-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R0gm499x+GeFVMoXDITVKo72eC5va/JohEVkLV+HH1XJtyWUQ5PazroXx0AiAEUi AEHhaw0V7sVporCJZhVsmA== 0000910680-03-000111.txt : 20030212 0000910680-03-000111.hdr.sgml : 20030212 20030212170138 ACCESSION NUMBER: 0000910680-03-000111 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20021229 FILED AS OF DATE: 20030212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDSOURCE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001084726 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 522094496 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49702 FILM NUMBER: 03555281 BUSINESS ADDRESS: STREET 1: 110 CHESHIRE LANE CITY: MINNEAPOLIS STATE: MN ZIP: 55305 10-Q 1 form10q122902.txt DECEMBER 29, 2002 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended DECEMBER 29, 2002 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 000-49702 MEDSOURCE TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) State of incorporation: DELAWARE IRS Employer Identification No: 52-2094496 110 CHESHIRE LANE, SUITE 100, MINNEAPOLIS, MN 55305 (Address and zip code of principal executive office) (952) 807-1234 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No: |_| The number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding as of February 3, 2003 was 27,800,820. TABLE OF CONTENTS Part I: Financial Information ----------------------------- Item 1. Financial Statements.................................................3 Consolidated Balance Sheets..........................................3 Consolidated Statements of Operations................................4 Consolidated Statements of Cash Flows................................5 Notes to Consolidated Financial Statements...........................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................9 Item 3. Quantitative and Qualitative Disclosures About Financial Market Risk.13 Item 4. Controls and Procedures..............................................14 Part II: Other Information -------------------------- Item 1. Legal Proceedings....................................................15 Item 2. Changes in Securities and Use of Proceeds............................15 Item 3. Defaults Upon Senior Securities......................................15 Item 4. Submission of Matters to a Vote of Security Holders..................15 Item 5. Other Information....................................................16 Item 6. Exhibits and Reports on Form 8-K.....................................16 Signatures....................................................................17 -2- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 29, JUNE 30, 2002 2002 --------------------------------------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $15,400 $38,268 Accounts receivable, net 25,070 24,031 Inventories 22,761 20,503 Prepaid expenses and other current assets 3,274 2,402 ------------------- ------------------- Total current assets 66,505 85,204 Property, plant, and equipment, net 51,396 42,045 Goodwill, net 130,510 113,113 Other identifiable intangible assets, net 3,923 4,092 Deferred financing costs 1,937 1,971 Other assets 5,447 1,404 ------------------- ------------------- Total assets $259,718 $247,829 =================== =================== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $6,075 $7,924 Accrued compensation and benefits 5,237 5,352 Other accrued expenses 2,635 3,491 Restructuring reserve 1,462 2,381 Current portion of long-term debt 4,994 5,939 ------------------- ------------------- Total current liabilities 20,403 25,087 Long-term debt, less current portion 43,362 35,967 Other long-term liabilities 813 455 Stockholders' equity: Preferred stock - 1,974 Common stock 277 269 Additional paid-in capital 275,092 268,455 Treasury stock (1,282) (1,282) Accumulated other comprehensive loss (259) - Accumulated deficit (78,688) (83,025) Unearned compensation - (71) ------------------- ------------------- Total stockholders' equity 195,140 186,320 ------------------- ------------------- LIABILITIES & STOCKHOLDERS' EQUITY $259,718 $247,829 =================== ===================
See accompanying notes. -3-
MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS) THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------- ----------------------------------- DECEMBER 29, DECEMBER 30, DECEMBER 29, DECEMBER 30, 2002 2001 2002 2001 ---------------- -------------- --------------- ----------------- Revenues $44,621 $38,290 $85,624 $72,155 Costs and expenses: Cost of product sold 33,170 28,509 63,982 54,616 Selling, general and administrative expense 8,023 7,679 15,928 14,080 Amortization of intangibles 85 80 168 169 ---------------- -------------- --------------- ----------------- Operating income 3,343 2,022 5,546 3,290 ---------------- -------------- --------------- ----------------- Interest expense, net (659) (2,409) (1,180) (4,886) Other income (expense) 23 (13) 22 (27) ---------------- -------------- --------------- ----------------- Income (loss) before income taxes 2,707 (400) 4,388 (1,623) Income tax (expense) (13) -- (15) -- ---------------- -------------- --------------- ----------------- Net income (loss) 2,694 (400) 4,373 (1,623) Preferred stock dividends and accretion of discount on preferred stock -- (2,661) -- (5,322) ---------------- -------------- --------------- ----------------- Net income (loss) attributed to common stockholders $2,694 ($3,061) $4,373 ($6,945) ================ ============== =============== ================= Net income (loss) per share attributed to common stockholders Basic and diluted $0.10 ($0.58) $0.16 ($1.32) ================ ============== =============== ================= Weighted average common shares outstanding Basic 27,652,413 5,256,155 27,398,219 5,256,057 Diluted 27,862,127 5,256,155 27,622,816 5,256,057
See accompanying notes. -4-
MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 29, DECEMBER 30, 2002 2001 ----------------- ------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 4,373 $ (1,623) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 3,941 3,769 Amortization of other intangibles 168 169 Amortization of deferred financing costs and discount on long-term debt 206 563 Amortization of unearned compensation 71 71 Loss on retirement of equipment 49 - Changes in operating assets and liabilities, net of effect of business acquired: Accounts receivable (156) 191 Inventories (1,668) (3,198) Prepaid expenses and other current assets (813) (416) Interest escrow fund - 1,250 Accounts payable, accrued compensation and benefits, accrued expenses and other (4,688) (4,751) Other (821) (49) ----------------- ------------------- Net cash provided by (used in) operating activities 662 (4,024) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net of cash acquired (18,359) -- Investment in other assets (3,751) -- Other additions to plant and equipment, net (6,500) (5,115) ----------------- ------------------- Net cash used in investing activities (28,610) (5,115) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt (1,550) (3,387) Proceeds of long-term debt 8,000 -- Redemption of Series E preferred stock (2,010) -- Proceeds from sale of common stock, net of costs 640 5,554 ----------------- ------------------- Net cash provided by financing activities 5,080 2,167 ----------------- ------------------- Decrease in cash and cash equivalents (22,868) (6,972) Cash and cash equivalents at beginning of period 38,268 20,289 ----------------- ------------------- Cash and cash equivalents at end of period $ 15,400 $ 13,317 ----------------- -------------------
See accompanying notes. -5- MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. INTERIM FINANCIAL STATEMENTS MedSource Technologies, Inc. (the "Company") has prepared the unaudited interim consolidated financial statements presented herein in accordance with accounting principles generally accepted in the United States for interim financial statements and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The consolidated financial statements are unaudited but, reflect all adjustments, consisting of normal recurring adjustments and accruals which, in the opinion of management, are considered necessary for a fair presentation of our financial position and results of operations and cash flows for the interim periods presented. The consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to consolidated financial statements included in the Company's annual report for its fiscal year ended June 30, 2002. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. 2. ACQUISITION On September 4, 2002, the Company acquired Cycam, Inc., a company located in Houston, Pennsylvania that manufactures reconstructive implants and instruments. The total purchase price was approximately $24.4 million, which included $18.4 million in cash and 667,175 shares of common stock valued at $6.0 million. The acquisition was recorded using the purchase method of accounting. The preliminary purchase price allocation was $5.5 million to net tangible assets and $18.5 million to goodwill. In conjunction with the acquisition, the Company drew $8.0 million from the acquisition line under the Company's existing credit facility. The effect of the acquisition on the financial position and results of operations is not material, and therefore no pro forma data of this acquisition is required or presented. 3. INVENTORIES Inventories consisted of the following (in thousands): DECEMBER 29, JUNE 30, 2002 2002 ---------------- ---------------- (UNAUDITED) Raw material $ 12,453 $ 10,638 Work-in-progress 6,294 6,529 Finished goods 4,014 3,336 ---------------- ---------------- Total $ 22,761 $20,503 ================ ================ 4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) represents net income (loss) attributed to common stockholders plus the results of any stockholders' equity changes relating to the Company's previous interest rate swaps and current interest rate cap agreements. For the three-months ended December 29, 2002 and December 30, 2001, comprehensive income (loss) was $2.4 million and ($3.1) million, respectively. For the six-months ended December 29, 2002 and December 30, 2001, comprehensive income (loss) was $4.1 million and ($6.9) million, respectively. -6- 5. INCOME (LOSS) PER SHARE Basic and diluted net income (loss) per share attributed to common stockholders for each period presented was computed using the weighted average number of shares of common stock outstanding during the period. For the three and six-month periods ended December 29, 2002, the impact of the assumed exercise of certain options and warrants was dilutive and was therefore included in determining the diluted weighted average shares outstanding. For the three and six-month periods ended December 30, 2001, the impact of the same securities would have been anti-dilutive, and those securities were therefore excluded from the computation. The table below sets forth the computation of basic and diluted net earnings (loss) per share:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED DECEMBER 29, DECEMBER 30, DECEMBER 29, DECEMBER 30, 2002 2001 2002 2001 --------------------------------- ----------------- ----------------- (UNAUDITED) (UNAUDITED) Numerator: Net income (loss) $2,694 ($3,061) $4,373 ($6,945) Denominator: Basic-weighted average shares outstanding 27,652,413 5,256,155 27,398,219 5,256,057 Effect of dilutive securities: Employee stock options 46,354 - 61,237 - Warrants 163,360 - 163,360 - --------------------------------- ----------------- ----------------- Diluted-weighted average shares outstanding 27,862,127 5,256,155 27,622,816 5,256,057 --------------------------------- ----------------- ----------------- Basic net earnings (loss) per share $0.10 ($0.58) $0.16 ($1.32) --------------------------------- ----------------- ----------------- Diluted net earnings (loss) per share $0.10 ($0.58) $0.16 ($1.32) --------------------------------- ----------------- -----------------
6. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001 with early adoption permitted for companies with fiscal years beginning after March 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statements. Other intangible assets will continue to be amortized over their useful lives. The Company adopted the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Amounts previously recorded as separately identifiable intangibles for acquired work force and customer base were subsumed to goodwill in accordance with FAS 141, increasing goodwill by $34.6 million as of the date of adoption. Effective with the July 1, 2001 adoption of FAS 142, goodwill is no longer amortized but is instead subject to an annual impairment test. The transitional test conducted in connection with the adoption of FAS 142 and the annual impairment test, performed as of the beginning of the Company's fiscal 2002 fourth quarter resulted in no impairment being required. In the current quarter, the Company made purchase price allocations related to the earlier HV Technologies and Cycam, Inc. acquisitions. These allocations resulted in a $0.4 million increase to goodwill. -7- 7. RESTRUCTURING CHARGE In June 2001, the Company completed a strategic review of its manufacturing operations and support functions. Based on this review and with approval of the Board of Directors, management began actions to eliminate redundant facilities and recorded a restructuring charge of $11.5 million. Information relating to the restructuring charges is as follows (in millions):
