource (the "EBITDA
Determination"). The Shareholders shall have fifteen (15) days after receipt of
the EBITDA Determination (the "EBITDA Dispute Period") to dispute the amount or
the method of calculation of the amount reflected therein (an "EBITDA Dispute").
If the Shareholders do not give written notice of an EBITDA Dispute to MedSource
within the EBITDA Dispute Period, the EBITDA Determination shall be deemed to
have been accepted by the Shareholders in the form in which it was delivered by
MedSource. In the event that the Shareholders do not agree with the amount or
the method of calculation of the EBITDA Determination, the Shareholders shall
give MedSource an EBITDA Dispute Notice within the EBITDA Dispute Period,
setting forth in detail the basis of their disagreement, and MedSource and the
Shareholders shall, within fifteen (15) days after receipt by MedSource of such
EBITDA Dispute Notice, attempt to resolve such EBITDA Dispute and agree in
writing upon the final determination of EBITDA. In connection with the review by
the Shareholders of the EBITDA Determination, MedSource shall use reasonable
efforts to cause its auditors to make their workpapers and audit of the Buyer's
balance sheet as of April 30, 2000 and related statements of income and cash
flows for the 12-month period then ended available to the Shareholders and the
Shareholders shall sign any customary waivers requested by MedSource or its
auditors. In the event that the Shareholders and MedSource are unable to resolve
any such EBITDA Dispute within the fifteen (15) day resolution period, then a
non "Big-Five" accounting firm from either Massachusetts or the Hartford,
Connecticut area which has not in the past provided any services to either
MedSource, the Company or any affiliate thereof, selected by MedSource and
reasonably acceptable to the Shareholders (the "Appraiser") shall be employed as
appraiser hereunder to settle such EBITDA Dispute as soon as reasonably
practicable in which case (x) each party shall furnish to the Appraiser such
workpapers and other documents and information as the Appraiser may request, (y)
each party and its accountants shall be afforded reasonable opportunity to
present such material relating to the disputed issues as it may wish to the
Appraiser and to discuss the disputed issues with them, (z) the Appraiser shall
render its determination(s) in writing by notice to the parties, which
determination(s) shall be final and binding on the Shareholders and MedSource
(the "Appraiser's EBITDA Determination"). The Shareholders, on one hand, and
MedSource, on the other hand, shall bear the fees and expenses of the Appraiser
for the services of the Appraiser in proportion to the difference between the
determination of EBITDA as submitted to the Appraiser by the Shareholders and
the Appraiser's EBITDA Determination, calculated as follows: (i) the
Shareholders shall bear the portion of such fees and expenses equal to a
fraction, the numerator of which is equal to the excess of the determination of
EBITDA as submitted to the Appraiser by the Shareholders over the Appraiser's
EBITDA determination, and the denominator of which is the excess of the
determination of EBITDA as submitted to the Appraiser by the Shareholders and
the EBITDA Determination as submitted to the Appraiser by MedSource and (ii)
MedSource shall bear the remaining portion of such fees and expenses; provided,
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however, that in the event the fraction set forth in the preceding clause (i) is
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less than zero, such fraction shall be deemed to
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equal zero, and in the event that the fraction set forth in the preceding clause
(i) is greater than one, such fraction shall be deemed to equal one.
(c) Any and all revenue to the Company associated with the Bryton
molds shall be excluded from the EBITDA calculation pursuant to paragraph (a) of
this Section 2.4.
2.5 Closing of Stock Transfer Book. On and after the date of this Agreement
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there shall be no transfers on the stock transfer books of the Company of shares
of capital stock of the Company that were issued and outstanding immediately
prior to the date hereof.
3. Representations and Warranties of the Shareholders and the Company. The
Shareholders and the Company, jointly and severally, represent and warrant to
the Buyer and MedSource as follows:
3.1 Organization. The Company is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Massachusetts 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 in the
State of Massachusetts, which is the only state in which a qualification or
licensing to conduct its business is required. The Shareholders have delivered
to the Buyer Group true, correct and complete copies of the Company's Articles
of Organization and Bylaws, as in effect immediately prior to Closing.
3.2 Capitalization.
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(a) The authorized capital stock of the Company consists of 15,000
shares of Company Common Stock. The Company Shares are the only shares of
capital stock of the Company that are issued and outstanding, and all of the
Company Shares are owned of record and beneficially by the Shareholders in the
amounts set forth in Schedule 3(a)(i), free and clear of any Liens. All of the
Company Shares are duly authorized, validly issued, fully paid and
non-assessable. 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 or the Shareholders to issue, transfer or sell
any shares of capital stock, options, warrants, calls or other equity interest
of any kind whatsoever in the 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 or any of the Shareholders 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 (each, an "Entity").
3.3 Authorization; Validity of Agreement. Each of the Shareholders and the
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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 to be executed and delivered
by the Company or the Shareholders, as
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the case may be, pursuant to this Agreement, including but not limited to any
item referred to in Article 7 (collectively, with this Agreement, the
"Transaction Documents"), to which the Company or the Shareholders, as the case
may be, is a party, and to assume and perform its or their obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. Each of this Agreement and the other Transaction Documents has been
duly executed, authorized and delivered by the Company and each Shareholder, as
applicable, and is a valid and binding obligation of the Company and each
Shareholder, enforceable against each of them in accordance with their
respective terms.
3.4 No Violations; Consents and Approvals.
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(a) The execution, delivery and performance of each of this Agreement
and the other Transaction Documents by the Company and each Shareholder party
thereto, do not, and the consummation by them of the transactions contemplated
hereby and thereby will not: (i) violate any provision of the Articles of
Organization or Bylaws of the Company, or (ii) violate any Law (as defined in
section 3.8(b)) applicable to any of the Shareholders or the Company or any of
their respective 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 (each, a "Governmental Entity") or any
other individual or other entity (each, a "Person") is required in connection
with the execution, delivery and performance of this Agreement or any of the
other Transaction Documents by the Company or any Shareholder or the
consummation by the Company or any Shareholder 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 as are set forth on Schedule
3.4(b) hereof (the "Required Consents").
3.5 Company Financial Statements.
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(a) Attached to Schedule 3.5(a) are the balance sheets of the Company
as of October 31, 1999 (the "Six-Month Balance Sheet") and October 31, 1998,
together with the related comparative statements of income and retained earnings
and statements of cash flows for the six-month period ended October 31, 1999 and
October 31, 1998, and the balance sheets of the Company as of April 30, 1996,
1997, 1998 and 1999, together with the related comparative statements of income
and retained earnings and statements of cash flows (including the related notes)
for the four (4) fiscal years then ended (all of the foregoing, the "Company
Financial Statements").
(b) The Company Financial Statements have been reviewed by ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, CPA and the reports of that firm are attached hereto as part of
Schedule 3.5(a). The Company Financial Statements have been derived from, and
agree with, the books and records of the Company and fairly present the
financial position of the Company as of the respective dates
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thereof and the results of operations of the Company for the respective periods
set forth therein. The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied ("GAAP"), as of the dates and for the periods involved,
subject, in the case of the Six-Month Balance Sheet and the related comparative
statements of income and retained earnings and statements of cash flows for the
six-month period ended October 31, 1999, to normal fiscal year-end adjustments
in the ordinary course (none of which, individually or in the aggregate, will be
material).
3.6 No Material Adverse Change. Since April 30, 1999, (i) no event,
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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, results of operations or prospects of the Company (a "Material
Adverse Effect"), other than events, conditions or circumstances solely
attributable to general economic conditions; and (ii) the Company has not taken,
nor have the Shareholders permitted to be taken, any action that if taken or
permitted to be taken after the date hereof would constitute a violation or
breach of or would otherwise be inconsistent with any of the provisions set
forth in section 3.32(a) through (p).
3.7 No Undisclosed Liabilities.
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(a) The Company does not have, and as of the Closing will not have,
any liabilities (whether accrued, contingent, known, or otherwise) other than
those that (i) are set forth or reserved against on the Six-Month Balance Sheet;
or (ii) were incurred since September 30, 1999 in the ordinary course of
business, none of which, individually or in the aggregate, is material to the
Company's business, operations, condition or prospects, all of which are set
forth on Schedule 3.7(a).
(b) The accounts payable of the Company set forth in the Six-Month
Balance Sheet or arising subsequent thereto are the result of bona fide
transactions in the ordinary course of business.
3.8 Litigation; Compliance with Law; Licenses and Permits.
-----------------------------------------------------
(a) Except as set forth in Schedule 3.8(a), there is no claim, suit,
action, or proceeding (each, a "Proceeding") pending, nor is there, to Seller
Group's best knowledge, any Proceeding threatened or any investigation, that
involves or affects the Company, by or before any Governmental Entity or any
other Person.
(b) Except as set forth on Schedule 3.8(b), the Company has, and on
the Closing Date will have, complied in all material respects 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 relating to Taxes (as defined in section
3.14(f)), 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, 1997,
no
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member of the Seller Group has received any notice of any violation of any Law
except as set forth on Schedule 3.8(b).
(c) 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 Person that is not a party
to this Agreement, in each case which the Seller Group believes necessary for
the Company to conduct its business as presently conducted. All such Licenses
and Consents are in full force and effect and neither the Company nor any
Shareholder has received notice of any pending cancellation or suspension of any
thereof nor, to the knowledge of any Shareholder, 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.
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 ("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 Group, true, correct and
complete copies of each of the Plans, including all amendments to date.
(b) Each of the Plans that is subject to ERISA complies 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 neither the
Shareholders nor the Company knows of any facts or circumstances that would
materially 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 any
Shareholder or 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) 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).
