EXHIBIT 2.5
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STOCK CONTRIBUTION AND EXCHANGE AGREEMENT
among
MEDSOURCE TECHNOLOGIES, INC.,
MEDSOURCE TECHNOLOGIES, LLC
as the Transferee
and
Peter J. Neidecker, Peter J. Neidecker Limited Partnership,
Peter C. Neidecker Irrevocable Trust,
Sally N. Morris and Sylvia N. Coors,
as the Transferors
with respect to the contribution and exchange
of all of the capital stock of
NATIONAL WIRE AND STAMPING, INC.
Dated March 22, 1999
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TABLE OF CONTENTS
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Contribution and Exchange of Shares.......................................................................1
Contribution and Exchange ..............................................................1
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Consideration ..........................................................................1
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Payment ................................................................................2
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The Closing...............................................................................................2
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Representations and Warranties of the Transferors.........................................................2
Organization ...........................................................................2
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Capitalization .........................................................................2
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Authorization; Validity of Agreement ...................................................3
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No Violations; Consents and Approvals ..................................................3
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Financial Statements ...................................................................4
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No Material Adverse Change .............................................................5
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No Undisclosed Liabilities .............................................................5
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Litigation; Compliance with Law; Licenses and Permits ..................................5
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Employee Benefit Plans; ERISA ..........................................................6
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Real Property ..........................................................................7
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Intellectual Property; Computer Software ...............................................9
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Tangible Personal Property; Capital Budget ............................................10
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Material Contracts ....................................................................10
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Taxes .................................................................................11
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Affiliated Party Transactions .........................................................14
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Environmental Matters .................................................................15
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No Brokers ............................................................................17
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Receivables ...........................................................................17
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Inventories ...........................................................................17
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Product Claims ........................................................................17
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Warranties and Returns ................................................................17
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Assets Utilized in the Business .......................................................18
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Insurance .............................................................................18
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Delivery of Documents; Corporate Records ..............................................18
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Customers, Suppliers and Distributors .................................................18
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Labor Matters .........................................................................18
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Bank Accounts .........................................................................19
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Directors, Officers and Certain Employees .............................................19
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Year 2000 .............................................................................19
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No Misstatements or Omissions .........................................................19
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Investment Undertaking ................................................................19
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Representations and Warranties of MedSource and the Transferee...........................................20
Organization ..........................................................................20
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Authorization; Validity of Agreement ..................................................20
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No Violations; Consents and Approvals .................................................21
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Litigation ............................................................................21
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Shares of Common Stock ................................................................21
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Capitalization ........................................................................22
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Material Contracts ....................................................................22
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Confidential Memorandum and Due Diligence .............................................22
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No Misstatements or Omissions .........................................................22
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Certain Tax Matters ...................................................................22
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Other Agreements of the Parties..........................................................................23
Conduct of Business ...................................................................22
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Access and Information ................................................................25
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Tax Returns; Taxes ....................................................................25
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Notice of Developments ................................................................26
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Non-Disclosure of Confidential Information ............................................26
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No Solicitation of Employees, Suppliers or Customers ..................................27
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Non-Competition .......................................................................27
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Public Statements .....................................................................28
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Other Actions .........................................................................28
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Cooperation on Taxes ..................................................................28
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Consents ..............................................................................28
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Employment Agreements .................................................................28
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Stockholders Agreement and Registration Rights Agreement ..............................29
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Exclusivity ...........................................................................29
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Equipment, Intellectual Property and Other Assets .....................................29
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Reserved ..............................................................................29
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Repayment of Certain Obligations to the Company .......................................29
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Transfer of Interests in Real Property ................................................29
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Financial Advisor .....................................................................30
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Termination of Executive Deferred Compensation Plans ..................................30
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Confidential Information ..............................................................31
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Real Property .........................................................................31
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Termination of Security Interest ......................................................31
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Certificate of Designation ............................................................31
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Renovation ............................................................................31
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Resignations ..........................................................................31
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Life Insurance Policy .................................................................31
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Conditions Precedent to the Closing......................................................................31
Conditions Precedent to MedSource's and the Transferee's
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Obligations to Close ..................................................................31
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Conditions Precedent to the Transferors' Obligations to Close .........................33
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Documents to be Delivered at the Closing.................................................................35
Deliveries of the Transferors .........................................................35
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Deliveries of the Transferee ..........................................................36
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Termination............................................................................................. 37
Survival of Representations and Warranties.............................................................. 38
Survival of Representations and Warranties of the Transferors .........................38
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Survival of Representations and Warranties of MedSource
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and the Transferee ....................................................................38
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Indemnification......................................................................................... 38
Indemnification by the Transferors ....................................................39
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Indemnification by MedSource and the Transferee .......................................39
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Indemnification Procedures ............................................................40
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Limitations on Indemnification by the Transferors .....................................41
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Limitations on Indemnification by MedSource and the Transferee ........................42
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Right to Set-Off ......................................................................42
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Miscellaneous........................................................................................... 43
Transaction Fees and Expenses .........................................................43
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Notices ...............................................................................43
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Amendment .............................................................................44
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Waiver ................................................................................44
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Governing Law .........................................................................44
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Jurisdiction ..........................................................................44
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Remedies ..............................................................................44
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Severability ..........................................................................44
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Further Assurances ....................................................................45
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Assignment ............................................................................45
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Binding Effect ........................................................................45
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No Third Party Beneficiaries ..........................................................45
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Entire Agreement ......................................................................45
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Headings ..............................................................................45
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Counterparts ..........................................................................45
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Schedules
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Schedule 1.1 Contribution and Exchange of Shares
Schedule 3.4(b) Consents and Approvals
Schedule 3.4(d) Certain Licenses
Schedule 3.5(a) Financial Statements
Schedule 3.5(b) Financial Statements
Schedule 3.6 Material Adverse Changes
Schedule 3.8(a) Litigation, etc.
Schedule 3.9(a) Employee Benefit Plans
Schedule 3.10(a) Real Estate Purchase Terms
Schedule 3.10(b) Leases
Schedule 3.10(c) Lender Interests
Schedule 3.10(e) Renovation
Schedule 3.11(a) Intellectual Property
Schedule 3.11(b) Licenses
Schedule 3.12(a) Title to Tangible Personal Property
Schedule 3.12(b) Tangible Personal Property
Schedule 3.12(c) Capital Budget
Schedule 3.13 Material Contracts
Schedule 3.14(a) Taxes
Schedule 3.14(a)(v) Tax Audits
Schedule 3.14(b) Tax Returns
Schedule 3.14(c) Jurisdictions
Schedule 3.15 Affiliated Party Transactions
Schedule 3.16 Environmental Matters
Schedule 3.17 Brokers
Schedule 3.20 Product Liability
Schedule 3.21 Warranties and Returns
Schedule 3.23 Insurance
Schedule 3.25 Customers; Suppliers and Distributors
Schedule 3.27 Bank Accounts
Schedule 3.28 Directors, Officers, Certain Employees
Schedule 5.1(b) Stock Issuances
Schedule 5.1(c) Payments to Officers
Schedule 5.1(m) Capital Expenditures
Schedule 5.1(n) Amendments, Waivers, etc.
Schedule 5.12 Key Employees
Schedule 5.18 Persons to Sign SNDA Agreements
Schedule 5.20 Executive Deferred Compensation Plans
Schedule 5.21 Confidential Information Letter Agreement
Schedule 6.2(j) Platform Companies
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Exhibits
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Exhibit 1.2 Form of Certificate of Designation
Exhibit 4.1 Form of MedSource's Certificate of Incorporation and Bylaws
Exhibit 5.12A Form of Peter J. Neidecker Employment Agreement
Exhibit 5.12B Form of Robert Brown Employment Agreement
Exhibit 5.12C Form of James Chambers Employment Agreement
Exhibit 5.12D Form of Thomas Richey Employment Agreement
Exhibit 5.12E Form of Linda Meadows-Burkey Employment Agreement
Exhibit 5.12F Form of Peter C. Neidecker Non-competition Agreement
Exhibit 5.13A Form of Stockholders Agreement
Exhibit 5.13B Form of Registration Rights Agreement
Exhibit 5.18A Forms of Terminations of Leases
Exhibit 5.18B Forms of New Leases
Exhibit 5.18C Form of Landlord-Lender Agreements
Exhibit 5.20 Forms of Plan Termination Agreements
Exhibit 6.1(i) Form of Opinion of Counsel for the Transferors
Exhibit 6.2(e) Form of Opinion of Counsel for the Transferee
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STOCK CONTRIBUTION AND EXCHANGE AGREEMENT
Dated March 22, 1999
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The parties to this agreement are MedSource Technologies, Inc., a
Delaware corporation ("MedSource"), MedSource Technologies, LLC, a Delaware
limited liability company whose sole member is MedSource (the "Transferee"), and
Peter J. Neidecker, Peter J. Neidecker Limited Partnership, a Colorado limited
partnership (the "Partnership"), Peter C. Neidecker Irrevocable Trust, a trust
formed under the laws of Colorado (the "Trust"), Sally N. Morris and Sylvia N.
Coors, (collectively, the "Transferors" and individually, a "Transferor").
W I T N E S S E T H:
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The Transferors collectively own all of the outstanding capital stock
of National Wire and Stamping, Inc., a Colorado corporation (the "Company").
The Transferee, a newly-formed Delaware limited liability company, is
entering into this Agreement in connection with and as part of an overall
agreement with the Transferors whereby the Transferee is, or will be,
concurrently or substantially concurrent with the closing hereunder, acquiring
all of the capital stock of the Company for cash and shares of preferred stock
of the Transferee in transactions intended to qualify as transfers to a
controlled corporation under Section 351 of the Internal Revenue Code of 1986
(the "Code").
In accordance with the foregoing, the Transferee desires to acquire
from the Transferors, and the Transferors desire to transfer to the Transferee,
all of the outstanding shares of capital stock of the Company upon and subject
to the terms and conditions set forth below.
It is therefore agreed as follows:
1. Contribution and Exchange of Shares.
1.1 Contribution and Exchange. Subject to the terms and conditions of this
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Agreement, at the Closing referred to in section 2, each of the Transferors
shall contribute, exchange, convey, assign, transfer and deliver to the
Transferee all of the shares of common stock of the Company owned by such
Transferor (collectively, the "Shares"), which are described on Schedule 1.1
opposite the name of each of the Transferors, free and clear of all claims,
charges, liens, security interests, mortgages, pledges, options, rights of use
or other encumbrances of any nature whatsoever (collectively, "Liens"), and the
Transferee shall exchange for, acquire and accept the Shares from the
Transferors. The Shares shall constitute all of the issued and outstanding
shares of capital stock of the Company.
1.2 Consideration. Subject to the terms and conditions of this Agreement,
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in consideration of the contribution, exchange, conveyance, assignment, transfer
and delivery of the Shares, at the Closing the Transferee shall pay to the
Transferors (i) $4,938,900 (the "Cash Portion of the Consideration"), which
amount shall be paid by delivery of bank or cashier's checks or by wire transfer
of immediately available funds to an account or accounts designated
in writing by the Transferors, and (ii) 9,170 shares of MedSource's Series A
Preferred Stock having the terms set forth on the Certificate of Designation
included as Exhibit 1.2 to this Agreement (the "Preferred Stock"). All cash
payments by the Transferee and deliveries of Preferred Stock to the Transferors
pursuant to this section 1.2 shall be allocated among the Transferors as set
forth on Schedule 1.1.
1.3 Payment. On the Closing Date (as defined in section 2), the Transferee
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shall deliver to the Transferors (i) the Cash Portion of the Consideration, less
any amounts deducted pursuant to section 5.15 and 5.20, if any, and (ii) the
Preferred Stock.
2. The Closing. The sale and transfer of the Shares by the Transferors to the
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Transferee (the "Closing") shall take place at the offices of the Transferee's
counsel, in New York, New York at 10:00 a.m., local time, as soon as practicable
after the conditions to close set forth in section 6 have been satisfied or
waived which is anticipated to be on or before April 15, 1999 or at such other
date, time or place as may be agreed to in writing by the Transferee and the
holders of a majority of the Shares (the "Closing Date"). The Closing shall be
deemed to be effective at 12:01 a.m. on the Closing Date.
3. Representations and Warranties of the Transferors.
The Transferors jointly and severally represent and warrant to MedSource
and the Transferee as follows:
3.1 Organization.
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(1) The Company is a corporation duly organized, validly existing and
in good standing under the laws of Colorado and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The 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 Transferors have delivered to the
Transferee true, correct and complete copies of the Company's articles of
incorporation and bylaws, as currently in effect.
(2) The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of Colorado. Peter J. Neidecker is
the duly authorized and acting general partner of the Partnership.
(3) The Trust is a duly organized and validly existing trust under the
laws of Colorado. Peter J. Neidecker is the duly authorized and acting sole
trustee under the Trust.
