EXHIBIT 2.10
[Execution Copy]
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AGREEMENT AND PLAN OF MERGER
by and among
Thermat Acquisition Corp.
(the "Buyer"),
and
its sole shareholder,
MedSource Technologies, Inc.,
("MedSource")
and
Thermat Precision Technology, Inc.,
(the "Company")
and
its shareholders,
Thomas J. Roche,
Karl Frank Hens
(collectively, the "Shareholders"),
May 15, 2000
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TABLE OF CONTENTS
Page
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1. The Merger...............................................................................................1
1.1 The Merger......................................................................................1
1.2 Effect of the Merger............................................................................1
1.3 Consummation of the Merger......................................................................2
1.4 Charter; Bylaws; Directors and Officers.........................................................2
1.5 The Closing.....................................................................................2
1.6 Further Assurances..............................................................................2
1.7 Tax Consequences................................................................................2
2. Conversion of Shares.....................................................................................2
2.1 Conversion of Shares............................................................................2
2.2 Stock Options, Warrants, Treasury Shares, Etc...................................................3
2.3 Surrender and Exchange of Shares; Payment of Merger Consideration...............................3
2.4 Closing of Stock Transfer Book..................................................................3
3. Representations and Warranties of the Shareholders and the Company.......................................4
3.1 Organization....................................................................................4
3.2 Capitalization..................................................................................4
3.3 Authorization; Validity of Agreement............................................................4
3.4 No Violations; Consents and Approvals...........................................................5
3.5 Financial Statements............................................................................5
3.6 No Material Adverse Change......................................................................6
3.7 No Undisclosed Liabilities......................................................................6
3.8 Litigation; Compliance with Law; Licenses and Permits...........................................6
3.9 Employee Benefit Plans; ERISA...................................................................7
3.10 Real Property...................................................................................8
3.11 Intellectual Property; Computer Software.......................................................10
3.12 Tangible Personal Property; Capital Budget.....................................................11
3.13 Material Contracts.............................................................................11
3.14 Taxes..........................................................................................12
3.15 Affiliated Party Transactions..................................................................16
3.16 Environmental Matters..........................................................................16
3.17 No Brokers.....................................................................................18
3.18 Receivables....................................................................................18
3.19 Inventories....................................................................................18
3.20 Product Claims.................................................................................18
3.21 Warranties and Returns.........................................................................18
3.22 Assets Utilized in the Business................................................................19
3.23 Insurance......................................................................................19
3.24 Delivery of Documents; Corporate Records.......................................................19
3.25 Customers, Suppliers and Distributors..........................................................19
3.26 Labor Matters..................................................................................19
3.27 Bank Accounts..................................................................................20
3.28 Directors, Officers and Certain Employees......................................................20
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Table of Contents
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(continued)
Page
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3.29 No Misstatements or Omissions..................................................................20
3.30 Investment Undertaking.........................................................................20
4. Representations and Warranties of the Buyer and MedSource...............................................21
4.1 Organization of the Buyer Group................................................................21
4.2 Authorization; Validity of Agreement...........................................................21
4.3 No Violations; Consents and Approvals..........................................................21
4.4 Litigation.....................................................................................22
4.5 Compliance with Law; Licenses and Permits......................................................22
4.6 Capital Structure..............................................................................22
4.7 Valid Issuance of Shares, Etc..................................................................23
4.8 Financial Statements...........................................................................23
4.9 Compliance with Securities Laws................................................................24
4.10 No Misstatements or Omissions..................................................................24
4.11 No Material Adverse Change.....................................................................24
4.12 No Undisclosed Liabilities.....................................................................24
4.13 Taxes..........................................................................................24
4.14 Registration Rights............................................................................24
5. Other Agreements of the Parties.........................................................................25
5.1 Tax Returns; Taxes.............................................................................25
5.2 Non-Disclosure of Confidential Information.....................................................26
5.3 No Solicitation of Employees, Suppliers or Customers...........................................27
5.4 Non-Competition................................................................................27
5.5 Other Actions..................................................................................27
5.6 Required Consents..............................................................................28
5.7 Stockholders' Agreement and Registration Rights Agreement......................................28
5.8 Real Property; Equipment and Other Assets......................................................28
5.9 Employment, Consulting and Non-Competition Agreements..........................................28
5.10 Interests in Real Property.....................................................................28
5.11 Deferred Compensation..........................................................................29
5.12 PCC Airfoils, Inc. Agreement...................................................................29
6. Closing Deliveries......................................................................................29
6.1 Deliveries of the Seller Group.................................................................29
6.2 Deliveries of the Buyer Group..................................................................30
7. Termination.............................................................................................30
8. Indemnification.........................................................................................30
8.1 Survival of Representations and Warranties of the Seller Group.................................30
8.2 Survival of Representations and Warranties of the, Buyer Group.................................31
8.3 Indemnification by the Shareholders............................................................31
8.4 Indemnification by the Buyer Group.............................................................32
8.5 Indemnification Procedures.....................................................................32
8.6 Limitations on Indemnification by the Shareholders.............................................33
8.7 Limitations on Indemification by the Buyer Group...............................................33
9. Miscellaneous...........................................................................................34
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Table of Contents
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(continued)
Page
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9.1 Transaction Fees and Expenses..................................................................34
9.2 Notices........................................................................................34
9.3 Amendment......................................................................................35
9.4 Waiver.........................................................................................35
9.5 Governing Law..................................................................................35
9.6 Jurisdiction...................................................................................35
9.7 Remedies.......................................................................................35
9.8 Severability...................................................................................35
9.9 Further Assurances.............................................................................36
9.10 Assignment.....................................................................................36
9.11 Binding Effect.................................................................................36
9.12 No Third Party Beneficiaries...................................................................36
9.13 Entire Agreement...............................................................................37
9.14 Headings.......................................................................................37
9.15 Counterparts...................................................................................37
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Schedules
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Schedule 2.3(b) Payment of Merger Consideration
Schedule 3.2(a) Rights, Agreements, Interests in Connection with Company Stock
Schedule 3.4(b) Consents and Approvals
Schedule 3.5(a) Financial Statements of the Company
Schedule 3.8(a) Legal Proceedings
Schedule 3.8(b) Material Violations of Law
Schedule 3.8(c) Licenses
Schedule 3.9(a) Employee Benefit Plans
Schedule 3.9(b) Employee Benefit Plans subject to Title IV of ERISA
Schedule 3.9(c) Employee Benefit Plans Provisions; Death and Medical Benefits
Schedule 3.10(b) Leases
Schedule 3.10(c) Service Contracts
Schedule 3.10(f) Utilities
Schedule 3.11(a) Intellectual Property
Schedule 3.12(a) Liens on Tangible Personal Property
Schedule 3.12(b) Fixed Assets Ledger
Schedule 3.12(c) Capital Budget
Schedule 3.13 Material Contracts
Schedule 3.14(a) Taxes
Schedule 3.14(c) Tax Returns
Schedule 3.14(d) Jurisdictions - Tax Proceedings
Schedule 3.19 Inventories
Schedule 3.20 Service and Product Liability Claims
Schedule 3.21 Warranties and Returns Policies; Product Failures or Defects
Schedule 3.22 Liens
Schedule 3.23 Insurance
Schedule 3.25 Customers; Suppliers and Distributors
Schedule 3.27 Bank Accounts
Schedule 3.28 Directors, Officers, Certain Employees
Schedule 4.4 Buyer Group Litigation
Schedule 4.6(c) Capital Structure of MedSource
Schedule 4.8(a) Financial Statements of MedSource
Exhibits
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Exhibit 1.3 Form of Articles of Merger
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AGREEMENT AND PLAN OF MERGER
Dated May 15, 2000
The parties to this Agreement and Plan of Merger (this "Agreement") are
Thermat Acquisition Corp., a Delaware corporation (the "Buyer"), and its
ultimate parent company, MedSource Technologies, Inc., a Delaware corporation
("MedSource"), on the one hand, and Thermat Precision Technology, Inc., a
Pennsylvania corporation (the "Company"), Thomas J. Roche ("Roche") and Karl
Frank Hens ("Hens"), shareholders of the Company (the "Shareholders"), on the
other hand. The Buyer and MedSource are hereinafter referred to collectively as
the "Buyer Group" while the Company and the Shareholders are hereinafter
referred to collectively as the "Seller Group."
This Agreement contemplates a transaction in which the Company will merge
with and into the Buyer with the result that the Buyer will continue as the
surviving corporation and the separate existence of the Company shall cease. As
a result of the Merger, upon the Effective Time (each term as hereinafter
defined) the outstanding shares of the capital stock of the Company shall be
converted into the right to receive an aggregate of 500,000 shares of MedSource
Class A common stock, par value $.0l per share ("MedSource Common Stock") and
the Cash Consideration (as defined in section 2.3(b)(ii)). The parties hereto
intend that this merger transaction be a reorganization under Section 368 of the
Code (as hereinafter defined) and intend that this Agreement be a "plan of
reorganization" within the meaning of the regulations promulgated under such
section of the Code.
The Board of Directors of the Buyer and the Board of Directors of the
Company have each determined that the Merger is in the best interests of their
respective shareholders, as the case may be, and have each duly adopted
resolutions approving this Agreement and the transactions contemplated hereby.
In accordance with the foregoing, the Buyer desires to merge with the Company
and the Company desires to merge with and into the Buyer, upon and subject to
the terms and conditions set forth below.
It is therefore agreed as follows:
1. The Merger.
1.1 The Merger. Upon the terms and subject to the conditions set forth in
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this Agreement, upon the Effective Time, and in accordance with the Delaware
General Corporation Law (the "DGCL") and the Pennsylvania Business Corporation
Law (the "PBCL"), MedSource and the Shareholders shall cause the Company to be
merged with and into the Buyer (the "Merger"). Upon the Effective Time, the
separate existence of the Company shall cease, and the Buyer shall continue as
the surviving corporation (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
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Section 259 of the DGCL and Section 1929 of the PBCL. Without limiting the
generality of the foregoing, and subject thereto, upon the Effective Time, all
the assets, properties, rights, privileges, powers and franchises of the Company
shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
1.3 Consummation of the Merger. The Merger shall become effective upon the
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filing with the Secretary of the Commonwealth of Pennsylvania and the Secretary
of State of the State of Delaware of a properly executed certificate or articles
of merger or ownership and other documents in the form of Exhibit 1.3 (the
"Articles of Merger") on the Closing Date (as hereinafter defined). The Merger
shall be effective when the Articles of Merger have been filed. The date and
time when the Merger is effective is referred to as the "Effective Time."
1.4 Charter; Bylaws; Directors and Officers. The Certificate of
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Incorporation of the Buyer from and after the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation immediately prior to
the Effective Time unless amended pursuant to the Articles of Merger and
thereafter amended in accordance with the provisions thereof and as provided by
applicable law. The Bylaws of the Buyer from and after the Effective Time shall
be the Bylaws of the Surviving Corporation as in effect immediately prior to the
Effective Time, The initial directors and officers of the Surviving Corporation
on and after the Effective Time shall be the directors and officers,
respectively, of the Buyer immediately prior to the Effective Time, in each case
until their respective successors are duly elected and qualified.
1.5 The Closing. The consummation of the Merger and the other transactions
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contemplated by this Agreement (the "Closing") shall take place at the offices
of the Buyer Group's counsel in New York City at 10: 00 a. m., local time, on
the date hereof. The date on which the Closing occurs is referred to as the
"Closing Date."
1.6 Further Assurances. On and after the Effective Time, each of the
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parties to this Agreement shall from time to time, at the request of any of the
other parties, promptly execute such instruments and take such other actions as
the requesting party may reasonably request to vest, perform or confirm, of
record or otherwise, in the Surviving Corporation, its respective rights, title
or interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of the Company, or otherwise to evidence or implement the
transactions contemplated by this Agreement.