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(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, or the Buyer Group 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.
(f) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302(a) of ERISA or Code section 412(a)), whether or not
waived.
(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) The Company is the owner of good, marketable and insurable title
to and owns the real property described on Schedule 3.10(a)(i) (the "Owned Real
Property") in fee simple free and clear of all Title Defects (as hereinafter
defined) except for the matters listed on Schedule 3.10(a)(ii) (collectively,
the "Permitted Exceptions"), and except for those mortgages and collateral
assignment of leases and rents set forth in the Title Commitment (as hereinafter
defined), all of which mortgages and collateral assignment of leases and rents
will be paid off by the Company at the Closing. Neither the Company nor the
Shareholders have received notice of any default or breach by the Company or
other owner under any Permitted Exception or other Title Defect affecting the
Owned Real Property or any portion thereof, 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 herein,
"Title Defects" shall mean and include any mortgage, deed of trust, lien,
pledge, security interest, claim, lease, sublease, charge, option, right of
first refusal, easement, restrictive covenant, encroachment or survey defect,
encumbrances, restrictions, limitation or other documents of record. The Owned
Real Property is part of the 17 ▇▇▇▇▇▇▇ Three condominium and there is no
documentation pertaining to the 17 ▇▇▇▇▇▇▇ Three condominium and binding upon
the owner of the Owned Real Property that is not set forth in that certain title
commitment dated November 29, 1999 and revised on January 10, 2000 and January
27, 2000 issued by Fidelity National Title Insurance Company of New York known
as File No. NYN99-4455-MA and Commitment No. 99-03193MA (the "Title
Commitment"). Neither Shareholder has any knowledge of any material adverse
change in the financial condition or prospects of the 17 ▇▇▇▇▇▇▇ Three
condominium since the date of such most recent certified financial statement.
(b) Schedule 3.10(b)(i) contains a true, correct and complete list and
summary of all the leases, subleases, licenses and other agreements under which
the Company uses or
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occupies or has the right to use or occupy, now or in the future, any real
property (such land, buildings and other improvements being herein called
collectively, the "Leased Property"; the Owned Real Property and the Leased Real
Property are collectively herein being referred to as the "Real Property").
Schedule 3.10(b)(ii) contains a true, correct and complete list and summary of
all leases, subleases and other agreements under which the Company gives another
Person the right to use or occupy, now or in the future, the Real Property. All
agreements set forth on Schedule 3.10(b)(i) and 3.10(b)(ii) are hereinafter
called collectively, the "Real Property Contracts." The Shareholders have
heretofore delivered to the Buyer Group true and correct copies of all Real
Property Contracts. Each Real Property Contract is in full force and effect, all
rent and other sums and charges payable by or to the Company thereunder are
current, no written notice of default or termination under any Real Property
Contract is outstanding, 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 Real Property Contract, 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. The Company has a valid and enforceable leasehold interest in the
Leased Real Property, subject to no Liens or Title Defects which interfere with
the operation of the Company's business. No Affiliate (as defined in Section
3.15) of the Company is the owner of, or has any ownership, economic or similar
interest in, any lease, sublease, license or other agreement concerning the Real
Property except as set forth in Schedule 3.10(b)(ii). Except as set forth in
Schedule 3.10(b)(i) and Schedule 3.10(b)(ii), none of the Real Property
Contracts have been amended, modified or extended as of the date hereof. Except
as set forth in Schedule 3.10(b)(ii), the Company maintains actual and exclusive
possession of the Real Property.
(c) The Shareholders have heretofore delivered to the Buyer Group a
true, correct and complete copy of the most recent title insurance policy with
respect to each parcel of the Owned Real Property. Except as set forth in
Schedule 3.10(b)(ii), there are no leases, subleases, licenses or other
agreements granting to any person other than the Company any right to the
possession, use or occupancy of the Real Property and no Person has any rights
to acquire, lease, sublease or otherwise occupy the Real Property or any part
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 Real Property or any interests therein; however, certain transfers of
interests in the Owned Real Property are subject to the approval of the Trustees
of the 17 ▇▇▇▇▇▇▇ Three condominium. All of the lands, buildings, structures and
other improvements used by the Company in the conduct of its business are
included in the Real Property and the Real Property is all the real property
necessary to conduct the Company's business. Except as set forth in Schedule
3.10(c), there are no service or maintenance contracts, management agreements or
similar agreements relating to the Real Property. There has been no service,
material or other work provided or supplied to the Real Property that has not
been paid in full, except as set forth in Schedule 3.10(c). All brokerage
commissions, finders fees and all similar charges or fees arising out of or
relating to any of the Real Property Contracts have been paid.
(d) With respect to the Real Property, (i) there is a right of ingress
and egress and direct access to public thoroughfares to and from the Real
Property, (ii) the Real Property has adequate water supply and sewer service for
the present use thereof and all sewer service and water supply facilities
required for the present use of the Real Property are properly and fully
installed and operating, and (iii) all curb cut and street opening permits or
licenses required for
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vehicular access to and from any part of the Owned Real Property to any
adjoining public street have been obtained and, if required, paid for by the
Company and are in full force and effect. The Seller Group has heretofore
delivered to the Buyer Group true, correct and complete copies of any
certificate or certificates of operation for any incinerator, boiler or other
burning equipment on the Real Property.
(e) All licenses, permits, franchises, approvals, authorizations and
certificates of occupancy (collectively, the "Approvals"), of all Governmental
Entities having jurisdiction over the Real Property or from all insurance
companies and fire rating and other similar boards and organizations in
connection with the construction, use, occupancy and maintenance of the Real
Property are in full force and effect in accordance with the respective terms
thereof, and none of the Approvals has been amended, assigned, pledged or
otherwise transferred. 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. The condition
and use of the Real Property conforms to each Approval. The Company is in
compliance with all Laws including, without limitation, those relating to
zoning, building, subdivision and land use restrictions that are applicable to
any portion of the Real Property or any buildings, plants or improvements owned
by the Company (collectively, "Real Property Laws"), and the Company has not
received any notice of violation or claimed violation of any Real Property Law.
The Real Property and its continued use, occupancy and operation as currently
used, occupied and operated does not constitute a nonconforming use under any
Real Property Law and the continued existence, use, occupancy and operation of
the Real Property, is not dependent on any special permit, exception, approval
or variance.
(f) 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 fully installed, operating, in good
condition and repair and adequate for the conduct of the Company's business as
presently and as proposed to be conducted, there are no defects in the same that
would hinder or impair business or operations of the Company and no
extraordinary repair or improvement expense with respect thereto are anticipated
during the two years following the Closing Date. The electricity service and all
other public or private utilities ("Utilities") serving the Real Property are
fully installed and operating, adequate for the conduct of the Company's
business as presently and as proposed to be conducted, and enter the Real
Property through adjoining public streets or through valid easements across
adjoining private lands, and all installation, connection and capital recovery
charges in connection with the Utilities have been paid in full.
(g) There is no pending, proposed, contemplated or anticipated (i)
annexation, condemnation, eminent domain or similar proceeding affecting, or
that may affect, all or any portion of the Real Property, (ii) proceeding to
change or redefine the zoning classification of all or any portion of the Real
Property, (iii) imposition of any special or other assessments against the Real
Property for public betterments or otherwise, (iv) special assessments affecting
the Real Property or any portion thereof that are or would be payable by the
Company and could result in a Lien against any of the Real Property, (v) change
in any applicable Law relating to the use, occupation or operation of the Real
Property, (vi) tax certiorari proceeding with respect to any Real Property,
(vii) changes in road patterns or grades that may adversely affect access to any
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roads providing means of ingress or egress from the Real Property, or (viii)
increases in the common charges of the 17 ▇▇▇▇▇▇▇ Three condominium or
assessments pertaining thereto.
(h) Neither the Company nor any Shareholder has received notice from
any Governmental Entity, 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 the Real
Property, and there are no outstanding requirements or recommendations from any
of the foregoing.
(i) There has been no damage to any portion of the Real Property
caused by fire or other casualty that has not been completely repaired and
restored.
(j) No portion of the Real Property is located in a special flood
hazard area designated by federal governmental authorities.
(k) Copies of the current real estate tax bills for the Real Property
have been delivered to the Buyer Group by the Shareholders. Said bills, with
respect to the Real Property, cover the whole of the Real Property and do not
cover or apply to any other property. No application or proceeding is pending
with respect to a reduction of the taxes on the Real Property.
(l) 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.
(m) Neither the Company nor any Shareholder has transferred any
development rights applicable to the Real Property.
3.11 Intellectual Property; Computer Software.
----------------------------------------
(a) Schedule 3.11(a) lists all items of intellectual property
including, without limitation, trademarks, trade names, service marks, service
names, ▇▇▇▇ registrations, logos, assumed names, copyrights, copyright
registrations, patents, know-how and all applications therefor that are owned by
any Shareholder, the Company or any other Person and used by the Company in the
operations of its business, (collectively, "Intellectual Property"), and there
are no pending or threatened claims by any Person relating to the Company's use
of any Intellectual Property. Except as set forth in Schedule 3.11(a), 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) Except as set forth on Schedule 3.11(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), the 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
-12-
computer programs referred to above will be adversely affected by any of
the transactions contemplated hereby.
3.12 Tangible Personal Property; Capital Budget.
------------------------------------------
(a) Except as set forth on Schedule 3.12(a), the Company has good,
marketable and valid title to all tangible personal property used in its
business or located on its premises free and clear of all Liens.
