EXHIBIT 2.2
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ASSET CONTRIBUTION AND EXCHANGE AGREEMENT
among
KELCO ACQUISITION LLC
as the Buyer whose sole member
is
MEDSOURCE TECHNOLOGIES, INC.
and
KELCO INDUSTRIES, INC.
as the Seller
and
▇▇▇▇ ▇. ▇▇▇▇▇, individually and as trustee of
the ▇▇▇▇ ▇. ▇▇▇▇▇ 1997 Annuity Trust,
and ▇▇▇▇▇ ▇. ▇▇▇▇▇
as Shareholders of the Seller
Dated as of January 25, 1999
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TABLE OF CONTENTS
PAGE
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Contribution and Exchange of Assets......................................................................1
Contribution and Exchange ............................................................................1
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Excluded Assets ......................................................................................3
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Consents .............................................................................................3
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Escrow Deposit .......................................................................................3
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Assumption of Specified Liabilities......................................................................4
Assumption ...........................................................................................4
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Excluded Liabilities .................................................................................4
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Consideration, Payment and Adjustments...................................................................6
Consideration ........................................................................................6
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Payment ..............................................................................................6
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Cash Consideration Adjustments .......................................................................7
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Transfer Taxes .......................................................................................9
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Allocation of Consideration ..........................................................................9
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Closing.................................................................................................10
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Representations and Warranties of the Seller and the Shareholders.......................................10
Organization ........................................................................................10
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Capitalization ......................................................................................10
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Authorization; Validity of Agreement ................................................................10
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No Violations; Consents and Approvals ...............................................................11
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Financial Statements ................................................................................12
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No Material Adverse Change ..........................................................................12
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No Undisclosed Liabilities ..........................................................................12
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Litigation; Compliance with Law; Licenses and Permits ...............................................13
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Employee Benefit Plans; ERISA .......................................................................13
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Real Property .......................................................................................14
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Intellectual Property; Computer Software. ...........................................................14
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Title to Acquired Assets; Capital Budget. ...........................................................15
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Material Contracts. .................................................................................15
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Taxes. ..............................................................................................16
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Affiliated Party Transactions .......................................................................18
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Environmental Matters ...............................................................................18
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No Brokers ..........................................................................................20
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Receivables. ........................................................................................20
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Inventories .........................................................................................20
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Product Claims ......................................................................................20
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Warranties and Returns ..............................................................................20
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Assets Utilized in the Business .....................................................................21
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Insurance ...........................................................................................21
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Delivery of Documents; Corporate Records ............................................................21
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TABLE OF CONTENTS (Cont'd.)
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Customers, Suppliers and Distributors ...............................................................21
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Labor Matters .......................................................................................21
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Directors, Officers and Certain Employees ...........................................................22
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Year 2000 ...........................................................................................22
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No Misstatements or Omissions .......................................................................22
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Investment Undertaking; Sophisticated Investor ......................................................22
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Representations and Warranties of the Buyer ............................................................23
Organization ........................................................................................23
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Capitalization ......................................................................................23
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Authorization; Validity of Agreement ................................................................23
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No Violations; Consents and Approvals. ..............................................................24
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Litigation ..........................................................................................25
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Shares of Capital Stock. ............................................................................25
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Other Agreements of the Parties.........................................................................25
Conduct of Business .................................................................................25
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Access and Information ..............................................................................26
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Tax Returns; Taxes ..................................................................................27
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Notice of Developments ..............................................................................28
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Non-Disclosure of Confidential Information ..........................................................28
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No Solicitation of Employees, Suppliers or Customers. ...............................................28
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Non-Competition. ....................................................................................28
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Public Statements ...................................................................................29
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Other Actions .......................................................................................29
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Change of Name ......................................................................................30
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Cooperation on Taxes ................................................................................30
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Employees ...........................................................................................30
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Consents; Releases ..................................................................................32
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HSR Filings .........................................................................................32
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Employment Agreements ...............................................................................32
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Grant of Stock Options ..............................................................................32
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Stockholder Agreement and Registration Rights Agreement .............................................32
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Exclusivity .........................................................................................32
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Equipment, Intellectual Property and Other Assets ...................................................33
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Certain Payments ....................................................................................33
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Interests in Real Property ..........................................................................33
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Accounts Receivable .................................................................................33
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Conditions Precedent to the Closing.....................................................................34
Conditions Precedent to the Buyer's Obligations to Close ............................................34
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Conditions Precedent to the Seller's Obligations to Close ...........................................36
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Documents to be Delivered at the Closing................................................................37
Deliveries of the Seller and the Shareholders .......................................................37
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Deliveries of the Buyer .............................................................................38
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Termination.............................................................................................39
TABLE OF CONTENTS (Cont'd.)
PAGE
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Survival of Representations and Warranties..............................................................39
Survival of Representations and Warranties of the Seller and the Shareholders .......................39
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Survival of Representations and Warranties of the Buyer .............................................39
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Indemnification.........................................................................................40
Indemnification by the Seller and the Shareholders ..................................................40
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Indemnification by the Buyer ........................................................................40
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Indemnification Procedures ..........................................................................40
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Limitations on Indemnification by the Seller and the Shareholders ...................................42
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Miscellaneous...........................................................................................43
Transaction Fees and Expenses .......................................................................43
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Notices .............................................................................................43
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Amendment ...........................................................................................44
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Waiver ..............................................................................................44
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Governing Law .......................................................................................44
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Jurisdiction ........................................................................................44
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Remedies ............................................................................................44
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Severability ........................................................................................45
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Further Assurances ..................................................................................45
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Assignment ..........................................................................................45
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Binding Effect ......................................................................................45
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No Third Party Beneficiaries ........................................................................45
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Entire Agreement ....................................................................................45
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Headings ............................................................................................46
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Counterparts ........................................................................................46
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Bulk Sales Law ......................................................................................47
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SIGNATURES..............................................................................................47
Schedules
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Schedule 1.1 Certain Liens
Schedule 1.2(a) Excluded Assets
Schedule 3.5 Allocation of Purchase Price
Schedule 5.2 Capitalization; Liens
Schedule 5.4 Violations, Consents and Approvals
Schedule 5.5 Financial Statements
Schedule 5.8(a) Litigation
Schedule 5.8(b) Violations of Law
Schedule 5.9(a) Employee Benefit Plans
Schedule 5.9(b) Employee Benefit Plans subject to Title IV of ERISA
Schedule 5.10(b) Leases
Schedule 5.11(a) Intellectual Property; Rights of Ownership
Schedule 5.11(b) Licenses, etc. Rights of Ownership
Schedule 5.12(a) Liens
Schedule 5.12(b) Fixed Assets Ledger
Schedule 5.12(c) Capital Budget
Schedule 5.13 Material Contracts; Defaults or Events of Default
Schedule 5.14(a) Taxes
Schedule 5.16 Environmental Matters
Schedule 5.19 Inventories
Schedule 5.20 Service and Product Liability Claims
Schedule 5.21 Warranties and Returns Policies; Product Failures or Defects
Schedule 5.23 Insurance Policies
Schedule 5.25 Sales; Sales to Customers; Suppliers and Distributors
Schedule 5.27 Directors, Officers, Certain Employees
Schedule 7.1 Conduct of Business
Schedule 7.6 No Solicitation
Schedule 7.12(a) Employees
Schedule 7.12(h) Certain Group Health Plans
Schedule 7.16 Employees to Receive Stock Options
Exhibits
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Exhibit 1.4 Form of Deposit Escrow Agreement
Exhibit 3.1A Form of Settlement Escrow Agreement
Exhibit 3.1B Form of Certificate of Designation
Exhibit 7.12(g) Form of Profit Sharing Plan Assumption Agreement
Exhibit 7.15A Form of ▇▇▇▇ ▇▇▇▇▇ Employment Agreement
Exhibit 7.15B Form of ▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement
Exhibit 7.15C Form of ▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
Exhibit 7.17A Form of Stockholder Agreement
Exhibit 7.17B Form of Registration Rights Agreement
Exhibit 7.21(a) Form of New Leases
Exhibit 8.1(h) Form of Opinion of Counsel for the Seller and the Shareholders
Exhibit 8.2(f) Form of Opinion of Counsel for the Buyer
Exhibit 8.2(h) Form of ▇▇▇▇ of Sale, Assignment and Assumption Agreement
ASSET CONTRIBUTION AND EXCHANGE AGREEMENT
Dated as of January 25, 1999
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The parties to this Asset Contribution and Exchange Agreement (this
"Agreement") are Kelco Acquisition LLC, a Delaware limited liability company
(the "Buyer") whose sole member is MedSource Technologies, Inc., a Delaware
corporation ("MedSource"), Kelco Industries, Inc., a Minnesota corporation (the
"Seller"), and ▇▇▇▇ ▇. ▇▇▇▇▇, individually and as trustee of the ▇▇▇▇ ▇. ▇▇▇▇▇
1997 Annuity Trust, and ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual, who own certain of the
outstanding capital stock of the Seller (the "Shareholders").
W I T N E S S E T H:
- - - - - - - - - -
The Seller is in the business of precision machining and related
products and services (collectively, the "Business").
The Buyer desires to purchase from the Seller, and the Seller desires
to sell to the Buyer, all of the Seller's assets and properties relating to the
Business in consideration for the payment of cash and preferred stock and the
assumption of the liabilities specified below, on the terms and subject to the
conditions set forth herein.
It is therefore agreed as follows:
1. Contribution and Exchange of Assets.
1.1 Contribution and Exchange. Upon the terms and subject to the conditions
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contained in this Agreement, at the Closing (as defined in section 4), the
Seller shall contribute, exchange, assign, transfer and deliver to the Buyer,
and the Buyer shall purchase and accept from the Seller, all of the assets and
rights of every nature, kind and description, tangible and intangible, wherever
located, that are owned, used or held for use by the Seller in or for the
Business, as the same shall exist on the Closing Date (as defined in section 4)
(collectively, the "Acquired Assets"), free and clear of any and all liens,
charges, claims, pledges, security interests or other encumbrances ("Liens"),
except for Liens set forth on Schedule 1.1, including, without limitation, the
following:
(1) accounts receivable, notes receivable, drafts or other similar
instruments;
(2) inventory, including but not limited to finished goods, work in
process, raw materials and supplies;
(3) prepaid expenses and deposits, other than as set forth in section
1.2;
(4) machinery, equipment, tools and dies, hand tools, vehicles,
computers and other data processing hardware (and all software related thereto
or used therewith) and other tangible personal property of similar nature,
including but not limited to all items set forth on the Seller's fixed asset
ledger attached to this Agreement on Schedule 5.12(b) (collectively, the
"Machinery and Equipment");
(5) office furniture, office equipment, fixtures and other tangible
personal property of similar nature (collectively, the "Furniture and
Fixtures");
(6) interests to the extent owned by the Seller in any patent,
copyright, trademark, trade name, brand name, service ▇▇▇▇, logo, symbol, trade
dress, design or representation or expression of any thereof, or registration or
application for registration thereof, or any other invention, trade secret,
technical information, know-how, proprietary right or intellectual property,
technologies, methods, designs, drawings, software (including documentation and
source code listings), processes and other proprietary properties or information
(collectively, the "Intellectual Property");
(7) all leases, agreements and other rights to use, occupy or possess,
or otherwise, with respect to machinery, equipment, vehicles and other tangible
personal property of similar nature to which the Seller is a party, and all
rights arising under or pursuant to such leases, agreements and rights;
(8) to the extent not included above, and subject to section 1.3, all
contracts, agreements, options, commitments, understandings, licenses, leases
and instruments relating to the Business including, without limitation, customer
and supplier contracts, sales representative and distributor contracts and
commission contracts with respect thereto, and each of the Material Contracts as
listed on Schedule 5.13 (collectively, the "Assigned Contracts");
(9) customer and supplier lists, mailing lists, catalogs, brochures
and handbooks relating to the Business;
(10) other books, records, files, contracts, plans, notebooks,
production and sales data and other data of the Seller relating to the Business,
whether or not in tangible form or in the form of intangible computer storage
media such as optical disks, magnetic disks, tapes and all similar storage
media;
(11) the name Kelco Industries and all variations thereof and all
similar names and the goodwill associated therewith, together with all
trademarks, service marks and trade names of the Seller related to the Business,
if any;
(12) rights related to any portion of the Business or the Acquired
Assets, including third party warranties and guarantees and other similar
contractual rights, as to third parties held by or in favor of the Seller, and
arising out of, resulting from or relating to the Business or the Acquired
Assets; and
(13) rights to insurance and condemnation proceeds relating to any
damage, destruction, taking or other similar impairment of any of the Acquired
Assets.
1.2 Excluded Assets. The only assets of the Seller that the Buyer is not
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acquiring hereby (the "Excluded Assets") are:
(1) notwithstanding anything in section 1.1 to the contrary, the
assets set forth on Schedule 1.2(a);
(2) the consideration to be delivered to the Seller pursuant to this
Agreement for the Acquired Assets to be sold to the Buyer hereunder and the
rights of the Seller hereunder;
(3) notwithstanding anything in section 1.1 to the contrary, all cash,
marketable securities, tax deposits and the split dollar life insurance
receivable set forth on the Estimated Closing Date Balance Sheet referred to in
section 3.3(a), subject to adjustment upon determination of the Closing Date
Balance Sheet referred to in section 3.3(d);
(4) the certificate of incorporation, corporate seals, minute books,
stock books, Tax Returns (as defined in section 5.14(c)) and supporting data
prepared expressly in connection therewith, and other records prepared directly
in connection with the corporate organization and capitalization of the Seller
and/or its operation as a corporation under applicable Laws (as defined in
section 5.8(b)); and
(5) shares of the capital stock of the Seller.