1.7 Tax Consequences. It is intended that the Merger shall constitute a
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reorganization described in Section 368(a)(l)(A) and 368(a)(2)(D) of the Code,
and that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code. The parties shall treat the transactions
contemplated hereby consistently with such intention.
2. Conversion of Shares.
2.1 Conversion of Shares. By virtue of the Merger and without any action on
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the part of the Shareholders, at the Effective Time, all of the outstanding
shares of common stock of the Company, $1.00 par value per share (the "Company
Shares"), as shown on Schedule 2.3(b), shall be converted into the right to
receive (i) the aggregate of 500,000 shares of MedSource Common Stock (the
"MedSource Shares") and (ii) the Cash Consideration (as defined in section
2.3(b)).
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2.2 Stock Options, Warrants, Treasury Shares, Etc. At the Effective Time,
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the Shareholders shall cause each outstanding stock option, warrant or other
right to purchase any capital stock of the Company, whether or not then
exercisable or vested, to be canceled, and no capital stock of MedSource, cash
or other consideration shall be paid or delivered in exchange therefor. Any
shares of the Company Common Stock (as defined in Section 3.2(a)) held in the
treasury of the Company shall be canceled and retired and no cash, securities or
other consideration shall be paid in respect of such shares.
2.3 Surrender and Exchange of Shares; Payment of Merger Consideration.
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(a) At the Effective Time, the Shareholders shall deliver all
certificates representing the Company Shares to MedSource, the Shareholders
shall be entitled upon such surrender to receive in exchange therefor, without
cost to them, the MedSource Shares and the Cash Consideration, and the
certificate or certificates so surrendered in exchange for such consideration
shall forthwith be canceled by MedSource.
(b) At the Effective Time, upon the surrender for cancellation of the
certificates representing the Common Stock pursuant to section 2.3(a) above,
MedSource shall deliver to the Shareholders:
(i) certificates representing an aggregate of 500,000 MedSource
Shares in the relative amounts and to the individuals as set forth on
Schedule 2.3(b), each registered in the name of such individual
evidencing the applicable number of MedSource Shares; and
(ii) $4,000,000 less the aggregate amount of Institutional
Indebtedness (as defined in section 2.3(c)) at the Effective Time (the
"Cash Consideration"), allocated as set forth on Schedule 2.3(b). The
Cash Consideration shall be paid by delivery of bank or cashier's
checks or by wire transfer of immediately available funds to an
account or accounts designated in writing, at least three (3) days
prior to Closing, by the Shareholders.
(c) For purposes of this Agreement, "Institutional Indebtedness" on
any date shall mean all of the Company's indebtedness on such date commonly
referred as such, including without limitation, all revolving credit facilities,
term loans and notes and lines of credit or loans due to banks, lending or
similar financial institutions or any other individual or other entity (a
"Person"), negative book balances and overdrafts, provided that Institutional
Indebtedness shall not include debt incurred as a result of the acquisition
after December 31, 1999 of a 100 ton injection molding machine.
(d) At the Closing, the Buyer may, but shall not be required to, repay
all of the Institutional Indebtedness. At Closing, Buyer shall cause the
personal guarantees of the Shareholders of (i) the Institutional Indebtedness
which is not repaid and (ii) the Real Property Lease to be released.
2.4 Closing of Stock Transfer Book. On and after the date of this Agreement
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there shall be no transfers on the stock transfer books of the Company of shares
of capital stock of the Company that were issued and outstanding immediately
prior to the date hereof.
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3. Representations and Warranties of the Shareholders and the Company. The
Shareholders and the Company, jointly and severally, represent and warrant to
the Buyer and MedSource as follows:
3.1 Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. The
Company is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing necessary. The
Shareholders have delivered to the Buyer Group true, correct and complete copies
of the Company's Articles of Incorporation and Bylaws, as currently in effect.
3.2 Capitalization.
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(a) The authorized capital stock of the Company consists of 100,000
shares of Common Stock of the Company, par value $1.00 per share ("Company
Common Stock"), 50,000 of which have the right to vote ("Voting Shares") and
50,000 which do not have the right to vote ("Non-Voting Shares"). 25,000 Voting
Shares and no Non-Voting Shares are issued and outstanding, and all of the
Company Shares are owned of record and beneficially by the Shareholders in the
amounts shown on Schedule 2.3(b), free and clear of all claims, liens,
mortgages, encumbrances, pledges, and other security interests of any kind
(collectively "Liens"). All of the Company Shares are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth on Schedule 3.2(a),
there are no (i) options, warrants, calls, preemptive rights, subscriptions or
other rights, convertible securities, agreements or commitments of any character
obligating now or in the future, the Company or the Shareholders to issue,
transfer or sell any shares of capital stock, options, warrants, calls or other
equity interest of any kind whatsoever in the Company or securities convertible
into or exchangeable for such shares or equity interests, (ii) contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
capital stock or equity interest of the Company or (iii) voting trusts, proxies
or similar agreements to which the Company or any of the Shareholders is a party
with respect to the voting of the capital stock of the Company.
(b) The Company does not own any outstanding shares of capital stock
(or other equity interests of entities other than corporations) of any
partnership, joint venture, trust, corporation, limited liability company or
other entity.
3.3 Authorization; Validity of Agreement. Each of the Shareholders and the
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Company has the requisite capacity or corporate power and authority, as the case
may be, to execute, deliver and perform this Agreement and each of the other
agreements, instruments, documents and certificates to be executed and delivered
by the Company or the Shareholders, as the case may be, pursuant to this
Agreement, including but not limited to any item referred to in Article 7
(collectively, with this Agreement, the "Transaction Documents"), to which the
Company or the Shareholders, as the case may be, is a party, and to assume and
perform its or their obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. Each of this Agreement and the
other Transaction Documents has been duly executed, authorized and delivered by
the Company and each Shareholder, as applicable, and is a valid and binding
obligation of the Company and each Shareholder, as applicable, enforceable
against each of them in accordance with their respective terms.
4
3.4 No Violations; Consents and Approvals.
-------------------------------------
(a) The execution, delivery and performance of each of this Agreement
and the other Transaction Documents by the Company and each Shareholder party
hereto and thereto do not, and the consummation by them of the transactions
contemplated hereby and thereby will not: (i) violate any provision of the
Articles of Incorporation or Bylaws of the Company, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, lease, option, contract, undertaking, understanding,
covenant, agreement or other instrument or document (collectively, a "Contract")
to which the Company or any Shareholder is a party or by which any of their
respective properties or assets may be bound or otherwise subject except for
such items referred to as Required Consents (as defined in section 3.4(b)) set
forth on Schedule 3.4(b), or (iii) violate any Law (as defined in section
3.8(b)) applicable to any of the Shareholders or the Company or any of their
respective properties or assets.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any legislative or executive agency or department or
other regulatory service, authority or agency or any court, arbitration panel or
other tribunal or judicial authority of any foreign, provincial, United States
federal, state, county, municipal or other local jurisdiction, political entity,
body, organization, subdivision or branch (a "Governmental Entity") or Person
(as defined in Section 2.3(c)), is required in connection with the execution,
delivery and performance of this Agreement or any of the other Transaction
Documents by the Company or any Shareholder or the consummation by the Company
or any Shareholder of the transactions contemplated hereby and thereby, except
for such consents, approvals, orders, authorizations, notifications, notices,
estoppel certificates, releases, registrations, ratifications, declarations,
filings, waivers, exemptions or variances (individually, a "Consent" and
collectively, "Consents") with respect to any License (as defined in section
3.8(c)) or Law or otherwise as are set forth on Schedule 3.4(b) hereof (the
"Required Consents").
3.5 Financial Statements.
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(a) Attached to Schedule 3.5(a) are the balance sheet of the Company
as of March 31, 2000 (the "Latest Balance Sheet"), together with the related
statements of income for the three-month period ended March 31, 2000, and the
balance sheets of the Company as of December 31, 1999, 1998 and 1997, together
with the related statements of income (including the related notes) for the
three prior fiscal years then ended (all of the foregoing, the "Financial
Statements").
(b) The Financial Statements, other than the March 31, 2000 financial
statements, have been reviewed by Hill, Barth & King, Inc., Certified Public
Accountant and the reports of that firm or predecessors to that firm are
attached hereto as part of Schedule 3.5(a). The Financial Statements have been
derived from, and agree with, the books and records of the Company and fairly
present the financial position of the Company as of the respective dates thereof
and the results of operations of the Company for the respective periods set
forth therein. The Financial Statements have been prepared in accordance with
United States generally accepted accounting principles, consistently applied
("GAAP"), as of the dates and for the periods involved, subject, in the case of
the Latest Balance Sheet and the related
5
statements of operations for the interim period, to normal fiscal year-end
adjustments in the ordinary course (none of which, individually or in the
aggregate, will be material to the business or the operations of the Company).
3.6 No Material Adverse Change. Since the date of the Latest Balance Sheet,
--------------------------
no event, condition or circumstance has occurred that could, or could be
reasonably likely to, have a material adverse effect on the condition (financial
or otherwise), business, assets, results of operations or prospects of the
Company, other than events, conditions or circumstances solely attributable to
general economic conditions (a "Material Adverse Effect").
3.7 No Undisclosed Liabilities.
--------------------------
(a) The Company does not have, and as of the Effective Time will not
have, any liabilities (whether accrued, contingent, known, or otherwise) other
than those that (i) are set forth or reserved against on the Latest Balance
Sheet; or (ii) were incurred since the date of the Latest Balance Sheet in the
ordinary course of business, none of which, individually or in the aggregate, is
material to the Company's business, operations, condition or prospects.
(b) The accounts payable of the Company 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 Shareholders since the Latest
Balance Sheet Date other than (i) employment compensation to the Shareholders in
annualized amounts not to exceed such payments made or accrued by the Company in
the year ended December 31, 1999; (ii) amounts necessary for the Shareholders to
pay federal and state income taxes on the pretax income earned during the period
ending December 31, 1999 and for the period commencing January 1, 2000 and
ending on the day prior to the Closing Date; (iii) amounts due to Affiliates for
rental of real property and equipment and royalties paid in connection with
Intellectual Property (as defined in Section 3.11(a)) used by the Company in its
business, in each case in annualized amounts not to exceed payments made or
accrued by the Company in the year ended December 31, 1999; provided, however,
that since March 31, 2000, no cash has been distributed to the Shareholders as a
result of the receipt of payments from royalties or licenses; and (iv)
approximately $317,000 in the Company's accounts on the Closing Date.
3.8 Litigation; Compliance with Law; Licenses and Permits.
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(a) There is no claim, suit, action, investigation or proceeding
(collectively, a "Proceeding") pending, nor is there, to the knowledge of the
Company and the Shareholders, any Proceeding threatened, that involves or
affects the Company, by or before any Governmental Entity, court, arbitration
panel or any other Person.
(b) The Company has, and on the Closing Date will have 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 3.14(f)), zoning, building codes, antitrust, occupational safety and
health, industrial hygiene, environmental protection, water, ground or
6
air pollution, the generation, handling, treatment, storage or disposal of
Hazardous Substances (as defined in section 3.16(k)), consumer product safety,
product liability, hiring, wages, hours, employee benefit plans and programs,
collective bargaining and the payment of withholding and social security taxes,
except for any non-compliance that did not have or will not have a Material
Adverse Effect on the Company. Since January 1, 1998, no member of the Seller
Group has received any notice of any material violation of any Law except as set
forth on Schedule 3.8(b).
(c) Except as set forth on Schedule 3.8(c), the Company has every
license, permit, certification, qualification or franchise issued by any
Governmental Entity (each, a "License"), and every Consent by or on behalf of
any Person that is not a party to this Agreement, required for it to conduct its
business as presently conducted. All such Licenses and Consents are in full
force and effect and neither the Company nor any Shareholder has received notice
of any pending cancellation or suspension of any thereof nor, to the knowledge
of any Shareholder, is any cancellation or suspension thereof threatened, except
where the failure to have such License or Consent would not have a Material
Adverse Effect on the Company. The applicability and validity of each such
License and Consent will not be adversely affected by the consummation of the
transactions contemplated by this Agreement.