INCURRED THROUGH BALANCE AT INITIAL DECEMBER 29, DECEMBER 29, ACCRUAL RECLASS 2002 2002 ----------- -------------- ------------- ------------- Impairment of goodwill and other intangibles $ 3.6 -- $ 3.6 -- Impairment of property, plant and equipment 1.9 $ 2.0 3.9 -- Employee termination benefits 3.8 (1.5) 2.0 $ 0.3 Other direct costs 2.2 (0.5) 0.5 1.2 ----------- -------------- ------------- ------------- $ 11.5 $ 0.0 $ 10.0 $ 1.5 =========== ============== ============= =============
-8- ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this Report on Form 10-Q. The following discussion contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. In many cases, you can identify forward-looking statements by terminology such as may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate, " "predict," "intend," "potential" or "continue" or the negative of these terms or other comparable terminology. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors, as more fully discussed below and under the heading "risk factors" contained in our Form 10-K for the period ended June 30, 2002. Readers should not place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We do not assume any obligation to update the forward-looking statements after the date hereof. OVERVIEW We provide product development and design services, precision metal and plastic part manufacturing, product assembly services and supply chain management. We provide our products and services to each of the following primary target markets: o Surgical instrumentation devices and components; o Electro-medical devices and components; o Interventional devices and components; and o Orthopedic devices and instruments. COMPANY HISTORY During 1998, our co-founders, Richard J. Effress and William J. Kidd, established MedSource to identify business opportunities in the medical engineering and manufacturing services industry. We began operations when we acquired seven companies during March 1999 and have subsequently completed six additional acquisitions, most recently HV Technologies, or HVT, in January 2002 and Cycam Inc. in September 2002. The acquisition of HVT, a specialized manufacturer of polyimide and composite micro-tubing used in interventional and minimally invasive catheters, delivery systems and instruments, enabled us to expand our offering of proprietary manufacturing capabilities to our customers in the interventional device market. We acquired Cycam Inc. in September 2002. The acquisition of Cycam, a manufacturer of reconstructive implants and instruments, enhances our capabilities within plastic machining, propriety coating technology, clean room knitting and packaging along with multi axis machining. All of our acquisitions were accounted for using the purchase method of accounting. During June 2001, we completed a review of our manufacturing operations and support functions. Based on our evaluation of the unique and common characteristics of our various facilities, we determined that we could achieve over-all cost savings by closing three of the facilities, thus improving capacity utilization and efficiency of the remaining facilities. We sold our facilities in Pittsfield and East Longmeadow, Massachusetts during our fiscal year ended June 30, 2002. We also initiated the shutdown of our facility in Danbury, Connecticut during our fiscal year ended June 30, 2002 and expect it to be closed by the end of February 2003. -9- RESULTS OF OPERATIONS REVENUES We recognize product revenues at the time products are shipped. Product shipments are supported by purchase orders from customers that indicate the price for each product. For services, we recognize revenues primarily on a time and materials basis. Service revenues are supported by customer orders or contracts that indicate the price for the services being rendered. For three months ended December 29, 2002, service revenues were less than 10% of total revenues. Revenues for product shipments and services rendered must also have reasonable assurance of collectability from the customer. Reserves for returns and allowances are recorded against revenues based on management's estimates and historical experience. We target the sale of our products and services to medical device companies in four target markets. As we have continued to focus on these markets, our sales to nonmedical customers as a percentage of our total revenues have been decreasing over time. Sales to nonmedical customers were less than 2% of our total revenues during the three and six-month periods ended December 29, 2002. Historically, most of our revenues were derived from manufacturing components used in medical devices. However, in order to accelerate revenue growth and better serve our customers, we aggressively pursued opportunities for the assembly of completed devices. To support this effort, we have completed a number of acquisitions to expand our product offerings and enhance our supply chain services. Over time, we anticipate that revenues from the assembly of completed devices will likely continue to grow as a percentage of our total revenues. Recent competitive pressures, coupled with the fact that many of our customers' orders are increasingly based on engineering projects with ever longer pre-commercialization phases and device assembly projects that are engineering intensive, but cost sensitive, has put pressure on engineering resources, lengthened our time-to-revenue cycle and increased the demand we face for lower cost products and services. In order to address these competitive pressures, along with the nature of our customer orders described above, we announced a growth strategy and restructuring initiative during January 2003. The initiative is intended to focus additional resources on our medical device assembly and engineering services businesses. The initiative will involve the cost savings measures described below under "-- Cost and Expenses." Our top four customers accounted for 56% of our revenues for the six months ended December 29, 2002, with three customers accounting for 28%, 12%, and 11% or our revenues respectively. We expect revenues from our largest customers to continue to constitute an increasing portion of our total revenues. We primarily derive our revenues from serving leading medical device companies. These customers are typically large companies with substantial market share in one or more of our four target markets, and we believe that expanding our relationships with these customers represents our most important revenue opportunity. As a result, we devote significant sales efforts to securing additional business from the business units and product lines of the leading medical device companies that we currently serve, as well as developing business with other business units and product lines of these customers. As we increasingly focus on serving leading medical device companies and expand our offerings to them by developing or acquiring additional engineering and manufacturing capabilities, we expect the percentage of revenues we derive from these customers to increase over time, as compared with revenues from non-medical device companies. We also intend to continue to selectively pursue promising opportunities with emerging medical device companies. As discussed above, we have acquired six businesses after March 1999. A substantial portion of our revenue growth to date has been attributable to the addition of these acquired companies' revenues. In the -10- periods following these acquisitions, we have grown our revenues by offering our existing customers access to our newly acquired engineering and manufacturing capabilities, as well as by offering the customers of the acquired businesses access to our existing capabilities. We generally have retained the medical device customers of the companies that we have acquired, but have selectively discontinued business with customers of the acquired businesses that did not fit our strategic focus of serving leading and select emerging medical device companies in our four target markets or related medical fields. We expect to continue to selectively make acquisitions of complementary medical engineering and manufacturing services providers that bring desired capabilities, customers and/or geographic coverage that either strengthens our position in our target markets or provide us with a significant presence in a new market. We generally do not have long-term volume commitments from our customers, and they may cancel their orders or change or delay volume levels at any time. COST AND EXPENSES Cost of products sold includes expenses for raw materials, purchased components, outside services, supervisory, engineering and direct production manpower including benefits, production supplies, depreciation and other related expenses to support product manufacturing. We purchase most of the raw materials that are used in our products at prevailing market prices and, as a result, are subject to fluctuations in the market price of those raw materials. In particular, the prices of stainless steel, titanium and platinum have historically fluctuated, and the prices that we pay for these materials, and, in some cases, their availability, are dependent upon general market conditions. Our margins are driven by sales mix between devices and components as well as the respective product mixes within our various product categories. Historically, our component business produced strong gross margins. When we were initially formed during March 1999, we were predominately a components supplier. However, in order to expand the scope of our services and accelerate revenue growth, we aggressively pursued opportunities for the assembly of completed devices, which generally have higher material content and a lower value added content, and can result in slightly lower gross margins but with lower capital investment. Additionally, we are seeing an evolving environment resulting in greater demands from our customers and more competition within both our components and assembly business. As a result of these conditions, we have initiated a growth and restructuring plan (described below). Selling, general and administrative expense includes support of our facilities for production and shipments to the customer as well as strategic investments in our sales and marketing, operations and quality teams, and our corporate support staff. The restructuring initiative we announced in January 2003 will involve continuing consolidation of our operations network, resulting in a decrease in overall floor space and related overhead costs. To cover the costs of this growth strategy and restructuring, we expect to incur costs related to restructuring efforts of approximately $25.0 to $35.0 million through the end of fiscal 2006. Additionally, we are currently determining what, if any, goodwill impairment charges will be incurred related to the initiative. THREE MONTHS ENDED DECEMBER 29, 2002 COMPARED TO THREE MONTHS ENDED DECEMBER 30, 2001 Revenues for the three-month period ended December 29, 2002 totaled $44.6 million compared to $38.3 million for the same period of the prior year, an increase of 16%, of which 12% was due to acquisitions and 4% was due to internal growth. Excluding the expected decline in shipments reported of non-medical revenue, a June 2001 company restructuring, and excluding an increased revenue from the HVT and Cycam acquisitions, our base medical business increased 10% compared to the prior year. These revenue gains were driven by higher demand across all major market segments. -11- Cost of products sold for the three-month period ended December 29, 2002 totaled $33.2 million compared to $28.5 million for the three-month period ended December 30, 2001. The increase in cost of products sold resulted principally from the increase in volume compared to the prior year period. Gross margin was 25.7% for the three months ended December 29, 2002, compared to 25.5% for the same period of the prior year. Selling, general, and administrative expense for the three-month period ended December 29, 2002 totaled $8.0 million, or 18.0% of revenues, compared to $7.7 million, or 20.1% of revenues, for the same period of the prior year. The $0.3 million increase in SG&A resulted mainly from the impact of acquisitions. Amortization of intangibles totaled $0.1 million for the three-month periods ended December 29, 2002 and December 30, 2001. Net interest expense totaled $0.7 million for the three-month period ended December 29, 2002 and $2.4 million for the same prior year period. This was due to both lower debt and interest rates from the prior period as a result of the March 2002 IPO and the debt refinancing in April 2002. Net income attributed to common shareholders totaled $2.7 million, or $0.10 per share, compared with a loss of $3.1 million, or $0.58 per share, for the same prior year period. SIX MONTHS ENDED DECEMBER 29, 2002 COMPARED TO SIX MONTHS ENDED DECEMBER 30, 2001 Revenues for the six-month period ended December 29, 2002 totaled $85.6 million compared to $72.2 million for the same period of the prior year, an increase of 19%, of which 12% was due to acquisitions and 7% was due to internal growth. Internal growth was driven by increased shipments of products in the interventional cardiology and reconstructive orthopedic markets to several of our