1.3 Consents. Except for the Assigned Contracts set forth on Schedule 5.4,
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to the extent that the assignment of any Assigned Contract shall require the
Consent (as defined in section 5.4(b)) of the other parties thereto or of any
third parties, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof or of other
obligations or commitments of the Seller. The Seller shall take any and all
action necessary to obtain any and all such Consents prior to the Closing Date.
If any such Consent is not obtained, and the Buyer waives the obtaining of such
Consent as a condition precedent hereunder, then the Seller shall cooperate with
the Buyer in any arrangement (such as subcontracting, sublicensing or
subleasing) requested by the Buyer intended to provide for the Buyer all of the
benefits of the Seller under such Contract.
1.4 Escrow Deposit.
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(1) Simultaneously with the execution and delivery of this Agreement,
the Buyer is delivering to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., as escrow agent, by check or
wire transfer, the amount of $250,000 as an escrow deposit (the "Deposit") to be
held in accordance with the escrow agreement (the "Deposit Escrow Agreement")
annexed hereto as Exhibit 1.4.
(2) The Deposit Escrow Agreement provides that, at the Closing, the
Deposit shall be returned to the Buyer. In the event, however, that the Closing
does not occur by March 31, 1999 and neither the Seller nor the Shareholders are
then in breach of this Agreement, all of
the conditions set forth in section 8.1 have been satisfied and the Seller and
the Shareholders are otherwise ready, willing and able to consummate the
Closing, then, pursuant to the Deposit Escrow Agreement, the Seller shall be
entitled to the Deposit made by the Buyer as liquidated damages for such
failure. The Deposit shall be the Seller's and the Shareholders' sole and
exclusive remedy and claim against the Buyer for such failure.
(3) The parties hereby expressly acknowledge that the amount referred
to above as liquidated damages and payable pursuant to the Deposit Escrow
Agreement constitutes liquidated damages and not a penalty. The parties further
acknowledge that the amount of loss or damages likely to be incurred upon
occurrence of an event that would make the Deposit payable as described above is
incapable or is difficult to precisely estimate, and the parties are
sophisticated business parties and have been represented by sophisticated and
able legal counsel and financial advisors and have negotiated this Agreement and
the Deposit Escrow Agreement at arm's length.
2. Assumption of Specified Liabilities.
2.1 Assumption. Upon the terms and subject to all of the conditions
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contained herein, at the Closing, the Buyer shall assume, and agree to pay,
perform and discharge (i) the obligations and liabilities of the Seller that are
reflected as "accounts payable" or "accrued liabilities" (which accrued
liabilities consist solely of "profit sharing contribution," "real estate
taxes," "wages," "bonus," "commissions," "medical, payroll taxes and other
withholdings" and "Minnesota minimum fee") including, without limitation,
accrued vacation, to the extent any and all such liabilities are reflected on
the April 30, 1998 balance sheet (the "April 30 Balance Sheet") of the Seller
included in the financial statements described in section 5.5 and not discharged
by the Seller before the Closing; (ii) the Institutional Indebtedness (as
hereinafter defined) of the Seller set forth on the April 30 Balance Sheet and
not discharged by the Seller before the Closing; (iii) the obligations and
liabilities of the Seller incurred since April 30, 1998 that are not in
contravention of section 7.1 and are reflected on the Closing Date Balance Sheet
as "accounts payable" or "accrued liabilities" (which accrued liabilities shall
consist solely of "profit sharing contribution," "real estate taxes," "wages,"
"bonus," "commissions," "medical, payroll taxes and other withholdings" and
"Minnesota minimum fee") including, without limitation, accrued vacation; and
(iv) the obligations and liabilities of the Seller for the Seller's Profit
Sharing Plan and Trust dated May 1995, but only to the extent provided in
section 7.12(g) (all of the foregoing, collectively, the "Assumed Liabilities"
and, individually, an "Assumed Liability"). For the purposes of this Agreement,
"Institutional Indebtedness" shall mean all current and long-term institutional
indebtedness (including all revolving credit facilities, term loans and notes
and lines of credit or loans due to banks or similar financial institutions,
negative book balances and overdrafts and capital lease obligations) of the
Seller reflected on the April 30 Balance Sheet.
2.2 Excluded Liabilities. The Buyer is only assuming the liabilities and
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obligations of the Seller expressly set forth in section 2.1. Without limiting
the generality of the foregoing, the Buyer is not assuming, and the Seller shall
remain responsible for and shall, except as expressly set forth in section 7.21,
promptly pay, perform and discharge, all of the liabilities and
obligations of the Seller other than the Assumed Liabilities (the "Excluded
Liabilities") such that the Buyer will incur no liability in connection
therewith, and the Seller and the Shareholders shall, pursuant to section 12,
indemnify the Buyer with respect to and shall hold the Buyer harmless from and
against all such Excluded Liabilities, including but not limited to the
following:
(1) any obligation or liability of the Seller arising from a breach of
a representation or warranty herein on its part or its failure to fully,
faithfully and promptly perform any agreement or covenant on its part contained
herein;
(2) any obligation or liability of the Seller to the extent the same
arose prior to the Closing out of or resulting from noncompliance with any
federal, state or local Laws, whether relating to the environment, the health
and safety standards applicable to employees, employee benefit plans, wage and
hour Laws or other labor related matters or otherwise;
(3) any obligation or liability of the Seller to the extent that the
Seller shall be indemnified by an insurer;
(4) any expenses of the Seller incurred in connection with the
transactions contemplated hereunder that are unpaid as of the Closing Date, it
being understood that all such expenses (including but not limited to fees and
expenses of finders, investment bankers, business brokers, attorneys and
accountants) shall be paid by the Seller out of the consideration to be
delivered to the Seller pursuant to this Agreement for the Acquired Assets to be
sold to the Buyer hereunder and the rights of the Seller hereunder, and not out
of any of the Acquired Assets;
(5) any obligations relating to an Excluded Asset;
(6) any liability for Taxes (as defined in section 5.14(c)), except
for Taxes expressly set forth in section 2.1;
(7) any indebtedness for borrowed money or any guaranty thereof,
except as expressly set forth in section 2.1;
(8) any amount due to any Shareholder, other than as an "accrued
liability" expressly set forth in section 2.1, or Affiliate (as defined in
section 5.15);
(9) any pension, profit-sharing or workmen's compensation or other
employee benefit or post retirement plan and any liability or obligation arising
thereunder, except as expressly set forth in section 2.1;
(10) any liability or obligation for, with respect to, related to or
arising out of any goods sold, shipped or delivered by the Seller prior to
Closing, including but not limited to any liability as a result of any injury to
persons or property;
(11) all waiver of premium claims as of the Closing Date to the extent
relating to events, conditions or circumstances that occur or exist prior to the
Closing; and
(12) all claims of employees arising out of events, conditions and
circumstances to the extent such claims existed or occurred prior to Closing,
including, but not limited to, medical and health claims and disability claims.
3. Consideration, Payment and Adjustments.
3.1 Consideration. As consideration for the sale, assignment, transfer and
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delivery of the Acquired Assets by the Seller to the Buyer, and upon the terms
and subject to the conditions contained herein, the Buyer shall assume the
Assumed Liabilities and pay, in the manner set forth in section 3.2, an
aggregate amount (the "Consideration") as follows: (a) $48,000,000 (the "Cash
Portion of the Consideration") as follows: (i) $46,000,000 (the "Fixed Cash
Amount") by wire transfer of immediately available funds to an account
designated in writing by the Seller at least three days prior to the Closing,
subject to preliminary adjustment as provided in section 3.3(b) on the basis of
the Estimated Closing Date Balance Sheet, and (ii) $2,000,000 (the "Settlement
Escrow Amount") to be held in escrow by ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, as
escrow agent (the "Escrow Agent") pursuant to the terms and conditions of an
escrow agreement in the form attached hereto as Exhibit 3.1A (the "Settlement
Escrow Agreement"), all subject to final adjustment after the Closing as
provided in section 3.3(d) on the basis of the Closing Date Balance Sheet
referred to in section 3.3(d) (the Cash Portion of the Consideration as so
adjusted, the "Cash Consideration"), and (b) 12,000 shares of the Buyer's Series
A Preferred Stock having the terms set forth in the Certificate of Designation
included as Exhibit 3.1B to this Agreement (the "Preferred Stock").
3.2 Payment.
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(1) On the Closing Date, the Buyer shall deliver to the Seller (i) an
amount (the "Estimated Cash Consideration") equal to the Fixed Cash Amount plus
(A) the Estimated Price Increase (as defined in section 3.3(b)), if any, or,
alternatively, less (B) the Estimated Price Decrease (as defined in section
3.3(b)), if any, and (ii) the Preferred Stock.
(2) On the Closing Date, the Buyer shall deliver to the Escrow Agent
an amount equal to the Settlement Escrow Amount.
(3) Upon the determination of the Cash Consideration, as finally
determined in accordance with section 3.3(d) on the basis of the Closing Date
Balance Sheet, either (i) the Buyer shall pay to the Seller the amount of the
Final Cash Consideration Increase (as defined in section 3.3(d)) and the Buyer
shall cause the Escrow Agent to pay the Seller the Settlement Escrow Amount in
accordance with the Settlement Escrow Agreement or, alternatively, (ii) the
Seller shall pay to the Buyer the amount of the Final Cash Consideration
Decrease (as defined in section 3.3(d)) (each such payment, a "Cash
Consideration Adjustment"), which such Final Cash Consideration Decrease shall
be made from the Settlement Escrow Amount in accordance with the terms of the
Settlement Escrow Agreement (and the Buyer shall cause the Escrow Agent to pay
to the Seller the portion of the Settlement Escrow Amount that exceeds the
amount of such Final Consideration Decrease, if any, in accordance with the
Settlement Escrow Agreement) and,
if such Final Cash Consideration Decrease exceeds the Settlement Escrow Amount,
then such excess shall be paid by the Seller pursuant to section 3.3(f) hereof.
3.3 Cash Consideration Adjustments.
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(1) At least three business days prior to the Closing Date, the Seller
shall deliver to the Buyer (i) a balance sheet (the "Estimated Closing Date
Balance Sheet") based upon the books and records of the Seller as of such date
and prepared in accordance with generally accepted accounting principles
consistently applied in accordance with past practice ("GAAP") and reflecting
the Seller's best estimate of each of the items, and the amounts thereof, to be
included on the Closing Date Balance Sheet and (ii) a certificate of the Seller,
duly executed by an executive officer of the Seller, stating that the Estimated
Closing Date Balance Sheet has been prepared in good faith, has been prepared in
accordance with GAAP and reflects the Seller's best estimate of, and fairly
presents, each of the items, and the amounts thereof, to be included on the
Closing Date Balance Sheet.
(2) If the Net Asset Amount of the Seller as shown on the Estimated
Closing Date Balance Sheet is greater than the Net Asset Amount shown on the
April 30 Balance Sheet, the payment of the Fixed Cash Amount to the Seller on
the Closing Date shall be increased, as a preliminary adjustment to the Fixed
Cash Amount as provided in section 3.2, by the amount of such excess (the
"Estimated Price Increase"). If the Net Asset Amount of the Seller as shown on
the Estimated Closing Date Balance Sheet is less than the Net Asset Amount as
shown on the April 30 Balance Sheet, the payment of the Fixed Cash Amount to the
Seller on the Closing Date shall be decreased, as a preliminary adjustment to
the Fixed Cash Amount as provided in section 3.2(a)(i), by the amount of such
deficiency (the "Estimated Price Decrease"). For purposes of this Agreement,
"Net Asset Amount" of the Seller as of any date shall mean the total assets of
the Seller less the sum of (i) the Excluded Assets set forth in section 1.2,
(ii) all "accounts payable" of the Seller and (iii) all "accrued liabilities" of
the Seller, all as set forth on a balance sheet of the Seller as of such date.
(3) As of the close of business on the Closing Date, or at such other
time on such other date as near as practicable thereto as may be mutually agreed
to by the parties to avoid business disruptions, the Buyer shall cause physical
counts to be made of the inventory of the Seller located at such of the Seller's
facilities as the Buyer shall request (the "Inventory Count"), which shall be
observed by the accounting firm of Ernst & Young LLP, the costs of the physical
inventory to be paid by the Buyer. The Seller's representatives shall be
entitled to attend and observe the taking of the Inventory Count. Upon
completion of the Inventory Count (and any adjustment pursuant to the
immediately following sentence), the Seller shall be provided with copies of the
relevant data relating to those counts for its review. The results of the
Inventory Count shall be adjusted to reflect the Seller's inventory at the close
of business on the day immediately preceding the Closing Date using actual
receipts and shipments, and the valuation of inventory for purposes of the
Closing Date Balance Sheet shall be based on the results of the Inventory Count
as so adjusted.
(4) Within forty-five (45) days following the Closing Date, the Seller
shall deliver to the Buyer a balance sheet of the Seller as of the close of
business on the Closing Date
prepared by the Seller with the assistance of the Buyer (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in accordance
with GAAP and shall set forth the calculation of the Net Asset Amount in a
manner consistent with the calculation thereof on the April 30 Balance Sheet and
the Estimated Closing Date Balance Sheet as of the Closing Date. In connection
with the preparation of the Closing Date Balance Sheet, the Seller shall provide
the Buyer and the Buyer's accountants and representatives full access to the
Seller's books, records, facilities and employees. If the Net Asset Amount of
the Seller as reflected in the Closing Date Balance Sheet is greater than the
Net Asset Amount reflected in the Estimated Closing Date Balance Sheet, the
Fixed Cash Amount shall be increased, by a final adjustment to the Estimated
Cash Consideration as provided in section 3.3(b), by the amount of such excess
(the "Final Cash Consideration Increase"). If the Net Asset Amount of the Seller
as reflected in the Closing Date Balance Sheet is less than the Net Asset Amount
as reflected in the Estimated Closing Date Balance Sheet, the Fixed Cash Amount
shall be decreased, by a final adjustment to the Estimated Cash Consideration as
provided in section 3.3(b), by the amount of such deficiency (the "Final Cash
Consideration Decrease").