3.9 Employee Benefit Plans; ERISA
-----------------------------
(a) Schedule 3.9(a) lists each "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974 ("ERISA")),
and all other material employee benefit (including, without limitation, any
non-qualified plans), bonus, deferred compensation, incentive, stock option (or
other equity-based), severance, change-in control, medical insurance and fringe
benefit plans maintained for the benefit of, or contributed to by the Company or
any trade or business, whether or not incorporated (an "ERISA Affiliate"), that
would be deemed a "single employer" within the meaning of Section 4001 of ERISA,
for the benefit of any employee or former employee of the Company (the "Plans").
The Seller Group has heretofore delivered to the Buyer Group, true, correct and
complete copies of each of the Plans, including all amendments to date.
(b) Each of the Plans which are subject to ERISA comply with ERISA and
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and has been administered in accordance with ERISA and, where
applicable, the Code. Each of the Plans intended to be "qualified" within the
meaning of Code section 401(a) has received a timely determination letter from
the Internal Revenue Service that it is so qualified and neither the
Shareholders nor the Company knows of any facts or circumstances that would
materially adversely affect such qualification. Except as set forth in Schedule
3.9(b), none of the Plans is subject to Title IV of ERISA. No "reportable
event," as such term is defined in Section 4043(b) of ERISA, has occurred with
respect to any Plan. There are no pending or, to the knowledge of any
Shareholder or the Company, threatened claims (other than routine claims for
benefits), actions, suits or proceedings by, on behalf of or against any of the
Plans or any trusts related thereto.
(c) Except as set forth on Schedule 3.9(c) or asset forth in the terms
of the Plans, no plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Company beyond their retirement or other termination of
service (other than (i) coverage mandated by
7
applicable law, (ii) death benefits or retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, or (iii)
benefits the full cost of which is borne by the current or former employee (or
his or her beneficiary).
(d) With respect to each Plan, neither the Company, the Shareholders
nor any ERISA Affiliate has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 or Section 406 of ERISA) that would subject the
Company, or the Buyer Group to any taxes, penalties or other liabilities
resulting from prohibited transactions under Code section 4975 or Sections 409
or 502(i) of ERISA.
(e) The Company has complied with the notice and continuation of
coverage requirements of Code section 4980B and the regulations thereunder with
respect to each plan that is, or was during any taxable year of the Company for
which the statute of limitations on the assessment of federal income taxes
remains open, by consent or otherwise, a group health plan within the meaning of
Section 4980B(g) of ERISA.
(f) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302(a) of ERISA or Code section 412(a)), whether or not
waived.
(g) Neither the Company, the Shareholders nor any ERISA Affiliate has
incurred or would incur a "withdrawal" or "partial withdrawal," as defined in
Sections 4203 and 4205 of ERISA, from any Plan that has resulted or would result
in a withdrawal liability of the Company or any ERISA Affiliate under such Plan.
3.10 Real Property.
-------------
(a) The Company owns no real property.
(b) Schedule 3.10(b) contains a true, correct and complete list and
summary of all the leases, subleases, licenses and other agreements under which
the Company uses or occupies or has the right to use or occupy, now or in the
future, any real property (such land, buildings and other improvements being
herein called collectively, the "Leased Real Property"). All agreements set
forth on Schedule 3.10(b) are hereinafter called collectively, the "Leases." The
Seller Group has heretofore delivered to the Buyer Group true and correct copies
of all Leases. Each Lease is 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
tenant under the Leases has a valid and enforceable leasehold interest in the
Leased Real Property, subject to no Liens which interfere with the operation of
the Company's business. No Affiliate (as defined in Section 3.15) of the Company
is the owner of, or has any ownership, economic or similar interest in, any
lease, sublease, license or other agreement concerning the Leased Real Property
except as set forth in Schedule 3.10(b). Except as set forth in Schedule
3.10(b), none of the Leases have been amended, modified, extended, surrendered,
terminated or assigned as of the date hereof. Each tenant under the Leases
maintains actual and exclusive possession of the Leased Real Property.
8
(c) Except as set forth in Schedule 3.10(b), there are no leases,
subleases, licenses or other agreements granting to any person other than the
Company any right to the possession, use or occupancy of the Leased Real
Property and no Person has any rights to acquire, lease, sublease or otherwise
occupy the Leased 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 Leased Real Property or any interests
therein. All of the lands, buildings, structures and other improvements used by
the Company in the conduct of its business are included in the Leased Real
Property and the Leased Real Property is all the real property utilized or
employed by the Company to conduct its business. Except as set forth in Schedule
3.10(c), there are no service or maintenance contracts, management agreements or
similar agreements relating to the Leased Real Property. There has been no
service, material or other work provided or supplied to the Leased Real Property
that has not been paid in full, except as set forth in Schedule 3.10(c). All
brokerage commissions, finders fees and all similar charges or fees arising out
of or relating to any of the Leases have been paid in full.
(d) With respect to the Leased Real Property, (i) there is a right of
ingress and egress and direct access to public thoroughfares to and from the
Leased Real Property and (ii) the Leased Real Property has adequate water supply
and sewer service for the present use thereof and all sewer service and water
supply facilities required for the present use of the Leased Real Property are
properly and fully installed and operating.
(e) To the knowledge of the Company and the Shareholders, all
licenses, permits, franchises, approvals, authorizations and certificates of
occupancy (collectively, the "Approvals"), of all Governmental Entities having
jurisdiction over the Leased Real Property or from all insurance companies and
fire rating and other similar boards and organizations in connection with the
construction, use, occupancy and maintenance of the Leased Real Property are in
full force and effect in accordance with the respective terms thereof, and none
of the Approvals has been amended, assigned, pledged or otherwise transferred.
There is no alteration, improvement or change in use of any Leased Real Property
caused by the Company that would require any new Approvals or amendment of an
existing Approval. The condition and use of the Leased Real Property conforms to
each Approval. The Company, the tenant under each of the Leases and the Leased
Real Property are in compliance with all Laws including, without limitation,
those relating to zoning, building, subdivision and land use restrictions that
are applicable to any portion of the Leased Real Property (collectively, "Real
Property Laws"), and the Company has not received any notice of violation or
claimed violation of any Real Property Law. The Leased Real Property and its
continued use, occupancy and operation as currently used, occupied and operated
does not constitute a nonconforming use under any Real Property Law and the
continued existence, use, occupancy and operation of the Leased Real Property,
is not dependent on any special permit, exception, approval or variance.
(f) To the knowledge of the Seller Group, the based Real Property
including, without limitation, all building systems and equipment, all
structural components, the roof, the basement, all plumbing, electrical,
mechanical, heating, ventilating, air conditioning and sprinkler systems, and
all sewer, waste water, storm water, paving and parking equipment, systems and
facilities, are fully installed, operating, in good condition and repair and
adequate for the conduct of the Company's business as presently conducted, there
are no defects in the same that would hinder or impair business or operations of
the Company
9
and no extraordinary repair or improvement expense with respect thereto are
currently anticipated. Except as set forth on Schedule 3.10(f), the electricity
service and all other public or private utilities ("Utilities") serving the
Leased Real Property are fully installed and operating, adequate for the conduct
of the Company's business as presently conducted, and enter the Leased Real
Property through adjoining public streets or through valid easements across
adjoining private lands, and all installation, connection and capital recovery
charges in connection with the Utilities have been paid in full.
(g) To the knowledge of the Seller Group, them is no pending,
proposed, contemplated or anticipated (i) annexation, condemnation, eminent
domain or similar proceeding affecting, or that may affect, all or any portion
of the Leased Real Property, (ii) proceeding to change or redefine the zoning
classification of all or any portion of the Leased Real Property, (iii)
imposition of any special or other assessments against the Leased Real Property
for public betterments or otherwise, (iv) special assessments affecting the
Leased Real Property or any portion thereof that are or would be payable by the
Company or the Tenant under the Leases and could result in a Lien against any of
the Leased Real Property, (v) change in any applicable Law relating to the use,
occupation or operation of the Leased Real Property, (vi) tax certiorari
proceeding with respect to any Leased Real Property, or (vii) changes in road
patterns or grades that may adversely affect access to any roads providing means
of ingress or egress from the Leased Real Property.
(h) Neither the Company nor any Shareholder has received notice from
any Governmental Entity, insurance company or Board of Fire Underwriters (or
organization exercising functions similar thereto) or from any mortgagee
requesting the performance of any work or alteration in respect of the Leased
Real Property, and there are no outstanding requirements or recommendations from
any of the foregoing.
(i) There has been no damage to any portion of the Leased Real
Property caused by fire or other casualty that has not been completely repaired
and restored.
(j) Copies of the current real estate tax bills and current utility
bills for the Leased Real Property of the building of which the Leased Real
Property is a part have been delivered to the Buyer Group by the Shareholders.
(k) The Company does not owe any monies to any contractor,
subcontractor or materialman for labor or materials performed, rendered or
supplied in connection with any Leased Real Property for which such person could
claim a lien against any of the Leased Real Property.
(l) Neither the Company nor any Shareholder has transferred any
development rights applicable to the Leased Real Property.
3.11 Intellectual Property; Computer Software.
----------------------------------------
(a) Schedule 3.1l(a) lists all items of intellectual property
including, without limitation, trademarks, trade names, service marks, service
names, domain names, uniform resource locators (URLs), keywords, logos, assumed
names, copyrights, mask works, patents, know-how and all applications therefor,
trade secrets and invention disclosures, that are owned by any Shareholder, the
Company or any other Person and used by the Company in the
10
operations of its business, (collectively, "Intellectual Property"), and, except
as set forth on Schedule 3.11(a), there are no pending or, to the knowledge of
the Shareholders of the Company, threatened claims by any Person relating to the
Company's use of any Intellectual Property. Except as set forth on Schedule
3.11(a) or as contained in the agreements listed on Schedule 3.11(a), the
Company has such rights of ownership (free and clear of all Liens) of, or such
rights by license, lease or other agreement to use (free and clear of all
Liens), the Intellectual Property as are necessary to permit the Company to
conduct its business and the Company is not obligated to pay any royalty or
similar fee to any Person in connection with the Company's use or license of any
of the Intellectual Property.
(b) The Company has such rights of ownership (free and clear of all
Liens) of, or such rights by license, lease or other agreement to use (free and
clear of all Liens), all computer software programs including, without
limitation, application software that are used by the Company and that are
material to the conduct of its business as currently conducted, as are necessary
to permit the conduct of its business as currently conducted. None of the
Company's ownership rights or rights to use any of the computer programs
referred to above will be adversely affected by any of the transactions
contemplated hereby.
3.12 Tangible Personal Property; Capital Budget.
------------------------------------------
(a) The Company has good, marketable and valid title to all tangible
personal property used in its business or located on its premises free and clear
of all Liens, except as set forth on Schedule 3.12(a).
(b) All material items of machinery, equipment, tooling and other
tangible personal property owned or leased by the Company and used in the
conduct of its business (other than items of inventory) are listed in the
detailed fixed assets ledger of the Company attached to Schedule 3.12(b)
(collectively, the "Personal Property"). The Personal Property conforms to all
material requirements of applicable Laws. All of the items of machinery and
equipment included within the Personal Property are fully operational and
operating in the ordinary course of the Company's business, as applicable, are
in good operating condition and in a good state of maintenance and repair,
ordinary wear and tear excepted, and are adequate for use in the conduct of the
Company's business as previously conducted and as reasonably expected to be
conducted.
(c) Schedule 3.12(c) includes a true, correct and complete capital
budget for the fiscal year ending December 31, 2000. Except as set forth on
Schedule 3.12(c), no capital expenditures are contemplated by the Company.