established customers. Excluding the already noted expected decline in shipments reported of non-medical revenue, a June 2001 company restructuring, and excluding an increased revenue from the HVT and Cycam acquisitions, our base medical business increased 14% compared to the prior year. Cost of products sold for the six-month period ended December 29, 2002 totaled $64.0 million compared to $54.6 million for the six-month period ended December 30, 2001. The increase in cost of products sold resulted principally from the increase in volume compared to the prior year period. Gross margin was 25.3% for the six months ended December 29, 2002, compared to 24.3% for the same period of the prior year due to a higher mix of business in higher-margin locations and increased operating leverage due to the June 2001 restructuring. Selling, general, and administrative expense for the six-month period ended December 29, 2002 totaled $15.9 million, or 18.6% of revenues, compared to $14.1 million, or 19.5% of revenues, for the same period of the prior year. The $1.8 million increase in SG&A resulted mainly from the impact of acquisitions. Amortization of intangibles totaled $0.2 million for the six-month periods ended December 29, 2002 and December 30, 2001. Net interest expense totaled $1.2 million for the six-month period ended December 29, 2002 and $4.9 million for the same prior year period. This was due to both lower debt and interest rates from the prior period as a result of the March 2002 IPO and the debt refinancing in April 2002. Net income attributed to common shareholders for the six-month period ended December 29, 2002 totaled $4.4 million, or $0.16 per share, compared with a loss of $6.9 million, or $1.32 per share, for the same prior year period. -12- LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity are cash provided by operations and borrowings under our senior credit facility, which includes a $25 million unused revolving credit facility. To date, our principal uses of cash have been to finance capital expenditures, meet debt service requirements and finance acquisitions. We expect that these uses will continue in the future. Management believes that current cash balances and cash generated from operations, combined with available borrowings under our senior credit facility, will be adequate to fund requirements for working capital, capital expenditures, and future expansion for the next 12 months. OPERATING ACTIVITIES Net cash provided by operating activities totaled $0.7 million for the six months ended December 29, 2002 compared to net cash used of $4.0 million for the prior year period. The increase in cash provided by operating activities over the prior year period was primarily the result of a $6.0 million increase in net income and a $1.5 million decrease in inventory offset by a $1.3 million reduction in proceeds from the interest escrow fund received in the prior year period but not recurring in the current period, as well as a $1.1 million increase in accounts receivable and other. INVESTING ACTIVITIES Cash used in investing activities was $28.6 million for the six months ended December 29, 2002, compared to $5.1 million for the prior year period. This increase was due to cash of $18.4 million used for the acquisition of Cycam, and a $3.8 million investment to acquire certain machinery, equipment and intangibles. Cash paid for capital expenditures increased $1.4 million when compared to the prior year period. We expect capital expenditures in fiscal 2003 to be approximately $10 to $12 million. FINANCING ACTIVITIES Cash provided by financing activities was $5.1 million for the six months ended December 29, 2002 compared to cash used by financing activities of $2.2 million for the prior year period. The increase was primarily due to proceeds of $8.0 million from the acquisition line under our senior credit facility, in connection with the acquisition of Cycam, a reduction of $1.8 million in long-term debt payments from the prior period, offset by $4.9 million reduction in common stock proceeds as well as $2.0 million used for the redemption of the remainder of the Series E preferred stock. CRITICAL ACCOUNTING POLICIES There has been no material change to the Critical Accounting Policies we disclosed in our annual report on Form 10-K for our year ended June 30, 2002. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK Amounts outstanding under our senior credit facility bear interest at a floating rate. To reduce our exposure to interest rate risk, we entered into cap agreements to hedge our exposure to interest rate risk under this facility. Changes in the fair value of the caps will be recorded in Accumulated Other Comprehensive Loss in Stockholders' Equity. We had entered into a similar swap agreement in connection with amounts due under our old senior credit facility. The effect of a 10% increase in interest rates would have resulted in an immaterial increase in interest expense during our period ended December 29, 2002. -13- FOREIGN CURRENCY RISK Most of our sales and purchases are denominated in United States dollars and as a result, we have relatively little exposure to foreign currency exchange risk with respect to our sales. Accordingly, we do not use forward exchange contracts to hedge exposures denominated in foreign currencies or any other derivative financial instrument for trading or speculative purposes. The effect of a 10% change in exchange rates as of December 29, 2002 would not have had a material impact on our operating results for the fiscal year then ended. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we are required to filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management's control objectives. Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman of the Board and Chief Executive Officer and our Senior Vice President -- Finance and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, our Chairman of the Board and Chief Executive Officer and our Senior Vice President -- Finance and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to MedSource (and its consolidated subsidiaries) required to be included in our Exchange Act reports. CHANGES IN INTERNAL CONTROLS There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out the evaluation referred to above. -14- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS RECENT SALES OF UNREGISTERED SECURITIES During October 2002, we issued an aggregate of 3,329 shares of our common stock upon exercise of warrants issued to one of the investors who had purchased our Series E preferred stock in 2001. The exercise price of the warrants was $0.01 per share, and the investor used a "cashless" exercise provision that enabled him to surrender the right to receive upon exercise of the warrants a number of shares of common stock with a value equal to the aggregate exercise price of the warrants and, as a result, surrendered the right to receive an aggregate of one share. We issued these securities in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder. During November 2002, we issued an aggregate of 1,332 shares of our common stock to four directors as payment for their $2,500 quarterly directors' fee. We issued these securities in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 as transactions not involving any public offering and Rule 506 thereunder. During December 2002, we issued an aggregate of 3,329 shares of our common stock upon exercise of warrants issued to one of the investors who had purchased our Series E preferred stock in 2001. The exercise price of the warrants was $0.01 per share, and the investor used a "cashless" exercise provision that enabled him to surrender the right to receive upon exercise of the warrants a number of shares of common stock with a value equal to the aggregate exercise price of the warrants and, as a result, surrendered the right to receive an aggregate of one share. We issued these securities in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder. During December 2002, we also issued an aggregate of 537 shares of our common stock to one director as payment for his $2,500 quarterly director's fee. We issued these securities in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933 as transactions not involving any public offering and Rule 506 thereunder. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our annual meeting of stockholders on November 5, 2002, our stockholders: o elected the following persons by the following votes to serve as Class I directors, to serve until our annual meeting of stockholders scheduled to be held in the year 2005 and until their successors are duly elected and qualified: VOTES ----- NOMINEE FOR WITHHELD - ------- --- -------- Richard J. Effress............................... 16,001,393 2,694,139 William J. Kidd.................................. 18,087,212 608,320 T. Michael Long.................................. 18,088,112 607,420 -15- o ratified the action of our board in appointing Ernst & Young LLP as our independent auditors for the fiscal year ending June 30, 2003 by the following vote: FOR AGAINST ABSTAIN --- ------- ------- 18,474,002 200,764 20,766 ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith: Exhibit Number Description ------------------------------------------------------------------------- 10.1 Form of Employment Severance and Termination Agreements between the registrant and William J. Kullback 10.2 Form of Employment Severance and Termination Agreements between the registrant and Rolf Dahl 99.1 Certificate of Chief Executive Officer 99.2 Certificate of Chief Financial Officer (b) The registrant did not file a current report on Form 8-K during the period covered by this report. -16- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 12, 2003 MEDSOURCE TECHNOLOGIES, INC. By: /s/Richard J. Effress -------------------------------------- Richard J. Effress, Chairman and Chief Executive Officer By: /s/William J. Kullback -------------------------------------- William J. Kullback Senior Vice President - Finance and Chief Financial Officer CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER I, Richard J. Effress, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MedSource Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 12, 2003 /s/Richard J. Effress -------------------------------- Richard J. Effress Chairman of the Board and Chief Executive Officer CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER I, William J. Kullback, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MedSource Technologies, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 12, 2003 /s/William J. Kullback ------------------------------------- William J. Kullback Senior Vice President -- Finance and Chief Financial Officer EXHIBIT INDEX Exhibit Number Description Page No. ------------------------------------------------------------------------- 10.1 Form of Employment Severance and Termination Agreements between the registrant and William J. Kullback 10.2 Form of Employment Severance and Termination Agreements between the registrant and Rolf Dahl 99.1 Certificate of Chief Executive Officer 99.2 Certificate of Chief Financial Officer EX-10 3 d885141-1.txt 10.1 - KULLBACK EMP. SEVERANCE AGMT. EXHIBIT 10.1 ------------ EMPLOYMENT SEVERANCE AGREEMENT The parties to this agreement are MedSource Technologies, Inc., a Delaware Corporation ("MedSource" or the "Company"), and William Kullback (the "Executive"). It is agreed as follows: 1. In the event that (a) the Company terminates the Executive's employment without "Cause" or (b) the Executive terminates his employment with the Company by written notice for "good reason" and provided that upon termination in either case, the Executive executes and delivers to MedSource the Release Agreement annexed as Exhibit A hereto which Release Agreement becomes effective in accordance with its terms, then the Company, in lieu of any and all other payments or benefits payable to the Executive, shall pay the Executive his base salary at the time of termination (payable in accordance with the Company's customary practice) for a period of 12 months following the date of termination (the "Severance Period"); provided, however, that if, after the date of termination (and before the end of the Severance Period), the Executive is employed by or otherwise receives remuneration from a person or entity other than the Company, (an "Alternate Employer"), the Company will pay such salary for up to six (6) months and if the remuneration being received from the Alternate Employer is less than the annualized rate of the base salary, the Company shall, until the end of the Severance Period, pay the Executive the difference between the annualized rate of his base salary upon termination and the amount that the Executive is entitled to receive from such Alternate Employer. The Executive agrees to provide complete information to the Company with respect to any Alternate Employer and his financial arrangements therewith. The Executive understands and agrees that for a period of 12 months following the date of termination of the Executive's employment, the provision of sections 3(b) and 3(c) shall apply. As used herein "good reason" shall mean any of the following: (i) the Company reduces the Executive's base salary, bonus computation or title; (ii) the Company substantially reduces the Executive's responsibilities or there is a change in employment conditions materially adverse to the Executive, any of which is not remedied within 30 days after receipt by the Company of notice from the Executive of such reduction in responsibilities or change in employment conditions; (iii) without the Executive's written consent, the Company requires the Executive to be based anywhere other than his present location in Minneapolis, Minnesota except for required travel on Company business in the ordinary course; (iv) the Company takes any action which would deprive the Executive of any material fringe benefit other than action which is applied to all executives as a whole. 