(5) The Buyer shall have thirty (30) days after receipt by it of the
Closing Date Balance Sheet (the "Dispute Period") to dispute any item,
calculation or amount, or the method of calculation of any item or amount,
reflected therein (a "Dispute"). If the Buyer does not give written notice of a
Dispute (a "Dispute Notice") to the Seller within the Dispute Period, the
Closing Date Balance Sheet shall be deemed to have been accepted by the Buyer in
the form in which it was delivered by the Seller. In the event that the Buyer
does not agree with any item, calculation or amount, or the method of
calculation of any item or amount, reflected on the Closing Date Balance Sheet,
the Buyer shall give the Seller a Dispute Notice within the Dispute Period,
setting forth the basis of its disagreement, and the Seller and the Buyer shall,
within fifteen (15) days after the receipt by the Seller of such Dispute Notice,
attempt to resolve such Dispute and agree in writing upon the final Closing Date
Balance Sheet. In the event that the Seller and the Buyer are unable to resolve
any such Dispute within the fifteen (15) day resolution period, then the
national office of the certified public accounting firm of McGladrey & ▇▇▇▇▇▇,
LLP or such other national office of a certified public accounting firm or
office as may be mutually agreed upon by the Seller and the Buyer (the
"Arbitrator") shall be employed as arbitrator hereunder to settle such Dispute
as soon as reasonably practicable, and the parties hereto shall use their
reasonable best efforts to ensure that the Arbitrator decides such matter within
30 days after submission to such Arbitrator. The parties agree that the
Arbitrator shall decide only the matter involved in the Dispute, and not any
other matters. Any Arbitration pursuant to this section 3.3(e) shall be
conducted in the national office of the Arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
existing and the Arbitrator's determination with respect to any Dispute shall be
final and binding on all parties and not subject to appeal on any ground, and
judgment on the arbitration award may be enforced in any court having
jurisdiction over the subject matter of the controversy. The Seller and the
Buyer shall each pay one-half of the fees and expenses of the Arbitrator for the
services of the Arbitrator in the arbitration.
(6) In the event of a Final Cash Consideration Decrease that is less
than or equal to the Settlement Escrow Amount, an amount equal to such Cash
Consideration Adjustment shall be paid by the Escrow Agent to the Buyer and an
amount equal to the
remainder of the Settlement Escrow Amount shall be paid by the Escrow Agent to
the Seller, in each case pursuant to the terms of the Settlement Escrow
Agreement. In the event there is no Cash Consideration Adjustment or in the
event of a Final Cash Consideration Increase, the Settlement Escrow Amount shall
be paid by the Escrow Agent to the Seller pursuant to the terms of the
Settlement Escrow Agreement. In the event of a Final Cash Consideration Decrease
that exceeds the Settlement Escrow Amount, the amount of such excess, together
with interest on such amount at a rate equal to the rate of interest announced
from time to time by Chase Manhattan Bank to be its prime or reference rate (the
"Prime Rate"), from the Closing Date to the payment date, shall promptly be paid
by the Seller to the Buyer, in immediately available funds by wire transfer to
such bank account as may be designated by the Buyer. In the event of a Final
Cash Consideration Increase, such amount, together with interest thereon at the
Prime Rate, shall promptly be paid by the Buyer to the Seller in immediately
available funds by wire transfer to such bank account as may be designated by
the Seller. Payments pursuant to this section 3.3(f) shall be made within ten
(10) days after the final determination of the Closing Date Balance Sheet.
3.4 Transfer Taxes. All sales, use, transfer, excise and similar taxes
--------------
imposed by any state, county, local or other governmental entity or Taxing
Authority (as defined in section 5.14(a)) as a result of the transfer of the
Acquired Assets hereunder and the other transactions contemplated hereby shall
be duly and timely paid by the Seller; provided, however, that the Buyer shall
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duly and timely pay any and all transfer or similar Taxes (x) imposed by the
State of Minnesota or Hennepin County, Minnesota in connection with the transfer
of any automobiles included in the Acquired Assets or (y) imposed by the State
of Delaware. The Seller shall duly and timely file all Tax Returns in connection
with such Taxes. The Seller shall give a copy of each such Tax Return to the
Buyer for its review with sufficient time for incorporation of the Buyer's
comments prior to filing, and shall give the Buyer a copy of the Tax Return as
filed, together with proof of payment of the Tax shown thereof, promptly after
filing.
3.5 Allocation of Consideration.
---------------------------
(1) The Buyer and the Seller agree that the Consideration and the
Assumed Liabilities shall be allocated among the Acquired Assets in accordance
with Schedule 3.5. The Buyer, the Seller and the Shareholders shall be bound by
such allocation for all purposes, including determining any Tax, shall prepare
and file all Tax Returns, including the information required under Treasury
Regulation Section.1.351-3 (the "Section 351 Schedules"), in a manner consistent
with such allocations, and shall not take any position inconsistent with such
allocation in any Tax Return, any proceeding before any Taxing Authority or
otherwise. In the event that any allocation is questioned, audited or disputed
by any Taxing Authority, the party receiving notice thereof shall promptly
notify and consult with the other party concerning the strategy for the
resolution thereof, and shall keep the other party apprised of the status or
such question, audit or dispute and the resolution thereof.
(2) The Buyer and the Seller shall duly and timely file their
respective Section 351 Schedules in accordance with this section 3.5. Each party
shall furnish a copy of each Section 351 Schedule filed by it to the other party
promptly after filing.
(3) At the Closing, the Shareholders shall cause the Seller to, and
the Seller shall, deliver to the Buyer a schedule that sets forth the true,
complete and correct tax basis of each Acquired Asset in the hands of the Seller
immediately prior to the Closing.
4. Closing. The closing (the "Closing") of the transactions contemplated by this
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Agreement shall take place at the offices of the Buyer's counsel in New York
City, at 10:00 a.m. local time (i) on March 31, 1999 or (ii) on any date on or
before March 31, 1999 that the Buyer informs the Seller in writing (not less
than ten (10) days prior to such date) that the Closing shall take place (the
"Closing Date"). The execution and/or delivery of each document to be executed
and/or delivered at the Closing and each other action to be taken at the Closing
shall be subject to the condition that every other document to be executed
and/or delivered at the Closing is so executed and/or delivered and every other
action to be taken at the Closing is so taken, and all such documents and
actions shall be deemed to be executed and/or delivered or taken, as the case
may be, simultaneously.
5. Representations and Warranties of the Seller and the Shareholders.
The Seller and the Shareholders jointly and severally represent and warrant
to MedSource and the Buyer as follows:
5.1 Organization. The Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business conducted by it makes such qualification or licensing necessary.
The Seller has delivered to the Buyer true, correct and complete copies of the
Seller's certificate of incorporation and bylaws, as currently in effect.
5.2 Capitalization. Schedule 5.2 sets forth a true, correct and complete
--------------
list of each Person (as defined in section 5.4(b)) who owns any shares of
capital stock of the Seller and the number and class of shares owned by such
Person. Except as set forth on Schedule 5.2, the Shareholders and the other
shareholders of the Seller own the issued and outstanding capital stock of the
Seller of record and beneficially, free and clear of all Liens. Other than
marketable securities set forth on the April 30 Balance Sheet or the Closing
Date Balance Sheet, the Seller does not own any shares of capital stock (or
other equity interests of entities other than corporations) of any partnership,
joint venture, trust, corporation, limited liability company or other entity.
5.3 Authorization; Validity of Agreement. Each of the Seller and the
------------------------------------
Shareholders has the requisite capacity and authority to execute, deliver and
perform this Agreement and each of the other agreements, instruments, documents
and certificates to be executed and delivered pursuant to this Agreement,
including but not limited to, any item referred to in section 9 (collectively,
with this Agreement, the "Transaction Documents") to which it is a party and to
assume and perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. Each of this Agreement and the
other Transaction Documents has been duly executed, authorized and delivered by
each of the Seller and the Shareholders party thereto and is a valid and binding
obligation of each of the Seller and the Shareholders, enforceable against each
of the Seller and the Shareholders in accordance with their respective terms,
except as such enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally.
5.4 No Violations; Consents and Approvals.
-------------------------------------
(1) The execution, delivery and performance of each of this Agreement
and the other Transaction Documents by each of the Seller and the Shareholders
parties thereto do not, and the consummation by each of the Seller and the
Shareholders of the transactions contemplated hereby and thereby will not, (i)
violate any provision of the certificate of incorporation or bylaws of the
Seller, (ii) except as set forth on Schedule 5.4, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness, license,
lease, option, contract, undertaking, understanding, covenant, agreement or
other instrument or document (collectively, a "Contract") to which the Seller,
any Shareholder or any other shareholder of the Seller is a party or by which
any of the Acquired Assets or the Business may be bound or otherwise subject or
(iii) violate any order, writ, judgment, injunction, decree, law, statute, rule
or regulation applicable to the Seller, any Shareholder or any other shareholder
of the Seller or any of their respective properties or assets.
(2) No filing or registration with, notification to, or authorization,
consent or approval of, any foreign, provincial, United States federal, state,
county, municipal or other local jurisdiction, political entity, body,
organization, subdivision or branch, legislative or executive agency or
department or other regulatory service, authority or agency (a "Governmental
Entity") is required in connection with the execution, delivery and performance
of this Agreement or any of the other Transaction Documents to which the Seller,
any Shareholder or any other shareholder of the Seller is a party or the
consummation by the Seller, any Shareholder or any other shareholder of the
Seller of the transactions contemplated hereby and thereby, except for such
filings, registrations, notifications, authorizations, consents and approvals as
are set forth on Schedule 5.4 hereof.
(3) No filing or consent, approval, order, authorization, notification
to, notice to, estoppel certificate, registration, ratification, declaration,
waiver, exemption or variance (collectively, together with the filings,
registrations, notifications, authorizations, consents and approvals of
Governmental Entities set forth in section 5.4(b), "Consents") of any individual
or entity (a "Person") is required in connection with the execution, delivery
and performance of this Agreement or any of the other Transaction Documents to
which the Seller, any Shareholder or any other shareholder of the Seller is a
party or the consummation by the Seller, any Shareholder or any other
shareholder of the Seller of the transactions contemplated hereby and thereby,
except for such Consents as are set forth on Schedule 5.4 hereof.
5.5 Financial Statements. Attached to Schedule 5.5 is the balance sheet of
--------------------
the Seller as of November 30, 1998, together with the related statement of
operations for the seven month period then ended (which such balance sheet and
statement of operations are not prepared on a basis consistent with year-end
statements), the balance sheet of the Seller as of April 30, 1998 (the "April 30
Balance Sheet"), together with the related statements of operations for the year
ended April 30, 1998, and the balance sheets of the Seller as of April 30, 1996
and 1997, together with the related statements of operations and cash flows
(including the related notes) for the two fiscal years then ended. The foregoing
financial statements, as applicable, have been derived from, and agree with, the
books and records of the Seller and fairly present the financial position of the
Seller as of the respective dates thereof and the results of operations of the
Seller for the respective periods set forth therein. Except as set forth in
Schedule 5.5, each of the foregoing financial statements has been prepared in
accordance with GAAP as of the dates and for the periods involved, subject, in
the case of the November 30, 1998 balance sheet and the related statement of
operations for the interim period, to normal fiscal year-end adjustments in the
ordinary course.
5.6 No Material Adverse Change. Except as disclosed on Schedule 5.19 or
--------------------------
5.25, since the date of the April 30 Balance Sheet, (a) no event, condition or
circumstance has occurred that could, or could be reasonably likely to, have a
material adverse effect on the Business, Acquired Assets or Assumed Liabilities,
or on the condition (financial or otherwise), results of operations or prospects
of the Seller or the Business; and (b) the Business has been conducted in the
ordinary course and consistent with past practice. As amplification and not in
limitation of the foregoing, since the date of the April 30 Balance Sheet, the
Seller has not (i) made any change in any method of accounting or accounting
practice, principle or policy used by the Seller, (ii) incurred any obligation
or liability or paid, satisfied or discharged any obligation or liability prior
to the due date or maturity thereof, except current indebtedness, obligations
and liabilities in the ordinary course of business, or (iii) other than in the
ordinary course and consistent with past practice, made any change or
modification in any manner of the Seller's (A) billing and collection policies,
procedures and practices with respect to accounts receivable or unbilled
charges, (B) policies, procedures and practices with respect to the provision of
discounts, rebates or allowances, or (C) payment policies, procedures and
practices with respect to accounts payable.
5.7 No Undisclosed Liabilities.
--------------------------
(1) The Seller does not have, and as of the Closing will not have, any
liabilities (whether accrued, contingent, known, or otherwise) for which the
Buyer is or may be liable other than those that (i) are set forth or reserved
against in the balance sheets referred to in section 5.5; or (ii) were incurred
since July 31, 1998 in the ordinary course of business, none of which,
individually or in the aggregate, is material to the business, operations,
condition or prospects of the Business.
(2) The accounts payable of the Seller as assumed pursuant to section
2.1 and as set forth in the balance sheets referred to in section 5.5. or
arising subsequent thereto are the result of bona fide transactions in the
---- ----
ordinary course of business and have been paid or are not
yet due and payable as at the Closing Date, in accordance with the respective
invoices relating thereto.