(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) are listed in the
detailed fixed assets ledger of the Company attached to Schedule 3.12(b)
(collectively, the "Personal Property"). The Personal Property conforms in all
material respects to all requirements of applicable Laws. All of the items of
machinery and equipment included within the Personal Property are fully
operational and operating in the ordinary course of the Company's business, as
applicable, are in good operating condition and in a good state of maintenance
and repair, are adequate for use in the conduct of the Company's business as
previously conducted and as proposed to be conducted on an efficient and
profitable basis.
(c) Schedule 3.12(c) includes a true, correct and complete capital
budget for the fiscal year ending April 30, 2000. Except as set forth on
Schedule 3.12(c), no capital expenditures are contemplated by the Company.
3.13 Material Contracts.
------------------
(a) Schedule 3.13 sets forth a true, complete and correct list of
every 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 or any Shareholder is a party or by which any of their
respective properties or assets may be bound or otherwise subject that: (i)
provides for aggregate future payments by the Company or to the Company of more
than $15,000 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 or similar arrangement with any employee of the Company; (viii) is a
lease of real property; or (ix) is otherwise material to the rights, properties,
assets, business 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.
-13-
(b) Except as set forth in Schedule 3.13: (i) each of the Material
Contracts is in full force and effect, (ii) there is not, and 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 Shareholders, on the part of any other party thereto and (iii)
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
unconditional and in full force and effect and such notices that have been duly
given and copies of such Consents have been delivered to the Buyer Group.
(c) Each of the Contracts to which the Company is a party and that is
not listed on Schedule 3.13 does not involve the payment by the Company or to
the Company of more than $15,000 (excluding purchase orders received from
customers in the ordinary course for the sale of products at standard prices, or
purchase orders given to suppliers in the ordinary course of business for the
purchase of products at standard prices) and is not otherwise material,
individually or together with one or more Contracts, to the Company or its
business.
3.14 Taxes.
-----
(a) Except as set forth in Schedule 3.14(a):
(1) the Company has (A) duly and timely filed or caused to be
filed with Tax Authority each Tax Return that 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, (B)
duly and timely paid in full, caused to be paid in full, all Taxes due and
payable on or prior to the Closing Date, and (C) properly accrued on the books
and records of the Company (including, but not limited to, the Six Month Balance
Sheet) in accordance with generally accepted accounting principles a provision
for the payment of all Taxes due or claimed to be due or for which the Company
otherwise is or may be liable;
(2) 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;
(3) 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 sections 1441, 1442, 1445 and 3402;
(4) 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);
(5) 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.
Section1.1502-6), and the Company is not, and never has been, a party to any Tax
allocation, Tax indemnification or Tax sharing contract or agreement;
-14-
(6) all Taxes assessed or proposed to be assessed with respect to
the Company's income, sales, assets or business, or for which the Company is or
may be liable have been paid;
(7) any assessment, deficiency or adjustment related to or in
connection with any Tax for which the Company is or may be 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;
(8) no Tax Proceeding has ever occurred or is pending, proposed,
or threatened 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;
(9) the statute of limitations for any Tax Proceeding or the
assessment or collection of any Tax for which the Company is or may be liable or
with respect to the Company's income, sales, assets or business has never been
extended or waived;
(10) 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;
(11) the Company has never entered into 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;
(12) 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 sections 162, 280G or 404 or any
similar provision of applicable law;
(13) 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;
(14) 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;
(15) 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;
-15-
(16) 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)(1)(A)(ii);
(17) 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);
(18) the Company (i) has not adjusted or 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;
(19) 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;
(20) 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;
(21) the Company and the Shareholders, to the extent permitted by
Law, have closed (or taken all action necessary to permit the Company or the
Buyer Group to close) each Tax Period that begins prior to the Closing Date as
of the close of day immediately preceding the Closing Date or on the Closing
Date; and
(22) Schedule 3.14 sets forth a list of all elections currently
in effect (or made within the five most recent Tax periods ending on or prior to
the Closing Date) with respect to any Tax or Tax Return.
(b) With respect to the Merger,
(1) the only consideration to be received, directly or
indirectly, by the Shareholders pursuant to the Merger is the consideration set
forth in section 2.3 and section 2.4;
(2) at least fifty percent (50%) of the aggregate value of all
Company Shares outstanding immediately prior to the Merger is preserved in the
Merger within the meaning of Treas. Reg.Section.1.368-1(e), and 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 an extraordinary
distribution (within the meaning of Treas. Reg.Section.1.36-1T(e)(1)(ii)(A))
with respect to any Company Shares;
-16-
(3) the Buyer will acquire at least ninety percent (90%) of the
fair market value of the Company's net assets and at least seventy percent (70%)
of the fair market value of the Company's gross assets held immediately prior to
the Merger (as determined in accordance with Rev. Proc. 77-37, 1977-2 C.B. 568,
as amended, modified or supplemented) (treating, for purposes of this paragraph,
any amounts paid by the Company to the Shareholders who received cash or other
property in connection with the Merger, Company assets used to pay
reorganization expenses, and all redemptions and distributions made by the
Company other than regular normal dividends, as assets of the Company held
immediately prior to the Merger);
(4) any liabilities of the Company assumed by the Buyer and the
liabilities to which the transferred assets of the Company are subject were
incurred by the Company in the ordinary course of its business;
(5) the Shareholders will pay their respective expenses, if any,
incurred in connection with the Merger, and the Buyer will not assume any
expenses of the Shareholders in connection with the Merger;
(6) there is no intercorporate indebtedness existing between the
Buyer and the Company that was issued, acquired, or will be settled at a
discount;
(7) the Company is not an investment company as defined in Code
section 368(a)(2)(F);
(8) the fair market value of the assets of the Company exceeds
the sum of its liabilities, plus the amount of liabilities, if any, to which the
assets of the Company are subject;
(9) the Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Code section 368(a)(3)(A);
(10) none of the compensation received by any Shareholder will be
separate consideration for, or allocable to, any of the Company Shares; none of
the MedSource Shares received by any Shareholder will be separate consideration
for, or allocable to, any employment agreement or any covenants not to compete;
and the compensation paid to any Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services;
(11) no part of the Company Shares exchanged for the MedSource
Shares in the Merger will be received by any Shareholder as a creditor, employee
or in any capacity other than that of a Company shareholder;
(12) the Company and the Shareholders will treat the Merger as a
reorganization within the meaning of Code sections 368(a)(1)(A) and 368(a)(2)(D)
and will report, disclose, account for and maintain all records relating to the
Merger as such;
(13) neither the Company nor the Shareholders shall take any
position that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Code sections 368(a)(1)(A) and
368(a)(2)(D); and
-17-
(14) neither the Company nor the Shareholders 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)(1)(A) and (a)(2)(D).
(c) Schedule 3.14(c) 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, 1995 and a description of each such Tax Return and the period for
which it was filed.
(d) Schedule 3.14(d) sets forth a list of all jurisdictions (foreign
and domestic) in which state income, franchise and other Tax Returns referred to
in clause (a)(1) have been the subject of Tax Proceedings and a description of
each such Tax Return and the period for which it was filed.
(e) The Seller Group has provided to the Buyer Group: (i) a copy of
all Tax Returns filed since December 31, 1995, 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.
(f) For purposes of this Agreement,
(1) "Tax" means any tax, charge, fee, levy, deficiency or other
assessment of whatever kind or nature 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 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
-18-
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 (i) obligations arising
-----------------------------
under this Agreement, (ii) the lease agreement and the purchase agreement with
P.C. Card Packaging, Inc., a Massachusetts corporation ("P.C. Card"), which
agreements are more fully described on Schedule 3.15 hereto, and copies of which
have been delivered to the Buyer Group, and (iii) as set forth on Schedule 3.15
hereto, as of the Closing Date neither the Company nor any of its affiliates,
nor any Shareholder or any of their respective affiliates or immediate family
(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 as set forth on Schedule 3.16:
---------------------
(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 on or ever was listed or is
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.Section.9601 et seq., or on any similar state list of sites requiring
investigation or cleanup;
(c) Neither the Shareholders nor the Company has received any notice
that remains pending or outstanding with respect to its 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) caused by the acts or
omissions of the Company or the Shareholders, or its or their agents, employees
or representatives, of a Hazardous Substance (as defined below) at, from, in,
to, on or under any Site and no Hazardous Substances are present in, on, about
or migrating to or from any Site that could give rise to an Environmental Claim
(as defined below) against the Company;
(e) There are no pending or outstanding corrective actions requested,
required or being conducted by any Governmental Entity for the investigation,
remediation or cleanup of any Site resulting from acts or omissions of the
Company or the Shareholders, or its or their agents, employees or
representatives, and there have been no such corrective actions, whether still
pending or otherwise;
(f) The Company has obtained and holds all necessary Environmental
Permits, and those Environmental Permits will remain in full force and effect
after the consummation of the transactions contemplated hereby;
-19-
(g) There are no past or pending, or to the knowledge of the
Shareholders or the Company, threatened, Environmental Claims against the
Company, and neither the Company nor the Shareholders is 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 could result in an Environmental Claim
against the Company;
(i) At any Site, there are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, (iii) asbestos
containing material, or (iv) recognized environmental condition, as defined by
ASTM E1527-97; 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,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substances, whether
now existing or subsequently amended or enacted, and the state analogies
thereto, all as amended or superseded from time to time; and any common law
doctrine, including, but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the presence,
Release, or exposure to a Hazardous Substance; (iv) "Environmental Permit" means
any 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, asbestos or asbestos-containing materials, gasoline,
diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing
materials, polychlorinated biphenyls; and any other
-20-
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 Shareholders or the Company, including all
soil, subsoil, surface waters and groundwater thereat.