2. The Company may terminate this Agreement and the Executive's employment hereunder at any time upon written notice for "Cause", which shall mean (i) the commission of fraud or embezzlement on the part of the Executive, (ii) a breach by the Executive of any of Sections 3(a), 3(b) or 3(c) of this Agreement, (iii) the conviction of the Executive of, or the pleading by the Executive of guilty or no contest to, (x) any felony or (y) any crime involving moral turpitude on his part and/or (iv) a material failure by the Executive to discharge his duties, responsibilities and obligations as an employee of the Company after the Executive shall have been duly notified of such failure and shall have had a reasonable time to cure the same. In the event of the termination by the Company of the Executive's employment for Cause, the Executive shall be entitled to receive his base salary accrued but not paid through the date of termination and no other monies or benefits except as provided by law. 3. Confidentiality, et al. In consideration for the foregoing, the Executive agrees that: (a) He will not at any time, divulge, communicate, use to the detriment of the Company or its subsidiaries or affiliates (collectively the "Companies") or for the benefit of any other person, firm or entity, or misappropriate in any way, any confidential information or trade secrets relating to the Companies or any of their businesses including, without limitation, business strategies, operating plans, acquisition strategies (including the identities of (and any other information concerning) possible acquisition candidates), pro forma financial information, market analyses, acquisition terms and conditions, personnel information, trade processes, manufacturing methods, know-how, customer lists and relationships, supplier lists, or other non-public proprietary and confidential information relating to the Companies. (b) During his employment with the Company and the Severance Period, the Executive shall not, directly or indirectly, for himself or on behalf of any other person, firm or entity, employ, engage or retain any person who at any time during the 12-month period preceding his termination, was an employee of any of the Companies or contact any supplier, customer or employee of any of the Companies for the purpose of soliciting or diverting any such supplier, customer or employee from the Companies or otherwise interfering with the business relationship of the Companies with any of the foregoing. (c) During his employment with the Company and the Severance Period, the Executive shall not, directly or indirectly, engage in, or serve as a principal, partner, joint venturer, member, manager, trustee, agent, stockholder, director, officer or employee of, or consultant or advisor to, or in any other capacity, or in any manner own, control, manage, operate, or otherwise participate, invest, or have any interest in, or be connected with, any person, firm or entity that engages in, directly or indirectly, any activity that is competitive with the business of the Companies as then conducted in the United States or Europe within 2,000 miles of any then facility of the Companies or of any customer of the Companies; provided, however, that notwithstanding the foregoing, the Executive may own up to 2% of the voting securities of any publicly-traded company. (d) The Executive acknowledges that the agreements herein are reasonable and necessary for the protection of the Companies and are an essential inducement to the Company's continuing Executive in the employ of the Company. 2 Accordingly, the Executive shall be bound by the provision hereof to the maximum extent permitted by law, it being the intent and spirit of the parties that the foregoing shall be fully enforceable. However, the parties further agree that, if any of the provisions hereof shall for any reason be held to be excessively broad as to duration, geographical scope, property or subject matter, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law as it shall herein pertain. 4. Equitable Relief. The Executive acknowledges that if he violates the provisions of this Agreement, the Company could suffer irreparable injury and, in addition to any other rights and remedies available under this Agreement or otherwise, the Company shall be entitled to an injunction to be issued or specific enforcement to be required (without the necessity of any bond) restricting the Executive from committing or continuing any such violation. 5. Amendment and Modification. This Agreement may not be amended, modified or changed except in a writing signed by the party against whom such amendment, modification or change is sought to be enforced. 6. Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of either of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only be written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of a party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this section 6. 7. 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, (b) sent by facsimile transmission with a written copy thereof sent on the same day by postage paid first-class mail or (c) by personal delivery to such party at the following address: If to the Company, to: MedSource Technologies Inc. 110 Cheshire Lane Suite 100 Minneapolis, MN 55305 Attention: VP-Human Resources 3 If to the Executive, to: The address set forth beneath the Executive's signature hereto. 8. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs and legal representatives and the Company and its successors and assigns. Successors of the Company shall include, without limitation, any person acquiring, directly or indirectly, all or substantially all of the business or assets of the Company, whether by merger, consolidation, purchase, lease or otherwise, and such successor shall thereof be deemed the "Company" for the purposes hereof. 9. Governing Law. This Agreement shall be governed by the law of the state of Delaware applicable to agreements made and to be performed entirely in Delaware. 10. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the matters set forth herein and supersedes all prior agreements and understandings between the parties with respect to those matters except any such agreements which may be in writing and which provide that they are not superseded by this Agreement. MEDSOURCE TECHNOLOGIES, INC. By: ------------------------------- Chief Executive Officer ------------------------------- William Kullback Date ------------------------------ 4 Exhibit A Release Agreement ----------------- Release Agreement made this _____ day of ________ between MedSource Technologies, Inc. and William Kullback ("Executive"). 1. GENERAL RELEASES. (a) For and in consideration of the severance benefits which the Executive will receive under the Employment Severance Agreement to which this Release Agreement is attached, the Executive fully and forever releases and discharges MedSource Technologies, Inc. ("Company") (which for purposes of this Agreement includes its present and former officers, directors, shareholders, employees, agents, investors, administrators, representatives, attorneys, affiliates, divisions, subsidiaries, parent corporations, predecessor and successor corporations and assigns) from any and all liability for any claim, duty, obligation, debt, covenant, cause of action or damages (collectively "Claims"), whether presently known or unknown, suspected or unsuspected, that Executive ever had, may have had or now have arising from any omission, act or fact that has occurred up to and including the date of this Agreement. Such released Claims include, but are not limited to: (i) any Claims arising out of or attributable to Executive's employment or the termination of employment with the Company; (ii) any Claims for wages, severance pay, bonuses, accrued vacation, personal days, holidays, sick days, stock, stock options, units, membership interests, attorneys fees, costs or expenses; (iii) all Claims arising under any agreement, understanding, promise or contract (express or implied, oral or written) between Executive and the Company; (iv) all Claims of wrongful termination, unjust dismissal, defamation, violation of the implied covenant of good faith and fair dealing libel or slander; (v) all Claims arising under tort law; (vi) any Claims arising under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference; (vii) any Claims arising under any federal, state or local constitution, statute, regulation or ordinance to the extent such claims may be validly waived including, without limitation, the Age Discrimination in Employment Act (the "ADEA"), Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Equal Pay Act, the Employee Retirement Income Security Act; and (viii) any Claims for any other loss or damage. (b) The Company, for itself and affiliated companies and its and their successors and assigns, hereby releases and forever discharges Executive from any and all claims based upon any act, omission or occurrence occurring up to and including the effective date of this Agreement, including, but not limited to, any matter arising out of Executive's employment with the Company. 2. ACKNOWLEDGMENTS. Executive acknowledges that the severance benefits provided under the Employment Severance Agreement exceed any payment or benefit to which Executive might otherwise be entitled pursuant to any policy, plan or procedure of the Company, 5 or pursuant to any prior agreement or contract with the Company. Executive understands that neither party hereto is waiving any rights or Claims that arise after the date Executive signs this Agreement. 3. COVENANT NOT TO SUE. Executive represents that he has not filed or permitted to be filed any Claims, administrative proceedings or lawsuits against the Company, and agrees that he will not do so at any time in the future with respect to the subject matter of all Claims released pursuant to this Agreement, except as may be necessary to enforce the Agreement or Employment Severance Agreement or obtain the benefits described in or granted by such agreements. 4. NON-DISCLOSURE OF AGREEMENT. Executive and the Company agree that neither party will, unless required by law, talk about, write about or otherwise publicize the terms of this Agreement and the Employment Severance Agreement, the benefits being paid under such agreements or the fact of their payment, except that this information may be disclosed to each party's respective attorneys, accountants or other professional advisors to whom disclosure must be made in order for them to render professional services. Such attorneys, accountants or other professional advisors will, however, be instructed to maintain the confidentiality of this information. Notwithstanding the foregoing, Executive and the Company agree that this Agreement may be used as evidence in any proceeding, administrative, judicial, arbitral or otherwise, relating to Executive's employment with the Company or the termination thereof. 5. NON-DISPARAGEMENT. Executive agrees that he will not, at any time, orally or in writing, disparage, denigrate or defame the Company, or any affiliate of the Company, their respective products, services or business conduct, or otherwise impugn the reputation of the Company or any affiliate of the Company, or that of any of their respective directors, officers, affiliates, agents, employees or representatives. The Company agrees that it will not, orally or in writing, disparage, denigrate or defame Executive or otherwise impugn his reputation. 6. NATURE OF AGREEMENT. Executive understands and agrees that this Agreement is a severance agreement and does not constitute an admission of liability or wrongdoing on the part of the Company. 7. TIME TO CONSIDER; REVOCATION; EFFECTIVE DATE. Executive hereby waives his right to take up to 21 days to decide whether to sign this Agreement. Executive shall have the right to revoke this Agreement within seven (7) days after Executive signs it. Any revocation of this Agreement must be in writing and submitted to Vice President-Human Resources of the Company. None of the Company's obligations hereunder become effective until Executive signs the Agreement and the seven (7) day revocation period has expired. 8. MISCELLANEOUS. (a) This Agreement shall be binding upon the parties and may not be modified in any manner, except by a writing signed by duly authorized representatives of the parties. This Agreement is binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators. 