3.13 Material Contracts.
------------------
(a) Schedule 3.13 sets forth a true, complete and correct list of
every Contract that: (i) provides for aggregate future payments by the Company
or to the Company of more than $25,000 and has an unexpired term exceeding three
(3) months and may not be canceled upon thirty (30) days notice without any
liability, penalty or premium (excluding purchase orders and invoices arising in
the ordinary course of business); (ii) was entered into by the Company with any
of the Shareholders, or an officer, director or significant employee of the
Company; (iii) is a collective bargaining or similar agreement; (iv) guarantees
or indemnifies or otherwise causes the Company to be liable or otherwise
responsible for the
11
obligations or liabilities of another or provides for a charitable contribution
by the Company; (v) involves an agreement with any bank, finance company or
similar organization; (vi) restricts the Company from engaging in any business
or activity anywhere in the world; (vii) is an employment agreement, consulting
agreement, independent sales representative agreement or similar arrangement
with any employee of the Company; (viii) is a lease of real property; or (ix) is
otherwise material to the rights, properties, assets, business or operations of
the Company (the foregoing, collectively, "Material Contracts"). The Seller
Group has heretofore provided true, complete and correct copies of all Material
Contracts to the Buyer.
(b) Each of the Material Contracts is in full force and effect and
there is not now and, to the knowledge of the Company and the Shareholders,
there has not been claimed or alleged by any Person with respect to any Material
Contract, any existing default, or event that with notice or lapse of time or
both would constitute a default or event of default, on the part of the Company,
or to the knowledge of the Company and the Shareholders, on the part of any
other party thereto and, except as set forth on Schedule 3.4(b), no Consent
from, or notice to, any Governmental Entity or other Person is required in order
to maintain in full force and effect any of the Material Contracts, other than
such Consents that have been obtained and are 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.
3.14 Taxes.
-----
(a) Except as set forth in Schedule 3.14(a):
(1) the Company has elected to be treated as an "S" corporation
for federal income Tax purposes at all times since its date of incorporation and
such election is effective for each year thereafter up to and including the
Closing Date. Schedule 3.14(d) hereto sets forth each other jurisdiction for
which the Company has made an "S" election (or similar election), or for which
an "S" election (or similar election) is effective, including the date of the
election, its effective date, the date of any termination of such election, if
any, and the cause of such termination. Except as set forth on Schedule 3.14(d),
such election is effective for each year from its effective date up to and
including the Closing Date.
(2) the Company has (A) duly and timely filed or caused to be
filed with Tax Authorities each Tax Return that is required to be filed by or on
behalf of the Company or that includes or relates to the Company, its income,
sales, assets or business, which Tax Return is true, correct and complete,
(B)duly and timely paid in full, caused to be paid in full, all Taxes due and
payable on or prior to the Closing Date, and (C) has properly accrued on the
books and records of the Company in accordance with generally accepted
accounting principles a provision for the payment of all Taxes due or claimed to
be due or for which the Company otherwise is or may be liable;
(3) the Company has not requested an extension of time within
which to file any Tax Return in respect of any Tax period which has not since
been filed;
(4) the Company has complied in all respects with all applicable
laws relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities, including, but not limited
to, Code section 3402;
12
(5) there is no lien for Taxes upon any asset or property of the
Company (except for any statutory lien for any Tax not yet due);
(6) the Company does not have, and is not expected to have, any
liability in respect of any Tax as a transferee or successor of any Person
(including, but not limited to, any liability arising under Treas. Reg. Section
1.1502-6), and the Company is not, and never has been, a party to any Tax
allocation, Tax indemnification or Tax sharing contract or agreement;
(7) all Taxes assessed with respect to the Company's income,
sales, assets or business, or for which the Company is liable have been paid;
(8) any assessment, deficiency or adjustment related to or in
connection with any Tax for which the Company is liable or with respect to the
Company's income, sales, assets or business that is or was required to be
reported to any Tax Authority has been so reported, and any additional Taxes
owed with respect thereto have been paid;
(9) there are no pending, proposed, or threatened Tax Proceedings
with respect to any Tax, the payment, collection or withholding of any Tax or
any Tax Return filed by or on behalf of the Company;
(10) there are no presently outstanding waivers or extensions or
requests for waivers or extensions of the time within which unpaid Tax may be
assessed or asserted;
(11) there is no outstanding subpoena or request for information
or documents from any Tax Authority with respect to any Tax for which the
Company is or may be liable or with respect to the Company's income, sales,
assets or business;
(12) the Company is not a party to any agreement with any Tax
Authority (including, but not limited to, any closing agreement within the
meaning of Code section 7121 or any analogous provision of applicable law or any
agreement relating to transfer or intercompany pricing) or requested or received
a private letter or other ruling from any Tax Authority relating to any Tax for
which the Company is or may be liable or with respect to the Company's income,
sales, assets or business;
(13) the Company is not a party to any contract, agreement or
other arrangement that could result, alone or in conjunction with any other
contract, agreement or other arrangement, in the payment of any amount that
would not be deductible by reason of Code section 280G or 404 or any similar
provision of applicable law;
(14) the Company is not a "consenting corporation" within the
meaning of Code section 341(f) or any similar provision of applicable law and
has not agreed to have Code section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Code section 341(f)(4)) owned
by the Company;
(15) the Company does not have any "tax-exempt use property"
within the meaning of Code section 168(g) or Code section 168(h) or any similar
provision of applicable law with respect to the Company, its income, sales,
assets or business;
13
(16) none of the assets of the Company is required to be treated
as being owned by any other person pursuant to any provision of applicable law,
including, but not limited to, the "safe harbor" leasing provisions of Code
section 168(f)(8) as in effect prior to the repeal of those "safe harbor"
leasing provisions;
(17) the Company is not, nor has it been, a "United States real
property holding corporation" within the meaning of Code section 897(c)(2) at
any time during the applicable period referred to in Code section
897(c)(l)(A)(ii);
(18) no election under Code section 338 or any similar provision
of applicable law has been made or required to be made by or with respect to the
Company (or a subsidiary, if any, of the Company);
(19) the Company (i) has not adjusted changed or received any
request, demand, or proposal from a Tax Authority to adjust or change any
accounting method, (ii) is not required to include in income any adjustment
pursuant to Code section 481(a) (or any similar provision of applicable law) by
reason of a change in accounting method, and (iii) has neither deferred any
income to a period after the Closing Date that has economically accrued or is
otherwise attributable to a period prior to the Closing Date nor accelerated any
deductions into a period ending on or before the Closing Date that will or may
economically accrue after the Closing Date;
(20) there is no power of attorney in effect relating to any Tax
for which the Company is or may be liable or with respect to the Company's
income, sales, assets or business;
(21) no jurisdiction where the Company does not file a Tax Return
has made or threatened to make a claim that the Company is required to file a
Tax Return for such jurisdiction; and
(22) Schedule 3.14(a) sets forth a list of all elections
currently in effect (or made within the five most recent Tax periods ending on
or prior to the Closing Date) with respect to any Tax or Tax Return.
(b) With respect to the Merger;
(1) at least fifty percent (50%) of the aggregate value of all
Company Common Stock outstanding immediately prior to the Merger is preserved in
the Merger within the meaning of Treas. Reg.Section 1.368-1(e) , and neither the
Shareholders nor the Company nor any Person related to the Seller Group has
redeemed or acquired nor does the Seller Group or any Person related (within the
meaning of Treas. Reg.Section 1.368-1(e)(3)) to the Seller Group have any plan
or intention to redeem or acquire any Company Common Stock or make an
extraordinary distribution (within the meaning of Treas.
Reg.Section 1.38-lT(e)(l)(ii)(A)) with respect to any Company Common Stock;
(2) the Buyer will acquire at least ninety percent (90%) of the
fair market value of the Company's net assets and at least seventy percent (70%)
of the fair market value of the Company's gross assets held immediately prior to
the Merger (as determined in accordance with Rev. Proc. 77-37, 1977-2 C. B. 568,
as amended, modified or supplemented)
14
(treating, for purposes of this paragraph, any amounts paid by the Company to
the Shareholders who received cash or other property in connection with the
Merger, Company assets used to pay reorganization expenses, and all redemptions
and distributions made by the Company other than regular normal dividends, as
assets of the Company held immediately prior to the Merger);
(3) the liabilities of the Company were incurred by the Company
in the ordinary course of its business;
(4) the Company is not an investment company as defined in Code
section 368(a)(2)(F);
(5) the fair market value of the assets of the Company exceeds
the sum of its liabilities, plus the amount of liabilities, if any, to which the
assets of the Company are subject;
(c) Schedule 3.14(c) sets forth a list of all jurisdictions (foreign
and domestic) in which any Tax Returns have been filed by or on behalf of the
Company, or with respect to the Company's income, assets or business since
December 31, 1996 and a description of each such Tax Return and the period for
which it was filed.
(d) Schedule 3.14(d) sets forth a list of all jurisdictions (foreign
and domestic) in which state income, franchise and other Tax Returns referred to
in clause (a)(2) have been the subject of Tax Proceedings and a description of
each such Tax Return and the period for which it was filed.
(e) The Seller Group has provided to the Buyer Group: (i) a copy of
all Tax Returns filed since December 31, 1996, and (ii) all audit reports,
closing agreements, letter rulings, or technical advice memoranda relating to
any Taxes for which the Company is or may be liable with respect to the
Company's income, assets or business.
(f) For purposes of this Agreement,
(1) "Tax" means any tax, charge, fee, levy, deficiency or other
assessment of whatever kind or nature including, without limitation, any net
income, gross income, profits, gross receipts, excise, real or personal
property, sales, ad valorem, withholding, social security, retirement, excise,
employment, unemployment, minimum, estimated, severance, stamp, property,
occupation, environmental, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other tax, duty,
fee, assessment or charge of any kind whatsoever, imposed by any Tax Authority,
including any liability therefor as a transferee (including without limitation
under Code section 6901 or any similar provision of applicable law), as a result
of Treas. Reg. Section 1.1502-6 or any similar provision of applicable law, or
as a result of any tax sharing or similar agreement, together with any interest,
penalties or additions to tax relating thereto.
(2) "Tax Authority" means any branch, office, department, agency,
instrumentality, court, tribunal, officer, employee, designee, representative,
or other Person that is acting for, on behalf or as a part of any foreign or
domestic government (or any political subdivision thereof) that is engaged in or
has any power, duty, responsibility or obligation
15
relating to the legislation, promulgation, interpretation, enforcement,
regulation, monitoring, supervision or collection of or any other activity
relating to any Tax or Tax Return.
(3) "Tax Proceeding" means any audit, examination, review,
reassessment, litigation or other administrative or judicial proceeding relating
to any Tax for which the Company is (or is asserted to be) or may be liable, the
collection, payment or withholding of any Tax, or any Tax Return filed by or on
behalf of the Company.
(4) "Tax Return" means any return, election, declaration, report,
schedule, information return, document, information, opinion, statement, or any
amendment to any of the foregoing (including without limitation any
consolidated, combined or unitary return) submitted or required to be submitted
to any Tax Authority.
(5) "Treas. Reg." means any temporary, proposed or final
regulation promulgated under the Code.
3.15 Affiliated Party Transactions. Except for obligations arising under
-----------------------------
this Agreement, as of the Closing Date neither the Company nor any of its
affiliates, nor any Shareholder or any of their respective affiliates or
immediate family (collectively, the "Affiliates"), will have, directly or
indirectly, any obligation to or cause of action or claim against the Company.