3.17 No Brokers. Neither the Company nor the Shareholders has employed, or
----------
otherwise engaged, any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' fees or other
similar fees in connection with the transactions contemplated by this Agreement,
except that ▇▇▇▇▇▇▇ Company has provided financial advisory services to the
Shareholders in connection with the transactions contemplated by this Agreement.
3.18 Accounts Receivable and Accounts Payable. All accounts receivable and
----------------------------------------
all accounts payable of the Company 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 such 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 twenty (120)
days after the day on which it first becomes due and payable. The Company has
since September 30, 1999 collected and will collect the accounts receivable in
the ordinary course of its business consistent with past practice and has not
and will not accelerate or otherwise alter its collection practices. Since
September 30, 1999, the Company has not and will not delay or alter in any way
the payment by the Company under any of its accounts payable in a way
inconsistent with its ordinary course of business.
3.19 Inventories. As reflected on the Company Financial Statements, the
-----------
inventories of the Company's business have been valued at the lower of cost (on
the first-in, first-out method) or market in accordance with GAAP, consistently
applied, and the value of obsolete materials and materials of below standard
quality has been written down in accordance with GAAP, consistently applied.
Except as reflected in the Six-Month Balance Sheet referred to in section 3.5,
the inventories of the Company's business contain no material amount of items
not salable or usable within twelve (12) months from the date thereof at normal
profit margins consistent with historical sales practices. 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 best
--------------
knowledge of the Shareholders or 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 service and product liability claims seeking damages in
excess of $1,000 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 five (5) years. Claims not
listed on Schedule 3.20 do not aggregate more than $10,000.
-21-
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,
1996, any failure or defect in any product sold by the Company that has
required, or that may require, a general recall or replacement campaign or
similar action with respect to such product or a reformulation or change of such
product, nor has there been any acceptance of material quantities of returned or
defective goods of the Company.
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 Closing, and all the agreements to which any Shareholder or the Company
is a party relating to the Company's business, constitute all of the properties,
assets and agreements necessary to the Company in connection with the operation
and conduct by the Company of its business as presently and as proposed to be
conducted. As a result of the Merger, upon the Closing the Buyer will obtain
good title to all of such assets, properties and rights, free and clear of all
Liens.
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 (i) are sufficient for compliance with
all material requirements of law and of all applicable material agreements; and
(ii) are valid, outstanding and enforceable policies. Complete and correct
copies of such policies have been furnished to the Buyer Group. All such
insurance policies or comparable coverage shall be continued in full force and
effect through the Closing Date. Since April 30, 1996, the Company has not been
denied any insurance coverage which it has requested.
3.24 Delivery of Documents; Corporate Records. The Seller Group has
----------------------------------------
heretofore delivered or made available to the Buyer Group 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 and copies of the
minute and stock record books of the Company. The minute and stock record books
of the Company contain true, correct and complete copies of the records of all
meetings and consents in lieu of a meeting of the Board of Directors (and all
committees thereof) and the shareholders of the Company since the date of its
incorporation.
3.25 Customers, Suppliers and Distributors. Schedule 3.25 sets forth (i)
-------------------------------------
the sales of the Company for the fiscal year ended April 30, 1999 and the sales
of the Company for the six months ended October 31, 1999, (ii) the ten customers
with the highest dollar volume of purchases from the Company during each of
those periods indicating the approximate total sales to each of those customers;
and (iii) the ten largest suppliers and the ten largest distributors of the
Company during each of those periods. There has not been any adverse change in
the business relationship of the Company with any such customer, supplier or
distributor, and neither the Shareholders or the Company is aware of any
threatened loss of any such customer, supplier or distributor.
-22-
3.26 Labor Matters. There are no labor strikes, slow-downs or stoppages or
-------------
other labor troubles pending or, threatened with respect to the employees of the
Company; no representation questions exist; there is no collective bargaining
agreement binding on the Company and there is no agreement which restricts the
Company from relocating or closing any or all of its businesses or operations;
there are no grievances asserted that might have an adverse effect upon the
Company's business, or the financial condition or prospects of the Company, 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 five (5) 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. Schedule 3.28 sets forth a
-----------------------------------------
complete and correct list of the names, current annual salary, bonus and title,
for each director and officer and each other employee of the Company who is a
party to an employment agreement with the Company or who received 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 $30,000. Neither the Company nor any Shareholder is aware of
any employee in the Company's senior management who intends to terminate his or
her employment relationship with the Company, either as a result of the
transactions contemplated hereby or otherwise.
3.29 Year 2000. Except as set forth on Schedule 3.29, all of the Company's
---------
systems, software, data and databases (other than data provided to it by its
customers) (collectively, the "Systems") are Year 2000 Compliant (as hereinafter
defined). For purposes of this Agreement, "Year 2000 Compliant" shall mean: (i)
the occurrence in or use by the Systems of dates before, on or after January 1,
2000 will not adversely affect the performance of the Systems with respect to
date-dependent data, computations, output or other functions, including, without
limitation, calculating, comparing and sequencing; (ii) the Systems will not
abnormally end or provide invalid or incorrect results as a result of
date-dependent data; and (iii) the Systems can accurately recognize, manage,
accommodate and manipulate date-dependent data, including, without limitation,
single century formulas and leap years.
3.30 No Misstatements or Omissions. No representation or warranty by any
-----------------------------
Shareholder or 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
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 Investment Undertaking. The Shareholders confirm that the shares of
----------------------
MedSource Common Stock to be issued to them pursuant to this Agreement will be
"restricted securities" within the meaning of Rule 144 of the General Rules and
Regulations under the Securities Act of 1933 ("Rule 144"). The Shareholders are
acquiring such shares for their own account and not
-23-
with a view to their distribution within the meaning of Section 2(11) of the
Securities Act of 1933. The Shareholders understand that such shares issued
hereunder may not be disposed of for a period of at least one year (and possibly
two years) pursuant to Rule 144. The Shareholders understand that each must bear
the economic risk of the investment indefinitely because such shares may not be
sold, hypothecated or otherwise disposed of unless subsequently registered under
the Securities Act of 1933 and applicable state securities laws or an exemption
from registration is available. Each Shareholder is a sophisticated investor who
either (i) has such knowledge and experience in financial and business matters
such that he is capable of evaluating the merits and risks of this investment in
the securities being acquired hereunder, or (ii) has obtained independent
professional financial advice sufficient to enable him to evaluate the merits
and risks of this investment in the securities being acquired hereunder. After
MedSource has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, MedSource shall use
its best efforts to file all reports required to be filed by it under the
Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder to the extent
required to enable the holders of the MedSource Shares to sell such Shares
pursuant to Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the Securities and Exchange Commission.
3.32 Conduct of Business. Since September 30, 1999, the Company has
-------------------
conducted its business in the ordinary course, consistent with past practice,
and in such a manner that would not result in a Material Adverse Effect. Without
limiting the generality of and in addition to the foregoing, prior to the
Closing Date, neither the Shareholders nor the Company has, except as the Buyer
may have otherwise consented to in writing, permitted the Company to:
(a) amend its Articles of Organization 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 or other distributions (whether in cash,
stock or property or any combination thereof) to any Shareholder or otherwise in
respect of its capital stock or redeem or otherwise acquire any of its
securities, or make any payments or distributions to the Shareholders, the
Affiliates, or any Person (other than institutional bank lenders) to which the
Company had, prior to Closing, any liability (other than trade accounts payable
incurred in the ordinary course of business, subject to the provisions of
Article 5) or any officer or director of the Company, except, as more fully
described in Schedule 3.32(c): (i) employment compensation to the Shareholders
in annualized amounts not exceeding such payments made or accrued by the Company
in the year ended April 30, 1999; (ii) amounts which were necessary for the
Shareholders to pay federal and state income taxes on the pretax income earned
during the period commencing April 1, 1998; and (iii) amounts which were due to
Affiliates for rental of real property and equipment and royalties paid in
connection with Intellectual Property used by the
-24-
Company in its business, in each case in annualized amounts not to exceed
payments made or accrued by the Company in the year ended April 30, 1999;
(d) (i) incur or assume any indebtedness other than trade payables
incurred in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any obligations of any other Person; or (iii) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than loans or advances to employees in the ordinary course of business in
accordance with past practices);
(e) except as set forth on Schedule 3.32(e), enter into, adopt or
amend any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements of or for the
benefit or welfare of any employee, or increase in any manner the compensation
or fringe benefits of any employee or paid any benefit not required by any
existing plan and arrangement (including, without limitation, the granting of
stock options, stock appreciation rights, shares of restricted stock or
performance units);
(f) except as set forth on Schedule 3.32(f), acquire, sell, lease,
transfer or dispose of any of its properties or assets except in the ordinary
course of business and consistent with past practice or entered into any
material commitment or transaction;
(g) except as may be required by law, take any action to terminate or
materially amend any of its employee benefit plans with respect to or for the
benefit of employees;
(h) modify any policy or procedure with respect to credit to customers
or collection of receivables;
(i) pay, discharge or satisfy before it was due any claim or liability
of the Company or fail to pay any such item in a timely manner, in each case
given the Company's prior practices;
(j) cancel any debts or waive any claims or rights of substantial
value;
(k) except to the extent required by applicable law, change any
accounting principle or method or make any election for purposes of foreign,
federal, state or local income Taxes;
(l) 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;
(m) except as set forth in Schedule 3.32(m), make or incur any capital
expenditure, lease or commitment for additions to property, plant, equipment or
other capital assets in excess of $15,000;
-25-
(n) except in the ordinary course of business consistent with past
practice, amend, waive, surrender or terminate or agree to the amendment,
waiver, surrender or termination of any Material Contract, License or Consent.