6 (b) In the event that one or more of the provisions of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Moreover, if one or more of the provision contained in this Agreement is held to be excessively broad as to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law. (c) This Agreement shall be interpreted and construed by the laws of the State of Delaware (other than those laws that would defer to the substantive laws of another jurisdiction). Executive hereby submits to and acknowledges the jurisdiction of the courts of the State of Delaware, or, if appropriate, a federal court sitting in the State of Delaware (which courts, for the purposes of this Agreement, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this Agreement or the subject matter hereof. (d) Waiver by either party of a beach of any provision of this Agreement by the other shall not operate as a waiver of any other or subsequent breach by such other party. 9. VOLUNTARY ASSENT. By signing below, Executive acknowledges and represents that Executive has read this Agreement, that he understands its meaning and content, that he has been afforded a sufficient opportunity to consider the Agreement, that he has have been advised to consult with an attorney about the Agreement, that he has freely and voluntarily assented to all of the terms and conditions hereof, and that he has signed the Agreement as his own free and voluntary act. Kindly sign this Agreement where indicated below and return the original to us. A second copy has been enclosed for your files. MedSource Technologies, Inc. By: ------------------------------ Agreed to and Accepted by: - -------------------------- William Kullback 7 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT ("Agreement") is made between Medsource Technologies, Inc. (the "Company") and William J. Kullback (the "Executive"), as of January 2, 2003 with respect to the following facts: RECITALS: A. The Executive is a principal officer of the Company and an integral part of its management. B. The Company wishes to assure both itself and the Executive of continuity of management in the event of any actual or threatened change of control of the company. C. This Agreement is not intended to alter the compensation and benefits that the Executive could reasonably expect in the absence of a change in control of the Company and, accordingly, this Agreement, though taking effect upon execution thereof, will be operative only upon a change of control of the Company, as that term is defined herein. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing recitals and the agreements of the parties contained herein, the parties do hereby agree as follows: 1. OPERATION OF AGREEMENT ---------------------- This Agreement shall be effective immediately upon its execution by the parties hereto. Anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any provision thereof shall be operative unless and until there has been a "Change in Control" of the Company as defined in Section 4 below. Upon such a Change in Control of the Company, this Agreement and all provisions hereof shall become operative immediately. 2. PURPOSE AND INTENT ------------------ The Board of Directors of the Company (the "Board") recognizes the possibility of a Change in Control of the Company exists and that such possibility, and the uncertainty and questions which it necessarily raises among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders in this period when their undivided attention and commitment to the best interests of the Company and its shareholders are particularly important. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company. 3. TERMINATION FOLLOWING CHANGE IN CONTROL --------------------------------------- For purposes hereof only, a termination of the Executive's employment following a Change in Control ("Termination Following Change in Control") shall be deemed to occur if at any time during the one-year period immediately following a Change in Control: (a) the Company terminates the Executive's employment, other than for "Cause" as defined herein; (b) the Executive terminates his employment with the Company for "good reason" which shall mean the occurrence of any of the following: (i) the Company reduces the Executive's base salary, bonus computation or title; (ii) the Company substantially reduces the Executive's responsibilities as in effect immediately prior to the Change in Control or as the same may be increased from time to time, or there is a change in employment conditions deemed by the Executive to be materially adverse as compared to those in effect immediately prior to the Change in Control, any of which is not remedied within 30 days after receipt by the Company of notice by the Executive, of such reduction in responsibilities or change in employment conditions; (iii) without the Executive's express written consent, the Company requires the Executive to be based anywhere other than Minneapolis, Minnesota except for required travel on the Company's business to an extent substantially consistent with that prior to the Change in Control; (iv) the Company fails to obtain the assumption of the performance of this Agreement by any successor of the Company; or (v) the Company takes any action which would deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the Company fails to provide the Executive with the number of paid vacation days to which the Executive is then entitled in accordance with the Company's normal vacation policy in effect on the date of 2 the Change in Control unless in each case the action is applied to all executives as a whole and on a Company wide basis. The voluntary termination by the Executive of his employment by the Company other than for good reason shall in no event constitute a "Termination Following Change in Control". 4. DEFINITION OF CHANGE IN CONTROL ------------------------------- A Change in Control will be deemed to have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), or a group (as defined in Rule 13d-3 of the Exchange Act) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding equity securities; (b) during any period of twenty-four (24) consecutive months, commencing on the date of this Agreement, individuals who at the beginning of such twenty-four (24) month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company unless the election, or the nomination for election by the Company's stockholders of each director who is not then a director has been approved in advance by directors representing at least a majority of the directors then in office who are directors at the date hereof; (c) an event occurs which constitutes a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirements; (d) there is a merger or consolidation of the Company and the persons owning a majority of the voting power of the stock prior to the transaction do not own a majority of the voting stock of the surviving entity; (e) the sale or other disposition of all or substantially all of the assets of the Company to an entity controlled by persons after the sale who prior to the transfer did not own a majority of the voting stock of the Company; or (f) the business or businesses of the Company for which the Executive's services are principally performed are disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise. 3 5. COMPENSATION FOLLOWING TERMINATION ---------------------------------- (a) Subject to the terms and conditions of this Agreement, upon a Termination Following Change in Control, the Executive shall be entitled to (i) a lump sum payment, within fifteen (15) days following such termination, in an amount equal to two times the highest annual level of total cash compensation (including any and all bonus amounts) paid to the Executive by the Company (as reported on Form W-2) during the three calendar years ended immediately prior to such termination or, if employed by the Company for less than one year, an amount equal to two times the Executive's current annual base salary plus two times any and all bonus amounts paid to executive by the Company during the period of employment, (ii) payment by the Company of continuing health coverage for a period of twenty-four (24) months, at a level commensurate with that which the Executive enjoyed with the Company immediately prior to such Change in Control. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any amounts to which the Executive shall be entitled by law (nor shall payment hereunder be deemed in lieu of such amounts), by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the date of termination or voluntary termination, or otherwise, provided however, if Executive receives health coverage through subsequent employment during such twenty-four (24) month period at a level commensurate with that which Executive enjoyed with the Company, the Company's obligations under Section 5 (a) (ii) shall cease when Executive commences to receive such health coverage. (c) Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law. 6. DEFINITION OF "CAUSE" --------------------- The Termination of the Executive's employment by the Company shall be deemed for "Cause" if it results from: (a) the commission of fraud or embezzlement on the part of the Executive; 4 (b) the conviction of the Executive of, or the pleading by the Executive of guilty or no contest to, (x) any felony or (y) any crime involving moral turpitude on his part; (c) a material failure by the Executive to discharge his duties, responsibilities and obligations as an employee of the Company after the Executive shall have been duly notified of such failure and shall have had a reasonable time to cure the same; (d) the Executive's death; or (e) an accident or illness which renders the Executive unable, for a period of at least six (6) consecutive months, to perform the essential functions of his job, notwithstanding the provision of reasonable accommodation by Employer. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under subsection (a) or (c) without (i) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause, (ii) an opportunity for the Executive, together with his counsel, to be heard before the Board, and (iii) delivery to the Executive of a notice of termination from the Board finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (a) or (c) of the preceding sentence and specifying the particulars thereof in detail. 7. TAX TREATMENT ------------- It is the intention of the parties that no portion of the payment made under Section 5 hereof (The "Termination Payment") or any other payment under this Agreement, or payments to or for the Executive's benefit under any other agreement or plan, be deemed to be an excess parachute payment as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or its successors. However, should it be asserted that any amount to be received by Executive hereunder is an excess parachute payment, it is agreed that the present value of the Termination Payment and any other payment to or for the Executive's benefit in the nature of compensation, receipt of which is contingent on the Change in Control of the Company, and to which Section 280G of the Code or any successor provision 5 thereto applies (in the aggregate "Total Payments") exceeds an amount in excess of the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code or any successor provisions thereto, Executive shall nevertheless be entitled to all such payments and the Company shall indemnify Executive for any tax imposed under Section 4999 of the Code or any successor provision thereto, including payment of the tax due on any payments made to Executive or on behalf of Executive to pay such taxes (i.e. "gross up"). Within ten (10) business days following delivery of written notice by the Company to the Executive of the Company's belief that there is a payment or benefit due which will result in an excess parachute payment as defined in Section 280G of the Code or any successor provisions, the Company and the Executive, at the Company's expense, shall obtain the opinion of legal counsel, as the Company and Executive may mutually agree upon, which opinions need not be unqualified, which sets forth (i) the amount of the Executive's Base Period Income, as defined in Section 280G of the Code, (ii) the present value of Total Payments, and (iii) the amount and present value of any excess parachute payments. In the event such opinion determines that there would be an excess parachute payment, included in the Termination Payment hereunder, or any other payment determined by such counsel to be includable in Total Payments, such opinion shall include the amount of tax due in relation thereto and the amount of the total gross up payment required for indemnification of the Executive by the Company. Such amounts shall then promptly be paid by the Company to the Executive or to the Internal Revenue Service on behalf of the Executive. The provisions of this Section, including the calculations, notices and opinions provided herein, shall be based upon the conclusive presumption that (i) the compensation and benefits provided herein and (ii) any other compensation, including but not limited to any accrued benefits, earned by the Executive prior to the Change in Control of the Company pursuant to the Company's compensation programs, would have been reasonable if made in the future in any event, even though the timing of such payment is triggered by the Change in Control of the Company. In the event such legal counsel so requests in connection with the Section 280G opinion required by this Section, the Company and Executive shall obtain, at the Company's expense, the advice of a firm of recognized executive compensation consultants concerning the reasonableness of any item of compensation to be received by the Executive, on which advice legal counsel may rely in providing their opinion. In the event that the provisions of Sections 280G and 4999 of the code for any successor provision are repealed without succession, this Section shall be of no further force or effect. 