3.16 Environmental Matters.
---------------------
(a) To the knowledge of the Seller Group, the Company is in compliance
with, and its business has been conducted in compliance with, all Environmental
Laws (as defined below) and Environmental Permits (as defined below);
(b) No Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C.Section 6901 et seq., is on or ever was listed or is
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.Section 9601 et seq., or on any similar state list of sites requiring
investigation or cleanup;
(c) Neither the Shareholders nor the Company has received any notice
that remains pending or outstanding with respect to the Company's business or
any Site from any Governmental Entity or Person alleging that the Company is not
in compliance with any Environmental Law;
(d) There has been no Release (as defined below) of a Hazardous
Substance (as defined below) by the Seller Group at, from, in, to, on or under
any Site and, to the knowledge of the Seller Group, no Hazardous Substances are
present in, on, about or migrating to or from any Site that could give rise to
an Environmental Claim (as defined below) against the Company;
(e) There are no pending or outstanding corrective actions requested,
required or being conducted by any Governmental Entity for the investigation,
remediation or cleanup of any Site, and there have been no such corrective
actions, whether still pending or otherwise;
16
(f) Except as set forth on Schedule 3.8(c), the Company has obtained
and holds all necessary material Environmental Permits, and those Environmental
Permits will remain in full force and effect after the consummation of the
transactions contemplated hereby;
(g) There are no past or pending, or to the knowledge of the
Shareholders or the Company, threatened, Environmental Claims against the
Company, and neither the Company nor the Shareholders is aware of any facts or
circumstances that could be expected to form the basis for any Environmental
Claim against the Company;
(h) Neither the Company, any entity previously owned by the Company,
nor any predecessor of the Company, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that could result in an Environmental Claim
against the Company;
(i) Except as set forth on Schedule 3.16, at any Site, there are no
(i) underground storage tanks, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos containing material, or (iv)
recognized environmental condition, as defined by ASTM E1527-97; and
(j) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses (which have been reduced to writing) conducted
by, on behalf of, or that are in the possession of the Company with respect to
any Site or any transportation, handling or disposal of any Hazardous Substance
that has not been delivered to the Buyer Group prior to execution of this
agreement.
(k) As used herein, (i) "Environment" means all air, surface water,
groundwater, or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources; (ii) "Environmental Claim"
means any and all administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints, requests for
information, proceedings or other communications (written or oral), whether
criminal or civil, (collectively, "Claims") pursuant to or relating to any
applicable Environmental Law by any person (including, but not limited to, any
Governmental Entity, Person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential: (A) violation of or liability
under any Environmental Law, (B) violation of any Environmental Permit, or (C)
liability for investigatory costs, cleanup costs, removal costs, remedial costs,
response costs, natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based on, resulting from, or related to the
presence, Release, or threatened Release into the Environment, of any Hazardous
Substances at any location, including, but not limited to, any off-Site location
to which Hazardous Substances or materials containing Hazardous Substances were
sent for handling, storage, treatment, or disposal; (iii) "Environmental Law"
means any and all Laws relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substances, whether
now existing or subsequently amended or enacted, and the state analogies
thereto, all as amended or superseded from time to time; and any common law
doctrine, including, but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the presence,
Release, or exposure to a Hazardous Substance; (iv) "Environmental Permit" means
any Licenses or Consents required by any Governmental Entity under or in
connection with any Environmental
17
Law; (v) "Hazardous Substance" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "extremely hazardous
wastes, " "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"pollutants," "regulated substances, " "solid wastes," or "contaminants" or
words of similar import, under any Environmental Law; (vi) "Release" means any
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of a Hazardous Substance into the
Environment; and (vii) "Site" means any of the real properties currently or
previously owned, leased, used or operated by the Company, any predecessors of
the Company or any entities previously owned by the Company, including all soil,
subsoil, surface waters and groundwater thereat.
3.17 No Brokers. Neither the Company nor the Shareholders has employed, or
----------
otherwise engaged, any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' fees or other
similar fees in connection with the transactions contemplated by this Agreement.
3.18 Receivables. All accounts receivable of the Company have arisen, and
-----------
as of the Closing Date will have arisen, from bona fide transactions in the
ordinary course of the Company's business consistent with past practice and
established in the ordinary course of such Company's business consistent with
past practice. Each of the accounts receivable of the Company either has been or
will be collected in full, without any set-off, within ninety (90) days after
the day on which it first becomes due and payable.
3.19 Inventories. As reflected on the Financial Statements, the inventories
-----------
of the Company's business have been valued at the lower of cost (on the
first-in, first-out method) or market in accordance with GAAP, consistently
applied, and the value of obsolete materials and materials of below standard
quality has been written down in accordance with GAAP, consistently applied.
Except as reflected in the Latest Balance Sheet referred to in section 3.5, the
inventories of the Company's business contain no amount of items not salable or
usable within twelve (12) months from the date thereof at normal profit margins
consistent with historical sales practices. Except as set forth in Schedule
3.19, the Company is not under any liability or obligation with respect to the
return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers.
3.20 Product Claims. No product liability claim is pending, or to the
--------------
knowledge of the Shareholders or the Company, threatened, against the Company or
against any other party with respect to the products of the Company's business.
Schedule 3.20 lists all product liability claims seeking damages in excess of
$1,000 asserted against the Company (or in respect of which any member of the
Seller Group has received notice) with respect to the products of the Company's
business or the Company during the last five (5) years. Claims not listed on
Schedule 3.20 do not aggregate more than $10,000.
3.21 Warranties and Returns. Schedule 3.21 sets forth a summary of the
----------------------
practices and policies followed by the Company with respect to warranties and
returns of any products manufactured or sold by it, whether such practices are
oral or in writing or are deemed to be
18
legally enforceable. Except as set forth on Schedule 3.21, there is not
presently, nor has there been since December 31, 1997, any failure or defect in
any product sold by the Company that has required, or that may require, a
general recall or replacement campaign or similar action with respect to such
product or a reformulation or change of such product, nor has there been any
acceptance of returned or defective goods of the Company in excess of $10,000 in
the aggregate for all such transactions with respect to products sold by it
since December 31, 1997.
3.22 Assets Utilized in the Business. The assets, properties and rights
-------------------------------
owned, leased or licensed by the Company and used in connection with the
Company's business and that will be owned, leased or licensed by the Company as
of the Effective Time, and all the agreements to which any Shareholder or the
Company is a party relating to the Company's business, constitute all of the
properties, assets and agreements utilized and employed by the Company in
connection with the operation and conduct by the Company of its business as
presently and as proposed to be conducted. As a result of the Merger, upon the
Effective Time the Buyer will obtain good title to all of such assets,
properties and rights, free and clear of all Liens, except as set forth on
Schedule 3.22.
3.23 Insurance. Schedule 3.23 contains a complete and correct list of all
---------
policies of insurance of any kind or nature covering the Company, including
policies of life, fire, theft, casualty, product liability, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance, indicating the type of coverage, name of insured, the
insurer, the expiration date of each policy, the amount of coverage and whether
on an "occurrence" or "claims made" basis. All such policies (i) are with
insurance companies that are financially sound and reputable and are in full
force and effect, (ii) are sufficient for compliance with all material
requirements of law and of all applicable material agreements, and (iii) are
valid, outstanding and enforceable policies. Complete and correct copies of such
policies have been furnished to the Buyer Group. All such insurance policies or
comparable coverage shall be continued in full force and effect through the
Closing Date. Since December 31, 1997, the Company has not been denied any
insurance coverage which it has requested.
3.24 Delivery of Documents; Corporate Records. The Seller Group has
----------------------------------------
heretofore delivered to the Buyer Group true, correct and complete copies of all
documents, instruments, agreements and records referred to in this Article 3 or
in the Schedules to this Agreement and copies of the minute and stock record
books of the Company. The minute and stock record books of the Company contain
true, correct and complete copies of the records of all meetings and consents in
lieu of a meeting of the Board of Directors (and all committees thereof) and the
shareholders of the Company since the date of its incorporation.
3.25 Customers, Suppliers and Distributors. Schedule 3.25 sets forth (i)
-------------------------------------
the ten customers with the highest dollar volume of purchases from the Company
during each of those periods indicating the approximate total sales to each of
those customers, and (ii) the ten largest suppliers and the ten largest
distributors of the Company during each of those periods. Except as set forth on
Schedule 3.25, there has not been any adverse change in the business
relationship of the Company with any such customer, supplier or distributor, and
neither the Shareholders or the Company is aware of any threatened loss of any
such customer, supplier or distributor.
3.26 Labor Matters. There are no labor strikes, slow-downs or stoppages or
-------------
other labor troubles pending or, threatened with respect to the employees of the
Company, no
19
representation questions exist, there is no collective bargaining agreement
binding on the Company and there is no agreement which restricts the Company
from relocating or closing any or all of its businesses or operations, there are
no grievances asserted that might have an adverse effect upon the Company's
business, or the financial condition or prospects of the Company, nor is there
pending any arbitration proceeding arising out of or under any labor union
agreement; the Company has not experienced any work stoppage during the last
five (5) years.
3.27 Bank Accounts. Schedule 3.27 sets forth the names and locations of all
-------------
banks, depositories and other financial institutions in which the Company has an
account or safe deposit box and the names of all persons authorized to draw
thereon or to have access thereto.
3.28 Directors, Officers and Certain Employees. Schedule 3.28 sets forth a
-----------------------------------------
complete and correct list of the names, current annual salary, bonus and title,
for each director and officer and each other employee of the Company who is a
party to an employment agreement with the Company or who received annual
compensation during the Company's most recently ended fiscal year, or who is
entitled to receive compensation, on an annualized basis, whether or not paid to
date, in excess of $50,000. Neither the Company nor any Shareholder is aware of
any employee in the Company's senior management who intends to terminate his or
her employment relationship with the Company, either as a result of the
transactions contemplated hereby or otherwise. The persons identified on
Schedule 3.28 are the Company's only key employees.
3.29 No Misstatements or Omissions. No representation or warranty by any
-----------------------------
Shareholder or the Company contained in this Agreement and no statement
contained in any certificate, list, Schedule, Exhibit or other instrument
specified or referred to in this Agreement, whether heretofore furnished to the
Buyer Group or hereafter furnished to the Buyer Group pursuant to this Agreement
on the part of any member of the Seller Group contains or will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
3.30 Investment Undertaking. The Shareholders confirm that the shares of
----------------------
MedSource Common Stock to be issued to them pursuant to this Agreement will be
"restricted securities" within the meaning of Rule 144 of the General Rules and
Regulations under the Securities Act of 1933 ("Rule 144"). The Shareholders are
acquiring such shares for their own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act of 1933.
The Shareholders understand that such shares issued hereunder may not be
disposed of for a period of at least one year (and possibly two years) pursuant
to Rule 144, which may not be available at all if MedSource is not in compliance
with the requirements of Rule 144. The Shareholders understand that each must
bear the economic risk of the investment indefinitely because such shares may
not be sold, hypothecated or otherwise disposed of unless subsequently
registered under the Securities Act of 1933 and applicable state securities laws
or an exemption from registration is available. Each Shareholder is a
sophisticated investor who either (i) has such knowledge and experience in
financial and business matters such that he is capable of evaluating the merits
and risks of this investment in the securities being acquired hereunder, or (ii)
has obtained independent professional financial advice sufficient to enable him
to evaluate the merits and risks of this investment in the securities being
acquired hereunder.
20
4. Representations and Warranties of the Buyer and MedSource. Each of the Buyer
and MedSource, jointly and severally, represents and warrants to the
Shareholders and the Company as follows:
4.1 Organization of the Buyer Group. Each of the Buyer and MedSource is a
-------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted, except, as to subsidiaries, for
those jurisdictions where the failure to be so organized, existing or in good
standing individually or in the aggregate would not have a Material Adverse
Effect on MedSource. Each of the Buyer and MedSource is duly qualified or
licensed to do business and is in good standing (with respect to jurisdictions
that recognize such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate would not have a Material Adverse Effect on MedSource. The
Buyer Group has heretofore delivered to the Seller Group true and correct copies
of the Articles of Organization or the Certificate of Incorporation and Bylaws
of each of the Buyer and MedSource as currently in effect.