3.2 Capitalization.
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(1) The authorized capital stock of the Company consists of 200,000
shares of Common Stock, par value $0.8635 per share. The Shares are the only
shares of capital stock of
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the Company that are issued and outstanding, and all of the Shares are owned of
record and beneficially by the Transferors, free and clear of all Liens. All of
the Shares are duly authorized, validly issued, fully paid and nonassessable.
Upon the Closing hereunder, the Transferee will receive good and marketable
title to the Shares, free and clear of all Liens. There are no (i) options,
warrants, calls, preemptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating the Company or
any of the Transferors 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
Transferors is a party with respect to the voting of the capital stock of the
Company.
(2) 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 (collectively, an "Entity") and the Company has not during at least
the last ten years owned any such shares or other interests in any Entity.
3.3 Authorization; Validity of Agreement. Each of the Transferors has the
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requisite capacity, power and authority to execute, deliver and perform this
Agreement and each of the other agreements, instruments, documents and
certificates to be executed and delivered pursuant to this Agreement, including
but not limited to, any item referred to in section 7 (collectively, with this
Agreement, the "Transaction Documents") to which it is a party and to assume and
perform his or her obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. Each of this Agreement and the
other Transaction Documents has been, or (to the extent such Transaction
Document is to be first delivered at the Closing pursuant to section 7) as of
the Closing Date will be, duly executed, authorized and delivered by each of the
Transferors party thereto and, assuming authorization, execution and delivery of
this Agreement by the Transferee, is a valid and binding obligation of each of
the Transferors, as the case may be, enforceable against each of the
Transferors, as the case may be, in accordance with their respective terms,
except as such enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally.
3.4 No Violations; Consents and Approvals.
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(1) Except as set forth in Schedule 3.4(b), the execution, delivery
and performance of each of this Agreement and the other Transaction Documents by
each of the Transferors parties thereto do not, and the consummation by each of
the Transferors 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 material note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, license, lease, option, contract,
undertaking, understanding, covenant, agreement or other instrument or
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document (collectively, a "Contract") to which any of the Transferors or the
Company is a party or by which any of the properties or assets of the
Transferors or the Company may be bound or otherwise subject or (iii) violate
any order, writ, judgment, injunction, decree, law, statute, rule or regulation
applicable to any of the Transferors or the Company or any of their respective
properties or assets in any material respect.
(2) Except as set forth on Schedule 3.4(b), no prior or subsequent
filing or registration with, notification to, or authorization, consent or
approval of, any foreign, provincial, United States federal, state, county,
municipal or other local jurisdiction, political entity, body, organization,
subdivision or branch, legislative or executive agency or department or other
regulatory service, authority or agency, including but not limited to the United
States Food and Drug Administration (the "FDA"), the United States Health Care
Financing Administration ("HCFA") and any foreign, state or local agency with
authority or responsibility similar to the FDA or HCFA (a "Governmental Entity")
is required in connection with the execution, delivery and performance of this
Agreement or any of the other Transaction Documents by the Transferors or the
consummation by the Transferors of the transactions contemplated hereby and
thereby.
(3) Except as set forth on Schedule 3.4(b), no prior or subsequent
filing or consent, approval, order, authorization, notification to, notice to,
estoppel certificate, registration, ratification, declaration, waiver, exemption
or variance (collectively, together with the filings, registrations,
notifications, authorizations, consents and approvals of Governmental Entities
set forth in section 3.4(b), "Consents") of any individual or Entity (a
"Person") is required in connection with the execution, delivery and performance
of this Agreement or any of the other Transaction Documents to which any
Transferor is a party or the consummation by any Transferor of the transactions
contemplated hereby and thereby.
(4) Schedule 3.4(d) sets forth a list of all licenses, permits,
filings, qualifications, registrations, franchises, certifications,
authorizations and similar credentials and documents from any Governmental
Entity or any private licensing or certifying organization (collectively,
"Licenses") that the Company now holds, or at any time since December 31, 1995
held, in connection with its business, including but not limited to any Licenses
from the FDA with respect to the qualification of the Company's facilities under
"good manufacturing practices" requirements and any Licenses pertaining to ISO
9000 or ISO 9002 certification. The Company makes no representation as to the
transferability of any of its Licenses. However, no License is at risk of being
forfeited, canceled or not renewed and no fact or circumstance relating to the
Company's business activities, personnel, products or facilities would cause any
License to be forfeited, canceled or not renewed. Except as set forth on
Schedule 3.4(d), since December 31, 1995, neither the FDA nor any similar
Governmental Agency has issued any "483 reports" or similar reports, findings or
citations and there are no outstanding matters with respect to any such "483
reports" or similar reports, findings or citations.
3.5 Financial Statements. Attached to Schedule 3.5(a) are the balance sheet
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of the Company as of September 26, 1998 (the "Third Quarter Balance Sheet"),
together with the related statements of income for the nine-month period then
ended, the balance sheets of the
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Company as of December 30, 1995, December 28, 1996 and December 27, 1997,
together with the related statements of income (including the related notes) for
the three fiscal years then ended, and the balance sheet of the Company as of
December 31, 1998, together with the related statements of income (including
related notes) for the period from January 1, 1998 through December 31, 1998
(all of the foregoing, the "Financial Statements"). The Financial Statements,
other than the Third Quarter Balance Sheet and the related statements of income
and cash flows, have been reviewed by Wenner, Silvestain and Company and the
reports of that firm are attached hereto as Schedule 3.5(a). That firm is and
has been the Company's only independent accountants for the periods covered by
the Financial Statements. 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 GAAP
(except as expressly set forth as such thereon or in the notes thereto) as of
the dates and for the periods involved, subject, in the case of the Third
Quarter Balance Sheet and the related statements of income for the interim
period, to normal fiscal year-end adjustments in the ordinary course (none of
which, individually or in the aggregate, will be material).
3.6 No Material Adverse Change. Except as set forth in Schedule 3.6, since
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the date of the Third Quarter Balance Sheet (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 the Company ("Material Adverse
Effect"); and (ii) the Company has not taken, nor has any Transferor permitted
to be taken, any action that if taken or permitted to be taken after the date
hereof would constitute a violation or breach of or would otherwise be
inconsistent with any of the provisions set forth in section 5.1(a) through (p).
3.7 No Undisclosed Liabilities.
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(1) The Company does not have, and as of the Closing will not have,
any liabilities (whether accrued, contingent, known, or otherwise) other than
those that (i) are set forth or reserved against in the balance sheets referred
to in section 3.5; or (ii) were incurred since December 31, 1998 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.
(2) The accounts payable of the Company set forth in the balance
sheets referred to in section 3.5 or arising subsequent thereto are the result
of bona fide transactions in the ordinary course of business and have been paid
or are not yet due and payable as at the Closing Date, in accordance with the
respective invoices relating thereto.
3.8 Litigation; Compliance with Law; Licenses and Permits.
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(1) Except as set forth in Schedule 3.8(a), there is no claim, suit,
action or proceeding ("Proceeding") pending, nor, to the best knowledge of each
of the Transferors, is
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there any investigation or Proceeding threatened, that involves or affects the
Company, by or before any Governmental Entity, court, arbitration panel or any
other Person.
(2) The Company has, and on the Closing Date will have, complied in
all material respects with all applicable foreign, provincial, United States
federal, state, county, municipal or other local criminal, civil or common laws,
statutes, ordinances, orders, codes, rules, regulations, permits, policies,
guidance documents, judgments, decrees, injunctions or agreements of any
Governmental Entity, including, without limitation, the United Stated Food and
Drug Administration (collectively, "Laws"), including but not limited to Laws
relating to zoning, building codes, antitrust, occupational safety and health,
industrial hygiene, environmental protection, water, ground or air pollution,
the generation, treatment, storage or disposal of Hazardous Substance (as
defined in section 3.16), consumer product safety, product liability, hiring,
wages, hours, employee benefit plans and programs, collective bargaining and the
payment of withholding and social security taxes. Since January 1, 1996, the
Company has not received any notice of any violation of any Law.
(3) The Company has every license, permit, certification,
qualification or franchise issued by any Governmental Entity (each, a "License")
and every approval, authorization, waiver, variance, exemption, consent or
ratification by or on behalf of any Person that is not a party to this Agreement
(each, a "Permit") required for it to conduct its business as presently
conducted. All such Licenses and Permits are in full force and effect and
neither the Company nor any of the Transferors has received notice of any
pending cancellation or suspension of any thereof nor, to the best knowledge of
each of the Transferors, is any cancellation or suspension thereof threatened.
The applicability and validity of each such License and Consent will not be
adversely affected by the consummation of the transactions contemplated by this
Agreement.
3.9 Employee Benefit Plans; ERISA.
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(1) Schedule 3.9(a) lists each "employee benefit plan" (as defined in
section 3(3) of ERISA), and all other material employee benefit (including,
without limitation, any non-qualified plans), bonus, deferred compensation,
incentive, stock option (or other equity-based), severance, change-in-control,
medical insurance and fringe benefit plans maintained for the benefit of, or
contributed to by the 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 the Employee Retirement Income Security
Act of 1974 ("ERISA"), for the benefit of any employee or former employee of the
Company (the "Plans"). The Transferors have heretofore delivered to the
Transferee true, correct and complete copies of each of the Plans, including all
amendments to date. Schedule 3.9(a) includes a brief description of the material
terms of each Plan providing for deferred compensation to Peter Neidecker,
Robert Brown, James Chambers, Tom Richey, Jean Okerman and Linda Meadows-Burkey
(collectively, the "Executive Deferred Compensation Plans").
(2) Each of the Plans that is subject to ERISA complies with ERISA in
all material respects and the applicable provisions of the Code and has been
administered in
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accordance with ERISA and, where applicable, the Code. Each of the Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code has
received a timely determination letter from the Internal Revenue Service that it
is so qualified and no Transferor knows of any facts or circumstances that would
materially adversely affect such qualification. None of the Plans is subject to
Title IV of ERISA. There are no pending or, to the best knowledge of each of the
Transferors, 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.
(3) No Plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Company beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death benefits
or retirement benefits under any "employee pension plan," as that term is
defined in Section 3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)).
(4) With respect to each Plan, neither the Company, any Transferor nor
any ERISA Affiliate of any of them 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 Transferee to any taxes, penalties or other liabilities
resulting from prohibited transactions under Section 4975 of the Code or Section
409 or 502(i) of ERISA.
(5) The Company has complied with the notice and continuation of
coverage requirements of Section 4980B of the Code and the regulations
thereunder with respect to each plan that is, or was during any taxable year of
the 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.
(6) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302(a) of ERISA or Section 412(a) of the Code), whether or
not waived.
(7) Neither the Company 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.
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(1) Except for the Company's ownership interest in the building and
land at 2801 South Vallejo Street, Englewood, Colorado (the "Location"), which
interest shall be sold by the Company prior to the Closing in accordance with
the terms set forth in Schedule 3.10(a), the Company owns no real property.
(2) Schedule 3.10(b) sets forth a list and description of all real
property leases and subleases under which the Company is tenant or subtenant
(the "Leases"), including the date of the Lease, the premises demised
thereunder, the name of the lessee and lessor, the
-7-
commencement date and expiration date of the Lease and the annual rent payable
by the lessee under the Lease. As used herein, the term "Leased Real Property"
shall mean the real property demised by the Leases and to be demised by the New
Leases.
(3) The Transferors have heretofore delivered to the Transferee true,
correct and complete copies of the Leases. Each of the Leases is in full force
and effect and is enforceable in accordance with its terms. The Company is in
possession of and quietly enjoys the Leased Real Property applicable to it and
the Company has a valid and enforceable leasehold interest, subject to no Liens,
except for the security interest expressly described in Schedule 3.10(c), which
security interest shall be terminated prior to the Closing as provided in
section 5.23, and such immaterial easements and rights-of-way, none of which
interferes with the operation of the business. To the best knowledge of each of
the Transferors, no event has occurred or failed to occur that, with the giving
of notice or the passage of time or both, would constitute a default under any
Lease. Except as set forth in Schedule 3.10(c), the Company has not entered into
any assignment of any Lease, sublease of all or any portion of any Leased Real
Property and no person has any right to occupy the Leased Real Property other
than the Company.
(4) With respect to the Leased Real Property (i) there is a right of
ingress and egress to public thoroughfares to and from the Leased Real Property,
(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, and (iii) all curb cut and street opening permits or
licenses required for vehicular access to and from any part of the Leased Real
Property to any adjoining public street have been obtained and, if required,
paid for by the Company and are in full force and effect. The Transferors have
heretofore delivered to the Transferee true, correct and complete copies of any
certificate or certificates of operation for any incinerator, boiler or other
burning equipment on the Leased Real Property.
(5) All licenses, permits and certificates of occupancy (the
"Approvals"), in connection with the construction, use, occupancy and
maintenance of any 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 building or other improvement located on the
Leased Real Property 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 is in compliance in all material respects with all
Laws including, without limitation, those relating to zoning, building and land
use restrictions that are applicable to any portion of the Leased Real Property
or any buildings, plants or improvements owned by the Company. Notwithstanding
the foregoing, the Company is currently in the process of renovating (the
"Renovation") the building at the Location. Set forth in Schedule 3.10(e) is a
true and complete set of the plans, specifications and itemized costs for the
Renovation and the projected timetable for completion thereof.