8. MISCELLANEOUS ------------- (a) Intent. This Agreement is made by the Company in order to induce the Executive to remain in the Company's employ, with the Company's acknowledgment and intent that it will be relied upon by the Executive, and in consideration of the services to be performed by the Executive from time to time hereafter. However, this Agreement is not an agreement to 6 employ the Executive for any period of time or at all, and the terms and conditions of the Executive's employment, other than those expressly addressed herein, shall be subject to and governed by a separate agreement of employment between the Company and the Executive, if any. This Agreement is intended only as an agreement to provide the Executive with specified compensation and benefits if he or she while employed by the Company is terminated following a Change in Control on the terms and conditions hereof. (b) Attorney's Fees. If any action at law or in equity is commenced to enforce any of the provisions or rights under this Agreement, the unsuccessful party to such litigation, as determined by the court in a final judgment or decree, shall pay the successful party all costs, expenses and reasonable attorney's fees incurred by the successful party or parties (including, without limitation, costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding, such costs, expenses and attorneys' fees shall be included as part of the judgment. (c) Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of Delaware. (d) Successors and Assigns ---------------------- (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree in writing to perform this Agreement. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall require the Company to pay to the Executive compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder in the event of a Termination Following Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be the date on which the Executive shall receive such compensation from the Company. As used in this Agreement, "Company" shall mean the Company as herein above defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation or law or otherwise. (ii) This Agreement shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. 7 If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there is no such designee, to Executive's estate. (e) Notices. Except as otherwise expressly provided herein, any notice, demand or payment required or permitted to be given or paid shall be deemed duly given or paid only if personally delivered or sent by United States mail and shall be deemed to have been given when personally delivered or two (2) days after having been deposited in the United States mail, certified mail, return receipt requested, properly addressed with postage prepaid. All notices or demands shall be effective only if given in writing. For the purpose hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 9(e), shall be as follows: The Company: MEDSOURCE TECHNOLOGIES, INC. 110 Cheshire Lane, Suite 100 Minneapolis, MN 55305 Attn: Chief Executive Officer Executive: ((NAME)) (f) Severability. In the event any provision in this Agreement shall be invalid, illegal or unenforceable, such provision shall be severed from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. (g) Entirety. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement or understandings relating to the subject matter hereof. However, it is understood and agreed by the parties that this Agreement is executed in conjunction with an Employment Severance Agreement between the Executive and the Company and that it is intended that in the event of termination of the employment of Executive within one year following a Change of Control, the provisions of this Agreement shall apply and in the event of termination of employment either before a Change of Control or after one year after a Change in Control shall have occurred, the Employment Severance Agreement shall apply. (h) Amendment. This Agreement may be amended only by a written instrument signed by the parties hereto, which makes specific reference to this Agreement. 8 (i) Setoff. There shall be no right of setoff or counterclaim, in respect of any claim, debt or obligation, against any payments to the Executive, his dependents, beneficiaries or estate provided for in this Agreement. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. THE COMPANY: MEDSOURCE TECHNOLOGIES, INC. By: -------------------------- Richard Effress, Chairman and CEO EXECUTIVE: ------------------------- William Kullback 9 EX-10 4 d885143-1.txt 10.2 - DAHL EMPL. SEVERANCE AGMT. EXHIBIT 10.2 ------------ EMPLOYMENT SEVERANCE AGREEMENT The parties to this agreement are MedSource Technologies, Inc., a Delaware Corporation ("MedSource" or the "Company"), and Rolf Dahl (the "Executive"). It is agreed as follows: 1. In the event that (a) the Company terminates the Executive's employment without "Cause" or (b) the Executive terminates his employment with the Company by written notice for "good reason" and provided that upon termination in either case, the Executive executes and delivers to MedSource the Release Agreement annexed as Exhibit A hereto which Release Agreement becomes effective in accordance with its terms, then the Company, in lieu of any and all other payments or benefits payable to the Executive, shall pay the Executive his base salary at the time of termination (payable in accordance with the Company's customary practice) for a period of 12 months following the date of termination (the "Severance Period"); provided, however, that if, after the date of termination (and before the end of the Severance Period), the Executive is employed by or otherwise receives remuneration from a person or entity other than the Company, (an "Alternate Employer"), the Company will pay such salary for up to six (6) months and if the remuneration being received from the Alternate Employer is less than the annualized rate of the base salary, the Company shall, until the end of the Severance Period, pay the Executive the difference between the annualized rate of his base salary upon termination and the amount that the Executive is entitled to receive from such Alternate Employer. The Executive agrees to provide complete information to the Company with respect to any Alternate Employer and his financial arrangements therewith. The Executive understands and agrees that for a period of 12 months following the date of termination of the Executive's employment, the provision of sections 3(b) and 3(c) shall apply. As used herein "good reason" shall mean any of the following: (i) the Company reduces the Executive's base salary, bonus computation or title; (ii) the Company substantially reduces the Executive's responsibilities or there is a change in employment conditions materially adverse to the Executive, any of which is not remedied within 30 days after receipt by the Company of notice from the Executive of such reduction in responsibilities or change in employment conditions; (iii) without the Executive's written consent, the Company requires the Executive to be based anywhere other than his present location in Minneapolis, Minnesota except for required travel on Company business in the ordinary course; (iv) the Company takes any action which would deprive the Executive of any material fringe benefit other than action which is applied to all executives as a whole. 2. The Company may terminate this Agreement and the Executive's employment hereunder at any time upon written notice for "Cause", which shall mean (i) the commission of fraud or embezzlement on the part of the Executive, (ii) a breach by the Executive of any of Sections 3(a), 3(b) or 3(c) of this Agreement, (iii) the conviction of the Executive of, or the pleading by the Executive of guilty or no contest to, (x) any felony or (y) any crime involving moral turpitude on his part and/or (iv) a material failure by the Executive to discharge his duties, responsibilities and obligations as an employee of the Company after the Executive shall have been duly notified of such failure and shall have had a reasonable time to cure the same. In the event of the termination by the Company of the Executive's employment for Cause, the Executive shall be entitled to receive his base salary accrued but not paid through the date of termination and no other monies or benefits except as provided by law. 3. Confidentiality, et al. In consideration for the foregoing, the Executive agrees that: (a) He will not at any time, divulge, communicate, use to the detriment of the Company or its subsidiaries or affiliates (collectively the "Companies") or for the benefit of any other person, firm or entity, or misappropriate in any way, any confidential information or trade secrets relating to the Companies or any of their businesses including, without limitation, business strategies, operating plans, acquisition strategies (including the identities of (and any other information concerning) possible acquisition candidates), pro forma financial information, market analyses, acquisition terms and conditions, personnel information, trade processes, manufacturing methods, know-how, customer lists and relationships, supplier lists, or other non-public proprietary and confidential information relating to the Companies. (b) During his employment with the Company and the Severance Period, the Executive shall not, directly or indirectly, for himself or on behalf of any other person, firm or entity, employ, engage or retain any person who at any time during the 12-month period preceding his termination, was an employee of any of the Companies or contact any supplier, customer or employee of any of the Companies for the purpose of soliciting or diverting any such supplier, customer or employee from the Companies or otherwise interfering with the business relationship of the Companies with any of the foregoing. (c) During his employment with the Company and the Severance Period, the Executive shall not, directly or indirectly, engage in, or serve as a principal, partner, joint venturer, member, manager, trustee, agent, stockholder, director, officer or employee of, or consultant or advisor to, or in any other capacity, or in any manner own, control, manage, operate, or otherwise participate, invest, or have any interest in, or be connected with, any person, firm or entity that engages in, directly or indirectly, any activity that is competitive with the business of the Companies as then conducted in the United States or Europe within 2,000 miles of any then facility of the Companies or of any customer of the Companies; provided, however, that notwithstanding the foregoing, the Executive may own up to 2% of the voting securities of any publicly-traded company. (d) The Executive acknowledges that the agreements herein are reasonable and necessary for the protection of the Companies and are an essential inducement to the Company's continuing Executive in the employ of the Company. 2 Accordingly, the Executive shall be bound by the provision hereof to the maximum extent permitted by law, it being the intent and spirit of the parties that the foregoing shall be fully enforceable. However, the parties further agree that, if any of the provisions hereof shall for any reason be held to be excessively broad as to duration, geographical scope, property or subject matter, such provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable law as it shall herein pertain. 4. Equitable Relief. The Executive acknowledges that if he violates the provisions of this Agreement, the Company could suffer irreparable injury and, in addition to any other rights and remedies available under this Agreement or otherwise, the Company shall be entitled to an injunction to be issued or specific enforcement to be required (without the necessity of any bond) restricting the Executive from committing or continuing any such violation. 5. Amendment and Modification. This Agreement may not be amended, modified or changed except in a writing signed by the party against whom such amendment, modification or change is sought to be enforced. 6. Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of either of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only be written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of a party, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this section 6. 7. 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, (b) sent by facsimile transmission with a written copy thereof sent on the same day by postage paid first-class mail or (c) by personal delivery to such party at the following address: If to the Company, to: MedSource Technologies Inc. 110 Cheshire Lane Suite 100 Minneapolis, MN 55305 Attention: VP-Human Resources 3 If to the Executive, to: The address set forth beneath the Executive's signature hereto. 8. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs and legal representatives and the Company and its successors and assigns. Successors of the Company shall include, without limitation, any person acquiring, directly or indirectly, all or substantially all of the business or assets of the Company, whether by merger, consolidation, purchase, lease or otherwise, and such successor shall thereof be deemed the "Company" for the purposes hereof. 