5.8 Litigation; Compliance with Law; Licenses and Permits.
-----------------------------------------------------
(1) Except as set forth in Schedule 5.8(a), there is no known claim,
suit, action or proceeding ("Proceeding") pending, nor, to the best knowledge of
the Seller and each of the Shareholders, is there any investigation or
Proceeding threatened, that involves or affects the Seller or the Business, by
or before any Governmental Entity, court, arbitration panel or any other Person.
(2) The Seller and the Business have, and on the Closing Date will
have, complied in all material respects with all applicable foreign, provincial,
United States federal, state, county, municipal or other local criminal, civil
or common laws, statutes, ordinances, orders, codes, rules, regulations,
permits, policies, guidance documents, judgments, decrees, injunctions, or
agreements of any Governmental Entity (collectively, "Laws"), including but not
limited to Laws relating to zoning, building codes, antitrust, occupational
safety and health, industrial hygiene, environmental protection, water, ground
or air pollution, the generation, treatment, storage or disposal of Hazardous
Substance (as defined in section 5.16), consumer product safety, product
liability, hiring, wages, hours, employee benefit plans and programs, collective
bargaining and the payment of withholding and social security taxes. The United
States Food and Drug Administration does not regulate the Seller's facilities or
the manufacture, distribution or sale of the Seller's products (including,
without limitation, the inventory included in the Acquired Assets). Since
January 1, 1996, the Seller has not received any notice of any violation of any
Law except as set forth on Schedule 5.8(b).
(3) Each of the Seller and the Business has every material license,
permit, certification, qualification or franchise issued by any Governmental
Entity (each, a "License") and every material approval, authorization, waiver,
variance, exemption, consent or ratification by or on behalf of any Person that
is not a party to this Agreement (each, a "Permit") required for it to conduct
its business as presently conducted. All such Licenses and Permits are in full
force and effect and neither the Seller nor any Shareholder has received notice
of any pending cancellation or suspension of any thereof nor, to the best
knowledge of the Seller and each of the Shareholders, 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.
5.9 Employee Benefit Plans; ERISA.
-----------------------------
(1) Schedule 5.9(a) lists each "employee benefit plan" (as defined in
Section 3(3) of ERISA), and all other material employee benefit (including,
without limitation, any non-qualified plans), bonus, deferred compensation,
incentive, stock option (or other equity-based), severance, change-in-control,
medical insurance and fringe benefit plans maintained for the benefit of, or
contributed to by the Seller or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that would be deemed a "single employer"
within the meaning of Section 4001 of the Employee Retirement Income Security
Act of 1974 ("ERISA"), for the benefit of any
employee or former employee of the Seller (the "Plans"). The Seller has
heretofore delivered to the Buyer true, correct and complete copies of each of
the Plans, including all amendments to date.
(2) Each of the Plans that is subject to ERISA complies with ERISA and
the applicable provisions of the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder (the "Code") and has been
administered in accordance with ERISA and, where applicable, the Code; provided,
--------
however, that the Seller's Profit Sharing Plan has not been amended for
-------
technical changes required to be made on or before April 30, 2000 under the
Uruguay Round Agreement Act, Uniformed Services Employment and Reemployment Act
of 1994 and the Small Business Job Protection Act of 1996. There are no pending
or, to the best knowledge of each of the Seller and the Shareholders, threatened
claims (other than routine claims for benefits), actions, suits or proceedings
by, on behalf of or against any of the Plans or any trusts related thereto. The
Seller's Profit Sharing Plan meets, in form and operation, the provisions of
Section 401(a) of the Code, and the related Trust is exempt under Section 501(b)
of the Code.
(3) No Plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Seller 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)).
(4) The Seller has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to each plan that is, or was during any taxable year of
the Seller 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.
5.10 Real Property.
-------------
(1) The Seller owns no real property.
(2) Schedule 5.10(b) sets forth a list and description of all real
property leases and subleases under which the Seller is tenant or subtenant (the
"Leases"), including the date of the Lease, the premises demised thereunder, the
name of the lessee and lessor, the commencement date and expiration date of the
Lease and the annual rent payable by the lessee under the Lease. As used herein,
the term "Leased Real Property" shall mean the real property demised by the
Leases.
5.11 Intellectual Property; Computer Software.
----------------------------------------
(1) Schedule 5.11(a) lists all Intellectual Property including,
without limitation, trademarks, trade names, service marks, service names, ▇▇▇▇
registrations, logos, assumed names, copyrights, copyright registrations,
patents and all applications therefor that are
owned by the Seller or any other Person and used by the Seller in the operations
of the Business, and there are no pending or threatened claims by any Person
relating to the Seller's use of any Intellectual Property. Except as set forth
in Schedule 5.11(a), the Seller 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
Seller to conduct its business and the Seller is not obligated to pay any
royalty or similar fee to any Person in connection with the Seller's use or
license of any of the Intellectual Property.
(2) Except as set forth on Schedule 5.11(b), the Seller 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 Seller 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 Seller's ownership rights or rights to use any
of the computer programs referred to above will be adversely affected by any of
the transactions contemplated hereby.
5.12 Title to Acquired Assets; Capital Budget.
----------------------------------------
(1) The Seller has title to the Acquired Assets, including, without
limitation, all assets shown on the Financial Statements, free and clear of all
Liens, other than (i) Liens, if any, for personal property taxes and assessments
not yet due and payable, (ii) inventories sold since the date of the Financial
Statements in the ordinary course of business and consistent with past practice
and (iii) Liens disclosed on Schedule 5.12(a). At the Closing, the Seller will
have caused each Lien referred to on Schedule 5.12(a) (other than Liens relating
to leased equipment) to have been terminated, and the Buyer will obtain title to
all of the Acquired Assets free and clear of all Liens.
(2) Except as set forth on Schedule 5.12(b), all material items of
machinery, equipment, tooling and other tangible personal property owned or
leased by the Seller and used in the conduct of its business (other than items
of inventory) are listed in the detailed fixed assets ledger of the Seller
attached to Schedule 5.12(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, equipment and tooling included
within the Personal Property are operating in the ordinary course of the
Seller'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
Business as previously conducted and are capable of manufacturing the products
of the Business.
(3) Schedule 5.12(c) includes a capital budget for the fiscal year
ending April 30, 1999. Except as set forth on Schedule 5.12(c), no capital
expenditures in excess of $25,000 in the aggregate are contemplated by the
Seller for the Business.
5.13 Material Contracts.
------------------
(1) Schedule 5.13 sets forth a true, complete and correct list of
every Contract in effect that (i) provides for aggregate future payments by the
Seller or to the Seller of more than $25,000 and has an unexpired term exceeding
six months and may not be canceled upon 60 days notice without any liability,
penalty or premium (excluding purchase orders and invoices arising in the
ordinary course of business) and/or may not be canceled; (ii) was entered into
by the Seller with any Shareholder, or an officer, director or significant
employee of the Seller; (iii) is a collective bargaining or similar agreement;
(iv) guarantees or indemnifies or otherwise causes the Seller to be liable or
otherwise responsible for the obligations or liabilities of another or provides
for a charitable contribution by the Seller; (v) involves an agreement with any
bank, finance company or similar organization; (vi) restricts the Seller or the
Business from engaging in any business or activity anywhere in the world; (vii)
is an employment agreement, consulting agreement or similar arrangement with any
employee of the Seller; (viii) involves an agreement or any other Contract
providing for payments from the Seller to any other Person, or by any Person to
the Seller, based on sales, purchases or profits, other than direct payments for
goods; or (ix) any other Contract that is material to the rights, properties,
assets, business or operations of the Seller or the Business (the foregoing,
collectively, "Material Contracts"). The Seller has heretofore provided true,
complete and correct copies of all Material Contracts to the Buyer.
(2) Except as set forth in Schedule 5.13, (i) there is not, and to the
best knowledge of each of the Seller and the Shareholders there has not been
claimed or alleged by any Person with respect to any Material Contract, any
existing default, or event that with notice or lapse of time or both would
constitute a default or event of default, on the part of the Seller or, to the
best knowledge of each of the Seller and the Shareholders, on the part of any
other party thereto and (ii) no consent, approval, authorization or waiver from,
or notice to, any Governmental Entity or other Person is required in order to
maintain in full force and effect any of the Material Contracts, other than such
consents and waivers that 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, waivers and notices have been delivered to the Buyer.
(3) Except as set forth on Schedule 5.13, the Contracts to which the
Seller is a party do not involve the payment by the Seller thereunder of more
than $50,000 per year in the aggregate (excluding purchase orders received from
customers in the ordinary course for the sale of products at standard prices)
and are not otherwise material, individually or in the aggregate, to such Seller
or the Business.
5.14 Taxes.
-----
(1) Except as set forth in Schedule 5.14(a):
(1) the Seller has (A) duly and timely filed or caused to be
filed with the Internal Revenue Service or other applicable Governmental Entity
(collectively, "Taxing Authorities") all Tax Returns that are required to be
filed by or on behalf of the Seller or that include or relate to the Acquired
Assets or the Business, which Tax Returns are true, correct and complete, and
(B) duly and timely paid in full or caused to be paid in full, all Taxes that
are due and payable on or before the date hereof that could result in a Lien on
any of the Acquired Assets or the Business and has recorded a provision for such
payment on the books and records of the
Seller in accordance with GAAP for the payment of all Taxes that are not due and
payable on or before the date hereof;
(2) the Seller has duly and timely complied with all applicable
Laws relating to the collection or withholding of Taxes, and the reporting and
remittance thereof to the applicable Taxing Authorities;
(3) no audit, examination, investigation, reassessment or other
administrative or court proceeding (collectively, a "Tax Proceeding") is pending
or, to the best knowledge of each of the Seller and the Shareholders, proposed,
or to the best knowledge of each of the Seller and the Shareholders threatened,
with regard to any Tax or Tax Return referred to in clause (i) above;
(4) there is no Lien for any Tax upon any of the Acquired Assets
or the Business;
(5) there is no outstanding or pending request for a ruling from
any Taxing Authority, subpoena or request for information by any Taxing
Authority, closing agreement (within the meaning of Section 7121 of the Code or
any analogous provision of applicable Law) relating to any Tax for which the
Seller is or may be liable or with respect to the Seller's income, assets or
business, power of attorney or adjustment related to or in connection with any
Tax that could result in a Lien on any of the Acquired Assets or the Business;
and
(6) no claim has ever been made by a Taxing Authority in a
jurisdiction in which the Seller has not paid any Tax or filed any Tax Return
relating to the Business or any Acquired Asset asserting that the Seller is or
may be subject to Tax in such jurisdiction.
(2) The Seller has provided to the Buyer true, correct and complete
copies of (i) all Tax Returns relating to, and (ii) all audit reports relating
to each proposed adjustment, if any, made by any Taxing Authority with respect
to, any taxable period ending after July 31, 1993, to any Taxes for which a Lien
may be imposed on any Acquired Assets or the Business.
(3) As used herein, (i) "Tax Return" means any return, declaration,
report, information return or statement, and any amendment thereto, including
without limitation any consolidated, combined or unitary return or other
document (including any related or supporting information), filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, payment, refund or credit of any federal, state, local
or foreign Tax or the administration of any Laws relating to any Tax or ERISA,
and (ii) "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of whatever kind or nature including, without
limitation, all net income, gross income, profits, gross receipts, excise, real
or personal property, sales, ad valorem, withholding, social security,
----------
retirement, excise, employment, unemployment, minimum, estimated, severance,
stamp, property, occupation, environmental, windfall profits, use, service, net
worth, payroll, franchise, license, gains, customs, transfer, recording and
other taxes, customs duty, fees assessments or charges of any kind whatsoever,
imposed by any Taxing Authority, including any liability
therefor as a transferee (including without limitation under Section 6901 of the
Code or any similar provision of applicable Law), as a result of Treasury
Regulation Section.1.1502-6 or any similar provision of applicable Law, or as a
result of any Tax sharing or similar agreement, together with any interest,
penalties or additions to tax relating thereto.
5.15 Affiliated Party Transactions. Except for obligations arising under
-----------------------------
this Agreement, as of the Closing Date the Seller will not have, directly or
indirectly, any obligation to or claim against the Business or any of the
Acquired Assets and no Shareholder or any of such Shareholder's immediate family
or Persons controlled by or are under common control with such Shareholders or
such Shareholder's immediate family (collectively, "Affiliates") will have,
directly or indirectly, any obligation to or cause of action or claim against
the Business or any of the Acquired Assets.
5.16 Environmental Matters. Except as set forth in Schedule 5.16:
---------------------
(1) the Seller is in compliance with, and the Business has been
conducted in material compliance with, all Environmental Laws (as defined below)
and Environmental Permits (as defined below);
(2) no Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C.Section.6901 et seq., is on or ever was listed or is
-- ---
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.Section.9601 et seq., or on any similar state list of sites requiring
-- ---
investigation or cleanup;
(3) Neither the Seller nor any Shareholder 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 Seller is not in
material compliance with any Environmental Law;
(4) there has been no Release (as defined below) 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
Seller;
(5) there are no pending or outstanding corrective actions requested,
required or being conducted by any Governmental Entity for the investigation,
remediation or cleanup of any Site, and there have been no such corrective
actions, whether still pending or otherwise;
(6) the Business has obtained and holds all necessary Environmental
Permits, and those Environmental Permits will remain in full force and effect
after the consummation of the transactions contemplated hereby;
(7) there are no past or pending, or to the best knowledge of each of
the Seller and the Shareholders threatened, Environmental Claims against the
Seller or, with respect to the Business, the Seller or the Acquired Assets, the
Shareholders, and neither the Seller nor any
Shareholder is aware of any facts or circumstances which could be expected to
form the basis for any Environmental Claim against the Business;
(8) neither the Seller, any predecessor of the Seller, nor any entity
previously owned by the Seller, 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 Buyer,
the Business or any of the Acquired Assets;
(9) there are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing
material at any Site; and
(10) there have been no environmental investigations, studies, audits,
tests, reviews or other analyses (which have been reduced to writing) conducted
by, on behalf of, or that are in the possession of the Seller with respect to
any Site or any transportation, handling or disposal of any Hazardous Substance
that has not been delivered to the Buyer prior to execution of this Agreement.