-8-
(6) The Leased 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, paving and
parking equipment, systems and facilities, are fully installed and, as
applicable, operating, in good condition and repair and adequate for the conduct
of the business of the Company as presently conducted, and there are no material
defects in the same that would hinder or impair the business and operations of
the Company. 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 business of the Company 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.
(7) To the best knowledge of each of the Transferors, there is no
pending, proposed, contemplated or anticipated (i) annexation, condemnation,
eminent domain or similar proceeding affecting, or that may affect, all or any
portion of the 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 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 and could result in
a Lien against any of the Leased Real Property, (v) change in any applicable
Laws relating to the use, occupation or operation of the Leased Real Property,
or (vi) tax certiorari proceeding with respect to any Leased Real Property.
(8) Neither the Company nor any Transferor has received notice from
any insurance company or Board of Fire Underwriters (or organization exercising
functions similar thereto) or from any mortgagee requesting the performance of
any work or alteration in respect of any of the Leased Real Property, and, to
the best knowledge of each of the Transferors, there are no outstanding
requirements or recommendations from any of the foregoing.
(9) There has been no damage to any portion of the Leased Real
Property within the last 24 months caused by fire or other casualty that has not
been repaired.
3.11 Intellectual Property; Computer Software.
----------------------------------------
(1) Schedule 3.11(a) lists all Intellectual Property including,
without limitation, trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names, copyrights, copyright registrations,
patents, proprietary information, inventions and all applications therefor that
are owned by the Company or any other Person and used by the Company in the
operations of its business (the "Intellectual Property"), and there are no
pending or threatened claims by any Person relating to the Company's use of any
Intellectual Property. Except as set forth in Schedule 3.11(a), the Company has
such rights of ownership (free and clear of all Liens) of, or such rights by
license, lease or other agreement to use (free and clear of all Liens) the
Intellectual Property as are necessary to permit the Company to conduct its
-9-
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.
(2) Except as set forth on Schedule 3.11(b), the Company has such
rights of ownership (free and clear of all Liens) of, or such rights by license,
lease or other agreement to use (free and clear of all Liens), the computer
software programs including, without limitation, application software that are
used by the Company and that are material to the conduct of its business as
currently conducted, as are necessary to permit the conduct of its business as
currently conducted. None of the Company's ownership rights or rights to use any
of the computer programs referred to above will be adversely affected by any of
the transactions contemplated hereby.
3.12 Tangible Personal Property; Capital Budget.
------------------------------------------
(1) Except for certain tools heretofore owned by any of not more than
six employees of the Company, which tools have never been owned by the Company,
were acquired by such employees at their own expense, are not proprietary to the
Company in any way, are widely available for purchase at retail "off the shelf,"
individually and in the aggregate are not material to the business of the
Company and in the aggregate do not have replacement value in excess of
$100,000, 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. Schedule 3.12(a) includes (i) an appropriately captioned, detailed
list of all tangible personal property used in the Company's business or located
on its premises and as to which such the Company does not have such title, and
(ii) a description of the Company's rights to such use or location, such as by
License, lease or other agreement.
(2) Except as set forth on Schedule 3.12(b), all material items of
machinery, equipment, tooling and other tangible personal property owned by the
Company and used in the conduct of its business (other than items of inventory)
are listed in the detailed fixed assets ledger of the Company attached to
Schedule 3.12(b) (collectively, the "Personal Property"). The Personal Property
conforms in all material respects to all requirements of applicable Laws. All of
the items of machinery, equipment and tooling included within the Personal
Property are fully operational and operating in the ordinary course of the
Company's business, as applicable, are in good operating condition and in a good
state of maintenance and repair, are adequate for use in the conduct of the
Company's business as currently conducted and are capable of manufacturing the
products of the Company's business on an efficient and profitable basis.
(3) Schedule 3.12(c) includes a true, correct and complete capital
budget for the fiscal year ending December 25, 1999. Except as set forth on
Schedule 3.12(c), no capital expenditures are contemplated by the Company.
3.13 Material Contracts.
------------------
(1) 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
-10-
$25,000 and has an unexpired term exceeding six months and may not be canceled
upon 60 days notice without any liability, penalty or premium (excluding
purchase orders and invoices arising in the ordinary course of business); (ii)
was entered into by the Company with any Transferor, or an officer, director or
significant employee of the Company; (iii) is a collective bargaining or similar
agreement; (iv) guarantees or indemnifies or otherwise causes the Company to be
liable or otherwise responsible for the obligations or liabilities of another or
provides for a charitable contribution by the Company; (v) involves an agreement
with any bank, finance company or similar organization; (vi) restricts the
Company from engaging in any business or activity anywhere in the world; (vii)
is an employment agreement, consulting agreement or similar arrangement with any
employee of the Company; (viii) involves an agreement or any other Contract
providing for payments from the Company to any other Person, or by any Person to
the Company, based on sales, purchases or profits, other than direct payments
for goods; or (ix) any other Contract that is material to the rights,
properties, assets, business or operations of the Company (the foregoing,
collectively, "Material Contracts"). The Transferors have heretofore provided
true, complete and correct copies of all Material Contracts to the Transferee.
(2) Except as set forth in Schedule 3.13 or Schedule 3.4(b), (i) there
is not, and to the best knowledge of each of the Transferors 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
best knowledge of each of the Transferors, on the part of any other party
thereto and (ii) no consent, approval, authorization or waiver from, or notice
to, any Governmental Entity or other Person is required in order to maintain in
full force and effect any of the Material Contracts, other than such consents
and waivers that have been obtained and are unconditional and in full force and
effect and such notices that have been duly given and copies of such consents,
waivers and notices have been delivered to the Transferee.
(3) The Contracts to which the Company is a party do not involve the
payment by the Company thereunder of more than $25,000 per year in the aggregate
(excluding purchase orders received from customers or delivered to vendors in
the ordinary course for the sale of products at standard prices, capital
expenditures set forth in Schedule 3.12(c), payments in the ordinary course
under Material Contracts, Leases, and the leases described in Schedule 3.12(a),
all in accordance with the terms thereof, and payments of salaries and benefits
to employees as described in Schedule 3.28) and are not otherwise material,
individually or in the aggregate, to the Company.
3.14 Taxes.
-----
(1) Except as set forth in Schedule 3.14(a):
(1) the Company has (A) duly and timely filed or caused to be
filed with the Internal Revenue Service or other applicable Governmental Entity
(collectively, "Taxing Authorities") all Tax Returns (as defined below) that are
required to be filed by or on behalf of the Company or that include or relate to
the Company, its income, assets or business, which Tax Returns are true, correct
and complete, and (B) duly and timely paid in full or caused
-11-
to be paid in full all Taxes (as defined below) for which the Company is or may
be liable that are due and payable on or before the date hereof and has recorded
a provision on the Financial Statements and on the books and records of the
Company in accordance with GAAP for the payment of all Taxes for which the
Company is or may be liable that are not yet due and payable;
(2) the Company has complied with all applicable Laws relating to
the collection or withholding of Taxes, and the remittance thereof to the
applicable Taxing Authorities;
(3) no audit, examination, investigation, reassessment or other
administrative or court proceeding (collectively, a "Tax Proceeding") is pending
or proposed, or to the best knowledge of each of the Transferors threatened,
with regard to any Tax Return referred to in clause (i) above or any Tax for
which the Company is or may be liable;
(4) there is no Lien for Taxes upon any property of the Company;
(5) the federal income Tax Returns filed by or on behalf of the
Company or that include or relate to its income, assets or business, have never
been examined by the Internal Revenue Service;
(6) (A) there is no pending request for a ruling from any Taxing
Authority and (B) there is no outstanding subpoena or request for information by
any Taxing Authority, with respect to any Tax for which the Company is or may be
liable or with respect to the Company's income, assets or business;
(7) neither the time to file any Tax Return nor the statute of
limitations for the assessment or collection of any Tax for which the Company is
or may be liable or with respect to the Company's income, assets or business has
ever been extended or waived;
(8) all Taxes asserted or proposed with respect to the Company's
income, assets or business, or for which the Company is or may be liable as a
result of any Tax Proceeding have been paid;
(9) there is no closing agreement, within the meaning of Section
7121 of the Code or any analogous provision of applicable Law relating to any
Tax for which the Company is or may be liable or with respect to the Company's
income, assets or business;
(10) the Company does not have, and could not reasonably be
expected to have, any liability in respect of any Tax under an indemnification
agreement or on a transferee liability theory, of any person or entity, and the
Company is not a party to any Tax allocation or Tax sharing agreement,
arrangement or understanding;
-12-
(11) 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, assets or business;
(12) any adjustment related to or in connection with any Tax for
which the Company is or may be liable or with respect to the Company's income,
assets or business that is or was required to be reported to any Taxing
Authority has been so reported, and any additional Taxes owed with respect
thereto have been paid;
(13) the Company is not a party to any Contract that would
result, individually or in the aggregate with any other Contract, in the payment
of any amount that would not be deductible by reason of Section 162, Section
280G or Section 404 of the Code or any similar provision of applicable Law;
(14) the Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code or any similar provision of applicable
Law;
(15) the Company does not have any "tax-exempt bond financed
property" or "tax-exempt use property" within the meaning of Section 168(g) or
(h), respectively, of the Code or any similar provision of applicable Law;
(16) none of the assets of the Company are required to be treated
as being owned by any other person pursuant to the "safe harbor" leasing
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 as in
effect prior to the repeal of those "safe harbor" leasing provisions or any
similar provision of applicable Law;
(17) no election under Section 338 of the Code or any similar
provision of applicable Law has been made or required to be made by or with
respect to the Company;
(18) the Company is not, nor has it been, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time during the applicable period referred to in Section
897(c)(1)(A)(ii) of the Code;
(19) the Company is not required to include any adjustment under
Section 481 of the Code or any similar provision of applicable Law in income for
any period ending after the Closing Date;
(20) the Company has not deferred any income to a period after
the Closing Date that has economically accrued prior to the Closing Date, nor
accelerated any deduction to a period on or prior to the Closing Date that
economically accrues after the Closing Date;
(21) no claim has ever been made by a Taxing Authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to Tax in such jurisdiction;
-13-
(22) the Company has never been included in a consolidated,
combined or unitary Tax Return.
(2) Schedule 3.14(b) sets forth a list of all jurisdictions (foreign
and domestic) in which any Tax Returns have been filed by or on behalf of the
Company, respectively, or with respect to the Company's income, assets or
business since December 31, 1994 and a description of each such Tax Return.
(3) Schedule 3.14(c) sets forth a list of all jurisdictions (foreign
and domestic) in which state income, franchise and other Tax Returns have ever
been examined by the applicable Governmental Entity since July 1993 and a
description of each such Tax Return and the period for which it was filed.
(4) The Transferors have provided to the Transferee (i) a copy of all
Tax Returns relating to, and (ii) all reports, correspondence and documents
relating to each proposed adjustment, if any, made by any Taxing Authority with
respect to, any taxable period ending after July 1993 to any Taxes for which the
Company is or may be liable or with respect to the Company's income, assets or
business.
(5) Any Tax allocation or Tax sharing agreement, arrangement or
understanding to which the Company was a party has been terminated as of the
Closing Date without further obligation of the Company.
(6) As used herein, (i) "Tax Return" means any return, declaration,
report, information return or statement, and any amendment thereto, including
without limitation any consolidated, combined or unitary return or other
document (including any related or supporting information), filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, payment, refund or credit of any federal, state, local
and foreign Tax or the administration of any Laws relating to any Tax or ERISA,
and (ii) "Taxes" means any and all taxes, charges, fees, levies, deficiencies or
other assessments of whatever kind or nature including, without limitation, all
net income, gross income, profits, gross receipts, excise, real or personal
property, sales, ad valorem, withholding, social security, retirement, excise,
----------
employment, unemployment, minimum, estimated, severance, stamp, property,
occupation, environmental, windfall profits, use, service, net worth, payroll,
franchise, license, gains, customs, transfer, recording and other taxes, customs
duty, fees assessments or charges of any kind whatsoever, imposed by any Taxing
Authority, including any liability therefor as a transferee (including without
limitation under Section 6901 of the Code or any similar provision of applicable
Law), as a result of Treasury Regulation section 1.1502-6 or any similar
provision of applicable Law, or as a result of any Tax sharing or similar
agreement, together with any interest, penalties or additions to tax relating
thereto.
3.15 Affiliated Party Transactions. Except for obligations arising under
-----------------------------
this Agreement, under the Neidecker Employment Agreement and under the Neidecker
Non-competition Agreement (as such terms are hereinafter defined) and as set
forth in Schedule 3.15,
-14-
as of the Closing Date no Transferor, nor any of such Transferor's affiliates or
immediate family ("Affiliates"), will have, directly or indirectly, any
obligation to or claim against the Company.