(o) except in the ordinary course of business consistent with past
practice, exercise any right or option under or extended or renewed any Material
Contract; or
(p) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
3.33 Notice of Developments. Prior to the Closing Date, the Seller Group
----------------------
shall promptly notify the Buyer Group, and vice versa, in writing of: (i) all
events, circumstances, facts and occurrences arising subsequent to the date of
this Agreement that could result in any material breach of a representation or
warranty or covenant of the Seller Group or the Buyer Group, as the case may be,
in this Agreement or which could have the effect of making any representation or
warranty of the Seller Group or the Buyer Group, as the case may be, in this
Agreement untrue or incorrect in any material respect, and (ii) all other
material developments affecting the business, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of the Company or MedSource, as the case may be.
3.34 Equipment and Other Assets. The Shareholders have, and have caused
--------------------------
their respective Affiliates (except P.C. Card) and other Persons affiliated with
them to, contribute to the Company all assets (including, without limitation,
all equipment, intellectual property, real estate or other assets) owned by any
of them that are used or usable by the Company. Any consideration received in
connection with such transactions shall reduce by the same amount the Cash
Consideration.
3.35 Repayment of Certain Obligations to the Company. The Shareholders have
-----------------------------------------------
paid in full, and have caused their respective Affiliates and other Persons
affiliated with them to pay in full, to the Company the outstanding amount of
all obligations, if any, of the Shareholders and such Persons (including,
without limitation, an amount equal to all outstanding principal and interest on
all indebtedness of the Shareholders or such Persons) to the Company and all
claims, if any, of the Company against the Shareholders and Affiliates, in full
satisfaction thereof.
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 its respective states of organization or incorporation and has the requisite
corporate power and authority to carry on its business as 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 have a Material Adverse Effect on MedSource. 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
-26-
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 Material Adverse Effect on MedSource. The Buyer Group has
heretofore delivered to the Seller Group 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 other agreement executed or to be executed by each of
the Buyer or MedSource 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 the Buyer and MedSource and, where
necessary, the shareholders of the Buyer and MedSource, 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 Articles of Organization or Certificate of Incorporation or Bylaws of the
Buyer or MedSource, as the case may be, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any material Contract to which the
Buyer or MedSource is 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 order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to the Buyer or MedSource or any of their respective
properties or assets.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity 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. Except as set forth on Schedule 4.4, there is no Proceeding
----------
pending nor, to the knowledge of the Buyer or MedSource, is there any
investigation or Proceeding
-27-
threatened, that involves or affects the Buyer or MedSource, by or before any
Governmental Entity or any other Person that if adversely determined would be
reasonably likely to have a Material Adverse Effect on MedSource.
4.5 Compliance with Law; Licenses and Permits.
-----------------------------------------
(a) To the knowledge of the Buyer Group, the Buyer Group has, and on
the Closing Date will have, complied with all applicable Laws, including but not
limited to 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, except where the
failure to so comply would not be reasonably likely to have a Material Adverse
Effect on the Buyer Group, taken as a whole. Neither the Buyer nor MedSource has
received any notice of any material violation of any Law, except for such
notices relating to violations that would not be reasonably likely to have a
Material Adverse Effect on MedSource.
(b) To the knowledge of the Buyer Group: (i) 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 the
neither Buyer nor MedSource has received notice of any pending cancellation or
suspension of any thereof nor is any cancellation or suspension thereof
threatened, except where the failure of any such statement in items (i) or (ii)
of this section 4.5(b) to be true relates to a fact or circumstance that would
not be reasonably likely to have a Material Adverse Effect on MedSource, taken
as a whole. 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, except where any inapplicability or invalidity would not be
reasonably likely to have a Material Adverse Effect on MedSource.
4.6 Capital Structure.
-----------------
(a) The authorized capital stock of MedSource consists of:
(1) 1,000,000 shares of Preferred Stock, par value $.01 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"), 65,000 shares have been designated as
Series Z (the "Series Z Preferred Stock"); 435,000 shares remain undesignated;
(2) 40,000,000 shares of MedSource Class A Common Stock.
(b) As of the date hereof, there were outstanding 4,498,000 shares of
MedSource Class A Common Stock, 38,340 shares of Series A Preferred Stock,
332,728 shares of Series B Preferred Stock and 65,000 shares of Series Z
Preferred Stock. Also at that date, 1,750,000 shares of MedSource Class A Common
Stock were reserved for issuance pursuant to outstanding options, warrants and
other convertible securities.
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(c) All outstanding shares of capital stock of MedSource are, and all
shares that may be issued pursuant to securities or rights disclosed on Schedule
4.6(c) will, when issued, be duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights, except as may be disclosed
on Schedule 4.6(c). Except as set forth in this section 4.6 or in Schedule
4.6(c), MedSource does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments, or agreements of any
character calling for the purchase or issuance of any equity securities of
MedSource or any securities representing the right to purchase or otherwise
receive any shares of capital stock of MedSource.
4.7 Valid Issuance of Shares, Etc. Each of the MedSource Shares to be
-----------------------------
issued in the Merger pursuant to the terms of section 2.3(b) will, upon such
issuance, be duly authorized, validly issued, fully paid and non-assessable and
owned of record by each respective Shareholder free and clear of all Liens other
than Liens that may result from acts of the Shareholders.
4.8 MedSource Financial Statements.
------------------------------
(a) Attached to Schedule 4.8(a) are the audited consolidated balance
sheet of MedSource as of July 3, 1999 (the "Audited Balance Sheet"), together
with the related statements of operations for the period commencing on March 30,
1999 and ended June 30, 1999, and the unaudited consolidated balance sheet of
MedSource as of January 1, 2000 (the "January 1, 2000 Balance Sheet"), together
with the related consolidated statements of operations for the period ended
January 1, 2000 (all of the foregoing collectively, the "MedSource Financial
Statements").
(b) The Audited Balance Sheet has been audited by Ernst & Young LLP.
The reports of that firm are attached hereto as Schedule 4.8(a). That firm is
and has been MedSource's only independent auditor for the period covered by the
Audited Balance Sheet. The MedSource Financial Statements have been derived
from, and agree with, the books and records of MedSource and 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 Financial Statements have been prepared in accordance with GAAP as
of the dates and for the periods involved, subject, in the case of the January
1, 2000 Balance Sheet and the related statements of operations for the interim
period, to normal fiscal year-end adjustments in the ordinary course (none of
which, individually or in the aggregate, will be material).
4.9 Compliance with Securities Laws. No outstanding share of capital stock
-------------------------------
of MedSource has been, and no shares of capital stock of MedSource or other any
equity securities to be issued as set forth in Schedule 4.6(c) will be, issued
or sold by MedSource in violation of the registration requirements of the
federal and applicable state securities laws, except for any violations that
would not be reasonably likely to have a material adverse effect on either the
Buyer Group or the Seller Group.
4.10 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 this Agreement on the part
of the Buyer or MedSource Group contains or will contain any untrue
-29-
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.
4.11 Conduct of Business. Since September 30, 1999, the Buyer and MedSource
-------------------
have conducted their respective businesses in the ordinary course, consistent
with past practice, and in such a manner that would not result in a Material
Adverse Effect.
5. Other Agreements of the Parties.
5.1 Tax Returns; Taxes.
------------------
(a) The Buyer Group acknowledges that on and after the Closing Date
the Company shall cease to exist as a result of the Merger and, accordingly, any
Tax Return referred to in section 3.14 that was not required to be filed prior
to the Closing Date shall be filed, or caused to be filed by the Buyer after the
Closing Date. A Tax Return caused to be filed by the Shareholders under this
section 5.1(a) shall be prepared on a basis consistent with past practice.
(b) After the Closing Date, the Buyer Group and the Shareholders shall
each make available to the other, upon reasonable request, all information,
records or other documents 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 the Tax. In
addition, the Buyer Group and the Shareholders shall cooperate with each other
upon request in connection with all matters relating to the preparation of any
Tax Returns and in connection with any Tax Proceeding. Any investigation,
review, comment or discussion by the Buyer Group 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 5.1 shall not affect the indemnity provisions of Article 9 or limit the
scope of such provisions (including but not limited to section 9.1) in any way,
or affect any other representations, warranties or obligations of the Seller
Group. Each party shall bear its own costs and expenses in complying with the
provisions of this section 5.1(b).
(c) After the Closing Date, the Shareholders shall duly and timely
file with the applicable Taxing Authority all Tax Returns required to be filed
by them in connection with the transactions contemplated by this Agreement
(including without limitation, all Tax Returns relating to any real property or
stock transfer Tax, mortgage recording Tax, or any documentary stamp Tax).
5.2 Non-Disclosure of Confidential Information.
------------------------------------------
(a) From and after the Closing Date, 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 including, without limitation,
personnel information, secret processes, know-how, customer lists or other
technical data.
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(b) From and after the Closing Date, no member of the Buyer Group
shall divulge, communicate, use to the detriment of the Shareholders or P.C.
Card or for the benefit of any other Person, or misuse in any way, any
confidential information or trade secrets relating to the Shareholders or P.C.
Card including, without limitation, personnel information, secret processes,
know-how, customer lists or other technical data.