(11) As used herein, (i) "Environment" means all air, surface water,
groundwater, or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources; (ii) "Environmental Claim"
means any and all administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints, requests for
information, proceedings or other communications (written or oral), whether
criminal or civil, (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 (x) violation of or liability
under any Environmental Law, (y) violation of any Environmental Permit, or (z)
liability for investigatory costs, cleanup costs, removal costs, remedial costs,
response costs, natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based on, resulting from, or related to the
presence, Release, or threatened Release into the Environment, of any Hazardous
Substances at any location, including, but not limited to, any off-Site location
to which Hazardous Substances or materials containing Hazardous Substances were
sent for handling, storage, treatment, or disposal; (iii) "Environmental Law"
means any and all Laws relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substances, whether
now existing or subsequently amended or enacted, and the state analogies
thereto, all as amended or superseded from time to time; and any common law
doctrine, including, but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the presence,
Release, or exposure to a Hazardous Substance; (iv) "Environmental Permit" means
any permits, licenses, approvals, consents or authorizations required by any
Governmental Entity under or in connection with any Environmental Law; (v)
"Hazardous Substance" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any
amount or concentration which are now included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances," "solid wastes," or "contaminants" or words
of similar import, under any Environmental Law; (vi) "Release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of a Hazardous Substance into the
Environment; and (vii) "Site" means any of the real properties currently or
previously owned, leased, used or operated by the Seller, any predecessors of
the Seller or any entities previously owned by the Seller, including all soil,
subsoil, surface waters and groundwater thereat.
5.17 No Brokers. Neither the Seller, any Shareholder nor any other
----------
shareholder of the Seller has employed, or otherwise engaged, any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement.
5.18 Receivables. All accounts receivable of the Seller have arisen, and as
-----------
of the Closing Date will have arisen, from bona fide transactions in the
ordinary course of the Seller's business consistent with past practice and
established in the ordinary course of such Seller's business consistent with
past practice. Each of the accounts receivable of the Seller either has been or
will be collected in full, without any set-off other than against reserves
established on the Closing Date Balance Sheet, within 120 days after the day on
which it first becomes due and payable.
5.19 Inventories. Except as set forth in Schedule 5.19, as reflected on the
-----------
Financial Statements, the inventories of the Seller 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 April 30 Balance Sheet referred
to in section 5.5, the inventories of the Seller contain no amount of items not
saleable or usable within 12 months from the date thereof at normal profit
margins consistent with historical sales practices. Except as set forth in
Schedule 5.19, the Seller is not under any liability or obligation with respect
to the return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers.
5.20 Product Claims. No product liability claim is pending, or to the best
--------------
knowledge of each of the Seller and the Shareholders threatened, against the
Seller or against any other party with respect to the products of the Business.
Schedule 5.20 lists all service and product liability claims seeking damages in
excess of $1,000 asserted against the Seller (or in respect of which the Seller
or any Shareholder has received notice) with respect to the products of the
Business or the Seller during the last five years. Claims not listed on Schedule
5.20 do not aggregate more than $20,000.
5.21 Warranties and Returns. Schedule 5.21 sets forth a summary of the
----------------------
practices and policies followed by the Seller 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 5.21, there is not presently, nor has there
been since December 31, 1995, any failure or defect in any product sold by the
Seller 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 returned or
defective goods of the Seller in excess of $10,000 in the aggregate for all such
transactions with respect to products sold by it since April 30, 1995.
5.22 Assets Utilized in the Business. Except as set forth on Schedule
-------------------------------
1.2(a), the assets, properties and rights owned, leased or licensed by the
Seller or used in connection with the Business and that will be owned, leased or
licensed by the Seller as of the Closing Date, and all the agreements to which
the Seller is a party, constitute all of the properties, assets and agreements
necessary to the Seller in connection with the operation and conduct by the
Seller of the Business as presently and as proposed to be conducted.
5.23 Insurance. Schedule 5.23 contains a complete and correct list of all
---------
policies of insurance of any kind or nature covering the Seller, including
policies of life, fire, theft, casualty, product liability, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance, indicating the type of coverage, name of insured, the
insurer, the expiration date of each policy, the amount of coverage and whether
on an "occurrence" or "claims made" basis. Complete and correct copies of such
policies have been furnished to the Buyer. All such insurance policies or
comparable coverage shall be continued in full force and effect through the
Closing Date. Since April 30, 1994, the Seller has not been denied any insurance
coverage which it has requested.
5.24 Delivery of Documents; Corporate Records. The Seller has heretofore
----------------------------------------
delivered to the Buyer true, correct and complete copies of all documents,
instruments, agreements and records referred to in this section 5 or in the
Schedules to this Agreement and copies of the minute and stock record books of
the Seller. The minute and stock record books of the Seller contain true,
correct and complete copies of the records of all meetings and consents in lieu
of a meeting of the Board of Directors (and any committee thereof) and the
shareholders of the Seller since the date of its incorporation.
5.25 Customers, Suppliers and Distributors. Schedule 5.25 sets forth (i)
-------------------------------------
the sales of the Seller for the fiscal year ended April 30, 1998 and the sales
of the Seller for the three months ended July 31, 1998, (ii) the ten customers
with the highest dollar volume of purchases from the Seller 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 Seller
during each of those periods. Except as set forth in section 5.25, there has not
been any known adverse change in the business relationship of the Seller with
any such customer, supplier or distributor, and neither Seller nor any
Shareholder is aware of any threatened loss of any such customer, supplier or
distributor.
5.26 Labor Matters. There are no labor strikes, slow-downs or stoppages or
-------------
other labor troubles pending or, to the best knowledge of the Seller and each of
the Shareholders, threatened with respect to the employees of the Seller; to the
best knowledge of the Seller and each of the Shareholders, no representation
questions exist; there is no collective bargaining agreement binding on the
Seller and there is no agreement which restricts the Seller 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 Seller's business, or the
financial condition or prospects of the Seller, nor is there pending any
arbitration proceeding arising out of or under any labor union agreement; the
Seller has not experienced any work stoppage during the last five years.
5.27 Directors, Officers and Certain Employees. Schedule 5.27 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 Seller who is a
party to an employment agreement with the Seller or who received annual
compensation during the Seller'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 $100,000. Neither the Seller nor any Shareholder is aware of
any employee in the Seller's senior management who intends to terminate his or
her employment relationship with the Business, either as a result of the
transactions contemplated hereby or otherwise.
5.28 Year 2000. All of the Seller'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 materially
adversely affect the performance of the Systems with respect to date-dependent
data, computations, output or other functions, including, without limitation,
calculating, comparing and sequencing; (ii) the Systems will not abnormally end
or provide invalid or incorrect results as a result of date-dependant data; and
(iii) the Systems can accurately recognize, manage, accommodate and manipulate
date-dependant data, including, without limitation, single century formulas and
leap years.
5.29 No Misstatements or Omissions. No representation or warranty by the
-----------------------------
Seller or any Shareholder contained in this Agreement and no statement contained
in any certificate, list, Schedule, Exhibit or other instrument specified or
referred to in this Agreement, whether heretofore furnished to the Buyer or
hereafter furnished to the Buyer pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit any
material fact necessary to make the statements contained therein, in light of
the circumstances under which it was made, not misleading.
5.30 Investment Undertaking; Sophisticated Investor.
----------------------------------------------
(1) The Seller and each Shareholder confirm that the shares of
Preferred Stock to be issued to the Seller 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 Seller and each
Shareholder acknowledge that the Seller is acquiring such shares for the
Seller's own account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act of 1933. The Seller and each
Shareholder understand that Rule 144 requires that such shares issued hereunder
may not be disposed of for a period of at least one year. The Seller and each
Shareholder understand that the Seller 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.
(2) The Seller, each Shareholder and each other shareholder of the
Seller 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 his 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 his
investment in the securities being acquired hereunder. The Seller, each
Shareholder and each other shareholder of the Seller is an "accredited investor"
as such term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933.
6. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller as follows:
6.1 Organization. The Buyer is a limited liability company duly organized,
------------
validly existing and in good standing under the laws of Delaware and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. MedSource is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and carry on its business as it is now being conducted. The Buyer
and MedSource are each duly qualified or licensed to do business as a foreign
limited liability company or corporation, as the case may be, and are in good
standing in each jurisdiction in which the nature of the business conducted by
them makes such qualification or licensing necessary. The Buyer has heretofore
delivered to the Seller true, complete and correct copies of its certificate of
formation and limited liability company agreement as currently in effect and
true, correct and complete copies of the certificate of incorporation and bylaws
of MedSource as currently in effect.
6.2 Capitalization.
--------------
(1) On the date hereof, the authorized capital stock of MedSource
consists of 4,000,000 shares of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, par value $.01 per share.
(2) On the date hereof, MedSource is the sole member of the Buyer.
6.3 Authorization; Validity of Agreement. The Buyer and MedSource each have
------------------------------------
the requisite limited liability company or corporate power and authority to
execute, deliver and perform this Agreement and each other agreement executed or
to be executed by them pursuant to the terms of this Agreement (collectively,
the "MedSource Agreements") and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Buyer of this
Agreement and the other MedSource Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the manager of the Buyer, and no other proceedings on
the part of the Buyer are necessary to authorize the execution, delivery and
performance of this Agreement and the other MedSource Agreements to which the
Buyer is a party and the consummation of the transactions
contemplated hereby and thereby. The execution, delivery and performance by
MedSource of the MedSource Agreements to which it is a party and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by the Board of Directors of MedSource, and no other proceedings on
the part of MedSource are necessary to authorize the execution, delivery and
performance of the MedSource Agreements to which MedSource is a party and the
consummation of the transactions contemplated thereby. This Agreement and each
other MedSource Agreement to which the Buyer is a party has been duly executed
and delivered by the Buyer and, assuming due authorization, execution and
delivery of this Agreement and each other MedSource Agreement by the Seller and
each Shareholder party thereto, is a valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with their respective terms, except
as such enforceability may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights generally. Each MedSource
Agreement to which MedSource is a party has been duly executed and delivered by
MedSource and, assuming due authorization, execution and delivery of each such
MedSource Agreement by the Seller and each Shareholder party thereto, is a valid
and binding obligation of MedSource, enforceable against MedSource in accordance
with their respective terms, except as such enforceability may be subject to or
limited by applicable bankruptcy, insolvency, reorganization, or other similar
laws, now or hereafter in effect, affecting the enforcement of creditors' rights
generally.
6.4 No Violations; Consents and Approvals.
-------------------------------------
(1) The execution, delivery and performance of this Agreement and the
MedSource Agreements by the Buyer and MedSource, as the case may be, do not, and
the consummation by the Buyer and MedSource of the transactions contemplated
hereby and thereby will not, (i) violate any provision of the certificate of
formation or limited liability company agreement of the Buyer or the certificate
of incorporation or Bylaws of MedSource, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, guarantee, other evidence of indebtedness, license,
contract, agreement or other instrument to which the 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.
(2) 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 other MedSource
Agreements by the Buyer or MedSource or the consummation by the Buyer or
MedSource of the transactions contemplated hereby and thereby, except filings
with the Federal Trade Commission and with the Department of Justice pursuant to
the HSR Act (as defined in section 7.14) and filings as may be required under
state and federal securities laws to give effect to the registration rights
granted under the Registration Rights Agreement (as defined in section 7.17).
6.5 Litigation. There is no Proceeding pending nor, to the best knowledge
----------
of the Buyer, is there any investigation or Proceeding threatened, which
involves or affects the Buyer or MedSource, by or before any court, Governmental
Entity or arbitration panel or any other Person.
6.6 Shares of Capital Stock. All shares of Preferred Stock issued to the
-----------------------
Seller pursuant to this Agreement, and all shares of Class A Common Stock
issuable upon conversion thereof, will be duly authorized and validly issued and
shall, upon issuance, be fully paid and nonassessable.