3.16 Environmental Matters. Except as set forth in Schedule 3.16:
---------------------
(1) the Company is in compliance with, and since 1984 its business has
been conducted in material compliance with, all Environmental Laws (as defined
below) and Environmental Permits (as defined below);
(2) no Site (as defined below) is a treatment, storage or disposal
facility, as defined in and regulated under the Resource Conservation and
Recovery Act, 42 U.S.C.section 6901 et seq., is on or ever was listed or is
-- ---
proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.section 9601 et seq., or on any similar state list of sites requiring
-- ---
investigation or cleanup;
(3) Neither the Company nor any Transferor has received any notice
that remains pending or outstanding with respect to its business or any Site
from any Governmental Entity or Person alleging that the Company is not in
material compliance with any Environmental Law;
(4) there has been no Release (as defined below) by or with the
knowledge of the Transferors or the Company, its agents, employees, contractors
or affiliates of a Hazardous Substance (as defined below) at, from, in, to, on
or under any Site and the Transferors and the Company have no reason to believe
that any 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;
(5) there are no pending or outstanding corrective actions requested,
required or being conducted by any Governmental Entity for the investigation,
remediation or cleanup of any Site, and there have been no such corrective
actions, whether still pending or otherwise;
(6) the Company has obtained and holds all necessary Environmental
Permits, and those Environmental Permits will remain in full force and effect
after the consummation of the transactions contemplated hereby;
(7) there are no past or pending, or to the best knowledge of each of
the Transferors threatened, Environmental Claims against the Company, and no
Transferor has specific knowledge of any facts or circumstances which could be
expected to form the basis for any Environmental Claim against the Company;
(8) neither the Company, any predecessor of the Company, nor any
entity previously owned by the Company, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that will result in an Environmental Claim
against the Company;
-15-
(9) there are no (i) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos containing
material at any Site;
(10) there have been no environmental investigations, studies, audits,
tests, reviews or other analyses (which have been reduced to writing) conducted
by, on behalf of, or that are in the possession of the Company with respect to
any Site or any transportation, handling or disposal of any Hazardous Substance
other than the Phase I environmental assessment dated February 9, 1998 prepared
by the E-Quest Corporation and delivered to the Transferee prior to execution of
this Agreement; and
(11) As used herein, (i) "Environment" means all air, surface water,
groundwater, or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources; (ii) "Environmental Claim"
means any and all administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints, requests for
information, proceedings or other communications (written or oral), whether
criminal or civil, (collectively, "Claims") pursuant to or relating to any
applicable Environmental Law by any person (including, but not limited to, any
Governmental Entity, Person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential (x) violation of or liability
under any Environmental Law, (y) violation of any Environmental Permit, or (z)
liability for investigatory costs, cleanup costs, removal costs, remedial costs,
response costs, natural resource damages, property damage, personal injury,
fines, or penalties arising out of, based on, resulting from, or related to the
presence, Release, or threatened Release into the Environment, of any Hazardous
Substances at any location, including, but not limited to, any off-Site location
to which Hazardous Substances or materials containing Hazardous Substances were
sent for handling, storage, treatment, or disposal; (iii) "Environmental Law"
means any and all Laws relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Substances and the
state analogies thereto, all as amended or superseded from time to time; and any
common law doctrine, including, but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of the
presence, Release, or exposure to a Hazardous Substance; (iv) "Environmental
Permit" means any permits, licenses, approvals, consents or authorizations
required by any Governmental Entity under or in connection with any
Environmental Law; (v) "Hazardous Substance" means petroleum, petroleum
hydrocarbons or petroleum products, petroleum by-products, radioactive
materials, asbestos or asbestos-containing materials, gasoline, diesel fuel,
pesticides, radon, urea formaldehyde, lead or lead-containing materials,
polychlorinated biphenyls; and any other chemicals, materials, substances or
wastes in any amount or concentration which are now included in the definition
of "hazardous substances," "hazardous materials," "hazardous wastes," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" or words of similar import, under any Environmental Law; (vi)
"Release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous
Substance into the Environment; and (vii) "Site" means any of the real
properties currently or previously owned, leased, used or operated by the
Company, any predecessors of the Company
-16-
or any entities previously owned by the Company, including all soil, subsoil,
surface waters and groundwater thereat.
3.17 No Brokers. Except for $461,000 payable to The Will Hoover Company
----------
("Hoover") as described on Schedule 3.17, neither the Company nor any Transferor
has employed, or otherwise engaged, any other broker or finder or incurred any
other liability for any brokerage or investment banking fees, commissions,
finders' fees or other similar fees in connection with the transactions
contemplated by this Agreement. The obligation to pay such amount to Hoover is
an obligation of the Company and will be paid by the Company in accordance with
section 5.19.
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. Subject to normal reserves that are 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 120 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 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. The inventories of the
Company contain no amount of items not saleable or usable within 12 months from
the date thereof at normal profit margins consistent with historical sales
practices. The Company is not under any liability or obligation with respect to
the return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers.
3.20 Product Claims. No product liability claim is pending, or to the best
--------------
knowledge of each of the Transferors threatened, against the Company or against
any other party with respect to the products of the Company's business. Schedule
3.20 lists all service and product liability claims seeking damages in excess of
$5,000 asserted against the Company (or in respect of which the Company has
received notice) with respect to the products of the Company's business or the
Company during the last five 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 legally enforceable. Except as set forth
on Schedule 3.21, there is not presently, nor has there been since December 31,
1995, 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 since December 31, 1995 that
-17-
individually or in the aggregate represent or indicate conditions or
circumstances that could have a Material Adverse Effect.
3.22 Assets Utilized in the Business. The assets, properties and rights
-------------------------------
owned, leased or licensed by the Company or used in connection with its business
and that will be owned, leased or licensed by the Company as of the Closing
Date, and all the agreements to which the Company is a party, constitute all of
the properties, assets and agreements necessary to the Company in connection
with the operation and conduct by the Company of its business as presently
conducted.
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, to the
best knowledge of the Transferors, 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 Transferee. All
such insurance policies or comparable coverage shall be continued in full force
and effect through the Closing Date. Since December 31, 1995, the Company has
not been denied any insurance coverage which it has requested.
3.24 Delivery of Documents; Corporate Records. The Transferors have
---------------------
heretofore delivered to the Transferee true, correct and complete copies of all
documents, instruments, agreements and records referred to in this section 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, in all material respects, of the records of
all meetings and consents in lieu of a meeting of the Board of Directors (and
all committees thereof) and the stockholders of the Company since the date of
its incorporation.
3.25 Customers, Suppliers and Distributors. Schedule 3.25 sets forth (i)
---------
the sales of the Company for each of the fiscal years ended December 27, 1997
and December 26, 1998, (ii) the ten customers with the highest dollar volume of
purchases from the Company during each of those years indicating the approximate
total sales to each of those customers; and (iii) the ten largest suppliers and
the ten largest distributors of the Company during each of those years. There
has not been any adverse change in the business relationship of the Company with
any such customer, supplier or distributor, and no Transferor 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, to the best knowledge of each of the
Transferors, threatened with respect to the employees of the Company; to the
best knowledge of each of the Transferors, no representation questions exist;
there is no collective bargaining agreement binding on the
-18-
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 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. No Transferor 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 5.12 are
the Company's only key employees.
3.29 Year 2000. To the best knowledge of each of the Transferors, all of
---------
the Company's equipment, systems, software, data and databases (other than data
provided to it by its customers) (collectively, the "Systems") are Year 2000
Compliant (as hereinafter defined). Notwithstanding the foregoing, no failure of
any System to be Year 2000 Compliant shall, individually or in the aggregate
with any other such failures, have a Material Adverse Effect. For purposes of
this Agreement, "Year 2000 Compliant" shall mean: (i) the occurrence in or use
by the Systems of dates before, on or after January 1, 2000 will not adversely
affect the performance of the Systems with respect to date-dependent data,
computations, output or other functions, including, without limitation,
calculating, comparing and sequencing; (ii) the Systems will not abnormally end
or provide invalid or incorrect results as a result of date-dependant data; and
(iii) the Systems can accurately recognize, manage, accommodate and manipulate
date-dependant data, including, without limitation, single century formulas and
leap years.
3.30 No Misstatements or Omissions. Neither this Agreement with respect to
-----------------------------
the Company or any Transferor nor any certificate, list, Schedule, Exhibit or
other instrument specified or referred to in this Agreement and provided by or
relating to the Company or any Transferor, whether heretofore furnished to the
Transferee or hereafter furnished to the Transferee pursuant to this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which it was made, not misleading.
3.31 Investment Undertaking.
----------------------
(1) Each Transferor confirms that the shares of Preferred Stock to be
issued to such Transferor pursuant to this Agreement will be "restricted
securities" within the meaning of
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Rule 144 of the General Rules and Regulations under the Securities Act of 1933
("Rule 144"). Each Transferor is acquiring such shares for such Transferor's own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933. Each Transferor understands that Rule 144
requires that such shares issued hereunder may not be disposed of for a period
of at least one year. Each Transferor understands that it must bear the economic
risk of the investment indefinitely because such shares may not be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act of 1933 and applicable state securities laws or an exemption from
registration is available.
(2) Each Transferor is an "accredited investor" as such term is
defined in Rule 501(a) of Regulation D under the Securities Act of 1933 and a
sophisticated investor who either (i) has such knowledge and experience in
financial and business matters such that he, she or it is capable of evaluating
the merits and risks of the investment in the securities being acquired
hereunder, or (ii) has obtained independent professional financial advice
sufficient to enable him, her or it to evaluate the merits and risks of the
investment in the securities being acquired hereunder.
4. Representations and Warranties of MedSource and the Transferee. MedSource and
the Transferee jointly and severally represent and warrant to the Transferors as
follows:
4.1 Organization. MedSource is a corporation duly organized, validly
------------
existing and in good standing under the laws of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. The Transferee is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. MedSource is 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 Transferee is duly qualified or licensed to do business as a foreign limited
liability company and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary. MedSource has heretofore delivered to the Transferors true, correct
and complete copies of its certificate of incorporation and bylaws as currently
in effect. The Transferee has heretofore delivered to the Transferors true,
correct and complete copies of its certificate formation and operating agreement
as currently in effect.
4.2 Authorization; Validity of Agreement. MedSource and the Transferee have
------------------------------------
the requisite power and authority to execute, deliver and perform this Agreement
and each other agreement executed or to be executed by them pursuant to the
terms of this Agreement (collectively, the "Acquisition Agreements") and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by MedSource and the Transferee, respectively, of this
Agreement and the Acquisition Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of MedSource and the sole member of the
Transferee, and no other proceedings on the part of MedSource or the Transferee
are necessary to authorize the execution,
-20-
delivery and performance of this Agreement and the Acquisition Agreements by
MedSource and the Transferee, as the case may be, and the consummation of the
transactions contemplated hereby and thereby. This Agreement and each
Acquisition Agreement has been, or (to the extent such Acquisition Document is
to be first delivered at the Closing pursuant to section 7) as of the Closing
Date will be, duly executed and delivered by MedSource or the Transferee, as the
case may be, and, assuming due authorization, execution and delivery of this
Agreement by each Transferor, is a valid and binding obligation of MedSource or
the Transferee, as the case may be, enforceable against MedSource or the
Transferee, as the case may be, in accordance with its terms, except as such
enforceability may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights generally.
4.3 No Violations; Consents and Approvals.
-------------------------------------
(1) The execution, delivery and performance of this Agreement and the
Acquisition Agreements by MedSource and the Transferee do not, and the
consummation by MedSource and/or the Transferee of the transactions contemplated
hereby and thereby will not, (i) violate any provision of the certificate of
incorporation or bylaws of MedSource or the certificate of formation or limited
liability agreement of the Transferee, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, lease, option,
contract, undertaking, understanding, covenant, agreement or other instrument to
which MedSource or the Transferee is a party or by which MedSource or the
Transferee or any of their properties or assets may be bound or otherwise
subject or (iii) violate any order, writ, judgment, injunction, decree, law,
statute, rule or regulation applicable to MedSource or the Transferee or any of
their respective properties or assets in any material respect.
(2) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity or any Person is required in
connection with the execution, delivery and performance of this Agreement or the
Acquisition Agreements by MedSource or the Transferee or the consummation by
MedSource or the Transferee of the transactions contemplated hereby and thereby,
except filings required under state and federal securities laws to give effect
to the registration rights granted under the Registration Rights Agreement (as
hereinafter defined).
4.4 Litigation. There is no Proceeding pending nor, to the best knowledge
----------
of MedSource and the Transferee, is there any investigation or Proceeding
threatened, which involves or affects MedSource or the Transferee, by or before
any court, Governmental Entity or arbitration panel or any other Person.
4.5 Shares of Common Stock. All shares of Preferred Stock issued to the
----------------------
Transferors pursuant to this Agreement will be duly authorized and validly
issued and shall upon issuance be fully paid and nonassessable.