5.3 No Solicitation of Employees, Suppliers or Customers. No Shareholder
----------------------------------------------------
shall, and no Shareholder shall permit any Affiliate of such Shareholder to,
from and after the Closing Date and for a period of three-years thereafter,
directly or indirectly, for itself or on behalf of any other Person, employ,
engage or retain any Person who, at any time during the preceding 12-month
period, shall have been an employee of the Buyer (except the other Shareholder
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇), or contact any supplier, customer or employee of the Buyer
(except the other Shareholder and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇) for the purpose of soliciting
or diverting any such supplier, customer or employee from the Buyer.
5.4 Non-Competition.
---------------
(a) Until the fifth anniversary of the Closing Date, no Shareholder
shall, and no Shareholder shall permit any Affiliate thereof to, anywhere in
North America or Europe, directly or indirectly, alone or in association with
any other Person, firm, corporation or other business organization (i) acquire
or own in any manner, any interest in any Person that is engaged in any facet of
the business of the Company, (ii) engaged in any facet of the business of the
Company or compete in any way with the business of the Company, (iii) be
employed in any capacity by, serve as an employee of, or consultant or advisor
to, or otherwise participate in the management or operation of, any Person that
(x) engages in any facet of the business of the Company, or (y) competes with
the business of the Company in any way; provided, however, that notwithstanding
the foregoing, the Shareholders and their Affiliates (collectively and not
individually) may own up to two percent (2%) of the voting securities of any
publicly-traded Company; and provided further, however, that P.C. Card may
---------------- -------
continue its business provided that it does not, directly or indirectly, alone
or in association with any other Person, firm, corporation or other business
organization, engage in the manufacture or sale of medical instruments or other
medical devices or components thereof.
(b) The parties hereto intend that the covenant contained in section
5.4(a) shall be construed as a series of separate covenants, one for each state
or country specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in section
5.4(a) above. If in any judicial proceeding, a court shall refuse to enforce any
of the separate covenants deemed included in section 5.4(a) unenforceable
covenant shall be deemed reduced in scope or, if necessary, eliminated from
these provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforce.
(c) Each of the Shareholders acknowledges that the provisions of this
section 5.4, and the period of time, geographic area and scope and type of
restrictions on its activities set forth herein, are reasonable and necessary
for the protection of the Buyer Group and are an essential inducement to the
Buyer Group's entering into the Transaction Documents to which it is a party and
consummating the transactions contemplated thereby.
-31-
(d) Until the fifth anniversary of the Closing Date, neither the Buyer
nor MedSource shall, and neither the Buyer nor MedSource shall permit any
Affiliate thereof to, anywhere in North America or Europe, directly or
indirectly, alone or in association with any other Person, firm, corporation or
other business organization, engage in the manufacture, distribution or sale of
solid memory packaging for non-medical related applications which in any way
competes with any business conducted by P.C. Card. Notwithstanding the
foregoing, the restrictions contained in this Section 5.4(d) shall terminate and
be of no force or effect upon any termination of the restrictions on any
Shareholder contained in Section 5.4(a) hereof or Section 6 of any Shareholder's
employment agreement referred to in Section 5.7 hereof.
5.5 Other Actions. Each of the parties hereto shall use all reasonable
-------------
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper or advisable under
applicable Laws, or reasonably required in order to carry out the terms and
provisions of this Agreement and to consummate and make effective the
transactions contemplated hereby.
5.6 Stockholders' Agreement and Registration Rights Agreement. At the
---------------------------------------------------------
Closing, each Shareholder shall enter into a stockholders' agreement with
MedSource in the form of Exhibit 5.6A (the "Stockholders' Agreement") and a
registration rights agreement in the form of Exhibit 5.6B (the "Registration
Rights Agreement").
5.7 Employment and Non-Competition Agreements. At the Closing, each of the
-----------------------------------------
Shareholders shall enter into an Employment and Non-Competition Agreement with
MedSource, in the form attached hereto as Exhibit 5.7A for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(the "▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement") and Exhibit 5.7B for ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (the "▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Employment Agreement").
5.8 Interests in Real Property. (a) At the Closing, the Shareholders shall
--------------------------
cause the Company to obtain, and the Company shall obtain and deliver to the
Buyer Group, the following documents with respect to the transfer of interests
in real property:
(i) The Articles of Merger executed by the Company;
(ii) (A) a validly issued permanent certificate of occupancy for
each of the buildings comprising a part of the Real Property; (B) to the
extent in the possession of the Seller Group, all licenses and permits,
authorizations and approvals pertaining to the Real Property; and (C) to
the extent in the possession of the Seller Group, all guarantees and
warranties which the Company has received in connection with any work or
services performed or equipment installed in the aforementioned buildings
and all improvements erected on the Real Property;
(iii) Such affidavits, indemnities and information (including,
without limitation, an owner's title affidavit and a non-imputation
affidavit) as the Buyer's title insurance company shall require in order to
issue policies of title insurance in the form required by this Agreement;
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(iv) To the extent in the possession of the Seller's Group, a set
of plans and specifications of the buildings and all improvements
comprising a part of the Real Property;
(v) a Certificate of Non-Foreign Status (as hereinafter defined)
(vi) a letter from the Trustees of the 17 ▇▇▇▇▇▇▇ Three
condominium that all condominium common charges and assessments have been
paid through January 12, 2000.
(vii) an Amended and Restated Lease between Company and P.C. Card
in the form attached hereto as Exhibit 5.8 (the "Amended and Restated
Lease").
(b) The following are to be apportioned between the parties as of and
on the Closing Date:
(i) ad valorem, real estate and personal property taxes, water
charges, and sewer rents;
(ii) utilities, including telephone, steam, electricity and gas;
(iii) rents under Real Property Contacts; and
(iv) condominium common charges of the 17 ▇▇▇▇▇▇▇ Three
condominium;
(c) All real estate taxes and assessment pertaining to the Owned Real
Property will be paid in full by Company for the tax period in which the Closing
occurs.
5.9 Supply Agreement. At the Closing, the Shareholders shall cause PC Card
----------------
Packaging, Inc. to enter into a long-term supply agreement with the Buyer, in
the form attached hereto as Exhibit 5.9 (the "Supply Agreement").
5.10 Accounts Receivables. After the Closing, it shall be the Buyer's
--------------------
responsibility to collect the Company's accounts receivable. The Shareholders
shall permit the Buyer to collect, in the name of the Company, all of the
Company's accounts receivable and to endorse with the name of the Company for
deposit in the Buyer's account any checks or drafts received in payment thereof.
The Shareholders shall take any and all steps reasonably requested by the Buyer,
at the Buyer's expense, to effectuate the intent of the preceding sentence. The
Shareholders shall promptly turn over to the Buyer any cash, checks or other
property that it may receive after the Closing in respect of any of the
Company's receivable.
5.11 Company Financial Statements.
----------------------------
(a) On or before 90 days from the date hereof, the Shareholders shall
cause to be prepared and delivered to the Buyer audited balance sheets, income
statement, statements of cash flow and statements of changes in stockholders'
equity prepared in accordance with U.S. GAAP, for the Company's business for the
fiscal years ended April 30, 1998 and April 30, 1999
-33-
and for the period commencing on May 1, 1999 and ended on the Closing Date. The
Buyer shall reimburse the Shareholders for all costs incurred by the
Shareholders in the preparation of such audit ("Reimbursed Amount") upon receipt
of satisfactory written evidence of such costs from the Shareholders.
(b) The Shareholders shall provide the Buyer and its agents, including
the Buyer's auditors, full access to the books and records, work papers and
other documents of the Company that is required in connection with the
preparation by the Buyer of any other financial statements for any fiscal
periods the Buyer deems necessary which take into account the operations and
financial condition of the Company's business. In preparing the Buyer's
financial statements, the Buyer's auditors shall consult with the Company's
independent accountants and any consultants designated by the Shareholders
("Company Accountants"). The Shareholders shall use their best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable in order to expeditiously complete the Buyer's financial
statements which may be related to the Company's business for the fiscal periods
desired by the Buyer.
5.12 Sale of Bryton Molds. Any proceeds to the Buyer resulting from the
--------------------
sale of any portion of the Bryton molds shall be divided equally between the
Buyer, on the one hand, and the Shareholders, on the other hand.
5.13 Cost of Environmental Tests. The Buyer and MedSource agree to
---------------------------
reimburse the Company and the Shareholders for any payments or costs incurred by
the Company or the Shareholders in connection with any additional tests and/or
examinations which may be reasonably required in connection with that certain
Phase I Environmental Report relating to the Owned Real Property.
Notwithstanding the foregoing, the parties hereby expressly agree that the
Shareholders will be responsible for any payments which may arise and shall be
obligated to reimburse either the Buyer or MedSource for any payments actually
made or costs incurred in connection with the remediation of any environmental
noncompliance relating to the Owned Real Property. For purposes of this Section
5.13, remediation shall be defined as the reasonable cure, repair or other
satisfaction of any and all environmental conditions disclosed in the Phase I
Environmental Report or any subsequent environmental reports.