9. Governing Law. This Agreement shall be governed by the law of the state of Delaware applicable to agreements made and to be performed entirely in Delaware. 10. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the matters set forth herein and supersedes all prior agreements and understandings between the parties with respect to those matters except any such agreements which may be in writing and which provide that they are not superseded by this Agreement. MEDSOURCE TECHNOLOGIES, INC. By: -------------------------------- Chief Executive Officer ------------------------------- Rolf Dahl Date ------------------------------- 4 Exhibit A Release Agreement Release Agreement made this [ day of ] MedSource Technologies, Inc. and Rolf Dahl ("Executive"). 1. GENERAL RELEASES. (a) For and in consideration of the severance benefits which the Executive will receive under the Employment Severance Agreement to which this Release Agreement is attached, the Executive fully and forever releases and discharges MedSource Technologies, Inc. ("Company") (which for purposes of this Agreement includes its present and former officers, directors, shareholders, employees, agents, investors, administrators, representatives, attorneys, affiliates, divisions, subsidiaries, parent corporations, predecessor and successor corporations and assigns) from any and all liability for any claim, duty, obligation, debt, covenant, cause of action or damages (collectively "Claims"), whether presently known or unknown, suspected or unsuspected, that Executive ever had, may have had or now have arising from any omission, act or fact that has occurred up to and including the date of this Agreement. Such released Claims include, but are not limited to: (i) any Claims arising out of or attributable to Executive's employment or the termination of employment with the Company; (ii) any Claims for wages, severance pay, bonuses, accrued vacation, personal days, holidays, sick days, stock, stock options, units, membership interests, attorneys fees, costs or expenses; (iii) all Claims arising under any agreement, understanding, promise or contract (express or implied, oral or written) between Executive and the Company; (iv) all Claims of wrongful termination, unjust dismissal, defamation, violation of the implied covenant of good faith and fair dealing libel or slander; (v) all Claims arising under tort law; (vi) any Claims arising under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference; (vii) any Claims arising under any federal, state or local constitution, statute, regulation or ordinance to the extent such claims may be validly waived including, without limitation, the Age Discrimination in Employment Act (the "ADEA"), Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Equal Pay Act, the Employee Retirement Income Security Act; and (viii) any Claims for any other loss or damage. (b) The Company, for itself and affiliated companies and its and their successors and assigns, hereby releases and forever discharges Executive from any and all claims based upon any act, omission or occurrence occurring up to and including the effective date of this Agreement, including, but not limited to, any matter arising out of Executive's employment with the Company. 2. ACKNOWLEDGMENTS. Executive acknowledges that the severance benefits provided under the Employment Severance Agreement exceed any payment or benefit to which Executive might otherwise be entitled pursuant to any policy, plan or procedure of the Company, 5 or pursuant to any prior agreement or contract with the Company. Executive understands that neither party hereto is waiving any rights or Claims that arise after the date Executive signs this Agreement. 3. COVENANT NOT TO SUE. Executive represents that he has not filed or permitted to be filed any Claims, administrative proceedings or lawsuits against the Company, and agrees that he will not do so at any time in the future with respect to the subject matter of all Claims released pursuant to this Agreement, except as may be necessary to enforce the Agreement or Employment Severance Agreement or obtain the benefits described in or granted by such agreements. 4. NON-DISCLOSURE OF AGREEMENT. Executive and the Company agree that neither party will, unless required by law, talk about, write about or otherwise publicize the terms of this Agreement and the Employment Severance Agreement, the benefits being paid under such agreements or the fact of their payment, except that this information may be disclosed to each party's respective attorneys, accountants or other professional advisors to whom disclosure must be made in order for them to render professional services. Such attorneys, accountants or other professional advisors will, however, be instructed to maintain the confidentiality of this information. Notwithstanding the foregoing, Executive and the Company agree that this Agreement may be used as evidence in any proceeding, administrative, judicial, arbitral or otherwise, relating to Executive's employment with the Company or the termination thereof. 5. NON-DISPARAGEMENT. Executive agrees that he will not, at any time, orally or in writing, disparage, denigrate or defame the Company, or any affiliate of the Company, their respective products, services or business conduct, or otherwise impugn the reputation of the Company or any affiliate of the Company, or that of any of their respective directors, officers, affiliates, agents, employees or representatives. The Company agrees that it will not, orally or in writing, disparage, denigrate or defame Executive or otherwise impugn his reputation. 6. NATURE OF AGREEMENT. Executive understands and agrees that this Agreement is a severance agreement and does not constitute an admission of liability or wrongdoing on the part of the Company. 7. TIME TO CONSIDER; REVOCATION; EFFECTIVE DATE. Executive hereby waives his right to take up to 21 days to decide whether to sign this Agreement. Executive shall have the right to revoke this Agreement within seven (7) days after Executive signs it. Any revocation of this Agreement must be in writing and submitted to Vice President-Human Resources of the Company. None of the Company's obligations hereunder become effective until Executive signs the Agreement and the seven (7) day revocation period has expired. 8. MISCELLANEOUS. (a) This Agreement shall be binding upon the parties and may not be modified in any manner, except by a writing signed by duly authorized representatives of the parties. This Agreement is binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators. 6 (b) In the event that one or more of the provisions of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Moreover, if one or more of the provision contained in this Agreement is held to be excessively broad as to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law. (c) This Agreement shall be interpreted and construed by the laws of the State of Delaware (other than those laws that would defer to the substantive laws of another jurisdiction). Executive hereby submits to and acknowledges the jurisdiction of the courts of the State of Delaware, or, if appropriate, a federal court sitting in the State of Delaware (which courts, for the purposes of this Agreement, are the only courts of competent jurisdiction), over any suit, action or other proceeding arising out of, under or in connection with this Agreement or the subject matter hereof. (d) Waiver by either party of a beach of any provision of this Agreement by the other shall not operate as a waiver of any other or subsequent breach by such other party. 9. VOLUNTARY ASSENT. By signing below, Executive acknowledges and represents that Executive has read this Agreement, that he understands its meaning and content, that he has been afforded a sufficient opportunity to consider the Agreement, that he has have been advised to consult with an attorney about the Agreement, that he has freely and voluntarily assented to all of the terms and conditions hereof, and that he has signed the Agreement as his own free and voluntary act. Kindly sign this Agreement where indicated below and return the original to us. A second copy has been enclosed for your files. MedSource Technologies, Inc. By: -------------------------------------- Agreed to and Accepted by: - ----------------------------------- Rolf Dahl 7 TERMINATION AGREEMENT THIS TERMINATION AGREEMENT ("Agreement") is made between Medsource Technologies, Inc. (the "Company") and Rolf Dahl (the "Executive"), as of February 3, 2003 with respect to the following facts: RECITALS: A. The Executive is a principal officer of the Company and an integral part of its management. B. The Company wishes to assure both itself and the Executive of continuity of management in the event of any actual or threatened change of control of the company. C. This Agreement is not intended to alter the compensation and benefits that the Executive could reasonably expect in the absence of a change in control of the Company and, accordingly, this Agreement, though taking effect upon execution thereof, will be operative only upon a change of control of the Company, as that term is defined herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the agreements of the parties contained herein, the parties do hereby agree as follows: 1. OPERATION OF AGREEMENT ---------------------- This Agreement shall be effective immediately upon its execution by the parties hereto. Anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any provision thereof shall be operative unless and until there has been a "Change in Control" of the Company as defined in Section 4 below. Upon such a Change in Control of the Company, this Agreement and all provisions hereof shall become operative immediately. 2. PURPOSE AND INTENT ------------------ The Board of Directors of the Company (the "Board") recognizes the possibility of a Change in Control of the Company exists and that such possibility, and the uncertainty and questions which it necessarily raises among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders in this period when their undivided attention and commitment to the best interests of the Company and its shareholders are particularly important. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control of the Company. 3. TERMINATION FOLLOWING CHANGE IN CONTROL --------------------------------------- For purposes hereof only, a termination of the Executive's employment following a Change in Control ("Termination Following Change in Control") shall be deemed to occur if at any time during the one-year period immediately following a Change in Control: (a) the Company terminates the Executive's employment, other than for "Cause" as defined herein; (b) the Executive terminates his employment with the Company for "good reason" which shall mean the occurrence of any of the following: (i) the Company reduces the Executive's base salary, bonus computation or title; (ii) the Company substantially reduces the Executive's responsibilities as in effect immediately prior to the Change in Control or as the same may be increased from time to time, or there is a change in employment conditions deemed by the Executive to be materially adverse as compared to those in effect immediately prior to the Change in Control, any of which is not remedied within 30 days after receipt by the Company of notice by the Executive, of such reduction in responsibilities or change in employment conditions; (iii) without the Executive's express written consent, the Company requires the Executive to be based anywhere other than Minneapolis, Minnesota except for required travel on the Company's business to an extent substantially consistent with that prior to the Change in Control; (iv) the Company fails to obtain the assumption of the performance of this Agreement by any successor of the Company; or (v) the Company takes any action which would deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the Company fails to provide the Executive with the number of paid vacation days to which the Executive is then entitled in accordance with the Company's normal vacation policy in effect on the date of the Change in Control unless in each case the action is applied to all executives as a whole and on a Company wide basis. 2 The voluntary termination by the Executive of his employment by the Company other than for good reason shall in no event constitute a "Termination Following Change in Control". 4. DEFINITION OF CHANGE IN CONTROL ------------------------------- A Change in Control will be deemed to have occurred if: (a) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), or a group (as defined in Rule 13d-3 of the Exchange Act) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding equity securities; (b) during any period of twenty-four (24) consecutive months, commencing on the date of this Agreement, individuals who at the beginning of such twenty-four (24) month period were directors of the Company cease for any reason to constitute at least a majority of the Board of Directors of the Company unless the election, or the nomination for election by the Company's stockholders of each director who is not then a director has been approved in advance by directors representing at least a majority of the directors then in office who are directors at the date hereof; (c) an event occurs which constitutes a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirements; (d) there is a merger or consolidation of the Company and the persons owning a majority of the voting power of the stock prior to the transaction do not own a majority of the voting stock of the surviving entity; (e) the sale or other disposition of all or substantially all of the assets of the Company to an entity controlled by persons after the sale who prior to the transfer did not own a majority of the voting stock of the Company; or (f) the business or businesses of the Company for which the Executive's services are principally performed are disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary) of the Company, or otherwise. 