EXHIBIT 10.2
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STOCK AND ASSET PURCHASE AGREEMENT
by and among
MedSource Technologies Pittsburgh, Inc.
(the "Buyer"),
MedSource Technologies, LLC,
("MedSource LLC"),
and
MedSource Technologies, Inc.,
("MedSource")
and
Cycam, Inc. ("Cycam"),
ELX, Inc. ("ELX"), and
Wagner-ELX ("Wagner-ELX")
(Cycam, ELX and Wagner-ELX each a "Company" and collectively the "Companies")
and
Donald J. Wagner
(the "Shareholder")
as of August 31, 2002
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TABLE OF CONTENTS
Page
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1. The Closing...........................................................2
2. Purchase and Sale of Cycam Shares.....................................2
2.1 Transfer of Cycam Shares..............................................2
2.2 Purchase Price and Payment............................................2
3. Purchase and Sale of ELX Shares.......................................3
3.1 Transfer of ELX Shares................................................3
3.2 Purchase Price and Payment............................................3
4. Purchase and Sale of Wagner-ELX Assets................................3
4.1 Sale of Assets........................................................3
4.2 Purchase Price........................................................4
4.3 Payment of Wagner-ELX Asset Purchase Cash Consideration...............4
4.4 Assumption of Liabilities.............................................4
4.5 Prorations, etc.......................................................4
5. Representations and Warranties of the Shareholder and the Companies...4
5.1 Organization..........................................................5
5.2 Capitalization; Subsidiaries..........................................5
5.3 Authorization; Validity of Agreement..................................5
5.4 No Violations; Consents and Approvals.................................6
5.5 Financial Statements..................................................7
5.6 No Material Adverse Change............................................7
5.7 No Undisclosed Liabilities............................................8
5.8 Litigation; Compliance with Law; Licenses and Permits.................9
5.9 Employee Benefit Plans; ERISA........................................10
5.10 Real Property........................................................11
5.11 Intellectual Property Rights; Computer Software......................14
5.12 Tangible Personal Property; Capital Budget...........................18
5.13 Material Contracts...................................................18
5.14 Taxes................................................................19
5.15 Affiliated Party Transactions........................................23
5.16 Environmental Matters................................................23
5.17 No Brokers...........................................................25
5.18 Notes and Accounts Receivable........................................25
5.19 Inventories..........................................................26
5.20 Product Liability Claims.............................................26
5.21 Warranties and Returns...............................................26
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TABLE OF CONTENTS (Cont'd)
Page
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5.22 Assets Utilized in the Business......................................27
5.23 Insurance............................................................27
5.24 Delivery of Documents; Corporate and Partnership Records.............27
5.25 Customers............................................................27
5.26 Labor Matters........................................................27
5.27 Bank Accounts........................................................28
5.28 Directors, Officers and Certain Employees............................28
5.29 No Misstatements or Omissions........................................28
5.30 Investment Undertaking...............................................29
5.31 Business of ELX and Wagner-ELX.......................................29
5.32 No Brokers...........................................................29
5.33 Cross References in Disclosure Schedule..............................29
6. Representations and Warranties of the Buyer, MedSource LLC
and MedSource........................................................29
6.1 Organization of the Buyer Group......................................29
6.2 Authorization; Validity of Agreement.................................30
6.3 No Violations, Consents and Approvals................................30
6.4 Capital Structure....................................................31
6.5 Valid Issuance of MedSource Shares, Etc..............................31
6.6 Public Information...................................................31
6.7 No Brokers...........................................................32
7. Other Agreements of the Parties......................................32
7.1 Preparation and Filing of Tax Returns; Taxes.........................32
7.2 Covenants of the Parties.............................................33
7.3 Transfer Taxes.......................................................34
7.4 Non-Disclosure of Confidential Information...........................35
7.5 Intentionally Omitted................................................35
7.6 Intentionally Omitted................................................35
7.7 Other Actions........................................................35
7.8 Required Consents....................................................35
7.9 Intentionally Omitted................................................35
7.10 Interests in Real Property...........................................35
7.11 Intentionally Omitted................................................36
7.12 Actions Prior to Closing.............................................36
7.13 Access to Information................................................38
7.14 Intentionally Omitted................................................38
7.15 Distributed Property.................................................38
7.16 Shareholder's Property...............................................39
7.17 Listing of MedSource Shares..........................................39
8. Closing Deliveries...................................................39
8.1 Deliveries of the Shareholder........................................39
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8.2 Deliveries of the Buyer Group........................................40
9. Intentionally Omitted................................................41
10. Indemnification......................................................41
10.1 Survival of Representations, Warranties and Covenants
of the Shareholder...................................................41
10.2 Survival of Representations, Warranties and Covenants
of the Buyer Group...................................................42
10.3 Indemnification by the Shareholder...................................42
10.4 Indemnification by the Buyer Group...................................43
10.5 Indemnification Procedures...........................................43
10.6 Limitations on Indemnification by the Shareholder....................45
10.7 Payment by Shareholder of Indemnification Amounts....................46
10.8 Limitations on Indemnification by the Buyer Group....................46
10.9 Other Indemnification Provisions.....................................47
11. Miscellaneous........................................................49
11.1 Transaction Fees and Expenses........................................49
11.2 Notices..............................................................49
11.3 Amendment............................................................50
11.4 Waiver...............................................................50
11.5 Governing Law........................................................50
11.6 Remedies.............................................................50
11.7 Severability.........................................................50
11.8 Further Assurances...................................................50
11.9 Assignment...........................................................51
11.10 No Third Party Beneficiaries.........................................51
11.11 Entire Agreement.....................................................51
11.12 Headings.............................................................51
11.13 Counterparts; Facsimile Signatures...................................51
11.14 Publicity and Disclosure.............................................51
11.15 Jurisdiction; Service of Process.....................................52
Signatures...................................................................S-1
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Schedules
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Schedule 2.1 List of Cycam Shares
Schedule 3.1 List of ELX Shares
Schedule 4.2 Adjustments to Wagner-ELX Asset Purchase Cash
Consideration
Disclosure Schedules
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Section 4.1(a) Description of Owned Real Property
Section 4.1(b) Description of Wagner-ELX Facilities Contracts
Section 4.1(c) Rights of Wagner-ELX obtained from Governments and
Governmental Agencies
Section 5.2(a) Partnership Interests
Section 5.2(b) Subsidiaries
Section 5.4(a) Acceleration of Payments
Section 5.5(a) Financial Statements
Section 5.5(b) Exceptions Regarding Financial Statements
Section 5.6 Material Adverse Changes
Section 5.7(c) Exceptions to Distributions
Section 5.8(a) Litigation
Section 5.8(b) Compliance with Laws
Section 5.9(a) Employee Benefit Plans
Section 5.9(b) Employee Benefit Plans subject to Title IV of ERISA.
Section 5.10(a) Permitted Encumbrances
Section 5.10(b) Leased Real Property
Section 5.10(c) Service Contracts
Section 5.11(a)(ii) Patents
Section 5.11(a)(iii) Trademarks
Section 5.11(a)(iv) Copyrights
Section 5.11(a)(xi) Third Party Licenses
Section 5.11(b) Intellectual Property
Section 5.12(a) Liens on Tangible Personal Properly
Section 5.12(b) Fixed Assets Ledger
Section 5.12(c) Capital Budget
Section 5.13 Material Contracts
Section 5.14(a) Taxes
Section 5.14(b) Tax Elections
Section 5.14(c) Jurisdictions - Tax Returns
Section 5.15 Affiliated Party Transactions
Section 5.16 Environmental Matters
Section 5.18 Notes and Accounts Receivable
Section 5.20 Product Liability Claims
Section 5.21(a) Warranties and Returns Policies; Product Failures or
Defects
Section 5.21(c) Failures or Defects in Delivered Products
Section 5.23 Insurance
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Section 5.25 Customers
Section 5.26 Severance Pay
Section 5.27 Bank Accounts
Section 5.28 Directors, Officers, Certain Employees
Section 7.12(a) Debt
Section 7.15 Distributed Assets
Section 7.16 Shareholder Personal Property
Exhibits
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Exhibit 2.2 Form of Escrow Agreement
Exhibit 7.5 Form of Non-Competition Agreement
Exhibit 8.1(b) Form of Legal Opinion of Counsel to Companies and
Shareholder
Exhibit 8.1(c) Form of opinion of Roger J. Ecker, General Counsel to
the Companies and the Shareholder
Exhibit 8.1(j) Form of Special Warranty Deed from Wagner-ELX
Exhibit 8.1(t) Form of Funds Flow Memorandum
Exhibit 8.2(b) Form of Legal Opinion of Counsel to Buyer
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement (this "Agreement") is made as
of August 31, 2002 by and among MedSource Technologies Pittsburgh, Inc., a
Delaware corporation (the "Buyer"), its ultimate parent, MedSource Technologies,
Inc., a Delaware corporation ("MedSource"), MedSource Technologies, LLC, a
Delaware limited liability company ("MedSource LLC") which is a wholly owned
subsidiary of MedSource and the sole stockholder of Buyer, Cycam, Inc., a
Pennsylvania corporation ("Cycam"), ELX, Inc., a Pennsylvania corporation
("ELX"), Wagner-ELX, a Pennsylvania general partnership ("Wagner-ELX") (Cycam,
ELX and Wagner-ELX to be sometimes individually referred to herein as a
"Company" and to be sometimes collectively referred to herein as the
"Companies"), and Donald J. Wagner, a resident of the Commonwealth of
Pennsylvania (the "Shareholder"). The Buyer, MedSource and MedSource LLC are
hereinafter referred to collectively as the "Buyer Group."
WHEREAS, the Shareholder owns of record and beneficially all of the
issued and outstanding shares of common stock, $1.00 par value per share, of
Cycam (the "Cycam Shares") and all of the issued and outstanding shares of
common stock, $50.00 par value per share, of ELX (the "ELX Shares");
WHEREAS, the Shareholder and ELX are the only general partners of
Wagner-ELX;
WHEREAS, Wagner-ELX owns certain real estate and other assets used in
the business of Cycam;
WHEREAS, upon the terms and subject to the conditions of this
Agreement, (i) the Shareholder desires to cause ELX to distribute to the
Shareholder or an assignee of the Shareholder all of the partnership interest
owned by ELX in Wagner-ELX, (ii) the Shareholder desires to sell to Buyer, and
Buyer desires to purchase from the Shareholder, all of the Cycam Shares (the
"Cycam Stock Purchase"), (iii) the Shareholder desires to sell to Buyer, and
Buyer desires to purchase from the Shareholder, all of the ELX Shares (the "ELX
Stock Purchase") and (iv) Wagner-ELX desires to sell to Buyer, and Buyer desires
to purchase from Wagner-ELX, certain assets of Wagner-ELX (the "Wagner-ELX Asset
Purchase");
WHEREAS, the Buyer, MedSource and MedSource LLC have each adopted this
Agreement and approved all of the transactions and other agreements contemplated
by this Agreement in accordance with the provisions of the Delaware General
Corporation Law and the Delaware Limited Liability Company Act;
WHEREAS, the Shareholder, as the sole shareholder of Cycam and ELX,
has approved this Agreement and all of the transactions and other agreements
contemplated by this Agreement in accordance with the laws of the Commonwealth
of Pennsylvania;
WHEREAS, the Shareholder and ELX, as the general partners of
Wagner-ELX, have approved this Agreement and all of the transactions and other
agreements contemplated by
this Agreement in accordance with the Partnership Agreement, dated as of
December 16, 1998, by and between Shareholder and ELX and the laws of the
Commonwealth of Pennsylvania.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the parties, the parties do hereby represent, warrant and agree as
follows:
1. The Closing. The consummation of the Cycam Stock Purchase, the ELX Stock
Purchase and the Wagner-ELX Asset Purchase (collectively, the "Transactions"),
and the other transactions contemplated by this Agreement (the "Closing") is
taking place simultaneously with the execution and delivery hereof and is
sometimes referred to as the "Closing Date."
2. Purchase and Sale of Cycam Shares.
2.1 Transfer of Cycam Shares. At the Closing, the Shareholder is delivering
to Buyer one or more certificates representing all of the Cycam Shares, as set
forth in Schedule 2.1. Such stock certificates shall be duly endorsed in blank
for transfer or shall be presented with stock powers duly executed in blank,
with such other documents as may be reasonably required by Buyer to effect a
valid transfer of such Cycam Shares by the Shareholder, free and clear of any
claims, demands, liens, mortgages, encumbrances, pledges, and other security
interests of any kind (collectively, "Liens").
2.2 Purchase Price and Payment. In consideration of the sale by the
Shareholder to the Buyer of the Cycam Shares, the Shareholder shall be entitled,
upon surrender to Buyer of certificates representing the Cycam Shares, to (i)
667,175 shares (the "MedSource Shares") of MedSource common stock, par value
$.01 per share ("MedSource Common Stock") and (ii) $15,950,000 in cash (the
"Cycam Stock Purchase Cash Consideration"). All of the MedSource Shares to be
issued to the Shareholder hereunder shall be paid into and held in escrow in
accordance with the terms of the escrow agreement in the form attached hereto as
Exhibit 2.2 (the "Escrow Agreement"). At the Closing, MedSource shall issue to
its transfer agent a written instruction to promptly deliver to the Escrow Agent
(as defined in the Escrow Agreement), in the name of Donald J. Wagner, one or
more certificates representing all of the MedSource Shares to be issued to him
hereunder. The Cycam Stock Purchase Cash Consideration shall be paid by delivery
of bank or cashier's checks or by wire transfer of immediately available funds
to an account or accounts designated in writing by the Shareholder. For purposes
of this Agreement, the "Fair Market Value" of a MedSource Share as of any date
shall be the average of the last reported sales price of a MedSource Share on
the Nasdaq National Market on the five trading days prior to such date;
provided, however, that if shares of are not traded on the Nasdaq National
Market on such date, then the Fair Market Value shall be the average of the last
reported sales price on the exchange or market on which shares of MedSource
Common Stock are traded at such time; provided, further, however, that, if
shares of MedSource Common Stock are not so traded at such time, the Fair Market
Value of such shares shall be as determined in good faith by the Board of
Directors of MedSource, unless the Shareholder shall object, within fifteen (15)
days after his receipt from MedSource of written notice that such determination
will be made by the Board of Directors of MedSource, in which case such Fair
Market Value shall be as determined by a nationally recognized investment
banking firm chosen
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by MedSource, subject to the approval of the Shareholder, which approval shall
not be unreasonably withheld, and in which event the costs of such determination
shall be shared equally by MedSource and the Shareholder.
3. Purchase and Sale of ELX Shares.
3.1 Transfer of ELX Shares. At the Closing, the Shareholder is delivering
to Buyer certificates representing all of the ELX Shares, as set forth in
Schedule 3.1. Such stock certificates shall be duly endorsed in blank for
transfer or shall be presented with stock powers duly executed in blank, with
such other documents as may be reasonably required by Buyer to effect a valid
transfer of such ELX Shares by the Shareholder, free and clear of any and all
Liens.
3.2 Purchase Price and Payment. In consideration of the sale by the
Shareholder to the Buyer of the ELX Shares, the Shareholder shall be entitled,
upon surrender to Buyer of certificates representing all of the ELX Shares, to
receive $750,000 in cash (the "ELX Stock Purchase Cash Consideration"). The ELX
Stock Purchase Cash Consideration shall be paid by delivery of bank or cashier's
checks or by wire transfer of immediately available funds to an account or
accounts designated in writing by the Shareholder.
4. Purchase and Sale of Wagner-ELX Assets.
4.1 Sale of Assets. On the terms and subject to the conditions of this
Agreement, Wagner-ELX agrees to sell, transfer, convey and deliver to Buyer, and
Buyer agrees to purchase from Wagner-ELX, on and as of the Closing Date, the
following property and assets of Wagner-ELX (collectively, the "Wagner-ELX
Assets" or the "Assets"):
(a) The manufacturing facilities of Wagner-ELX located in Houston,
Pennsylvania, including the real property described in Section 4.1(a) of the
Disclosure Schedule attached hereto (the "Companies' Disclosure Schedule") (the
"Owned Real Property"), together with all buildings, structures, installations,
fixtures and other improvements situated thereon and all easements, rights of
way and other rights, interests and appurtenances of Wagner-ELX therein or
thereunto pertaining (hereinafter collectively referred to as the "Wagner-ELX
Facilities" or the "Facilities");
(b) All rights of Wagner-ELX under the contracts, indentures,
guarantees, leases, commitments, and agreements identified in Section 4.1(b) of
the Companies' Disclosure Schedule (the "Wagner-ELX Facilities Contracts");
(c) The rights of Wagner-ELX under the franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies related to the Wagner-ELX
Facilities and the Wagner-ELX Facilities Contracts and listed in Section 4.1(c)
of the Companies' Disclosure Schedule;
(d) All purchase records, supplier lists, and other records related to
the Wagner-ELX Facilities and the Wagner-ELX Facilities Contracts; all deeds and
other instruments and maps related to the Wagner-ELX Facilities and the
Wagner-ELX Facilities Contracts; all real estate and engineering data,
blueprints and other property records related to the Wagner-ELX Facilities and
the Wagner-ELX Facilities Contracts; and all records regarding
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all governmental examinations, franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, clearances and similar rights related to
the Wagner-ELX Facilities and the Wagner-ELX Facilities Contracts; provided,
however, that Wagner-ELX may make and retain copies of any records transferred
to Buyer to be used for a valid business purpose; and
(e) All rights of Wagner-ELX under any claims, deposits, prepayments,
refunds, causes of action, rights of recovery, rights of set off and rights of
recoupment (including any such items relating to the payment of taxes) related
to the Wagner-ELX Facilities and the Wagner-ELX Facilities Contracts. The Assets
will be transferred by Wagner-ELX to Buyer free and clear of all Liens, other
than Permitted Encumbrances (as defined in Section 5.10 below).