-21-
4.6 Capitalization. On the date hereof, the authorized capital of MedSource
--------------
consists of 4,000,000 shares of common stock, par value $.01 per share and
1,000,000 shares of preferred stock, par value $.01 per share. Upon the Closing
hereunder, the Transferors will receive good and marketable title to the
Preferred Stock, free and clear of all Liens. As of the date hereof, MedSource
owns all of the outstanding membership interests of the Transferee free and
clear of all Liens. Upon the Closing, MedSource will own all of the outstanding
membership interests of the Transferee free and clear of all Liens, except as
may arise in connection with the financings of the transactions contemplated
hereby, the acquisitions described in Schedule 6.2(j) or the transactions
relating thereto. As of the date hereof, there are no options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible securities,
agreements or commitments of any character obligating the Transferee to issue,
transfer or sell any membership interests, options, warrants, calls or other
equity interests of any kind whatsoever in the Transferee or securities
convertible into or exchangeable for such membership or equity interests.
4.7 Material Contracts. There is not, and to the best knowledge of
------------------
MedSource and the Transferee there has not been, claimed or alleged by any
Person with respect to any Contract that is material to the rights, properties,
assets, business or operations of MedSource or the Transferee (the foregoing,
collectively, "Transferee Material Contracts"), 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 MedSource or the Transferee or on the part of any other
party thereto. No consent, approval, authorization or waiver from, or notice to,
any Governmental Entity or other Person is required in order to maintain in full
force and effect any of the Transferee Material Contracts, other than such
consents and waivers that have been obtained and are unconditional and in full
force and effect and such notices that have been duly given and copies of such
consents, waivers and notices have been delivered to the Transferors.
4.8 Confidential Memorandum and Due Diligence. MedSource and the Transferee
-----------------------------------------
acknowledge that the Transferors, in connection with their decision to enter
into this Agreement, have relied upon MedSource's and the Transferee's
statements of fact set forth in the MedSource Confidential Memorandum dated
January 12, 1999 (the "Memorandum").
4.9 No Misstatements or Omissions. Neither this Agreement with respect to
-----------------------------
the Transferee nor any certificate, list, Schedule, Exhibit or other instrument
specified or referred to in this Agreement and provided by or relating to
MedSource or the Transferee, whether heretofore furnished to the Transferors or
hereafter furnished to the Transferors pursuant to this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit any
material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which it was made, not misleading.
4.10 Certain Tax Matters. The transactions described in this agreement are
-------------------
an integral part of a single, integrated transaction in which the Transferee is
acquiring certain property in exchange for cash and stock of the Transferee.
Immediately after the consummation of the single, integrated transaction, the
transferors, collectively, of cash and other property to the
-22-
Transferee, in the aggregate, will be in "control" of the Transferee within the
meaning of section 368(c) of the Code. The Transferee will not take any action
that would prevent the transaction described in this agreement from being
treated for federal income tax purposes as a transfer to which section 351 of
the Code applies.
5. Other Agreements of the Parties.
5.1 Conduct of Business. During the period from the date hereof (or
-------------------
earlier, as set forth below) through the Closing Date, the Transferors shall
cause the Company to conduct its business in the ordinary course, consistent
with past practice, and in such a manner that would not result in a Material
Adverse Effect. Without limiting the generality of and in addition to the
foregoing, prior to the Closing Date, the Transferors shall not, except as the
Transferee may otherwise consent to in writing, permit the Company to:
(1) amend its articles of incorporation or bylaws;
(2) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities;
(3) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) to any stockholder or otherwise in
respect of its capital stock or redeem or otherwise acquire any of its
securities, or make any payments or distributions to any of the Transferors, any
of the Transferors' Affiliates, any Person (other than institutional bank
lenders) to which the Company has any liability (other than trade accounts
payable incurred in the ordinary course of business, subject to the other
provisions of this section 5) or any officer or director of the Company, except
(i) salary in annualized amounts not to exceed total compensation for the
persons and at the respective rates therefor in Schedule 3.28, (ii) rental
payments due to the Transferors and/or their respective Affiliates with respect
to rental of Leased Real Property and equipment used in the business of the
Company in annualized amounts not to exceed such rental payments made or accrued
during such fiscal year, and (iii) royalty payments due to the Transferors
and/or their respective Affiliates with respect to licensed use of Intellectual
Property used in the business of the Company in annualized amounts not to exceed
such royalty payments made or accrued during such fiscal year;
(4) (i) incur or assume any indebtedness other than trade payables
incurred in the ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for any obligations of any other Person; or (iii) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than loans or advances to employees in the ordinary course of business in
accordance with past practices);
(5) except as set forth in section 5.20, enter into, adopt or amend
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right,
-23-
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements, trusts, plans, funds
or other arrangements of or for the benefit or welfare of any employee, or
increase in any manner the compensation or fringe benefits of any employee or
pay any benefit not required by any existing plan and arrangement (including,
without limitation, the granting of stock options, stock appreciation rights,
shares of restricted stock or performance units);
(6) except as contemplated by section 5.22, acquire, sell, lease,
transfer or dispose of any of its properties or assets except in the ordinary
course of business and consistent with past practice or enter into any material
commitment or transaction;
(7) except as may be required by law and except as provided in section
5.20, take any action to terminate or materially amend any of its employee
benefit plans with respect to or for the benefit of employees;
(8) modify any policy or procedure with respect to credit to customers
or collection of receivables;
(9) pay, discharge or satisfy before it is due any claim or liability
of the Company, or fail to pay any such item in a timely manner given the
Company's prior practices;
(10) cancel any debts or waive any claims or rights of substantial
value;
(11) except to the extent required by applicable Law, change any
accounting practice, principle or method or make, amend or terminate any
election for purposes of foreign, federal, state or local income Taxes;
(12) take or suffer any action that would result in the creation, or
consent to the imposition, of any Lien on any of the properties or assets of the
Company;
(13) except as set forth in Schedule 5.1(m), make or incur any capital
expenditure, lease or commitment for additions to property, plant, equipment or
other capital assets in excess of $25,000, other than capital expenditures in
the aggregate amount of up to $192,000 relating to the Renovation, which shall
be completed in accordance with Schedule 3.10(e) at no additional cost to the
Company, any costs thereof in excess of such $192,000 amount being the sole
responsibility of the Transferors;
(14) except in the ordinary course of business consistent with past
practice or as otherwise set forth in Schedule 5.1(n), amend, waive, surrender
or terminate or agree to the amendment, waiver, surrender or termination of any
Material Contract, Lease or Approval;
(15) except in the ordinary course of business consistent with past
practice, exercise any right or option under any Lease or extend or renew any
Material Contract or Lease; or
-24-
(16) enter into any Contract to do, or take, or agree in writing or
otherwise to take or consent to, any of the foregoing actions.
5.2 Access and Information. From the date hereof until the Closing Date,
----------------------
each Transferor shall, and shall cause each of the Company's officers,
directors, employees, agents, accountants and counsel to, upon reasonable
notice, (i) afford the officers, employees and authorized agents, accountants,
counsel and representatives of MedSource and the Transferee reasonable access,
during normal business hours, to (A) the offices, properties, plants, other
facilities, books, Contracts and records of the Company and any records
concerning the Company maintained and accumulated by its representatives, and
(B) those officers, directors, employees, agents, accountants and counsel of the
Company who have any knowledge relating to the Company or the Company's
business, and (ii) furnish to the officers, employees and authorized agents,
accountants, counsel and representatives of MedSource and the Transferee such
additional financial and operating data and other information regarding the
Company or the Company's business (including, without limitation, any Contracts,
licenses and patents in effect as of the date hereof and any Contracts or
licenses being negotiated or entered into between the date hereof and the
Closing Date), properties and goodwill of the Company as MedSource or the
Transferee may from time to time reasonably request.
5.3 Tax Returns; Taxes.
------------------
(1) The Transferors shall cause the Company to duly and timely file or
cause to be filed with the applicable Taxing Authorities all Tax Returns that
are required to be filed by or on behalf of the Company through and including
the Closing Date, which such Tax Returns shall be true, correct and complete,
shall be prepared in a manner consistent with its prior Tax Returns and shall
not make, amend or terminate any election or change any accounting method,
practice or procedure without the Transferee's prior written consent. The
Transferors shall provide to the Transferee true, complete and correct copies of
such Tax Returns with sufficient time for comments and corrections prior to
filing. The Transferors shall also provide to the Transferee true, correct and
complete copies of any and all correspondence, reports and documents relating to
any Tax Proceeding with respect to any Tax or Tax Return of the Company. The
Transferors shall cause the Company to duly and timely pay in full or cause to
be paid in full all Taxes that are due and payable on or before the Closing Date
with respect to each Tax period ending on or before the Closing Date (each such
period or portion, a "Pre-Closing Period") for which the Company is or may be
liable or that could result in a Lien on the stock of the Company or any of its
assets. The Transferors shall cause the Company to record a provision on the
books and records of the Company in accordance with GAAP for the payment of all
such Taxes that are not due and payable on or before the Closing Date. The
Transferors shall cause the Company to duly and timely comply with all
applicable Laws relating to the collection or withholding of Taxes and the
reporting and remittance thereof to the applicable Taxing Authorities.
(2) (i) The Transferors, on the one hand, and the Transferee, on the
other hand, shall notify the other in writing on a timely basis but in any event
not later than 15 days of receipt of written notice of each pending or
threatened Tax Proceeding that could affect any Tax
-25-
relating to a Pre-Closing Period for which the Company is or may be liable. If
the recipient of such notice of a Tax Proceeding fails to provide such timely
notice to the other party it shall still be entitled to indemnification for any
Taxes arising in connection with such Tax Proceeding unless the other party's
rights in the Tax Proceeding are materially adversely affected by such failure
to give notice.
(ii) Notwithstanding the provisions of section 10.3 hereof, the
Transferee shall control the defense of any Tax Proceeding and following notice
to and consultation with the Transferors in accordance with section 11.2 may
make, in good faith, a compromise or settlement thereof, provided that the
Transferors shall have the right to participate in the conduct of any Tax
Proceeding at their own cost and expense.
(3) After the Closing Date, the Transferee and the Transferors shall
each make available to the other, upon reasonable request, all information,
records or other documents relating to Taxes with respect to Pre-Closing Periods
and shall preserve all such information, records or other documents until after
the expiration of any applicable statute of limitations (including extensions).
In addition, the Transferee and the Transferors shall cooperate with the other
upon request in connection with all matters relating to the preparation of any
Tax Returns and in connection with any Tax Proceeding referred to in this
provision. Any investigation, review, comment or discussion by the Transferee
related to or in connection with the payment of Tax, the preparation of Tax
Returns or drafts of Tax Returns, the filing of Tax Returns, any Tax Proceeding
or any provision of this section 5.3 shall not affect the indemnity provisions
of section 10 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 Transferors. Each party shall bear its own costs and expenses
in complying with the provisions of this section 5.3(c).
(4) The Transferors shall (A) duly and timely file with the applicable
Taxing Authority all Tax Returns required to be filed by any of the Transferors
in connection with the transactions contemplated by this Agreement, including
without limitation all transfer tax returns, and (B) duly and timely pay in full
all Taxes required to be paid in connection therewith. The Transferors shall
promptly provide to MedSource and the Transferee a copy of any such Tax Returns
and proof of payment of any such Taxes.
5.4 Notice of Developments. Prior to the Closing Date, each of MedSource,
----------------------
the Transferee and the Transferors agrees to give prompt notice to each other in
writing of (i) all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement that could result in any material
breach of its representations or warranties or covenants in this Agreement or
which could have the effect of making any of its representations or warranties
in this Agreement untrue or incorrect in any material respect, and (ii) all
other material developments affecting the Transferee's or the Company's
business, financial condition, operations, results of operations, customer or
supplier relations, employee relations, projections or prospects.
5.5 Non-Disclosure of Confidential Information. From and after the date
------------------------------------------
hereof, the Transferors agree that they shall not, and they shall cause the
Company not to divulge, communicate, use to the detriment of MedSource or the
Transferee or for the benefit of any other
-26-
Person, or misuse in any way, any confidential information or trade secrets
relating to the Company including, without limitation, personnel information,
secret processes, know-how, customer lists or other technical data.
5.6 No Solicitation of Employees, Suppliers or Customers. No Transferor
----------------------------
shall, and no Transferor shall permit the Company, any Affiliate of the Company
or any Affiliate of any Transferor to, for a period of two years after the
Closing Date, and during such additional period of up to one year during which
any Transferor or Affiliate of any Transferor is subject to similar provisions
pursuant to the Neidecker Employment Agreement, directly or indirectly, for
itself or on behalf of any other Person, employ, engage or retain any Person
who, at any time during the preceding 12-month period, shall have been an
employee of MedSource or the Transferee, or contact any supplier, customer or
employee of MedSource or the Transferee for the purpose of soliciting or
diverting any such supplier, customer or employee from the Transferee.