4.2 Authorization; Validity of Agreement. Each of the Buyer and MedSource
------------------------------------
has the requisite corporate power and authority to execute, deliver and perform
this Agreement and each other agreement executed or to be executed by each of
the Buyer or MedSource pursuant to the terms of this Agreement (collectively,
the "Buyer Acquisition Agreements") and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by each
of the Buyer and MedSource of this Agreement and the other Buyer Acquisition
Agreements to which the Buyer or MedSource is a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of the Buyer and MedSource and, where
necessary, the shareholders of the Buyer and MedSource, and no other corporate
proceedings on the part of the Buyer and MedSource are necessary to authorize
the execution, delivery and performance of this Agreement and the other Buyer
Acquisition Agreements by the Buyer and MedSource, as the case may be, and the
consummation of the transactions contemplated hereby and thereby. Each of this
Agreement and each Buyer Acquisition Agreement has been duly executed and
delivered by the Buyer and MedSource, as the case may be, and is a valid and
binding obligation of the party signatory thereto, enforceable against such
party in accordance with its terms.
4.3 No Violations; Consents and Approvals.
-------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Buyer Acquisition Agreements by each of the Buyer or MedSource, as the case may
be, do not, and the consummation by each of the Buyer and MedSource of the
transactions contemplated hereby and thereby will not, (i) violate any provision
of the Articles of Organization or Certificate of Incorporation or Bylaws of the
Buyer or MedSource, as the case may be, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any material Contract to which the
Buyer or MedSource is a party or by which the Buyer or MedSource or any of their
respective properties or assets may be bound or otherwise subject, or (iii)
violate any order, writ, judgment,
21
injunction, decree, law, statute, rule or regulation applicable to the Buyer or
MedSource or any of their respective properties or assets.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution, delivery and performance of this Agreement or the Buyer
Acquisition Agreements by each of the Buyer and MedSource, as the case may be,
or the consummation by the Buyer or MedSource of the transactions contemplated
hereby and thereby.
4.4 Litigation. Except as set forth on Schedule 4.4, there is no Proceeding
----------
pending nor, to the knowledge of the Buyer or MedSource, is there any
investigation or Proceeding threatened, that involves or affects the Buyer or
MedSource, by or before any Governmental Entity or any other Person that if
adversely determined would be reasonably likely to have a Material Adverse
Effect on MedSource.
4.5 Compliance with Law; Licenses and Permits.
-----------------------------------------
(a) To the knowledge of the Buyer Group, the Buyer Group has, and on
the Closing Date will have, complied with all applicable Laws, including but not
limited to Laws relating to Taxes, zoning, building codes, antitrust,
occupational safety and health, industrial hygiene, environmental protection,
water, ground or air pollution, the generation, handling, treatment, storage or
disposal of Hazardous Substances, consumer product safety, product liability,
hiring, wages, hours, employee benefit plans and programs, collective bargaining
and the payment of withholding and social security taxes, except where the
failure to so comply would not be reasonably likely to have a Material Adverse
Effect on the Buyer Group, taken as a whole. Since December 31, 1998, neither
the Buyer nor MedSource has received any notice of any material violation of any
Law, except for such notices relating to violations that would not be reasonably
likely to have a Material Adverse Effect on MedSource.
(b) To the knowledge of the Buyer Group: (i) MedSource has every
License, and every Consent by or on behalf of any Person that is not a party to
this Agreement, required for it to conduct its business as presently conducted;
and (ii) all such Licenses and Consents are in full force and effect and neither
the Buyer nor MedSource has received notice of any pending cancellation or
suspension of any thereof nor is any cancellation or suspension thereof
threatened, except where the failure of any such statement in items (i) or (ii)
of this section 4.5(b) to be true relates to a fact or circumstance that would
not be reasonably likely to have a Material Adverse Effect on MedSource, taken
as a whole. The applicability and validity of each such License and Consent will
not be adversely affected by the consummation of the transactions contemplated
by this Agreement, except where any inapplicability or invalidity would not be
reasonably likely to have a Material Adverse Effect on MedSource.
4.6 Capital Structure
-----------------
(a) The authorized capital stock of MedSource consists of:
(1) 1,000,000 shares of preferred stock, par value $.0l per share
(the "Preferred Stock"), of which 100,000 shares have been designated as Series
A (the "Series A Preferred Stock"), 400,000 shares have been designated as
Series B (the "Series B Preferred
22
Stock"), 65,000 shares have been designated as Series Z (the "Series Z Preferred
Stock"); 435,000 shares of Preferred Stock remain undesignated; and
(2) 40,000,000 shares of MedSource Class A Common Stock.
(b) As of the date hereof, there were outstanding 4,448,000 shares of
MedSource Common Stock, 38,340 shares of Series A Preferred Stock, 332,728
shares of Series B Preferred Stock, and 65,000 shares of Series Z Preferred
Stock. Also at that date, 175,000 shares of MedSource Common Stock were reserved
for issuance pursuant to outstanding options, warrants and other convertible
securities.
(c) All outstanding shares of capital stock of MedSource are, and all
shares that may be issued pursuant to securities or rights disclosed on Schedule
4.6(c) will, when issued, be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights, except as may be disclosed
on Schedule 4.6(c). Except as set forth in this section 4.6 or in Schedule
4.6(c), MedSource does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments, or agreements of any
character calling for the purchase or issuance of any equity securities of
MedSource or any securities representing the right to purchase or otherwise
receive any shares of capital stock of MedSource.
4.7 Valid Issuance of Shares, Etc. Each of the 500,000 MedSource Shares to
-----------------------------
be issued in connection with the Merger pursuant to the terms of section 2.3(b)
will, upon such issuance, be duly authorized, validly issued, fully paid and
non-assessable and owned of record by each respective Shareholder free and clear
of all Liens other than Liens that may result from acts of the Shareholders.
4.8 Financial Statements.
--------------------
(a) Attached to Schedule 4.8(a) are the audited consolidated balance
sheet of MedSource as of July 3, 1999 (the "Audited Balance Sheet"), together
with the related statements of operations for the period commencing on March 30,
1999 and ended July 3,1999, and the unaudited consolidated balance sheet of
MedSource as of April 1, 2000 (the "April 1, 2000 Balance Sheet"), together with
the related consolidated statements of operations for the period ended April 1,
2000 (all of the foregoing collectively, the "MedSource Financial Statements").
(b) The Audited Balance Sheet has been audited by Ernst &Young LLP and
the reports of that firm are attached hereto as Schedule 4.8(a). That firm is
and has been MedSource's only independent auditors for the period covered by the
Audited Balance Sheet. The MedSource Financial Statements have been derived
from, and agree with, the books and records of MedSource and fairly present the
financial position of MedSource as of the respective dates thereof and the
results of operations of MedSource for the respective periods set forth therein.
The MedSource Financial Statements have been prepared in accordance with GAAP as
of the dates and for the periods involved, subject, in the case of the April 1,
2000 Balance Sheet and the related statements of operations for the interim
period, to normal fiscal year-end adjustments in the ordinary course (none of
which, individually or in the aggregate, will be material).
23
4.9 Compliance with Securities Laws. No outstanding share of MedSource
-------------------------------
capital stock has been, and no shares of MedSource capital stock or other equity
securities to be issued as contemplated by this Agreement will be, issued or
sold by MedSource in violation of the registration requirements of the federal
and applicable state securities laws, except for any violations that would not
be reasonably likely to have a material adverse effect on the Buyer taken as a
whole, and provided in regard to securities to be issued as contemplated by this
Agreement, that the representations and warranties of Section 3.30 are accurate
and correct.
4.10 No Misstatements or Omissions. No representation or warranty by the
-----------------------------
Buyer or MedSource contained in this Agreement and no statement contained in any
certificate, list, Schedule, Exhibit or other instrument specified or referred
to in this Agreement, whether heretofore furnished to the Seller Group or
hereafter furnished to the Seller Group pursuant to this Agreement on the part
of the Buyer or MedSource Group contains or will contain any untrue statement of
a material fact or omits or will omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
4.11 No Material Adverse Change. Since April 1, 2000 (i) no event,
--------------------------
condition or circumstance has occurred that could, or could be reasonably likely
to, have a Material Adverse Effect on the condition (financial or otherwise),
business, assets, results of operations or prospects of MedSource, other than
events, conditions or circumstances solely attributable to general economic
conditions.
4.12 No Undisclosed Liabilities. MedSource does not have, and as of the
--------------------------
Effective Time will not have, any liabilities (whether accrued, contingent,
known, or otherwise) other than those that (i) are set forth or reserved against
on the April 1, 2000 Balance Sheet; or (ii) were incurred since April 1, 2000 in
the ordinary course of business, none of which, individually or in the
aggregate, is material to MedSource's business, operations, condition or
prospects.
4.13 Taxes. Except as set forth in Schedule 4.13:
-----
(1) MedSource has (A) duly and timely filed or caused to be filed
with Tax Authorities each Tax Return that is required to be filed by or on
behalf of MedSource or that includes or relates to MedSource, its income, sales,
assets or business, which Tax Return is true, correct and complete, (B) duly and
timely paid in full, caused to be paid in full, all Taxes due and payable on or
prior to the Closing Date, and (C) has properly accrued on the books and records
of MedSource in accordance with generally accepted accounting principles a
provision for the payment of all Taxes due or claimed to be due or for which the
Company otherwise is or may be liable;
(2) MedSource has not requested an extension of time within which
to file any Tax Return in respect of any Tax period which has not since been
filed;
(3) MedSource has complied in all respects with all applicable
laws relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities; and
24
(4) There is no lien for Taxes upon any asset or property of
MedSource (except for any statutory lien for any Tax not yet due).
4.14 Registration Rights. The registration rights of the Shareholders
-------------------
contained in the Registration Rights Agreement are on terms equally as favorable
as the registration rights afforded to other issuances of MedSource Common
Stock.
5. Other Agreements of the Parties.
5.1 Tax Returns; Taxes.
------------------
(a) No Shareholder shall take or fail to take any action or permit the
Company to take or fail to take any action which could result in the termination
of any "S" corporation election (or similar election) of the Company. The
Shareholders shall duly file or cause to be filed on a timely basis all Tax
Returns of, relating to or which include the Company, its income, assets or
business, for all Pre-Closing Periods. Such Tax Returns shall be true, correct
and complete, shall be filed on a basis consistent with prior Tax Returns of or
relating to the Company, its income, assets or business, and shall not make,
amend or terminate any election by the Company (or to which the Company is
subject) or change any Tax accounting method, practice or procedure of the
Company, without MedSource's prior written consent. The Shareholders shall give
MedSource a copy of each such Tax Return for its review with sufficient time for
comments and corrections prior to filing. The Shareholders shall cause the
Company to timely and properly withhold and collect, pay over and report all
Taxes required to be withheld or collected by the Company on or before the
Closing Date.
(b) The Shareholders shall be responsible for and shall timely pay all
Taxes, including, without limitation, any Taxes resulting from a Tax Proceeding
for which the Company is or may be liable with respect to any Pre-Closing
Period. In addition, subject to the provisions of sections 5.1(a) and 9 hereof,
the Shareholders shall be entitled to receive all refunds of Taxes with respect
to any Pre-Closing Period, to the extent that such Taxes were originally paid by
the Shareholders. The Shareholders shall indemnify the Company, the Buyer Group
and their respective Affiliates, as the case may be (collectively, the
"Taxpayer"), and hold the Taxpayer harmless, from and against any (i) Taxes of
the Company with respect to a Pre-Closing Period for which the Taxpayer is or
may be liable, (ii) the effect, if any, on the Taxpayer in any period that ends
after the Closing Date of an adjustment with respect to a Pre-Closing Period and
(iii) fees and expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Buyer Group or their Affiliates in connection therewith or
in enforcing its rights or collecting any amounts due hereunder. This indemnity
shall apply notwithstanding any investigation made by the Buyer Group in
connection with the transactions contemplated by this Agreement or, its receipt,
examination, filing of or commenting on any Tax Return, and shall be separate
and independent of any other indemnity between the parties hereto. For purposes
of this Agreement, "Pre-Closing Period" shall mean any tax period ending on or
before the Closing Date.