6. Conditions Precedent to the Closing.
6.1 Conditions Precedent to the Buyer Group's Obligations to Close. The
--------------------------------------------------------------
obligation of the Buyer and MedSource to enter into this Agreement and to
consummate the transactions contemplated hereby is subject to the satisfaction
prior to or on the Closing Date of each of the following conditions; provided,
--------
however, the Buyer or MedSource shall have the right to waive all or any part of
-------
each such condition and to close the transactions contemplated hereby without,
however, releasing the Shareholders or the Company from any covenant,
obligation, agreement or condition contained herein or from any liability for
any loss or damage sustained by the Buyer or MedSource by reason of the breach
by any Shareholder or the Company of any covenant, obligation, agreement or
condition contained herein or by reason of any misrepresentation made by any
Shareholder or the Company; and provided further, however, that the
---------------- -------
participation of the Buyer Group in the Closing shall not in any way be deemed
to be a waiver of any claim they may have hereunder for any breach of any
representation, warranty, covenant or agreement:
-34-
(a) The Buyer Group shall have received, each in form and substance
reasonably satisfactory to each member of the Buyer Group, all Required Consents
and any other Consent from any Governmental Entity or other Person that is
required for the consummation of the transactions contemplated hereby and for
the Buyer to own and operate the assets and business of the Company.
(b) 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.
(c) The Shareholders and/or the Company shall have delivered to the
Buyer Group each of the items required to be delivered pursuant to section 7.1.
(d) The Buyer Group shall have received a copy of a Phase I
Environmental Report relating to the Owned Real Property which shall be
satisfactory in its sole judgment to the Buyer Group.
(e) The Company shall have entered into the Supply Agreement.
(f) No Law shall be in effect that prohibits any party hereto from
consummating the transactions contemplated hereby.
(g) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
(h) The Buyer Group shall have received all such documents and
instruments with respect to the transfer of all legal rights in the real
property to be transferred pursuant to this Agreement, including, without
limitation, all documents and instruments required by Section 5.8 of this
Agreement shall be delivered.
(i) The Buyer Group shall have received from the Company and the
Shareholders at the Closing a certificate of non-foreign status (the
"Certificate of Non-Foreign Status") in the form required by Code section 1445
and the regulations thereunder, signed by an appropriate officer of the Company
and the Shareholders under penalties of perjury.
(j) The Buyer Group shall have obtained at its sole cost and expense
an owner's extended coverage policy of title insurance with respect to the Owned
Real Property, issued on the Closing Date by a title insurance company
acceptable to counsel for the Buyer Group. Each such title insurance policy
shall be in an amount designated by Buyer and shall insure the Company's
ownership of fee title free and clear of all Title Defects, liens, encumbrances
and other exceptions to or exclusions from coverage other than Permitted
Exceptions. 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 to the effective date of such
insurance policy. Each such title insurance policy shall otherwise be in form
satisfactory to
-35-
counsel to the Buyer Group. At MedSource's sole option and expense, each such
policy shall include an ALTA-9 comprehensive endorsement. Such title insurance
policy shall otherwise be in form reasonably satisfactory to counsel to the
Buyer Group.
6.2 Conditions Precedent to the Seller Group's Obligations to Close. The
---------------------------------------------------------------
obligations of the Shareholders and the Company to consummate the transactions
contemplated hereby is subject to the satisfaction prior to or on the Closing
Date of each of the following conditions; provided, however, that the Seller
-------- -------
Group shall have the right to waive all or any part of each such condition, and
to close the transactions contemplated hereby without, however, releasing the
Buyer or MedSource from any covenant, obligation, agreement or condition
contained herein or from any liability for any loss or damage sustained by the
Seller Group by reason of the breach by the Buyer or MedSource of any covenant,
obligation, agreement or condition contained herein, or by reason of any
misrepresentation made by the Buyer or MedSource; and provided, further,
-------- -------
however, that the Shareholders' or the Company's participation in the Closing
-------
shall not in any way be deemed to be a waiver of any claim they may have
hereunder for any breach of any representation, warranty, covenant or agreement:
(a) The form and substance of all certificates, opinions, consents,
instruments and other documents delivered to the Seller Group under this
Agreement shall be satisfactory in all reasonable respects to the Seller Group
and its counsel.
(b) At Closing, subject to section 2.3 hereof, MedSource shall repay,
assume or otherwise restructure the Company's outstanding Institutional
Indebtedness identified on Schedule 6.2(b) so as to relieve the Shareholders of
any personal liability for their existing guarantees of such indebtedness, and
shall release or cause to be released all assets not owned by the Company which
secure such Institutional Indebtedness.
(c) The Buyer Group shall have delivered to the Seller Group each of
the items required to be delivered pursuant to section 7.2.
(d) No Law shall be in effect that prohibits any party hereto from
consummating the transactions contemplated hereby.
(e) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
7. Documents to be Delivered at the Closing.
7.1 Deliveries of the Seller Group. At the Closing, the Company shall, and
------------------------------
the Shareholders shall cause the Company to deliver the following items to the
Buyer Group:
(a) The Required Consents;
(b) The opinion of ▇▇▇▇▇▇▇ & ▇'▇▇▇▇▇▇, LLP, counsel to the Seller
Group, in the form of Exhibit 7.1(b);
-36-
(c) The Employment and Non-Competition Agreements referred to in
section 5.7 duly executed by the respective Shareholders;
(d) The Stockholders' Agreement duly executed by the Shareholders;
(e) The Registration Rights Agreement duly executed by the
Shareholders;
(f) The Supply Agreement duly executed by PC Card;
(g) Stock certificates representing the Company Shares, duly indorsed
in blank or accompanied by stock transfer powers and with all requisite stock
transfer tax stamps attached;
(h) A certificate duly executed by the secretary of the Company,
attesting, with respect to the Company, the resolutions duly and validly adopted
by the Board of Directors of the Company evidencing the authorization of its
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, as to its Articles of Organization and Bylaws,
and as to the incumbency of each of its executive officers;
(i) A certificate with respect to the Company from the Secretary of
State of the Commonwealth of Massachusetts attesting as to its valid existence
as of a date recent to the Closing Date;
(j) The Articles of Merger;
(k) The Certificate of Non-Foreign Status;
(l) The Amended and Restated Lease; and
(m) All documentation required by Section 5.8 of this Agreement.
7.2 Deliveries of the Buyer. At the Closing, the Buyer shall and MedSource
-----------------------
shall cause the Buyer to deliver the following items to the Seller Group:
(a) A certificate of the secretary of each of the Buyer and MedSource
certifying the resolutions duly and validly adopted by the Buyer Group
evidencing the authorization of their execution and delivery of this Agreement
and the other Transaction Documents to which the members of the Buyer Group are
parties and the consummation of the transactions contemplated hereby and
thereby, and the names and signatures of the officers of each member of the
Buyer Group authorized to sign this Agreement and the other Transaction
Documents to be delivered hereunder;
(b) The opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, counsel to the
Buyer Group, in the form of Exhibit 7.2(b);
(c) The Cash Consideration pursuant to section 2.3;
-37-
(d) The MedSource Shares required to be delivered pursuant to sections
2.1 and 2.3(b), duly indorsed in blank or accompanied by stock transfer powers
and with all requisite stock transfer tax stamps attached;
(e) The Employment and Non-Competition Agreements referred to in
section 5.7 duly executed by an officer of MedSource;
(f) The Stockholders' Agreement duly executed by MedSource;
(g) The Registration Rights Agreement duly executed by MedSource; and
(h) The Supply Agreement duly executed by MedSource.
8. Termination.
[Intentionally Omitted].
9. Indemnification.
9.1 Survival of Representations and Warranties of the Seller Group. At the
--------------------------------------------------------------
Closing, the Buyer Group shall, without waiving any of its rights hereunder,
advise the Shareholders if the Buyer Group has actual knowledge of (i) any
material breach of any of the representations and warranties of the Company and
the Shareholders herein and (ii) any situation in existence prior to the Closing
which would result in the payment of Damages by the Shareholders or the Company.
Notwithstanding any right of the Buyer or MedSource to fully 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 fully 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 until the third anniversary of the Closing Date, and the
Shareholders' liability in respect of any breach of any such representation or
warranty shall terminate on the third anniversary of the Closing Date, except
for liability with respect to which notice shall have been given on or prior to
such date to the party against which such claim is asserted pursuant to section
9.6. Notwithstanding the foregoing, the representations and warranties contained
in sections 3.2(a), 3.3, 3.9, 3.12, 3.14 and 3.16 shall survive the Closing, and
the Shareholders' liability in respect of any breach thereof shall continue, in
the case of sections 3.2 and 3.12, in perpetuity, in the case of section 3.16,
until the date of the expiration of the statute of limitation applicable to any
liability relating thereto, which liability shall remain an obligation of the
party against whom such claim is asserted, and, in the case of sections 3.9 and
3.14, until the date that is six (6) months after the expiration of the statue
of limitation applicable to any liability relating thereto which such liability
shall remain an obligation of the party against whom such claim is asserted.
9.2 Survival of Representations and Warranties of the Buyer Group. At the
-------------------------------------------------------------
Closing, the Shareholders shall, without waiving any of their rights hereunder,
advise the Buyer Group if the Shareholders have actual knowledge of any material
breach of any of the representations and warranties of the Buyer Group herein.
The Shareholders and the Company have the right to rely
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fully upon the representations and warranties of the Buyer and MedSource
contained in this Agreement or in any other Transaction Document. All such
representations and warranties shall survive the execution and delivery of this
Agreement and the Closing hereunder and shall thereafter continue in full force
and effect until the third anniversary of the Closing Date and the Buyer's and
MedSource's liability in respect of any breach of any such representation or
warranty shall terminate on the third anniversary of the Closing Date, except
for liability with respect to which notice shall have been given on or prior to
such date to the party against which such claim is asserted pursuant to section
9.6, which such liability shall remain an obligation of the party against whom
such claim is asserted.
9.3 Determination of Damages Without Regard to "Materiality" or "Knowledge"
----------------------------------------------------------------------
Qualifications.