4.2 Purchase Price. The total purchase price to be paid to Wagner-ELX for
the Wagner-ELX Assets shall be $1,300,000 (hereinafter referred to as the
"Wagner-ELX Asset Purchase Cash Consideration"), subject to adjustments as set
forth in Schedule 4.2.
4.3 Payment of Wagner-ELX Asset Purchase Cash Consideration. At the
Closing, Buyer shall pay to Wagner-ELX the Wagner-ELX Asset Purchase Cash
Consideration in cash, by delivery of bank or cashier's checks or by wire
transfer of immediately available funds to an account or accounts designated in
writing by the Shareholder.
4.4 Assumption of Liabilities. Except as hereinafter specifically provided,
Buyer is not assuming any liabilities or obligations of Wagner-ELX and
Wagner-ELX shall be solely liable for all of its liabilities and obligations
arising from or in connection with ownership of the Assets prior to the Closing
Date, whether or not reflected in its books and records. Subject to the
conditions of this Agreement, Buyer is only assuming the liabilities and
obligations of Wagner-ELX arising from and after the Closing Date under the
Facilities Contracts (other than any liability or obligation arising out of
events occurring prior to the Closing Date or relating to a violation or breach
(or alleged violation or breach) thereof that occurred prior to the Closing
Date) (the foregoing liabilities to be assumed under the Facilities Contracts
are referred to herein as the "Assumed Liabilities").
4.5 Prorations, etc. On the Closing Date, property taxes, utilities and
other similar obligations to third parties shall be prorated between Wagner-ELX
and Buyer. General real estate taxes applicable to any of the Company Real
Property (as defined herein) due and payable in the year of the Closing shall be
prorated between Wagner-ELX and Buyer on a daily basis as of the Closing Date
based upon the fiscal year of the relevant taxing authorities, with Wagner-ELX
paying those allocable to the period prior to the Closing Date and Buyer being
responsible for those allocable to the Closing Date and the period subsequent
thereto. On the Closing Date, Wagner-ELX shall pay in full all special
assessments (and charges in the nature of or in lieu of such assessments)
levied, pending or constituting a Lien with respect to any of the Company Real
Property as of the date of this Agreement. Notwithstanding the foregoing, the
Pennsylvania realty transfer tax payable in connection with the purchase and
sale of the Owned Real Property shall be allocated for payment fifty percent to
Buyer and fifty percent to the Shareholder at the Closing.
5. Representations and Warranties of the Shareholder and the Companies. As
a material inducement to the Buyer Group to enter into this Agreement and
consummate the
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Transactions, the Shareholder and the Companies hereby make to the Buyer Group
the representations and warranties contained in subsections 5.1 through 5.32 of
this Article 5.
5.1 Organization. Cycam and ELX are corporations and Wagner-ELX is a
general partnership. Each Company is duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and has the
requisite corporate or partnership, as the case may be, power and authority to
own, lease and operate its properties and to carry on its business in the manner
and in the places as now being conducted. Each Company is duly qualified or
licensed to do business as a foreign organization and is in good standing in
each other jurisdiction in which the nature of the business conducted by it
makes such qualification or licensing necessary. Each Company has delivered to
the Buyer Group true, correct and complete copies of such Company's Articles of
Incorporation and By-Laws, or certificate of limited partnership and/or
partnership agreement, as applicable, as currently in effect (all of such
documents to be collectively referred to herein as the "Company Organizational
Documents") and no amendments thereto are pending. No Company is in violation of
any of its Company Organizational Documents.
5.2 Capitalization; Subsidiaries.
(a) The authorized capital stock of Cycam consists of One Thousand
(1,000) shares of common stock, par value $1.00 per share, of which Five Hundred
(500) shares are issued and outstanding, and the authorized capital stock of ELX
consists of One Thousand (1,000) shares of common stock, par value $50.00 per
share, of which Sixty (60) shares are issued and outstanding, and all of the
Cycam Shares and ELX Shares are owned of record and beneficially by the
Shareholder, free and clear of all Liens. ELX and Shareholder are the only
partners of Wagner-ELX and own such partnership interests free and clear of all
Liens. The partnership interests are held in the proportions set forth in
Section 5.2(a) of the Companies' Disclosure Schedule. All of the Cycam Shares
and ELX Shares are duly authorized, validly issued, fully paid and
nonassessable. There are no (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating now or in the future, the Companies to issue,
transfer or sell any shares of capital stock, options, warrants, calls or other
equity or partnership interest of any kind whatsoever in the Companies or
securities convertible into or exchangeable for such shares or equity or
partnership interests, (ii) contractual obligations of the Companies to
repurchase, redeem or otherwise acquire any capital stock or equity or
partnership interest of the Companies or (iii) voting trusts, proxies or similar
agreements to which any of the Companies or the Shareholder is a party with
respect to the voting of the capital stock of the Companies or the partnership
interests in Wagner-ELX. None of the Companies' capital stock or partnership
interests has been issued in violation of any federal or state law.
(b) Except as set forth on Section 5.2(b) of the Companies' Disclosure
Schedule, each Company has no subsidiaries and does not own any outstanding
shares of capital stock or have any direct or indirect interest in or control
over any corporation, partnership, joint venture, trust, corporation, limited
liability company or other entity.
5.3 Authorization; Validity of Agreement. Each of the Shareholder and the
Companies has the requisite capacity or corporate or partnership power and
authority, as the case
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may be, to execute, deliver and perform this Agreement and each of the other
agreements, instruments, documents and certificates to be executed, delivered
and performed by each of the Companies or the Shareholder, as the case may be,
pursuant to this Agreement, including but not limited to any item referred to in
Article 8 (collectively, with this Agreement, the "Transaction Documents"), to
which each of the Companies or the Shareholder, as the case may be, is or may be
a party, and to assume and perform his or its obligations hereunder and
thereunder, and to consummate the Transactions and any other transactions
contemplated hereby or thereby. The execution, delivery and performance by each
of the Companies of this Agreement and the other Transaction Documents to which
any Company is a party and the consummation of the Transactions have been duly
and validly authorized by the Board of Directors or each general partner, as the
case may be, of each of the Companies and, where necessary, the shareholders or
partners of each of the Companies, and no other corporate or other proceedings
on the part of the any Company are necessary to authorize the execution,
delivery and performance of this Agreement and the other Transaction Documents
and the consummation of the Transactions by the Companies. This Agreement and
all other Transaction Documents are being duly executed and delivered by each of
the Companies and the Shareholder party thereto. This Agreement and all other
Transaction Documents are valid and binding obligations of each of the Companies
and the Shareholder party thereto, as applicable, enforceable against each of
them in accordance with their respective terms.
5.4 No Violations; Consents and Approvals.
(a) Except as set forth on Section 5.4(a) of the Companies' Disclosure
Schedule, the execution, delivery and performance of each of this Agreement and
the other Transaction Documents by each of the Companies and the Shareholder
party hereto and thereto do not, and the consummation by them of the
Transactions and any other transactions contemplated hereby and thereby will
not: (i) in the case of each of the Companies, violate any provision of its
Company Organizational Documents, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, lease, option,
contract, undertaking, understanding, covenant, or agreement, whether written or
oral, (each, a "Contract") to which any Company or the Shareholder is a party or
by which any of their respective properties or assets may be bound or otherwise
subject, or (iii) violate any Law (as defined in Section 5.8(b) hereof)
applicable to the Shareholder or any of the Companies or any of their respective
properties or assets.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any legislative or executive agency or department or
other regulatory service, authority or agency, or any court, arbitration panel
or other tribunal or judicial authority of any foreign, provincial, United
States federal, state, county, municipal or other local jurisdiction, political
entity, body, organization, subdivision or branch (a "Governmental Entity") or
other Person (as defined below), is required in connection with the execution,
delivery and performance of this Agreement or any of the other Transaction
Documents by any of the Companies or the Shareholder, or the consummation by any
of the Companies or the Shareholder of the Transactions and any other
transactions contemplated hereby and thereby, except for such consents,
approvals, orders, authorizations, notifications, notices, estoppel
certificates, releases,
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registrations, ratifications, declarations, filings, waivers, exemptions or
variances (individually, a "Consent" and collectively, "Consents") with respect
to any License (as defined in Section 5.8(c) hereof) or Law (the "Required
Consents"). For purposes of this Agreement, the term "Person" shall mean an
individual, corporation, limited liability company, partnership, joint venture,
association, trust, unincorporated organization or, as applicable, any other
entity.
5.5 Financial Statements.
(a) Attached hereto as Section 5.5(a) of the Companies' Disclosure
Schedule are the unaudited balance sheets of each of the Companies as of June
30, 2002 (the "Latest Balance Sheet"), together with the related statement of
income for the six-month period ended June 30, 2002, and the audited balance
sheets of each of the Companies as of December 31, 2001 and 2000, together with
the related statements of income (including the related notes), cash flows and
changes in owners' equity for the three prior fiscal years then ended, audited
by Herbein & Company, Inc. (collectively, the "Financial Statements").
(b) The Financial Statements have been derived from, and agree with,
the books and records of the Companies and fairly present the respective
financial positions of each of the Companies as of the respective dates thereof
and the respective results of operations of each of the Companies for the
respective periods set forth therein. Except as set forth in Section 5.5(b) of
the Companies' Disclosure Schedule, the Financial Statements (including the
notes thereto) have been prepared in accordance with United States generally
accepted accounting principles, consistently applied ("GAAP"), as of the dates
and for the periods involved, subject, in the case of the Latest Balance Sheet
and the related statements of income for the interim period, to normal fiscal
year-end adjustments in the ordinary course (none of which, individually or in
the aggregate, will be material to the business or the operations of the
Companies, taken as a whole).
5.6 No Material Adverse Change. Except for the transactions contemplated by
this Agreement and as set forth in Section 5.6 of the Companies' Disclosure
Schedule, since the date of the Latest Balance Sheet, no Company has: (i)
incurred any liabilities, except liabilities contemplated by Section 5.7(a)(ii);
(ii) paid any material obligation or material liability other than, or
discharged or satisfied any Liens other than those securing current liabilities,
in each case in the ordinary course of business; (iii) declared or made any
payment to or distribution to its shareholders or partners as such except in the
ordinary course of business consistent with past practice, or purchased or
redeemed any of its shares of capital stock or partnership interests, or
obligated itself to do so; (iv) mortgaged, pledged or subjected to any Lien any
of its assets, tangible or intangible, except in the ordinary course of
business; (v) sold, transferred or leased any of its assets except the sale of
inventory in the ordinary course of business; (vi) suffered any material
physical damage, destruction or loss (whether or not covered by insurance)
affecting the properties, business or prospects of such Company; (vii) entered
into any transaction other than in the ordinary course of business; (viii)
encountered any labor difficulties or labor union organizing activities; (ix)
issued or sold any partnership interests, shares of capital stock or other
securities or granted any options, warrants, or other purchase rights with
respect thereto other than pursuant to this Agreement; (x) made any acquisition
or disposition of any material assets or become involved in any other material
transaction; (xi) except in the ordinary course of business consistent with past
practice, increased the compensation payable, or to become payable, to any
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of its directors or employees, or made any bonus payment or similar arrangement
with any directors or employees or increased the scope or nature of any fringe
benefits provided for its employees or directors; (xii) made any capital
investment in, any loan to or any acquisition of the securities or assets of any
other person; (xiii) canceled, compromised, waived or released any material
right or claim; (xiv) made any change in employment terms for any of its
directors, officers or employees outside the ordinary course of business; (xv)
made or pledged to make any charitable contribution or other capital
contribution outside the ordinary course of business; or (xvi) agreed to do any
of the foregoing other than pursuant to the Transaction Documents and the
Transactions contemplated hereby and thereby. In addition, since the Latest
Balance Sheet, no party (including any Company) has accelerated, terminated,
modified or canceled any material agreement, contract, lease or license to which
any Company is a party or by which any Company or its assets are bound. To the
knowledge of the Shareholder and the Companies, since the date of the Latest
Balance Sheet, no event, condition or circumstance has occurred that has, or
would reasonably be likely to have, a material adverse effect on the condition
(financial or otherwise), business, assets, liabilities, results of operations
or prospects of any Company, other than events, conditions or circumstances
solely attributable to general economic conditions or industry conditions
affecting companies engaged in businesses comparable to the Companies'
businesses (a "Company Material Adverse Effect").
5.7 No Undisclosed Liabilities.
(a) To the knowledge of the Shareholders and the Companies, the
Companies do not have, and as of the Closing will not have, any liabilities
(whether accrued or unaccrued, absolute or contingent, liquidated or
unliquidated, due or to become due or otherwise) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than those that (i) are set forth or adequately reserved against on the Latest
Balance Sheet; or (ii) were incurred since the date of the Latest Balance Sheet
in the ordinary course of business, consistent with past practices and custom,
none of which, (X) is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim, lawsuit or violation of law, rule or
regulation or (Y) individually or in the aggregate, would have a Company
Material Adverse Effect.
(b) The accounts payable of the Companies set forth in the Latest
Balance Sheet or arising subsequent thereto are the result of bona fide
transactions in the ordinary course of business.
(c) No cash has been distributed to the Shareholder since the Latest
Balance Sheet Date other than (i) employment compensation to the Shareholder in
annualized amounts listed in Section 5.7(c) of the Companies' Disclosure
Schedule; (ii) amounts necessary for the Shareholder to pay federal and state
income taxes on the pretax income earned during the period ending December 31,
2001 and for the period commencing January 1, 2002 and ending on the day prior
to the Closing Date; (iii) amounts due to Affiliates (as defined in Section 5.15
hereof) for rental of real property and equipment used by the Companies in their
respective businesses, in each case, in the annualized amounts set forth in
Section 5.7(c) of the Companies' Disclosure Schedule; (iv) loans from the
Shareholder to any Company in the amounts listed in Section 5.7(c) of the
Companies' Disclosure Schedule; and (v) distributions by any Company to the
Shareholder in the amounts listed in Section 5.7(c) of the Companies' Disclosure
Schedule.
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5.8 Litigation; Compliance with Law; Licenses and Permits.
(a) Except as set forth in Section 5.8(a) of the Companies' Disclosure
Schedule, there is no claim, suit, action, investigation or proceeding
(collectively, a "Proceeding") pending, or, to the knowledge (as defined below)
of the Shareholder or any Company, any Proceeding threatened, or, to the
knowledge of the Shareholder or any Company, any reasonable basis for any such
Proceeding, that involves or affects any Company or any Affiliate of any
Company, by or before any Governmental Entity, court, arbitration panel or any
other Person. No Company or Affiliate of any Company is subject to any
outstanding injunction, judgment, order, decree, ruling or charge. In this
Agreement, an individual will be deemed to have "knowledge" of a particular fact
or other matter if (i) such individual is actually aware of such fact or other
matter; or (ii) under the circumstances, in order to form such individual's
understanding of the relevant facts and circumstances, a prudent individual
would be expected to conduct a reasonable investigation concerning the existence
of such fact or matter and in the course of conducting such investigation such
individual would reasonably be expected to discover or otherwise become aware of
such fact or other matter. A Person (other than an individual) will be deemed to
have "knowledge" of a particular fact or other matter if any individual who is
serving, or who has served within the twenty four (24) months immediately
preceding the Closing, as a director, officer, or partner, of such Person (or in
any similar capacity) has, or at any time had, knowledge of such fact or other
matter as provided in clauses (i) and (ii) of the preceding sentence.
(b) Except as set forth in Section 5.8(b) of the Companies' Disclosure
Schedule, to the knowledge of the Shareholder and each Company, each Company has
complied with all applicable criminal, civil or common laws, statutes,
ordinances, orders, codes, rules, regulations, policies, guidance documents,
writs, judgments, decrees, injunctions, or agreements of any Governmental Entity
(collectively, "Laws"), including but not limited to Laws relating to Taxes (as
defined in Section 5.14(e) hereof), medical devices and products and the
manufacture thereof, zoning, building codes, antitrust, occupational safety and
health, industrial hygiene, environmental protection, water, ground or air
pollution, the generation, handling, treatment, storage or disposal of Hazardous
Substances (as defined in Section 5.16(k) hereof), consumer product safety,
product liability, hiring, wages, hours, employee benefit plans and programs,
collective bargaining and the payment of withholding and social security taxes,
except where the failure to comply would not have a Company Material Adverse
Effect. Since January 1, 1997, no Company has received notice of any violation
of any Law for which any Proceeding is pending on the Closing Date.