(c) The Buyer Group shall promptly forward to the Shareholders a copy
of all written communications from any Tax Authority received by the Taxpayer
relating to the Company and the Shareholders for any Pre-Closing Period. The
Shareholders shall promptly forward to the Buyer Group a copy of all written
communications from any Tax Authority
25
received by any Shareholder relating to any Pre-Closing Period for which the
Taxpayer is or may be liable.
(d) After the Closing Date, the Buyer Group and the Seller Group shall
each make available to the other, upon reasonable request, all information,
records or other documents relating to any Tax relating to the Company and the
Shareholders and shall preserve all such information, records or other documents
until the date that is six (6) months after the expiration of the statute of
limitations applicable to such Tax. In addition, the Buyer Group and the Seller
Group shall cooperate with the other upon request in connection with all matters
relating to the preparation of any Tax Returns relating to the Company and in
connection with any Proceeding referred to in this provision. Any investigation,
review, comment or discussion by the Buyer Group related to or in connection
with the payment of Taxes, the preparation of Tax Returns or drafts of Tax
Returns, the filing of Tax Returns, any Tax Proceeding or any provision of this
section 5.1 shall not affect the indemnity provisions of Article 9 or limit the
scope of such provisions (including but not limited to section 9.1) in any way,
or affect any other representations, warranties or obligations of the Seller
Group. Each party shall bear its own costs and expenses in complying with the
provisions of this section 5.1(d).
(e) the Buyer Group and the Seller Group will treat the Merger as a
reorganization within the meaning of Code sections 368(a)(l)(A) and 368(a)(2)(D)
and will report, disclose, account for and maintain all records relating to the
Merger as such;
(f) neither the Buyer Group nor the Seller Group shall take any
position that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Code sections 368(a)(l)(A) and
368(a)(2)(D); and
(g) neither the Buyer Group nor the Seller Group has taken or shall
take any actions either prior to, in connection with or subsequent to the Merger
that will prevent the Merger from qualifying as a reorganization within the
meaning of Code sections 368(a)(l)(A) and (a)(2)(D).
5.2 Non-Disclosure of Confidential Information.
------------------------------------------
(a) From and after the date hereof, no member of the Seller Group
shall divulge, communicate, use to the detriment of the Buyer Group or for the
benefit of any other Person, or misuse in any way, any confidential information
or trade secrets relating to the Company or MedSource or their respective
Affiliates including, without limitation, personnel information, secret
processes, know-how, customer lists or other technical data;
(b) All information, data and material furnished to the Buyer Group by
the Seller Group prior to the date of this Agreement or hereafter furnished to
the Buyer Group by the Seller Group is confidential. Except for disclosures
which may be necessary to satisfy conditions of this Agreement, the Buyer Group
agrees that the Buyer Group will not, and no agent representing the Buyer Group
to which such information, data and material may be furnished will, disclose or
otherwise make available, at any time, any such information, data or material to
any other person whomsoever who does not have a confidential relationship with
the Buyer Group; that the Buyer Group and the Seller Group will protect such
information, data and material with a high degree of care to prevent the
disclosure thereof, and that if, for any reason, the transactions contemplated
by this Agreement are not consummated, all
26
information, data and material concerning the Company obtained by the Buyer
Group and its representatives, and all copies thereof, will be delivered to the
Company.
5.3 No Solicitation of Employees, Suppliers or Customers. No Shareholder
----------------------------------------------------
shall, and no Shareholder shall permit the Company or any Affiliate of either of
them to, from and after the Closing Date, and for a period of three years
thereafter, directly or indirectly, for itself or on behalf of any other Person,
employ, engage or retain any Person who, at any time during the 12-month period
preceding the Closing Date, shall have been an employee of the Buyer, or contact
any supplier, customer or employee of the Buyer for the purpose of soliciting or
diverting any such supplier, customer or employee from the Buyer.
5.4 Non-Competition.
---------------
(a) Until the second anniversary of the Closing Date, no Shareholder
or their respective Affiliates shall, anywhere in North America or Europe,
directly or indirectly, alone or in association with any other Person, firm,
corporation or other business organization (i) acquire or own in any manner, any
interest in any Person that is engaged in any facet of the business of the
Company, (ii) engaged in any facet of the business of the Company or compete in
any way with the business of the Company, (iii) be employed in any capacity by,
serve as an employee of, or consultant or advisor to, or otherwise participate
in the management or operation of, any Person that (x) engages in any facet of
the business of the Company, or (y) competes with the business of the Company in
any way; provided, however, that notwithstanding the foregoing, the Shareholders
and their Affiliates (collectively and not individually) may own up to five
percent (5%) of the voting securities of any publicly-traded Company, provided,
further, however, that notwithstanding the foregoing, nothing in this Section
5.4 shall restrict a right Hens has under that certain License Agreement entered
into between MedSource ,and Hens, dated of even date herewith.
(b) The parties hereto intend that the covenant contained in section
5.4(a) shall be construed as a series of separate covenants, one for each state
or country specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in section
5.4(a) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in section 5.4(a) unenforceable
covenant shall be deemed reduced in scope or, if necessary, eliminated from
these provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforce.
(c) Each of the Shareholders acknowledges that the provisions of this
section 5.4, and the period of time, geographic area and scope and type of
restrictions on its activities set forth herein, are reasonable and necessary
for the protection of the Buyer Group and are an essential inducement to the
Buyer Group's entering into the Transaction Documents to which it is a party and
consummating the transactions contemplated thereby.
5.5 Other Actions. Each of the parties hereto shall use all reasonable
-------------
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper or advisable under
applicable Laws, or reasonably required in order to carry out the terms and
provisions of this Agreement and to consummate and make effective the
transactions contemplated hereby.
27
5.6 Required Consents. The Seller Group shall cause the Company to receive
-----------------
all Required Consents, as set forth on Schedule 3.4(b) attached hereto. The
Required Consents shall be obtained and provided to the Buyer prior to, or as
soon as practicable after, the Closing Date. The Shareholders and/or the Company
shall promptly provide the Buyer with (i) 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 contemplated hereby and (ii)
all Consents obtained from any party to any Contract or any Lease and any
Approval with respect to the Leased Real Property.
5.7 Stockholders' Agreement and Registration Rights Agreement. At the
---------------------------------------------------------
Closing, each Shareholder shall enter into a stockholders' agreement with
MedSource (the "Stockholders' Agreement") and a registration rights agreement
(the "Registration Rights Agreement").
5.8 Real Property; Equipment and Other Assets. At the Closing, the
-----------------------------------------
Shareholders shall, and the Shareholders shall cause their respective Affiliates
and other Persons affiliated with him to, contribute to the Company all assets
(including, without limitation, all equipment, intellectual property, real
estate or other assets) owned by any of them that are used or usable by the
Company. Any consideration received in connection with such transactions shall
reduce by the same amount the Cash Consideration.
5.9 Employment, Consulting and Non-Competition Agreements. At the Closing,
-----------------------------------------------------
Hens shall enter into an Employment and Non-Competition Agreement with MedSource
(the "Hens Employment Agreement"). At the Closing, Roche shall enter into a
Consulting Agreement with MedSource (the "Roche Consulting Agreement").
5.10 Interests in Real Property.
--------------------------
(a) On or prior to the Closing Date, the Shareholders and the Company
shall cause the Company to obtain the following documents with respect to the
transfer of interests in real property:
(1) terminations of lease (collectively, the "Terminations of
Lease") between the Company and the applicable landlords terminating the
existing leases with respect to the Leased Real Property.
(2) leases (collectively, the "New Leases") between the Buyer and
the applicable landlords respecting the Leased Real Property.
(b) At or prior to the Closing, the Seller and Shareholders shall
cause each of the landlords under the Leases, and each ground, superior or
underlying lessor of the Leased Real Property to execute and deliver a
landlord-lender agreement (each, a "Landlord-Lender Agreement" and,
collectively, the "Landlord-Lender Agreements") in favor of MedSource's lender
and a memorandum of lease in recordable form (the "Memorandum of Lease").
(c) At or before the Closing, the Shareholders and the Company shall
deliver to the Buyer (i) true and complete maintenance records for the Leased
Real Property, (ii) a validly issued permanent certificate of occupancy for the
Leased Real Property, (iii) all original licenses and permits, authorizations
and approvals pertaining to the Leased Real
28
Property, and (iv) all guarantees and warranties which the Company has received
in connection with any work or services performed or equipment installed in the
Leased Real Property.
5.11 Deferred Compensation. After the Closing, the Buyer shall commence
---------------------
payments to Thomas J. Roche pursuant to the terms of the Deferred Compensation
Agreement.
5.12 PCC Airfoils, Inc. Agreement. The Seller Group agrees that any
----------------------------
technology transferred under the PCC Airfoils, Inc. Agreement referred to in
Schedule 3.11 (a) hereto, or resulting from the efforts under such agreement,
will not be used by the Seller Group in the manufacture of ceramic cores for the
investment casting industry unless authorized in writing by Sherwood
Refractories (an entity referred to in the PCC Airfoils, Inc. Agreement).
6. Closing Deliveries.
6.1 Deliveries of the Seller Group. At the Closing, the Shareholders shall,
------------------------------
and the Shareholders shall cause the Company to deliver the following items to
the Buyer Group:
(a) The Required Consents;
(b) The opinion of MacDonald Illig Jones & Britton LLP, counsel to the
Seller Group.
(c) A tax, lien and judgment search of the Company showing no items
not disclosed in the schedules to this Agreement;
(d) The Employment, Consulting and Non-Competition Agreements referred
to in section 5.9 duly executed by Hens, Roche and any key employees,
respectively;
(e) The Stockholders' Agreement duly executed by the Shareholders;
(f) The Registration Rights Agreement duly executed by the
Shareholders;
(g) The Deferred Compensation Agreement duly executed by Roche;
(h) Stock certificates representing the Company Common Stock, duly
endorsed in blank or accompanied by stock transfer powers and with all requisite
stock transfer tax stamps attached;
(i) A certificate duly executed by the Chairman of the Board of
Directors of the Company, attesting, with respect to the Company, the
resolutions duly and validly adopted by the Board of Directors of the Company
evidencing the authorization of its execution and delivery of this Agreement and
the other Transaction Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby, as to its
Articles of Incorporation and Bylaws, and as to the incumbency of each of its
executive officers
(j) A certificate with respect to the Company from the Secretary of
the Commonwealth of Pennsylvania attesting as to its valid existence as of a
date recent to the Closing Date;
29
(k) The Memorandum of Lease duly executed and acknowledged by the
applicable landlords;
(l) The New Leases duly executed by the applicable landlords;
(m) The Termination of Leases duly executed by the applicable
landlords and the Company;
(n) the Landlord-Lender Agreements, duly executed and acknowledged by
the applicable parties.
6.2 Deliveries of the Buyer Group. At the Closing, Buyer shall and
-----------------------------
MedSource shall cause the Buyer to deliver the following items to the Seller
Group:
(a) A certificate of the Secretary of each member of the Buyer Group
certifying the resolutions duly and validly adopted by the Buyer Group
evidencing the authorization of their execution and delivery of this Agreement
and the other Transaction Documents to which the members of the Buyer Group are
parties and the consummation of the transactions contemplated hereby and
thereby, and the names and signatures of the officers of each member of the
Buyer Group authorized to sign this agreement and the other Transaction
Documents to be delivered hereunder.
(b) The opinion of Parker Chapin LLP, counsel to the Buyer Group.
(c) The Cash Consideration pursuant to section 2.3;
(d) The MedSource Shares required to be delivered pursuant to sections
2.1 and 2.3(b);
(e) The Employment, Consulting and Non-Competition Agreements referred
to in section 5.9 duly executed by an officer of MedSource;
(f) The Stockholders' Agreement duly executed by MedSource;
(g) The Registration Rights Agreement duly executed by MedSource; and
(h) The Deferred Compensation Agreement.