5.7 Non-Competition.
---------------
(1) Until the second anniversary of the Closing Date and during such
additional period of up to one year during which any Transferor or Affiliate of
any Transferor is subject to similar provisions pursuant to the Neidecker
Employment Agreement, no Transferor and no Affiliate of any Transferor 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 the business of the Company, (ii) engage in the business of the
Company or compete 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
the business of the Company, or (y) competes with the business of the Company;
provided, however, that notwithstanding the foregoing, the Transferors and their
Affiliates (collectively and not individually) may own up to 2% of the voting
securities of any publicly-traded company.
(2) The parties hereto intend that the covenant contained in section
5.7(a) shall be construed as a series of separate covenants, one for each state
or country specified. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in section
5.7(a) above. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in section 5.7(a), then such
unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(3) Each of the Transferors acknowledges that the provisions of this
section 5.7, and the period of time, geographic area and scope and type of
restrictions on its activities set forth herein, are reasonable and necessary
for the protection of MedSource and the Transferee and are an essential
inducement to MedSource and the Transferee entering into the Transaction
Documents to which they are a party and consummating the transactions
contemplated thereby.
-27-
5.8 Public Statements. From and after the date hereof and until the Closing
-----------------
Date, none of MedSource, the Transferee nor any Transferors shall, or permit any
Affiliate thereof to, either make, issue or release any press release or any
oral or written public announcement or statement concerning or with respect to,
or acknowledgment of the existence of, or reveal the terms, conditions and
status of, the Transaction Documents or Acquisition Agreements or the
transactions contemplated thereby, without the prior written consent of each of
the other parties hereto (which consent shall not be unreasonably withheld or
delayed), unless such announcement is required by Law or a Governmental
Authority, in which case the other parties shall be given notice of such
requirement prior to such announcement and the parties shall consult with each
other as to the scope and substance of such disclosure.
5.9 Other Actions. Each of the parties hereto shall use all reasonable
-------------
efforts to (i) take, or cause to be taken, all actions, (ii) do, or cause to be
done, all things, and (iii) execute and deliver all such documents, instruments
and other papers, as in each case may be necessary, proper or advisable under
applicable Laws, or reasonably required in order to carry out the terms and
provisions of this Agreement and to consummate and make effective the
transactions contemplated hereby.
5.10 Cooperation on Taxes. Each of the Transferors, MedSource and the
--------------------
Transferee shall cooperate with each other by executing or causing to be
executed any required documents and by making available to the other, all books
and records relating to the Company or the business of the Company (including
work papers, records and notes of any kind) at all reasonable times, for the
purpose of allowing the appropriate party to complete its Tax Returns, respond
to audits, make any determination required under this Agreement (including, but
not limited to, determinations as to which period any asserted Tax liability is
attributable), verify issues and negotiate settlements with Tax authorities or
defend or prosecute Tax claims.
5.11 Consents. The Transferors shall cause the Company to receive all
--------
Consents as promptly as practicable but in any event on or prior to the Closing
Date, each of which Consent is set forth on Schedule 3.4(b) attached hereto. The
Transferors shall promptly provide the Transferee 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 any Leased Real Property.
5.12 Employment Agreements. Simultaneously with the execution of this
---------------------
Agreement, the Company and Peter J. Neidecker shall enter into an employment
agreement in the form of Exhibit 5.12A (the "Neidecker Employment Agreement").
At the Closing, the Company and each of Robert Brown, James Chambers, Thomas
Richey and Linda Meadows-Burkey shall enter into an employment agreement
substantially in the form of Exhibits 5.12B, 5.12C, 5.12D and 5.12E,
respectively (collectively with the Neidecker Employment Agreement, the
"Employment Agreements"). At the Closing, the Transferors shall cause each of
the Employment Agreements to be in full force and effect. At the Closing, the
Company and Peter C. Neidecker shall enter into a non-competition agreement
substantially in the form of Exhibit 5.12F (the "Neidecker Non-competition
Agreement").
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5.13 Stockholders Agreement and Registration Rights Agreement. At the
--------------------------------------------------------
Closing, MedSource and the Transferors shall enter into a stockholders agreement
in the form of Exhibit 5.13A (the "Stockholders Agreement") and a registration
rights agreement in the form of Exhibit 5.13B (the "Registration Rights
Agreement").
5.14 Exclusivity. For 90 days from the date hereof or until this Agreement
-----------
is earlier terminated as provided in section 8, no Transferor shall knowingly
permit the Company or any of his or her respective Affiliates, officers,
directors, employees, agents or representatives, directly or indirectly, to
encourage, solicit, initiate or participate in discussions or negotiations with,
provide any information to, receive any proposals or offers from, or enter into
any agreement with, any third party, in each case other than MedSource and the
Transferee, that involves the sale, joint venture or the other disposition of
all or any portion of the Company, its or business or any merger, consolidation,
recapitalization or other business combination of any kind involving the
Company. If any Transferor receives or becomes aware of any such offer or
proposed offer, such Transferor shall promptly notify MedSource and the
Transferee.
5.15 Equipment, Intellectual Property and Other Assets. Prior to the
-------------------------------------------------
Closing Date, the Transferors shall, and the Transferors shall cause their
respective Affiliates and other Persons affiliated with any of them to,
contribute to the Company all assets (including, without limitation, all
equipment and Intellectual Property, but excluding any Leased Real Property)
owned by any of them that are used by or in the business of the Company. Any
consideration received in connection with such transactions shall be deducted
from the Cash Portion of the Consideration.
5.16 Reserved.
--------
5.17 Repayment of Certain Obligations to the Company. On or prior to the
-----------------------------------------------
Closing Date, the Transferors shall pay in full, and the Transferors shall cause
their respective Affiliates and other Persons affiliated with any of them to pay
in full, to the Company the outstanding amount of all obligations, if any, of
such Transferors and such Persons (including, without limitation, an amount
equal to all outstanding principal and interest on all indebtedness of such
Transferors or such Persons) to the Company and all claims, if any, of the
Company against such Transferors and Affiliates, in full satisfaction thereof.
5.18 Transfer of Interests in Real Property. On or prior to the Closing
--------------------------------------
Date, the Transferors 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") in the forms attached hereto as Exhibit 5.18A terminating the existing
leases with respect to the Leased Real Property.
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(2) leases (collectively, the "New Leases") substantially in the
forms attached hereto as Exhibit 5.18B between the Company and the applicable
landlord respecting the Leased Real Property.
(3) the following executed documents from each landlord
respecting the Leased Real Property: (A) a memorandum of lease pertaining to
each New Lease in form and substance reasonably satisfactory to the Transferee
(collectively, the "Memoranda of Leases"); and (B) a landlord-lender agreement
substantially in the form attached hereto as Exhibit 5.18C (collectively, the
"Landlord-Lender Agreements") in favor of MedSource's and/or the Transferee's
lender(s) in form and substance satisfactory to such lender providing, inter
alia, that such lender(s) may occupy the premises leased under each New Lease
for the purpose of taking possession of, removing and/or selling Transferee's
personalty located thereon.
(4) subordination, non-disturbance and attornment agreements and
estoppel certificates signed by each holder of a mortgage or deed of trust
encumbering the Leased Real Property each (collectively, the "SNDA Agreements"
and, individually, a "SNDA Agreement") for each of the New Leases.
(5) Landlord-Lender Agreements and SNDA Agreements from any
lessor under any ground, superior or underlying lease covering the Leased Real
Property.
(6) each SNDA Agreement shall be in recordable form and the SNDA
Agreements shall be duly executed, delivered and acknowledged by each applicable
lender or landlord, as the case may be.
(7) (A) true and complete copies of all available material
maintenance records for the Leased Real Property; (B) a validly issued permanent
certificate of occupancy for each of the buildings comprising a part of the
Leased Real Property; (C) all original material licenses and permits,
authorizations and approvals pertaining to the current operations at the Leased
Real Property; and (D) all material guarantees and warranties which the Company
has received in connection with any work or services performed or equipment
installed in the aforementioned buildings and all improvements erected on the
Leased Real Property.
5.19 Financial Advisor. At the Closing, the Transferee shall pay or cause
-----------------
the Company to pay to Hoover the aggregate amount of $461,100, which is the only
amount payable by the Company to Hoover in connection with the transactions
contemplated hereby.
5.20 Termination of Executive Deferred Compensation Plans. On or prior to
----------------------------------------------------
the Closing Date, the Transferors shall cause each of the Executive Deferred
Compensation Plans with each of the participants listed on Schedule 5.20 to be
terminated in full by all parties thereto, pursuant to termination agreements
among the respective parties to such Plans substantially in the forms attached
hereto as Exhibit 5.20 (the "Plan Termination Agreements"), upon the payment by
the Company to each such participant of the amount set forth opposite their name
on such Schedule such that the Company thereupon shall have no further liability
of any kind to any such participant; provided that any excess of (i) the
aggregate of all amounts paid or
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payable in connection with such terminations to all such participants over (ii)
the aggregate of all amounts properly set aside for such Plans and reflected as
such on the December 31, 1998 balance sheet of the Company included in the
Financial Statements (increased by the net earnings or decreased by the net
losses, as the case may be, since the date of such balance sheet through
investment of such amounts) (the "Funded Amount"), shall be deducted from the
Cash Portion of the Consideration.
5.21 Confidential Information. The Transferee acknowledges the execution by
------------------------
Kidd & Company, LLC of a letter agreement regarding the confidential information
of the Company. A copy of the letter agreement is attached hereto as Schedule
5.21. MedSource and the Transferee agree to be bound by the terms of the letter
agreement to the same extent as Kidd & Company, LLC, as though each was an
original signatory to the letter agreement.
5.22 Real Property. Prior to the Closing, the Transferors shall cause the
-------------
sale by the Company of all of its interest in the building and land at the
Location to be consummated in accordance with the terms set forth in Schedule
3.10(a).
5.23 Termination of Security Interest. The Transferors shall cause the
--------------------------------
security interest described in Schedule 3.10(c) to be terminated in full without
any consideration paid or payable by the Company in connection therewith.
5.24 Certificate of Designation. Prior to the Closing, MedSource and the
--------------------------
Transferee shall properly file the Certificate of Designation contained in
Exhibit 1.2 with the Delaware Secretary of State.
5.25 Renovation. The Transferors shall cause the Renovation to be completed
----------
in accordance with Schedule 3.10(e) and section 5.1(m) and, with respect to the
Renovation, shall cause to be obtained, at no cost to the Company, all required
Approvals or modifications to existing Approvals in material compliance with all
Laws and the Transferors covenant and agree that the Leased Real Property shall
be, including after the completion of the Renovation, in material compliance
with all Laws, including those relating to zoning, building and land use
restrictions.
5.26 Resignations. At the Closing, the Transferors shall cause each of the
------------
officers and directors of the Company to deliver their resignations to the
Transferee.
5.27 Life Insurance Policy. The Company waives any and all right to the
---------------------
return of premiums to which it may be entitled following the Closing with
respect to the split-dollar, second-to-die life insurance policy heretofore
maintained by the Company on the lives of Peter C. Neidecker and Dora Neidecker.
6. Conditions Precedent to the Closing.
6.1 Conditions Precedent to MedSource's and the Transferee's Obligations to
-----------------------------------------------------------------------
Close. The obligations of MedSource and the Transferee to enter into this
- -----
Agreement and to
-31-
consummate the transactions contemplated hereby are subject to the satisfaction
prior to or on the Closing Date of each of the following conditions; provided,
--------
however, that MedSource and the Transferee shall have the right to waive all or
- -------
any part of each such condition and to close the transactions contemplated
hereby without, however, releasing any Transferor from any covenant, obligation,
agreement or condition contained herein or from any liability for any loss or
damage sustained by MedSource or the Transferee by reason of the breach by any
Transferor of any covenant, obligation, agreement or condition contained herein
or by reason of any misrepresentation made by such Transferor; and provided
--------
further, however, that MedSource's and the Transferee's participation in the
- ------- -------
Closing shall not in any way be deemed to be a waiver of any claim either may
have hereunder for any breach of any representation, warranty, covenant or
agreement:
(1) The representations and warranties of the Transferors contained in
this Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect as if made on the Closing Date, except for such representations and
warranties as are made as of a specific date, which shall be true and correct in
all material respects as of such date; provided, however, that if any
-------- -------
representation or warranty is already qualified by materiality, for purposes of
determining whether this condition has been satisfied, such representation or
warranty as so qualified shall be true and correct in all respects.
(2) The covenants and agreements of the Transferors contained in this
Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all respects.
(3) The Transferee shall have received a certificate dated the Closing
Date and executed by each Transferor (the "Transferors' Certificate") certifying
the satisfaction of the conditions referred to in sections 6.1(a) and (b).