(c) Each Company has every license, permit, certification,
qualification or franchise issued by any Governmental Entity (each, a
"License"), and every Consent by or on behalf of any Person that is not a party
to this Agreement, required for it to conduct its business as presently
conducted. All such Licenses and Consents are in full force and effect and each
Company is operating in compliance therewith. The Shareholder and the Companies
have not received notice of any pending cancellation or suspension of any
thereof, nor is any cancellation or suspension thereof, to the knowledge of the
Shareholder or any Company, threatened, nor, to the knowledge of Shareholder or
any Company, does any reasonable basis exist for any such cancellation or
suspension. The applicability and validity of each such License and Consent will
not be adversely affected by the consummation of the Transactions.
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5.9 Employee Benefit Plans; ERISA.
(a) Section 5.9(a) of the Companies' Disclosure Schedule lists each
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other material
employee benefit (including, without limitation, any non-qualified plans),
bonus, deferred compensation, incentive, stock option (or other equity-based),
severance, change-in control, medical insurance, life insurance and fringe
benefit plans maintained or contributed to by any Company or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that would be
deemed a "single employer" with any Company within the meaning of Section 4001
of ERISA or Section 414 of the Code, for the benefit of any employee or former
employee of any Company (collectively, the "Plans"). The Companies and the
Shareholder have heretofore delivered to the Buyer Group, true, correct and
complete copies of each of the Plans, including all amendments to date, the
summary plan description for each Plan, any insurance contract, trust agreement
or other funding arrangement related to any Plan, any actuarial valuation for a
Plan, the most recent IRS determination letter for the Plan (if applicable), the
annual report on Form 5500 Series (including all attachments and schedules) for
the three most recent Plan years for each Plan required to file such forms, and
a list showing all former employees or dependents of employees or former
employees currently on COBRA or similar continuation coverage under any Plan.
(b) Each of the Plans complies with the applicable provisions of
ERISA, the Code and any other applicable law or regulation, and has been
administered in accordance with ERISA, the terms of the Plan and, where
applicable, the Code, except where the failure to comply would not have a
Company Material Adverse Effect. Each of the Plans intended to be "qualified"
within the meaning of Code Sections 401(a), 403(a) or 501(c)(9) has received a
timely determination letter or approval letter from the Internal Revenue Service
that it is so qualified and has, in fact, been continuously qualified under the
applicable section of the Code since the effective date of such Plan. Neither
the Companies nor the Shareholder has knowledge of any facts, circumstances or
omissions that would materially adversely affect such qualification. Except as
set forth in Section 5.9(b) of the Companies' Disclosure Schedule, none of the
Plans is subject to Title IV of ERISA. No "reportable event," as such term is
defined in Section 4043(b) of ERISA, has occurred with respect to any Plan.
There are no pending or, to the knowledge of the Companies and the Shareholder,
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 or any fiduciary thereof.
(c) No plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Companies beyond their retirement or other termination
of service (other than (i) coverage mandated by applicable law, or (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA.)
(d) With respect to each Plan, neither the Companies nor the
Shareholder nor any ERISA Affiliate has engaged in a "prohibited transaction"
(as such term is defined in Section 4975 or Section 406 of ERISA) that would
subject any Company, or the Buyer Group, directly or indirectly, to any taxes,
penalties or other liabilities resulting from prohibited transactions under Code
Section 4975 or Sections 409 or 502(i) of ERISA.
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(e) Each Company has complied with the notice and continuation of
coverage requirements of Code Section 4980B and the regulations thereunder, or
of any similar state law or regulation, with respect to each Plan that is, or
was during any taxable year of any Company for which the statute of limitations
on the assessment of federal income taxes remains open, by consent or otherwise,
a group health plan within the meaning of Section 4980B(g) of ERISA.
(f) No Plan has incurred an "accumulated funding deficiency" (as
defined in Section 302(a) of ERISA or Code Section 412(a)), whether or not
waived.
(g) Neither the Companies, the Shareholder nor any ERISA Affiliate has
incurred or would incur a "withdrawal" or "partial withdrawal," as defined in
Sections 4203 and 4205 of ERISA, from any Plan that has resulted or would result
in a withdrawal liability of any Company or any ERISA Affiliate under such Plan.
(h) On and after the Closing Date, neither the Companies nor the Buyer
Group will have any liability related to any plan, program or arrangement
maintained or contributed to by any ERISA Affiliate which is not a Plan, but
which would be a Plan if it were maintained by any Company for its employees.
5.10 Real Property.
(a) The Owned Real Property listed on Section 4.1(a) of the Companies'
Disclosure Schedule is all of the real property owned by the Companies. For
purposes of this Agreement, "Permitted Encumbrances" means
(i) easements, covenants, restrictions and similar encumbrances
that do not and could not interfere with the use of the Owned Real
Property as currently used and improved;
(ii) minor encroachments that do not adversely affect the value or
use of the Owned Real Property as currently used and improved; and
(iii) those items identified on Section 5.10(a) of the Companies'
Disclosure Schedules
Neither the Companies nor the Shareholder has received notice of any
default or breach by any Company or other owner under any Permitted Encumbrance
or other Title Defect (as defined below) affecting the Owned Real Property or
any portion thereof and no such default or breach now exists, and no event has
occurred or is continuing which with notice or the passage of time or both,
would constitute a default thereunder. As used herein, "Title Defects" shall
mean and include any mortgage, deed of trust, lien, pledge, security interest,
claim, lease, sublease, charge, option, right of first refusal, easement,
restrictive covenant, encroachment or survey defect, encumbrances, restrictions,
limitation or other documents of record.
(b) Section 5.10(b) of the Companies' Disclosure Schedule contains a
true, correct and complete list and summary of all the leases, subleases,
licenses and other agreements under which any Company uses or occupies or has
the right to use or occupy, now or in the future, any real property (such
leased, subleased or licensed real property being herein called
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collectively, the "Leased Real Property;" the Owned Real Property and the Leased
Real Property are collectively herein being referred to as the "Company Real
Property"). The Companies and the Shareholder have heretofore delivered to the
Buyer Group true and correct copies of all leases for the Leased Real Property
(collectively, the "Leases"). Each Lease is legal, valid, binding, enforceable,
in full force and effect, all rent and other sums and charges payable thereunder
are current, no written notice of default or termination under any Lease has
been received or given, no termination event or condition or default which has
remained uncured beyond applicable cure periods exists on the part of any party
under any Lease, and no event has occurred and no condition exists which, with
the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition. Each Company has a good, clear,
marketable, valid and enforceable leasehold interest in the Leased Real
Property, subject to no Liens which interfere with the operation of any
Company's business. No Affiliate of any Company is the owner of, or has any
ownership, economic or similar interest in, any Lease or other agreement
concerning the Leased Real Property except as set forth in Section 5.10(b) of
the Companies' Disclosure Schedule. Except as set forth in Section 5.10(b) of
the Companies' Disclosure Schedule, none of the Leases have been amended,
modified, extended, surrendered, terminated or assigned as of the date hereof.
Each Company maintains actual and exclusive possession of the Leased Real
Property.
(c) The Shareholder has heretofore delivered to the Buyer Group a
true, correct and complete copy of the most recent title insurance policy with
respect to each parcel of the Owned Real Property. Except as set forth in
Section 5.10(b) of the Companies' Disclosure Schedule, there are no Leases or
other agreements granting to any Person other than any of the Companies any
right to the possession, use or occupancy of the Company Real Property and no
Person has any rights to acquire, lease, sublease or otherwise occupy the
Company Real Property or any part thereof or to otherwise obtain any interest
therein, and there are no outstanding options, rights of first refusal or rights
of reverter relating to the Company Real Property or any interests therein. All
of the lands, buildings, structures and other improvements used by Companies in
the conduct of their respective businesses are included in the Company Real
Property and the Company Real Property is all the real property utilized or
employed by the Companies to conduct their respective businesses. Except as set
forth in Section 5.10(c) of the Companies' Disclosure Schedule, there are no
service or maintenance contracts, management agreements or similar agreements
relating to the Company Real Property. There has been no service, material or
other work provided or supplied to the Company Real Property that has not been
paid in full, except as set forth in Section 5.10(c) of the Companies'
Disclosure Schedule. All brokerage commissions, finders fees and all similar
charges or fees arising out of or relating to any of the Company Real Property
have been paid in full.
(d) With respect to the Company Real Property, (i) there is a right of
ingress and egress and direct access to public thoroughfares to and from the
Company Real Property, (ii) the Company Real Property has had adequate water
supply and sewer service for the present use thereof, and (iii) all curb cut and
street opening permits or licenses required to be obtained by the Companies for
vehicular access to and from any part of the Owned Real Property to any
adjoining public street have been obtained and, if required, paid for by the
Companies and are in full force and effect.
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(e) All licenses, permits, franchises, approvals, authorizations and
certificates of occupancy (collectively, the "Approvals"), of all Governmental
Entities having jurisdiction over the Company Real Property in connection with
the construction, use, occupancy and maintenance of the Company Real Property
are in full force and effect in accordance with the respective terms thereof,
and none of the Approvals has been amended, assigned, pledged or otherwise
transferred. There is no alteration, improvement or change in use of any Company
Real Property caused by any Company that would require any new Approvals or
amendment of an existing Approval. The condition and use of the Company Real
Property materially conforms to each Approval. Each Company is in material
compliance with all Laws including, without limitation, those relating to
zoning, building, subdivision and land use restrictions that are applicable to
any portion of the Company Real Property or any buildings, plants or
improvements owned by any Company (collectively, "Real Property Laws"), and no
Company has received any notice of violation or claimed violation of any Real
Property Law. To the knowledge of Shareholder and each Company, the Real
Property and their continued use, occupancy and operation as currently used,
occupied and operated does not constitute a nonconforming use under any Real
Property Law.
(f) The Company Real Property including, without limitation, all
building systems and equipment, all structural components, the roof, the
basement, all plumbing, electrical, mechanical, heating, ventilating, air
conditioning and sprinkler systems, and all sewer, waste water, storm water,
paving and parking equipment, systems and facilities, are fully installed,
operating, and, to the knowledge of the Shareholder and the Companies, in
working order and repair and adequate for the conduct of each Company's business
as presently conducted. The electricity service and all other public or private
utilities ("Utilities") serving the Company Real Property are fully installed
and operating, and, to the knowledge of the Shareholder and the Companies,
adequate for the conduct of each Company's business as presently conducted, and
all installation, connection and capital recovery charges in connection with the
Utilities which the Companies are required to pay have been paid in full.
(g) Shareholder has not received any notice of any pending, and to the
knowledge of the Shareholder and each Company (except in the case of clauses
(v)-(vi), which are to the actual knowledge of Shareholder and each Company),
there are no proposed, contemplated or anticipated, (i) annexation,
condemnation, eminent domain or similar proceeding affecting, or that may
affect, all or any portion of the Company Real Property, (ii) proceeding to
change or redefine the zoning classification of all or any portion of the
Company Real Property, (iii) imposition of any special or other assessments
against the Company Real Property for public betterments or otherwise, (iv)
special assessments affecting the Company Real Property or any portion thereof
that are or would be payable by any Company or could result in a Lien against
any of the Company Real Property, (v) change in any applicable Law relating to
the use, occupation or operation of the Company Real Property, or (vi)
tax-certiorari proceeding with respect to any Company Real Property.
(h) Neither the Companies nor the Shareholder has received notice from
any Governmental Entity, insurance company or Board of Fire Underwriters or from
any mortgagee requesting the performance of any work or alteration in respect of
the Company Real Property, and there are no outstanding requirements or
recommendations for any such work or alteration from any of the foregoing.
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(i) There has been no damage to any portion of the Company Real
Property caused by fire or other casualty that has not been completely repaired
and restored.
(j) Copies of the real estate tax bills and utility bills received by
the Companies through the Closing Date for the Company Real Property have been
delivered to the Buyer Group by the Shareholder.
(k) No Company owes any monies to any contractor, subcontractor or
materialman for labor or materials performed, rendered or supplied in connection
with any Company Real Property for which such person could legitimately impose a
lien against any of the Company Real Property.
(l) Neither the Companies nor the Shareholder has transferred any
development rights applicable to the Company Real Property.
5.11 Intellectual Property Rights; Computer Software.
(a) For the purpose of this Section 5.11, the following terms shall
have the meanings attributed thereto:
(i) "Intellectual Property" means all Patents, Copyrights, Trade
Secrets, Know-How, Trademarks, whether common law, statutory or
otherwise, domestic and foreign and all registrations and
registration applications for any such rights, and all Proprietary
Information, Internal Software Systems, domain names and uniform
resource locators (URLs).
(ii) "Patent" means all classes or types of patents, design
patents, utility patents, including, without limitation,
originals, divisions, continuations, continuations-in-part,
extensions, reexaminations, or reissues, patent applications and
invention disclosures for these classes or types of patent rights
(whether or not patentable and whether or not reduced to practice)
in all countries of the world, all of which are listed on Section
5.11(a)(ii) of the Companies' Disclosure Schedule.
(iii) "Trademark" means service marks, trademarks, trade names,
brands, product and service names, logos and other distinctive
identifications used in commerce, whether in connection with
products or services, together with all goodwill related to any of
the foregoing, including without limitation those listed on
Section 5.11(a)(iii) of the Companies' Disclosure Schedule.
(iv) "Copyright" means all original works of authorship fixed in
any tangible medium of expression under the copyright laws of the
United States and all other countries for the full term thereof
(and including all rights accruing by virtue of bilateral or
international copyright treaties and conventions), including, but
not limited to, all renewals, extensions, reversions or
restorations of copyrights now or hereafter provided for by law
and all rights to make applications for copyright registrations
and
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recordations, regardless of the medium of fixation or means of
expression, all registrations and applications being listed on
Section 5.11(a)(iv) of the Companies' Disclosure Schedule.
(v) "Internal Software Systems" means the computer software,
computer firmware and other similar or related items of automated,
computerized, and/or software systems that are used or relied on
by the Companies for their internal operations.
(vi) "Know-How" means all factual knowledge and information that
is not capable of precise, separate description but which, in an
accumulated form, after being acquired as a result of trial and
error, gives to the one acquiring it the ability to produce and
market something which one otherwise would not have known how to
produce and market with the same accuracy or precision necessary
for commercial success.
(vii) "Proprietary Information" means without limitation all
formulae, algorithms, processes, procedures, writings, data,
protocols, techniques, proposals, designs, ideas, concepts,
strategic, research and development information and related
documentation, business and other plans, research, inventions and
invention disclosure (whether patentable or unpatentable), and all
records of the foregoing, test, engineering and technical data,
proprietary information and methodologies, communications and
associated peripheral devices and resources; computer software,
programs and code, both object and source, in whatever form and
media, databases, specifications and other information processing
tangible and intangible items.
(viii) "Trade Secrets" means any Proprietary Information that
generally facilitates the production, manufacturing or sale of
products, increases revenues, or provides an advantage over the
competition and is not generally known.
(ix) "Licensed Intellectual Property" shall mean (A) Intellectual
Property which any Company uses or has the right to use pursuant
to Third Party Licenses and (B) Intellectual Property which is
publicly available for use without restriction or obligation of
any kind to any other person or entity.
(x) "Company Intellectual Property" shall mean Intellectual
Property (A) created or developed by employees of the Companies or
(B) to which the Companies have acquired, by purchase, assignment
or other transfer the unconditional, unrestricted, exclusive right
to control or prevent any and all use of such Intellectual
Property by others without the consent or approval of or payment
to, any other person.
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(xi) "Third Party Licenses" shall mean all licenses, agreements,
obligations or other commitments under which a person has granted
Companies a right to use any Intellectual Property in connection
with any Company's business but retains one or more rights to use
such Intellectual Property, all of which are listed and described
on Section 5.11(a)(xi) of the Companies' Disclosure Schedule.
(b) Except as specifically set forth in detail on Section 5.11(b) of
the Companies' Disclosure Schedule:
(i) Each Company owns all legally enforceable right, title and
interest to all Company Intellectual Property free and clear of
all liens, claims, encumbrances and other restrictions without an
obligation to pay any royalties, license fees or other amounts to
any other person or entity.