7. Termination. This Agreement may only be terminated by the mutual agreement of
the parties hereto. Upon termination of this Agreement, all obligations of the
parties shall terminate except those under sections 5.2 and 8; provided,
however, that no such termination shall relieve the Shareholders or the Company
of any liability to the Buyer or MedSource, or the Buyer or MedSource of any
liability to the Shareholders or the Company, by reason of any breach of or
default under this Agreement.
8. Indemnification.
8.1 Survival of Representations and Warranties of the Seller Group.
--------------------------------------------------------------
Notwithstanding any right of the Buyer or MedSource to fully investigate the
affairs of the Company and the Shareholders and notwithstanding any knowledge of
facts determined or
30
determinable by the Buyer or MedSource pursuant to such investigation or right
of investigation, the Buyer and MedSource have the right to rely fully upon the
representations and warranties of the Shareholders and the Company contained in
this Agreement or in any other Transaction Document. All such representations
and warranties shall survive the execution and delivery of this Agreement and
the Closing hereunder and shall thereafter continue in full force and effect
until the second anniversary of the Closing Date, and the Company's and the
Shareholders' liability in respect of any breach of any such representation or
warranty shall terminate on the second 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
8.5. The foregoing notwithstanding, the representations and warranties contained
in sections 3.2, 3.3, 3.14 and 3.16 shall survive the Closing, and the
Shareholders' and the Company's liability in respect of any breach thereof shall
continue, in the case of sections 3.2 and 3.3, in perpetuity and, in the case of
sections 3.14 and 3.16, until the date that is sixty (60) days after the
expiration of the statute of limitation applicable to any liability relating
thereto which such liability shall remain an obligation of the party against
whom such claim is asserted.
8.2 Survival of Representations and Warranties of the, Buyer Group. The
--------------------------------------------------------------
Shareholders and the Company have the right to rely fully upon the
representations and warranties of the Buyer and MedSource contained in this
Agreement or in any other Transaction Document. All such representations and
warranties shall survive the execution and delivery of this Agreement and the
Closing hereunder and shall thereafter continue in full force and effect until
the second anniversary of the Closing Date and the Buyer's and MedSource's
liability in respect of any breach of any such representation or warranty shall
terminate on the second 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 8.5, which
such liability shall remain an obligation of the party against whom such claim
is asserted. The foregoing notwithstanding, the representations and warranties
contained in sections 4.2 and 4.6 shall survive the Closing, and the MedSource's
and the Buyer's liability in respect of any breach thereof shall continue in
perpetuity.
8.3 Indemnification by the Shareholders. The Shareholders shall severally,
-----------------------------------
but not jointly, indemnify and defend the Buyer and MedSource and each of its
respective officers, directors, employees, shareholders, agents, advisors or
representatives (each, a "Buyer Indemnitee") against, and hold each Buyer
Indemnitee harmless 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 any
Shareholder or the Company contained in this Agreement or in any other
Transaction Document or in respect of any claim made based upon facts that would
constitute any such breach; or
(b) Any Shareholder's or the Company's failure to perform or to comply
with any covenant or condition required to be performed or complied with by the
Shareholders or the Company contained in this Agreement or in any other
Transaction Document.
31
8.4 Indemnification by the Buyer Group. The Buyer and MedSource shall
----------------------------------
indemnify and defend the Shareholders and their agents, advisors or
representatives (each, a "Shareholder Indemnitee") against, and hold each
Shareholder Indemnitee harmless from, any Damages that the Shareholder
Indemnitee may suffer or incur arising from, related to or in connection with
any of the following:
(a) Any breach of any representation or warranty made by the Buyer or
MedSource contained in this Agreement or in any other Transaction Document or in
respect of any claim made based upon facts alleged that would constitute any
such breach; or
(b) The Buyer's or MedSource's failure to perform or to comply with
any covenant or condition required to be performed or complied with by the Buyer
Group contained in this Agreement or in any other Transaction Document.
8.5 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 8.3 or 8.4, such indemnified party
shall, if a claim for indemnification in respect thereof is to be made against
an indemnifying party pursuant to this Article 8, give written notice to the
latter of the commencement of such claim or Proceeding, setting forth in
reasonable detail the nature thereof and the basis upon which such party seeks
indemnification hereunder; provided, however, that the failure of any
indemnified party to give such notice shall not relieve the indemnifying party
of its obligations under such section, except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice.
(b) In the case of any such Proceeding by a third party against an
indemnified party, the indemnifying party shall, upon notice as provided above,
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified party, 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 8.5(b)
notwithstanding, if both the indemnifying party and the indemnified party are
named as parties or subject to such Proceeding and either such party determines
with advice of counsel that there may be one or more legal defenses available to
it that are different from or additional to those available to the other party
or that a material conflict of interest between such parties may exist in
respect of such Proceeding, then the indemnifying party may decline to assume
the defense on behalf of the indemnified party or the indemnified party may
retain the defense on its own behalf, and, in either such case, after notice to
such effect is duly given hereunder to the other party, the indemnifying party
shall be relieved of its obligation to assume the defense on behalf of the
indemnified party, but shall be required to pay any legal or other expenses
including, without limitation, reasonable attorneys' fees and disbursements,
incurred by the indemnified party in such defense.
32
(c) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
assume the defense thereof, then the indemnified party may respond to, contest
and defend against such Proceeding (but the indemnifying party shall have the
right to participate at its own cost and expense in such defense by counsel of
its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover from the indemnifying party the entire cost and
expense thereof including, without limitation, reasonable attorneys' fees and
disbursements and all amounts paid or foregone as a result of such Proceeding,
or the settlement or compromise thereof. The indemnification required hereunder
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills or invoices are received or
loss, liability, obligation, damage or expense is actually suffered or incurred.
8.6 Limitations on Indemnification by the Shareholders. The Shareholders
--------------------------------------------------
shall have several, but not joint, indemnification obligations pursuant to
section 8.3(a) respecting Damages that result from breaches of representations
or warranties set forth in this Agreement (other than the representations and
warranties contained in sections 3.2(a), 3.3,3.14, and 3.16 for which there is
no limitation) only if and only to the extent that the aggregate of all Damages
resulting from such breaches shall exceed $100,000. Anything herein to the
contrary notwithstanding, the Shareholders shall have no liability with respect
to Damages that result from breaches of representations or warranties set forth
in this Agreement (other than the representations and warranties contained in
sections 3.2(a), 3.3, 3.14, and 3.16 for which there is no limitation) for and
to the extent that the aggregate amount of such Damages exceeds $4,000,000. All
indemnities by the Shareholders under this Article 8 may be satisfied either in
cash or, at the option of each Shareholder, by the payment of one-half of the
indemnification liability in cash and one-half of the indemnification liability
by the surrender of a number of MedSource Shares with a value equal to such
liability. It is the intent of the parties that any amounts paid under this
Article VIII shall represent an adjustment of the purchase price and the parties
will report such payments consistent with such intent.
8.7 Limitations on Indemnification by the Buyer Group. The Buyer and
-------------------------------------------------
MedSource shall have indemnification obligations pursuant to section 8.4(a)
respecting Damages that result from breaches of representations or warranties
set forth in this Agreement only if and only to the extent that the aggregate of
all Damages resulting from such breaches shall exceed $100,000. Anything herein
to the contrary notwithstanding, the Buyer and MedSource shall have no liability
with respect to Damages that result from breaches of representations or
warranties set forth in this Agreement, for and to the extent that the aggregate
amount of such Damages exceeds $4,000,000.
33
9. Miscellaneous
9.1 Transaction Fees and Expenses. Each party hereto shall bear such costs,
-----------------------------
fees and expenses as may be incurred by it in connection with this Agreement and
the transactions contemplated hereby.
9.2 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.: (612) 807-1235
with a copy to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attention: Edward R. Mandell
Facsimile No.: (212) 704-6160
if to the Seller Group, to:
Karl F. Hens
34 West Smith Street
Corry, PA 16407
and
Thomas J. Roche
714 North Center Street
Corry, PA 16407
with a copy to:
MacDonald Illig Jones & Britton LLP
100 State Street, Suite 700
Erie, PA 16507-1498
34
Attention: James E. Spoden
Facsimile No.: (814)-454-4647
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
(5) business days after such notice or demand is sent, and, in the case of
clause (b), the business day next following the date such notice or demand is
sent.
9.3 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.
9.4 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.
9.5 Governing Law. This Agreement shall be governed by, and interpreted and
-------------
enforced in accordance with, the laws of the state of Delaware.
9.6 Jurisdiction. Each of the parties hereto hereby irrevocably consents
------------
and submits to the jurisdictions of the United States District Courts of either
the State of New York or the Commonwealth of Pennsylvania in connection with any
Proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, waives any objection to venue in such Districts (unless
such court lacks jurisdiction with respect to such Proceeding, in which case,
each of the parties hereto irrevocably consents to the jurisdiction of the
courts of the State of New York or the Commonwealth of Pennsylvania in
connection with such Proceeding and waives any objection to venue in either the
State of New York or the Commonwealth of Pennsylvania, and agrees that service
of any summons, complaint, notice or other process relating to such Proceeding
may be effected in the manner provided by clause (a) of section 9.2.
9.7 Remedies. In the event of any actual or prospective breach or default
--------
by any party hereto, the other parties shall be entitled to equitable relief,
including remedies in the nature of 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.
9.8 Severability. The provisions hereof are severable and if any provision
------------
of this Agreement shall be determined to be legally invalid, inoperative or
unenforceable in any
35
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.
9.9 Further Assurances. Each party hereto covenants and agrees promptly to
------------------
execute, deliver, file or record such agreements, instruments, certificates and
other documents and to perform such other and further acts as the other party
hereto may reasonably request or as may otherwise be necessary or proper to
consummate and perfect the transactions contemplated hereby.
9.10 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. Neither the Buyer or MedSource
nor the Shareholders may assign any of their obligations hereunder without the
consent of the other party. Except for the permitted assignees, neither party
shall have the right to assign any rights or delegate any duties hereunder
without the consent of the other party. Permitted assignees of the rights
hereunder of the Buyer or MedSource shall include any Person controlling,
controlled by or under common control of the Buyer or MedSource. Permitted
assignees of the Shareholders' rights hereunder shall include any Affiliate.
(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,
each Shareholder hereby acknowledges and agrees that all of the covenants,
representations, warranties and indemnities of the Shareholders under this
Agreement, and under any other agreement or instrument contemplated hereby to
which any 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.
9.11 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
9.12 No Third Party Beneficiaries. Nothing contained in this Agreement,
----------------------------
whether express or implied, is intended, or shall be deemed, to create or confer
any right, interest or remedy for the benefit of any Person other than as
otherwise provided in this Agreement.
36
9.13 Entire Agreement. This Agreement (including all the schedules and
----------------
exhibits hereto), together with the Exhibits, Schedules, certificates and other
documentation referred to herein or required to be delivered pursuant to the
terms hereof, contains the terms of the entire agreement among the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, commitments, understandings, discussions, negotiations or
arrangements of any nature relating thereto.
9.14 Headings. The headings contained in this Agreement are included for
--------
convenience and reference purposes only and shall be given no effect in the
construction or interpretation of this Agreement.
9.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
37
THERMAT ACQUISITION CORP.
By:/s/ Richard J.Effress
-------------------------------
Name: Richard J. Effress
Title: Chairman
MEDSOURCE TECHNOLOGIES, INC.
By:/s/ Richard J.Effress
-------------------------------
Name: Richard J. Effress
Title: Chairman
THERMAT PRECISION TECHNOLOGY, INC.
By:/s/
-------------------------------
Name:
Title:
/s/ Thomas Roche
----------------------------------
Thomas J. Roche
/s/ Karl Frank Hens
----------------------------------
Karl Frank Hens
38