7. Other Agreements of the Parties.
7.1 Conduct of Business. During the period from the date hereof (or
-------------------
earlier, as set forth below) through the Closing Date, the Seller shall conduct
its business in the ordinary course, consistent with past practice, and in such
a manner that would not result in a Material Adverse Effect. Without limiting
the generality of, and in addition to, the foregoing, prior to the Closing Date,
the Seller shall not, except (x) as the Buyer may otherwise consent to in
writing or (y) as set forth on Schedule 7.1:
(1) amend its certificate of incorporation or bylaws;
(2) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities;
(3) (i) incur or assume any indebtedness or Institutional 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), except as would not have
an adverse affect on, or change in, the ability of each of the Seller and the
Shareholder, to consummate the transactions contemplated hereby;
(4) other than in the ordinary course and consistent with past
practice, enter into, adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans, funds or other
arrangements of or for the benefit or welfare of any employee, or increase in
any manner the compensation or fringe benefits of any employee or pay any
benefit not required by any existing plan and arrangement (including, without
limitation, the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units);
(5) acquire, sell, lease, transfer or dispose of any of its properties
or assets except in the ordinary course of business and consistent with past
practice or enter into any material commitment or transaction with respect to
the Business or any of the Acquired Assets;
(6) 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;
(7) other than in the ordinary course and consistent with past
practice, enter into, modify any policy or procedure with respect to credit to
customers or collection of receivables with respect to the Business or any of
the Acquired Assets;
(8) fail to pay any claim or liability of the Seller in a timely
manner given the Seller's prior practices with respect to the Business or any of
the Acquired Assets;
(9) waive any claims or rights of substantial value;
(10) 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;
(11) 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
Seller that will not be satisfied by the Seller at or prior to the Closing;
(12) except as set forth in the capital budget in Schedule 5.12, make
or incur any capital expenditure, lease or commitment for additions to property,
plant, equipment or other capital assets in excess of $25,000 with respect to
the Business or any of the Acquired Assets without the prior written approval of
the Buyer;
(13) 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, Lease or Approval;
(14) except in the ordinary course of business consistent with past
practice, exercise any right or option under any Lease or extend or renew any
Material Contract or Lease; or
(15) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
7.2 Access and Information. From the date hereof until the Closing Date,
----------------------
the Seller shall, and shall cause each of the Seller's officers, directors,
employees, agents, accountants and counsel to, upon reasonable notice, (i)
afford the officers, employees and authorized agents, accountants, counsel and
representatives of the Buyer reasonable access, during normal business hours, to
(A) the offices, properties, plants, other facilities, books, Contracts and
records of the
Seller and any records concerning the Seller maintained and accumulated by its
representatives, and (B) those officers, directors, employees, agents,
accountants and counsel of the Seller who have any knowledge relating to the
Seller or the Acquired Assets, and (ii) furnish to the officers, employees and
authorized agents, accountants, counsel and representatives of the Buyer such
additional financial and operating data and other information regarding the
Acquired Assets (including, without limitation, any Contracts, licenses and
patents in effect as of the date hereof and any Contracts or licenses being
negotiated or entered into between the date hereof and the Closing Date),
properties and goodwill of the Seller as the Buyer may from time to time
reasonably request.
7.3 Tax Returns; Taxes.
------------------
(1) The Seller and the Shareholders shall duly and timely file or
cause to be filed with the applicable Taxing Authorities all Tax Returns that
are required to be filed by or on behalf of the Seller or that include or relate
to the Acquired Assets or the Business, which Tax Returns shall be true,
complete and correct, and shall duly and timely pay in full or cause to be paid
in full all Taxes that are due and payable on or before the Closing Date and
could result in a Lien on any Acquired Asset or the Business, and has recorded a
provision on the books and records of the Seller in accordance with GAAP for the
payment of all such Taxes that are not due and payable on or before the Closing
Date. The Seller shall provide to the Buyer true, complete and correct copies of
such Tax Returns and all correspondence, reports and documents relating to any
Tax Proceeding with respect thereto. The Seller shall duly and timely comply
with all applicable laws relating to the allocation or withholding of Taxes and
the reporting and remittance thereof to the applicable Taxing Authorities.
(2) The Seller and the Shareholders shall indemnify the Buyer and
Affiliates, (collectively, the "Taxpayer"), and hold the Taxpayer harmless, on
an after-Tax basis, from and against any (i) Taxes with respect to any period on
or before the Closing Date for which the Taxpayer is or may be liable, (ii) the
effect, if any, on the Taxpayer in any period that ends after the Closing Date
of an adjustment with respect to a period on or before the Closing Date and
(iii) fees and expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Buyer or its Affiliates in connection therewith or in
enforcing its rights or collecting any amounts due hereunder. This indemnity
shall apply notwithstanding any investigation made by the Buyer in connection
with the transactions contemplated by this Agreement or, its receipt,
examination, filing of or commenting on any Tax Return, and shall be separate
and independent of any other indemnity between the parties hereto.
(3) The Buyer shall promptly forward to the Shareholders a copy of all
written communications from any Governmental Authority received by the Taxpayer
relating to any period on or before the Closing Date. The Shareholders shall
promptly forward to the Buyer a copy of all written communications from any
Governmental Authority received by the Seller or any Shareholder relating to any
period on or before the Closing Date for which the Taxpayer is or may be liable.
(4) The Buyer shall not settle or make any payment of any amount
claimed to be due with respect to a proposed adjustment described above for at
least 15 days after giving
notice thereof to the Shareholders under Section 7.3(c) hereof. If, within such
15-day period, the Buyer receives from all of the Shareholders in writing a
request that the proposed adjustments be contested, which includes a reasonable
basis in fact or in law for such contest, and acknowledges their liability under
this indemnity, the parties shall contest such proposed adjustments in good
faith and agree to consult with each other regarding the contest and to keep
each other informed as to its progress, all at the Shareholders' expense. The
decision of a court of competent jurisdiction as to the outcome of such contest
which has become final shall be conclusive and binding on the parties.
(5) Any Taxes for a period which includes but does not end on the
Closing Date shall be allocated between the period before the Closing Date and
the balance of the period in accordance with this Section 7.3(e). To the extent
permitted under applicable Law, the parties shall elect to treat the Tax period
as ending at the close of business on the Closing Date. Where applicable Law
does not permit such an election to be made, the taxable income or other Tax
base for the entire period shall be allocated between the period on or before
the Closing Date and the balance of the period on the basis of an interim
closing of the books at the close of the Closing Date, except that exemptions,
allocations and deductions calculated on an annual basis shall be apportioned on
the basis of the relative number of days in the period on or before the Closing
Date and in the balance of the period.
7.4 Notice of Developments. Prior to the Closing Date, the Seller shall
----------------------
promptly notify the Buyer 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
in this Agreement or which could have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any material
respect, and (ii) all other material developments affecting the Acquired Assets,
liabilities, Business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
the Seller.
7.5 Non-Disclosure of Confidential Information. From and after the date
------------------------------------------
hereof, the Seller and the Shareholders agree not to divulge, communicate, use
to the detriment of the Buyer or for the benefit of any other Person, or misuse
in any way, any confidential information or trade secrets included in or
relating to the Acquired Assets including, without limitation, personnel
information, secret processes, know-how, customer lists or other technical data.
7.6 No Solicitation of Employees, Suppliers or Customers. Neither the
----------------------------------------------------
Seller nor any Shareholder shall, and neither shall permit any Affiliate of the
Seller or any Shareholder to, from and after the Closing Date, and for a period
of five 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, or contact
any supplier, customer or employee of the Buyer for the purpose of soliciting or
diverting any such supplier, customer or employee from the Buyer.
Notwithstanding anything to the contrary contained in this section 7.6, none of
the activities set forth on Schedule 7.6 shall be deemed to contravene the
provisions contained in this section 7.6.
7.7 Non-Competition.
---------------
(1) Until the third anniversary of the Closing Date, neither the
Seller, nor any Shareholder nor any Affiliate of any of the foregoing shall,
anywhere in North America or Europe, directly or indirectly, alone or in
association with any other Person, firm, corporation or other business
organization (i) acquire or own in any manner, any interest in any Person that
is engaged in any facet of the Business, (ii) engage in any facet of the
Business or compete in any way with the Business, (iii) be employed in any
capacity by, serve as an employee of, or consultant or advisor to, or otherwise
participate in the management or operation of, any Person that (x) engages in
any facet of the Business, or (y) competes with the Business in any way;
provided, however, that notwithstanding the foregoing, the Seller, the
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Shareholders and each other shareholder of the Seller and the Affiliates of the
foregoing (collectively and not individually) may own up to 2% of the voting
securities of any publicly-traded company.
(2) The parties hereto intend that the covenant contained in section
7.7(a) shall be construed as a series of separate covenants, one for each state
or country specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in section
7.7(a) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in section 7.7(a), then such
unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(3) The Seller and each of the Shareholders acknowledge that the
provisions of this section 7.7, 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 and are an essential
inducement to the Buyer's entering into the Transaction Documents to which it is
a party and consummating the transactions contemplated thereby.
7.8 Public Statements. From and after the date hereof and until the Closing
-----------------
Date, none of the Buyer, the Shareholders nor the Seller shall, and each of the
Buyer, the Shareholders and the Seller shall use their reasonable best efforts
not to, permit any Affiliate thereof to, either make, issue or release any press
release or any oral or written public announcement or statement concerning or
with respect to, or acknowledgment of the existence of, or reveal the terms,
conditions and status of, the Transaction Documents or the transactions
contemplated thereby, without the prior written consent of each of the other
parties hereto (which consent shall not be unreasonably withheld or delayed),
unless such announcement is required by Law or a Governmental Authority, in
which case the other parties shall be given notice of such requirement prior to
such announcement and the parties shall consult with each other as to the scope
and substance of such disclosure.
7.9 Other Actions. Each of the parties hereto shall use all reasonable
-------------
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper or advisable under
applicable Laws, or reasonably required in order to carry out the terms and
provisions of this Agreement and to consummate and make effective the
transactions contemplated hereby.
7.10 Change of Name. Simultaneously with the Closing, the Seller shall take
--------------
such action necessary to change its name to a name that does not include the
words "Kelco," or "industries."
7.11 Cooperation on Taxes. Each of the Seller and the Buyer shall cooperate
--------------------
with each other by executing or causing to be executed any required documents
and by making available to the other, all books and records relating to the
Acquired Assets or the Business (including work papers, records and notes of any
kind) at all reasonable times, for the purpose of allowing the appropriate party
to complete its Tax Returns, respond to, defend or prosecute any Tax Proceeding,
make any determination required under this Agreement (including, but not limited
to, determinations as to which period any asserted Tax liability is
attributable) and verify issues.
7.12 Employees.
---------
(1) The Buyer and the Seller shall prepare a mutually agreeable list
of employees of the Seller to be attached to this Agreement as Schedule 7.12(a).
The Buyer shall offer employment effective as of the Closing to all employees of
the Seller listed on Schedule 7.12(a) to this Agreement (all such employees who
accept such offer of employment being the "Transferred Employees"). In addition
to the obligation of the Seller set forth below, all responsibility for
employees of the Seller, other than Transferred Employees, including, without
limitation, claims arising out of the decision not to include such employees on
Schedule 7.12(a), shall be Excluded Liabilities.
(2) Subject to the terms and conditions of this section 7.12, from and
after the Closing, the Buyer shall provide the Transferred Employees with terms
and conditions of employment including, without limitation, salaries, hourly
wages, employee benefits and other perquisites, that have been reviewed and
discussed with the Seller and are reasonably agreeable to the Buyer and to the
Seller. The Buyer shall count Transferred Employees' service with the Seller
("Seller's Service") as service with the Buyer for purposes of determining
Transferred Employees' eligibility to participate in, and vesting of benefits
under, all of the Buyer's employee benefit plans and arrangements including, but
not limited to, those employee benefit plans identified on Schedule 7.12(h)
hereto. The Buyer shall, between the date of the execution of this Agreement and
the Closing Date, establish insurance or other arrangements through which the
employee benefits and other perquisites to be provided by the Buyer to
Transferred Employees may be provided commencing as of the Closing Date, and the
Shareholders and Seller shall lend such cooperation as the Buyer may reasonably
request in connection with such efforts.
(3) The Buyer shall not be responsible for any payments, expenses and
costs paid or required to be paid in connection with the employment (other than
Assumed Liabilities) or termination of employment of any employees of the Seller
who are not listed on Schedule 7.12(a) to this Agreement, or who are listed on
Schedule 7.12(a) and do not accept the Buyer's offer of employment with the
Buyer.
(4) Except to the extent expressly provided in section 2.1 and this
section 7.12, the Seller shall remain responsible for (A) payment of any and all
wages, accrued vacation
pay, bereavement pay, jury duty pay, disability income, supplemental
unemployment benefits, fringe benefits or other perquisites of employment,
termination indemnities or similar benefits (whether arising under any plan,
program, policy or arrangement of the Seller or under applicable local law),
payroll taxes and other payroll related expenses and (B) payments to or under
employee benefit plans (within the meaning of Section 3(3) of ERISA) maintained
or contributed to by the Seller, in either case arising out of or relating to
the employment of any of the Transferred Employees by the Seller prior to the
Closing.
(5) The Seller shall retain responsibility and liability for all
workers' compensation claims of the Transferred Employees to the extent relating
to events, conditions or circumstances that occur or exist prior to the Closing.
Notwithstanding the foregoing, the Buyer may, at its election, assume
responsibility for the supervision, defense or settlement of any such workers'
compensation claims at the Seller's cost and expense, provided that such costs
and expenses are reasonable. The Buyer shall keep the Seller reasonably apprised
of the status of such workers' compensation claims. The Seller may, at its own
expense, participate in the supervision, defense or settlement of any such
workers' compensation claims, and shall cooperate in the supervision, defense or
settlement of any such workers' compensation claims if requested to do so by the
Buyer. The Buyer shall have sole responsibility and liability for any workers'
compensation claims of Transferred Employees to the extent relating to any
event, condition or circumstance that occurs after the Closing.
(6) In respect of grievances or EEOC Claims of Transferred Employees
to the extent relating to their employment by the Seller including, without
limitation, any such grievances or EEOC Claims filed before state or local
authorities for which payment has not been made prior to the Closing, the Seller
shall retain responsibility and liability for all amounts due with respect
thereto including, without limitation, the payment of any amounts in the nature
of back pay or employee compensation, and any state or federal taxes in
connection with such back pay or employee compensation. Handling of such
grievances and EEOC Claims shall be at the Seller's cost and expense. The Buyer
shall have sole responsibility and liability for any EEOC Claims of Transferred
Employees that relate to their employment with Buyer.
(7) The Buyer shall assume the Seller's Profit Sharing Plan and Trust,
but only to the extent provided in Exhibit 7.12(g) (the "Plan Assumption").