(ii) Each Company has taken commercially reasonable actions with
each individual and entity, including each employee, agent,
consultant and contractor, who has contributed to or participated
in the conception, creation and development of the Company
Intellectual Property on behalf of such Company so that each such
individual or entity either (A) has been an employee or has been
party to a duly executed "work-for-hire" agreement with such
Company, in accordance with applicable law, or (B) has executed,
or agreed to execute, valid written assignment in favor of such
Company as assignee that has conveyed to such Company all right,
title and interest in and to all tangible and intangible property
arising from such individual's or entity's work throughout the
world, in perpetuity, in each case of (A) or (B) waiving any claim
any such individual or entity may have with respect to such
tangible or intangible property.
(iii) To the knowledge of the Shareholder and each Company, there
is no unauthorized use, disclosure, infringement or
misappropriation by any third party (including any employee or
former employee of any Company) of any Company Intellectual
Property of any Company or of any right of any third party in
Licensed Intellectual Property. No Company has any agreement to
indemnify any individual or entity against any charge of
infringement of any Intellectual Property, other than
indemnification provisions normal and usual for such Company's
industry contained in purchase orders or license agreements
arising in the ordinary course of business. No Company has
received (nor does the Shareholder or any Company have any
knowledge of) any notice, claim or allegation from any person or
entity questioning the right of any Company to unconditionally
use, possess, transfer, convey or otherwise dispose of any Company
Intellectual Property or questioning the right of any Company to
use any Licensed Intellectual Property. There is no interference,
opposition, cancellation, reexamination or other contest,
proceeding, action, suit, hearing, investigation, charge,
complaint, demand, notice, claim, dispute nor any claim of
infringement, misappropriation or other
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violation by any Company of any Intellectual Property or other
proprietary rights of any other individual or entity pending or,
to the knowledge of the Shareholder and each Company, threatened
against any Company.
(iv) Each Company's use of the Company Intellectual Property in
its business as presently conducted, has not and will not, to the
knowledge of each of the Shareholder and the Companies, violate,
interfere with or infringe upon the rights of any other individual
or entity nor does such use by such Company constitute a breach of
any agreement, obligation, promise or commitment by which such
Company may be bound or constitute a violation of any laws,
regulations, ordinances, codes or statutes in any jurisdiction.
(v) No licenses or other rights have been granted by any Company,
and no Company has any obligation to grant any licenses or other
rights, with respect to any Intellectual Property. No claims have
been made by or against any Company for any violation or
infringement by others of any rights with respect to any
Intellectual Property. To the knowledge of the Shareholder and
each Company, there are no such claims which any Company may have
the right (or a reasonable basis) to make or assert.
(vi) To the knowledge of each of the Shareholder and the
Companies, each Company has all rights in Intellectual Property
necessary to conduct its business as it is currently conducted by
each Company and such rights will not be adversely affected as a
result of or in connection with the execution and delivery of this
Agreement, the Closing or the consummation of any of the
Transactions and any other transactions contemplated hereby. With
respect to Third Party Licenses, (A) each Company is not (and to
the knowledge of the Shareholder and each Company, no other party
to any such Third Party Licenses is) in breach or default with
respect thereto, and no event has occurred which with notice or
lapse of time would constitute a breach or default or permit
termination, modification or acceleration thereunder and (B) each
Company has not (and to the knowledge of the Shareholder and each
Company, no party to any such Third Party License has) repudiated
any provision thereof.
(vii) All statements and representations made by the Shareholder
and any Company in any pending Intellectual Property applications,
filings or registrations were true in all material respects as of
the time they were made. No registered copyright, registered or
unregistered trademark or service mark, or patent used in the
business (other than in circumstances where any of the Companies
has intentionally allowed registered copyright, registered or
unregistered trademark or service mark, or patent not material to
the business to lapse, expire, become abandoned or be canceled)
has lapsed, expired or been abandoned or canceled, or is subject
to any injunction, judgment, order, decree, ruling or charge or is
subject to any pending or (to the knowledge of the Shareholder and
each Company)
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threatened oppositions, cancellations, interferences or other
proceedings before the United States Patent and Trademark Office,
the Trademark Trials and Appeals Board, the United States
Copyright Office or in any other registration authority in any
country.
5.12 Tangible Personal Property; Capital Budget.
(a) Each Company has good, marketable and valid title to all tangible
personal property owned by such Company and used in its business or located on
its premises free and clear of all Liens, except as set forth on Section 5.12(a)
of the Companies' Disclosure Schedule.
(b) Each material item of machinery, equipment, tooling and other
tangible personal property owned or leased by any Company with a value in excess
of $5,000 and used in the conduct of its business (other than items of
inventory) is listed in the detailed fixed assets ledger of the Companies
attached hereto as Section 5.12(b) of the Companies' Disclosure Schedule
(collectively, the "Personal Property"). The Personal Property conforms to all
material requirements of applicable Laws. All of the items of machinery and
equipment included within the Personal Property are operational and operating in
the ordinary course of the respective Company's business, as applicable, are in
working condition and are adequate for use in the conduct of the respective
Company's business as previously conducted.
(c) Section 5.12(c) of the Companies' Disclosure Schedule includes a
true, correct and complete capital budget for the fiscal year ending December
31, 2002. Except as otherwise set forth on Section 5.12(c) of the Companies'
Disclosure Schedule, no material capital expenditures are contemplated by any
Company.
5.13 Material Contracts.
(a) Section 5.13 of the Companies' Disclosure Schedule sets forth a
true, complete and correct list of every Contract that: (i) provides for
aggregate future payments by any Company or to any Company of more than $20,000
or has an unexpired term exceeding three (3) months and may not be canceled upon
thirty (30) days notice without any liability, penalty or premium; (ii) was
entered into by any Company with (A) an officer, director or significant
employee of any Company or (B) any Persons controlled by or affiliated with any
of them; (iii) is a collective bargaining or similar agreement; (iv) requires
any Company to guaranty or indemnify the obligations of another Person or
otherwise causes any Company to be liable or otherwise responsible for the
obligations or liabilities of another or provides for a charitable contribution
by any Company; (v) involves an agreement with any bank, finance company or
similar organization; (vi) restricts any Company from engaging in any business
or activity anywhere in the world; (vii) is an employment agreement, consulting
agreement, independent sales representative agreement or similar arrangement
with any employee, consultant or agent of any Company; (viii) is a lease of real
property; or (ix) is otherwise material to the rights, properties, assets,
business or operations of any Company (the foregoing, collectively, "Material
Contracts"). The Shareholder has heretofore provided true, complete and correct
copies (or if oral, a written summary of terms and conditions) of all Material
Contracts to the Buyer, or representative forms of such Material Contracts,
where the number of such contracts makes the
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providing thereof impracticable and where the terms of each such contract are
substantially the same.
(b) Each of the Material Contracts is a legal, valid, binding,
enforceable agreement of the applicable Company, in full force and effect. With
respect to any Material Contract, there is not now and, to the knowledge of the
Shareholder and each Company, there has not been claimed or alleged by any
Person, 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 respective
Company, or to the knowledge of the Shareholder and each Company, on the part of
any other party thereto. No Consent from, or notice to, any Governmental Entity
or other Person is required in order to maintain in full force and effect any of
the Material Contracts, other than such Consents that have been obtained and are
unconditional and in full force and effect, and such notices that have been duly
given and copies of such Consents have been delivered to the Buyer Group.
5.14 Taxes.
(a) Except as set forth in Section 5.14(a) of the Companies'
Disclosure Schedule:
(i) each Company has (A) duly and timely filed or caused to be
filed or requested and received an extension of time to file with
the applicable Tax Authority each Tax Return that is required to
be filed by or on behalf of such Company or that includes or
relates to such Company, its income, sales, assets or business,
which Tax Return is true, correct and complete in all material
respects, (B) duly and timely paid in full, or caused to be paid
in full, all Taxes relating to such Company and its income, sales,
assets or business for all periods ended on or prior to the
Closing Date, whether disputed or not, regardless of whether any
such Taxes are disclosed on any Tax Return and (C) has properly
accrued on its books and records in accordance with GAAP a
provision for the payment of all Taxes due or claimed to be due or
for which such Company otherwise is or may be liable;
(ii) no Company has requested an extension of time within which to
file any Tax Return in respect of any Tax period which Tax Return
has not since been filed;
(iii) each Company has complied in all material respects with all
applicable laws relating to the payment, collection, reporting or
withholding of any Tax, and the remittance thereof to any and all
Tax Authorities, including, but not limited to, Code Sections
1441, 1442, 1445 and 3402;
(iv) there is no lien for Taxes upon any asset or property of any
Company (except for any statutory lien for any Tax not yet due);
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(v) no Company has, nor is expected to have, any liability in
respect of any Tax as a transferee or successor of any Person
(including, but not limited to, any liability arising under Treas.
Reg.ss. 1.1502-6), and no Company is, nor has been, a party to any
Tax allocation, Tax indemnification or Tax sharing contract or
agreement;
(vi) all Taxes imposed with respect to each Company's income,
sales, assets or business, or for which any Company is liable,
have been paid;
(vii) any assessment, deficiency or adjustment related to or in
connection with any Tax for which any Company is liable or with
respect to any Company's income, sales, assets or business that is
or was required to be reported to any Tax Authority has been so
reported, and any additional Taxes owed with respect thereto have
been paid;
(viii) no Tax Proceeding has ever occurred or is pending,
proposed, or, to the knowledge of the Shareholder and/or the
Companies, threatened with respect to any Tax, the payment,
collection or withholding of any Tax or any Tax Return filed by or
on behalf of any Company;
(ix) the statute of limitations for any Tax Proceeding or the
assessment or collection of any Tax for which a Company is or may
be liable or with respect to the Company's income, sales, assets
or business has never been extended or waived;
(x) there is no outstanding subpoena or request for information or
documents from any Tax Authority with respect to any Tax for which
any Company is or may be liable or with respect to such Company's
income, sales, assets or business;
(xi) no Company has entered into any agreement with any Tax
Authority (including, but not limited to, any closing agreement
within the meaning of Code Section 7121 or any analogous provision
of applicable law or any agreement relating to transfer or
intercompany pricing) or has requested or received a private
letter or other ruling from any Tax Authority relating to any Tax
for which any Company is or may be liable or with respect to any
Company's income, sales, assets or business;
(xii) no Company has entered into any contract, agreement or other
arrangement that could result, alone or in conjunction with any
other contract, agreement or other arrangement, in the payment of
any amount that would not be deductible or would cause a deferral
of deductions by reason of Code Sections 162, 279, 280G or 404 or
any similar provision of applicable law;
(xiii) neither Corporation is a "consenting corporation" within
the meaning of Code Section 341(f) or any similar provision of
applicable law and neither Corporation has agreed to have Code
Section 341(f)(2) apply
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to any disposition of a subsection (f) asset (as such term is
defined in Code Section 341(f)(4)) owned by any Company;
(xiv) no Company has any "tax-exempt use property" within the
meaning of Code Section 168(g) or Code Section 168(h) or any
similar provision of applicable law with respect to such Company,
its income, sales, assets or business;
(xv) none of the assets of any Company is required to be treated
as being owned by any other person pursuant to any provision of
applicable law, including, but not limited to, the "safe harbor"
leasing provisions of Code Section 168(f)(8) as in effect prior to
the repeal of those "safe harbor" leasing provisions;
(xvi) neither Corporation is, or ever has been, a "United States
real property holding corporation" within the meaning of Code
Section 897(c)(2) at any time during the applicable period
referred to in Code Section 897(c)(1)(A)(ii);
(xvii) no election under Code Section 338 or any similar provision
of applicable law has been made or required to be made by or with
respect to any Company (or a subsidiary, if any, of any
Corporation);
(xviii) no Company (i) has adjusted, changed, or received any
request, demand, or proposal from a Tax Authority to adjust or
change any accounting method, (ii) is required to include in
income any adjustment pursuant to Code Section 481(a) (or any
similar provision of applicable law) by reason of a change in
accounting method, and (iii) has neither deferred any income to a
period after the Closing Date that has economically accrued or is
otherwise attributable to a period prior to the Closing Date nor
accelerated any deductions into a period ending on or before the
Closing Date that will or may economically accrue after the
Closing Date;
(xix) there is no power of attorney in effect relating to any Tax
for which any Company is or may be liable or with respect to such
Company's income, sales, assets or business;
(xx) no jurisdiction where any Company does not file a Tax Return
has made or threatened to make a claim that any Company is
required to file a Tax Return for such jurisdiction;
(xxi) no Company has elected to be treated as an "S" corporation
for federal, state and local income Tax purposes since the date of
its incorporation and effective for each Tax period thereafter up
to and including the Closing Date and has been so qualified at all
times since its date of incorporation; and
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(xxii) Wagner-ELX has, at all times since its formation, been
treated as a partnership for federal, state and local income Tax
purposes.
(b) Section 5.14(b) of the Companies' Disclosure Schedule sets forth a
list of all formal elections currently in effect for which a filing with a Tax
Authority has been made (or made within the five most recent Tax periods ending
on or prior to the Closing Date) with respect to any Tax or Tax Return. Section
5.14(b) of the Companies' Disclosure Schedule hereto sets forth each other
jurisdiction for which ELX has made an "S" election (or similar election), or
for which an "S" election (or similar election) is effective, including the date
of the election, its effective date, the date of any termination of such
election, if any, and the cause of such termination.
(c) Section 5.14(c) of the Companies' Disclosure Schedule sets forth a
list of all jurisdictions (foreign and domestic) in which any Tax Return has
been filed by or on behalf of any Company, or with respect to any Company's
income, assets or business since December 31, 1996 and a description of each
such Tax Return and the period for which it was filed.
(d) No income, franchise or other Tax Returns filed on behalf of any
Company has been the subject of Tax Proceedings.
(e) The Shareholder has provided to the Buyer Group: (i) a copy of all
Tax Returns filed since December 31, 1996, and (ii) all audit reports, closing
agreements, letter rulings, or technical advice memoranda relating to any Taxes
for which each Company is or may be liable with respect to such Company's
income, sales, assets or business.
(f) For purposes of this Agreement:
(i) "Corporation" means any of Cycam or ELX.
(ii) "Post-Closing Period" means any Tax period that ends after
the Closing.
(iii) "Pre-Closing Period" means any Tax period that ends on or
before the Closing.
(iv) "Tax" means any tax, charge, fee, levy, deficiency or other
assessment of whatever kind or nature including, without
limitation, any net income, gross income, profits, gross receipts,
excise, real or personal property, sales, ad valorem, withholding,
social security, retirement, excise, employment, unemployment,
minimum, estimated, severance, stamp, property, occupation,
environmental, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other
tax, duty, fee, assessment or charge of any kind whatsoever,
imposed by any Tax Authority, including any liability therefor as
a transferee (including without limitation under Code Section 6901
or any similar provision of applicable law), as a result of Treas.
Reg.ss. 1.1502-6 or any similar provision of applicable law, or as
a result of any tax sharing
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or similar agreement, together with any interest, penalties or
additions to tax relating thereto.
(v) "Tax Authority" means any branch, office, department, agency,
instrumentality, court, tribunal, officer, employee, designee,
representative, or other Person that is acting for, on behalf or
as a part of any foreign or domestic government (or any political
subdivision thereof) that is engaged in or has any power, duty,
responsibility or obligation relating to the legislation,
promulgation, interpretation, enforcement, regulation, monitoring,
supervision or collection of or any other activity relating to any
Tax or Tax Return.
(vi) "Tax Proceeding" means any audit, examination, review,
reassessment, litigation or other administrative or judicial
proceeding relating to any Tax for which any Company is (or is
asserted to be) or may be liable, the collection, payment or
withholding of any Tax, or any Tax Return filed by or on behalf of
any Company.
(vii) "Tax Return" means any return, election, declaration,
report, schedule, information return, document, information,
opinion, statement, or any amendment to any of the foregoing
(including without limitation any consolidated, combined or
unitary return) submitted or required to be submitted to any Tax
Authority.
(viii) "Treas. Reg." means any temporary, proposed or final
regulation promulgated under the Code.
5.15 Affiliated Party Transactions. Except for obligations arising under
this Agreement, as of the Closing Date neither the Companies nor any of their
respective officers or directors, or any of their respective spouses or
immediate family (collectively, the "Affiliates"), will have, directly or
indirectly, on an individual or joint basis any obligation to or cause of action
or claim against any Company. Neither the Shareholder nor any Affiliate of the
Shareholder (other than the Companies) is, or since January 1, 2000 has owned
(of record or beneficially) an equity interest or any other financial or profit
interest in, a Person that has (a) had business dealings or a financial interest
in any transaction with any of the Companies or (b) engaged in competition with
any of the Companies in any market presently served by them. Except as set forth
in Section 5.15 of the Companies' Disclosure Schedule, neither the Shareholder
nor any Affiliate of the Shareholder (including, without limitation, the
Companies) has any agreement, arrangement, contract or other understanding with
any of the Companies.
5.16 Environmental Matters.
(a) Each Company is in compliance with, and its business has been
conducted in compliance with, all Environmental Laws (as defined below), except
to the extent that non-compliance would not result in a Company Material Adverse
Effect.