(4) The Transferee shall have received, each in form and substance
reasonably satisfactory to the Transferee, all Consents of, and estoppel
certificates and releases from, and shall have delivered all notices to, any
Governmental Entity or other Person that is required for the consummation of the
transactions contemplated hereby and for the Transferee to own and operate the
Company, which Consents, notices, estoppel certificates and releases are listed
in Schedule 3.4(b) attached hereto, including without limitation such releases,
termination statements and other documents as shall release the Company from any
and all liabilities or obligations under the Company's promissory note to Old
American Insurance Company dated August 28, 1998 and referred to in Schedule
3.10(a), from any and all Liens Old American Insurance Company may have on any
assets of the Company and from any and all liabilities or obligations under the
Company's promissory note to Neidecker Limited Partnership dated April 30, 1989
and referred to in such Schedule.
(5) No event or events shall have occurred between the date hereof and
the Closing Date which, individually or in the aggregate, have, or are
reasonably likely to have, a Material Adverse Effect.
-32-
(6) The form and substance of all certificates, opinions, consents,
instruments, and other documents delivered to the Transferee under this
Agreement shall be satisfactory in all reasonable respects to the Transferee and
its counsel.
(7) The Company shall have closed on the sale of all of its interest
in the building and land at the Location in accordance with the terms set forth
in Schedule 3.10(a).
(8) The Company shall have entered into the Amended and Restated
Leases.
(9) MedSource and the Transferee shall have received from Edward L.
Sperry, Esq. an opinion dated the Closing Date in the form of Exhibit 6.1(i)
attached hereto.
(10) The Transferee shall have received from each Transferor at the
Closing a certificate of non-foreign status, in the form required by Section
1445 of the Code and the regulations thereunder.
(11) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
(12) MedSource and the Transferee shall have obtained the financing
required to fund the contribution and exchange hereunder and the transactions
contemplated by the parties hereto on terms and conditions acceptable to
MedSource and the Transferee.
(13) Each of the Employment Agreements and the Neidecker
Non-competition Agreement shall be in full force and effect.
(14) The Transferee shall have obtained a tax, lien and judgment
search, which search shall be conducted at no cost to the Transferors, of the
Company showing no items not disclosed in the schedules to this Agreement.
(15) The Plan Termination Agreements shall be in full force and
effect.
6.2 Conditions Precedent to the Transferors' Obligations to Close. The
-------------------------------------------------------------
obligation of the Transferors to consummate the transactions contemplated hereby
is subject to the satisfaction prior to or on the Closing Date of each of the
following conditions; provided, however, that the Transferors shall have the
-------- -------
right to waive all or any part of each such condition, and to close the
transactions contemplated hereby without, however, releasing MedSource or the
Transferee from any covenant, obligation, agreement or condition contained
herein or from any liability for any loss or damage sustained by the Transferors
by reason of the breach by MedSource or the Transferee of any covenant,
obligation, agreement or condition contained herein, by reason of any
misrepresentation made by MedSource or the Transferee; and provided further,
-------- -------
however, that the Transferors' participation in the Closing shall not in any way
- -------
be deemed to be a waiver
-33-
of any claim it may have hereunder for any breach of any representation,
warranty, covenant or agreement:
(1) The representations and warranties of MedSource and the Transferee
contained in this Agreement shall have been true and correct in all material
respects when made and shall be true and correct as of the Closing Date, with
the same force and effect as if made as of the Closing Date, other than such
representations and warranties as are made as of a specific date, which shall be
true and correct in all material respects as of such date; provided, however,
-------- -------
that if any representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been satisfied, such
representation or warranty as so qualified shall be true and correct in all
respects.
(2) The covenants and agreements contained in this Agreement to be
complied with by MedSource and the Transferee on or before the Closing Date
shall have been complied with in all respects.
(3) The Transferors shall have received a certificate dated the
Closing Date and executed by an officer of each of MedSource and the Transferee,
certifying to the satisfaction of the conditions referred to in sections 6.2(a)
and (b).
(4) The Transferors shall have received a certificate of the Secretary
of the Transferee (the "Transferee Secretary's Certificate") certifying the
resolutions duly and validly adopted by the Transferee evidencing its
authorization of the execution and delivery of this Agreement and the other
Transaction Documents to which the Transferee is a party and the consummation of
the transactions contemplated hereby and thereby, and the names and signatures
of the officers of the Transferee authorized to sign this Agreement and the
other Transaction Documents to be delivered hereunder.
(5) The Transferors shall have received from Parker Chapin Flattau &
Klimpl, LLP, counsel for MedSource and the Transferee, an opinion dated the
Closing Date in the form of Exhibit 6.2(e) attached hereto.
(6) No Law shall be in effect which prohibits any party hereto from
consummating the transactions contemplated hereby.
(7) There shall be no order, decree or injunction of a court of
competent jurisdiction or other Governmental Entity that prevents the
consummation of the transactions contemplated by this Agreement or Proceeding
that threatens to prevent such transactions.
(8) MedSource and the Transferee shall have obtained the financing
required to fund the contribution and exchange hereunder, the transactions
contemplated by the parties hereto and the purchase of the other platform
companies acquired concurrently herewith (the "Platform Companies").
-34-
(9) The Certificate of Designation in the form attached hereto as
Exhibit 1.2 shall have been properly filed with the Delaware Secretary of State.
(10) MedSource shall have acquired at least three of the other
businesses described on Schedule 6.2(j) on terms for each such acquired business
substantially as set forth on such Schedule. MedSource shall have closed on such
acquisitions concurrently with the Closing hereunder.
(11) The Preferred Stock, on a fully diluted, as converted basis
(prior to management options), shall represent not less than 4.5% of the capital
stock of MedSource as of the Closing.
(12) Kidd & Company, LLC and each seller of a Platform Company that
receives equity interests in MedSource concurrently with the Closing shall have
signed the Stockholders Agreement.
7. Documents to be Delivered at the Closing.
7.1 Deliveries of the Transferors. At the Closing, the Transferors shall
-----------------------------
deliver or cause to be delivered the following items to MedSource and the
Transferee:
(1) the Transferors' Certificate referred to in section 6.1(c) duly
executed by each of the Transferors;
(2) the Consents referred to in section 6.1(d);
(3) the opinion of counsel to the Transferors referred to in section
6.1(h);
(4) a certificate of non-foreign status in the form required by
section 1445 of the Code duly executed by each of the Transferors;
(5) the Stockholders Agreement duly executed by the Transferors;
(6) the Registration Rights Agreement duly executed by the
Transferors;
(7) the Consents of Spouses duly executed by the applicable spouse
thereunder;
(8) the SNDA Agreements, duly executed and delivered by each
applicable lender, landlord or lessor under any ground, superior or underlying
lease covering of the Leased Real Property, as the case may be;
(9) stock certificates representing the Shares, duly indorsed in blank
or accompanied by stock transfer powers and with all requisite stock transfer
tax stamps attached;
-35-
(10) a certificate duly executed by each of the Transferors,
attesting, with respect to the Company, as to its articles of incorporation and
bylaws, the incumbency of each of its executive officers and the resolutions
adopted by its directors and (if applicable) shareholders with respect to this
Agreement and the transactions contemplated hereby;
(11) a certificate with respect to the Company from the jurisdiction
of its incorporation attesting as to its existence as of a date recent to the
Closing Date;
(12) the Termination of Lease and New Leases duly executed by the
respective landlords thereunder;
(13) the Memoranda of Leases duly executed by all parties thereto;
(14) the Landlord-Lender Agreements duly executed by the respective
landlords or lessors under any ground, superior or underlying covering the
Leased Real Property;
(15) each Employment Agreement (other than the Neidecker Employment
Agreement, which shall have been duly executed and delivered by Peter J.
Neidecker simultaneously herewith) duly executed by the executive named therein
and the Neidecker Non-competition Agreement duly executed by Peter C. Neidecker;
(16) a certificate duly executed by the Transferors certifying as to
the Funded Amount; and
(17) the Plan Termination Agreements duly executed by the respective
Plan participants named therein.
7.2 Deliveries of the Transferee. At the Closing, MedSource and the
----------------------------
Transferee shall deliver or cause to be delivered the following items to the
Transferors:
(1) the certificate referred to in section 6.2(c) duly executed by an
officer of each of MedSource and the Transferee;
(2) the Secretary's Certificates of MedSource and the Transferee
referred to in section 6.2(d) duly executed by the Secretary of MedSource or the
Transferee, as the case may be;
(3) the opinion of counsel to MedSource and the Transferee referred to
in section 6.2(e);
(4) the Cash Portion of the Consideration;
(5) the certificates representing the Preferred Stock;
(6) the Stockholders Agreement duly executed by MedSource;
-36-
(7) the Registration Rights Agreement duly executed by MedSource;
(8) a certificate duly executed by an officer of each of MedSource and
the Transferee attesting, with respect to MedSource and the Transferee, as to
its certificate of incorporation and bylaws and certificate of formation, as the
case may be, the incumbency of each of its executive officers signatory to this
Agreement or any Transaction Documents and, in the case of the Transferee, the
resolutions adopted by the Transferee's directors with respect to this Agreement
and the transactions contemplated hereby;
(9) certificates from the Delaware Secretary of State attesting as to
the existence and good standing of MedSource and the Transferee as of a date
recent to the Closing Date;
(10) the New Leases duly executed by the Transferee; and
(11) each Employment Agreement (other than the Neidecker Employment
Agreement, which shall have been duly executed and delivered by the Company
simultaneously herewith) and the Neidecker Non-competition Agreement duly
executed by an officer of the Company.
8. Termination.
(1) This Agreement may be terminated at any time prior to the Closing:
(1) by the mutual agreement of the Transferee, MedSource and all
of the Transferors;
(2) by the Transferee and MedSource, on the one hand, or
Transferors holding a majority of the Shares, on the other hand (if the
Transferee and MedSource are, on the one hand, or all of the Transferors are, on
the other hand, not in breach of or default under this Agreement) giving written
notice to such effect to the other party if the Closing shall not have occurred
on or before April 15, 1999, or such later date as the Transferee, MedSource and
Transferors holding a majority of the Shares shall have agreed upon prior to the
giving of such notice;
(3) by the Transferee or MedSource in the event of a material
breach by or default of the other party hereto; or
(4) by Transferors holding a majority of the Shares in the event
of a material breach by or default of the other party hereto.
(2) Upon termination of this Agreement pursuant to section 8(a), all
obligations of the parties shall terminate except those under section 10 and the
confidentiality obligations referenced in section 5.21 and; provided, however,
-------- -------
that no such termination shall
-37-
relieve any Transferor of any liability to the Transferee, or the Transferee of
any liability to the Transferors, by reason of any breach of or default under
this Agreement.
9. Survival of Representations and Warranties.
9.1 Survival of Representations and Warranties of the Transferors.
-------------------------------------------------------------
Notwithstanding any right of MedSource and the Transferee fully to investigate
the affairs of the Company or the Transferors and notwithstanding any knowledge
of facts determined or determinable by MedSource and the Transferee pursuant to
such investigation or right of investigation, MedSource and the Transferee have
the right to rely fully upon the representations and warranties of the
Transferors 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
Transferors' 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
10.3. The foregoing notwithstanding, (i) the representations and warranties
contained in sections 3.2, 3.3 and 3.14 shall survive the Closing, and the
Transferors' liability in respect of any breach thereof shall continue until 60
days after all liability relating thereto is barred by all applicable statutes
of limitation, including extensions and waivers and (ii) the representations and
warranties contained in section 3.16 shall survive the Closing, and the
Transferors' liability in respect of any breach thereof shall continue until 60
days after all liability relating thereto is barred by all applicable statutes
of limitation, including extensions and waivers, or eight years from the Closing
Date, whichever is less..
9.2 Survival of Representations and Warranties of MedSource and the
---------------------------------------------------------------
Transferee. Notwithstanding any right of the Transferors fully to investigate
- ----------
the affairs of MedSource and the Transferee and notwithstanding any knowledge of
facts determined or determinable by the Transferors pursuant to such
investigation or right of investigation, the Transferors have the right to rely
fully upon the representations and warranties of MedSource and the Transferee
contained in this Agreement or in any other Transaction Documents or Acquisition
Agreements, including the Memorandum as amended from time to time prior to the
Closing Date. 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 MedSource's and the Transferee'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 10.3. The foregoing notwithstanding,
the representations and warranties set forth in sections 4.2, 4.6 and 4.10 shall
survive the Closing, and MedSource's and the Transferee's liability in respect
of any breach thereof shall continue until 60 days after all liability relating
thereto is barred by all applicable statutes of limitation, including extensions
and waivers.