(8) Nothing in this section 7.12 shall limit the at will nature of the
employment of the Transferred Employees or the right of the Buyer to alter or
terminate any employee benefit plan, except that the Buyer agrees that, for no
less than one year from the date hereof, the Buyer shall provide employee
benefits that, in the aggregate, are not materially less favorable than the
employee benefits provided by the Seller to such Transferred Employees as of the
date hereof. The Buyer further agrees, as of the Closing Date, that the Buyer
shall be the sponsor of plans and shall have in place contracts of insurance
necessary to provide to or for the benefit of the Transferred Employees such
similar employee benefits under plans maintained by the Seller classified as
"group health plans" as defined in Section 5001(b)(1) of the Code and set forth
on Schedule 7.12(h) hereto.
7.13 Consents; Releases. The Seller and the Shareholders shall cause the
------------------
Seller to receive all Consents on or prior to the Closing Date. At or prior to
the Closing, the Shareholders and the Seller shall cause the Business and the
Acquired Assets to be released from all liabilities, liens or other obligations
not constituting Assumed Liabilities. On or prior to the Closing Date the
Shareholders and the Seller shall obtain the consent of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
"Spousal Consent"), which shall release any Lien that such person may have on
any Acquired Asset or the Business.
7.14 HSR Filings. In addition to and without limiting the agreements of the
-----------
parties contained in section 7.13, the Seller, the Shareholders and the Buyer
will promptly take all actions necessary to make the filings required of them or
any of their Affiliates, and shall promptly cooperate with the other party with
regard to any filing required by the other party, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), and shall use all reasonable
commercial efforts, and cooperate with each other, to promptly comply with any
request for additional information in connection therewith. The Buyer shall pay
the filing fee required under the HSR Act in connection with the transfer of the
Acquired Assets hereunder.
7.15 Employment Agreements. Simultaneously with the execution and delivery
---------------------
hereof, the Buyer and ▇▇▇▇ ▇. ▇▇▇▇▇ shall enter into an employment agreement in
the form of Exhibit 7.15A (the "▇▇▇▇ ▇. ▇▇▇▇▇ Employment Agreement"), the Buyer
and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall enter into an employment agreement in the form of
Exhibit 7.15B (the "▇▇▇▇▇ ▇▇▇▇▇ Employment Agreement") and the Buyer and ▇▇▇
▇▇▇▇▇▇▇ shall enter into an employment agreement in the form of Exhibit 7.15C
(the "▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement"). At the Closing hereunder, the Seller
and the Shareholders shall cause each such employment agreement to be in full
force and effect.
7.16 Grant of Stock Options. After the Closing, MedSource shall enter into
----------------------
stock option agreements with the employees of the Seller identified on Schedule
7.16 to purchase an aggregate of 2,000 shares of its common stock, par value
$.01 per share.
7.17 Stockholder Agreement and Registration Rights Agreement. At the
-------------------------------------------------------
Closing, MedSource and the Seller shall enter into a stockholder agreement in
the form of Exhibit 7.16A (the "Stockholder Agreement") and a registration
rights agreement in the form of Exhibit 7.16B (the "Registration Rights
Agreement").
7.18 Exclusivity. From and after the date hereof and unless and until this
-----------
Agreement is terminated as provided in section 10, neither the Seller nor any
Shareholder shall, and neither shall knowingly permit the Seller or any of their
respective Affiliates, officers, directors, employees, agents or
representatives, directly or indirectly, to encourage, solicit, initiate or
participate in discussions or negotiations with, provide any information to,
receive any proposals or offers from, or enter into any agreement with, any
third party, in each case other than the Buyer, that involves the sale, joint
venture or the other disposition of all or any portion of the Seller, the
Acquired Assets or the Business or any merger, consolidation, recapitalization
or other business combination of any kind involving the Seller. If the Seller or
any Shareholder receives or becomes aware of any such offer or proposed offer,
the Seller or such Shareholder, as the case may be, shall promptly notify the
Buyer.
7.19 Equipment, Intellectual Property and Other Assets. Prior to the
-------------------------------------------------
Closing Date, the Shareholders shall take all steps necessary to contribute all
equipment, intellectual property and other assets, except for real property,
owned by any Shareholder or any Affiliate of any Shareholder, that is used in
connection with the Business. The Shareholders and their Affiliates shall not
receive any consideration for any such contribution and any such equipment,
intellectual property or other assets shall become part of the Acquired Assets.
7.20 Certain Payments.
----------------
(1) Notwithstanding any term or provision of this Agreement to the
contrary, on or prior to the Closing Date, the Shareholders may permit the
Seller to pay, and the Seller may pay, to the Shareholders in the aggregate an
amount not in excess of the aggregate outstanding principal and interest on all
indebtedness of the Seller to any and all Shareholders (payable to the
respective Shareholders as applicable in full satisfaction thereof).
(2) On or prior to the Closing Date, the Shareholders shall repay all
amounts owed by them to the Seller.
7.21 Interests in Real Property.
--------------------------
(1) On or prior to the Closing Date, the Seller and the Shareholders
shall cause the landlord under the Leased Real Property to enter into the leases
(the "New Leases") in the forms set forth in Exhibit 7.22(a) with respect to the
property located at 6400-6420 and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇.
(2) On or prior to the Closing Date, the Seller and the Shareholders
shall cause the following documents to be delivered to the Buyer: (i) true and
complete maintenance records for the Leased Real Property; (ii) a validly issued
permanent certificate of occupancy for each of the buildings comprising a part
of the Leased Real Property; (iii) evidence reasonably satisfactory to the Buyer
that the Seller's use of the Leased Real Property complies with applicable
zoning Laws; and (iv) 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
Leased Real Property.
(3) On or prior to the Closing Date, the Seller shall terminate the
lease for the premises known as the Bass Creek Building, 6075 ▇▇▇▇▇▇▇ ▇▇▇▇,
Plymouth, Minnesota, without any liability to the Seller or the Buyer.
7.22 Accounts Receivable.
-------------------
(1) After the Closing, the Seller shall permit the Buyer to collect,
in the name of the Seller, all accounts receivable constituting part of the
Acquired Assets and to endorse with the name of the Seller for deposit in the
Buyer's account any checks or drafts received in payment thereof. The Seller
shall take any and all steps reasonably requested by the Buyer to effectuate the
intent of the preceding sentence.
(2) The Seller shall promptly turn over to the Buyer any cash, checks
or other property that it may receive after the Closing in respect of any
receivable constituting part of the Acquired Assets.
(3) Following the Closing, the Buyer shall use commercially reasonable
efforts to collect all accounts receivable included in the Acquired Assets in
accordance with their respective terms. Any amounts received by the Buyer from
the obligor of any such accounts receivable shall be credited as follows: (i) if
such obligor has specified the receivable in respect of which payment is being
made, against such receivable and (ii) if such obligor has not specified the
receivable against which such payment is being made, against the oldest unpaid
receivable due from such obligor.
(4) Promptly after the expiration of the 120-day period following the
Closing Date, the Buyer shall assign to the Seller, and the Seller shall
purchase from the Buyer, any uncollected accounts receivable included in the
Acquired Assets that are uncollected after the expiration of such 120-day
period. Promptly after the receipt by the Seller of a written notice (an
"Assignment Notice") from the Buyer that sets forth each such uncollected
receivable and the face value thereof, the Seller shall pay the Buyer an amount
equal to the face value of each uncollected receivable set forth in the
Assignment Notice.
(5) After the Buyer has provided the Assignment Notice to the Seller,
the Buyer shall promptly turn over to the Seller any cash, checks or other
property that it may receive from the obligor under any accounts receivable set
forth in the Assignment Notice.
8. Conditions Precedent to the Closing
8.1 Conditions Precedent to the Buyer's Obligations to Close. The
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obligation of the Buyer 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 Buyer shall have the right to
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waive all or any part of each such condition and to close the transactions
contemplated hereby without, however, releasing the Seller or any Shareholder
from any covenant, obligation, agreement or condition contained herein or from
any liability for any loss or damage sustained by the Buyer by reason of the
breach by the Seller or any Shareholder of any covenant, obligation, agreement
or condition contained herein or by reason of any misrepresentation made by the
Seller or any Shareholder; and provided, further, however, that the Buyer's
-------- ------- -------
participation in the Closing shall not in any way be deemed to be a waiver of
any claim it may have hereunder for any breach of any representation, warranty,
covenant or agreement:
(1) The representations and warranties of the Seller and the
Shareholders contained in this Agreement shall have been true and correct when
made and shall be true and correct in all respects as of the Closing Date, with
the same force and effect as if made on the Closing Date, except for such
representations and warranties as are made as of a specific date, which shall be
true and correct in all respects as of such date.
(2) The covenants and agreements of the Seller and the Shareholders
contained in this Agreement and required to be complied with or performed on or
prior to the Closing Date shall have been complied with or performed in all
respects.
(3) The Buyer shall have received (i) a certificate dated the Closing
Date and executed by an executive officer of the Seller, and (ii) a certificate
dated the Closing Date and executed by each of the Shareholders, in each case
certifying the satisfaction of the conditions referred to in sections 8.1(a) and
(b).
(4) The Buyer shall have received, each in form and substance
reasonably satisfactory to the Buyer, all Consents of, and estoppel certificates
and releases from, and shall have delivered all notices to, any Governmental
Entity or other Person that is required for the consummation of the transactions
contemplated hereby and for the Buyer to conduct and operate the Business, which
Consents, notices and estoppel certificates are listed in Schedule 5.4 attached
hereto and which releases are listed in Schedule 7.13.
(5) No event or events shall have occurred between the date hereof and
the Closing Date which, individually or in the aggregate, have, or are
reasonably likely to have, a material adverse effect on the Acquired Assets or
the Business.
(6) The Buyer shall have received a certificate of the Seller (the
"Seller Secretary's Certificate") certifying the resolutions duly and validly
adopted by the Board of Directors and the Shareholders of the Seller, its
authorization of the execution and delivery of this Agreement and the other
Transaction Documents to which the Seller is a party and the consummation of the
transactions contemplated hereby and thereby, and the names and signatures of
the officers of the Seller authorized to sign this Agreement and the other
Transaction Documents.
(7) The form and substance of all certificates, transfer documents,
title reports, opinions, consents, instruments, and other documents delivered to
the Buyer under this Agreement shall be satisfactory in all reasonable respects
to the Buyer and its counsel.
(8) The Buyer shall have received from counsel for the Seller and the
Shareholders an opinion dated the Closing Date in the form of Exhibit 8.1(h)
attached hereto.
(9) The Buyer shall have received from the Seller at the Closing a
certificate of non-foreign status, in the form required by Section 1445 of the
Code and the regulations thereunder.
(10) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated and no notice shall have been received by any party from any
Governmental Entity of any pending or threatened investigation concerning the
acquisitions.
(11) 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.
(12) The Buyer shall have received the Spousal Consent.
8.2 Conditions Precedent to the Seller's Obligations to Close. The
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obligation of the Seller and the Shareholders 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
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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
from any covenant, obligation, agreement or condition contained herein or from
any liability for any loss or damage sustained by the Seller by reason of the
breach by the Buyer of any covenant, obligation, agreement or condition
contained herein, by reason of any misrepresentation made by the Buyer; and
provided further, however, that the Seller's participation in the Closing shall
-------- ------- -------
not in any way be deemed to be a waiver of any claim it may have hereunder for
any breach of any representation, warranty, covenant or agreement:
(1) The representations and warranties of the Buyer contained in this
Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect as if made as of the Closing Date, other than such representations and
warranties as are made as of a specific date, which shall be true and correct in
all material respects as of such date.
(2) The covenants and agreements contained in this Agreement to be
complied with by the Buyer on or before the Closing Date shall have been
complied with in all material respects.
(3) The Seller shall have received a certificate dated the Closing
Date and executed by an officer of the Buyer, certifying to the satisfaction of
the conditions referred to in sections 8.2(a) and (b).
(4) The Seller shall have received a certificate of the Secretary of
the Buyer (the "Buyer Secretary's Certificate") certifying the resolutions duly
and validly adopted by the Buyer evidencing its authorization of the execution
and delivery of this Agreement and the other Transaction Documents to which the
Buyer is a party and the consummation of the transactions contemplated hereby
and thereby, and the names and signatures of the officers of the Buyer
authorized to sign this Agreement and the other Transaction Documents to be
delivered hereunder.
(5) The form and substance of all certificates, opinions, consents,
instruments and other documents delivered to the Seller under this Agreement
shall be satisfactory in all reasonable respects to the Seller and its counsel.
(6) The Seller shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP, counsel for the Buyer, an opinion dated the Closing Date in the
form of Exhibit 8.2(f) attached hereto.
(7) No Law shall be in effect which prohibits any party hereto from
consummating the transactions contemplated hereby.
(8) The Seller shall have received a ▇▇▇▇ of Sale, Assignment and
Assumption Agreement duly executed by the Buyer, in which, among other things,
the Buyer agrees to assume the Assumed Liabilities, in the form of Exhibit
8.2(h) attached hereto (the "▇▇▇▇ of Sale, Assignment and Assumption
Agreement").
(9) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated and no notice shall have been received by any party from any
Governmental Entity of any pending or threatened investigation or proceeding
concerning the acquisitions.