(b) No Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C.ss.6901 et
-23-
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.ss.9601 et seq., or on any similar
state list of sites requiring investigation or cleanup.
(c) Neither the Shareholder nor any Company has received any notice
that remains pending or outstanding with respect to any Company's business or
any Site from any Governmental Entity or Person alleging that such Company is
not in compliance with any Environmental Law.
(d) There has been no Release (as defined below) of a Hazardous
Substance (as defined below) by any Company at, from, in, to, on or under any
Site and, to the knowledge of the Shareholder and the Companies, no Hazardous
Substances are present in, on, about or migrating to or from any Site that are
reasonably likely to give rise to an Environmental Claim (as defined below)
against any Company.
(e) Except as set forth in Section 5.16 of the Companies' Disclosure
Schedule, 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.
(f) Each Company has all Environmental Permits (as defined below)
necessary for the conduct of its business. A list of such Environmental Permits
is set forth on Section 5.16 of the Companies' Disclosure Schedule. The
Shareholder has delivered copies of all such Environmental Permits to the Buyer
Group.
(g) There are no past or pending or, to the knowledge of the
Shareholder and the Companies, threatened, Environmental Claims (as defined
below) against any Company, and the Shareholder and the Companies are not aware
of any facts or presently existing circumstances that are reasonably likely to
result in an Environmental Claim against any Company.
(h) Neither any Company, any entity previously owned by any Company,
nor any predecessor of any Company, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that is reasonably likely to result in an
Environmental Claim against any Company.
(i) Except as set forth on Section 5.16 of the Companies' Disclosure
Schedule, at any Site, to the knowledge of Shareholder and each Company, there
are no (i) underground storage tanks, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos containing material, or (iv)
recognized environmental condition or historic recognized environmental
condition (as defined by ASTM E1527-00).
(j) All 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 any Company with respect to any Site or any
transportation, handling or disposal of any Hazardous Substance have been
delivered to the Buyer Group prior to execution of this Agreement. A list of
such reports is set forth in Section 5.16 of the Companies' Disclosure Schedule.
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(k) The Shareholder has no actual knowledge of any Environment-related
adverse changes to the condition of any Site from the condition of such Site as
described in the Phase I Environmental Assessment dated April 17, 2001 conducted
by Eckland Consultants Inc.
(l) 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 notice by a person or entity alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (A)
the presence, or release into the environment, of any material or form of energy
at any location whether or not owned by the Companies or (B) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law; (iii) "Environmental Law" means any and all Laws relating to the protection
of health and the Environment, worker health and safety, and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Substances, whether now existing or subsequently amended or enacted,
and the state analogies thereto, all as amended or superseded from time to time;
and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance; (iv)
"Environmental Permit" means any Licenses or Consents required by any
Governmental Entity under or in connection with any Environmental Law; (v)
"Hazardous Substance" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other 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 any Company, any predecessors of
any Company or any entities previously owned by any Company, including all soil,
subsoil, surface waters and groundwater thereat.
5.17 No Brokers. Neither the Shareholder nor any Company 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.
5.18 Notes and Accounts Receivable. Except as set forth in Section 5.18 of
the Companies' Disclosure Schedule, all notes and accounts receivable of each
Company have arisen, and as of the Closing Date will have arisen, from bona fide
transactions in the ordinary course of each Company's business consistent with
past practice. Except as set forth in Section 5.18 of the Companies' Disclosure
Schedule and except for the allowance for doubtful accounts and similar reserves
set forth in the Latest Balance Sheet, each of the notes and
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accounts receivable of each Company either has been or will be collected in
full, without any set-off or counterclaim, within one-hundred twenty (120) days
after the day on which it first becomes due and payable.
5.19 Inventories. Except to the extent reserved for in the Latest Balance
Sheet, the inventories of each Company contain no items not salable or usable in
the ordinary course of business, as such business is currently being conducted
under current market conditions. No Company is under any liability or obligation
with respect to the return of inventory or merchandise in the possession of
wholesalers, distributors, retailers or other customers. All inventory items are
located on the Company Real Property. Since the date of the Latest Balance
Sheet, no inventory items have been sold or disposed of except in the ordinary
course of business.
5.20 Product Liability Claims. Other than as set forth in Section 5.20 of
the Companies' Disclosure Schedule, (i) no claim arising out of any injury to
individuals or property as a result of the ownership, possession or use of any
product manufactured or purchased and sold, leased, or delivered by any of the
Companies is pending or, to the knowledge of the Shareholder and each Company,
threatened, nor, to the knowledge of Shareholder or any Company, is there any
reasonable basis for any claim against any Company or against any other party,
(ii) currently there are no, and during the last five (5) years there have been
no, product liability claims seeking damages in excess of $1,000 asserted
against any Company (or in respect of which any Company has received notice)
with respect to the products of such Company's business or the Company, and
(iii) the Companies are not subject to claims that involve amounts in excess of
$50,000, in the aggregate.
5.21 Warranties and Returns.
(a) Except as set forth in Section 5.21(a) of the Companies'
Disclosure Schedule, no product manufactured or purchased and sold, leased, or
delivered by any of the Companies ("Delivered Products") is subject to any
contractual commitment, guaranty, warranty (express or implied), indemnity, or
other similar obligation pursuant to any contract to which any Company is bound
(collectively, "Product Obligations").
(b) Except to the extent reserved for in the Latest Balance Sheet,
each Delivered Product has been in material conformity with all Product
Obligations and all applicable laws, and none of the Companies has any Product
Obligation liability or liability with respect to similar obligations that may
be imposed by applicable law.
(c) Except as set forth in Section 5.21(c) of the Companies'
Disclosure Schedule, there is not presently, nor has there been since December
31, 1996, any failure or defect in any Delivered Product 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 Delivered
Product, nor has there been any acceptance of returned or defective goods of any
Company in excess of $50,000 in any calendar year for all such transactions with
respect to products manufactured or purchased and sold, leased or delivered by
any Company since December 31, 1997.
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5.22 Assets Utilized in the Business. The assets, properties and rights
owned, leased or licensed by each Company and used in connection with each
Company's business as of the Closing Date (collectively, the "Utility Assets"),
and all the agreements to which each Company is a party relating to each
Company's business, constitute all of the properties, assets and agreements
utilized and employed by each Company in connection with the operation and
conduct by each Company of its business as presently conducted. The Utility
Assets constitute all of the assets, tangible and intangible, of any nature
whatsoever, necessary to operate the business conducted by the Companies in the
manner presently operated by them.
5.23 Insurance. Section 5.23 of the Companies' Disclosure Schedule contains
a complete and correct list of all policies of insurance of any kind or nature
covering each Company, including policies of life, fire, theft, casualty,
product liability, workmen's compensation, business interruption, employee
fidelity and other casualty and liability insurance, indicating the type of
coverage, name of insured, the insurer, the expiration date of each policy, the
amount of coverage and whether on an "occurrence" or "claims made" basis. All
such policies (i) are in full force and effect, (ii) are sufficient for
compliance with all material requirements of law and under Material Contracts
which require insurance coverage to be maintained, and (iii) are legal, valid,
binding, and enforceable policies. All premiums with respect to such insurance
policies are currently paid in accordance with the policy terms. Complete and
correct copies of such policies have been furnished to the Buyer Group. All such
insurance policies or comparable coverage shall be continued in full force and
effect on identical terms through the Closing Date. Except as set forth in
Section 5.23 of the Companies' Disclosure Schedule, since December 31, 1997, no
Company has been denied any insurance coverage which it has requested, and no
insurance coverage of any Company has been discontinued.
5.24 Delivery of Documents; Corporate and Partnership Records. To the best
knowledge of the Shareholder, the Shareholder has heretofore delivered to the
Buyer Group true, correct and complete copies of all documents, instruments,
agreements and records that are (i) of the types delivered to Buyer under this
Article 5 or in the Companies' Disclosure Schedule to this Agreement and (ii) of
the types requested by the Buyer Group, and copies of the minute, stock and
partnership record books of each Company. The minute, stock, and partnership
record books of each Company contain true, correct and complete copies of the
records of all meetings and consents in lieu of a meeting of the Board of
Directors (and all committees thereof), shareholders and all partners of each
Company, as applicable, since the date of its incorporation or formation.
5.25 Customers. Section 5.25 of the Companies' Disclosure Schedule sets
forth the ten customers of the Companies with the highest dollar volume of
purchases from the Companies during each of the twelve months ended December 31,
2001 and December 31, 2000 indicating the approximate total sales to each of
those customers. Except as set forth on Section 5.25 of Companies' Disclosure
Schedule, there has not been any material adverse change in the business
relationship of any Company with any such customer, and the Shareholder and each
Company is not aware of any threatened loss of any such customer.
5.26 Labor Matters. No Company is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses, vacation, holiday or
sick pay, or other direct
-27-
compensation for any services performed for them to the date hereof or amounts
required to be reimbursed to such persons. No Company will by reason of the
Transactions contemplated hereby or anything done prior to the date hereof be
liable to any of its employees for so-called "severance pay" or any other
payments whether upon termination of employment of any employee or otherwise,
except as described in Section 5.26 of the Companies' Disclosure Schedule.
Section 5.26 of the Companies' Disclosure Schedule describes each Company's
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection the termination of employment. Each Company
is in material compliance with all applicable laws and regulations respecting
labor, employment, fair employment practices, work place safety and health,
terms and conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices against any Company pending
or, to the knowledge of the Shareholder and each Company, threatened against any
Company, nor does Shareholder or any Company have knowledge of any reasonable
basis for any such claim. There are no labor strikes, slow-downs or stoppages or
other labor troubles pending or threatened with respect to the employees of any
Company, no union has been recognized with respect to the representation of any
employee of any Company, no representation questions exist, there is no
collective bargaining agreement binding on any Company and there is no agreement
which restricts any Company from relocating or closing any or all of its
businesses or operations, there are no grievances asserted by any employee,
current or former, that might have a material adverse effect upon any Company's
business, or the financial condition or prospects of any Company; nor is there
pending any arbitration proceeding arising out of or under any labor union
agreement. No Company has experienced any work stoppage during the last five (5)
years.
5.27 Bank Accounts. Section 5.27 of the Companies' Disclosure Schedule sets
forth the names and locations of all banks, depositories and other financial
institutions in which each Company has an account or safe deposit box and the
names of all persons authorized to draw thereon or to have access thereto.
5.28 Directors, Officers and Certain Employees. Section 5.28 of the
Companies' Disclosure Schedule 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 each Company who is a party to an employment agreement
with any Company or who received annual compensation during each Company's most
recently ended fiscal year and for the period of January 1, 2002 through the
Closing Date, or who is entitled to receive compensation, on an annualized
basis, whether or not paid to date, in excess of $50,000. The Shareholder and
the Companies are not aware of any employee in any Company's senior management
who intends to terminate his or her employment relationship with any Company,
either as a result of the Transactions or otherwise.
5.29 No Misstatements or Omissions. No representation or warranty by
Shareholder contained in this Agreement and/or other Transaction Document
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
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5.30 Investment Undertaking. The Shareholder confirms that the shares of
MedSource Common Stock to be issued to him pursuant to this Agreement will be
"restricted securities" within the meaning of Rule 144 ("Rule 144") of the
General Rules and Regulations under the Securities Act of 1933, as amended (the
"Act"). The Shareholder is acquiring such shares for his own account and not
with a view to their distribution within the meaning of Section 2(11) of the
Act. The Shareholder understands that such shares issued hereunder may not be
disposed of for a period of at least one year (and possibly two years) pursuant
to Rule 144. The Shareholder understands that he 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 Act and
applicable state securities laws or an exemption from registration is available.
Shareholder is an accredited investor (as such term is defined in Rule 501(a) of
the General Rules and Regulations under the Act) and a sophisticated investor
who (a) has such knowledge and experience in financial and business matters such
that he is capable of evaluating the merits and risks of this investment in the
securities being acquired hereunder and (b) to the extent Shareholder has deemed
appropriate, has obtained independent professional financial advice to assist
him in evaluating the merits and risks of this investment in the securities
being acquired hereunder. Shareholder and his agents have had access to such
books and records of MedSource as they have requested and the opportunity has
been made available to the Shareholder and his representative(s), if any, to ask
questions of and receive answers from representatives(s) of the Buyer Group
concerning MedSource and the terms and conditions of the Transaction and to
obtain additional information necessary to verify the accuracy of the written
materials provided to him by the Buyer Group.
5.31 Business of ELX and Wagner-ELX. ELX and Wagner-ELX do not conduct any
business with, or engage in any business-related activities with, any persons
other than Cycam.
5.32 No Brokers. Neither Company nor the Shareholder has employed, or
otherwise engaged, any financial advisor, 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.
5.33 Cross References in Disclosure Schedule. Any fact or item disclosed in
one section of the Companies' Disclosure Schedule that clearly also relates to
another section or sections of the Companies' Disclosure Schedule shall be
deemed to be disclosed with respect to such other section, sections, subsection
or subsections of the Companies' Disclosure Schedule.
6. Representations and Warranties of the Buyer, MedSource LLC and
MedSource. As a material inducement to the Shareholder and the Companies to
enter into this Agreement and consummate the Transactions, each of the Buyer,
MedSource and MedSource LLC, jointly and severally hereby makes to the
Shareholder the representations and warranties contained in this Article 6.
6.1 Organization of the Buyer Group. Each of MedSource and Buyer are
corporations and MedSource LLC is a limited liability company. Each of
MedSource, MedSource LLC and Buyer is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business in the manner and in the places as now
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being conducted. Each of the Buyer, MedSource and MedSource LLC is duly
qualified or licensed to do business as a foreign organization and is in good
standing in each other jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing necessary. The Buyer Group
has delivered to the Shareholder true, complete and correct copies of the
Certificate of Incorporation and By-laws of each of MedSource and the Buyer and
the Certificate of Formation and Limited Liability Company Operating Agreement
of MedSource LLC, as currently in effect (all of such documents to be
collectively referred to herein as the "Buyer Group Organizational Documents"),
and no amendments thereto are pending. Neither MedSource, MedSource LLC nor the
Buyer is in violation of its Buyer Group Organizational Documents.
6.2 Authorization; Validity of Agreement. Each of the Buyer, MedSource LLC
and MedSource has the requisite corporate or limited liability company power and
authority, as the case may be, to execute, deliver and perform this Agreement
and each of the other agreements, instruments, documents and certificates to be
executed, delivered and performed by each of them pursuant to this Agreement,
including but not limited to any item referred to in Article 8 (collectively,
with this Agreement, the "Buyer Acquisition Agreements") to which each of
MedSource, MedSource LLC or the Buyer, as the case may be, is or may be a party,
and to assume and perform its obligations hereunder and thereunder and to
consummate the Transactions and any other transactions contemplated hereby or
thereby. The execution, delivery and performance by each of the Buyer, MedSource
LLC and MedSource of this Agreement and the other Buyer Acquisition Agreements
to which the Buyer, MedSource LLC or MedSource is a party and the consummation
of the Transactions have been duly and validly authorized by the Board of
Directors of each of MedSource and the Buyer and by the sole member of MedSource
LLC, and, where necessary, the stockholders or members of MedSource, MedSource
LLC and the Buyer, and no other corporate or other proceedings on the part of
the Buyer, MedSource LLC and MedSource are necessary to authorize the execution,
delivery and performance of this Agreement and the other Buyer Acquisition
Agreements and the consummation of the Transactions by the Buyer, MedSource LLC
and MedSource, as the case may be. This Agreement and all the other Buyer
Acquisition Agreements are being duly executed and delivered by each member of
the Buyer Group party thereto. This Agreement and the Buyer Acquisition
Agreements are valid and binding obligations of Buyer, MedSource LLC and
MedSource, as applicable, enforceable against each of them in accordance with
their respective terms.
6.3 No Violations, Consents and Approvals.
(a) The execution, delivery and performance of each of this Agreement
and the other Buyer Acquisition Agreements by each of the Buyer, MedSource LLC
and MedSource party hereto and thereto do not, and the consummation by them of
the Transactions and any other transactions contemplated hereby or thereby will
not: (i) violate any provision of any Buyer Group Organizational Document; (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any material Contract to which the Buyer, MedSource LLC or MedSource is a
party or by which the Buyer, MedSource LLC or MedSource or any of their
respective properties or assets may be bound or otherwise subject, or (iii)
assuming the accuracy of the representations and warranties in
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Section 5.30 hereof, violate any Law applicable to the Buyer, MedSource LLC or
MedSource or any of their respective properties or assets.
(b) Assuming the accuracy of the representations and warranties in
Section 5.30 hereof, no filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity or other Person
is required in connection with the execution, delivery and performance of this
Agreement or any of the other Buyer Acquisition Agreements by any of the Buyer,
MedSource LLC and MedSource, or the consummation by any of the Buyer, MedSource
LLC or MedSource of the Transactions and any other transactions contemplated
hereby and thereby, except filings under applicable state securities laws, if
any, which filings shall be made by the Buyer Group in compliance with
applicable law.