10. Indemnification.
-38-
10.1 Indemnification by the Transferors. Subject to the limitations
----------------------------------
contained in section 9 and section 10.4, the Transferors shall jointly and
severally indemnify and defend MedSource and the Transferee and each of their
respective officers, directors, employees, managers, shareholders, members
agents, advisors or representatives (each, a "Transferee Indemnitee") against,
and hold each Transferee Indemnitee harmless from, any loss, liability,
obligation, deficiency, damage or expense including, without limitation,
interest, penalties, reasonable attorneys' and consultants' fees and
disbursements (collectively, "Damages"), that any Transferee Indemnitee may
suffer or incur based upon, arising out of, relating to or in connection with
any of the following (whether or not in connection with any third party claim):
(1) any breach of any representation or warranty made by any
Transferor contained in this Agreement or in any other Transaction Document or
in respect of any claim made based upon facts alleged which, if true, would
constitute any such breach;
(2) any Transferor's failure to perform or to comply with any covenant
or condition required to be performed or complied with by the Transferors
contained in this Agreement or in any other Transaction Document; and the acts
or inactions relating to the Company on or before the Closing Date; or
(3) each and every Environmental Claim or any other violation of
Environmental Law, or alleged Environmental Claim, or any other alleged
violation of Environmental Law, against the Transferee arising out of or
relating to any fact, condition, act or omission in each case with respect to
the business or any of the assets of the Company, or alleged fact, condition,
act or omission that existed on or prior to the Closing Date.
10.2 Indemnification by MedSource and the Transferee. Subject to the
-----------------------------------------------
limitations contained in section 9 and section 10.5, MedSource and the
Transferee shall indemnify and defend the Transferors and each of the
Transferor's agents, advisors or representatives (each, a "Transferor
Indemnitee") against, and hold each Transferor Indemnitee harmless from, any
Damages that such Transferor Indemnitee may suffer or incur arising from,
related to or in connection with any of the following:
(1) any breach of any representation or warranty made by MedSource or
the Transferee contained in this Agreement or in any other Transaction Document
or in respect of any claim made based upon facts alleged which, if true, would
constitute any such breach; or
(2) MedSource's or the Transferee's failure to perform or to comply
with any covenant or condition required to be performed or complied with by them
contained in this Agreement or in any other Transaction Document or Acquisition
Agreement.
-39-
10.3 Indemnification Procedures.
--------------------------
(1) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damage referred to in sections 10.1 or 10.2, such indemnified
party shall, if a claim for indemnification in respect thereof is to be made
against an indemnifying party pursuant to this section 10, 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.
(2) (i) In the case of any such Proceeding by a third party against
an indemnified party, the indemnifying party shall, upon notice as provided
above, assume the defense thereof, with counsel reasonably satisfactory to the
indemnified party, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof (but the indemnified party shall have the right, but not the
obligation, to participate at its own cost and expense in such defense by
counsel of its own choice) or for any amounts paid or foregone by the
indemnified party as a result of the settlement or compromise thereof (without
the written consent of the indemnifying party).
(ii) Anything in section 10.3(b)(i) notwithstanding, if both the
indemnifying party and the indemnified party are named as parties or subject to
such Proceeding and either such party determines with advice of counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the other party or that a material conflict
of interest between such parties may exist in respect of such Proceeding, then
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.
(3) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
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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.
10.4 Limitations on Indemnification by the Transferors.
-------------------------------------------------
(1) The Transferors shall have indemnification obligations pursuant to
section 10.1(a) respecting Damages that result from actual or claimed breaches
of representations or warranties set forth in this Agreement (other than the
representations and warranties contained in sections 3.2, 3.3, 3.14 and 3.16),
only if and only to the extent that the aggregate of all Damages resulting from
such actual or claimed breaches shall exceed $100,000 and then the Transferors
shall be responsible only for Damages in excess of such first $100,000 in
Damages. Anything to the contrary notwithstanding, the Transferors shall not
have any liability pursuant to (i) section 10.1(a) with respect to Damages that
result from actual or claimed breaches of representations or warranties set
forth in this Agreement (other than the representations and warranties contained
in sections 3.2, 3.3, 3.14 and 3.16) or (ii) section 10.1(c), in each case, for
and to the extent that the aggregate amount of the Damages set forth in the
preceding clauses (i) and (ii) exceeds $5,000,000. For the purposes of
determining the amount for which any Transferee Indemnitee is able to seek
indemnification from the Transferors under section 10.1(a) for any breach or
alleged breach of any representation or warranty in this Agreement, the use of
the term "material" shall be disregarded and the amount of any and all claims
for such indemnification shall be determined as if no such term were present in
such representation or warranty. The parties hereto expressly acknowledge that
the sole purpose for using the term "material" is to determine whether the
conditions set forth in section 6.1 have been satisfied and to determine whether
a claim for indemnification may arise.
(2) The limitations set forth in paragraph (a) of this section 10.4
shall not limit or reduce the Transferors' obligations to indemnify MedSource
and the Transferee in respect of Damages that result from actual or claimed
breaches of the representations and warranties contained in sections 3.2, 3.3,
3.14 and 3.16.
(3) In the event that any Damages of the Transferee are covered by
insurance proceeds or other reimbursement obligations, whether maintained by
MedSource, the Transferee or any Transferor, MedSource and the Transferee shall
not be deemed to have any Damages if and to the extent that MedSource or the
Transferee actually realizes the proceeds of such insurance or other
reimbursement obligations, which payments shall in no event be included in the
basket set forth in section 10.4(a).
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10.5 Limitations on Indemnification by MedSource and the Transferee.
--------------------------------------------------------------
(1) MedSource and the Transferee shall have indemnification
obligations pursuant to section 10.2(a) respecting Damages that result from
actual or claimed 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 actual or claimed breaches shall exceed $100,000 and then
MedSource and the Transferee shall be responsible only for Damages in excess of
such first $100,000 in Damages. Anything to the contrary notwithstanding,
MedSource and the Transferee shall not have any liability pursuant to section
10.2(a) with respect to Damages that result from actual or claimed breaches of
representations or warranties set forth in this Agreement (other than the
representations and warranties contained in sections 4.2, 4.6 and 4.10) for and
to the extent that the aggregate amount of such Damages exceeds $5,000,000. For
the purposes of determining the amount for which any Transferor Indemnitee is
able to seek indemnification from MedSource and the Transferee under section
10.2(a) for any breach or alleged breach of any representation or warranty in
this Agreement, the use of the term "material" shall be disregarded and the
amount of any and all claims for such indemnification shall be determined as if
no such term were present in such representation or warranty. The parties hereto
expressly acknowledge that the sole purpose for using the term "material" is to
determine whether the conditions set forth in section 6.2 have been satisfied
and to determine whether a claim for indemnification may arise.
(2) The limitations set forth in paragraph (a) of this section 10.5
shall not limit or reduce MedSource's and the Transferee's obligations to
indemnify the Transferors in respect of Damages that result from actual or
claimed breaches of the representations and warranties contained in sections
4.2, 4.6 and 4.10.
(3) In the event that any Damages of the Transferors are covered by
insurance proceeds or other reimbursement obligations, whether maintained by
MedSource, or the Transferee or any Transferor, the Transferors shall not be
deemed to have any Damages if and to the extent that the Transferors actually
realize the proceeds of such insurance or other reimbursement obligations, which
payments shall in no event be included in the basket set forth in section
10.5(a).
10.6 Right to Set-Off. MedSource and the Transferee shall have the right to
----------------
set-off the amount of any and all Damages for which any Transferor is liable to
MedSource or the Transferee hereunder against any sums otherwise payable to the
Transferors hereunder or under any other agreement, document or instrument
(except the New Leases) executed and delivered by any Transferor or Affiliate of
any Transferor pursuant to this Agreement or contemplated hereby. Neither
MedSource nor the Transferee will exercise any right to set-off until it has
given the Transferors not less than 15 days notice in writing within which
period the Transferors shall have the right to pay the amount of the Damages for
which the Transferors are liable to MedSource or the Transferee in cash. The
remedies provided herein shall be cumulative and shall not preclude assertion by
any party hereto of any other rights or the seeking of any other remedies
against any other party hereto.
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11. Miscellaneous.
-------------
11.1 Transaction Fees and Expenses. Except as otherwise expressly provided
-----------------------------
herein, MedSource and the Transferee shall bear such costs, fees and expenses as
may be incurred by them in connection with this Agreement and the transactions
contemplated hereby and the Transferors shall bear such costs, fees and expenses
as may be incurred by any and all of them and the Company in connection with
this Agreement and the transactions contemplated hereby.
11.2 Notices. Any notice, demand, request or other communication which is
-------
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail or (c) by personal delivery to such party at
the following address:
if to MedSource and/or the Transferee, to:
MedSource Technologies, Inc.
c/o Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Richard J. Effress
Telecopier No.: (203) 661-1839
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Attention: Edward R. Mandell
Telecopier No.: (212) 704-6288
if to the Transferors at:
Peter J. Neidecker
3101 East Orchard Road
Greenwood Village, Colorado 80121
Telecopier No.: (303) 741-5589
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this section.
The date of giving or making of any such notice or demand shall be, in the case
of clause (a)(i), the date of the receipt, in the case of clause (a)(ii), five
business days after such notice or demand is sent, and, in the case of clause
(b), the business day next following the date such notice or demand is sent.
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11.3 Amendment. Except as otherwise provided herein, no amendment of this
---------
Agreement shall be valid or effective unless in writing and signed by or on
behalf of MedSource, the Transferee and the Transferors holding a majority of
the Shares.
11.4 Waiver. No course of dealing of any party hereto, no omission, failure
------
or delay on the part of any party hereto in asserting or exercising any right
hereunder, and no partial or single exercise of any right hereunder by any party
hereto shall constitute or operate as a waiver of any such right or any other
right hereunder. No waiver of any provision hereof shall be effective unless in
writing and signed by or on behalf of the party to be charged therewith. No
waiver of any provision hereof shall be deemed or construed as a continuing
waiver, as a waiver in respect of any other or subsequent breach or default of
such provision, or as a waiver of any other provision hereof unless expressly so
stated in writing and signed by or on behalf of the party to be charged
therewith.
11.5 Governing Law. This Agreement shall be governed by, and interpreted
-------------
and enforced in accordance with, the laws of the State of Delaware without
regard to any conflict of laws provision that would defer to the substantive
rules of another jurisdiction.
11.6 Jurisdiction. Each of the parties hereto hereby irrevocably consents
------------
and submits to the exclusive jurisdiction of the United States District Court
for the District of Delaware in connection with any Proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby, waives any
objection to venue in such District (unless such court lacks jurisdiction with
respect to such Proceeding, in which case, each of the parties hereto
irrevocably consents to the jurisdiction of the courts of the State of Delaware
in connection with such Proceeding and waives any objection to venue in the
State of Delaware, 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 11.2.
11.7 Remedies. In the event of any actual or prospective breach or default
--------
by any party hereto, the other parties shall be entitled to equitable relief,
including remedies in the nature of rescission, injunction and specific
performance. All remedies hereunder are cumulative and not exclusive. Nothing
contained herein and no election of any particular remedy shall be deemed to
prohibit or limit any party from pursuing, or be deemed a waiver of the right to
pursue, any other remedy or relief available now or hereafter existing at law or
in equity (whether by statute or otherwise) for such actual or prospective
breach or default, including the recovery of damages.
11.8 Severability. The provisions hereof are severable and if any provision
------------
of this Agreement shall be determined to be legally invalid, inoperative or
unenforceable in any respect by a court of competent jurisdiction, then the
remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any such invalid,
inoperative or unenforceable provision shall be deemed, without any further
action on the part of the parties hereto, amended and limited to the extent
necessary to render such provision valid, operative and enforceable.
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11.9 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.
11.10 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto, their heirs and
their respective successors and permitted assignees. Permitted assignees of
MedSource's and the Transferee's rights hereunder shall include any Affiliate of
the Transferee and any or all financial institutions or other entities investing
and/or lending monies to finance the transactions herein contemplated. Permitted
assignees of the Transferors' rights hereunder shall include any Affiliate of
such Transferor. None of MedSource, the Transferee nor the Transferors may
assign any of its 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.
11.11 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.
11.12 No Third Party Beneficiaries. Nothing contained in this Agreement,
----------------------------
whether express or implied, is intended, or shall be deemed, to create or confer
any right, interest or remedy for the benefit of any Person other than as
otherwise provided in this Agreement.
11.13 Entire Agreement. This Agreement (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.
11.14 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.
11.15 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.
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MedSource: MEDSOURCE TECHNOLOGIES, LLC
By: /s/ Richard J. Effress
-----------------------------------
Name: Richard J. Effress
Title: Chairman
Transferee: MEDSOURCE TECHNOLOGIES, INC.
By: /s/ Richard J. Effress
-----------------------------------
Name: Richard J. Effress
Title: Chairman
Transferors: /s/ Peter J. Neidecker
---------------------------------------
PETER J. NEIDECKER
/s/ Sally N. Morris
---------------------------------------
SALLY N. MORRIS
/s/ Sylvia N. Coors
---------------------------------------
SYLVIA N. COORS
PETER J. NEIDECKER LIMITED PARTNERSHIP
By: /s/ Peter J. Neidecker
------------------------------------
Name: Peter J. Neidecker
Title: General Partner
PETER C. NEIDECKER IRREVOCABLE TRUST
By: /s/ Peter J. Neidecker
------------------------------------
Name: Peter J. Neidecker
Title: Trustee
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