--------------
(a) Certain representations and warranties contained in this Agreement
and in certain Agreements, documents and instruments executed and delivered in
connection with this agreement include either (or both) a Materiality
Qualification (as defined below) or a Knowledge Qualification (as defined
below). Notwithstanding any such qualification, it is the intention of the
parties that the only purpose of the Materiality Qualifications and the
Knowledge Qualifications is to determine whether the representations and
warranties contained in this Agreement are true and correct for purposes of the
parties' condition to consummate the transactions contemplated at the Closing.
Accordingly, Damages recoverable under this section 9 shall be determined as
though no Materiality Qualification and no Knowledge Qualification were
contained in or applied with respect to any representation or warranty contained
in this Agreement. For example, if the Company was subject to an easement not
required to be disclosed pursuant to section 3.10 and such easement cost the
Buyer $5,000 after the Closing as a result of interference with the business,
although there might arguably be no breach of representation, the $5,000 cost of
such interference would be included for purposes of determining whether the
threshold in section 9.7 was met and thereafter whether the Shareholders would
be obligated to indemnify the Buyer Group as provided herein.
(b) As used herein:
(1) the term "Materiality Qualification" means any term,
expression, word or combination thereof that qualifies a representation,
warranty or other statement made with respect to "materiality," "in all material
respects," or insofar as any misstatement of such representation, warranty or
other statement would result in or reflect a "Material Adverse Effect," or words
or terms of similar import, and
(2) the term "Knowledge Qualification" means any term,
expression, word or combination thereof that qualifies a representation,
warranty or other statement made with respect to the "knowledge" of the party
making the representation, warranty or other statement.
9.4 Indemnification by the Shareholders. The Shareholders, jointly and
-----------------------------------
severally, shall indemnify and defend the Buyer and MedSource and each of its
respective officers, directors, employees, shareholders, agents, advisors or
representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless (after taking into account any
-39-
Taxes imposed on each Buyer Indemnitee as a result of any payment under this
Section 9.4), from any loss of profits, 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 may suffer or incur based upon, arising
out of, relating to or in connection with any of the following:
(a) Any breach of any representation or warranty made by and
Shareholder or the Company contained in this Agreement or in any other
Transaction Document or in respect of any claim made based upon facts that would
constitute any such breach;
(b) Any Shareholder's or the Company's failure to perform or to comply
with any covenant or condition required to be performed or complied with by the
Shareholders or the Company contained in this Agreement or in any other
Transaction Document; or
(c) Any liability with respect to the complaint filed with the
Massachusetts Commission Against Discrimination and the EEOC on February 23,
1998 by ▇▇▇▇▇ ▇▇▇▇ against the Company and an employee thereof, or the facts
relating thereto.
9.5 Indemnification by the Buyer Group. The Buyer and MedSource, jointly
----------------------------------
and severally, shall indemnify and defend the Shareholders and their agents,
advisors or representatives (each, a "Shareholder Indemnitee") against, and hold
each Shareholder Indemnitee harmless, on an after-tax basis, from, any Damages
that the Shareholder Indemnitee may suffer or incur arising from, related to or
in connection with any of the following:
(a) any breach of any representation or warranty made by the Buyer or
MedSource contained in this Agreement or in any other Transaction Document or in
respect of any claim made based upon facts alleged that would constitute any
such breach; or
(b) the Buyer's or MedSource's failure to perform or to comply with
any covenant or condition required to be performed or complied with by the Buyer
Group contained in this Agreement or in any other Transaction Document.
9.6 Indemnification Procedures.
--------------------------
(a) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damages referred to in sections 9.4 or 9.5, such indemnified party
shall, if a claim for indemnification in respect thereof is to be made against
an indemnifying party pursuant to this Article 9, give written notice to the
latter of 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.
(b) (1) 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, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof (but the
-40-
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).
(2) anything in section 9.6(b)(1) 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. If a Proceeding shall be commenced against more than one Buyer
Indemnitee (a "Multi-Buyer Indemnitee Proceeding"), the Shareholders shall be
responsible for the legal and other expenses which are actually incurred in
connection with the representation of all Buyer Indemnitees who are named as
defendants in such a Multi-Buyer Indemnitee Proceeding only to the extent the
Buyer Indemnitees are represented in such a Multi-Buyer Indemnitee Proceeding by
a single legal counsel.
(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
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
assume the defense thereof, then the indemnified party may respond to, contest
and defend against such Proceeding (but the indemnifying party shall have the
right to participate at its own cost and expense in such defense by counsel of
its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover from the indemnifying party the entire cost and
expense thereof including, without limitation, reasonable attorneys' fees and
disbursements and all amounts paid or foregone as a result of such Proceeding,
or the settlement or compromise thereof. The indemnification required hereunder
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or incurred.
9.7 Limitations on Indemnification by the Shareholders.
--------------------------------------------------
(a) The Shareholders shall have indemnification obligations pursuant
to section 9.4 respecting Damages that result from breaches of representations
or warranties set
-41-
forth in this Agreement (other than the representations and warranties contained
in sections 3.2(a), 3.3, 3.9, 3.12, 3.14, and 3.16) only if and only to the
extent that the aggregate of all Damages resulting from such breaches shall
exceed $103,000 (plus the amount of any reserves expressly set forth on the
Six-Month Balance Sheet directly relating to and covering such Damages).
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 (other than the representations and
warranties contained in sections 3.2(a), 3.3, 3.9, 3.12, 3.14, and 3.16) for and
to the extent that the aggregate amount of such Damages exceeds $3,700,000.
(b) The limitations set forth in paragraph (a) of this section 9.7
shall not limit or reduce the Shareholders' obligations to indemnify the Buyer
or MedSource in respect of Damages that result from actual or claimed breaches
of the representations and warranties contained in sections 3.2(a), 3.3, 3.9,
3.12, 3.13, 3.14 and 3.16.
(c) Limitations on Indemnification by the Buyer Group. The Buyer and
-------------------------------------------------
MedSource shall have indemnification obligations pursuant to section 9.5
respecting Damages that result from breaches of representations or warranties
set forth in this Agreement only if and only to the extent that the aggregate of
all Damages resulting from such breaches shall exceed $103,000. 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 $3,700,000.
10. Miscellaneous
10.1 Transaction Fees and Expenses. The Shareholders, on the one hand, and
-----------------------------
the Buyer and MedSource, on the other hand, shall bear such costs, fees and
expenses as may be incurred by them in connection with this Agreement and the
transactions contemplated hereby.
10.2 Notices. Any notice, demand, request or other communication which is
-------
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail or (c) by personal delivery to such party at
the following address:
if to the Buyer Group, to:
MedSource Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Seller Group, to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇'▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
(5) business days after such notice or demand is sent, and, in the case of
clause (b), the business day next following the date such notice or demand is
sent.
10.3 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.
10.4 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.
10.5 Governing Law. This Agreement shall be governed by, and interpreted
-------------
and enforced in accordance with, the laws of the Commonwealth of Massachusetts.
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10.6 Jurisdiction. Each of the parties hereto hereby irrevocably consents
------------
and submits to the exclusive jurisdiction of the United States District Court
for the District of Massachusetts in connection with any Proceeding arising out
of or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in such District (unless such court lacks jurisdiction
with respect to such Proceeding, in which case, each of the parties hereto
irrevocably consents to the jurisdiction of the courts of the Commonwealth of
Massachusetts in connection with such Proceeding and waives any objection to
venue in the Commonwealth of Massachusetts, and agrees that service of any
summons, complaint, notice or other process relating to such Proceeding may be
effected in the manner provided by clause (a) of section 10.2.
10.7 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 rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive. Nothing
contained herein and no election of any particular remedy shall be deemed to
prohibit or limit any party from pursuing, or be deemed a waiver of the right to
pursue, any other remedy or relief available now or hereafter existing at law or
in equity (whether by statute or otherwise) for such actual or prospective
breach or default, including the recovery of damages.
10.8 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; provided,
--------
however, that nothing herein shall be construed as allowing a court to change
-------
the Merger Consideration provided for in section 2.3.
10.9 Further Assurances. Each party hereto covenants and agrees promptly to
------------------
execute, deliver, file or record such agreements, instruments, certificates and
other documents and to perform such other and further acts as the other party
hereto may reasonably request or as may otherwise be necessary or proper to
consummate and perfect the transactions contemplated hereby.
10.10 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. Permitted assignees of the
rights hereunder of the Buyer or MedSource shall include any Person controlling,
controlled by or under common control of the Buyer or MedSource. Permitted
assignees of the Shareholders' rights hereunder shall include any Affiliate (as
defined in Section 3.15 hereof). Neither the Buyer or MedSource nor the
Shareholders may assign any of their obligations hereunder without the consent
of the other party. Except for the permitted assignees, neither party shall have
the right to assign any rights or delegate any duties hereunder without the
consent of the other party.
10.11 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
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10.12 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.
10.13 Entire Agreement. This Agreement (including all the schedules and
----------------
exhibits hereto), together with the Exhibits, Schedules, certificates and other
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 supersedes any and all prior
agreements, commitments, understandings, discussions, negotiations or
arrangements of any nature relating thereto.
10.14 Headings. The headings contained in this Agreement are included for
--------
convenience and reference purposes only and shall be given no effect in the
construction or interpretation of this Agreement.
10.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank;
the next succeeding page is a signature page]
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MEDSOURCE TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. Efress
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
A.P.X. ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
APEX ENGINEERING, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as shareholder of Apex
Engineering, Inc.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as shareholder of Apex
Engineering, Inc.
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