6.4 Capital Structure.
(a) The authorized capital stock of MedSource without giving effect to
the Transactions, consists of:
(i) 1,000,000 shares of preferred stock, par value $.0l per share
(the "Preferred Stock"), of which 6,000 shares have been
designated as Series E (the "Series E Preferred Stock") and 4,000
shares have been designated as Series F Preferred Stock (the
"Series F Preferred Stock"); and
(ii) 70,000,000 shares of MedSource Common Stock.
(b) As of the date hereof, there were issued and outstanding
26,930,703 shares of MedSource Common Stock, no shares of Series E Preferred
Stock and no shares of Series F Preferred Stock.
6.5 Valid Issuance of MedSource Shares, Etc. Each of the MedSource Shares
to be issued in connection with the Transactions pursuant to the terms of
Section 2.2 hereof will, upon such issuance, be duly authorized, validly issued,
fully paid and non-assessable. Upon delivery of any MedSource Shares to the
Shareholder pursuant to the terms of the Escrow Agreement, such MedSource Shares
will be registered in the name of the Shareholder, free and clear of any and all
Liens, except those arising under applicable securities laws, those contemplated
by the Buyer Acquisition Agreements and those arising by reason of any action by
Shareholder.
6.6 Public Information. MedSource has made available to the Shareholder a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by it with the Securities and Exchange
Commission (the "SEC") (as any such documents have since the time of their
original filing been amended, the "MedSource Filings") since January 17, 2002,
which are all the documents (other than preliminary material) that it was
required to file with the SEC since such date. As of their respective dates, the
MedSource Filings did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the MedSource Filings complied in all
material respects with the applicable requirements of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated
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under such statutes. The financial statements contained in the MedSource Filings
were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated (except as may be
indicated in the notes thereto, or, in the case of unaudited financial
statements, as permitted by Form 10-Q), and fairly present the consolidated
financial position of MedSource and its consolidated subsidiaries at said dates
and the consolidated results of operations and cash flows of MedSource and its
consolidated subsidiaries for the periods then ended.
6.7 No Brokers. Neither the Buyer nor MedSource has employed, or otherwise
engaged, any financial advisor, 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.
7. Other Agreements of the Parties.
7.1 Preparation and Filing of Tax Returns; Taxes.
(a) To the extent permitted under applicable law, Buyer and each of
the Corporations shall close or terminate (or cause to close or terminate), as
of the Closing Date, each Tax period relating to each Corporation or each
Corporation's income, sales, assets, business or other activities. The
Shareholder and the Buyer Group covenant to do any and all things necessary and
required so that the income and loss of ELX for the tax year in which the
Transactions close is assigned for all Tax purposes to each short taxable year
under "closing of the books" method, as contemplated under Section 1362 of the
Code and the Treasury Regulations promulgated thereunder, including but not
limited to, filing an election under Section 1362(e)(3) of the Code.
(b) To the extent not filed prior to Closing, Buyer shall prepare (or
cause to be prepared) each Tax Return required for each Corporation for each
Pre-Closing Period. At least thirty (30) days prior to the date on which such
Tax Return is due to be filed (including any extensions) with the appropriate
Tax Authority pursuant to applicable law, Buyer shall deliver such Tax Return to
Shareholder for Shareholder's review and comment. Upon the expiration of such
thirty (30) day review period, Buyer shall file (or cause each Corporation to
file) such Tax Return and pay (or cause each Corporation to pay) to the
appropriate Tax Authority any Taxes due with respect to such Tax Return. At
least three (3) days prior to the filing of such Tax Return, Shareholder shall
pay to Buyer an amount equal to the Taxes due with respect to such Tax Return,
if, and to the extent that, such Taxes are not reflected in the reserve for a
Tax liability (other than any reserve for deferred Taxes established to reflect
timing differences) on the Latest Balance Sheet. If the federal income Tax
Return for Cycam for the Pre-Closing Tax Period that includes the Closing Date
or any state income Tax Return for Cycam for a Pre-Closing Tax Period that
includes the Closing Date (each, a "Refund Return") reflects an overpayment of
Tax (each, a "Pre-Closing Refund"), then a refund shall be requested on each
such Refund Return in an amount equal to the Pre-Closing Refund determined for
such Refund Return. In the event the Shareholder reasonably anticipates that a
Pre-Closing Refund will be reflected on a Refund Return prior to its preparation
by the Buyer, the Corporations and/or the Shareholder shall provide, at or (with
respect to the Shareholder) promptly after Closing, a completed Form 4466 (or
any equivalent form under state law) to be filed immediately following
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the Closing requesting an expedited payment of such Pre-Closing Refund. Upon
receipt of any such Pre-Closing Refund by Corporations or the Buyer Group, the
amount of any such Pre-Closing Refund shall be paid to the Shareholder, or, if
paid to the Shareholder, the amount of any such Pre-Closing Refund shall be
retained by the Shareholder. If any Refund Return is audited and the result of
such audit, after all reasonably available appeals are exhausted, is that such
Pre-Closing Refund exceeds the amount of the actual refund determined by the
audit, the Shareholder will then promptly remit to the Buyer the difference
between the Pre-Closing Refund and the actual refund.
(c) Buyer shall prepare (or cause to be prepared) and file (or cause
to be filed) each Tax Return required for the Corporations for each Post-Closing
Period. At least three (3) days prior to the date on which such Tax Return is
due to be filed (including any extensions) with the appropriate Tax Authority
pursuant to applicable law, Shareholder shall pay to Buyer an amount equal to
the Taxes on such Tax Return to the extent such Taxes relate to the portion of
such Post-Closing Tax Period ending on and including the Closing, if, and to the
extent that, the portion of such Taxes are not reflected in the reserve for Tax
liability (other than any reserve for deferred Taxes established to reflect
timing differences) on the Latest Balance Sheet.
(d) In the case of a Tax payable for a Post-Closing Period, the
portion of such Tax that relates to the portion of Post-Closing Period ending on
and including the Closing shall (i) in the case of a Tax (other than a Tax based
upon or related to income, employment, sales or other transactions, franchise or
receipts) be deemed to be the amount of such Tax for the entire Post-Closing
Period multiplied by a fraction, the numerator of which is the number of days in
the Post-Closing Period ending on and including the Closing and the denominator
of which is the number of all of the days in the Post-Closing Period, and (ii)
in the case of a Tax based upon or related to income, employment, sales or other
transactions, franchise or receipts, be deemed equal to the amount which would
be payable if the Post-Closing Period ended on the Closing. Any credits relating
to a Post-Closing Tax Period shall be taken into account as though the
Post-Closing Tax Period ended on the Closing.
7.2 Covenants of the Parties.
(a) With respect to ELX, Shareholder shall not take or fail to take
any action or permit ELX to take or fail to take any action which could result
in the termination of any "S" corporation election (or similar election) of ELX
prior to the Closing.
(b) The Buyer Group shall promptly forward to the Shareholder a copy
of all written communications from any Tax Authority received by the Buyer Group
relating to Cycam, ELX and/or the Shareholder for any Pre-Closing Period. The
Shareholder shall promptly forward to the Buyer Group a copy of all written
communications from any Tax Authority received by the Shareholder relating to
any Pre-Closing Period for which any member of the Buyer Group is or may be
liable.
(c) After the Closing Date, the Buyer Group and the Shareholder shall
each make available to the other, upon reasonable request, all information,
records or other documents relating to any Tax relating to the Companies and the
Shareholder and shall preserve all such information, records or other documents
until the date that is six (6) months after the expiration
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of the statute of limitations applicable to such Tax. In addition, the Buyer
Group and the Shareholder shall cooperate with each other upon request in
connection with all matters relating to the preparation of any Tax Returns
relating to the Companies and in connection with any Proceeding referred to in
this provision. Any investigation, review, comment or discussion by the Buyer
Group related to or in connection with the payment of Taxes, the preparation of
Tax Returns or drafts of Tax Returns, the filing of Tax Returns, any Tax
Proceeding or any provision of this Section 7.2 shall not affect the indemnity
provisions of Article 10 or limit the scope of such provisions (including but
not limited to Section 10.1) in any way, or affect any other representations,
warranties or obligations of the Shareholder. Each party shall bear its own
costs and expenses in complying with the provisions of this Section 7.2(c).
(d) Each Company hereby agrees and covenants that any and all existing
Tax sharing agreements or similar arrangements, written or unwritten, binding on
such Company and its subsidiaries shall be terminated on or before the Closing
Date and no payments pursuant to any such Tax sharing agreement or similar
arrangement shall be made on or after such termination.
(e) Buyer and the Shareholder shall duly and timely elect pursuant to
Section 338(h)(10) of the Code (and any comparable provision of applicable Law)
to treat the sale of the ELX Shares as a sale of assets by ELX while it is an
"S" corporation (or its equivalent) for income and franchise tax purposes.
Within sixty (60) days after the Closing Date, Buyer and the Shareholder shall
jointly prepare and sign any required forms and schedules, including a
computation of the modified aggregate deemed sale price and the adjusted
grossed-up basis (and any comparable amounts under applicable Law) and the
allocation thereof among the assets of ELX deemed to have been purchased in
relation to the relative value thereof, as determined by the Buyer in a manner
that shall comply with Section 338 of the Code and the Treasury Department
regulations promulgated thereunder. Buyer and the Shareholder shall duly and
timely file any document necessary to effectuate such election, including
without limitation Treasury Department Form 8023 (and any similar forms required
under state or local Laws relating to Tax) in accordance with the requirements
of Section 338 of the Code (or state or local Laws relating to Tax, as the case
may be). The parties shall report the deemed sale consistent with such
allocation for all financial, Tax or other purposes, shall not take any position
inconsistent therewith and shall cooperate with each other to take all actions
necessary and appropriate as may be required to effect and preserve such
election. Each party shall promptly notify the others of any Tax Proceeding
relating to the computation of the modified aggregate deemed sale price or the
adjusted grossed-up basis (or any comparable amount under applicable law) or the
allocation thereof, and will keep the other parties apprised of the progress
thereof. Shareholder shall also pay any Tax imposed on ELX attributable to the
making of the election, including (i) any Tax imposed under Code ss.1374, (ii)
any tax imposed under Treas. Reg. ss.1.338(h)(10)-1(d)(5), or (iii) any state,
local or foreign Tax imposed on ELX's gain, and Shareholder shall indemnify
Buyer Group against any such Taxes.
7.3 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interests) (except for any Pennsylvania realty transfer tax payable in
connection with the purchase and sale of the Owned Real Property, which will be
allocated in accordance with Section 4.5 hereof) incurred in connection with
this Agreement shall be paid by Shareholder when due, and Shareholder shall, at
his own expense,
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file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees.
7.4 Non-Disclosure of Confidential Information. All information, data and
material furnished by one party hereto to the other, whether prior to or
following the date hereof, is confidential. Except for disclosures which may be
necessary to satisfy conditions of this Agreement, each party will not, and no
agent representing any party to which such information, data and material may be
furnished will, disclose or otherwise make available, at any time, any such
information, data or material to any other person whomsoever who does not have a
confidential relationship with the party furnishing such information. Each party
receiving any information, data or material hereunder will protect any and all
such information, data and material with a high degree of care to prevent the
disclosure thereof, and if, for any reason, the Transactions are not
consummated, all information, data and material furnished to any party or its
representatives hereunder, and all copies thereof, will be delivered promptly to
the furnishing party.
7.5 Intentionally Omitted.
7.6 Intentionally Omitted.
7.7 Other Actions. Each of the parties hereto shall use all reasonable
efforts to (a) take, or cause to be taken, all actions, (b) do, or cause to be
done, all things, and (c) 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 and any other transactions contemplated hereby.
7.8 Required Consents. Shareholder shall use his best reasonable efforts to
obtain all Required Consents. The Required Consents shall be obtained and
provided to the Buyer prior to, or if approved in writing by the Buyer, as soon
as practicable after, the Closing Date. Upon receipt by the Shareholder, the
Shareholder shall promptly provide the Buyer with (a) copies of all filings made
with any Governmental Entity or other Person or any other information supplied
in connection with this Agreement and the Transactions and (b) all Consents
obtained from any party to any Contract or any Lease and any Approval with
respect to the Company Real Property.
7.9 Intentionally Omitted.
7.10 Interests in Real Property.
(a) On or prior to the Closing Date, the Shareholder shall deliver to
the Buyer Group the following documents with respect to the transfer of
interests in the Owned Real Property:
(i) a validly issued permanent certificate of occupancy for each
of the buildings comprising a part of the Company Real Property,
if any;
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(ii) all guarantees and warranties which any Company has received
in connection with any work or services performed or equipment
installed in the aforementioned buildings and all improvements
erected on the Company Real Property, if any;
(iii) true and complete maintenance records for the Company Real
Property;
(iv) such affidavits, indemnities and information (including,
without limitation, an owner's title affidavit and a
non-imputation affidavit) as the Buyer's title insurance company
shall require in order to issue any policies of title insurance in
the form desired by the Buyer Group; and
(v) a set of plans and specifications of the buildings and all
improvements comprising a part of the Company Real Property.
(b) All real estate taxes and special assessments pertaining to the
Company Real Property shall be prorated in accordance with Section 4.5.
7.11 Intentionally Omitted.
7.12 Actions Prior to Closing.
(a) Prior to or at the Closing:
(i) Each Company and the Shareholder shall cause the repayment of
all of the debt due to the Shareholder, any Company, any owner of
equity of any Company or institutions pursuant to promissory
notes, revolving credit facilities, term loans and notes, lines of
credit, capitalized leases or other similar arrangements
outstanding as of the Closing Date, all of which is set forth on
Section 7.12(a) of the Companies' Disclosure Schedule (all of the
foregoing collectively referred to as the "Debt"). Such repayment
will be made from the aggregate Available Cash (as defined below)
of each Company with respect to each such Company's Debt and
otherwise in accordance with this Section 7.12(a). Notwithstanding
the foregoing, at the Closing each Company that, as of the
Closing, shall owe any amounts to the Pennsylvania Economic
Development Financing Authority ("PEDFA"), shall deliver to JP
Morgan Trust Company, National Association, as trustee (the
"Trustee") under trust indentures dated as of April 1, 2000 and
April 1, 2002 (the "Trust Indentures"), notices of defeasance (the
"Defeasance Notices") relating to such Debt to PEDFA in which such
Company shall instruct the Trustee to take all steps necessary to
defease the bonds pursuant to the Trust Indentures in connection
with the PEDFA Debt, including a draw on a letter of credit
established by PNC Bank ("PNC") established in connection with
such Debt to PEDFA (the "PNC LOC"). For purposes hereof, the
"Available Cash" of any Person as of any time shall mean all cash
(as such term is used in accordance with GAAP) of such Person at
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such time, but shall, in any event, exclude all checks that such
Person has written but have not cleared as of such time and shall
include all third party checks that such Person has deposited but
have not cleared as of such time (subject to collection);
provided, however, that any amounts owed by any Company to PEDFA
shall be deducted from the amounts underlying the PNC LOC for
purposes of determining such Company's Available Cash.
(ii) The Shareholder shall deliver to the Buyer Group a statement
(the "Closing Statement") setting forth, with respect to each
Company as of the Closing Date (and prior to giving effect to the
Closing), either (I) the amount of any shortfall with respect to
the Debt of such Company (determined by subtracting the amount of
such Company's Available Cash from the amount of such Company's
outstanding Debt) (the "Shortfall") or (II) the amount by which
the Available Cash of each Company exceeds the Debt of such
Company (determined by subtracting the aggregate amount of such
Company's outstanding Debt from such Company's Available Cash)
(the "Surplus").
(b) At the Closing, either:
(i) with respect to any Shortfall set forth on the Closing
Statement of any Company, the amount of such Shortfall shall be
paid by Buyer to each payee of the Debt to which such Shortfall
relates and an amount equal to the sum of any such Shortfall shall
be deducted from the ELX Stock Purchase Cash Consideration or the
Cycam Stock Purchase Cash Consideration, as the case may be;
provided, however, that if any of the ELX Stock Purchase Cash
Consideration (with respect to ELX) or the Cycam Stock Purchase
Cash Consideration (with respect to Cycam) is not sufficient to
cover the Shortfall of ELX or Cycam, as the case may be, then any
such excess of such Shortfall over such cash consideration shall
be deducted (y) first, from the consideration paid with respect to
the other Companies, pro rata to their relative amounts, and (z)
second, if such cash consideration paid with respect to the other
Companies is insufficient, by reducing the number of MedSource
Shares to be issued to the Shareholder pursuant to Section 2.2 by
such number of MedSource Shares having an aggregate Fair Market
Value, as of the Closing, equal to the uncovered portion of the
Shortfall; or
(ii) with respect to any Surplus of any Company, the amount of
such Surplus shall be added to the cash proceeds delivered at the
Closing to the Shareholder with respect to the applicable Company
for which any such Surplus occurs.