3 5. COMPENSATION FOLLOWING TERMINATION ---------------------------------- (a) Subject to the terms and conditions of this Agreement, upon a Termination Following Change in Control, the Executive shall be entitled to (i) a lump sum payment, within fifteen (15) days following such termination, in an amount equal to two times the highest annual level of total cash compensation (including any and all bonus amounts) paid to the Executive by the Company (as reported on Form W-2) during the three calendar years ended immediately prior to such termination, (ii) payment by the Company of continuing health coverage for a period of twenty-four (24) months, at a level commensurate with that which the Executive enjoyed with the Company immediately prior to such Change in Control. (b) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 5 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 5 be reduced by any amounts to which the Executive shall be entitled by law (nor shall payment hereunder be deemed in lieu of such amounts), by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the date of termination or voluntary termination, or otherwise, provided however, if Executive receives health coverage through subsequent employment during such twenty-four (24) month period at a level commensurate with that which Executive enjoyed with the Company, the Company's obligations under Section 5 (a) (ii) shall cease when Executive commences to receive such health coverage. (c) Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive or his estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to any applicable law. 6. DEFINITION OF "CAUSE" --------------------- The Termination of the Executive's employment by the Company shall be deemed for "Cause" if it results from: (a) the commission of fraud or embezzlement on the part of the Executive; (b) the conviction of the Executive of, or the pleading by the Executive of guilty or no contest to, (x) any felony or (y) any crime involving moral turpitude on his part; (c) a material failure by the Executive to discharge his duties, responsibilities and obligations as an employee of the Company after the Executive shall have been duly notified of such failure and shall have had a reasonable time to cure the same; 4 (d) the Executive's death; or (e) an accident or illness which renders the Executive unable, for a period of at least six (6) consecutive months, to perform the essential functions of his job, notwithstanding the provision of reasonable accommodation by Employer. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause under subsection (a) or (c) without (i) reasonable notice to the Executive setting forth the reasons for the Company's intention to terminate for Cause, (ii) an opportunity for the Executive, together with his counsel, to be heard before the Board, and (iii) delivery to the Executive of a notice of termination from the Board finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth above in clause (a) or (c) of the preceding sentence and specifying the particulars thereof in detail. 7. TAX TREATMENT ------------- It is the intention of the parties that no portion of the payment made under Section 5 hereof (The "Termination Payment") or any other payment under this Agreement, or payments to or for the Executive's benefit under any other agreement or plan, be deemed to be an excess parachute payment as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), or its successors. However, should it be asserted that any amount to be received by Executive hereunder is an excess parachute payment, it is agreed that the present value of the Termination Payment and any other payment to or for the Executive's benefit in the nature of compensation, receipt of which is contingent on the Change in Control of the Company, and to which Section 280G of the Code or any successor provision thereto applies (in the aggregate "Total Payments") exceeds an amount in excess of the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code or any successor provisions thereto, Executive shall nevertheless be entitled to all such payments and the Company shall indemnify Executive for any tax imposed under Section 4999 of the Code or any successor provision thereto, including payment of the tax due on any payments made to Executive or on behalf of Executive to pay such taxes (i.e. "gross up"). Within ten (10) business days following delivery of written notice by the Company to the Executive of the Company's belief that there is a payment or benefit due which will result in an excess parachute payment as defined in Section 280G of the Code or any successor provisions, the Company and the Executive, at the Company's expense, shall obtain the opinion of legal counsel, as the Company and Executive may mutually agree upon, which opinions need not be unqualified, which sets forth (i) the amount of the Executive's Base Period Income, as defined in Section 280G of the Code, (ii) the present value of Total Payments, and (iii) the amount and present value of any excess parachute payments. 5 In the event such opinion determines that there would be an excess parachute payment, included in the Termination Payment hereunder, or any other payment determined by such counsel to be includable in Total Payments, such opinion shall include the amount of tax due in relation thereto and the amount of the total gross up payment required for indemnification of the Executive by the Company. Such amounts shall then promptly be paid by the Company to the Executive or to the Internal Revenue Service on behalf of the Executive. The provisions of this Section, including the calculations, notices and opinions provided herein, shall be based upon the conclusive presumption that (i) the compensation and benefits provided herein and (ii) any other compensation, including but not limited to any accrued benefits, earned by the Executive prior to the Change in Control of the Company pursuant to the Company's compensation programs, would have been reasonable if made in the future in any event, even though the timing of such payment is triggered by the Change in Control of the Company. In the event such legal counsel so requests in connection with the Section 280G opinion required by this Section, the Company and Executive shall obtain, at the Company's expense, the advice of a firm of recognized executive compensation consultants concerning the reasonableness of any item of compensation to be received by the Executive, on which advice legal counsel may rely in providing their opinion. In the event that the provisions of Sections 280G and 4999 of the code for any successor provision are repealed without succession, this Section shall be of no further force or effect. 8. MISCELLANEOUS ------------- (a) Intent. This Agreement is made by the Company in order to induce the Executive to remain in the Company's employ, with the Company's acknowledgment and intent that it will be relied upon by the Executive, and in consideration of the services to be performed by the Executive from time to time hereafter. However, this Agreement is not an agreement to employ the Executive for any period of time or at all, and the terms and conditions of the Executive's employment, other than those expressly addressed herein, shall be subject to and governed by a separate agreement of employment between the Company and the Executive, if any. This Agreement is intended only as an agreement to provide the Executive with specified compensation and benefits if he or she while employed by the Company is terminated following a Change in Control on the terms and conditions hereof. (b) Attorney's Fees. If any action at law or in equity is commenced to enforce any of the provisions or rights under this Agreement, the unsuccessful party to such litigation, as determined by the court in a final judgment or decree, shall pay the successful party all costs, expenses and reasonable attorney's fees incurred by the successful party or parties (including, without limitation, costs, expenses and fees on any appeals), and if the successful party recovers judgment in any such action or proceeding, such costs, expenses and attorneys' fees shall be included as part of the judgment. 6 (c) Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of Delaware. (d) Successors and Assigns ---------------------- (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree in writing to perform this Agreement. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall require the Company to pay to the Executive compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder in the event of a Termination Following Change in Control of the Company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be the date on which the Executive shall receive such compensation from the Company. As used in this Agreement, "Company" shall mean the Company as herein above defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation or law or otherwise. (ii) This Agreement shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's devisee, legatee, or other designee or, if there is no such designee, to Executive's estate. (e) Notices. Except as otherwise expressly provided herein, any notice, demand or payment required or permitted to be given or paid shall be deemed duly given or paid only if personally delivered or sent by United States 7 mail and shall be deemed to have been given when personally delivered or two (2) days after having been deposited in the United States mail, certified mail, return receipt requested, properly addressed with postage prepaid. All notices or demands shall be effective only if given in writing. For the purpose hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 9(e), shall be as follows: The Company: MEDSOURCE TECHNOLOGIES, INC. 110 Cheshire Lane, Suite 100 Minneapolis, MN 55305 Attn: Chief Executive Officer Executive: Rolf Dahl (f) Severability. In the event any provision in this Agreement shall be invalid, illegal or unenforceable, such provision shall be severed from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. (g) Entirety. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement or understandings relating to the subject matter hereof. However, it is understood and agreed by the parties that this Agreement is executed in conjunction with an Employment Severance Agreement between the Executive and the Company and that it is intended that in the event of termination of the employment of Executive within one year following a Change of Control, the provisions of this Agreement shall apply and in the event of termination of employment either before a Change of Control or after one year after a Change in Control shall have occurred, the Employment Severance Agreement shall apply. (h) Amendment. This Agreement may be amended only by a written instrument signed by the parties hereto, which makes specific reference to this Agreement. (i) Setoff. There shall be no right of setoff or counterclaim, in respect of any claim, debt or obligation, against any payments to the Executive, his dependents, beneficiaries or estate provided for in this Agreement. 9 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above. THE COMPANY: MEDSOURCE TECHNOLOGIES, INC. By: --------------------------- Richard Effress, Chairman and CEO EXECUTIVE: -------------------- Rolf Dahl 9 EX-99 5 exhb99_1.txt RICHARD EFFRESS CERTIFICATION EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of MedSource Technologies, Inc. on Form 10-Q for the period ended December 29, 2002 as filed with the Securities and Exchange Commission on the date hereof, I, Richard J. Effress, Chairman of the Board of Directors and Chief Executive Officer of MedSource certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) such report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of MedSource. Dated: February 12, 2003 /s/Richard J. Effress ---------------------------------------- Richard J. Effress Chairman of the Board and Chief Executive Officer EX-99 6 exhb99_2.txt WILLIAM KULLBACK CERTIFICATION EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of MedSource Technologies, Inc. on Form 10-Q for the period ended December 29, 2002 as filed with the Securities and Exchange Commission on the date hereof, I, William J. Kullback, Senior Vice President -- Finance and Chief Financial Officer of MedSource certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) such report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of MedSource. Dated: February 12, 2003 /s/William J. Kullback --------------------------------------- William J. Kullback Senior Vice President -- Finance and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----