(10) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
9. Documents to be Delivered at the Closing.
9.1 Deliveries of the Seller and the Shareholders. At the Closing, the
---------------------------------------------
Seller and the Shareholders shall deliver or cause to be delivered the following
items to the Buyer:
(1) the Settlement Escrow Agreement, each duly executed by the Seller;
(2) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement duly
executed by the Seller that, among other things, conveys, transfers and sells to
the Buyer all right, title and interest of the Seller in and to the Acquired
Assets;
(3) the releases referred to in section 7.13;
(4) the certificates referred to in section 8.1(c) duly executed by an
executive officer of the Seller and by each of the Shareholders;
(5) the Consents referred to in section 8.1(d);
(6) the Seller's Secretary's Certificate referred to in section
8.1(f), duly executed by the Secretary of the Seller;
(7) the opinion of counsel to the Seller and the Shareholders referred
to in section 8.1(i);
(8) the certificate referred to in section 8.1(j);
(9) a Tax, lien and judgment search of the Seller and the Acquired
Assets showing no items not disclosed in the schedules to this Agreement;
(10) each Employment Agreement, duly executed by the executive named
therein;
(11) the Stockholders Agreement, duly executed by the Seller;
(12) the Registration Rights Agreement, duly executed by the Seller;
(13) the New Leases, duly executed by the landlord thereunder;
(14) the Spousal Consent, duly executed by each party thereto; and
(15) the Plan Assumption, duly executed by the Seller.
9.2 Deliveries of the Buyer. At the Closing, the Buyer shall deliver or
-----------------------
cause to be delivered the following items to the Seller:
(1) the Settlement Escrow Agreement, duly executed by the Buyer,
(2) the certificate referred to in section 8.2(c), duly executed by an
officer of the Buyer;
(3) the Buyer Secretary's Certificate referred to in section 8.2(d),
duly executed by the Secretary of the Buyer;
(4) the opinions of counsel to the Buyer referred to in section
8.2(f);
(5) the Fixed Cash Amount, subject to preliminary adjustment as
provided in section 3.3(b);
(6) the stock certificates representing the shares of Preferred Stock
referred to in section 3.1(b);
(7) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement, duly
executed by the Buyer;
(8) each Employment Agreement, duly executed by the Buyer;
(9) the Stockholders Agreement, duly executed by MedSource;
(10) the Registration Rights Agreement, duly executed by MedSource;
(11) the New Leases, duly executed by the Buyer; and
(12) the Plan Assumption, duly executed by the Buyer.
10. Termination.
(1) This Agreement may be terminated at any time prior to the Closing:
(1) by the mutual agreement of the Buyer and the Seller; or
(2) by either the Buyer or the Seller in the event of a material
breach by or default of the other party hereto but not before ten (10) days
after giving written notice to such effect to the other party; provided,
--------
however, that delivery of such notice shall not affect the right of the other
-------
party to cure the default and to close during such ten (10) day period.
(2) Upon termination of this Agreement pursuant to section 10(a), all
obligations of the parties shall terminate; provided, however, that no such
-------- -------
termination shall relieve the Seller or any Shareholder of any liability to the
Buyer under section 12, or the Buyer of any liability to the Seller under the
Deposit Escrow Agreement, by reason of any breach of or default under this
Agreement.
11. Survival of Representations and Warranties.
11.1 Survival of Representations and Warranties of the Seller and the
----------------------------------------------------------------
Shareholders. At the Closing, the Buyer shall, without waiving any of its rights
------------
hereunder, advise the Seller if the Buyer has actual knowledge of any material
breach of any of the representations and warranties of the Seller and the
Shareholders herein. The Buyer has the right to rely upon the representations
and warranties of the Seller contained in this Agreement. All such
representations and warranties shall survive the execution and delivery of this
Agreement and the Closing hereunder and shall thereafter continue in full force
and effect until the third anniversary of the Closing Date, and the Seller's 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
12.3. The foregoing notwithstanding, the representations and warranties
contained in sections 5.3, 5.12, 5.14 and 5.16 shall survive the Closing and the
Seller's and the Shareholders' liability in respect of any breach thereof shall
continue until 60 days after the expiration of all applicable statutes of
limitation, including extensions and waivers, except for liability with respect
to which notice shall have been given on or prior to such date to the party
against which such claim is asserted pursuant to section 12.3.
11.2 Survival of Representations and Warranties of the Buyer. The Seller
--------------------------------------------------------
and the Shareholders have the right to rely upon the representations and
warranties of the Buyer contained in this Agreement. All such representations
and warranties shall survive the execution
and delivery of this Agreement and the Closing hereunder and shall thereafter
continue in full force and effect until the third anniversary of the Closing
Date, and Buyer'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
12.3.
12. Indemnification.
12.1 Indemnification by the Seller and the Shareholders. Subject to the
--------------------------------------------------
limitations contained in section 11 and section 12.4, the Seller and the
Shareholders shall jointly and severally indemnify and defend the Buyer and each
of its officers, directors, employees, shareholders, agents, advisors and
representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless from, any loss, liability, obligation, deficiency, damage or
expense including, without limitation, interest, penalties, reasonable
attorneys' and consultants' fees and disbursements (collectively, "Damages"),
that any Buyer Indemnitee may suffer or incur based upon, arising out of,
relating to or in connection with any of the following (whether or not in
connection with any third party claim):
(1) any breach of any representation or warranty made by the Seller or
any Shareholder contained in this Agreement or in respect of any third-party
claim made based upon facts alleged which, if true, would constitute any such
breach; or
(2) either the Seller's or any Shareholder's failure to perform or to
comply with any covenant or condition required to be performed or complied with
by the Seller or the Shareholders contained in this Agreement.
12.2 Indemnification by the Buyer. Subject to the limitations contained in
----------------------------
section 11 and section 12.4, the Buyer shall indemnify and defend the Seller and
the Shareholders and each of the Seller's officers, directors, employees,
shareholders, agents, advisors and representatives (each, a "Seller Indemnitee")
against, and hold each Seller Indemnitee harmless from, any Damages that such
Seller Indemnitee may suffer or incur arising from, related to or in connection
with any of the following:
(1) any breach of any representation or warranty made by the Buyer
contained in this Agreement or in respect of any third-party claim made based
upon facts alleged which, if true, would constitute any such breach; or
(2) the Buyer's failure to perform or to comply with any covenant or
condition required to be performed or complied with by the Buyer contained in
this Agreement.
12.3 Indemnification Procedures.
--------------------------
(1) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damage referred to in sections 12.1 or 12.2, such indemnified
party shall, if a claim for
indemnification in respect thereof is to be made against an indemnifying party
pursuant to this section 12, give written notice to the latter of the notice of
such claim or the commencement of such Proceeding, setting forth in reasonable
detail the nature thereof and the basis upon which such party seeks
indemnification hereunder; provided, however, that the failure of any
-------- -------
indemnified party to give such notice shall not relieve the indemnifying party
of its obligations under such section, except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice.
(2) (i) 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 indemnified party shall have the right, but not the
obligation, to participate at its own cost and expense in such defense by
counsel of its own choice) or for any amounts paid or foregone by the
indemnified party as a result of any settlement or compromise thereof that is
effected by the indemnified party (without the written consent of the
indemnifying party); provided, however, that the Seller and the Shareholders
shall have the right to receive from the Buyer reimbursement for any Damages
incurred by the Seller or the Shareholders to the extent such Damages would be
included in, and in the aggregate less than, the basket set forth in section
12.4(a).
(ii) Anything in section 12.3(b)(i) notwithstanding, if both the
indemnifying party and the indemnified party are named as parties or subject to
such Proceeding and either such party determines with advice of counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the other party or that a material conflict
of interest between such parties may exist in respect of such Proceeding, then
(A) 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, in each case after notice to such effect is duly given hereunder to the
other party and (B) the indemnifying party shall be relieved of its obligation
to assume the defense on behalf of the indemnified party; provided, however,
-------- -------
that (x) in the event the indemnified party elects to retain such defense on its
own behalf, the indemnifying party shall not be required to pay any attorneys'
fees and disbursements incurred by the indemnified party in such defense and (y)
in all other cases, the indemnifying party shall be required to pay any legal or
other expenses including, without limitation, reasonable attorneys' fees and
disbursements, incurred by the indemnified party in such defense.
(3) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided
that proper notice is duly given, if the indemnifying party shall fail promptly
and diligently to assume the defense thereof, then the indemnified party may
respond to, contest and defend against such Proceeding (but the indemnifying
party shall have the right to participate at its own cost and expense in such
defense by counsel of its own choice) and may make in good faith any compromise
or settlement with respect thereto, and recover from the indemnifying party the
entire cost and expense thereof including, without limitation, reasonable
attorneys' fees and disbursements and all amounts paid or foregone as a result
of such Proceeding, or the settlement or compromise thereof. The indemnification
required hereunder shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills or invoices
are received or loss, liability, obligation, damage or expense is actually
suffered or incurred. The obligation of the Seller and the Shareholders to pay
the Damages of a Buyer Indemnitee pursuant to this section 12.3(c) is subject to
the right of the Seller and the Shareholders to receive from the Buyer
reimbursement for any Damages incurred by the Seller or the Shareholder to the
extent such Damages would be included in, and in the aggregate less than, the
basket set forth in section 12.4(c).
(4) Any payment pursuant to this section 12 shall be treated as an
adjustment to the consideration exchanged for the Acquired Assets.
12.4 Limitations on Indemnification by the Seller and the Shareholders.
-----------------------------------------------------------------
(1) The Seller and the Shareholders shall have indemnification
obligations pursuant to section 12.1(a) respecting Damages that result from
actual or claimed breaches of representations or warranties set forth in this
Agreement (other than the representations and warranties contained in sections
5.3, 5.12, 5.14 and 5.16), only if and only to the extent that the aggregate of
all Damages resulting from such actual or claimed breaches shall exceed
$250,000. Notwithstanding the foregoing, the Seller and the Shareholders shall
have indemnification obligations pursuant to section 12.1(a) respecting Damages
that Schedule 5.16 expressly includes in the "basket" set forth in this section
12.4 only if and only to the extent that the aggregate of all such Damages shall
exceed $250,000.
(2) The limitations set forth in paragraph (a) of this section 12.4
shall not limit or reduce the Seller's and the Shareholders' obligations to
indemnify the Buyer in respect of Damages that result from actual or claimed
breaches of the representations and warranties contained in sections 5.3, 5.12,
5.14 and 5.16. Notwithstanding the foregoing, the Seller and the Shareholders
shall have indemnification obligations pursuant to section 12.1(a) respecting
Damages that Schedule 5.16 expressly includes in the "basket" set forth in this
section 12.4 only if and only to the extent that the aggregate of all such
Damages shall exceed $250,000.
(3) In the event that any Damages of the Buyer are covered by
insurance proceeds or other reimbursement obligations, whether maintained by the
Buyer or the Seller, the Buyer shall not be deemed to have any Damages if and to
the extent that the Buyer actually realizes the proceeds of such insurance,
which payments shall in no event be included in the basket set forth in section
12.4(a).
(4) Anything to the contrary notwithstanding, the indemnification
obligation of ▇▇▇▇▇ ▇. ▇▇▇▇▇ for Damages hereunder shall not exceed $2,300,000.
13. Miscellaneous.
13.1 Transaction Fees and Expenses. Each party hereto shall bear such
-----------------------------
costs, fees and expenses as may be incurred by it in connection with this
Agreement and the transactions contemplated hereby.
13.2 Notices. Any notice, demand, request or other communication which is
-------
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail or (c) by personal delivery to such party at
the following address:
To the Buyer:
MedSource Technologies, Inc.
c/o Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, Connecticut 06830
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
To the Seller or any Shareholder at:
c/o Kelco Industries, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
with respect to each of the Seller and the Shareholders, with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Towers
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Telecopier No.:(▇▇▇) ▇▇▇-▇▇▇▇
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
business days after such notice or demand is sent, and, in the case of clause
(b), the business day next following the date such notice or demand is sent. A
copy of any notice to the Shareholders shall be sent concurrently to the Seller
and a copy of any notice to the Seller shall be sent concurrently to the
Shareholders.
13.3 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.
13.4 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. The Buyer's receipt of Tax Returns, waiver of bulk sales and other
waivers and receipt of information contained herein shall not be deemed to waive
the Buyer's rights under the indemnification provisions of Section 12.
13.5 Governing Law. This Agreement shall be governed by, and interpreted
-------------
and enforced in accordance with, the laws of the State of Minnesota.
13.6 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 Minnesota 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 State of Minnesota
in connection with such Proceeding and waives any objection to venue in the
State of Minnesota, and agrees that service of any summons, complaint, notice or
other process relating to such Proceeding may be effected in the manner provided
by clause (a) of section 13.2.
13.7 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.
13.8 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.
13.9 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.
13.10 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
Buyer's rights hereunder shall include any Affiliate of the Buyer and any or all
financial institutions or other entities investing and/or lending monies to
finance the transactions herein contemplated. Permitted assignees of the
Seller's rights hereunder shall include any Affiliate of the Seller. Neither
Buyer nor Seller may assign any of its obligations hereunder without the consent
of the other party, except to a permitted assignee. Except for the permitted
assignees, neither party shall have the right to assign any rights or delegate
any duties hereunder without the consent of the other party.
13.11 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
13.12 No Third Party Beneficiaries. Nothing contained in this Agreement,
----------------------------
whether express or implied, is intended, or shall be deemed, to create or confer
any right, interest or remedy for the benefit of any Person other than as
otherwise provided in this Agreement.
13.13 Entire Agreement. This Agreement (including all the schedules and
----------------
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.
13.14 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.
13.15 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.
13.16 Bulk Sales Law. The parties waive compliance with the provisions of
--------------
any bulk sales law that may be applicable to the transactions contemplated
hereby.
Seller: KELCO INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
General Manager
Buyer: KELCO ACQUISITION LLC
By: MedSource Technologies, Inc.
its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman
Shareholders: /s/ ▇▇▇▇ ▇.▇▇▇▇▇
-----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, individually and as Trustee
of the ▇▇▇▇ ▇. ▇▇▇▇▇ 1997 Annuity Trust
/s/ ▇▇▇▇▇ ▇.▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