(c) Not more than ninety (90) days after the Closing Date, the Buyer
may notify the Shareholder and Wagner-ELX in writing (a "Dispute Notice") that
the Buyer disputes one or more of the computations of Shortfall or Surplus (as
the case may be) set forth on any
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Closing Statement. Such Dispute Notice shall set forth the nature and basis of
the dispute. In the event that the Buyer, on the one hand, and the Shareholder
and Wagner-ELX, on the other hand, shall fail to agree on the computations of
the Shortfall or Surplus (as the case may be) of any Company within forty-five
(45) days after the Shareholder and Wagner-ELX shall have been given the Dispute
Notice, then the national office of PricewaterhouseCoopers (the "Auditor") shall
make the final determination with respect to the amount of the final computation
of the Shortfall or Surplus (as the case may be) that is the subject of the
dispute. For each computation of the amount of the Shortfall or Surplus (as the
case may be) of a particular Company, the Auditor shall only be authorized to
choose between the number set forth on the Closing Statement and the number set
forth in the Dispute Notice. The decision of the Auditor shall be final and
binding on all parties hereto. The costs and expenses of the Auditor shall be
paid by the party whose position was not selected by the Auditor. Promptly
following the determination of the Auditor, the party that owes a portion of the
purchase price hereunder shall pay all amounts due to the party that is owed
such portion hereunder, together with interest compounded annually at the rate
of 8% per year from the Closing Date to the date of such payment.
7.13 Access to Information.
(a) Upon reasonable notice, the Shareholder and each Company shall
afford to the officers, employees, accountants, counsel, financial advisors and
other representatives of the Buyer Group reasonable access during normal
business hours, during the period prior to the Closing Date, to all its
properties, books, contracts, commitments, records, officers and employees and,
during such period, the Shareholder shall furnish promptly to the Buyer Group
all other information concerning each Company and its business, properties and
personnel as the Buyer Group may reasonably request. The Buyer Group will hold
any such information obtained pursuant to this Section 7.13 in confidence in
accordance with, and shall otherwise be subject to, the provisions of Section
7.4 hereof.
(b) Upon reasonable notice, each member of the Buyer Group shall
afford to the officers, employees, accountants, counsel, financial advisors and
other representatives of each Company reasonable access during normal business
hours, during the period prior to the Closing Date, to all of its properties,
books, contracts, commitments, records, officers and employees and, during such
period, the Buyer Group shall furnish promptly to such persons all other
information concerning each member of the Buyer Group and its business,
properties and personnel as the Shareholder may reasonably request. Each Company
and the Shareholder will hold any such information obtained pursuant to this
Section 7.13 in confidence in accordance with, and shall otherwise be subject
to, the provisions of Section 7.4 hereof.
7.14 Intentionally Omitted.
7.15 Distributed Property. Notwithstanding anything in this Agreement to
the contrary, prior to or simultaneous with the Closing the Companies may
distribute to the Shareholder the assets and properties described in Section
7.15 of the Companies' Disclosure Schedule; provided, however, that such
property shall be distributed to the Shareholder "AS IS, WHERE IS" and no
Company shall make any representation or warranty whatsoever to the Shareholder
concerning such property.
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7.16 Shareholder's Property. The Buyer Group acknowledges that the personal
property described in Section 7.16 of the Companies' Disclosure Schedule is
owned by the Shareholder in his individual capacity and may be removed from the
Facilities by the Shareholder at any time.
7.17 Listing of MedSource Shares. Within 15 days following the Closing, the
Buyer Group shall take all action necessary to cause the listing of the
MedSource Shares on the Nasdaq National Market.
8. Closing Deliveries.
8.1 Deliveries of the Shareholder. At the Closing, the Shareholder shall
deliver the following items to the Buyer Group:
(a) A certificate duly executed by a duly authorized officer or
general partner (as the case may be) of each Company, attesting as to (i) the
full force and effect of resolutions duly and validly adopted by its Board of
Directors, shareholder or general partners (as the case may be) attached to such
certificate as an exhibit regarding the authorization of such Company's
execution and delivery of this Agreement and the other Transaction Documents to
which such Company is a party and the consummation of the Transactions and any
other transactions contemplated hereby and thereby, (ii) the full force and
effect of the Company Organizational Documents of such Company attached to such
certificate as an exhibit, and (iii) the incumbency, name and signature of each
of such Company's executive officers or general partners (as the case may be);
(b) The opinion of Metz Lewis LLC, counsel to the Shareholder, in the
form attached hereto as Exhibit 8.1(b);
(c) The opinion of Roger J. Ecker, general counsel to the Companies
and the Shareholder, in the form attached hereto as Exhibit 8.1(c);
(d) Documentation reasonably satisfactory to Buyer's counsel that the
Shareholder has caused ELX to distribute to the Shareholder or an assignee of
the Shareholder all of the partnership interest owned by ELX in Wagner-ELX;
(e) The Escrow Agreement and five undated, blank stock transfer powers
(each with a "medallion" signature guarantee reasonably acceptable to counsel to
the Buyer Group), all duly executed by the Shareholder;
(f) A certificate with respect to each Corporation from the Secretary
of the Commonwealth of the Commonwealth of Pennsylvania attesting as to its
valid existence as of a date near the Closing Date;
(g) The Closing Statements referred to in Section 7.12(b) hereof;
(h) Stock certificates representing the Cycam Shares and the ELX
Shares, duly endorsed in blank or accompanied by stock transfer powers and with
all requisite stock transfer tax stamps attached;
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(i) The documentation required by Section 7.10 hereof;
(j) A special warranty deed from Wagner-ELX in the form attached
hereto as Exhibit 8.1(j) conveying marketable title to the Owned Real Property
to the Buyer, subject only to Permitted Exceptions;
(k) A warranty bill of sale conveying all right, title and interest of
Wagner-ELX in and to the Assets;
(l) An affidavit of the Shareholder and each Company regarding liens,
judgments, residence, tax liens, bankruptcies, parties in possession, survey and
mechanics' or materialmens' liens and other matters affecting title to the Owned
Real Property and/or as may be reasonably required by Fidelity National Title
Insurance Company of New York to delete the so-called "standard exceptions" from
the title insurance policy to be issued to the Buyer for the Owned Real
Property, and to issue a non-imputation endorsement to the title insurance
policy to the Buyer;
(m) A transferor's certification stating that neither the Shareholder
nor Wagner-ELX is a "foreign person," "foreign partnership," "foreign trust" or
"foreign estate" as those terms are defined in Section 1445 of the Internal
Revenue Code, and containing such additional information as may be required
thereunder;
(n) An instrument terminating all leases, including the lease by and
between Wagner-ELX and Cycam dated December 18, 1990, as amended; (o) The
Non-Competition Agreement duly executed by the Shareholder;
(p) UCC-3s and pay-off letters with respect to the Debt to PEDFA and
related Satisfaction Pieces, the Defeasance Notices, a termination of the
assignment of rents, leases and profits relating to the PEDFA Debt and a
statement from PNC dated as of the Closing Date stating that the funds held in
deposit account(s) with PNC for the benefit of the Companies are sufficient to
satisfy the Corporations' Debt to PEDFA as stated in the Trustee's payoff
letters and thereby satisfy any drawn funds on the PNC LOC in connection with
the Debt the Corporations owe to PEDFA;
(q) UCC-3s for Technology Development and Education Corporation debt;
(r) Pay-off letters from Donald J. Wagner and each Company with
respect to debt owed to them;
(s) Resignations, as of the Closing Date, of all officers and
directors of each of Cycam and ELX;
(t) The funds flow memorandum (the "Funds Flow Memorandum"), in the
form attached hereto as Exhibit 8.1(t), duly signed by each Company and by the
Shareholder.
8.2 Deliveries of the Buyer Group. At the Closing, Buyer shall, and
MedSource shall cause the Buyer to, deliver the following items to the
Shareholder:
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(a) A certificate of the Secretary or another officer of each member
of the Buyer Group attesting as to (i) the full force and effect of resolutions
duly and validly adopted by its Board of directors and (if applicable)
stockholder(s) evidencing the authorization of such member of the Buyer Group's
execution and delivery of this Agreement and the other Transaction Documents to
which any member of the Buyer Group is a party and the consummation of the
Transactions and any other transactions contemplated hereby and thereby, (ii)
the full force and effect of the Buyer Group Organizational Documents of such
member of the Buyer Group attached to such certificate as an exhibit and (iii)
the incumbency, names and signatures of the officers of such member of the Buyer
Group authorized to sign this agreement and the other Transaction Documents to
be delivered hereunder;
(b) The opinion of Jenkens & Gilchrist Parker Chapin LLP, counsel to
the Buyer Group, in the form attached hereto as Exhibit 8.2(b);
(c) The Escrow Agreement, duly executed by Buyer;
(d) The Non-Competition Agreement, duly executed by Buyer;
(e) A certificate with respect to each of the Buyer, MedSource and
MedSource LLC from the Secretary of State of the State of Delaware attesting as
to its valid existence as of a date near the Closing Date;
(f) The Cycam Stock Purchase Cash Consideration, the ELX Stock
Purchase Cash Consideration and the Wagner-ELX Asset Purchase Cash
Consideration;
(g) An instruction letter, addressed to MedSource's transfer agent,
regarding the issuance of the MedSource Shares in accordance with Section 2.2;
and
(h) The Funds Flow Memorandum, duly signed by each of MedSource,
MedSource LLC and the Buyer.
9. Intentionally Omitted.
10. Indemnification.
10.1 Survival of Representations, Warranties and Covenants of the
Shareholder. Notwithstanding any right of the Buyer Group to fully investigate
the affairs of each Company and the Shareholder and notwithstanding any
knowledge of facts determined or determinable by the Buyer Group pursuant to
such investigation or right of investigation, the Buyer Group has the right to
rely fully upon the representations and warranties of the Shareholder contained
in this Agreement or in any other Transaction Document; provided, however, that
the Buyer Group shall promptly notify the Shareholder if Buyer Group, prior to
the Closing, has actual knowledge of any clear and unambiguous breach of any
representation, warranty or covenant of the Shareholder and any Company. 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 eighteen (18) month 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 10.5, which such liability shall
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thereafter remain an obligation of the party against whom such claim is
asserted. The foregoing notwithstanding, the representations and warranties (x)
contained in Sections 5.2 and 5.3 hereof or with respect to fraud by any Company
or the Shareholder shall survive in perpetuity, and (y) contained in Section
5.14 or that relate to Inter-Op acetabular shell products sold to Sulzer Medical
and its affiliated entities (collectively, "Sulzer") shall survive until the
date that is sixty (60) days after the expiration of the statute of limitations
applicable to any liability relating thereto, which such liability shall remain
an obligation of the party against whom such claim is asserted. The obligation
of Shareholder or any Company in connection with any covenants required to be
performed or complied with by the Shareholder or any Company contained in this
Agreement, including, without limitation, obligations that arise under this
Article 10 or in any other Transaction Document (other than the Seller
Pre-Closing Covenants defined below) shall survive the execution and delivery of
this Agreement and the Closing hereunder and shall thereafter continue in
perpetuity in full force and effect. The indemnification obligation of the
Shareholder under Section 10.3(b) hereof with respect to the covenants contained
in Sections 7.8 [Required Consents], and 7.12 [Actions Prior to Closing] of this
Agreement (the "Seller Pre-Closing Covenants") shall survive until the eighteen
(18) month anniversary of the Closing Date, except for any liability for a
breach of any such covenant 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 10.5 hereof, which such liability shall thereafter remain an
obligation of Shareholder.
10.2 Survival of Representations, Warranties and Covenants of the Buyer
Group. Notwithstanding any right of the Shareholder to fully investigate the
affairs of the Buyer Group and notwithstanding any knowledge of facts determined
or determinable by the Shareholder pursuant to such investigation or right of
investigation, the Shareholder has the right to rely fully upon the
representations and warranties of the Buyer Group contained in this Agreement or
in any other Transaction Document; provided, however, that the Shareholder shall
promptly notify the Buyer Group if the Shareholder, prior to the Closing, has
actual knowledge of any clear and unambiguous breach of any representation,
warranty or covenant of the Buyer Group. 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
eighteen (18) month 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 10.5, which such
liability shall thereafter remain an obligation of the party against whom such
claim is asserted. The foregoing notwithstanding, the representations and
warranties contained in Sections 6.2 and 6.4 hereof or with respect to fraud by
the Buyer Group shall survive in perpetuity. The obligation of any member of the
Buyer Group in connection with any covenants required to be performed or
complied with by any member of the Buyer Group contained in this Agreement,
including, without limitation, obligations that arise under this Article 10 or
in any other Transaction Document shall survive the execution and delivery of
this Agreement and the Closing hereunder and shall thereafter continue in
perpetuity in full force and effect.
10.3 Indemnification by the Shareholder. Subject to the provisions of this
Article 10, the Shareholder shall indemnify and defend each member of the Buyer
Group, any affiliated entity (including, without limitation, Cycam and ELX) and
each of their respective officers, directors, employees, stockholders, agents,
advisors or representatives (each, a "Buyer
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Indemnitee") against, and hold each Buyer Indemnitee harmless from, any loss,
liability, obligation, deficiency, damage, Tax or expense including, without
limitation, interest, penalties, reasonable attorneys' and consultants' fees and
disbursements (collectively, "Damages"), that any Buyer Indemnitee 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):
(a) Any breach of any representation or warranty made by the
Shareholder or any Company contained in this Agreement or in any other
Transaction Document or in respect of any claim by a third party, made based
upon facts alleged that would constitute any such breach;
(b) The Shareholder's or any Company's failure to perform or to comply
with any covenant required to be performed or complied with by the Shareholder
or any Company contained in this Agreement or in any other Transaction Document;
(c) The sale to Sulzer of Inter-Op acetabular shells manufactured
prior to the Closing, including without limitation, (i) the recall by Sulzer of
its acetabular shells for hip implants, and (ii) all claims, complaints and/or
litigation brought in connection therewith; and
(d) Any Taxes for which any Company is liable with respect to any
Pre-Closing Period (whether or not shown on any Tax Return) with respect to
periods or portions thereof ending on or before the Closing Date, including
Taxes accruable upon income earned through the Closing Date which have not been
paid in full or accrued as current liabilities for Taxes on the Closing
Statement.
10.4 Indemnification by the Buyer Group. Subject to the provisions of this
Article 10, the Buyer Group and each member of the Buyer Group shall, jointly
and severally, indemnify and defend the Shareholder and his heirs, executors,
administrators, estate, agents, advisors or representatives (each, a
"Shareholder Indemnitee") against, and hold each Shareholder Indemnitee harmless
from, any Damages that any Shareholder Indemnitee may suffer or incur arising
from, related to or in connection with any of the following:
(a) Any breach of any representation or warranty made by any member of
the Buyer Group contained in Article 6 of this Agreement or in any other
Transaction Document or in respect of any claim by a third party made based upon
facts alleged that would constitute any such breach;
(b) The failure of any member of the Buyer Group to perform or to
comply with any covenant required to be performed or complied with by any member
of the Buyer Group contained in this Agreement or in any other Transaction
Document; and
(c) The Assumed Liabilities.
10.5 Indemnification Procedures.
(a) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damages referred to in Sections 10.3 or 10.4 hereof, such
indemnified party shall, if a claim for indemnification in respect thereof is to
be made against an indemnifying party pursuant to this
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Article 10, give written notice to the latter of the commencement of such claim
or Proceeding, setting forth in reasonable detail, to the extent known to the
indemnified party, the nature thereof, the relevant facts underlying the claim,
the amount of damages at issue and the basis upon which such party seeks
indemnification hereunder; provided, however, that the failure of any
indemnified party to give such notice shall not relieve the indemnifying party
of its obligations under such section, except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice.
(b) Except as provided in Section 10.5(d) below, in the case of any
such Proceeding by a third party against an indemnified party, the indemnifying
party may, upon at least ten (10) days notice to the indemnified party, 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 the settlement or compromise thereof (without the written consent of the
indemnifying party). Anything in this Section 10.5(b) notwithstanding, if both
the indemnifying party and the indemnified party are named as parties or subject
to such Proceeding and either such party reasonably determines in good faith
with advice of counsel that there may be one or more legal defenses available to
it that are different from or additional to those available to the other party
or that a material conflict of interest between such parties may exist in
respect of such Proceeding, then the indemnifying party may decline to assume
the defense on behalf of the indemnified party or the indemnified party may
retain the defense on its own behalf, and, in either such case, after notice to
such effect is duly given hereunder to the other party, the indemnifying party
shall be relieved of its obligation to assume the defense on behalf of the
indemnified party, but shall be required to pay any legal or other expenses
including, without limitation, reasonable attorneys' fees and disbursements,
incurred by the indemnified party in such defense.
(c) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
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
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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.
(d) In the case of any Proceeding by a third party in connection with
any matter described in Section 10.3(c) hereof, the Buyer Group shall have the
right to control the defense thereof, with counsel reasonably satisfactory to
Shareholder; provided, however, that the control by the Buyer Group of such
defense shall in no way otherwise relieve Shareholder of any obligation to
indemnify the Buyer Group pursuant to this Article 10; provided, further,
however, that Shareholder shall have the right, but not the obligation, to have
Shareholder's counsel monitor any such Proceeding at the sole cost of the
Shareholder. Shareholder shall use all reasonable efforts to cooperate with the
Buyer Group and any agents of and counsel to the Buyer Group (including any
insurer and its counsel) at all times during any such Proceedings.
10.6 Limitations on Indemnification by the Shareholder.
(a) The Shareholder shall have indemnification obligations respecting
Damages that any Buyer Indemnitee suffers or incurs based upon, or arising out
of, relating to or in connection with any matters listed in Section 10.3(a)
(other than the representations and warranties contained in Sections 5.2, 5.3
and 5.14 hereof for which there is no limitation) if and only to the extent that
the aggregate of all Damages suffered or incurred by the Buyer Indemnitees
pursuant to Section 10.3(a) exceeds $250,000. Anything herein to the contrary
notwithstanding, the Shareholder shall have no liability with respect to Damages
that any Buyer Indemnitee suffers or incurs based upon, or arising out of,
relating to or in connection with any matters listed in Sections 10.3(a) (other
than the representations and warranties contained in Sections 5.2 and 5.3
hereof, for which the limitation is set forth in Section 10.6(c) below), 10.3(b)
(with respect only to the Seller Pre-Closing Covenants), 10.3(c) and 10.3(d),
for and to the extent that the aggregate amount of such Damages exceeds the
lesser of (i) $10,000,000 or (ii) $3,000,000 plus (x) all proceeds received by
the Shareholder (or a transferee thereof) from the sale of any MedSource Shares
and (y) the Fair Market Value of the MedSource Shares not yet sold by the
Shareholder (determined as of the date of any claim by the Buyer Group).
(b) The representations and warranties (and the related Companies
Disclosure Schedule) set forth in this Agreement and in the other Transaction
Documents are the sole and exclusive representations and warranties made by the
Shareholder and the Companies to the Buyer Group in connection with the
Transactions. The Shareholder and the Companies shall not be deemed to have made
any representation or warranty other than as expressly made in this Agreement or
the other Transaction Documents. Without limiting the foregoing, Shareholder and
the Companies make no representation or warranty with respect to any information
or documents made available to the Buyer Group or its counsel, accountants,
advisors or representatives except for the express representations and
warranties made in this Agreement (and the related Companies' Disclosure
Schedule) and the other Transaction Documents.
(c) The maximum aggregate indemnification obligation of Shareholder
with respect to Section 10.3 (a) (with respect to the representations and
warranties contained in Sections 5.2 and 5.3 hereof) and Section 10.3(b) (other
than with respect to the Seller Pre-Closing Covenants) shall be limited to the
value of the aggregate number of MedSource Shares
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delivered to the Escrow Agent in accordance with Section 2.2 (the value of such
MedSource Shares to be determined in accordance with Section 10.6(a)(ii)(y)),
the Cycam Stock Purchase Cash Consideration, the ELX Stock Purchase Cash
Consideration and the Wagner-ELX Asset Purchase Cash Consideration.
10.7 Payment by Shareholder of Indemnification Amounts.
(a) At the election of the Shareholder, the indemnification
obligations of the Shareholder under this Article 10 may be satisfied in cash or
with the MedSource Shares; provided, however, that if the Shareholder shall have
sold any MedSource Shares prior to the satisfaction by him of such
indemnification obligation, the percentage of the indemnification amount that
may be paid by the Shareholder in MedSource Shares at that time shall not exceed
the percentage of the unsold MedSource Shares out of the total MedSource Shares
deposited in the Escrow Fund at Closing. To the extent that any MedSource Shares
are held in the Escrow Fund, such indemnification amounts shall be withdrawn
from the Escrow Fund in the event Shareholder has elected to satisfy an
indemnification obligation with such MedSource Shares prior to the time that
indemnification is sought directly from the Shareholder. The election of
Shareholder to satisfy an indemnification obligation in cash or MedSource Shares
shall be made at the time payment is due, as provided in Section 10.5.
(b) The value of any MedSource Shares delivered in payment of any
indemnification obligation of the Shareholder shall be for all purposes the Fair
Market Value of the MedSource Shares as of the Closing Date.
(c) Notwithstanding anything in this Article 10 to the contrary, if
any Buyer Indemnitee suffers any Damages and receives payment from the
Shareholder for such Damages, then Buyer shall subrogate to the Shareholder any
rights of reimbursement for such Damages that the Buyer may have (i) under any
commercial general liability or umbrella or excess insurance policy issued to
any Company, provided that the insurer under any such policy has acknowledged a
duty to indemnify and defend the Buyer, and (ii) from Sulzer, to the extent that
Sulzer has specifically agreed to indemnify the Companies or the Buyer in
connection with such matters, provided that the Buyer Group shall have no
obligation whatsoever to attain or attempt to attain any such agreement.
10.8 Limitations on Indemnification by the Buyer Group.
(a) The Buyer Group shall have indemnification obligations respecting
Damages that any Shareholder Indemnitee suffers or incurs based upon, or arising
out of, relating to or in connection with any matters listed in Section 10.4(a)
only if and only to the extent that the aggregate of all Damages suffered or
incurred by the Shareholder Indemnitees pursuant to Section 10.4(a) exceeds
$250,000. Anything herein to the contrary notwithstanding, the Buyer Group shall
have no liability with respect to Damages that any Shareholder Indemnitee
suffers or incurs based upon, or arising out of, relating to or in connection
with any matters listed in Section 10.4(a), for and to the extent that the
aggregate amount of such Damages exceeds $10,000,000.
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(b) The representations and warranties (and the related MedSource
Disclosure Schedule) set forth in this Agreement and in the other Buyer
Acquisition Agreements are the sole and exclusive representations and warranties
made by the Buyer Group to the Shareholder in connection with the Transactions.
The Buyer Group shall not be deemed to have made any representation or warranty
other than as expressly made in this Agreement or the other Buyer Acquisition
Agreements. Without limiting the foregoing, the Buyer Group makes no
representation or warranty with respect to any information or documents made
available to the Shareholder or its counsel, accountants, advisors or
representatives except for the express representations and warranties made in
this Agreement (and the related MedSource Disclosure Schedule) and the other
Buyer Acquisition Agreements.
10.9 Other Indemnification Provisions.
(a) Certain representations and warranties of the Shareholder and the
Companies contained in this Agreement and in certain agreements, documents and
instruments executed and delivered in connection with this Agreement include
either (or both) a Materiality Qualification (as defined below) or a Knowledge
Qualification (as defined below), and the representation in Section 5.10(g) of
this Agreement is qualified by a reference to "notice" received by the
Shareholder. Notwithstanding any such qualification, for the purpose of
determining whether the Buyer Group has sustained Damages, all of such
representations and warranties shall be read as if such Materiality
Qualifications and Knowledge Qualifications did not exist (and Section 5.10(g)
will be read as if the word "notice" did not exist) and all such Damages shall
be included for purposes of determining whether the threshold in section 10.6(a)
was met. Accordingly, Damages recoverable under this Section 10 shall be
determined as though (i) no Materiality Qualification and no Knowledge
Qualification were contained in or applied with respect to any representation or
warranty contained in this Agreement, and (ii) the word "notice" did not exist
in Section 5.10(g).
For example, if any Company, since the date of the Latest Balance
Sheet, has suffered a physical damage not required to be disclosed pursuant to
section 5.6 because it is not material and such damage costs the Buyer $25,000
after the Closing, although there might arguably be no breach of representation
if it were to be determined that such $25,000 is non-material, the $25,000 cost
of such physical damage shall nevertheless be deemed to be Damages and shall be
included for purposes of determining whether the threshold in section 10.6(a)
was met and thereafter whether the Shareholder is obligated to indemnify the
Buyer as provided herein. If the amount of such Damages was $300,000, then
whether such amount was deemed material or not, the Shareholder shall be
obligated to pay the Buyer Group $50,000 (assuming no other claims).
As used herein:
(i) the term "Materiality Qualification" means any term,
expression, word or combination thereof that qualifies or limits a
representation, warranty or other statement made with respect to
"materiality," "in all material respects," "Company Material
Adverse Effect," or insofar as any misstatement of such
representation, warranty or other statement would
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not result in or reflect a "material adverse effect," or in all
such other words or terms of similar import, and
(ii) the term "Knowledge Qualification" means any term,
expression, word or combination thereof that qualifies or limits a
representation, warranty or other statement made with respect to
the "knowledge", or in all such other words or terms of similar
import, of the party making the representation, warranty or other
statement.
(b) The amount of any Damages for which indemnification is provided
under this Article 10 shall be net of any amounts recovered by the indemnified
party under such person's insurance policies with respect to such Damages, after
giving effect to any impact of such claims on the indemnified party's premiums
and other costs of insurance. Each party hereby waives, to the extent permitted
under applicable laws and not otherwise prohibited by said party's insurance
policies, any subrogation rights that its insurer may have with respect to any
indemnified Damages. Except as provided in Section 10.7(c) hereof, nothing
herein shall require any party to maintain or seek recovery under any insurance
policy for any purpose, nor limit the right of an indemnified party to
indemnification as provided in this Article 10 in respect of Damages which may
be recoverable under policies of insurance, but have not been so recovered;
provided, however, that to the extent of any such recovery by an indemnified
party after payment of Damages by an indemnifying party, the indemnified party
shall repay the indemnifying party, reasonably promptly after such recovery, the
amount of Damages previously paid and so recovered.
(c) The Buyer Group and the Shareholder each acknowledge and agree
that, from and after the Closing, their sole and exclusive remedy, with respect
to any and all claims relating to the matters described in Section 10.3(a),
10.3(b) (but only with respect to Seller Pre-Closing Covenants and not excluding
any injunctive relief that may be obtained in respect thereof), 10.3(c) and
10.3(d) and Section 10.4(a) and 10.4(c) hereof (but, for the avoidance of doubt,
not covenants or fraud) shall be pursuant to the indemnification provisions set
forth in this Article 10. In furtherance of the foregoing, the Buyer Group and
the Shareholder hereby waive, from and after the Closing, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
they may have against each other relating to the matters described in Section
10.3 and Section 10.4 hereof (but, for the avoidance of doubt, not covenants or
fraud) arising under or based upon any federal, state or local statute, law
(including common law), ordinance, rule or regulation or otherwise.
(d) It is the intent of the parties that any amounts paid under
Sections 10.3 and 10.4 hereof shall represent an adjustment of the purchase
price and the parties will report such payments consistent with such intent.
(e) Each member of the Buyer Group and Shareholder hereby consents to
the non-exclusive jurisdiction of any court in which a Proceeding is brought
against any indemnified person for purposes of any claim that an indemnified
person may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on each member of
the Buyer Group and Shareholder with respect to such a claim anywhere in the
world.
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11. Miscellaneous.
11.1 Transaction Fees and Expenses. All costs, fees and expenses incurred
by the Companies and the Shareholder in connection with this Agreement and the
Transactions shall be borne by the Shareholder. All costs, fees and expenses
incurred by the Buyer Group in connection with this Agreement and the
Transactions shall be borne by the Buyer Group.
11.2 Notices. Any notice, demand, request or other communication which is
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail, or (c) by personal delivery to such party at
the following address:
if to the Buyer Group, to:
MedSource Technologies, Inc.
110 Cheshire Lane, Suite 100
Minneapolis, Minnesota 55305
Attention: Richard J. Effress
Facsimile No.: (952) 807-1235
with a copy to:
Jenkens & Gilchrist Parker Chapin LLP
405 Lexington Avenue
New York, New York 10174
Attn: Edward R. Mandell, Esq.
Facsimile No.: (212) 704-6288
if to the Shareholder, to:
Donald J. Wagner
149 Johnson Road
P.O. Box 278
Houston, PA 15342
in each case, with a copy to:
Metz Lewis LLC
11 Stanwix Street, 18th Floor
Pittsburgh, PA 15222
Attn: LeRoy L. Metz, II, Esq.
Facsimile No: (412) 918-1199
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or such other address as either party hereto may at any time, or from time to
time, direct by written notice given to the other party in accordance with this
Section 11.2. The date of giving or making of any such notice or demand shall
be, in the case of clause (a)(i), the date of the receipt, in the case of clause
(a)(ii), five (5) business days after such notice or demand is sent, and, in the
case of clause (b), the business day next following the date such notice or
demand is sent.
11.3 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.
11.4 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.
11.5 Governing Law. This Agreement shall be governed by, and interpreted
and enforced in accordance with, the laws of the State of Delaware.
11.6 Remedies. In the event of any actual or prospective breach or default
by any party hereto, the other parties shall be entitled to equitable relief,
including remedies in the nature of injunction and specific performance. All
remedies hereunder are cumulative and not exclusive. Nothing contained herein
and no election of any particular remedy shall be deemed to prohibit or limit
any party from pursuing, or be deemed a waiver of the right to pursue, any other
remedy or relief available now or hereafter existing at law or in equity
(whether by statute or otherwise) for such actual or prospective breach or
default, including the recovery of damages. Notwithstanding the foregoing, any
claims subject to the exclusivity of remedies provision of Section 10.9(c)
hereof shall be governed thereby.
11.7 Severability. The provisions hereof are severable and if any provision
of this Agreement shall be determined to be legally invalid, inoperative or
unenforceable in any respect by a court of competent jurisdiction, then the
remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any such invalid,
inoperative or unenforceable provision shall be deemed, without any further
action on the part of the parties hereto, amended and limited to the extent
necessary to render such provision valid, operative and enforceable.
11.8 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.
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11.9 Assignment.
(a) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto, their heirs and their
respective successors and permitted assignees. Except for the permitted
assignees, neither party shall have the right to assign any rights or delegate
any duties hereunder without the consent of the other party. Permitted assignees
of the rights hereunder of the Buyer or MedSource shall include any Person
controlling, controlled by or under common control of the Buyer or MedSource.
(b) Notwithstanding the foregoing, the Buyer Group (including each
subsequent assignee of the Buyer Group) shall have the right to assign any or
all of its rights and obligations hereunder to any other Person who acquires all
or substantially all of the assets and business of the Buyer Group (or a
subsequent assignee of the Buyer Group); provided that the assignor shall not be
released from any of its obligations hereunder by reason of any such assignment.
(c) Notwithstanding any provision of this Agreement to the contrary,
Shareholder hereby acknowledges and agrees that all of the covenants,
representations, warranties and indemnities of Shareholder under this Agreement,
and under any other agreement or instrument contemplated hereby to which
Shareholder is a party may be collaterally assigned to any and all lenders to
the Buyer Group or any of their Affiliates, any and all of whom may enforce
their rights and remedies in connection with any such collateral assignment or
realization thereon to the extent provided in the applicable security agreements
and other debt instruments or at law or in equity.
11.10 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 the
parties hereto.
11.11 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, representations, warranties, understandings,
discussions, negotiations or arrangements of any nature relating thereto,
including, without limitation, the Letter of Intent dated as of July 9, 2002
from MedSource to Shareholder and the Companies.
11.12 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.
11.13 Counterparts; Facsimile Signatures. 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. This Agreement
may be executed by facsimile.
11.14 Publicity and Disclosure. No press release or other public
disclosure, either written or oral, of the Transactions, shall be made by a
party to this Agreement without the prior written consent of Buyer and
MedSource.
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11.15 Jurisdiction; Service of Process. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the State of
Delaware, County of New Castle, or, if it has or can acquire subject matter
jurisdiction, in the United States District Court for the District of Delaware,
and each of the parties consents to the non-exclusive jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
[Remainder of this page left blank intentionally]
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The parties have executed and delivered this Stock and Asset Purchase
Agreement as of the date first written above.
MEDSOURCE TECHNOLOGIES
PITTSBURGH, INC.
By: /s/
-------------------------------------
Name: Daniel Croteau
Title: Vice President - Corporate
Development
MEDSOURCE TECHNOLOGIES, LLC
By: MedSource Technologies, Inc., its sole member
By: /s/
-------------------------------------
Name: Daniel Croteau
Title: Vice President - Corporate
Development
MEDSOURCE TECHNOLOGIES, INC.
By: /s/
-------------------------------------
Name: Daniel Croteau
Title: Vice President - Corporate
Development
[Signatures continued on next page]
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CYCAM, INC.
By: /s/
-------------------------------------
Name: Donald J. Wagner
Title: President
ELX, INC.
By: /s/
-------------------------------------
Name: Donald J. Wagner
Title: President
WAGNER-ELX
By: /s/
-------------------------------------
Donald J. Wagner, its General Partner
By: /s/
-------------------------------------
Karen Harrison. Its General Partner
SHAREHOLDER:
By: /s/
-------------------------------------
Donald J. Wagner
2